Justin Forman Welcome back to the Faith Driven Entrepreneur and Faith Driven Investor podcast. It is a gift to be with you guys today. There are some days more than others that we just look around and appreciate and have perspective of making the most out of every moment and not taking for granted anything that we have in front of us. And this is one of those days. About a week ago, a friend forwarded a story of Richard Garnett, and it was a talk that he had given some time ago. But we got a chance to watch it and listen to how is it a professional actor of 15 years and TV and film and theater? He went on to be a feature of an entrepreneur and a faith driven investor and thinking intentionally about how to be generous with his time, how to be generous with the things that he was stewarding. And man, there are times when you can hear theory, you can hear idea. And then there’s times when you hear people’s story. And when you hear people’s story in light of the moment and what they’re battling and battling health and sickness and the journey that Richard was on, that somehow those pictures become that much more real and that much more vivid. And last week, Richard went home to be with Jesus after battling cancer for the past ten years. And there are a few messages that I think I’ve heard in the last year or the last ten years that are as powerful as this. So we wanted to share this with you. We’re grateful for our friends, McClellan Foundation and others that captured this and wanted to share this with the movement so that it might be an inspiration and encouragement and a challenge to us all. Let’s listen. 

Richard Garnett I’m Richard, and I’m dying. And I thought I’d tell you my story. I work in financial services, and one of my favorite clients, their headquarters is in Brussels. And if you go into the men’s toilets in their offices in Brussels, in front of each men’s urinal is a sheet of A4. It’s laminated for obvious reasons, and it has on it what’s called their lessons from the Loo. It’s basically all the deals that went south where they’ve lost 20, 30, 40, 50 million and the lessons that they’ve learned. So what I’d love to share with you is my lessons from the loo of life when it comes to money. I became a Christian when I was 16. For the first half of my life, first 20 years, God called me to be a professional actor. That didn’t involve making a lot of money. You’ll be surprised to know. I was taught to give the first 10% to the church and the other 90%. You can do with what you want. Actually, we couldn’t afford orange juice. We couldn’t afford biscuits. Didn’t amount to much. And then in the late 90s, I was in Japan doing some Shakespeare. I’ve been away from home for five months and our third daughter was born. And I cried out to God for a way to earn a living that didn’t involve living out of a suitcase.

And he very graciously answered my prayer. I was a long story cut short by the chairman of one of the largest companies in the world that I never heard of to kind of help him do his speeches and do his communication. And that started the journey of what we and my team do for the last 25 years. Basically, we help people persuade other people to give them hundreds of millions of pounds. And the challenge of that is I will find myself earning in half a day or a day what I had been earning in a week, two weeks, a month as an actor. What did I do with that? Well, 10% went to the local church. The rest of it, I’d been told, was mine to do with what I wanted. So what did I do? I looked around my church. I looked around my town where I live. I without even thinking about it, I inflated my lifestyle. What had been holidays in the UK became holidays abroad. What was wool became cashmere. The kids went to private school. We moved out every five years because we could open up and up the property ladder. And after a while, I felt a deep disquiet that that was the right thing to do.

And. You know, Jesus tells the story about the farmer who has excess at the end of the year and builds barns. Can you remember the word that Jesus uses to describe that farmer The fool? I was that fool. I came to the conclusion that I was a living embodiment of foolishness. Now, Jesus had some advice, actually, kind of at the back end of that story, he says, Be rich towards God. But what did that actually look like? So I started to do some research. And what I found staggered me. If you take evangelical Christians in the world, 20% of them reside in the West. Let’s call it North America, Europe, the UK, and 80% reside in the rest of the world. So you’ve got the wealthy church and the poor church, the wealthy church, evangelical Christians in the in the West. Guess every year what proportion of our income we give away. 2.5%. I came to the somewhat shocking conclusion that I was one of the greediest generations of evangelical Christians ever to inhabit planet Earth. We give out 2.5% to our local churches. On the whole, they spend roughly statistically 50% on buildings, 25% on the staff team, 10% on missions. Some of that goes abroad. Net what does that mean? That means for every hundred pounds that God gives to evangelical Christians in the West, 25 PE goes outside the West. One quarter of 1%. And this didn’t strike me as fair. So what was my responsibility to that? I didn’t consider myself wealthy. I basically drove a Ford Mondeo estate. I had clients who earned 100 million a year. They were wealthy. I wasn’t. And I did the research.

Guess how much you have to earn to be in the top 1% of the wealthiest people on the planet. 30,000 pounds a year. I was earning more than 30,000 pounds a year. I was at the top of God’s financial pyramid. If God wanted to fund His work around the world, I’d be the first person that he came to. So what did I do? I opened a stewardship account. We upped our giving percentage. And then the question was, Well, who do we give to? So at the time, my local church was raising 4 million for a building refurbishment program. And I can remember saying to my vicar, I’m not sure if God had 4 million spare. He’d invested in that. Now, leaving aside the extraordinary hypocrisy of me saying that having moved from a perfectly fine four bedroom house to the five bedroom house, that was my do wrapper. Leaving aside that hypocrisy, I still thought that was the right thing to say. So we did support our local church, but also we determined that most of it would go overseas because that’s where the huge opportunity for the gospel is and that’s where the massive needs are. So where? So my clients are very smart investors and one of their principles are invest in great people doing great things. So that’s what I prayed for. Great people doing great things. There was a girl in our church. She’d just come back from a gap year. She was 18 years old. She went to Romania and in her gap year she found five and seven year olds sleeping off the streets. So she started an orphanage in her gap year. She wanted money. There was money in our pot and our stewardship pot. We supported her. Then my business partner took me to Uganda to an orphanage. I didn’t want to go to Africa, frankly. The idea horrified me. But he dragged me there. He bribed me to go there. And what I found astonished me. I found couples had moved into the African bush at the height of the Aids crisis. Christian couples and they built a house and the house had three rooms. In the first room they put seven beds for the seven orphaned girls they adopted. In the second room, they put another seven beds for the seven orphaned boys they adopted. In the third room is where they lived. And I suddenly had this epiphany. I’m not part of some irrelevant subculture of Christians in the UK. Believe in weird stuff. I’m part of a global network of inspirational, extraordinary people doing amazing things, and they could do with my help. And I had enough money in the pot to help them. I can remember taking my daughter there and we went on holiday to one of Uganda’s national parks. It’s beautiful. And when I was on holiday, I suddenly thought, I wonder if these kids have been on holiday in their own country. And I said to Sam, how much would it cost to actually take these 80 kids in their parents community of 150 people on holiday, Probably the only holiday of their life to one of their own national parks. And he gave me the number. Do you know what the number was? It was less than we would spend on a bog standard two week holiday in Europe for a family. There was money in the pot. Jesus said something really interesting about money. He says where your treasure is, then will your heart be? When I invested in that holiday, it gave me such joy. Such joy, and it still does to this day. And the more I invested in this kingdom, the more joy I got. More than the joy of a new house, a foreign holiday, whatever it might be. And then somebody said, Why don’t you meet a man called Eric in Paris? We’ll meet at the bistro. Never a hard thing to do to have a meeting in a Parisian bistro. I went there and I said, Eric, what are you doing? He said, This was the beginning of the 2000s. I want to use the Internet to convert the French. Good luck with that. How are you doing that? This was the beginning of the Internet, by the way. So my corporate clients were using the Internet, but I hadn’t met a Christian who was doing it. He said, I’m converting the gospel into like a seven minute YouTube video called The Father’s Love Letter. And then strategically using Google AdWords to draw people to watch it. And when they watch it, they can click on a link if they want to become a Christian. I went, That’s smart. So what are you finding in terms of conversion rates? He said for every 100 people who watch it, four people say they want to become a Christian. I went, That’s extraordinary. And what’s your vision? He said, Well, I want to translate it into the other major languages. There are 30 of them English, Spanish, Farsi, Japanese, Chinese, etc., etc. But how much would that cost? He gave me a number. There was money in my pocket for it. And I’ll tell you, I came out of that meeting and I’ll tell you how I felt. Imagine it’s about 20, 30 years ago. You’re in Harvard. Next door to you is a strange man called Mark Zuckerberg. And he wanders in one day and he said, I’m going to start this thing. I’ve got a weird name for it, Facebook, but I need some cash. And if you give me some cash, I’ll give you shares in the business. If you knew then what you know now, what would you sell in order to get shares? Be the first investor in Facebook. I would sell everything and wander around in underpants for a year. I’d persuade my parents to sell their home to cash in their chips. That’s what I felt like. My my mindspace moved from. What’s the minimum percentage I can get away with before God? And what is the most I can get for a turtle treasure? Here’s what I think God pays us. And this is chocolate money. Can you see this? It’s what you consume at Christmas. All the money we have this side of happiness. Chocolate money. We can consume it all when we invest it globally in what he’s doing locally, regionally, nationally. Internationally. It becomes eternal treasure. And suddenly I was thinking, why should I spend 20 grand on a car when I can buy a bill banger for five and invest 15 for eternity? Long story short, I’ll take you to 2005. Our marriage collapsed. I was feeling awful. What was my first response to that? I’ll buy myself a holiday home that will make me feel better. I like to say I like golf. I get somewhere there. And then a friend rang me up and said, Don’t be stupid, Richard. You’re self-medicating your pain. There are better things to do with the money and the work. There’s a devotional I love called God Calling two Old Ladies by 100 years ago, Anonymous. When they prayed, Jesus spoke to them. And they write down. They wrote down what he said. And every January the 5th, I’d read this is what Jesus said to them about money. Don’t be afraid of poverty. Let money flow freely. I will let it flow in. But you must let it flow out. I never send money to stagnate only to those who pass it on. Keep nothing for yourself. Hoard nothing. Only have what you need and use. This is my law of discipleship. I wanted to be brave. I wanted to be brave. I wanted to be like that. I wanted to live without a safety net. So I stopped paying into my pension fund and I set my lifestyle. And then I determined to give whatever the excess was away to invest it in the kingdom. I wanted to do that, but it was terrifying. Every January, I’d feel the enemy say to me, Richard, because I’m self-employed, at the beginning of the year, my diary is empty. Every genre, I’d feel the enemy say to me, you know, this is the year you get found out. You know, there’s the year that nobody’s going to ring you. And I felt Jesus saying to me, Will you give me until Christmas, Richard? If you’re on a park bench at Christmas, we can have a conversation. For 15 years. I was filling that park bench and I’ve got 15 of these paper diaries in my bedroom to prove that you cannot give God that God meets your needs in every conceivable way. And that for me was really, really exciting to be part of that journey. And then I’ll take you to 2014. Christmas Eve. I’m in a hospital in Watford and a young man who looks like he’s about 16 is actually a doctor, comes and kneels down and looks up into my eyes. That’s never a good sign, is it? And he says, You’ve got cancer. We think you got cancer. On January the 5th, I was with an oncologist and they confirmed it. My cancer was mesothelioma. It comes from asbestos. They reckon it comes from asbestos in old theaters, actually, and it’s incurable. And they said you’ve got about a year, 18 months to live. At that point, my son, who was in the meeting, had his laptop over and he said, Dad, I found it. I said, What have you found? He said, I found him. He said, Tell him a joke. The oncologist was somewhat surprised. I said, okay, what’s the joke? You said? How do you treat a patient with me so clearly? Omar? As best as you can anyway. Memorable moments. Since then, I’ve had chemotherapy. Two big operations, 60 rounds of immunotherapy, 60 rounds of radiotherapy. Couple of months ago, they said the cancer’s move from the right lung to the left lung. It’s stopped working. So we’re going back to chemo. So I’m in the middle of chemo, so my brains are fog and I have to sit down and. Here’s my thought. The closer I get to death, the more grateful I am. Because I’ll tell you this. If somebody has got a servant, I’ve got the opposite. I’ve been awful at talking about my faith to other people. I’ve been dreadful at inviting people to Alpha or Christianity explored whatever it might be. But the fact that Jesus gave me an opportunity to invest some of the money that He’s given me in the first place. I mean, don’t you find it fairly hysterical that a rather stupid unemployed actor is is employed to advise people, to persuade other people to give them hundreds of millions of pounds? I find that ludicrous. But the chance to make a difference. We have a cancer club at church. It’s not the most popular club, to be fair. I like it. We’ve lost a few. We’ve gained a few over the years. One of my friends, Sandra, is dying at the moment and she said the closer I get to death, everything drops away. Apart from two things. Love the love that God has for me, the love that I have for others and making a difference every day. Can I make a difference? She coaches from her bed. Six people. She’s an extraordinary woman and I can resonate with that. The chance to make a difference is so important to me. A young man called Ed phoned me up a couple of years ago, said We found a people group in India that has no gospel presence at all, and we found 15 Indian evangelists who want to go full time to invest their time in reaching the gospel with them. I went, Ed, how much would that cost? He went, all in all, 15 full time evangelists, unreached people group. 12,000 pounds a year. 12,000 pounds a year to change the lives of an entire people group. That really excited me. It still does. Let me end with three things I’d love to say to you. Do you know if Western evangelicals gave not 2.5%, but 10%, do you know how much more money would flood into the kingdom every year? I’ll tell you, 100 billion pounds. That’s 100,000 million pounds. That’s the same that Putin is pouring into the war in Ukraine. Imagine that as a power for good across the West, across the world. But I’m not asking you to be more generous of that reason. It’s for purely selfish reasons. This side of heaven. I’ve known very few things that give more joy than being a part of what God is doing financially and in eternity. Actually, we get this treasure. What is this treasure? John Lennox, who many of you know is a mass professor at at Oxford, a lovely Christian man, and he’s written a book on what to do when we invest our time and treasure and talent. And he uses the story that Jesus tells of the dodgy steward. He used money to buy friends. And he says, when we invest our time and our treasure in what God is doing, we. We make friends. We make friends. I have friends all over the world. By God’s grace. And I’m so looking forward to getting to Harvard because we can sit down and I’m going to hear their stories. And the fact that I’ve been able to play some tiny, tiny, tiny, minuscule part in their stories thrills me now. And I know Will through me then I hope that’s part of my treasure. One of my great heroes in life is a man called George Miller. For those of you who don’t know, George Miller was a Victorian German gentleman who got called to move to Bristol, and God called to look after orphans. And in the course of his life, he looked after 10,000 orphans. And he’s one of the founding fathers of orphan care in the UK. George Miller’s life as to extraordinary elements to it. Number one, he never asked anybody for money. And looking after 10,000 orphans costs a lot of money. The only person he asked was God. Every day he asked God and God gave him. 210 million pounds at today’s prices. Now, why could God trust him so much? I think the second thing that makes Muller extraordinary is of the 210 million pounds that God gave him, he gave away to other ministries all across the world. 70 million. One third he gave away. Do you know what Miller’s legacy is? Because at some time he supported 200 missionaries in China. Well, his legacy isn’t just what he’s achieved in the UK. It’s the growth of the Chinese church. Muller’s legacy, 150 years later, is 120 million Christians in China who are there because partly of what he funded. So my question to you is, are you not just serving your local communities and your churches, but are you serving the global church? Because Western money can make a huge difference. Let’s take the 4 million that we spent on our refurbishing our church. If you invested 1 million and you gave it to my friend Ed and the charity called 500 K in India. India, you know, has 500,000 villages with no Christian presence at all. 1 million. There would support 500 full time evangelists for three years and lead to the planting of between 1000 and 1500 churches. If you put 1 million to work in Africa, where so many families live on less than a dollar a day, and you gave it to a Christian charity called Five Talents, you’d actually support 10,000 women. The poorest of the poor. To be able to read and write and count and save and earn their way out of poverty. If you invested 1 million in Bible translation because we know without the Bible, you can’t evangelize. And still 2 billion people on the planet with no translation of scripture in their heart language. If you invest in just 1 million, you be able to translate the Bible for a people group of 20 million. And make God’s story accessible to them. And then if you were really strategic and you decided to use the Internet to access the 12 least rich countries in the world, you know what 1 million would achieve if you gave it to Jesus dot net, who are very smart at this stuff. You’d basically, in those 12 countries, enable the gospel to be seen 100 million times, which would lead to 200,000 people indicating that they wanted to come to Christ and to be followed up on line. Think of the difference that 4 million can make around the world. The last thing I want to say is this. Thank you. Thank you. And bless you in everything you have done for his kingdom and everything you are doing and in everything you will do. Bless you. 

Justin Forman After listening to that message, there might not be a lot of words that need to be said. I can’t think of many, but I hope that you’re inspired. I hope that you’re challenged. I hope that you’re encouraged. I hope that if you’re listening on this on the drive home, that it gives you just a whole booster shot of energy when you run into the things of your family. If you’re running into the workplace, would it leave all of us with this idea that it’s worth the trade, it’s worth the trade of living a life that’s fully alive, living a life that is staring into the headwinds of what society and what culture might say, but saying we are living for something so much bigger than this world. Many of you guys might have a chance to join that conversation even this week. The Faith Driven Entrepreneur Conference. I pray along that journey that you might find friends, that you might find community, that you might find people and fellow travelers that you can lock arms with and live that intentional life, that surrendered life that Richard just shared with us. God, I pray blessings on each and every entrepreneur as they’re listening to this. I’m so grateful for the words that you have given that you gave Richard and that you shared with us today. May we? We’ve challenged and inspired to live fully a life fully devoted to you. And it’s in your name we pray. Amen. 

Richard Cunningham Welcome back, everyone, to another episode of the Faith Driven Investor podcast. A joy to have you with us for what will be a Tuesday, September 3rd marks on the markets edition of the Faith Driven Investor Podcast, releasing this episode one day later from our normal Monday cadence in celebration of Labor Day. And speaking of Labor Day, man, it is hard to believe there are only four months left in 2024. To our Northern Hemisphere friends, hope you have had a wonderful summer to everyone out there. Hope back to school and the beginning of a new semester and your rhythms is in a sweet spot for you and your loved ones. One final housekeeping item I want to make note of is we don’t have our mainstays, Luke Roush or John Coleman and the FTI Podcast Studio with us today. They’ve got a dense travel schedule going on, but not to worry because we’ve got an unbelievable amount of firepower with us in the studio for this March on the markets episode, and Andrew Behrman of Sovereigns Capital and Chris Kim of Argosy Strategic Partners. Gentlemen, welcome on to the podcast. Great to have you guys with us. 

Andrew Behrman Thanks, Richard. So exciting to be on. And, obviously you’ve been a fan listening to you guys from afar. So it’s really exciting to be, here with you and Chris. 

Chris Kim Yeah. Same here. I’m really honored to be here to appreciate it. 

Richard Cunningham Well, thank you guys for your time. I’m excited that the listeners are going to get to hear from you all. So normally, gentlemen, on the way, we do a mark’s in the markets episode, naturally, we kind of spend time looking at public markets or the economy at large and things like that. But both of you are private equity investors, and so we’re doing something a little bit different where we might get some of those macro thoughts here and there as they relate. But we’re going to spend the vast majority of our time looking at the private equity world and universe. But given this is each of your first time on the face of an investor podcast, that would get some background, an intro from each of you. So, Chris, maybe we start with you kind of what kind of work are you up to? A little bit of your background in story? 

Chris Kim Okay, so I have the privilege and honor leading Argosy Strategic Partners. I founded in 2019, and we are a division of RBC capital, and they are an asset manager based out of Wayne, Pennsylvania. I don’t even know where Wayne was when I started interacting with Argosy folks, but I do know king of them all. So I heard it was like right next to freshman. So I was like, okay, so I kind of understand where went that. But yeah, before that I spent some time at a secondaries firm, but definitely later on go into a little bit more what is secondaries and what it’s been to. You know, what we’re talking about with the private market. But outside of that I feel like every day is just either work or trying to, like, keep up with my two little kids. I have a four year old and almost two year old. And I think when I come to my desk. Man, I’m like, this is so much easier than at home. And I keep up with like, so bless my wife who is, you know, holding on the fort at home. But yeah, just going back to, you know, lady Irish street partner has been doing since 2019. We’ve got on our team to five now here in New York City. And hopefully we’re going to keep growing the team. So and then spending a lot of time very much indeed because I feel like that’s going to be the biggest component of our team going forward. And these are they absolutely fascinate me. So I don’t know if against any am I just like as much anything more than happy to talk about defenses, the indoor contact? I don’t know any out. 

Richard Cunningham So fantastic intro Chris. Thank you a lot to unpack there, but I love the shout out to the bride as I hope someday she’s listening to this and feels affirmed by your commentary on her work. Andrew. What about yourself, man? 

Andrew Behrman Yeah. Happy to. So I’m originally from central Georgia. I went up to undergrad at, Georgia Tech. So proud. Yellow jacket, big week, zero for the jacket since everybody tuned in. So we’re fortunately on top of the SEC this week because no one else has played other than their opponent Florida State. So taking screenshots now. So the last you go, I started off my career out of Georgia Tech and investment banking, actually at SunTrust right here in Atlanta, was working on what they call their acquisition finance desk at the time, really focused on underwriting some of these sponsored buyout deals from private equity firms. Didn’t know that I end up in private equity, but before my analyst years were done, ended up taking a role over at Invesco large global asset manager on their alternatives and institutional strategy team. And, you know, corporate strategy focused on things like fundraising, product development and M&A strategy for Invesco to grow their alternatives business. But while I was there, I had the opportunity to, meet and report into John Coleman and was only a few years later, I think, March of 2021. I like to think I was John’s first call. I might have been the sixth or seventh in actuality, but, I got the call about sovereign capital, learn the story, and was just so excited at the opportunity to join. So I came to the firm and helped us launch our Fund of funds complex back in the summer of 2021. And really, the focus for us is to find private capital investment managers that are part of the faith driven investor movement to invest behind and build a diversified portfolio for investors. So I’m out here now in Atlanta with my wife Ali and our son, Jordy James. We just moved back to Georgia. We’ve been on a kind of a hiatus, while I’ve been working at sovereigns. We’ve both managed to finish grad school, which has been a nice accomplishment. Between Barcelona, Spain and Wilmore, Kentucky, two very similar places, if you’re familiar with either of those. And it’s been an awesome journey. And, glad to be back here, at Home Base. 

Richard Cunningham There we go. Well, fantastic to have you both on. This is going to be a ton of fun. Great diversity of experience, as you can hear. And, Andrew, you mentioned that you are running the fund of funds complex at sovereigns. I think that’s an important place to start. Let’s do a little private equity 101. You’re investing in a number of other private markets fund managers. So maybe, you know, I think people here private equity and they have some natural assumptions of it takes $1 million to get into it, or high risk or just feels complicated, has something to do with funds, but maybe kind of level set and set the stage for us here because it’ll help Chris when he’s talking about what the secondaries market is. If you kind of define the private equity or private markets investing universe for us a little bit. 

Andrew Behrman Sure. So maybe I’ll start by just saying, you know, we’re fortunate in here to have a leadership team that helps us run the fund of funds complex. So it’s a great benefit to have John and Luke leading that strategy. Obviously, we have a team behind them now, obviously yourself, Richard, me and Jonathan, let’s quickly break down the private markets broadly. So if you look at the global asset management universe, right. Everything under the sun as far as asset management is concerned, you’d see there’s about $120 trillion under management broadly. Right. That’s what BCG is. Global report little US scoping down to the private markets. You’re really talking about a specific set of strategies that comes down to things like private equity and venture capital, private debt, real estate infrastructure and secondaries, which is somewhat of a mixed universe. Of all of the strategies that Chris will tell us more about and those strategies in kind of 2022, 2023, they represented about 14 to 15 trillion of that 120. Right? So meaningful, but still smaller in the grand scheme of, the asset management universe. So the big expectation there is that many investors, both institutional and retail, are expected to continue to allocate to these strategies for a number of reasons that we could get into. But by 2028, most estimates you would see out there would say that private markets are expected to be something between 20 to $25 trillion of total assets under management. So a lot of growth coming from that universe. Strategies. 

