Investing to Catalyze Positive Change with Noel Pacarro Brown, Investing with Impact Director & Financial Advisor, Conscious Wealth Management Group at Morgan Stanley. Matt Salloway, Chief Executive Officer, GSI Ventures. Rosemary Sagar, Chief Investment Officer, Kingdon Foundation. Thomas Haug, Managing Member, Aspen Tree Advisory.
Moderated by Steven Saltzstein, Chief Executive Officer, FORCE Family Office.
SPEAKERS
Noel Pacarro Brown
Investing with Impact Director & Financial Advisor
Conscious Wealth Management Group at Morgan Stanley
Matthew Salloway
Chief Executive Officer
GSI Ventures
Rosemary Sagar
Chief Investment Officer
Kingdon Foundation
Thomas J.A. Haug
Managing Member
Aspen Tree Advisory
MODERATOR
Steven Saltzstein
Chief Executive Officer
FORCE Family Office
TIMESTAMPS
EPISODE TRANSCRIPT
Steve Saltzstein: (00:06)
Good morning, I'm Steve Saltzstein. I'm the CEO of a FORCE Family Office. I want to thank you all for joining us today. FORCE stands for, family office research, consulting and events, and we are the largest network of investment seeking family offices in the US. Basically, what we do, is we bring families together to share intellectual capital, best practices, meet best in class service providers. But ultimately, what we do is, we bring families together in the context of co-investing and we have made so many different co-investment alliances and relationships. It's now my pleasure to welcome the rest of the panel. Noel.
Noel Pacarro Brown: (00:49)
Hi, I'm Noel Pacarro Brown. I'm with The Conscious Wealth Management Group at Morgan Stanley. We are a wealth management team that focuses on impact investing and bringing families together like Steve.
Matt Salloway: (01:03)
Hi, good morning. I'm Matt Salloway. I'm the CEO of GSI Ventures, which is a single family office for a member of the Saudi royal family. GSI stands for growth, sustainability, and integrity. I'm also the co-founder and managing partner of SIP Global Partners, which is a performance-based global VC fund investing in the 5G economy. Very nice to be here.
Rosemary Sagar: (01:28)
Hi, I'm Rosemary Sagar and I manage the charitable assets for Mark Kingdon at Kingdon Capital. Kingdon Capital is one of the oldest hedge funds in New York, it was set up in '83 and the charitable foundation was set up in the late '90s. And I've been there almost 17 years now and have more of an institutional background. I ran the international investment division at US Trust and international equities at GE Investments, which was managing the pension fund.
Thomas Haug: (02:08)
Good morning. I'm Thomas Haug. Is my mic on?
Rosemary Sagar: (02:11)
Mm-hmm (affirmative).
Thomas Haug: (02:11)
I'm Thomas Haug, managing member of Aspen Tree Advisory. Aspen Tree Advisory is a multifamily office based here in New York, best city in the world. We have a consulting and advisory practice primarily for family offices. And for a number of years, I have served on Steven Saltzstein's board. So thank you for joining us this morning.
Steve Saltzstein: (02:32)
So Rosemary, let's start with you. Can you talk about how running a family office, you think about the dynamics of impact investing and this morning we're here to talk about creating positive change. How do you think about that in regards to your asset allocation model?
Rosemary Sagar: (02:51)
Since we have this family office perspective and the institutional perspective, I think it's a good idea to sort of think impact investing as a ... It's both art and science and the institutional perspective has been very much ... Well, moving more and more to the science end. And there's been some very good innovations the last few years on metrics, in terms of compiling data and actually measuring the impact. But for family offices, my view is, it's more at the art end of the spectrum. And it's more of the question of, "Okay, what does impact mean to the individual family office?" So speaking for us, I mean, the theme here is positive impact, but we'll take it a step further.
Rosemary Sagar: (03:43)
We want to make a difference and there's different ways of making a difference and therefore ... Matt, does something completely different from what we do, but we take the global holistic view of ... We can make donations and we can invest with impact and making a difference but ultimately we want to make the biggest difference possible, and what's the best way to get there?
Steve Saltzstein: (04:14)
So how do you decide where to put your money? How do you decide what investments to make?
