Frazer Rice's Podcast: Recent Episodes
Frazer Rice
The LGBTQ+ community has always been an important part of American fabric.
But it’s only in last two decades that society, the law and the financial services industry have started to catch up to the community’s unique planning needs. To help us put context around these features and the evolution of the law, I spoke with estate planning attorney, Brian Balduzzi
Brian is a lawyer in Philadelphia at the international law firm FAEGRE DRINKER. Among many other activities, Brian serves as the Vice President of the Cornell Pride Alumni Association, where he holds his MBA.
I’m thrilled to have him on to discuss this important topic.
BACKGROUND
We start off talking about Brian's background and a little bit about his practice. Then we dive into some specifics.
LGBTQ+ TRENDS
-
Demographic Shift – more need, more complexity
-
Court decisions in review – Windsor/Obergefell planning and post-planning, and (perhaps) re-planning
-
Planning Needs: Concepts around DINK (Double Income No Kids) lifestyles, urban lifestyles, “chosen family”, estranged from biological family, dignity under the law/hospitals/banks
SPECIFICS
-
Documents: Extra durable, trust planning (privacy, avoid/minimize probate), ILITs (insurance to cover unexpected costs or taxes?), Power of Appointments, no contest clauses, guardians
-
Holistic Advisor: gender-neutral terms, no assumptions re: marriage, family tree dynamics, privacy/confidentiality/outing
-
Some Must Review/Updates for all LGBTQ+ families: Pre-2015 planning, beneficiary designations, decisions to marry/adopt, prenups, separation/divorce planning
OUTRO
You can find Brian here:
BRIAN BALDUZZI LINKEDIN
This was an opportunity to speak with an amazingly accomplished portfolio manager and entrepreneur. Right now, the specter of interest rate volatility, market volatility and inflation risk have investors' full attention. Nancy Davis's fund, IVOL, was built on her experience dealing with these issues and has received a lot of positive recent notice. Nancy began her career at Goldman Sachs where she became the Head of Credit, Derivatives and OTC Trading. She went on to be a portfolio manager at HighBridge and taking on management responsibilities at Alliance Bernstein before taking the leap and founding her firm, QUADRATIC CAPITAL LLC in 2013. It is there that she has built a unique business around her expertise. In this episode, we talk about her background, what problems her strategies try to solve and how she does it, and the decision to structure her fund as an ETF.
Outline
Describe your background and what led to the founding of Quadratic-
The experience at Goldman Sachs, HighBridge, Alliance Bernstein
Getting back to being a Portfolio Manager and forming your own firm
What Investment Issues does IVOL try to address?
Interest Rate Volatility
Increased Inflation
Investment expectations and market volatility;
Where would IVOL normally fit in an asset allocation?
Dealing with Interest Rate Volatility
Generationally low interest rates vs the Federal Reserve with its foot on the interest rates
Interest rate jumps that are big on a percentage basis but not that big in terms of actual BPS
Financial industrial complex where expertise in dealing with rising interest rates is retired or dead
What is the difference between interest rate volatility and equity volatility- how do you exploit this? Recent examples
What is the difference between CPI and "actual inflation"?
How does your strategy try to address that?
The fund is made up substantially with TIPS, but also with other securities and options- Why are TIPS not fully adequate? How does being invested in OTC rates improve upon other methods?
How does the IVOL implement its investment strategy (TIPS + other options/FI)- Why is this preferable?
Enhancing other allocations
Traditional Fixed Income - IVOL holds TIPs and is long-volatility, which can act as a potential diversifier to a fixed income portfolio centered on the Barclays Agg.
Real Estate- IVOL may help hedge the risk of falling real estate prices brought on by rising long term interest rates.
Equities- IVOL owns fixed income volatility and may act as a market hedge since volatility has historically increased during large equity sell-offs. IVOL is potentially defensive for an equity portfolio given its use of US Treasuries. Further, its options potentially benefit from a steepening of the yield curve, which historically has often occurred during equity market declines.
TIPS- IVOL owns TIPS, but they are enhanced using TIPS with options. These options function as options on inflation expectations, because the yield curve is largely a result of inflation expectations.
Floating Rate Notes- IVOL has the potential to appreciate when the int...
I'm thrilled to have Ted Seides on the show to discuss his new BOOK, his wildly successful PODCAST, his FIRM'S media and coaching focus and the world of capital allocation. Ted has a unique perspective in the asset management world, having worked for the legendary David Swensen at the Yale Endowment, having conducted thousands of interviews with portfolio and investment managers and having capital allocation responsibility both for others (at Protege Partners) as well as himself. He takes a look back at what he learned and peers into the future of a space that has many challenges.
https://www.amazon.com/Capital-Allocators-worlds-managers-invest-ebook/dp/B08N56SPN6/
Introduction
Ted's Background-
His experience at the Yale Endowment with David Swensen and lessons learned.
