Investing is highly personal, especially when it comes to one’s own money. And within the world of alternative investments, an investor’s personal passions and experiences will often attract them to a specific asset class.
Shana Sissel, founder and CEO at Banríon Capital Management, joins WealthChannel’s Andy Hagans to discuss how investors can align their allocation to alternative investments with their personal passions.
Episode Highlights
- An overview of Banríon Capital Management and how the firm provides services to financial advisors.
- How passion can be the “bridge” that gets individual investors interested in alternatives.
- The difference between “ESG” versus values-based or impact investing.
- Why sports rights are an intriguing asset class for financial advisors and retail investors.
- How an investor can balance their emotional investment into specific asset classes, while also staying within “guardrails” to have a diversified portfolio.
Featured On This Episode
- The Queen Of Alternatives (And Alts For All), With Shana Sissel (The Alternative Investment Podcast)
Today’s Guest: Shana Sissel, Banríon Capital Management
- Banríon Capital Management – Official Website
- Banríon Capital Management on LinkedIn
- Shana Sissel on LinkedIn
- Shana Sissel on Twitter
About The Alternative Investment Podcast
The Alternative Investment Podcast is a leading voice in the alternatives industry, covering private equity, venture capital, and real estate. Host Andy Hagans interviews asset managers, family offices, and industry thought leaders, as they discuss the most effective strategies to grow generational wealth.
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Show Transcript
Andy: Welcome to the show. I’m Andy Hagans, and today we’re talking about passion, and the important role that it plays in investor portfolios in the world of alternatives. And joining me today is Shana Sissel, founder and CEO at Banríon Capital Management. Shana, welcome to the show.
Shana: Thanks so much for having me again.
Andy: Absolutely. Yeah, welcome back. Really enjoyed our first episode that we recorded together, where we revealed to the audience that you are the queen of alternatives, the unchallenged queen, so I don’t wanna introduce you without mentioning that. But today, I think this is a really interesting take. This is, it’s maybe something that, like, a few guests have brought up in passing, but the role of passion in investing, and in alternatives specifically, to me, it’s definitely there, but it’s very rarely discussed. And, you know, why don’t we just start with why is passion important? You know, you work with a lot of financial advisors. Financial advisors are speaking with clients, educating clients, and for you, this is often a bridge where investors first get into alternatives. Is that right?
Shana: Yeah, absolutely. So, everybody kind of remembers Peter Lynch, the famous Fidelity portfolio manager for the Magellan Fund back in the ’80s and ’90s, always used to say, “Buy what you know. Buy what you love.” And he was thinking about it more in, like, the stock sense. But, broadly speaking, the ability to invest, and align that investment with what you’re passionate about is much broader in the alternative space. And when we think about why we aren’t seeing this huge move to alternatives in the advisor market, I think there’s a lot of reasons. But I think one of the ways that we can bridge that frustration or that hesitancy that clients have, or advisors have, is thinking about alternatives as an opportunity to help clients invest with impact, invest aligning with values, or aligning with passion. And so, you know, the alts space is everything. It’s literally everything you can imagine. It’s wine, it’s antiques, it’s baseball cards, it’s sports rights funds. It’s any and everything you can possibly imagine.
Andy: I’m already sold, because I wanna convince my wife to let me buy, like, a Ty Cobb T206 baseball card. So, I already love it, and I feel like you’re already building the case that I should be investing in baseball cards, Shana.
Shana: And there are private funds that do that. And that’s the really interesting opportunity that sits within alternatives. I think alternatives at large have largely tried to be sold to advisors and their clients in the way that institutions use them. So, thinking about, like, private equity, you know, mezzanine debt, distressed debt, hedge funds. And that’s a little intimidating, and also not necessarily something that connects with investors, especially individuals who might be uncomfortable with illiquidity or with lockups. So, when you’re introducing the concept of alternatives and this diversifying nature that they can bring to a portfolio, you know, what better way to do that but to start the conversation by A, getting to know your client better by asking questions about things that they enjoy, that they want to get more involved in, and then finding ways in which they can invest in those things?
So, you know, like you said, baseball cards, that is an opportunity to potentially find ways for your clients who maybe they wanna invest in baseball cards, maybe they’re just sports fans. So, there’s organizations like Velocity, there’s CAZ Investments, that did a sports rights fund. There’s a number of organizations that do sports rights and sports-related alternative investment products. So, that’s one perfect example that I think will resonate with a lot of people. But the goal here, of course, is, when advisors are going to breach the topic of alternatives, which can be scary in and of itself, because there’s complexity, there’s illiquidity, there’s lockups, there’s strange fee structures, the easiest way, I think, for everybody is to have something that they can connect with, because the conversation gets less focused on the scary things, and it actually creates a level of excitement.
