Invest Like the Best with Patrick O'Shaughnessy
00:00:00 · Patrick O'Shaughnessy
[00:00:00] S0: I know firsthand how complex the tax stack is for asset managers, and seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount, and more risk. Ridgeline offers a better way forward, one unified platform that automates away all that complexity across portfolio accounting, reconciliation, reporting, trading, compliance, and more. All at scale. Ridgeline is revolutionizing investment management, helping ambitious firms scale faster, operate smarter, and stay ahead of the curve. See what Ridgeline can unlock for your firm. Schedule a demo at ridgelineapps.com. OpenAI, Cursor, Anthropic, Perplexity, and Vercel all have something in common. They all use Work OS. And here's why. To achieve enterprise adoption at scale, you have to deliver on core capabilities like SSO, SCIM, RBAC, and audit logs. That's where Work OS comes in. Instead of spending months building these mission critical capabilities yourself, you can just use Work OS APIs to gain all of them on day zero. That's why so many of the top AI teams you hear about already run on Work OS. WorkOS is the fastest way to become enterprise ready and stay focused on what matters most, your product. Visit workos.com to get started. Felix by Rogo is a personal finance agent that turns a single prompt into finished client ready work using your firm's own templates, context, and standards. Send Felix an email like, take these comments and turn them for me, or update my tracker with the context of these emails, or run the ability to pay math on this buyer, and Felix sends back finished PowerPoint decks, Excel models, and sourced research. Felix works the way your team already does, delivering work quickly and accurately around the clock. Learn more at rogo.ai/felix. Hello, and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like The Best. This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and wanna go deeper, check out Colossus, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus along with all of our podcasts at colossus.com.
00:02:00 · S1
[00:02:00] S1: Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc.
00:02:28 · Patrick O'Shaughnessy
[00:02:28] S0: My guest today is Vlad Barbolat, the chief investment officer of Liberty Mutual Investments, the $120,000,000,000 investment platform that sits within one of the largest insurance companies in the world. Vlad grew up in Soviet Moldova, came to America in 1990, and built a career that eventually led him to one of the most distinctive capital allocator seats anywhere in finance. Today, we talk about how the mutual insurance structure creates a unique investment platform, what Liberty looks for in a new deal or partner, and what it means to build a career and a life in a country that gave you opportunities you never would have had anywhere else. Please enjoy my great conversation with Vlad Barbalat. Vlad, this is gonna be a fascinating conversation given that you sit in one of the most interesting investment seats probably in the world. I think to give people context, the right place to start is for you just to describe the platform, how much money you manage, how it's managed, to why that platform is unique and different. The seat itself is so interesting to me, and then we'll go into all the things that you've learned sitting in the seat and building the platform. But first, just like ground us in what is the thing, how big is it, how does it work?
00:03:29 · Vlad Barbalat
[00:03:29] S2: The thing is the balance sheet of one of the largest insurance companies in the world, one of the most diversified insurance companies in the world, Liberty Mutual Group, which has two primary insurance businesses that ultimately feed the investment platform. First is the one that probably most are familiar with, the Liberty Jingle, which is our personal lines business, one of the largest in The US, that of course is the home and auto component of our business. And then there is the business that is much more global in nature, and really serves a sophisticated set of companies, brokers, partners providing commercial and specialty insurance across many domains of business. Those two insurance businesses ultimately feed an investment platform that takes the reserves as well as the surplus capital of Liberty Mutual Group and invests it for the benefit of our balance sheet, ultimately for the benefit of our policyholders, so that we can ensure that our promises are always met and have the financial strength behind them. We are about a $120,000,000,000 in capital and what's interesting about our platform is that it allows us an incredibly unique way of behaving as investors, which is to say we are focused not on any form of third party capital, which has lots of benefits but also lots of challenges when you manage money. And it allows us to think about investing from a long term perspective and that allows us to do the right thing not the expedient thing. It allows us to maintain what I would describe as investment hygiene, that is one of the most difficult things to do when you're managing other people's money. The other part that's quite unique is the ecosystem that we're in, which allows us to continuously grow our capital base in the service of our policyholders. We are not driven by shareholders, for example, whose priority is return on capital in the form of dividends and buybacks. That's not part of our structure and it allows us to, again, think about making decisions that are the right decisions, not expedient decisions.
00:05:34 · Patrick O'Shaughnessy
[00:05:34] S0: Maybe explain one level more why the insurance idea is so powerful. Very famously, Buffett built a big chunk of Berkshire's success on this idea that if you have a sort of insurance part of your business, you control this float, and that that's this magic access to capital, and creates this permanence that allows you to do things others can't do. Maybe build that bridge between sort of the Buffett way of thinking, and how it feels to actually operate this thing.
00:05:58 · Vlad Barbalat
[00:05:58] S2: What really is interesting to me is how insurance is one of these industries that serves so many different purposes. And the way I like to think about it is that one side of our business and one side of our balance sheet is all about protecting, whether it's an individual, whether it's a business, and syndicating that risk, allowing risk to be taken by the people in the world. And so we have a very appropriate way we think about that at Liberty. We say we want people and businesses to embrace today and confidently pursue tomorrow. That's what the insurance part of our business does. When we sell those promises, when we take in those premiums, we then move them to the other side of the balance sheet, and we do something else that's really interesting for the economy and society. We invest that float as Buffett would say it, but ultimately invest our policy holders premiums in order to grow the economy, to support the economy, invest in critical infrastructure, fund entrepreneurs, create jobs. And so where we sit in the economy is quite a unique place. We do things on both sides of our business that allow us to protect and now create the foundation of commerce, and at the same time grow the economy. That's a unique spot.