Rosemary Sagar: (04:22)
Okay. I should explain that, we're just three officers of the foundation and Mark and Anla, his wife, do the donating and I do the investing and they are very passionate about a handful of causes and are very involved on the boards. So it's sort of probably, 80/20 or 90/10 or something where the balances is thinly spread, but the whole concentration is so that truly a difference can be made. And so we need high returns for that. So we will never have the luxury of sacrificing returns to make an impact on the investing side, because ultimately, that's the more direct way of making an impact through donations. So that's what I mean by looking at it holistically. We've looked at SRI and there's a lot to be said, but it hasn't suited our needs because ultimately, it would leave us with too low returns for the most part, even though there are correlation benefits.
Steve Saltzstein: (05:34)
So Tom, just following up on that question. Do you think being an impact investor you have to sacrifice returns?
Thomas Haug: (05:44)
So I don't. I think impact investing was thought of very differently years ago. And as of late, I actually think there are certain impact investments that generate equal or more significant alpha then traditionally thought.
Steve Saltzstein: (06:01)
Right.
Thomas Haug: (06:02)
And I feel like there is much more of a focus on impact today than there ever has been before.
Steve Saltzstein: (06:10)
Right, Noel.
Noel Pacarro Brown: (06:11)
I would agree with that. I mean, those institutions, these organizations that are actually channeling capital for change are not just looking at profitability at all costs. They're bringing in all the other nonfinancial data in order to really hone in an opportunity. And it's that looking so expansively that allows to mitigate risk. It also sees greater opportunities. So if anything, the folks that I work with actually believe that type of approach is going to lead to a greater outcome, both on the financial and impact side.
Steve Saltzstein: (06:47)
Matt, you have a global effort with the prince you're, running offices in Japan, where you're partnered with NTT DoCoMo in Saudi Arabia and the US. How do you think about it globally?
Matt Salloway: (07:02)
We spend a lot of time when we started the family office about five years ago. How are we going to create the right mission statement, the right values? And when we took a step back and I'll quote not to get a little cheesy, but I'll call Ralph Waldo Emerson, who said, "To leave the world better than you found it, that is to have succeeded." And I think, from the family that I work with, we wanted to find a way to obviously protect our capital and grow it, but also to find a way to make an impact. And that's what we're trying to do. GSI, the values, the core values are pillars, growth, sustainability and integrity. It took a while to come up with those ideals. And they basically, embody how we look to invest, how we look to partner with folks.
Matt Salloway: (07:56)
Technology for us is an area where we believe we can make the biggest impact. We have a foundation, the family has a foundation. The foundation is focused on many important causes. I'm sure like Rosemary's family, but on the investing side, we are returns driven. And that's a fact, I mean, that's how we look at everything. When we get into technology, we started a fund about two years ago with NTT. The fund is mostly investing in North America, but being abridge into Japan, the Middle East. We believe we can have a true impact on other economies. Bridge the gap, other cultures. Improve the quality of life aligned sort of with the values in Saudi, specifically a vision 2030. Moving away from oil and, and becoming more sustainable. So the way that we approach it, I think it's unique to each family, but it's all about making a difference, but also growing our capital.
Steve Saltzstein: (08:56)
You have to mind the return, so to speak, but do you give extra weight if something is going to make a positive impact in the world?
Matt Salloway: (09:06)
We definitely do. And again, we have a broad view of impact. So we're investing in disruptive technologies. For example, we're investing in 5G, ORAN. A company called Parallel Wireless, which is bringing connectivity to rural areas around the world. If you look on their website just to give them a plug, they actually were bringing Afghanistan. They were in Nigeria, a lot of areas that don't have connectivity. So that's one area, we're also doing workplace safety technology. So making sure employees can safely do their jobs and not have injuries, which can devastate families. Again, it's about the returns, but we want to make sure that there is something positive, broadly speaking that can occur from our investments.
Steve Saltzstein: (10:03)
Are you ever concerned about maybe doing too good a job in the sense that like, for instance, when the ride sharing companies went to India, there were all these protests. The Indian taxi drivers were up in arms because it was hurting their lifestyle and they didn't want to have to go through the transition. You ever wonder that you're kind of piercing the veil, so to speak?
