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We’ve barely made it past January and we’re already seeing incredible work happening in the Faith Driven Investing Movement around the world and across various asset classes. From the conference streamed in over 100 major cities to small group meetings and an intimate gathering of Fund Managers, God is moving through Faith Driven Investors who are taking on this charge to build, give, and invest for God’s glory. 

So in today’s episode of the Faith Driven Investor Podcast, we’re going to hear Justin Forman and Henry Kaestner will share about the current state of Faith Driven Investing and show how you can get off the sidelines and get in the game, to be part of this exciting work. 

They mention a handful of videos and resources that we’ll link below

Dear Investor Video

Wichterman Story

Potomac Angel

Learn more about Groups

Episode Transcript

Joey Honescko We’ve barely made it past January, and we’re already seeing incredible work happening in the faith driven investing movement around the world and across various asset classes. From the conference streamed in over 100 major cities to small group meetings and an intimate gathering of fund managers. God is moving through faith driven investors who are taking on this charge to build, give and invest for God’s glory. So in today’s episode of the Faith Driven Investor podcast, we’re going to talk about the current state of faith driven investing and show how you can get off the sidelines and into the game to be part of this exciting work. Let’s get into it.

Rusty Hey everyone! All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies of securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Joey Honescko Welcome back, everyone to the Faith Driven Investor podcast. My name is Joey Honescko, and I’m filling in for our usual host, John Coleman and Luke Roush today. On a regular time, I’m getting to work behind the scenes as a producer of the show, but today I get to come out and chat with our two guest today, co-founders of faith driven entrepreneur and faith driven investor Justin Foreman and Henry Kissinger. Gentlemen, how are you doing today?

Henry Kaestner Well thank you. It’s great to be with you guys.

Justin Forman Awesome. It’s it’s an honor. It’s great to have you back. I mean, you’re you’re traveling a lot there for a bit.

Henry Kaestner I was traveling a lot. And it is a beautiful thing. More travel than normal. But, you know, we changed the way that we do the feature of an investor conference this year. In the past, of course, we’ve had this feature of an investor live, and we’ve had thousands of people around the world dial in same time. And there’s something really special about being a part of the programing and guest there talking. And just everybody’s experiencing at the exact same moment. And yet, of course, is the movement is getting more global. That gets to be pretty difficult with time zones. And so then we went ahead and we started doing it. So it’d be the same time, you know, say 8:00 in whatever region were in. But most recently we did something that allowed us did have a really neat barnstorming trip through Asia, and that is that engaged host and long term advocates for feature of an investor got in and said, you know, we’d like to host a watch party and cash would be great if some of the folks that are featured in the conference might actually be there for it. So that gave us an opportunity, as we’ve tried to be more and more flexible with that, to be in Jakarta on Tuesday and Kuala Lumpur on Thursday, Singapore was on Wednesday and Manila Friday, Hong Kong on Saturday. So it’s awesome. And what was so encouraging for me is that, you know, ours is a movement that’s powered by 3500 volunteers. And most of them, to be clear on the feature of an entrepreneur side, but a growing number on the feature of an investor side. And they’re just leaning into the fact that, you know, we’ve got space in a church or in my business conference room, and I can invite 15 or 20 folks and let’s get around the table and let’s watch it. So we’ve had watch parties. I think it’s small with maybe 5 or 6 and as big as, I guess, maybe 120 or so getting together and community fellowship. And I get a chance to experience that and eat some phenomenal food. But there’s just something really special about experiencing a movement of God in different cities and realizing how universal God’s love is. Anytime you get to be with God’s image bearers, they come from different cultures. That’s a special thing. And just, is really encouraging.

Justin Forman Yeah, it’s so fun to see it. It’s a local movement, but connected with that shared DNA. But, you know, you’re talking about watch parties of all sizes. It’s fun to see some of the yeah, ten, 20, 30 people in a smaller watch party. But you also had some hosts that had some epic setups. I mean, there were some screens there that, like, belonged in the basketball. Oh yeah. I mean, you had some great setups here.

Henry Kaestner The technology in Singapore was amazing. We had a, I don’t know, a 70 foot wide screen. It was unbelievable. If you sat on the far left of it, just the way it worked, whoever was on the video looked much bigger. And so it’s funny, I was sitting on the left hand side and as I was doing that co-host segment with Luke, it made me look like a giant. It made him look like a little puny guy, which I thought was very, very funny. I took a bunch of pictures of it I sent to Luke is Luke’s, of course, a former football player, and I’m very much not. So I enjoyed my couple of minutes of being physically bigger than Luke.

Joey Honescko Yeah, it’s cool too, because it’s not just in Asia. That’s where you got to go. But you know, we had dozens of folks meeting in Ukraine, was one of the big watch parties. We had, people all over Europe, Africa, in the US. So there were all these really cool things. One of the videos that stood out to a lot of people was this Dear investor, story. And, Justin, we’re going to play the clip here in a second, but I wanted to set you up a little bit because you were kind of thinking about the value of this clip. Talk a little bit about just the vision behind it, and then we’ll play it and talk about it a little bit.

Justin Forman Yeah. It’s a gift to be able to work with such a creative team. And as we’re thinking about some of these pieces with a Dear Entrepreneur video that we did at the Feature an Entrepreneur conference this year, we felt like we wanted to present the issue from a bunch of different perspectives. And so in that piece, we were trying to speak to this wound that a lot of entrepreneurs carry, this feeling like there’s a disconnect in the church. And so when it came to investing, we came to this piece we’re trying to wrestle through, I think really two things. One, like, how do we present this thing that God’s calling us into, not as it got to, but as it get through. And I think internally we’ve talked about like, how do we marry that passion and boldness that we. A friend like David Platt has in his teaching to this contagious joy of like, Nicky Gumbel. And so the people see it’s not like out of compulsion, but it’s this upside down journey, an adventure that’s fun and exciting. It’s living on the edge. And so we endeavor to try to create a piece that did that. But then the second thing that I think that was so much fun was really showing what Henry’s remarking on us is the global nature of the movement, that this is not one ministry, this is not one organization, one fund manager, one pastor, one anything. It is a collective thing. And the snippets of these pieces from voices of leaders in the movement from Africa to Asia to the US, in all different asset classes and generosity in investing and young and old. It was just fun to really kind of pull together a piece that I think is kind of like an anthem cry of saying, okay, what is this really all about? So yeah, it was a lot of fun. We’re so grateful for so many friends that contributed to the piece, and it’s been really encouraging to see how it turned out.

Joey Honescko Yeah, the video is definitely worth watching. It adds a lot with the visuals, but here we’re just going to play. It’s about three minutes. We’re going to play the audio clip and we’ll jump back in after that. It’s time we had.

Video Transcript An honest conversation about wealth. Money has power, and Christ followers are just as enticed by what it offers. We’ve been trained to think that comfort comes from collecting and consuming. We fill storehouses with security and give just enough away to feel good while staying safe. We might check boxes of generosity, but our desires are suddenly focused on prestige, recognition, stability. We don’t have to settle for a casual, comfortable Christian spin on the world’s definition of success. We don’t have to try to balance God and money. Jesus makes it clear that we cannot. We can only serve one master, not two or even one and a half. Money beckons us with promises of power, but then it holds his power over us, makes us operate from scarcity, not abundance. As if God never fed thousands with a willing kids lunchbox, the boy gave up all his power. Five loaves, two fish, 100%, not ten, not 20, or even 90. And it wasn’t about. The tools he held, it was about how he held them, saying, Lord, use what power I have for your good and your glory, not mine. God has given you a lunch box to. He’s equipped you with capital, influence, leadership. And he’s inviting you into an incredible journey where you partner with and see lives changed and communities restored. But it starts with surrender. It’s his plans for your investment, not yours. It’s his reputation that drives you, not yours. It’s his mission that consumes you. Now yours. See, there’s a growing movement of faith driven investors deploying capital for God’s kingdom. And you can be a part of it. As individual investors, fund managers, advisors, ministry leaders. We have different roles. Yet our calling is very similar to glorify God in all that we do. God doesn’t want to guilt you into anything. He wants to invite you into a wildly different way of seeing everything. He wants to bring you on an adventure into an upside down world where you find joy through surrender, where you receive, when you give, and where abundant life comes down from weighing your life down. Every investment has an impact. What will yours be? We want to see God’s will done in every corner of the earth, from every tribe and nation and time under his power and for his glory. Amen, Amen, Amen.

Joey Honescko I think one thing that stands out when I hear that video, and I’ve heard you guys both talk about this a lot, and it’s worth mentioning, is this idea of joy through surrender that this isn’t a trading down or a sacrifice, but this is a trading up that comes from living out the way that God has called us to. So I’d want to give you guys a second just to kind of riff on that particular topic. And then I’d love to hear what kind of stands out in the particular lines that are meaningful to y’all as well.

Henry Kaestner Well, I think there are a bunch of things that are at play here, and I think that one is absolutely a joy through surrender. But I think that it works best when we embrace this theological concept that God owns at all. You’d think that would be very, very bad news for the person who is. Up until now, I thought that they owned 90% of everything and got on 10%. Any day in which you lose 90%. You know, that would be a bad day, you’d think. And yet, the counter cultural reality of the way that God designed the world in us to be in relationship with him is that as we do surrender, we get this joy and we give up this monochromatic life that’s conformed to the pattern of world. And we walk in this technicolor, beautiful life of living with God in and as his steward, rather than the burden of owning and all the things that money can do as the worries of the world and the deceitfulness of riches kind of crops us. When we change that, it is something that’s really powerful, and yet that is amplified when we do it together in community. See, wealth isolates, and that’s a challenge. And it’s maybe the way that Satan would have it. Wealth isolates us. And as people have more and more wealth to steward above and beyond that which they might even need in this lifetime. But definitely in the course of this year, people try to hold themselves out a little bit because they’re concerned that people are asking them for money, and most people do. When we’ve all done that, we’ve all been at different stages in our life. We’ve seen people that have more wealth or power, and so we are attracted to them and we want to we want to invite them into what we’re doing or ask something of them. And so while it tends to isolate, I think one of the most powerful parts of what happens is FDI watch parties is that you get these two things happening together. One is the joy through surrender and the joy and real, with a real emphasis on the joy. And then doing that in community and experiencing that joy together in a non prescriptive, presumptuous way. It’s not like, oh, well, if you’re not investing in this fun, whether you’re not doing this well enough. No, it just is. What is God telling each of us? How do we share best practices? How do we do this in community? And that becomes something really beautiful.

Justin Forman You know, I think one of the things that strikes me about it is what Henry is talking about here, Joy, is I think we’ve gone as far as obligation can take us. I think in the church that this conversation of obligation or obedience or you should versus you get to like, I think that we have to pivot because I think we’ve gone as far as obligation has taken us.

Henry Kaestner I think that’s a good word, you know, because we try to be faithful and obedient. Right? But there’s something on the other side. But what you’re saying, I think, is that we’ve kind of maxed out the whole dialog around money and power and possessions and all those things has been about faithfulness and obedience. And there’s great scripture on that right side of self take up our cross, etc. and yes, we need to be faithful and obedient. And yet so much of the gospel message, of course, is on this other end of the spectrum, right?

Justin Forman Oh, absolutely. And I think it’s you have to get to the other side. And it’s hard to like, even talk about the joy until you get to the other side and taste that joy. And I think that like, it’s what you’re hitting on is, is when you do it in community, people help you get over that gap, that chasm, whatever it is. And once you get into it, it’s I mean, your analogy of Technicolor, some of our listeners might be a little bit too young for that. It might be 720 versus 4K, whatever the analogy is. But the point is still the same. It’s like once you see it in Technicolor, once you see something in 4K, you just can’t go back. And it’s that joy element of it that, you know, it’s like we’ve made it so complex sometimes that it’s so simple. And I think that at times, like when you said that aspect of like, there’s a selfishness in this, in some ways it’s like, I do this because I want to feel God’s pleasure and then experiences joy. But I think it speaks to Scripture where it says, actually, it’s not selfish. It’s like when your prayers are aligned with his heart. That’s the beautiful thing. It’s not that you’re pulling in a different direction. It’s it. You’re praying for joy. You’re wanting joy. And those are the prayers God wants to answer. You don’t have struck by that because. So this week we’re filming a project for faith through an entrepreneur, an investor about prayer, and a friend, Derwin Gray, pastor in North Carolina, spoke to this concept and he let this simple statement said. He said, If God answered all of your prayers, would your life be more holy if he gave you everything that you prayed for? Would it look more like his kingdom, or would it look more like an Amazon shopping list? Would it look like that? It really stepped into what God wants, and I think that’s what you’re hitting on is, is like when we’re pursuing joy, when we’re pursuing that, like God going to step into those moments. And yeah, there’s just something about joy. It’s going to be just, I think, a key piece of this movement for the years to come.

Henry Kaestner I’ve got to answer all my prayers. The Ravens are doing the Super Bowl. I think that’s a great point. I’m so excited about that series coming out. It makes me think about Chip Ingram as a frequent contributor to all that we do. Effort driven. Who talks about the four prayers that God answers being Ephesians one and two. Philippians one, Colossians one two about really praying in a way that is in line with God’s heart, with a hopeful expectancy, that in doing so we will experience his joy. Because that’s the way the God designed us. And yet so much of what we do is it tend to be apart from that. And so it’s this balance. Just to recap, for those of you who are following along, it’s just faithfulness, obedience on one side. Right. There’s this. You know, we hear about the tithe and there are different things that we need to be thoughtful about. And they’re very good points in Scripture. And yet this movement is about taking that that’s already in existence, of course, and then bringing over the sense of joy and gratitude on the other side. So the gratitude coming from the fact that we’ve been given this gift of life and we have it now and forever and just opportunity to participate in the work that God is doing in building the world. So we’re grateful for the fact that we get to do that. And then the joy that comes with bringing that all together and doing it in community and seeing things that are just infinitely more fulfilling than all the things we otherwise would have wanted on our Amazon list. And yet, I’m so grateful we’re doing this this morning, because otherwise, every day, if I don’t talk about this or think about this, or do this in communion, maybe not every day, but on a regular basis, I will drift back into being conformed to the pattern of the world and the deceitfulness of riches. And maybe that’s because of the power of mammon.

Justin Forman Yeah. A powerful thought there. You know, one of the other things that maybe change in conversation a little bit, Henry. I’d love to hear your thoughts on just these moments, these events, these conferences. It’s a fun, like, kind of measure up moment where you can see where the movement has grown. The steps that have been taken. We’re such doers as entrepreneurs. Investors were always thinking about what’s next, what’s next, what’s next. And we don’t have those moments of like pause and reflect and say, man, how far things have come. How much God has been up to. And I don’t know about you, but I was just struck by so many of them. I think two things that stood out to me was one was just the momentum in the conversation with Dallas Jenkins that John Coleman had, and just about the wonder projects and some of the big things happening. And there have been recent news here in the last couple of weeks about the House of David series. That’s going to be a part of that Amazon Prime getting behind it. You just can sense this momentum of conversation that’s happening there on that front and the faith driven investing community really rallying behind that. But I think the other thing that stood out to me was just Tim’s conversations about just the growth and the maturing that’s happened in this phase. I mean, I think some of the statistics that he said in that was that we’ve gone from, what was it, 22 products to 155 with 29 new products and funds, kind of launched in the last two years. And in then he started talking about that, I think mainly first from just a public markets perspective, but then he shifted it into just kind of the whole movement as a whole. And I mean, you’ve been in this I mean, even from the beginning, like, how does that conversation, when you hear Tim talk about the progress and the things that are happening, how does it impact you?

Henry Kaestner Well, I’m encouraged by. There are a bunch of different things to point to. I think that this year we had a feature of an investor conference for professionals and the venture capital private equity industry. So it’s last Friday, and we had 168 of them at the Rosewood Hotel in Menlo Park. And it was so cool to hear about how some of these fund managers are incorporating chaplaincy, or offering chaplaincy up to some of their portfolio companies, and starting to feel better about sharing their faith in a winsome way to their portfolio companies, and how increasingly faith driven entrepreneurs in emerging markets are getting access to capital that is aligned with their faith. So there’s some incremental things that are developments in pretty much every type of industry, real estate. Absolutely. But then, of course, private equity in venture capital now, and also on the public market side. So we have, you know, there’s a first ever ETF that’s investing in Christian CEOs, a publicly traded company. So companies that are publicly listed run by Christian CEOs. And there’s just great work that’s being done by Eventide as they continue to invest in a way that makes a world rejoice. I mean, there’s so many different great things that we hear about along the way. And yet when I hear of people coming away from these conferences, it tends not to be any one particular thing. It tends to be the sense of, wow, I found a community of people that are really wrestling with these things, and the benefit and the joy, and the thing I’m taking away from this was how I just feel much more alive in my faith in this community. And that happens on the watch parties, of course. And I happened at the conference we had at the Rosewood. But it happens with these faith driven investor groups we have. The biggest takeaway is like, I was in this group for six weeks, an hour a week. You know, we go through and learn about some of the things are going on. But I met people struggling with the same things I am. And, you know, can we make money doing this? If you’re talking about feature investing, is it mean that we need to just go ahead and just, you know, give up Alpha and in the name of Jesus or what does this even mean? Am I judged because I do this or that? And just being able to process all of these things together and finding new friends and a bunch of them decided to go to Africa together to find out what’s going on in Africa. So I two weeks from now, it’s a group of about a dozen that are part of Phaedra investor Group are going to go to Nairobi, Kigali and Lagos, Nigeria just like, hey, we’ve all been in this group together. Let’s go talk to some fund managers. Let’s find out if we can do this in a way that makes an impact. Let’s find out if we can actually find some fund managers that actually can provide some good return. And what does it even look like? But I think that in each case, the what’s really drawing them together is this kind of like it’s a I don’t know if this worship is the right word, but it’s this it’s this togetherness, is this community of people just like, hey, we’re all trying to figure out how to steward what God’s given us. Let’s do it together. And the joy that comes from that. I’m really looking forward to hearing with these folks, these 12 people learn when they come back.

Joey Honescko Yeah. What I’m excited about what you’re saying, Henry, is pulling all these different pieces together. We’ve talked about heart change kind of in this early stage with this Dear Investor video, this going from black and white to Technicolor existence. And then you’re talking about the role community plays in shaping that. And I think Tim’s content and some of the other things that we’ve seen here talking about the. Opportunities to really get in the game. And one of the coolest takeaways for me when I was watching the conference was seeing stories like the Germans or the Farrells of these people that actually stepped up and saw, hey, I can get in the game, I can do this. And one thing that I was thinking about, Henry, as you were talking, is in your early investing journey, how did community help you align your faith in your investing? I’ve heard you talk a lot about the way that community in general does that. I’d love to know, just kind of from your own experience, what that has looked like.

Henry Kaestner Well, everything I’ve ever done entrepreneurially it’s always been done with a partner. You know, the most recent example, of course, is Feature of Movements with my partner. Justin is on the line right now with us. And the case for me to answer your question is co-founding Sovereign Capital with Andre Mann and with Luke Roush. And Luke and I continue to talk like once a week as we just process what God is showing us as we steward our own personal capital. But then as Luke, as a fiduciary, and I’ve moved on now I have a full time in the ministry. But just as he and John Coleman are fiduciaries of other people’s money. But I still get involved because we’re looking at these trends about what’s going on in real estate investing and what’s going on in public markets, and how we’re thinking about voting proxies, and how do we have a winsome witness to our faith as we steward capital? So for me, it was when you talk about joining a community started off really just deep partnership. And Luke and I committed. I can never done this by myself for that matter. I could never have done bandwidth without David. I could never have done Chapel of Brokers without Tom hunt. I think I know that God has designed us to be in partnership. Jesus, you know, sent two grown men to go get a donkey. So there’s this opportunity to do things together because it’s otherwise it’s just super hard, super hard for me to do anything by myself. Thank goodness he sent me. Kimberly. I don’t know what I’d be if I didn’t have Justin as my partner of Faith driven, and Kimberly is my partner at home. I don’t know, I probably would be eating wild honey dressed in camel’s hair.

Justin Forman You know, Henry, one of the things that strikes me about that is it’s like, yeah, you’re just talking. You’ve talked about community beginning. Then you broke it down to like, from 0 to 1. You broke it down to that idea of like, what does it take to find that person, that partner, that person for you and your family, that person in different ventures and things. I think that’s one of the things, Joy, that when I look at the stories about the women. And then when I look the one that we did about atomic Angel group. Like, there’s such humility in that. And I just want to just, like affirm, encourage, celebrate that. Like there are people when I think about doing DNA and I think about the humility of that story in like, how Dana just breaks it down to say, hey, we stepped in this major wealth event and it scared me and it paralyzed her. And she tells the story of like every decision, like, do I buy, you know, is it window treatments? Like, is it this car, is it this trip, is it this whatever. And she talks about that. But then she talks about the point where they found another couple. I think it’s April Chapman and her husband that then started this conversation where she felt safe and she felt they both felt safe having these conversations about things that are otherwise off the table in church. And I’m just so grateful for that story because it’s fun to see the progression of the movement, or in some ways, the collective words of the movement go out, and then they come back, and they come back in a form that’s so much richer than the way that they went out. And it’s because of that humility, it’s because of that authenticity. It’s because of that vulnerability that we’re able to say, oh, that’s what this looks like to get in a game that’s more accessible than I ever thought it was, that’s more joyful than I ever thought it might be able to be. And so I’m just so grateful for Bill and Dana in that story. And of course, then the Potomac in January, maybe we’ll get more into that. But it is just fun to see leaders of the movement, the humble heroes, taking this movement deeper by their authenticity, in their vulnerability.

Henry Kaestner I think through the grace of God and great content team, I don’t know, we’ve done 120 stories or something crazy. I mean, a lot. The team has been prolific, by the way. You can find most of our videos on the faith driven, itinerant feature of an investor video library sites, and you can get a sense for this. And yet and maybe it’s just because it’s a recency bias. I think my favorite story that we’ve ever done, definitely a feature of an investor is Bill and Dana Westerman, because it’s so raw and it’s so real, and it talks about being in partnership as a couple. And there’s a line in there. She’s like, and I didn’t want to be bullied, right. Because I see that in my relationship with Kimberly, because we’ve at different times, we’ve been at different places along our generosity, journey and generosity can sometimes get conflated with fate driven investing. And part of that’s good, part of that’s bad. The generosity part is helpful because that’s what taught Kimberly and I both that God owns at all, and that that’s not bad news and giving is a part of that. But then also is investing and so is our lives in our time. But I know that different times I’ve been ahead of Kimberly on the generosity journey, and there have been times when she’s been ahead of me. Where is it point in time where we had a second home that we really loved, and yet we really were excited about making a gift to ministry called Hope International Microfinance. And it was Kimberly that suggested that we sell the house. So it doesn’t mean that I’m always even though this is kind of what my vocation is, doesn’t mean that I’m always the one in lead. In some cases, she’s the one in lead. I was a little bit more excited about holding on to that than Kimberly was, but the investing side is something that is just altogether it’s different and it’s beautiful in there, can be really productive and participate in seeing other things grow fruit on other people’s trees. And that happens too, with giving. But this concept of innovation and taking what’s wrong in the world and using for those of us who come at this with an entrepreneurial background, just the creative process in coming up with an innovation that fixes what’s wrong in the world, either to return us to the Garden of Eden where things were really, really perfect or to bring about the New Jerusalem is something that’s just really powerful. And you get this tension and you get to see the sense at one point in time, Dana was behind Bill in this journey, but then she kind of goes out in front and just is able to just really get the sense of this, the beauty of it all. So it’s just such a beautiful story. I shouldn’t wax so long on that one. But I think that as people go through the series and see that Bill and Dana worked in story, they’ll identify with it. They’ll see the fact that’s so important that we do this together, and they’ll get a sense for just the challenges, but also the opportunities as well.