Richard Cunningham Great rundown. Yeah. I mean, the growth is significant. Momentum is significant. I like what you. Pointed out there about both institutional and retail investors kind of having their mind on the private markets. And Chris, that kind of slides over to you. So what is a secondary strategy and what is a strategic partners specifically up to as you think about kind of the private market universe, and where do you guys kind of carve out a corner in the market if you will? 

Chris Kim Yeah. So I guess to kind of go a little bit more into this whole private funds universe that I was talking about, that’s around 14 to 15 trillion as the latest report. I think covering a lot of the other assets. One thing that really differentiates private fund universe and, you know, it can be a little different depending on the strategy within the private fund universe. But most of it I would describe as illiquid in the sense like when an investor goes into private fund, they are making some level commitment in terms of dollars and time, and they’re going to lock up their capital with this manager and then managing to go out and execute their strategy. So if it’s like a traditional buyout, I can go probably do you know buyout companies if it’s infrastructure you’re going after infrastructure assets, real salaries etc.. But unlike stock market where you could probably sell most of the time, whenever you feel like you really aren’t in control, that you actually give up control of your capital to these fund managers, you trust them and I hope that they will deliver what they say now just returns that also to strategy and maybe other values that go behind there to go along with their strategy too. And with that illiquidity cost, I guess that was the genesis to secondary market. And it kind of started around in the 90s where, you know, private equity still was in traction, is gaining some momentum and some investors. A lot can happen in 10 to 15 years. So it’s just a typical timeline that your money is locked up in these funds seems really long 10 or 15 years. But within that 10 or 15 years you don’t wait till like the end. Is it like money back? You know, as they sell a company? These are paying distributions back to you as a limited partner. And the investor by a lot can happen, like I said, in ten, 15 years. So if you want to offload your position or your remaining value, you will have to access the secondary market. And generally as of today, the secondary market represents 1 to 2% of the overall private market. So if it’s the 14 or 15 point that actually number works. It’s like spot on to around 1%. The secondary market is on track to hit probably 140 billion plus in volume this year. So that tells you Jericho 1% and it’s grown quite significantly. I would say just a little context. In the early 20 tens, like 2014, the volume was around 40 billion. So it’s grown quite a bit. And to dive even a little bit more into secondary is just mainly three big buckets. One in the secondary world there’s the general trade of LP interest, which is kind of example we’ve been talking about. If you’re an investor and say so-called fund manager, you’re a limited partner, and if you’re also of interest, you’re selling your LP interest to someone like us, our strategic partners, which is what we do. We mainly focus on the lower end of the market because, like I said, like 140 billion, big number, higher average transaction size. It’s up to like 5 million. So we are like the real like lower middle market of the secondary universe because the average fund size in second is whereas a billion plus. It’s pretty pathetic in the secondary universe. And we feel we are here in the lower end of the market because it’s extremely underserved. Not many dedicated secondary buyers or a liquidy solution provider. So it’s a lower than market and just talked about the markets are going to keep growing the private markets. We believe also they can keep growing. And that means probably most likely the secondary volume will continue to grow as well. 

Andrew Behrman Yeah. And just to your point there, Chris, I mean, if you look back to 2015, in the private markets, the total AUM or something like 5 to $6 trillion, right? So in just over 6 or 7 years, the markets more than doubled. So obviously that growth and trajectory of overall assets under management there, you’d expect there will continue to be a need for liquidity beyond the current macro forces of kind of lower distributions coming to investors and needing a solution in the form of secondaries to get that liquidity. But you mentioned something important about kind of the private markets generally that’s kind of worth double clicking on. You know, in the private markets, they differ pretty substantially from the public markets by the form of unique benefits and unique trade offs that come to investors. Right. And so I’ll start with the benefits. You know, there generally private markets have less correlation to the overall public markets. Right. So people generally think, hey, if I can get access to some of these other asset classes, if there is a public market drawdown, there’s less chance that my private strategies will experience the same drawdown. And let’s put some figures of that, you know, the expected kind of correlation for private equity to the S&P 500, something like .43. Right. Whereas in venture capital the correlation to the S&P 500 is actually negative. It’s something like just negative 0.07. So it goes to show you that there’s a real diversification effect of being in these strategies. So that’s attractive to investors. There’s also, you know, the form of active involvement that you can have when you invest in a manager that has direct control of assets through actual full ownership. In the case of buyout, for example, board representation back there is often in venture capital to help influence decision making and also an opportunity to kind of partner closely with management teams right to drive value. So all of that translates many times to investors kind of saying like, hey, there’s an opportunity here in the private markets for higher returns potentially, and diversification of my overall book. But just as you mentioned, Chris, that comes with trade offs and the form of access is actually quite limited to some of these strategies. They have investment minimums many times that require relationships and regulatory considerations. And then you also have there’s no real time price in private markets like we see in the public markets. Right. Often you need to wait a whole nother quarter before your fund or your investment to strike a value. And with that comes the consideration that you may not actually be able to get out of that investment right away. There’s an illiquidity constraint in the overall private markets there. So worth mentioning that as it relates to secondaries. 

Richard Cunningham All right, Andrew, one of the things you said is that there’s benefits and trade offs of accessing or being exposed to the private markets. And I want to talk real quickly about the performance side of things. Public markets have been on this just historical bull run. And I think the temptation is to believe, well, then private markets must be just taking it in the teeth. We’ve heard about, you know, VCs kind of struggles or re correction from 2020 through 2022 highs maybe real quickly just provide kind of a snapshot for the moment in time where we are from a performance standpoint, publics versus privates and things like that. 

Andrew Behrman Yeah, absolutely. So if you look at kind of the back two years, you’d see exactly what you’ve just articulated, Richard, a not much positive movement, if anything, just this slightly positive movement in private equity, what we call net asset values or valuations, compared to something like a 15 to 20% markup and the public equities valuations. Right. And if you zoom out though for a bit and say, okay, let’s look at the back four and a half years, what you’d see is that private equity valuations have generally trended just about the same level of return as the Nasdaq and S&P 500. Right. So widening the timeline there matters. And then if you look at any rolling ten year period, the data would suggest that if we go back from literally this year all the way back to 2001, any rolling ten year period, there’s very few where private equity has underperformed that of public markets. Generally, it’s going to overperform or outperform over a ten year through the cycle type of strategy. And beyond that, it also matters a lot in private markets. It matters a lot who you pick. Right. And what I mean, there is that, manager dispersion is a real thing in private markets. It’s also true in public markets. But what you would see is if you looked at the public market. So U.S fund kind of global equities, if you looked at kind of the bottom quartile of returns versus the top quartile, what you’d see is that spread is something like 7 to 9%, right. So 200 basis points of performance. So you can get from being in a bottom quartile versus a top quartile manager. So that’s your manager selection window there. U.S core real estate similar story about a 6% bottom quartile performance 8% top quartile has over the past ten years. But then you go to private equity and some of these more private strategies. What you see is over the past ten years, the bottom quartile private equity performance is something like 2% and the top quartile is 23%. So imagine the level of outperformance that simply comes from picking the best managers. Now obviously that’s tough to do. It takes a lot of diligence, takes intensive resources. But considerable difference there. And similarly, in non-core real estate, for example, what’s often categorized as a private market strategy, bottom quartile -2%, top quartile 14%. So the kind of summary there is, you know, who you pick matters. And it creates an opportunity for outsized performance for manager selection. Right. And so that expertise of your underlying managers is going to matter. And then because of the level of active ownership that you can get from these private managers, you’re going to be able to ensure, ideally, that the values of the managers that you’re picking align with your own values, right? So you have a little bit more of an active role and who you’re picking as well in the private markets. 

Richard Cunningham Great commentary, Andrew, and I’m going to do my best to kind of summarize where we are at the moment, just kind of in terms of the conversation, if you can’t tell these guys are just a brain trust. It is fun to hear you guys riff on this. So you’ve got the private equity universe. And oftentimes, unless you are the one directly going to invest in underlying companies, startups or mature businesses, you’re going to partner with a fund manager, Mr. or Mrs. Investor, and your title as you partner with that fund manager is a limited partner. And you guys stop me if at any point I’m venturing off course here. Chris, you pointed out in Andrew your. Just talking about the illiquidity side of it, that oftentimes these agreements are 10 to 15 years of partnership. Now, the upside of that partnership is the opportunity for low correlation to the public markets. Andrew, as you were just talking about, or the historical outperformance that private markets have displayed in private equity, venture capital, private credit, what have you across those different types of asset classes? Now, one of the biggest things though, with that liquidity constraint, yes, is the desire for outperformance. But also you get seven eight years down the road and you might say, hey, I need to offload this position. It’s done well. It’s possibly matured. Maybe it hasn’t, but I can’t hold on for the rest of the remainder of this fund life. And it’d be great if someone wanted to buy my position from me. In the same way you would go out and liquidate stocks in a public exchange in the stock market that just does not exist in the private markets. And so that’s where secondaries have been introduced. And so I hope that kind of sets up a summary for where we are right now as we get into some of the commentary. Because Chris, secondaries are all the rage. It seems like as people are talking about, you’re giving me a head shake back and forth and your humility. But as people are talking about the private markets and, you know, honestly, the run that the public equities have been on, you know, the climbing interest rates, some of the macro conditions that private markets have been dealing with that have led to a little bit of a recent drag on performance. People are really talking about the secondaries market. So what are you seeing right now. Kind of give us some of the performance commentary or maybe just the overall thoughts on where things are currently. 

Chris Kim Yeah, I guess secondary is kind of having a moment right now for the past one two years is definitely been. And I like I mentioned earlier, it’s been growing, but primarily due to the lack of M&A activity, IPO activity, especially if you have any exposure to the private markets, you’ve probably or self or organization already, now that this report is coming in, has gotten a lot lighter. And so because of that, that’s actually boosted the secondary, you know, along with the historic run that the public markets have been on. But the private markets have been quite a robust self, not just in way and also in M&A activity or IPO. So if you’re invested in these private funds, you probably knows, you know, for next span of years. The past 510 years have been a lot of money back to and kind of I would say a lot of private investors, the way they manage a portfolio is that they are rarely just invested in just one private fund. You know, they’re probably investing in a whole basket, a whole portfolio of private funds, and they’re like, oh, I’m getting all these distributions. And what they do is they are committing to the general partners next fun. And their hope is that as they get these distributions, they can use that for a following commitments to the next funds by assets issues. And it has lightened up. But they’ve already made these commitments. You know they find themselves in this a little awkward in balance. You know lower distributions. But the outflows are now greater. That’s one of the main reasons why secondary is just kind of having a own. 

Andrew Behrman Yeah. That’s like an extremely important distinction. Right, Chris of like performance in the private markets versus public markets, the way it’s recorded is actually quite different. If you’re invested in a stock and you see on paper that stock is now increased in value by 20%, chances are you could sell it pretty soon and get something around 20%. You know, depending on the day and where the markets are and private markets, you see a couple of different types of markings, right? You see all managers recording what’s called net asset value, which are what they expect. The fair value is of your investments at a point in time. And what you’re articulating is that there’s a difference between what value is recorded there on the paper and the actual cash that has been received by investors, what we call, DPI or distributions paid in. And so it’s, I think critical to understand and as you mentioned like secondary is having their moment is, you know, many times that distributions as a percentage of the nav net asset value, it kind of hovers around something like, I don’t know, 30%. Right. So people can kind of expect, you know, generally I’m going to start to recover some distributions and I can commit to new funds. What’s kind of occurred over the past two years since rates have increased, exit activity has declined. And what we’ve seen is that distribution as a percentage of net asset value has declined all the way to something like 10%, a figure not seen since the great financial crisis, when liquidity was also obviously hard to come by. And so maybe, say a little bit, Chris, about how does secondary step up as a solution and that environment. 

Chris Kim Yeah, that’s exactly what’s happening Andrew, thanks for that. Where one of the main reasons why we’re having our moment is that when distributions are going back down at ten, 15% a value, sometimes it breaks out when LPs are used to a 30% rate at distributions and it’s not happening. The secondary groups can come in and help fill that gap. And you’re basically taking the control away from the GP and back. As the LP is, is you’re always rely on the GP to send back the capital to you, right? And it helps boost that DPI number. And in today’s memo, it’s hard to even blame the GP, the high rates and just all the macro factors that are going on like GP’s, or are they just not happy with the prices that you get for their assets? They tell LPs, we got to wait longer. You know, it’s hard to sell our remaining assets. So us LP goes, well, yeah I could just sell my position on the secondary market. So that’s kind of like an interesting dynamic that’s happening where the secondary market kind of in some way empowers LPs to have this other outlet of accessing capital. And because of that, what’s happening there, there’s also a greater interest, I would say, in the last few years for fundraising for secondary funds. It’s probably no secret that fundraising has been pretty tough for most private funds strategies. All right. We use Pitchfork quite a bit, and I was looking at some of the pitch book numbers, and I noticed for their December 2023 figures for the last 12 months, they were all negative for all sectors private equity, venture capital, real estate that except secondary secondaries was up 65% in fundraising activity because people I guess LPs view secondary. So like this could be a moment where secondaries can come in and start buying up all these assets at probably an attractive price because something that I haven’t mentioned about secondaries because of this illiquidity factor, there’s also an illiquidity discount that comes into play. So when you’re buying a value in and you talked about the net asset value, and a lot of times you price off that. In the end, more times than not most secondary transactions occur at a discount. Like if you own a Microsoft stock is trading X dollars. If you want to sell it, you get it probably at that X dollars with that, maybe a little spread plus or minus at probably $0.05 or something. But on the secondary market, if your position is worth $1, it’s very rarely you probably can sell it for a dollar. You probably have to sell it at some level of discount. And there’s a lot of factors that go into that level down. 

Richard Cunningham Chris, this is fascinating. So now you’ve got me captivated by what are some of these underlying assets or positions that are selling. Is it you know, we’ve heard a lot in the news about Venture capital’s tough slog because valuations got so high in 2020 and 2021. So is it positions and interests and startup companies that are growing, or is it the buyout managers you guys were talking about earlier that, you know, buy control or the ownership entirely of a firm or a company? So I’m curious about what you’re seeing on the market, if you will, for secondaries managers like yourself to go in and acquire. 

Chris Kim Yeah. Earlier I mentioned like the secondary market is really divided into three big buckets and the first bucket being LP interest and debt cost. It’s around 50% of our activity. And now within that LP interest it’s primarily buyout. Buyout is the heavy. It’s always been the anchor of secondaries activity. Most funds generate quite well and they’re easy to trade. And then if you look at say in the venture world, probably the second largest within the secondary universe, it’s still the discounts are quite large on the venture side, and a lot of it has to do with usually, you know, most venture companies are on the younger side and not cash flow positive. A lot of times you’re pricing basically off the latest funding round versus a lot of buyout companies. They do a full valuation analysis with the like. There’s various ways to go about a comparables, DCF, things of that sort. But the venture assets a lot of times the companies like well the companies worth the 2021 series B that was raised in 2 or 3 years has elapsed. You know, not really much has happened to that company. You know, you even wonder, is the company even operational? You know, with all of these. 

Richard Cunningham It’s a long time in the life of a company. 

Chris Kim Yeah. Especially when a company that’s like only say like five years old. So the last two years, you know, you really want to know what’s been occurring. But it’s sometimes hard to get that information about the company unless you work there or something. And also, I think people are just worried that venture assets are very inflated the past 3 or 4 years, you know, their rates at astronomical valuations for multiple reasons. And with the high rates, it definitely doesn’t help as much. I think venture capital assets, you know, companies are trying to grow at really fast clips. I think interest rate checks anymore. That’s how I did a buyout in the venture. I think there’s definitely quite a bit of activity with credit funds. Right. It’s a pretty hot sector right now. Generally you know the risk perceive of credit funds slower. So a lot of secondary buyers like that kind of yield and they trade quite low real estate along with venture very difficult right now I think the spreads are to live. And when I talk about spread for both venture and real estate or just anything in secondaries, it’s just what the sellers are willing to sell an asset for. What a buyer’s willing to pay the gap is just still to versus buyers. It’s not too difficult for a buyer still to come to an agreement, and there’s still activity in the mentioned real estate, but it could be greater to spread narrow. But spreads are quite there. 

Andrew Behrman Yeah, I think I mean that’s a key piece right. Like on the discount, Chris, as you come as a buyer to buy a fund interest, it’s largely. Are they going to be related to? Well, what’s the strategy of the underlying assets. Right. Like how early stage is this company, how reliable is the underlying value that all of these assets are being marked at? I would assume and then there’s some function of beyond. I mean, you articulated all of that. Well, there are some certain types of companies where the valuation is probably a bit more reliable, like buyout for example. And then there’s also a component of timing, right. Well, for example, if I want to sell my house and I can wait 36 months, I’ll probably get a better price if I need to sell it tomorrow. Right. And so maybe just say a little bit about how does the speed of needing liquidity, because what comes to mind here is kind of the institutional versus retail seller. And I know you operate with both types of sellers. So maybe just say a little bit about, you know, how does that kind of speed of exit required relate to the discount that you might see? 

Chris Kim Yeah. Thank you for pointing that out, Andrew. It’s definitely one of the biggest factors when it comes to pricing. Even within the secondaries world, there’s different timelines that people work with. And my brain’s all over the place. I’m like, well, where do I start? I would say starting with like large and small sellers, they’re just different profiles, like most large sellers, like they’re probably large pension groups. They are large endowments, foundations and universities. And a lot of times they don’t make that decision on a whim. And they’re going off, let’s say, a $1 billion portfolio LP interest. You know, they probably planned it out many quarters in advance. And a lot of times they’re not doing it because they lack liquidity. It’s almost we call it a portfolio reallocation. They are just moving capital around. They have an X amount of dollars or percentage. Private markets know related some other portfolio or they want to deploy it somewhere else. Or they could be like a new CIO comes along for this university and they’re like, I need some money. So I could implement this strategy within the portfolio, the overall portfolio of the endowment for small sellers. You a lot of times they’re like high net worth. So are small family offices falling down. And then even liquid is, I would say, more than just a simple reshuffling of the capital. Maybe some of the sellers you dealt with were providing liquidity solution for them so they can meet their debt payment. Maybe the father passed away the family and the children. They want to figure out the capital that’s locked in these private funds that the father invested in and used for something else. They buy a house. So I would say a lot more real, like more relatable situations for small sellers. And that’s kind of like one of our main purposes to be that liquidity solution provider. And the timing does help with pricing because like stock market, the exchange rate, I don’t know what the seconds it takes. It’s probably like a millisecond to take a trade. And you go your broker, can you get it into cash flow shows up in your brokerage account, even though stock the fast as you could do a secondary trade for like a typical LP interest trade, it takes about a quarter, a full quarter as in like months. So it’s not a fast process. And for a seller that really needs cash, the last thing you want is that trade to fall through. And then they got to restart the process and it takes them another three months. So I think something that we’re really striving for our security to be very reliable. It’s dependable. That’s probably where a lot of folks on all sides want to work with sellers, want to work with us. Intermediaries want to work with us even though they’re large secondary buyers. You know, we’re hoping that they’ll recommend us because, you know, we’re dependable. We don’t try to trade deals. You know, I always like, tell our group that our word is gold. So even before a contract is out, like if we say we’re going to do it at this price or at this timing, you know, we’re going to do our best to, you know, stick to it. So there’s a little plug on us, I guess. 

Andrew Behrman Yeah. Well it’s important, right. Because as the private markets grow, generally retail investors are going to increasingly enter. And that can be a good thing right to have exposure to that in your portfolio. But what I hear you saying a bit is, you know, all investors need to be considerate of what’s my total asset allocation, what’s my risk tolerance, what are my liquidity needs going to be. And generally, institutions are going to be in a situation where they have a longer time horizon. They can be a bit more patient. And so that’s just a key consideration for, you know, retail and high net worth investors as this market continues to grow and become part of their asset allocation. 

Chris Kim Yeah. And one of the thing I would add is generally large institutions like I mean I know they might have their own version of it, but they don’t really have like life events that smaller like high net worth come across and that can shake up the plan. But I would say institutions generally have like they have a big shake up. Something happens to them, something big event. Usually I would say they’re they have such a long term plan that any kind of whether it out versus the smaller sellers. 

Richard Cunningham Or key articulation from a rapidly growing and honestly just exciting development in the private markets guys. So thank you. All right. Brace yourself. This is going to feel like a hard pivot. But I think it’s key on a marks in the markets episode. Just to kind of make sure we’re as faith driven investors orienting ourselves around everything we’re seeing from a headline standpoint and all that’s going on. And so the general question I want for you guys is. What is top of mind for you right now in your work? And as you’re, you know, faithfully going about being an excellent investor in light of, hey, we’ve got an election in the next 60 to 90 days. There is talk of an imminent rate cut coming here in September, maybe 50 basis point, 75 basis points. Public markets have been on a historic run. Is there going to be a continuation of that soft landing, hard landing? Where are we going to end up the inflation situation with kind of the balancing act of the fed in their rate cuts. You know, as you do your work and as I’m in a faith driven investor, you’re listening to this podcast, what are those things kind of top of mind. How can we, as you know, the people of the cross kind of keep that redemptive mindset in the midst of all of these ever changing and ever active headlines? And so I’ll kind of give you that grab bag to both of you and let you comment where you wish. And then we’ll close with our final question that we love to ask after that, Chris, go ahead. 

Chris Kim Oh, that was a lot I want to try and digest right now. I think the Lord’s just been constantly reminding me with, I don’t want to necessarily call it noise, but everything is happening out in the world. Never forget to steward what he’s given me. Well, like as in like, I don’t consider myself the likeliest of like, leaders. But I think given this opportunity, this group, you know, I got two little kids now and yeah, I was even having a dinner with someone last night, and we’re just talking about what it takes to just become wise. It just seems such a lost thing. My wife always says, and I say, she’s the wise one in our family. I gotta learn from her. You know, the world doesn’t need more smart people. She always reminds me of that. And yeah, it just comes with, like, just understanding how little we really know and how little we actually have in our control. I think ultimately just an added bit more on him. But sometimes it gets lost like it gets up in there, like you listed all these factors that go going and it just conflict is raising my work here and now I’m trying to build a team and think about how to build a culture and everything. But yeah, sometimes my mind just gets to ahead of everything too fast and I just go slow down just for life. And I forget the really important stuff. I would say not to try and see the things you do are important. I don’t even know if that really just any things you just brought up, but that’s something that’s been really like on my heart lately. 

Andrew Behrman Yeah, I think it’s an important consideration, Chris, of like, just like we were talking about investment horizons of different institutions. I mean, as private capital investors, we’re fortunate and blessed to have the benefit of thinking through the cycle as it relates to investments right over multi year periods. So our capital is able to be a bit more patient than you may see at times in the public markets where things are driven by a quarter to quarter performance, we have a little bit more ability to say no. We want to have an active influence for the long term. And I think as believers, you know, we have we have the ultimate eternal mindset, right? Like we know where the end is headed. Right? And so we can be really grateful and rest assured in that making our plans right as we should, and diversifying, having a strong asset allocation but relying on, you know, it’s the Lord’s timing, it’s his will be done. And we know what the salvation story is and what the redemption of creation is in. 

