Invest Like the Best with Patrick O'Shaughnessy
00:15:26 · Patrick O'Shaughnessy
[00:15:26] S0: Vanta automates security and compliance for over 16,000 fast moving companies like Ramp, Cursor, and Harvey, keeping them audit ready around the clock. It's the number one agentic trust platform, and it now helps companies like yours watch for the risks that show up between audits, across your vendors, your AI tools, and your whole environment. Every new tool your team signs up for, every vendor that turns on AI features, is an opportunity for something to go wrong, and most security programs weren't built for AI's pace of growth. The Vanta agent works like a twenty four seven GRC engineer in the background, finding issues, drafting fixes for you, and cutting vendor assessment time by up to 50%. Whether you're a fast growing startup or a global enterprise, Vanta helps you earn and prove trust. Invest like the best listeners get a special offer for $1,000 off at vanta.com/invest. Ridgeline is the first end to end system of record with embedded AI for investment management firms, running portfolio accounting, reconciliation, reporting, trading, and compliance on one unified platform. Firms are moving off legacy technology and onto Ridgeline because of how far ahead Ridgeline's AI features are compared to anything else in investment management software. I've been hearing from a lot of investment managers about AI, and they fall roughly into two camps, with some unsure of where to even start and others convinced they can build their own order management system over a weekend. The reality is that running an investment firm will always require governance controls and a single source of truth for your data, and no amount of AI enthusiasm changes that requirement. Ridgeline is built on exactly that foundation, which is why I believe that firms that come out ahead in the AI era will be the ones running on Ridgeline's unified platform. If you're serious about your firm's AI strategy, Ridgeline should be part of that conversation. You can request a demo at ridgeline dot a I. Let's put the hat of the originator on, whether that's a GP or someone that has a specific deal or something, someone that needs capital and has an idea. And they come to you because you've got the reputation you do for being one of these both big, stable, and flexible partners that likes novel stuff. What gets you and your team's attention?
00:17:37 · Patrick O'Shaughnessy
What are the attributes of an originator, their strategy, the idea that tends to get you engaged? Above all, if you're coming from place of a newish idea and you've
00:17:46 · Vlad Barbalat
[00:17:46] S2: got ideas and you're looking for capital partners, one is we always want to get that phone call. By the virtue of what I've described before, our approach to the way we partner with people, these kinds of things come as referrals rather than a barrage of cold calls, and that in itself is super helpful. What are we interested in? There's a very wide waterfront of things that we do and we already know that. If something falls outside the waterfront, there's obviously going to be a higher burden of proof on that. We may not have the expertise. We may not be able to assess or find a fit in the book, but that's more rare. What is more interesting is, what's the unique proposition that is being brought forward? By the way, those are not frequent. It's not easy to be original in many of these industries and sub industries. But we're willing to back people, we're willing to take a risk on people we believe in, if we see integrity, if we see an idea that makes sense, and if we can find a true partnership that has the ability to serve both the originator in this case, and liberty for the long run. That links to something very important to me in my time in this role, which is to say, what possesses a professional sitting at a stable large insurance asset manager to take entrepreneurial risk. That's a cultural dynamic and one that shouldn't be taken for granted because the easy answer is, this falls outside my area of comfort, why in the world would I take the risk? We have been incredibly purposeful in developing a culture where people have the incentive, the types of people that would be curious and interested, and have the governance structure in place to actually take those risks. And I view that component of the organization as one of the largest and most important responsibilities I have. To make sure that we have the people that will actually engage the right way, because the first time someone turns that call away or behaves in a manner which doesn't demonstrate curiosity and entrepreneurial spirit, those referrals that I talked about earlier, they'll dry up because the reputation is built on that entrepreneurial spirit.
00:19:58 · Patrick O'Shaughnessy
[00:19:58] S0: Why take the risk at all? If I think about the $120,000,000,000 again, there's a long history of insurance being pretty sleepy, investing in bonds, earning a small spread on the float, no one gets fired, nothing goes wrong, you can still be a great insurance provider. Why bother at all? Applying your craft and your career in this space versus like a more traditional asset manager? Why is the juice worth the squeeze?
00:20:22 · Vlad Barbalat
[00:20:22] S2: I really do believe what I described before, is really unique place to sit in the financial system, in the fabric of the economy. You sit and you support the economy in two different ways. But specifically, why not just invest the whole thing in the bond portfolio and go away? That would prevent you from ultimately being a balance sheet that can adopt new technologies because that's obviously a constant in our world. It is a balance sheet that is able to adapt to the evolution of the economy. Risks are evolving all the time. The risks that insurance companies took on twenty five years ago are very different than they are today, and for sure they will be different tomorrow. I'll give you an example, data centers. This is a totally different scale of asset and values than of an asset that have existed before. Insurance balance sheets aren't large enough to just absorb that. That's why you have an extension into all forms of third party capital coming in. But that's an example of where if you build a fortress balance sheet, you're able to do things that others will not. How do you build that fortress balance sheet? Through two main engines of profitability. One is the underwriting part, but that's a thin margin business. And then through the asset side, where if you simply take the approach of let me buy a 4% investment grade bond or 5% investment grade bond versus trying to achieve a 7%, 8%, 9%, 10% return on the totality of your portfolio. It's all the difference in the world. It is a competitive business where the amount of capital you have will dictate the opportunity set that is available to you both on the liability side and the asset side.
00:21:56 · Patrick O'Shaughnessy, Vlad Barbalat
[00:21:56] S0: In a mutual structure. I would totally understand it if I was an equity shareholder, you can invest this at a high rate of return, like that's good for me. Maybe close the loop for why that's good for the holistic thing. [00:22:07] S2: I would actually reverse that. I think as a public insurer, you're not likely to be able to pursue what we're doing because if you're a shareholder of a public insurer, you can bifurcate these two things and say, you have historically not been a sophisticated investor, you've been much more conservative. What I ask of you, management, is to deliver me a very consistent margin on the underwriting. I'd like to get as much capital back from you in the form of dividends or buybacks, I don't need you to recreate an investment firm on the asset side of your balance sheet because if I wanted you to do that, well instead I can just take [00:22:49] S0: I could do it.