What does your BUSINESS do today? Any particular lessons going strictly from the allocation industry into more of a media focus? How have you taken the amazing access you have to the capital allocation system and used it to build your media focus?
With this being your second book (the first is "So You Want to Start a Hedge Fund"), take us through the book writing process- how did you use the podcast to source material and whom were you writing the book for?
(As an aside, David is famous for having a [losing] bet with Warren Buffett that his allocation to hedge funds would beat an S&P 500 Index- he has talked about that frequently in other venues and WROTE ABOUT IT HERE.)
More specific questions on the Asset Allocation Space-
In synthesizing lessons from your interviews and balancing against your own experience, what was the most surprising common theme that resonated through them?
Overcoming adversity (Pulling the plane out of the death spiral) . . . in the interviews and your experiences, how do allocators stop negative momentum? Does career risk act as a natural stabilizer? How big a threat is career risk for the asset manager and the allocator and how do you minimize that in the decision-making?
Manager selection as "predicting evolution" . . . how do you diagnose skill in a snapshot of time vs a culture of process evolution that will continue to persist?
The job description of CIO . . . (A question I didn't ask, but should have was "Have you ever had anyone from the search industry on?" . . . how do they navigate this insular world where neutrality and discretion is often pried?)
The Impact of ESG, not on investments necessarily, but the managers themselves? What percentage of asset managers are people of color? Women?
It is six times more difficult for a manager to get a face-to-face meeting with an institutional allocator than a high school senior to gain acceptance at Yale or Harvard. What is the future for new and emerging managers in this environment?
I see the concept of locating wealth and assets at the state level all the time for a variety of reasons . . . There has been only occasional talk of U.S. citizens exploring other citizenships.
At the federal level, US citizens are taxed on worldwide income no matter where they live. However, with a new regime in Washington (and wealth tax initiatives) , there seems to be more interest in foreign citizenship options.
To help make sense of the myths and the current climate, I spoke with David Lesperance. He is a top International Tax and Immigration Advisor with his Gadanz, Poland based firm, LESPERANCE AND ASSOCIATES.
Citizenship Diversification
-Who should be interested in this and why?
-How prevalent is it? 6045 in 2020 (How many estate tax returns were there?)
Jurisdictional Arbitrage
-Why would you do it? Taxes, ideology, other reasons?
-If you are a US citizen, what's the process?
-How much does it cost? (Including the calculation of exit tax of 40 pc of net worth)
-What are the usual places to "go"?
-What are the rules of engagement once you're "out"?
-What is the concept of "back-up citizenship?"
Future legislation-
-Are you putting yourself on "Bad Lists"?
-The Dangers of a Wealth Tax for wealthy people . . .
-Step Up in basis removal?
-The increasing cost of "Citizenship Insurance"
https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/
The 75th "Wealth Actually" Podcast . . . Wow . . . it seems like I just started this project a few months ago. It has been 4 and a half years since the first one . . . it's alarming how fast time flies. Hopefully, I have improved over time!
This 75th recording is an industry specific interview, but it has wide ramifications. In getting up to speed on a different project, I stumbled across the book "Ethics for Trustees 2.0" by MARGUERITE LORENZ. Based in California, Marguerite is a Master Trustee and the Managing Partner of LORENZ PRIVATE TRUSTEES.
https://www.amazon.com/Ethics-Trustees-2-0-Guide-Trustee/dp/172837278X/
Ethic for Trustees 2.0 is a quick and extremely informative read on the roles and responsibilities of a trustee and the establishment of good practices around decision-making that involves judgment and discretion. It also went into some detail about the California licensing component of individual trustees- something I knew little about. So in typical "me" fashion, I called up Marguerite to find out more about the book and her firm's unique practice. That led to her gracious appearance on the latest "Wealth, Actually" podcast.
We covered:
-Her unique background and the formation of her private trustee business. (It has its own unique succession story too!)
-Marguerite's rationale and experience in writing the book
-The Definitions of a Trust, their uses and some of the nomenclature
-The Duties of a Trustee/Fiduciary- (many of which trustees aren't aware of)!
-What makes a good trustee? How does one deal with arguing beneficiaries? Tricky assets?
-The Origin of CALIFORNIA LICENSING FOR PROFESSIONAL TRUSTEES (and why it may be important for normally exempted attorneys and CPAs to get licensed.