Justin Forman You know, I think it’s beautiful to look at the power of the stories. It’s beautiful to look at so many partners today would be remiss to not mention so many great ministries and partners and friends in the space. From generous, giving and generous, you have a national Christian foundation and so many the hosts of these watch parties. Nothing. I tend to think what they set in motion by their faithfulness and obedience and catalyzing movement in their city. And so encouraging to see that. I think one of the things that I would also before we kind of maybe move to the kind of some of the next ideas, is like, where were we challenged from this event and where were the things that we felt like maybe we got feedback on and said, hey, where do we go? Further still? And I was struck by one comment that somebody made about just saying, okay, there’s. Some stories and some great things that talked about gospel proclamation and talked about sharing the why, what we do. And I think collectively as a movement and as a ministry, there’s a challenge for us to say, how do we make sure that we don’t just rap, either great results or great impact or social side of things, but we don’t miss the opportunity to share the why that drives us. The story, the words weaving the gospel threads into this conversation. It’s tough at times. It’s tough as in faith to an entrepreneur. And sometimes it’s even, I think, more difficult for the patron investor. But I think that’s a challenge into growth area for us as we tell stories and content. But I think it’s a growth area also for the movement, for us to say, what does it look like to make sure that we don’t work so hard to get to that place and then miss the opportunity to tell that? Why?

Henry Kaestner Yeah, I’m trying to think about you. Get me going with what kind of feedback did I get about the conference and what’s next. And the thing that is really our greatest challenge, I think, in the movement over the course of the next several years is developing the third leg of the stool. So many people want to get in the game, and yet for good reason. We’re working with financial advisors who are trusted, fiduciary, who are working with us to help us to understand our need for income or our tolerance for risk, or the different places where we feel called. And that’s a really valuable part of the ministry. There’s some number of people come out of the faith driven investor group who then go ahead and are able to get right in the game, and they see a list of 35 different fund families that are on the feature of an entrepreneur marketplace. And they’re like, okay, I want to go ahead and pick some that are in real estate, some that are in emerging markets, and some of them are private equity, venture capital. And I’m used to making my own investment decisions. But most of the way that people steward wealth is with working with an advisor, and for good reason. That’s a really important role in society and the economy. And I’ve been encouraged by and this is a difference, I think, between this year’s watch party and conference and the year before is that more financial advisors were hosting and involved in watch parties and are starting to develop those arrows in the quiver and just acknowledge the fact that that’s difficult to do. So many of the ones that are working with wealthy people have been doing this for 25 or 30 years. So for them to change and go ahead and onboard new fund managers and to do the discovery and diligence behind thinking about, gosh, now I’ve got to go ahead and onboard another 5 or 6 different fund managers because I want to have something in real estate. I want to have more arrows in the quiver, so to speak. That’s a lot of work. And that’s the number one thing. I think that the movement needs are more advisors to come in and say, you know what? We see that there’s an opportunity to start an investment capital way that builds God’s kingdom. We’re going to go ahead and do the work to onboard some of these new funds, understand what’s right for our clients, and then we’re going to commit a part of our practice to helping people to understand not just how they can make more money, just to give it away, but how in the process of investing the capital that they need for retirement or for college education or whatever might participate in work, that guy’s burning Kingdom right now. And yeah, some of it could be negative screen stuff, which is, you know, just making sure we’re not investing in pornography and gambling and some of the other things that some of the big name companies are involved in. But more importantly, I think what positive screens, what investments might we make that would allow for flourishing both on the private equity and venture capital side and real estate, but also on the public markets? That’s the key part. That’s what is not completely there. Hopefully there are some listeners to this podcast who like, you know what, I get it. I see that there’s going to be market demand. More and more people are coming out of faith driven investor groups who want to get in the game, and I want to help them be that river guide.

Joey Honescko Yeah. As we come to a close here, I’m thinking we touched on heart change. We’ve touched on the opportunities in the movement. Now we’re talking about some of the barriers of the movement. I would love to end this here thinking about what are the hopes for the movement in 2024?

Justin Forman You know, I mean, that could go so many different ways. And it’s such a big, broad movement that it’s going to be hard to even scratch the surface of the whole thing. But if I were to reframe that and say, what is one of the things you’re most excited about in this season? And to build on some of the things that Henry mentioned when you talked about the partnership and recognizing that this is a decision with him and Kimberly. And then when I think about like what Henry is talking about with the River guides, I think one of the things that we just continue to be reminded of is that this journey to faith driven investing, it’s not a sprint, it’s a marathon. It’s going to take a lot of things, and it’s going to take several key partners. It’s going to be making sure that you’re reunited at home and that you’re connected, united, something different, but something similar with your advisor. And I think that one of the fun things that I’m really looking forward to is that we have this new project releasing, and Brooke and Luke Roush can talk through their journey. And so that they it’s broken and kind of talk through it and just talk through their journey of like being in this space, but then also going there as a family themselves. And I think that that’s going to be just an incredible tool. Do something that couples can go through with other couples individually. But I think it’s just going to be a key step in the movement to uniting a home, uniting a family and saying, hey, this might take some time from us to get where we are from, where we are to where we want to go, where that’s calling us to go. But it’s such a needed one. Like if you want to go nowhere, try and go somewhere alone. If you want to go somewhere far, you know, go together with your spouse. And I think that that season is it’s a fun thing that we’re recognizing that like, these are needed conversations that have to happen. And it’s one we’re right on the edge of.

Henry Kaestner Yeah. And a further that, my hope is that husbands and wives get together on their knees and just ask God how he would have them steward their lives, but yes, their investment capital in their financial resources. That’s the big win. That’s the thing that can happen right now. I remember as we were getting started with FDI, maybe 6 or 7 years ago, as were coming up the idea, I think the first conference might have been five years ago, but a friend of mine named Ben Shelf was looking through the white paper we’re putting together and sort of kind of our plan of action, and one in which we talked about one of the big challenges was that there wasn’t enough supply. Now, five years on, there’s a lot of supply. There’s a lot of fund managers that committed themselves to their faith and written spiritual migration plans and big multibillion dollar funds and new funds and all that. So supply is not a problem. But Ben suggested there was supply wasn’t a problem before either. He said. It’s not a problem of supply and demand. It’s a problem of us just not asking God intently about how he would have a store to camp on. The example that he had, and not a bragging way, was that they had gotten a big windfall from selling a company that he owned, and so he got down on their knees and they said, God, we have no idea how to invest this capital. How much of it should we give? How much of it should we invest? But we know it’s all yours. So we ask that you guide us in the next week. Somebody that he knew who’s on the board of, I think it was InterVarsity or just a larger organization who had had a good presence in the Bay area, was getting evicted from their building that they’re in. So they went ahead and they bought a building to house this ministry. And it was a financial you know, the ministry had been paying rent before. And so they continue to pay rent. And so Ben and his wife were able to make a fixed income type of return in a way that was a great blessing to the ministry. And God answered that prayer. And that’s the big win. The big win is just asking God lead us with hopeful expectancy that he will. But I think that more than anything else, God just wants us to be in relationship with him. And too often I haven’t asked God about how he would have me make any one of a number of decisions, but way too often it’s financial. And when it’s financial. In the past it had been about giving or how much to give, but he did not until recently ever been about how would you have me invest? I just made the assumption that God wanted me to invest and make as much money as possible, and I just I never asked him. And that’s the big win for 2024, is that more and more couples will get down on their knees and ask, God, how would you have a steward of capital? And there are a lot of listeners to this, to be clear, that are single. It’s just that we want to make sure that for those who are married, they don’t go, this, this is not a single player sport unless you’re single and great. Being with you guys always is.

Joey Honescko Always a pleasure. Thank you Henry. Thank you. Justin. Justin, you said that phrase scratching the surface. And I think that’s what this episode did. We’re going to dive into a lot of these topics in more detail over the coming weeks. So keep up with the show. Check out the website for those videos and those resources that we’re talking about. And, we’ll see you in two weeks. The next show.

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The Faith Driven Investing Movement always starts with heart change, but it shouldn’t end there. Christians are called to take action. We put our hands and feet in motion in response to God’s transformation in our lives.

A lot of Faith Driven Investors believe that, but many of us struggle with a practical question.

Where do we start?

This is not a prescriptive or presumptuous movement, but in this podcast episode, we want to hone in on some of the themes and ideas people have been talking about this year and give you some practical and actionable takeaways.
John Coleman will join Richard Cunningham for an in depth look at how investors around the world can start to get in the game.

Episode Transcript

Joseph Honescko: The faith driven investing movement always starts with heart change, but it shouldn’t ever end there. Christians are called to take action. We put our hands and feet in motion and response to God’s transformative work in our lives. A lot of faith driven investors believe that. But many of us still struggle with the practical question where do we start? We never want this podcast to be hyper prescriptive. But in this conversation, we do want to hone in on some of the themes and ideas. Leaders around the movement have been talking about at various gatherings this year, and we want to give some practical, actionable takeaways. John Coleman will join Richard Cunningham for an in-depth look at how investors around the world can start to get in the game. You’re listening to the Faith Driven Investor podcast. Let’s dive in.

Rusty Rueff: Hey everyone. All opinions expressed on this podcast, including the team and guests, are solely their opinions. Hosted guests may maintain positions in the companies and securities discussed. And this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard Cunningham: Well, hello everyone, and welcome to the Faith Driven Investor podcast. We are grateful you are tuning in from wherever you get your podcasts. Glad you’re here. My name is Richard Cunningham. I reside in Austin, Texas, and I have the great privilege and joy of serving on the Faith Driven Investor staff, and I am actually going to be your podcast host for the next season ahead of the FDI podcast. And if you’re wondering, whoa, whoa, whoa, where are my normal guys, my mainstays John Coleman, Luke Roush, Henry Kastner? Not to worry, there’s still very much going to be involved in the life and the future of the FDI podcast. We’re just shifting some things around here internally so we can actually hear more from them. I’ll kind of start manning the host responsibilities, and we’re going to move folks like John Luke Henry into that color commentary, expert insight and kind of guidance role as they have just so many years of experience across this FDI space. And so we’ve got John Coleman here with us today. And John thrilled about this new season of the FDI podcast. And welcome. And I know you’ve been on the road a lot. Everything going well?

John Coleman: Well, Richard, I’m doing pretty well. Although I would say FDI listeners should know that despite Richard’s kind introduction and thoughtful introduction, this is a coup. It’s actually quite tense on the podcast right now. I only wish you knew. Now, Richard, I’m really excited for this season. Obviously, I’ve known Richard for quite some time, and, it’s just such a privilege to get to work with him in this new season of the FDI podcast. And I can’t wait to dig into the topics that we both care about. Invite some great guests on. So I’m very much looking forward to the road ahead.

Richard Cunningham: Absolutely, man. So we’ll call this episode one phase one of the coup. That is our play here.

John Coleman: The revolution.

Richard Cunningham: That’s revolution. So so yeah, recording this at the end of February 2024. And John, today we’re hitting on man, it’s been a red hot start to the new year in the faith driven investor landscape. And specifically there’s been some seminal events that have taken place. So today specifically, I think we kind of want to hit on. Whereas Justin and Henry last week talked a lot about the heart posture themes that came out of each of those gatherings. Today, we want to pull out some of the threads in the themes, specifically from the FDI conference, kind of talk about some of the tactical, practical applications of them. It’s a John. We’re going to spend most of the time teeing up some topics for you. But before we start diving into the conference and some of those threads, just generally speaking, your thoughts on just all the momentum in the hot start we’re off to here in 2024?

John Coleman: Yeah, I’m really encouraged by, you know, I’ve only truly been a part of the faith driven investing community for three years now. I actually just had my three year anniversary at Sovereign’s [Capital] this week, and before that, I was kind of aware of some of the dynamics but not fully invested in those. And I would say there’s been almost a step change in the level of engagement, the quality of engagement, and the breadth of engagement around faith driven investing. You know, the FDI, conference, broadly speaking, was very broad. Tons of direct investors, very global, a lot of high net worth investors and institutions, a mix of asset managers, the FDI fund manager gathering for those not familiar is really about professional investors, fund managers. That was in Palo Alto hosted this year as Richard had a lot of venture capitalists, private equity folks, real estate folks. But this was a session for those who are every single day living and breathing the professional investing world from big firms like some of the mainstream firms that you would know, to specialist firms like ours that are in faith driven investing and in Kingdom advisors. You know, it’s kind of the Super Bowl of the faith driven financial advisor community. And it’s just always an encouragement. They had several thousand people this year. They have this massive exhibit hall. They’ve got these great mainstage speakers, and there you’ve got several thousand wealth managers, financial advisors coming together with asset managers like us with other third parties trying to think through. How do they get their clients in the game for faith driven investing, and how do they counsel their clients with biblical wisdom? Right? Which is also an important part of the advising thing. So I was deeply encouraged on all fronts, although, I would like to travel a little bit less. So if we could have fewer conferences over the next couple of months, that might be better.

Richard Cunningham: Yeah, we we certainly start the year off hot, to say the least. So let’s go specifically to the first of the gatherings we were talking about. The FDI conference kicked off with Luke Roush, your managing partner with you at Sovereign Capital, Henry Kaestner, also Sovereign Capital, talking about this idea of, hey, when you are done with today’s conference, hopefully you’d be able to see that faith driven investors are at work deploying capital in predominantly one of three ways for market rate return, for concessionary and maybe impact investing, as often has been referred to or deploying for philanthropic or just pure giving purposes. And so when you hear that, why was it so important that Henry kicked off the FDI conference kind of through that lens?

John Coleman: Well, I think especially given how much we talk about the values of faith driven investing, anytime you talk about values investing, it’s very important to clarify with those with whom you’re speaking, where you stand along that spectrum. Right, because you do want to be honest and transparent about the return and risk profile that you’re seeking alongside those values. And there’s a legitimate spectrum from pure philanthropy to pure high return investing, whatever asset class that is that you can what you just need to be transparent about where you are on that. I think we’re values based investors, whether Christians or advocates of ESG get into trouble, is when they claim to be investing with the values lens in a way that doesn’t dampen returns. But in fact, there is some structural reason why returns will be lower, and there’s no problem with that if people want to make that conscious trade off. But you got to be conscious of that trade off. And in fact, as professional investors, you then have to be thoughtful about what you can accomplish along each of those points in the spectrum, because I’m a big believer that the private sector can actually solve many of the problems in the world. I think that philanthropy is suited to certain types of problems, but not others. And so we’re constantly trying to think through how can we use market capital to solve the world’s greatest problems rather than philanthropy? But there remain things that have to be philanthropic, right? And it’s important to identify those and figure out how we fund those and put capital against them. And in fact, Jesus called us very directly to engage in those charities, right? For the poor, for the widow, for the orphan, and those those causes still hold true. There are another category of investments that we could get into, things like, charter school financing, for example, maybe low income housing financing and certain constructs that do have a return profile. But you’re making something of a conscious trade off on that profile in order to have the type of impact that you want to have for the risk return profile that you’re getting. And we firmly believe there are elements of the high return spectrum where you’re not at least seeking to trade off returns. You can never guarantee returns, obviously, but you’re seeking high returns alongside a deep integration of cultural values or redemptive mission, etc.. And so we always think as professional investors about where we stand on that spectrum and how we communicate that well to and investors. And I think anyone dealing in values, whether ESG or faith driven investing, really has to be thoughtful about that as well.

Richard Cunningham: John, you captured it really well. But I want to talk real quickly specifically about the story of Dana and Bill Westerman. And this is a situation where Dana’s father, about 12 years ago, left them an inheritance check, a meaningful inheritance check. That kind of rocked their world. And so, John, I think it’d be helpful if someone in your seat who interfaces often with LPs and investors of all sorts, when you see these kind of liquidity events or windfalls or moments like this across the faith driven investing ecosystem, what steps do people take initially? What pitfalls do you potentially see people fall into? Maybe contrast that a little bit with kind of some of what you see Dana and Bill do in their story?

John Coleman: Yeah, and Dana and Bill are such an inspiration. Right? They’ve been mainstays of the faith driven investing ecosystem. They’re one of those families who really put up risk capital to get into areas that innovate for faith driven investing. And so I personally just have a ton of respect for each of them. And I’m really grateful for the impact that they’re having. You know, it’s not uncommon that people come into large amounts of money. And one of the interesting things, Richard, is that when people suddenly come into big amounts of money, it’s often destructive, right? There are a ton of studies that show that lottery winners, after winning the lottery are more likely to go bankrupt, are more likely to suffer from various mental health challenges, are even more likely to take their own lives than those who haven’t won the lottery because they don’t have the habits, mindsets, values surrounding infrastructure to manage it appropriately. Becomes destructive for them. We see it all the time with things like professional athletes, right? A kid who’s never had financial resources comes into something. Or young person at 19 or 20 or 21 years old, they’re in a millions of dollars suddenly, and they just have no framework through which to manage that. There are people who try and take advantage of them all over, right? And they don’t have the infrastructure, other people, frameworks for investing that allow them to steward that well. I think, you know, if I offered some advice to fate driven investors, I think resonant with what Dana and Bill talked about. The first is to make sure right out of the gates that your heart posture is right with regards to these things. You know, we can talk about it further. The Bible is very clear that the love of money is the root of all kinds of evil, but money itself is just a tool. God actually bless the number of people in the Bible. Abraham was one of the richest people of his day, right? David and Solomon, were both extraordinarily wealthy, which actually led to the downfall of at least one of them over time. But that was a blessing as long as they used it for his purposes. And so really digging into what the Scripture says about the use of money and capital, thinking about the mindsets and values that turn that from a totem to a tool, they turn it from an idol to something that you use for kingdom purposes. That’s the first step, is to get that mental framework right, to really understand what you want to do there. The second is to be very practical about pausing. When you come into those resources and really thinking about what is the level of lifestyle that I need in order to live, and what is the level of lifestyle that I can live when I come into this money. And then secondly, you know, how am I going to steward those resources? I think Dana and Bill laid out a framework. For example, I believe it was 60-40 where they were going to do faith driven investing, where they think maybe I got that number wrong, but 60% of it in philanthropy with 40% of it, I believe, you know, some framework like that where you know exactly what you’re setting aside for philanthropy, what you’re investing for the future, and then within that investment and philanthropic pool, how are you going to determine the framework by which you’re going to distribute that capital, and who is going to be your partner in doing that? And that’s one reason I still think it’s incredibly important for most people to have a financial advisor, for example. Right. Someone who has total transparency to what you have, who can keep you accountable. And I think it’s important that person be values align like I have a financial advisor, even though I’m a professional investor, he knows what my will says. He knows what all is in my portfolio, he knows what our goals are, and he shares my Christian faith and my values. And so he’s equipped to step in and make sure that I’m living up to the standards that I established upfront, as well as offering me wise advice. And, you know, second person is speaking to that. And I think those elements are really important for anyone stewarding capital, but particularly if you come into that quickly.

Richard Cunningham: I mean, that’s really good. And I appreciate you bringing up the leg of the stool that is the outside counsel, the financial advisor, the outside wisdom. Appreciate your humility and sharing about your own. You also mentioned something when you said 6040 and you specifically spoke to faith driven investing versus philanthropy, but you say 6040 to start thinking asset allocation might be helpful to help people orient around this conversation of sometimes people think faith driven investing, they only think alternative markets. And there’s totally a lot of spiritual integration there. Other times they think, hey, it’s screening out sin stocks in the public markets, maybe talk about just for an investor out there listening in, asset allocation, a personal balance sheet and briefly kind of maybe orient people. Like how do you think about an asset allocation. It’s you know, it’s really hard to get to why if you don’t first know where you are at X. And I think that’s something you’re talking about is taking a moment, stopping, pausing and understanding. Hey, God, we want you to use these things. But we first need to kind of reflect on, hey, where are we currently?

John Coleman: Yeah. And you know, Tim McCreadie got into some of this later in the conference as well. So I’ll kind of blend some thoughts from the two of those I think. Yeah, yeah. There’s the basic topic of asset allocation. You said 6040, which is the classic stock bond portfolio that people talk about. Right. People used to recommend the average person should be 60% stocks, 40% bonds, etc.. The truth is that asset allocation is just a framework by which we think about how to put our money in different instruments stocks, bonds, money markets, bank account, cash depository institutions, alternative investments based on a few things. Our risk tolerance, right. Which is obviously quite important. How much risk can we take our timeline for investing? Am I 20 years old or am I 90 years old? How long can these assets stay put where they are and our liquidity needs at the very least, right? Which is how much capital do I need now? Which is why most people aren’t 100% in private equity, for example. Right. Which is quite illiquid. You know, I might need some cash now for daily living, for emergencies, for things like that, or to meet my liabilities over time. That’s the basic type of asset allocation. Usually work through that with a financial advisor or even if you’re an institution like I sit on a couple of endowment ICS and we constantly think about what is the asset allocation that matches our lives. Abilities so that we can make sure that we support the institutions those endowments are intended to support in a proper way. And we have consultants who help us think about that in a very rigorous, analytical and quantitative way. And that looks different for someone with $200,000 or $200 million. But each of us have to pick that. I think in the same way, we’ve all got to think about our asset allocation within faith driven investing to the types of points along that spectrum that you and I talked about at the beginning of this call. I think it’s really healthy to have giving goals, for example. So the tithe, that’s the most basic example of that in the Bible, which Dana and Bill talked about as well. But for many people with a lot of financial resources, you can actually go above that tithe, right? You can set aside a bigger pool of capital, or you could even have a goal that, you know, over time, you want to give away as much as you spent, right? And you set a number for that for your lifetime goal, saying, I’m going to give as much as I spent over the course of my life. So something like that where you deciding what your philanthropic capital is and then based on the capital that you actually need to support your lifestyle versus what’s in philanthropy, you’re choosing, where do I want to play on that spectrum of concessionary returns, of high returns? How comfortable am I taking high risk? You know, typically people with more capital are better able to take big risks, and that has tactical implications. And so you have to start thinking about based on your own profile, where are you going to play. I think that deciding that upfront and pushing yourself to think about impact, equivalent to the financial returns you want to get, is a really important part of that equation, though, because it’s very easy to default into just doing a me two portfolio what everyone else would do. And I think for us, we have to be reminded that we’re called to steward that capital in a dramatically different way.