Matt Salloway: (10:25)
That's a great question. You can look at it from every side, it's not easy, obviously creating automation and taking away jobs. There's a lot of impact to, to families. And so you have to really take a hard line stance and say, "Is it doing more good than, than not?" And obviously, bringing technologies to new countries is a challenge and every country has its own values and needs. You're absolutely right, we have to be mindful of that. We've tried to be that way. I mean, we're working in two of the most, I'd say insular countries, Japan and Saudi Arabia, very different demographics. One is the oldest economy in Japan, Saudi is one of the youngest economies. I think 75% of the population is under the age of 40 in Saudi.
Matt Salloway: (11:20)
So we have to be mindful. There's also different values, religious values. So there's a lot that goes into what we think about, but fundamentally we want to invest in the best technology that we believe can really change the world.
Steve Saltzstein: (11:36)
Noel, can you look at impact in a non-correlated lens?
Noel Pacarro Brown: (11:42)
Before, we go there. I was hoping to address something you said, Matt, which was that you want to be effective in the places where you're investing. And I think some of the conversation around ESG is the S part, the social factor, the focus on human capital. And we hear a lot about DEI and why it's important because channeling capital to places where it's usually not there, it's the right thing to do. But it's also the smart thing to do, because if you have folks on the ground who understand these issues in these cultures, in these regions, that's a better investment. You're getting more data. And it's not data that we see on the balance sheet. And it's not even data that we can see in the UN Sustainability Development Goals, but it's having actual connectivity and people that understand how to make the investment most effective and lift all folks together.
Noel Pacarro Brown: (12:30)
So just to play on the conversation around metrics, and maybe we go there next, I'm not sure, but there's lots of ways to look at it, but I think ultimately having people on the ground and connectivity with the communities in which you're serving is critical to this conversation.
Steve Saltzstein: (12:47)
Well, let's talk about measurement. I think we're going through a phase where there needs, and there's going to be standardization. I mean, obviously you're hearing it from the SEC, you're seeing it in Europe and there all these kind of international scales. Do you have any sense of who you think has the best model? Specifically, your high net worth individuals or family offices can think about it?
Noel Pacarro Brown: (13:12)
So for us personally, we actually work with several different asset managers who I find brilliant. Just like any other investment, you're going to find asset managers who have deep knowledge, but also expertise with people in the field. Analysts who are looking at things to find inefficiencies. That's really what we're here to do. And so, if an asset manager is doing that well and using both the financial and non-financial data in a way that's not just looking at the point of profitability over the next quarter, but generational change. Then you're going to find a really good solution. So for our team, we look at all the different asset managers, most of them think way beyond the next 10 years. And we relay that back to our clients and say, "How does this fit with the way that you're thinking about your desire to make an impact?" And then we go from there.
Steve Saltzstein: (14:03)
Tom, do you think that family offices are better suited to make impact investments because they can think in terms of generations?
Thomas Haug: (14:11)
So I think the time horizon for family office is definitely more significant and lengthier than some other investors. So when you look at the time horizon of an impact investment, number one, you're looking to make change. Number two, you're looking to take as much time as needed to effectuate that change. And number three, the return profile may be more significant, if you have the patience to wait it out. So 100%, I do think impact has become a focus for families more and more over recent years for that reason.
Steve Saltzstein: (14:48)
Rosemary, you're probably known as the smartest family office investor in New York. I think that's really true. How should folks think about the best place on the balance sheet to deploy their capital in regards to debt facilities, equity, prep, things of that nature in order to have the most positive impact?
Rosemary Sagar: (15:10)
We look at all the alternatives, basically. We have a very fundamental process. So we look for the sustainable performance and through that lens, even before impact became a thing, we would avoid any negative impact because by definition it's not sustainable. I mean, that's our main assumption, so it would be screened out. Going back probably 15 plus years. We have invested in a variety of strategies that have positive impact and actually, several of the best impact is on the lending side, on the credit side. So we're in two SBIC funds and that's helping smaller businesses that wouldn't have access to financing, otherwise. And it is highly profitable too. The best case, I mean, our Holy Grail is we want to have higher returns, while making positive impact in our investments and then have even more funds to then deploy in donations and have an another whammy on the same play so to speak.
Steve Saltzstein: (16:34)
Right.
Rosemary Sagar: (16:35)
That's the [crosstalk 00:16:35].