Andy: Right. You don’t wanna start that sales pitch with, “Well, let me tell you about the catch. Let me tell you all the bad things about this product.” And they’re not really bad things necessarily, but I totally, I get what you’re saying. You wanna lead with something that will evoke emotion. And a lot of investors, even putting aside the advisor thing, because some of our listeners are self-directed, some of them have advisors, but even putting that aside, I think all investors are emotionally-driven, and the very best investors, they really know how to manage their emotions, or even be fearful when others are greedy, be greedy… But the bottom line is we’re all human beings, and a lot of those investment decisions really are emotionally-driven. You know, even if you put guardrails around them. And you say, “I’m gonna have a portfolio model, and I’m gonna have a diversified, balanced portfolio,” there still is going to be all sorts of subjectivity and elements of that portfolio that will tilt with a client’s or an investor’s particular interests or passions, right?
Shana: Absolutely. And we can all say some investors are better when they’re not emotional, but I guarantee you, even the best institutional investors, who aren’t emotionally attached to the money that they’re allocating, when it comes to their personal investments…
Andy: There you go.
Shana: …it’s a little bit different. You know, they might be better at managing their emotions, but they’re still more emotional about how they invest their individual assets versus their institutional assets. And I think that’s true with everyone. Even if you think of, like, the ultra-ultra-high-net-worth, most of them have substantial cash, or, like, yield. They don’t have a lot of risk in those portfolios. And why is that? I mean, they can afford to take risk, right? They don’t want to. They have this massive…and they don’t feel like they need to, because they have a massive amount of assets that can generate yield, so why take risk?
And so, again, a perfect example of somebody who can take risks, but doesn’t. Institutions are a different breed. That is not individual money. That’s not money that’s emotionally attached. It’s very specific needs and very specific goals, to meet certain cashflow needs and demands. But individuals tend to behave differently with their own investments. Even the best investors in the world are slightly different in the way that they invest their personal assets versus their professional assets.
So, you know, again, it comes down to what gets you excited? You know, even if you think about, again, we’ll talk about those ultra-high-net-worth. Maybe they’re angel investors. They’re angel investors in passion projects. They’re not just randomly investing, right? They’re investing in people, because they’re passionate about whatever that person is working on. They’re never gonna invest in something they don’t understand or they don’t care about.
So, again, it all comes down to making that connection. And I think, when it comes to introducing alternatives, and private funds in general, to a client that has never invested, or if it’s the first time an advisor is sort of proactively discussing it, you know, finding a way to make that connection on the emotional level. And, you know, we’re talking about passion in terms of, like, ego, but passion can mean impact and value too, right? You know, making the world a better place, doing things that people feel like they are making a difference in their community, and helping people, is also an impact and passion that you can take advantage in the alternatives markets.
Andy: Totally. And I think that the concept of impact, we can talk about this later, but some people might immediately associate that with ESG, but I’m like, but also in real estate, we deal with private equity real estate funds and those managers all the time, and a lot of people just love the idea of building things, right? And so, they’re just naturally attracted to, like, ground-up development. So, even then, that’s a passion. It’s making an impact in local communities. I think one of the issues is, even in the nomenclature or the very structure of the alternative investment universe, you know, when you have… There used to be the 60-40, right? That sort of default model. And now you hear more about the 50-30-20 or whatever you wanna call it.
But within that 50, within the world of stocks… You know, and I don’t have your job, so you can shoot this down, Shana, but, for me, you know, VTI, it’s probably gonna work for almost everybody, with their fit, you know, whether you’re… Sure, international is diversification, but whether you’re the Harvard Endowment or, you know, the little old grandma with the tiny little nest egg, you know, there’s only so many ways to skin that cat, and most people are gonna be just fine with a big, broad, simple answer. But within alternative investments, like, we give it one label, but it’s actually all these very disparate asset classes, disparate strategies. You know, hedge funds really have nothing to do with private credit necessarily. And private credit has nothing to do with farmland. And farmland has nothing to do with baseball cards. So, I almost think that it’s underserved, in a way, to even lump all these things together and say they’re all alternative investments, because even with ultra-high-net-worth, you know, you mentioned family offices, they’re more heavily allocated to alternatives, but it’s very rarely in this balanced way, where they say, “Oh, we’ll put a fifth in private credit, and a fifth in private equity, and a fifth in venture.” It’s usually heavily tilted to one or two areas within alternatives.
