← Alt Goes Mainstream: The Latest on Alternative Investments, WealthTech, & Private Markets
Alt Goes Mainstream: The Latest on Alternative Investments, WealthTech, & Private Markets
Stable Asset Management's Erik Serrano Berntsen - what it takes to build a great alternative asset management firm
01:11:55
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Eric Serrano Bernsen
Steve has said something, a quote, which I love. He's like, Eric, I realize that people don't invest money with people they think are the best. They invest money with people they like. The biggest risks in running a asset management business are non market risks. So nothing to do with the portfolio, which is a bit counterintuitive. Everybody gets a piece. We're going mainstream. Everybody's gonna eat. We're going mainstream.
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Michael
All my family
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Eric Serrano Bernsen
see you on Main Street. We're going mainstream.
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Podcast Host
From Wall street to Melrose Avenue,
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Michael
venture
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Podcast Host
capitalists to athletes to creators to person who's collected trading cards
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Eric Serrano Bernsen
and a collision
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Podcast Host
of culture and finance,
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Michael
this episode of Alt Goes Mainstream is brought to you by Ultimus, the full service fund administrator and transfer agent powering asset managers in private and public markets. As alts go mainstream, you need real expertise to handle complex fund structures, connect with key distribution partners and handle sophisticated compliance reporting and transparency demands. That's Altimus High Tech High touch Solutions for over 450 clients and 2,500 funds with over $775 billion in assets under administration. Backed by an expert team of over 1200 employees, they place client service at the core of their business, helping you navigate complexity during your fund structuring or launch, and then supporting you through every stage of growth. Whether you're already in the market or
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Podcast Host
thinking about entering private wealth.
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Michael
You can trust their team's deep expertise in retail alternatives to help you reach your goals. Learn more at altimusfundsolutions.com or email infoultimusfundsolutions.com welcome back to the Altcos Mainstream Podcast. Today's episode dives into what it takes to start, build and scale an alternative asset manager. We sat down in Stable Asset Management's London office with Eric Serrano Bernsen. Eric is the founder of Stable, where he defines and executes the firm's investment strategy. Stable is one of the largest and most tenured GP stake builders globally. The firm manages around 5 billion in assets and has built over 40 firms since 2006. Stable makes strategic seed and acceleration investments to launch and scale alternative gps across public and private markets. With offices in New York, London and Palm beach, the firm backs investment firm founders who understand that extraordinary performance requires building exceptional organizations committed to education as a catalyst for change. Eric supports the LSC Alternative Investments Conference, the world's largest student conference for alternative, which is how we met 16 years ago, as well as Girls who Invest and Girls are investors. Stable backs 100 women in finance and is a founding partner of the 10,000 Interns Foundation. Eric holds a BA in Politics, Philosophy and Economics from Keble College, Oxford and an MBA with honors and a concentration in Finance from the University of Chicago
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Podcast Host
Booth School of Business.
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Michael
Eric and I had a fascinating conversation
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Podcast Host
about what it takes to be a
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Michael
great investor and build a unique investment firm. We discussed how the business of asset management has evolved since 2006. The incentives gap between LPs and GPs and how that evolves as GPS scale. How GP seeding and GP stakes can be a solution to LP and GP misalignment how to discern a manager's edge and how edge can change with firm growth. The most non obvious trait that makes for a great asset management founder the nuances of evergreen structures and which strategies might be better suited for evergreen structures the merits of the GP stakes investment strategy for LPs. Thanks Eric for sharing your wisdom, expertise and passion about GP stakes and asset
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Podcast Host
management in a collision of culture and finance. We're going mainstream Eric, welcome to the Elkos Mainstream podcast.
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Eric Serrano Bernsen
Michael, I'm so excited to be here. We've known each other for what, 20 years and your brand just is on an ascending parable.
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Podcast Host
Congratulations. Well, no, same to you. I mean it's been. You started stable in 2006.
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Eric Serrano Bernsen
Yeah, it's been a while. It's 20 year anniversary. It's the year of the horse. Coincidence? I don't think so. The stable is ready. We have a great stable of partners. And yeah, I'm very excited about sharing a bit about the journey today with you.
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Podcast Host
Well, let's start there. Let's get into the name. You mentioned two reasons for the name construction, but I always find GP's naming conventions fascinating. Why did you name the firm stable?
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Eric Serrano Bernsen
So I think naming the firm is half the fun. Our business is building GPS and I tell our partner founders the first step is half the journey. So you're like 55% there just deciding you're going to do this. But probably 90% of the fun, because being a GP founder can't always be fun is naming it. So we have extensive meetings about what should we name a firm and when it came to stable, I actually have to give credit to my wife. We were trying to communicate the fact that we're stable capital, long term aligned. But we also want to build a stable for our partnerships where we're very helpful. So now we have quite a few horses in the race. Since we started, we've built 43 firms.
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Podcast Host
How many of those firms did you help create their name?
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Eric Serrano Bernsen
Well, I think it's a very Personal decision. I always say you kind of have two babies, you have your family at home and your children, and then your firm is your second baby. So I don't opine very heavily when we're brainstorming. I think the only time that I was actually involved in a name was one of our founders wanted to name it after a Japanese sword that was unpronounceable. And there I had to really step in and coach the founder. That was probably not the best name.
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Podcast Host
It's interesting that we're talking about naming conventions and honestly, probably not that ironic given where we are in private markets. Because if you think about when you started stable 2006, alternative asset management was a very different ecosystem than it is today. Branding is top of mind for managers. Not that it wasn't then, but it takes on a different meaning, particularly as you add things like the wealth channel as firms. 2006, a number of firms had not yet been public. Fortress went public in 2007. Blackstone, Apollo had not yet been public. All the firms we now know today that are public were not. So I think branding takes on a different meaning. I'd love to hear your perspective on that and even as well, how you've evolved your brand and the way you think about your stable of managers. Because I think it's so instructive as it relates to the evolution of asset management more broadly.
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Eric Serrano Bernsen
It's amazing, isn't it? Now you sort of take for granted that people know there's brands in asset management, people realize there's value in these gps, they're listed companies. But back then that was probably underappreciated. So if you think back then, I think it was sort of equities, fixed income, balanced portfolios. Alts were satellite, you were ahead of the curve. Now alts are core. And I think back then there was an obsession with benchmarks and sort of beating your competitors. Now it's all about solving problems. So I think it went from back 2005-10, it's manage money. Now it's solve portfolio problems at scale. And how does that bleed into brand? I think it leads into you're not only providing returns, you also have to provide solutions. So I think that's something that gets bandied around a lot and that's been the same as stable. I think if I did it again, I was quite product focused. And so we're always thinking about what is the strategy. But actually you got to empathize with your asset owner and think, what solution do you need to solve for them? Is it cash flow is it return targets. So now it's gone from very benchmark focused to more outcome focused.
