Episode 159 - Marks on the Markets - Thematic Investing with David Erickson
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John and Luke are joined by David Erickson, the Chief Investment Officer of Ascension Investment Management for this month’s edition of Marks on the Markets.
Ascension Investment Management helps their clients reach socially responsible investment goals without sacrificing returns. They do this by delivering high-quality comprehensive investment solutions that enable clients to better carry out their mission by allowing them to focus on the big picture
In this episode, David unpacks their approach in more detail, gives an overview of what he’s seeing in the market, and helps us understand the value of thematic investing.
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All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies and securities discussed. This podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization.
Episode Transcript
Transcription is done by an AI software. While technology is an incredible tool to automate this process, there will be misspellings and typos that might accompany it. Please keep that in mind as you work through it.
John Coleman: Welcome back to the Faith Driven Investor podcast. This is John Coleman, your host, and I am joined today by co-host Luke Roush. Luke, how are you doing this morning?
Luke Roush: It's a great day to be live, John. Good to be with Dave here.
John Coleman: That's an endorsement. That's an endorsement. Well, today we have a very special episode of Mark's on the Market. We have Dave Erickson with us. Dave is the CIO of Ascension Investment Management, which manages more than $40 billion in assets dominantly for Catholic clients and institutions. And so they've been doing great work for a long period of time. Dave's held that role since 2009. I believe he had more than 30 year career in investment management, including the University of Wisconsin, Strong Capital, PNC Bank, Chemical Bank and other institutions. And we are very fortunate to have Dave today talking to us about themes he's seeing in the market and the way in which Ascension conducts thematic investing. So Dave, thank you for being here with us today.
Dave Erickson: Thank you for having me.
John Coleman: Well, listen, the first thing we like to do here, given that this is a mark's on the market, where we're just hearing perspectives on the current market environment is to get your kind of broad overview of where you think things stand today. It's been choppy for the last 18 months Here. We're recording in September of 2023. What's your outlook for the remainder of the year for these choppy markets?
Dave Erickson: Well, again, thanks for having me. That's the question of the hour is which landing do we have? Is it a soft landing? Is it a hard landing? Is it a no landing? And what's been interesting over the last few months, it feels like there have been months. They've had each theme and it's switched to another. It seems like, well, we're definitely no landing. Its place is coming down. We seem to be going a soft landing. So that's what we're debating right now. I was recently at a conference where there is a panel of economists and they all were relatively in the same ballpark of kind of feeling pretty good about a soft landing. And it makes me nervous whenever I hear a consensus and people are agreeing, I feel like, well, there must be something we're missing and something is wrong. You know, if I think of the history of how we've gone through Fed cycles and economic cycles, you know, normally if we hit a inflationary period, the Fed raises rates. It usually there's a lag before those rates take effect. And if rates go too far, sort of slows the economy, too much unemployment rises. And some of that had it made a good point to me once that said, you know, unemployment has never gone up 1% or at least rarely have gone up 1% and stopped, which is what the Fed is trying to engineer right now. They want inflation to come down and inflation goes up a little bit. You know, we can handle that, but maybe we go from three and a half to four and a half, or if it stays there, there is your soft landing. I'm just skeptical that we can reach that so perfectly. You know, I think the lag of what the Fed increases and interest rates has had in the economy is not fully been felt. And I feel like we're feeling it now. We're seeing credit card delinquencies increase. We're seeing layoffs, you know, gradually, you know, all of the growth metrics and consumer outlooks, you know, all those are just kind of getting a little bit worse. And that's what it would look like if it became a hard landing, is you would see inflation drop, which is great. But then you'd also see growth in economic numbers also decline. You know, will it sort of glide into a really nice ending so that we hit a soft landing? And I think that question is still open for debate. You know, they've raised it very, very quickly. The economy, our economy, the global economy has been built on 0% interest rates for a very, very long time. And what happens when you refinance, you know, at five, six, seven or higher? I think those things are all in front of us. I have lots of thoughts about that. And can in all of that is that we're trying to figure this out on the backs of a pandemic that we've never experienced before. So when someone says you should never say it's different this time, I think, well, maybe it is different this time, because I don't know if we've ever had a pandemic in an economy like this. So maybe we were fine. The pandemic came. There's a lot of moving back and forth to get to equilibrium, but we will get there because we're just trying to get through something we've never experienced before. So I guess I think forward I'm hopeful for a soft landing that at least if it's a recession, it's mild. But I think there's a real risk that we sort of dip into more recessionary period then sort of hit it just right.