Richard Cunningham: Yeah, I’m really glad you talked about that, and I’m glad you brought up Tim McCreadie too. So Tim, to kind of catch up here speaks later on in the conference. And he does a wonderful job of essentially kind of making the point that, hey, the product on the shelf, the momentum in the movement, the number of assets that are pouring into faith driven investing, the excuses are starting to go away one by one, for why someone would be hesitant to step into faith driven investing for a long time. And John, I’ll have you riff on this real quickly. It was, well, hey, I’m not an accredited investor. And so for legal reasons, there’s no reason I could ever be involved in the faith driven investing movement. But what’s coming to bear is remarkable opportunities in the public markets for your everyday retail investor to lean into faith driven investing and financial advisors are receiving more and more product outside expertise consultation that shows them well. There is competitively cost effective products with competitive returns for someone in their everyday stocks and bonds portfolio. Speaking of that kind of asset allocation to access faith driven investing, and then I would hope that anyone hears this and says, hey, this is a conversation I can have with my financial advisor or this as I engage at work. Maybe you work in the asset management space or the financial services industry. You can kind of start to push the line a little bit and say, hey, have we thought about mainstreaming, if you will, the concept of investing that is inspired by our Christian values? ESG certainly pushed to the forefront and found its way kind of, you know, at mass, it feels as if because of the number of Christ followers out there, this is something where there can be ground up demand that causes the intermediaries to act.

John Coleman: Yeah. That’s right. And when we communicate that with the intermediaries, I don’t think they’re bad people or anything like that. It’s just this structural kind of momentum of intermediaries. Right. They’re typically cautious and conservative with their clients assets. The ESG or mainstream values investing framework is a helpful one because they’re accustomed to that. They already make exceptions for values based investments within frameworks with which they’re more familiar. What we can now push on is to say, hey, this is just a different category of values based investment. It’s important to me, and I’d love it if we could begin to at least explore adding some of these options to the platform. And it’s easier to start with things like ETFs and mutual funds because they’re more broadly available. But that can extend to private equity, to venture capital, to real estate. And I’ll tell you, Richard, you know, one of the encouragements to me is I am seeing quality, faith driven options now in almost every asset class. You know, one of my propositions coming in with Henry was there are very, very few asset classes that can’t be done with some element of spiritual integration. I’m not sure what that looks like for gold. I know there’s a very vibrant debate about Bitcoin, but you know, for the vast majority of stuff stocks, bonds, real estate, private credit, direct lending, asset based leasing, music, REITs, movie studio content, investment, venture capital, private equity, all these different things that we think about. I’m seeing emerging opportunities to do it in a faith oriented way at one level or another, and I think that’s quite exciting to me as well.

Richard Cunningham: Absolutely. Really well said. Well you tee up a good kind of transition. And so we’re going to move a little bit down the balance sheet here and kind of go from one asset class to the next as we did that in the conference. And so now here we are in the real assets kind of category. Chuck Welden of WeldenFields and his real estate investment company has really spent some time thinking on, hey, what could spiritual integration that term, John, we’ve used number of times look like in our multifamily real estate investing. And so we’d love to invite you just I know Sovereign’s has some real estate kind of activity inside of what you all do as an asset manager. Have you kind of speaking to this particular asset class for a moment?

John Coleman: Yeah, and getting to know Chuck over the last few years has been a joy. Obviously they’ve got WeldenField, but he’s also been instrumental in Lion’s Den.

Richard Cunningham: Oh great. Call out in.

John Coleman: A number of other just pieces of infrastructure in the faith driven investing movement. And in many ways, he’s been right there, shoulder to shoulder with Rob West and with Henry Kaestner and with Ross Robinson and so many others who’ve just been in this for the long haul. And it pioneered it. And so my respect for Chuck as a person, it’s just extraordinarily high. I think real estate is one of the most interesting areas that faith driven investors should be thinking about. If you think about the context of real estate, you are operating in a space where you touch individual people a huge percentage of their time, or in commercial real estate, you know, where you’re getting people or even industrial where they’re producing things. You have this opportunity in the lived environment to be where people are all the time, right? To really people that are one of the greatest callings that we have in the Bible. Is hospitality, right? For strangers, for enemies? We are to extend love and hospitality and greeting to those people. You go all the way back to the Old Testament and just think about the people who were spared because they invited strangers into their homes to provide them protection. You think about the way that Jesus behaved, inviting people in when his followers were gathering. You think about all of these examples. The Good Samaritan, if someone who was willing to take someone in, who was willing to take them to an end and take care of them, another opportunity for hospitality, right? I think real estate is one of these exciting areas where we get to practice our faith deeply in a lived environment that contains people for such a huge percentage of their time. Multifamily, I think, is particularly exciting for that reason, you think about the opportunity to welcome in people who are often in unstable situations, and yet through their lived environment, you can try and provide a safe space. Surround it with people, including the property managers, those who are working the property, even the maintenance staff, the folks working landscaping. You can prepare them to extend Christian hospitality to these people. There are these opportunities to take people where they live, and instead of them having to go seek out hospitality, and instead of them having to randomly run across this idea of Christian love, you can bring it to them where they live. And so I’m extraordinarily excited about that.

Richard Cunningham: Man. Really well said. One of the things to the faith, true investors listening, who maybe aren’t in the real estate space but are thinking, I’d love to see some of these fund managers. That’s John talking about. Or just like, look at a website and see how people are communicating this. That’s the beauty and FDI groups and that’s the beauty. And just kind of poking around our website is you’ll bump into some of these names. And so now we’re talking culture and entertainment. But John, you actually conducted this interview in the FDI conference with Dallas Jenkins. And one of the things you guys talked about is so much of what happens in our world is downstream of what we see in the arts and what we see in entertainment. Talk about that more. And what Dallas Jenkins, creator of The Chosen, has done. But just more broadly, I think when people think of faith driven investing, they think of what we’ve talked about today stocks, bonds, real estate, maybe some one off private equity fund manager. They might think of crypto or something like that, but they don’t think of entertainment or movies or values investing in that regard. So maybe help kind of people look at this asset class.

John Coleman: This is one that’s kind of a personal hobby horse of mine. I’m super impressed. I love it. You know, I think there are very few things that Christians could do to influence the culture for human flourishing. Then create culture, movies, television shows, music, the written word books, you know, all of these sorts of things. You think about it. The United States in particular, exports almost nothing else as much as culture, right? You go everywhere else in the world, and you are listening often to American music and movies and TV. We are surrounded by it. Your kids, between that and social media, are spending hours and hours a day in front of these things. It is having as great an influence on our ability to flourish, our ability to come to know truth, and just the way that we think about ourselves in the world around us as anything else. And again, it combined with social media in particular. And so I think Christians have an obligation to be engaged in culture. I think historically, Christians have done, at least in recent history, a reasonably poor job of that. We often haven’t made product. That’s it, the quality standard of the mainstream product that was out there. And that, honestly, is one of the things that was so revolutionary about the chosen and what Dallas did with The Chosen Dude.

Richard Cunningham: I think I’m betting a thousand on crying during every episode. Just oh my gosh.

John Coleman: And you know, we rewatch all the episodes. We make our kids watch them with us and they love watching them, right? Because they’re really good. And that’s the test, right? When your kids want to watch something with you, because my kids would love to go watch all these other things because they’re good, they’re really good, and we want to make content like that. And I think Dallas has really done that. I’m a huge fan of a guy named John Erwin who’s done that with Jesus Revolution and American Underdog. And I think there are an emerging set of opportunities to invest in that type of culture that are really taking off. One of the ones that we did, and I’m not trying to promote us recently, alongside a number of others, was Help John and Dallas launch a new movie studio called The Wonder Project, which is intended to do exactly that. They’ve recently announced a partnership with Amazon. They’re producing a TV show now called House of David that will hopefully do for the story of David. What the chosen has done for the Gospels is the aspiration. It’s also kind of a cool story. It’s going to be like Lord of the Rings or Game of Thrones for the story of David, which I think is really neat. And we think that just like The Chosen that can reach hundreds, millions of people, the chosen is such a hundred million people. But in order to do that, you need capital because this stuff is expensive. Go look at what Netflix or HBO or Amazon or any of the studios Lionsgate are putting into movies. You know, they don’t cost $1 million. An independent film will cost 15 to $30 million. Some of these giant studio productions are $200 million or more. So they take serious capital. And that’s why I think Christian’s opening that up as an asset class to invest in beginning to Marshall Capital, conscientious, as long as the creators can match that with great creation is an exciting opportunity. The scary thing about the space is a lot of folks have gotten burned there historically because it is a different type of investing, like venture capital. There are winners and losers. You really have to understand the industry in order to do it well. And that’s why I think professional investors who are faith aligned, getting into the space is essential right now, because it is easy to get the economics wrong. If you’re not familiar with the studio system, Dallas and John are obviously quite familiar with that. So they’ve been able to craft something that I think can be positive for investors. Other creators can too, but I think professional investors leaning into the space, starting to raise funds, really learning the system and helping individual investors and institutions get in the game is important. And as I think about the impact investing side, you know, somewhere in between kind of high return and philanthropy, there are very few things I think we could be doing that would touch more people and help to make their lives a little bit better every day.

Richard Cunningham: Man, that’s fun to hear you talk about. And, you know, you mentioned John Erwin’s name, and this is someone we’ve had on multiple faith driven investor events. Speaking of conferences, just so much of what they do is of such excellence. So I’m going to go on a little bit of just a kind of rampage here to close us as I look at the remainder of the conference and just say we went to emerging markets, something near and dear to one of the feature investor founders, Hearts and Henry Kaestner. And we showcase the story of Christeen Rico and how she left an executive level role at Apple and moved to her birthplace of the Philippines to start an accelerator and joined up with the venture capital fund. And then Tim Macready kind of reigned us back in and said, hey, it’s not just about the alternatives market. There is an opportunity, as we’ve kind of hit on here, to think about the mainstream implications and opportunities of faith driven investing in your traditional asset allocation and your stocks and bonds portfolio. As you look to Stewart ETFs and mutual funds as you need liquidity. And Tim did a great job. And we’re going to have him on the podcast here in the weeks ahead. Talking more about his research around growth of the movement, the products available, some of the spiritual integration metrics he’s looking at in his team at Brightlight are looking at. And that was great. We showcased a wonderful story of green hope out of Indonesia with Tommy Tjiptadjaja and Sugianto Tandio, which was just super powerful talking about investing and partnership. And I want to tease this one out a little bit as our final story was a practical hey, what next for faith driven investors? And it was the story of Potomac Angel capital. And we’re going to have Patrick Farrell on our very next faith Driven investor podcast talking about Potomac, the application of investing in community, not going at this alone, and the opportunities at play for spiritual integration as you think of really early stage investing and partnering with entrepreneurs and incubation in the formation of their companies. So with all that in mind, John, before we sign off here, as we think about this next season, season’s FDI podcasts, any closing remarks or thoughts from you?

John Coleman: Yeah, I would just say to this community, first of all, be really encouraged by what’s happening in the marketplace. There is a lot of innovation happening. We talked about some of it today. You’re seeing it at the FDI. I mean, the FDI fund manager gathering, Richard, which we didn’t talk about too much. We had investors from some of the biggest venture capital and private equity firms in the world, CEOs of some of the biggest asset managers in the world who are Christians, who are trying to think about redemptive uses of their capital that may look a little bit different than Sovereign’s. It may not be able to go quite as far in some of those institutions as we would go on the spiritual integration. Inside, but we also have to let a thousand flowers bloom. And it’s important that people get engaged where they are. I think secondly, I would encourage people to not let the perfect be the enemy of good. I think it’s easy to throw up your hands if you can’t do your entire portfolio is faith driven, or if you don’t know how to do that and say, well, I’m just going to stick with what I got, not do anything. And my point of view is like, just dip a toe in the water, get started with one thing, move cautiously and deliberately. Do a second thing once you get comfortable with that. Just get in the game. Start trying to do it thoughtfully. Get an advisor who can help you do that in a way that doesn’t sacrifice returns. It keeps you safe, and then spread the word. We talked about spreading the word to gatekeepers, trying to get them more amenable. We want to get the word out about FDI and FDE, certainly just so more people are engaged in the movement so that more folks are considering doing this with their capital. But spread the word. And certainly as we launch into the next phase of this podcast, we would love your feedback on how to make this as engaging as possible. You know, we want to make sure we’re telling stories that are impactful, that we’re giving people educational materials that make a difference, that we’re making the faith driven investing ecosystem practical for people that they can actually get in the game, Richard. And it’s not just a hypothetical. It’s not just theory. And we want you to push us on who you want to see on this podcast, what topics you want to see, what things are confusing, what we can help clarify, and how we can make this as engaging as possible so that we can be a part of that movement that you all really you all are leading.

Richard Cunningham: Yeah, absolutely. Really well said. John. This is a movement that is led by those of you actually out in the field. And John, you said a key phrase that I’m so pumped that you said because it was the theme of the overall 2024 FDI conference, and that was get in the game. Take that opportunity to go from spectator, go from passively kind of digesting this, like you said in theory and moving it into practical application. And it’s just one fateful step at a time. This is not prescriptive or presumptuous. This is in faithful obedience. And Joey Honescko, our producer behind the scenes, reminded me that, hey, if you ever to John’s point, you have that suggestion, you have that guest we need to talk to podcast at FaithDrivenEntrepreneur.org . So John Coleman, thank you so much for your time today. We will see you folks next time with our good buddy Patrick Farrell on to talk about Potomac Angel capital.

Henry Kaestner: We are grateful for the opportunity to serve this community and see listeners come in from more than 100 countries. Faith driven investing can be a lonely journey, but it doesn’t have to be. The best way to stay connected is to join a group study with other investors looking to get the same answers to questions you have, and find great community as they do so. There’s no cost, no catch in person or online. You can meet an hour a week with other peers from your backyard or the other side of the world. You can also stay connected by signing up for our monthly newsletter at faithdriveninvestor.org . This podcast wouldn’t be possible without the help of many of our friends. Executive Producer Justin Foreman intro mixed in, arranged by Summer drags. Audio and editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb.

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On this special edition of Marks on the Markets, Richard and Luke are joined by Patrick Farrell, the co-founder of Potomac Angel Capital. 

The group connects like-minded investors with mission-driven entrepreneurs for mutual financial benefit, lasting impact, and meaningful relationships. 

And in this episode, Patrick is going to dive into the unique opportunities and challenges that come with angel investing.

He and Luke will also highlight some of the specific market trends to be aware of for anyone thinking about early stage investing.

Find the Potomac Angel Capital video here: https://www.youtube.com/watch?v=bvRsD7xB9zM 

If you like the content, please follow, rate, and share the show.

Episode Transcript

Joseph Honescko: Have you ever been bit by the church parking lot deal? You know the situation. A well-meaning believer with access to capital wants to support another well-meaning believer with a business idea, since they worship alongside each other on Sundays. The investor feels that it would be right to help the prospective entrepreneur out. So they shake hands and agree to work together. And that’s about when the problems start to arise. Without proper expectations, setting agreement upon terms, due diligence, strategy, planning and execution, the business fails and the investor loses money. These situations are often far too familiar amongst faith driven investors, so much so that many have separated themselves from investing in these risky early stage ventures, which makes it difficult for these potentially impactful businesses to find the funding they need to survive. So what if innovative investors could redeem this type of investing? Today, on a special episode of marks on the markets, Richard and Luke are joined by Patrick Farrell, the co-founder of Potomac Angel capital. The group connects like minded investors with mission driven entrepreneurs for mutual financial benefit, lasting impact and meaningful relationships. In this episode, Patrick is going to dive into the unique opportunities and challenges that come with angel investing. He and Luke will also highlight some of the specific market trends to be aware of. For anyone thinking about early stage investing. You’re listening to the Faith Driven Investor podcast. Let’s get started.

Rusty Rueff: Hey everyone! All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies of securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard Cunningham: Well, hello and welcome everyone to the Faith Driven Investor podcast. We are grateful you are tuning in from wherever you get your podcast from. If you were not with us in our most recent recording, I am Richard Cunningham, I’m on staff with FDI and I have the great privilege. I don’t know if it’s a good thing or a bad thing. Luke Roush of taking over the hosting roles in this next season of the FDI podcast, and the heart behind it, is we want to get you and John Coleman and Henry Kaestner out of the host seat and into that kind of expert analysis, color commentary seat. John Coleman last week said, hey, this is a coup. And he wasn’t very happy about it. I haven’t gotten the opportunity to publicly comment on this yet. So here’s your opportunity before we welcome our man, Patrick Farrell to the show.

Luke Roush: Hey, have you this is a major upgrade, major upgrade to have Richard Cunningham in that seat. Let’s go buddy.

Richard Cunningham: Man, I just I wholeheartedly disagree, but your words are kind. Today is going to be a lot of fun. We’ve got a very close friend, leader in the faith driven investing landscape, and our buddy Patrick Farrell, newest resident to my hometown of Austin, Texas, which I’m particularly excited about joining us today, talking about kind of in the series that we’re doing post FDI conference, where we zoom in on particular stories that we shared in the 2024 FDI conference back in January, Potomac Angel capital being one of those. And the work Patrick’s doing leading that charge. So we’re gonna get to hear from that. But then today’s also a unique marks in the market podcast. So we’ve got Luke and Patrick also providing some insights on, you know, what is relevant to this conversation being early stage investing, direct investing, Luke and their work out of the sovereign venture funds, Patrick and his work with Potomac Angel capital. So you’ll get a little bit of market commentary as well as we think about this conversation with Patrick Farrell. Welcome to the show, man. Grateful you are here. How’s it going.

Patrick Farrell: Man? It’s great to be here just about 75 yards from where you’re sitting, Richard says. Super fun to be live from Austin, Texas. And man, been a fan of the podcast for years, so it’s such a joy to be on it.

Richard Cunningham: May. We’re pumped to have you here. So let’s dive right in. Patrick Potomac, Angel capital. The story was told at the very end of the FDI conference, this incredible representation of what it looks like for faith driven investors to get in the game. For those who couldn’t join us for the FDI conference, maybe give us a little kind of response and commentary of what it was like to have that story told in the FDI conference, but also catch those up who maybe might not be familiar with the work of Potomac and what you guys are doing.

Patrick Farrell: Yeah. Well, I mean, it’s one thing to be sort of living that story day to day, but then to see it on video production and, you know, broadcast across hundreds of cities with such a blessing. But I found myself kind of sitting there at the watch party here in Austin going, man, guys are really up to something. And obviously I know that because I’m living it. But it really struck me just to see it up there and just to be humbled by how God has been building this thing and that I’m along for the ride. So that was so awesome to have it featured on the conference. Yeah. So a little bit of background, Potomac Angel capital. We’re an angel network based out of Washington, DC. We invest in mission driven founders from mostly in the United States, but also some internationally. And all of our investors are based in DC. They’re all faith driven investors, and we’re doing early stage angel investing. And so our our angel investors are part of a group that invest together in these early stage companies. And we’re investing really for three things. One is for meaningful impact. So these companies that we’re investing in, our mission oriented and really participating in God’s redemption of all things we’re looking for. Founders are open to relationship. We want to walk alongside founders for the tumultuous journey that is entrepreneurship. And then obviously, we want to look for we’re looking for financial upside. So we want to make sure that these ventures are providing profits and returns to their investors. And so we’ve been doing that for a couple of years now, and it’s been super fun to kind of engage in that space.

Luke Roush: One of the things that we talk a lot about, Patrick, is this idea that it’s not a bad thing to be wrong for like 95% of investors are entrepreneurs, as long as you’re the absolute right thing for the other 5%. And some of what came through, I think, in your video is, you know, a real filtration of, hey, we want to be known for being different and having a different approach in terms of how we engage on both sides of the ledger, maybe speak a little bit more of that just in terms of like a real niche that you have carved out, feel like God’s called you into.

Patrick Farrell: Yeah. Great point Luke. I mean, I think part of it is we’re going to be doing excellent deals. So that’s the foundation being excellent investors. Part of what we’re up to. We’re not making any concessions there. But ultimately what we’re saying is at the end of the day, what we want it to be is like a facilitator of relationships, relationships between the entrepreneurs and investors, relationships between entrepreneurs and entrepreneurs, investors and investors, and ultimately facilitating the relationships between all those stakeholders and God the Father, the son, and the Holy Spirit. And so there’s like this relational focus. And so we. Specifically and intentionally structured our processes, our conversations, the way in which we’re engaging with founders to say, hey, relationships are going to be at the center and at the core of this thing. And if you’re open to that and you want us around for the ride good, if you’re not, that’s okay. But we’re probably not a great fit for you. And so we’ll do things like be really transparent in some of our feedback, where we know a lot of our peers are a little bit more hesitant to do that for a number of good reasons. We’ll make sure that we’re trying to bless entrepreneurs in our feedback as well, where we’ll support them even if we don’t invest in them. Really just trying to create that sort of relational focus. And that’s really what’s built a community on top of the deal flow that’s been so powerful to see and how it’s blessed the DC area.

Richard Cunningham: I love it. Well, Patrick, one of the things we talked about and we talk about often here on the podcast, but both just broadly across kind of the faith driven ecosystem, is this concept of getting in the game. And for investors everywhere, kind of wherever the Lord is uniquely positioned them. Hey, what does it look like for you specifically to get in the game? I think we’ve got two great exemplars here, represented in both of you and what, you know, Luke, the work of Sovereigns Capital and what you guys are doing. And Patrick, what you guys are doing to Potomac Angel capital in the opportunity you’re offering for investors in DC and coming soon to Austin, I think, is what you’re going to get into a little bit later on the opportunity to get in the game, maybe kind of from a definitional standpoint here. I think people here, early stage investing, they hear angel investing, they hear venture investing. And a lot of these terms start to mean the same things to people. Would you both kind of maybe distinguish your approaches, what makes them unique, and maybe just educate a little bit about, hey, venture investing out of a fund what sovereigns is doing along with other venture capital funds, angel investing, and kind of this community oriented approach through Potomac and take us to school a little bit guys.

Patrick Farrell: Yeah, for sure. Well, I’ll start Luke. And then you could kind of add some color on the fun side. Typically when, you know, early stage companies are starting to raise capital, oftentimes they’re a little bit too early stage, a little bit too risky for institutional capital. And so what ends up happening is they have to go to family and friends or high net worth individuals, folks that they’re in relationships with or folks like us, angel networks to try to raise that sort of really early capital. So typically we’re working behind companies when they’re just getting to market, just building their team and really getting behind them and hoping to and not only see them take it all the way through exit or acquisition or IPO or through profitability, but also hoping to get in and kind of create that bridge between where they are right now and where an institutional investor can get behind them. And so typically we’re writing smaller checks in a fund would. Right. We’re taking a little bit more of a minority position. We’re investing on instruments that are facilitated to make the deals run faster. So there’s not a ton of legal. And we’re really jumping in early early stage with these entrepreneurs. And then hopefully if we’ve made a good bet the company grows and as well. And then a firm like sovereigns is able to kind of hop in and provide some more fuel to the fire. So that’s where I’d kind of create the bridge to you Luke.

Luke Roush: Yeah. You know, I think that the red thread that runs through everything that we do is really centered on leadership. And our view is that, you know, faith driven cultures are not just created, but also stewarded and perpetuated over time by the right leadership team that continues to make that a priority and really living out, you know, what does it look like to love your neighbor in and through a company? We have tremendous influence. And, you know, in a lot of ways, Patrick, you’ve got even more influence as an early, early stage investor. Maybe one of the first, you know, checks into the business, and that comes with an incredible amount of influence. And that influence can be shepherded, for better or worse. So capital equals influence and that influence. If you find not just alignment around the what we’re doing, but also why and how we’re doing it, there’s real power in that. And I think that that creates an environment where the entrepreneur feels more free to be able to share, not just on like, hey, this great thing happened or that great thing happened, but also, hey, here’s some challenges, here’s some real struggles that we’re having because it’s not just about the what, it’s also the why and, the how. And so for our work, you know, we’re looking for companies that have demonstrated product market fit. They have some number of customers that are already coming in the door. And we’re looking to, you know, find individuals, leaders that we believe in, the vision that they’re casting. They understand the problem they’re trying to solve. There’s enough of a market fit validation to feel like, all right, this isn’t just a total flier napkin. And then, you know, but both of us, you know, an area where I think both of us can find a lot of commonality is patience. It almost always takes longer and takes more money than you think it’s going to take. And also just that, you know, hey, great companies are usually built over, you know, a decade or more. And so this idea of kind of quick in and out or, you know, pulling up a plan every ten days to figure out whether the roots are growing is not a great way of keeping track of businesses. You got to be able to let that stuff, you know, ride a little bit and be patient. So I think that’s how we fit together.