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Podcast Host
I think that's a great segue into how you think about A your business and B the constituents who you work with. So you think very deeply about how you're serving gps, but also you have a pretty interesting way in which you're providing solutions to asset owners. I'd love for you to talk about that in two contexts. One is, when you started stable, what did you see as the need for both GPS and LPs and what does that need for both GPS and LPs look like today?
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Eric Serrano Bernsen
If we take a step back, what does stable do? We build investment firms and the gap in the market that we saw 20 years ago was really twofold. There was an incentives gap, that's the misalignment between LPs and GPs. So we'll touch on that first. And then the second gap was really a know how gap. It was a sort of lack of understanding that actually the biggest risks in running a asset management business are non market risks, so nothing to do with the portfolio, which is a bit counterintuitive. So we'll get into that in a second. So let's take the first misalignment gap. What's the opportunity set there between LPs and GPs? I think it's fairly obvious, although a bit taboo to talk about. As a GP grows, it becomes more misaligned with their lp. Why? Because the GP is uninterested in scaling. Management fees become a very significant part of the income. There's less incentives to seek returns. And so it goes from sort of performance delivering to perhaps asset gathering. And there's also this adversarial relationship between LP and gp, where the GP wants to have high fees, the LP wants to have low fees. So how do you mitigate that misalignment? Our solution was to make the LP a partner in the gp. So that's kind of how GP Stakes was born. GP stakes as an industry is really about aligning incentives by having the LP own the means of production, which is super cool. Because then when we go to RLP's and say, hey, we need higher fees, they say, oh yeah, what do you need them for? Do we need to acquire more talent? Do we need to invest in risk management? It's really a collaborative process. So you change it from adversarial to collaborative. So that was the first gap. The second gap is really about this difference between investing and running a business. So every GP is really two things. But everyone focuses on the portfolio. But actually when you build a gp, when you select a GP to partner with, you're not underwriting the portfolio, you're underwriting an operating system. And so the operating system is the business. And we can go into the pieces that form the operating business. But I think the underappreciated issue was that most firms fail because of non market risk. They're spending too much time on the business and less time on investing. So that shows up in returns. They're having operational issues, regulatory issues, headline issues, talent acquisition issues. And so the best firms isolate the business from the portfolio and they don't let portfolio volatility bleed into the business. Because if the portfolio companies are not doing well, then communication with investors is stressed or your team is leaving, or bonuses aren't as high. So it's really the fragility of the business that you need to protect because the portfolio will do what it does. But you can lose money. As long as you lose money the way you say you would lose money, you can't mess up the business side. That's non forgivable.
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Podcast Host
Gosh, there's so many things to unpack here. I want to start with the first part that you mentioned about the GPLP relationship. So you talk about as a firm scales, there becomes this misalignment between GPs and LPs because funds get bigger, maybe returns change, et cetera. What would you say to the notion that as firms get bigger, their edge just changes or the way that they might think about their edge changes? Do you believe in that or do you think that that's more of a justification for scale?
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Eric Serrano Bernsen
No, I think you're absolutely right. I think that's a really astute way to think about it. I think your capabilities with size and time change by definition and then you can apply them to different things. So let's take the wealth channel. That's somewhere where you're sort of the leading voice alt is going mainstream. As a firm gets bigger, it tends to have more budget, a bit more extra slack, and you need a lot of budget and a lot of time to build a good relationship with the wealth channel. So for example, that's a good example that demonstrates that edge changing over time. If you're a small gp, you're typically focusing on large institutional investors where you can have a small number of relationships because your ability to serve them in terms of budget time capabilities is not going to stretch to say, a very broad wealth channel type strategy. But as the firm grows, I think it's beautiful that these bigger firms now are kind of moving towards serving the wealth channel because it's really freeing up the smaller and mid sized managers to address a more institutional capital base that had really been captured by the bigger players. Now the bigger players are, okay, we have good institutional relationships, but where is the next source of capital coming? That's the wealth channel. So they're kind of getting a bit distracted because they can't tailor as much. They can't be as sort of high touch with the institutions. They really need to focus on wealth. And that shows you that the edge is just changing over time.
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Podcast Host
How do you think about evaluating a manager's ability to create edge at different points along their growth curve? And what do you think it takes to build a manager that can grow and scale? There are probably managers who are better at just managing a certain amount of capital. There are other managers who can do that to start because you're seeing them at the seed phase. You also invest at the acceleration phase, but you're helping managers get started, you're seeding them with capital. What do you see in the managers that are able to successfully scale and also how do you underwrite those different types of edges from the outset, even though over time they may have that evolution of their edge?
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Eric Serrano Bernsen
Yes, I think there's three types of edges that we look at, Investment edge, operational edge and commercial edge. So I'll go through each of those in turn. On the investment side, the smaller the manager, the more important the investment side is because you tend to lead with returns. So the way you're differentiating it is not necessarily the highest returns, but differentiated returns. So it might be decorrelation, it might be a smaller market where the beta is different from sort of large markets. So we put a lot of focus on your track record, your expertise, what's your right to win? That's the investment side and that's the earlier emphasis. The operational side starts mattering more as you scale because you have to serve more and more sophisticated investors. You have to serve more of them in terms of quantum. So this is all about the infrastructure, that operating system we talked about. So there we're trying to assess which GPs understand that the unsexy infrastructure is really what's going to make the difference at that scaling point. So it's things like how good is your reporting, how good is your brand and client relationship management. So that operational side is really what unlocks your ability through returns. Returns are sort of necessary but not sufficient condition. And then you need the operational infrastructure to really scale and that's operations and business development. So we think about it in those two sides. And then the commercial side is really about a lot of what you're an expert in. It's branding. What channel are you addressing? And for me, that part is really more about client service and investor relations.
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Podcast Host
So on those last two points, it feels like the industry has gone through this evolution from funds to firms. When do a lot of those managers who are entrepreneurs building their own businesses, when do they start thinking about that evolution? Because it's so hard to raise a first fund. You gotta get the money in, invest it, you earn your right to then raise a second fund. You do right by your LPs. When do you think the best managers and business builders tend to start thinking about their fund as a firm?
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Eric Serrano Bernsen
I think before they start. So I love meeting a founder who tells me, this is what I'm really good at right now. Let me talk to you about my 20, 30 year plan. So we did some research on the best founders and gps. We call it Project Legends. So Project Legends, there's public GP founders and private GP founders. And you'll be surprised. What do you think the average age of a founder on the public and private side is? And here we're sort of selecting lifetime P and L and success. So we kind of take the top 30, 40 founders in each. What age do you think they're launching their firms at?
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Podcast Host
Early mid-40s.