Luke Roush: To do a follow up on that is, you know, when you think about kind of a return to normal and what that looks like, do you think of it as kind of a return to historical norms, then we probably keep rates where they are? Or do you see us actually going back to where we were in 2017, 1819?
Dave Erickson: Yeah, I think it's hard to imagine we go back to zero or, you know, one or 2% in short term rates. So, you know, but, you know, it has been in my career that I've seen, you know, short term rates at five, 6%. So, you know, we've been here before and I don't remember us feeling that, you know, the world was falling apart or rates were too high. But we feel that now because we're so used to zero, you know, our long term being two or 3% now our mortgage being sub 3%, you know that it's seven. You know, our hair is on fire. There was a time when that was true. So what is normal? You know, those are just such good questions are the answer to, you know, I would be able to trade the next five, ten years and just do it. Great. You know, I think there were deflationary forces that we've been building upon for years with China exporting deflation for a long time. I think that is generally over or, you know, we have to have severe change to see that come back into play so that maybe, you know, what was normally, 2, as a short term rate, you know, maybe that adds another percent or two on top of that deep globalization. At the same time, the rate of technology change is so incredibly fast, it's something that we're super interested in. So, you know, normal to me feels like, you know, short rates on two or three long rates, you know, five ish or something, you know, could that be lower than we are now? But not back to the crisis days of 0%? You know, I think that would feel real good to me. A positive yield curve rates. People can earn money on their cash to some degree, but maybe not as high as we are now.
John Coleman: Well, Dave, one of the things I want to dig into with you deeply is this idea of thematic investing. So I had a chance to attend your investment conference just a couple of months ago. And what I found fascinating about Ascension Investment management's approach to this and your approach to this was how thoughtful you were about formulating themes around which you are investing. And so what I wanted to do now was maybe get an overview just of how you guys think about thematic investing and what your themes are for the year, and then maybe start to spend some time walking through those as well. And so if you don't mind, just for our listeners, lay out what is thematic investing look like at Ascension Investment Management and what are your themes for 2023?
Dave Erickson: Great question. So buckle up for this one because this is something I am very interested in talking about. But for context, as you mentioned, I have been in investing for a long time and you know, back in, you know, the nineties and the 2000, 2010, it seemed that if you were an institutional investor, a CIO, one of the themes that you really focused on was diversification, almost to the point that diversification was the goal. You know, you almost like if you had a new manager with return stream that was uncorrelated at it because you know, you can either lever that up or you know, you can add that to the portfolio and get a higher risk adjusted returns. So if you found another risk adjusted return manager, add that one. So diversification became the goal. Hedge funds really met this test because they were doing lots of different and interesting things. And so I really built portfolios and a lot of my career on that training is that it was diversification, diversification by asset class, by geography, by, you know, types of investment equity to debt. And as time went on, I thought, you know, we're going through such technological change and disruption across all different areas health care, entertainment, just the technology just goes on and on that it seemed like we were spending a lot of time in diversifying asset classes that were capturing some of these themes, but also were capturing old themes because we just this is how we did it. And one thing that was a challenge for a CIO, I think for any investor that has to work with clients and explain their process is that if you ever want to make a change, it's hard to change a process that you've defended in the past that you've done because it feels like you're saying, You know what? I used to say it like this. Now I want to do it like this. And no one really likes, you know, changing processes at all. Feels like maybe something's wrong. But one thing that was a blessing in disguise, I shouldn't say because I know the pandemic was so terrible for people, but in a way, there was a consequence for us is that it almost drew a line in the sand for us to say, Hey, wait, we should be doing things different. The world has