“If you invest in companies that are looking at long-term value, you’re going to be better off.”
Afsaneh Mashayekhi Beschloss is founder and CEO of RockCreek, a women-founded leading investment firm investing globally with a focus on sustainability. Previously, she was a partner at the Carlyle Group, Treasurer and Chief Investment Officer of the World Bank, and worked at Shell International and J.P. Morgan. Ms. Beschloss has advised governments, central banks, and regulatory agencies on global public policy, energy and financial policy.
Beschloss’ globe-trotting career started with a childhood in her native Iran pre-revolution that went on to include multiple stints at the World Bank. An early interest in ESG investing, that has become increasingly the focus of investment portfolios, saw Beschloss as a pioneer in industries like renewable energy. This shift will have far-reaching positive effects. “I think actually renewable energy is going to be really good for the geopolitical risks that we have been facing the last 30 some years, maybe more, since we started using oil.”
Younger generations will seek to align their investments with their values, ensuring a company creates a positive impact. Her work seeks to address some of the most pressing issues in the world from lack of housing to growing economic inequality.
LISTEN AND SUBSCRIBE
SPEAKER
Afsaneh Mashayekhi Beschloss
Founder & CEO
RockCreek
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie: (00:07)
Hello, everyone. Welcome back to SALT talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum at the intersection of finance technology and geopolitics in lieu of our in person SALT conference, which many of you have attended, we've been hosting these SALT talks to provide our audience a window into the minds of subject matter experts and also to provide a platform for big, important ideas that we think are shaping the future. We're very excited today to welcome Afsaneh Beschloss to SALT talks. Afsaneh was doing, I like to say, was doing ESG before ESG was cool. She's the founder and CEO of the RockCreek Group, which is a leading global investment firm that applies data-driven technology and innovation to sustainable investing. RockCreek has about 14 billion in assets, under management in multi-asset class portfolios, including public private and early stage markets.
John Darsie: (01:02)
RockCreek is one of the largest women founded investment firms in the world with more than 80% of its senior management team being diverse. RockCreek advisory board is a star study group of people. It includes former fed chairman, Alan Greenspan, Laura Tyson, who's also on the board of CBRE and AT&T. Jessica Einhorn, who's also on the board of BlackRock. DeAnne Julius, Caroline Atkinson, and Liaquat Ahmed. Previously, Afsaneh was a managing director and a partner at Carlyle group. She was the treasurer and the chief investment officer at the World Bank, and she also worked at Shell International and JP Morgan. Afsaneh has advised governments, Central Banks, regulatory agencies, Sovereign Wealth Funds, and public and private companies on global public policy, financial policy, energy policy, and sustainable investing. She spent around 14 years, I believe, at the World Bank.
John Darsie: (01:56)
She worked on energy investments and policy work in the sustainable investing space including in climate related, renewable energy, power and infrastructure projects. And she was the founder of the World Bank's natural gas group, and she pioneered work using natural gas as a transitional fuel in order to reduce carbon emissions. Afsaneh is also on the board of the Institute for Advanced Study at Princeton. She's on the council for foreign relations. She's on the Gavi Vaccine Alliance, The World Resources Institute, and she's also the vice chair of PBS, public broadcasting. She's also the recipient of the Institutional [inaudible 00:02:35] Lifetime Achievement Award and the Robert F. Kennedy Ripple of Hope Award. She was recognized as one of American bankers, most powerful women in banking, and one of Barron's 100 Most Influential Women in Finance. She has a master's philosophy with honors in economics from the University of Oxford, where she taught international trade and economic development. She's the coauthor of the Economics of Natural Gas and the author of numerous journal articles on energy finance and sustainable investing.
John Darsie: (03:05)
If you have any questions for Afsaneh during the talk today, reminder type them into the Q&A box at the bottom of your video screen. And conducting the interview today will be Anthony Scaramucci, the founder and managing partner of SkyBridge Capital, which is a global alternative investment firm. And he's also the chairman of SALT. So I'll turn it over to Anthony to conduct the interview.
