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The Alternatives Mason: Building Alts Knowledge Brick by Brick | Episode 1 | Guest Aaron Filbeck
6 Plays1 year ago
Welcome to The Alternatives Mason: Building Alts Knowledge Brick by Brick. Banrion Capital Management uses technology to help independent advisors scale and educate themselves on alternative investments. Since education is such a big piece of the Banrion mission and business, we are excited to kick off this series to dive into the nits and grits of the alternatives space. Our first guest is Aaron Filbeck, Managing Director and Head of UniFi by CAIA.
As Managing Director and Head of UniFi by CAIA™ , Aaron oversees content and product strategy for the UniFi by CAIA™ Program. Prior to this, Aaron was responsible for the strategic direction of CAIA Association's content agenda, thought leadership, and member education initiatives, and supported content development for the CAIA Charter Program. His work has been published by Oxford University Press and The Journal of Investing, and covers topics such as ESG/sustainable investing, liquid alternatives, commodities, and asset pricing/factor investing. He is a frequent writer and speaker on these topics. Aaron’s practitioner experience lies in private wealth management, where he served as portfolio manager, overseeing asset allocation, portfolio construction, and manager research efforts for high-net-worth individuals and institutional retirement plans.
He earned a B.S. with distinction in Finance and a Master of Finance from Penn State University. He holds the Chartered Alternative Investment Analyst (CAIA), Chartered Financial Analyst (CFA), Certificate in Investment Performance Measurement (CIPM), Financial Data Professional (FDP) designations, is a CERTIFIED FINANCIAL PLANNER™, and holds the the CFA Institute's Certificate in ESG Investing. He is a Past President of CFA Society Columbus and serves on the CFA Society Philadelphia Programs Committee. Aaron is an adjunct professor and serves on multiple advisory boards for Penn State University.
Host Brittany Mason’s diverse background has given her a unique perspective stepping in to the role as Chief of Staff at Banríon Capital. Throughout her career she has embraced challenging projects proving her ability to lead the development and the successful launch of brands. From staffing, branding, and marketing, Brittany has spent the last 20 years working in the fashion and entertainment industry with some of the world’s most iconic brands. This includes but not limited to event management and production for high scale events like the Superbowl, Indianapolis 500, TAO Group, NYFW, Miami Fashion Week, product launches at Salesforce’s Dreamforce, CES, and partnerships with brands such as John Frieda, Eleven Australia, and Valentino.
Her extensive work in the industry motivated Brittany to produce her own events. In 2013 her first directorial project was to spread awareness for Prostate Cancer. This 1 minute campaign video reached 13 million in just a few short weeks. This is when Brittany began producing charity fashion shows and coaching young entrepreneurs under her brand MOXIE Media. In Just one year Brittany worked with approximately 100 thousand students. In 2017 Brittany launched MOXIE Media Productions in Ireland, becoming the Director and license holder of Miss Universe Ireland. Brittany is known for the rebrand and launch of the Universe brand in Ireland and over the course of 5 years built a historical track record for the country that earned several global awards. Miss Universe Ireland became one of the country’s most exclusive and sought out events to attend. In 2019 MOXIE Media gained the right to Miss Indiana USA and Miss Indiana Teen USA making it the first production company in history to participate in the 3 largest competitions year after year; Miss Teen USA, Miss USA, and Miss Universe. Through her work she has shown her commitment to creating career opportunities and empowering others, especially women to become leaders within their own communities.
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Transcript
Introduction and Podcast Goals
00:00:00
Speaker
Welcome to the Alternatives Mason podcast with host Brittany Mason, Chief of Staff at Bonner & Capital Management. You'll learn how to build alternatives knowledge brick by brick.
00:00:26
Speaker
We are live. Hello, everyone. I am Brittany Mason. I am Chief of Staff here at Banner and Capital Management. And I am so excited today because this is our very first episode of the Alternatives Mason Building Alts Brick by Brick. So here at Banner and Capital Management, it is a key focus for us for Alts education.
