The Private Capital Strategy Series Episode 11: New ways to connect with institutional investors

Is the traditional networking milieu of drinks and steak being supplanted by more active engagements like sports and hikes?
James Rulli of Old City Investment Partners brings to the table a refreshed playbook that delves into these cutting-edge approaches in GP-Institutional Investor connectivity. Paul Filanowski offers insight on this new connectivity culture, illuminating how it’s being redefined through both human interactions and digital mediums, and importantly, how these two elements are mutually influential. Watch the episode below to learn more.

Chris Gale  00:02

This is the Private Capital Strategy Series, Episode 11. We have James Rulli here from Old City Investment Partners and Paul Filanowski from 4Pines Fund Service. We’re here to talk about new ways to connect with institutional investors. James, tell us about yourself, tell us what we should know about Old City

James Rulli  00:25

Thank you very much for taking the time. And thanks, everyone, for joining. And thank you, Chris, and Paul, for having me. So my name is James Rulli. I’m the managing director of Old City Investment Partners. We are a broker-dealer that has been around for approximately 16 years. We raise capital on behalf of alternative investment funds. We also have a pool of capital that we invest alongside those funds that we raise capital for. I joined the firm approximately four years ago to scale our business outside of the US. More recently, I’ve been more involved with the capital allocation piece of what we do as well, alongside the asset-raising side of things.

Chris Gale  01:07

Tell us more about the asset-raising side of it. When we were first talking, it was about new ways to do that – part of it may have to do with generations changing and also COVID. You told us recently about an event in New Orleans, for instance, that illustrates a smart way to engage with institutional investors.

James Rulli  01:31

Yeah, so first and foremost, I think that the community is more important than ever. I think that if you can blur the lines between fun and work, it’s something that’s really looked upon fondly, across the whole investor community, and also the fund-manager community by extension. So the example that you’re referring to Chris is a conference that Old City hosted in New Orleans to coincide with JazzFest, where we had 15 of our highest alternative fund managers spanning across hedge funds, private equity, venture capital, private credit, alongside 60 of our closest investor relationships, to enjoy three days of targeted panel content, one-on-one meetings, but then also to enjoy the festivities and the amazing environment that is JazzFest in New Orleans. As I mentioned before, it blurs the lines between being able to really fulfill your modus operandi as a professional, and engage on that front, but at the same time, really be in an environment that is exceptionally fun, and creates long-lasting memories with those alongside the peers that you work alongside of the industry. We found that to be an effective medium to achieve that engagement and build that community.

Chris Gale  02:52

How do you balance an in-person event like that and virtual events? Where are you coming out these days in terms of how to strike the balance between those two things?

James Rulli  03:03

I say this while we’re on a virtual event, but I think people certainly have a certain element of fatigue, having been bombarded with hundreds and hundreds of different webinars on certain subject matter. They definitely serve a purpose. There is a place for them, and they’re a great way of transmitting information, especially if its subject matter has really been thought through and is poignant. More so than ever, there’s been an overcorrection toward more in-person events. And I think, with a greater number of these events, surfacing, but also with a greater resource put toward these events and more thoughtfulness put toward these events. They’re starting to become somewhat unmissable. And so I think that, if you’re a professional in the alternatives industry, irrespective of which side of the table you sit on when you have these events that are so, so highly put together in terms of one, the subject matter, but two, the experience, they always become too good to miss. And you feel as though if your peers in the industry and your friends and your network will be attending these things, becomes pretty easy to justify your attendance. So, to answer your question in a pretty roundabout way, I do think that there will always be a place for high-quality and more frequent virtual events that serve a very specific subject matter. But that should be augmented by the in-person and bringing people together in a really thoughtful way.

Chris Gale  04:43

I was reading some interviews you’ve done, and I think you’ve talked about more active events. Certainly, we have still this steak and lunch and dinner and drinks. But it sounds like how do you select more active events? And how do you select the right way of engaging with the investors? How do you figure that out?