Anthony Scaramucci: (03:23)
John, thank you. It's a real pleasure to be on. Afsaneh, great to see you. I wanted you to start out with your personal background because I think it's a fascinating background. Obviously John gave a lot of elements of your biography, but I think the early part of your story is fascinating for me, and I know other people would be interested as well.
Afsaneh Beschloss: (03:45)
Thank you, Anthony. And thank you, John, for the background introduction and congratulations, Anthony, on both what you're doing at SALT and also the great news at SkyBridge on all fronts.
Anthony Scaramucci: (03:58)
Well, we're coming back, but just when we're coming back, some of our girlfriends are leaving, but that's fine. That does happen to you when you're having a bad moment, but no problem, you know what I mean? I'm playing this song for all of our investors, should I stay or should I go? And my attitude, unfortunately, is if you want to leave, go ahead, but you're going to miss some great performance, but we can go into that at another time. Let's talk about you and your personal background, which I think is so fascinating.
Afsaneh Beschloss: (04:29)
Sure. I was born in Iran. A very different Iran, which was very fast moving. It was developing very rapidly in terms of its economy, but also in terms of education, health, everything was sort of becoming very close to first world versus third world. I grew up in a family that really, really valued education. My father was president of the university, he always taught in some form all his life. My mother decided to stay home. I'm one of three daughters. I think the pressure she put on us in terms of not letting us learn to cook, for example, at an early stage has affected my relationship with my family now, but on the positive side she really, she and my father said, whatever you decide to do, you have to do your absolute best. It doesn't matter what it is, but you do have to do your best. So there was that sense and there was always a sense of sort of public service also in our household, given that a lot of my family was in education.
Afsaneh Beschloss: (05:35)
So that's where I grew up. I came to the States the first time when I was 16 and there was a program still exists called the American Field Service. And I came as an exchange student and lived in Concord, Mass. Which is not your typical US City, but for me, it was my first experience and really a hugely exciting one. And I lived with a family where the father taught at MIT and the kids were kind of around my age group, went to school. And then basically, decided to get into economics. The interesting thing is when I was at Concord, our neighbor across the street was Robert Solo, who at the time I didn't know.
Anthony Scaramucci: (06:17)
Sure. MIT.
Afsaneh Beschloss: (06:20)
[inaudible 00:06:20]. I went on eventually to Oxford and did my masters degree in economics with the idea that I might go teach and do sort of economic development, but then there was something called the Iranian revolution and my plans got derailed. So that's how I ended up at JP Morgan. They have the most incredible training program.
Anthony Scaramucci: (06:45)
JP Morgan in London? Or where were you in?
Afsaneh Beschloss: (06:48)
So I was hired in JP Morgan London because that's where I was studying and teaching at Oxford working on my thesis. So that's where I got hired, but then I moved to New York and, literally, I think it might've been when the hostage crisis was also sort of going on. I couldn't have had a better experience at JP Morgan, at that time, it was very team oriented, the culture, the values, very different than banking today in general. I made some of my best friends then. Then it became evident that the plans of going back home to teach and to do economic development were not going to happen. I decided to go to the World Bank, which allows you to do economic development, help reduce poverty and use market tools to do those things. So that was that. And I had a great career first doing energy. And as John said, clean energy on the early side of the cycle and then moved to finance.
Afsaneh Beschloss: (08:00)
I was talking to a friend of mine at the World Bank and he said, "We have this great trading floor. You should come try it." And I said, I've never traded before. And he said, "Well, take it. Try it." So that's how I ended up to move to finance and the rest is history.
Anthony Scaramucci: (08:18)
So talk about the starting of RockCreek and where is RockCreek today? And I'm assuming it's named after the Rock Creek in Washington, right?