Guest Introduction: Erin Fillback
00:00:49
Speaker
And we have proprietary technology to help our advisors scale and educate themselves on alternative investments. So since education is such a key point here at Bannering Capital Management, our very first guest today is Erin Fillback, the managing director and the head of Unify by Kaya. Thank you so much, Erin, for joining us today. I'm so excited to dig deep and get into the nitty gritty of alternative investments with you.
00:01:18
Speaker
Well, thanks so much, Brittany, and thanks for having me. Thank you. So why don't we just dive right in? Let's get started. Why don't you just tell us a little bit of background on your journey to alternatives?
Erin Fillback's Background and Perspectives
00:01:34
Speaker
Sure, so I started my career in the wealth management space a number of years ago and we were pretty heavy allocators to the alternative investments space within our portfolios. So I pretty quickly learned the ins and outs of different strategies and
00:01:53
Speaker
how they can be used in a portfolio. About four years ago, left the wealth management space and then joined KIAA and had a couple of different roles here, but most recently moved into this Unify platform, which I know we'll talk about later on. But just love the space, love the mission of what we're trying to do, and obviously education is at the center of that.
00:02:18
Speaker
Absolutely.
Misconceptions and Educational Needs in Alternative Investments
00:02:20
Speaker
So it seems like there are some misconceptions from the investor community about alternative investments. So does that start with the financial service industry or is that specifically with advisors?
00:02:35
Speaker
Yeah, so I think one of the biggest misconceptions about alternatives is that it's kind of an umbrella term for a lot of different things. So if you look at the underlying strategies in the industries that underpin alternatives, it's very, very diverse. And so I think the first kind of misconception that we see
00:02:54
Speaker
a lot of industry practitioners and advisors, especially when they look at this space, they tend to kind of lump it all together into one piece of the portfolio without really truly understanding what's the underlying kind of risk return drivers of each of those strategies. Yeah. So, you know, why don't you just tell us a little bit more about some of the education that Unify by KIAA, the program actually includes?
00:03:23
Speaker
Sure. So, you know, CHI Association's about 21 years old, so we're officially legal to drink, if you will. But we've been around for over 20 years, focused exclusively on providing education in the alternative space. Started really with our CHI designation, which I know some of the members of your team or members of our association have gone through that program. I myself have gone through that program and I'm a member of the association.
00:03:53
Speaker
And that's a high-stakes, two-level examination process where we're really teaching the ins and outs and the technical elements of alternatives and trying to help people understand how do you fit this in a portfolio, how do you analyze managers, how do you do things like manager selection and due diligence, and then of course portfolio construction and asset allocation.
00:04:16
Speaker
So that's really kind of the bread and butter of what we've done and what we've been known for for a number of years. But we also have other educational offerings as well. So UNIFI is what I oversee. And what we're really focused on is providing education to the wealth management space.
00:04:33
Speaker
So if you think about your typical advisor or a wholesaler, intermediary, or someone who works in client service, they may not be in the ins and outs of portfolio management, but they need to understand how this stuff works. They need to speak the language, understand the jargon that this industry uses. And so we try to build educational programs that give them that foundational understanding of all the different strategies that are out there.
00:05:00
Speaker
So that's who you would say your target market is, who's best suited to participate in those programs.
Educational Programs for Wealth Management Professionals
00:05:06
Speaker
Yeah, you know, and I think, you know, we're primarily focused on wealth management. That's kind of the primary audience of, you know, the way that we teach things, we try to do it in a very contextual manner that's relevant to the wealth management space. But I think it's also a really good platform for people who are new to this industry, who have never really, you know, dealt with these strategies before or just, you know, are just getting up and started. This is a really good place to start for them.
00:05:33
Speaker
And maybe they go on and do other things and get more technical, or they just have that foundational element as well. So I'm actually enrolled myself in the Fundamentals of Alternatives at the Unified KAIA Foundation. And, you know, I have to admit, this is a whole new world for me. My background, actually, I've just made the switch over to finance really in the last couple of years. And my background is more marketing.