Richard Cunningham Looks like man, that’s good from both you guys. I mean, I think the general answer I got there was, Richard, tune out the noise. There’s a lot of headlines and it’s just not worth getting lost in them. 

Andrew Behrman Look, there’s going to be changing dynamics, right? I mean a lowering interest rate environment. Maybe some M&A activity does pick up. You start to see some of those distributions, Chris, that haven’t been as present in the markets. 

Chris Kim I would just add like to address some of the actual topics. I just start with the rates and everything. Like at least amongst the secondary investors, there is a strong opinion that we do believe M&A activity will open up starting in the second half, if not first half of next year, with the expectation of rates absent of any major macro geopolitical event. That goes on and it’s reflecting the secondary price. Secondly, pricing has been increasing overall and deployments been also increasing too. So when you have positive things going on, generally, it does indicate that there is an anticipation and expectation that net asset value should in the coming quarter. In the coming years, distributions are going to pre. So this slow historic ten plus percent. There’s an institution debt that’s going to rise as well. And so with those things secondary investors are trying to load up on assets. As they’re acquiring assets they’re only yielding 10 to 15% you know in distribution. So we’ve been seeing a lot on our side. And one thing that’s kind of nice about us, and I think Andrew’s probably in the same situation. Like we are essentially a funnel. You know, we actually have hundreds of positions. So we feel a notice if we actually talk to the GP’s, we talk to all of these private firms and hear what they’re seeing in the market, and they’re getting a lot more activity with their portfolio companies, but they’re perceived to be performing a little better. Do you say they’re actually getting more inbound interest, maybe to be acquired or do some kind of strategic X, Y, and Z with it? So definitely activity is picking up in some sectors more so than others, I would say, by having good run things. Ventures, though, seems to be lining a little bit, but it’s like picking up two and depends where you operate that you’re right. It’s been, I think, very strong play, especially with the hiring. So people look elsewhere for access to capital. 

Andrew Behrman Yeah, I think there’s comfort in diversification I think and that’s probably true for any investor to say like, let me build an asset allocation that’s going to be in many ways all weather, so that when tough times do come in the short term, I’m prepared and can keep that long term mindset in mind. I mean, I think as a fund investor on the private equity side, I think we constantly are thinking about, hey, what’s our top down view of secular trends that are going to continue to occur throughout the cycle? Right. And then secondly, how do we pick great managers with expertise that can navigate those cycles? Well, and I think if you’re able to do those two things, you know, in a diversified way, you should be able to perform well. 

Richard Cunningham Two words, gentlemen, great summaries. And this is the question we love to ask at the close of every FDI podcast is, what’s the Lord been teaching you in and through His Word lately? Andrew, we’ll start with you. Chris. We’ll close with you. 

Andrew Behrman Yeah, well, it seems like it’s been a theme here, but, probably just the theme of patience and having a long term mindset. You know, I’ve got a 16 month old now. I continue to build the team here at sovereigns. And, you know, I’ve been reading about the patriarchs and the Old Testament, you know, and often when the patriarchs made decisions without seeking the Lord’s guidance first or in haste, things didn’t turn out so well. And so, I’m generally reminded, you know, to have patience, to be thinking with a long term view in mind. And it’s easy, I think, to get kind of gung ho about how to steward capital. Well, right now, and I’m reminded that, you know, that’s a multi-year exercise. And I’m also called the steward in my family, my community, and be an active believer in, active in my calling. 

Richard Cunningham You know, one of the things we love to talk about in the faith driven landscape and that is faithfulness over willfulness. I really appreciate that, Chris. What about yourself? 

Chris Kim Yeah, I think kind I touch upon that earlier about just wisdom. I think just as a father of two kids now and trying to lead this group too many times, I still find myself not boasting in the Lord, and he keeps bringing me back to first Corinthians that the only thing that’s worth trusting is in the Lord. So I think that’s been heavy on my heart and keep me grounded. If I lose sight of that, that it’s actually like, I know the podcast variety, the backgrounds, you know, where we’re at. But, you know, I’m in New York City and if there’s anything that need some humbling, it’s probably the city, you know? So I think it’s very easy to get caught up with all the activity that’s happening around you. And it’s just wonderful to have to work to just constantly remind what it all comes out to. But I’m called to do so. Try not to take any credit. I got a question. That’s awesome. 

Richard Cunningham Well, Chris Kim, our strategic partners, Andrew Berman, Sovereign Capital, what a joy to have you guys on friends. This has been another edition of marks on the markets with Faith Driven Investor. We will catch you next time. Thanks so much for tuning in. 

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 Faith Driven investing.org. This podcast wouldn’t be possible without the help of many of our friends. Executive Producer Justin Foreman intro. Mixed and arranged by Summer Driggs. Audio and editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb. 

You’re listening to Faith 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. Hosted 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 Welcome back, everyone, to another episode of the Faith Driven Investor podcast. A joy to have you with us whenever and wherever you are catching this episode. It’s the end of October 2020 for its marks on the Markets Pod. The guy we featured on our last Mark’s In the Markets podcast is in the studio with me, our co-host John Kuhlman. And John was talking domestic markets, kind of US public markets, broader economic thoughts in the midst of an election year, federal, you know, rate cuts, things of that nature. And John, we’re doing something different today, which I’m really excited about because I know we’re going to talk about a subject that is particularly top of mind and top of heart for many inside the Faith Driven Investor community. And we’re going to zoom in on different markets, and that’s frontier in emerging markets. So, John, how are you, man? Good to have you in the podcast studio. And we’ll get to introduce our guests here shortly.

John Coleman Yeah, Richard, I’m doing really well. Obviously, this is a topic near and dear to each of our hearts, the heart of our friend Henry Kaestner, who’s spending a ton of his time thinking about developing markets and frontier markets now. And I’m really excited to look into this. It also gets us out of the echo chamber of the US election and interest rate movements for the time being, so we can think a little more broadly. So it should be a lot of fun.

Richard Cunningham Isn’t that the truth? And so we’ve got the Pragma advisors team here with us. It’s a full house. Patrick Tamano Andrew Just some leaders in the FDA space. Friends. I want you all to introduce yourselves and you’re going to start with you. And then also, Patrick, when we come back to you, maybe some of the origin stories as to how this crew came together to put together this particular pragma investment market study for 2020 for Patrick to make sure is.

Patrick Lowndes Man Well, thank you so much for having me and my team here, Richard and John. This is really exciting to get to feature some of this research and some of what we’ve been up to for, gosh, almost six years now. And from the Seattle area, it was five lovely kids, happily married and coming out of the software industry, but really becoming a generalist across a lot of different kinds of companies. And so a lot of my work and just following the work of really what God is up to in some of the hardest parts of the world to do business now is just drawn, my team and I here to research and canvas the market and so I can share a little bit more about the origin story in a sack. But yeah, we’re we’re pumped to be here.

Andrew Winker Great. Well, I can jump in. Yeah, it’s great to be on the podcast. I’m calling in from Houston today. My wife and I are Houston, been here for for several years. My passion for this space first started right when I was getting ready to enter the workforce. So like most millennials, I had some kind of vague idea of impact in my head, but didn’t really know where to direct that. So right before I entered the workforce, I took a class called Perspectives through my local church and really just opened my eyes to the global nature of God’s kingdom, you know, the intersection of the unity of the body of Christ, the diversity of the body of Christ, and mutually how we partner together. And I realized that I really want to dedicate my life to building that kingdom, not my own. So that, somewhat unnaturally maybe led me into consulting. But one of the things that led me to jump into that field, I started my career at a Bain and company out of school, and I really loved solving problems alongside tight knit teams of people. Some of the things that gave me the most joy. So the natural evolution of that for me is I’ve gone throughout the first kind of seven, eight years of my careers thinking about what problems exist in the world today, that I want to really put my shoulder behind solving, and then to who do I want to do that alongside? So right now I’ve that that’s led me a couple of different places. Right now I’m in a fun place where I’m getting to pursue work kind of through a portfolio career, doing a couple of different things, looking at work at the intersection of one redemptive business to radical generosity of capital and then three frontier markets. And I’m like the ones we’re looking at. So Paragon was a great fit for that and excited to kind of be a part of the team with Patrick and tomorrow.

Tamanno Hodjihanova Yeah, I love it. Well, my friends, I’m Tamanno. I was originally born in Uzbekistan, so a big part of my passion for Frontier and emerging markets is because I’m a part of the people that will never get to hear right unless we have development and capital and things that are working in those areas and markets for the gospel and and the end for flourishing and what that looks like. I’m calling in from Dallas, Texas. I went to a small little school here and have stayed in the area close to my local church and do a couple of different things. Part of my work is with the Lion’s Den and help with a big part of that event, and it’s happening in April every year. And then also recently jumped on with a financial advisor, Rachel McDonough, and work alongside her at Wall Square to really connect the head and the heart of investing. Right. How do we take the values that we know that we are called to as believers? And what does it look like in the ways that we do capital?

Richard Cunningham Fantastic. So as you can hear, we’ve got some experts in the crowd. Get tech entrepreneur, tech investor, Bain consultant with that kind of structured consulting background and then to mano with her roots with Lion’s Den, Rachel McDonough, who’s been such a key leader in this space in terms of helping advisors and Faith Driven Investor get in the game. And so I’m going to set up a little bit of context on this study. And one of the key things I want to note is this. Study we’re talking about from pragma, there are 2024 kind of frontier in emerging markets investment study. It will be available in the show notes for you to download. And then today’s kind of topic is going to really be unpacking it. But the reason this is so important is when you look at US public markets, thanks to folks like Tim McCready and the work of Bright Light and his team, among many others, it’s pretty easy to go get your arms around the size and kind of the scope and breadth of the Faith Driven Investor movement ecosystem because of reporting standards. Now it gets far more difficult even in established domestic markets here in the US and the private space to understand how large is the faith driven investing ecosystem as we think about venture capital or private equity or private credit, among other asset classes. And you’ll get where I’m going with this, because if it’s difficult in the US, imagine how tough it is to kind of grasp and get a sense of when you go into not only international markets but frontier in emerging developing markets internationally. And that’s the noble and honorable work of our friends here at Pragma who said, Hey, we want to go find who are the fund managers, who are the kind of people captivated by the love of Jesus who understand that redemptive and good business can be a force for good in places where that otherwise might not exist. And so that’s what our friends are going to be unpacking here today. And Patrick, with that in mind, would love some more of the origin story, how this crew here came together, what the Lord originally put on your heart and why Pragma came into existence and kind of some of the your origin story. And then we’re going to get into the research.

Patrick Lowndes And that’s excellent. So a little bit of background. It was, again, like I said about six years ago when pragma started, but even before that, probably for now 15 years I’ve been that the Lord’s called me to be really generous towards NGOs bringing transformation of all different kinds in these tough parts of the world. So my eyes been here when I realized that God’s heart includes all people all over the world, and especially the ones that are overlooked. We like to send, you know, a lot of our work to where there’s already a foundation. There’s already, you know, a strong presence of believers and Christians. And so I’ve been very much motivated to say, well, hey, where where haven’t we gone yet? And so six years ago, we started getting together. Probably about 15 people started circling together at a conference and we said, How do we get together and encourage each other more often? Maybe do some small investments together? How do we help outside of like these conference highs that we typically get? I think we’ve all been to one of those conferences where we’re like, Well, now what? Right? So we started getting together and shortly after we started getting together, I had a pretty big exit event and sold my first software company to ServiceNow. And all of a sudden, you know, at the ripe age of 30, I had this pile of cash that I was like, Wow, what am I supposed to do with this now, Lord? And so I began kind of canvasing the market, figuring out who is putting capital in these parts of the world that I care about. And to be honest, the list was not very long. I mean, John, fortunately, sovereigns is one of the short listed names there that we had, but it wasn’t I think it was 17 funds and sources of capital that first year in 2019 when we did the research. And then over the years it’s blossomed and grown. And that word, yeah, I think I’ll just say that word pragma advisors. It comes from this, you know, the parable and in Luke 19 where Jesus is saying this master said to his servants, Go put this money to work. So we’re very interested in like, how can we put our money, our talent, our skills to work? And you know, what that’s blossomed into is this focus on the frontier in emerging markets. Starting from only 17 funds. A few years ago, we analyzed more than 100 funds. So praise God for just the movement and the momentum behind the growth in this space. You know, Richard, we can get into some of the details on like how we selected, you know, what we looked at. But I just want to tell that little bit of backstory so people know kind of the origin of where we all started from.

Richard Cunningham And then you guys have an interesting definition for Frontier in emerging markets, I think is also helpful to kind of level set before we get going into the research is just like as your team thinks about defining frontier in emerging markets, oftentimes that can be just an economic calculation as to like a country’s GDP or whatnot. And what they’re doing kind of from an economic marketplace or mindset. How is the team thought about that as before we kind of get into the research for kind of the geographic landmass for what we’re talking about.

Patrick Lowndes Yeah, excellent question. Yeah, we hear this a lot and I think there’s a few angles where we can commonly look at this and I’m going to break it into three parts to make it simple. So the first one is economically frontier, right? So they’re not a Tier one market still very much developing are on the world scene. It’s frontier and it’s growing. There’s a lot of potential and there’s usually a reason why it’s not a Tier one market. And that gets to the second issue in frontier and emerging markets, which there tends to be some social, you know, political instability, you know, I’ll say destabilizing factors that make these markets more difficult to do business, more difficult to flourish. That’s why they’re not Tier one markets. And so I think a lot of people have said, hey, I want to go where it’s economically. They’re not doing well and I want to solve social issues. And we totally agree. Like, let’s do that. I mean, I love where the movement’s gone and. Sub-Saharan Africa. Also out in Southeast Asia. That third piece that matters to us in our research and as we are kind of evaluating which funds to include, because is this question of where do people only have a very small fraction of a percent of Christians that are living and doing work? Because as Christians were called to be a blessing to our own community? Right. That’s part of what God has asked us to do. But if there’s like less than 2%, 1%, a fraction, then it’s really hard for people to get a taste in a relational way of who Jesus is or what is his kingdom like. And so we’re really interested in places basically where there’s very few Christians because we feel like that’s truly the frontier from a spiritual perspective. In addition to the economic and the social frontiers that we’re also tackling. So is that helpful?

John Coleman Yeah. And I want to follow up there, Patrick, because I think what you all have articulated so far is the impact thesis for Frontier in emerging markets meaning and especially the distinctively faith driven impact you’re articulating how do we help a portion of the world develop or stabilize that’s unstable or developing? How do we, in the process of that, share the gospel, be a good neighbor, demonstrate the love of Jesus? The third question I always have, though, is kind of is there an economic or commercial case for this? And I know there are risks inherent in frontier in emerging markets, obviously, but do you believe there’s kind of a commercial or an economic case for investors to feel rosy, not just the impact that they can have, but potentially about the return profile?

Patrick Lowndes Yeah, absolutely, John. And I don’t want to steal too much thunder from my team as we’re going to get into some of that in the report and kind of what the different categories of financial and commercial return. So that’s certainly something we’re going to hit on. The little bit that I’ll say is, you know, some people look at a new market and they get excited about opportunity. Right? But I’d say most people that haven’t done an investment overseas or in a fund overseas, they are usually waiting for a later stage company. They’re waiting for a lower risk because I don’t want to lose it. In other words, I’ve got my grip pretty tight on fear of loss. Right? And that’s the reason why we don’t see people put in half their portfolio necessarily in these markets. Right. We’re talking about a smaller chunk, but there is an increasing amount of opportunity. There’s another type of investor that looks at these markets and says, wow, I can go after non consumption like the prosperity paradox talks about. I can go after non consumption in a market with kind of a venture capital sized return, but with a much more stable and profitable business because they’re just like no competition is for some of these things. So in a stable market, it’s really hard to get big returns unless you are like innovating and the only one doing it. Whereas in these other markets there’s a lot of whitespace. And so some investors and this is where we’re looking for more fund managers to come out, but some are really focused on where’s the whitespace and the big opportunity to scale. And that’s where there can be massive economic opportunity. And we’re starting to see more and more people analyzing their market like that, which is quite financially attractive.

Andrew Winker I think one thing I would add there, Patrick, it’s a great point. Really, I would take like a macro lens and a micro lens. I mean, if you look at kind of canvas the markets, we’re looking at like at the macro lens, you’re looking at two thirds of the world’s population, one third of the world’s GDP and only 10% of the world’s private capital. So just by that alone, a lot of these markets are just undercapitalized. You know, there’s a lot of kind of opportunity at that. But I think the caveat there is if you try and kind of cram that opportunity set into the just kind of pure worldly return maximization kind of mindset, it breaks a little bit because I don’t think what you can expect is to solve kind of all of those challenges on the typical ten year fund lifecycle to 20 mile, you know, So it kind of takes a different model. And I think there’s a real opportunity for the Body of Christ to lean in to some of that risk and think about redefining what does it really look like to see the Kingdom of God transcend in this kind of market with all the flourishing and blessing that that would entail? But I think that we kind of have to shed a lot of our traditional kind of risk paradigms in doing that while still maintaining a level of excellence.

Richard Cunningham I think we’re hitting on something important here. And I want to go to Tim on a real quick because she is our person who is has the frontier in emerging markets routes being from Uzbekistan originally. So how would you comment on this? And I know we’re kind of pushing off getting into the study. We’re going to get their promise. We’re kind of teasing it out further. But Tamara, I think it’s important to kind of get your commentary and then we’ll dive in.

Tamanno Hodjihanova Yeah, that’s great. I mean, maybe let’s go back. I didn’t hear the name Jesus until I came to the States. So I am one of the people who grew up in a region in a place of the world where the name of Jesus is rarely heard and continues to be the case for a big part of the world. And that is a big part of the reason that I think both my heart and. It’s hard as and learning to recognize that we as a body of Christ have a commission and a challenge to walk into the hard of places like this and redefine risk and look into a different way of investing to recognize that maybe yes, John, we’re maybe not in a place where we can have the same amount of return as you would hear in these markets or even in the public markets here. But there is a place in a space for us to lead out, to recognize that there is an opportunity here that we can both have spiritual, economic and social and environmental impact all at the same time. And we have gotten to see a big part of the organizations and the times that we’ve gotten to highlight, just even as Patrick mentioned, having 17 come to over 35 this year and see the movement of local leaders and international leaders working in these places and seeking to look at transformation differently, seeking to look at risk differently. I think there’s a lot to be said for how this space is changing and how it will continue to over the next couple of years as we get to see more capital and hope and pray that more capital would get deployed in these areas.

Richard Cunningham That leads to a lot of questions. So let’s dive in and let’s kind of go bottom line up front friends and maybe kind of when you look at this study from a 30,000 foot view, maybe major takeaways and also kind of some of the methodology of the study as well, because we’ve talked about the number of funds there are out there, the number of capital allocators and the people we can kind of go evaluate and get their sense of how they’re thinking about impact plus return is is it more concessionary? Is it fully market rate, whatever that might be? What was kind of the overall approach to the study? And then maybe kind of some of those larger takeaways and then we’ll dive into those as we go?

Patrick Lowndes Yeah. Andrew, would you like to maybe talk about we looked at more than 100 funds. What were some of the screening factors that we had? Because I think that while some people might look at the study and say, Hey, wait, you’re missing so-and-so. And I think it’s just good, maybe the level set with that. And then, yeah, we’ll jump into some of the high level themes, but would you mind hitting that for us?

Andrew Winker Yeah, no, I think that one of the things I had found into my brain for my consulting lifestyle was kind of what it means to take a hypothesis or a thesis driven approach, you know? So with that in mind, kind of our overall way we looked at this was just start off with a couple of relatively simple critical questions that we wanted to answer. So things like we already talked about a little bit, what do we mean by frontier markets? You know, who’s even participating in this space, who’s been doing work here? How much capital is being deployed? Where is it being deployed? What’s the target financial return of those investors. So we kind of set out with a couple of questions we wanted to answer. And then from there, it was a lot of kind of honestly, a lot of picking up, don’t you know, we did over 30, 40 kind of interviews to really get a kind of a bottoms up perspective of what’s going on in these markets. We supplemented that with a lot of secondary research. I mean, huge things. It was incredible to kind of go through the database that FDI has of these kinds of different funds in different places and get to supplement that with some primary research. So kind of a combo of both of those things. And we do want to celebrate. There’s a wide variety of approaches people have to this. Our particular criteria for when we were looking at funds was first and foremost sources of capital that are kind of led by Christians or followers of Jesus, focused on companies with Christian or Kingdom kind of led founders and leaders that are pursuing multiple bottom lines of impact and what they’re doing, and they’re deploying capital directly into companies. So those are the four kind of criteria we looked like. And that kind of frames up the who in the landscape that we’re looking at in the study.

Richard Cunningham Helpful. So we got Faith Driven Investor is deploying into Faith driven entrepreneurs direct investments. So the investor is kind of exercising their influence as being a shareholder on the company’s cap table. Good. Patrick, what else would you add?

Patrick Lowndes The thing that I was going to highlight were and you ask are like, what are the big takeaways? And this might be obvious, but just to state it and you’ll see it graphically in the study, just there’s a big uneven distribution of capital. We’re talking about less than 3% of funds in the space deployed outside of the US. And if you’re looking in, our target area tends to be North Africa and the Middle East and the better part of Asia. We’re talking about point 1% of funds that are intentionally deployed towards these kinds of markets. So I mean, we got a lot of headroom to grow in this space. But the second big takeaway that we had is just we talked with lots of fund managers. We talked with individual investors who are prolific in this part of the world. And another theme came up, John, it kind of begs it goes back to your question about what are your expectations? And so, you know, having the right expectations matters a lot. So this is the third time we’ve done this study. Some of our favorite reports that we do and the analysis is are two by two. And I’ll just take a second, Richard. I’ll just unpack that. So what we’ve got is this two by two looking at on the y axis going up the left side, we’ve got kind of geography. Where are you focused? Right. So again, the parts where capital is prolific and saturated, abundant, it’s on the bottom. And where it’s not abundant tends to be. On the top in our target area of focus. And then on the bottom is the target investor financial return. There’s about 44 funds that we analyze in this space. And you can see a nice gap of how much capital that’s being deployed. And what you’ll see when you look at that is just it’s pretty stark how tiny the dots are and the bubbles are that are deployed in these parts of the world. And then just as you kind of get to the more established parts of world, naturally that’s where more capital will be. So we think that’s a helpful way for people to understand who’s focusing on some of these harder to reach areas in the frontiers and how can I orient part of my own risk profile to try to maybe step into that, maybe to try to you know, this is called Faith Driven Investor. Like, where’s my faith? Am I going to invest only by risk adjusted returns, or am I actually going to invest in faith that maybe in sometimes makes me look like a fool, right? Am I willing to actually risk some of my own perception, you know, in the market to friends or my financial advisor? If I make some bets, that might look really risky. But to the kingdom of God, if you’re able to move the needle beyond just the financial, do you remember to move the needle on other areas? I mean, I had a CFO one time show me the IRR, you know, with looking at all the factors, all the bottom lines. And if you look at for all eternity, out to the right. The IRR numbers are ridiculous. If you truly do value those other kinds of impact as being real impact. So it’s just a very different way to look at investing in these parts of the world. So that two by two, I just give a shout out there, Richard. That’s usually our favorite. People say, I never knew where the money is going in the world.