Steve Saltzstein: (16:35)
So the ends justifies the means, so to speak.
Rosemary Sagar: (16:38)
Yeah, but I have to say, I think that ... I hate to generalize, but it's probably in the direct investments that you have the biggest bang for the buck. So we have invested in a company that got breakthrough status for a medical device that helps in oncology surgery and basically highlights every last cancer cell during surgery and allows clean margins, reduces the need for a second surgery by more than 40% and that sort of thing. So we're expecting a very positive outcome for the exit. And in the meantime, we're basically changing the future for so many cancer patients. And ultimately, all our proceeds are going to get donated.
Steve Saltzstein: (17:36)
I think I showed you that deal.
Rosemary Sagar: (17:40)
I showed you that one.
Steve Saltzstein: (17:41)
Fair enough, fair enough. Matt, you're kind of playing both sides in the sense that you have a family office and you have a fund. So where do you think you can make the most positive change? Is it through direct investments from the family office or is it in some sort of LP structure?
Matt Salloway: (17:59)
Well, I take a very holistic approach. I don't think that there's an answer that one is better than the other. I think in unity, we're able to do a lot more. And we started this fund because we had such a strong family office infrastructure. We were investing in tech companies in the US and bringing them into the Middle East. And we were doing that also for our own returns. It wasn't just impact. The fund came about because we were doing, I think, fairly well. And we partnered with some close colleagues of ours in Japan, who were doing the same thing, bringing technology to Japan. And we felt, if we combine this ecosystem, it would be probably one of the most unique. I mean, being able to bring tech companies into Japan and Saudi. Japan being the third largest economy, Saudi being one of the largest economies in the Gulf. We felt like that would really have a positive impact, not only on our portfolio, but also on the world, the way that we're trying to bring together. I think it's a combination of both, is the answer. If that makes sense.
Thomas Haug: (19:06)
And Steve, if I could just make a quick comment. Most of the people that are here that know the trail of how Aspen Tree has evolved. I was very good at selecting managers and selecting professionals that knew how to run investment portfolios. And I think there very much is a place for that. And just because you're hearing more and more today about family office, co-investments and collaboration. Especially, in and surrounding the impact space, I think there very much is a place for managed portfolios and at certain points, it's a good thing to leave it up to the professionals.
Steve Saltzstein: (19:50)
Tom, let me ask a follow-up question, which is, today, now more than ever, there are a myriad of different financial structures and sectors within the sector that you can take advantage of. I mean, you can get involved in impact through EV, through water generation, through diversity and inclusion, but you can also do it through a SPAC, through bonds, whatever it might be. How should a family office think about kind of that giant spectrum of opportunities?
Thomas Haug: (20:20)
So I think it really comes up to their investment thesis and what their overall portfolio construction looks like outside of the impact space. If a family has a lot of exposure to a certain sector, but they are still looking to make a philanthropic portion of their portfolio. I think it's important to just make sure that there's not too much overlap when you say, maybe exercising SPAC opportunities, which we've heard tons about, or doing some sort of more public offering. When you think of impact investing recently, I think we think about private investments. We think of private companies, we think of funds, but there are plenty of public vehicles that you can make an impact and exercise investments through.
Steve Saltzstein: (21:15)
How do you guys ... And just open it up to all of you. How do you guys think about the concept of opting out versus opting in? And what I mean by opting in is, if you look at Engine No. 1, which is this small hedge fund that recently got three board seats on Exxon's board and they did that all under the auspices of hoping to change their policy on climate change. It couldn't be more activists versus folks who just basically say like, "All right, I'm going to completely stay out of investing in oil and gas because it's increasing greenhouse gases."
Thomas Haug: (21:46)
Steve, I'm going to make one comment and then turn it over to the panel. So in that scenario, if you look at that, they took one fifth of the company's board seats. And I think there is going to be a very positive change surrounding that. That's big, I mean, three board seats out of what, 15.
Steve Saltzstein: (22:08)
Yeah.
Thomas Haug: (22:09)
Yeah.