Patrick Farrell: Yeah, as Luke said like this is a long game that we’re playing. We’re not investing in really liquid assets. These are companies that are growing and scaling and hoping that, you know, within 5 to 7, sometimes even ten years to provide an exit to investors. So we’re thinking about the long term redemptive impact and upside financially, which means that for our investors, they have to be willing to kind of weather that long period of time without having that sort of liquid option. And they also have to understand that at our stage, it’s a very risky game. We’re talking about a point in time where there’s no guarantees that companies are successful, but that’s also what makes it really, really fun and makes it really, really valuable to walk alongside entrepreneurs, because that process is such a roller coaster and can be so emotionally stressful and puts stress on their families. And so we want to walk alongside for that journey because they got to make it out of the early stages. They’re going to get to the later stage. And so yeah, just wanted to add some color on that Luke because I think, as you.

Luke Roush: Well know, it’s like, you know, a lot of times people will say, you know, it takes a village to raise children, but if you really want to build, you know, an angel portfolio of investments, it’s probably going to take more than just you. Right. And so I get pinged all the time by hey, would you look at this deal for me? Tell me if you think it might be a good angel. Deal. And my response is always, well, you know, how many angel deals have you done or do you expect to do? Because if you really want to build a portfolio of angel deals, because of the risk in the timeframe that you described, Patrick, you got to be prepared to write 15 or 20 or 30 checks, and the likelihood that you individually can diligence that many different types of companies that are likely to come across your plate, it’s very low. That’s going to be much better done in community with other people, where you can rely on one another and a close knit circle of trust and rely on the strengths of the group. And that’s that’s what you guys have really leveraged, I think.

Patrick Farrell: Yeah. Luke, we’re going to have to get you out there doing the sales pitch for me at some point, because that’s exactly right. It’s really about the community doing deals in community, reduces the risk for the investor, but also just having somebody else to get eyes on, having me and my team around to help diligence the opportunity to help filter those opportunities. Man, it just makes doing it so much easier. And so yeah, 100% with you on that one.

Luke Roush: Yeah. And it’s like after you write a check. Right. So like we always kind of laugh when firms will put out these press releases of like, hey, we wrote a check, right. That’s awesome. Like, it takes a lot of work to originate a deal, to diligence a deal, and then actually, like structure a transaction and wire the money over. But like a lot of the hard work, particularly in this early stage of venture investing, is still ahead of you. And so it’s not, you know, something to be celebrated with, like, hey, we raised all this capital or we invested all this capital. What’s really to be celebrated is how do you walk alongside, you know, the team, as you said, it’s a lonely journey and the work of actually monitoring performance and being able to help founding teams look around the corner and like what’s coming next. You know, you, Patrick and the folks that you have a chance to work with and invest with, you know, you guys have a lot of pattern recognition collectively amongst the group. So helping founders kind of look around that corner and figure out what’s coming. I mean, it’s extraordinary intelligence that founders are able to bring in through having the right investor pool.

Patrick Farrell: Yeah, yeah, 100%. And especially since, like a lot of the folks in our group are either entrepreneurs that are like in long term businesses that are just cash flowing in their investing out of that, or they’re former entrepreneurs who have had an exit or multiple exits like they’ve been there, done that. And that sort of experience is huge when you’re walking around, you know, trying to help a founder look behind the next curtain or the next stage of growth is just having somebody who’s been there. So that’s a huge value that we bring to the table as well.

Richard Cunningham: Love it man. You guys, I could just put a quarter in and watch you go. This is great. We need to realize that the NPS score of the FDI podcast will be a lot higher the less we hear the Richard Cunningham voice. So, hey, while we’re talking maybe methodology and kind of, you know, some of the uniqueness, nuances and similarities between angel investing, venture investing, maybe give us some color on just what you guys are seeing right now, some trends, commentary in the markets. I know, I mean, on a public markets front, we’re potentially about to close here recording this on Leap Day. Just so everyone’s oriented of where we are February 29th, 2024. We’re about to close with maybe S&P 500 and Dow Jones being up the highest they’ve been as a first two months start to the year since pre-COVID levels. So stock market kind of persists on that. We’ve been down a couple of days this week having a positive start to the year, but maybe bring us down to the earlier stages in the venture kind of sandbox fellows, and give us some kind of what you’re seeing.

Patrick Farrell: Yeah. Well, especially it was almost a year ago when SVB collapsed and that was I think, a marker in the market for us because 2022, I think if you look at the data, was a record high in terms of valuations, money pouring into the early stage, and all of a sudden SVB collapses, market starts to take a turn. And we saw a lot of companies that typically would have moved quickly to institutional capital end up going back to angels and kind of re raising and trying to kind of weather that storm. And so also and we had this kind of flood of deal flow, flood of quality entrepreneurs because all that institutional capital sort of dry up. And so we’ve seen in the last year or so just a ton of high quality, amazing deals. And our investors are starting to be like, man, we’ve got an opportunity cost. We cannot invest in everything. And so. Subsequently because so much of supply, maybe if you were to use it in a sort of economics term, has flooded into the angel stage. We’ve consequently seen valuations come down a little bit in a later end of last year, early end of this year. But now I think that the market is starting to open back up a little bit. Capital is flowing a little bit easier, and some of those entrepreneurs that are in that kind of middle ground are starting to be able to raise capital, which is awesome, because that’s what we want companies to be able to kind of increase and improve in stage and kind of grow and of course with their timelines. But it’s been a flood of interest and the angel stage that we didn’t quite anticipate, and that’s coincided with Potomac Angel capitals brand. And just the fact that we’re doing deals has also kind of gotten out there a little bit. So some of that might be intertwined. But yeah, we’ve seen a lot of folks coming out of the pandemic starting businesses hitting that Angel stage right around now. And so it’s been really fun to see what folks are innovating on out there. But Luke, just curious if you agree with that, what you’ve seen on your end.

Luke Roush: Yeah, no, I do. I think when you start a firm deal, flow is at first it’s harder than it should be just because people don’t know who you are and at times you don’t even know who you are. You’re kind of figuring out you’re building the plane or building the car while you’re running it. I think later it actually is almost easier than it should be because there’s a recognition of the brand and there’s a recognition of the relationship that you built with founders and with your investors. And so the more differentiated you are, the quicker you can build that differentiation and really attract deal flow. And so this is why, you know, a handful of firms in Silicon Valley that have really built expertise, whether it’s fintech or whether it’s AI or whether it’s software as a service. And then once you kind of have that reputation, then everybody’s kind of coming to you. And I think on an angel stage basis that’s done more locally, regionally than it is, like monolithically in a market, like a Silicon Valley or Boston or someplace like that. So I think that is actually encouraging. Should be encouraging to founders everywhere that you’ve got an opportunity to you don’t have to get on a plane and go out to Northern California to be able to attract early stage capital. There are groups that are more local, regional trust based, with real deep roots in a market. And that’s what you guys are doing. I think what we’ve seen in terms of deal flow is because some of the funds that were investing, you know, five, six, seven, eight, even ten years ago, the public markets effectively shut down. So some of the companies that grew up during that period and would be responsible kind of counted for to be able to return capital back to the original investors, which would create an kind of virtuous cycle of them. Redeploying all of that liquidity in the public markets has kind of gotten locked up or at least put on hold. And then, you know, when you think about M&A transaction volume, right, the two major ways for a company that is one of your investee or one of our investee to exit is either go public or get bought in. The M&A volume over the last 18 months has been really, really slow. We are seeing that start to change. But I think that over the last year or so, that has resulted in a lot of companies that are needing funding in some of the pockets that they might have gone to for that funding are still kind of waiting to get liquid on their stuff from 5 to 10 years ago. So it’s a long road and there are kind of like ebbs and flows and deal flow based on things that are entirely outside of a founder’s control. So I think I agree with what you shared.

Richard Cunningham: Good words. Thank you both. Yeah, I’m looking at an e y study right now. And it said in 2023, venture funding kind of accumulated at $140 billion, which was low and down from already declining levels in 2022. And there’s projections that 2024 might be a sub $100 billion in kind of total venture funding type year. So Luke, that sentiment you have about just what’s taking place in the public markets, though, we’re seeing that IPO market and kind of engine ramp back up. There’s still kind of interest in the hangover that trickles all the way back down all the way to the you know, even the pre-seed and seed levels that you two play at. All right I want to kind of make a transition here. You are an incredibly humble dude. I love your vulnerability and transparency. If anyone you haven’t heard the Patrick Farrell story, you need to watch the Potomac Angel capital video because you just you get to see his heart shine through. You also get to see his just wicked awesome parents, Paul and Leonard. Just special people that are in DC. Some of the founding investors alongside friends like Bill and Dana Wichterman at Potomac. But Patrick maybe in humility, there’s some cautions out there about angel investing. Like, you know, there’s the famous line of like, I’ve been burned by the church parking lot deal. But just because we share the same faith, people, you know, walked into a deal with, you know, poor expectations around terms and people get burned and lose a lot of money. It’s highly illiquid. So you have to view it. And, you know, you guys are hitting on this earlier just in terms of full blown asset allocation. And there is also this thought to is, you know, Proverbs 15:22, while there’s great wisdom in a multitude of counselors and angel investing situations, can get a play where there’s groupthink and more people around a deal actually isn’t helpful. It just slows down the process. People aren’t actually willing to talk honestly about maybe what’s going on there. So maybe in just humility, talk a little bit about this. Some of the things you’re seeing, some of the pitfalls for people to be aware of when it comes to. Angel investing. There may be honestly, some of the rebuttals or different ways you guys are trying to kind of counteract some of these thoughts as well.

Patrick Farrell: Yeah, 100%. I mean, where my mind goes to first is a lot of entrepreneurs experience angel networks as highly unprofessional, hard to get a hold of. Take a really long time to invest. And so the way we’ve really fought that is just by me and my co-founder, Mike. With the time that he has putting all of our weight behind the network. So that is my full time thing. And that allows me to do is just try to be excellent as to how we set up our processes or systems. A lot of my job is running around trying to get in touch with people, bringing people into the fold, kind of, to use a colloquial term, herding cats. And so if you’re willing to put that sort of work in, you can really make an angel network run efficiently and effectively and really be founder friendly in that process. So we do our best, but that also doesn’t always cover some of the downsides of an angel network. The angel investors are spending their own time, precious time from their family or from their day job to engage in investing. And when things get busy, it’s typically not going to be a priority. So sometimes things can slip in terms of timelines. Obviously, one of the things that can be pretty difficult to is just when founders are looking for checks that are going to want to come within, like a certain time frame, sometimes it’s hard to meet those timeframes. And so we’ve seen a multitude of things. And you mentioned groupthink. I think Potomac Angel capital, we do it better than most by trying to encourage lively debate, different opinions on certain things, and making sure that all of our investors kind of get heard when we’re having discussions about deals. But by and large, you know, sometimes there are folks in network, they’re just coming up to speed on angel investing and somebody with a lot of clout, a lot of experience at the table will say, hey, I don’t like this deal. I think I’m out. And they’ll feel maybe insecure about their interest in a deal or moving forward. And that can kind of circulate throughout a network. So, you know, we’re not immune to groupthink, even though we’re believers, even though we’re trying to do this in a really redemptive way. That is certainly a downside to the structure. And we know that. So really for us, it’s just about being as transparent and effective communicators with entrepreneurs as we can. So we blessing them throughout the process. So we’re not setting unrealistic expectations and just encouraging and educating our investors on some of the pitfalls of our structure and process so that they can be thinking through it and be acting in accordance with the Kingdom as we’re doing our work together as well.

Luke Roush: There are two things I mentioned real quick. One is just the importance, and Patrick nailed it on communication. You know, it’s okay if you gotta communicate bad news, but just make sure you communicate the bad news. Don’t just kind of sit on it. You know, we tell our team is that in the absence of communication, everybody assumes the worst. And so if it’s going to be another two weeks, call people and tell them, hey, it’s going to be another two weeks. And I know you wanted to happen yesterday, but we got two weeks, you know. And so that way at least they know where they stand. And and then the other thing I think is really, really important is, you know, a lot of the bad stories that go around about angel investors or venture capitalists or private equity folks is where people will substitute getting to the right price on a deal with terms. And so there’s a lot of structure on the deal. And certainly the saying in Silicon Valley is I’ll let you set the price. Just let me set the terms. And what that means is that, like, you know, you can overcome a lot of things. And but what happened, you know, just to make sure that entrepreneurs aren’t confused about this, newer investors, you know, what structure is doing is it’s creating situations where the interest of the investor and the entrepreneur are maybe not totally aligned. Sometimes structure can be used to create alignment, but sometimes it can be used to basically give a higher price, but then create situations where there’s potential for a win lose. And so I feel pretty strongly that the earlier you’re investing, the more clean you want term sheets to be, and not just trying to overcome poorly negotiated price points with structure that creates a lot of strife downstream.

Patrick Farrell: Yeah. And I would even say at our stage look like with our limited resources and time, sometimes if we get like an 80 page, you know, lunch purchase with all sorts of terms in it. Yeah. Here’s some of our investors off, even though we’re going to do the work to kind of run through that. And like our best, it can definitely scare folks off for sure.

Luke Roush: I agree.

Richard Cunningham: All right, gents, I want to close with this. And kind of our final topic that we’re going to wade into is Patrick, you’re clearly here in Austin, as we just talked about. Potomac, though, started in Washington, D.C. you’ve got this flourishing healthy network there, and you might be able to correct me on some of the particulars, but 14 deals done already with something like 20 members. So, you know, be sure to brag a little bit on all that’s taking place there and the Lord allowed you guys to accomplish and the early life of Potomac. But hey, what’s God doing in your story? What’s he teaching you in his word? You’re now here in Austin, Texas, so there’s clearly some kind of physical work taking place as he’s taking you to a new location. And then Luke would love for you to also chime in of just like, hey man, what’s the Lord teaching his word? What’s he showing you right now? And encourage those that are listening on the Faith Driven Investor podcast.

Patrick Farrell: Yeah, well, this is what’s really fun for me is just to kind of share stories about how God is moving in this space. So obviously we started Potomac Angel Capital in January 2022. In D.C., a really heightened focus on locality and investors faith driven investors in community Together in person, which created a really unique blend and allowed us, especially with me putting all of my time behind it, allowed us to kind of accelerate quickly and start doing deals fast. That alongside just a very willing group of investors who were partnering with God and listening to him and saying, yeah, we want to invest in these companies. So it was super fun to watch. It kind of really blow up in the first year. And then after that first year, we started talking to folks in our networks, folks that we knew, and they started to say like, hey, you guys have got something kind of unique in D.C. there’s some awesome angel networks out there, but you guys have kind of taken a different approach, a different model. We wonder if your model would work well in other cities. And so we started to explore that. And like any good entrepreneurs, me and my business partner, Mike Grubbs, came down to South by Southwest last year in Austin, just to do some market validation to figure out whether there was some demand down here for this, for the people wanted it, whether there was anything like what we had in D.C. here in Austin. And literally the first day in my quiet time here in Austin, I just felt like God was inviting me to move here, which for me was an incredibly impractical thing to think that you’re hearing from God. Mainly because I’ve been in DC for ten years. I’ve grown up in the area. I left for college and then came back. All of my investors were in DC. I had deep community church roots, all of it. And God’s like, let’s go to Austin where I don’t know very many people. And Richard, we were kind of acquaintances before then, but I didn’t have very many relationships in Austin. And so what that did is it kicked off sort of a discernment process with some of the people that were holding me accountable, walking with me in my life, and turned out that everyone was thumbs up, even my parents who were sad to see me go. We’re like, I think this is what God’s doing. And so I came down here in the fall to Austin, moved to Austin full time. I still go back to DC about a week, a month just to manage the relationships and all the good stuff that God is doing at Potomac Angel capital, and that’s still my day job. But I’m down here creating relationships, casting vision, hoping to plant a new network of investors down here with a similar ethos to Potomac in local community faith driven. What does it look like to do this thing together here for the good of the city of Austin? And then obviously all the companies that we’re founding and walking alongside. And so that’s kind of created this is sort of an adventure for me down here in Austin, just following Jesus on every next step, letting him lead the way. And man, it’s been really, really fun. And so, Richard, as you know, we’re co-hosting pitch event and panel next weekend at South by Southwest Sunday service, which is going to be unbelievable opportunity, such a huge conference, but also just to to put faith in the marketplace on display. And Richard’s going to be joining us on a panel for that particular event. So that’s super fun. But just see what is up to here in Austin. And I’m droning because it’s so exciting. But man, this city is really, really taking off. God is doing some awesome things, moving some great people here. And so it’s been really fun to just be on this adventure, with Jesus so far.

Luke Roush: That’s great. Yeah, I think for me, I’m just going to pump like one book that I got and I’ve been going through, same as ever that’s written by Morgan Housel. And it’s just, you know, the tagline is a guide to what never changes. And that takes me to Hebrews 13 eight. Jesus Christ is the same yesterday and today and forever. And so I think that there’s a whole bunch of things in business, in the marketplace that, you know, we somehow kind of like discover a new every 5 or 10 years or so. But the reality is that the fingerprints of kind of lessons learned that we should be applying to the work that we do every day are all over the last 100 or 200 years. But the only thing that really is consistent throughout all of human history and will always be true, is what is the character and nature of God, and who is the Son Jesus Christ? And what is the relationship that His Son wants to have with each of us, because he loves us all equally. And so anyways, I’m excited about that. Appreciate the opportunity, Patrick, to have you on, to hear your wisdom and just, the work that you guys are doing with Potomac Angel, it’s awesome. It’s inspiring. And, I think we need more organizations like it. And, super excited to see how God uses you, not just in the DC area, but also down in, the great state of Texas.

Patrick Farrell: Yeah, for sure. And this will be my plug to say thanks to you, Luke and you, Richard, for the work they are doing at sovereigns and FDI that are really paving the way for folks like me to step up and say, hey, I got this idea. I think that can fit in this in this faith driven ecosystem. And so it’s been inspiring to follow y’all’s lead. And I appreciate all the work you’re doing.

Richard Cunningham: Awesome. Well, Patrick Farrell Luke Roush, what a joy to get to do this. Friends. We will catch you next time.

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In Matthew 6, Jesus says to store our treasures in heaven, not earth, and in this episode of the Faith Driven Investor Podcast, Finny Kuruvilla joins John and Richard to talk about what that might mean for investors.

They’ll also discuss the importance of investing with a goal and supporting others, investing in the common good, and the role of wealth in the church. They also touch on market trends and Eventide’s perspective, as well as healthcare investing and innovations.

If you like what you heard, please share, review, and follow the show.

Episode Transcript

Joseph Honescko: In Matthew six, Jesus tells us to lay up our treasures in heaven, not earth. So how is that going to work for investors? In today’s episode of Finny Kuruvilla from Eventide joins Richard and John to unpack this teaching from the sermon on the Mount and to give investors some practical ways they can implement this in their own lives. He and John both will also hit on a few market trends that they’re seeing, and they’ll talk about the ways they are continually evaluating what it means to lead a faith driven culture. All that and more in this episode of the Faith Driven Investor podcast. Let’s get into it.

Rusty Rueff: Hey everyone! All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies of securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard Cunningham: Well, hello everyone, and welcome to another episode of the Faith Driven Investor podcast. We are grateful to have you tuning in wherever this podcast might find you. My name is Richard Cunningham. I have the joy of serving on staff with faith driven investor. Joined today by one of our amazing mainstays in John Coleman and John Coleman. We are in for a treat today because it is not just you and I in the podcast studio.

John Coleman: Yeah, that’s right. We are very fortunate to have one of the brightest minds in the space and someone that I’ve come to admire a lot. Finny Kuruvilla from Eventide Asset Management, one of the founders, obviously lead portfolio manager over there. And, it’s always a thrill to have Finny on. Thanks for joining us, Finny.

Finny Kuruvilla: It’s great to be with you. Thanks, John. Thanks, Richard.

Richard Cunningham: Yeah. Finny I was looking back to your podcast archives, and this is your fifth official FDI podcast to be on. And, you know, if we were to go back and probably mined the data of all of the faith driven investor videos, conference, talks, podcast, I mean, you might be our most quoted individual. So it’s hard to think of many people who have done as much for the faith driven investing movement as you have. And I also just love, you know, John, I don’t know about you, but when they look at me, it’s Richard Cunningham, comma, you know, breathing adult. But for Finny Kuruvilla it is Finny Kuruvilla at medical doctor, PhD, co-chief investment officer, senior portfolio manager, managing director, founding member of Eventide. As you said, so just what a joy to have you on and thank you for all the contributions, Finny, that you make to the broader ecosystem.

Finny Kuruvilla: Well, hey, thanks, Richard. And one of the things that I want to say in response to that very, very flattering introduction is we have benefited so much from the collaborative spirit that especially a driven investor has brought to the field. I truly believe that that’s something that honors God in that we’re supposed to be supporting one another, encouraging one another. And I just want to thank all of you for setting a high bar and showing us leading the way and what that looks like. So kudos to you all.

Richard Cunningham: Appreciate that. Well, let’s have some fun today guys. Finny, you’re catching us in this kind of theme of we’re unpacking conference talks that we’re giving, you know, recording to say on March 20th. This podcast will drop on Monday, March 25th. But a couple months ago, at the end of January, you gave this remarkable talk titled Emptying the Storehouses at the Faith of an investor annual conference. And we get to bring you on to kind of pull out some of the threads of that talk. And so if maybe for those that weren’t with us at the conference or haven’t gotten to check out your video yet, which will be all over the internet soon, maybe kind of unpack it a little bit and we’ll camp out there for a while.