John Coleman So let me dig into the topic with you also, as I mentioned to you guys, since we were chatting beforehand. I’ve spent a little bit of time in developing markets, worked in Afghanistan and Saudi Arabia, had teams in the Middle East and Africa and Asia for a while. And, you know, there are a lot of legitimate challenges, I would say, that make excellence operating in emerging markets even more important than operating in U.S. markets. You know, on Faith Driven Investor, we often talk about trying to institutionalize the space such that people are investing because we’re really excellent at what we do, not just because we’re Christians. And I think the demand for that in emerging markets or frontier markets, and this is my personal opinion, can even be greater because I’ve also seen how destructive certain types of philanthropy and investment can be in emerging markets. There are legitimate concerns that entail real risk. People care about the security and safety of the people for which they have responsibility. Obviously, even regulations, anti-terrorism measures like we had to blacklist certain countries in the frontier markets, even at relatively extensive investment firms. I was out because we couldn’t be implicated in not understanding where the financial management of those funds was going to. And even when I was on the ground in Afghanistan, we were still having to pay for things with briefcases full of cash and the controls over that was challenging. It was really challenging to think about operating in that environment. So apart from just kind of the risk tolerance people might have for losing their capital, how do you think about the demand for excellence in emerging and frontier markets, both for the protection of investors, but also to assure that that capital is serving a constructive rather than a destructive purpose with the people it’s encountering?

Andrew Winker I mean, John, I think it’s an excellent question. I mean, I think that we’ve all seen a lot of the harm that aid can do when you might be trying to solve the wrong problem with aid. You know, and I think one of the really cool things that we see in this space is a lot of the things that we highlight is there’s really kind of a community element to it. You know, so if you think about how are we not just deploying capital into these regions, how are we really also putting our shoulder behind trying to really think about solving some of those problems alongside others? So several of these groups I mean, I work at the fund that has kind of every single investment is paired kind of within this mentor network. You know, so if a company that’s doing a food distribution business in Central Asia is looking at, hey, how do we solve some of these problems, well, let’s find someone in our network that was a VP at Cisco Foods for for 25 years. And how do we actually connect them to where we’re not reinventing the wheel, solving some of these problems? It’s just a more effective distribution, you know, of really kind of matching those problems. But I think that that will take patience. You know, I mean, you’re dealing across some more like that example I gave was someone that probably is more Western on the Cisco side dealing with someone in a frontier market, with a different culture, with a different kind of land. And so it really does, I think, take this mutuality of relationships going in to do that. But I think there’s an incredible opportunity for it. I think it just takes kind of reengaged with a little bit more than capital, which is one of the reasons we had a lot of there’s a lot of incredible capacity builders doing work in this space, too. You know, so we really long to see there be collaboration across, I guess we could call the whole value chain of capital into these markets, you know, and really see some collaboration both across kind of individuals joining these teams, but also organizations themselves.

John Coleman I love those stories and I would love I mean, if you all have another example would be kind of fun to hear a story of someone who’s navigating this well.

Tamanno Hodjihanova Yeah. I don’t know if I have a story, but maybe to add on to what Andrew was saying is I think it’s also really important to have local leaders on the ground in those countries. Right. It’s one thing to try to have a fund here focused on a country in the West, you know, from the West perspective, and that’s great. But there’s a part of trust community building, relational building that you don’t get unless you have a team and people locally on the ground that know, get a sense for the culture, know what it is to work. And so a lot of the organizations that we interviewed and you tell me if I’m wrong, but most of them have and or travel pretty extensively into those regions or have teams on the ground or have partnerships that they have developed over the years that allow them to help with some of the due diligence, some of the work that’s happening in relational building as well as our story that we can think of. I think that’d be fun to share.

Andrew Winker I was just going to share, I think one group that’s kind of pulling together a lot of this stuff in a really cool way is a group called Angelo Investment Network. And so they’re actually a network of these different fund managers and kind of entrepreneurs. And so one of the really encouraging things that I learned through this study was just kind of seeing the seeds of some really incredible locally led ecosystems in places like Egypt, Pakistan, Mongolia, with a lot of national and leaders really coming together and saying, hey, how do we think about really blessing our markets? You know, and I think that we really have an opportunity to join with our brothers and sisters in those parts of the world, you know, and learn from each other, you know, and actually pull up to the table and listen. There’s kind of this convening of these leaders. And so I think that that’s one story, an example of I think that we really can kind of come to that table as listeners and say, hey, what does God do it in these parts of the world that we might not even know about, you know, and how do we kind of doing this? That’s one group, I think, from the study that I was really encouraged by. There’s there’s plenty more. We we actually kind of profile meetings like 5 to 7 that we know particularly well. So if you’re curious for more specific kind of stories, I would point to those in the study of some of those kinds of sources of capital or funds that have been operating for a long time in these parts of the world.

John Coleman That’s awesome And maybe articulate. You know, I think one thing that people overlook, there is such a history of charity in these regions, right? I think when people think about doing something good in Africa or in parts of Central Asia or in parts of Southeast Asia that are more impoverished, they typically think about funding one of the excellent humanitarian organizations, anti-poverty organizations like World Vision or Compassion. And those play a role. But I also think that the future of these regions will be contingent upon them developing their own sustainable enterprises. Right. I mean, that was really the work we were tasked with when I was in Afghanistan was aid was almost distorting that economy in unhelpful ways because the smartest, best equipped people were all figuring out ways to just work with the United Nations or with other organizations handing out aid rather than building businesses. Right. That would exist long after these aid organizations had exited. Talk about, if you don’t mind, just kind of the role that private capital plays in building sustainable industry or business in these areas versus the philanthropic which is worthwhile in its own right. So I’m not diminishing that but is not well equipped for certain problems.

Patrick Lowndes John, we have on page six of the report, we have a really. A nice classic. That kind of helps picture the difference and like kind of the role that aid and charity play alongside in sort of like relief as opposed to just like rehabilitation and then the final stages like development. How do we now develop out of that? Right? So I’d point people to page six of the study, but at a high level, you know, leaders like Angela have told us we don’t just need people to show up and dump lots of investment capital into markets today. We don’t need that necessarily right now. What we need is the awareness of where communities are and ecosystems are in the stage of maturity and readiness, because sometimes we’re still working on the basic like shifts in mindsets and critical thinking and shifts and mindsets on how does relationships work. But transparency, where I’m willing to collaborate instead of hoard power, right, where I’m not in a survival mindset, but I’m in more of a flourishing, an abundance mindset, right? Kurt Laird’s book, The Culture Key, really unpacks this. If you want a good long read on this topic. And he actually was in Afghanistan telling a lot of these stories. So I would say coming to the table as an investor, the first good question to ask is who’s already here? What’s already happening and how ready are they to pursue? Even if you have a pitch deck in front of you, like how ready are they within their market to operate this kind of a business? Right. And those are the kinds of questions, some of the most excellently run funds, they have networks of people on the ground. These are not people just flying in from across the world and have no context culturally. So I think that’s how we as Faith Driven Investor can come in with foreign direct investment as an excellent partner and co investor.

Richard Cunningham That’s really good. All right. So there’s so much in so many different directions we could go in and I’m enjoying this conversation a lot, but one of the things I want to talk about is making it super relevant to the Faith Driven Investor who’s listening to this and is just like, Man, I’m just trying to think about how to implement negative or positive screens in my public market holdings and my asset allocation here domestically at home, like Frontier and Emerging Markets was maybe on my mind from a like a charitable capital standpoint. Now you’re kind of giving me the argument that, okay, like maybe this should also be something I consider from a investment capital standpoint. Patrick, you mentioned on page six that kind of overview of moving beyond charity. And I also think, you know, Greg learned a hand as the person I think of in the FDI ecosystem is help kind of popularize this idea around. Like as Americans, we give $557 billion and I’m using your data here. This is from 2023 to charity. And we have a million and a half nonprofits in the US competing for that same kind of pool of capital, which is that $557 billion it’s given the charity. Now that’s a significant amount of wealth and capital that’s given, but there’s $50 trillion of investable assets in the US alone. And we probably estimate just from kind of demographic data that 50% of that is held by Christian. So I love the way that you guys unpack this, where it’s saying, Hey, there is a charitable universe to this, but there’s also an investable universe. So maybe lean more into those tensions. And I also want to talk about kind of dipping back into the terrible waters, how this is possibly a way for someone to engage with donor advised fund capital. So now it’s kind of the blended world where it is given capital that can also be thought of as impact investment capital, not just given capital to adapt. That goes out as a grant to A501C3, but it’s given that could then be invested. So what thoughts do you guys have there?

Tamanno Hodjihanova And that’s great. So I think the question of I love that we get to blend both charitable and investment, all our conversations in the ways that we approach capital and maybe to make it super practical to the general Faith Driven Investor audience. Right. It certainly is recognizing that and we say this a lot on the feature and podcast, Everything that we own, everything that we have got, owns, right? It is all his those resources all belong to him. So what would he have you do? What could that look like? Is there things that you’re not currently thinking of in the ways that he would have you to do with that capital that may be a little outside of your comfort zone, and a part of it is leaning in to recognize that that could be the case. And a second is there’s a section in the report where we talk about how do you prepare yourself and then how do you walk with people and walk alongside them? The stuff is really hard and nuanced and it’s not something that you jump into and automatically know what to do or how to walk in the steps over. There are people who are leaders that we stand on the shoulders of that have continued to do this work. And so I would just encourage you to walk alongside your financial advisor if that’s the case. Right. Or finding people in the future in space that are working out sort of answer the questions that are hard and take a lot of time and due diligence. The other part of it is getting involved in communities and in events that are doing work like this that allow you to take small steps and invest with others to learn more. Something that I think I would encourage our veteran community is to look that our patients, we often want really quick results for lots of different things. I want to be able to invest capital and great after this all works out. But the reality is most people have been burnt out in front of an emerging market investments. We’ve talked about this beforehand. This is really hard. It’s probably not going to go the way that you thought will. And so taking baby steps will be the best way to walk into that space to know how you do that with others and then recognizing that there are ways and things that we can learn even when investments may not go the way that you thought. And this is also not a big part of your portfolio. Please don’t put all of your investment capital into what this looks like. But there are ways that we get to deploy mindfully and with wisdom to know how to do that. Does that help A little bit. And Andrew, please. The deaf world is fascinating because I think it’s a great first step that will allow you to donate, but also then get to experience kind of the investment side and working alongside some of the funds and companies.

John Coleman And maybe before Andrew jumps in, the one comment I’d offer there is people can often put more capital to work here than they think. I agree with you. If you’re managing kind of a balanced portfolio of your private capital, that frontier in emerging markets would typically be a small percentage thought about differently in the dark world, for example, which you just brought up. If you’re dedicating a lot of philanthropic capital to the emerging world, your ability to repurpose that, at least temporarily, for investments in the emerging world, which could ultimately then also be given philanthropically because you’re trying to earn a return on that capital could be a smart way to deploy that. Right. If you’ve got a great deal of your wealth, I mean, we know people, thank goodness, in our ecosystem who really believe this idea. You talked about that it’s all God’s right. And so they’re putting 90% of their net worth into philanthropic capital. You know, thinking about repurposing some of that, at least for a time, into investment capital or vice funds through places like Impact Foundation, etc.. You can actually put a lot of capital to work here and with a totally different mindset than you might take to call it your standard investment portfolio. Right. And so I would push our listeners maybe a bit further than you would because you’re being so conscientious that especially with resources like you all are developing that give people Guideposts to where they might steward this effectively, our ability to think creatively about the capital we deploy in this space and hopefully provide enough capital that we can be catalytic to those regions. I think there’s an extraordinary opportunity there. And you’re right, everyone needs to be sensible. You don’t want to put capital to work that you need to survive or that your kids need to go to college necessarily. But there are pools of capital out there that I think people could see through this way. So not contradicting what you said at all, but just saying you’re being incredibly conscientious, which is appropriate. But I think the vast majority of Christians who are dedicating a lot of philanthropic capital really could think more creatively about the ways in which they deploy that sometimes in this space.

Andrew Winker John I think that’s spot on. And if you look at the last like in 2022, there’s an estimated 224 billion in DAF assets. You know, if you look at our study, like when we kind of layer in, I mean, obviously pointing to Tim McCreadie did some awesome research. There’s 100 billion public markets Faith Driven Investor you know so even if you just think about wait, there’s two acts the number of DAF capital assets sitting waiting to be deployed. I think that the idea of permanent capital is an excellent lever. You know, it seems like a no regrets move that if if you had a magic wand and you could think about how can we creatively and patiently take that capital, that might be it’s already pre given, you know, and think about really joining alongside others. I think that’s a definitely a an arrow in the quiver to think about. That being said, I mean I do think there really are opportunities from anything from pure donation, you know, to helping to operating budgets of things, to catalytic capital, you know, looking at more kind of below market returns, but with a longer term impact all the way to there are opportunities for above market returns, as Patrick was saying, in some of these places. You know, I think those are all kind of areas in the quiver in an impact foundation. Using your DAF to invest is definitely an important lever there. I think that on the concept of time horizon is important here. You know, in general, I think that faithfulness over long periods of time is what yields fruitfulness. And so if we really are investing for eternity, you know, I think that we need to be able to stretch beyond that typical ten year fund life cycle that most people think about. And that’s typically the book end of our time. And if we’re honest, a lot of times you’re not even patient for that long. You know, if you’re really trying to invest for enduring transformation, it’s going to take time and patience, but it will be so worth it. It is so much joy to get to labor alongside our brothers and sisters, join Shoulders and do this together. But it’s going to take it out of the comfort zone a little bit.

Richard Cunningham I want to do this real quickly. I want to hear from each of you. When you think about the number of funds you got to interview the 40 something plus that ended up in the study and a name comes to mind from it from an impact methodology and approach. We’ve got to be careful here that this is by no means an investment recommendation. We’re trying to highlight and shine a spotlight on great work and faithful believers getting to work in markets that otherwise there hasn’t been a lot of activity. But I think each of you Rapid Fire would love to hear you talk about a particular approach that you’re captivated by and maybe kind of set up who they are, where they’re operating, what their kind of methodology is to kind of help give more kind of color and texture to some of these funds you’ve interviewed. Patrick, let’s start with you.

Patrick Lowndes Yeah. I mean, I think clearly the leader in this space, I would say, is transformational as Sammy for more than 20 years, I mean, $9 million of capital and the level of diligence and rigor on the ground and the people, I mean, they have basically shown us as younger, you know, next generation shown us, here’s how not to screw it up. Right. And so I think I look up to transformational, see me as probably one of the leaders in the space. And we did highlight we did a little feature on them. And again, it’s not a recommendation, it’s just something to go research. We’re a research group with that. So yeah, that’s one.

Andrew Winker I can go next and let tomorrow. Hopefully I don’t steal yours tomorrow. And I loved I think a lot of listeners might be familiar with the Lion’s Den. You know, there are some great lions dens in Birmingham and in DFW. One of my favorites that I’ve gotten to participate in the past couple of years is a lion’s den put on by a group called the Open Network. And that’s a really incredible way to kind of learn in community. You know, so making direct investments in some of these companies, getting to meet and just hear the stories of people running these businesses, but then also going to invest alongside others, you know, who have some experience doing that. So it was a really fun way for me, kind of relatively early on to pull together capital with some friends and invest in that kind of way. So again, as Patrick said, caveat that with 50 million different kind of disclaimers of not professional investing advice, but we really I think they’re doing some great stuff. And Angela network, as we said earlier to you.

Tamanno Hodjihanova Yeah, I’ll hone in on Angela for a little bit. I know we’ve already mentioned them, but something that really stands out to me with them is that they’re not operating out of the US. They’re also very locally ecosystem minded, right? So they are bringing together leaders and investment operators that are based in those regions and helping them to think holistically about a transformational plan not just for their city, but for the entire country. And then looking at how to create ecosystems and support around that, that allow for long term development and transformation, which I think is just super, super cool. That’s really encouraging for my heart to know that we have local leaders on the ground that are creating funds and investment networks and working alongside to do that for their own regions, which is at the end of the day, that’s where we want those communities to be.

John Coleman Well, I know Richard’s about to drive us to our final question, which we always ask about what folks are learning through Scripture. I wanted to conclude before we do that and we closed the podcast just saying two things. One is I really appreciate the work that you guys are doing. I think we are called as Christians to engage with the poor and disenfranchized. We’re called to engage with the world broadly to those who are unreached. So many of those are outside of the developed markets right now, where most of us live. Most listeners are actually in the United States, for example, where there’s a mission field of its own. But we’re really called to engage more broadly than that and to bring the church abroad. And I think we have an obligation to that, not just as Christians, but as human beings, right? Where there’s the greatest need in the world is often outside of our country. And I love that you guys are adding rigor to this, that you’re trying to help be a guidepost to others. Patrick That you’re putting your own all of your putting your own resources against this in a way that’s showing that you’re supporting on behalf of something greater than yourself, not just for yourself and the heart that you all have for this is awesome. And I’d really encourage FDI investors, as Richard was saying, this is kind of the final horizon. This is the frontier for most folks because, you know, public equities is where you start getting into private equity itself is a little bit challenging. Sometimes thinking about doing that in Ethiopia or in Afghanistan or Tajikistan, etc., is probably even a step further. And the fact that you all are trying to professionalize this space, but research against it to identify those who can be effective partners in this space. Man, what an awesome mission. Field and our our hope. I know I know Henry is deeply passionate about this is that folks will join him in that mission or really inappropriate ways to monitor to your point, with their own finances. Think about how to do that and really make this a core part of the way in which they engage philanthropically and through investment dollars, whether philanthropic or private in me. And I’m just so encouraged by the work you all are doing to put diligence behind this and rigor behind this, because I think it’s exactly what’s needed in this space.

Richard Cunningham Yeah, I’ll pile on because I’m scrolling through the research report in full, as John is saying this comment, and I’m astounded. Like you’ve got a market map and it’s not just the sources of capital. We’ve been talking about the funds I’ve highlighted, but there’s also the capacity builders, there’s the investor support. So the advisors that are really thinking about this, there is the infrastructure in terms of like, hey, how could this capital actually flow? Then there is specific breakdowns of those different sources of capital who they are, where they’re operating. There’s investment minimums. Then there’s thought leadership around like, Hey, is that equity, is it debt, is it performance based kind of revenue financing? What does that look like? They unpack the value of having a guide. They provide specific highlights and amounts deployed. I think people often ask is like, hey, give us the specifics. We’re looking for kind of the the teasers and the two pages and that overviews of like how I could actually as a Faith Driven Investor step up and get in the game. And so I think this research, as John is saying, is crucial to that. I’m also a sucker for a good two by two framework, and Patrick got into that earlier. It’s phenomenal. It breaks it down geography basis. So I’ll stop there. I could pile on all day long, but thank you guys for this exceptional work. And we’re going to close with what we always love to ask. I’m going to go around the horn and be brief because I know we’ve gone a little long here. Is that what’s God been teaching you in in through his word lately? We’ll go Patrick Tamano and then Andrew. That’s our final question we love to ask each and every iPod.

Patrick Lowndes Well, we’re in the book of Exodus at our church and how God shows his power over the gods among us. And the most popular competitor to God being the God of men in our money. So I’ve just been encouraged that even in this alternative investment class, I shouldn’t worship my financial security or my portfolio return, but I should be just remembering that God is my provider. Seek His kingdom first. You know, even like I was just mentioned in the Richard Garnett episode 180, just being focused on eternity. So that’s what I’m learning in the Book of Exodus.

Tamanno Hodjihanova Yeah. That’s awesome. I love the Book of Access. I’ve been reading through the Gospel of Matthew and I’ve just been struck by how many times the word behold gets used before miracles or certain things that Jesus will do. And just a reminder for my heart. Right. The Lord is not asking us to do all the things just for the sake of doing them, but rather we get to behold and see the work that he’s doing and will continue to do and join alongside him in that. And man, what a cool way of getting to see his glory and his faithfulness even more so as we just get to look to him for those things.

Andrew Winker It’s an awesome company. Yeah, I’ve been trying to spend a lot of time just naturally. I’ve kind of run pretty fast, so trying to slow myself down and really enjoy, just kind of trying to chew on just the Sermon on the Mount. And so specifically just it’s been incredibly freeing for me, hearing Jesus’s words talking about do not be anxious, you know, just kind of soaking in the language of will he not much more. Just those kinds of words. So really trying to simplify my life around what does it mean to seek first the kingdom? You know, it’s his job to provide for my needs, not mine. A lot of times I can kind of run to that. And so those types of things can sound cliche to me, but so I really have to remind myself that seeking first the kingdom doesn’t mean seeking first my job or my work so that I can seek first the kingdom or trying to mobilize others into seeking first the kingdom without doing it myself. It it’s really, truly trying to build my whole life purpose around enjoying God, beholding Jesus and partnering with Him to build this kingdom where it’s moving. And so it’s truly what my heart longs for, or at least it’s what I want it to. Sometimes it doesn’t, but that’s been freeing for me.

Richard Cunningham It’s good. Andrew My wife’s memorizing the Sermon on the Mount right now, and I think it’s slowing her down.

Andrew Winker She’s got me beat. I’m not trying. I’m. I’m. I wish I could memorize it.

Richard Cunningham She’s way cooler and better than I am. All right. A bonus round question really fast, Patrick. Pragma has done this incredible study, but there’s more that you’re up to. And I think kind of the framework of what all you’re doing helps people kind of understand the necessity and the size of the opportunity. So close is there.

Patrick Lowndes I’ll give you three pillars. So this is our first pillar insights into research. And this is also what has been happening where capital is flowing. We’re also beginning to look at where market opportunity could be in some of these markets. So more on that. That’ll be a future episode. We’ll talk about that. The second piece is just investment advisory and trying to work with family offices that are looking to get more strategic. How do I take the first steps? How do I think about all the different options in the space? And the final piece is, even if you have market opportunity and you have a plan to deploy capital, you need talent, you need great operators. And so we’ve been doing this for six years now, helping operators get a little bit sharper. And so that talent pipeline is the third pillar of what we like to do. And there are some ways that we do that. But yeah, we love any and all those things that are going to catalyze more resources, more excellent operators. And at the end of the day, a lot more people that love Jesus blessing the nations and the whole world with their gifts.

Richard Cunningham Super cool. Well, hey, this has been the Faith Driven Investor podcast where we’re zooming in on the 2024 pragma investment market study focused on emerging and frontier markets. Patrick Kimono Andrew, one encouragement to have you on Friends. You’re going to download this report either at pragma advisors.com or we’ll have it in the show notes. So we’re going to look at and say, Yeah, this looks like it was put together by some expert consultants. It’s good work. And so thank you for being on Friends and we will catch everyone next time.

Andrew Winker Thank you.

Speaker 2 We are grateful for the opportunity to serve this community and see your listeners come in for more than 100 countries. Faith Driven Investor. It 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 and faith driven investing Dawg. This podcast wouldn’t be possible without the help of many of our friends. Executive Producer Justin Foreman. Intro mixed and arranged by Summer Drags Audio and Editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb.

Ron Blue: All of a sudden in five years, I had a national clientele, a rich, wealthy Christians who wanted to give, and that’s how the whole thing got started. And today, there’s ten thousand clients at that firm Serve’s that are giving away one hundred and fifty million a year. They’re managing about 12 billion in assets. And I look back and I realize how God prepared me to do what I did. I can take zero credit for it.