Noel Pacarro Brown: (22:10)
I see this as an opportunity for influence and ultimately, usually that's the investment, but now you can have additional influence. And so for us, it's been a way to help even the younger investors. The next generation get really engaged because oftentimes, they don't know what it is to feel power and influence quite yet. But in this conversation around, and we talk to them about the group, As You Sow and proxy voting and shareholder engagements for the public side, it starts to come alive. And so it to me, is the somewhat democratization of the capital markets, because every investor, not just those with the most capital can feel that their vote counts and it's going to be doing something.
Noel Pacarro Brown: (22:53)
So we love that conversation, but we would never impose it. I do have clients who live in the rainforest in Hawaii and say, "I'm a passive person have discreet. I don't want my name on anything." But have the asset managers vote and do my proxy voting.
Matt Salloway: (23:11)
I'm sorry, I would add one other thing. And I think, the question gets to the point of how impact has really become mainstream in some ways. I mean, we participated in 2015 in an impact investment conference at Harvard University, they do a great job. I'll give them a plug, James Gifford and Falco, who I think are two of the leaders in impact. We brought together some of the leading families, we talked about, how next generation families can get more involved in impact. And it was so much more limited. Now, every bank has an impact officer. There's a lot more of these funds, there's these metrics. Obviously, you have to make sure, if there are people in the audience that are looking to get into impact, you have to make sure that there's real teeth to the screening and what people are saying. But I think, at the end of the day, it's amazing how far we've come and how much there's been a push for the entire industry.
Rosemary Sagar: (24:17)
I might add also, I think back to your question. I think activism is a very essential ingredient for having impact, but I think the main difference probably between the opting in, opting out, is the timescale of change because being activists is hopefully going to accelerate the pace of change dramatically versus opting out and withholding capital and funding from undesirable behavior. So that's how I view it.
Steve Saltzstein: (24:49)
Are family offices and ultra high net worths, are they looking at climate change as a risk factor when they're considering making allocations out of the portfolio?
Noel Pacarro Brown: (24:59)
Absolutely. Yeah. I mean, at least for our investors, for an asset manager that doesn't even consider it. They say, "How do you risk manage?" It's just very obvious. Of course, I'm from Hawaii. So we live on an island and I do work on the West Coast, so we're seeing it real time. It's our lived experience. And so to not consider that, when you're managing capital seems like, what world are you in? So no, it's not just risk, it's opportunity. So it's one thing to be a responsible corporation. It's another to actually create solutions. And so I think when it comes to family offices that are leading the charge, like some of the folks here, they get to be slightly more innovative and be the tip of the spear, which then creates opportunities that are scalable for the rest of everyone else to participate in.
Noel Pacarro Brown: (25:47)
But those innovative solutions start with that private investment, oftentimes not all have access to. So we're really leaning on the folks who can, to make those investments, so that we can follow suit and bring more capital to the opportunity.
Steve Saltzstein: (26:03)
Well, do you think, because your business is Hawaii, Oregon, and California.
Noel Pacarro Brown: (26:10)
Yeah, mostly.
Steve Saltzstein: (26:11)
Do you feel that there's kind of an East Coast, West Coast thing, when it comes to the recognition and real application of impact investing?
Noel Pacarro Brown: (26:19)
Yes and no. I mean, we find kindred spirits here in the city and they've been amazing. This is going to be a little bit of a fan girl moment, but when I heard Justin Rockefeller speak, it was like, "Oh, yes. Absolutely." He gets it. He's got friends who get it and he's not from the West Coast. So no, I think that absolutely in Silicon Valley, there's a focus on innovation. There's a focus on what's going to be happening 10, 20 years from now. And so that type of thinking and creativity is just a beautiful environment to be having these types of conversations around impact solutions. Not to mention, I think people are a little more connected. I don't want to generalize, but most part, connected to nature and the effects of climate. And also, there is more focus on social justice in these hubs like San Francisco, LA, Seattle.
Noel Pacarro Brown: (27:07)
So I think the conversation is, it's not like learning a foreign language. It's definitely, everyone's speaking in this way. And so I'm excited to be able to have our business there and serve the families, we do.
Steve Saltzstein: (27:22)
Tom, I'd venture to say, no one in this room knows more family offices than you do. Do you hear from them, or do they reflect thinking about impact investing differently based on where they're living in the country?
