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cover of episode Kipp deVeer – Scaling for Private Wealth Globally in Credit (Private Wealth 5, EP.449)

Kipp deVeer – Scaling for Private Wealth Globally in Credit (Private Wealth 5, EP.449)

2025/6/2
logo of podcast Capital Allocators – Inside the Institutional Investment Industry

Capital Allocators – Inside the Institutional Investment Industry

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@Kipp deVeer : 作为Ares Management的联合总裁,我亲历了公司从以信贷业务为主导,到积极拓展房地产、基础设施融资以及数字基础设施等多元化资产类别的过程。通过收购GCP,我们成功转型为一家真正的全球性公司,业务遍及美国、欧洲和亚洲。大约六七年前,我们就已开始关注私人财富渠道,并敏锐地意识到该市场的巨大潜力和对另类资产的旺盛需求。为了抓住这一机遇,我们通过收购Black Creek公司,迅速建立起了财富管理业务,并组建了一支由经验丰富的专业人士组成的团队。在Black Creek的CEO Raj Danda的带领下,我们加速了财富管理业务的增长,并积极拓展全球市场。我们坚信,只有少数几家公司能够在该领域占据领先地位,因此我们必须迅速行动,抢占市场份额。目前,Ares已经成为市场份额领先的五家公司之一,并致力于为客户提供多元化的投资选择和卓越的投资业绩。未来,我们将继续加强与大型平台的合作,拓展独立机构渠道,并不断创新产品和服务,以满足不断增长的私人财富管理需求。

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Ares Management's current status is discussed, including its $500 billion AUM, its credit-centric approach and growth in real assets, particularly with its recent acquisition of GCP. This acquisition made Ares a global firm with presence in US, Europe and Asia.
  • Ares Management's AUM is $500 billion.
  • Credit business dominates, but growth in real assets is a key focus.
  • GCP acquisition resulted in global presence (US, Europe, Asia).

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Thank you.

WCM is a global equity investment manager, majority owned by its employees. They believe that being based on the West Coast, away from the influence of Wall Street groupthink, provides them with the freedom to live out their investment team's core values, think different and get better.

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Hello, I'm Ted Seides, and this is Capital Allocators. This show is an open exploration of the people and process behind capital allocation. Through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital.

You can join our mailing list and access premium content at CapitalAllocators.com. All opinions expressed by TED and podcast guests are solely their own opinions and do not reflect the opinion of Capital Allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Capital Allocators or podcast guests may maintain positions and securities discussed on this podcast.

30 years ago, institutional investors held most of their assets in stocks and bonds. David Swenson led a movement to an approach to portfolio management that broadened the asset mix to alternative investments, including hedge funds, private equity, venture capital, and real assets. These days, almost every institutional portfolio incorporates significant allocations to alternatives to produce better outcomes with similar risk or similar outcomes with lower risk.

However, capital in the hands of individuals has not yet followed suit. Private wealth portfolios, particularly the so-called mass affluent, typically hold only 2% to 5% of their assets in alternatives, compared to a range of 20% to 50% for institutions. But that's changing quickly. Innovations in structure have allowed individuals to access alternative strategies at lower minimums with liquidity options not previously available.

According to Arctos Partners, the six largest private banking and wire house platforms committed $110 billion to funds last year, approximately twice the amount invested from the six largest institutional investors in North America. And those flows are just beginning.

the potential investment dollars from private wealth to alternatives are staggering. Every 1% asset allocation shift would equate to approximately $500 billion of new investments. The impact of these capital flows will have ramifications for GPs and LPs for decades to come. How will the capital get deployed? What will it do to asset prices? What will it mean for returns and for fees? And who will win and who will lose?

This mini-series, Private Wealth, explores the important questions raised by the accelerating convergence of institutional-style investing with private wealth. We'll hear from three of the most influential asset owners, one each from the private banking, wire house, and RIA channels, and three of the most significant asset managers playing in the space.