Henry Kaestner: Welcome to a special edition of the Faith Driven Investor podcast, From time to time, we’ll get involved in a broader definition of investing. And this is one of those times when we think about storing the wealth that guys entrust us with. Much of that is going to take place with investing in mutual funds and in stocks and bonds and venture capital, private equity, all the different topics that we have rolled out over the course of the last year and a half or so, over 75 or 80 podcasts with speakers like Frank Chen from Andreessen Horowitz, Andrew Stevens. And gosh, we’ve had just about every asset class. But lest we think that it’s just about investing that God cares about, which is different, of course, in a way, a lot of people think about it, the reverse of that as people just care about giving. But since we and you is listening to this podcast, subscribe to more of this one pocket mentality, that is we stored these assets. We have an opportunity to participate in the work that God is doing. We need to, from time to time, start focusing a bit on the giving side as well, and in some cases were called to go ahead and make that investment into the private equity fund or into the mutual fund. And in some cases, we’re called to be faithful to the giving opportunity that’s right in our midst. And so every once in a while, maybe every 10 episodes or so, we’ll get into that a little bit more deeply. And whenever we do that and do that with one of my best friends in the world, Darrell Heald, you probably know enough about my story by now to note, at age 28, I came to faith. At age 38, I had what I call my born again again moment when I met Darryl. And Darryl asked me the simple question, Henry, why do you give? And that sent me into God’s word. And it just changed my life. So whenever we have an opportunity to talk about this, I’d like to bring Darryl back on board. We’ve been partners in ministry and invested in so many things since that time 13 years ago, which I’m super grateful for today. We’ve got an incredible guest in Baila. So before I go any further, Darryl, welcome. Welcome to the program.

Darryl Heald: Thanks. And good to be on the program. And I’m super excited. You could have just skipped over any of my intro. Let’s go straight to our guests.

Henry Kaestner: Well, before we do that, we’re going to go almost straight to our guest from Blue. And Ron, by the way, welcome to the program. It’s awesome. Have with us back again

Ron Blue: a little bit. Yeah. Yeah. I’d love talking to you guys.

Henry Kaestner: You’ve always been such a great encouragement to me talking about this, these formative experiences that God has put in my life in these really important relationships. Ten years ago, we started Sovereign’s Capital and it was Darryl that introduced us to you, and you went ahead and got it right away and said, I’ll do anything I can do to help you. And we asked if you’d be on our board of advisors and if we could get this guy who’s probably the biggest name in Christian investing and the generosity with which you said, yeah, absolutely. You know, if any way I can help you and you put my face on your website and just tell other people that you’ve talked to me and that blew me away. It blew me away. I’ll never forget. I’ve told you before, but I’m going to tell you and our listeners that again, as we’re getting ready, though, I was taking certain liberties with our relationship and I showed up this podcast nine minutes late. And what our listening audience may not know is that we on occasion will have several of these podcast recordings we do in sequence. And we just got off the podcast interview with Dallas Jenkins, who is the guy behind the chosen, and we’re talking about him. And he had a message. He also has known Ron, interestingly, and this is something Ron, I don’t think you knew, is that Ron hired Dallas well before he was famous to direct a video that Ron did, which I think is super cool. But one of the things that came up in the interview we had with Dallas was that somebody had come to him early on in his career and said Dallas. And I was on a Facebook post on a video he’d done, and he wasn’t sure that the film they had done had been received as well as he had hoped. And somebody from Romania four o’clock in the morning said, Dallas, your job is not to feed the 5000, it’s just to supply the five loaves and two fish. Now, they’re just beginning with what you have. And then, Ron, as I was explaining interest, apologizing for being late, you shared an anecdote that was very similar to that. And whenever I hear those repeated themes, it makes an impact in my life. It makes me feel like God is trying to tell me something and maybe as well. And you were talking about a time when you thought you showed up to an event and it wasn’t as well received. Or maybe there weren’t as many people there as you would have wanted in your bride. Told you what

Ron Blue: she said, Ron. She said God said feed the sheep, don’t count them. And it changed my whole perspective. You know, it just it took away the whole idea of how big the audience don’t make any difference. It may be an audience of one because you don’t know who God is going to put it in the audience and you don’t know what he’s going to say to them. So my job just to be faithful to deliver his message and he takes it from there however he wants to. So don’t count them. Just feed them. And appreciate. Henry, you’re feeding. Flock here of people that are really becoming serious, you know, when you get serious about your money, you’re serious about your faith, and when you put those two together, that’s a big deal. That’s why Jesus spoke so much about money, because it’s the greatest barrier to my relationship to the Lord. The God of Mammon steals that every single day. And we live in a culture that I think is the most difficult to live in because there’s so many temptations. And I don’t mean that in a condemning way, but I say, you know, I didn’t even know what I needed till I went to the mall and that and there’s billions of dollars being spent every day trying to make me discontent. And a lot of it gets through.

Henry Kaestner: So I’m still with you.

Ron Blue: It’s hard to live in this culture and have the proper perspective on money. So I’m delighted that you’re doing what you’re doing.

Henry Kaestner: Well, thank you. And to your point, we’re trying not to count our listeners in, but they know all three of them know that I love them. And Mr. Tony

Ron Blue: Abbott, your wife doesn’t count

Darryl Heald: two of them. Love I love.

Ron Blue: I’ll tell if

Henry Kaestner: you are one of those two people, though. You’ll know that we’ve had Ron on before. We featured Ron and one of our conferences, and he weren’t our first ever lifetime achievement award. And so some number of the folks listening to this are going to understand some of who you are in your background. But before we get into that, I really want Daryl to guide our conversation today because it’s something that’s so near and caught to who he is and and the ministry that guys got him on. But give us a flyover. Who is Ron Blue? What have you done? What is God done through you in your career? Bringing us up to speed real quickly and then going to go real deep on generosity?

Ron Blue: Well, can it real quickly. I turned 79 this year just a few months ago, and I was fine with that until I realized that I was living in my 80th year. Then I began to feel really bad

Henry Kaestner: right now that if we could all look as good as you do in our 80th year, then nobody would ever have to fear being 80, that’s for sure. But you’re now to be clear, you’re seventy nine.

Ron Blue: Right? And the good news is that before long I’m going to be able to shoot my age in golf. If I can live long enough,

Henry Kaestner: I’m not going to live that

Darryl Heald: long.

Ron Blue: Well, that quick story, I was raised in a Christian home, but I totally rejected the faith. And I went to college. I went to college to have a good time. I did got kicked out twice, got back and got married. That changed everything. Got my MBA from Indiana University in nineteen sixty seven and went to work on Wall Street with at that time Pete Margaret Mitchell and was with Pete Murray for three years, starting my own firm. I didn’t want to stay with the big firm, so I started a firm in Indianapolis which today is still going by the way and

Henry Kaestner: name on the door to

Ron Blue: the same name on the door. They don’t know who I am. Anyway, I spent seven years doing that and during that seven years my wife came to Christ in nineteen seventy two, asked me what I thought about that, and I threatened her with divorce because I was on the success track. Then I was an entrepreneur and I wanted to become wealthy and I was getting it. So she didn’t say anything for two years but she lived out first beta three and there was a godly woman that I there was something different. And so I prayed to receive Christ on my way to play golf. In nineteen seventy four, I had the four spiritual laws. I was by myself read through those and I said to the Lord, I don’t want to change anything, but I’m willing to be changed. And that day I shot a thirty six on the front side and I said, man, if I had known this how to become a Christian in a long time ago, if I got back on my game on the backside. But that led to joining Campus Crusade two years later and working in Africa for two years. I traveling to Africa. I made ten trips. But during that time I was also teaching leadership seminars and decision making seminars in the United States. I was gone 70 percent of the time and my wife, we were in a strange city when we moved to Atlanta. My income had gone from one hundred and fifty thousand to twenty five thousand and we had five kids below the age of 12 and she had a husband gone 70 percent of the time. And she called me at the office one day and she said, How do you get on Christian? And I said, What do you mean? She said that this is the abundant life I’ve had, all the abundance I can take. And what that led then was I was with Dr. Howard Hendricks, who was a friend and mentor, and he had been asking for financial advice from me. And I had been out of the financial world for a couple of years. But he said, would you take a look at my finances? Which I did, and I was able to sit down with him and Gene and say, you know what, Howie, you’re doing just fine. And it was like a load came off of his shoulders. This was in nineteen seventy nine. And now when I look back over those 40 some years, I realized that the question he was asking is really the question almost everybody wants the answer to, and that is how am I doing? They want to know the answer to that question, every one of us wants to know, and of course, it changes over time. So I felt like having traveled to Africa, that there was a lot of money in the United States. So I determined through a series of things that I wanted to help Christians plan to manage their money so they have more to give away. And that was not called financial planning at the time. Financial planning didn’t exist. There was no such thing as a CFP, and it was product sales or investment sales and insurance sales and so forth. But the first client that I had, he wanted to give a million dollars to Campus Crusade. I did not know him. He was a physician. And I said, well, what’s your income? He said, eighty two thousand a year. I said, What’s your net worth? He said, I don’t know, three or four hundred thousand. And so I’m thinking, there’s no way he can give a million dollars away. But God in his providence had done something. And that was the last couple of years as a CPA. I had done a lot of bank projection work and all it was was projecting cash flows over five years and working them out to a final net worth statement. So that’s what I did for this doctor. And it turned out he could give away a million dollars. He gave he had more property than he realized. He gave away his property, lowered his taxes, increase his cash flow, increases giving with Florida’s taxes were to increase his cash flow. And you worked all that out. And in five years, he could give away a million dollars and still have basically what he started with. And I thought there’s a lot more people like that. And I thought recently, what if he’d only wanted to give one hundred thousand? That would have been my bar. But it was a million, and so my bar became a million, and because he gave it to Campus Crusade, Dr. Bright asked me to speak at all of their donor events. And I would say, look, if you want to give away a million dollars or more, I can help you do that. And not only that, you can pay me to help you. And so I knew how to build a time based business, so I didn’t have to sell any product. And I knew how to do financial planning. And all of a sudden in five years, I had a national clientele, a rich, wealthy Christians who wanted to give. And that’s how the whole thing got started. And today, there’s ten thousand clients that the firm serves that are giving away one hundred and fifty million a year. They’re managing about 12 billion in assets. And I look back and I realize how God prepared me to do what I did. I can take zero credit for it. And it’s such a joy now to I can look back and say, wow, isn’t this great? And I’ll finish with this. What I found was the people that gave away those huge sums of money were the most joyful people I knew and the most contented. They were accomplishing something with the resources God had entrusted to them and they were experiencing the joy of giving. So they were good investors. They were good entrepreneurs, but they were better givers. And I don’t mean that on a comparative basis, but so I’ve had a great life. Henry, helping people give away money

Darryl Heald: your life, indeed. Thank you for sharing the history. What a legacy it’s got. I mean, it takes a while to tell a story when you start to your seventy ninth year.

Ron Blue: Yeah, but

Darryl Heald: I love you. So Henry and I know each other thirteen years, but Rodney and I’ve known each other over 30 years. Yeah. So I was the young real estate broker and the company I was working for actually owned the building where you all were Ozzfest. And so I was two floors below Rodell Balloon Company and I was going to church with a couple of the young financial planners that were working for Ron. And they started give me these books that he wrote, Money Matters and Money Matters for Your Kids. And I was very much influenced by Iran. And Judy, Kathy and I both have been. And one of the reasons why we did what we did, a lot of ways that we raised our kids around these money issues, giving and things like that were influenced by you. And I’m thankful. So we’re really grateful for that. And it’s kind of fun that our families are friends. We’ve served on a number of boards together as well. But Rodney, thanks for joining us today. One of the things that I know that I’ve heard you talk about a number of times is what are the impediments to giving? You have this triangle like why aren’t more people giving? Because you just gave this great example of this guys says, hey, I want to give a million and so on. But where is that kind of a state of giving? And in one sense, there’s a lot of resources out there. Occasionally we see a person like this doctor being generous. But what’s holding a lot of other people back?

Ron Blue: Well, I think if I were to boil it all down, Darryl, I think there’s three things that have to happen in giver’s life. No. One, there has to be transformation. You’ll never see maximum giving apart from transformation. So it begins with a heart attitude, a belief in what the Bible says about eternity and about my life here. But secondly, there needs to be intentionality. A lot of people give, but they really give out of their surplus. So they give large sums of money maybe, but they don’t necessarily maximize their giving unless they have intentionality. And I used to say there’s two questions. No one who owns it, you got to answer that question. But the second big question is, how much is enough? You know, how much is enough to accumulate, how much is enough on a lifestyle? And there’s not a right answer on that. There’s only a faith answer on it in the faith answer says, OK, God, what would you have me? And I would ask this way, how much do you want me to keep? And the rest I’ll give away. I love what Bob Buford, my friend, said to me one time, he had heard me ask that question, how much is enough? He said Ronnie said, I figured out how much is enough. I doubled it and gave the rest away.

Darryl Heald: I said,

Ron Blue: But that’s OK. He said, a finish line. And if you have a finish line, then the question becomes if you’re accumulating. Why am I accumulating more? And I believe so. There needs to be intentionality. But I think there’s a third thing that is very helpful in maximizing giving, and that is accountability. And I was in that business of providing accountability and I required all of my financial planners to have a financial planner, myself included. I have a financial planner. You know, I’ve written 20 books on finances, but actually read one book 20 times. But I have a financial planner because I can’t hold myself accountable. And Judy and I think differently a lot on the giving. She’s far more generous than I am. I mean, she’d give it all away. When we sold the business, I felt pretty good. She said, you know, God gave you all that. I said, you’re right. She said, you better give it all away so that when my retirement. But when she said that, then we told the financial planner what we were going to do. And so we’ve been held accountable to not accumulating them. And I would continue to accumulate if I didn’t have a financial planner holding me accountable to a decision that I felt like I had made at a particular point in time. Anyway, there are lots of stories about that. But I think transformation, intentionality and accountability are really three things that when they take place, you see maximized giving. And I will say this to that. I know that the only thing that breaks the power of money is giving. You ain’t got to open your hands or you’ll never experience the freedom of a relationship with Christ because you’ll always be there be two things to be going on. No one will be fair. And fear mentioned a lot in the Bible. And when you if you haven’t done that, there’s a fear of loss. And you obsessed with it, and that’s the biggest, you know, I talk and you’ve heard me say this, the paradox of prosperity and the paradox of prosperity is that the more you have, the more choices you have. Therefore, the more confusing it becomes. I mean, anybody that’s owned a boat knows what I’m talking about. When I sell the boat, they say it’s the second happiest day of their life, or if you own two homes or whatever it may be. And we’ve had two homes and I’ve had a boat and was happy with all of it was gone. But the more you had, the more choices you have and therefore the more fear of loss and the more confusing life becomes contrary to the American dream. And I’m not talking against people living well at all. That’s not the issue. God places people such as you guys, and I think probably such as the audience in positions of great influence because of the success they’ve had either invested in rebuilding their businesses. And that’s a good thing. And it’s OK to enjoy that. It says God gives me Rusty all things to enjoy. But he doesn’t say that joy should be my objective. He said also says right along with that, you’ve been given much in order to give much. So generosity, investment, entrepreneurship, they all tied together because they represent success in many ways, but then conquering the success by living generously.

Darryl Heald: That’s great. Thanks, Ron. I love those three things there. And so what is the so I mean, there is a significant financial services industry out there, right. That is looking to serve, you know, everyone listening to this podcast. So then what’s the disconnect with the current level of service and what you’re talking about? And if I’m kind of leaning in to what you’re saying right now as an investor and wanting to be more intentional, have that accountability, what does that look like?

Ron Blue: Well, the problem in the financial services world is that there’s a conflict of interest inherent in it. So, you know, when I tell people that my metric of success in the financial planning firm was how much our clients are giving away. Not how much we were accumulating, and today, if you would talk to around the blue adviser, they would talk about how much their clients give. And, you know, as a consequence of that, we almost never lost a client one. And number two, we almost never lost the client generationally. So now I’ve lived long enough to see people and I knew through it Kathee years and years ago. And he’s now in there for generations of the cafes. And they’re all working with advisors that are faith based, an advisor that is faith based and a client that is faith based, share the same language and the same value system. So if I’m an investor or an entrepreneur, I’m looking for an advisor. I want to know what that adviser believes. I want to know what motivates you. I want to know what he thinks about giving, because theoretically, if a client gives to a million dollars, I’ve lost the fees on a million dollars. What I found is when a client gave away a million dollars, got replaced with somebody who had two million. So I think there’s a scarcity mentality. And to me that is almost it just can’t be because the scarcity mentality says I serve a God who can’t create and I serve a God who’s not sovereign. I was once talking to a group of advisers and there were six Merrill Lynch advisors sitting next to one another. And I said, Are you guys in competition? And they kind of squirmed and I said, if you are you do not believe in a sovereign God, God can raise up those clients and he will. But, you know, faith, I see the evidence of faith in retrospect. I never see it in prospect. So I’ve got to make that decision, do that thing. That’s right. And then God honors that and blesses it.

Henry Kaestner: By that you mean you can see patterns in your life where God was faithful and blessed you in times when you didn’t see that happening. But it’s so much more difficult for us to anticipate how that pattern will continue in our lives. We’ve seen it time and time again about how God is provided right when we needed. And yet it’s so hard to just kind of project that forward as if God was sovereign and love me up until May. Twenty six, twenty twenty one. And then after that I was on my own.

Ron Blue: Yeah, well that’s true. And the life of faith never stops. You know, I struggle like everybody day to day. Now I do say this. I had good mentors and I do have a quiet time almost every day. And today I was meditating on abiding in Christ. What does that mean? You know, and it means total surrender. But I knew that, but I needed to know it again today. Yeah, and now it’s near the end of the day and I need to know it again. So the life of faith doesn’t end, but it is a life of fruitfulness and joy. Also, when you look back and, you know, I got the privilege now of looking back and not seeing what I did, but seeing what how God used even me. He used Balan’s as he could use me. And my wife taught me that

Darryl Heald: we love dearly. We love to feel. But what are the things that we actually just had a discussion on today? So we’ve seen this out of covid, this incredible rising market, so many asset prices going up so often. So one of the conundrums, it seems like with when we think about what we’re stupid in asset is like, if I think it’s going to continue to go higher, why give now? What would be your advice on that?

Ron Blue: That’s a great question. Yeah, I love that question. I used to get that a lot when I used to get it. When I was speaking to donor groups, they said, you know, if I’d give me a million dollars, I could make two million and I have more to give. So I said, well, let me let me give you an illustration. Most people know the magic of compounding. If I took ten thousand dollars and compounded it at twenty five percent over 40 years, it would grow to seventy three million dollars without adding another penny to it. If, on the other hand, it only compounded out at twenty four percent, same time period, it would be 52 million. So it’s the twenty one million dollar difference on one percentage point. Now the reason I say that is because what is God’s interest rate. Thirty fold. Sixty fold. One hundred and thirty fold is thirty thousand percent and sixty four to six thousand percent. Nine hundred dollars. Ten thousand percent. So how much is ten thousand dollars given to the kingdom. At ten thousand percent for all eternity. That’s the difference, so I want to do my given while I’m living, so I’m knowing where it’s going and I want it I want it invested in the kingdom because the return in the kingdom is far more than what the stock market’s going to return. So I use that illustration because people can grasp that and to say, well, I’m going to give when now you need to give right now and say something else. I think you need to give some cash to nondeductible cash. And I got this from a pastor who he did this and I picked up the example. So it was not mine, but I carry cash in my pocket and I look for people that are unnoticed. The most unnoticed are those who clean the bathrooms in airports, and so when I go out and I do a lot of flying, so when I go in the bathroom, I look for that cleaner and they’re always standing in the corner head down, sometimes not saying anything. And you walk over and you give them 20 dollars or forty dollars or one hundred dollars, whatever it may be. And the joy that you see on their face, that’s far more fun, if you will, than writing a big check to a ministry that had a guy followed me out one time and he said, I saw what you did. Why did you do that? And I said, listen, I am so blessed. I want to share that blessing with somebody else I love.

Darryl Heald: Rod, one of my favorite stories you have, why don’t you tell our audience is the Chick fil A’s story, the lady that.

Ron Blue: Yeah, I’ll make it short. I used to take my son many years ago to breakfast every Friday, one of my sons to and there was this lady named Rex and she worked at Chick fil A. We’d always meet at the Chick fil A and she was always the most pleasant, smiling and so forth. If she got saucy when I opened the door, she would have our meal ready for us because we’re always ordered the same thing. So I was walking out one day and I thought, I wonder if you can keep a fast food waitress. And I’ve never done that. So the Lord convinced me to tip her, give her something. So I reached in my pocket and I pulled out of twenty and the Lord said, You cheapskate, you got a lot of toys. And I said, Oh, no. So I took five hundred dollars and I followed him up. I went back in and I said, Can you take a tip? Is it OK? She said, yes. So I gave her one hundred dollars. She didn’t know how much it was and walked out. And the next week I was back in the chick Ticketfly and I was before my son had come and she came over to the table and she said, I was so happy. When you gave me the money last week, I needed a new set of tires, she said. But when I got home, my daughter, who was in high school, came home and there was a girl in her class who had had a fire in their apartment and they lost everything. She said they needed the money worse than I did. And so I had the ability to give that hundred dollars to that family. And I thought, man, I gave out of my abundance and she gave out of her property at that impacted me, I mean, and convicted me for sure. So I encourage people who you can give a lot of money away, but I encourage people to give some cash away to give it away. We’ve got a family that has ten kids that, you know, here in Atlanta. They had two of their own and they adopted three from Africa and then a family. The parents died and they adopted all five of them. So they have ten. So at the end of the year, Judy said we need to give them some money. We go to Costco every now and then fill up some cards and take it over there to them. But she wanted us to write them a check. And I thought, well, if I write that the helping hands, it’ll be deductible, but they’ll also take their percent. So I wrote the check and we drove over there and we gave it. And that type of giving is is just blessed giving. I really enjoy that. And I don’t want I don’t want to talk about me in the sense of I’m so good because I am not naturally generous by any means. I’m naturally pretty selfish. And, you know, I like nice things. I like to fly first class. I like to drive a Lexus, but I God won’t let me drive a brand new Lexus anymore. I have to buy. I used to run ride.

Darryl Heald: I mean, we could love to hear more stories than all, but why don’t we do this? I mean, because you have helped people do all this planning. So you talk about this blessed giving. What is your allocation look like? Kind of know we think about asset allocation all the time. And and so I’ll go from a giving standpoint, what is your advice on what are the dimensions and all in a giving allocation?

Ron Blue: Well, no one there’s nobody including Bill Gates or Warren Buffett that has enough money to solve all the needs. So you can’t solve every need with money. And so I generally counsel people. Where’s your heart? You know, what’s your passion? One of the things that you think are important, you can give broadly, but have again, I’ll come back to this intentionality. What is it that you really want to give to that you’re committed to? And I think husbands and wives need to be talking about this together because they probably have different interest. And that’s OK, that’s the way we grow. So I think giving it’s not an allocation. Well, I do believe in tithing to the church, but that’s the beginning point. I don’t really consider that the giving. I mean, it is. Yes, but the real giving takes place after that. I’m giving out of obedience. I want to give out of obedience, but I also want to give out of desire. So what is it that motivates me and that can change over time? So I can for people, it’s not necessarily an allocation. The Bible talks about giving to widows, giving the orphans, giving to the poor for sure, and giving to the church. But there’s a lot of ministries and I want to attach my money to my heart when it comes to giving. So I have things that I like and things that Judy likes. You know, it is funny because every time we get a letter from John Erickson, I know it’s going to cost me money because Judy loves Johnny. She loves the minister. We’ve known John for 40 some years and that’s a passion. So any time Johnny goes, she gets money because it’s a passion. So I said, give her your passion is tell your heart to your money in terms of your giving. So, yeah, I’m sorry, Daryn, when you’re asking me questions, you’re asking me questions in my sweet spot.