Thomas Haug: (27:42)
You gave me a very tough question, if you think of California emissions and you think of lowering greenhouse gases and environmental, obviously you think of California. You think of the West Coast, I think that has changed. If you think of, Shane who we had here yesterday, he's dedicated his life and invested a lot of money into the EV space to lower greenhouse gas emissions. There are other companies that are New York-based that-
Steve Saltzstein: (28:18)
By the way, just to be clear, that's Shane McMahon from the McMahon family in Connecticut that founded WWE and WWF.
Thomas Haug: (28:28)
Yeah, if you look at some other companies that I work with, their mission is to lower greenhouse gas emissions. They are based in New York and Colorado. I do think, across the country, people have realized that lowering emissions and raising standards is very important, when you think about the current administration's mission to plug leaking wellheads and focus on alternative fuel sources and everything else. I think that's something that spans across the country at this point. And then when you look at technological advancement that drives most of the impact today, New York is a hub, Seattle is a hub, California's a hub. The Southeast is becoming a hub. So think it is pretty broad, in my opinion.
Steve Saltzstein: (29:29)
Matt, you really put your money where your mouth is, and not only with GSI, but you also are a film producer and the common theme in your films is social justice, diversity and inclusion. I'd be surprised, if anybody else in this room has really done more for their mission then you have. Can you just talk about, what you're doing with, with producing? You're a polymath, by the way. He's an attorney, he runs this great family office. He's got a fund, I don't know, just got engaged and he's an executive producer or producer on all these films. Can you just talk about that.
Matt Salloway: (30:13)
Thank you. I think for that, I'm going to have to put you in the next film.
Steve Saltzstein: (30:15)
Exactly.
Matt Salloway: (30:19)
Just to combine worlds, the first female Saudi director made a ... I think she spoke a few years ago and she said, "Art can really take hold of you. It can open your mind." I've always had a passion for art and film as a vehicle to change the way we think, to educate, to inspire. And again, we try to make commercial films. It's not just about making a film solely for the message. It's a combination similar to what we do with the family office and the fund, but I've been fortunate to be part of over 10 films. Our most recent film is called, Worth. It's the story of Ken Feinberg, who was the 911 special master. He was really tasked with the role of determining the value of human life. And obviously, it was a transformation as he went from kind of very matter of fact, trying to figure out a formula to really understanding and becoming so much more empathic and going through a transformation to understand what the families were going through and to understand what our worth is in humanity, regardless of what we do and how much we make. We're all in a sense the same.
Matt Salloway: (31:49)
And so we were fortunate, that came out ... That's on Netflix. If everyone wants to check out Michael Keaton plays, Ken and Stanley Tucci plays the other lead. We were fortunate to be part of the Butler, which was a civil rights film. And for me, that was a passion. My mother was very involved with civil rights. So a lot of these movies I think can make a real difference in the way we think about the world and that's the way we also approach our investments in technology, in the family office. How can we, as I said, at the very beginning, leave the world better than when we found it.
Thomas Haug: (32:24)
And Matt, I would like to personally thank you for the last film you produced, as a 911 rescue and recovery worker coming up on 20 years this year. It's heavy in a lot of our hearts and you released that film at the right time and I really appreciate it to keep the memories alive.
Matt Salloway: (32:43)
Absolutely. Thank you for your service.
Noel Pacarro Brown: (32:46)
I guess I would offer that those same stories are embedded in the families that we serve. So a lot of them created wealth that may have had implications that they didn't expect, whether they created greater inequality, or they actually created some part in the climate crisis. So what I see, is this great opportunity to bring family back together, to go back to the source of the wealth, understanding what was done and say, "Okay, and now what can we do with it?" And so it becomes this point of healing often and also inspiration for the next generation, because so many times when we see with families that have created enormous amounts of wealth, the children become kind of the shadow of that established wealth. And you try to find ways to engage them in order to not live a toxic type of scenario, just by pure physics of that experience.
Noel Pacarro Brown: (33:41)
And it's this conversation around impact investing, where we get them into talking about what can we do about this family legacy? Which yes, it started in this way, but now we're redefining it. And so I see this just like your work in film. I feel like this is our mini stage to help the families that we're working with.