Finny Kuruvilla: Yeah, sure. So this is a talk that is very much deep in my heart. In the talk, I didn’t actually get to give some of the backstory to it, but maybe I’ll do some of that now before recapping some of the talk. I was born and raised in Southern California, and my dad worked for an organization called World Vision, which a lot of, you know, it’s a humanitarian, humanitarian relief and development organization. It actually was my first job that I had when I was 16 years old, answering the telephones there. And one of the things that I did while I was working there was, you get to have your eyes opened to the plight of the global poor, and you get to see through videos. In my case, I wasn’t there out on the field. But through videos you get to see how millions of people live in different places all over the developing world. And it was such an illuminating experience to be able to see that. And then you step out of your world from World Vision, and then you’re now in Southern California, in LA and Pasadena, and you see the disparity there. While I was in college, I was very involved in InterVarsity Christian Fellowship. I still am, but while I was there, we did a Bible study through a passage where people go to John the Baptist and they say, hey, John, what does it mean to repent? And he gives a few points of what repentance looks like. But one of the points that he mentions is you who have two tunics should give to the one who has none. And I remember when I read that and study that, it just cut me to the heart because I thought, wow, am I really living like that? And I remember going, thinking about that passage in the light of what I was doing about vision and thinking again about the disparity, opening my closet, seeing that I wasn’t living consistent with that teaching from John the Baptist, who’s talking about the beginning of repentance. This is an advanced Christianity. Advance on God is the beginning of repentance. And so that ended up setting me on a trajectory of asking questions. Why don’t we talk about this as much as I think we should in the church today? And are we potentially sweeping under the rug some of the harder teachings that in some ways are? Be the most pressing for us who are living in one of the most prosperous, if not the most prosperous, economies of all time. So that was some of the background that formed me when I was in college. Specifically, the talk that I gave at this Empty the Storehouses FDI conference was on the sermon on the Mount and basically advocating that the sermon on the Mount is the place where we see the most direct teaching on how we’re supposed to be looking at money and the concept of treasures on Earth. One of the things that Jesus tells us is he says very plainly, very clearly, do not lay up for yourselves treasures on earth. And he says, that’s where moth consumes or rust destroys, where thieves break in and steal. He says, instead we’re supposed to put our treasures in heaven. And then he explains the rationale by saying, where your treasure is, there your heart is also. He goes on to say, no one can serve two masters. Either hate the one and love the other, or be devoted to the other one and despise the other. Can’t serve God and mammon. So that was the main text that I focused on. And one of the things that we took away and unpacked out of that is we ought to be taking that as face value as we possibly can. So I mentioned a couple of direct applications. So number one is we want to be investing in a way that’s directed at a goal. So if we’re investing we shouldn’t be just accumulating these piles of money. I think that’s something that’s easy to fall into if one is a prosperous individual. And if one lives in a place like the United States, where people are just kind of hoarding money and it’s easy to stop it in this place, or that we are supposed to be goal directed with our investing. If somebody says, hey, I’m saving to buy a house or start a business, great, let’s have that mentality. Let’s not have the mentality of the person who’s building the second bar. The second application that I talked about was we don’t want to be investing and take advantage of other people. And it’s hopefully something that especially. With Faith Driven Investors. We’ve talked a lot about this theme over the years, and I know you all thought very deeply about this as well, which is that investing, it should be something where we’re blessing others through that, not merely extracting value from others. And one of the passages that I think is very illuminating here is from Deuteronomy, where God says, don’t bring the earnings of prostitution into the temple because it’s an abomination to him. So God wants money that comes in his treasury not from sinful activities, but from activities that are building up the community. And so putting into practice love your neighbor, even in our investing, is a first order activity. And then I also mentioned investing just isn’t about the negatives. It ought to be about the positives as well. And we can support with our investing both the redemptive good and the common good. The redemptive good is, of course, advancing the church, advancing the kingdom, furthering the gospel, evangelism, discipleship. Common good would be helping people to be clothed, to be fed, to be whole in terms of not suffering from disease. And so that at a high level was the goal of the talk and some of the key points there. And that’s something that I think we always need to be pressing into and always reminding ourselves of some of those basics.

John Coleman: Yeah. And that’s you know, what’s really interesting is this is a topic I’ve been thinking about a little bit lately as well, and I actually started thinking about it for a World Fishing conference. So we’ve gotten to know Edgar Sandoval a little bit and just love Edgar, love world fishing. I mean, the mission that they’re on is phenomenal. And their leadership right now, I think is extraordinary. And they asked me to come and give a talk on money, how believers should look at money. And I love that sermon on the Mount passage. You know, there are well over 2000 references to money in the Bible. Many of them are cautionary statements like the love of money is the root of all kinds of evil. And yet God also clearly gives certain people in the Bible money to steward for his purposes. And it’s actually one of the blessings or tools that he offers them in order to forward his purpose. Abraham would be one of the first big examples of that, for example, or David in the New Testament. The examples are a bit more scarce, but even someone like Nicodemus could use financial resources for God’s purposes. And so the question I think for believers is what are you doing with that? And are you paying as conscious a set of attention to money as one of the blessings that God can give you as your other talents? And I think one of the things that I find at least is consistently people neglect this investing area. You know, there are really only three things you can do with money. You can give it away, you can help others with it, you can spend it or you can invest it. There’s not I mean, savings is just investing without any return. So there’s not much else you can do with it. And Christians spend a ton of time thinking about how they give away their money, even if it’s not a lot of what they give away. We spend a decent amount of time thinking about how we spend it, but I think the average Christian doesn’t think as much about the way in which they invest it, even though for many people that’s actually a bigger pool of capital than they’re giving or spending, right, for a lot of people. And anyway, I just think it’s a fascinating distinction that many Christians have drawn where they just they seek return, maybe even just to build this pile without purpose, as you described it, with their investments. But at the same time, I think God has really called us to pay attention every dollar and to make it purposeful, both in terms of the use that you’d have for it. But also, if I’m deploying this capital, like there should be some intersection with the Great Commandments or the Great Commission in the way that I deploy that capital as you’re referencing, whether that’s just staying away from the bad things, prostitution, trafficking, gambling, you know, things that are addictive, but also leaning into creating a more flourishing world for others. And I think that’s where Eventide has been such a leader in that space. But I think it’s just fascinating that Christians have not reflected deeply on that historically, or maybe as deeply as we need to.

Finny Kuruvilla: Yeah. You know, it’s fascinating what you mentioned there about some of those examples of individuals who did have financial resources. You pointed to Abraham, and he certainly be a good example of that. There is actually, in the New Testament, a fascinating passage. It’s in First Timothy chapter six, where Paul specifically addresses the wealthy that are in the church, and he tells them what they’re supposed to do. He says, don’t be haughty. And he says, don’t put your hopes in your money, but instead do good. Be rich in good works. Be generous and ready to share. So, you know, he’s contemplating the fact that there are already, at that time, plenty of people who have wealth. Another example would be John Mark, and we know that it was his home that the believers gathered in while they were in Jerusalem. And these individuals who had these larger homes tended to be those who would be the hosts, the patrons of the church. There was a very, very important function that the church required and needed in those early years. There were no church buildings or things like that for centuries to come. And so I think it’s something that is very good for us to remember. Which is that we’re not saying wealth is evil or bad or anything like that. This is not a call to condemn people or anything like that, but it’s a call to ask and hopefully challenge one another to say, are we truly doing good? Are we truly rich in good works with our wealth, and our wealth is on us now, has tremendous capacity to be a force for good or force for evil. And so I think even in the New Tetament, we see some of those admonitions and encouragements.

John Coleman: And I’ll let Richard push us forward. But I will say, you know, the one thing that occurs to me even in that passage that you’re referencing, or the two passages that you reference, is it’s not necessarily a bad thing or mindsets around wealth and the way in which we use it can be evil or can be a bad thing, but there’s never really a call to just store it up. And then at the end of your life, do something good with it. I think this is one of the traps we do fall into, like you said, is building this big pile saying, oh, what I’m good at is making it as big as possible. And then at the end of my life, I’m going to give it away over time. And I think rather everyone is called to start right this moment, thinking about the way wealth is used for the kingdom in the way it’s stewarded for God’s purposes, rather than just, you know, those of us who have proven some proficiency at kind of making wealth bigger, which is what investments is, you know, doing that for no purpose, right? Rather than deploying it according to those precepts right away.

Finny Kuruvilla: Yeah, that’s exactly right. I think it’s Ron Ballou who has this quote where he says, do your giving while you’re living, so you’re knowing where it’s going. And I like that concept because we know there are so many examples of individuals who have a lot of wealth, and instead of deploying it while they’re alive, they put it in some foundation. And this is something that I was actually just reading about. The foundations take a life of their own and often end up doing activities contrary to the wishes of the person who left the wealth to that foundation in the beginning. It’s actually the rule, not the exception. Or often things go haywire, and straying from the purposes that the individual who acquired the wealth really intended there. So I think it’s a great reminder for us, and I truly believe that that is the paradigm that Jesus is setting here is like, now give now while you’re alive. So in that treasure ahead of you, I don’t let it be corrupted here on this earth. Send it ahead and store it up for a bright future in the life to come.

Richard Cunningham: Yeah, finance that. You use the word at the end of your conference talk. It’s the arbitrage opportunity, right? Our stores of treasure here on Earth are in decay. So trade it now for something that lasts forever and just the ultimate arbitrage opportunity. I love the way you put it. All right, guys, well, that’s fun to hear you riff on just for the sake of time. Let’s keep on moving down the line. And so we’ll go back to some of those practical applications at the end, talking about those opportunities to promote good and flourishing, the common good, the redemptive good. Finny you were kind of alluding to. But for now, we want to hit on Finny. Your last FDI podcast appearance was roughly seven months ago, August of 2023. You and John had this wonderful conversation on all that was taking place in the world of health care investing and M&A markets being drier. But yet the S&P was, you know, just charging on with the likes of Meta and Amazon and Google, among others, the AI frenzy. But just love to kind of hear you guys. You know, this is not a marks in the market podcast. But Vinnie, we’d be remiss not to have you at least weigh in kind of with what, Eventide. Seeing what you’re seeing and kind of maybe since your last FDI podcast appearance as we closed out 2023, have kind of made it into the first quarter here of 24 of just what’s going on from the Eventide vantage point. What are you guys seeing? I know health care has always been a massive focus of you all. So maybe camp out there a little bit as well.

Finny Kuruvilla: Yeah, a high level. We’ve seen a lot even in the early months of 2024. Just a couple of themes and notable points here. You correctly noted that there was a lot of uncertainty in 2023, and the general consensus was that there would be a recession, but instead there was no recession and the S&P just motored higher. That was one of the stories of the year that it motored higher, despite the fact that there was high inflation in the fed kept raising interest rates. There’s still a lot of uncertainty with the economy and consensus right now is that there’ll be about a 40% chance of recession over the next 12 months. I put that with the giant asterisks because the economists were generally wrong last year. And there’s a reason why economics is called the dismal science. It’s often just very, very difficult to forecast the economy. And the joke is, of course, that economists have predicted nine of the last five recessions.

Richard Cunningham: That’s awesome, I love that.

Finny Kuruvilla: Yeah. And right now what we’re seeing is an interesting phenomenon where inflation is certainly come down compared to last year. But the S&P continues to track higher. It’s almost at 5200 as we speak right now really defying most expectations. There’s still a lot of debate about why that’s happening and why the economy is as resilient as it’s been. We’ve been in the camp that you shouldn’t buy the rhetoric of there’s going to be recession, partly because it’s such a novel, such. We’ve been in in the last couple of years, with the economy being released from all the Covid restrictions, and there’s just not good models that anybody can point to, in our view, that have the kind of confidence that should make us pound the table in either direction. So that, thankfully has worked pretty well. And overall we’ve seen that. Generally speaking, the economy, if there aren’t shocks, tends to do pretty well. And the innovation and the skills of the free market and what we know about businesses, they do pretty well about navigating through hard times. And when everybody’s talking about a recession, usually it’s not going to happen because there’s a lot of belt tightening that’s already gone on. One of the great I think, questions that we’re going to understand over the next year is what has been the role of this productivity number. So there’s this very mysterious number. It’s actually easy to understand conceptually, but it’s hard to measure empirically. So productivity is how much does a given worker how much does their output increase year over year. So I use the analogy of a person who works at a donut store and they’re making donuts. And if they can make 100 donuts a day in 2023 and in 2024, and they can make 103 donuts a day, their productivity has grown by 3% year over year, and it seems like one of the reasons that the economy has been able to do well, despite the inflation, is that we’ve been more productive than people have anticipated than economists anticipated. There’s a whole lot of reasons why that might be true, but I think one of them is not so much. AI is starting to play a role, but it’s probably a bit early to attribute the productivity improvements to AI. But it’s that there was so much belt tightening and so much concern about a recession, and companies were getting lean and mean through all of the doom and gloom rhetoric there. In that type of setting, you can actually and you typically would expect even that productivity would do well because everybody is ready and there’s not a lot of excess. And so that type of phenomenon is probably what’s been at play and why the economy has done so well, and in general, why the more people talk about recession and the more people that are fearful out there, you actually in the back of your head should be thinking, okay, good. I’m glad that there’s that fear that’s out there. And the other famous adage is that the market likes to climb the wall of worry, and it descends the slope of hope. And there’s definitely been a robust wall of worry that the market has been climbing over the last couple of years.

John Coleman: Between that and the blue quota, I’m getting a new appreciation for Finney’s ability to rhyme and create memorable markets.

Finny Kuruvilla: You know.

John Coleman: Finney, I would just say I don’t know how you think about it in general. I’m so skeptical of people trying to time markets without a specific reason, a time. Right, like, you know, right now, for example, we’re super cautious about office real estate, but there’s this specific set of context around that that makes you nervous about that sector, that particular asset class where you can identify, I think, generalized concerns about recession, market timing, cash on hand. It’s so difficult to predict in my mind. And if you look historically, by and large, just continuing to allocate in the way that you would with the tranches of, you know, you want to diversify your asset classes, you want to be thoughtful about the way in which you position a portfolio. But if you do that and you just stay in markets, typically that’s the best solution over the long run, rather than seeking to time more aggressively without a specific conclusion. And that’s been my push to folks right now. I mean, this is not financial advice on this podcast, obviously, but, you know, it’s very easy to get whipsawed by all these predictions. Market timing is notoriously difficult. And just as often as you get out and avoid a downswing, you miss a major upswing. And I’m with you. There are just so many long term reasons to be confident that, at least in the United States and in a fair number of other economies, the long term trends are oriented towards greater productivity, whether that’s AI, robotics, which is more of a real time thing. I think even in the industrial space, things like that, all these technological innovations are oriented towards improving productivity and output, and there’s really been no major setback on those. So I continue to feel the way that you feel, which is don’t overthink the timing of markets, or at least that’s the way that I would put it. Stick to what you feel confident in in your allocations, and make bets on those specific things where you feel you have a good understanding of where things are headed.

Finny Kuruvilla: Yeah, I couldn’t agree more. One of my mentors, who I’ve actually never met but I call my mentor because he made such a big impact on me through his books is Peter Lynch, and Peter Lynch has this great concept, which is that more money has been lost trying to time and dance around corrections than in the corrections themselves, that all of the artful positioning is not actually hostile and adverse to one’s net returns. I mean, there’s so many ways that one can show that we’ve got a lot of charts, and I have a whole lot, actually. We’ll talk about addresses this, but you’re absolutely right. And rather than timing the market, it’s time in the market that’s a better predictor of your long term returns. And you correctly noted that there are typically a handful of days. In a year that are going to be these massive upside drivers. But if you miss those days and I actually gave a talk on this, that this entire archive, if you miss those days, those handful of days in the year, I don’t have the exact number on top of my head, but your returns are a fraction of what it would be then if you are just simply staying in the market throughout it all. So yeah, it’s it’s a very important lesson to learn that most people haven’t learned really well. And I hope those timeless principles would be things that we would go back to again and again and remind ourselves that despite the fear, despite all of the rhetoric out there in general, it’s the more boring strategies that tend to outperform the more sophisticated ones.

Richard Cunningham: Yeah, I’ve heard it before. You got to be right a lot of times in terms of when to get out, when to get back in, the highs and lows and all of it. Might as well just be right once and stay in. What about on the health care side of things in terms of a very capital intensive, highly innovative field? You know, this is something you and John got into in your recent podcast. These fields tend to be hit pretty hard by the interest rate environment, as they need capital infusion as they’re oftentimes not profitable. Even tide has a big focus in that space on the health care side of things. What are you guys seeing there?

Finny Kuruvilla: Yeah, the space thankfully has come back a lot since we spoke last, and it’s been really good to see that we’re starting to come out of some of that very fearful capitulation that was happening, particularly in the October 2023 time period. So it’s been nice to see that. I still think we have a long way to go to come back to even be average. So we have this odd situation right now where the so-called Magnificent Seven, Meta, Amazon, Google, those types of companies are trading at very rich multiples and very lofty valuations. But we’re still in the situation that a lot of those smaller cap, more capital intensive industries like biotech are still considerably lower than they would normally be valued. And so that’s a first observation there. Second observation, I would say, is that on the innovation side, it continues to actually accelerate. And so even in the last couple of months, there have been a number of significant advances on the obesity front. So we’re closely watching this field. I think everybody knows now about [….] and all that. That’s just the very first gen medications. Those are injectable. We know that those medications have pretty serious liabilities, chief of which is that when you lose weight, you lose both fat and muscle. And it’s widely appreciated that you don’t want to be losing muscle mass in the same way as losing fat. But that’s what these medications do, is they’re dropping both together. There’s some very interesting innovations that are happening there where it’ll still take some time to work out a lot of the details, but. I’m confident that over time, we’re actually to get to medications that are going to be actually enhancing or at least stabilizing muscle mass, and it’ll be selective loss of fat. So that’s a pretty exciting development that is still in the clinical trial stage, but it’s something that we’re actively investing in. Another highlight here that I’d like to touch on just briefly, because I mentioned this last time, was we talked about this Car-T concept, which is to remind everyone that is. But Car-T is basically a way where you engineer your own immune cells to attack cancer cells. And I told the story of a little girl named Emily Whitehead, who was the first pediatric patient ever treated with one of these Car-T approaches where basically they do a blood draw, they take out your immune cells, they infect your immune cells with a virus in a dish, and that virus retrains your immune system to attack the cancer that’s inside of the body. You grow up those cells and then re infuse them back into the patient. And I told that story about her and she literally had her leukemia. She was going to die. She was on her way to go to hospice. And within 23 days her leukemia disappeared after receiving treatment. So that has now been extended. And this is like hot off the press just last month. So February of 2024, somebody said, hey, maybe we can use that technology to go and attack the cells that are creating autoimmune disease and in particular the disease called lupus. And they published in the New England Journal of Medicine, which is the top journal in the medical world that they were able to induce these patients into remission for one year. No disease, no steroids. It’s pretty amazing that now we can train the immune system to attack the bad cells of the immune system that are causing these autoimmune conditions. So it’s not FDA approved yet. It’s it’s still in clinical trials. And so we’ll hope that this crosses the finish line. But how exciting is that? I mean, just amazing. And then just last week. So again very hot off the press just down the street [….] At Mass General Hospital right here in downtown Boston. They use that same technology for brain cancer. So brain cancer is one of the more deadly forms of cancer that’s very difficult to treat. And what we know now is that this same type of therapy, works not just for liquid tumors like leukemia, which is what Emily had, but now we’re seeing it work for solid tumors as well. So again, it’s early stage, not FDA approved, but incredibly exciting here. And so we are in and I think what is easily characterized as the golden age of taking immunology and harnessing our immune system to address very serious diseases like cancer and autoimmunity. So I am just thrilled to see this innovation that’s happening at a very brisk pace. And my full hope and confidence is that as this accelerates, we’re going to get more and more of these therapies that cross the finish line to FDA approval, and our health care is going to continue to get better and better. So very exciting days for us here in the biotech and health care world.

John Coleman: Man, I always leave these conversations like very encouraged. Finny not all of our investment topics are quite this encouraging, both in terms of, you know, it’s such a natural intersection with this idea of human flourishing. Right? And even, you know, even when I like, think about the New Testament in such a simplistic and stupid way, a lot of what Jesus did when he was working miracles was helping people with their physical ailments, right? As almost an analogy to what could be done for the soul. Right? But also to just care for people physically here on earth. And you get to work in a space where that’s the goal every single day for everyone who’s working in this market is to try and make human life better. Maybe that’s a nice way to transition into the way that you guys think about faith and values in the context of the portfolios that you’re building. Again, there is this natural intersection with human flourishing, particularly in health care, which you’re so focused on. But how does Eventide think about the incorporation of values? Think about the promotion of human flourishing investing that makes the world rejoice in the context of your portfolios. And how are you all thinking about innovating on that every day?

Finny Kuruvilla: Yeah, it’s a great question, John, and it’s something that all of us who work in asset management, in any kind of faith driven way, ought to be constantly challenging us to. We would all concede that we’re in the early days of figuring all this out, and we’re trying to develop frameworks that are better and better and stronger and stronger, that respond to all of the dynamism of the markets. And we all know that markets are living, breathing animals, and we better be responding as well and sharpening our tools and our ethics. There’s a lot to be said here. There’s both issues, specific areas that we’re investing a lot of time in. And then there’s frameworks and heuristics that we’re trying to refine in terms of how we look at management. So. On the issues specific side of things. There’s a lot of talk right now about IVF and stem cells, all that which is in the news. And how do we bring pro-life values into these questions here. So we’ve been doing interviews with different ethicists. This week, in fact, I interviewed a well-known ethicists on the issue of life and how to think about that. I would say a lot of people who would say that life begins at conception. Haven’t thought very deeply about the implications of that. For example, stem cells and IVF, things like that. So we want to be really good and sharp in that. It’s an area where I think we’re probably just underdeveloped in general. We collectively the church are underdeveloped in general there. So there’s issue specific sets, and we would like to hopefully put out some whitepapers and videos as we learn more about how to hopefully elevate the whole field and community with us as we learn together. And then there’s the framework and heuristic side of things. How do we take our own learnings and bring that to bear and how we assess, for example, management teams or how different companies are interacting with? Save the environment or broader society, even the environment. We have a fantastic panelist here who covers energy. And how do we think about, as Christians all the questions around pollution and carbon and all of that. And it’s of course a huge field here, but we need to have views on that. And it’s easy to be reactive and to say, well, you know, this group over there, they’re hyper concerned about carbon credits or what have you. And they’re maybe not like minded to us in terms of some of their values. And so they must be wrong. So we’re going to go to some other side. How do we come up with good values here on some of these and good heuristics around what does it look like to be responsible with respect to some of these environmental questions? And I think that we’ve done some fantastic work even in the last six months, I would say especially probably be a topic of a whole podcast to get into some of the innards of that. But we’ve been investing quite a bit of time and energy, and to being able to assess our company well in terms of how they are interacting with the environment there. So those would be two of the areas that we’re refining and improving on.

John Coleman: Yeah. One of the topics you touched on, and I know there a lot of folks prefer this avoid embrace engage framework. There are a bunch of different frameworks. I think they’re helpful. But you know, there are different ones that work. We’ve been thinking a lot more about this engagement topic, which you’re highlighting, which is, you know, we have the ability, particularly in public markets, I think, to speak into societal wide questions, both generally, as you mentioned, through thought leadership, but specifically through the shareholding that we have in companies. Right, which has been a focus for us on the public equity side. The price for that is, I think you have to be really excellent at what you do to build a voice on the engagement topics from an investment point of view, which is why I think Eventide almost has the permission to speak into these. It’s what we’re seeking to cultivate as well. But I think my observation is that in cling more to the avoid side of the spectrum, historically, Christians have often missed an opportunity for what I’ll call constructive engagement. We’ve been willing to beat up on topics aggressively, but we haven’t been willing to engage in the really thoughtful debates about these topics to articulate a cogent perspective. And, you know, this idea of stem cells and IVF, for example, is one where there are obviously a huge number of well-meaning people on different sides of this debate who are going through extremely difficult life circumstances. Right. This is not a light topic and apart from it maybe the Catholic Church, which has actually articulated some principles around this in a reasonably thoughtful way. I think many of those of us in other branches, as a church, I’m a Protestant, have not been as thoughtful about our intellectual positions. And so I think one of the things I’m encouraged about that you’re talking about Finny, and even your own personal thought leadership that I hope others will take up, is how do we lean into these big issues of the day in the areas in which we’re investing, and be thoughtful about articulating a cogent set of principles for human flourishing around those, as we are our investment thesis. And I think if the great investors in the Christian worlds could do that, our ability to influence culture in a positive way would be enhanced greatly.