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Eric Serrano Bernsen
Interesting. So I think you bias the same way most people do, which is older. So on the public side, the average age, the median is about the same is 33. And on the private side it's 38. And on the private side, you have an interesting dynamic, which is sometimes a duo. And that's kind of what I think you're thinking about. So in public markets, what's interesting is your access to opportunity is often relatively level playing field because you're interacting with this anonymous market where on the private side it's all relationship based. So what's interesting to observe there, you take a firm like Blackstone or tbg. At Blackstone you have Steve Schwarzman is sort of the younger, hungry, late 30s, and then you've got Pete Peterson, who has the door opener and the gray hair and also the slightly smoother player. And Steve has said something, a quote, which I love, and I've had a chance to spend a bit of time with him. And I asked, what was the secret to your success? What really made a difference? He's like Eric, I realized that people don't invest money with people they think are the best. They invest money with people they like. I think that was a real big insight. You know, back to building trust and the fact that you don't always have to shoot for the stars on returns, but you have to be a really good fiduciary for your partners. At tbg, you had Jim Colter, Bondurman, so you get these kind of duos. And I think my point about starting young means that not only you have more time to compound, because staying in the game is half of it. If people ask like how are you successful? It's like just staying alive, man. You know, just gotta keep the game.
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Podcast Host
And then it's staying in the game,
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Eric Serrano Bernsen
getting in the game and staying in the game. You miss 100% of the shots you don't take. So when people are about to take that shot and I meet a founder and they tell me, here's my 34 year plan and this is how I have unlocking level 2. It's like a game. So you have the right to win at level one and then ping level two opens up and then you can do something else. You have to be quite prudent. And one framework we used a lot at Bain was called Profit from the Core. It's about one step adjacencies. So you have like a spider chart and you have strategy, geography, size of company, et cetera. Don't move too many things at the same time because the area of that spider is how much you need to be paying attention to. And so that's one of the frameworks I use in that discussion with the founder. But I want him or her to have an idea of what they're going to build next. Because what you do today, you set not only your culture, but you set your target investment strategy on day one. But it's compounding all the way. There's huge path dependency to this business. When we look at our most successful gps and this is not great news because you can't manage it, but timing is very important. So our most successful portfolio companies, they did really well at the beginning and that gives you this license again to play again.
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Podcast Host
When you think about timing being so important, does that make you thematic investors as it relates to the type of strategy at the right time and also just the industry trends too. I imagine we're in a point in time where scale is an advantage for firms. But then people, these larger firms are much bigger company. Maybe entrepreneurs want to go start their own business. So there may be more talent to flood the market in something like private Credit as an example. So how does the timing impact how you think about the thesis driven approach to investing or backing and seating managers as well as what strategies might win in a given time?
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Eric Serrano Bernsen
I think you're spot on. I think one of the hardest things that we need to do is make an assessment of how benign is the market environment for this strategy right now. And again it's a bit of a taboo subject because again, it comes back to misalignment. It takes time to get to know a GP and so it doesn't reward relationships where the asset owner picks you to manage money for a short period of time and they're like, oh, the opportunity set is kind of less exciting, I'm going to pull my money out. So there's this kind of semi permanence to the relationship which is not mirrored necessarily in the opportunity set in the market. And the problem there then is you also don't want your GPS changing what they do. So strategy drift is this big issue in the industry and I think it requires a bit more nuanced understanding. I think the best investors realize that there is some seasonality to what they do, but that they can also structure a firm where they make the firm a bit more all weather. So let's unpack that. At the beginning you tend to only have one product, but it goes back to this scaling mentality. What is the other strategy that's adjacent to my main strategy that's going to bring some resilience to my gp and then how can I attract investors that understand that I'll be moving a bit between the two depending what the opportunity set is? So when we're considering an investment, we actually take a lot of feedback from the founders because if you're really deep in your space, you should be the one that's really alert to when is a good time to launch. So it's really interesting for us is, you know, we obviously have a lot of proactive sourcing, but we get a lot of inbounds and then we see these patterns of like, oh, we've just had like four or five incoming asset backed finance managers telling us that something interesting is about to happen or we're looking a lot at receivables. That's an interesting part of the market. And then we're like, this looks like something in the next six to 12 months we should probably dedicate some time to.
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Podcast Host
It brings up an interesting point because the other thing that you do is you're helping asset owners, particularly institutional LPs, match their capital with the right Allocators and investment strategies. How much lead time do you want to have before investing in a strategy or a manager? What I'm trying to get at is there may be an interesting strategy
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Michael
and
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Podcast Host
you may get signals from, oh, you're seeing four or five asset backed finance managers at one time. Do you want to wait until LPs start to see this as a strategy that's interesting or is it better for both you and the LP to try to capture that alpha earlier and be earlier to that market because there may be still more inefficiency.
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Eric Serrano Bernsen
It's a bit more the early with the commensurate risk that if the winds change, the demand might not come, but you have to be there already. So it's a great question. We have two modalities of investment. We have more of a seed set up from scratch modality and we have more of an acceleration go into existing businesses that we can scale with significant capital and institutionalizing that operating system. And our ticket sizes are somewhere between 100 to $300 million, sometimes a bit smaller, sometimes a bit bigger. But when we come in with that amount of capital, either if we're starting you from scratch or accelerating you, that means that you're already a scale and you can already attract institutional capital. But the difference is the speed to market. This is what you're alluding to. So if we think that we have six to 12 months before the asset owner community starts really in earnest looking at a certain space, then we can probably afford to build something from scratch. The cycles there are really around the talent and their non compete and non solicit. So it takes us typically somewhere around 6 to 12 months to set up a business, but that's typically bottlenecked by contractual issues. The fastest we've set up a business purely from an operational perspective is four weeks. So now the beauty in this industry is costs are variable, there's an open mindedness to use service providers and not build everything in house. That's something that's changed a lot in asset management. It's just become the minimum efficiency scale in terms of infrastructure has really gone down the min. Efficient scale in terms of size has gone up on an asset point of view. But you can start things with less people than you used to. But on the acceleration side that's sort of more plug and play there. Our role is work coming in and we're assessing the quality of the infrastructure. And there we might do things like, okay, the risk management function is a bit underdeveloped or reporting is poor or the value creation function in say private markets manager isn't quite there. So we can come in and really improve that plus invest a few hundred million dollars and that speed to market can be two or three months from start to finish. One thing we're working on a lot right now in private markets is evergreen capital. So if we talk about evergreen Capital for a second, we've made two or three investments where the business already has closed ended vintage type funds, but they want to have an evergreen product. And the evergreen product, excellent for wealth, that's something that you know a lot about more than I do. But it's also really good for the GP because it increases capital permanence.
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Podcast Host
That's good for the investor and the GP too, or the business owner.