Shana: Yeah. No, that’s absolutely true. To your point, in the traditional markets, you know, I worked on the institutional side. I worked for Mercer Global Investments, I worked for Russell Investments, I worked for Fidelity Strategic Advisors, so I’m very used to that institutional mindset. Even in the institutional mindset, it’s not unusual for those big managers to, you know, take passive bets in the areas where they feel like there’s the least opportunity for excess return, large cap in particular. That is not unusual. Even then, the large institutions may use an active manager, but because of their size, they can negotiate fees down to minuscule amounts, which the individual retail investor is unable to do. But the point here is that most of the time, the institutional investors aren’t taking risk in those markets. They’re getting broad-based exposure, like you said. And then they’re looking at the alternative space. And again, to your point, it’s a very disparate and, you know, fragmented group of investment types. It’s basically just everything else that.
Andy: Everything else. Yeah. It’s just the kitchen sink. Yeah.
Shana: Everything else that’s not public. And a lot of people think of it as, like, “Oh, alts is, like, its own, like… Oh, I’m gonna allocate 20% to alts.” You can’t think of it that way either, because private equity is still equity, and it’s still equity beta, it’s just a different way to capture equity beta. Private credit’s credit. It’s still fixed income, it’s still yield. And then there’s, like, those diversifying things, which the hedge funds tend to fall into. And also these other things we’re talking about, like sports rights, and baseball cards, and antiques, violins. I remember I came across somebody who was investing in, like, very rare violins. Music rights, all of those things. And you pointed to real estate. You know, building is something people are passionate about. People kind of understand real estate, because everybody either lives in an apartment building or owns a home, and so it’s personal. Everybody is connected to it.
And then there’s the Opportunity Zone things. Things like low-density housing rehab, you know, vintage housing. Improving the internal structure so that it’s more energy-efficient, but you keep the character that makes the community the community, or you improve, you know, Section 8, or low-income housing. I mean, there’re so many different ways you can skin this cat for, you know, using a kind of lame phrase. But there’s a million different ways you can invest in alts, and that is kind of what makes it fun, but also what makes it intimidating, right? Because you can find anything, and then you gotta make sure that it’s reasonable and valid, and operationally sound, and it gets a little complicated from that, but that’s kind of what my firm seeks to solve for, is looking for those really interesting ways to have impact, whether it be on the ego level, as I like to say, or the value and impact level, where it’s, you know, more in that social, making-the-world-a-better-place.
And I don’t like the term ESG because I think it’s been hijacked. Like, everyone and anyone talks about ESG, and it’s so subjective. You know, what one person considers ESG and what somebody else does is completely different. It’s very much a personal definition. So, I like to think more of, like, social impact, impact investing, value-based investing, and let the investor define what that means to them, because maybe some investors are okay with.
Andy: Well, totally, Shana. I’m right with you. I mean, here’s my perspective on ESG is that, you’re right, the values-based is going to be personal and subjective. But I would say, on the institutional side, ESG, like, does have a fairly defined, somewhat solid, you know, somewhat… But I guess my point is I don’t think individual investors are in interested in that. Like, I don’t…
Shana: They’re interested in impact, but…
Andy: Right. But I don’t think…
Shana: …the institutionalized idea of ESG, not so much. And I would argue that, you know, on the institutional side, there’s a lot of debate on what ESG is, and most firms will pick E, S, or G, because you can’t really do all three effectively. You know, and then you have the whole, is it an inclusive or exclusive kind of screening model, where, you know, you’re not excluding anybody, but you’re including only people that meet certain things, and then you can have energy in there, and have some.
Andy: Well, exactly.
Shana: It’s, like, a million different things.
Andy: Exactly.
Shana: But my point it that, like, there’s no good definition. So, when you’re dealing with individual investors, it’s really whatever personally is important to them.
Andy: Well, bingo. No, that’s exactly my point, is, even if all of these institutions, your point is they all might have different decisions or different policies, but as an individual, I just don’t care. I don’t care what Blackstone thinks about social issues. I just don’t. I, like, literally could not care any less, but I care a lot about my own money, and my own values, and I think every investor feels the same. So, obviously, the ESG thing, it’s become a little bit of this, you know, political hot potato, wild card, whatever you wanna call it. Are advisors staying away from that? Are they more, you know, using the language that you and I are using right now, talking about impact and values, I guess? Because to me, the whole ESG thing, it’s more relevant to pensions and that institutional world. How is this playing out, like, on an individual level, with investors, retail investors, and their advisors?