Finny Kuruvilla: Yeah. I will say a couple of things on this. And like you, I’m not a Catholic. I have a lot of respect for the Catholic Church, but I’m not personally one who would be considered as Roman Catholic. It’s something where one of the things that I have seen, that they have done well, and they could teach the rest of us some good lessons, and especially those of us who work on the investing side, is they have a way of thinking that I would call maybe more historically aware and more of a sense of building on that what’s come before us, you know, some of the times because of a false understanding of sola scriptura, it’s not actually legit it’s sola scripture to say the Bible is the only authority. True sola scripture says the Bible is the only infallible authority. But there are plenty of other authorities, hopefully the pastors and teachers in your home, your parents. We read books. We listen to people online. I mean, there’s varying levels of authority here. The correct understanding of soul scriptura, which I do subscribe to, is that the Bible is the only infallible authority. And I think sometimes because we’ve misunderstood sola scriptura, we believe that we kind of have to like, reinvent the wheel or just like read the Bible and come up with something, you know, spontaneously, as opposed to what’s actually a more faithful understanding of the Scripture, which the reformers and the radical reformers and everybody pointed to, which is that Scripture is the only infallible authority. But we are fools if we don’t try to learn from those who come before us. And I think that’s where the Catholic Church is, ahead of the Protestant community, in the sense that they’ve learned and they’ve built and they’ve developed frameworks and pressure tested them. And that’s something that I want to see more of in the Protestant world in general, is us give more thought to, hey, let’s learn from those who’ve gone before us and not be so chronologically arrogant that we believe that. We’ve got it all right. And everybody who’s gone before us hasn’t thought through those issues, because they have. There’s been very, very good work on these issues before us. And I think first, to make the investment of time to read and understand well what those who’ve gone before us have done and said is step number one, noting. Step number two is to somehow put together as best as we can and memorialize our understandings and whitepapers and podcasts and different discussions so that we can continue to move the ball forward in the process. And world is occasionally done that the Chicago statement would be an example of that. And biblical inerrancy is an example of where people will come together and put together these working group statements like, hey, this is what we think inerrancy means. And and even that will get revised and pressure tested. And that’s not violating sola Scriptura. That’s actually honoring the forefathers of the faith that have come before us. And so I think those will be some of the challenges that I would give to the investing community.

Richard Cunningham: Man, this is awesome. Do you guys riff on it? Kind of reminds me in ways where, hey, I’m the individual investor right now listening to you guys riff on this and it’s like, I wish I had access to John Coleman or Finny Kuruvilla on my shoulders. I’m thinking about the investment decisions I’m making, and I think eventide put out this post about engaging with Pinkston to interview Christians out there. And it’s just I think the push to everyone is, hey, you can engage with your advisor on these topics, and I think your survey results said 63% of Christians have never discussed values based investing with their financial advisor, even though 88% want to align their investments with their values. And so I think, you know, before we close here and FInny talk about what you’re kind of learning in Scripture, I think it’s just a great push to the every day and faith driven investor or the advisor out there to say, hey, these aren’t conversations that you have to reserve. Just to John and Finny on the Faith Driven Investor podcast, these are things you can lean into and your next kind of financial advisor update meeting.

Finny Kuruvilla: Yeah. The other part of that survey was that 62% of Christians are willing to make a switch to another adviser who offer investments that resonate with their values. And so it’s hopefully a wake up call that this is a time where people want their investments to be in line with their values. And you might even lose business as they go to another firm or individual who can speak to their heart values. Their most investors are more interested in those higher level conversations than they are hearing about beta and alpha and sharp values and things like that. Like that’s not necessarily where people’s hearts out. Of course, everybody wants competency. People want to know that their finances are being deployed and invested in a responsible way. But I think where the faith driven community, including the financial advisory community, ought to step up is to say, like, let’s differentiate ourselves from the robo advisors and everybody else by being able to engage at a heart level with some of these issues that are very, very important to clients.

Richard Cunningham: Yeah, that’s so good. Good words. Well, Finny, take us home. What’s the Lord been teaching you in Scripture lately? Maybe for you. All of team Kuruvilla and your wonderful family would love to hear that.

Finny Kuruvilla: I love this question, and I really appreciate that you all end the podcast with this question. Yeah, I’ll give you a short distillation of one of the themes of the last as a year of my life, but I went to a seminar. It was an all day seminar a few months ago that was put on by a group that specializes in going into hard situations where there’s been some kind of a breakdown, a church split, or a business that’s falling apart as a Christian group. And they go in and they do about 30 of these engagements a year, and they go in and try to mediate reconciliation, healing and unity to where there’s brokenness. And I’m in my late 40s right now, and I have sadly been watching a lot of my college friends go through divorces and a lot of hard experiences there. It’s sad to watch, and these are people who are in the church and know well the teachings of Scripture here. One of the things that I’ve learned is that. True conflict resolution and true unification of the church and families is a skill. It’s not something that comes naturally to any of us. It’s something that we need to be trained and prepared. And again, I wish I could talk about this for a lot longer here, but just very, very briefly. We are supposed to be the ministers of reconciliation. That’s our job description, if you will, that Paul uses in second Corinthians is that Jesus even says, blessed are the peacemakers, for they will be called children of God. How do you know that we’re children of God? The children look like the father, right? They look like the parents. They had the same skin color, hair, all that. Our resemblance to the father is that we’re supposed to be agents of peace. Because the father brings peace to the world. That’s supposed to be one known for. Unfortunately, it’s not usually the case. That’s what people think of reflexively. When they think of the Christians. They often think of divisions and splits and fightings and all that. And I am more and more convinced that because it’s a when not an if we’re all going to be having conflict in our organizations or families, etc., this ought to be a skill that is part of Christianity one on one, and we ought to be pressing so far into this that you can’t be a person who’s been sitting in a church for more than a year or two without having gone through some kind of formal, rigorous training on this. I know that sounds like a bold claim, but I really believe it. And that as I’ve gone through this training and read a book on it and really had my eyes open to the fact that here I am, in my late 40s, being raised in the church, that I hadn’t gone through this. And as I’ve gone through this, I thought, wow, I could have had a more successful 20s, 30s and early 40s had I had these skills in my tool bag. And there are very much learnable skills that require growth and challenge. But I think this is one of the great needs of our world today, is to have the Christian community rise up to the challenge of being peacemakers and ministers of reconciliation, and treating it like a discipline, just like we would treat any other discipline. You don’t learn naturally medicine, you get mentored and trained, and that you have to go through classes and exams and all that. It’s the same thing with this. Maybe not as daunting as having to go through medical school, but it’s a skill that we need to embrace there. So I’ve been thinking a lot about that and how we and the church ought to be much, much stronger on that and encourage that early on.

John Coleman: And I love that concept, and I know you’re talking about that at the individual level, but I even think at the social level, if you think about the instances over the last, you know, 30, 40 years where Christians were deeply respected for the work that they did, it was often in reconciliation, whether that’s Bishop to in South Africa, whether it’s the US civil rights movement where Reverend King and Andrew Young and others leaned into their faith and as a tool for reconciliation across differences. And it can be, you know, just such an inspiring thing for Christians to navigate.

Finny Kuruvilla: It really can. John. And let me just say one final comment on this. Jesus right after that says, you’re going to be the city on the hill, salt of the earth. They will see your good works and glorify the father in heaven. It’s through that kind of activity that the world is mesmerized with the power of Jesus, right? We live in a very broken, divided, hostile world. There’s poor dialog. It’s just it’s a mess. This is winsome. This is attractive. This is something that we can actually gain a social capital that we currently don’t have. So yeah. Amen to what you just said.

John Coleman: Finny Kuruvilla Eventide Asset Management. Awesome work you guys continue to do. Finny you’ve just been such a almost a founder in this space beyond even tide in such a pioneer here. I’m always humbled by your ability to reference scripture, usually in the original languages, which I know I definitely can’t do, I’m sure Richard can do, and it’s just such a blessing to our audience to have you on. Thank you so much for being here. And thank you, Richard, for hosting.

Finny Kuruvilla: Thank you John.

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In this edition of Marks on the Markets, Richard and John are joined by Bob Doll, the newly appointed President and CEO of Crossmark and a staple in the Faith Driven Investing movement. 

Each year, Bob outlines 10 market predictions for the coming months, and in this episode, he shares what he sees happening in 2024, how his predictions are looking after the first quarter, and how the election might affect the markets.

Episode Transcript

Richard Cunningham: You’re listening to Fate Driven Investor, a podcast that highlights voices from a growing movement of Christ following investors who believe that God owns it all and cares deeply about the heart posture behind our stewardship. Thanks for listening.

Hey everyone! All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies of securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard Cunningham: Well. Hello everyone, and welcome to another episode of the Faith Driven Investor Podcast. My name is Richard Cunningham. I have the joy of being on staff with Faith Driven Investor. And I’m your host today, joined, as always by one of our incredible mainstays in John Coleman, managing partner at Sovereign Capital. And John, if we’re doing a marks on the markets episode, I couldn’t think of someone better than newly appointed president and CEO of Crossmark Global Investments, Bob Doll, formerly the CIO of Crossmark for the last three years. Bob, I’m pretty sure you’re supposed to be retired as of 2021, but here you are having quite a busy last three years. What a joy to have both of you on the show. How are we doing, gentlemen?

John Coleman: Man, I’m just excited to be here with Bob. I mean, he’s someone I’ve known about for many years. Since my, since my last position in investment management had a lot of admiration for him over the years, the various firms he’s worked at, and, of course, just one of the best guests on a podcast out there. Bob, you’re on TV all the time. Everybody’s looking for your insights. We’re pretty fortunate to get him today. Thanks for coming on.

Bob Doll: Richard. And John. Thanks for those kind words. They’re humbling because we know markets are the great equalizer. If people aren’t, the markets certainly will, hit us across the face from time to time. So it’s a thrill to be with you folks and share things as we find them at this moment. On the retirement bit, I was eligible for retirement, so took retirement, but had no intention of retiring. Making the decision to move to a faith based money manager was a joy. And since I’ve done that, I’ve looked in the mirror literally several times and saying, what took you so long? So it’s been a joy.

John Coleman: Man. I feel the same way. Bob, you and I are in the same boat in that we spent most of our careers in kind of mainstream investment management organizations, and I’d say the last three, you and I came into this space about the same time. Actually, you came in just a bit after I did, I think. And, it’s been the most fun three years of my career, so I’m glad to hear it’s been the same for you.

Bob Doll: Sure has. It’s as I know you will agree. Yes, it’s a job and it’s a career and it’s investments, but it’s a ministry as well. And that is part of the joy for sure.

Richard Cunningham: Awesome. Well, for just anyone who doesn’t know Bob’s background though, you can look it up and it is quite detailed. This is a guy who spent time at Blackrock, Merrill, Oppenheimer, Nuveen and then to kind of paint the story for you there as a listener. Bob retired in March of 2021, but then it didn’t take long for him to join back up into the workforce with Crossmark Global Investments served as the chief investment officer for three years, and then now as the newly appointed CEO and president. Crossmark is a Houston, Texas based $6.2 billion asset manager investing out of the Stuart family of mutual funds across equity, fixed income, liquid alternatives and derivative income asset classes. And so it is some retirement you are enjoying, Bob, but what a joy to have you on the podcast. We are grateful the faith driven investor ecosystem is grateful. And so to kind of set today up because this is a marks in the markets episode. If you didn’t know Bob Doll every year does this amazing thing where he releases ten predictions for the upcoming year. And so coming into 2024, Bob released these ten predictions he had for the markets and kind of the broader economy for 2024. And, Bob, if I’m not mistaken, before I get into reading off those predictions and you and John respond to those and we kind of have some kind of commentary now that we’re one quarter into the year, what’s the story behind those predictions? Am I not mistaken that these started like 30 years ago or something like that?

Bob Doll: Yeah, I’ve done them for at least 30 years. Richard. You know, a blog I had at the time was doing it, got tired of it and said, Bob, you want to try this. And I’ve been doing it ever since. I think among the things that have given us some credibility is every quarter we write up how we’re doing and then get someone to score us at the end of the year. I don’t change them during the year. I’m not a strategist like so. Side strategists change their mind and evolve over time, so we live with them all year long. We get some right, we get some wrong. And, hopefully we learn from them.

Richard Cunningham: I mean, that’s awesome. I mean, you, John, and I all come from kind of the asset management space. So my respect and admiration that you do this is high because we know how leery compliance and marketing can be of predictions that get kind of put out there. And then you have to explain them. If they didn’t go, you know, perfectly correct. How did 2023 go before we go into 2024?

Bob Doll: Not great. I tried my worst. I think it was the third time I got only five right. You know? So I despair of the year when I get three right. Three out of ten and, you know, come here. What Bob says about next year, that’s not going to go over well. We’ve average. The good news is 72% over the many years we’ve been doing it. So the problem is we never know which seven out of ten we might get. Right. If we did know which ones, we could all make a bloody fortune. I guess.

Richard Cunningham: That’s incredible. Well, I mean, it kind of reminds me, I think I’m in, like, the fifth percentile in my March Madness bracket. So as we record this, it’s March 25th, Monday of Holy Week. This will be released after Easter in April. So I hope all of our listeners have a wonderful Easter celebration. But, you know, I’m down there in the March Madness rankings. But I believe these year’s predictions and we’ll show you just how astute Bob is. So I’m going to read off the ten predictions, and then we’ll dive in letting you to kind of respond where you are first, kind of feeling compelled by. So here are Bob Doll’s ten predictions for 2024. Number one, the US economy will experience a mild recession as the unemployment rate rises above 4.5%. Number two, the 2 to 3% inflation ceiling of the 2010 becomes the 2 to 3% inflation floor of the 2020s. Number three, the fed cuts rates fewer than six times suggested by the fed funds futures curve number four credit spreads widen as interest rates decline. Number five earnings growth falls short of the double digit percentage consensus expectation prediction number six stocks record a new all time high early in the year, but then experience a fade number seven. Energy financials and consumer staples outperform utilities, health care and real estate. Number eight. And this is a final one that will return to kind of Bob talking about his movement to a faith based asset manager. This is faith based share of industry AUM rises for the eighth year in a row. Number nine geopolitical crosscurrents multiply but have little impact on markets. And number ten the white House, Senate and House all switched parties come election time in November. So there are Bob Doll’s ten predictions for 2024. Bob, as you hear that, what immediately kind of jumps out to you and allow you guys some time to just respond to those.

Bob Doll: Sure comes to my mind is the theme that envelops all these, and then I’ll let John figure out which ones we want to go after. In particular, the theme is Goldilocks remains a fairy tale. What do we mean by that? Coming into the year and to some degree, still, the expectation by the consensus is that we’re going to get double digit earnings growth. That is, the economy is going to be good and earnings are going to grow nearly double the normal rate. But on the other hand, and at the same time, inflation is going to continue to fall and the Fed’s going to cut rates. At the start of the year, the expectation was six times. Our view is one side or the other or both get disappointed. Goldilocks remains a fairy tale. Or you can have your cake and eat it too. That’s the theme for these predictions that caused us since the beginning of the year and still now to be cautious. Not bearish, but cautious. We are in a momentum driven bull market, and predicting the end of the momentum is a fool’s game and therefore you ride the momentum. But you have, you know, short leash on the market or stops not too far below the market should, in fact, the high risks associated with PE ratios of 21.5 times be a concern for the market, which I think they will become at some point. So that’s the broad panoply of this, set of predictions.

John Coleman: Yeah. You know, as I think about that, Bob, if I think about my own position at the beginning of last year, I was probably a bit too pessimistic. I thought going into last year, the chances of recession were much higher. I thought the fundamentals of the economy were likely to deteriorate in a more substantial way. I didn’t think we’d hold as strong as we have, honestly, and I certainly didn’t predict that markets would rebound in quite the way that they did. Obviously a lot driven by the Magnificent Seven. And we’ve seen technology trends and we can come to that. Now it does feel like markets are potentially overshooting a little bit, or getting too optimistic that there is a little bit of a Goldilocks syndrome. And what I’m wondering is, you know, is the fundamental economy able to continue to chart a relatively positive course this year? Maybe not in line with the expectations that you’re mentioning, but at least continuing positive momentum. And there I tend to maybe have, maybe chastened by last year or more optimistic view, which is it doesn’t seem like we’re going to have a serious recession. You mentioned a mild recession here, and maybe that’s a place to dive in. It doesn’t seem like we’re going to have to dramatically raise rates anymore, although I am skeptical that we’re even going to be able to lower them at all, potentially the Federal Reserve. And so maybe as we dive into this, Bob, let’s start with the fundamentals of the economy. You’re predicting kind of a mild recession with unemployment rising, which is not where we are right now. I think we’re effectively below frictional unemployment right now, are below what you would predict for frictional unemployment. How do you see that beginning to kick in? And are there any early warning signs that that might materialize?

Bob Doll: Yeah. First of all, 4.5% inflation, as you know, is still a very low number. In fact, in the slides I used to back this up, I show long term unemployment rates. And four and a half is barely above.

John Coleman: Right. That’s right.

Bob Doll: As you, both probably know, when inflation has moved up one half of 1%, 5/10 following that has always led to a recession. We’re up 4/10. So there’s not much room left. Of course we can break the rule. Nobody sets their rules in the economy, in the markets. But you ask, what signs are we seeing? The unemployment rate has ticked up modestly. I think we will see more of that. I would point out, while the government measures lots of things, one of the things that they do not measure well is people working multiple jobs. Yeah, a lot of people that were working three jobs and believe it or not, they’re a bunch of people are only working two now. Many are working, two are only working one now, not because they’ve chosen to, but because the job is not available to them anymore. And what I would add to your good question is the bifurcation we’re seeing in the economy and with the consumer. High end consumers are doing just fine. They’re loving life. Stock markets up a bunch, their home prices up a bunch. And, you know, taking money off the table in those areas to live if they need to, which most of them don’t is quite good. Lower level consumers clearly struggling. Their Covid money is gone and there’s evidence they’re upping their credit card balances to live. And recently in the last month, evidence that they’re taking money out of their 401 case with a tax penalty in order to live. So, again, I don’t want to be a bear on the economy, but I think there are increasing number of signs. Maybe I add this, John, if I might. Most people, myself included, expected a recession last year begging the question why didn’t a recession happen? Yeah, I think there’s several answers one, most of us. I know I did. Underestimated how much the Covid cash kept the economy going. That is money that hiring consumers accumulated because they were in their pajamas for four months and didn’t go out and spend money, or at the other end of the spectrum, got a lot of checks from the government. Took a while to spend those. Second reason is even post the Covid stimulus. Last year, the government put a lot of money into the economy, more than most of us thought. And thirdly, and this is the one I’m still researching. Private credit. Private credit exploded kind of from a decade ago, almost 0 to $2 trillion in half that expansion in the last two years. Those three things provided so much cash for our economy. That’s mainly why we didn’t have recession. So yeah, we’re going to get a recession this year. Yeah. Who knows. I do think we will get a slowdown, perhaps a noticeable slowdown that will cause this double digit earnings expectation not to make it.

John Coleman: Well, and I think just in terms of the unemployment rate, Bob. And check me if you think this is wrong. I do think some of the deflation in in the unemployment rate or at coming down was related to a decline in labor force participation during Covid as well. And all of the trends that you just highlighted would lead us to believe that that will begin to take up again. People are burning through savings. They’re having to live more on credit. Those who left the workforce are getting impacted by higher prices and by inflation and by a real affordability crisis, not just an inflationary crisis, but in things like housing, you know, a real affordability crisis spurred by continued constraints in supply. And so it does feel like more people are going to get back in the workforce. Fewer people are going to be dropping out of the workforce. And unemployment is likely to increase, at least because of that. In addition to the idea that there may be some frictions in the economy spurred by artificial intelligence or by firms continuing to cut their workforces to kind of lean up for potential troubles that could cause that number to rise.

Bob Doll: I fully agree with all of your points. There are good points to me, and underscoring what you just said is a bigger picture thought Covid has stressed and strained normal relationships. So economists have really struggled because the rule book does not include a pandemic and the experience pattern. So it’s really difficult to understand sometimes what these relationships are and what they have done and what they might do.

Richard Cunningham: Up in real quick. Bob, one of the predictions is prediction number six. Stocks record a new all time high earlier in the year, but then experience a fade. We are once again recording this at the end of Q1 2024. Has that checked out? Too early to tell to my knowledge, feels like things have been marching on and everyone’s kind of sitting there. As you guys have alluded to, scratching their head at the momentum that’s at play.

Bob Doll: Yeah. You know, the jury’s still out. We don’t know if the stock market continues straight up for the rest of the year. We’ll have to mark this one wrong. But my guess is at some point here in the first half, our guess might have been the first quarter, although we didn’t state that explicitly. We see a high for the year and then a fade. And it doesn’t mean a big bear market necessarily. And I come back to earnings probably aren’t going to make the double digit percentage gain. And we’ve already moved from six down to three expected fed cuts. And some people now are moving to two. And they’re even some people say we’re not going to get any and all of that for a PE of 21.5 times, you know, if the PE was 15 or 16 or 17, I might say that’s okay. But when PEs are, you know, in the 20s, I’m an old man. I’ve only seen PEs over 20 – 3 times. Tech bubble, Covid and now and the first two times the outcome wasn’t pretty. Let’s hope it’s different this time. But valuation when it’s this high demands almost perfection and we don’t have perfection. There are a lot of flies in the ointment.

John Coleman: Can we talk about. I do want to circle back to this idea of the interest rates and inflation in a moment, because I think, you know, that’s an important topic to touch on. But one of the things we’re monitoring. If you go one click below in the market right now is this divergence between the Mega-cap stocks, especially the Mega-cap technology stocks and small cap and mid-cap stocks. And you mentioned this price to earnings ratio at 21.5, I think was what you were talking about. And obviously that’s substantially higher for some of the Magnificent Seven or those that have been driving markets right now. For those not as familiar. There’s a group of stocks that people refer to as The Magnificent Seven lately, which is almost always a harbinger of doom. I think when you get a label like that, but includes firms like Nvidia, meta, Apple, Amazon, these big technology players that have rapidly grown, that people view as safe technology stocks with really strong earnings and revenue that have been almost all of the upside performance of the S&P 500 from an asset weighted perspective recently. And those mega caps have diverged quite substantially from the small and mid-cap stocks. What’s your perspective on that and how sustainable is that? I know on our side, we’ve been predicting that small and mid-cap have to make up some of that difference at some point, seeing that there has to be more of a return to norm. But these mega caps keep running. What are you seeing right there? What do you think might happen?