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Eric Serrano Bernsen
That is great for the GP owner as well. I think it's very win win, which is rare in this industry we've talked about often. There's no solutions, just trade offs. The GPLP relationship is misaligned at birth, but I think through the GP stake you can align those incentives because then the evergreen capital provider is also an owner in the upside of that economics.
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Podcast Host
So I want to get to a nuance there because I think the fact that some of your managers who are not the size and scale of a Blackstone Apollo, although you do partner with Apollo and one of your GP relationships that you have, the firms are smaller in size and scale and yet they're doing evergreen. So I'm going to lay the foundation for this question a bit with in the wealth space, many of the largest asset managers would argue that they are best equipped to do evergreen funds for a number of reasons, but in part because you need the platform from pre to post investment. So everything from deal sourcing to the ability to execute on that deal, manage a portfolio, handle the operations and also do all the distribution, that's what it takes to win in the evergreen space. And many of the largest managers are investing a lot of capital to do. So why are smaller managers, some of the managers that you're working with, what's making them decide to do evergreens number one and related. Given that you work with a lot of institutional allocators, you work with wealth allocators as well, who are becoming more institutionalized. Are these institutional allocators investing in the evergreens too? Because that's another interesting data point. Many people think of wealth as being where the evergreen evolution is heading towards, but maybe institutions are thinking about evergreens too in certain contexts.
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Eric Serrano Bernsen
Yeah, I think they are. I think you're spot on. So most of our capital is institutional. By that I mean pension, sovereign wealth fund, very, very large pools of capital. And in those pools of capital, the attraction of the Evergreen is very similar to the wealth channel. From the asset owner perspective. It's a very efficient way to build a relationship and then be able to continue that without constant re engineering new vehicles. It's lower cost, it's a lot less friction. And particularly in private credit, which we should talk about because obviously the explosion of private credit is another big change since we met 20 years ago. In private credit it's the perfect structure because you have that yield collection, you can recycle that yield, you can choose like many wealth channel clients might, to have that distributed. But at least it allows you to kind of set it and forget it. Structurally you're always paying attention to what's happening to returns. But structurally it doesn't have this constant closed ended vintage based engagement requirement. So I think institutions are just as interested in Evergreen as the wealth Channel. But you were asking a bit about how you square the circle between Evergreen Capital. That's really sensed to be the remit of the large GPs and smaller GP capabilities. And what's really happening in our world is the limiting factor for our type of portfolio company, which is anything from 2,300 million to 3,4,5 billion dollars, is not their capabilities or their bandwidth, it's the capital, it's the capital that's not available. So we can create this beautiful catalyst where we're going into a business that already has all the capabilities, maybe it's managing half a billion billion dollars, but it's very hard for them to attract Evergreen capital. And then we're investing, you know, our last investment is a couple of hundred million into an evergreen vehicle for a business that already had closed ended vintage based funds. And then you're opening up not only the wealth channel in that evergreen, but also the institutional capital. We have large sovereigns and pensions who were invested in the closed ended saying oh well you know, my next re up is going to be into the evergreen and that's just beautiful. So we can add huge value by making this privileged evergreen capital come down into smaller firms.
- [30:21]
Podcast Host
Brings up an interesting question because one of the trends that the wealth channel is evolving into is this balance of customization with scale. But then you add in differentiation. So now access to private markets is to some extent table stakes and evergreens are more accessible not just to large LPs but a wider swath of LPs and at smaller size, obviously the infrastructure has made that possible. Brings up an interesting question of smaller managers creating evergreens. Does that create some form of differentiation for the LPs that you're working with? And you work with some large wealth platforms as well. But how is this whole trend of customization with scale but adding differentiation informing how your managers are building LP relationships and how you're building relationships with the wealth channel as well?
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Eric Serrano Bernsen
So I think you've hit on this eternal trade off that the wealth channel is facing now. You have the brand safety and high touch point capabilities of large asset managers. You've got Blackstone, you got Apollo, and then you have the requirement or the need or the desire to also differentiate their product. Because if everyone has Blackstone and Apollo, what's the difference? So they also want these Nichier specialist managers, but they also want the nicher ones to have the same capabilities and operational infrastructure. So that creates a bit of a minimum efficient scale. But that measurement scale is not, you know, if you're managing a billion dollars, you can definitely service the wealth channel. So what I think is really interesting is that I expect the wealth channel will have a core set of managers that's brand halo effect for them. That's really a footfall driver. It's sort of almost a hygiene factor. So it's a concept from retail when I was in private equity at Bain that I loved, which is a hygiene factor at a store is it's a clean store that doesn't actually make people want to go there because they expect it to be clean everywhere, but it does make people not come. And by that I mean if you don't have these core brands on the shelf, I think people will not necessarily come in the first place. But then you need to differentiate with the specialist strategies. And there if you're managing to offer that in evergreen format, that's why I think it's interesting to some of these wealth channels that we work with and that's when partnerships comes in. So what's beautiful about smaller and medium sized asset managers is that they're much more willing to tailor. And so what's more exciting to the Wealth Channel than designing their own product? Because maybe they want Evergreen, maybe they want certain reporting, maybe certain education, maybe certain access. And the big GPS are not going to be able to provide that to all the wealth channels. So there's this natural coming down in scale where we're seeing a lot of AUM coming into our portfolio companies.
- [33:26]
Podcast Host
So if both institutional LPs are now open to evergreens in certain Contexts and smaller GPs are also thinking about Evergreens as you think about the go forward for this industry and as you think about the way in which you'd want to work with managers at Stable, you think Evergreens are going to become the structure of choice for many gps and that's going to be the main structure through which they invest as opposed to drawdowns? Or do you think that drawdowns will continue to persist, particularly in the smaller and mid mid sized part of the market and then many of the largest firms will have large evergreens, maybe some drawdowns as well, but you'll have this bifurcation in terms of structure based on size and scale.
- [34:11]
Eric Serrano Bernsen
Yeah, I think it's based on size and scale and on strategy. So the matrix I envision is channel and asset class. So I think in public and private credit, clearly evergreen is the name of the game. Public always kind of was, it was open ended. The beauty in private credit is you have on and off ramps now, but it's essentially sort of like an open ended vehicle. I think for private equity real assets infrastructure it gets a bit more complicated because it's all about how are you allowing an on and off ramp. Is it true permanent capital, then you're okay. But clearly, and this is maybe worth clarifying, evergreens aren't necessarily permanent capital. There are on and off ramp. It just means that it's continuously offered. And there's also potentially a way to have liquidity over time. So I think by asset class, private equity will probably be the asset class that struggles the most together with real assets. But private credit? Absolutely. Almost everything we're doing is evergreen as
- [35:13]
Podcast Host
a GP Cedar and to some extent staker or accelerator. Do you think that the business proposition and value of certain types of GPS as an extension of what you just shared, that private equity may not be able to do, particularly at the smaller and midsize end of the market, may be more challenging for them to do. Evergreens versus private credit as an example, does all of that guide how you think about enterprise value creation as an investor at the management company or GP level in terms of what types of managers you think are going to succeed as a GP Cedar staker?