changed at the pandemic and maybe we should approach investing differently. And we saw that one of our health care clients you mentioned, we're Ascension Investment management. We're a subsidiary of Ascension, the health care system. And so we got to see a lot of disruption happen in the pandemic through the health care system. And one of it was telehealth that we were interested in having telehealth be released to our patients. And almost overnight, you know, March to April, the numbers went through the roof and we saw quickly that the disruption pace that we might have been before, whatever that arc was, is now been accelerated to a significant degree. And I felt that was true across the board and I felt this might be now a good time for us to change our approach and think about investing portfolios differently. And if someone says, Why are you changing? I had something. Well, the pandemic has changed things. So what we did at that point was we changed our team to be from asset class specialists who used to have an equity director, hedge fund person, real assets, you know, private equity. And what I found over time, what had happened the past, that if you were, say, a hedge fund manager, you were looking for the best hedge funds. If you were a real asset person, you were looking for real estate and you'd pound the table for a real estate almost all the time. And I wanted someone to think more. What are the themes that are important? And we can figure out the structure, the type of fund, the type of manager, but let's find a theme. Let's get that went behind our back first, because I feel like this change is coming. So we changed our folks to be generalists as opposed to specialists in asset class. And we've set up our process to say, go out and talk to as many people as you can and look for disruptive themes that we want to capture and at the flipside, you know, find disrupted areas that we want to avoid. And that caused us to, as I said, changed our staffing, it changed our asset allocation. We just basically said we're no longer interested in certain asset classes like it [....] went down, certainly. But what we focused on is disruptive themes and themes that we want to capture. And if we get that right and are truly long term investors, I feel like we're going to capture this correctly.
John Coleman: And before you get into the theme, because I actually think that's one of the most interesting parts of this is what you've selected. And I've seen a preview of that at your conference. Just quickly comment. So how much does that actually shape the portfolio? And this is a question I had. So if you have these kind of $40 billion in assets, 40 billion plus, I would assume you still have some exposures that you're seeking by asset class. You want some fixed income exposure, some public equities exposure, and then these themes are driving kind of a layering of that. But just talk, if you would, about how much of the portfolio is actually shaped by the themes versus more conventional exposures that you have, because I think this will be a new concept for a lot of people.
Dave Erickson: Yeah, I mean, we still have asset classes, We have to build a portfolio, we have to have benchmarks, you know, so we can at the end of the day, compare it to something. So if I were to think of in broad asset classes, we have public equities, we have private equities and private asset classes, we have cash and fixed income, and then we have some inflation assets that are more like insurance policies. We only use commodities and tips as an assurance policy for inflation, But don't get into much more specifics than that. So the themes that we captured the best is in public and private equity. I mean, that's really where we can look for long term thematic approaches and all the areas that I mentioned that we want to be owners of these companies and these ideas. You know, certainly you can pick it up in venture capital, for example, but it doesn't necessarily have to be. But also in lending, you know, when we look at lending as a good example, you could have lots of diversified lending approaches, but we want to even be thematic there like, do we want to lend to, you know, energy or. Fossil fuel versus maybe data centers or cell phone towers. You know, we would be much more, you know, into the data side. We think that's got the wind to our back as opposed to maybe a very well defined strategy. But it's in an industry that we think is being disrupted. So, you know, we only have limited capital. We don't have to do everything. We're just going to choose the areas that we think have those themes.
John Coleman: Well, and if you would, now maybe you lay out at a high level what your themes are currently. And then Luke and I might just try and dig into those a bit more as you do that, just to understand where those came from and what you're expecting in those different areas.