Shana: I think ESG is a term that people just kind of have gotten used to using. But I do think when advisors are talking to their clients, they really are talking more about impact investing. And there have been plenty of studies, I believe State Street did a study a few years ago that showed this, that women and younger investors, like, millennials, like, the 40-ish and younger investors, are particularly interested in investing in a way that makes the world a better place, and makes them feel good, whether that be ego or impact. So, there’s definitely more conversation there.
If you think about a firm like Ethic, which does, you know, kind of custom SMAs in that “ESG space,” like, it is very much allowing the investor to define what ESG is to them when they create the portfolios. And they’ve had a lot of success in the advisor market. They’ve grown a ton. Because there is demand there. But then when you think about ESG mutual funds, which are not customized, and very much, to your point, like, nobody cares what BlackRock thinks is important, those haven’t taken off the way people would’ve expected. And quite frankly, if you look at ESG funds versus their non-ESG counterparts, they’re not substantially different.
The SEC has cracked down a little bit on that UN PRI signing. Like, you know, a lot of firms signed that, but it didn’t actually change the way they were investing. It was sort of like a virtue signaling. So, there’s been some crackdown on that and it’s become less popular to advertise those things. But I do think that opportunity to connect on a personal level and to create investments and find investments that align with people, either on a ego or impact basis, is the key to success in introducing and actually getting more individuals and their advisors to consider this alternative world, because it’s vast, and you can find pretty much anything you could possibly imagine in it, so why not look for ways in which you can connect your clients with things that make them happy, that they’re going to be excited to invest in? And that also helps with overcoming some of the common objections about liquidity and lockups. People aren’t as concerned about that because they want to be investing in that. They would invest in it forever.
Andy: Yeah, I’m just saying I’m not gonna sell my prized baseball card just because the market’s down, okay?
Shana: Right. Exactly. Exactly. That’s exactly the point. I love the sports rights fund that CAZ did recently, because, same thing, like, if you’re telling your buddies at the golf club, right, that you invested and now you own an ownership interest in, you know, name your favorite sports teams, I’ll say, you know, the Celtics, that’s one of my favorites… So, I own a ownership interest. They don’t need to know that it’s a tiny little minority interest, but I own a piece of the Celtics, right? I’m bragging about that. Like, the last thing I’m gonna do is sell that when the market gets tough or something to that extent, because I’m very personally connected to it, and now I’ve talked all about it, and I’m not gonna tell my buddies I sold my ownership interests in the Celtics because, you know, the market was down. Like, then what was the point? It couldn’t have been that valuable or that important.
And so, again, I think it overcomes a lot of the most common objections. But, from the advisor perspective, think about it from that relationship standpoint, right? When you’re talking to your clients about the things that really get them excited, things that they’re passionate about, things that align with their values, what their values are, now you’re creating a much deeper connection with your client. So, from just the ability to maintain the relationship, and keep the client and their assets, is much stronger there, and the ability potentially to get more of their assets also grows, because now you’ve taken a personal interest in them, and you’re getting to know them, and you’re finding ways to help them invest in ways that get them excited.
Andy: Totally. Now, I mean, I don’t wanna say I’m surprised to be hearing this from you, Shana. Maybe that’s not exactly the right word, but, you know, you are a portfolio construction expert, or at least I would consider you an expert, right? And so, that kind of mathematical, you know, diversification, modeling standpoint, I would think could lead one to the conclusion of, like, well, an alts allocation, if you, you know, look at all the back data and you back test it and yada-yada, it really should be 3% private credit and 7% private… Like, there’s probably, who knows, you could probably make some sort of mathematical answer and say, “It should be diversified ideally like this.” But that’s not what you’re saying at all. You seem to be saying, at least what I’m hearing, is you wanna be in alternatives, but it’s okay, within that allocation, to be imbalanced, to be following, you know, what you’re interested in, essentially.
Shana: Absolutely. And I’ll tell you why. So, in all the years I’ve been working with advisors and talking about alternatives, I’ve taken a lot of feedback, and heard what they had to say. You know, that.
Andy: Sure. Was that fun? Was that fun and pleasant for you, Shana?
Shana: Yeah. I mean, it was never, you know… Alts in general are pretty unpopular, or have been pretty unpopular with advisors, because inevitably, anyone who’s at any point tried them usually got burned for inappropriate use. So, I’ve always looked at it as, look, you should have alts in your portfolio, and I actually believe you should have the diversifying alts, which are the unsexy, like, hedge-fund-esque kind of stuff, like the equity market neutral, the global macro, managed futures, capital structure arbitrage, that kind of stuff, which is very complex, but broadly speaking, it’s more accessible today, because we have interval funds. ETFs can do this kind of thing now. We have mutual funds that are doing hedge-fund-like strategies. There’s a broader array of accredited investor options in these types of products, with low minimums. You know, I’ve seen minimums as low as $10,000, $50,000 in some of these funds.