James Rulli  05:17

Yeah, so I think that what you’re alluding to specifically, is something that I created in London. The objective function of that specific event called active volts, or that community called active volts, was to try and get people together in the industry outside of the pub. I don’t know where folks are dialed in from on this on this webinar. But in London, it certainly is the case that a lot of socializing takes place, over drinks and in the pub. And I think that there became a certain period thereafter, we were all shut down where the weekly drinks turned into bi-weekly drinks turned into three or four times a week drinks. And while everyone was having a great time, I think they probably did themselves physically a few injustices. The remit of what I created was really to bring investors and industry professionals together outside of the pub, whether it be tennis, whether it be paddle, which is big in this part of the world, Pickleball is bigger in your part of the world, whether it be golf outings, whether it be certain workout classes. That was the objective function of that. And look, ultimately, that’s not for everybody either, right? So I think it’s just about, what, we’ll touch more on this later. But I think it’s about really knowing your customer or knowing the people that you’re trying to get to and serve, and figuring out what is the best solution. What is the best mix of engagement that works on a case-by-case basis for certain people?

Chris Gale  06:49

So I guess to that point – by the way, Pickleball is fighting words amongst some people over here. Just checking the attendee list to see. I wanted to dip in on the operations and finance side. At Old City, how does the finance and operations team enable what you’re doing?

James Rulli  07:16

Sure. So Old City we serve, we serve a few different – I’m going to use the word customer – we serve a few different customers, we serve investors, with whom we’re trying to connect and show various funds that we are representing on a marketing basis we serve those funds, who are performing that function for. And then we also serve other independent third-party placement agents who sit on the Old City platform, given that we are a broker-dealer regulated by the SEC and FINRA. And so from our perspective, it’s very important that our operation operations and financial tech are set up in a way such that there’s always a consistent up-to-date flow of information, whether that be information with regards to the most up-to-date, marketing materials and performance numbers of the various managers, not only that we are representing, but also those managers that form a peer set such that we can have a holistic and 360-degree view of where our clients sit in a broader opportunity set of other similar funds strategies.

It’s also important, from an operational perspective, that all of the diligence we’re conducting in servicing our requirements, as the regulated entity is always up to date, such that if the SEC were to knock on our door and say, “Hey, one of your placement agents worked on such and such fund manager, and then they ended up doing something nefarious.” We’re up to date in terms of the diligence that we conducted, to be able to service that request. So from our perspective, it’s, there are multiple facets in which the ops team and the finance team work pretty tirelessly to ensure that our system is up to date. And I would say that from a pure placement agent perspective, we’re pretty atypical in that sense.

Chris Gale  09:06

Really? And are those recent investments? Or is that in terms of the finance the operations side to enable, what you’re doing? Is that something that’s always been the case or has it just been ratcheted up recently?

James Rulli  09:19

Look, like any business out there, we’ve scaled over time. We started as a one or two-man show back in 2005. And we’ve become much more institutional in 18 or so years that we’ve been in business. I think, certainly since I joined the firm, there’s been a concerted effort and significant resources put towards scaling the operation and technological capabilities that we have as a firm. And I think looking forward 10 years from now, that’s really a way you can build embedded enterprise value and continuously focusing on trying to be the best service provider within the placement management landscape is what we obsess over. And I don’t think we’ll ever stop investing in the team and the technology commensurate to that task.

Chris Gale  10:07

So, Paul, I wanted to turn to you. Obviously, you’re not positioned to talk about Old City specifically, but how does what James is describing represent a trend or any trends in the industry? With regard to the middle and back office, the finance and the ops team supporting what the front office is doing, either on the investment side or on the fundraising side?

Paul Filanowski  10:29

Sure. I go back to Mike Trinkaus, who is our CEO here. He used to say cash is king, I think now data is king. And it goes back to what James mentioned. He needs to have the most current up-to-date data, and real-time at this point where we’re going, in front of them. So we were there to change the innovation of what he’s doing to get folks out. And it’s enabling our ops and finance teams to be able to support them. And that’s where we come in utilizing technology and our experience in building relationships as well.