Afsaneh Beschloss: (08:27)
Absolutely. It is the park in Washington. It's a beautiful park and it has become even more busy since post-COVID where it's almost like the [inaudible 00:08:36], you can't run or walk a bike. There's so many people on it. In terms of RockCreek, had a great experience at the World Bank and moved to go to Carlyle as the 12 partner at the Carlyle. And then decided start RockCreek. And we started like you with alternatives and then evolved the firm to be more multi-asset task. We have two businesses, really one is sort of developing our own storefronts. And the other side is doing multi-asset class portfolios in a very customized way for fairly sophisticated, large institutions.
Anthony Scaramucci: (09:18)
But you're also involved in ESG investing. I mean, that's one of your big claims to fame. So tell us a little bit about that. Tell us what excited you about that and tell us where you think we are in that part of the cycle.
Afsaneh Beschloss: (09:32)
So I think ESG impact sustainable investing is sort of different terms and it's become very popular as we speak. I think what I learned when I was at the World Bank, the first thing I think I was a summer intern there once, and I did a paper on shadow pricing. And what I realized as an economist then, and very early on is that we do have prices for capital, for labor. We don't have prices for the environment. We don't have prices for the air we breathe, for the water we drink, for the agriculture land in the sense of the soil and the goodness versus the value of the land itself. So there was sort of interesting that we pulled those things externalities. So what we realized that the World Bank is that you have to somehow value this. And that was pretty early. That was really in the 1990s, early 2000, where you knew that you had to value this, that these were scarce commodities, that you could not just use them and not value them.
Afsaneh Beschloss: (10:35)
So that early shadow pricing, I think, study that I did, really, was very influential. Moving forward to RockCreek, what we see now is that if you actually invest in companies, if you invest to funds or directly in companies that are looking at longterm value, you're going to be better off. Just look at the last couple of months, post-COVID. The companies that have done well have often been at the intersection of technology, which is something new and innovation. Plus, let's say, telemedicine, let's say education, let's say affordable finance. So those are the things that actually have been growing because as we have realized in our society, you cannot just provide services to a small group, as you can provide these services to a bigger group, there will be more demand for it, and actually your company will do better.
Afsaneh Beschloss: (11:29)
Some of the ESG investments during this period have done so much better, Anthony. And it's not only because oil and gas were down. And so you see all these ESG funds that are even ETFs in Europe, in the US, doing better than the general market. So all you had to do was to invest in an ETF, you would've done better. But obviously, if you invest in ESG through direct companies, private or public, it has been some of the really most interesting times, I would say-
Anthony Scaramucci: (12:02)
It's going to continue though, in your opinion. So we're not peak cycle or anything like that or anything, we're just at the early stages of it, is that correct?
Afsaneh Beschloss: (12:11)
Absolutely. And I think if we look at your kids, if you look at my kids, if you look at the next generation, people in their twenties, people in their thirties, they're going to be looking more, if they decide to buy a car, it's going to be an electric car. They are not going to invest as they start investing their own money in companies that don't have their culture or their values. They're going to be much more Parkinson of that, I would say, than our generation has been. That trend is moving fast. We see it with renewable energy. If you look in the last part of this year, those are the only energy investments that have actually gone on as oil and gas investing has basically dried up the projects that got to slow down a little bit under renewable site have taken off again.
Anthony Scaramucci: (13:06)
Just a broad question on energy, because I know you established the National Gas Group at the World Bank and you know a lot about energy and you've seen our demand has been crushed by the COVID-19 pandemic and you've seen this increase in supply. What does that mean geopolitically in your mind. We're moving towards ESG and sustainable things, is that going to set off another potential geopolitical crisis in your mind?
Afsaneh Beschloss: (13:37)
I think actually renewable energy is going to be really good for the geopolitical risks that we have been facing the last 30 some years, maybe more, since we started using oil. A lot of oil comes from a lot of countries that have gone through political stripes or cost political stripe in the Middle East, but other parts of the world. The less we need to import oil, the better off we are. I think I prefer to use the more sort of cleaner forms of renewable energy, but frankly, natural gas is much cleaner than oil, certainly much cleaner than coal. And batteries are not quite where we would like them to be. Hopefully, there will be there soon, but in the meantime, you can't just live off of renewable energy. You do need to have some kind of backup. So natural gas, which just happens to be something I spent a lot of time on is growing quite fast, both in the US and in emerging markets.