Those have real true diversification benefits, but when you start talking about some of the other stuff, there’s a couple of things we need to remember. In the institutional space, you know, usually, especially if you’re, like, an endowment, somebody is telling every year, like, “Harvard’s endowment smoked Yale’s.” Like, so there’s a competitive aspect to that. So, there’s somewhat of a, “I need to beat the next guy.” And that doesn’t really exist in the individual investment world. I can’t stress this enough, but most advisors will tell you, and even I saw this when I worked on the institutional side, poor performance doesn’t normally get you fired unless it’s poor performance for a reason that has nothing to do with, like, stock selection. Like, you know, there’s some operational breakdown, you’re not following what you said you were going to do, you’re investing outside of, like, your mandate. Things of that nature will get you fired.
But just underperforming, if value’s underperforming and you’re a value manager, you’re not gonna get fired because you are underperforming the S&P 500 if value in general is underperforming. It’s just not gonna happen. If you continue to do what you’re supposed to do, you can go on your merry way. And with advisors, there’s some of that. But also, advisors are helping their clients meet some sort of financial goal in the future, right? Pay for their kids’ school, buy a house, buy a second house, retire early, whatever it is. And there’s no brownie points. You don’t get a trophy because you overshot the bogey, right? Now, your client will probably not be mad at you if you made them an extra $100,000, but they’re not gonna fire you because you met the bogey. They’re not gonna fire you because so-and-so’s advisor made him more money. It doesn’t matter. Did they meet the goal? Can they buy the house, send their kid to school, retire comfortably? That’s the only thing that matters, right? So, I think we get hung up on, “Oh, are we beating the market?” No. “Are we on track to reach our goal?” You will 100% get fired if you don’t help them meet their goal.
Andy: So, you’re talking more about absolute return, or just the binary, do we meet the goal or not?
Shana: Right.
Andy: Versus relative performance. Something you and I may pay to, like, I may, as a member of the financial media, or you may, in your role, but the average investor, it’s probably not even really on their radar, you know?
Shana: Right. I mean, all they care about is can they do what they’re setting out to do? You know, and when you think of it from that point, our job as advisors, and my job as a PM who works with advisors, is to make sure that we do that. And better if we can do it with less vol, and, you know, lower drawdowns. And guess what? Alts allow us to do that. And guess what? If we can do that in the common portfolio, and then provide new and interesting ways to get your client excited about just investing in general, then we have a client for life. We’ve helped them meet their goals. We’ve helped them invest in a way they’re excited about. We’ve helped them sleep better at night because we haven’t had big drawdowns, because we’ve thought about diversification. And some of these more esoteric alts are diversifiers.
I mean, I guarantee you baseball card markets have no correlation to the S&P 500. Sneakers, that was huge during the pandemic, remember? You know, all these people who are collecting and selling sneakers, during the pandemic, like, I guarantee you, and obviously, it did so well during the pandemic, that has no correlation to traditional equity markets. Then you need to start to think about the more traditional alternatives, which, again, are diversifiers, things like private equity and private credit. They have their place, right? They definitely have a place, but it’s more of a, “I’m gonna put a little bit of this in my equity portfolio because I think I can get a slightly better return,” and it makes sense, but it’s not really, like, a diversifier in that sense. It’s just an opportunity to potentially make a little bit extra money, but no one’s firing you because you didn’t. They definitely could fire you if you did.
Andy: Shana, well, I would say that I think, with alternatives, one thing that trips me up sometimes is there’s a difference between negative correlation, non-correlation, and then light correlation. I mean, I would say, probably without looking into it too much, like, some of the collectibles do probably have a light correlation to the S&P 500, just in the sense that, you know, multi-millionaires or billionaires might be, you know, had a great year, and they’re like, “Okay, I’ll head over to Heritage Auctions, or Christie’s or Sotheby’s and, you know, go blow money on collectible random art.” So, I mean, but that’s not the same type of correlation that you’re gonna find between, you know, one equity mutual fund and another equity mutual fund or anything like that. And then…
Shana: Oh, exactly.
Andy: …you pointed out some of, like, the, like, merger arbitrage, hedge fund, or managed futures. Some of those might actually have negative correlation, where they’re zigging when the market zags. So, it’s just kind of my disclaimer that, you know, alternatives, you know, I like to talk about them as a portfolio diversifier, but it really does matter, asset class by asset class. We lump ’em all into this term, but they all kind of behave…
Shana: Very differently.
