I'm Making A Career Bet And I've Gone All In
I’m making a career bet and I’ve gone all in.
Remember the Kool-Aid that everyone talked about? Yeah - that was me who drank it. The entire pitcher…wrestled the last cup away from a colleague.
I have spent most of the last 25 years on trading desks – some of those jobs have simply disappeared but I didn’t pursue the others because this is much bigger. We’re talking about a massive industry shift occurring to a massive industry. An industry that is so staid that it has been fighting tooth and nail to avoid even a moderate shift.
The industry that I am referring to is the alternative asset business. An industry representing trillions of dollars (trillion with a T).
But our bet is not on a change to the underlying business model. It is a bet on a change to the process by which that underlying business achieves its growth and makes its money. Specifically, the growth of assets under management.
Our take...we will see more evolution in the process by which capital is raised by the industry over the next 2-5 years than we have seen in the last 20 years combined.
As a matter of fact, it is hard to imagine the industry could meaningfully advance if it didn’t change.
The reason comes down to supply and demand. There has never been a more unsustainable imbalance than we are experiencing now. There are simply far too many managers now all fighting to be heard. We are at the point where it is impossible for allocators to listen effectively.
Fortunately, there is a confluence of events occurring right now that will prompt this change.
1. Technology - utilized by every other industry for years is finally starting to be embraced to more effectively bring buyer and seller together.
2. Modern marketing strategies – again stuff utilized by practically every other industry for years, is also starting to be adopted by our industry. Video, social media, creative messaging, edgy and fresh language…absolutely nothing new. Just new for this industry.
3. An appreciation for “branding.” The largest funds have understood the value of branding for years. A great brand is nothing more than a positive pre-conceived notion about a product. A reputation. The phrase, “no one ever got fired for investing in Och Ziff” is simply testament to a phenomenal brand.
4. Easing of the regulatory environment. Prior to the JOBS Act, the discrepancy between the ability of 40 Act funds and alternative providers to promote themselves was incomprehensible (irrespective of whether alternatives were interested in promoting themselves or not).
Individually, all of these things are meaningful. But not nearly as meaningful as a far more powerful dynamic occurring. A dynamic that will unequivocally force behavior to change.
What do I mean by that? Picture in your mind your typical allocator - someone who has been at it for the last 20 years. Now picture in your mind the person who will be taking his place in a few years.
Whether you visualized it or not, the industry will need to wrap its collective mind around the idea that the person sitting on the other side of the table is going to look and act very differently over time.
At some point, there will be a generational shift to a group of people that have never known anything but technology, social media and video. It could take 2 years or it could take 10 years. But there is no arguing that shift is inevitable.
And the way in which that next generation of CIOs and allocators sources information is massively different than the way that past CIOs and allocators have sourced information.
And you can bet - it won't be via 40 page marketing decks.
By JD David