Darryl Heald: Why does the government. So what is that? Let’s say your blessed peace is like how much percentage of your giving and what do you all look like it? What about global? What about, you know, nationally? How do you kind of break that down and think about some of the different buckets that you’re giving to?

Ron Blue: We made a decision early that we like to give to people, so we give a lot to missionaries. We made a decision along that line that people that are working in Third World countries have more difficulty in raising money than they do in America. So we have a tendency to get more internationally when we’re giving to missionaries and missions than we do in this country. We like to give it comes down to people. What’s the impact on people? So the sex trafficking, the poor, that’s where we like to put our money and that’s our passion. I heard today we have high school curriculum on personal finance and we charge the school twenty five dollars a student to give them the curriculum. The guy that heads up our high school ministry and our institute read a testimony today of a high school junior who how, having gone through the class, it had changed the direction of his life to wanting to be in ministry. And that’s where he was going. And he said, twenty five dollars bought a changed life. That type of thing means a lot when you’re giving and I think we’d like to give to where we see the results. Also, it’s hard to give some place that you’re not tied to, literally tied to. So we pray about it a lot. We don’t give to everything that comes to our door by any means. And I don’t feel guilty and not giving because God has given us the ability to give. He’s given us the places to give and I can’t give every place. And in some cases it may be if I give, somebody else doesn’t have to give. So I don’t feel guilty at all about turning down requests for money.

Darryl Heald: Thanks, Ron. Another thing to where I’m just curious with I’m sure a lot of the listeners probably have children, grandchildren and all how you, Judy, have written on this before, but could you give us some ideas on how we can help our kids or grandkids understand that it’s more blessed to give our safe?

Ron Blue: Well, there’s two things about training children that can really sum it up. And I had a father asked me one time, how do you train your kids to manage money? And I said two things. No one more is caught than taught. So they’re going to do what you do. That’s the biggest factor in how kids handle money and think about money, and I said, the second thing is you learn to manage money by managing money. And that’s the really hard thing today. And a credit card society of having your kids manage money. But there needs to be a way and there are ways that they can do that. And that same father said to me later, he said, I realized when you said that, that because I do online giving my kids had never seen me tithe. And we didn’t talk about it because we had made that decision. We did our online giving so they’d never seen me tithe. So just think about it. What am I doing to communicate the values of giving one? And number two, how can I train my children to manage money? And here’s the mistake that parents make. They don’t let their kids make mistakes, especially the wealthy. I see they can afford to bail them out. And I don’t mean out of jail, but they can afford to do a lot of things. So what would that look like?

Darryl Heald: What how would you set that? What would be a couple of suggestions that you would say, hey, you know, you should try these couple of things?

Ron Blue: Well, no one intends on the age. OK, so we started training our kids. By the time the youngest was eight, we kind of had the system figure it out. And so we gave them a budget to buy their clothes and we knew that they would have spending money needs, that they would have needs to make gifts to Christmas and so forth. And we wanted them to say, but we wanted them to tithe. So we gave them money and we did it on a monthly basis so that they had to manage the money. So when you give them one twelfth of their clothes, money. In February, they don’t have to buy their school clothes until August, so they had to learn to say, but they also had to learn that when the envelope was empty, they were done and we allowed them in some cases to trade from one envelope to another, with the exception of tith in savings. But there had to be their ability to make the financial decisions. So somehow you probably need to help him set a budget and then figure out the management side of it, especially with the credit cards today, because cash, you just don’t deal with cash much anymore.

Richard Cunningham: You’re listening to Faith 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.

Speaker 2: 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 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: Welcome back, everybody, to another episode of the Faith Driven Investor podcast. It is the end of November 2024. We are talking marks on the markets and given that it’s the end of November, we want to wish you and your loved ones a very happy Thanksgiving.

If you happened to catch this podcast on the other side of the Thanksgiving holiday, then wishing you a blessed start to your advent season. I’ve got John Colman in the podcast studio with me. John, we’re talking markets. We’re talking economy. Not sure if you heard there was an election earlier this month. And so we’re going to kind of look at how things are responded to that. But as overjoyed and thrilled I am is to have you in the studio. We’ve got a very special guest with us today, don’t we?

John Coleman: Yeah. We’ve got a frequent FDI contributor, maybe frequent Ross Roggensack who runs Oak City Consulting, a long time leader in the faith driven investing movement. Brilliant on markets. Just a great friend of mine, great friend of a lot of folks in the movement. And we’re so privileged to have you on today. Ross. Thanks for coming.

Ross Roggensack: Well, thanks for letting me. I’m always glad to be here.

John Coleman: Always glad we knew you would be able to handle a very laid back topic. Like US elections, you know, where there are no emotions at play. So congrats on taking on such an easy podcast with.

Richard Cunningham: The wise sage. Well, guys, great to have you with us. So let’s start there. Let’s hit on that November 5th election. So we’re coming up, we’re recording this on Friday, the 22nd. This podcast will release during the week of Thanksgiving, so it’ll be kind of roughly right around three weeks out.

Post-election, Trump won 76.1 million votes to 74.2 was Kamala Harris to Donald Trump in the popular vote. So he got that one. He won all seven key battleground states, winning the Electoral College. 312 to 226. The Senate race took out to 5347 in favor of the GOP. And while there’s still three uncalled races in the House race, it looks like Republicans have 219 right now to the Democrats to 13.

So, guys, I want to start here is what happened in this election. How did this all kind of transpire and was this the outcome you saw coming? Were you surprised and maybe John will start with you on that.

John Coleman: Yeah. So I’d maybe put the election just in a little bit of historical context, at least on the Republican side. This is probably the biggest electoral victory for a president since George H.W. Bush in 1988.

So if you’ll remember, you know, in 2000, President George W Bush, there was a disputed election for some period of time between he and Al Gore. It was incredibly close, one of the closest in history to that time in 2004, President Bush won in a bit more convincing fashion. He even had a slightly wider popular vote margin than President Trump did, although with 16 million fewer voters. But he had a smaller Electoral College margin.

And then, of course, President Trump’s first victory back in 2016 was quite narrow and he lost the popular vote, won the Electoral College. And so for Republicans, at least, this is a mandate in the way that they interpret it, because this is the biggest electoral victory that a Republican presidential candidate has had since 1988.

What was behind that was a very broad based movement in the electorate. Some of these stats may be a bit outdated. Some of our friends in places like California have not been able to calculate votes entirely yet. And so I’ll be talking from some stats I heard probably a week ago as some of the count on the West Coast was still ongoing, but effectively Trump gained ground versus 2020 in all but two states.

So 48 states moved in favor of President Trump among almost every demographic category. And of course, you can cut those in a variety of ways. Kamala Harris seemed to pick up ground among unmarried women. For example, the President Trump seemed to pick up ground amongst most other categories, including what was surprising to many people amongst minority communities in the US.

So Trump won one of the largest shares of the black male vote of any Republican in quite some time. He got a little more than 20% of the black male vote. He got nearly half of the Hispanic vote in the US, which has been not typical for Republican presidential candidates. And again, he won more margin in 48 states. They kind of moved his direction.

And so this really was an across the board pickup in electoral support for President Trump in almost every category and where he didn’t pick up ground. There were issues at play, I think, like with unmarried women, where abortion was quite a big topic, you know, where there was just momentum for Democrats in that area.

And so I think you could say this was a very wide ranging victory for President Trump. That victory had tails. You know, famously, President Trump, the last few elections, Republicans have not gained ground in the way that they thought they would. The last election, there was supposed to be a red wave. A. Quote that didn’t materialize.

And yet, in this election, President Trump now has a 53 vote majority in the Senate. As you noted, they’ll have control of the House of Representatives by a pretty decent margin. And so this did look like a mandate to bring in a new mode of administration, I think, across the board in the federal government.

And I think there were a number of things that moved that. I think, one, just the economy is not where people want it to be. I think there’s broad based dissatisfaction with inflation, for example, and just the cost of living. I think there were a series of cultural issues that were at play in the Trump campaign hit on those quite a lot with relation to a variety of hot button cultural topics.

Immigration was obviously a huge issue in this election because of the perceived mismanagement of that under the Biden administration and Kamala Harris’s participation in that. And then a series of just desires about the economy generally.

I mean, the Biden administration and later the Harris campaign had endorsed things like an unrealized capital gains tax increase, taxation, etc., that I think a lot of people reacted negatively to. And so I think there were a number of issues working in his favor. And the truth is, when a sitting president is as unpopular as President Biden is, and when an economy is as weak as it is right now under this sitting administration, there’s often a vote for change. And I think that materialized.

Richard Cunningham: Ross, what would you add to that from your vantage point?

Ross Roggensack: A couple of things. Just as a person who believes in God and the Bible. I think that we know that God’s in control and that regardless of who won, even if Kamala had won, he would still be in control. He’d still be on the throne. So everything’s going to be okay whichever side you run for.

I think I wasn’t that surprised. I remember when the assassination attempt happened and he jumped up and did the fight, fight, fight thing. I looked at my wife and said, this election’s over. You can’t beat that. And just kind of thinking about I don’t know if that’s providential. I don’t know if the hand of God was on him. I won’t try to intercede on that.

But I do think that something was happening, and I think that it was. After that you kind of saw neutral, seemingly neutral people. Elon Musk and Joe Rogan and others kind of jumped in just because they saw, I think, what was happening and what needed to happen. And so I’m just really glad that he won the popular vote. That was a good. Wearing the last time when he won the electoral but didn’t win the popular vote. And we you know, I think that’s part of the reason the markets have been so giddy is that they’re able to kind of put that tension behind it and just move on. So it’s a new day. It’s a fun day. And I’m glad.

John Coleman: One, the fact that the election, as you said, Ross, it was over that night. Right. Basically, I mean, if you stayed up late enough, you kind of knew what the presidential outcome was going to be. The House is still a bit up. And I do think that’s been a good thing for the country. And I think it’s been a good thing for markets that there hasn’t been a disputed election at all in this case. And there’s a clarity of the outcome.

And you could feel that. I mean, we’ll look back on this. I can’t wait for the books that are written about it. It’s hard to almost process all that happened in the last three months. I mean, we had a sitting president replaced on the ticket of his own party mid campaign after the first presidential debate and then a new candidate put in place with no. Kind of subsequent primary system, etc.. I mean, there were just a lot of moving pieces at play here and it is nice to have a definitive outcome. I think if nothing else, no matter where you land at it outcome, I think it’s good for the country right now and lets people kind of move forward with clarity.

Richard Cunningham: Yeah. So Trump’s putting together his team and thank you guys for those insights and maybe it might be helpful to have one of you talk about maybe just the Senate confirmation process of Cabinet picks as we get into this.

But there’s some kind of highlight names, like you’ve got this Department of Government Efficiency coming out with advisors like Ellen and Vivek Ramaswamy. Matt Gates was picked to be the attorney general, and now he has stepped aside, as it sounds like it was a distraction to the whole kind of Trump administration. And now it’s Pam Bondi out of Florida, Matt Whitaker for Naito, Tulsi Gabbard for Director of National Intelligence. Marco Rubio is Secretary of State, RFK Jr for Secretary of Health and Human Services.

So you’re starting to see a lot of these names come up and there’s massive responses kind of in both directions as you see on them. But ultimately, what is the a strategy or mandate, John, is the word you used earlier, as you see with who Trump is putting around him to be a part of this administration?

John Coleman: Yeah, you know, it’s not every pick is in place right now. And certainly there are some important picks, I think, remaining to be had. I know there have been some rumors today about the Department of Agriculture, for example, and what that might look like. I think there have been a few signals in the picks that he’s made so far.

One is it does seem like he’s picking folks who will shake up the existing system, which is what he promised during the campaign. I mean, to have Robert F Kennedy at Health and Human Services, Tulsi Gabbard at that DNI. Seth at the Department of Defense. And, you know, a variety of other picks, You can tell this is not an establishment cabinet in many ways and that they are looking to make dramatic changes.

And like you said, the DOJ’s the Department of Government Efficiency with Vivek and Ellen is explicitly intended, I think, to be a signal that they’re shaking things up. And that’s very consistent with President Trump’s campaign. Right. I mean, I think they ran on this and they said we are going to make dramatic and big changes. And I think what you’re seeing is them coming through on that campaign promise to really make dramatically different picks and to do something different.

I think in the foreign policy realm, there have actually been a couple of signals you can pick up. One is my impression is that this is a very pro-Israel cabinet so far. You know, one of the big two conflicts in the world right now is Israel and Lebanon or Iran, however you want to position that conflict. And I think Elise Stefanik at the U.N. is a big defender of Israel. I think Mike Huckabee being ambassador to Israel is a signal. I think Marco Rubio has been a strong supporter of Israel at the State Department, the Ukraine war.

You know, Trump has promised to try and drive that to conclusion. And it strikes me that even apart from his VP pick, J.D. Vance, that the signals are there, that he’ll do that. And yet, if you’re a person who’s worried about disruptions in the international order, I do think, for example, that Marco Rubio and Mike Waltz are extremely mature politicians, thoughtful people who you could expect to navigate those conflicts quite well.

And so I think there is a balance there on the international order front between folks who kind of know how these things are done and those who are intended to shake things up that hopefully portend a really thoughtful approach to the end of those conflicts, which is, you know, Trump has said he’s going to end Ukraine on day one, which I think within the first 30 to 60 days is what he’ll shoot for. I think he’ll look to end the conflict in Israel. And it seems like he’s going to try and make good on those promises.

You know, the other pick that’s outstanding right now is the Treasury Department. At the time of this recording, there’s been some back and forth on that because of Trump’s trade policies. He put Howard Lutnick, who’s a big supporter of his tariff policies in at Commerce. And then there’s still a bit of an ongoing debate around Treasury, at least the last I looked in the news right now. And I think that will be an important signal. But overall, this is a cabinet that is looking to shake things up, I think. And it seems like he’s really going to try and make good on that campaign promise. But Ross, what are you saying?

Ross Roggensack: He’s shaking things up. All right. And I think that here Treasury movies between Kid Rock and Ted Nugent. There you go. You know, I think that who he’s talking about for Treasury sounds really good. And I imagine for markets that will be important as well as whoever he puts at OMB, those are kind of the big things we’re sort of watching. And certainly the names he’s floating for Treasury probably are all good.

Richard Cunningham: Unpack that correlation a little bit, Ross. Why are those two positions in particular so key for kind of economic and market outlooks? Well.

Ross Roggensack: Treasury is just so important as it relates to especially a lot of what Trump talks about in terms of tariffs, etc.. And then just the way the Fed interacts with Treasury, it needs stability. He can’t sort of take a flier on that when he’s got to. I was joking in case anybody wasn’t sure about ten. Nugent It would be fun, though, but I think that somebody like Kevin Warsh would calm markets. Understand that there’s an adult in that seat and nothing crazy is going to happen. So I think that the market’s really at this point probably could well be assured that at least somebody is. And that’s probably maybe a reason for some of the rally the last couple of days as his name came out or the other studies mentioned. So it’s. So far, so good.

Richard Cunningham: So let’s go there, because all of this ties back to kind of underlying outcomes and markets and economy is this is the FDA I pod and Ross the point you’ve kind of made in the month response to the election.

It seems like markets generally are viewing Trump’s policies as stimulatory less regulatory oversight. Prospect of lower taxes. You even saw things or particular kind of segments of the market really jumped. If you know, if the prospect of lower interest rates continues to take place, something like the Russell 2000, which is more of your small cap universe, continues to jump.

So a couple of quick numbers is S&P 500 is up roughly 25% on the year, 2% on the month. If we’re looking at kind of November and just the response, the election, Russell, 2000 is up 18% on the year, 8% on the month. So significant jump. Nasdaq, which is, you know, maybe you’re more tech oriented kind of concentration of 29% of the year. We know a lot of that has to do with the Magnificent Seven and just the way they’ve ripped

So markets and we’re now here in public equities most particularly have seemed to be just positive in response to the election. Is that what you guys are kind of diagnosing as well?

Ross Roggensack: Yeah. I think certainly if you think about the 2016 election when he won and the market at least overnight was straight down and then straight up, and then we had a pretty wildly bullish environment until he was inaugurated. It feels similar. Some differences here and there, but certainly feels a lot like the last time he was elected.

And so I think there’s some confidence in small cap U.S. based companies and probably in private equity and M&A in less regulation and more growth, less taxes. I mean, all those things are positive and especially with the House and the Senate, I think that there’s some confidence that, you know, by the spring we’ll have a tax bill done. I mean, things are going to happen fast, as I think certainly he learned and they all learned they got to get it done now or it won’t get done.

So I think we’ll see a lot of stuff happen and the markets about tomorrow, not today. And the markets are thinking about the summer or the fall when we’re past those tax cuts and we’re maybe thinking about what is the event going to do to cut government and maybe will the war in Russia be over and maybe, you know, all the kind of things that I think are forcing the market up right now?

John Coleman: Yeah, I would say it’s not even a very partizan thing to say that the last administration, it proposed some things that were extremely negative for markets on capital gains taxation, unrealized capital gains tax there. FTC under the Biden administration has been extraordinarily restrictive. The DOJ had been aggressive, the SEC had been aggressive. There were a lot of very negative things for markets embedded in that.

I think I agree with Ross. I mean, a couple of the factors at play right now that markets love deregulation. I think we’ll see a lot of cutting of regulation. I think markets like that, there’s a decent chance the M&A markets open up under a new FTC commissioner, which would be really good for markets.

I think the chances that taxes go up dramatically, corporate taxes or personal income taxes or capital gains taxes have diminished quite a lot, you know, and that would have caused a sell off at the end of the year. I think if people thought that cap gains taxes were going up next year, people would have liquidated this year, which would have caused a sell off. And I think there’s not the urgency around that right now.

And so I think in general, there is a much more business friendly environment at play right now and probably more pro-growth environment deregulation, you know, with hopefully a healthy attitude towards M&A markets, etc..

I think the one thing that might warrant some watching is the continued inflationary pressures in the economy, some of which is obviously outside of President Trump and his administration’s control. The Fed has lowered rates, but that hasn’t impacted a lot of our fixed income markets, mortgage rates, etc., because there is still a fear about inflation, I think in markets right now.

And if rates were to come down more significantly, we’d see more of a bump in small caps and mid-caps, we’d see more economic activity. People are looking for that. If Trump can end the foreign wars that are going on right now in Ukraine with Ukraine and Russia with Israel, I think that’ll be good for markets.

And then the tariff policies, the big question mark probably, I think, you know, he’s proposed a fairly aggressive approach towards tariffs in the United States towards other countries. And we just have to see how that materializes. It’s been quite some time since that was a platform in a presidential election in the United States. And there are potentially some good things that are out there, potentially some challenging things that economically. And I think that’s one area people will potentially be watching in the first few months.

Richard Cunningham: You mentioned a lot to unpack there, John, and want to be sure we kind of go line by line and under almost like the lens of let’s play out the other side of this and kind of what are some of the negatives.

Although there’s been a lot of optimism and positive response like. IPO and M&A markets are just low and have been very slow. And the hunger and the starvation of and the need for distributions is out there. I mean, the last three years have been some of the lowest since the kind of great financial crisis in eight and No. Nine in IPO and M&A markets thinking about like an asset class like VC and 2022 to 2024 combined.

There have been less distributions in the VC asset class than there were in 2019 alone. And you know, you think of these companies like a databricks or a stripe or, you know, plaid camp. All these folks have been waiting on the sidelines for that IPO. They just continue not to kind of come to fruition. So does a Trump administration help activate these markets as or even correlation there? What do you guys see there? Because there’s just a necessity for these markets to pick up.

John Coleman: Yeah, I mean, Richard, just to emphasize one thing, you’ve said, you know, liquidity in private markets has been really challenging. I think, Ross, you’ve probably seen that venture’s probably the most extreme example of that. That’s true in private equity. It’s true in some other categories. We just have not seen distributions coming out of funds. We have not seen companies selling the IPO. Markets have been slow and the M&A markets have been slow.

And again, part of that is just the position of the current FTC commissioner, Lina Khan, who’s been very restrictive, I think, on M&A markets, particularly by larger companies. And so we haven’t had the exits that would typically allow for distributions out of venture and private equity portfolios.

And because we’ve seen a bit of a downturn, at least up until about a year ago in the economy and a rise in interest rates, people have been trying to hold positions in funds for longer to squeeze the return out of them that they could they didn’t want to sell when valuations were compressed or when they were down.

I think we’re starting to see those come back independent even of the Trump election. I think we started to see valuations rise. Venture valuations have certainly started to creep up. And I think at some point you just have to start selling these things. You have to have an opening in M&A and IPOs. You can only sit on these positions for so long.

And so I think in particular, if the FTC’s position towards M&A is a little bit looser next year and if people have a favorable view of the forward looking economy, which would push up valuations which are often predicated on a forward look at earnings in companies, which seems to be happening because of public equity markets, I think we could see much more activity in the new year, liquidating private equity and venture portfolios.

And I think it almost has to pick up at some point. Right. It’s been a pretty anemic three years for liquidity and there’s just so much pent up demand to create liquidity that it’s difficult for me to imagine that continuing through the next year. Ross And what are you seeing?

Ross Roggensack: Yeah, I mean, some of it is just pent up demand, so I don’t want to give Trump too much credit. I do think he might be in a position where it will get better. Some of it will be because of that. But, you know, in terms of negatives, you know, J.D. Vance has been a bit on Lina Khan’s side and the FTC, and maybe there’ll be a little bit of hesitancy, I’m not sure, in terms of wanting to break companies up or slow down that momentum.

But it does feel like the pent up demand and just where we are in the cycle, we should be entering a better season for Venture especially and probably for private just because of the way money flows are starting to go. So it’s probably good timing for Trump, which is a lot of what a good presidency is, is just being in the seat at the right time sometimes or not at the wrong time, you know?

Richard Cunningham: Yeah, Ross, that’s a great point. I think that’s something we need to keep in mind is that markets are exchanging hundreds of billions of dollars of hands a day, and they’re going to do that regardless of who’s in the White House.

So we definitely don’t want to give credit or take away credit to any to full an extent. While this helps kind of set the competitive landscape or the rules of play in a lot of ways, who’s in the administration? Definitely appreciate it.

Ross Roggensack: Don’t worry, we will take credit. Well, that’s so true.

Richard Cunningham: Going on, let’s get into, John, another one of the points that you unpacked and that was fed and rate cuts. You know, one of the things that I think kind of flew under the radar is on November 6th and seventh, there was a second rate cut in this kind of cutting cycle.

There was the massive one back in September. We’ve come down now to a range of 4 or 5 to 4.75. But you mentioned, John, there’s still some inflationary pressures that is taking actions now. They’ve cut rates all the way up to 75 bips and kind of this period, we’re still seeing a really high ten year treasury, though the spread on yields between risk free rates, you know, the US treasuries and what corporations are having to pay to borrow money is at a 17 year low, 26 year low on kind of credit grade bonds.

So where are you at as you look at kind of the Fed’s policy, the inflation picture that we’re looking at and maybe with the optimism that we’re seeing overall, what could possibly break the system? Is there something in play here that we haven’t hit on yet that could be a big sensitivity to all of this kind of forward looking optimism we are feeling?

John Coleman: Yeah, I’ll be brief because I think Ross is more of a fixed income expert than I am. I would say yes. My impression is there is still fear of inflation in the system. There’s a lack of certainty around what government spending is doing, for example, to that environment.

