Podcast Summary: Capital Allocators – Mike Kelly on Democratizing Access to the Middle Market (EP.473)
Date: November 24, 2025
Host: Ted Seides
Guest: Mike Kelly, Co-President & CIO, Future Standard

Overview

This episode of Capital Allocators explores the evolution and democratization of alternative investments—particularly private credit and private equity—for the wealth management channel, focusing on the middle market. Ted Seides engages Mike Kelly, a veteran alternative asset executive and current Co-President & CIO of Future Standard, to discuss his career trajectory, insights on building asset management businesses, lessons in incentives, and the phenomenal expansion of alternative investment access for non-institutional investors.

Key Discussion Points & Insights

Mike Kelly’s Entry into Investments and Alternatives (07:36–10:22)

• Early Career Path:
  • Started at Salomon Brothers in FIG banking and fixed income trading.
  • Noted that the most talented investors worked in "arcane" alternatives—hedge funds, VC, private equity (08:00).
  • Broke into hedge funds by cold-calling from a directory; Lee Cooperman was the only one to answer. Cooperman’s “PhD” requirement meant “Poor, Hungry, and Driven."
  • Worked under Lee Cooperman at Omega, then at Tiger Management with Julian Robertson.
  • Helped found FrontPoint Partners to institutionalize hedge funds.

“He told me that he only hired PhDs... then he said that PhDs stood for poor, hungry and driven.”
— Mike Kelly (09:05)

Lessons on Investment Mindset (10:22–12:56)

• Intellectual Flexibility:
  • Be open to challenging your own views with “disconfirming evidence.”
• Variant Perception:
  • Lesson from Michael Steinhardt: Only opportunity is where your view differs from what’s in the price.

“Come to a view based on your work, but be open to change your mind if you see disconfirming evidence.”
— Mike Kelly (10:38)

Institutionalization of Hedge Funds (12:44–14:58)

• Demystifying Alternatives:
  • FrontPoint aimed to provide transparency, risk reporting, and diligence, making alternatives approachable for institutions.
  • Brought “best facets” of traditional asset management—reporting, partnership, and client focus—to the hedge fund space.

Incentives, Leadership, and Lessons from FrontPoint (16:04–18:23)

• Matching Expectations and Incentives:
  • Importance of aligning product, performance, and client motivation for sustainable relationships.
  • Quoting Charlie Munger: “Show me the incentives and I’ll show you the behavior.”

“If you correctly frame the incentives, they will behave appropriately. They’re rational human beings.”
— Mike Kelly (17:44)

From Institutionals to the Wealth Channel (18:31–21:58)

• Spotting an Opportunity:
  • Saw mass affluent and individual investors as neglected by alternatives, despite “mission-based opportunity.”
  • Joined Franklin Square (now Future Standard) to build businesses democratizing alternatives via the wealth channel.

“If [alternatives] are so good for the most sophisticated allocators... why are they not made available to this group?”
— Mike Kelly (19:09)

Building Out Future Standard’s Platform (22:01–24:10)

• Product Expansion:
  • Started with GSO-managed BDC, then broadened via partnerships (GoldenTree, EIG, Rialto).
  • Built internal teams (e.g., in private credit via Andrew Beckman) and completed acquisitions (Portfolio Advisors, Post Road Group).
  • Now manage ~$90B across private credit, private equity, real estate, infrastructure, and multi-asset.

Strategy Selection & Manager Partnerships (24:10–28:39)

• Selection Criteria:
  • Sought “best of breed” managers in areas where private wealth clients’ needs and risk/return profiles aligned.
  • Focus on first-layer fee sharing, “leveling the playing field” on access and fees for private clients vs. institutional clients.

“We want to level the playing field... same types of investments... same treatment as institutional investors.”
— Mike Kelly (29:08)

Building Distribution and Wealth Channel Expertise (30:18–32:31)

• Distribution as a Moat:
  • Early alternative managers ignored wealth channel. Future Standard built a major distribution and client-facing operation (140 out of 600 staff).
  • Serve RIAs, broker-dealers, wirehouses with education, sales, and marketing infrastructure.

“We had a fully built national wholesale distribution capability...”
— Mike Kelly (30:55)

Buy vs. Build: Mergers and Vertical Expansion (32:31–36:19)

• Acquiring vs Building Teams:
  • Favoring acquisitions (Portfolio Advisors for private equity) when relationships, history, and infrastructure were hard to replicate.
  • Distinction: sometimes acquire teams/firms, sometimes build internally if scale and capabilities can be developed.

Investment Vehicles: BDCs, Interval Funds, and Beyond (36:19–39:06)

• Vehicles for Access:
  • BDCs: suited for income-seeking individuals, regulated, leverage-friendly, but with structural investment limits.
  • Interval funds: more flexible, favored for credit and now gaining adoption in private equity “evergreen” strategies.
  • Trade-offs: vintage diversification, compounding, but lower liquidity and often lower return than closed-end PE funds.