- [35:47]
Eric Serrano Bernsen
So let's take a step back in GP stakes. Let's talk about the life cycle and the different players at different times, because I think you're making a really interesting point around what attributes are you looking in a GP as an owner? So if you go back in history, the GP stakes business actually started on the earlier end. So cedars late 80s, 90s and on the public side More than anything were seeding GPS and taking a minority stake. And then in the 2000s, 2010s there were a couple of evolutions. Players started realizing that you could also buy stakes into already scaled managers in addition to build them from an earlier stage. And they realize that pivoting into private might make more sense, at least when you're buying. So you really have two vectors. You have the buy versus build. So that's depending on where you are in the lifecycle. And the other vector that emerged is how active are you in value creation. So are you more of a passive just provider of capital or do you also provide infrastructure for the business? And that's kind of how the market map evolved, I think from a GP owner, it depends what you're seeking. So we're earlier stage, we're GP builders, we're really looking for scale and growth. So for us, our growth rates, if you look at our portfolio, we're doing 30, 40, 50% growth rates, whereas the market is sort of probably high singles. And so for us it's all about growth. For stake buyers, it's all about durability of cash flow. So they're making an assessment of how permanent is this capital and what multiples I'm going to pay for management fee and carry going forward. For us it's all about building. So we don't pay for our cash flows, we create them from scratch. So it's a much higher return strategy.
- [37:51]
Podcast Host
I want to touch on the point you made about growth rates. I think that's an important one. So if I pick and picture my head that the CAGR of alternative asset management, AUM, I think it's generally around like 10 to maybe high elevens percent. You're growing at four to five times that number. If we unpack that, is that more a function of your picking the right strategies that have the ability to grow aum, or is it more. This is kind of a venture question. Or is it more the individual or the team themselves that's driving that massive relative outperformance in AUM CAGR relative to
- [38:29]
Eric Serrano Bernsen
the market, It's a bit of both. So I think it's easier to pick tides than boats. So that's how we think about it. You have to have a sort of foundational tide view. Private credit, excellent example. We started investing in private credit in 2019 because we felt that there would probably be a shift post GFC bank regulation into that space. And even, even late 2010s that hadn't really happened. Like the explosion has been pretty Recent, but then within that you're picking boats and we talked about it a bit earlier, for us it was picking specialist boats because when you start from smaller, you have to be differentiated. There are some strategies that the big GPS do really well. There are economies of scale, particularly private credit in vanilla direct lending. It's the cost to serve, it's a sourcing, it's really an asset origination game. But when you go down into more specialist strategies, and you mentioned earlier, one of our partnerships with Apollo, we have a business called Harborview which is in the media and entertainment space. So things like music royalties, media rights, tennis tours, and this business is something that even someone like Apollo may not have in house expertise for that. So then they seek to partner with gps where they can not only have an interest, but they can also provide huge amounts of capital to deploy.
- [39:49]
Podcast Host
I think that brings up an interesting thought in my head. So you have these large platforms like Apollo and their peers that have tons of resources. They have the ability to direct large pools of capital, as do you, because you have these asset owner relationships. You have people who may be specialists at what they do, but need access to capital. You also have the interesting purview of having backed hedge funds and more liquid strategies managers. In addition to now focusing heavily on the private side, do you think that the broader alternative asset management landscape is going to undergo this kind of pod shopization that the hedge fund world went through? Because if you think about it, it's like managers may be great at what they do, but they don't have the resources and they need the resource, particularly on all the things outside of investing. At the same time, the biggest GPS in the world need deal flow. Is that how this industry evolves?
- [40:41]
Eric Serrano Bernsen
Yeah, I think there's going to be a bifurcation like there was on the public side. So history tends to rhyme. And what we saw on the public side, as you point out, is there were some specialist strategies that remained independence, shall we say. But the huge, the vast majority of AUM now is in these multi manager pod shops. And I think we're seeing the same on the private side, which is the big platforms that typically started either on the private credit or the private equity side are then adding product, they're adding infrastructure, they're adding real estate, they're adding secondaries. And that's really a platform type approach. So I think we will see a big part of the market, probably 60, 70% of the market will end up being these multi manager private asset managers and then you'll still have room for the 20, 30, 40% of specialist managers that, you know what differentiates them? I think maybe capacity and scaling isn't as big as the platforms would want it and maybe there's a temperament, cultural differentiation as well. People always think more is better, more money, more money. But actually a lot of our founders just want to create their own culture and remain independent. They're not optimizing for scale, they're optimizing for doing their thing their own way.
- [41:55]
Podcast Host
So I think that brings up another really interesting question at this moment in time in this industry, which is it's challenging to raise capital. The biggest firms with the biggest brands and the most scale have the ability and wherewithal and resources to raise capital. As someone who works with managers who are starting de novo, and you've done this for 20 years, you've seen the evolution of the industry too, which I think is important to note. Do you think that you're seeing more talent now wanting to spin out and start managers, or do you see less talent because both the safety of a larger platform as well as the growth of those large platforms on a risk adjusted basis, Maybe talent decides to stay at larger firms rather than start new and smaller firms.
- [42:45]
Eric Serrano Bernsen
That's a great question. I think if you go back to a very philosophical point, let's assume that entrepreneurial desire is equally distributed amongst generations. So let's say that every time a new class of investor graduates from spending 10, 15 years at a prior firm, and we're back to this age analysis, so you know, they're hitting their mid to late 30s and instead of a midlife crisis, they're having a midlife entrepreneurial catalyst moment, hopefully. Let's assume that's stable, which I think probably it is. What are the unlocking characteristics in the market that will drive whether there are more founders looking to start a GP or not? So I think it's two things. I think it's the benignness of the market that we were referring to earlier and then the availability of strategic partners like stable and let's look at each of those in turn. So right now I think tailwinds in private credit means we're seeing a lot more founders in the private credit space because they assess, oh, this is probably a good time for me to launch, it's a bit easier to raise capital. The opportunity set is interesting, but maybe in private equity at the moment we're seeing less founders because that part of the market is a bit more challenged in terms of distribution, winter and some complicated vintages. And then the second aspect is oh, now there are large institutional firms like Stable that can actually allow me to de risk this launch. And that's just a sort of evolution and maturation of the GP stakes early stage market. 20 years ago when we started, we were writing 20, $25 million checks and admittedly that was like more back then, but it wasn't a big amount of money. Now if we can write hundreds of millions of dollars and we have a pretty comprehensive value creation platform to help you on the infrastructure side, then you can take that risk. So it's just a combination of the market benignness and the fact that partners like us exist that I think will constantly increase the number of founders that are willing to take the chance.