Dave Erickson: Yeah, so my team is the experts on these themes. I seemed to learn from them. We have these Monday get togethers called Lunch and Learns. That was another process that we had because we said, Hey, as generalists, you're going to be out learning all these things and bring it back as a presentation to the group. And so I'm constantly learning about solar, you know, coming from space or deep sea mining for resources, like we have all these different things. But I had said one time, I don't think I can do this and get away with this, but if I could build a portfolio from scratch, put it into a safe and not open it up for ten years, you know, I think there are three themes I'm really excited about. And what I would do is build a portfolio of these three themes from an equity perspective, say, private public, and then have some cash because I need to have cash and spending, maybe some fixed income for downside protection, like that's my portfolio. If I could do that, those growth themes come down to three that I'm really excited is technology generally. But artificial intelligence. I would say specifically it is the kind of revolution that we're seeing in health care and the transition to clean energy. I think those are three amazing themes that is coming now. Picking the winners and losers. Exactly is the trick. You know, it's not every company that does is in these areas are going to be the next Amazon or what have you. But I think those are themes that if you just even were really good at those, you're going to do really, really well. I'm sure there are many others. We feel like, you know, robotics, entertainment and VR space, there's all kinds of things I think, that are just super interesting. But those three that I mentioned are the three key themes that we're thinking about a lot.
Luke Roush: One of the things that stuck out to me, Dave, when you're just providing the background, is this idea that you're focused on kind of a ten year period, not a one year period or a three year period or a five year period. So kind of anchoring into those more time, less things rather than timely things. I think it's important for your team. I'm curious kind of within AI health care and just kind of the revolution and change that's occurring there as well as the clean energy industry, Are you actually taking kind of long positions on the disruptors and short positions on those that will be disrupted? Or are you more just trying to pick winners in that disruptor category?
Dave Erickson: Yeah, I think we are more picking winners and using that in our private equity space. Private credit, private real asset, you know, those that are structured to be long term, it's not trading on a daily basis, you know, can take long term approaches to it, don't have shareholders to answer to. So a lot of those themes can be, I think, best captured in the private equity space. But, you know, at the same time, many of these things are going to be picked up in public companies. You know, they have the money, the research, the, you know, Google and Apple. And so, you know, just owning those, I think, will pick up as well. But we don't necessarily short the ideas as much as just avoiding the asset classes. So just for example, and, you know, if there are listeners out there there in these asset classes, you know, forgive me, I'm sure it's and in the near term it could be very profitable. But, you know, like in high yield bonds, for example, that was a separate asset class for us with its own benchmark. And my thought process there, you know, these are generally companies that are over leverage but have high leverage, you know, have a lot of exposure and energy in different places. And so they're rather than, say, short, you know, different industries, we just step aside, you know, and stay away from areas that are kind of not in these themes. And so if we can pick that right, I think shorting is just too difficult. And in the near term, we do have to live in the near term. So none of my clients that I work with is willing to sell you on a ten year basis. You know, I have to meet with them quarterly. And so if I, for example, think fossil fuels is a disrupted industry and then the Ukraine war happens, they lead, you know, the sectors in the S&P, you know, my performance can be really, really difficult. So we're not so much shorting. It's just we are under weighting those asset classes and trying to capture the long term in the privates.
John Coleman: Given the nature of Ascension investment management, you'd mentioned this going in. I'm actually fascinated by this disruption health care topic, Dave, because you guys are so close to this and I know we've seen this for a while heading into the pandemic. For example, one of the funds that I was leading had fortunately selected a couple of telehealth and e-health services. So like what was called Roman health at the time, now called ROE, there is a series of kind of mail order health. et cetera. And even at sovereigns, we've taken some bets on that space. But given that you have such an interesting perspective on this, both in the markets as well as part of this big health care company. When you say disruptions in health care, what does that look like right now? What themes do you think are playing out within that space?