Anthony Scaramucci: (14:40)
Let me say something contrary because I want to get your reaction to it. I totally understand that our less reliance. We can move our military, we can rethink our footprint. But what I'm wondering about is the stability of the region, meaning the oil consumption goes down, the economies of the region get depressed, or they have to change, will that cause more instability in that region of the world? What's your opinion of that?
Afsaneh Beschloss: (15:09)
What you're seeing is sort of what I started seeing during my childhood, growing up in Iran, where you saw Iran was trying to not be a one commodity economy. So if you look at the region, Russia is still very commodity-based. Most of its external revenues are from commodities. If you look in the Gulf countries, that's basically it. The majority, as you said, of their income and revenues come. And so all those social programs that they put in place, all the construction projects have been financed by this. What has been really interesting if you look at the investments they're making currently, two things. One is that they've been trying to diversify their economy, whether it's through tourism or whatever they can do, that's one area.
Afsaneh Beschloss: (15:59)
They've been also using this gigantic oil funds they have, to diversify, again, out of energy, into other areas. Last but not least, some of the biggest solar projects that are going on are in the middle East right now. So they're realizing that they themselves need to diversify. I have friends from the World Bank who are in Saudi all the time, right now, working on one of the biggest solar plants which just got [crosstalk 00:16:28].
Anthony Scaramucci: (16:28)
It's great news.
Afsaneh Beschloss: (16:29)
Yeah.
Anthony Scaramucci: (16:29)
So it just means that a lot of their commodity based industries and countries are turning more towards their intellectual capital. You and I both know there's always been a paradox of the oil. It comes out of the ground, you overly rely on it, and then you don't build these other industries that could make the country more sustainable and longterm successful. I want to go into a topic I know that has a lot of interest to you, and that is affordable housing. We were under inventoried in affordable housing. And what do you think is holding us back from that? And where do you think the compelling investment opportunities are there and why did you get so focused and interested in that?
Afsaneh Beschloss: (17:12)
I think affordable housing, specifically, what was interesting is we started looking at it a few years ago at RockCreek. We realized, number one, it happens to be an under invested area. Number two, it had actually really good returns, especially when it was done by people who do good while they're doing well. And there are a few groups that have been not [inaudible 00:17:39] people investing in affordable housing, but actually very thoughtful, very experienced people. And we partnered up with a group called Rose Affordable. And what has been really interesting is to see that the gap they fill is not just the housing, but it's everything else that's goes with housing. It's the community programs, it's providing doctors and medical assistants, and this was pre-COVID. It is making sure that the buildings have internet access.
Afsaneh Beschloss: (18:10)
And so all of those things meant that their population, in the last few months, has obviously suffered less. It also means if your population is more healthy, they will continue to work. If you do have broadband access and internet access, your kids can continue with their education. As we saw that became the big issue in many areas. Plus of course they also benefit from government programs. I think what we're seeing with affordable housing is that it falls into lots of different categories, but there's a huge shortage where a very large part of our population and the data is different, but it's almost 10 to 12 million families that are basically not being able to afford housing very well. They're spending more than half of their income on housing. So there's very little left for everything else.
Afsaneh Beschloss: (19:04)
And one of the reasons, when we keep on saying, why is the economy growing so slowly? This is again pre-COVID. When you have to spend so much of your income on housing, you can not spend it on other things. The other trend in the US has been that profit margins are much higher for luxury housing. So when builders have the ability, they will go into those areas versus affordable housing. Last but not least, something which is really important because we've all been trying to support our communities, particularly people on the front lines, teachers, firefighters, those populations that are middle income families, middle to middle lower families, they actually are completely not taken care of when it comes to housing. They have very little access to affordable because they don't fit into either the low income affordable, neither the luxury housing. So there is a big shortage of housing in our country.