“You’re not going to generate the same level of returns in a private equity evergreen structure... the returns will be more likely a 12 or 13%.”
— Mike Kelly (40:26)

Expectations, Education, and Returns (41:24–45:58)

• Private Credit:
  • Now tighter spreads, higher base rates, but additional premium for smaller, more fragmented credit.
  • Outperformance in riskier, less efficient middle/small market lending.
• Private Equity:
  • Era of “financial engineering” (high leverage, multiple expansion) giving way to value creation via operational improvement, especially in the middle market.
  • Advisors and investors need to align return expectations with newer regime and lower leverage/multiples.
• Education paramount: Fundamental analysis, transparency, and communication are vital as expectations reset.

“The days of financial engineering your way to higher returns, in my view, are over.”
— Mike Kelly (41:45)

Alternatives and Defined Contribution (46:02–48:03)

• 401(k) Potential:
  • Private markets to access DC plans via hybrid collective trusts and similar vehicles.
  • “No reason” longer-horizon investors shouldn’t engage with illiquidity premia.
  • Key: Advisors best suited to determine suitability based on complexity, liquidity, and fee trade-offs.

“If you’re in your 20s or 30s... why should all your assets be in 100% daily liquid instruments? It doesn’t make any sense to me.”
— Mike Kelly (46:36)

Competitive Landscape and Brand (48:03–50:20)

• Differentiation:
  • Future Standard focuses on true middle-market opportunities, positioning differently from alternatives “giants” serving megadeals.
  • Unified platform and brand reflect “anticipating what’s next” and raising standards for clients.

Risks, Inflows, and Institutional Implications (50:20–54:25)

• Main Risk:
  • Not overvaluation, but education—and making sure investors understand the illiquidity and realistic return expectations.
• Institutional Impact:
  • Private wealth capital is “here to stay,” now often a co-investor or secondary liquidity provider for institutions.
  • Institutional investors should learn to coexist (and partner) with retail/wealth capital influx.

“It’s awareness, education and expectations management where it has the greatest surface area for risk.”
— Mike Kelly (50:59)

Catalysts for Current Adoption (54:25–56:13)

• Why Now?
  • Post-2021: Market backdrop changed (end of low-rate “golden era”), challenging traditional 60/40 portfolio returns.
  • Simultaneously, infrastructure for wealth access matured (products, platforms, compliance).

Excitement for the Future (56:13–59:16)

• Biggest Opportunities:
  • Private credit and asset-based finance remain underpenetrated.
  • Private secondary markets (for both credit and equity) offer “very early innings” potential.
  • Longevity, digitization/tokenization of private assets, and rethinking product design for longer lifespans are emerging themes.

“We are just scratching the surface on areas like asset based finance.”
— Mike Kelly (56:29)

Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote | |-----------|---------|-------| | 09:05 | Mike Kelly | “He told me that he only hired PhDs... PhDs stood for poor, hungry and driven.” | | 10:38 | Mike Kelly | “Come to a view based on your work, but be open to change your mind…” | | 17:44 | Mike Kelly | “If you correctly frame the incentives, they will behave appropriately..." | | 19:09 | Mike Kelly | “If [alternatives] are so good for the most sophisticated allocators... why are they not made available to this group?" | | 29:08 | Mike Kelly | “We want to level the playing field for all investors...” | | 41:45 | Mike Kelly | “The days of financial engineering your way to higher returns, in my view, are over.” | | 46:36 | Mike Kelly | “If you’re in your 20s or 30s... why should all your assets be in 100% daily liquid instruments?” | | 50:59 | Mike Kelly | “It’s awareness, education and expectations management where it has the greatest surface area for risk.” | | 56:29 | Mike Kelly | “We are just scratching the surface on areas like asset based finance...” |

Timestamps for Major Segments

• 07:36 – Mike Kelly’s investment beginnings and early career
• 10:22 – Lessons on analysis and variant perception
• 12:44 – Institutionalizing hedge funds
• 16:04 – Incentives, expectations, and pitfalls
• 18:31 – Pivot to wealth/retail markets
• 22:01 – Building Future Standard and expanding strategies
• 30:18 – Distribution as a competitive moat
• 36:19 – Investment vehicles (BDCs, interval funds)
• 41:24 – Expectations, regime change, and realistic returns
• 46:02 – Defined contribution and the 401(k) opportunity
• 50:20 – Risks of democratization and capital inflows
• 54:25 – Why mass adoption happened now
• 56:13 – Future opportunities and industry outlook

Closing Personal Insights (59:49–62:35)

• Personal Background: Adopted child, first in family to attend college.
• Influential Mentors: Lee Cooperman (career break, values), Gil Caffre (integrity).
• Best Advice: “So you believe, so you will achieve”—mindset’s central role.
• Next Chapter: Family focus, servant leadership, teaching/mentoring.

Tone & Style

Throughout, Mike Kelly’s tone blends humility and candor, frequently emphasizing the need for transparency, education, and properly aligned incentives. Both he and Ted maintain an insider's but accessible approach, engaging the complexities of institutional vs. wealth management channels without veering into jargon.

For anyone interested in the past, present, and future of alternatives for wealth management—and specifically how middle market strategies are being made widely available—this conversation is a masterclass in both philosophy and practical business execution.