Just as this channel is in the early innings of changing the investment landscape, so too will this mini-series be just the beginning of our exploration of what it means for you. My guest on the fifth episode of Private Wealth is Kip DeVere, the co-president of Aries Management, a leading global public alternative investment firm that manages $500 billion across credit, private equity, real assets, and infrastructure.

Kip came on the show last year to share the Aries story, and that conversation is replayed in the feed. Our conversation covers Aries' credit-centric approach to serving the wealth chain. We discuss Aries' dedicated focus and expansion in private wealth alongside a strategic acquisition five years ago, the resources and strategies Aries has developed since, and the

the firm's approach to scaling distribution, servicing financial advisors, navigating pro-cyclical capital flows and credit, and maintaining underwriting discipline amidst rapid growth. We discussed the challenges of building brand recognition in the channel and opportunities ahead in wealth for real assets and infrastructure investments and in Europe and Asia.

Before we get to the interview, a quick announcement. We've set new dates for our Capital Allocators University for investor relations and business development professionals. Those dates are December 3rd and 4th in New York City. Later in the year is just a better time of year for this gathering. It's post AGM season, travel starts to wind down, it's right before the holiday crunch time, and it's a great time for capital raisers to reflect on their previous year and plan for the year ahead.

December 3rd and 4th in New York City. CAU for IRBD is a closed door gathering for capital raisers to connect with peers, learn from allocators and other experts, and really share in best practices with each other. You can learn more at capitalallocators.com slash university. Thanks so much for spreading the word about Capital Allocators University for investor relations and business development professionals.

Please enjoy my conversation with Kip DeVere. Kip, thanks for coming back on. Thanks, Ted. Good to see you. I'd love to get an update on the breadth of Aries today. I know it hasn't been too long since you were on, but when you're growing fast, it's hard to keep up. Firm does continue to grow. We're about 500 billion of AUM today. Still dominated by the credit business, but we're focused on growth in a lot of the other areas. So real assets, which for us is real estate, infrastructure, finance,

And increasingly with an acquisition that we just closed called GCP, we're focused on digital infrastructure and other parts of that asset class. With GCP, we're really a global firm now. This GCP acquisition brought hundreds of people in the Japanese real estate business, gets us entry into that market. So we feel like we've really crossed over from being a U.S.-centric firm into being really active in the U.S., in Europe, and in Asia.

So we're going to dive in on the private wealth channel in particular, and I'd love to hear your capital formation trajectory in that space from when it started to where you are today. We started focusing six or seven years ago and frankly did a couple of things early, some good, some not so good. But it was obvious to us that that market was very large, that there was a tremendous amount of demand from that market to the alternative asset classes that we manage and

But the way that we really started building wealth was actually through an acquisition. So we bought a company during that COVID period called Black Creek that was based out in Denver. But with, in our head, what was really a real estate acquisition, a bulk up on the industrial side and add talent investing, we inherited a 75-person retail and wholesaling team. We were fortunate because...

The now head of our wealth management business was a pretty experienced Morgan Stanley guy. His name's Raj Danda, who had actually left Morgan Stanley a couple of years prior to go out and be the CEO of Black Creek. So we had somebody pretty sophisticated there who understood wealth. He had been a banker by background, but had ended up in the wealth business at Morgan Stanley. And that was sort of the allure of Black Creek and had been continuing to upgrade the talent in what was a 75-person U.S.,

wholesaler, retailer, selling both through wires, but also through the RIAs and the independent folks. We accelerated the growth quickly, although nervously at his insistence, which was the right thing to do. But he basically said, this whole opportunity is growing and it's becoming global. And we need to make sure that we

race to the finish line, because his view, and I think he was right and we see it today, was that there would be four or five alternatives firms that really were at the top of the market in terms of market share. And to put it in perspective, the early mover in that space was Blackstone by a long shot. And the reason they were is because they could afford to be. So

So they went out and hired a ton of people to very people-intensive business. Raj basically said, we need to go from 75 to 150 people globally like yesterday, which we did, although took a little bit of a breath before we did it. So what was that decision process where...