Anthony Scaramucci: (20:02)
Well, and it's a good segue too. You've traveled the world. You're an economist, you're a money manager and we both analyze the world. And I think you potentially share this worry that I have, that there's an income gap widening. There's a wealth gap widening. Lower and middle income people feel like they're struggling. And as you and I have talked in the past, I grew up in a blue collar neighborhood with blue collar parents, but they had this aspirational idea about their children. And that idea is shifting now. And so I'm wondering if you've done any research into that, studied it. And what do you think we could do to solve some of those problems can come into the housing situation?
Afsaneh Beschloss: (20:47)
I think housing is part of it, but also wages and incomes are another part of it. And the inequality that all the numbers are pointing to what I learned, as you said, both at school studying economics and economic development, but then also working in emerging markets. What is really sad is that a lot of the issues that existed in emerging markets started getting slowly a little better, although we can come back to that because a lot of the development, let's say in Latin America, over the last 20 years, might have got erased just in the last few months, which is huge. But when you come to the US, we developed a great banking sector, but that banking sector is really for people who can afford it, it's for bigger corporations. Even in the good days, before COVID, or before the 2008 crisis, what we had is that a lot of low income people had to go to the payday lenders.
Afsaneh Beschloss: (21:49)
If you wanted to get a mortgage, you couldn't. In fact, a lot of startups we've invested in would look at credit scores in a very different way than traditional credit scores and do better in terms of having people who are borrowing from them who had a much better record as it turned out, than the typical banks giving mortgages. I think this is a really great time to think in two ways. One is, for example, the World Bank was created to help Japan get out of the war and reconstruct and Europe the same thing. And then this job became how do you provide longterm development to poor countries? We need that kind of institution in our country, in the US today. Institution that will have the interest of providing services to low income.
Anthony Scaramucci: (22:46)
It's fascinating. It's a good idea. It's almost like a USAID embedded in a World Bank for the United States.
Afsaneh Beschloss: (22:52)
Or separate. Separate from the World Bank. But a lot of those tools and for example in these countries, there are banking systems for low income.
Anthony Scaramucci: (23:04)
Let's say when John Darsie runs for president, he's going to be the chairman of that bank. That's actually a very, very good idea. I have to turn it over to him in a second. And we're going to talk about his stuffed animals and so forth, but before we go over there, because there's a ton of questions coming in. People are fascinated by you, as am I. I have to ask this question. Some of us remember the very famous Alan Greenspan briefcase. And if you recall, he would run across the street. If the briefcase was thick, we were getting a rate cut. If it wasn't thick, we weren't getting one. And so does he still have the briefcase? And it's important for me to know this? I just thought I would throw it out there.
Afsaneh Beschloss: (23:46)
Oh, absolutely. He has his briefcase in his office. And let me tell you, Alan is 94.
Anthony Scaramucci: (23:52)
That's awesome.
Afsaneh Beschloss: (23:52)
He, until COVID, he would come to the office every day and some nights on a Friday afternoon, if I'm trying to sneak out, Alan was still there. So I had to sneak around his office. And one of the sadness, for me, of COVID, has been that, whenever there was a problem, serious problem or issue or markets as we're going through some really, really high volatility I'd go to Allen and get his wise council. And his suitcase is there. And by the way, there's one other items you should be aware of that he keeps which is his G7 jacket. So it's a really nice piece that he wears when the room is too cold.
Anthony Scaramucci: (24:38)
It was like swag from G7.
Afsaneh Beschloss: (24:39)
It's so cool.
Anthony Scaramucci: (24:41)
John, you got to pay attention because we need better SALT swag once we get back out there.
Afsaneh Beschloss: (24:48)
I'll send you a picture.