Andy: …slightly differently.
Shana: And that’s why I bring up the private equity, private credit thing, because private equity actually is highly correlated to public equity markets. And private credit is also highly correlated to private debt market, or public debt markets. And so, they very much are related, and there’s high correlation there. Now, the reason you include them is because the potential for outsized returns is greater because they’re less efficient markets where you can have an information edge, and there’s alpha, and illiquidity, and there’s a number of reasons why. But, to your point, alts is a broad universe. And when I talk about alts, and when I think about incorporating alternatives in the portfolio, I kind of put them in those different buckets. Like, that private equity, private credit is still equity and debt. And you have, like, real assets and collectibles and the stuff we’re talking about in that sense. Like, those tend to have light correlation. They can actually be all over the place. It’s really a supply-demand thing.
And then you have, like, your diversifiers, which is your market neutral, and your global macro, and things of that nature. So, like, you can’t think of alts as just one, like, “Oh, I’m allocating 20% to alts and everything that falls into alts goes in there,” because that’s not how it is. But that’s why I think it’s so important to think of alts as an opportunity, right? So, opportunity to diversify, opportunity to potentially increase returns in traditional asset classes, opportunity to have passionate and emotional connections with an investment, and your client, to build and grow those relationships. Why can’t we leverage all of those things to our advantage? And that’s the beauty of the alternative universe.
Andy: Totally. And, you know, you mentioned this bridge, or let’s call it the concept of the bridge. You know, the, kinda whets your appetite, gets you into alternatives. I have to say, I wanna ask you about yourself, but I also wanna say it’s totally true in my case, as an investor. Jimmy, my business partner and I, you know, we co-founded WealthChannel, but in our 20s and early 30s, we had four different startups that, you know, we co-founded, we built up, we scaled, and then we exited. And then, with those liquidity events, you know, we became investors, and learned about private equity and all this stuff. But looking at my track record now as an investor, I’ve always been attracted to angel investing, venture capital, micro private equity, and that’s because I’m an entrepreneur, right, and I’ve had that experience. And by the way, I don’t even know that I have this, like, wonderful track record as an angel investor.
Shana: But you haven’t been paying attention either because you’re just investing to align with something you’re passionate about.
Andy: Exactly.
Shana: That’s the point. That’s the whole point.
Andy: Exactly. So, I wanna ask you though, you know, for you personally, if you’re comfortable sharing, what are your passions, you know? So, you know, to give our audience some more examples, you know. I see real estate entrepreneurs all the time become LPs in real estate funds, because they’re just passionate about real estate. How about you, Shana? What are you passionate about?
Shana: So, I’m really passionate about helping women succeed in life and be able to maintain and support themselves financially. Not that I’m one of those people that’s like, “I don’t need a man.” Like, that is not the case at all. Like, having a good partner and being happy in life is important, but you should never count on somebody else for your own happiness or your own financial support. So, I’m very passionate about helping women understand markets, and supporting female entrepreneurs, and helping women succeed in whatever it is they’re looking to achieve. So, things like, while I’m personally not invested in these things right now, because I have a startup, and it’s capital-intensive, you know, for me to maintain my startup as we’re raising capital, you know, microfinance and female entrepreneurs would appeal to me.
And then I think about other things that I’m really passionate about. So, things like educating kids in personal finance. You know, that is something, I think of somebody like John Rogers at Ariel Investments, that’s something he’s really passionate about, so he actually funds a public school in Chicago, and he funds their financial literacy program, and that brings him joy. I’m pretty sure he gets no return on investment. I’m pretty sure that’s just… But it brings him joy. That’s how he invests his money. He views that as an investment on the future generations. So, that’s something. And then if you just wanna get into my ego stuff, I love the sports rights stuff. I’m a huge sports fan, and I totally would, you know, jump at the chance to have some sort of even minority ownership in sports. I love horses. People invest in horses. You know, you hear it all the time when you watch the Kentucky Derby. “So-and-so is an investor in this horse.” So, things like that.
Andy: So, when Banríon has this liquidity event, you know, you sell it to Fidelity… No, it’s a merger. You merge with Fidelity, and big liquidity event, I’m hearing you’re gonna be buying in or investing in some race horses. You might, maybe a sports rights fund, sports franchise fund. Maybe you just buy a franchise or two.
Shana: Depends on how good that liquidity event is.
