Generating Alpha From Geographic Diversification: Carlyle Global Head Of Wealth

Forbes

Shane Clifford, Managing Director-Partner and Global Head of Wealth at Carlyle, sits with Editor-At-Large Maneet Ahuja to talk about the firm's "glocal" strategy to generating alpha.  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00And I talk about being global, right? You've got to be global, but local.

00:05Welcome. I'm Manita Huja, editor-at-large at Forbes and founder of Iconoclast.

00:10And we're here at the Case Summit. I'm thrilled to be joined now by Shane Clifford,

00:14Managing Director and Head of Global Wealth Management at Carlyle,

00:19one of the world's largest investment firms with $465 billion in assets under management.

00:24Shane, thank you so much for joining us.

00:26Thanks for having me. I'm excited for the conversation today.

00:28Yeah, no. So tell us about Carlyle's role within the wealth management industry

00:33and why Case is such an important place for you guys to be represented right now.

00:38Sure. So when you think about Carlyle, I think some folks always think about us in the institutional

00:43kind of world with the whole, those LPs, global LPs, where it'd be sovereign wealth funds,

00:49U.S. state pension funds. It's been a big, big part of the growth of the firm since it was founded

00:54back in 1987. What probably isn't as well known is that we've been in the wealth space

01:00since the early 2000s. We've raised over $60 billion over those years, predominantly in closed-end

01:08vehicles. And we can dig in a little bit about what that means down the road.

01:12And more recently, we've been really focused on the evolution of Carlyle in the wealth space.

01:20I think what's incredibly important for me is the brand. The Carlyle brand is incredibly powerful

01:27from a global footprint in all things wealth. So I definitely benefit and the team benefits from that.

01:34Mm-hmm. So you've spoken a lot about how Carlyle is adapting its private market offerings to meet

01:40the distinct needs of RIAs. Can you go into that a little bit and some of the offerings that Carlyle

01:46focuses on? Sure. So I think, you know, I spend a lot of time traveling globally. Yeah. And I think

01:53you've got to get out of that ivory tower. And you, you know, at times in this industry, you'll get

01:57really, really smart investment folks that will have a great idea, but there may not be any actual

02:03end-client demand for that in the, in the industry, right? So we spend a lot of time at Carlyle today

02:10trying to understand what is it that an advisor is trying to solve in a client's portfolio.

02:16And then in-house, what investment capabilities do we have that we can bring to, to those end

02:24clients? And, and partners like Case are important in that conversation because they've got, they've

02:29really got a pulse of the market here in particular in the RIA side. They're very, very strong in the IBD

02:34channel as well. So I really benefit from them in terms of being able to get some direct market

02:40feedback as well from the Case folks. And so it is a collective that gets us there in the end, but

02:45I would say I'm vehicle agnostic. So whether one access us through a closed-in vehicle or through an

02:51evergreen structure, what has to be at the core of the conversation is what's best for the client.

02:57And can we bring our institutional investment excellence to that end-wealth client?

03:03So we touched on IRAs, but you guys also cater to family offices,

03:08wirehouse advisors. Each of these investment segments have different goals, timelines, client

03:13profiles. How's your firm customizing engagement to cater to the end user?

03:19Yeah, I think it starts with, you know, with C-suite engagement and an understanding at the C-suite

03:26around how each of these different types of LPs behaves and what it is that they're trying to solve for.

03:34So under the leadership of Harvey Schwartz, I think what we really do have is a sense for the market

03:41today and what each of these channels is looking for. So when I think about, for example, the family

03:46office space, those are folks that are looking for more one-off, bespoke mandates to work with us on

03:53versus if we're working in something, let's say the mass affluent, right, where we're really going down

03:59to that accredited investor level, then that's something where we're trying to create a fund

04:05that's scalable, but that's very accessible in particular from an operational perspective.

04:10So it's probably got to have a ticker involved in it. So there's different vehicles that you need

04:15for different channels. And I think it's kind of understanding the pros and cons of each of those

04:22things. We're always going to be really super deliberate in how we approach each of those

04:27channels, which we can, we can dig into if you want a little bit further as well.