00:06:00
Speaker
Brand building, advertising, stuff like that. So very different, but the program itself I have found is it's very thorough. It's very informative. And I'm also a very visual learner. So I will say the slides and the graphs, everything is incredibly helpful. And so I'm excited to get certified and just expand my own knowledge as well.
00:06:25
Speaker
And so that's the biggest takeaway. I want people that are listening, you know, to this, to this, is to, you know, don't be intimidated by, by this whole world and boundary and capital and you yourself at UNIFI, the KIAA Association, we're all committed to helping educate people in this space.
00:06:50
Speaker
Yeah, you know, I think as I think about what I hope someone, and I think you're a perfect example of someone who, you know, you're new to the industry, you're trying to understand how this stuff works. My hope is that anyone who goes through one of our programs walks away with a couple of things. I mean, one is kind of that foundational knowledge. You actually understand when we say hedge funds, what does that mean? When we say private equity, what does that mean?
00:07:12
Speaker
You know, I think the second thing that would be really important is just understanding how all this stuff fits into a portfolio. As I mentioned before, you know, that misconception of alternatives are just this holistic umbrella where there's a lot of different things and we can just tuck it away into this part of your portfolio. I think by going through this program, you get a better understanding of the individual unique risk return profiles that are associated with it.
00:07:38
Speaker
And then, most importantly, having better conversations with your clients. You know, you get the foundational knowledge, you understand how it fits. Now, hopefully, you can articulate it when you're sitting across the table from, you know, Mr. and Mrs. Smith who are, you know, trying to understand how they can save for retirement and so on. That's awesome. So, what would you say then are the three main takeaways you want people to have after going through this program?
00:08:06
Speaker
Yeah, again, I think foundational knowledge is one. I think you walk away with the basics of how this stuff works. The portfolio construction and the fit, if you're starting with a traditional 60-40 portfolio, you're looking at all these different strategies that are out there, and you're thinking through how does this actually fit together. So going through a program like this,
00:08:29
Speaker
at least gets you started on that journey of understanding how it all fits. And then I think that communication and client education element is so important as well. Well, and speaking about how it all fits, what do you believe is the role of alternative investments within the investor portfolio?
Role of Alternative Investments in Portfolios
00:08:48
Speaker
Yeah, it's a great question and something that we think a lot about here at KIA. I think it really depends on what you're trying to accomplish within a portfolio. When I think about my experience in wealth management, clients aren't thinking about things like correlations and standard deviations and statistical concepts.
00:09:10
Speaker
they're focused on things like, do I have enough money to retire? When I'm retired, can I actually pull a sustainable withdrawal rate out of my portfolio to support my lifestyle? Do I have enough income that I can generate for my portfolio? So I think trying to think through those kind of concepts in the client lens is a really important starting point. And then you can really back into the appropriate strategies that you fit into a portfolio.
00:09:39
Speaker
Some are more income-oriented. You know, they're generating cash flow that's very consistent, and that's really good for clients that have an income objective. There's more growth-oriented strategies that
00:09:49
Speaker
If you're trying to save for a long-term horizon or you're thinking about intergenerational wealth, growth strategies might be an appropriate thing. Obviously inflation is something that we haven't had to worry about for about 10 years, but recently has certainly changed. And so inflation protection is a big thing to think about. And then just generally diversification, you know, protecting on the downside, having a smoother ride and so on. And then from there, the strategies kind of fit in accordingly.
Cryptocurrency and Risk Management
00:10:20
Speaker
So what would you, given the current state actually in traditional markets, many are considering alternatives like cryptocurrency and Bitcoin, for example. So following the bank failures recently.