Andy: And then female entrepreneurship, just all…
Shana: And then, I… We wanna talk real estate, I don’t think it’s a particularly good investment, but I would love to own some real estate by the ocean. Maybe I’d buy some, like, homes on the beach and Airbnb them, and make some extra money that way. I could see myself doing that because, you know, retiring on the shore is high on my list of things to do. So, yeah, I mean, these are the things I’m passionate about, and these are the things that I will inevitably, should I have an amazing liquidity event in the future, be doing with any, you know, unexpected cash windfall that I may have.
You know, the other day, I kinda laugh about this, and I posted it on social because it was funny to me. So, a while back, when, like, Powerball was having that, like, $1 billion thing, I bought some Powerball tickets through the Illinois State Lottery. They have an app. So every now and then, I get an email from, like, Illinois State Lottery telling me, like, “Hey, such-and-such a jackpot” Every now and then, I’m like, “Eh, whatever. I’ll buy a ticket. Two bucks.” It’s on my phone, so it’s easy. So, the other day, Powerball jackpot was, like, $250…or $250 million. Like, not a particularly big one. But I had, apparently, Illinois State Lottery had given me two bucks. So, I was like, “All right, I’ll buy a ticket.” Next day, I got an email saying, “Hey, you’ve won.” And I immediately was like, “Oh, my god, I won the lottery. Oh, my god, I won $250 million.” And in my head I’m thinking about all of the things we just talked about, like, “Oh, my god. I can do this, I can do this, I can do this.” Turns out I, like, hit one number and got $2. But, you know, it got me all excited, and it got me thinking, but, like, to the point is, like, we all have those kind of things. If you ask anybody, “If you won the lottery, what would you do?” they’ll tell you, and then we can find ways that they can invest today, in those kind of things, because, again…
Andy: Well, that’s a good point, Shana, because a lot of these things probably now do scale, even, not only to regular high-net-worth accredited investors, you know, like outside of family offices. A lot of this stuff has always been available to family offices, or definitely institutional investors, and it’s kind of scaled down to there to everyday high-net-worths, accredited investors, but even to non-accredited investors, some of these things are now available. So, to your point…
Shana: Yeah. And not only that, but that’s what Banríon’s doing is, when we’re building our access platform, that’s something we’re paying special attention to, is trying to bring on these more interesting, emotionally-connecting kind of investments to our platform, to help our advisors come with good stories to proactively talk to their clients about alternatives. Like, that’s part of our mission is to help advisors get comfortable with alts, and this is part of how we intend to do that. So, that’s part of what we’re doing.
But even more, I recently read, like, earlier this week, that there is a bill that’s being considered by Congress that will allow for an accredited investor exam, where anybody who wants to invest in this space can actually take an exam if they don’t meet the, you know, general criteria of sophistication, they can take this exam. And if they pass it, then they can be accredited as well and they can invest in these things. So, there is potentially an opportunity in the future for people who aren’t currently able to invest in this space to invest in this space.
And so, being ahead of it now, and thinking about it this way now, I think is a real opportunity for advisors to really think about how they can grow and build their business, and enhance their relationships with clients. And down the road, I really think these types of things, to your point, are becoming more and more available. You know, interval funds are growing, and while the first iteration of interval funds wasn’t my favorite, some of the new stuff that’s coming out is allowing for more interesting ways for the average investor to be able to access some of these much more interesting and much more connecting types of emotional investment opportunities. You know, you don’t have to be an accredited investor to, you know, collect baseball cards. You can just do it more efficiently by doing a fund with somebody who’s a professional, but, like, you or I can go into, like, any collectible store and do that. So, again, there’s a real opportunity here.
Andy: Yeah. And I gotta clarify, with a lot of these collectibles, there’s a whole… Most of that collectible market segment is not investable, but then there’s a slice of it that is, right? So, like, with baseball cards, if you go buy a pack of $10 worth of baseball cards, you’re gonna open probably a dollar worth of baseball cards, right? But if you get a Honus Wagner or Mickey Mantle rookie card, that’s an investment-class card, so that, you know…
But my question, you know, I know we’re almost out of time, but where can this go wrong, or what kind of guardrails need to be around this? You know, because I’m thinking, well, I can’t go liquidate my portfolio, or even half my portfolio, and go buy baseball cards. Even if I’m sticking with investment-grade cards, you know, that wouldn’t be a wise decision. So, you know, when you’re speaking with advisors, or even from that perspective of portfolio construction, where could this go wrong, or what kind of guardrails should investors have in mind or advisors have in mind when they’re talking about these more passion-type investments?