-When does advice graduate from being to transactional to ongoing and how does it relate to administration of structures and discretionary decision-making?
-Traps for the unwary trustee
-What functions or areas of trustee responsibility are good to ask for help? When do you bring in outside experts?
-Useful Resources and Groups:
INDEPENDENT TRUSTEE ALLIANCE
ESTATE PLANNING GROUP NETWORK
-How do we stay in touch?
MARGUERITE LORENZ LINKEDIN
LORENZ PRIVATE TRUSTEES (WEBSITE)
MARGUERITE LORENZ TWITTER
https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/
EUAN RELLIE is on the podcast today. We went around the world in half an hour and probably could have solved the worlds problems over drinks if we had the time. Alas, we only get a taste of Euan's informed worldview and his story of building a business and advising clients as they solve the puzzle of doing business in Asia and around the world successfully. We do get a hear a bit about of his love for Arsenal Football at the end.
For those who want to hear more from Euan, he is an excellent twitter follow . . . @EUANRELLIE. He is quoted often on matters of finance, fashion and culture- recently in the New York Times and the South China Morning Post.
In his day job, Euan is an investment banker with the firm he founded, BDA Partners. Since founding BDA in 1996, he has lived in New York and London, and Singapore, and has worked in China, Taiwan, Korea, Japan, India and across the Middle East. 1990-1996, he worked for Schroders, the UK investment bank now part of Citigroup, in New York, London and Singapore. He was Head of SE Asia Execution for Schroders Asia-Pacific Regional Advisory Group.
Our discussion covered a wide range of topics- I wish we had longer!
Economic Outlook
What are some of the good and difficult data points that you are focussing on?
Background-
How did you get into the world? How did your London background prepare you for New York?
BDA's Function
Focus on Asia and helping firms on the sell side. Helping firms access the capital and expertise in Asia and around the world
Prospects for Asia-
What does the U.S./China dynamic look like long term? What do American businesses get wrong doing business far from home?
United States Politics-
What should we take away from this tumultuous last few months? What can we expect in the post-Trump world? What should we feel optimistic about?
Arsenal Football
How do the prospects for this season look? What does the future look like?
BDA Partners Website: https://www.bdapartners.com/
https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/
Occasionally, I get to speak with someone in the industry that both affirms my experiences, but also pushes my thinking and worldview. DAVID C WELLS JR, CEO of Family Capital Strategy, fits that bill on the topic of advising families. I met him in Nashville early in 2020 and stayed in touch. When I heard he was writing a book, I knew we were kindred spirits having gone through that process myself. That book, "When Anything is Possible", just came out and I couldn't be happier for him. I think it is a terrific companion to those looking to forestall the "Shirtsleeves to Shirtsleeves" phenomenon and help business owners and their families structure and build lives of purpose. In this podcast, we discuss some of his insights and the book-writing process itself.
https://www.amazon.com/When-Anything-Possible-Wealth-Strategic/dp/173568130X/
Introduction
Chapter 1 Wealth Strategy: Defining the Terms
Section One: Wealth Structure
Chapter 2 Wealth and What It Is
Chapter 3 Level of Wealth
Chapter 4 Psychology: Money’s War on Our Brains
Chapter 5 Coming Into Wealth
Section Two: Wealth Identity
Chapter 6 How You Feel About Yourself Affects How You Feel About Wealth
Chapter 7 Defining Your Wealth Identity
Section Three: Wealth Strategy
Chapter 8 How to Spend It
Chapter 9 How to Invest
Chapter 10 Giving to the Next Generation
Chapter 11 Philanthropy
Chapter 12 Building a Life of Intention
Here are a few recent blog posts which introduce concepts from the book:
The Challenge and Complexity of Entitlement
Adjusting to Life After The Liquidity Event
Creating a Wealth Surplus to Pass to Future Generations
What You Should Know Before Marrying Rich
You can find David here:
Book - whenanythingispossible.com
Website: www.familycapitalstrategy.com
Newsletter -
Here is the first video foray for the "Wealth Actually" podcast (a bit by accident! We had to switch formats midstream . . . so I decided to experiment with the video format).
I interviewed Christopher Ott on #Cybersecurity for the Ultra High Net Worth, High Net Worth and Family Office space. We talk about how one should view their own digital risks, how to protect yourself, and what to do when you have been compromised. We kept it to 40 minutes and probably could have discussed issues for more than three hours.
Chris is a partner at Rothwell Figg, the litigation firm based in Washington, D.C.
Successfully
litigating complex data security matters, conducting hundreds of
investigations, and winning dozens of appeals,
Prior
to entering private practice, Mr. Ott held various influential positions at DOJ
including Supervisory Cyber Counsel to the National Security Division of the
DOJ,
In these roles, he investigated and charged the largest known computer hacking and securities fraud scheme and the hack of Yahoo by Russian intelligence operatives, the largest data breach in history,
https://youtu.be/XzYwkjA1qiA
BASICS
Cybersecurity- the main concerns are around the ability to control access and use of information. Everybody has at least three types of information
PREDICTIVE DATA
This is data that will help predict what you are going to do. This is especially useful for hackers and other criminals as they figure out how to access your data.
CONTROLLING DATA
This is data that regulates the access to a client's information.
This can include: Passwords (and the need for two factor control, Phones (with automatic password access that can be migrated), and "Deep Fake" video and voice that can trick the gatekeepers into relinquishing access
INFLUENCE
This can include social, political, or economic influence.
THREE TYPES OF ADVERSARIES
Criminals
Spies
Hybrid hackers
-Russian Type
-Chinese Type
SPECIAL CONCERNS FOR HNW INDIVIDUALS
More data
More control
Much more influence
· Direct socio-political
· Indirect socio-political
WHAT IS IMPORTANT?
§ Control
· Analog passwords
· Never take shortcuts
· Device security
After a slew of podcasts about structuring, estate planning, investment themes and politics, I thought it would be fun to dive into a sport with a long, regal. and unusual history- COURT TENNIS (or "Real Tennis"). Descended from handball, and equal parts tennis (players face each other unlike squash and racquetball), platform tennis (where the walls are part of the court), the sport has all sorts of peculiar rules. It has strange looking racquets, arcane rules and courts with unusual and idiosyncratic dimensions. There are less than 50 courts in the world and roughly 10,000 players.
Longtime friend of the podcast, Haven Pell, joins us to talk about its interesting origins, where the sport is now and where it's going. He is part of a team that is building a new court in Washington and has written about that process in his blog, THE PUNDIFICATOR.
He even shares the story of how Court Tennis gave us the Left and Right side of the aisle in American politics!
https://pundificator.com/around-the-world-in-50-courts-a-brief-detour/
We cover . . . the equipment
The "Off-Center" Racquet
The Rules
The Crazy Dimensions of the Courts
The History of the Sport
Some of the Best and Most Famous Players in the World
And here is a little sample of some high level play:
https://www.youtube.com/watch?v=p1RK9fuGZgI
https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/
For a few years, the wealth advisory and asset management worlds have been captivated by three letters . . . ESG: Environmental, Social, and Governance. ESG has been an exploding trend as investors want to align their personal values with their investments. The principle is that one's investments can do well by "doing good." Against that backdrop, asset managers are looking for new criteria to evaluate investment opportunities in the context of ever increasing difficulties in beating indexes over time. To some, ESG is a marketing gambit. To others, it is a framework to unlock greater returns and create positive social impact while doing it. To many, it is somewhere in between.
To help make sense of this phenomenon, I spoke with John Rosenberg who has direct experience in asset management and the ESG world.
John worked for the Federal Reserve Bank of San Francisco and has had a long career in banking and now works as an investment manager at a single family office and manages the LOUGHLIN WATER PARTNERS LP - an investment fund focused on technologies and assets that provide clean water and alternative energy. (Early on, John worked as a ski bum which he declares to be the most honest job on the resume!)
Outline
Could you give me some background on ESG Investing? We hear a lot of different terms bandied about such as Sustainable, Impact, ESG, or even SRI. Where did the term come from and how has it evolved?
Are ESG stocks different from other stocks? Is there some particular differentiation? Are the letters all equal?
A few weeks ago marked the 50th Anniversary of the Milton Friedman's essay on Shareholder Theory where he states that the corporation's social responsibility should be focused on profits. (The Social Responsibility of Business is to Increase its Profits). Do you agree with that?
Milton Friedman thought corporations should be focused on profits, not other social responsibility initiatives.
What is the driving theory behind ESG investing? Do you believe it actually promotes virtuous behavior? How do you parse the difference between a company that does many things well, but has a problem underpinning it's ESG score (i.e. tobacco bonds that fund good causes, but have dubious sources of revenue or a top notch company with an executive with a checkered record?)
Are there data services to evaluate whether or not companies are engaging in responsible behavior? How does one deal with one data service vs another? How much of the analysis is qualitative? How do you get past the "check the box" or "greenwashing" phenomenon?
You have been doing this, in one form, for a while now. What do you think of new entrants to the space?
Jeff Uben, formerly of Value Act, made some comments critical of ESG investors awhile back. What do you think about that? https://www.barrons.