You hire them for their investment capability and all of a sudden you're getting pitched, hey, this is going to be a bigger opportunity. When we were in the midst of negotiating the acquisition, we saw it as an asset that we could unlock.

But it was a really interesting period of time in 2000, 2001, whenever it was. Blackstone, because of their early lead in the market, had a roughly 60%, 65% market share in that channel. Five, six years ago, that channel was exclusively non-traded breeds and BDCs. Blackstone has two very large funds in that channel.

and were an overwhelming market leader, almost to their disadvantage. So they'd gotten to a point where FAs everywhere were saying, this is great. My clients want more access to this product, but do I really want to be 60% exposed to Blackstone? Not really. I wish I could diversify. So the race to the finish line comment was a belief has proven to be true.

that if we got there and we really focused on it by putting people in the field, educating the RIAs and the FAs about ARIs and our products, we could jump right up the leaderboard and get our fair share, which is what's happened. There are now four or five firms, including Blackstone and ARIs, that have probably 30% or 40% market share at the top of the stack.

What is your team that's doing that distribution look like today from the 75 to the 150? Yeah, it's diverse. It requires a lot of servicing because it's smaller checks with bigger numbers of investors than we've been used to. At the top of the house, we have Raj and he's got a handful of folks that I would call his senior management team. But below them, it's really a sales force in the field.

We have a bunch of both external and internal wholesalers. Internal wholesalers really means client facing stuff. When there are requests that come in, they respond to the huge number of clients there. The only other thing I'd add is that we did go out and hire a pretty substantial

person in each of the European market in London and in Hong Kong. So we've taken the effort global as well, which is important. Last year, the capital raising that we did in Europe was tremendous and a little bit of a surprise for us. And I think this year may be that year for Asia. But being global is important because I think it's a global opportunity. As you frame out what that team needs to look like, have you figured out the math of for every X number of clients or dollars you need a certain number of people?

For sure. Both on the institutional side and on the retail side, we spend a lot of time looking at metrics. I mean, it's really the two metrics that they like to use are number of engagements divided by salespeople. How productive are you just on a visit standpoint? And then, of course, it's dollars raised by people in the field. And are you getting efficiency? And it's all about making sure that you have the right message. You're going to the right people with the right things.

Because the death of a sales force is that you're deploying your sales force with clients in regards to products they're not interested in. Your effectiveness ratio is down, down, down. What do those rough numbers look like in the wealth channel? The way that we think about it is just different from the institutional business. Generally, what you're seeing from these clients is they're putting...

$200,000 to $500,000 check sizes to work. And we found that that money is quite sticky. It's sort of a set it and forget it, particularly on the income strategies like REITs and BDCs. But a lot of the other strategies that folks are bringing are playing into the three themes that we like to communicate around our products. One is durable income. So you have people that just say,

here's $300,000 and set it and forget it. And I like the fact that it isn't particularly correlated with public markets and I get great income and I'm just going to let it sit there. And we find that to be very sticky. The second one is just diversified private equity.

A lot of folks have done that through a secondaries platform. Others have done it through more of a primary private equity product. Blackstone does that. Vista does that. And the third is tax-advantaged real assets. And we and others do that largely through REITs and increasingly through infrastructure funds.

As you look at those strategies, what is different other than taxes that you've seen from the demand and the wealth channel compared to what you see in the institutional channel? I don't think there's actually a whole lot that's different. I think the driver retail, and we have a particular lens on this because of our large public BDC that has a stock price that tends to

look and feel a little bit more like a public equity exposure to an RIA. I had this debate for years with financial advisors where I'd say, just buy the BDC. Well, my clients don't like it when the stock goes up and down and they don't like the correlation to the market and the volatility. And so we'll do what we do. When stock goes down, buy more. When stock goes up, if you want to, you can lighten up and sell it.