Shana: Well, two things to consider. When you think about passion investors, you gotta think about what a client’s comfort with is in illiquidity. And then you also have to think about, of the illiquid investments we’re going to make, how much of those are gonna be in some of the more esoteric things? So, say, you know, I would say, on average, you know, the average individual might be okay with 10% being illiquid. So, as an advisor, maybe it’s prudent for me to do 5% of that, 2.5% in private equity, 2.5% in private credit, or maybe, you know, all 5% in private credit, depending on the markets. And then take the remaining 5% and do something more interesting with it, where it’s kind of like, it’s illiquid, I can’t really access it, we may make money, we may not, but at least we’re connecting with something that is making you feel good, and that matters.
And then the other thing is, you know, when we talk about alts, and I don’t care where we’re talking about alts, or what kind of alternative we’re talking about, these are largely unregulated pools of assets. And so, the due diligence that is required to make sure that, like, the fund itself, or whatever it is that you are investing with, is a, you know, good operational entity, and that, you know, the people are doing what they’re saying they’re doing, there’s audited information, if we’re talking about collectibles. I can go to a vault and see it, and there’s somebody, like, monitoring that what they say they own, they actually own, and it’s taken care of. Like, those are the things you have to become very cognizant of. That’s what we at Banríon kind of take the lead on for the advisor.
If we bring something on our platform that falls into this kind of category, you can feel really confident that we didn’t bring it on here just because it’s a good sales gimmick…
Andy: I see, because…
Shana: …but more that we also did all the work to make sure that it’s also a, you know, entity that isn’t going to end up in the headlines, and that they’re doing what they’re actually saying they’re doing. And that can be true with anything. Like, think about gold funds, you know, anything that’s backed by some sort of real asset. You have to have somebody who’s making sure that that asset exists where it’s held, and who’s, you know, managing and monitoring the care and security of that asset. You need to make sure that, like, the TPA’s real, and the pricing is, like… You, operationally and compliance-wise, have to be much more dialed in with some of these more esoteric types of things. But I think that’s true with alternatives in general.
Andy: Right. It totally is. And, I mean, to your point, you know, alternatives, I think they’re a pain in the rear end for a lot of advisors, because, within that, there’s so many different asset classes, and it’s like, “Am I really gonna have time to do due diligence on each asset class, and then each fund?” and that’s where a firm like Banríon comes in, where you have a platform…
Shana: Yeah. But you wanna avoid your manager…you know, watching an episode of “American Greed” on CNBC and seeing the guy that you just invested in. And more often than not, if you watch that show, it is stuff like this that ends up being part of that American greed. It’s these more esoteric things, because of all the things we just talked about. But that’s why it becomes that much more important to work with a firm like Banríon, who is doing that work for you, and you can feel confident that we’ve made sure that this is operationally a real entity and that, you know, we’ve checked all the boxes from that respect, so then you can go and confidently talk about it.
But I think the bigger story here is that it actually makes the conversation easier, and that is more of the reason advisors and retail clients have stayed out of alts, is the difficult conversation, more than the potential risk of those headline blowups. You know, more times than not, those are rare occasions where you have swindlers and, like, anybody who had half a brain could kinda see it. But if you just have some general rules operationally, even the people that you meet, that you love, that you would love to invest in, you know, you can say, “I’m sorry. I have this one really hard-and-fast rule and you don’t meet it.” And those are things that you can kind of hold true. And having professionals who do that work is really important. So, I can’t understate that. That is what could go wrong, for sure, in this space.
Andy: I love it. So, you know, healthy mix of optimism and passion, with guardrails and due diligence, and, you know, letting professionals do their job and help you. Shana, this has been a really insightful conversation. I just, I love your passion. I love my passions. I love the idea that I could actually allocate a portion of my portfolio to baseball cards. So, maybe we should follow up on that separately. But in the meantime, where can our audience of family offices, advisors, high-net-worth investors go to learn more about Banríon Capital Management and all of your services?
Shana: Well, we have, obviously, our website, banrioncapital.com, and then we have a YouTube channel that you can find information about our team, our services, see some of our media clips, and our podcasts, and our web series, “You’re Doing It Alt Wrong.” Our podcast, “The Alternatives Mason,” which is about educating brick-by-brick on alternative products. So, you know, we have a broad array of different ways you can interact with us, but our website’s the best place to start, and our YouTube channel’s probably the second. And then if you just wanna follow along with what we’re doing, LinkedIn and Twitter is where you can find us.
Andy: Shana, I appreciate all the work you do on behalf of the alternatives industry. I think you’re a great spokeswoman for the industry, educating people on all those platforms. So, thanks again for joining the show today.
Shana: Thanks again for having me.