Chris Gale  11:01

Here’s a follow-up question. I’m thinking about the conversation that Mike Trinkaus had with Bob, on co-sourcing. What I’m feeling like is, is that there are some new workflows and new processes that get built up to support, for instance, what James is describing. Does, should the GP have the license to the software where a GL lives? On their side on the front side? How can they best make sure they’re able to build an advantage in their workflows?

Paul Filanowski  11:43

Yeah, we’re seeing a lot of momentum on co-sourcing, which is the GPR. Our clients will have direct access, so we just log into their instance. So they would own the data on the system, we would just have a license and go in, which is great, because it gives them real-time access to their data. So at any time, they want to run reports, stuff like that, they have another app for their disposal.

Chris Gale  12:06

Excellent. James is speaking to it from the broker-dealer side, what do you see on the PE side, the VC side?

Paul Filanowski  12:18

We see a lot of folks, really, similar to James wanting to get out and build relationships and networks. We’ve been starting to travel and ramp up that we’re seeing folks that want to meet us in person, they want us to meet their managing partners, the owners of the firms to get to build those relationships. So as Jason, I think people were a little bit wiped out just from the online teams, Zoom videos, people are interested in I think, going out and starting to have that person-to-person contact again.

Chris Gale  12:47

And then James, coming back to you, any. There are a lot of folks here. Are there any particular special sauces or secrets to your playbook that you found successful? We mentioned, for instance, what you’re doing in London. We’ve mentioned New Orleans. Anything else that you’d highlight that institutional investors are looking for right now?

James Rulli  13:16

Yeah, we all tend to overcomplicate what we do as professionals, but ultimately, this comes down to a game of fighting for attention span. And so within that using tech companies, that example, everyone’s always saying you obsess over your customer. And in this industry, the same thing is true, but the practicality of what that really means is different. Tech companies are looking to obsess over their customers, which might be measured in the millions, we’re looking to obsess over our customers that might be measured in the hundreds, five hundreds, right? So what do I mean by that? Well, what I mean by that is if you really want to get the attention, and then long-term trust, which is ultimately what it’s about, and form a relationship with institutional investors, you really need to be maniacal and your focus and find out what really matters to you. How can I serve your needs and wants as not only a professional but an individual, as a person? And what we typically see in this space is, even though institutions might manage billions or hundreds of billions of dollars, the teams that manage certain assets or pockets of assets, so let’s say a pension fund might have a team that specifically focuses on credit hedge funds. And those teams are typically pretty small, right? You don’t typically have teams of 100 people focused on one asset class. It’s very often you’ll see a family office that manages $10 billion, but the team has only six or seven investment professionals. So what does that mean? That means that the focus and the premium that is placed on a high-quality set of peers to which you can exchange and push back and forth ideas is extremely valuable.

If you can be a conduit to that, if you can be somebody who is allowing people to get access to that, that is tremendously valuable, right? And so, another part of this equation is that we live in a time where access to a base layer of superficial information is easier to access, and more prevalent than it ever has been in the past. So what does that mean? That means that now I can find the contact details of every single institutional investor across 1000 different lists online, which means that their personal contact information is now the commodity that many, many, many industry professionals have access to. So how do I go above and beyond and make sure that I’m the person that is trying to target somebody? Yes, obviously, from a sales perspective, because that’s ultimately what we’re here to do. But how can I ask myself first, what can I give? How can I be a resource for this person such that I can stand out from the pack of 100, 200, or 300 other people daily who are trying to get their attention? If you speak to any investor who works in any kind of institutional institution around the world, you’ll hear the same thing from them, which is that every single day, there are hundreds and hundreds and hundreds of unsolicited emails that hit their inbox, and how do you not be another number is another thing that we obsess over. And so that gets us back to being a resource to people and bringing people together.