Just after having had this debate, they love the semi-liquid product that has very little correlation and not a lot of volatility, hopefully, if you're managing it well. And it just looks and feels, as they think about allocations for clients, very different than the traditional portfolios that most retail mass affluent investors are used to, which is stocks and bonds. As you look out now over the next couple of years,

How do you scope out what you think this opportunity is in the space? It's funny. A lot of different people are looking at it and come up with vastly different numbers. But I think the point is it is a very large and growing market. Importantly for us, it's just been historically for Aries untapped. So if you look at our roughly 500 billion of AUM today, about 40 billion of that is from the Wealth Channel.

Most firms like Aries expect that 40% of their capital raising going forward will come from the wealth channel. That's not our expectation. But I mean, I think if we think about sizing new capital on an annual basis, my guess is something like 20% of our forecast for 2025 would be retail flows from the wealth channel.

Where's that inflection coming from? So you go back a few years, you weren't even thinking about it. Why is it happening now? I think we're responding to a trend in the mass affluent community that is a desire for

More sophisticated portfolios than you'd refer to as the traditional 60-40 portfolio that I think it was 2021 experienced negative returns in both public equities and public fixed income. So folks are looking for more and they realize there are other

things out there that they can do. It's the increased preponderance of private market transactions, the increased prominence of alternatives firms. I think there are a lot of folks that are sitting around with whatever their investable assets are, $3 to $10 million. And they're saying, all I read about is KKR and Apollo and Aries and Blackstone. Why can't I get access to anything like that? So there's huge demand from the clients.

And increasingly, both the wire houses and the independents are focused on delivering that for their clients. So I think we're just responding to a large and growing market that for us is pretty obvious that's been historically untapped. With what started, as you mentioned, non-traded BDCs and REITs, it feels like there's a growing supply of different types of structures and vehicles. How has it evolved for you over the last couple of years?

Five to 10 years ago, the wealth slash retail was literally non-traded REITs and BDCs. That was it. I think innovation has been secondaries, real assets like infrastructure have been interesting. A lot of folks have launched those funds, but we're not going to blow an endless 30 product portfolio out to people because we don't want to be confusing our view of how the market has evolved and is likely to continue.

is that if you're an FA, you're going to say back to my comment of I don't want to be 60% exposed to Blackstone. Most of the FAs we talked to will say, I want three to five managers that have a pretty well curated set of products. And I talked about the three themes that we try to

communicate with them. And we played into that. We have a six or seven product portfolio today to deliver to FAs. And it's credit and it's real estate, it's private equity, it's infrastructure. Maybe we'll launch one or two more, but our focus is that's a pretty solid offering. It's pretty comprehensive. And my guess is if you're an FA, you look at Aries and you say, I'm interested in four of their funds, and then I'm going to do three Blackstone funds and three Blue Owl funds.

And that's what you deliver for your client. And you feel diversified and you're not taking single manager risk because when they're going to come back with their clients, their clients are going to be asking questions. How's performance or the markets are volatile? What's going on in my credit funds? You want to be able to call one or two folks that you have a relationship with.

that you're invested with. Get a quick read on the market so you can turn back around and say, I called my folks at Aries and I called my folks at Blue Owl and this is what they told me and move on with life. How would you think about the space if you weren't one of the five or six players that are capturing that market share today?

I think it's hard. Some of the smaller firms are trying to figure out how to access it, but the top three to five players now are pretty consistent in terms of capital raised. People's market share has changed over five years, but it hasn't changed that much over the last year or so. The top five have been the top five now for a while. As you look at each of those three themes,

Just love to hear the story behind, you know, start with a durable income. Yeah. Harry's grew up as a credit firm and a lot of what we do across everything institutional is built on private markets credit being, we think,

less volatile than public market credit and delivering premium yields. That message is pretty easy for people. We have a long track record of delivering performance behind that message. So the funds that we have in the retail channel and credit are not surprisingly the largest ones that we manage and are growing the quickest.

I think if you're smaller, you have to come with something that looks really differentiated because a lot of the product that they see, whether it's from Aries or Blue Owl, it's similar. And you're just choosing, I think, based on brand name or manager selection or performance, certainly. But you get to the top four or five people pretty quickly and it becomes obvious that it's where you want to allocate.

The concept that private credit is less volatile, higher returns than public sounds a lot like what you hear about private equity and public equity and some of the grumbling about different marks. Why would it be the case that the private credit has less volatility than public other than infrequent marks? It's quarterly marks and it's mark to model versus the vagaries of the markets that don't necessarily make sense. Over time, I think public credit

Credit can be hard because people tend to be bad sellers or they just tend to be sellers because they feel that they need to. So you set up buying loans at 99 and a half and you get a coupon. And by the way, if you don't like the way things are going, you have the benefit of liquidity, but you're probably selling at 97.

So if you're making a 6% or 7% coupon and you take two points to exit and you're in for two years, blah, blah, blah. It just is the nature of creating losses there. You can obviously also buy loans at par and have them trade to 102 and sell them. So if you're good, you're doing that too. But the key is really private credit. And we believe this and believed it for 20 years. And this is the merit of the asset classes. You've originated it. You've done tons of due diligence. You have better information.

But more than anything, you control your downside. So in most private credit deals, you're levering a company five to six times against enterprise value. Pick a maybe current number of 12 to 15 times. So you've got a lot of room. And if things don't work well, maybe you're levered eight times. Companies still probably work 10 to 12 times. But the key is that you have the ability to actually go in.

and protect to the downside, maybe own a company, which we have to do sometimes, but you have to have the resources to do that effectively. But the point is you have this free call option as a lender to own companies if you have to. And if you're lending to good companies and you control your outcomes or you're a lead investor, you can probably get to better resolutions, limit capital losses over time. And if you look at our historical charge-offs versus...

defaults in the public markets, they're just better over a 20-year period because of that control. But you need the resources to be able to go in and roll up your sleeves and do that. On the theme of diversified private equity, one of the questions you always get in the structure of, say, interval funds, which seem to be gaining a lot of traction is, how does this work of an asset that is not liquid in a strategy that has some liquidity provisions?

The key is if you're an investor in that type of strategy, you have to look for diversification.

I'd be concerned looking at a fund that was, quote, semi-liquid in a concentrated pool of private equity assets because there's no easy way to create capital to the extent you need it. You can manage it by having a credit facility that you leave untrawn and you can draw down your credit facility if you need it. There are other ways to manage through it, but I think the key is in a private equity strategy, you want a lot of diversification.

And how do you think about that liquidity requirement as a strategy, maybe different from how you might go about, you could say, an institutional private equity strategy that doesn't have that need for the broad diversification? The whole big picture wealth, it's something we talk to the wires and the FAs about a lot, which is the key is that as this market is tapped and growing, that it's actually done thoughtfully.

we tell everybody that the education is the key and we're like, it is semi-liquid. You're not going to be able to get back more than most likely 20% of your capital over a one or two year period. So think about that when you allocate your initial check size, because it gets invested immediately. So as long as the end investor understands that it truly is semi-liquid, i.e. they can't get it all back yesterday,

Everybody still has their burnt fingertips from '09 around gating of hedge funds and how it was horrible and they couldn't get their money out. But the way these structures are set up are actually set up to protect investors because the alternative is a fire sale of assets at bad prices, which creates bad outcomes for the investor. So long as they're knowledgeable and thoughtful about what they're getting into, and that requires a lot of education, both from us and from the financial advisor community,

I think this will be sensible growth tapping a market that has a lot of desire to be in these assets. As you look at the market for some of these products, maybe particularly say interval funds, how have the fee load evolved as these products have gotten rolled out relative to what you might see in the institutional market? What's nice here is that the fees are almost off the shelf.

If you were to launch a non-traded BDC today, you'd say, who are the biggest non-traded BDCs? What are their fees? Boom, by the way, they're all exactly the same. And they haven't moved much. That's true of the other asset classes as well. So everybody's a carbon copy of one another. By the way, the fees that are then paid through to distribution, so if you're going through a wire, are also standard. It's off the shelf and there hasn't been a lot of discussion about it. As you get bigger and more

Folks have more capital with you. They always negotiate fee. We'll see if that happens in time, but it's not part of the discussion today. Everything is right off the shelf. What are some of the challenges that you've learned in managing these products in the channel that you might not have known when you jumped into it?

It's very resource intensive. It requires a lot of people and a lot of education and going to a lot of conferences. And for us, it's building the Aries brand. Believe it or not, we're still at a point that when you go to certain places, people just have a better feel for Aries.

A firm like Blackstone or KKR, who's been around 20 years and is always on the front page of the Wall Street Journal, Ares historically, because we don't have a large cap private equity business, didn't have that history of being on the front page of the Wall Street Journal for a while. Some of that by design for a long period of time before we went public. But after we went public, part of that exercise was...

Building the brand, getting it out there and having people understand what the firm is, how we're different from other alternatives managers that they can select with. So not that the institutional marketing business isn't people intensive. It is, but this is particularly people intensive and you really need to be in geography. Our institutional sales force is all over. I mean, we have folks in California and the Northeast and the Southeast.

in Asia and Europe. We need somebody pretty close because they actually have to go into a local market like that and see the FAs there. And these are FAs that manage $500 billion to a billion dollars of client money. And if you want to try to get that deep with those type of folks, which over time, I think everybody needs to, it just requires a lot of people. How have you figured out how to maintain a consistent brand message when you have so many different people going out telling the story?

It's just making sure at the top of AWMS, Series Wealth Management Solutions, there's a consistent view of what we stand for, what differentiates us both in terms of people and performance. And then these three themes that I mentioned before are the things that we lead with. These are the themes that we want to be consistent on. And then we put the product that we have behind those themes and it all hangs together pretty well.

When you have what feels like a tidal wave of capital coming, you're one of the players in this mix. How do you think about the level of excitement and what energy you have to put in to make sure you capture an opportunity like that?

We've spent a tremendous amount of energy at the most senior levels of the firm. Mike, myself, a whole bunch of others spend a lot of time on this. The big dollars is you go in and inevitably you're driven by the wires because they're the largest AUS of Morgan Stanley, Merrill Lynch. These are huge drivers of capital. So early days, we went and

had very senior level meetings at those platforms where we have great relationships because of what we're doing elsewhere, not in the wealth channel and said, this is something we're really focused on. We want to be top three with you guys. And these are the products that we want to have on your system. In a place like Morgan Stanley, there's huge manager vetting and selection teams.

So, you know, we were doing that years ago and we weren't doing it with salespeople. We were doing the senior most people at our firm to make sure that they actually understood what our vision was. So I think we're pretty close to fully formed in terms of where we want to be. And now it's just taking that message and broadly distributing it into smaller ticket, smaller city, smaller institutions. As you've looked at mapping that part of it out, say the independent landscape, how do you triage?

We do have partnerships with people. There are folks out there who do that for a living, whether it's iCapital or Case. They do a really nice way of really being deep with that community that we couldn't possibly go make one-off calls on all the time. And it tends to be in group formats. And if you're not doing it through the wires, there are folks that are able to get non-wirehouse FAs and RIAs in a room.

If I can get invited into that room, that's a great format because you have 100 smaller market FAs all in the room hearing about Aries, hearing about how we're differentiated. And they're like, oh, great. Now I'm going to see this on offer. I have a better feel for who they are and what they do and how they're different. But it requires a lot of running around and just trying to get in front of people because those tickets are small. If you're talking about a billion dollar RIA in a smaller market, they probably have a

110 million dollar clients, 205 million dollar clients, and their allocation is going to be 300,000 to four funds. That's hard for us to chase down if we're not doing it in some sort of group format. We put on our own things. So we do events where we get those people in a room and we do the whole song and dance and try to tell them about Aries. We do it ourselves, but we also have partners that help us do it.

So you mentioned a surprising interest last year from Europe and maybe this year is going to be the year of Asia. What are you seeing in the international markets for wealth?

Growth. And it's interesting because we, for a really long time, because of the public BDC, spent a lot of time in London trying to figure out how to basically get some listed income fund in Europe. And we talked to every bank and everybody. And there were a couple examples of things that got done pre the GFC.

that actually didn't go so well. We found that there were burnt fingers on these traded or non-traded income products. We gave up and just said, we'll just raise institutional capital here, and I don't think this is going to work. Launching some of these income products in Europe, pretty eye-opening for us because we attracted a lot more capital than we expected. That's a good sign. We think Asia, part of it is just we're new there with people on the ground. So we have the first year effect. By

My comment on Asia is more about our first year effect this year than anything else. It's a big market with a lot of the same dynamics.

that exist here, which is you just have folks that increasingly are hearing about all this stuff that these alternative managers are doing and they're saying, why don't I have any exposure to this? And if we're smart and others are smart, which I think we've been in developing the right products and just simply making them available and making phone calls to make them available, there's demand there.

As this gets more and more popular and that, say, $40 billion becomes whatever it does, whether it's 20% or 40% of your growth, how do you think about the implication of that large flows coming in on the markets that you're investing in? The influence is when you see large flows...

That money has to get to work immediately, particularly in the income strategies. We're used to it with the public BDC, but it's inherently pro-cyclical money. You're taking inflows in during good markets. Inflows tend to go down in bad markets, unfortunately. You wish you could convince retail to come in during bad markets, but usually it doesn't work that way. So it does have a bit of an influence, and particularly with a couple of our competitors

that are more oriented to retail than we are. If they have a big flow quarter in a particular product, we'll see them be very competitive on new underwritings because they have a bunch of cash sitting around that they need to deploy. What comes and goes point in time. Actually, somebody asked me a very good question that no one had asked me before, which said, will there inherently be worse performance in these funds?

because the money is coming in in a pro-cyclical way. I said to him, convince your clients basically to not redeem during volatile times. And if it's really volatile, you should probably convince them to try to allocate a little more. But timing vintage is tricky for anybody. And it's really tricky for a mass affluent investor. But it's a good question. We'll see. Because it's pro-cyclical money, it inherently

has a little bit of an impact on the investing environment on a quarter to quarter basis. Over time, it should smooth out. How do you think about the maintaining discipline in underwriting standards when you're faced with capital's in and you have to put it to work? It's really only relevant in our credit products. We want a balanced set of capital sources, specifically to private credit because it's most relevant to the wealth piece where everyone has BDCs.

We have commingled funds that are drawdown funds that are not remotely pro-cyclical. You can just say we're not deploying anything in that fund. We have separate accounts, same thing. We have a public BDC, which depending on repayments is either needing to put capital to work or not. And then we have retail credit funds. So as long as we have a balanced roster of stuff to deploy, we're not under so much pressure to deploy funds.

because of the balance of capital that I feel comfortable with how we're set up. I would not want 75% of my credit capital to be in a procyclical structure like this, which it inherently is. And that's where you can lose discipline. As you look at planning your business for what you think is going to happen, what do you see as scenarios where this doesn't play out? Growth that's too fast.

With not enough education, that's just not good for the growth of this industry. It just needs to be smart growth where people understand and are excited, hopefully, right, about what they're getting access to. But you just don't want to grow too fast, which is why we've tried to create the infrastructure with 150 or so people globally that we can get out there. But the question for me when we launched the credit funds in particular was, how do we shut it off?

We've seen one or two competitors in the BDCs and retail, they call it queuing. Basically say, we're not really accepting new capital right now. The FAs tend to not like that because they have clients who want to put money to work and you're turning them down. We've actually seen one or two of our competitors queue credit capital over the last year or two. I think it's really smart.

