The Compound and Friends Podcast: "Ladies and Gentlemen, Mr. Harvey Schwartz"

Release Date: December 27, 2024
Host: Downtown Josh Brown, Michael Batnick
Guest: Harvey Schwartz, CEO of Carlisle and Board Member at Carlyle
Duration: Approximately 50 minutes

1. Introduction and Background

The episode kicks off with a brief promotional segment by Harvey Schwartz for Vaneck and Public Bond accounts, highlighting opportunities in clean and efficient energy solutions like nuclear power. Following the advertisements, Josh Brown and Michael Batnick introduce the podcast, setting the stage for a deep dive into Harvey Schwartz's illustrious career and his current role at Carlisle.

2. Early Career of Harvey Schwartz

Harvey Schwartz shares his humble beginnings in the financial industry. Starting his career in 1987 at JB Hanauer, a municipal bond firm in Livingston, New Jersey, Harvey recounts the challenges of cold calling high-net-worth clients to sell tax-free municipal bonds.

Harvey Schwartz [05:46]: "You make as many phone calls a day as you can, say, 'Hi, I'm Harvey Schwartz,' and they'd hang up immediately. One out of fifty might pick up."

Harvey's early career was tumultuous, especially during the infamous 1987 stock market crash, which left a profound impact on him.

Harvey Schwartz [06:19]: "Markets are very volatile. Something I didn't understand. They don't teach it in school, really."

3. Transition to Citibank and Goldman Sachs

After facing setbacks and nearly filing for personal bankruptcy, Harvey was fortunate enough to secure a temporary position at Citibank, thanks to a friend's intervention. His tenure at Citibank was transformative, eventually leading him to a rigorous training program that set the foundation for his Wall Street career.

Harvey Schwartz [09:02]: "That was really where I'd say my more conventional journey on Wall Street started."

Harvey's move to Goldman Sachs was facilitated by a colleague from Citibank who recognized his potential. At Goldman, Harvey made significant strides, particularly in structured derivatives and trading, positioning himself as a key player during the firm's navigation of the 2008 financial crisis.

4. Insights from the 2008 Financial Crisis

Harvey reflects on his experiences during the 2008 financial crisis, emphasizing the importance of understanding systemic risks and the fragility of the financial system.

Harvey Schwartz [16:20]: "Understanding the vulnerability, it goes back to what we were talking about before the show. These moments are incredible points for all of us to pause and say, hey, what brought us here?"

He highlights two critical turning points that signaled the end of the crisis for him: the implementation of the Troubled Asset Relief Program (TARP) and the transformation of Goldman Sachs into a bank entity.

5. Evolution of Capital Formation and Carlyle’s Strategy

Post-crisis, the capital formation landscape witnessed a significant shift from institutional investors to wealth management. Harvey discusses how Carlisle has adapted to these changes by prioritizing wealth management and launching innovative credit solutions.

Harvey Schwartz [36:31]: "Of the many significant trends that will drive the evolution of capital formation, this is probably the most significant for the next 10 or 20 years."

Harvey emphasizes the global nature of this evolution, noting that it's not just a U.S.-centric phenomenon.

6. The Shift from Institutional to Wealth Investors

Harvey and Michael delve into the transition from traditional institutional investors to a broader wealth investor base. They discuss the growing importance of wealth management in providing capital for business growth and the diversification of investment strategies to include more illiquid assets.

Harvey Schwartz [37:58]: "It's like the early days of ETFs. And it will be as significant."

Harvey underscores the increasing role of private equity and credit in wealth portfolios, driven by the changing needs and goals of modern investors.

7. Future of Wealth Management and Private Markets

The conversation shifts to the future trajectory of wealth management, particularly the integration of illiquid investments in retirement accounts like 401(k)s. Harvey anticipates a substantial shift in how individual investors approach portfolio construction, with a greater emphasis on long-term, diversified assets.

Harvey Schwartz [46:39]: "It's going to happen. All that happened because it should happen."

Michael adds that the flexibility in portfolio construction is essential for both institutional and individual investors, highlighting Carlisle's strategic initiatives to cater to this evolving landscape.

8. Conclusion and Highlights of Carlyle’s Success

As the podcast wraps up, Josh Brown highlights Carlisle's impressive financial metrics, including a 17% year-over-year increase in assets under management to $447 billion, record fees, and substantial dry powder growth. Harvey lauds the team's efforts in mobilizing growth and repositioning the firm for future success.

Harvey Schwartz [33:54]: "We've changed the carry protocols. We've elevated people, introduced new CFOs, and repositioned the firm for growth."

Josh and Michael commend Harvey and his team for Carlisle's resurgence and strategic direction, noting the firm's alignment with market trends and its ability to leverage its iconic brand in the wealth management space.

Notable Quotes & Timestamps

• Harvey Schwartz [05:46]: "You make as many phone calls a day as you can, say, 'Hi, I'm Harvey Schwartz,' and they'd hang up immediately. One out of fifty might pick up."

• Harvey Schwartz [06:19]: "Markets are very volatile. Something I didn't understand. They don't teach it in school, really."

• Harvey Schwartz [09:02]: "That was really where I'd say my more conventional journey on Wall Street started."

• Harvey Schwartz [16:20]: "Understanding the vulnerability, it goes back to what we were talking about before the show. These moments are incredible points for all of us to pause and say, hey, what brought us here?"

• Harvey Schwartz [36:31]: "Of the many significant trends that will drive the evolution of capital formation, this is probably the most significant for the next 10 or 20 years."

• Harvey Schwartz [37:58]: "It's like the early days of ETFs. And it will be as significant."

• Harvey Schwartz [46:39]: "It's going to happen. All that happened because it should happen."

• Harvey Schwartz [33:54]: "We've changed the carry protocols. We've elevated people, introduced new CFOs, and repositioned the firm for growth."

Key Takeaways

• Resilience and Mentorship: Harvey Schwartz's journey underscores the importance of resilience and the impact of mentors and influential figures in shaping one's career trajectory.

• Adaptation to Market Changes: The financial industry's landscape has dramatically evolved post-2008, with a notable shift towards wealth management and alternative investments.

• Strategic Positioning of Carlisle: Under Harvey's leadership, Carlisle has effectively repositioned itself to capitalize on emerging trends, focusing on wealth management and innovative credit solutions.

• Future of Investments: The integration of illiquid assets into retirement accounts and the diversification of investment strategies are poised to redefine portfolio constructions in the coming decades.

This episode offers invaluable insights into the financial industry's evolution, the strategic maneuvers of a leading investment firm, and the personal journey of a seasoned executive navigating through market turbulences. Whether you're a seasoned investor or new to the financial landscape, Harvey Schwartz's experiences provide a roadmap for resilience, adaptation, and strategic growth.