If you can ask yourself, “How can I use the network that I already have, and open that up to other investors who also want introductions and to be connected to investors?” That is a great way to provide a service without selling explicitly to a network that you’re trying to get in front of. So look, I think that we, as I mentioned, I think that we typically overcomplicate what we do in this business, but it ultimately comes down to really listening and figuring out what this person wants as a professional, as an individual. How can I cater to that as best as I possibly can? What can I do? What value can I provide? Before, I was in a position where I was asking for something in return, something very similar that one of my colleagues does to great effect on a weekly basis, just aggregate pertinent industry, news articles from various publications, and then just send that out in a very easy bullet bulleted list format to a to an email list, right? And, and people love that investors love that. It’s just a very simple, nice give. That means you can constantly be in front of the people you’re trying to speak to daily and provide value first before you ask for something in return.

Chris Gale  17:38

I think earlier, we were talking about, you’ve seen the rise of some bad actors, or sloppy actors, at least, who might be abusing either the access or as you’re mentioning about the news articles. I don’t know how much you’re seeing ChatGPT and generative AI, coming into the picture. But tell us more about some of the friction that’s being faced, as in theory, the barriers to identifying people are coming down. But it sounds like it’s raising new barriers, trying to control the volume of outreach that might be hitting people.

James Rulli  18:18

Yeah, look, I think that it’s it really, as you mentioned, it really does come down to a problem of volume, it really does come down to the fact that many of these folks are, are bombarded on a daily basis. And it also comes down to the fact that look, ultimately, it used to be the case, 308, or even 10 years ago, where there weren’t 5,000 or 10,000, alternative investment managers. That you weren’t spoilt for choice in the same way that you are now. That wasn’t the case that if you wanted to go and invest in 10, macro funds, there were 10 good macro funds out there. So you’re not only facing an information or a noise problem from the basis of so many people trying to contact you. You’re facing a noise problem from the sheer amount of choices that you have, that just didn’t exist, 5-10 years ago. And so what it means to be a thoughtful and differentiated investor in the alternatives world means something very different now to what it did 10 years ago, it’s much easier to distinguish yourself as a unique-minded investor that can build a portfolio of funds that maybe not everybody is investing in than it was before. But by the same token, it’s much easier to invest in funds where there potentially there’s some career risk associated with doing so. And so I just think you have to be mighty mindful and cognizant of all of that, as you build a holistic approach to reaching out to getting in front of and ultimately building long-term relationships with institutional investors.

Chris Gale  20:03

So then it sounds like understanding the individual and then going back to the earlier point about the data, having the information available so that you can be responsive to those individuals, as you get into the details.

James Rulli  20:24

Yeah, it comes down to as well having the information available, but also doing the work, right? There’s nothing worse than hopping on the phone with somebody for a catch-up and to exchange ideas, but all you’re doing is taking all of their ideas, right? So you want it to be a bipartisan relationship with the folks that you interact with, you want to come to the table with something. So keeping on top of your own research, keeping on top of your own ideas, keeping on top of how certain asset classes are performing versus other asset classes just trying to be a purveyor of insight is something that I think is important, and certainly that we focus on a great deal at Old City.

Chris Gale  21:03

So, if I can come back to you in terms of the data and the insights, there may be a proliferation of ways to identify people to reach out to. But what we haven’t talked about is that there appears to be a finite and shrinking number of accountants or young people my daughter’s age, who are interested in getting an accounting degree. Can we come back to the middle and the back office that’s working to enable what James is talking about? Is there a collision between fewer people trained in accounting and a lot of people who think that they can reach out to institutional investors that push James into continuing to sharpen his game?

Paul Filanowski  21:55

Yeah, we’re definitely seeing a shortage. We’re hearing about it, reading about it. I think the Wall Street Journal just had an article about the shortage of accountants. And definitely, we have to differentiate ourselves as well and try to figure out how we’re going to cope with that. Luckily, we’ve got experience here. Our two co-founders Mike Trinkaus and Celeste Barone have the background of experienced portfolio advisors. Mike’s got that. We’ve got a deep bench of accountants, which has been great. But obviously, we’ve got a plan for that. So we’ve had to have an office now in Syracuse, New York. So we try to, as you said, we’re really to differentiate ourselves and how we’re going to deal with this. So it’s definitely where we haven’t seen it yet. We’re hearing about it a lot. But definitely, it’s out there.

Chris Gale  22:40

That is one of the reasons why 4Pines looked at the technology side and the co-sourcing point.

Paul Filanowski  22:50

That’s part of it. I think another part is just this industry. It’s something that’s much needed from a technology standpoint. And that’s why we’ve got the former CTO of IBM, a lot of the things we do in this industry on a repeatable call capital, distribution, stuff like that. So we’re trying to work around that. So a lot of efficiencies are in place to make it easier. So when James calls us or calls the client or his firm asking the back office for data, it’s easily at his disposal.

Chris Gale  23:16

Excellent. I’m watching the clock. I have a few questions that came in that I want to put in front of you two gentlemen. James, the first one is, do you use any particular tools or software to keep track of these personal elements and institutional investors? Stories and background?

James Rulli  23:46

If you asked one of my colleagues, they’d probably give you a much greater answer than I just because of my inherent lack of organization. But yes, I do. I do use and we as an organization use HubSpot as an example. That’s, that’s our day-in-day-out bread and butter. And then we also have document management systems that we use so that we can consistently have at our fingertips, the best collateral and the most up-to-date information with regards to the funds. I’ve tinkered and toyed with all of the different email plugins, and whatever. To me, there’s a little bit of I just feel a little bit of an ick factor associated with that and not saying that it’s not effective for other people. But me personally, I’m a little bit more old school and my approach. Sorry, that’s probably not the answer that you were looking for.

Chris Gale  24:31

Is there anything that you would say, James or Paul, about fund of funds? They’re interesting because they’re both on the LP and the GP side. Anything unique that you’d call out there?

James Rulli  24:58

I’m happy to start, Paul. I would just say that if you look at the evolution of funds of funds through time they really started. Because a vast amount of capital that was relevant for alternative investments, did not have teams necessarily, that were set up to be able to underwrite a portfolio of set investments. Now, that’s changed a lot over time, where now you have the majority of the E and F cohort, who all have sophisticated investment teams that have been doing this for many years. The same goes for pension funds. That’s one of the reasons why a lot of capital fled the space as people started to think to themselves, “Why are we paying two layers of fees to access managers that we can ultimately underwrite and construct portfolios of ourselves?” The second thing that led to a dearth of capital amongst the fund money amongst the funder fund cohort was the rise of the multi-strats. Then being able to deliver uncorrelated instruments, interesting alphas, which sucked up a lot of the capital from the space. Now, having said that I do think that some parts of the market are seeing a resurgence and a need to exist for some of these funds of funds. Obviously, they’re different in respect that, unlike typical LPs in fund of funds, they have their LPs to serve. And so they go through many of the same operational complexities and people complexities that come with a typical fund manager and having a service to your client base and having your client base be able to redeem on a basis that is not commensurate to your vision of how long you think your business should run.

When you have somebody who is your capital provider and the provider of your blood as a business that can say, on a quarterly or annual basis, I’m going to take that blood away from you – but you had anticipated living for more than 10 years – that can pose some tough challenges. But I do think fund of funds now serve a purpose in quite specific niches, I think there are hard-to-access asset classes such as micro small-cap investing, where having access to a consummate sector specialist professional, who knows how to underwrite specific funds, who knows how to gain access to capacity in capacity constrained funds, and ultimately construct portfolios that are well risk manage they do serve a purpose. And then also, I think that the majority of the fund and fund universe now is a proxy for low-beta alternative investments. So the majority of true funded funds that you’ll see that are not safe to specialists, they’re typically trying to offer a beta that’s less than two, and then a diversified alternative investment exposure to their ultimate investors. So you won’t see them too often traffic in the world of long-biased equity fund managers for example.

Paul Filanowski  27:58

We’re certainly seeing, especially in fund of funds, just centralizing the data, there are so many data databases that these firms have that they’re looking at, for us for help and expertise, trying to centralize the data, being able to report off of it, having it easy, at their disposal, at their fingertips.

Chris Gale  28:17

Perfect. Great. Well, we just hit the half-hour. So thank you very much, to everybody who joined us. Thank you, Paul. Hope you get some rest. And then James. Have a good evening, London. Thanks for joining us, everybody. Thank you.