Dave Erickson: Well, you know, certainly the health care industry is being disrupted by, you know, as much of the telehealth, but even, you know, urgent care centers that you see, you know, as opposed to going to hospitals necessarily. You know, how we staff logistics. I see that there are some robots being used in different places. So, you know, within that, like the ascension of related, I just think that the interaction with data and I don't really know how artificial intelligence is going to be used necessarily within, say, health care system. But the things that I'm interested in more is more the longer term themes that I think will eventually affect all health care systems, you know, personalized medicines. It is using artificial intelligence to scan lab reports or data. It could be, you know, could we assist our nursing through some more efficiencies? I don't know if robot nurses are a thing. I know that they exist and can do some functions. Certainly don't know if they can replace, you know, the personalized care that you have. But, you know, there as I go through conferences, the challenge we have in health care is that, you know, we have some really interesting solutions. It's very expensive. We've got to bring those costs down. So that's affordable for everyone. It is just, I think, just an area that's just ripe for ideas. And, you know, the specifics, it's hard to get into to all of them. But, you know, those are just, I think, areas that are really interesting. And yeah, I think those are there's I think that we'll be pursuing.
John Coleman: And we recently had a guy named Finny Kuruvilla from Eventide on one of these marks in the markets episode, and he is a biotech and health care investor generally. And what I'm constantly reminded of myself Dave, because I agree with all the themes you outlined, he was great about pointing out just the increasing advances in biotechnology and understanding the human body, which is actually a hopeful theme right now. You know, a lot of what we see in the world is maybe heading the wrong direction, but some of the breakthroughs that we're seeing in things like understanding neurological systems, understanding the way in which biotechnology can treat common causes of death like heart attacks or cancer, etc.. I just think it's an incredibly interesting space, particularly on the venture and growth equity side, where you're able to take advantage of some of the innovations that are happening in that industry as scientific progress continues to march forward.
Dave Erickson: Right, yeah. And you know, you see what was done with the pandemic, how we were able to come up with the vaccine that the new technology so quickly. I think I was really struck. I attended the Milken Institute conference, California, and that's a very thematic conference. They're going through all kinds of things like education, health care, and just sort of panel after panel on the health care side. It just was so interesting of just the research that they're doing, the solutions that they're tackling. It's amazing. I think right now we're trying to tackle it more from going to a very specific type of solution because we don't really know where it's all going. I'm sure it is a long road, but I think it's an area that's that's going to have some amazing solutions. And so we'll continue to pursue that space.
Luke Roush: Yeah, Dave that resonates with me. Just in terms of specificity on the problem that you're trying to solve as you think about disruptive change in health care, I personally, you know, totally agree with the idea that specificity matters in terms of what you're trying to get after. I want to switch over from health care to artificial intelligence, just because that seems like it's kind of the phrase of the year for 2023. Love to get kind of your views on how you're leaning into that as a trend. And maybe in a similar vein, is health care. Are there specific niches where you really feel like there's promise to be an early mover as an investor?
Dave Erickson: Yeah, I suppose there's two types of people. When Chat GPT drop, I think there are some that just dove in and couldn't stop talking about it. That's me. And then there are others who roll their eyes about it, and that's my my kids at least are my or my wife and they're tired of hearing about it. I just think that the artificial intelligence in ChatGPT, for example, is so interesting because it just almost was a fully formed technology that had been worked on for years, but sort of fell into my lap almost overnight. And I've seen people compare the technology of AI to the Internet, you know, is, you know, you got to make sure you're not investing in Netscape, you know, so you got to make sure you do Amazon. So take it slow, take it slow, take it slow. And I think that's true. I don't know if the winners today will be the ones that we're talking about five years from now. But when I think about the Internet, for me it was a slow process that I learned, you know, I had to get the technology to get installed. When it worked on my computer, it was very slow. So maybe I could do an email or upload something, but it would take forever. ChatGPT almost worked instantly for me and changed the world almost overnight. And it was free and it was easily accessible. Very quickly was an app on my phone. And so I feel like it's almost like a different kind of technology. I think it's more like maybe electricity in a way, is that, you know, before it was dark and now it's like it wasn't a gradual thing. And and the infrastructure is pretty easy if you have the Internet, you had chat the next day. So I think we're still grappling with exactly all of the uses for it. I'm not one of those that feel it's going to destroy us all or, you know, we're all going to lose our jobs. But it's an amazing tool that you can use right now. You know, I think for us and we're as a team doing a team project where we're talking to all of our partners and using it ourselves and then coming back to say, what are some applications today that we can use to make ourselves more efficient? And what, where do we think it's going? And just the things that I just quickly say, you know, things today is that it helps me summarize and it helps me produce, helps me write like a lot of ways if I need to respond to someone and it takes me a half hour or so to put something out, I can probably get some a few thoughts down, have Chat write something for me, I can edit it. And that process now is 10 minutes as opposed to 30 minutes. So in terms of making me more efficient today, it's fantastic. We don't use it for helping us answer investment questions yet. You know, for us too, I don't know if I trust the data at least. And actually I used it to come up with a trivia night for my family reunion. And one of the questions said that the sinking of the Titanic was in 1963, which I was like, Yeah, that's not right. I have to be careful with the hallucinations for it. But I think the future, it just, it, it should just continually get better. And one of the things that I'm interested in, I would love to be able to take all of our data and put it into an AI sort of learning language model that can just be self-contained with our data, all of our notes, all of our research, all of our manager letters so that we can have a conversation with that data that I could say, you know, what's our exposure in China, for example? And it can tell me, I don't want to going out to the university, I'd like to build a self contained that I certainly am looking forward to. You know, Microsoft and Google applications that will be built in that I maybe I can speak a presentation into existence. You know, those are all things I think we are just about there and similar to our phones and maybe the iPhone is a good example. When we got the iPhone, it sort of changed things, but it eventually got better and better with apps is that we will continue to find, Hey, I use it for this way and someone else will say, That's a great idea, I'll use it, and it'll just sort of multiply on itself. So I think we are just at the beginning stages of how we are going to be working differently with artificial intelligence. I think it's more of a it's a tool at this point than a replacement. I think it probably will replace in some ways, just like all technology does. But, you know, this is something that we have a high interest in. We want to understand it. It was spending just a lot of time in it. One thing and the last thing I would just add that I think is interesting is that most of the AI applications I think we'll find in existing things we already have. So like Microsoft Office, there's going to be an AI component to that. So is there a new company to invest in or does that just make Microsoft better? You know, so is I just going to be because you need the data, you need the computing power? You know, will there be a slew of new companies? Will Netscape and AOL be replaced by Google and Amazon, or is that just going to make the existing even better? Because it's hard to have all the tools you need to make the effect of We'll see about that. We're trying to play either side of that and hoping finding more winners and losers on this.
Luke Roush: And that's one of the things I think you're going to have a real interesting front row seat to, given your themes you described, is the intersection of AI and health care and the use case that you describe in your own firm is also what a lot of health care foundations are looking for, which is kind of privatized data lakes or ponds where you can control what's in there. You can control confidentiality of patient data, but still use that technology to be able to draw conclusions on treatment regimens, etc.. So have you seen any of that kind of intersectionality between those two themes today?
Dave Erickson: I'm sure that's happening. If I had others on my team that are hitting the road and doing that, I would see that more. You know, I know there is a big we want to be very careful, you know, that data has to be ringfenced, you know, so that is not public domain or I don't know of any example where that's being used within health care necessarily. But, you know, I hear of the situations of, you know, a doctor analyzing x rays versus the AI and that effectiveness and where does that go. So I'm probably not the best person to answer all of those specifics within health care, but it just has to believe that it's coming that why wouldn't you use this technology to help you make. Better decisions alongside your own, I think is going to make things a lot more effective.
John Coleman: I want to back up a little bit and add one more layer to this, because you obviously, given the nature of this podcast in your work, have one more layer to your investments, which is the values of the people that you represent. Ascension Health is a Catholic institution. You represent a number of Catholic institutions with various values. I know the Catholic Church has been quite thoughtful about owning some of those, and then some of the groups you work with will have an even different set of priorities, I think, or a way in which they approach those priorities. As you approach your investment on behalf of those individuals, how do you think about incorporating Catholic values into your investing and what can that look like along the spectrum?
Dave Erickson: Okay. Yeah, it's interesting. Ascension Investment Management, our parent Ascension, you know, is a very Catholic institution. I mean, it is we think of what we do as a ministry. You know, number one, we talk about our hospital systems as health ministries. We pray before most of our meetings. So we get together and think about it in terms of forwarding Jesus healing ministry. So I was so fortunate. It wasn't necessarily my plan to have work so incorporate with my faith. But I've been blessed to work for Ascension and just some amazing people here, the way they approach their faith with this, which it was very evident to me early on, is that they did not want to invest in anything that violated their values. And so it was immediately very clear that we have a very sophisticated social responsible investment guidelines. I would say in terms of the Catholic space, I would put up our guidelines in terms of its sophistication and how we really try to refine it to work with managers and line up with anyone else's. So that's number one, is just making sure that whatever we do is that we are not violating our values. We're trying to for the Catholic Church values and yet invest in the exact opposite. That would just be working against ourselves. But the second has been is how do we then be proactive in, you know, having our values be known and accomplished through the world. And we have different ways of doing that. Certainly within our companies, we are providing health care at discounted rates or for free. I mean, that's what our non-for-profit health care system does. But we also have spent many, many dollars on impact investing, which I'm sure you've covered and lots of other podcasts. We've been doing impact investing since 2014. In 2014, we raised about $50 million in a fund of funds, all private funds either in environmental stewardship or in solutions that help the poor and vulnerable. And that could be in education, housing, food, financial inclusion. We've done lots of things. I know you've talked to Patrick Fisher. We've been a good partner with Patrick at Creation for a long time, so I've been so blessed with is that when we've asked to do new things and new ideas that would be proactively forwarding the values of the Catholic Church, they have been very willing to support us. And so it really feels that my faith has been intertwined with my work, and I feel very blessed about that.
John Coleman: Yeah, And just one quick follow up question on that. I will say, having been at your conference, I was privileged to meet some of the folks who invest with you all, and it's often priests or nuns or others who have dedicated their life in service in such a deep and authentic way. Right? I mean, they really everything to their faith. One of the interesting components of your work, I think, is that and I think you don't mind me saying this, you're a Protestant Christian work [......] institution. And so maybe just comment. You know, often we see those worlds a bit divided, honestly in the impact space or in the investing space. Talk about how that works for you all and just the way in which you see your personal faith, if you don't mind intersecting with that work and with these Catholic institutions.
Dave Erickson: Yeah, it's really interesting. You know, I went to Wheaton College and so, yeah, I went I grew up in an evangelical church and and actually with my background, I had not spent much time with nuns or priests or really in Catholic faith. I had friends, but I had never really had attended services or may have been to a wedding or two. So there's a lot of education for me to sort of understand. But it was very clear to me when I saw, like in the [.....] guidelines of the things they wanted to restrict. I thought that just completely aligns with the values that I grew up with, whether it's Protestant, Wheaton College or not. So what I've really been challenged by is I feel like in my church upbringing, it feels like the emphasis has been on grace. You know, it's, you know, we're forgiven. There's no works I can do to receive the grace I received from Jesus. And so I think sometimes that can focus me more on sort of de-emphasizing works. I always like its grace alone. And so with Ascension, so the emphasis like, no, you know, we also want to do works, you know, and to see the sisters that I work with have dedicated their lives to, you know, works for the church, for the poor and suffering that has really challenged me. That just they shouldn't be just sitting here and having devotions, you know, I should be out in the world and doing things as well. So they have really challenged me, you know, to get off my seat, to do more. And in terms of, you know, conflicts, I don't feel like there is anything other than that challenge that, you know, we need to be caring for the poor, the widows, the orphans. And I think that's affected my faith in going forward in my other church life.
Luke Roush: Yeah, that's great. Great insight and great commentary. Switching gears just slightly into the work Dave that you guys do, allocating to other fund managers, what do you look for in those partners? How do you think about the relationship over time? Love to hear your comments on that.