Steve Saltzstein: (34:03)
However, sometimes impact investing can alienate people or just the concept of it. Some people use the term global warming, some people use the term climate change and certain people get very sensitive about that. And I'm just wondering, if impact investing can hurt your co-investment relationships. I mean, a lot of times, and I'm not talking about where I am on the political spectrum, but a lot of times I sit in a room and I just keep my mouth shut. I'm just curious, have you seen that at all? Because certainly look, there's a lot of red state families and blue state families. Do you see, or at any times feel alienated by whatever the agenda of the family office is?
Matt Salloway: (34:58)
I don't know if this addresses your question, but we look at a lot of investments as a family office and we consider ourselves impact investors. Do we lead with that when ... Probably not, but we're returns driven investors. If someone shares a fund with us, that is an impact investment, are we skeptical? Is there a question whether that will still have a returns priority? I think five years ago, there might've been more of that stigma. I think it's changed. I think the way that we look at impact and the way that families are approaching it and especially with technology, I mean the Yale endowment is now putting over 20% of their portfolio into venture. Whether you agree or don't agree, there's so much capital going in, but that's the gold standard of portfolio allocation. They're putting 20%.
Matt Salloway: (35:59)
So there's a lot more opportunities to do impact investments, maybe not your traditional, just a clean energy or all these metrics. But I think because of the amount of sort of technology opportunities and the way the market is, there's more and more opportunities there to become active.
Steve Saltzstein: (36:20)
Rosemary, can you talk a little bit about co-investment relationships, as a family office, how do you develop them? Who do you trust, et cetera?
Rosemary Sagar: (36:31)
Well, we've been doing it long enough that we have a good network between Mark and myself. We have tended to go for the situations, where we have a personal relationship from the past or whatever, and we have a high comfort level. That's what it boils down to. We like direct investing, but we don't do a lot of it because we're a very lean team and you really have to be on top of those investments. You have to have a champion. So co-investing has been the better way to proceed because then you're making sure that there is good brains purely focused on that investment and nothing else. So that's been our preferred route. And at the same time also, I mean, we're a 100% invested in alternatives, which by definition are very liquid. And when you get into PE structured investments and venture and whatever. Yeah, we just don't do 10 year horizons. We don't have the patience for that because we have to produce donations all the time.
Rosemary Sagar: (37:45)
So doing co-investments has also been a way for us to shorten that time period and shorten the duration of the investment, because that way by the time we co-invest in a particular investment generally, at a later series, we're closer to exit and much better transparency, so the risk goes down. Typically, it'll be lower multiple at that stage, but it'll be a higher IRR.
Steve Saltzstein: (38:12)
Right.
Rosemary Sagar: (38:15)
That's kind of our sweet spot. So we've done that different ways. A recent investment of ours was actually in a co-investment fund of a venture capital fund of funds firm on the West Coast. I mean, there's a particular angle to it because they're mainly ... A lot of the GP and a lot of the LPs are athletes that actually are become preferred LPs in individual investments because they test out the products in consumer and wellness and so on and therefore, their preferred. And we were able to get into the final round before the close of this co-investment fund, where about 40% was already invested and with some exits imminent. So we managed to shorten that timeframe. We're already getting distributions, returns impact because of the underlying investments and a shorter duration.
Steve Saltzstein: (39:25)
Does anyone on the panel look at carbon credits? Because there are a number of technologies out there that have no real fundamental business model, other than carbon credits. For instance, I don't know if you saw last week in the Journal, there was an article about, I'll call it an unfactory, in Iceland that was pulling carbon out of the air. The only way that they're going to have a sustainable business model is carbon credits. So I'm just curious if, folks are looking at that.
Noel Pacarro Brown: (39:54)
I belong to a big firm on purpose, because I would rather have those analysts that are focused on that, give me the report to know, and I think it's still young and it's still an exciting opportunity that we want a little more research on before we allocate any funds. Yeah.
Thomas Haug: (40:14)
I'll just add, we've heard a lot in recent days about carbon credits, but there has been very little guidance. I do think there will be families that will take advantage of carbon credits because it works for them. But I think a lot of family foundations and families will also look for a returns based approach. They'll proceed with a philanthropic endeavor, if there's zero return or zero alpha being generated, you have to have a need for those carbon credits.
Steve Saltzstein: (40:54)
Right. I think we have time for a couple of questions from the audience, if anyone would like to ask one.