- [44:52]
Podcast Host
What's the most non obvious trait or skill set that makes a great gp?
- [44:58]
Eric Serrano Bernsen
Self awareness. So I think everyone's super smart and everyone works very hard. I have a bit of a pet peeve to these advice from billionaires of work smarter, not harder. All the successful gps I know work incredibly hard, so unfortunately there's no shortcut on the hours. And then another sort of billionaire advice that I think is misguided is follow your passion. But the person telling you that probably made their fortune in iron smelting. So I'm not sure that was their passion. I think it's more about follow your talent. And so I think a lot of the the founders I see, I want them to be really good at what they do and hopefully that makes them love it as well. But that characteristic that people are not assessing is self awareness. And self awareness is really important because you need to know what you don't know. So when we look at a founder, often they're very good on the portfolio side, but they don't really have much idea on how to build a business. So it's talent acquisition, it's how you run the balance sheet of the gp, it's how you communicate with investors. So the most underrated attribute in hindsight, having done this for a while now, is if the founder is aware of their own shortcomings, then they bring in talent and help to compensate for that. But it's an industry that's fairly high ego, right? It is.
- [46:24]
Podcast Host
But that then gets to uncovering a talent as you describe it, and B self awareness on that point, what are the most unique or different ways that you uncover talent?
- [46:37]
Eric Serrano Bernsen
So I think sourcing is a sort of always on. We use the Glenn Glary Glen Ross paraphrase instead of ABC always be closing. We call it always be sourcing. And I think sourcing is probably 80% of the magic in this industry. And to think about sourcing and talent acquisition, you need to think of the emotional journey that a founder goes through. So once she's made the decision to launch, where does she go first for help? It's actually not intuitive. It's probably lawyers, compliance consultants, branding agencies, pitchbook manufacturers. You know, like the people who make pretty slides. They're amazing. Sourcing, because the first thing you do, you get excited about the color, the branding, the name that we talked about earlier. And so we have, I think, some of the best networks in those early warning signs of when is talent looking to do something. And that's more on the seating side. On the acceleration side, we track hundreds of gps where we saw them at seed stage. It maybe wasn't for us then, but two or three years in, when they have momentum, hopefully we've established a relationship with them. And really the insight there is have touch points with people over long periods of time because that will increase your ability to have conviction in them as a person and their conviction in you. It takes two to tango. I think when you have the capital, you might become a bit arrogant and not realize that you're actually selling yourself to people. So sometimes when people ask me what I do, I say, I convince people who don't need my money to please take my money. It's quite counterintuitive because the best talent doesn't need us, and the best relationships are the ones that the founder wants to work with you, doesn't need to work with you.
- [48:23]
Podcast Host
What's the most effective aspect of either the interpersonal side of that relationship or the platform that you have that enables that to happen, where you're earning the right to win and work with managers or founders who don't need your money?
- [48:41]
Eric Serrano Bernsen
I think in hindsight, what I didn't expect is that the most powerful alignment with founders is that I'm a founder myself. So that's incredibly powerful because I've already been through that journey. I didn't have that obviously, at the beginning, but when you're talking founder to founder, there's this sort of unspoken bond that you're actually quite unconvinced of your own talent and you're pretty scared and you don't necessarily know what you're doing. So there's a lot of trial and error in this industry. To the outside, you're always projecting like you know what you're doing, but actually you're pivoting constantly. So I think what gave us credibility was compared to other firms in the market that are not founder led and the leadership changes and they're part of a bigger firm. We're a standalone firm, we're not part of a huge firm. And they can always pick up the phone and talk to me. And it's not great for my family or social Life. But it's 24 7, so I spend most of my weekends talking to my partners about their issues. You know, we need to fire someone. This investor has an issue, how do we communicate that? And that availability from a founder lens is probably what's most powerful. Yes, of course the platform helps and success breeds success to a certain point. Obviously the size of our checks is important, but that's also a selection criteria. If we sense that someone is really focused on the capital side of our value proposition and not our operating system support, that's probably a bit of an amber flag because you know, before you get married you say all the right things, but then once you get married, behaviors change.
- [50:14]
Podcast Host
So I think you bring up a really interesting insight in that you're a founder too, just like these managers are and you're able to connect on that point. I want to tie that concept to the fact that what you do as a firm is interesting because you're constantly evaluating businesses and asset managers and the founders of those businesses on a daily basis. What would you take from those lessons that you've learned and the 20 years of data points, both tangible and intangible data points as to how you would evaluate your own asset management business.
- [50:50]
Eric Serrano Bernsen
There's a Spanish saying which is the cobbler's son has no shoes. Which is we tend to give lots of advice to others that we don't necessarily follow and we focus on our trade as applied to others and not ourselves. So we have a lot to learn. But I think what we've done well is we realize the difference between the portfolio and the business pretty early on. And if you look on the business side, the one differentiator that also leads from this founder led continuity edge is I think we treat trust from our LPs as a real balance sheet item. And what do I mean by that? Market cycles means that you will always have periods of underperformance. But if you're front footed in terms of over communicating, sharing bad news and always having the client first in mind, that trust allows you to absorb shocks that returns can't absorb. So it's almost like a buffer that allows you to have more permanence in that relationship. And so applying that founder to founder relationship also with the asset Owners is probably what we've done best. We don't have enough time to go through everything that we don't do well. But some of the bigger mistakes probably that we made early on was underestimating how important talent acquisition would be in our portfolio companies. So to give you an example, there's huge key person risk in these businesses. We were talking about the operating system and the operating system for me is three things. Talent, capital permanence and trust. So let's park trust and capital permanence just on the talent side. We've had instances where the leadership of a GP that we've backed has changed six or 12 months into the investment because you know, it's a high stress environment. Some people haven't worked together before and we were never really focused on how do we put teams together that are more likely to stay together and that I think in a couple of investments we've gotten a lot better. But just trying to hold that culture together because everyone talks about culture but like what does that really mean? I think putting a lot of emphasis in talent acquisition so that we have continuity at least in the first few years, that's something that we didn't do as well.
- [53:23]
Podcast Host
If gps are listening to try to understand how to better build and run their firms, how should they think about what you call the operating system of a firm?