00:10:37
Speaker
Yeah. So, you know, this has been a very interesting market for sure. And I think, you know, especially with what we've seen and with SVB and digital assets and kind of the volatility that's been experienced there, it's kind of interesting to see the role of different strategies and asset classes in a portfolio. You know, I think as I think about what's recently happened, and I know SVB has kind of been on everyone's mind,
00:11:06
Speaker
I'm probably not the best person to play the blame game because I'm sure there's a lot to go around, but I think it does highlight the importance of things like risk management when you're managing a portfolio, whether it's your own portfolio or you're at a bank and you're managing a portfolio of loans.
00:11:22
Speaker
risk and risk management is an important consideration. But I also think this creates opportunity for investors. So, you know, I was at one of our annual conferences a couple of weeks ago with a lot of institutional allocators, the big endowments and pensions who are, you know, thinking very long-term in their approach.
00:11:41
Speaker
And one of the comments was, you know, everyone's kind of moving away from venture capital after what happened with Silicon Valley Bank, but this might be the best year to actually invest in it when everyone else is running away. You know, if you have patient capital and you have the stomach for it, really moving into it is something to consider. So I think the environment really creates opportunities depending on the strategy you're looking at.
00:12:05
Speaker
that actually was gonna be my next question. So obviously the VC world has definitely gotten some heat after the SBB bank collapse. And so can you talk just a little bit more about the role the venture capitalists have played in that saga and where those opportunities lie for people that are interested in these types of alternative investment structures?
00:12:30
Speaker
Yeah. And again, I don't want to point fingers necessarily at anyone. And I think there's a couple of things at play. I mean, one is just how does a bank manage their day-to-day operations? And so that's one consideration to think of. And there's a lot of good people that work at those banks. I know some of them. And they're good, thoughtful people in terms of risk. But I think it does kind of bring up how do you structure the loans
00:12:59
Speaker
checking accounts of your portfolio, how concentrated is your client base, and do your clients move in a similar fashion when bad things happen? I think on the venture side, again, I think it does create opportunity for those who are either new to the asset class or can actually commit capital to the asset class.
00:13:22
Speaker
just because, you know, we've seen kind of a pullback in interest and that brings valuations down. So if you've got a long-term perspective, there might be an opportunity there. But again, don't have my crystal ball and, you know, can't make predictions like that, but I think it does create opportunity.
00:13:41
Speaker
Well, building off of that, most people think that building a portfolio, they lean on the old 60-40 rule, as you mentioned earlier, 60% invested in stocks, 40% in bonds. So where do alts fit into all of that?
00:13:57
Speaker
Yeah, it's another good question, and I think it goes back to the common of just the role of alts in a portfolio and what you're trying to accomplish. So I'll just say, you know, I'm not anti any allocation, you know, 60-40 portfolio.
00:14:14
Speaker
is a fine strategy to pursue and if that's the result of all the financial planning that you did and figuring out what makes the most sense and that's what you come up with, that's a great portfolio for you. But I think there is a wider opportunity set than just those two asset classes in a portfolio.
00:14:33
Speaker
um where alts fit in a portfolio like that I think depends on kind of the you know the underlying risk driver of the alternatives you know if you think about your 60 which is allocated to equities well is your equity public or is it private um you know are you thinking about more growth oriented assets like uh you know opportunistic real estate uh so you know maybe I think
00:14:57
Speaker
thinking more in terms of the role that the asset class plays in the portfolio and the underlying risk driver is more important than saying, well, I should take my 60-40 portfolio and make it a 50-30-20, for example, and just put all the alts over in that 20% and set it and forget it. So taking a little bit more of a sophisticated approach to what's my risk return profile that I'm seeking and what am I trying to accomplish with the portfolio.
00:15:23
Speaker
That's good, that's good. So a recent study from Vidro Financial found that capital allocations to alternative investments by global assets has jumped to about $144 billion in 2022, and that's from $130 billion in the prior year. So does that mean that we're on our way for more people adapting alternatives?
Growth and Opportunities in Alternative Investments
00:15:50
Speaker
What do you think contributed to that increase?