I know several people who believe, for example, that we have been in a mild recession apart from government spending, which is obviously deficit spending consistently right now, and that that’s been kind of artificially inflating our view of how the economy is performing. And we’ve certainly seen that even within some of the businesses that we advise. You know that the last year has been a bit bumpier than it might look at a surface level in markets.

And so there’s a little bit of uncertainty around that. I think people are also worried about the long term financial health of the US federal government, given the debts that we’ve accumulated in the reset of interest rates coming in the new year on those debts, which is going to take our payments, I think above $1 trillion annually in the new year.

And there’s just no signs in the underlying economy that all the areas of inflation haven’t totally come back to normalized rates. You know, I think the Fed, Ross, is still said they’re targeting 2%, although they’ve been a little soft on that number to try and achieve the soft landing. And it doesn’t seem that we are achieving that level right now.

And look, inflation is just notoriously hard to tame, right? Periods of inflation often lasts a little bit longer than you think. You can’t clearly read when they’re over all the time. And so I think markets have a tough time achieving a degree of certainty that those periods are over. And until that happens, and until people are comfortable with the direction of the economy, I think it’s going to be very difficult to get rates in a in a series of places around the economy much lower. But Ross, I’ll defer to your expertise in this area.

Ross Roggensack: Yeah, I’m not an expert. I’m just old. I’m not an expert. But I do think when the Fed cut in September by 50 and then 25 again in November, you know, we’ve seen rates much higher than even when they cut. And so it feels like there’s a tension of maybe a chance that we’re growing faster than what the Fed thinks. And so they’re moving too quickly. So the bond market is trying to tell them to stop it because they’re going to juice the economy too much to where we get inflation back.

Lately, there’s been the bond vigilante kind of threat out there that if the Fed and the government just spends any more money, that we’re just not going to buy bonds anymore. And so there’s always that threat. I’m a little surprised since the election that we haven’t seen the ten year come down in yield. I would have thought it might have just because that sort of bond vigilantes and would be shaken off a bit for a while because there would be some expectation that we would shrink government. Government is just so large. It’s twice the size it was 15 years ago.

And I know John spends way too much time in Washington, and it gets bigger and richer every time you go, I’m sure. And we know where that money comes from. It comes from us. So it’ll be interesting. I would expect the biggest risk in the market is that that if we see the ten year go to five or somewhere near there, that that would not be handled very well by the stock market, I don’t think.

So that’s sort of the the boogeyman out there is rates of rates can come down some more. That would help. But the longer they stay up here at 440 or so, they started to creep to five. That should be a warning sign to all of us that you should sit up and pay attention that maybe some bad things could happen, at least for a while.

John Coleman: I think almost certainly, Ros, you need to launch a podcast called Bond Vigilante at this point, or at least get a T-shirt.

Richard Cunningham: I’m in agreement.

John Coleman: Only appropriate.

Ross Roggensack: Now we’ll get Ed Yardeni to teach, and he’s the one right now is the one that came up.

Richard Cunningham: With some kid rock hair for Ross and a Bond vigilante t shirt would be would.

Ross Roggensack: Be the look that said that they threw.

Richard Cunningham: Up the shocker sign for all those at home. Man Let’s go back to John. You mentioned one last thing, kind of like the caveat to all of what you’re saying, and that is foreign conflict and just kind of the geopolitical scene, the two major wars.

Let’s double click into that a little bit because I think that’s another one of those hey, all of the optimism, kind of uniformity around House, Senate president kind of all in one direction. But here we have with these foreign conflicts that are pretty unpredictable and feel very fragile at the state. What thoughts do you guys have there? Russ, we’ll start with you.

Ross Roggensack: Well, not to be too much of a Republican here, but what’s happening right now in Russia with us approving the missiles that are being flown into Russia, that are missiles that are training is really dangerous. And I do think in this lame duck period, they need to calm this down or else we could have a very serious issue in Russia and in Ukraine if that doesn’t reverse itself or at least if somebody doesn’t calm the message because there’s a lot of threatening language by Putin about nuclear weapons, that.

Is really scary. And we will forget about the stock market in a hurry if a nuclear bomb gets dropped in Ukraine. No doubt. So I don’t really know what they’re trying to achieve. It’s scary and I don’t know what they’re trying to do. It’s confusing to me. And a little bit frightening, actually.

John Coleman: Yeah. You know, this is an area where everything is pretty unpredictable. I mean, I can offer some of my thoughts on where I suspect we’re headed. But the truth is with these I mean, international conflicts are very difficult to predict.

And, you know, first, as Christians, we just got to be. Any time there are wars at this scale, like what’s happening in the Middle East, what’s happening in Russia, in Ukraine, it’s just a human tragedy. Right. I mean, the number of civilians who have died in both of those conflicts, the number of civilians who are still threatened, even the military personnel who are dying and are threatened. I mean, it’s a human tragedy that that’s happening. And I think, you know, all of our prayers, regardless of where we stand on the political resolution of those, are that that human cost can end, that people will stop dying, that we can find a resolution to these. And, you know, certainly we want to be sensitive to that as we’re predicting things.

I’m actually reasonably bullish on a conclusion to those conflicts over the next year, and I’m reasonably bullish that we won’t see other conflicts developed with nations like China which might pose a threat. And I’ll voice why. The first is I do think that in both of the conflicts, Ukraine and Russia and Israel and again its neighbors, so Lebanon, Iran, you know, the Palestinian territories, the clear signal is that the new administration would like to actively in those conflicts.

I think with regards to the Israel conflict, there is a clear signal, the pro-Israeli stance among the administration, at least in the appointees we have so far. And I think the Trump administration’s strong ties with places like Saudi Arabia, you know, Saudi Arabia has already signaled that they’re willing to lower some of their standards for normalization of relations with Israel since President Trump won the election.

Are all signs that we could see that come to conclusion and Iran contained in the region a bit more, because if you had the Saudis and Israelis working together hand in hand with the American government, there are probably solutions that could be had to the ongoing conflict there. So I’m somewhat bullish that that will happen.

And then in Ukraine and Russia, I think both sides are legitimately exhausted with the conflict at the moment. Ross is right. Putin said some scary things. He revised his nuclear policy. Ukraine is now launching long range missiles into Russia. Russia recently launched a nuclear capable missile into Ukraine, even though it didn’t have a nuclear warhead attached to it. Those are super threatening signals.

My hope is that those threatening signals are jockeying in advance of what they understand will be a strong push for a negotiated settlement in the first days of the Trump administration. And the question there is exactly what they’ll agree to, the two big levers being how long won’t Ukraine have to promise not to go in to Naito? And how long will Naito have to promise not to allow Ukraine in? Is it ten years? Is it 20 years? Is it longer? And then the second is obviously where the territorial lines set. Putin would love to freeze them where they are I think on the front, Ukraine would like to push those back and only give up something like Crimea, for example. And so that will become the process for debate. I do think there will be a settlement to that. I think Putin may not acknowledge this, but he would like to see an end to that conflict. It hasn’t gone well for Russia, hasn’t gone well for Ukraine. Both sides are probably in a place now where they’re willing to talk with the right people at the table.

And then finally, I’m bullish. You know, some people still have a fear that conflict could escalate with China. And once again, I’m somewhat bullish that it won’t. I think China’s in a weaker domestic position than most outsiders recognize right now. I think their economy is a bit weaker. I think they just announced stimulus, I believe, over the course of the last week or two. They’ve got a debt problem. They’ve got a real estate problem. They’ve got a shrinking population.

And they’ve just witnessed what happened to Russia when it went into Ukraine, a conflict they thought would be easy, which has turned out not to be easy and quite embarrassing for the Russian state. It’s hard for me to imagine without some sort of massive provocation, China, for example, invading Taiwan or something of that nature at this time.

So I’m somewhat bullish. We can get those conflicts under control next year and I’m hopeful we can obviously because of the human cost. But, you know, the caveat is these things are hard to predict, right? You don’t know what these international actors are thinking. And so you can only hope for the best and develop policies you think you know, can drive those to conclusion.

Richard Cunningham: You know, we got a bond vigilante and a foreign policy writer on the podcast today. It’s good to be wrong.

John Coleman: All of this stuff will be proven wrong by the end of next week. Richard.

Richard Cunningham: It’s for the best part as you’re on the record, so we’ll be able to call you out right away and we’ll. Yeah, Thank you guys for sharing that. It’s been a thousand days plus now. And Ukraine, Russia and 400 plus Israel, Hamas. So as you’ve talked about, John, just the cost of life.

Ross Roggensack: 600,000 Ukrainians have died in this war, 600,000. Think about that number. Just amazing. That we know of.

Richard Cunningham: Well, maybe that’s a good place to just kind of stop. Put a pin in the conversation and just say, Hey, for anyone listening that maybe is disheartened by the election outcome. Here’s something like I was talking about the foreign conflict or on the other side of the coin is just overjoyed by the election outcome.

Let’s get back to that kind of like eternal mindset, biblical perspective. We asked the question at the close of every podcast of What’s the Lord been teaching you in and through His word lately? And so maybe in light of the subjects we’ve covered in just your time with the Lord, how would you process and kind of think about this? What encouragement would you guys offer? Ross, we’ll start with you. John will close with you.

Ross Roggensack: Well, my church has been walking through Joshua. And a few weeks ago we ventured out to the Battle of Jericho, which wouldn’t be encouraging to many. So I’m not going to go there. But just before the battle. Joshua is I guess he’s meditating or praying and he looks up and there’s a soldier in front of him with a strong sword.

And Joshua looks at him and says, Are you are you for us or against us? And this is the Lord now speaking to Trinity right in front of him. And the answer was no, which is not an answer. It’s basically that’s the wrong question.

And our pastor kind of asked us to think about in light of that, in the light of what we do in our work, oftentimes I want to go in a direction. I ask if the Lord is with me or against me. Am I going in the right direction? And our pastor kind of rephrased it and said, maybe we should be asking the Lord which direction should we go and not? Am I going in the right way? So maybe that’s a good thing to think about as we welcome to the next season, is us just being quiet and asking, Lord, where are you going? You know, where are you going? Can I go with you? So that’s sort of what I’ve been thinking about.

Richard Cunningham: And that’s good, Ross. We’ve been processing through God’s will and just call on my wife and I his life. Honestly, just lately just been processing the big questions I just got Where would you have us? And we keep coming back to the word will.

And what you just said remind me of first Thessalonians 516, which is rejoice, always pray, continually give thanks in all circumstances, for this is God’s will for you in Christ Jesus. We want to ask those questions about right and wrong. Got you on this side, that side, and you just stops and says, Rejoice, pray, give thanks. That’s my will for you. Kind of like you’re saying, God, what direction would you take me in? John Coleman, Take us home.

John Coleman: Well, first, just let me know. I’m almost shocked. We got through an entire podcast right now without having to talk about cryptocurrencies. Given that Bitcoin is almost at 100,000. I know that’s Ross’s favorite topic because it’s probably his heaviest asset allocation is is Bitcoin.

Ross Roggensack: So you’re a wealthy man right now?

Richard Cunningham: Ross That’s my fault for not bringing up crypto, but it has been rippin.

John Coleman: It has been good time in the crypto markets. You know, I have been thinking a lot over the last few days about humility. I heard the founder of Hello on a podcast recently talking about humility. They have some prayers for humility on the app. I’ve been using the Halo app actually to do daily devotionals and things like that, and they have some great prayers on humility.

And then I was actually watching a sneak peek of a TV show on Monday that I won’t reveal that forthcoming from some friends of all of us here on the podcast. And there was a scene with the Prophet Samuel where he was talking to Saul and he talks about how when Saul was small in his own eyes, God made him great. But then when Saul started to believe his own story, him to fail to attribute God, obviously he was humbled and it’s just helped to remind me constantly.

Like any time we start to feel on top of the world for anybody feeling on top of the world right now, you know, we need to remember God is in control and that we are subject to him and we should always seek humility. We should have humility. We should remember to give glory and credit to God. We shouldn’t let the valleys be too deep or the peaks be too high.

Right? We should know that we’re on a journey and that journey will have both suffering and triumphs. And we should just always be cautious in our dealings with ourselves and with others that we constantly give credit to God, that we treat others as better than ourselves, and that we as Christians are setting an example for how we treat others so that we communicate that message of humility and love that Jesus consistently gave us.

And it’s only by doing so that we can ever truly achieve great things not for ourselves, but for others and for God. Right? And that’s just really hit home for me over the course of the last week with a couple of messages I’ve seen.

It’s an area I fall short all the time, and so it’s something I have to keep in front of my eyes. You know, Ross is smiling way too big when I made that last comment about falling short on humility. But but it really is. I mean, you got to pray about it. You got to think about it. And I’m too tempted to give myself credit for stuff sometimes. And I think we all are. And, you know, as folks are feeling either great or bad right now, it’s important that we all remember to put that in context of eternity and the role that we play here. For the God that we serve to fear.

Richard Cunningham: The Lord is the beginning of wisdom. I think humility is one of those great byproducts of wisdom. Ross Robinson of City Consulting, John Coleman of Sovereign’s Capital Friends. This has been another episode of the Faith Driven Investor podcast. Wonderful to have you with us. Have a great Thanksgiving. Start your Advent season. We’ll catch you next time.

Speaker 2: We are grateful for the opportunity to serve this community and see your listeners come in for more than 100 countries. Faith Driven Investor It can be a lonely journey, but it doesn’t have to be. The best way to stay connected is to join a groups 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 and arranged by Summer Drags Audio and Editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb.

Richard Cunningham You’re listening to Faith 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.

Speaker 2 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 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 Welcome back, everyone, to another episode of the Faith Driven Investor podcast. Man we are nearing the end of 2020 for Luke Roush and really it’s been since May, since we’ve had the opportunity really in earnest to hit on the real estate markets. And we’ve got an incredible leader in the space. Nick Bonner with us here today that will introduce your momentarily, but excited to have you back in the podcast. Luke, I know it’s been a couple of weeks and excited to be talking. Real estate feels like it’s after an election. A lot of Fed activity, everything that’s been going on, we just kind of need to pay tribute to that asset class and large. But Luke, how are you doing? How is Team Roush this Thanksgiving?

Luke Roush We are doing great. We had a great Thanksgiving. Grateful for unique times that we live in. And certainly the last handful of months has been unique in the real estate realm and dynamic, which makes for a fun podcast session. So this is a great guest and a great conversation we’re going to have today.

Richard Cunningham It sure does. So coming from sunny San Diego, California, where he can probably dunk on as in terms of weather as our friend Nick Bonner. Nick has been a leader in the FDI real estate space for quite some time, thinking about just redemption inside of real estate. Longtime CBRE, Caldwell Broker, great expertise. Nick, awesome to have you on the phone with us. Man.

Nick Bonner I was a joy to serve and I’m grateful for you guys and your entire team. What you’re doing to spur the movement of faith driven investing. We’ve heard Luke say it before. Aslan is on the move. You guys are helping investors to be found faithful and they can return. So thank you guys for what you doing.

Richard Cunningham Absolutely. Well, Nick, you’ve got a wild story. And I think that’s just kind of where we want to start with this podcast is your time at the Pine Tops Foundation what you’ve had your hand in over kind of your career, I think will help frame up where we’re going and kind of what happens now and present day with your work. But I just want to hand over the mic to you to kind of contextualize this episode a little bit and who you are.

Nick Bonner Awesome. Well, thank you. Yeah. So I’ll start off just like a quick background on me because I think it helps sort of frame this up. Pastor’s kid born and raised, actively involved in the church my whole life, spent about a decade on the board of a church board, 13 years on the board of a Christian foundation called the Pine Tops Foundation. In about the last 20 years in commercial real estate, in the capacities of lender, broker, property, manager of my own assets, investments and the like. And all that has sort of helped frame up a lot of my thinking around some of what we’re going to dive into today. Since I started volunteering with the foundation, we’ve deployed over 500 grants and over 40 different private placements, the majority of which were for impact investments. And I mentioned that because my roles in commercial real estate in the foundation have opened my eyes to a very broad spectrum of the deployment of capital and the impact that it can have, which has really stirred up a lot of good questions and opportunities around this space for me. Give me a what I think is a pretty unique perspective. So I’ll start real quick with Pinetop, just to give you a brief overview of that. So Private Christian Foundation, we set out about nine years ago. We sort of said, Hey, we need to come up with a theory of change because in spite of being one of the wealthiest Christian nations in history, the church in America has declined. And so we don’t have a money problem. We don’t have a critical mass problem. We have an efficacy problem. So what are we going to do to steward God’s money in a way that actually results in real change? And so the answer to that was what we call the Great Opportunity Report or the GAO report for sure. And how we came about with that was initially was intended to be a confidential internal domestic strategy for us. But we quickly realized it was something that was just much bigger than anything we could ever tackle on our own. And so what we did with that is we basically asked two questions. One, what is the state of the church look like in 2050 and how do we change that? So we built demographic models around it, and then we went back through history and said, okay, how do we change that based off historical record? Like, where have we seen big growth in the church and are there common denominators there? And the answer was, Yeah, there’s five. And so we built a chapter on each one of those five intro to kind of frame it up and then a closing chapter of just ideas, just tons of ideas to like, all right, how do we get after this? So if you’re listening to this podcast and you’re like, okay, this is an investor podcast, but a lot of people on here are faith driven. And so if you’re tired of people talking about the church and how it’s dying and how it’s, you know, not efficacious, read this report and get inspired and get to work, there’s some really exciting ideas that come out of that and so you can find it. It’s free. Great opportunity, dawg. We probably had 40, 45,000 downloads on it. We’re not marketing. And it’s just it’s kind of tough to tell like how much exposure it’s had because it’s a PDF document that just gets forwarded around. But our best guess is, you know, probably 45,000 different church leaders of major denominations and ministries that have been using that as their game plan. That’s required reading in a number of seminaries and denominations. And so, you know, we’re excited about what it’s. And I’m more excited about what other people will do with it when they get a hold of it and start to ideate on like, Wow, what’s my part in this? So one example of that is a real estate model called Open Doors. And what’s fun about this is this wasn’t even my idea. Like we hired a bunch of McKinsey consultants and KKR people. There’s 150 different people that helped us put this dock together. Their names are in the back of it. And they came up with this idea that like, hey, as we look at the overall church, like your two biggest costs, like most companies are people in real estate and arguably maybe there’s a vocational angle in there for pastors. But clearly the low hanging fruit is in the real estate because as I started digging into it, I realized the average church in an American city spends half of their finances on a building that the only fully utilize about 5% of the week.

Richard Cunningham Absolutely. I’ve always thought about that.

Nick Bonner It’s a colossal waste of stewardship. I mean, it’s just like it makes me angry when I think about it. And so their idea was we’ve got to have a better model for that. What if we had for profit sustainable solutions with third parties that owned this property? What if we had sort of like a we work for churches like 20 years ago, if I would have told you that you’d be interested in sharing your music collection, your home in your car, you’d be like, You’re crazy in your office space, for that matter, right? But like, here we are. So why is the church so far behind this? Why couldn’t we do that, too? So a couple other big stats for you, as I sort of do some of an original research on this is there’s about $1 trillion of equity just buried in the dirt in church buildings, just church buildings alone, not even the rest of the real estate the church owns. And so if we deployed that capital alone, we could triple the current rate of church planting. And why that’s important because I didn’t know really anything about church planting before this report is church planning is one of the five most catalytic things that could be done that would be positively disruptive for the church. It is a common denominator behind all big revivals in American history. One other stat on that, which is roughly 12% of companies own their own properties, but roughly 84% of churches own theirs. And it’s such a big difference. It’s like, wow, why are we settling for, you know, a property tax exemption and maybe 3% appreciation when the scripture tells us that we’re given returns of 30, 60 and 100 fold? Like what if we were putting our capital into our mission in the same way that businesses put their capital into their mission? And so that was sort of the big idea behind like, okay, we’ve got to do something different about about real estate. So what does that look like?

Luke Roush Yeah, well, I’d just dovetail on that, Nick. One of the things that we talk a lot with business leaders that we partner with about is stay focused and stay clear on the business that you’re in. If you’re in the business of distributing heavy industrial equipment, focus on distributing heavy industrial equipment. Don’t focus on somehow trying to become like a real estate mogul through the the dirt that’s underneath your dealerships. And so we try to always remind business leaders of what is the business that you’re in. If you’re in the real estate business and you’re trading multifamily properties, you probably want to own the real estate. But if you’re in almost any other kind of business, you’re looking to control that costs and make it a variable expense rather than a sunk asset. So what you’re bringing up is very apropos. And, you know, it’d be curious to go back and figure out how did we get here? Maybe it’s just a spirit around kind of own in the building that started, but more importantly, I think more constructively, where do we go from here in terms of trying to return to the core mission, which is reaching people with the Gospel? So please continue.

Nick Bonner Yeah, I know with you and I’ve got a whole white paper I wrote on how we got here that you guys have been nice enough to post on FDI on, you know, basically takes you into the etymology. It’s about words, like language matters. Like we can’t even look at a building and call it the right thing. We look at buildings and we call them churches. They’re not churches, the churches, the exits, the gathering of people. So, so long as we look at buildings and say, that’s a church, then we actually even create a mindset where a pastor is like, Wait, you want me to share my church? No, this is my church. Like, I’m not sharing this building. And so we just need to think differently about this. And to your point, there’s an example I give of you guys get pitched by businesses all the time. So let me pitch you on a business idea for a moment. All right. So I’m going to start a business. It’s a predominantly retail business. We are only going to be actually visible to the community a half a day a week. We’re going to go to our main parishioners and we’re going to ask them to take their day off for 2 to 4 hours and spend that moving, picking up stuff and moving in and out the rest of the week. There’s going to be zero sign that we actually are even in existence. And as the CEO of this company, I’m going to spend a decent amount of time on things that are. Pletely outside of my scope or set of abilities. Do you want to invest in me? You’d be like, Are you.

Luke Roush Crazy? That sounds like a long cut, Nick.

Nick Bonner Right. So this is the model. This is plan A for church planting. Like we’re sending these guys out to battle the go get slaughtered. Like these poor pastors have these really crummy models that they’re given. And so you probably hear my voice. We just we need better solutions for this. And so I don’t want to camp on this for too long. But the quick idea with this whole open doors model was let’s go out and buy buildings or create a fund for profit sustainable, fund them, go buy buildings, be a church industrial office, whatever, it just have to work for the users, renovate it so that multiple churches can share the space when they need it, when they don’t need it, which we just learned is the majority of the time, at least the entirety of the building. We rent that out to other uses, like Christian preschool or coffee shop or coworking or let’s just let’s take wedding space back. I mean, an event space is a huge income generator and all of those uses can both subsidize the church’s cost to be in the space and bring in new sources of people. So that might not normally set foot inside of a church. So now you put the well inside of the building. You have these divine collisions that can occur within the church and you’re creating a sense of space of a third place that people want to be in. And you just tell the pastors, Hey, you’ve got access seven days a week, why don’t you sit in the lobby and just hand out coffee to people as they come in like they’re showing up at your front door? Just love people and basically take all the distractions away from them. So that was the model set out to do it. I love Henry Kissinger’s example of like introducing somebody to the world of sushi where he says, like, you got like the apartment life model over here. And that’s like, you know, the California roll. And then you’ve got, you know, some of these other private equity funds that are like the nigiri sushi, right? You don’t take somebody straight into Gary Sushi. You start him at the California, get an appetite and you go towards that. Well, this open doors model, like there’s so many different moving pieces to it and then there’s like all this cultural overlay and spiritual things of like people, you know, hating on the church that it’s like, that’s the nigiri sushi. And I came out of the gates swinging for that, and it was hard. It was an interesting time because I was a part of a group. It was kind of like the first FDI group ever, only unofficial. You’ll recognize the names of like Beaner Skin. And I don’t know if, you know Matt Migliore is, but couple of other guys that are part of this.