04:31Yeah, no, we definitely will. I want to also touch on Carlisle is navigating this moment of great

04:37transformation as the private markets become more accessible. And we're dramatically seeing the

04:42public markets shrink. Talk to us about this macro backdrop that you're seeing and this sea change

04:49that is happening that's creating this great opportunity for investors. Yeah, look, I think

04:55the convergence has already happened. You know, when I'm out there, I think we need to play catch up

05:01with the end market. When I talk to end clients, they understand what has happened to, you know,

05:08over the last 20 years, when you see how many public companies have delisted, when you see the rise of

05:13private enterprise and what that means. So I think actually, we need to give more credit to individual

05:20investors who they understand that diversification is everything. So if you believe in diversification,

05:27you believe in giving clients access to private markets, because true diversification today

05:33implies access to public and to private. And I think that now is table stakes. I think we all get

05:41that. We understand that. I think as an industry, what we really need to get bandied about a lot in

05:48this business is the democratization of all right. It's kind of this kind of this like in vogue slogan

05:54that we've been talking about extensively. Yeah, and it's not, you know, I would say what it should be is

06:00the responsible democratization of all for the wealth channel. And I think responsible is really

06:07important here because ultimately, a big component of this is going to be education. And it's going to

06:14be a journey for everyone on that side. And, and I do, I kind of think about education as really being

06:22the cornerstone of how Carlisle is approaching this market. But it's complicated. It's evolving.

06:28What do you mean by that? Talk to me a little bit about education being the cornerstone. What are

06:33you guys implementing or putting out there in terms of, is it industry white papers or research?

06:39How are you engaging with clients in this moment where it just seems like there's continuous

06:46uncertainty in global geopolitical, you know, issues at play?

06:50Yeah, I think, look, I, I, I always say this about Carlisle. We, we don't have a content problem. We

06:56produce just, you know, best in class content. Now I think for an institutional LP, I would say that

07:03we're really in the storytelling business, right? And for an institutional LP, you typically get,

07:09you know, 30 minutes to sit in front of a board. And with that board, you've got the investment

07:15consultant, you've got staff, and you have the board of trustees. And you're going to have 30 minutes

07:20to go through a pretty thorough deck. And let's call it 89. Now you're not going to go through all

07:25God forbid, all 80, 90 pages would be brutal for anyone. Right, right. But you have the opportunity

07:30to talk to the end decision makers. The wealth channel is an intermediary channel. And I think

07:37sometimes people, they miss that, they miss that piece of the puzzle. Because at the end of the day,

07:44we have in gen, and I'm generalizing a little bit, but typically, we've got about five minutes

07:51to explain the thesis to the intermediary, that's that financial advisor, that private banker,

07:59that individual then is going to have probably three minutes to explain it to the end client.

08:06And I always think about my own parents, I think about my in-laws. And I think about my father-in-law,

08:11who's a dentist down in Florida, right? And I always think about how does he want to get that

08:16information? Right. So we've got to take this institutional quality content, and now we've

08:23got to deliver it in a very different format. So I've got to take a 10-page white paper that's got

08:29fantastic information in it. Right. But distill it for a broader audience. Distill it. And it's,

08:34you know, and I think video content as well is one that you just, you got to be up to speed on that.

08:39Mm-hmm. So is that something that you guys are leaning in on, is just more engagement with the

08:43media, but more of your own, like, content generation as well? Yeah, I think when I think

08:50about content today, it's multifaceted, right? Because we really are focused on video content,

08:59but it's got to be under five minutes. Right, right. Like, if you look at kind of, and you know this.

09:02It's got to be snippets, yeah, to catch their attention. You know, but at the end of the day,

09:06we also, we're going to do, you know, one-on-one education as well. So I think we spend a lot of

09:13time producing longer, more informative content for the advisor community. And then we spend,

09:20you know, shorter, more punchy time with end-client content. So you're addressing two different

09:27client bases there between the intermediary and the end-client. And I think that's a journey for

09:32all of us. But what excites me as a private markets GP is that the entire industry is embracing this,

09:39and we're all getting after it together, which is kind of exciting.

09:42One of the things that I've been asking folks today is, we feel like there's, part of this sea

09:47change is this acceptance of alternatives, this democratization of altas, this flight,

09:54another avenue of flight to safety, actually, during a time where there's so much uncertainty.

10:02And do you think that's why maybe investors are more receptive toward this? So I know that we're

10:06seeing $30 trillion wealth transfer in the next five years, I think even greater than that over the

10:13next 10. Are we seeing more assets flow into this space? I think you're seeing more assets because

10:19there's greater transparency now today with these evergreen vehicles. And I think at the end of the day,

10:24people understand their risk appetite. There are risks to investing in public markets, there are

10:31risks to investing in private markets. And with the convergence of those two things now, I think

10:37people think about their credit allocation. And they think about that overall. And then two underlying

10:43components could be public credit and private credit. So if one is doing opportunistic credit or direct

10:49lending in the private space, you have to understand the risk components of that and how it informs your

10:56overall portfolio construction. So I think people are being a lot more thoughtful today. So I think in

11:04particular on the credit side, you in terms of that flight to a flight to quality flight to a safer place,

11:10we've seen it definitely with private credit these days.

11:13Oh, interesting. So you touched on risk briefly. So as we talk about risk, and access expands,

11:20so does the need for investor protection. How do you think about balancing broader participation with

11:26the unique risks that private markets also pose?

11:30I think when it comes to risk, you have to be very thoughtful about this. And what I mean by that

11:37is, we're not in the, you know, when I look at the industry today, there is significant upside in

11:48terms of asset gathering for some of these vehicles. I think you have to be very careful about that.

11:53And I, you know, I'm fortunate in that I'm in a place right now where there is exponential growth

12:01going on across the industry in terms of flows coming into these evergreen funds. At Carlyle,

12:07we're trying to really manage those inflows in a very deliberate way because at the end of the day,

12:14our primary focus is on the performance of our funds, the liquidity of our funds,

12:18and managing the overall risk of the vehicle. And I think if you take in too much in AUM coming in

12:26the door towards you, that can become really complicated really quickly. So how do we manage

12:32those levers if you're in my seat? Well, yeah, tell us, how do you? You don't want to have mass

12:37distribution of your vehicle. So what I tell people is, I want to do more things with less partners.

12:43So I am not looking to, you know, broadly distribute all of our funds in every place,

12:50in every country, in every geography, because that creates all sorts of complications ultimately for

12:55us. So from my seat, we're going to be very deliberate. Let's say if we're launching a new fund,

13:00I am going to probably pick five global partners that are probably going to be region specific.

13:07And I'm going to probably wait 12 to 18 to 24 months to see that. Now, some of my peer group will go,

13:13they'll go with 20 to 25 partners. Ultimately, we're going to play the long game. We're going

13:19to play that kind of three to five year time horizon at Carlyle. And we're, we understand

13:24that at the end of the day, if we're, if we're achieving the performance that we, we say we're

13:30going to give you as an end client, and we, and we do that. That comes with dedicated focus and

13:34attention. A hundred percent. A hundred percent. Yeah. So tell me about then what some of the top

13:39criteria are that you look for with these select partners over this duration? You know, so it's

13:46got, first of all, it's got to be with partners that, um, have as much pride in their brand as we

13:53have in ours. And I think what I mean by that is these are typically partners that have been in the

13:59business a really, really long time. Um, and they are folks that want to be associated with

14:06Carlyle. They want their end clients to have access to Carlyle and we want to have access to

14:11those end clients as well. So there has to be a deliberate partnership there. I think adding to

14:16that as well has to be the fact that there has to be a commitment to education and, and that's a

14:21two-way street. So we've got to work with that partner in terms of the education of end clients,

14:27in terms of the education of the advisor community. So I want to work with folks that are committed

14:32to education. I also think that we need to be committed as well to doing multiple things

14:38together because ultimately, you know, what I want to do is I want to be able to offer our best in

14:44class closed end vehicles on that platform alongside perhaps some co-investments and alongside our

14:50evergreen structure. So I'm trying to create an ecosystem that exists in this partnership and I

14:56can do that with a limited number of key partners as a result. That makes a lot of sense. So what do

15:02you think are some of the misconceptions about the private markets industry today? Yeah, I think we

15:10need to, as an industry, perhaps be, be, be more open and talk a lot more. I think when, and what I

15:17mean by that is I think we've historically been, been somewhat shut off from the broader investment

15:23community and kind of, I think we need to do a better job of getting out there and telling our

15:28story. And, and I know that from talking to end clients and talking to advisors that as soon as

15:34you have the opportunity to tell them about the benefits of private markets, they get it, you know,

15:39they get it probably faster than perhaps at times, some of these articles. When I think about

15:44the benefits of secondaries, for example, you talk about the mitigation of the J curve. The minute you

15:50talk to someone about that, they're like, I get it. And how do I access secondaries as a result?

15:55And then that's where you really dig in. So it's, it's more of a process. And I put it more on us

16:01than anyone else. Us, the GPs in the private market space, we now need to kind of get out there in a

16:07very meaningful way. And I think we're doing that these days. Right. And you're seeing that with all

16:10the activity happening at Carlisle and across the industry. A hundred percent. Yeah. So Carlisle

16:16recently partnered with UBS. I think we spoke about that briefly before. Can you share how

16:23the company's global footprint shapes the firm's perspective on opportunities in the private

16:29market space today? Yeah. So when we talk about great partners, you know, one of the key, key

16:34attributes is, is a firm that has a global footprint, right? Because we have a global footprint. So,

16:40you know, we're particularly excited right now about efforts in the Japanese market that I've been in

16:45this bit. You can see by my gray hair, I'm sure these lights are bringing up all my gray hair.

16:50You know, I'm 26, 27 years in this business. Oh, I thought you were going to say you're 26,

16:5527 years old. That's a while ago. So when I, when I think about this business, I've been talking about

17:04Japan forever. And I'm going to tell you, Japan's coming, it's coming. Right. In the last two years,

17:09it has actually arrived from a wealth perspective. So the great news, for example, in that market is

17:15Carlisle has been in that space since 2000. So we're 25 plus years in the business there. So

17:21that's one example, whether I think about the main money. So basically being a first mover

17:26globally in certain key markets gives the firm a very key competitive advantage.

17:32And I talk about being glocal, right? You got to be global, but local.

17:37I love that. Glocal.

17:38Glocal. Okay.

17:39So feel free to steal it. All right.

17:41I'm not sure where, I might've borrowed it myself from someone at some point, but

17:44glocal is the way to go. And so we've got to have boots on the ground with the relationships,

17:50again, that understand the underlying kind of, kind of dynamics of that market.

17:57That's something that's really compelling. And from my seat, if you think about the major money

18:02centers that are out there, it's, it's Tokyo, it's Hong Kong, Singapore, Abu Dhabi, and Dubai.

18:07And then you get to kind of your Zurich, your Geneva, your London on the internet.

18:11Oh, after.

18:11And then Toronto. So like, these are all, if you're in my seat, these are all the places

18:16that you're thinking about.

18:17As top of mind.

18:18Yeah, correct.

18:19So it sounds like geographic diversification is key to generating alpha.

18:24All day long. Yeah. And our investment teams then are on the ground in all of these locations

18:29as well. So we've got a bit of a unique position there, especially relative to a lot of our peers

18:35here in the U.S. who, you know, right or wrong of a very U.S.-centric view.

18:39Right.

18:39We have that, but we also have the global perspective.

18:41The global perspective. So when leading in a fast-changing environment like the private markets,

18:46how do you balance the long-term vision and agility needed to adapt quickly?

18:52You could look up and there could be a new executive order any day of the week or just

18:57geopolitical, geopolitical developments that impact all of our portfolios.

19:03Look, it's hard is the honest answer, right? So I think that you have to be realistic. You have

19:11to set short, medium, and long-term goals. For example, you know, I think the worst kept secret

19:16was that executive order that was going to come out around the retirement space over the summer

19:21that came out specific to the 401k defined contribution world. You know, everyone in the

19:27private markets arena has been getting ready for that. We'll see what the DOL letter says

19:32in February. That will kind of set the guardrails and kind of, I think, will give us a better

19:38understanding of that space. So when I look at all of these things, I think you have to really think

19:45about what do you want to achieve in the current year? And then what is the three and the five-year

19:50target? When I think about wealth today, I would say wealth 1.0 was what I'm going to broadly define

19:57as banking. And what I mean there is RIAs, IBDs, Wirehap, all that good stuff. And I think for the

20:04most part, most firms today are pretty good at that. And I think understand, or at least we

20:10understand how to work in that channel. 2.0 is going to be retirement and then 3.0 will be insurance.

20:17So I think what you're going to see is- What's your timeline prediction on that?

20:22Well, I think retirement is a 26 event for the US. The UK market actually is one that's actually

20:28there already. And then I think insurance comes up maybe over the next two to three years. I think

20:35there's probably some product innovation needed as well. We're spending a lot of time on CIT wrappers,

20:40for example, for the retirement space. And we'll see what we ultimately do there. But it's exciting,

20:46and it's going to be a really interesting time for everyone in the industry.

20:50So what I find so interesting about your background is you've led in both traditional

20:54institutional settings, and now at the forefront of wealth and democratization. How has your

21:00leadership style evolved as the industry itself keeps changing?

21:04Yeah, yeah, yeah. There's the home front, and then there's the, you know, it's, I'm at the bottom of

21:10the pecking order at home, first of all. So I have no leadership at home, which is fantastic,

21:14because that allows me to decompress, which I love, right? Which is just, with three teenage boys

21:21and an awesome wife, I'm incredibly fortunate on the private side that I kind of have that

21:27foundation. So I think when you think about leadership, I think it is key to, one, understanding

21:35the firm you're at and what's the DNA of that firm. I think what's great about Carlyle is we still

21:40have the three founders involved. You know, David, Bill, and Dan are just fantastic folks and mentors

21:48that I have available to me. And then I think about folks in the C-suite, whether it be Harvey,

21:53So I have to ask, I have to interrupt and ask, what are some of the key leadership qualities or

21:58traits that you've learned from them? I mean, David is pretty much the funny, one of the funniest

22:03people. I think he could go head to head with Dave Chappelle. And, um, but some of the other

22:09leadership traits, I think, you know, I think David would tell you, don't take yourself too

22:13serious. Right. And he's a hundred percent right. Um, and I think he would also, Bill would tell you,

22:21you know, uh, don't, don't be afraid to fail. You're going to fail, but it's like, it's,

22:27but he'll take that one step further and be like, okay, let's dig into why did that fail?

22:31And let's understand it probably at the core, there was something there that actually

22:36was right. It was execution. Yeah. That probably, so I think with all of these folks and I, I look

22:43at Harvey and the team and when I look at Harvey, what he does is he kind of looks at from the ground

22:50up how a business works. He wants to understand everything and he's just this sponge. Um, and it's

22:56incredibly impressive when you get to work with folks like that. So I think over the years,

23:01I've been fortunate to work with great folks and I, I try to take key attributes from them and then

23:05make it my own. I think ultimately the seat I'm in is about scaling the business in the only way you

23:13can scale it is if you empower the people, your colleagues that you work with. So I have to have

23:18great teams that work with me because ultimately they need to make decisions independent of me.

23:25I'm just, I could be a bottleneck otherwise. So if you're not empowering people, you're not leading

23:29these days. Right. So we're just about out of time, but I have to ask about something I'm

23:33personally very passionate about, which is F1. You guys made a really big announcement and a big

23:39investment in the Red Bull team. So talk to us about how that kind of came together and why that

23:45presented itself as this must execute opportunity for Carlisle at this moment. Yeah, I think, you know,

23:52this is all about Carlisle trying to redefine itself in the market as well. And, and I think

23:57it talks to, um, our need or our desire to want to be present and kind of from a global perspective.

24:05So I, I'm fortunate that I got to work with some really great folks in our corporate communications

24:11and marketing teams to think about where should we go? We looked at golf, we looked at tennis,

24:16we looked at a lot of different things. Ultimately we landed on F1 because F1 is global. And as we

24:22said throughout this interview, it's key for us. And I think too, it's, it's growing exponentially

24:28today. And then ultimately we needed to find a partner in that space that really understood us

24:35and culturally we could kind of connect. And Oracle Red Bull racing was that and Laurent and the team

24:41there are just fantastic. It helps that they're the number one team, you know,

24:46winning team. So that doesn't hurt us. Um, it's exciting. It's, it really, I think it's going to

24:52be fascinating to watch the next three years, that partnership and how it evolves and how we can kind

24:57of learn from each other. I think there's a lot that we can do together. Super excited about it.

25:02So you mentioned you were looking at some other sports potential opportunities. Could we see more

25:07Carlisle sports investments in the coming years? You know, I, hopefully when you interview Harvey next,

25:13you can ask him about my budget and increasing that for me. I think that, um, I think we got to

25:19digest this partnership first and I think you will see us continue to be creative. Um, I always use the

25:27word that we, we like to be a little scrappy and I think it's fun to be scrappy in this business. So

25:32we're going to be thoughtful. We're going to be scrappy. And I think we'll do interesting things

25:37down the road. Stay tuned is what I would say there. Okay. Stay tuned. Well, Shane Clifford,

25:41Carlisle, global head of wealth management. Thank you so much for joining us. It's fantastic. Appreciate

25:46the time.

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