Dave Erickson: Yeah, that's a really interesting question. It varies by type. You know, I like to say we pick managers that share our values, you know, through and through. And it's hard to always know picking through investment partners, they are experts at telling their story to us. And so I think one of the things I've learned more and more is that. One of the worst things I can do is to ask about, say, should I invest in China or not, is to talk to a China long only manager. Because you know what? They're experts in having me invest in their fund. They're going to tell me it is a great time. Invest in China or real estate or wherever that might be. So I think we do want to have very good relationships with managers. We do want to feel that they are partners with us. We need them to understand how we invest with our values. So if they are pushing against us, that's not going to work. And so we quickly move away from that. I think that we where all this on our sleeve aggressively. So I think if Ascension coming in, they know this is what's coming. We're going to be coming with an SRI guidelines and lots of values on our sleeve. You know, we just we need them to show a definable edge that they can provide, that they are invested in areas that are in those thematic things. And if it's something we just want beta, we just want exposure, then, you know, a lot of times we have lean toward more, say, quantitative managers that we can get lower expense basis, that we can really define exactly what we're getting. But it all depends, you know, tenure relationships with private managers. You know, there is character building there that we need to find. It's just very difficult to do even if you can visit them every day for, you know, every month for a year. And you are you really getting to know them? You do the best that you can. You want to pick ethical partners. You do a lot of reference calls, you do everything you can. But that is challenging. You know, these are people at the end of the day and trying to judge them is a challenging job. I think we've done a pretty good job. If I look through our managers now, I think we have people that have proven to be good partners. And when we go back to them, you know, with other products that they might be using because we've built trust over time.
John Coleman: Yeah. And I think people lose that sometimes who aren't deep, especially in the private markets, is it's as much about the people that you're investing with and their alignment and their process and those sorts of things as anything, you know, given this is the Faith Driven Investor podcast, we do like to end every interview with a relatively unique question for an investing podcast, which is just is there anything you're learning in Scripture right now that you wanted to share with others? I know you've got a deep faith. Life, as you've already articulated, would love to hear anything on your mind right now that's prominent in your study of Scripture that you think others might like to hear about?
Dave Erickson: Yeah, I think the one thing I was driving at, I listen to a podcast, you know, often if I have time, I listen to Tim Keller's sermons, which I just I know a lot of people do, and I'm sure there are others that are up and comers. But man, I just love coming back to Tim Keller and I listen to one on sort of Jacob wrestling with God and well, the one the point that he made about that was that as Jacob was struggling with his birthright and with his family and he was ready to sort of have this wrestling match with his family as he was going through that, then all of a sudden God showed up and wrestled with him instead. And I thought the point of it, without going into all kinds of detail, is that a lot of times when we're struggling with something, we think we're wrestling with work, we're wrestling with the person at work. It could be a spouse, it could be. And, you know, we're preparing ourselves to wrestle with these people. And a lot of times it's not that who are wrestling with. We're wrestling with God. We're wrestling. There's something in our lives that we're struggling with. That's where we're really trying to work out. And if we sort of think about that and work that out with him directly, then that will take care of other things. And so I have been spending some time, you know, as work is challenging, my kids are grown and they still provide challenges and things like that. But I find a lot of times, you know, the wrestling that I'm doing that I think, oh, why is life unfair? It's something within me that I'm wrestling with God. And if I get that right, some of these other things hopefully correct itself. So those are conversations I've been having with friends and pastors recently. When I know you asked this question, that was the immediate thing that came to my mind.
John Coleman: Well, Dave, we are very grateful for this conversation. And, you know, at Sovereigns, we often say capital has influence. Right. And that bears a responsibility for us because those of us who steward capital are responsible for making sure that's a positive influence on the world. And I think it's an encouragement to us and to all of our listeners that someone of your deep conviction, your deep values, is working on behalf of these really authentic Catholic organizations to try and steward their capital well and to create a better world as a result of that capital. So we're really grateful for you for the work that you do, and we're also grateful to you for joining the podcast today. Thanks so much. Dave Erickson from Ascension Investment Management.
Dave Erickson: Thank you so much for having me.