- [53:35]
Eric Serrano Bernsen
So I think it's pretty multivariate. I think there's a number of categories. So I always start with capital permanence is how do you build in as much long term alignment as possible. So on the public side for instance, we always do multi year lockups because the importance of capital is that it changes incentives and the importance of infrastructure is that it changes outcomes. So let me unpack that capital changes incentives because if you have a long Runway you will hire differently, you will set your comp structures differently, you will even design your investment product differently in terms of when you crystallize, carry or how quickly you need to monetize DPI, etc. So capital permanence is probably the first part of the operating system that you have to get right. Then second is how are you thinking about the healthiness of the firm. So a lot of gps overspend, they don't look at their balance sheet expenses, tracks, aum, but you really need to plan for like trough revenue expense philosophy. So always leave in a lot of buffer because rainy days are coming. So just think of your own balance sheet. It's back to kind of how GPs are run often doesn't mirror how Portfolio companies that they invest in are evaluated and that's that irony.
- [55:05]
Podcast Host
How should LPs evaluate whether a GP has the ability to have a good operating system? Is it where they came from? Are there certain firms that people tend to come out of where they do a better job because it was hammered into them? Is it just an intangible ability to evaluate people well and certain people have that capability and facility or others don't?
- [55:30]
Eric Serrano Bernsen
I think it's a bit of everything. So I think obviously where you come from, influence is how much importance you give the operating system. And clearly if you come from these already scaled high operating system cultures, you tend to be better at that. But it's also something that can be taught and that's our edge. So we come into teams that potentially don't have experience or time to look at it because distraction is the biggest killer. The reason again these investment firms fail are typically non market driven. So teams go from having 90% of their time dedicated to investing to 50% of their time because the founder, if they were at a big firm, they were purposefully shielded from LPs because the house didn't want you to meet the capital that can then entice you to leave. But you didn't worry about operations, you didn't worry about finance, you didn't worry about hr, you didn't worry about ir. You're literally just focused. So that awareness of that culture means that again coming into the self awareness point, you need to bring in someone like stable who can help you on the business side, set it up but also acquire talent. The CEO, cfo, coo, all of these C level non investment function hires are super important. So it's a combination of a bit of culture, a bit of background, but also self awareness to build that. And I think it's not rocket science. I think the beauty is investing is a bit of an art and it's a lower hit rate. But the business side is a science, you know what you have to build for. And so as long as the volatility of the portfolio is not changing priorities on the business side, so you have to insulate both sides. You can really run a pretty tight business over here and you see it in outcomes. Look at the public and private side. Largest hedge fund in the world. Bridgewater largest private. So alts manager say call it Blackstone. Are they the absolute top performers? No. But are they incredibly well run businesses? Yeah. And that's what rewards scale.
- [57:29]
Podcast Host
I think something that's so interesting about asset management as a category is or as A business construct is these businesses are great businesses. Like beautiful capital permanence, as you talk about with evergreens, that in and of itself is a really interesting innovation and business feature. Even closed end or drawdown funds in private equity and even some private credit funds. Seven to 10 years, you lock up a customer, you generate revenues for seven to 10 years better than most software businesses. Even people love software businesses and the way in which SaaS companies generate revenues. Do you think we'll end up in a world where there are more great businesses in asset management or less? Because the reality is a 2, 3, 4, $5 billion asset manager is a good business and you don't need a lot of people.
- [58:23]
Eric Serrano Bernsen
They're beautiful businesses.
- [58:25]
Podcast Host
So is this a world where. And yes, I know there's nuance to this question because investment performance at the end of the day is the most important to LPs. But to your point too, there's different products for different investors at different times too. As a firm scales, they have a different set of LPs because they have a different set of products and different set of return promises. But are we going to end up in a world where you build four or $5 billion asset managers? That's a great business and there can be a lot of those. Or do you need to be a really big business to be a great business in asset management? How does this whole industry and market structure unfold?
- [59:01]
Eric Serrano Bernsen
So horses for courses in the stable. We have different horses and they run different courses. I love that you brought up SaaS because we think of it as CAS capital as a service. So it's a bit tongue in cheek. But what we're trying to allude to is that as businesses, GPs are capital, light recurring revenue, pretty scalable, low marginal cost. How many more people do you need to manage a billion dollars? Not that many. Right. And so when you look at listed or private asset managers, an average margin is 50%. And if you have a 50% EBITDA margin, and if you're growing a 50% EBITDA margin business at 30% a year, that's a pretty interesting cash flow. And so it's worth unpacking how to evaluate asset management businesses. To your point on kind of why are they so interesting? Asset management businesses create two types of cash flow. They create fre and pre fee related earnings and performance related earnings. Management fees are obviously longer dated. As you point out, they could be 7, 10 permanent. So that's a bond. I mean, all you're doing is you're discounting the cash flow and securitizing that and then carries a bit more complicated depending on the strategy. In public markets, which I love, there's no hurdle, there's no clawback. You have annual income more private credit is sort of a beautiful in betweener between public and private. There you have yield, which I think for us is very important. Liquidity is paramount. And now in these days even more so. And then you have the more back ended, higher MOIC type of private equity type strategies and you take those two cash flows and you put multiples on them and the management fees have higher multiples and the performance fees have lower multiples. But if you put that together, those cash flows are very valuable. And in a time now when people want yield, I think it's a very attractive addition to a portfolio. And it's actually two great additions. I think something like the wealth channel or the institutional channel, they're getting LP return by investing in the gp. They're boosting it with the economics of ownership. What's more exciting than owning the means of production? So you're seeing a lot of institutions owning stakes in asset managers listed or otherwise. And then they have this second derivative which is they have a much more aligned, closer relation of the GP where they can have tailoring of the product they want. So they build their own strategy and that's like a farm team. So a lot of our institutions love the return profile, but they also love the fact that they have this collaborative, healthy relationship with the GPS where they can utilize them in more tailored ways.
- [61:43]
Podcast Host
Two questions come up there. One, is there less of a stigma for GPs to take capital and investors for their management company because there's a part of the market and There are certain GPs who might and even LPs who might think that's a negative signal or did at one point and maybe that's not the case as much. And that kind of gets me to the second part of this question, which is are LPs choosing to do GP stakes investing or seed investing through a conduit or a partner like stable others as their way of sourcing managers? And there are ripple effects for that too, like do they need fund to funds as much or do they need consultants as much? Like it's a really interesting question as it relates to like if gps don't necessarily have a stigma against them for taking a partner who helps them build their business and is an owner and that's not a negative signaling event for the LPs, how does this cascade down to the way in which LPs decide to work with GPS?