00:15:54
Speaker
Yeah, well, you know, I certainly do think that there is a lot of momentum in terms of adoption to alternatives. A lot of people are looking at the sub strategies that fall under that alternatives umbrella. And we've seen things like private equity, for example, grow massively over the past 10 years, you know, but once was kind of a niche industry is now kind of full blown almost $10 trillion.
00:16:20
Speaker
and assets under management. So I do think that that trend will continue. What I think has kind of driven that adoption and the interest is just, you know, if you look over the past 10 years, we've just come off of a period where interest rates were near 0%, inflation was low, stable, you know, there wasn't a lot of concerns on that front.
00:16:45
Speaker
You know, equities were rocking. It was the best asset class to be in and you really didn't have to do a whole lot. You could kind of set the easy button, you know, set it, forget it. You know, I think as I look at what happened last year in 2022, people realized that these assets have risk and we saw inflation reverse its trend. We saw equities go down. We saw fixed income go down. It was the worst year for stocks and bonds combined.
00:17:13
Speaker
in decades. And so I think people are just thinking about, is there a better opportunity set that I can allocate towards? Are there other strategies that make sense for my portfolio? And just generally kind of reacting to the market, I think is one
00:17:29
Speaker
one driver one other thing that i'll say for driving adoption is that you know private markets have definitely grown in assets and interest and a lot of that has come from just capital formation you see a lot of
00:17:45
Speaker
private companies staying private for longer or they don't go public at all and so your public market opportunity set has certainly shrunk over the past 20 years or so and a lot of the value creation is occurring in the private markets and so as people look at their portfolios they're looking and saying well there's this whole other opportunity set that I'm missing out on these companies that
00:18:08
Speaker
might be earlier stage, more innovative, more interesting. And so being able to allocate to that portion of the economy, I think it's very attractive for people as well. I agree. So what do you
Conclusion and Call to Action
00:18:22
Speaker
think? Where do we go from here? How do we get more advisors involved not only in alternatives, but also signing up for courses that you offer at Unify at KIAA or Alts Education in general?
00:18:39
Speaker
Well, and I think as an organization and a professional body, you know, Kaya has tried to be much more vocal in the industry. And we made a very conscious effort a couple of years ago to be more out there with thought leadership and helping people navigate this very complex industry and all the kind of sub industries within it.
00:19:00
Speaker
I think conversations like this are important. You know, getting people more comfortable, asking why it's important, and really going back to basics, I think is a really important thing. So, appreciate you having me on this podcast to talk about it, because I think it is important to start with those foundational questions.
00:19:19
Speaker
But in terms of what we're trying to do, we're trying to make education more widely available to the wealth management space. We've got this CHI designation that is recognized in the industry by allocators and asset managers.
00:19:36
Speaker
For a lot of advisors, they're brand new to this space, and they need that foundational education to help them understand what's going on in the portfolio, to make sure it's appropriate for their clients, and so on. So I think we're going to continue to build new programs, update old programs, and make sure that if you're new to this space, you've got a very solid foundation before investing.
00:20:00
Speaker
Exactly, exactly. That's the main takeaway from this episode that we want everyone out there listening to have. You know, we've got your back here at Badrian Capital over at KIAA and we offer just a wealth of information and education on the alternative space. So, you know, don't be intimidated. We've got you. And Aaron, I can't thank you enough for really just taking the time to talk to us today and dig deep on, you know, the alternative space. So.
00:20:29
Speaker
Thank you so much for taking the time. Thanks for having me. It was a pleasure. Now, everyone listening, be sure to follow us, Bannering Capital on Twitter and on Instagram and LinkedIn. Thank you so much, everyone, for listening in, for tuning in, and I will see you next time right here, live from the green couch.
00:20:54
Speaker
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results.
00:21:19
Speaker
and an indices reference for comparisons are unmanaged and cannot be invested into directly. As always, please remember, investment involves risk and possible loss of capital. Please seek advice from a licensed professional.