Speaker 6: (41:12)
What are you're ... Oh, okay. What are your thoughts also, on these kind of absurd cash yields that some of these crypto corporations have been promising that are collateralized, actually over collateralized in crypto assets like Bitcoin?
Noel Pacarro Brown: (41:27)
So you're speaking to the ESG impact investing panel.
Speaker 6: (41:30)
Right.
Noel Pacarro Brown: (41:30)
And so I don't think any one of us is a crypto expert. However, on our team, we did hire a partner who came from the digital currency world because we do see it as something we want to be knowledgeable about and we want to have network and some real expertise. So I wish I had her with me on this stage, but I would say, that the concern for us is really the climate effect and trying to mitigate and understand the actual trade-off between the use of digital currency and the impact it has on the climate.
Rosemary Sagar: (42:07)
I could add our perspective to that. Crypto has been very criticized for being environmentally unfriendly and huge consumer of energy and so on. So we have made only one investment, a recent investment in the space, and that's actually a fund that focuses on like the pickaxes and shovels in terms of the infrastructure required for cryptocurrencies. And the impact perspective is that they're making it more efficient and figuring out ways to use less energy and therefore, having an indirect impact in addition to hopefully being profitable.
Steve Saltzstein: (42:50)
Rosemary, look at El Salvador. El Salvador recently adopted crypto as their national currency or one of their national currencies. I don't know, is it possible that crypto perhaps can lift some of these developing nations, giving them kind of an alternative to either the dollar or whatever?
Rosemary Sagar: (43:12)
Yeah. Again, this comes to the elastic concept of impact because yes, it could uplift the masses, if it gets inflation under control and money supply and so on and therefore, helps to preserve the value of the currency. Yes. Again, it's sort of how far do you go on the definition of impact?
Steve Saltzstein: (43:39)
Right.
Thomas Haug: (43:39)
And there's a reason there has been so much focus on crypto during this conference and backstage I was talking to John and Jerry and I would encourage you to grab John's ear for a few minutes. In the case of El Salvador, I definitely think there is a net benefit and I think there will be a net benefit globally, but how do you frame that into impact? I guess that's ... We're a little confused.
Rosemary Sagar: (44:07)
I think there's a great argument to be made for impact in terms of the use of blockchain to protect farmers, to protect ... That sort of thing, prevent theft and increased security. All of that.
Speaker 7: (44:22)
Hi. I have a question. It's a little bit off topic, but we're sort of in a heightened regulatory environment, family offices, as an investment unit. Are there any risks to regulation? I don't know, if there are any lawyers on the panel.
Steve Saltzstein: (44:49)
I'll take that. I'm talking on a panel in a couple of weeks with Jeffries and Senator Corker and just about that, the new proposed regulation of family offices. Look, the number of family offices has skyrocketed and frankly, the investment power of family offices has multiplied tenfold over just the last five years. You never want to regulate things generally, but there also is a discussion to be had about, how much power they're wielding and do things just at least need to be looked at? I don't think that, that's absurd at all. I think we have time for one last question.
Speaker 8: (45:41)
Sorry.
Speaker 9: (45:47)
... quantitative metrics to get an idea, to measure the impact, if you could.
Noel Pacarro Brown: (45:55)
Right. I mean, we could be here all day. Thank you for that question. That's the beauty of the nonfinancial data. So Europe has its own measure, there's the UN Sustainability Development Goals. There's Sustainalytics, there's MSCI with buckets of analysts and they all have their own ratings. What we've done is basically triangulated data between three of our favorite data providers. And this is me, as in Morgan Stanley, we've had teams of people looking at what's the best to own. And so only through triangulating a database that's really focused on equity. One that's focused on carbon emissions. And one that's kind of broadly looking at sustainability. Then we can get a measure of how aligned a person's portfolio is to their values. So we've actually had to use multiple databases to come at some level of a relative marker. I don't know, if anyone else has other measures.
Steve Saltzstein: (46:51)
The last thing I'll say is that, the SDG criteria is being used as a way to give favorable treatment for impact investing through charging lower bond yields to folks that are ESG focused. So I think it's interesting anyway, it seems to be kind of a burgeoning area. I think we're out of time, unfortunately, but I want to thank our panel and thank you very much for joining us. Thank you all.
Rosemary Sagar: (47:22)
Thank you.