- [62:43]
Eric Serrano Bernsen
Yes. I think the stigma point has really disappeared compared to when we started. I think to when we started there were two obstacles. One was people didn't realize how hard it was to start and build a gp and so they were always thinking, oh, well, if you're really good at what you do, you should just start it in your garage. But actually, over the last 20 years, that minimum efficient scale in terms of capital has just gone up and up and up. So unless you are very lucky and your dad is worth 10 billion and he's giving you a billion to start, it's unlikely that you're going to be able to start at scale. So I think that adverse selection stigma has gone away because you see the top talent taking a seat. And what's really interesting is if you look at the winners today, Blackstone was seeded by a Japanese institution. Vista was seeded by a high net worth individual. You go through the list and a lot of the big brands today were actually seeded and had a GP stake builder as part of the early days. It's just, it might not be talked about as much and you know, the founder always wants to assign causality to their success, to their own doing rather than everyone around them. But I think that stigma has disappeared when it comes to do LPs and institutions want to work more with firms that they have a stake in? Absolutely. If you're an asset owner that's deciding to allocate between firms and they're quite similar and one firm is one that you own a stake in and one you don't, you're obviously going to go with your partner because that stays within the family. So we're seeing more and more partnerships evolve. Where five, ten years ago it was mostly sophisticated institutions that were doing GP stakes, now we're seeing a couple of really interesting entrants. So in terms of partnerships with younger firms, you're seeing players in the wealth channel say Coriant is an interesting firm, they're in turn owned by Mubadala. They're very sophisticated, they're innovative, they're involved in having stakes in asset managers because they can build product for their wealth channel in the way that they want to build it. It's a very interesting firm and insurance companies are doing lots of this. We've talked about Apollo. They have the athene side of things. Another sophisticated insurer, Liberty Mutual, is someone we have a partnership with on the real estate side. They're looking to create product for their type of insurance assets that's friendly for their regulatory Environment and regulatory capital rules. And so we're seeing a lot of interesting types of LP segment getting involved in GP stakes because it's only logical, if you're going to put money with someone, why not be partners with them as well?
- [65:18]
Podcast Host
It gets to another interesting question, because LPs are going to be more inclined to work with GPs who they already have some sort of a relationship with. I want to ask a slightly different dimension to that question, which is around manager edge in some senses, if that's the case, the LPs are relying on you to discern what makes a manager great or different. There's a lot of things obviously that go into an LP deciding to allocate to a manager, or you as a staker seeder deciding to work with another GP because you discern all these data points to create their edge. But I think if we distill down the decision to allocate, it comes down to one question that an allocator has to figure out, which is what is your edge as a manager? How do you discern edge for a manager?
- [66:12]
Eric Serrano Bernsen
So I think edge is very different depending on the strategy. So it might make sense to use a few examples. So let's talk about the more recent strategies that we've been investing in are say around capital solutions or mid market lending or opportunistic lending or distressed lending or receivables or asset backed finance. Those are sort of a swath of sub strategies within the kind of uncorrelated private credit, private equity royalties you could put into equity or credit structured equity. You're probably straddling both. The edge in each of those strategies is probably different and you need to look at the value chain of what they do. So typically we're looking at sourcing, we're looking at underwriting, we're looking at structuring and we're looking at portfolio management and we're looking at exit. And frankly, I think different strategies and different GPs play it completely differently. So some of them have a real weighting on the front end of that. It's really sourcing and underwriting, but they don't do a ton of portfolio management or value creation. And some of them are all about exit and portfolio management or value creation. So they'll participate in more auctions and have less of an emphasis on sourcing, but they're just really good at entry to exit, multiple expansion. Right. And that edge is really on the investment side. But if we go back to. And the portfolio side, but if we go back to operating system, what is the Edge there, the portfolio side is kind of table stakes. And we were discussing this earlier, like what is the incremental success factor that we've seen in our portfolio companies that have scaled to multibillion? It's really understanding that the operating system is where the edge is, because candidly, the edge on the portfolio, there's not huge dispersion of performance in a bunch of strategies. As soon as you get into kind of more institutional products, if you're doing crypto or things like that, which we don't, I think there's some dispersion in returns where you can just lead with returns. But in what we do for institutional wealth type of audience there you really need the operating system to be spot on. And that comes back to this edge of, oh, I need to pay ops, I need to pay sales, I need to pay ir, it takes a village. And so that's the real edge is when you're meeting a founder, are they talking about all these other things that they need and want to pay for? Because if you're being stingy and thinking that it's sort of all about you, you're never going to get anywhere.
- [68:39]
Podcast Host
So I think that's a great segue into how GPS might learn from some of the success stories in the space. If a GP were to ask you what managers or firms or firm founders they should emulate, are there any founders, firms that you'd say these are firms to emulate and here's why.
- [69:01]
Eric Serrano Bernsen
Yeah, again, I think people have very different superpowers. A few that come to mind that I really think are excellent communicators are people like Ray Dalio or Howard Marks. I think their edge and superpower is distilling really complicated concepts into easy to understand risk reward questions. So they're very frameworked, they're highly synthesized, and they're just, you know, a pleasure to read and listen to. So I think communication edge to me has always been something I admired because I think it's actually really hard to do. And to make something look effortless takes a lot of effort. So communication is just a theme of people that I admire. And then on the other side, I think I admire patience and this long term hustle. So you look at someone like Steve Schwarzman or Jim Coulter or Warren Buffett, and first you have to live a long time. So I think life expectancy is an edge because compounding gets pretty spectacular towards the back end of your life. But what is the common theme of their careers is they work incredibly hard, they never give up. I go to conferences and see these individuals that are 40, 50, 60 years in and they're there before me and they've been up and like working out and I'm like, if this is what it takes to become a legend, I hope I have it in me. But that type of effort is incredible.
- [70:26]
Podcast Host
Well, you do Creatine every day and you have great Matcha here, so you're on the right track.
- [70:30]
Eric Serrano Bernsen
Creatine and Matcha might be the edge that now you've given away to everyone.
- [70:35]
Podcast Host
It might be. But I think the first part of what you said was also so interesting because it really brings everything full circle and I think it's a really important point. Today's world of asset management is communication edge. You think about what you talked about at the beginning. We talked about brand and brand is different for different firms. DNAs are different for different firms. But in today's world of asset management, with social media, with the way in which people consume and find information that relates to how managers sell both to LPs as well as the partner companies or founders that they decide to work with. So I think that's such an interesting perspective on things because it also changes the skill set that executives at the largest firms think they probably have a different they need a different skill set than they might have thought 10 years ago. And then even founders, they think about how do they build their firm. So I think that's such an interesting
- [71:29]
Eric Serrano Bernsen
way of and if they have someone like you with this amazing platform you've built. Thank you for having me on it.
- [71:34]
Podcast Host
Thanks for coming on the show. This was great. You did a great job communicating too.
- [71:37]
Eric Serrano Bernsen
So thanks so much.
- [71:39]
Michael
Thanks for listening to this episode of Alt Goes Mainstream.
- [71:42]
Podcast Host
I hope you enjoyed it.
- [71:43]
Michael
You can read more about Alts at my substack altgoes mainstream.substack.com Thanks a lot and have a great day.