YouSaid · the spoken record

Erik Serrano Berntsen

lines on the record: 75
first: 2021-10-18
most recent: 2021-10-18
sittings or episodes: 1
sources: podcast

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“And I think there's a behavioral bias in life that affects all of us, which is we assign too much causality to our success, to our own doing, and not the people around us, or luck or other exogenous variables. So even when you ask someone, they honestly tell you, oh, you know, I'm not going to miss much. It's actually going to be better when I'm on my own. Generally speaking, there's a line spot there. And so we spend a lot of time digging into what are the sources of edge. Is it the size of your old firm? Is it the brand? Is it the relationship network? Is it one of your colleagues who's very risk conscious and taps you on the shoulder and prevents you from doing crazy things? And it's not that we won't back you if a lot of that is staying behind, but then the question becomes of the things that are not coming with you, can you replicate them? And in what period of time? So we try and again disaggregate sources of edge and make that analysis. And if we believe that a high percentage of that...”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“In managing the relationship with the management team and in structuring the opportunity. So we really need to understand what your skill sets are and where the lacunas are in that evolution to founder and leader. Another one that's very important on the investment side is what we call person versus seat. Fancy word for that would be personal alpha versus organizational alpha.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“Manager, you also need to be good at portfolio construction, your timing, sizing, and you need to be good at exposure management. So we spend a lot of time trying to segregate these skills and figuring out, has this analyst spent time learning these portfolio manager skills? And it depends. Some firms are quite hierarchical. So analysts don't get as much exposure and they're not able to develop those skill sets as much. Some are more flat. Some of them get their own books early on in their careers. So depending where they're coming from, the type of culture and training they had, then we can be more or less happy with whether they're going to make that transition correctly. And in private markets, it's similar when you're a managing director or a director, you're not quite leading the deals. You might spend a lot of time on the fundamental analysis, but maybe you haven't been involved in sourcing the opportunity. Or maybe you're not involved.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“On the diligence side, the way we have come to think about it is that when you're underwriting an investment in an emerging manager, there's three areas that you really need to dig into. There's investment questions, there's operational questions, and there's commercial questions. So in terms of investment, there's a few things that are particularly important with emerging manager investing. One is the evolution a founder has to make from being an employee, being an analyst, being a VP, you know, depends your playing. But essentially, you're the number two, number three. And you're evolving into the number one, into the founder. And one issue is that the skills that you've been using as a number two aren't necessarily the same ones that you need as a number one. So let's take public markets as an example. As an analyst, you tend to focus a lot on security selection, sort of fundamental analysis. But as you become a portal,”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think there's three obstacles to investing in an emerging manager from the allocator point of view. First is how do you diligence these emerging managers? Second, how do you manage your own risks as an allocator? And finally, it's how do you create alignment when investing with an emerging manager? So let's take each of them in turn.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“The ideas that come across our desk are really driven by the founders. So founders will say, hey, this is a strategy I've been investing in for a long time. It's now the right time for me to start a business. And at the same time, there's all these tailwinds for my strategy. It's like early warning signal. So you start seeing these clusters. So maybe three, four years ago, we saw healthcare clusters very early on. We saw that there were very talented founders wanting to start healthcare firms across asset classes. Recently, we've seen in the last couple of years a lot of activity in equity capital markets, for example, or in strategies that are replacing lending or warehousing roles that financial institutions were playing. And that for us is an even more powerful way to then match managers with investors who have historically been interested in that or are also sharing thoughts around how attractive that space might be.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, what we try and do is we try and create prebriefs for our partners on the investors that are most likely to resonate with that founder's investment strategy. And it also involves having touchpoints with all these allocators. We spend huge amounts of time just comparing notes with other allocators and figuring out, okay, what types of investment strategies are now deemed to be more interesting, it tends to be a bit of a rear view mirror exercise. What we find incredibly powerful in trying to predict which investment strategies might face more benign market environments is actually just look at the data of the ideas that are being presented to us. So you get a lot of inbounds and we also have a more prepared mind sort of proactive sourcing approach. But a lot of”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“First of all, I'd say it's not an exact science, second I say what people are looking for changes more rapidly than you'd think given everyone espouses a longer term view. But one tool that we use a lot is our CRM system. So there we have 15 years of interactions with LPs. And as you get to know LPs, you really get a sense for the style of investing they have, the types of founders they like to back, the stage of the life cycle of a firm that they like to get in at. And all those things helps build a profile. So I think that fundamental profile is more important than necessarily what they're looking for at any one time. I think there's sort of a core preference set of attributes. And that varies by investor, but you also can make vague generalizations by investor type, be them endowments and foundations, be them family offices, be them funder funds, big pensions.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“Part of that distribution challenge is an information gathering one where it'd be easy if you were backing someone in a certain strategy and you knew this group of allocators is interested in that strategy now. How do you gather that information so that you have it in your hands and can deliver that to someone that you're working with?”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“Founders, the styles are very different, but all of them succeed in one way or another. So I really recommend that book, both for founders and allocators.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“To invest in your first fund or in the first three years of your hedge fund. So focusing time on the right allocators at the right time in the life cycle. Look, here is what we did when we faced this issue. Here's what we got wrong, here's what worked for us. It might not work for you. We've seen this situation before, and this is how it played out. And that founder-to-founder conversation is invaluable. But you need to underscore, we're not smarter. We've just done it all before. We've built over, what is it now, 20 businesses from scratch to multi-billion dollars. And it's just we've seen many of these movies before we know how they end. So I'm not saying our approach isn't necessarily the best. There's many ways to skin the cat when it comes to supporting founders. There's actually this fantastic book called The Power Law by Sebastian Malabi. And it gives you a history of VC, but moreover, it goes deep into how each legendary VC firm invests and how they support their founders. And all these stories around did they step in and replace the founder? Were they supportive of apparent madness?”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's not that we're smarter than anyone else, or this is rocket science, it's just that we know what challenges to expect and how we might help mitigate them showing up later today. And then on the distribution side, it's all about efficiency. So one thing I really struggled with building stable was that raising capital as a black hole of time. You know, like I mentioned, I was an investment professional. I'd never met an LP in my life. I didn't know how they thought. Every hour that you're raising capital, you're not investing. So the opportunity cost is huge. So it's stable. Our goal with founders is to focus them on the right allocators at the right time. And that's because most allocators will meet with most investment opportunities. Everyone takes a meeting when you launch your first private equity fund or your first venture fund or your first hedge fund. But 90% of them are just learning from you. They're not necessarily going to.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“We figured out we have to develop an operating partner platform. So sort of private equity, venture capital inspired. We built a team, we built resources such as playbooks, how-to guides. We built monthly processes that would provide founders with hands-on business building support. And we think about it in two buckets, operations and distribution. So let me walk you through both. On the operational side, it's everything from partnership agreements, shadow equity agreements, fund governance documents, selecting service providers. What we're really doing here is ensuring best practice. But on top of that, we also want to future-proof the business because decisions you make day one will come and haunt you a few years later. And I learned this myself. A lot of the wise things we do are because we got them wrong and we fixed them. And that's because we already have seen the full life cycle of an investment firm.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“The challenge on the founder side is that a lot of the skills that make you a great investor are typically not the ones you need to build an investment firm. Sometimes you'll find founders that are gifted at both and they're like unicorns. So if you find one, you should immediately try and partner with them. Great investors are typically contrarian and you need that to generate returns. You have to see things others don't. You have to believe something that others don't. And that involves strong analytical skills, being very detail oriented. Whereas successful business builders are consensus builders, they have strong interpersonal skills. They think big picture. They have cross-functional breadth. And that cross-functional breadth is something that doesn't make itself evident up front. Investment firms are really two very different things meshed together. They're a portfolio and they're a business in the business of managing that portfolio. And that distinction is often lost, I think. So to address that challenge,”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“An emerging manager. And that's what took me on the journey of figuring out what are the challenges founders face when building an investment firm. And that's what inspired the frameworks we use today, which is we care about two stakeholders. We care about the founders on one side, and we care about allocators on the other. And we had to understand what are the challenges the founder faces, what are the challenges the allocator faces. And the founder ones were more intuitive to me as a founder myself, but really empathizing with what is the career risk? What is the portfolio risk that an allocator is taking when making a bet on an emerging manager as opposed to playing it safe with established players?”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“So it's 2008. The world is on fire, and I decide this is the best time to start a firm because the incumbents are completely overwhelmed by what's going on. Office space is cheaper, salaries are cheaper to hire people. And luckily I'm armed with this necessary but not sufficient condition for entrepreneurial success, which is a very healthy dose of self-confidence and delusional optimism. Because I think if you're not delusionally optimistic, you'd never start a business. And that's how the idea for stable is born. So I felt I knew the investing side of the equation and the operational side of the equation, but I was really missing access to capital. And you can have a great idea, but if you don't have capital to put behind it, it probably just stays an idea. So the first thing I had to do was figure out, okay, who do I go for capital? And who are the people that are interested in backing?”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“unless you're prepared to fail, and one of my roles today is a backer of founders is to give them that confidence to just try.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not dangerous enough to ask them questions about. And my hedge was, I'll go into an MBA, and if it fails, I'll go back, find a job. And instead of saying, hi, Mr. Employer, I went to start an investment firm aimed at backing founders to have their own investment firms, but I failed. Here I am, give me a job. I'll say, look, I'm now super knowledgeable in all these other new things. Please hire me. And I think that feeling of fear, that fear of failure, the fact that I needed a hedge for me is symptomatic of one of the obstacles. Maybe the main obstacle to starting your own firm. And looking back, that was especially true in Europe. I think where it's more of a stigma, where I think in the US, failure is seen more as a badge of honor, as a positive learning experience. And I think that's reflected, obviously, in the fact that the US is a leading entrepreneurial market. And I wish in school, I had been taught that you'll never come up with anything original.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, and they're sitting at Bane, and I'm thinking, I'd love to do something of my own, to finally be a founder myself. And disclaimer here, I think I'm going to give you the retrofitted story. So it sounds linear and hopefully easy to follow. But let's be clear. It sounds like we always knew what we were doing. That's not the case. I think most progress we made was through trial and error. You pilot something, it doesn't work, you pilot it again, it doesn't work. And then finally, you figure it out, you just go big with that, continually tweaking. To this day, we still improve every day. But not only is it retrofitted, but I have a confession to make, which is I was at Bait and I was thinking, okay, I'll try and build my own business, but I need a hedge because I had no confidence it was going to work. And on top of that, there were lots of technical aspects to investing that I felt I was missing, you know, all the statistics, the econometrics, the options pricing, all these things that people talk about and you feel you're”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“To get paid to learn because I didn't have a lot of money back in the day. So I'm searching for a place where I can get training, again, really wide. And I thought I need to become more of a practitioner. A lot of these theories I've learned at school will not survive impact with reality. So I get some advice from some of my older peers at school and they tell me you should really try consulting. So I end up at Badenco because they were super entrepreneurial. They'd already spun out all these firms investing across asset classes. What became bank capital, they had sancity and credit. They had Brookside and hedge funds. So I also saw a path there to getting into investing. And what I find is huge intellectual curiosity, big on analysis, big on frameworks today my team calls me a complete framework addict. But it was really that focus on applying those tools to the real world that I found super fun.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think the most fun part of school for me was joining the dots between different fields. So when it came time to come to university, I was like, hey, can I study the broadest thing possible? But in Spain, everything's very vocational. In Europe, you have to decide when you're 16 if you want to be a lawyer or a doctor or something. And you guys here in the US, I think with liberal arts have cracked it. But I looked around and then I found this degree called Politics, Philosophy, and Economics. And I thought, good, this is broad enough. And in hindsight, it was awesome because I became convinced that you can't really understand economics without understanding philosophy. You know, forget about efficient markets and rational actors. I think what do the humans that are building our economy really espouse their philosophy? And you can't understand the implementations of those philosophies into economics without understanding politics. And then university ends and it ends really quickly because in the UK you only study for three years so that felt a bit short. And I was like, where can I continue to learn? But now I”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“Loved studying, loved learning I'm an only child, which people think means that you're spoilt and selfish, but I think it means you really like people and hanging out with others because you didn't have that. I loved quiz shows. I loved playing trivial pursuit.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, absolutely. First of all, let me congratulate you on having built capital allocators from Seedling into such an amazingly useful resource. So I'm half Spanish, half Norwegian, which explains the strange accent and very long name. I grew up in Spain. Dad was a doctor by training. He had three degrees, but he decided to stop practicing medicine quite early and start his own firm. And that became a consulting firm. So from a young age, I was quite interested in building my own business. And not only to be a master of my time, which my father always said was the ultimate privilege, but to build something that I could look back on and be proud of. And my mom was an air stewardess. She tells me this was super glamorous back in the sixties. I think the world has changed. And then when I was born, she started working for the Norwegian embassy. So she's still disappointed I became a capitalist, actually, instead of working at the United Nations or be a diplomat like her. And I always tell her, hey, mom, you know, I'm actually investing capital, building things, ensuring pensioners have retirement income, helping charitable foundations. It makes her somewhat happy, but not entirely happy with my career choice. So looking back at school days, I guess starting at the beginning,”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“We're going to talk a lot about backing alternative founders. If this is some semblance of a seating business, we should start when you were a little seedling. Take me through your background and how you came to this business.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on today's show is Eric Serrano Burnson, the founder and CEO of Stable Asset Management, whose mission is to back the founders of tomorrow's leading investment firms. Our conversation starts with Eric's own experience from launch to around $3 billion in assets under management today. We turn to the lessons he's learned providing strategic capital, advice, and support to investment founders early in their life cycle. We discuss the qualities that make for successful founders and the factors to maximize the probability of success across building teams, attracting capital, and staying resilient. We close with Eric's perspective on the seeding business. Please enjoy my conversation with Eric Serrano Brundson. Eric, thanks so much for joining me.”
2021-10-18 · Capital Allocators · Erik Serrano Berntsen – Backing Alternative Founders at Stable Asset Management (Capital Allocators, EP.218) · IDENTIFIED FROM THE TRANSCRIPT · source