Luke Roush These are some of the urges and they threw in real estate.

Nick Bonner The O.G.. So we all get together. Dan Mack it maybe not a name you guys know, but it’s just a phenomenal human being. And a buddy of mine, John Kim, we all get together. We’re like, How do we solve for this stuff? So it’s during Covid. We’re like, Well, let’s just do like a video. Like we can’t meet with people. Just do a video meeting like, you know, every week. So it was awesome. Was first FTI Group during that time super formative for me. This is when Ben starts Callus Capital was turns in the Sovereigns real estate fund. We introduced each other like narthex, which is doing like their own real estate fund co hatch. Well then Field Redemption Collective. There’s like all these groups that are spinning in our minds and we’re learning about all these great solutions that entrepreneurs are pursuing and having the realization that, like, man, access to this capital is really hard because the only thing that investors love more than their money is their time. And so if you want to invest in one of these models, it’s going to take time to go evaluate is brand new. Like these aren’t California rules. These are somewhere between that and the Gary Sushi. And so God gave me a vision during this time that was like, Man, I love these people in their models so much. I’m going to take the operator route. But my goal is to prove this so well that we could go raise up ultimately a REIT where all of my buddies, we could all collaborate and roll up all of our individual funds into this massive REIT because then we can begin to democratize the capital in this space. Right now, the barriers of entry for anything really Christian impact is really high. If you don’t invest in this stuff, you got to have typically minimum like a quarter million bucks. Be ready to have your money locked up for 5 to 7, maybe ten years. And oftentimes there isn’t a massive amount of diversification. So if grandma wants to invest your money, you’re saying, no, grandma, don’t, don’t do it. And so what if there were a highly diversified vehicle that had a $2,000, you know, minimum and a ton of flexibility that opens up the pool so much bigger. And so I sort of got off track a little bit. I wanted to share an example of one of the thought experiments also that led me to this space. So years ago, Tom Blaisdell wrote this white paper where he explains that there’s we all think that government is supposed to solve this stuff. Or guess what? Like there’s only about 15 times the amount of government money available, then donation capital. And certainly donation capital was not enough to get the job done. There’s 100 and. 50 times the amount of investment capital available in the ecosystem. Then there is donation capital. So the thought experiment on this is. So all the two pocket investors, right? Let’s just imagine for a moment that in the philanthropy space we could create a KPI that measured kingdom impact. I don’t believe you can, but let’s just imagine for a second that you could. So if we did, let’s imagine that the philanthropy space has a 100% return on their KPI. Let’s imagine that the impact space does a really poor job and they only have a 1% return on theirs. Even in that scenario, the impact investment space would still have a 50% greater return than the philanthropy space because of its sheer size. Right. And so please don’t understand me. Like philanthropic capital is absolutely necessary. I’m just trying to cast a bigger net, bigger vision beyond that as the sole apparatus for solving the world’s issues. Right. So this is not binary thinking. This is like a continuum. God made 17,000 types of butterflies. So there’s plenty of room for expression and creativity in our work. But this thought experiment gives you a sense of like, how critically important it is to actually get into this impact investment space and start doing work there.

Richard Cunningham Right? That’s really important. I want to double down on that real quick because I think that’s just worth stopping because it actually plays off really nicely. One of the most legendary FTI videos, in my opinion, for those that have been through kind of the six week FDI cohort is when Greg learned a hand unpacks this concept and he talks about, you know, Americans are given somewhere around 400 to $500 billion to philanthropy, which what you’re talking about charity each year. And that number is actually going down, which is a bummer. You know, we the church should be joyfully, hopefully like increasing that number in that share that we’re giving. And that’s such a small percentage of GDP. And what you’re talking about here is the hundred plus trillion dollars in investable assets out there. Just a small portion of that was unlocked for other than, you know, purely profit driven purposes, which making a good return is absolutely key. You’re saying what could take place here is just an even greater multiple. Am I am I understand that correctly?

Nick Bonner Yeah. And I love Greg learned a hand. And that is a man that has put his money where his mouth is. And his two by two model was instructive and edifying for me as well, where like, you know, on the vertical axis, you’ve got the spiritual impact on the horizontal, you’ve got financial. Everybody wants to be talking to the right, but what about top on the left? Like what about concessionary investments? Like where’s our space for that? And like, where’s our ability to like seek the Holy Spirit’s guiding in that space. In fact, a lot of the times he’ll tell you this and I’ll tell you the same some of my favorite investments are talking to the left. So there’s certainly needs. One of my dreams is after we sort of prove out the right thing is actually go out and do a concessionary fund. But it’s a hard issue. And I think I need FDI to help mature the hearts of a lot of the faith driven investors before I’m willing to take a flier on that one.

Luke Roush Hey, Nick, one question that I wanted to ask pertinent to the reconstruct is any time you think about creating an open ended vehicle like that where there’s more flexibility around minimums, more flexibility around individuals who can access it is from a networth perspective. And then also having the liquidity to be able to support that more open doors access pun intended. Given your background, I’d love to have you just talk a little bit about how do you tactically start that? Like once it’s big, once it’s stable and you’ve got sufficient liquidity reserves and all that to be able to facilitate churn, it’s easier to imagine. But a lot of times I’ve seen folks get hung up on this model because they can’t figure out how do you get critical mass at the beginning? Maybe talk a little bit about how you’re facing into that or thinking about facing into that in the coming years.

Nick Bonner Yeah. So I don’t want to blow the story too much, but for the vehicle, the plan would be raise enough money that you can get an initial critical mass. And so, you know, an initial rig, A-plus offering, would allow you to do 75 million a year every year until you’ve got enough capital and operational history to go to an investment banker and say, okay, let’s go big now. And what an investment banker is willing to start with as their minimum, whether that’s, you know, 300 million or 2 billion, you know, that’s the question that would need to be answered at that point in time based on that fund and its performance. But ultimately, if you go the I.B. route to the road to Wall Street, we bring.

Richard Cunningham Luke on the pod for investment expertise, and you can just see him foaming at the mouth, chomping at the bit. Want to get into that conversation?

Luke Roush I love innovation. I love people who are looking at what others have looked at and seeing new opportunities. That’s really what innovation is. Very rarely is it inventing something new, but it’s figuring out how to apply a concept from one field in the maybe a new field and just creatively playing at the margin of, you know, intersecting circles. So I really like the construct and I think that know what you’re really pointing towards, Nick, is the democratization of faith driven investing. Even if it’s true that the majority of assets are held by very few individuals globally, the reality is that, you know, the vision, mission, dream, I think that we all share this is our collective mission is to be able to allow everyone to participate, whether in big ways or small ways, in this idea of reflecting our values and how we steward capital and to try to look for market based mechanisms that can lead to an enhanced ability to plant churches and do some of the things that you’ve outlined through that Global Opportunity report, which is incredibly insightful for me. And it sat on my desk for well over a year as I just kind of processed and reprocess the contents. So really grateful for point. Absolutely, in a way with that.

Nick Bonner Yeah, well, praise God and thank you. Yeah. One of the visions that God had given us with this is like the widow’s might. Like when we came out with this, we went to a number of the operators that are doing really good work, and the people that are running the ministry side of their work came to us, were like, I can’t invest in the work we’re doing. I don’t have a quarter million dollars. But like this vision of like being able to go to Wall Street and have a lower minimum, man, like I’m in. So there’s a lot of people that want to be a part of this. And that’s what’s driving me more than anything is all my friends and family that are like, Hey, I’d love to be a part of this, but I can’t do it just yet. And even like even the investors that have a lot of the money, like so my best friend’s house, three years old, he had a liquidity event recently and he came to me. He’s like, Nick, you know, I want to do a faith driven investing real estate thing. What do I do where I go? And I’m like, Yeah, here’s like six different funds have invested into you. And he’s like, Dude, I don’t know what I’m doing. I don’t have the time to dig through this. So is there an easy button? Like, is there like way I can invest in all of these? And I was like, Well, yeah, we could figure that out. Actually introducing the business, give us like solvency. Got a real estate fund, do that. So yes, trying to solve for that is the fun part. So let me take you back. Yeah.

Richard Cunningham I was about to say, bless my linear brain that likes to hear the conclusion of the story that gets us to the present day and go quickly through the kind of like the open doors to now.

Nick Bonner Yeah. So open doors start that, by the way. Like I still got a full time job at CBRE and joked during the time of working two and a half full time jobs and working full time at C, which is not like a residential where you can work like 20 hours a week, like you got to be full time. And it’s a very competitive industry. Plus volunteer and Pinetop plus starting this whole Open Doors syndicate, I thought it would take 18 months. And right before Covid, I was well on my way on pace for that. And then Covid hit and bunch of other things hit. And, you know, it ended up taking more like six years. And so during that time, I mean, this is a podcast for another day. But like I just had to say it was rough. I ended up having a full on panic attack. And I’m not a person that is panicky, my wife. Laughed when our therapist diagnosed me with anxiety. She was like, You don’t have anxiety, but there’s something to like going after this stuff that has real repercussions. And so I actually wrote a whole white paper on like discerning that call in, like, how do we know if like, we followed God when we’re in the middle of like, the desert? Did I do wrong or this is actually where you brought me God. And so during this time I bump into Dallas Jenkins and he’s like, Nick, you have to read me and myself and Bob by Saul Fisher The story of the collapse of Vegetables and shout out to the Holy Post. By the way, I’m Phil Fisher. So I read the story and he’s got we have time to go into it in detail. But like he talks about the Schumann Night Woman, which is not a story that I remember in the Bible, but quick upshot on this. So there’s this woman who’s barren. She’s serving a Leisha. He says, Hey, God’s going to give you a child. God gives her a child. A year later, she raises him up. When he’s in his teens, the child basically ends up dying in her arms. So she goes to her husband. Her husband asked her how she is, and she says this astounding thing. She says, all is well, which is not something you would normally say when your first and only child dies. She goes a like she asked the same questions. Use this all as well. And it’s clear that she’s messed up about this, by the way, like she’s like grieving over this. But the question that he poses in this is like, what kind of a God gives somebody a dream and then takes it away. Right. And then the second question is, what kind of a person answers all is well when their only child dies in their arms in the answer is like God had clearly taken her through a journey personally where the moral of the story that she learned was like, sometimes God gives us a desire or a dream only to take it away only because only then, after taking it away, can we really know if we love him more than the desire or the dream. And should he ever give that dream or desire back to us, only then would we ever actually be able to experience it to its fullest. So this is a super powerful lesson for me through this process because I think I sort of made this like seeing how important this vision was. I think I, in spite of my best efforts, I sort of made it a little bit of an idol. And so I’ll pause for a quick diagnostic for those listening, if you want to figure out if you’ve got an idol of your own, let me ask you two quick questions. The first question is fill in this blank. For me, living is for me, living is for me. And be like, I don’t know, going on great surf trips or, you know, hanging out with my family or having success in business. Right.

Richard Cunningham Spoken like a guy who lives in San Diego.

Nick Bonner Yeah. All good things, right? And then answer that next one for me, dying is for me, dying is, man, if I lost this or if that happened. Right. So if your answer to those two questions is anything other than Jesus, then you’re set up for failure. Because the problem is, for me, living is like all of those things can be taken away in an instant. The only possible answer that can fit in both blanks and protect you from suffering is if the answer is Jesus. So I’ll fast forward through the story and I’ve got the money raised. I’ve got 30 plus churches that are like, If you build, it will come. We’re excited. I got multiple redundancy and all the tenants. I’ve pulled the trigger on the Lego. I spent all the money, I’ve got everything ready. I’ve got a couple of buildings lined up and God presses pause in a big way. And so I’ve got to tell you, this only got story for a moment because I think people will be blessed by it. So five years prior, I’d been shopping for a new church after 17 years of the same church and during the storm camping out in the book of Colossians, I’m reading cautions every day for the entire summer. The Lord is speaking to me through caution so loudly that I actually read chapter one every day for 30 days straight. Never done this before or since then. Every time I read it, he speaks to me. So I go to 12 different churches, and if you know me, I’m a nerd. I got my spreadsheet. I’m evaluating these churches on like 15 different points and three pastors preach on Colossians chapter one. And I’m like, What are the chances? And the Holy Spirit, you know, meets me in a way as a sort of Baptist Presbyterian background that I am not used to being about. I’m like weeping in these churches, super embarrassing, but I don’t really care at the same time. And at the end of it, I’m like, God, wow, this is amazing experience. Like, what are you doing here? Like, I can’t attend three church. I got to pick one and he doesn’t give me that answer, so I have to pick one. So I pick one church back into the story. Fast forward five years. So church one, I’m attending church. Two of those three joins our church in August of last year and says, Hey, like we just love you guys are doing are going to join your church now two on the same roof. And then in September, a third church comes to us and says, Hey, we’re closing down at the end of this year. We want to sell our building to you. But this isn’t a market sale. We’re not stupid. This is a. Time passed. We see a legacy here and we want to basically hand this thing over to you. You’ve got to pay off our debt and our severance. But, you know, it’s a $50 million building. They want to sell us for 5 million bucks. And long story short, with this process, the church can’t raise the money because they’re like, look, their only catches. You got 30 days to raise 5 million bucks. So I call the people I know. I’m like, let’s get you a $45 million write off. You guys could buy this thing for 5 million. You could gift it to my church. Nobody wants to do it. Shocker to me. I can’t believe it.

Richard Cunningham I know where this is going. Back to the open doors thing. Yeah. Wow. I’m excited to hear how this ends.

Nick Bonner So bottom line is, we’re closing in and I’m like, Yeah, we’re not going to buy this thing. What are we going to do? And I feel like praying about it. I’m like, got to understand what’s going on. And guys like, Hey, who did I give that vision to? You have three churches under the same roof and I’m like, Me is like, Well, what were those three churches? And so I go back through my notes, You want to get to the third church was the preach on Colossians. There’s the church that wants to sell this building to us. And I’m like, Whoa, goosebumps, right? Like, okay. And then God’s like, Hey, how much money does the church need? 5 million bucks. And how much money do you raise for the open doors model? 5 million bucks. Like with God, like.

Richard Cunningham Isaac on the altar necklace.

Nick Bonner This is the Isaac on the altar moment, man. And so rule number one is churches don’t own real estate with open doors like they can’t like you need a third party. And so, again, just to abbreviate all this, I make the decision. I go to my lead capital provider. I’m like, Hey, here’s the idea. I don’t really know if you want to do this, but here’s the opportunity. We could do it alone. I could just back out. We could just sort of put open doors on pause and they’re like, This is great, let’s do it. And I’m like, okay, I was open. You’d say, No, but here we go. So bottom line is I put open doors on hold, give up my capital, then help them close escrow on the building. And that may end up being the first open doors building. And it may not. It’s out of my control. And so for the second time in six years, I give up my career and then found myself on the other side of it saying like, okay, God, like, what do we do now? And the following from that was really a dark night of the soul. My wife gave me John Comer’s book Lit The Dark Night of the Soul, which was cathartic during that time. So just like just felt like God had just sort of hugged me out to dry. And so this was a time of of a lot of soul searching. But now I just have to say that God is just so good and so patient. And I was rebellious in my heart during that time. But he just showed me a tremendous amount of grace through it. And I think the upshot during this time was what I came down to, in spite of all my anger about sort of like giving up my career twice now, this is like, you know, God, whatever you want to do with me, do with me. Where else can I go? It’s like Peter, like only you have the words of life. So if your endgame is for me to end up, you know, poor and naked and alone, then, like, I guess, like, okay, there’s nowhere else I can turn to. So that was a really, I guess, maturing time in my face. And I think I’ll speak to this maybe a little bit later. But there are few biblical characters that didn’t have a desert journey that God took them through or they just had to like abandon basically all things and make the decision that it’s really only God. It’s not the dream, it’s not the desire. It’s got to be only God. So you fast forward to today, which is shortly after all that happened. I got a phone call into Andrew Arroyo from Andrew Arroyo. Real Estate is a buddy of mine who calls me and says, Hey, Nick, I think there’s a generational wealth making opportunity in commercial real estate. We’ve got 40% of all commercial, say, debt roll. In the next three years. There’s going to be a lot of people that need to sell fundamentally good buildings for discounts just to, you know, meet redemption cues and to pay off their lenders. And so I said, yeah, it sounds interesting, man, but I’ve just seen too much. And for me, it’s in Pachter bust. Like, I can’t do anything that doesn’t have a legitimate impact. It’s like me too, like I’m in the same boat. He’s like, Nick. He’s like, for the last X amount of years you’ve been sharing all these Christian models, all these redemptive impact models of people for free. What if we did that? You actually got paid to do it? I was like, Whoa, that would be a dream come true. And so fast forward on this. Again, we’re in the process right now of starting, as I understand it, the world’s first Christian impact investment rate. And it’s one of those things where it’s like Mark since got this quote where there decades when nothing happens in days or decades happen. And this is one of those for me where I feel like by giving up Isaac on the altar with this whole open doors thing, like God allowed me to, instead of hitting my 20 year vision of like, Hey, we’ll go to open doors. And 20 years later I have a right. It was like, Now let’s just do the rewrite. Now you’ve been faithful, go. And so I’m super excited by this idea because we just yesterday, I mean, this all happened in real time. So what’s today’s Thursday? So Tuesday I sent my farewell notice to everybody at KB yesterday. The SEC got back to us and said, We’re officially qualifying you guys to be a read on. And is real. Like, it’s getting real really fast. I haven’t even updated my LinkedIn profile. So bottom line is we’re going to go start this REIT that can do all those things that we were talking about where we’re going to go find all these other operators and invest into them and lift up their arms and provide an easier route to capital on both sides of the equation. Want to grow both the supply and the demand side of the equation. So if you got a question of the REIT, we’ve talked about that more later. But I just want to say that the lesson here for me is it’s actually the second time in my career that God has taught me this lesson. I hope there’s not a third, but it’s a Joseph story. Like God doesn’t move in a linear fashion all the time. A lot of times we think he should go from point A to B to C to D, and God can go to A to F, over to Q and straight to Z and right back to again if he wants to. But like if you look at the stories in the Bible of people like Joseph, it’s like, man, we’re not in control of this stuff. God is in control of this stuff. And if we can just hang on to him, the places he’ll take us to, all the places will go.

Luke Roush I think that’s a good word. And you know what I would say, Nick? Is that what you’re talking through in terms of the journey that you’ve been on, is what it looks like to be actively faithful and guard against being willful. There’s certain things that God has put in our control and is allowed to be in our control and those other things that are kind of outside of our control. It’s a trying to discern, as you did in your path through the desert, what is the voice of God? What is maybe the voice of the enemy or your own voice? Kind of speaking of the voice of the world, speaking in the year, trying to discern which voice and listening for the accent that God has and how he speaks to us, which oftentimes is corroborated by Scripture and or godly counsel around us. That is what discernment looks like in the process of being faithful, but being actively faithful and moving forward with full recognition that God controls the outcomes and teaches us things along the way. And in Patterson’s quote, around decades happen in days and other times it’s, you know, days happen over decades. I think that’s a really important reminder around controlling what we can control and trusting God with some level of the timing and the outcome. So this has been super instructive and informative, I think, for Richard and I sitting here and it’s great to hear your story. I love the process that you’re going through to be able to democratize real estate and what it looks like for more people to get in the game, which in the words of Henry and Justin. So, Richard, over to you.

Richard Cunningham Yeah, I mean, if you’d allow me, honestly, the liberty just to try to summarize like Nick, because it’s powerful and it’s a really cool, as you said, only God story, kind of all of it, but it’s this catalytic vision. You receive it pine tops for how you can engage as kind of this church issue that we have the systemic church issue. And I love that. It’s so overlaps with your passion and your background and, you know, just professionally what you’re capable of, which is in the real estate space. And so then you get this vision for open doors, which is for church real estate spaces, to kind of step in as an antidote and a healer. There Open Doors is at the finish line, docs are created and signed, capital is raised, and you’re there on the goal line. And then all of a sudden the Lord comes down the pipeline with this $50 million church that is an opportunity to be acquired for 5 million. You sacrifice the capital, the Isaac on the altar moment for Open doors. This project you are so excited about for the acquisition of this church leads to what sounds like a pretty dark season or just a lot of contemplation of like, God, how would you use me? And then all of a sudden this Rick comes to fruition in a way which was the ultimate end game. You started open doors with in a way that you could never have kind of fathomed. And so I just I love that it’s God not moving in a linear fashion and so deeply edifying. And there’s 30 podcasts inside of just this one podcast that we could pull on each individual strand. But maybe Nick closes down with this of just like generally you’ve given so many just kind of incredible tidbits of wisdom in here, like what it was like kind of that last piece of advice you might leave the audience with as it relates to real estate or just engaging with the space, what have you. And we’ll close there.

Nick Bonner Yeah. So and there’s so much I want to say on this front. So I’d like to speak to two different audiences here in your podcast. So first, to those who haven’t yet done any impact investments, I’d say, you know, there’s this great Leonardo Da Vinci Code who says, I’ve been impressed by the urgency of doing knowing is not enough. We must apply. Being willing is not enough. We must do right. So if you haven’t done impact investment like start now, it doesn’t matter how much money you have, like you start now. Don’t wait until your victory lap. Our time is now. How are you stewarding the other 90% of the capital that God’s entrusted with you? And if you don’t have time to go investigate, 400 different operators go investigate and five funds make them do the due diligence and I’ll give you a freebie. Like there’s a bunch of people that are on this podcast. Chuck Weldon was just on this podcast. He’s fantastic. Invest in him. We’re going to. Launch capital. Their outstanding guys are great. Yeah, we’re talking about really solid people. And so those who are active, I’d encourage them to consider the Greg learn a hand to buy to. I mean, try some concessionary investments and see what God does and go pray about that. There’s this Viktor Frankl quote that says Success like happiness cannot be pursued. It must ensue, and it only does so at the unintended side effect of one’s personal dedication to a cause greater than oneself or as a byproduct of one’s surrender to a person other than oneself. And so my final thought on this is if your identity isn’t being an investor, you will likely do a poor job of furthering that gospel through investment. Dump your identity as an investor or receive your inheritance as a child of God. Bring him your loaves and fish and watch him walk away.

Richard Cunningham Come on. Nick Bonner. Thank you. How awesome to hear your story, man. Thank you for what you’re doing for this broader, redemptive investing space, specifically within the asset class of real estate. I’m excited to follow your journey. Friends in the FDI ecosystem, I would say keep your eyes open on LinkedIn, social media, everywhere. You’re going to see Nick around and this is going to be something that we’re going to follow along closely. So friends, Happy Advent, we’ll catch you for one last FTI podcast after this one to close out 2024. But otherwise, we’ll catch you next time. Thanks so much.

Speaker 2 We are grateful for the opportunity to serve this community and see your listeners come in for more than 100 countries. Faith Driven Investor It can be a lonely journey, but it doesn’t have to be. The best way to stay connected is to join a groups 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 Faith driven investing.org. This podcast wouldn’t be possible without the help of many of our friends. Executive Producer Justin Foreman. Intro mixed and arranged by Summer Drags Audio and Editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb.