🎧 Private Debt & The Democratization of Alternatives - Aaron Filbeck
Education for Democratization 2.0
Hi! It’s George from Investorama, your guide to the future of investing - without the hype.
Below I’m sharing a few highlights from my latest podcast conversation with Aaron Filbeck, Managing Director and Head of UniFi by CAIA™. I’m going through their newly launched Private Debt Micro-credential, and it’s great. It was an opportunity for a conversation about that booming asset class and the democratization of alternatives, more broadly.
I couldn’t resist a good meme, but I must give credit where it’s due.
You can listen/watch on YouTube and every podcast platform.
As an industry, we really try to focus on the product itself. And really tout the benefits of the product and not necessarily what the client was trying to accomplish in the portfolio. As we think about Democratization 2.0, I think we have an opportunity, especially in private markets, to think more about and start with what the client's trying to accomplish and then work our way backwards. Does the client really need this? Does it actually work to help the client achieve these different objectives?
It’s a fundamental principle, but to be fair, it’s not easy to implement. When I worked in sales in financial markets, I was not often told to focus on the client’s best outcomes.
There are a lot of new entrants into this market, whether it's a financial advisor, distribution, staff who are now looking at new products for the first time, that really need more of an understanding of how these things work a conceptual level. They're not gonna be an analyst. They're not gonna be a CIO. They do need to know enough to ask the right questions, understand the jargon, and understand how these different strategies work. We launched this platform called Unify by CAIA, which is a learning platform. And the vision for this platform is to develop a series of programs depending on where you are in your learning journey.
There’s a massive gap between the number of opportunities available and how prepared and informed we are to appreciate them. Education is the way to close this gap, and it’s part of the fun of finance (if you’re into that sort of thing). You never stop learning.
Below is a screenshot of the curriculum of Unifi’s micro-credential for Asset-Based lending. That’s just one type of private debt, and it covers six sub-sectors with very different risk, return, maturity and other characteristics.
When you look at alternatives broadly, and I think private debt's no exception, the dispersion of outcomes is very wide relative to traditional assets. Some of that is due to manager skill and their ability to deliver. But another piece of that is the style that's being pursued.
That reminds me of a Buffett quote:
When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
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