Anthony Scaramucci: (24:50)
All right. So I want to see that. I have one more questions. Again, these are personal curiosity questions, forgive me. Liaquat Ahmed, who is at the Brookings Institute, he's on your board. He wrote a brilliant book Lords of Finance discussing the 1929-33 crisis and the policy implications and some mistakes that were made, et cetera, that could have exacerbated that crisis. Dr. Greenspan obviously spoken about that. So has Dr. Bernanke actually. We had Dr. Bernanke at SALT a few times, and he encouraged me to read that book, which I did. What do you think Liaquat Ahmed thinks about this crisis and what is your personal opinion about all the deficit spending? Is it okay to do it? Are we all modern monetary theorists now, or will there be some implications long term to the amount of deficit spending that we are involved in?
Afsaneh Beschloss: (25:43)
So the Liaquat is really an exceptional person. He was working on Korea and Asia in sort of the early days of his career. He's got a PhD in economics. We sat next to each other on the World Bank trading floor. He was doing non-US bonds, believe it or not. And I had just started on the trading desk on the US side. And then he went on to Fisher Francis. So he has an unbelievable interesting background as an economist and as somebody who understands markets. Which is why this book is so incredibly interesting and I hope you do invite him to your SALT conference-
Anthony Scaramucci: (26:24)
We would love to do that, of course.
Afsaneh Beschloss: (26:27)
And he's always interviewing all the Fetchers and has really good insight. And his book showed us what happens in the crisis, which is why when it came out, it was so interesting, around 2008. I think what we have learned is that, both then and now, is that this is not business as usual. You'll have a health crisis and a financial crisis and inequality and-
Anthony Scaramucci: (26:56)
And he got energy too. So it's health, equality, energy. There's a price shock in energy.
Afsaneh Beschloss: (27:02)
And energy sector, by the way. Interestingly about energy, is that it's a very impactful area because we all use energy. But in terms of its total size of the US economy, it has got much smaller as relative to communications or technology or other areas. But it still employs a lot of people, obviously. If you put all of that together, there is no choice. So we do need to increase the deficit. What I'm concerned about as we're looking at the numbers, is that what happened the last few months, markets went up, a small sliver of people who can invest, who have the ability to invest, who have the cash to invest, invested so they got better off. Really the majority of people who are laid off are probably not going to find the jobs they wanted coming out of COVID. A lot more dislocation than the markets expected.
Afsaneh Beschloss: (27:56)
And the money that got pushed through PPP or through the federal reserve went to all the biggest organizations. If it's the federal reserve, it went through BlackRock, obviously, to help solve the bond problem. Why not have used some of that money through smaller firms? All the PPP went, initially, to bigger businesses than smaller businesses. A lot of small businesses wouldn't even know how to fill those forms. They didn't have banking relationships. Coming out, we have incurred this huge, huge deficit, but what good is going to come out of it? I think that's my big question. And that's what I'm worried about.
Anthony Scaramucci: (28:43)
Makes sense. Well, I got to turn it over to John now because we have a whole bevy of questions for you from our viewers and listeners. Go ahead, John.
John Darsie: (28:52)
Yeah. We have great participation and engagement on the call. So thank you for everyone that's tuning in. I have a couple of questions about RockCreek that came in. You talk about how the firm focuses very heavily on leveraging data and technology to drive your investment decisions. You're also very focused on sustainable investing or ESG investing, which some people regard as a morphous still. People are trying to identify exactly what ESG investing is. How do you combine data and technology to drive investment decisions when you're investing in things that are sustainable and fit within the ESG framework?
Afsaneh Beschloss: (29:28)
So John, very early, when we started RockCreek, we invested a lot in technology. And what that allowed us to do is that with our data scientists and data researchers, we were able to get our data from whatever we invested in or whatever thousands of investment firms that we covered and companies. As we were looking through this huge amount of data, we realized that the same tools that we had developed for risk management, which allowed us to map different securities to different risks, could be used to, for example, look at different securities versus the SDGs that the UN has put out. So we started putting these things together and it was really interesting because what you start seeing is that, as you said, there are lots of different measures to look at ESG. If you look at our measure versus a Morgan Stanley measure, versus a Bloomberg measure versus others, you might end up in different places.