Bob Doll: You know, several observations. First of all, November, December when we got the big fed says I’m done quote unquote rally. We got a good broadening in the market and down cap or equally weighted portfolios or small cap certainly did better than we come into the new year. And it fades again. So we’re having this tug of war of late last few weeks. Small is doing a little bit better again. I agree with you. For the market to be sustained to the upside, we need more broadening, which we very well might get. And where I thought you were going, and worth pointing out, is the PE of the 493 in the S&P, those seven is lower, noticeably lower, but still not low. And that reminds you when people bring that up is you know, the stock market is always cheap. If you take whatever the bubble is out of the bull market, you know, he will do that all the time. So I tend to look at the overall and then understand the differences inside. To The Magnificent Seven. John, we’ve obviously seen some splintering. Tesla has been an awful stock. It’s had some fundamental problems and some valuation compression. And my guess there’s more to come. Apple Amazon. Those stocks have flagged a bit. They’ve broken some technical uptrend lines etc. so it’s no longer monolithic as it was for much of last year for the Magnificent Seven, which I think is healthy for the market, meaning we need that broadening to take place. So I think that, look, technology and AI is certainly among the reasons the stock market has done well. It is among the reasons bulls on the economy think it will do well. And look, AI is making a difference. It will continue to make a difference. But I wonder a bit if the stock market’s not overdone that theme.

John Coleman: You know, maybe we could touch on this topic of interest rates and inflation really quickly because inflation has come down, although it remains persistent. And the history of inflation tells us it’s always more persistent than we think it will be, or it’s almost always more persistent than we think it will be. And count me among those who thinks the likelihood that we don’t get an interest rate decrease this year is pretty high, that actually the fed has to maintain rates, I don’t know that they’ll have to raise them, but they’ll have to maintain them. And the only thing that causes me to question that a little bit is the possibility of political pressure headed into an election season where the fed will be under enormous pressure to keep the economy humming, rather than allowing it to slip into a recession because of the electoral process. Say, a little bit more just about what you think will factor into the Fed’s decision of whether to raise or cut rates or hold them steady, and whether you think inflation is actually kind of stamped out now, although it may stay a little bit higher or whether there’s real danger.

Bob Doll: So let’s put some numbers on it. As we all know, headline inflation got to 9%, core inflation to about six. Let’s stick with core inflation. Core inflation has come from six to just under four. Remember the Fed’s target is 2. It’s a lot easier to get inflation from 6 to 4 down two points than it is 4 to 2. Two more points. So I like you, John. I’m dubious. I don’t think we’re going to get to 2% inflation. If we do, we will be in a recession. Now, can it go a bit lower? We’ve just had two months of disappointing inflation numbers. Many economists argue that that would happen. And maybe that’s ending. And now we’ll begin a downdrift again. And I’m in that school. But I think we’re not going to get below three. And look is there a big difference for two and three for interest rates and PE ratio. You bet there is for the economy to some degree. It will the fed get it to three and wave a checkered flag and say yeah it’s close enough. That’s not out of the question. You know the dual mandate is firmly in their mind. Keep inflation under control and watch the unemployment rate. So like you sounds like doubtful. We’re going to have many if any cuts this year. The fed would love to cut rates for a whole bunch of reasons. And with foreign central banks beginning to cut rates, the pressure will be more from that on the fed than it will be from the politics of the U.S. election, in my view. So fed funds rate probably a little lower at the end of the year, but not much.

Richard Cunningham: What about looking at things like geopolitical crosscurrents? You know, we’ve seen, you know, a pretty devastating headline in Russia. And what could that result in, in terms of just tensions and disputes kind of in foreign markets? What does that looked like in terms of what’s going on here in our local economy, but also on a global level?

Bob Doll: It seems like every time you make a list of geopolitical issues, every 2 or 3 months, it gets a little longer. So why is that happen? My thesis is because the U.S. has lost hegemony. My analogy, is like way back when when you went out at 10:00 in the morning for school recess, you had 15 minutes to go play on the playground. It was the three of us. And John’s the big guy, the bully. We hold back a little bit from our misbehavior, because we’re just a little worried about how this bully might react. Conversely, when there’s no bully on the playground, everybody does what they feel like. And that’s where we are. The world is a messy place. And yo, Russia of late. And where did that come from in the U.S.? Warns Russia? I mean, it’s just an amazing and complicated world. So I think that list will continue to grow. And so far it’s not affected markets any way at all. A lot of the reasons, because the guts of the economy has not been touched. Take the Middle East. People said, oh, conflagration in the Middle East. Oil prices are going to go through the roof and the economy is going. That didn’t happen. And it doesn’t mean it won’t happen at some point. But most of these things have been contained not to affect the economy of the world, and therefore markets have been fine.

John Coleman: Yeah. You know, I think this is super fascinating, actually, because we’ve had these two proof points in the Russian invasion of Ukraine as well as in the war in Israel, obviously, the terrorist attack in Israel and then the war in Gaza. And they have been contained to those regions. Right. By and large, I mean, there have been some impacts. Part of that is I think world energy markets are a bit more stable, especially with the US energy output being so high right now. I would say the one conflict I think that could throw the international markets into more disarray would be if something happened with China and Taiwan. I don’t believe there’s an incredibly high chance of that. But because of the Taiwanese centrality to processors at the moment, because of the role those play in artificial intelligence and in a lot of the other operations that we’d see. And to your point, the US losing hegemony, we really live in a bipolar world right now between China and the United States. I think Russia is a player. You know, there are other players, but if you think it’s superpowers, it’s really the United States and China at the moment. Absent that, I think I agree with you. I don’t think these international conflicts, unless something super dramatic happens, are likely to play a role. I do want to get your thoughts on domestic politics, because obviously that tends to have a much bigger role in markets. I’m interested in the switch parties comment because we have a one seat Republican majority in the House right now. That obviously could be expanded in November. It could switch. We’ve got a strange white House race right now where there’s broad dissatisfaction with both major candidates, honestly, particularly because of the age issue. And the Senate, structurally, is the one that looks a bit more straightforward in that it’s a friendlier GOP map than Democratic map right now, just in terms of the states and the seats that are coming up. Talk to us a little bit more about your prediction that all parties switch in November. I’m interested. Does that mean you think it’ll be a Democratic House and a Republican White House and Senate, or is it a is it a broad based Republican? And what’s driving that? What impact do you think that will have on markets if that materializes?

Bob Doll: Yes, I think we’ll wake up in November after the election. Republican president, Republican, Senate, Democratic House, all three switching. And that’s not just, you know, reaching into the air. Nine of the last ten elections in the U.S., we have booted out the incumbents. That kind of string has not happened since after reconstruction, which is a long time ago. We are in the mood in this country that whoever is in the chair. I don’t like him or her. I’ll take the other guy, the challenger. And so we’re booting regularly those folks out. Yes. You have to right the Senate. Given the GOP friendliness, I would put 70% chance that the Republicans take the Senate, maybe 75. The House and the white House are obviously much more difficult. I think with the number of Republicans retiring and being frustrated with the operations in the House, some of the demographics, etc., I think it’s, you know, 55, 60 that the Democrats take the House, the white House. Obviously, you use the word strange election. That’s one word I can think of. A bunch of others do. It’s a crazy world in which we live. And nobody wants either guy. You’re absolutely right. Look, if anybody strong or medium was running against, I’m going to use the phrase a doddery old man who has trouble finishing sentences and has a record on a lot of things that are suspect. You’d think that guy would be winning in a landslide, but not the case because Donald Trump has his problems just like Joe Biden does. So this probably goes down to the wire back, connecting this to the last subject about geopolitical things. Donald Trump has made it clear that if he gets elected, he’s going to put a 60% tariff on Chinese goods. That. It’s like a massive tax increase to Americans. And I think that could exasperate the domestic economy, not to mention the geopolitical issues that would come from that. So keep your eye on this space.

John Coleman: Well, and I’ll make one prediction that’s not on your list. That’s just perpetually on my mind. And then Richard can get us back on track with additional predictions. I actually think there’s substantially more weakness in China right now than people believe. I’ve been in China bear for some time, and part of that’s just a structural conviction that it’s nearly impossible to have a dynamic economy or political system as restrictive as China’s. They’ve tried to split the difference in having more of a free market approach to the economic system, with more of a totalitarian political system. And I just think that leads to a lot of stasis in the way in which resources get distributed in autocracies means that they’re much more fragile than we think. And I think there have been some early warning signs that the Chinese economy and political system is weaker than we think. Obviously, data is difficult to trust. That comes out of China at the moment. But if I had one prediction this year, I’d say over the next 12 to 18 months, I wouldn’t be surprised if real substantive weakness in the Chinese economic and political system begins to leak out. And then the way in which that manifests in the broader world, whether that’s hostility towards Taiwan, whether it’s domestic political turmoil, I’m not exactly sure, but I wouldn’t be surprised if we start to see that soon. Given what I think are some headwinds that the Chinese economy is facing.

Bob Doll: Richard, let’s add that is prediction 11. I agree with John. I’d, I just add two points. One, short term or this could last for a while is the real estate problem. Yeah. There’s too many 100 plus story buildings in China that nobody’s living in, and they’re financed on debt. I mean, how do you square that circle? And then the long term demographic problem. Demographers argue that China’s population at the end of this century is likely to be about half what it is today. Hard to fathom. You know, the one birth policy, even though it doesn’t exist anymore, has become a way of life. So the Chinese folks fewer get married when they do. It’s later in life. Many of them have no kids. If they do, it’s one. If you have two, you have a big family. Crazy.

Richard Cunningham: Well, John Coleman, let the record show you made the Bob Doll 2024 predictions […..]

Richard Cunningham: Well, gents, I want to. First off, a blast to hear you guys riff on all of this. I want to close here because, Bob, you’ve got this really compelling prediction number eight. And that is faith based share of industry. AUM rises for the eighth year in a row. So first off, I think it’d be fun to hear you kind of. Paint the picture of how that prediction is created, what we’re measuring like, you know, kind of what’s the baseline, what specific industry AUM is it just public markets, as you know, include private markets and things like that? I mean, just talk about kind of that trend we’re seeing in this faith based space that all of us are really passionate about.

Bob Doll: Yeah. It’s curious that folks that ask about this are not just people of faith. I have a lot of people go through these predictions and that’s where they go. Tell me about this one. So depending on who you talk to, most argue that faith based money management is 40 to $50 billion, which is a tiny little speck in the overall asset management industry. So we are part of a very small industry. But when you look at the market share of that total, well, it’s a very low number. It has grown seven years in a row. So the prediction is based on the fact that I observe more. And you guys, do too more and more people and institutions wanting to line up their investments with their beliefs, whether they’re faith based or not. And, that cause I think getting this one right is going to be like shooting fish in a barrel. I think this will continue to grow. And I think part of our collective opportunity and you both know this is education. A lot of people are not aware that this little sliver of the money management industry even exists. And when they do, light bulbs go on. In my three short years at Crossmark, one of my biggest surprises is a how much education we have to do of strong faith based people, and b how many non faith based people are willing to do business with us. And when I ask why, they say something to the effect that, you’re good people, we’ve been watching you. We trust you. Would you manage our money? Which is just a real joy and an opportunity and frankly, a mission field.

John Coleman: Yeah, what I add to that. So I think we’re both a little bit biased here, Bob. So it’s always, challenging to make predictions where you’re heavily incented on one side of the prediction. But I do think you’re right. I mean, I’ve been really encouraged. The growth over the last few years has been extraordinary. I think there’s more interest than ever in taking a hard look at the values of investments, partially because there’s been this reaction against a relatively monolithic set of values that had been a part of the industry that people are now questioning, and they’re taking a look at how their providers match up with that and whether they really reflect their values. So it’s just putting a ton of money in motion. And the faith based share of the marketplace is so small that there’s almost unlimited amount of upside right now to that asset growth. So I think all that works in the favor of growth in this faith based market. I think the other component of that is just the number of quality providers or the supply of faith based asset management that’s out there right now. I know Richard and colleagues at Faith Driven Investor have been central to trying to encourage people to get in the game, to try and get really good people in the game. And frankly, I think the more people like Bob Doll we have come over, the more that that increases the credibility of this space. I mean, you were a legend in your own right in the mainstream world, and the fact that you’ve contributed your talents and time to the faith driven world, I think, is exactly what we need across the board in multiple asset classes to just increase the quality and the reputation of the space. And the more that we have that, the more the supply improves, the more incredibly talented people move over to try and make this a priority in their own work. I think inevitably people will be drawn to the space and hopefully the performance of the space will warrant continued growth.

Bob Doll: Fully agree. And you folks have faith driven investors. Sovereigns capital more generally have been to contribute to that as well. You’ve educated people, you’ve brought people together, and we just need to continue to do that because, together we can grow the pie separately, will sub optimize our individual and collective opportunity.

Richard Cunningham: Man, that’s really well said. Yeah. There’s a lot of pie out there as John, you were alluding to. And so let’s not get so siloed in kind of our own individual lanes that we’re running in and just remind ourselves that, man, this is kingdom purposes here. What an opportunity. What a privilege. All right, Bob, let’s close with this. One of the questions we love to ask. And I’m sure we’ve asked that before, as I believe this is your third ever official FDI podcast appearance is just man, we’ve covered a lot of ground here, a lot of it, you know, rightfully sober minded in terms of just what’s happening across markets and across the world, but maybe share a little bit of encouragement with us in terms of what’s God has been teaching you personally, just whether it be in your work, in your quiet times with him, that’s folks. Tune into this post Easter. What encouragement might Bob Doll share about what the Lord’s been teaching him lately in his word?

Bob Doll: You prompted me on this, so I thought for a bit. And the simple but profound concept of God’s sovereignty struck me. It’s been ringing in my mind, in my heart, in my devotional life. My job, as you pointed out, the front end. You know I have more responsibility than I intended, asked for or wanted. God had a different plan. Family. We have three kids. Two walking with the Lord. One not the one that’s not having professed faith and a lot of fruit earlier in life, but walked away and my wife renewal time. Bob stopped trying to be God. God is sovereign. He knows what he’s doing and personally the same thing day by day. So that leads to greater peace, greater joy, which comes out of the peace and contentment that the day by day. He knows the future, and we just need to attempt to understand and walk in his will. And then God’s sovereignty just rings loud and clear.

Richard Cunningham: Amen. Well, friends, thank you so much for tuning in. This has been Bob Doll on a marks on the markets Faith Driven Investor podcast episode. Bob, what a joy and a privilege to have you on. Thank you for your incredible work, John. As always, thank you for being such a key part of this show. And friends, we’ll catch you next time.

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In this episode, John Coleman is joined by Tony Minopoli and Andrew Abela to explore faith driven investing in the Catholic world and in the Catholic Church. 

Tony is the President and Chief Investment Officer of the Knights of Columbus Asset Advisors. In that capacity, Tony oversees all elements of the investment strategy and operations for the Knights, predicated on nearly two decades with that institution and a prior career in investment consulting with the Valuation Associates. Through his role with the Knights, he’s also helping the Catholic Church more broadly continue to advance its thinking on faith based investing. 

Andrew is a professor of marketing and the founding dean of the Bush School of Business at Catholic University. In addition to a storied academic career, which we may delve into, Andrew has worked with institutions like McKinsey and Company and Procter and Gamble, published broadly, and as a leading thinker on faith based, faith based and principled entrepreneurship and investing alike.

The two join John to share about what it looks like for Catholics to engage in Faith Driven Investing both in the modern day and throughout history.

Knights of Columbus Asset Advisors: https://www.kofcassetadvisors.org/

Busch School of Business: https://business.catholic.edu/

Episode Transcript

Richard Cunningham: You’re listening to Fate Driven Investor, a podcast that highlights voices from a growing movement of Christ following investors who believe that God owns it all and cares deeply about the heart posture behind our stewardship. Thanks for listening.

Rusty Rueff: Hey everyone! All opinions expressed on this podcast, including the team and guests are solely their opinions host and guests may maintain positions in the companies of securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

John Coleman: Welcome back to the Faith Driven Investor podcast. This is John Coleman hosting solo today without my co-host Richard Cunningham, but with a very, very special episode. Today we are going to explore faith driven investing in the Catholic world and in the Catholic Church. And we have two extraordinary people to help us do that today. The first guest is Tony MInopolI, who’s the president and chief investment officer of the Knights of Columbus Asset Advisors. In that capacity, Tony oversees all elements of the investment strategy and operations for the Knights, predicated on nearly two decades with that institution and a prior career in investment consulting with the Valuation Associates. Through his role with the Knights, he’s also helping the Catholic Church more broadly continue to advance its thinking on faith based investing. Secondly, we have Andrew Abela with us today. He’s a professor of marketing at the founding dean of the Bush School of Business at Catholic University. In addition to a storied academic career, which we may delve into, Andrew has worked with institutions like McKinsey and Company and Procter and Gamble publish broadly, and is a leading thinker on faith based and principled entrepreneurship and investing alike. Andrew and Tony, we are really grateful to have you on today. Welcome to the show.

Tony Minopoli: Thank you. What glad to be here.

Andrew Abela: Thank you

John Coleman: Awesome. Well, to kick off, I was hoping that we could just level set a bit on what this looks like in the Catholic Church today. You’re each working on that in your own ways, in your different spheres. But maybe you could start off by just setting the table for what is the Catholic Church’s current approach to faith aligned or faith driven investing? And maybe, Tony, we could start with you and then you Andrew.

Tony Minopoli: I was going to defer to the professor among us first, but I’m happy to take a shot at it. You know, for us John, the key is, is that the Knights of Columbus is an entity. We don’t create Catholic doctrine. We never have. We followed Catholic doctrine very closely. And as a result, particularly for our investment strategy, we’re not going to talk about our funds individually. But in the sphere of managing a family of Catholic compliant mutual funds, we had an anchor to something, because among Christianity, there’s a wide different range of beliefs and acceptances among the different groups of Christians. But the Catholic Church, still 51 million people in the US claim connection to the Catholic faith. It’s in varying degrees, but within that church. And Andrew knows this better than I. There’s even a wide array of attitudes and beliefs, even among those that are supposedly in the more narrow defined Catholic faith. So as a result, we had an anchor to something, because the last thing I could do was try to explain, you know, well, we’ll do this for this here. What we believe this here that’s different. So we essentially work and we’ve worked very closely with Catholic view to take the teachings of the bishops and define them into investment rules, into a usable, screenable methodology to which to invest. But in a nutshell, and and Andrew certainly could speak more to this in broad terms, things to do with abortion, contraceptives, embryonic stem cell research, human cloning, weapons of mass destruction, things of like cluster bombs and landmines, things of that nature. Pornography doesn’t really come in. There’s not many opportunities to invest in pornography in the publicly traded market. So that really doesn’t weigh in. And then for profit health care that really pays for any of the others, I would say from a practical matter. And I’ll end on this hand it to Andrew, is a practical matter. The things that we run into most often, whether we’re managing the Knights of Columbus assets or the mutual fund assets, are things to do with abortive action and contraceptives and an embryonic stem as it relates to biotechnology. Those are the real sort of places we can delve into this more as we chat today. But I would say those are the areas where you run into the most things that you have to review. So, Andrew, I’d turn it over to you for your view on that.

Andrew Abela: Thank you Tony. Yes, everything Tony said. And in terms of what’s driving our interest now, about 20 some years ago, the Conference of Bishops, which is the group that brings all of the Catholic bishops in the United States together, published their kind of guidelines on faith based investing, and then they updated those in 2021. The first set of guidelines was mainly about excluding the kinds of stocks that Tony was just talking about this time around this in 21, they also asked the faithful to not just exclude stocks that would be compromising, but also to exercise your votes and to engage with management to try to kind of move people in the right direction. And so there’s a big conversation now about how to do that. So Tony and I have been working together with a few other asset managers to figure out the best way to do that, the most practical way to do that, and that is the state of the art. I would say at this point in the Catholic investing world.

Tony Minopoli: Andrew would it be worth, maybe if both of us took a second? And the most recent white paper, the main summum bonum white paper that came out for the […] So John, one of the […] within the Vatican, wrote a paper, and I had forgotten all the Latin I learned when I was in Jesuit prep school. But then summum bonum, which translates to the good measure, was a paper that came from the […] of Science within the Vatican, and really took this notion of investing in a way that is not detrimental to the environment, investing in a way that is helpful to the less fortunate. Also engaging it’s not just about negative screening, and that is a lot of the work that Andrew is mentioned, that we’re teaming up together with some other really fine professionals is how best you engage, you know, the proxy voting, which any shareholder can think about. But do you do a, you know, a shotgun approach of just carpet bombing letters to all these CEOs, or do you really try to get engaged in meaningful engagement with individual companies? I think most of the people involved at that conference and involved in this thought process are not so naive is to think that they’re going to move publicly traded companies into the realm of acting like good Christians, but if we could just get them to be neutral. Right. Sell your product, sell your service. But don’t be antithetical to Christianity. From my corner, I think that would be a win. And there’s a lot of companies that go a lot further and are espousing things that are sort of antithetical to Christianity. So this was interesting because to my knowledge and Andrew, please correct me. This was the first time the Vatican was as sort of forceful on this topic by issuing the main summum bonum and white paper. So just another thought to add into the conversation, John.

John Coleman: Yeah. And, you know, there’s a parallel conversation happening in the faith driven investor movement that we’re most familiar with that’s exemplified by this podcast. And people frame it a couple of different ways. And then, Andrew, maybe you could react to some of this one. It’s a very simple framework that a lot of folks use, which is avoid, embrace, engage, avoid being more negative screening, embrace means positive screening or leaning into certain thematic things, which Tony might even be environmental concerns like you just highlighted. And engage means even where something’s not explicitly faith forward or positively screened. Since you have a voice as a shareholder in that company, how do you encourage positive movements in that company? Something we’ve seen lobby for quite a lot lately, for example, or adoption benefits in the midst of the noise around abortion as a topic, you know, how do we encourage companies to include adopt adoption benefits in their health care? Another framework we’ve leaned into a bit, trying to span both public and private markets is exactly what you highlighted. You’ve got negative screening. You’ve got positive screening, again, where you do thematic engagement according to something you think is redemptive, right? A redemptive purpose either in public or private markets. The third we talk about often is cultural formation. So as private equity investors or venture investors, we often have an opportunity, not just invest thematically, but to lean into the actual culture and operations of business, to shape it in a way that’s more faith aligned, which could include the supply chain, making sure that that’s properly accounted for and handled appropriately, including chaplaincy in the company or organization, employee resource groups that are religious family friendly policies like maternity and paternity leave, adoption benefits. But you get to shape a culture in a way that encourages human flourishing. And then we’ll often talk about all of those can be done with a high return. But there is this concessionary impact space right where you may choose to engage in things like Microlending or, we’ve seen charter school financing, for example, in the US, where you may trade off some return in order to engage in something you find particularly redemptive. So it sounds like the Catholic Church is having a debate right now about the various ways you can positively lean into faith and investing. That’s very similar to the one that we’re seeing carried out more broadly in Christianity. But, Andrew, I don’t know if you’re seeing some of the same things that we’re talking about now in the research that you’re doing.

