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

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

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

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

Andrew Abela: Thank you

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Richard Cunningham: Well welcome everybody and hello. And it’s episode 171 of the Faith Driven Investor podcast. We are grateful you’re here. My name is Richard Cunningham. You find this recording this at the end of April 2024. John Coleman, as always, one of our mainstays is here in the studio with us from Atlanta, Georgia. And John, we’ve got a great one today is it’s a marks on the markets episode. And one of our guests is someone we admire greatly. A Denver, Colorado native, Matt Monson. Someone you get to work pretty closely with. Matt, we are so overjoyed to have you in the podcast studio.

Matt Monson: Yeah, thanks for having me.

John Coleman: Oh, man, it’s so great. We haven’t had Matt on since 2022, I think was what we said. And look, I just have a ton of respect for this guy. I’ve gotten to work for him, with him for the last three years and just towering intellect in the public equity markets in particular, Matt, and always well prepared. So I can’t wait to hear your thoughts on what’s happening right now.

Richard Cunningham: Oh man, I’m equally excited. Let’s see that intellect on full display today here on this marks on the markets episode. And so without further ado gents, let’s dive in. Equity markets have just made a monumental run. We saw last week a pretty tough week in terms of drawbacks for the equity markets, specifically The Magnificent Seven. But Matt, maybe how did we end up here? How has there been such a soft landing? Is there still upside in these markets. And just kind of orient our listeners as to where we are currently?

Matt Monson: Yeah, that’s a good question. You know, I would say the greatest opportunity for sure is in small and mid-caps and then some select large caps. So remember that seven stocks are driving a lot of the move in the stock market today. So the other 793 stocks in the S&P 500 are not actually all that expensive. So many people know that when they buy the S&P 500, that 34% of their dollars are actually just going into ten companies. Many of those companies were up 50 to 200% last year in 2023. And they’re up significantly again in 2024. So this type of concentration is in these top ten companies is actually the same across many different large cap indexes. So one of my thoughts is just that, you know the labor market here has been surprisingly strong, especially after these monumental rate hikes have taken place. I mean, this was the third largest set of rate hikes in the last ten tightening cycles ever since the 50s. And it could have broken the economy, but it didn’t. And one of my thoughts just share on why that might be is you see it in the surveys. The Small Business Survey for NFIB shows that 40% of small businesses weren’t able to fill the seats that they had open. So even if that tightening reduced demand and someone lost a job along the way, there were so many unfilled jobs just waiting for them that we didn’t end up seeing it result in unemployment rates ticking up.

John Coleman: Hey Matt, I want to dig into this soft landing topic. But before we do, can we pause on this magnificent seven kind of top ten topic for a moment? Because I’ve been trying to think this through, because it’s been a historic run for the last couple of years with those seven stocks in particular, particularly things like Nvidia, Apple, Amazon, Tesla, it’s obviously pulled back quite a lot of those Magnificent seven. And I’ve been trying to understand, you know, how much of this is momentum, how much of this is a flight to quality in those stocks. Because whatever we’d say about them, you know, they are seven of the most successful companies in the world in terms of growth, in terms of profitability. So it doesn’t look like the.com era where there’s this completely inexplicable rise in certain stocks. I mean, these I get why people want to invest in Alphabet or Meta or Amazon or Apple, because the structural growth in those companies and financial stability, those companies actually has been very positive over the last several years. So help me think through just how to read those Magnificent Seven, because I keep thinking there will be a reversion to the mean, and that small caps will catch up to those large caps. Or frankly, 99% of the market will catch up to that 1% of the market. And yet that 1% continues to kind of outpace. So how do you think about the success of those seven stocks, and how much of that is legitimate and sustainable versus how much of that is kind of momentum driven?

Matt Monson: Yeah, I think if you unpack the business models for the seven, they all end up with one common theme in place. They have a technology based monopoly, and we can walk through each one one by one. But for the most part, the business models are really good and they don’t have a lot of competition. And so when we look at companies that have done. Really well over time. Limited competition was always a key factor. And so I don’t think when we looked at them last in, you know, call it months ago, I don’t think the valuations look incredibly stretched even across the Magnificent Seven. And so you’re seeing a lot of the stock price performance being driven by earnings growth and a combination of earnings growth and valuation expansion. But you know that multiple expansion isn’t the standalone reason for stock price performance on those seven.

John Coleman: Yeah that’s my read is they’re actually fundamentally healthy stocks. They may be overvalued relative to some of the competition. But what I wouldn’t expect from them, given what we’re discussing is a dramatic pullback or it doesn’t feel like the same type of bubble atmosphere that you would have gotten during the.com era, right? So you may see a drawback, but my impression is that’s on the order of kind of a ten, 20, 30% reversion to small caps in mid-caps or other large caps rather than, you know, some sort of dramatic, collapse in those securities.

Matt Monson: Yeah, that’s why I see it. And, you know, there’s another theme there, too, is that AI is driving a lot of the growth that we’re seeing in The Magnificent Seven. And, you know, we all maybe have a different view on what I could be, but if it’s going to be the next penicillin and an airplane and the internet, then you’ve got something much bigger on your hands. It’s, you know, at best in the beginning of the first inning here for AI. And so if that’s the case, it’s going to be market size expansion. I mean, it’s really an arms race, right? Because you have so many different CEOs right now that will get fired if they don’t invest in and explore AI. And I’m not talking about the people who are selling it to the rest of us. I’m talking every business is looking into it, and we don’t even know what the financial ROI is going to be from that yet. But no one’s going to be penalized for overspending. People are only going to be penalized for not diving in headfirst at this point.

John Coleman: You know, in the last craze in technology like this that I remember was blockchain, obviously, because cryptocurrencies were linked to that. And there was this distributed ledger technology that was for use in other things. And there was a period of time, maybe 5 or 6 years ago, where everybody was like putting blockchain in their latest earnings release, and they were getting huge bumps for that. If they talked about it. To me, the AI thing seems a lot more legitimate. You know, we had a pullback in that blockchain craze a few years ago. The difference here is that blockchain really required fundamental shifts in the infrastructure of business. And it was almost like the fax machine. A lot of use cases for it required every single counterparty to get on the same blockchain so that they could operate together. AI is interesting because the computing power is obviously much greater than with something like blockchain, which is one of the bottlenecks right now. But it doesn’t require all the counterparties to operate. And we’re seeing tons of interesting use cases come up for that, whether that’s diagnosis in health care, whether it’s cybersecurity applications where you’ve got artificial intelligence, you know, enabling those, you know, just this host of use cases that are springing out of these large language models. And my biggest question is whether those, you know, can continue on pace and whether we can move past the large language models, indeed, to something more like artificial general intelligence, which is, you know, and people stand in different areas. Obviously, Sam Altman is very optimistic about the continued progress of those. I recently saw a podcast, I think it was with Mark Zuckerberg, who was much more skeptical about the near-term movement into AGI. So I’m with you. I think the AI thing is quite interesting, and figuring out how it fits into the way that companies do business is a big part of how they’re likely to succeed financially moving forward.

Richard Cunningham: Well, you guys can already tell we’re off to a fast start. Matt Monson is on full display, and what a joy it is to kind of listen to you guys riff on this. You know, Matt, let’s back up for a second just to kind of remind everyone. So you are a public equities investor. You run a couple of really neat funds at Sovereign Capital, the Omega Fund and an ETF that maybe you can tell us more about later on. And you’re kind of distinct approach. But as we look at this disconnect between the run up of large cap stocks compared to small cap stocks, you guys have gotten into the AI conversation already. You know, how are you maybe responding to this as you kind of evaluate markets in your role specifically?

Matt Monson: Yeah, that’s a great question. So we actually just ran a bunch of data last week. So I’ve got a fresh off the top of my mind. You know, we’re all cap investors, which means that we are one third large cap, one third mid one third small caps. And so we don’t have a bias towards talking up anything specifically. And we can kind of move between them. But what I’ll bring to the conversation is that large caps right now are trading at a 33% premium to their 18 year pre-COVID forward earnings multiple. And so right now they’re trading at 20.7 times forward earnings. Small caps, however, are trading at a 20% discount to their historical multiple. And they’re only trading at 15 times forward earnings, say small caps, for reference, have typically traded at a small premium to where the large caps have traded. But right now, at a 25% discount, it’s a historically wide discount. And so let me remind folks of a few different things from 2000 to 2016. Small caps were up 410%. Mid-caps were up 370%, both of which significantly outperform large caps, which only rose 112% during that time period from 2000 to 2016. And then the tables turned so 2017 through present. Large caps are up 152% versus small up only 67 and mid up 92. So the recency bias inherent in all of us over the last seven years has shown that large caps have won. So I run into clients all the time who only want to own large caps, and they’re forgetting about that 16 year stretch before that, that small caps and mid-caps absolutely dramatically outperformed large caps. So I just find that to be interesting. And so we love being in the all cap space because we’re able to access all of them, not knowing when and to what degree one cap will turn and will be the leader for the next 16 years.

Richard Cunningham: Wow, that’s some good data. I worked for a premium investor that sought out specifically small cap and value premiums for a number of years prior to move it over to faith driven investor. And it was in the midst of that, you know, kind of unprecedented large cap outperformance and growth, outperformance of small in value. And so it was a tough couple of years for the firm, to say the least. But there is so much reference back to the historical basis for small cap and everything like that. So gentlemen, any closing comments. Kind of as we look at the public equities market and everything, as before, we get into kind of the interest rate conversation and go that way.

John Coleman: Well, I would say my overall comment and perhaps Matt hasn’t been surprised, but he just listed those numbers. You know, 2001 I think was through 2016 and then 2016 to present. And what continues to surprise me is just the incredible momentum and resiliency of US equity markets. I would have expected a dramatic slowdown in the current environment. I would have expected much more fear in the equity markets because of all the instability, inflation, etc. and yet US equities have just proven remarkably resilient in this environment. You know, that’s one of the things I continue to be curious about, because it several times over the last 3 or 4 years, I would have guessed that we were in for a prolonged pull down in markets because of Covid, which came back very quickly because of the fear of recession, because of rising interest rates and inflation. And yet US equities have continued to plow forward. And so I’m cautiously optimistic that they’ll continue to improve because of the fundamentals in the economy. And I know we’re going to get to some of those here in a moment. Matt mentioned those, but it’s been such a curiosity to me that they have been so resilient and we’ve had such a soft landing, despite all the moves of the last couple of years.

Richard Cunningham: Good comments, John. So maybe let’s do this before interest rates. I think this is key to go into as well. Matt, any thoughts on maybe how what you’re seeing play out in the public equities markets, how it’s affecting things in the venture and PE space, and then also kind of that big question of, you know, what is it going to take to open IPO markets back up now that equities kind of have improved stabilized. Yes there’s been the pullbacks. But let’s go venture in PE markets maybe IPO markets. Prior to us commenting on just the interest rate environment and things like inflation.

Matt Monson: Yeah that’s a wonderful question. I would say it depends. You know for some private equity and venture capital shops they own large cap names. And if you own large cap names that are now looking at comps in the marketplace that are trading north of 20 times earnings, you know, now you’re going to see elevated mark to markets in your funds. Fund performance is going to go up. Your opportunity to exit into the public markets, whether to a strategic or in an IPO will be a lot better. Now the other side of that coin is if you are a venture fund or a private equity fund that owns a smaller mid-cap, you’re not seeing those elevated valuation multiples. As I mentioned before, you know, you’ve got small cap forward earnings multiples at 15 times, which isn’t going to create the kind of juicy backdrop that you’re going to see in the large cap markets right now with regards to IPOs. You know, I think there’s a lot of talk right now that, hey, you know, the IPO market slow. What’s going on. You know I was looking at the historical data on it. And actually 200 IPOs a year is a fairly average number. And right now we’re running just below that. So back to the recency bias in 2020. You saw a record number of IPOs in the US for 80. And then in 2021 a record above and beyond that at 1035. There are no other years like that. In the last 20 years the average is really around 200. And so I think we’ve got a pretty healthy IPO market right now.

John Coleman: That is fascinating, Matt. I would not have guessed that that is recency bias. And I guess we all forget. We been in the markets for like 20 years. But it’s so easy to forget the. Prior eras. And Richard, what I would say I’m seeing in the private markets is fundraising is still a little bit slow in private markets, because people are still not getting distributions from their old private equity and venture holdings. I think selling positions has slowed a little bit. I do think the IPO markets, even if they’re more back in an historical average that represents such a slowdown from the prior era, from the prior several years, that you haven’t seen the liquidity mechanisms for some of these venture backed and private equity backed companies at the pace you would have seen them before, which slows down distributions. My perception is that the venture markets have bounced back in terms of valuations quite rapidly. You know, there was a dramatic pullback in venture valuations, which seems to be heating back up again, not at the 2021 levels, but we’re seeing pretty aggressive valuations in the early stage. Venture markets and growth equity markets again whereas private equity has stayed somewhat deliberate. And I think part of that is because of the high interest rates, which we’ll get into, you know, the private equity model, the LBO model is predicated on debt financing for many firms. And I think the inability to access cheap debt has kept valuations in those markets a bit more tame and has made them a little bit slower to inflate. That’s my perception right now. And so the private equity valuation market has come back but a bit more slowly. And I think that will only continue to increase as some of these IPOs do you pick up I mean Matt said we’re slightly below the historical average. You know, you’d like to see some liquidations, either sales in the private markets or IPOs of these private equity backed companies, or if interest rates start to come down, which I think would ignite, you know, the debt markets for IPOs in a pretty significant way.

Richard Cunningham: Right on. Well let’s get right into that. So interest rates what do we think in gentlemen 2024 2025. There’s been you know, maybe some tempering of expectations on what was supposed to be a rate cut heavy year by the fed. Matt, any thoughts on your end?

Matt Monson: Yeah. I mean, if we zoom out for just one moment, inflation has been a little stickier than people expected it to be. You know, running just a little north of 3%, depending on what data you want to look at. And because of that, the expectations for rate cuts have come down. You know, maybe it was going to be a handful earlier and now it’s going to be still there’s expectations for a little bit that may happen in the second half of the year. And as those expectations change it causes interest rate volatility. As there’s interest rate volatility it impacts cyclicals. It impacts financials. It impacts small caps. And so it really ripples through. You know I think a lot of this is just on the heels of the labor market strength that we were talking about earlier. You have so many small businesses that have open racks that they can’t fill and order magnitude. And that’s around 40% right now. And so even with rising rates that have crushed some of the consumer demand, you still aren’t seeing those job losses and an increase in in the unemployment rate the way that you maybe would have expected. And so just a remarkably strong labor market, I think, is really underpinning what we’re seeing in terms of the overall economic strength, which has led to, you know, that persistent inflation around, a little north of 3%.

John Coleman: You know, and to Matt’s point, I think inflation is almost always stickier than people think it will be. Right? I feel like historically, almost every time you think you’ve beaten inflation, it lingers a little bit longer than you think. And I do think there are still inflationary pressures on the economy, particularly the fiscal side of spending. You know, the United States government continues to pump liquidity into the economy, whether that’s student loan debt relief, etc.. The second observation I would make, though, because Matt has mentioned several times the historical ratios and how recency bias is throwing us off. I would say we’re suffering from a lot of recency bias around interest rates and inflation and employment as well. I had the privilege to one of my friends is now the president of the Ronald Reagan Foundation out on the West Coast, and I was touring the Reagan Library with him recently, and I saw some stats where they were trumpeting Ronald Reagan’s presidency, 1981 to 1989. And I’m not getting into the politics of this, but just listen to these stats. They were saying how impressive it was that during Reagan’s eight years, inflation fell from 12.4% to 4.6%, right, which is a little north of where we are today. I think unemployment fell from 7.4% to 5.2%, which is north of where we are today. And Matt, I remember when 5% was basically considered structural unemployment, right? The federal income tax rate, the top taxpayer rate was cut from 50% to 28%. So taxes were much higher. And the mortgage interest rate in the 80s dropped from 15.4% to 10.3%. And so if you actually look at the economic numbers today. The real aberration was the great financial crisis. Until two years ago, it was historic, global, low and negative interest rates, which drove just insane numbers around the economies of the world. And now we’re at a point that’s more like the historical averages with inflation. Unemployment’s sold that low. I think with interest rates, mortgage rates, etc.. And so I wonder if part of this soft landing is just that. Despite our recency bias, the actual real impacts of the economy, of the interest rates that we’re experiencing now are more in line with historical impacts than something really injurious, like the interest rates that were present in 1981, for example.

Richard Cunningham: Man, I don’t know that about Reagan’s presidency. I mean, kind of a fertile soil, if you will, to come down and and a lot of those numbers and metrics John. That’s interesting.

John Coleman: Yeah. I mean, it was wild to me to to see the numbers and see that, you know, even in 89, which I don’t even remember that. Well, mortgage rates being a 10.5%. You know, you think about what would happen today if we announced that mortgage rates were going to go up to ten and a half. I think we’re sitting at about eight right now, and it’s totally frozen. The mortgage markets, because of all these people locked in to kind of two and a half to 3.5% rates, but we’re actually living in a relatively normal interest rate environment right now. And it’s a little inflationary, but it’s not actually as inflationary as a lot of prior periods.

Richard Cunningham: Good historical precedent. Well, something else, gentlemen, that I think we need to just have a really sober awareness of and have our eyes on and, and I’d be curious to hear you guys thoughts on implications as it relates back to the markets as just time of conflict. We’ve seen what’s going on in Ukraine and Russia now for an extended period of time. There’s even, you know, recent updates to the conflict in the Middle East with Iran and Israel. You know, as you guys think about these international conflicts, what type of implications have there been on markets? Do you expect there to be on markets? Is that stuff priced in? Where are we at currently and what what kind of comments do you guys have there?

Matt Monson: That’s a good question. I think, you know, from my perspective right now, the direct implications are limited to the energy markets in terms of our funds. However, if this spirals into a broader conflict in the Middle East, you know, then we’re going to start to see a change in demand. And so one comment that one of my colleagues always uses is that threats to freedom are threats to growth. And we’re not seeing threats to freedom yet on our side, but we’re actively monitoring that.

John Coleman: Yeah. You know, apart from the obvious human cost. And I think we’ve all seen that and been praying for that over the last couple of years, whether that be Ukraine or, in Israel and Gaza. What’s been surprising to me is how markets are basically assuming these will stay contained, regional conflicts. I think we’ve seen brief periods where they assumed there was a possibility of a broader outbreak right at the beginning of the Ukraine invasion by Russia. I think we saw more market movements like this could break out. Right when Iran was sending missiles into Israel, there was a pullback, I think, because there was a fear of a broader war with Iran. But right now, my impression is the markets are assuming that these will stay regional conflicts. And especially with regards to the most recent activity in Israel, I think a part of that has been the surprising partnerships that have arisen during that. You know, I think if Iran had attacked Israel and there had been no regional support, I think the chances of all out war would have been higher. To see the Jordanians giving the Israelis airspace and the Saudis offering Israeli support was pretty surprising in the area. You know, traditionally, Iran has been an enemy of many of the Arab states in the region, and they’ve often viewed Iran as a much greater threat than Israel because it’s larger, it’s been more historically powerful. It’s obviously a different branch of Islam than the dominant Arab powers in the Middle East. But the fact that those Arab powers came to Israel’s support in the midst of the Iran bombardment, apart from the obvious conflict in Gaza, was a surprise. And, you know, I’m an amateur at this, but one of my observations is that might have muted some of the reaction, because even the Iranians probably weren’t expecting that kind of response from their Arab neighbors. And that probably caused them to be a little bit more cautious in the way they continue to react to the conflict. But right now, it seems like markets are just assuming these will stay regional. And like Matt said, unless there’s some indication that this breaks out more broadly or it turns into China invading Taiwan, or something of that nature, which could have real implications on broader U.S. markets. I don’t see this having a great impact if it doesn’t escape regional conflict.

Richard Cunningham: Well, gents, thank you. I know we’ve hit you covered a lot of ground, and we’re going to go in a fun direction here next because I want to kind of get into the Matt, you are such an admired leader and look to leader in the future of an investing space. And. So we’re going to get here into a second. We hear a lot in the news about corporate engagement, proxy voting and things like that. And so I want to go there as you kind of think about that. But before we do that, I want to provide you both just maybe a opportunity to tie a bow on summarize kind of as you look at the economy, markets, all of it, just maybe the Matt Monson John Coleman kind of state of the Union 30 seconds type. Just tie a bow on all of your thoughts as it relates to interest rates conflicts going on. AI disconnect between large caps and small caps, all of it for our listeners.

Matt Monson: Thanks, Richard. You know, one thing we didn’t touch on earlier that we’re watching closely and we think is really interesting, is that on our team, there’s been a lot of work that’s been done to look at the impact of shrinking M2 and the impact that we think that’s going to have on CPI. And so we think a lot of the M2 that’s come out of the system right now, you haven’t seen the full effect of that yet on CPI. And so we think that there’s actually going to be a reduction in inflation going forward based on actions that have already happened, because there’s typically been an 18 month lag. And so we think inflation is still heading in the right direction. You know, given some of my comments earlier around what we see on valuations, we don’t feel that the companies we own are stretched at all on valuation. And that’s just, you know, you’re going to hear that from other active managers as well, because we’re not passively deploying dollars into an index and you get what you get. And then we pick each one of our exposures, and we think there’s plenty of companies that have really good demand drivers for growth, fair or super attractive valuation. And so we’re really constructive on the public equity markets. And then just the greater backdrop of the US economy, we don’t see any big risks right now that we’re scared about, and certainly not the way that we’ve had things to talk about over the last 5 or 10 years.

John Coleman: Matt, how do you think about the upcoming election? That’s one of my instincts, is that markets will be a little bit muted as the US election plays out because of all these other risks in the economy, so it’s hard to see people getting too bullish or bearish absent some sort of shock globally, like we said, a big conflict or something like that. How do you think about the election in 2024 and its impact on markets right now?

Matt Monson: Yeah, when it comes to elections, usually there’s an unknown party, and a known party, and in some cases after a president’s been there for two terms, it’s two unknown parties. We have an interesting dynamic right now. We have two known parties. We had a former president, a sitting president, and we’re going to end up with one of them. And so I think that there’s less risk and less uncertainty heading into this election than there have been. And, you know, many, if not all previous elections.

Richard Cunningham: Interesting. Well, thank you both, gentlemen. So, Matt, let’s talk about kind of John, I’ve been in this season on the FDI podcast of talking about how to how can investors truly get in the game? How can we take more proactive steps forward and be faithful with what the Lord has called us to steward? And I think it should be helpful for listeners at home to hear a little bit about kind of what is your approach been, as you guys think about public equities, investors, corporate engagement, proxy voting, maybe provide a little bit of education there for what this can practically look like for your faith driven investor audience.

Matt Monson: Yeah, I love that question. You know, historically, public equity investors have just bought shares and been along for the ride. Worse yet, many investors don’t vote their own shares. They allow someone else to vote their shares for them. And you can guess what happens. That third party has their own set of values that they exercise when they vote your shares. So for faith driven investors, this is particularly problematic because if you own any ETF from a non faith driven ETF fund manager, you can almost be sure that your vote is being cast in conflict with biblical values. So in the world, we focus on how we give away our wealth and we focus on how we spend it. But most people don’t think about investing their wealth in line with their values. The faith driven investing industry is taking big leaps forward right now with corporate engagement, which means reaching out to companies and letting them know there’s another voice out there. Companies are responding with more neutral agendas as a result than some of the socially aggressive agendas that you maybe are hearing about in the headlines. And so there are multiple different paths to corporate engagement. And so I can outline them. I’m really I’m thrilled with what we’re seeing right now. So there’s a number of different firms out there that are reaching out to companies and moving their agenda in a really positive way. We have a little bit different approach at Sovereign Capital, so we’re engaging with the CEOs of publicly traded companies to bring them together around roundtables and to meet one another to learn best practices from one another. But we want to see them do is hear from their peers about what’s working well to enable human flourishing and what works really well to build better cultures, because we want to see those companies installing chaplaincy, installing employee benevolence funds, and really changing the face of what public companies look like.

Richard Cunningham: Man, that’s really encouraging. So for those at home listening, wondering, man, I just I feel so disconnected from my investments. There are practical steps you can take as a shareholder and how encouraging also that there are, you know, shareholders that are running ETFs and these other kind of fund structures who are engaging large company CEOs. And you heard Matt talking about it, bring them together to kind of be inspired and encouraged together. And Matt, you know, maybe help, you know, kind of orient people around the sovereigns public equities approach. You guys specifically invest in Christ following leaders of publicly traded companies, correct?

Matt Monson: Yeah, we do. If I sum it all up in just a few quick seconds, we believe that culture is the greatest competitive advantage in business and that if you invest in a company with a faith driven leader who’s building an exceptional culture to love and care for their people, that you’ll end up attracting and retaining some of the best talent in the marketplace, and that if you have a company with phenomenal talent, it looks like a sports team with all the best players, you should be able to outperform the competition. And so that’s the thesis behind what we do. We believe that there’s no trade off between culture and performance. And in fact, the greater the culture, the greater the performance.

Richard Cunningham: That’s awesome. Well, gentlemen, before we go to Matt and kind of have Matt share a little bit of a personal encouragement, I just what the Lord’s been teaching him in Scripture. Any closing thoughts, any any kind of saved rounds before we exit today’s episode.

John Coleman: I’m reminded, you know, we’re recording this the week of Passover, and it started yesterday, which is April 22nd as we’re recording this. And I am in a unique seat in that I have a number of family members who are Jewish and a lot of friends who are Jewish. And in the news right now in the United States, we’re seeing actually a rise in antisemitism across the country. And I think that’s caused me just to reflect on the importance of Judaism in Christianity and the important ties between those two groups, and just the important humanity of refusing to kind of discriminate against people on the basis of their race or religion or other things. And just a real heart for this. What should be an incredibly special time for Jewish people right now? But I know in the US at least, it’s been marked by a lot of fear. If you look at university campuses, etc. and so without weighing in on the conflict in the Middle East too much, it’s just been on my heart how tied Judaism and Christianity are, how important it is that the Jews in our country feel welcome and safe, and that during this Passover season that they feel celebrated and welcomed by those of us who are their brothers and sisters. So I know that’s not exactly a reflection from Scripture, Richard, but it’s been on my heart a little bit this week of Passover with some of the images that I’ve been seeing in the news, just, on university campuses and elsewhere.

Richard Cunningham: Thanks for sharing. John, appreciate that. Matt, what is Lord been kind of teaching you in Scripture lately.

Matt Monson: Yeah. There’s this verse. It’s so countercultural that I just want to bring to the forefront for everyone. It’s first Thessalonians 5:16 to 18. It’s what I call direction for living. It says, rejoice always, pray continually, give thanks in all circumstances, for this is God’s will for you in Christ Jesus. What would it be like if we all did that every day, every time something bad comes your way? If that was our response.

Richard Cunningham: Man, that’s so good, so good. Well folks, this has been a marks on the markets episode with Matt Monson of Sovereign Capital. Matt, what a joy to have you on. Thank you for sharing. You just kind of profound wisdom and insight on the capital markets. John, as always, what a joy to get to do this alongside you and folks. We will catch you next time.

Richard Cunningham: What’s going on, everybody? Welcome to another episode of the Faith Driven Investor podcast. We are grateful to have you joining us as we record this. It is Monday, May 13th, 2024. This episode will actually drop on Monday the 20th, but whenever or wherever this faith driven investor podcast finds you. Thrilled to have you listening. My name is Richard Cunningham, joined by one of our faithful mainstays in Luke Roush, co-founder and managing partner of Sovereigns Capital. And Luke. We are in for a treat today, my friend, aren’t we?

Luke Roush: We are indeed. We’ve got one of our great friends who’s on today and someone who I’ve got a personal relationship with […] together with him, we’ve served on boards together. We participate in things like Christian Economic Forum together. And I really appreciate his generosity. And actually jumping on the podcast today, I was worried he might still be in mourning since Saban’s retirement from Alabama, but he’s come out of, mourning to, spend an hour with us, and we’re grateful for it.

Richard Cunningham: Yeah. Chuck Welden out of Birmingham, Alabama. Weldenfield the lion’s den. You know, Chuck, I had the privilege of joining the faith driven investor movement in May of 2021. So three years ago. And I’d be willing to bet that there hasn’t been a week that’s gone by since I’ve been involved with Faith Driven Investor, where the name Chuck Welden wasn’t mentioned. And I think it’s just because you’ve been blazing a trail, leading so much of this kind of conversation around what is faith driven investing, living it out yourself. And so we are overjoyed and thrilled to have you on the podcast, and you find us in this season, Chuck, where we are going back to folks who were featured on the 2024 Faith Driven Investor conference that aired in January. Whether they were a speaker, there was a video story on them, and Faith encoded this just masterful job telling the story of Welden Field, the real estate investment company that you helped run there in Birmingham. And so catches up, Chuck, who are you? What is Welden Field all about? For those that maybe didn’t get to see the conference feature, and we’re just so thrilled to have you on the pod today.

Chuck Welden: Well thank you. Chuck Welden from Birmingham, As you have already said, one wife four kids and ten grandkids. So that’s that’s the way you want to do that as far as ratios. Thanks for having me on the show. It’s pretty risky, you know, handing me a microphone. I assume you have some ability to turn me off or edit at the right time. And by the way, if you want to hear any Luke stories like, when he shipped his new […] to my office by accident, if that would be helpful, you know, to help set the stage. I’ll be glad to tell you the rest of the story sometime. You know, in Birmingham, we’re big fans of FDI. Eversource has a watch party every year, and we all go to it and love it. So thank you all for really investing in the whole country in the movement. I really appreciate what y’all do. I would like to start with 2 or 3 quick comments though. I like to say when I get a situation like this, one is, you know, if we’ve accomplished anything, it’s only because God’s been about it. We just basically, where’s God involved? And let’s go jump on his bandwagon. Number two, if you think you’ve been accomplished just because of all the folks that have invested in us. I mean, Birmingham is a backwater town, and yet we’ve had so many great people come here, invest in us, befriend us, teach us, mentor us. And it’s really advanced our thinking. We could not have done it without that. And third thing is, I know I’ll butcher whatever you say today, so I really prefer […] to watch the SPU video or the little five minute animated video that we made. They both do a great job explaining the fund and why we’re doing it and what we hope to accomplish. So if they sent Richard, we can refer people back to that. That’s probably the best thing we can do at the end of the day.

Richard Cunningham: Yeah, we absolutely can. And when people hear SPU, it’s Seattle Pacific University. They’re the crew behind Faith and Code that did this remarkable feature of Welden Field. But yeah Chuck hand it over back to you.

Chuck Welden: So maybe I’ll just give a little context for who. Weldenfield is basically my father, my uncle and another gentleman, Mr. Field, hence Weldenfield. They created the company back in 1977. And we’re active in property management in both multifamily. And then also we do development and redevelopment of hotels, multifamily, single family land and do good bit of private equity investing, including sovereigns, which has been a blessing for us as far as kind of a scale of our operations. I have about 850 employees, 14 states. We manage about 200 properties, about 20,000 units, and we’ve developed well over 12,000 units of multifamily, 3000 units of single family, you know, several hotels. So that doesn’t mean that we are smarter. That doesn’t mean that we make less mistakes. In fact, it probably tells you that we’ve made more mistakes because we’ve done all that. But we like to fail forward and try not to repeat the same mistake again, but we always assume it is. So that’s kind of a background of, you know, Weldenfield in a nutshell.

Luke Roush: The idea of actually failing forward and, learning from past mistakes. In the early days of sovereigns, we had something called RMD, which we, aggressively tried to avoid. And RMD stands for repetitive Mistake disorder. And, we suffered from RMD in the early days. But to your point, there’s opportunities to just process together as you bring new team members on. Sometimes they experience the same mistakes that you made before, and that really means that you are, in this case, me. I failed to appropriately train them on some of the mistakes that we had made. And so this idea of continuous learning and improvement, not just for existing staff, but new staff, you know, you’ve forgotten more than a lot of people will ever know about real estate Chuck. So maybe speak a little bit about that. Some of the things that you guys learned in the early days, that they really want to make sure that you’re avoiding in the current moment.

Chuck Welden: Yeah, we have lots of theories going into this, and it’s like, where’s the Tysons? That everybody’s got a plan until they get in the mouth. And so it’s true in real estate too, you know, we to about five properties of the fund in a variety of locations but for different demographics, all things that would help expand our knowledge base so that we could do a better job going forward. And we’ve learned some things. I mean, learned lots of things. For instance, we basically have 3 to 6 people volunteering ten hours a week that live on site. They get a rent stipend, and basically we provide a fishing pond. That’s kind of what we do. We give them a fishing pond. They want to love their neighbor, serve them, be involved in activities and social events that have a chance to lead to a gospel presentation. We call it connect, share, gather, train. That’s what we provide. We were we’re a fishing pond. And here’s some of the things that we learned quickly in the fishing pond. One is when you buy a property, you think you own it, but people who have lived there already, they own it. You’re visiting their house for the first year. After a year or two, it becomes your house. And so we have to be less aggressive the first year or two than we thought we could be. We thought we could be more aggressive, and really, we have to be more cautious and really go deep in those relationships. Number two, we started off thinking we’d only have 2 or 3 people per site. We realized quickly if somebody leaves or if two people leave, all of a sudden, all those relationships you’ve created, all those time spent, you have to start over again. If you have 3 to 6 people there, then or two people leaving doesn’t put you back to ground zero again. The third that we found out is ministry is messy. You got to be ready for anything to happen.

Richard Cunningham: That’s awesome. Chuck, maybe back up for a second and talk to us about how you kind of got to this investment thesis or methodology. So we’re really talking multifamily real estate investing here, buying apartment buildings. And then you’re talking about thoughtfully deploying people into these apartments. And you mentioned volunteers. So I’ll be curious about how that works as well from an economic standpoint with the fund and returns and what all that looks like. So thoughtfully deploying people into these communities to go spread the gospel and be on mission.

Chuck Welden: Let me tell about how we get here first, and I’ll come back to more details about what the program looks like.

Richard Cunningham: Yeah, give us some of the breakdown.

Chuck Welden: So basically, if you go back 20 years, I’ve been on about 20 missions trips, 12 countries, multiple times in my whole family or different members of my family. You know, one of those missions trips one day in Honduras of building another school building and, you know, wondering how many mistakes did I make today and what’s going to happen next Monday when we leave? Who’s in to come fix all the mistakes we made. And by the way, the four guys sitting on the hill watching me, I wonder how many of them would be working on this project if I wasn’t here volunteering today. So all of a sudden, Austin Hug here induced me to the concept of job maker versus job taker. So I set on a path, a journey to find out is there a way for me to use my business skills, my legal skills, my financial skills, real estate investment banking, those kind of things in a way to advance the gospel by being a blessing in the country instead of taking jobs or volunteering. By the way, vision trips are great. Volunteering is great. I don’t want anybody misinterpret me how important that is for family and for us as Christians, but in my case, I feel convicted. I need to do something a little bit different. And so we just covered business missions. So we then invest in 40 companies in about five continents, in about 15 countries and largely businesses. We knew nothing about honey bees, cattle, it, bookstores, dairy farms, insurance, whatever it was. And then one day, several of our investors, including Luke’s partner Henry and the McLeland Group and, Tom Phillips, 3 or 4 guys came to me and said, hey, why are you doing this? You’re on these boards of these companies around the world, your gallivanting around, why don’t you do your own real estate business? And by the way, [….] Ramones said, Chuck, I know how to make money. I don’t know how to give money away, but can I make money and be a blessing at the same time? And so I got challenged to see if we could figure out how to take real estate. And figure out a way to have impact investing within the real estate compounds. And so that’s really what the challenge was. So we started the fund raise about $20 million, about five properties. And that’s what we’ve been doing for four years now. It’s still only about 5 or 10% of our total business, but it’s a growing piece of our business. And think about all the different people out there that are actually activating this space in the ecosystem, including sovereigns and FDI, you’re a large part of this. But as a result of that, we’re getting more and more investors asking is, can we have a positive impact instead of a crazy impact?

Luke Roush: Maybe speak a little bit about. So one of the things we’ve talked about, Chuck, is kind of being known for what we’re for rather than what we’re against. And when you talk about resident impact on the folks that you have a chance to minister to maybe talk a little bit about what that looks like, you know, and how you’re for people who live in the apartment complexes that you guys have.

Chuck Welden: Yeah. If you think about it, in multifamily, the average person only knows three people in the whole community. I mean, it’s lonely and Covid only added to this, but it’s already there before Covid. Yeah. How about your own neighborhood? How many people in your own neighborhood do you really know that you’ve had supper with or similar sandwich? It’s just not true the way it was in the 60s and 70s. So what we realized is, if we can bring these 3 to 6 people to come live on the site, not parachute in, they live there. They’re part of the community. They create relationships. They earn their right to be heard because they’re working out at the gym. They offer to babysit for the mother who’s sick. They offer to bring food for the husband who’s out of it doesn’t have a job. We act as a social and service community, and then we do events and parties, and we create a social fabric. And that leads for an opportunity for these folks who agree to give us ten hours a week for the fact that we give them a rental reduction. They volunteer and use those ten hours, and we create a program of activities. They turn in. We’re very big into measuring things Luke. And, you know, KPIs are huge to you and to me. We measure 12 inputs all the way from prayer walks. How quick do they meet the resident when they move in? When do they have their first spiritual conversation? When do people come to events? How many people came to the events? How many events do we hold? We measure 12 to 15 things and we measure three outputs as well. We measure outputs of people returning to returning to faith, those coming to faith, and those attending Bible study or churches. And we trust God for the outputs. And, you know, we think we’re in control of the inputs. We’re really not even in control of the inputs, but we constantly evolve and change our inputs. If we don’t see outputs that match the effort we’re putting in. So it’s all about KPIs for us. We have a business plan and we have a spiritual plan, and they both have to be prioritized for what we’re doing.

Luke Roush: It’s good.

Richard Cunningham: Man I love that. Now you had a line that was you don’t treasure what you don’t measure. And then I believe you guys have hired for a position called a chief spiritual officer. Is that correct?

Chuck Welden: Yes. What do you think? That if you don’t have somebody responsible and that lives it every day, then it won’t get done? As one of the team members said, years ago, the spiritual was number five on my list. I had to set about fixing the roof leaked. We had to get the survey finished. I had to interview a manager, and so was number five. Back in the day was number one, but the next day started back at number five again. Because tyranny of the urgent always allow spiritual and important things or priorities, or spend time your kids or your wife to always be […]. It can be done them all. And these urgent things had to be done today that aren’t always the priority. So we said if we didn’t dedicate somebody, no one would really focus on it. In the end, we hired two guys, both 50% of their time. Calling priority is the chief spiritual architect. He’s designing the system or, designing the training, the recruiting methods, the discipleship modules, the evangelism training everybody. And Randy Wilson is the chief spiritual officer. He’s implementing those things they both can do either job or both are better at their respective jobs.

Richard Cunningham: That’s awesome. Yeah. And and Randy has a line in that video in the conference that I thought was so good where he said, if there is profit and no spiritual impact, we failed. If there is spiritual impact and no profit, we’ve also failed. It is finding kind of the tension and the lever to balance. And so talk about that a little bit as you approach investors. And I love how black and white you got in the video where you said, hey, in a traditional multifamily investment strategy, here’s kind of an expectation around the return profile. If you want to kind of ratchet up the spiritual integration and deploy these people into these communities, here’s where the returns might change and what that looks like. And so talk about that side of things and kind of how you guys have all process through that.

Chuck Welden: Sure.  And of course, anything I say today is subject to the fact that we’re in a transition point right now on returns in almost every industry, particularly real estate, have cap race, interest rates and insurance number. Traditionally, I would have told you that in our value add program, 15 to 18% internal rate return over a 3 to 5 year period, we decide in the fund. First of all, we would go longer. Instead of three five years, we would go 7 to 8 years because our investors wanted us to go deeper with our roots, so that when we leave one day, there’s a chance somebody’s still living there, somebody still living on the property. That still carries on the mission for some time period afterwards. So that’s one thing. Secondly, we sort to charge 200 basis points, which is basically 2% of the equity on an annual basis. So we told everybody your return would be approximately 2% less than what we’d get in a normal deal. So instead of 15 to 18, maybe 13 to 16. Now the numbers are being redefined right now because of there’s nothing trading right now. So we’re just use relative numbers for this conversation. And all these investors said, great, if we can get that return and have this kind of impact. We’ve had about 60 people either come to Christ or recommit their lives, most of them after 10 to 20 years. I mean, they have a church in ten years, maybe 20 years in some cases. So that’s what we did. And, they accepted those returns and we’ve accomplished those returns. So everybody seems to be happy so far.

Luke Roush: You know, here’s the way I kind of think about it, Chuck. And you and I have talked about this extensively before, but I kind of think of this journey that you’re on with the Weldenfield fund. It’s kind of being a first mover risk, right? Like you’re trying some new things. You’re going to make some errors of commission, in terms of what you try from a spiritual integration and both evangelism as well as discipleship perspective. But ultimately, you know, to the point that you were alluding to a moment ago, if you’ve got 5 to 7 years to demonstrate the results of this risk that you’re taking in terms of community member retention, right. The churn that you see or maybe see less of in your communities. I like to think that actually, buyers will appreciate some of the things that stem out of that. You’re not doing it for that reason, except, you know, that output is a byproduct of really caring for and loving people well, where they are. And so, you know, is there any idea that, hey, actually, at the end of the day, maybe the property is worth more than it would be if we hadn’t done this? And so what you give up along the way, you kind of get on the back end again, not the animating reason to do it, but it is kind of it’s interesting, you know, it seems concessionary in the early days and yet maybe not over time. Any thoughts or perspectives here? A few years in.

Chuck Welden: Yes, we have a lot of debates internally and with other investors like you and Tom Lowe particularly the challenge me the most in this area. You know, big picture wise, you know, apartment life, which is somebody we used on over a dozen properties over the years. They’ve done several studies to say it’s actually accretive, that the money you spend actually pays you back like 3 to 4 ratio. We decide just to be conservative in our underwriting. My father is a pretty hard man. And so I’ve been taught to under-promise and overdeliver. And so I really instinctively really in the end, the 2% that we’re spending in, by the way, it’s a maximum of 2%. Sometimes we spend less. And I’ll come back to that. We spend sometimes less than 2%. But I believe that in many cases. It’s costing us nothing because people are staying longer. We’re getting great reviews. We’re having people tell us that they moved in specifically because of friends of theirs that enjoyed that. We’re there are. So do you think you’re happier residents that stay longer? The turnover expense is less. They leave the apartment in better shape when they do leave, and they give you better ratings on their net. That’s really kind of like the perfect thing is, I guess there’s this guy 12 years ago. Let’s talk about being a good neighbor. So maybe it actually works. And so I do believe in the end that we’re not spending that whole 2%, maybe half and maybe none. I don’t know if it really will ever give you your performance. Certainly gives you a better in a Y a better T 90 trailing 90 for, you know, for purposes of selling on the back end. So certainly on the back end you may get a benefit also because you had lower expenses. But as you said, that’s not the reason we’re doing it. But I think at the end this is not costing anybody very much at all.

Luke Roush: That’s good, that’s good. And, you know, I think that there is this, this idea of trying new things. Right? Anytime we invest in an early stage company, they’re taking risk. Right. And there’s inherent risk in the process. But, you know, there’s an opportunity for believers who want to be more impactful in how they shepherd capital to take some of that risk. Right. And as you demonstrated and more people jump in, it’s just like the standard adoption curve. And I think your point about, you know, managing expectations, we always say expectations minus results equal satisfaction. And so the message is, you know, manage expectations. So I think it’s good.

Chuck Welden: But you maybe think it’s only I probably would like to touch on, you know, just like we one day had that aha moment that the […] kids had no shoes. As I was telling you, we invest in all these […] businesses that weren’t doing it with our own 850 employees and our own 20,000 units, we had that aha moment that our kids have no shoes. So I like to point out that we think we have 4 or 5 customers or clients or whatever you want to call it. We drew a, archery bulls out in the bulls, our residents. That’s our most important clientele that we believe we are called to minister to. But the next circle for us is our employees own site. Just because we’re Christian owned doesn’t mean that everybody that works for us is a believer. So we’ve had them also come talk to us about things because of what they saw, how we treat people. The other group is the construction crews are largely Hispanic Latino construction crews, and they come for 30 days to six months and often don’t go home very often. They once a month. So we’re now hiring Spanish speaking pastors to come in on a weekly basis and minister to those gentlemen. Soccer match, or come to the restaurant and have some beers and hang out and eat. So we realize that’s an opportunity we didn’t think about in the first three properties. So look at this example of mistakes we made or being an early adopter. We didn’t have a playbook to go back. But yet we’re realizing that. But the two people that we’re most excited about, maybe that is really interesting looking. Probably the same thing is the operator and the investors. We want all our investors to be so excited about when they get our spiritual report. They say, I can elevate, I can do this at my manufacturing plant, I can do this at my car dealership, I can do this at my bank, because at some point, demonstrating something is better than arguing. I mean, I don’t matter, arguing I love arguing, I’m a lawyer, but I don’t win any people with a lot of arguments. But I do want people to try new ideas when they see it and they experience and they taste it. So we think our investors and and secondly, other operators. We’ve had 15 other operators from around the country come to Birmingham. We did a person with eight of them about a month ago. We have two guys, including Nick Bonner, Luke, who, you know, he’s bringing a guy from California that he thinks he’s got lined up to think through how to do some of this. And they’re coming to Birmingham for two days just for us to invest in, them, we learn from them as well. I don’t I mean, we always learn from everybody comes, but he’s really coming to see what we’ve learned. So operators and investors are two other great people to have an influence on.

Richard Cunningham: Man, that’s good fun to hear about the multiplication. And it’s also gets back to Chuck that laser sharp focus you guys have on the KPIs. And you know, you treasure what you measure to use the word you use and focusing on those engagements. And it’s not just to feel good, hey, let’s write a check to the good guy so that it feels like we’re winning in our investment portfolio. But you’re actually coming back and saying, here’s how we are focusing on gospel progression and gospel impact inside of our community. So that’s deeply inspiring.

Chuck Welden: Enriching. Every company has a certain missional potential. And we think that if you don’t sit down your eyes, look at your balance sheet, your eyes look at your checkbook, your eyes, somebody evaluate your handicap on your game. You’re looking to see how many pounds I lifted this week. What’s my personal best this week? I’m talking to Luke, not me right now, but so everything else we keep score in life. But the one thing we don’t keep score on is this we say God’s and everything we do, we pray before meetings and those are all wonderful things. But for me, those are cop outs. I want to get my hands dirty and figure out every intersection point that exist, and try to capture every intersection point that we financially can capture. So that’s how we look at it.

Richard Cunningham: I love it, it’s motivating. Hey, there’s another thing I want to get into here, Chuck, that you’re also pretty passionate about. And that is this tension of raising rents and affordable housing and just the situation we’re in right now. It just, you know, cost of living in America is just growing, whether it be inflation, interest rates, you name it. But specifically on the rent side of things, how do you guys wade into those waters as a real estate owner and operator?

Chuck Welden: You know, I think the last time I cried was when I watched [….], so I don’t cry. I mean like once every 20 years, but I almost cried. And here’s the story. The first property was under contract. John Ray told me to go look at it in Pensacola. I walked in. There’s older gentleman. He’s paying rent with cash and managing 20,000 units. I knew what that meant is he can’t afford to pay his rent by the 10th. So as he gets checks from Social Security or wherever else, pensions, whatever, he’s getting his money, he’s paying weekly. And I said to myself, this is going to be an unintended consequence because we rehabbed the property and renovate it, raise the rents in order to give your investors the returns that they would like to have. You’re gonna raise rents 100 and $400 per unit per month, and some people will not be able to afford that change. And that was on Saturday. I came back on Monday, our weekly meeting. I said, guys. The homie, today’s about one topic. What are we going to do here? Because this man Joe won’t be there a year from now. And his story got worse. He got dementia, his wife get dementia. And our residents found his sister, who he had talked to in 20 years and moved him to Atlanta, where he finished his days. But I was so humbled by that situation. So we now try to look at the rent row and go talk to people and let them know what’s going up. In some ways, we should do this. We should not want people to leave. We should want everybody to stay as long as possible, and then they just get kicked out when they can’t pay the rent. We said, no, no, we’re going to talk to people and we’re gonna go help them. If they’re lower income, we’re going to help them get on the waiting list at the local housing authority, or we’re going to help identify some of the properties in town. But they’re so full right now and so that did not solve all the problems. So we took some of the money and used a little bit of a benevolence fund to help transition people a little bit. Basically, we took the investors moneys, and that was part of the reason we have that money is to serve our residents. And thirdly, Wilson has let them stay a month or two longer at the lower rent. But I would be lying. If I said we solved all the problems and then we did have people get hurt through this process. But there’s no somebody else gonna buy that property. And we came to the conclusion that we would just do the best we could and try to do more than anybody else would have done. But, Richard, there are consequences. There’s always unintended consequences.

Luke Roush: Have you thought Chuck where you own properties. And it may be just it’s a different market segment and it’s not what you guys do, but have you thought about going down market in a similar zip code so that you’ve got a place to transition people into? Or is that just kind of out of scope for what you told your investors you do with the fund?

Chuck Welden: Yeah. We purposely designed this first fund to be a medium fastball down the middle of the strike zone, where we knew that we had a chance to hit a double or triple and not strike out, because we know that if we fail, we don’t know anyone out there. There’s other people doing great stuff. Launch. Careful. There’s there’s 3 or 4 of the great funds out there. Sovereign’s has its own real estate foundation. Great guys out there, but largely is. We’ve met with everybody that we can find. We haven’t found many people doing very much like what we’re doing or like Launch or Sovereigns is doing. So we purposely decided to not take hardly any risks. Looked like that. But you have to hear the roots of it. Weldenfield is for the first 15 years was affordable housing. Section eight tax credits 202 for former home. So we have a heart for that. And our team has a heart for that. And so that is something we hope. But here’s what happens. Every time somebody brings us up to me I’ll say, okay, let’s talk about let me tell you what your returns are going to be. And they say, well, that’s not really the return I want. I wanted X. And I said, well, then you don’t want to do affordable because affordable does not make as much money. It’s a tougher market. You’re not going to make as much. But we’re still praying and hoping that some investors migrate into the affordable world so that we can do some things like that Luke. But these funds are just, you know, you see us being a mass properties. Really.

Richard Cunningham: Chuck, you said a line earlier that when you guys leave, you know what happened. There’s another tension to manage there in terms of Weldenfield comes in, buys the property, holds five, seven, ten years, whatever it might be. Cash flows in the interim and then ultimately sells to the next owner. What does that look like? Talk to us about the kind of the tension to manage as you leave a property.

Chuck Welden: Great question. And you’ve really hit on the two biggest tensions that we’ve discovered so far. I mean, there’s other business challenges, but those are two structural tensions in our mind as far as leaving. We know we’re leaving. Even Nasser, who built that big statue, it fell down eventually. Nothing lasts forever. And so what we’ve done is we’ve tried to bring in local churches and local ministries where we can. I mean, use example Bellevue Baptist have of Memphis, Tennessee is right down the street from one of our properties, and they never have 2 or 3 people from the church living on the property. And we’re encouraging that. We’re thinking that we have local in Huntsville. We had a guy that came up to us when he saw his prayer walking or saw Randy prayer walk and said, who are you? Why are you here? Explain what we’re doing. This guy goes out of the neighborhood and I walk my neighborhood in this apartment community, I think every week for like 15 years, hoping something would change, hoping that. And so we’re trying to find those persons of peace, those people who care about their neighborhood, churches that care about their neighborhood ministries, like No Place Left or the big life that care about their neighborhoods and their towns and get them to move in. With the idea that even when we leave, maybe they’ll stay 2 or 3 years and Weldenfield even talked about and like, we have a property we may be selling right now, and we’re talking about taking some of our part of the profits and trying to seed the property for another year or two. Because once somebody moves in there, they can keep doing all the activities. It’s not like the new company is going to kick them out. Now, they may not be as cooperative, and they may not let them hang the sand inside the elevator and people, things like that. But overall, once you’re a resident, you know people, you still get a chance to talk to them.

Luke Roush: So this whole idea of community, I think is really, really interesting, Chuck, because one of the things that I’ve never appreciated before, getting to know you and understanding the work that you do and others do is, you know, Class-A apartments. There is no community. People want to be able to go home, retreat into their apartment, and they’re kind of not looking to know anybody on the hall or anybody down the way. You know, class B, class C apartments are very different. A lot of folks that are hanging out and spending time in community with others, and they really are hungry for friendship. And so I think that’s something that you guys have really cute in on that, I think, is it’s indicative of a broader need that our society has to know and be known. And I love what you guys are doing there.

Chuck Welden: Yeah, I think you’re right. And I mean, there’s another verse on that one as well. harder for rich man to go through that eye of a needle than a camel. So the whole idea is that if you’re wealthy you don’t think you need anything. So we our residents have real problems. They have depression, they have drugs, they have broken marriages. And these are all opportunities for us. We had a lady whose husband was so mad at her. He wouldn’t go to her birth of a second child. He didn’t show up to the birth of his second child. So two of our team members, two girls from our team, went and stayed with her for 48 hours for a C-section delivery. She becomes a Christian. Her 12 year old becomes a Christian. I don’t know how I, you know, if I care about the guy, I don’t know where he is, but, I mean, these broken relationships. These are opportunities. And there’s same things exist in the eight properties. But we had it so much better. We can had things so much better.

Luke Roush: You talked about it, man. Being a good neighbor. Some guy 2000 years ago to use your line talked about that. Hey, Chuck, this is not a marks in the markets episode. Will be really brief here, but would be remiss while we have you and your just deep tenure in the real estate investing field not to get such some quick comments on. State of real estate market. I know we’re talking multifamily primarily today, but and I saw something in the news about a Fort Worth office building that sold for a 140,000,000 3 years ago, sold in an auction the other day just for 12 million, and say that it feels like there’s a little bit of doom and gloom, whether it be this interest rate environment, you name it. But any comments from you on kind of just the state of real estate investing and where things are?

Luke Roush: I’m not a math major, Richard, but that property in Fort Worth carry the one. Okay. Yeah. That’s a bad investment.

Richard Cunningham: That’s that’s not going to feed the kids.

Chuck Welden: When you take zeros off, it’s bad. We put zeros on. Yeah. Office has got a very tough road. I mean, office isn’t going away, but it’s going to totally be be a new bottom for it. We don’t know where that bottom is right now. Retail has come back a little bit. But the neighborhood, you know, not the big box but the neighborhood where you can eat and get services that’s becoming stabilized and actually growing right now, a little bit industrial, has been the darling along with multifamily for the last ten years. Industrial starting to slow down just a little bit. I was with some industrial guys all last two weeks and they talked about how things are slowing down the pre leasing. It’s really slow right now in particularly in even Dallas and Austin in Houston, multifamily reason we like multifamily is that people have to live somewhere. I mean, all these other things you still do in your house, are you at your house right now when we do this? Richard, are you at your house?

Richard Cunningham: I sure am.

Chuck Welden: Okay, so two out of three of us are at our houses, not me. So multifamily is here to stay? There’s a shortage of housing. 3 to 5 million. There’s a projected 45 million people living in apartments. That’s the size of Canada. So that’s not going to change anytime soon. I think there’s record delivery coming on, and 24 in the first half of 25. We’re looking at some new development opportunities, trying to deliver them in 2026 because that’s when there’ll be no deliveries coming right now. So multifamily is, I think it’s a good place to be right now. There is a correction being made. Properties are probably go down 10 to 30% of what they were worth at the peak. And some of those recover that very quickly over the next 2 or 3 years. Some won’t I would just say that whoever talks to you may find somebody that has some scars, make sure they have some scars, because so many of the guys who are going broke right now. I mean since 08. And they’ve never had a bad day in their life. They’ve never seen a day in which they didn’t make money and things went up in value. Yeah. That’s, that’s that’s is somebody who’s been around a while and have good track records. But I think multifamily will settle back in and probably be in the 13 to 17% returns over the short time period. Which is, you know, compared to 15 to 18 traditionally. There was a few years where was in the 30s, but that was just a that was a freak accident where everything happened just right. That was never sustainable. So that’s my projection of multifamily right now.

Luke Roush: That’s good, that’s good. And it’s relevant. And I think a lot of people are trying to figure out what to believe, both in terms of the underlying asset class itself and then also in terms of the rate environment, which is. Yeah. Any thoughts on that?

Chuck Welden: Yeah, interest rates are very tough and cab rates course are directly related to that. Ten year Treasury and B bonds really drive up cap rates because that’s kind of the alternatives. If you wanna look at a risk adjusted valuation that’s kind of how people compare. You know the ten year get down to 380 jump back to before 50 maybe. I think it’s in the four 40s. Now, the question is what would be long term? I think it would be in the 350 to 400. I don’t think it’ll stay above 400 forever, but I don’t see it going below 350 anytime soon. I mean, is I think that, and the idea of inflation, trying to get that down to 2%, I think is impossible. They should just say 3% or 4% and just go with it. There’s too much consequences to what they’re doing right now. You know that thinks cap rates. I think it’s a good time to be buying because I do think there’s a possibly some rate cap reduction. I think there’s a possibly some interest rate reduction. And insurance has already dropped $5, went from 800 dollars to 2000 is probably back down to 16 1700 now. Probably will continue to come down. And it’s just a great fear pendulum. All these guys left because they get burned. And then people made so much money that the guys who lost money were coming back because they realized, oh, these other guys are making the money that they lost. And so we call the greed fear pendulum. You can’t ever stay on one side, the other. You always run back and forth.

Luke Roush: Yeah, maybe just wrap us up, Chuck. We always like to finish with one question, which is, what is God been teaching you in and through his word? Recently. So, over to you on that.

Chuck Welden: Well, I’m in the Psalms right now, and I guess maybe the theme I see over and over again is faithfulness and obedience. There’s so many songs by David and the other writers that talk about somebody attacking them, or somebody persecuting them, or sickness or whatever these things are that they’re experiencing. But it seems like those who are obedient and faithful. As they said, I think it’s Psalm 73. And then I walked into the temple and it changed everything. I mean, walking to the temple and seeing God’s goodness and grace reminded them that they could be obedient despite the situation. And so it’s so hard sometimes to even I mean, our business is tough right now. It’s been tough for a year and a half to two years. But, I think every time we’ve had a downturn in the economy, I’ve been through four of them. The only thing that made me feel comfortable was just being obedient and faithful and treating the investors money, just like you would treat yours doesn’t mean you always win. You’re still gonna lose. But that’s how we sleep at night.

Richard Cunningham: Amen. Well, Chuck Weldon, just from the bottom of our hearts. Man, thank you so much. What a joy to have your tenure and your expertise involved in the faith driven investor ecosystem to have you today, specifically on the podcast. And so, friends, this has been the Faith Driven Investor podcast episode with Chuck Welden of Welden Field at a Birmingham, Alabama, key leader in the Birmingham Lion’s Den movement and just a longtime friend of the ecosystem. And so thank you all so much for listening. We will catch you next time.

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.

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

Richard Cunningham: What’s going on everyone? Welcome to another episode of the Faith Driven Investor podcast. Grateful to have you tuned in from wherever you’re getting this podcast. This is dropping on Monday, June 3rd. So for those of you in the Northern hemisphere, happy Summer. It is upon us in Austin, Texas. It’s scorching hot already. And with that in mind, we’ve got John Coleman in the podcast studio, Tim MacReady. And this is going to be a really fun episode. It’s a marks on the markets episode. But before we go there, I want to quickly plug some things going on in the FDI ministry and ecosystem, and that is Foundation courses. Kick off July 8th and October 14th. Those are kind of the final two cohorts for this year, and we take great joy and pride in producing content like the FDI podcast within the faith driven investor ecosystem. But as with all things inside the body of Christ, it is better and community and alongside brothers and sisters. And so we’ll just heavily encourage you if you’re listening to the podcast and you have yet to go through an FDI Foundation course, this is the way to experience kind of the beginning of community within the FDI ecosystem. And once again, July 8th and October 14th, something really fun that we’re also doing, taking place on June 21st and 22nd, as well as September 13th and 14th, is kind of this weekend workshop for spouses and couples where you can experience the FDI Foundation course in a weekend. So maybe you as a spouse have gone through it and you’d love to take your husband or wife through the course. This could be a really neat opportunity to kind of experience faith driven investing community in a retreat style setting. And then all of this. If you have any questions faith driven investor.org, go hover over community or email Samantha Couch or Ben McLennan from our team. They are both Sam or Samantha at Faith driven investor.org and Ben at Faith Driven Investor.org. So I know that’s an abnormal kind of plug here before we start a podcast, but just know that we are deeply proud of these community opportunities and they are deeply meaningful experiences. Tim MacReady, John Coleman have both participated, helped lead, have been featured in all types of community opportunities that we’ve offered there with me in the podcast studio today. John Coleman, how is your Memorial Day?

John Coleman: Man, it was great. And just let me follow up with that plug. I have heard so much awesome feedback on the FDI groups on the community. So you guys are building the content is really good. I’ve obviously experienced it myself, but I keep hearing from people how impactful it’s been and so I hope everybody listening will really consider if they haven’t done an FDI group, if they’re considering a weekend community. I think this new couple’s content is really cool, actually. Jackie and I are thinking about going through it soon. I know Brooke and Luke, we’re a big part of that as well. So just great work to the faith driven investor team there because you guys are piecing together something incredibly meaningful.

Richard Cunningham: Thank you, John, for that. All right, John, I mean, he’s got to be one of my favorite people. If we were to like power rank folks involved in the FDI ecosystem, Tim is easily my top Australian voice, I’ll tell you that much. But led $1 billion Australian pension fund. So Tim, please correct me if I say anything wrong. Christian super. Recently in 2022 relocated his family to the States. He’s in Colorado. He’s running bright light, which is just an amazing research institution and just financial services organization that is going across kind of this broader FDI ecosystem and providing institutional level research, diligence, scoping out the kind of breadth and depth of the FDI ecosystem. And it’s just a really key and important leg of the stool as it relates to helping get people in the game of faith driven investing. In our January 2024 FDI conference, Tim was a featured speaker. He gave all types of data on just what is going on in the FDI ecosystem, the growth we’ve seen just in the last few years alone, such a key voice. You’ll always see him speaking at things like Kingdom Advisors. So Tim, what a joy to have you on the podcast. And let’s start with you kind of filling in any of the gaps of my kind of career progression for you there, because your story is just too interesting not to highlight.

Tim MacReady: Richard. John, really good to be with you and with our audience today. Yeah. So to kind of dial a little further back, even I grew up on the mission field. Parents were missionaries in Papua New Guinea. I returned to Australia for college at 17 and studied actuarial science with the goal of kind of getting into financial services and seeing what was what opened through God’s kind of moving there ends up working in corporate pensions consulting for nearly five years, kind of building skills. And then, as you mentioned, moved to Christian super, pension fund, superannuation is Australian for pension and spent 15 years there really exploring. What does it mean in the context of a pension fund where you’re stewarding assets on behalf of 30,000 Australians? What does it mean to be faithful? What does it mean to think about not just retirement from a biblical perspective, but also investing from a biblical perspective? And we really wrestle through what strategies can we use to develop this faith based investing capability? Can we screen out of the portfolio those companies that are misaligned to. Our values and to human flourishing. Can we invest more in those companies that are leading towards flourishing? Can we exercise our influence as shareholders? Can we even invest in faith driven entrepreneurs and faith driven leaders in the marketplace? And as I said, do that for 15 years. Out of that team of Christian Super, we formed Bright Light, which is where I work today. We’ve got people across Australia, New Zealand and myself here in the US, really at this intersection of how do we marry faith values and investment portfolios in a way that is excellent and has integrity to our investment objectives and our faith?

John Coleman: Well, if I could just pump up Tim a little bit more because you could miss it in that description, which was beautiful. He was really one of the first movers in the institutional marketplace, in faith driven investing, particularly from a positive screening perspective. Tim, I think what you all did at Christian Super more than a decade ago starting to get into this, I know, in full transparency for the audience. There were early investors with sovereigns, but from my point of view, kind of along with the McLellan Foundation, maybe a couple of others, Christian Super led the way for what the evolution of faith driven investing could look like, covering both negative and positive screening, getting beyond negative screening, trying to support managers who are doing that. And now I’m just so encouraged by what you all are doing in the context of bright light as well, carrying on and evolving that legacy further. And I think with your background also adding a lot of rigor to producing frameworks and data regarding faith driven investing that can help solidify in institutionalize the industry in really meaningful ways. So some of our audience might not be familiar with that background, but Tim has been a leader here for more than a decade, as he articulated. And I think his work at Christian Super and now Bright Light has been some of the most important in the industry.

Richard Cunningham: Tim we get to get on calls often. So I’m going a little off script here, but you’re kind of theology for the why behind faith driven investing I think is so captivating. And so as we get into bright light in the research, you’re doing, some of that conference talk that you gave, I think it would be helpful to, to start with some of the why? Because I think some people still are kind of like, what’s the big deal? Why faith driven investing? I don’t kind of find it compelling yet. And we want this to be something that’s never prescriptive or presumptuous. We want the Lord to lead here. But your kind of articulation of the theology and you’re kind of personal. What I thought has always been super meaningful.

Tim MacReady: Yeah. I mean, I love getting into this, Richard. I think when we look at the calling and vocation that God gives us as believers, there’s a general calling to faithfulness, to obedience, to living out our faith in every sphere of life. And so for those of us working in the investment field or in finance, I think it’s really important to understand and to think through, well, what is it? What is the redemptive purpose? What is the contribution to God’s redemptive plan for the world that investing or finance has? And for me, it boils down to this. Investing in general as an activity takes capital from places where it would be unproductive, to places where it can be used productively for profit and for human flourishing to produce goods and services that promote human flourishing. And I think that’s a vision of investing that we could get on board with, even without a deep understanding of the gospel, the idea that God has an overall redemptive plan for the world that is about flourishing in about relationships with him and with each other. And so then as a believer, how do we live that out? Well, we look for places where investing can be more redemptive, can lead to more of those goods and services that create flourishing, and can move away from some of those goods and services that don’t create flourishing. Companies do a lot of good. They create jobs. They create products, they create services. They create marketplaces where people can interact. These are all good things. As Christians, as believers, my theology of investing is how do we do more of that? How do we support companies that are doing more of that? And so that looks like how do we support faith driven entrepreneurs, faith driven investors specifically, but also how do we get alongside those broader parts of the market that are actually also about flourishing, even if not necessarily specifically faith oriented in their approach?

John Coleman: Well, in Tim, I think what you’ve articulated there, the flourishing thing can sound a little bit like motherhood and apple pie, to use a US expression, where everybody says, of course, of course, that’s what we want. But I think it’s, you know, one of my side gigs is I write a little bit primarily for Harvard Business Review, and the big topic I write about is purpose, meaning human flourishing. And the situation we face in the world right now is reasonably bleak, actually, even as the world is becoming more prosperous, safer people’s perception of their own flourishing of things like loneliness, of disengagement, of dissatisfaction, of purposelessness is growing right despite that prosperity. And so it’s not a given even within capitalism, which I think we think it’s the right system, right? It unleashes human potential. It’s innovative. But even within that system, it’s so possible for people to not flourish, to feel disengaged, to feel like their work doesn’t have meaning. And if you look at all the stats, I think globally only around 15% of people feel engaged at work right now, depending on the country. There’s no country I’ve seen where a majority of people feel like work is a meaningful source of purpose in their life. I think the highest I’ve seen is Italy in the 40 something percent, in South Korea at 6%. Right. And so there is so much work for people who believe in human flourishing, who want people to feel purpose, who want people to leave work better than they came, to create work environments like that, to create redemptive products and services. And so I think it’s easy to gloss over that idea of redemptive products and services, flourishing workplaces. But from my point of view, it’s never been more important than it is today. And the disconnect has never been greater. In meeting our task as investors and entrepreneurs is a real challenging and timely one.

Richard Cunningham: Yeah, it’s well said from both of you. All right, John, when we had Matt Monson on, you used the phrase towering intellect. And so I’m going to repeat that phrase here for Tim MacReady because buckle up folks, as you’re listening, we’re about to get into some just awesome data. So Tim, you do a lot of research, at bright light on a macro level of kind of the growth of the FDI ecosystem, but then also in just individual manager diligence and looking at product offerings and funds out there and understanding, hey, is this a good fit for particular advisors and their clientele or institutions? And you serve in a number of roles at Bright Light, but I just kind of want to hand the floor over you and say, hey, you’ve done so much study on the kind of the ecosystem and the faith driven investing movement. Where should we start this conversation? And then I know we’re going to get into some numbers. So it’s going to be fun to hear.

Tim MacReady: Yes thanks, Richard. So to kind of start with what’s our role in the ecosystem for groups like us that kind of support a lot of market participants? It can be kind of tough to pin where exactly we fall. So our job is to help the people who want to invest in line with their values, to find the right investments to make. If you imagine, and I know there’s many metaphors flying around, but if you imagine capital markets as systems of plumbing that funnel capital from one place to another, the way that pipes funnel water from one place to another in the faith driven ecosystem, many of those pipes are blocked or still being built. And our job with a plumber who comes along to build the pipes and to unblock the pipes. And so we support investment advisers, family offices, charitable foundations, donor advised funds and all kinds of other investors who want to align their values in their portfolio. And so, as you’ve said, that means we research the market broadly, but we also research individual strategies and products across both the public and private markets in the faith driven investment ecosystem. And then we use that research to help construct diversified portfolio, whether that’s tailored for individual clients or model portfolios that advisors can use across multiple clients that integrate these faith based strategies across both public and private markets. And this necessitates a lot of research. We research because we want to bring confidence, transparency and excellence to this space of faith driven investing. And we hope that our research does that in the macro sense. When we do research into the state of the faith based investing market. It shows the depth of the market. It shows that this is a real market with over $100 billion invested in it. It demonstrates the performance of the market. It shows that there are strategies that have track records of delivering good performance, and it just helps people to understand what it is that they’re investing in. So that’s the confidence side. It also brings transparency by publishing research. We’re able to show that there are differences between faith based strategies and their broader market counterparts. We can show that when faith based funds screen companies that are not aligned to Christian values or not supporting flourishing when portfolios are different, we can show that these organizations exercise their rights as shareholders differently. We can show that they are finding positive opportunities to invest in companies doing good, or to use their influence for good. Transparency helps us to understand why faith driven strategies are different in a way that we hope inspires and helps consumers to make informed decisions in line with their values. And then on the excellence side of things, we’re able to highlight trends. We’re able to find gaps in the market. As many products as there are, there are still some parts of the market where there’s only a few products on the shelves, or the shelves are looking a bit empty, and we’re able to push the ecosystem and specifically the managers within the ecosystem towards excellence. Five years ago, for example, best practice largely looked like just screening out sin stocks in certain industries. Now, screening can be much more nuanced. We’ve got corporate advocacy and engagement strategies being more widely adopted. We’re seeing the beginnings of integrating more positive impact criteria into portfolio design. All of those point towards excellence. And then we can also identify those products and strategies where we think improvement is needed in order to kind of lift to that excellence level. And then when we get to researching individual strategies, it’s the same thing. It’s the confidence, the transparency and excellence to help people to allocate. And we can go into some more detail in that as we continue our conversation.

John Coleman: Tim, would you say a little bit more about the corporate engagement side in particular? You know, we just had two wonderful Catholic investors on the podcast. We had Tony Minopoli from the Knights of Columbus and Andrew Abela from Catholic University, both of whom are helping the Catholic Church think through what this looks like. And I do think, as you’ve articulated in public markets, there’s this pushing a negative screening is kind of table stakes for most now. I think almost everyone believes that that has a role at some level. Some people screen out 20 stocks, some people screen out 800. You know, that’s a choice of preference. I think the next step, which is becoming easier and easier, especially through things like direct indexing, is corporate engagement and proxy voting. This idea that if you hold a stock, you should take back your voice and use your voice to potentially influence the companies. And then, of course, I think as you articulated, that third step, which is the hardest, but also perhaps the most worthwhile, is this positive screening or thematic engagement, like how do we invest specifically in things we’re supportive of, corporate engagement in particular such a hot topic right now? Would you say more about what that looks like from a Christian perspective? I know you’re doing some of that. Like how does that manifest and why is it important?

Tim MacReady: So we use corporate engagement to speak to a wide range of strategies, all designed around the central goal of influencing the companies that we’re invested in for good, in alignment with our values. We’re at the point now where I think table stakes for corporate engagement is proxy voting it its shareholders. When we own shares in companies, we have rights to vote those. Many times the company, at their annual general meeting will present all the standard things. Approve the auditor. Approve the remuneration report, elects new directors all of the nuts and bolts that make a company work at an operational level. But increasingly over the last five seven years, companies are either bringing themselves or having brought into the discussion at these annual general meetings resolutions on a whole range of other things. It might be resolutions to investigate supply chain transparency risks for a company that’s sourcing from offshore. It might be resolutions to explore what the implications of paying a living wage or a certain minimum wage would be to low income employees. And many of these resolutions actually speak in large part to the values of the company. Yes, they’re about the long term financial success of the company, but many times they’re speaking to the values that shareholders expect a company to live out in the way that it conducts its operations. And so those kinds of resolutions, we think it’s really important for faith based firms who are managing assets to understand and to vote on sometimes something that at first blush looks wonderful, like eliminate all child labor from a supply chain can actually be very complex for a company to do, and we might prefer to see more nuanced approaches that, say, understand the risks of child labor in a supply chain, and take steps to support communities who are kind of forced into that situation. But even just exercising votes, there is, we think, table stakes now for managers working in this space. And five years ago, that wasn’t true. Five years ago, most managers just outsourced their proxy voting to a central firm who would just vote them in whatever way they thought. But then we take a step further. So those conversations around supply chain, around child labor, around politicization, around what communities are served, around creating flourishing spaces for employees, invitations to a broader dialog with a company on those issues. And we think that the best strategies today, and we do this with some of the clients that we support on their behalf, actually involve sitting down with companies and saying, hey, we’re believers. We represent a broad pool of assets that comes from people who believe in the dignity of everyone made in God’s image, who want to see flourishing, who want to see your company profit and succeed. We’d like to have a conversation with you about these issues, about how trafficking risks might play into your operations, or how risks of certain localized environmental issues where they might be polluting local rivers and causing problems for water supplies. All of these things, we think, are invitations to speak to companies and to demonstrate that we think as Christians we care about their long term profitability, but we also care about how they do their business and the people that they serve.

John Coleman: Well, one thing that I think is unique about what you’re talking about, a lot of times corporate engagement has been portrayed in public and often as executed as negative, like we’re lobbying against something right now. There’s a big example where a couple of big pension funds are fighting Exxon on something and trying to get rid of the entire board, for example. What we found is sovereigns. And I think what you’re describing is often the leaders of these companies want to do the right thing. Often they actually want to do things that help people to flourish. Often they’re people of faith, right, who agree with some of those principles, but they need a voice to articulate those amongst their shareholders to try and prioritize them. And so this isn’t just negative. It’s not just beating companies up. Often. It’s working with management teams to help them more fully express the values they already hold. And in that way, I think corporate engagement can be more than just the kind of beating up a company, although that might be necessary sometimes. It can also be encouraging them to do the right thing, helping them to understand where something is happening that they might not have seen, or being a shareholder voice for something the leader would like to do, so that it’s easier to have that discussion with their board.

Tim MacReady: Absolutely, John. I think corporate engagement brings both the prophetic voice and the priestly voice, the prophetic voice that says, this is wrong. As believers, we believe in the dignity of all people. And this direction that you’re going company is wrong. But often it also needs to be the priestly voice that gets alongside internal resources of the company and gives them the support to advocate internally on these kinds of issues. And so I think both are important.

Richard Cunningham: Man, it’s good to hear you guys riff on Tim. You mentioned it in your earlier comments about kind of this idea of just unknowingly, almost kind of just lobbying away your corporate engagement. And a lot of times it’s been institutional shareholder […..] are the two main kind of proxy voting in corporate engagement. You know, almost service providers, if you will. And Jerry Boyer did some research recently just looking at the way those organizations are voting. And you kind of wonder, hey, how did so much money so rapidly plow into ESG and spaces like that? And it’s really it’s because these centralized locations. Tim, you were talking about that. Many large institutions just kind of wield their influence, if you will, just because it’s what everyone else is doing. They vote the rights, if you will. And so that’s kind of how we get into situations where there’s a lot of just homogenous, similar behavior among these kind of mega corporations, if you will. All right. Well, cool to hear you guys hit on that topic, Tim. Confidence, transparency, excellence. In terms of the reasoning and the rationale behind a lot of your research on the confidence piece, a lot of it is showing the depth and breadth of the market and the broader FDI space. And this gets back to that conference talk that you gave in January. Any comments there? And just kind of insight on where we are on a macro level within the faith driven investing landscape?

Tim MacReady: Yeah, we are gearing up to publish our second annual research report into the state of play in public markets for faith based investing and faith driven investing. This year, we’ve gone past $100 billion in faith based strategies across mutual funds and ETFs and [….] funds. Last year, I think we were at about $90 billion. So there’s been good growth in the market over the last 12 months. There are 164 mutual funds and ETFs, and that’s not even accounting for all the separately managed accounts, strategies and model strategies that people can have access to as well. With 25 managers working directly in the faith based investing space, including 20 managers working solely in faith based investing. So every product that they have is integrating faith alignment strategies in some way. And so there’s this depth of products available. But also like a $100 billion market is a big market. We might look at that relative to the size of the asset management market overall in the tens, if not hundreds of trillions of dollars and think it’s just a drop in the bucket. And it is. But $100 billion is a big number, and that’s a lot of assets that are being thoughtful about the way that they’re stewarded for values as well as for growth. So we look at the performance of the market as we drove deep this year. We wanted to look at whether performance that was coming out of faith driven strategies is consistent with what we would expect and with what we see in the broader market. And the answer is that it is we divided the universe up into passive funds and active funds, passive funds that just invest essentially in an index or a benchmark, and active products that are seeking to add value. And over the last 12 months, we found that 38% of the active funds outperformed their benchmark. That is better than the broader market, where 36% of funds outperformed their benchmark last year in the index or passive fund space. We found that performance is very closely aligned to the indexes that once you accounted for fees, essentially those funds perform pretty much exactly as you would expect them to. Now there’s a range of quality in that. There are strategies that seem to be consistently outperforming. There are strategies that seem to be consistently underperforming, and there are many products that seem to cluster around what we would expect their performance to be based on the benchmarks for the kinds of assets that they’re investing in. But overall, as I said, we just found that performance is consistent with what we’re seeing in the broader market. We also have done a deeper dive this year into fees and costs, where we have found that fees are expenses of the mutual funds and ETFs are slightly higher than what we see in comparable products in the broader market landscape. You can get index products. The average index fee at the moment in the broad market is five basis points, or 0.0 5%. The average fee in faith based index products is around about 0.25% up our products available from as little as nine basis points all the way through to about 44 basis points. And similarly for active products, we found about a 15 basis point fee increase for face products over their non faith products. But crucially, we also found that the average fees in faith based products are falling faster than fees in the rest of the industry. And so as more assets flow to faith based investing, we’re starting to see those fees expenses converge with the broader market. And it’s very common as new products and strategies are developed for fees to start higher and then drop down. So overall, the big message that we’re finding from our research is that this is a credible movement with a significant amount of capital invested and performance that aligns with the kinds of performance that we would expect in the kinds of performance we would get if we didn’t adopt faith based investing strategies.

Richard Cunningham: Yeah. That’s encouraging. And another one of the things you said, too, is that as the credibility grows, the assets grow. It seems like the fees are falling and the ability to access is getting easier, as that number has jumped to that 164. And that’s only mutual fund and ETFs. I think you mentioned 25 managers and 20 of which are working solely in the faith based space. Tim. So this is public market side. You do a lot also on the private market side, specifically on manager diligence and individual, you know, fund diligence, probably harder to capture all of the macro data like it’s, you know, available in the public markets. But what are you seeing there? As you look across kind of the private markets.

Tim MacReady: Yeah. And Richard, let me speak to why we think that the micro-level research is important as well. So it’s one thing for me to get up and say, hey, this is a big market. There’s lots of products available, but that doesn’t necessarily help people to know which products to buy. As with anything in investing, putting the wrong portfolio building block into the wrong part of the portfolio, even if it performs as it’s expected, can actually lead to investment outcomes that are not aligned with a client’s objectives or with an investor’s goals. And so one of the things that’s challenging about allocating to faith based strategies is clients may not know how to talk to advisors about all the different options they have. 164 product is an awful lot of products. And as you’ve said, it doesn’t even take into account all the separately managed account strategies or all the strategies in the private markets. Advisors might not be able to access all the products. And so it’s important not just to understand the broad landscape, but to understand the investment credentials and the faith integration credentials of a product, to know whether it’s right for you or for a client that you’re working with. Even with something as basic as screening, there are so many different approaches to what is screened and how screening is applied. Do we just take the traditional sin stocks, or do we also try and hit on some of these much more qualitative and subjective issues, like child labor or trafficking or harassment? And so we think it’s just as important when you’re building a faith based portfolio to understand the role of each building block in a portfolio. We would love to know. We would love to be able to confidently say which strategies will outperform next year, in which ones won’t, but because we don’t, each strategy has to play a role in a diversified portfolio. Some will perform better if markets do well, some will perform better if markets struggle. And then you need the expertise to package these different products together into a coherent strategy that performs the way that the client expects us to. And so that’s why across both public and private markets, we research and evaluate strategies across the areas that we think matter to faith based investors, both their investment merits but also their faith integration merits. That is particularly important in the private markets. It’s much harder to get data. We don’t have a concrete scale where we know exactly how many assets are invested. We know it’s into the billions of dollars. We just don’t know how many billions of dollars. We saw about 50 strategies launched last year, specifically in the faith driven space, whether that’s groups investing in faith driven entrepreneurs, whether it’s groups investing in multifamily housing and putting chaplains in to support community development and gospel witness opportunities, whether it’s in the private credit space where we see groups lending to faith driven and impact driven entrepreneurs, even in some of the more esoteric spaces cooperatives, employee ownership. We’ve just seen a lot of products launched in the last year. And so we know, as I said, roughly 50 products launched last year. The highest category was private equity and venture capital with probably 30 or so products, real assets. So multifamily housing, office, etc. was probably about ten strategies and about ten strategies in private credit and other types of approaches. We’re going deeper on trying to understand the scale of the market and map the performance. It’s going to take us a little longer than it did for the public markets, because the data is not so readily available and it’s often in inconsistent formats. But that’s part of our job, is to translate that complex data into something that consumers can understand. As we look at the private markets, here’s what we do see. We see increasing size. We’re seeing many managers starting to come back with fund three fund four at larger sizes than what they raised in earlier funds. We’re seeing scalable opportunities, particularly in the real estate space, and we’re seeing an increased what we would describe as institutional quality, what you might also call kind of professionalism and excellence across the board, just lifting levels as the movement grows and as the amount of capital invested increases.

John Coleman: Well, I think one of the things you highlighted that’s really important from our perspective is thinking about both the spiritual integration or impact, as well as the financial acumen or the investment quality. I think one of the things that’s plagued the industry a bit in the past is the gray lines in faith driven investing between concessionary investing and market return investing, and sometimes people had an impact thesis. They would kind of pitch it as market return, but it was really concessionary in some respect. And I think the future is look, there is a role for concessionary investing. Not everything has to be at market. I think that spectrum between philanthropy and market returns is broad, and there’s actually room along every part of that spectrum, including pure philanthropy, but getting much clearer about which strategies are concessionary for their asset classes, which are market return is incredibly important. And, you know, one of the things that we’ve embraced is in a variety of ways. There are theses in faith driven investing and spiritually integrated investing that can lead to market outperformance. The thesis we embrace as a firm is that faith aligned cultures can outperform the cultures that promote human flourishing, and a love of God and love of neighbor can beat their competition in the marketplace. And hopefully that leads to investment performance. But I think the data in the institutionalization of the industry to be clearer about those distinctions, about which strategies fall, where will only help the industry move forward, because then people will have clarity what they’re measuring from an investment performance sense against mainstream offerings versus what they’re doing with some sort of concessionary impact thesis, right? Whether that be through philanthropic dollars or whether that be, you know, through their private investing dollars, but acknowledging, you know, that they’re intentionally seeing something below market for the risk that they’re taking something. We see a lot. For example, Tim, on the credit side, when you talk about things like Micro-lending super valid strategy but often has concessionary elements to it, right. And I think people having a good understanding of that framework in which products fall and what parts of that spectrum is only good for the industry as it moves forward.

Tim MacReady: Absolutely, John, it speaks to this transparency piece of being able to say, what do we expect a particular strategy or products to deliver? And then we can measure whether the excellence flowed out of that is we set realistic objectives and setting realistic objectives, not just in the return side, but also in the impact side. One of the things that we have seen starting to happen in the industry, in faith based investing, is people with a lot of good intentions, but not necessarily a clear plan on how they’re going to demonstrate that they achieved the impact that they set out to achieve, whether it’s spiritual impact, social impact, creation care impact. And so one of the big areas of focus for us as we research products and strategies at the moment is, yes, continuing to push them on investment excellence, but really pushing deep on, okay, you’re making these claims about if we invest in faith driven entrepreneurs, this will happen. Or if we put chaplains in multifamily apartment buildings, this will happen. Where’s your evidence? What are you going to measure? What are you going to report back? How are we going to be able to demonstrate that this faith driven capital is delivering the kind of outcomes that are expected and with financial performance? I don’t want to say that’s easy, but it’s relatively straightforward. We know what return we got at the end of the day with the impact performance. We want to see products being able to trace a line that says, here’s how we think we’re going to have a positive impact, support human flourishing. Here’s what we did, here’s what we measured to see whether that’s happening or not.

Richard Cunningham: Tim, one of the lines I’ve heard you give is that the credible objections or hesitations for advisors and institutions to keep saying no to this space are starting to disappear. So maybe unpack that a bit more, and then I want to go rapid fire with you both on a little bit of just kind of tying comments on the marks on the market style of this podcast and just overview a little bit of what we’re seeing as we turn the calendar from May into June.

Tim MacReady: So Richard the common objections we hear. The market’s not big enough. It doesn’t have enough depth. There’s no evidence that the performance is going to be similar. What if I’m giving up performance and leaving something on the table? And that’s a legitimate question, right? Like we want to be faithful stewards to invest as the master would have us invest. We get objections around kind of my advisor doesn’t understand this or all of these kinds of things. And what we’re seeking to do is systematically explore each of these objections and understand how valid they are. I think with $100 billion in 164 mutual funds and ETFs, the kind of depth of the market argument is dead in the water. There are some niche areas where faith based products don’t exist. There are, for example, that we’ve found zero index bond funds. And so if you really want an index bond fund in the faith based market, you’re going to struggle to find that. But there are a lot of low fee bond products that seem to perform very closely to the index. If you like growth stocks, there’s growth products. If you like value, there’s value. If you like small cap, the small cap. All of these different styles are available in various products. And so I think argument number one, the depth of the market isn’t there. I think we’ve comprehensively demonstrated that by and large it is. If you want to get into some very niche strategies, it may be harder, but the depth of the market is there for the vast majority of what clients and advisors are looking for. The second question is this performance question that we believe we’ve tackled this year. And I mean, as researchers, we want to have integrity as we approach our research. As we went deep on performance, we didn’t know for sure philosophically, theologically, as John has articulated, we think that there’s a lot of merit to faith based investing strategies in terms of the way God has set the world up to work. But what would the evidence show? Well, the evidence is showing that the performance is there in line with the broader market. And so we think we’re on the edge of kind of comprehensively busting that myth as well. Or that objection in terms of my advisor doesn’t understand this or can’t access the strategies. This is where we want to really challenge people. Push your advisor, make your advisor work with whoever is controlling their list of products to get these strategies on, and kind of tell your advisor, well, if you can’t get me access to these kinds of strategies, then maybe you need to think about who you’re working with, because there are [….] firms out there that will give advisors access to these strategies. And sometimes people need to be willing to push their advisor or encourage their advisor to move. There are some areas where I think there’s legitimate concerns. The work that we’ve done on […..] this year does show that faith based investing is marginally more expensive than its secular counterparts. We would encourage people to kind of wrestle through is that small additional cost worth it for the extra value that these organizations are bringing? All of the things that make faith based, investing genuinely faith based take time and they take effort. And so it makes sense to us that those products would be marginally more expensive than the non faith based counterparts. And so while that might be a legitimate objection, we’d encourage people to kind of wrestle with that question of what would the master have us do with what he’s entrusted to us? And is 15 basis points really that much of a barrier when you look at the value that a lot of these faith driven managers are actually generating in terms of their not just its screening, but the impact on the companies through their engagement work. So we think that most of those barriers are either kind of demonstrated to be easily overcomeable or on their way to kind of having solutions.

Richard Cunningham: And that’s good. Tim. And it’s really good to hear you articulate. It paints the necessity and the importance of a firm like yours in the work you’re up to. All right, both of you, rapid fire. We’ve done a marks on the markets and really on here on like the state of faith driven investing. But I want to do that even further and just kind of say what key happenings in the markets. You got rapid fire here. And I know that’s not much time to unpack what’s going on in the economy and public markets, but we’d love to hear from both of you what you’re seeing lately and you’re working in your research.

John Coleman: You know, I think since the last month, one of the key themes in the market, I’ll highlight two themes that I think are really prominent right now. One is the disconnect in the way that people feel, at least in the United States, versus the statistics on the market generally. There have been a number of surveys recently, particularly with the presidential election coming, showing that a majority of Americans feel that we’re in recession, even though the data would not confirm that. Quite the opposite, a number of Americans are feeling inflation more acutely than the data would say is happening. And so there’s actually a really active debate right now about the distribution of economic activity in the United States, even though we’re not technically in recession, even though inflation seems to be slowing, at least the growth of inflation seems to be slowing. It’s normalizing a bit. Even though the markets are up, many people are still feeling the impacts of inflation and what they perceive as an economic slowdown more acutely. And indeed, there were some statistics recently that showed at. Least in real terms rather than nominal terms, that the majority of Americans are worse off than they were a few years ago. From an economic perspective, because inflation has outpaced their personal well-being, and there are even a lot of serious people now discussing whether CPI and inflation measures capture what’s important. One of the easiest to understand examples was, recently there was a report that put out the increases in fast food prices at places like McDonald’s, and you could see that a lot of menu items had either doubled or more than doubled over the course of the last few years, which, of course is greater than what I think it’s been about 18% inflation over that period of time. And so there’s a feeling that maybe CPI isn’t accurately reflecting the types of things that are hitting most Americans, particularly things like housing, things like food, etc., that are quite important to them. And then the second topic that I see that we’re tracking is this continued disconnect between what I’ll call the Mega stops, the Mega cap stocks in small and mid-cap stocks. Large cap stocks have been on a roughly decade long run. Now, it’s not even just large caps. It’s the Magnificent Seven, or potentially a slightly larger group of securities in that, led by companies like Nvidia and Nvidia was worth $100 billion a few years ago. Now it’s worth $2.5 trillion, I think. And they just released earnings that outpaced even what the analysts expected. And I think there’s a question mark about how much longer that can last. Like, will we see a reversion to the mean between mid-cap and small cap stocks and large cap stocks? Or is there something sustainable, particularly in this mega cap run, particularly related to innovations like artificial intelligence that make it more sustainable? So I think all of us would have thought maybe a couple of years ago, like Nvidia has to slow down at some point. And yet it could be that AI is just becoming such a critically important part of the economy that we’re seeing a fundamental economic transformation. And so I think there’s a lot of discussion right now around what people’s public markets exposure should look like. Given that historically mid-caps and small caps are now undervalued relative to large caps, and yet we continue to see this persistence in return. So those are two topics, at least over the last couple of weeks that I’ve been tracking.

Tim MacReady: Yeah, I’d agree with John there. And I’ll pick up that point and kind of run with it. I think this dislocation that’s happened between the large cap growth stocks, particularly those Magnificent Seven and the rest of the market, is really interesting. It does seem to be largely driven by these kind of expectations of productivity enhancement through artificial intelligence. And I think those stocks are positioned well to benefit from that. But people have seen that when we look at parts of the market that might be undervalued. One of the questions that I would ask is, well, who are the other beneficiaries? All of this artificial intelligence is going somewhere. Nvidia produces and is deeply involved with kind of many of the systems that will enable artificial intelligence, but where are the companies who are going to be the beneficiaries of this, whether it’s pharmaceutical companies that might be able to significantly increase the pace of their research or the effectiveness of their research, whether it’s professional services firms where they might be able to significantly increase productivity by using artificial intelligence tools to automate many of the responsibilities of those firms. We just haven’t seen the same run up in the companies that are going to be the beneficiaries. And the uses of artificial intelligence that we’ve seen in the companies that are going to be the protagonists and the drivers of the creation of the tools of artificial intelligence. The second thing that I kind of draw attention to is around this kind of economic outlook, interest rate […..] that we’re at at the moment. For most of the last couple of years, the consensus was that all of the money that we had pumped into our economies in Covid, all of the kind of reduced interest rates that then kind of saw interest rates sharply increasing, that there was going to be a day of reckoning for that. And that day of reckoning probably looked like a fairly typical recession. Well, that’s not how it’s played out in the US. Companies and corporate profits have been really strongly resilient over 2023 and 2024. Europe struggled a little more, but even in the last quarter, we’ve started to see good economic activity indicators coming out of Europe there surprising to the upside. And inflation is tracking back towards the kind of 2 to 3% target across developed markets, albeit with all the caveats that John has mentioned there around, whether it’s actually still as useful a metric as it was. And so investors are now expecting not to fall into a recession. We think that’s probably a reasonable expectation. There’s an optimistic outlook among investors that doesn’t match the more pessimistic outlook among consumers. And we think a lot of the gap between those two things is going to be borne out in the pace of interest rates cuts, if and when they do come, people are expecting rate. Cuts to come in the latter part of 2024 into early 2025. If those are delayed, we may well start to see that business confidence and business indicators dropping back to where consumers are. If the rate cuts come through and we start to see a lot of people, particularly in the US, refinancing mortgages and feeling more comfortable with spending, then perhaps the consumer outlook increases to match the current business outlook. But I think if I were watching one thing over the next six months, it would be what are the expectations of rates in terms of what the market’s thinking and how that matches up to what various central banks around the world are saying that their intentions are?

Richard Cunningham: Right on. Impressive, gentlemen. That’s the markets in, like, 5 to 6 minutes with Tim MacReady and John Coleman. Very impressive. All right. Tim will take us home with this. This is our favorite question to ask on the FDI podcast. What’s the Lord been teaching you and in through his word lately. And we’ll close with that.

Tim MacReady: So I have spent a lot of time in years past thinking about contentment as the foundation for all Christian financial activity. It’s contentment that enables us to be joyfully generous. A discontent person can be generous. They can kind of, through gritted teeth, pull their wallet out and put money in the plate every Sunday. But the biblical command or invitation is not to generosity. It’s to joyful generosity. And only a content person can genuinely be joyfully generous. What I’ve been reflecting on in the last 18 months or so is how much trust leads to contentment. As someone who’s kind of studied a lot, both theologically and in investment markets, working in finance. I’ve thought a lot about trust and contentment. And I thought when we were living in Australia, I’m doing a pretty good job of trusting God to be my provider of not relying on external things. But I can tell you, when you pick up your family and move 8500 miles across the world to another country, it really challenges and things that you thought, yeah, I’m trusting God for that. You realize that? No, it was just that I had a sense of stability and security and having lived in the same house for ten years, and kids have been going to the same school for six years, like, it’s actually not that I was necessarily trusting God, but that that sense of stability was there. And so I didn’t need to trust. And so we’ve faced a whole range of situations, from simple things like going to the DMV and getting a driver’s license to working out how to buy a car when you don’t have a credit history, and all of these kinds of things that have really challenged my sense of stability and contentment and finding in myself that I think that always points back to a trust issue in God, do I trust that he is my Heavenly Father who loves to give good things? Who wants the best for me, and who will give me everything that he has promised? Not everything that I want, but everything that he has promised that he will give. And so I’ve been doing a lot of thinking and reflecting on that, and just the way that instability shows us where those places where we might have thought we were doing pretty well, but actually our trust might be a bit shallow than we expected.

Richard Cunningham: Wow, Tim. That’s good. That’s a really good word to close on. Well, friends, this has been Tim MacReady on a faith driven investor. Mark’s on the Markets podcast episode. What a joy to have you on. Thank you for the work you’re doing through Bright Light to you and your team. This has been exceptional for John Coleman. What a blast, gents. Have a wonderful day and we’ll catch you all next time.

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

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

Richard: Welcome everyone to another episode of the Faith Driven Investor podcast. A joy to have you with us from whenever and wherever you’re getting this July 1st, 2024 marks on the markets episode of the Faith Driven Investor podcast. I’m Richard Cunningham, wonderful to have you with us. And all of you know, as our investor audience that we typically in Mark’s on the markets look at predominantly US public equities when we do this. And we’re taking a little trip across the pond today, deviating from the markets we normally look at. And we’re going to a continent that we have a deep passion and love for here in the FDI ecosystem, none more than our two guests here. And it’s the continent of Africa. And so we’ve got Henry Kissinger on to provide a little color commentary. And Andrew Furman, who runs Clio Ventures. Gentlemen, welcome onto the pod.

Andrew: Thanks for having us.

Henry: So good to be here, Richard.

Richard: Yeah. And I should say, welcome back, as you guys are both mainstays and great friends across this movement, have been trailblazers across the movement, and a lot of the work you’re doing right now is trailblazing in the continent of Africa. So let’s start there. As we get into this episode, where did that passion for Africa start in both of you? Andrew, we’ll start with you.

Andrew: You know, it’s a great question. I always sort of joke, if you would have told me five, six years ago, this is what I would have been doing, I probably would have chuckled it. It wouldn’t have quite made sense. The journey for me, and I think probably to Henry to some extent, because we’ve been on this together, even though he’s been on it longer than I have, is it really kind of came up as a really natural need that we saw in terms of capital mix with just some really incredible founders and people that we were meeting. I think a lot of this, and I know we’ll touch on this a bit later, but I think there are a lot of misconceptions people have that I had as well. And just, you know, early on and in that faith driven investor and faith driven entrepreneur journey, just meeting more and more and more specifically, I would say tech founders in Africa. And you walk away from these conversations thinking, this is not what I thought. This is incredibly awesome. Somebody needs to back them. So the really cool part of the journey for me is that it was incredibly unexpected, very natural, very iterative. And here we are.

Richard: That’s awesome. Henry, what about you? I feel like you’re kind of the John the Baptist for the continent of Africa, within the faith driven investing space. And so maybe give us a little of the background and color for your passion for the continent.

Henry: Oh gosh. Well, it sounds like a great thing to say. The reality, of course, is that the body of Christ has been here in Africa for hundreds of years, both on the missionary side, but to build hospitals and schools and and even business to. And while some of the legacy has been clouded by the extraction element, exploitation element of a lot of people that have gone into the marketplace in Africa, there have been some wonderful people and some amazing people on the continent that have been investing in faith driven entrepreneurs for decades. And yet there is, I think, though, I think you’re speaking of something that collectively, the body of Christ, primarily in the West, is starting to pay attention to it a bit more. And I think that we’re all kind of looking in emerging markets a little bit differently over the last 4 or 5 years. I think part of it is God removing the scales from our eyes to look at the rest of the world and realize that there’s 7.5 billion people who do not live in America. And that is we look at stories like and Bible, as you see on the parable of the Good Samaritan, we just realize that our neighbor is not necessarily the person living next door, but around the world. And realizing that God had worked through my career to help me to understand that there’s a lot of joy and a lot of productivity that can come from investing in emerging markets. We started an investment fund about 13 years ago, and seven of our first ten investments were in Jakarta and Singapore, and they were very, very successful both in terms of spiritual integration but also in terms of alpha. And that helped me to understand that there are great opportunities to invest with excellence overseas. And so when I went to Africa five years ago, six years ago, for the first time in a long time, I really think that God told me that all of the things that I’ve been doing up until then were in preparation to learning how to do investing and entrepreneurship with excellence. But bringing me to Africa and it’s given me great joy. Yeah, I love talking about it.

Richard: It’s awesome. And Andrew, why is it an investing approach as opposed to something like philanthropy or government work or NGO work, which is all exceptionally meaningful, as Henry was just talking about great believers being on the ground in Africa. But why investing in your specific approach?

Andrew: Yeah, it’s a really good question. So let me just say at the outset, there’s a wonderful place for both philanthropy and charity, government aid, all of that. There’s natural disaster. We want to get people food. We want to get people water. We think the data is pretty clear that aid, whether it’s government, philanthropy, charity in the wrong area, can substantially harm economic development. And we think we’ve got a couple decades worth of data to show that in Africa, but also other places as well. So our heart for investing is we want to see that economic development. We think that a lot of the other aid and philanthropy are very helpful and needed Band-Aids. But we can’t just keep giving Band-Aids to Africa. We actually have to give that capital to see it take a step in terms of economic development. I think there’s another question within there as well, which is we’re. Really excited about venture, specifically because we think that a lot of cases, I don’t know if we think Africa’s going to grow in the same pattern that other places have, but for us, venture is being able to bring really innovative and a lot of times new solutions and ways of doing things to very real problems. And so we look at investing to say if we want a long term change trajectory of Africa and actually see people grow no longer dependent on that aid, that’s what we think is a solution, is investing in the continent.

Richard: Henry, what might you add to that?

Henry: So I’m fascinated by the relationship between dignity and dependency. And I can think about a number of different times in my life where I’ve been given things and I can be grateful, but also a number of things where God’s allowed me to have opportunities to really to innovate and create and get out there and take chances and fail and and to do well. And it’s been that iterative creative process where I’ve really felt like I’ve come alive in my faith, and I really felt like I’ve been able to make a contribution to society. And I think that it’s given me the right type of pride, a sense that God might use me, and that by going through a journey with him and taking chances in employing people and making a service and testing it out in the market, well, it allows me to feel like I’m in a place to be able to help lead the transformation in whatever marketplace or whatever industry has put me in. But what makes an entrepreneur? How does an entrepreneur thrive? How do you do the helping on the teaching? Well, part of it is the job skills, and there’s some incredible organizations that help teach entrepreneurial skills. All throughout the canon, I think about snap and I think about trigger, but capital and the Holy Spirit are the fuel that allow veteran entrepreneur to thrive. And when you can come alongside somebody and be strapped to the mast with them by putting skin in the game. I’m mixing too many metaphors, but you follow me. But being in it with an entrepreneur and like, I know that you’ve got this vision and we’ve talked about how you might think about product market fit, we’ve talked about how you might think about intellectual property or supply chain. And I know that you want to go out there and you want to hire some people, and you want to develop some channels to market, and you’re going to need some capital to do that. And I’m in it with you. That’s a powerful bond. There’s something about putting in the fuel that symbolically says, you know, beyond the training that I gave you, I’m in it. I’m going to go ahead and take something that’s near to me and dear to me that I’m stewarding and throw in with you the encouragement and the wind in the sails that that gives to an entrepreneur is amazing. It’s the way that God created us to be in community. And I think there’s something really special. We do that, and to be clear, that’s best done when it’s multifaceted, when you’re able to come into a deal together with local capital. Right. It’s oftentimes a bad recipe. When we go ahead and we have money, we’re coming in from the West. We find an entrepreneur in Africa. They win us over from their heart story. And we come in and and we invest in them. A lot of times that doesn’t go super well because at some point in time, their vice president of finance is going to leave, and then they need a new one, right? The local capital, they comes in at equal terms to us, is going to be able to help them to get a new vice president of finance or to make the introduction of the customer that they need. But the capital that we come in with, and maybe some of the experience we have in a different type of market can add value to. And so it’s just kind of it’s a mix. It’s a bunch of different things that allow for the entrepreneur to feel like I’ve got partners that have got my back that are praying for me, that are in it with me. I’ve got local partners, I got partners from overseas, and now I’ve got the momentum to get out there and do all that God has given me to do.

Richard: It’s well said. And then when you think about Africa from a just general tailwinds perspective and kind of from a demographic 30,000 foot view markets perspective, I’ve heard both of you kind of make the case for Africa demographically, whether it’s the population size and age and just everything that’s taking place on the continent. Unpack a little bit of that more, because there’s truly a passion here for the redemptive and the financial alpha side of faith driven investing in Africa. But there’s also, just from a good business sense, almost economic case for Africa as well.

Andrew: Yeah, it’s a great question. So, you know, at the outset, let me give a quick sort of definition of what we practically see as venture capital in Africa. I think a lot of times in the US, we’re specifically thinking of, you know, advanced software, whatever that I SAS, whatever that might be. And to some extent, yes, it’s there in Africa. I don’t think we are going to see a lot of, you know, homegrown new AI type products out of Africa. That’s not exactly what we see. My definition of a venture capital investments a little bit simpler, which is something that can take on a rocket like growth trajectory. And so with that in mind, when we look at what we’ve seen be successful in Africa, I think there’s a little bit of a difference with the US, where in the US some of venture, not all is kind of nice to have products, right? Even thinking about ChatGPT incredibly useful to me. I probably use more AI tools and a lot of other people, but I’m using that with a. Over my head with access to food. I have the necessities already in Africa. A lot of the deals we’ve seen successful on the venture side are ones that are solving a core problem. So food access, last mile delivery, things like that. So going to your question, Richard, I view it as a couple things. There is a long list of tailwinds, whether it’s demographics, even tech penetration, smartphone adoption, all of that’s there. But I also think the other aspect that makes venture specifically very attractive, and I mean this from a tailwinds perspective, is there’s still a lot of problems in Africa. So we took a couple investors out there a few months ago. And I think one of the eye opening things for them was we were in a country in West Africa. And as we were driving from the airport to the hotel, they were seeing these local informal markets. And you’re kind of looking at all this and at the infrastructure or lack of it and thinking, well, how can venture exist here? But then you sort of have this moment of a really amazing tech founder that understands venture, looks at this is a glass half full mentality. There is a problem to be solved. And if we can do that in a commercially viable way, the world is our oyster. But also we’re going to be able to help a lot of people. So I think when when people hear my case for it, I think there are a lot of times surprised to hear me put there are a lot of problems that need to be solved on that list of tailwinds. But that’s what we think. We think there are a lot of great things in its favor, and the fact that there are opportunities we think are going to be solved by innovative solutions. That’s where venture comes in.

Henry: Yeah, and I think that’s important. Also, when you talk about venture, let’s talk about what we think of when we think of the African entrepreneur until 5 or 6 years ago. And this is gonna sound wrong because it is wrong. I thought of the African entrepreneur as somebody that’s making handicrafts, making oven mitts, and helping disadvantaged people to learn how to diversify their income by, again, making handicrafts. Or I thought about Fairtrade coffee, or I thought about mining or things like that. I had no idea about what was going on in fintech or software as a service and how Africa now it’s got 20 or 30 years of a legacy of jumping over traditional legacy telecommunications banking. You think about some of the best financial apps in the world have their origin in Africa. You think about Android, what is it? 5 or 6 unicorns have come out of the continent of Africa. There’s an innovative, particularly in West Africa. There’s an innovative aspect to their culture, and then there’s this financial need that has helped them create different products, which actually their marketplaces are ahead of what we have in America. And that’s continuing on. And one of the things that we’re seeing now is, is just seeing more and more African technologies. And that’s why you’ve got unicorns coming out of Africa. You couple that with the fact that you’re going to have twice as many people in Africa, because the average age in Africa is 19, with the fact that they are having massive economic development, many of their economies are growing at a rate faster than the United States. You bring all those things together, the innovative culture, the size of the market, the speed at which it’s growing. And you’ve got this cocktail for great financial returns from venture at lower valuations. And you’d find in the United States, which has lower growth rates and a different type of product base. And so that’s exciting. You couple that with the fact that, well, clearly the West has gotten bigger market. You’re starting to see downstream opportunities for liquidity. So when you come into a deal and see a deal or an aid deal, maybe ten, 15 years ago, the market wasn’t mature enough to a place where you could really see where acquisitions would come in, or there could be a B round or C round. But increasingly, you’re starting to see that because strategic in America are looking at Africa and seeing the market size and saying, you know what? We’ve been duking it out with people for market share here in the West for quite some time. Let’s go to where the market’s getting bigger and where it’s getting more prosperous, and where there’s more capital to buy the products and services online through the apps and the marketplaces and people coming to Africa.

Richard: What about from a risk standpoint, guys, because so Kaleo Ventures has a portfolio of 30 plus ventures, and just you guys are off to an incredibly hot start. Henry, I know on your own, you’ve also done a number of deals in Africa, whether it be through funds or with other faith driven entrepreneurs. When you’re talking to LPs and people are just you’re talking about Africa in the case and you’re making a number of the point you’re making right now, I got to think they’re just like, hey, this frontier market is probably has so much risk. How do you approach that conversation? How do you get someone to kind of from all of like the demographics you’ve pointed out in the possibilities, but how do you kind of get them warmed up to the idea of like, hey, there is a legitimate economic viability here?

Andrew: Yeah, it’s a really good question. You know? And one of the funny things for me is I think people are surprised where a lot of times in conversations with anyone who’s curious about Africa, they’ve got a list of ten things that scare them and it’s foreign currency. It’s all that. And I think people are expecting me to have a really good argument for why their view of economics is wrong, or that geopolitical. And it’s only not that I normally respond yes to most of the risk they face where I push is, I think sometimes we complicate some of the basic tenets of investing. If we can think back to what it is seventh grade, eighth grade algebra, and we think about, you know, probability weighted outcomes or it’s, you know, the parentheses. Are expected return. That’s what investing is. And I think a lot of times we forget that most of what we consider risk, which I put in quotes because I don’t always know what people mean when they talk about the risk. Most of it is just basic math, which means we can tweak some of the inputs and get a different output. Like one example I normally give is. A lot of times I’ll talk to people who view Africa only as concessionary and they do equity investing. In my mind, that’s a math problem. I’ll ignore dilution and a lot of other of the complications here. But like, let’s assume that your average entry valuation for a company is $10 million and you say you’re a concessionary fund because maybe you’re returning a net IRR of like 10%. That’s not the company’s problem that you’re investing. It’s not the portfolio company. If you have that valuation that you get in that $5 million entry, your return profile looks very different. Now, a lot of other considerations with minimum check size, maximum all that. But the bottom line for me is risk is really a math problem. If you gave me a $10 million valuation US deal. Same deal in Africa for ten. My case isn’t that we do the deal in Africa. We wouldn’t. The question I have is at what level of valuation does that become attractive if you bring that $10 million deal in Africa down to eight to 6 to 4 to 2 to 1 at some level, as an investor, you go, okay, even though there are these ten risks we don’t see in the US, man, it’s attractive at a $2 million valuation. So our main pitches, we think investors tend to view risk in a binary fashion. The US is not risky. Africa is risky. But we forget that Warren Buffett aphorism that you can find a great company that makes an awful investment. That’s how we view it. Risk is not binary. There are ways to structure around it, and a lot of it is based on the valuation that you find.

Henry: Okay. I love that I think that’s right on. But I’m going to go ahead and look at it from a little bit of a different angle. My biggest risk is getting up to heaven. And God is like look you knew there seven half billion people didn’t live in America. And you knew that when you gave a cup of cold water and in the name of Jesus, you took care of the poor. Those are the different types of things that pleased me. And since you knew was my capital all together, who told you that it was all about building up a bigger pile of capital so that you could either hand it on to next generation, or give it away, because you knew intellectually that giving it away wasn’t always the best way to lift people out of financial spiritual poverty. So my risk is at the end when I get up there and I’m called into account now, I think that the interview is going to go great because we have a loving God who loves us, and yet we know that there’s going to be some level of accounting about what we did while we’re on Earth and beyond that. And because that sounds too fear based, I right now want to experience his joy as I steward his capital. My greatest risk is that I live this existence where I just have index funds, and just the things that might seem to make sense on a risk adjusted return by just staying in America. And I live this plain vanilla life in a way that’s black and white, and I miss the technicolor, beautiful tapestry of investing in these different economies. And yes, with excellence in a way that you can get return. But I get down on my knees and I ask God how I might steward his capital. Where might I deploy his capital through the experiences he’s given me in a way that advances his kingdom the most, I have to change my paradigm about how I think about risk now. I think as we do that, we might find that we might get great return in terms of financial return. And I think that we can invest with biblical values and make great returns, not at the expense of biblical values, but because of them. And fortunately, that’s worked well in Southeast Asia and thus far in Africa. But the greater risk for me, the greater risk is God saying, listen, I give you all this opportunity, all this capital of steward. And you knew that the marketplace was going to double in Africa. You knew that investing in entrepreneurs and then entrepreneurs were cultural change agents. You knew all of these things, but you just elected just to do it where it was safe. Man, I just don’t want it to go down like that. And so at same time, I don’t want to preach or force anybody to invest in Africa, in my experience. So it just getting down my knees and like, God, how would I do this? And I felt him calling me to do that as a big part of what I do. But the listeners to this might go through that same exercise. Lord, how would you have me steward your capital? I just listen this crazy podcast guess you kept on telling me about Africa is the place to be. Lord, if you want me to go there and to investigate it and look at the different funds that are out there and look at their assets under management, look at their track records, look at their spiritual integration, and whether they indeed are moving the needle in the way the marketplace is set up. If you lead me there, find me faithful. If instead you have me to invest in faith driven investing in real estate in America, lead me there. But allow me to experience your joy now while I allocate your capital, and allow me to just be faithful and obedient to what you’d have me do.

Richard: So maybe let’s get into specifics of some of these stories pulling color for us a little bit. So. This episode releases on July 1st, 2024. We’re recording it on Friday, June 21st. Andrew Henry, you’re hopping on a plane and going to Africa tomorrow, so talk to me about some of the entrepreneurs, the folks. You get to go see some of these. Henry, you’ve used the word spiritual integration a number of times now, as you guys invest specifically in faith driven entrepreneurs. Tell us some of the stories and some of more captivating things that you’ve seen.

Andrew: Yeah, I’d love to. So, you know, going back to what I said about some of the really good venture founders we find in Africa are ones that are tackling something that is a problem that would cause people not to invest in Africa. So one of the common ones we hear is, well, how can there be economic development when there’s not consistent access to the power grid, right. And so we’ve got two startups that I absolutely love. One of them is focused on, you know, it’s a it’s a software solution that helps utility providers minimize grid loss. And with some of the initial pilots they ran, you know, they’re a couple of years past launch now. But average on grid time went up by about 35 or 40%. So if you think of the working day and you’re adding 35 or 40% of power to the working day, the economic benefit of that is massive. And so again, it’s this glass half full mentality. Yes. Lack of access to power is a huge problem in Africa, but a really good, innovative founder is going to find a way to fix that. We’ve got another one that, you know, for a lot of places in Africa, solar is actually probably one of the best solutions. It’s incredibly cost effective. And it’s also very dependable because a lot of these rural areas especially, or even some of the urban areas, there’s some of the at the mercy of the grid, which ties into governments. Have they been efficient with funds, all of that. So to be able to essentially have your own grid through solar is massive. But the upfront cost of solar is very prohibitive to actual adoption. So we’ve got a company that is essentially a credit or financing plug. So kind of a mix of fintech and climate tech. And those are the kind of solutions that we think are great. They adapt well to the context in Africa. If they’re successful, they’re going to help an incredible number of people, but they’re trying to do this in a commercially viable way. So those are the types of solutions we see as identifying a real problem in Africa. They’re thinking, how can we think through a new innovative solution to cover that. And so we just continually meet with founders. We don’t invest in everyone we meet unfortunately. But you know, I think everyone we meet with, we just love this passion and this energy of, you know, whether it’s the continent as a whole or in most cases, it’s their country that they love and they want to see and grow, and they’re just trying to think through really new, cool ways to solve very real problems.

Henry: Yeah, well, I’m glad that you don’t invest in everyone that you see. I think that a good venture portfolio invest in a distinct minority. So I think the selectivity that you and other managers have there is really, really important. But I want to also introduce a different paradigm. And I semi conscious of the fact I’m getting all preachy on this podcast. I don’t think that that sells podcast very well, but there’s a working theory of change that I have when I think about the alleviation of financial and spiritual poverty in Africa, that I think is really compelling for me. And it’s twofold. One is that when you think about spiritual integration, because that’s the other thing, like, so we talk about risk. We’ve unpack that a little bit, some nuance. And I think that Andrew looking because he is he’s a fiduciary manager to deliver and wants to be a top quartile fund to deliver great financial return. That’s his job. And he does that. And that’s important. And I looked at risk from a little bit of a different level as an LP in his fund about how I get excited about what it looks like to come alongside these men and women of their faith as they look to be a blessing on their community. And one of the things that is really just captivating me, and has allowed me to experience more joy in my investing in Africa, is that when I sit down with an entrepreneur in Africa and I meet some of Andrew’s portfolio or some of the portfolio companies of the other funds we’ve invested in, they get spiritual integration in the fact that they can bring their whole selves to work into the marketplace every day. Somewhat of a foreign concept here in the United States, when you work with a feature, an entrepreneur in America, you have to help them to come along to understand that their work matters to God, and that being a Christ follower means that you can share your faith when someone in your story, when somebody in the marketplace, you can pray for people in Jesus’s name. These are all things that are counterintuitive to a Western entrepreneur that is trying to throw off the vestiges of an evangelical Gnosticism. What in the world does that mean? Well, you know, a lot of us in the missions world will know that you can go to a place where they formerly had animist beliefs, and then they convert to Christianity. You go to their churches and it’s kind of this mix up of just, you know, kind of some of the animist traditions and then the new Christian ones. It’s called syncretism. And it’s easy for us from the West to be able to see that and say, that’s really weird, and that’s messed up, and it is. And yet we’re unconscious of the same type of syncretism we have here in the United States, and that is that we come out of the Greek belief. Gnostics were early heretics, but it was just the way that things happened in the agora, in the Greek marketplace. The Greeks believed in a separation between the secular and the spiritual, and we have exacerbated that. And that ends up being the case today. And you don’t see that in the Bible. You see Lydia, you see Paul. You see Priscilla and Aquila, you see these people bringing their faith into the marketplace in a way that was just inclusive. Well, we have to realize that because we come from the Greek tradition, we have those challenges. They don’t have that in Africa. In Africa, the traditional faith traditions are that if you have a problem with your business, you go to the witchdoctor and he gives you an idol to put in the store window, or he gives you a powder sprinkle over your competitors products. When they come to Christ, they haven’t come out of that type of background. And of course their work matters in the spiritual world. They have no problem praying with people in Jesus’s name. They have no problem talking about their story. We don’t have to talk about the integration, about being a blessing, making a redemptive product and service, loving on their partners, vendors, customers in place. That becomes intuitive and the next thing that happens, and this is one of the things that Andrew and I are going to be spending some time with, with some of these companies next week, is that as they integrate their faith and they become more generous and they understand that God owns it all. They’re in a great spot to go on boards of ministries and orphanages in the villages they came from, and to love on the people in an expanding marketplace. Nigeria has 210, 220 million people going to 400 million. The people are going to have the best idea about how to come up with the right type of new systems for adoption, or foster care or church planning are going to come from this entrepreneurial class. They’re going to be coming in with their own financial money, their own resources, their time, their resources, and then inviting us to come along side with them. So sometimes I wrestle with. You know, we’re investing all these fintech entrepreneurs, many of whom are Western educated. And is that really going to be enough to lift people out of poverty in these villages? Because that’s a big passion of mine. Well, I think that part of the answer is understanding that since entrepreneurs are the cultural change agents and continents in emerging markets like Africa, that if we can come along with them and give them an alternate sense of what success looks like from the financial success that they will have, what does that look like? And instead of going ahead and buying a flat in Kensington or sending their kids to Eton or Deerfield or Phillips Exeter for them to instead understand that God owns the financial resources that will come out of their business, and to pour that back in to their countries that they know the culture of. That’s what gets me really fired up.

Richard: Henry, why are you talking about those specific countries? I think it’d be helpful to do this real quickly. Where are you guys focus currently from? Like, a specific country standpoint. And are there differences? Kind of. Africa is a massive place, like in kind of what you’re seeing in West Africa versus East Africa, and where kind of some of your focuses.

Henry: Well, Andrew should answer that for his find a clue from a family office perspective. We’ve invested in funds in East Africa, in South Africa and then in West Africa. I may have a special place in my heart for West Africa, because the dynamism of the marketplace and just there’s a creativity and innovation of entrepreneurs there that’s really compelling. But there are great opportunities to invest in entrepreneurs all over emerging markets and in Africa, pretty much in every sector.

Andrew: You know, and I would agree with what Henry said. You know, on our thesis, we are technically a Pan Africa fund, so we’re one of the few we can actually do North Africa as well, even though, to be clear, we haven’t. I think a lot of times, you know, we’ve done a lot of investing in East Africa. So some in Kenya, Uganda, Ethiopia, South Africa, Latin Nigeria. The one clarification I normally make is I think especially when Western Christians talk about Africa, they tend to say Kenya and Nigeria in the same sense. And I just try to remind people Kenya is just over 50 million people, Nigeria’s 220. So yes, again, very developed countries. We’ve got some great portfolio companies. Kenya. We love Kenya. Nigeria is big. And when you think about, any kind of venture backed company to have a captive market that’s four times bigger without having to go cross-border is a very big deal. So we are pan Africa and probably with deals in 12 or 15 countries. But, really West Africa for us is a good additional focus to have just because, again, it’s just such a larger population to some extent, a little bit more untapped. I think that a lot of the DFI and some of the more impact focused money for a lot of good reasons has centered on East Africa. The UN’s there, there’s some easier entry points. And so to some extent, West Africa is a little bit more untapped. And as Henry said, in some ways we just see a little bit more of an innovative approach to problems because they really haven’t had the capital access in the past. And so their only option is finding something different that’s market compatible.

Richard: Well said. Thanks for explaining that. That’s probably a good point to plug if you’re a faith driven investor out there. Curious about frontier emerging markets, Africa specifically, whatever it might be, there are faith driven investor groups designed to go focus on specific geographies. I feel like I mean, I want to plug in, explore West Africa, East Africa or Southeast Asia, what have you. There are ways to plug in to the FDI kind of community and ecosystem with that geographic lens, alongside other faith driven investors who are passionate about a particular area. All right, gents, last question. And then I want to hear about what the Lord’s been teaching you in his word. And we’ll wrap this thing. But I’m a faith driven investor listening to this podcast, and I’m still kind of wondering, man, like, it just feels like the investment minimums would be so large to go into Africa and make a change or just I’m not there yet. Like, I can’t hop on a plane reasonably like the two of you and go to Africa tomorrow and things of that nature. What all opportunities as you think about the continent, are there beyond maybe just capital or what is kind of that final thing you’d like to kind of encourage someone with or leave with them?

Andrew: It’s such a good question. You know, one of the things about a year ago, I started we’ve got some friends who are a little bit later founders maybe kind of series B or series C in Africa. And over the course of a couple of weeks, I pulled all of them and essentially asked them how much of the mentorship that you’ve been given from people in the West has ported over to the African context? And the reason I ask that question is, as I talk to Americans, I think their view is I don’t have anything to offer. Right? I mean, I just don’t understand Africa. I don’t stand a local context. I don’t understand the risks that they face. And the average number and I have is written down. The average number was 95%. So in other words, the founders at succeed tend to say almost all of the mentorship that we can glean from somebody in the West ports over to Africa. So yes, there are local things that you might not know, but I think my encouragement would be if you’ve got a heart for it, and maybe over the capital or the logistics or even the time to pursue it, don’t underestimate the impact that you can have made. Terms of mentorship perspective to a younger or just earlier founder in Africa. I think that would be the encouragement I’d want to give is there are more ways to help than just capital, and it’s probably going to be more helpful than you think.

Henry: My encouragement would be to just check it out. And there’s some really, really neat funds out there. And of course, Andrew with Kaleo. But you’ve got Sango, you’ve got a Rua future Africa Ventures platform, aka Creed. There’s just some really, really compelling ways to get in, to invest with excellence, with people who understand the marketplace and then just and pray about it. If the body of Christ just realized that God does care about how we steward his capital and ask him, Lord, should I be looking at this or not? That’s the big one.

Richard: All right. Well, our favorite question to ask on the pod, what’s God been teaching you in it through his Word lately? And we’ll close there.

Andrew: You know, I think my answer, this is one of those things that’s not new, but I think we have to continually remember as believers, I’ve been in the book of Hebrews in Leviticus a lot, and I think Lord’s been hammering home is the work is finished. I know Jesus said that on the cross, but you see in Hebrews, you know, he sat down at the right hand of the father. Our high priest sat down. He finished his work. That’s what the Lord’s been showing me. The work is done first.

Henry: I love, of course, this question, and really the story in the Bible is that I think it got really used on me recently. Is the ten lepers okay, Jesus going down the street and he sees ten lepers and he heals them all. And some amount of time goes by and I don’t know how much time it was, but one comes back and thanks him in a loud voice. Okay, what happened? The other nine? What do they do? Well, I don’t know. They went back to the office and all these emails get caught up on. Or maybe some of the lepers went back and try to figure out if that cute girl that they knew before they had leprosy is still available. I don’t even know what they’re doing, but they got distracted. Only one came back and said, thank you. If you look at that story from an apocryphal vantage point, Jesus walks down the street, sees ten lepers, and says, here’s the deal. You’re going to have to work for me for the next 7 or 8 months. I’m going to get you at 6 a.m., and you get off your shift at 10 p.m., but at the end of that, you will have earned your freedom from this debilitating skin disease. How many of the ten would have taken him up on that deal? The answer is all ten. And then we have this challenge with the beauty and the challenge of our Orthodox Christian faith, which is we have unmerited favor, free grace. And the question is, am I the one leper? Am I going back and praising God in a loud voice? Or am I completely sucked in by the worries of the world and the deceitfulness of riches? And I don’t have the opportunity to have the type of return of the 30, 60, 100 fold. Because if we just have an intellectual cultural understanding, the odds are that nine out of ten of us won’t live the type of life that we’re capable of, and we’re at a disadvantage to other faith traditions in some of these emerging markets that are based on earning your salvation by doing good works. But again, if we can really capture the beauty of the gift given us and the value of it, then God can use that to multiply again 30, 60, or 100 fold, which gives us an advantage over the faith traditions where you have to earn something. And so what he’s been teaching me is and just really question is like, are you the one leper I want to be the one leper. I don’t want to be the nine.

Richard: That’s awesome. Well, Andrew Furman, Cleo Ventures Henry Kastner, obviously co-founder of the Faith driven movement, both of you guys are such a profound encouragement. You’ve been trailblazing inside this FDA space. Safe travels to Africa. Have a wonderful trip. Thank you for what you guys are doing, the work you’re doing, the ways you’re kind of helping faith driven investors shift their focus from maybe just their domestic focus to what else God is doing across the globe. What a joy to have you on, gents.