Afsaneh Beschloss: (30:30)
So what we decided to do with our technology was to create a tool where we can use our own ways of rating a company, but we also can use anybody else's so that we don't start becoming very rigid and depend on one set of ratings. You're absolutely right. There is no common way to rate things. I think what we do know, like we're talking about housing, is for example, more people of a certain income group now have housing that didn't have before. That is progress. And that is a positive thing. So just measuring those numbers is helpful. If you invest in this energy project versus this other one, this is the carbon impact, that is easier to measure. I think some of the things that are harder are more in the social area, but what we're trying to do is to the extent possible. And I wouldn't say it's perfect, as you said, there's a lot of issues with measurement, but still using the tools we have to come up with some sort of rating and measurement.
John Darsie: (31:41)
Yeah. It's fascinating. Another question about RockCreek. I said in the intro that RockCreek is one of the largest women founded investment firms. Your workforce is 80% diverse. So you guys live these governance principles that you look for in companies and funds that you invest in. Why do you think that's important and how does it help you as a firm to arrive at good investment decisions?
Afsaneh Beschloss: (32:05)
John, I think what is it allowed us to do is to cast a much wider net. So we invest in small companies, as well as large companies. We invest in large firms and smaller firms. So what happens is that you have, particularly at points of stress in the markets, less volatility in your total portfolio. We also find that smaller firms often are doing something which is relatively unique. So they have a higher possibility of generating alpha versus larger firms who might have more of an average return. So the idea for us also is that in terms of our own team, having people who come together from very, very different backgrounds it means that they come up with different themes. They come up with different ideas and we try to argue constructively sometimes. We disagree and sometimes we agree and we try to come together, but having that culture, which is respectful, but allows you to think differently has really helped us with our returns.
John Darsie: (33:17)
Great. The next question is about your time at the World Bank. You became an expert on the so called Global South, which is basically another term for developing our emerging economies or a less pejorative term than third world countries. So what is your view today on the Global South and investment opportunities in places like China, Asia, and other developing economies?
Afsaneh Beschloss: (33:41)
What has happened, John, over the last especially 15, 20 years, is that emerging markets went from a very different place when I started my career in development to a much better place in terms of education, in terms of health, in terms of job opportunities, productivity. And if you look at the growth rates in emerging markets or South versus developed economies, it has basically generally been about at least double the size. So if ours was two to 3%, emerging markets would be three to 6%. I think what has happened particularly in the last 15 years was China, as you said. So China has become a huge part of the market. China, when I first went to China, had zero market. There was no companies to invest in. And the World Bank had just started working with the Chinese and sort of sharing US and European and other emerging market ideas and ways of investing across their economy.
Afsaneh Beschloss: (34:49)
I worked a lot with CNO and their energy sector at an early age. And so early stage of when they opened and what happened is that China developed so much so that now today, if you look at MSEI, the largest share in MSEI is North Asia. And then if you throw in India, between China and North Asia and India, you have almost 80% of MSEI. So the emerging markets now mean something very different. As I was saying earlier to Anthony, my concern now is that China might be a big beneficiary coming out of COVID, as we can see. It might be the only country that might have a positive, just positive 1% plus or minus growth rate. Everybody else, in particular, if you look at Latin America, if look at Africa, huge loss of the last 20 years of development. And it's really, really important to see how we can do something and help to make sure that that does not go the way it seems to be going, particularly in Latin America.
Afsaneh Beschloss: (35:59)
So emerging markets has come to do to mean very different things. We are competing with the Chinese, as you well know on technology, on education, on telemedicine, they're developing so fast. In finance, they were able to push money, not just to people who had banking relationships, but to every individual. So they have been able to create financials infrastructure that is in some ways, much more flexible than ours.
John Darsie: (36:32)
Great. We'll get to a couple more questions and then we'll let you go. This has been fascinating. Thanks again for joining us. You do a lot of your investing at RockCreek through third party managers. So you have a direct business and you have fund to funds multi-manager type business. When you're evaluating managers, how do you evaluate talent and gain an edge through a multi manager approach? And why do you think a multi manager approach is often better than, if say, a family office or an institution were to try to go direct into certain products.