Andrew Abela: Yeah, there’s a lot of parallels. And in fact, the parallels are such that I’m so glad we’re having this conversation, right. Because we just need to work together more. What we have heard from, CEOs and executives is it’s helpful to them to receive the countervailing pressure from our side. So, as Tony said, even if we just get folks to being neutral on the cultural issues, that’s a big win, because too many corporations have been advocates for a very sort of secularists kind of anti-life perspective. And so kind of pushing back against that. And the more we can be kind of working together, I think that really helps. The, employee resource group movement has become really strong. We’re happy to host every summer since its initial launch about five years ago, the Religious Freedom and Business Conference, which is the annual gathering of all the leaders of the ERGs that are focused on religious liberty. And so it’s like a very ecumenical gathering, not just all flavors of Christians, but also Muslims and Hindus and so on, just arguing that corporations need to make space for people of faith in a corporation. Which I think is a very positive move. I know that, John, you and I have had this conversation already about the role of virtue in the workplace, a very Christian idea that is nevertheless rooted in Aristotelian philosophy and so accessible to pretty much any thinking person, you know. So this is another area that we want to encourage and help, because I think it’s not just our society, but our corporations are realizing the consequences of living in a post-Christian world where things we used to be able to take for granted, like basic human decency, honesty, and so on just seem to be eroding and need to be those back. So I think this is an opportunity for people of faith to say, hey, we have some good ideas here to share.

John Coleman: So would you say a bit more, Andrew? And then I’m going to come back to you, Tony, about this concept of virtues, because we also have the faith driven entrepreneur organization that we work with. And it’s we talked about we have a very strong belief that for the performance of a company, culture is the greatest competitive advantage in business, that top performing cultures will regularly outcompete others in the marketplace, something that’s been affirmed by research from McKinsey and company, from the London Business School and others. And we think that this idea of virtues and values in a business are essential to that culture. Say more about what you mean by virtues and why that’s different than values in a business.

Andrew Abela: Yeah. So we make a big distinction between values and virtues. So many businesses talk about their corporate values, but values are just talking the talk. Whereas virtues are walking the walk. The virtue is the action or particularly the habits specifically. So you could value honesty, for example. But to have honesty as a virtue means you’re in the habit of always acting with honesty, always speaking the truth. To have self discipline as a value is one thing, but to actually be in the habit of acting with self-discipline is another thing entirely. I remember so I was last at McKinsey 25 years ago, so it’s been a while. But even back then we were talking about the power of corporate culture as a competitive advantage. You could imagine a corporation’s, we often referred to it when we were talking to our students, the set of human virtues as the human operating system. Right? Particularly the four big ones, the cardinal virtues. So practical wisdom or prudence, justice, fortitude or courage and temperance or self-discipline, those four together make up, if you will, a sort of a human operating system. And just like the operating system on your iPhone, if you don’t updated regularly, things start to slow down or not work or crash, you know, same with human beings, same with a corporate culture. If a corporate culture has a particular vice or defect, and I say a lack of honesty or a lack of justice, then that’s going to undermine pretty much everything that the corporation tries to do. And the execution of your strategy could be terrific, but the execution is not going to be as effective because you’re missing an essential part of human flourishing.

John Coleman: I love the way y’all are approaching that in the intellectual history. For nerd like me, dating back to Aristotle and the discussion of habits and virtues, and obviously to the Israelites before that, I think it’s so incredibly rich. Tony, I want to dig into the Knights a little bit more, if you don’t mind. One, I would love for you to just tell people who are the Knights of Columbus for those who aren’t Catholic and what’s the history? And then maybe secondly, dovetail into what does this look like in a portfolio as large as yours? How do you just think about tactically bringing this in to the work you’re doing in asset management?

Tony Minopoli: Sure. So without reading all the pages of history, the Knights of Columbus was founded right here in New Haven, Connecticut, in 1882 by, Blessed Michael McGivney. In our world, in the Catholic world, blessed means he’s one miracle on his way to his second miracle of being canonized a saint. And on another podcast, we’ll talk about those. But father McGivney started this because at the time, there were a lot of Catholic men in the area that were building a lot of the infrastructure and a lot of blue collar folks that were dying and leaving widows and orphans. And as a man of action, as a young man in his 30s, he thought he would create this organization that started off literally as a mutual benefit society. And we became what you would call an actuarially based life insurance company, probably around 1900 and 1901. So we now boast over 2 million members worldwide. We’re the largest Catholic lay organization in the world. We have about 1.4 million members in the US. It’s our biggest jurisdiction and we’re basically men of service. So the thought processes is that we work in our local communities to provide charity. In a typical year from the parent, we will donate about $40 million to a variety of charities, our subsidiary councils. We have 10,000 councils here in the United States, but our subsidiary councils collectively donate about 140 million. So across the order, it’s about $180 million of actual dollars pre-COVID. And now we’re working back up to it John. We were donating as a fraternity north of 70,000,000 hours of community service. So we’re now knights of action, I would say as well. So I’m very proud to have been a knight since 1994. I joined the company in 05, so I didn’t become a knight for the expediency of a job, but I was very swayed by the work that we do. The general account for the Knights of Columbus on a market value basis, about a $27 billion portfolio. Right outside of my office is our bond trading floor. We manage about $25 billion of fixed income. We have our equity team up in Boston managing north of a billion in equities. And we have followed the USCCB teachings for longer than I’ve been here. One of the things I brought to the Knights when I was an advisor, I served when I was in evaluation Associates. The Knights were a client, which is how I ended up getting here. But one of the things I brought was to bring a bit more rigor to how we screen company. So we brought in a third party to help us decipher the USCCB teachings and to develop screen lists. We now work with a professor, Professor John Grabowski from Catholic You, who’s on retainer to the Knights. Where else can you have a moral theologian and your team when you’re investing? But at the Knights of Columbus. So we really do incorporate what John helps us to do. Again, he’s not writing Catholic Doctrine, but our screening advisor is a consult, and they’re not Catholic, but they’re they have a very good screening program. So John sometimes serves as an umpire calling balls and strikes. If we determine that, hey, this company actually shouldn’t be screened out, John will help evaluate it. Between us, the screening agent and John will determine what the right move is. As I said earlier, you know, John, the challenge, if it is one, it’s really in biotech and health care that we find the most in. Typically, it’s a big pharma company that may have had an abortive fashion or contraceptive. Then they divested the drug. Many big pharmaceutical companies find the most efficient way to develop a pipeline is to go acquire a smaller company. So then they acquire a smaller company in their drug pipeline. And when you go down the list, you may find a they have a drug that’s now out of bounds. So out they go. And we go through the screening rigorously every 90 days. So as I tell our board, whether it’s for the general account of the insurance company or our shareholders of our mutual funds, you’re never more than 90 days for scrubbing the portfolio. And in equities it’s easy, you know, if it’s a big cap company, you can move out of it quickly. You know, if it’s a middle sized bond, you know, post a financial crisis. Wall Street doesn’t have proprietary trading desks anymore. It can take you a little bit longer to divest. We try to keep a foot in both camps being critically adherent to the faith. But also, you know, I guess in a doctor’s sense, trying to do no harm to our shareholders. So we’ll develop a plan to move that security out. It’s never taken more than a few weeks, but, you know, you develop a divestiture plan. I have to say, in 18 years of being here 18.5 years now, it’s never caused a problem to where we could not evaluate another name or a different way of investing or a different company to purchased. And one of the things I’m very happy about is that we’ve been able to compete in the return space, but while also adhering to the Catholic teaching. Today, as I say to our board, all the way we are walking the walk, but we’re living proof that you can do well and you can do good all at the same time. So maybe it takes a little bit longer, but you eventually get there. We’re very, very proud of that.

John Coleman: Yeah, I love to hear that, Tony. And we tend to have a firm belief in that. And I want to let you in on this as well, that when you’re behaving in a way that we believed in the truth of our faith, and we believe that it’s in touch with something really important about human nature and what creates human flourishing. And then if you’re leading companies in alignment with that, that those companies can actually perform, that they can succeed because they’re in touch with something deeply true about people, about the people that work within a company, about those who purchase their products and services that allow them to perform even greater than those who are anchored in some sort of truth or who are detached from that. But, Andrew, I think I cut you off. You were going to jump in.

Andrew Abela: Not at all. So you’ve heard the old joke about the professors who argue. Yes, that may work in practice, but it doesn’t work in theory. You know, that used to be the argument about faith based investing, right? That portfolio theory says if you’re going to exclude a bunch of stocks, then your returns are necessarily going to have to be lower. You’re both experience [….] that’s that’s not true. And I’m a little hesitant because we’re not done with the research yet. But we’ve been working through a study looking at portfolio returns of faith based portfolio versus non and over extended period of time. And I’m finding that in theory, yes, it does work that you can be selective and screen out certain stocks and still not cost anything in terms of returns. Which sort of makes sense. There’s a there’s a beautiful line in the letter of Pope Leo the 13th from 1887. We remember him fondly because he was the founder of Catholic University. So. He wrote when Christian virtue is observed. That leads to a measure of prosperity, in a sense, because we’re behaving in the way God intended. So of course things should work out right. So it’s not a terrible shock, but it’s good to say to the average Christian investor, you don’t have to take a big hit, or you don’t have to take any hit on your returns. To be a faith based investor. Now, you might want to, as you pointed out, because there are certain sectors that you might. But now that becomes part of your charitable giving in a sense, right. By taking out a reduced return. But that’s a that’s a particular deliberate choice.

John Coleman: Yeah. We always think of the uses of capital, not literally black and white, but on a spectrum between pure philanthropy and high return investing. And as long as you’re conscious of where you’re playing there, it’s a conscious decision and you’re behaving in a way that’s aligned with the wishes of those whose capital you’re stewarding. It’s open, that spectrum is open, and you can really just Tony, as you would play in a risk return spectrum in fixed income to equities, to private equity. You can kind of choose at what point on that spectrum between philanthropy and return to play. One topic that we haven’t explicitly addressed, I’d be so curious to get your feedback on is ESG, and a question that we get frequently, if you’re willing to address it, is, is ESG aligned with faith driven investing or where are they align and where are they different? And so I’d be curious, as you all have reflected on specifically Catholic, faith based or faith driven investing and the points of similarity or difference with ESG? Just how do you view those intersections right now and whether that’s an active discussion or not for y’all, or you just have your own approach that’s completely different from that, and it’s not really a topic of discussion.

Tony Minopoli: I’ll kick off just how we thought about it particularly, you know, the environmental concerns I think are aligned, particularly with the current pope. Pope Francis is very concerned about the environment and has spoken extensively about it. Not to say that past popes weren’t concerned about the environment, but Pope Francis has written and spoken about it extensively. Some of the things that fall under the s are not necessarily aligned with the Catholic faith, so it’s a little difficult to align purely with them. And on the governance side, in many cases, a lot of the things that come up under governance, you know, single type of shared class, making sure things are disclosed properly. Those, I think are just common sense investment themes. But broadly, the way that we think about ESG, our first priority is Catholic social teaching. We need to be compliant there. ESG in the capital market sense. You need to understand how a company is perceived. So all of our securities, right, whether it’s debt or equity, we do think about the ESG factors. And greatest example as an energy company, just because an energy company is an energy company, it doesn’t mean it’s necessarily you can’t touch it. Because if you think about a company that manages their industrial or environmental impact well and follows all the governance rules, they may score poorly, but they may actually be a solid investment. So in broad terms, we will not invest in something because it scores high in ESG. We will not avoid something purely because it ranks low on ESG factors. But as a prudent investment manager, it’s incumbent upon me and my team that we understand the context of how a company is perceived with the real I, John. Is that company going to have an ability, for example, to tap the capital markets? Will they can they raise capital or have they violated environmental regulations in so many states that now their management is going to be tied up in lawsuits. And, and I always it’s a tired and old example, but I use it all the time and not to pick on GE. But when GE got in trouble all those many years ago for the PCBs in the Hudson River in New York, it took them forever between law, the lawyers and regulators and fines and then shareholder lawsuits. So management was management able to truly execute on their management strategy? No, they were distracted. So that’s we want to understand the context of ESG in a company. Because again, somebody that follows the right way, they’re going to be able to execute their management strategy. And we think that will lead to a better investment outcome. But for us, Catholic social teaching outtrump ESG. Andrew.

Andrew Abela: Yeah, couldn’t agree more. We have vigorous debates both within our school and with colleagues outside Catholic and other Christian, about the purpose of a business. The classic debate between sort of stockholder stakeholder. This gets a little more abstract. You know, professors like to talk about these. Abstract. Okay. So it’s what we do, you know, we bring it back to practice. And my perception is that we went from one extreme to another, where in the 80s and the 90s, we were all talking about profit maximization as the o, the sole goal. You know, it’s kind of like a, you know, an extreme form of Milton Friedman, kind of that the purpose of this is to maximize. Profits and nothing else. You know, he did go on to say, but to stay within the norms and, you know, and rules and so on. People forget that part. And ESG in some sense has gone to the other extreme where, you know, set aside the fact that, you know, one reading group can agree with another about what exactly ESG is, you know, said so totally agree with Tony, is you don’t abandon a stock just because it’s rated low, or you don’t buy it because it’s rated high, because those ratings can often be close to meaningless. But with the reason we think Catholic social teaching is so helpful is you’re looking at the good of a business. And is that not limited solely to profitability? But it doesn’t exclude profitability in the way some kind of ESG kind of perspectives take. So if you asked us kind of [….] what is the purpose of a business, we would say the purpose of a business is to do some good for some group of people and to do it profitably because you’re not doing it profitably. You’re just not a business. You’re yet another organization that has to be funded philanthropically or through taxation. Right? So business is the only self-sustaining, self-funding enterprise. And so to do that, you have to basically have a clear vision of the good that you’re doing, and then you have to do that with virtue to do that virtuously. And if you follow through on that, all the evidence is that you would be very profitable, successful. And so you would satisfy both the shareholder and the stakeholders is that’s kind of that’s the win win aspiration. I think that we should all have, instead of pitting kind of social justice versus profitability, you know, makes one good and one bad. No, those things don’t have to be in opposition.

John Coleman: Yeah, I think I love what you’re saying there, Andrew, because I do think there’s a way in which the free enterprise system, upon which capital markets rests or upon which investment rests, actually does contain kernels that can promote human flourishing. Obviously, it can be used for bad, it can be used for good. But actually embracing the right principles combined with that system can help to unleash human flourishing, which is one of the reasons we’ve seen this explosion in, people escaping poverty, for example, around the we’ve seen an explosion in the ability of people to escape their circumstances if they’re born into poor circumstances, economic mobility, the ability to pursue their own talents and merits. And so we think that certainly the system can and often is used to promote human flourishing, but it also has to exist within a set of values or virtues, as you would say, that allow it to function properly. And with regards to investments around here at FDI, we often say all investing is impact investing. Every dollar you put to work has an impact on the world for positive or negative. The only question is what kind of impact will it have? And I think the pushback against ESG has been a good thing, and that there are many valid criticisms from both the right and the left. And we don’t have to get into those. But it’s also forced, I think, Christians to say, what is our distinctive set of values that we want to pursue? What is it unique about the Christian faith that we want to see expressed in investment capital? And how can we now define something that’s distinctively Christian faith aligned, rather than simply falling in line with framework? That to your point, Tony has some similarities, but some differences, I think, from what dominant Christian doctrine, would be. I have a question. It may be on our listeners minds because, I’m a Protestant. We are notoriously hard to organize, I would say, as it’s a set of church denominations, you both had mentioned that you’re working with various denominations or orders within the Catholic Church to forward thinking about what this looks like. Could you explain to us what is collaboration look like within the church, across the various pools of assets that you all have? And how does that work? I mean, you’re both in the center of it. What does that look like for y’all?

Tony Minopoli: Andrew, please kick this off. But, John, I’ll just say, if you can visualize herding cats and wild cats, that’s sort of the start of it.

Andrew Abela: Tony is exactly right. Because here’s this is just a descriptive statement. Yeah. So the Conference of Bishops guidelines, which I mentioned before for faith based investing, faith driven investing, apply to the funds of the conference itself. Now. The conference is made up of the 200 and some bishops of the United States. Each has his own diocese. Many of them have their own foundations which invest their own association. The conference’s rules don’t apply to the to the bishops own, foundations. They are purely voluntary. So some bishops well, as a matter of course they will follow those others would say we have a better way to do it. We’ll do it differently. So even among the brother bishops themselves, there are some differences. But I say that purely descriptively, to say that there is coordination, but it’s not monolithic, you know, and in some sense, I think I would rather have it that way than have a top down. Usually I’ll do it this way, because when it’s that dictatorial, you can make some really, really big mistakes, right? Whereas when it’s more distributed in this way, if you make mistakes, they tend to be a bit more localized, you know? So I think there’s room for more collaboration, not just among Catholics but among all Christians, you know, because goodness knows the forces of secularism tend to sometimes seem to be really coordinated. And so if we’re going to provide any kind of countervailing power, but I think the best way to do that is through communication, kind of sharing of ideas, kinds of meetings. John, that you’ve organized, that we’ve organized, that the Knights that Tony, you participated in, in several of ours. Right. The more kind of discussion we have, the more aligned we can become around the same vision. It’s kind of how I would put it.

Tony Minopoli: The few things that I mean, one of the joys working with these disparities is it brought me into Andrew’s orbit, and the Knights have had a close relationship with Catholic University forever, but it’s allowed me to collaborate with Andrew. Andrew has become a friend. We chat about these kinds of things all the time. We’ve done. We’ve done a lot of work together, and there’s a lot more work that we’re planning on doing together. But Andrew makes a very key point that even across the various Christian denominations, the commonality of whether it’s an Episcopalian Catholicism or the various different parts of Christianity, of the Protestants, there’s a lot more similarity than there is difference. And if we leave the differences to the side, the core things matter, right? The things on life, the things on family. So I always joke, I have a young man, he’s not so young anymore because I’m not so young anymore. But he used to work for me. And when I was organizing the Knights of Columbus mutual funds, he and I were chatting, and he’s an Orthodox Jew. And he said to me, you were talking about the diocesan structure. And he said, if we ever had that structure in the Jewish faith, we would have raised $10 billion before you even open the door. And it struck me, because certainly as Catholics and I’m going to take the rest of my Christian brothers with me in the canoe, we never act in concert and imagine the change that we could forge if we actually did. Because again, though, there are differences in the faith denominations. Man, the similarity is a heck of a lot stronger than the differences. And I’m hopeful. And Andrew is right. I think the fact that there’s room for interpretation may bring more people into thinking about faith based investing, because it isn’t this dogmatic thou shalt do this and thou shalt not do that. But it allowed for us to say, you know what? We’re going to anchor to the central tenants of the bishops. We’re going to work with those clients. We have clients with separate accounts that’ll be a bit nuanced. And as my former pastor said, Tony, it’s a very large church with many different people in it. And I think when you move beyond Catholicism into Christianity as a whole, man, it’s an even bigger tent with a lot of very disparate, disparate opinions. But we can do better together.

John Coleman: Amen. I couldn’t agree more. And we’ve often had this discussion that man, the people who believe deeply in the Christian faith, we share so many of the same commitments. Right? I mean, we really believe in the dignity of all human being. We believe that every person on earth is created in the image of a loving God, and that everything that we build should be oriented towards helping those folks connect with their creator, live out their human dignity, really pursue something that can bring them well, having purpose and flourishing. And there’s really a crisis for that in the world today, right? If you look around the world, people are struggling, they’re unhappy, that are lonely, that they’re disconnected from that sense of purpose. And we have an opportunity as investors and business leaders every day to either help bring them closer to their creator and to understanding their own dignity and purpose or further away from it. And if we could just work together in concert more, to try and forward that shared vision, I think it could be really powerful as we wrap today, because that was such an inspiring call from both of you. I would love to just maybe ask a personal question, which is obviously, both of you are men of deep faith. You’ve been motivated by your faith, even in your careers, what you’ve pursued. Maybe just each of you individually. Tell me, what is it in your personal faith life that keeps you motivated about this, that keeps calling you into your profession, that you’d want to share with others.

Tony Minopoli: Quickly for me, John, my my younger brother has special needs, and he is in. I have to stop at my parents. We still have my mom and dad. They’re 85 and 83, and I have to stop at my dad’s house to sign a piece of paper for an investment that he’s making, and I’ll go in there this evening to go see my parents and have my dad sign this paper. And my little brother is literally the living, breathing, walking embodiment of Christ’s unconditional love. He’ll want to know, how did my day go? He wants to know that you’re okay. If he met you, John, chances are you probably give you a hug. And secondly, he’d want to know how your day went. Is everything okay? And watching the Knights of Columbus, its Special Olympics with him when he was a little boy is what motivated me to say. There’s something to this faith piece that needs to be part of my life. And when I got to work at the Knights of Columbus at the time, I had two competing offers one from a mega, mega large hedge fund that will go unnamed, and the Knights of Columbus. From an economic standpoint, I made probably the least wise decision of of a guy pursuing a financial career, but knowing that the money that I helped generate allows Patrick Kelly, our Supreme Knight, for wheelchairs, for coats, for kids, for food, for families, for disaster relief, and a very good friend of mine that works at a big Wall Street firm, said, it must be nice going to work someplace every day where the purpose for why you make money is just not to make someone that’s wealthy, wealthier, and people that know me well know how important my Catholic faith is and what a part of my identity is. And frankly, to come to a place where we have a chapel on the fourth floor and I can go to mass when you know it’s available, I can go down there and spend a few minutes in quiet, contemplate a prayer. It means an immense amount. And, and to be able to live my faith in my profession and, and know the good that comes from the work that the Knights do, it pretty much makes it makes it a life worth living. And I got to grow with it for, for many years. And my first job was working for the Knights of Columbus and Council 16 at their duckpin bowling alley when I was a ten year old as a pin setter, and hopefully my last job as CIO of the Knights of Columbus. The second job paid better than the first. But, I’ve had an involvement with the Knights of Columbus for for a long, long time Andrew.

Andrew Abela: That it’s hard to top. But whoever says that Catholics can’t share about their spiritual life, you just proved them wrong, Tony, so I do. So mine comes to a different place. I as a teenager, I fell away from the church, was a practical kind of atheist and went through some kind of dark and meaningless times. You know, it just kind of reached a point where I was very successful. I as you mentioned, I started my career at Procter and Gamble. I was at the time the youngest brand manager worldwide at Procter and Gamble. I thought I had the world ahead of me. I was a McKinsey, traveling around the world, working for them in Russia, just after Russia opened up, when when we all thought that it was going to become a great democracy and so on. And then a certain point, I just realized the emptiness of it all and was called back and kind of gave my life to Christ, came back into the church. And that was almost 30 years ago. And life just keeps getting better each year as I get closer to him, you know, everything makes more sense, everything works out better, and you just start to realize that this is the way we’re supposed to live, you know? So 11 years ago, I had a dream come true, and the university asked me to start a business school. And I’d had a vision of what? What would it be like to have a business school that was from the very ground up, focused on teaching and doing research about what does it mean to be a Christian in business? And that’s what we’ve been doing for now, 11 years. We’re 700 students and growing. We’ve been actually double digit growth the last four years, which is not rare in higher education, you know, nowadays. And that’s just been a real treat. And so just being able to work with folks like Tony and others and then to kind of bring them to the younger people and say here, this is what you’re striving for, is you want to go out and serve Christ in the world of business. You know, it’s been a real gift to me, I have to say. Yeah.

John Coleman: Well, gentlemen, that was an inspiring way to end Andrew Abela of Catholic University. Tony Minopoli of the Knights of Columbus Asset Advisors. We’re really grateful for you guys for being on the podcast, for the work that you’re doing every day on behalf of our shared faith. And, just really encouraged by this conversation and hopeful to see what’s next. Thank you so much for joining the Faith Driven Investor podcast today.