If the investment environment's not there, you shouldn't be taking pro-cyclical capital and putting it to work at any price. So the risk is that it grows too fast and that people underwrite poorly because of the nature of the capital. And then the returns aren't there and you lose confidence. Eventually, we probably go through another cycle. Maybe there's a recession at some point in time.

How have you prepared for both the education and client management and then in your portfolios when there's been such a wave of growth in the space for a time that isn't as robust?

It's inherently not any different than the institutional market because you're always talking with clients about time seem good, but what happens if they're not? And we talk about our track record of managing through cycles and downturns and our risk management infrastructure and portfolio management shops and all that stuff. So I don't think it's different, but the retail investor hasn't been tested yet because most of this has come online with COVID and coming out of COVID. And it's been a pretty

easy, low vol period of time. So I don't think it's any different, but I'm not sure how it'll play out with this customer base. I'm just hopeful that there is enough education and enough understanding of the structures, which I do think are set up well to protect investors in downturns. And then we'll just do what we always do, which is we'll manage the capital the same way in these funds.

All right, Kip, I want to make sure I get a chance to ask you a couple of closing questions that are different from the last time you came. What was your first paid job? I think I was a golf caddy. It was my first paid job. I think I was 13, 14. And what'd you learn from doing it? To be honest, I grew up in a place where we had a lot of doctors and lawyers and bankers, so I was lucky. I learned how to talk to some of these old rich guys who liked to play golf. And I was pretty well-behaved.

It was be buttoned up and make conversation, but do what you're told. And if you did that, it tended to get paid a little bit better. How's your life turned out differently from how you thought it would? I feel very blessed and very fortunate. I don't know if it's different. I feel like I've achieved a lot of the things that I had hoped to achieve through hard work and partnership with friends that I've worked with a long time now and

I've got a great wife and great kids, and I just feel very blessed. I don't know if it's different, but I feel like the things that I was hoping would come around came around. What's a mystery that you wonder about?

I think a little bit just as we're all getting older about mortality and what happens and where you go and what's the truth there is something that's always been a mystery for me, but we'll see if we ever figure that one out. All right, Kip, last one. If the next five years are a chapter in your life, what's that chapter about? I've got two kids in high school. One is going off to college next year. The other one's a freshman in high school.

So she'll be gone in three years. So the next three years are obvious for me, which is I've still got kids who are in the house and going to college and all that. And I think when we get in years four and five, the question will be, what are we doing? I'm still very engaged and enthusiastic about my job. So I'm trying to make sure I enjoy that five years of still having the kids around, still having a job that I love, working with people that I love.

I think the harder chapter for me is what's the five to 10 years and it's whether I'll still be enthusiastic and super engaged or whether the kids will be gone and I'll want to go follow hobbies, passions, travel, skiing, whatever else. So I think the next five years, so long as everything hangs in, I'm doing what I'm doing for the time being. I'm pretty enthusiastic about it and frankly, pretty lucky to have what I have. How about the next five years at Aries?

The platform is for the time being fully built. We feel like we're in all the asset classes on the alternative side that we need to be to be of the most value to clients, whether it's institutional or retail. We're focused on making some of them a little bit bigger and better, particularly probably in real assets and private equity, and then a focus on growth in Asia.

I don't think having done a handful of acquisitions to fill out our dance card over the last couple of years, there's anything really big that we're missing or that we have our sights on. I never say never. So I think it'll be more of the same. Keep up good performance, keep attracting capital, make sure we retain the people that we have who we think are great and continue pressing a lot of the advantages that we've built. Okay. Thanks so much for sharing this great insights. Always a pleasure.

Thanks for listening to the show. To learn more, hop on our website at capitalallocators.com, where you can join our mailing list, access past shows, learn about our gatherings, and sign up for premium content, including podcast transcripts, my investment portfolio, and a lot more. Have a good one, and see you next time.

We're sunsetting PodQuest on 2025-07-28. Thank you for your support!

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