Afsaneh Beschloss: (37:04)
Doing multi-manager is we invest on behalf of some universities and pension funds and others where we put together a customized portfolio. And the advantage there is that there's so much talent out there. So many great firms. And what we do is to have these databases that we talked about a little earlier, but also database of new firms, new, what we call emerging managers. Emerging managers are firms that are starting their businesses, in fact, for example, when I was at the World Bank, the World Bank did the first 5 million investment in Bridgewater. So that was an emerging manager at the time, this was a while back. But we, at RockCreek, continue to invest in a lot of new managers. And that is because of this large database. And it allows you to create portfolios where you can generate very, very high alpha.
Afsaneh Beschloss: (38:03)
Secondly, you can change directions much faster. Thirdly, we were talking about emerging markets. We do a fair bit, let's say in Asia, in the rest of emerging markets, and it was really important to find talent on the ground. There's no way we can get a team here sitting in New York or Washington or London that is as good as a team that is sitting in the cities, in China, in India, in Brazil, in Mexico. They know much better about both the good and the bad. So we find that that way, you can generate much higher returns.
John Darsie: (38:40)
So my last question is about you, personally, as an entrepreneur. So you've repeatedly bet on yourself over the course of your career. You talked about how you started at Carlyle. You establish RockCreek through a management buyout of that business in 2003. Then you recently bought back the balance of the equity of the firm from Wells Fargo, and you're managing about $14 billion. What has made you successful as an entrepreneur?
Afsaneh Beschloss: (39:05)
John, I didn't really set up to become an entrepreneur. When I was at the bank, I was lucky to start leading groups and I was allowed to do that sort of within a very hierarchal structure, I created on hierarchical structure. So I really enjoyed being part of teams that were on hierarchical and people who are smarter than me coming together to create something good and fun to do. And that sort of started within a very big organization. And I think it was really, again, not my plan to start RockCreek or later on to do the last transaction. But as you know, my friends at Wells Fargo also agreed that they were in the news every day, it made sense that we part ways because while we had our separate management, we were the managing partner of that business. I think we realized that it was better at this point in history to separate or as we separated in 2018.
Afsaneh Beschloss: (40:07)
So in terms of sort of being entrepreneurial, I think what is fun for me, I actually have been very happy working within big organizations as I worked in Shell, JP Morgan, World Bank, smaller organizations like Carlyle that relative to the World Bank and then at RockCreek. And each has its own pros and cons. And what I find is that being an entrepreneur is heavily overrated is 24 by seven, just like all the other jobs that I have done. And at the same time, you can move faster. Let's say you can get your tech team and your investment team to work together to produce something much faster than in a big organization. That has been really much more fun and being able to proceed with speed is something that I do enjoy doing and definitely easier with a great team that I have been very fortunate to be part of at RockCreek.
John Darsie: (41:07)
Well, Afsaneh, we want to thank you again for joining us. You're a rock star. We always enjoy seeing you at different events. And we were looking forward to having you out at our SALT conference in Las Vegas in May, unfortunately, that had to be canceled, but we'll maybe look forward to having you and Liaquat Ahmed on a panel together at a future SALT conference. But in the meantime, the SALT talk we'll do this was fascinating. And thanks again for joining us. Anthony, you have any final words?
Anthony Scaramucci: (41:32)
No, it's just terrific to spend with you. I'm looking forward to getting it together soon. I usually, at this moment, Afsaneh, I start picking on John, but he went with a very plain background this time. He's had stuffed animals back there, he's monkeys. He is a very strange guy, John Darsie. But when he's president, I'm going to make sure that you're in charge of the World Bank of the United States for this kid. He's going to be of a lot of help, Afsaneh. I promise you that. God bless you and thank you and just stay safe. And hopefully, we'll see you soon.
Afsaneh Beschloss: (42:07)
Thank you for inviting me. And it was really fun to be with you and John, thank you.