From Managing Portfolios to Running an Organization with Mike Freno
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This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

This week on the podcast, what a fascinating guest. Mike Frino is chairman and CEO of Barings. They run over $431 billion in global assets. Fascinating combination, not really related to the Barings Bank of old. You know, if I think of Barings Bank, you think of the bank that blew up when you had an unauthorized trader, a

acting out as well as the first bank in China and Japan and finance the Louisiana purchase.

That is not this entity. ING purchased them out of bankruptcy. I think it was for like a dollar or a euro. And some years later sold them to MassMutual. And then MassMutual combined Barings Investing with a number of other shops, including Babson, a very well-regarded investing firm. The shop manages about...

well over $430 billion. About half of that comes from MassMutual. The other half comes from institutional investors. What they do is really fascinating. They have been working in various credit and other private areas for decades. I know there's been a big rush into private credit and private debt over the past few years.

Barings has been doing this and MassMutual has been doing this for decades and decades. They run a ton of money in order to...

manage their future liabilities as an insurer. And it's pretty much non-equities. I think they have about $10 billion out of the $400 and change billion that's in public equities. Most of what they do are real assets, credit, debt, middle market banking,

They're looking for a fairly reasonable stream of future income, less volatility, and the potential to meet those, as an insurer, those future liabilities down the road. Really, not just a fascinating area, but...

But Mike Frino is so knowledgeable. He worked as a trader. He worked as essentially a high-yield portfolio manager before going to the president and then CEO of the company. So he has seen the world of private investing from both sides, both as an investor and as part of the management team. Super knowledgeable, super informative.

I found this conversation to be absolutely fascinating. And I think you will also, with no further ado, my discussion with Mike Frino, chairman and CEO of Barings. Thanks for having me. Great to see you. Great to have you here. Let's talk a little bit about your background and background.

What led you to this career, a B.A. from Furman University, an M.B.A. from Wake Forest Business School. Was finance always the career plan? Well, originally I started out in accounting. So I was an accounting major coming out of Furman and worked with...

the legacy firm for the date myself a little bit, Coopers and Libran briefly before it was merged into PricewaterhouseCoopers. And so I spent a couple of years on the audit side and then actually transferred over to the tax side. So my first four working years were spent in public accounting. And so that was really the intention at the time was I was interested in accounting. I loved

Many people won't appreciate this, but love the way financial statements work. I like to see how businesses make money. And so I always envisioned myself doing that. But it did have a good, a fortunate opportunity to go really work at a startup hedge fund. It was M&M Partners at the time. It was relatively small. We were just over 100 million when I went to work there. I went as a controller. So to kind of help out on the accounting side of things and the fund side of things. And

And then as companies grow and you're only five people, you tend to start to wear a lot of hats. And as a result of that, had the opportunity to start trading, had the opportunity to start doing some analysis. We had multi-strategies that we ran. We ran a merger arbitrage strategy, also distressed debt, which is really where I probably gravitated to the most just because of

The fundamental analysis that's associated with debt investing. All right. So you start out as an accountant at PricewaterhouseCoopers. You're a controller at M&M Partners Hedge Funds. How do you go from there to Babson, a fairly large investment shop?

Yeah. So it was, again, often these things, you have to be in the right spot at the right time. And fortune was there for me. And so, again, I was gravitating more towards, I did some trading. So I was working on the trading desk, but really gravitated toward our distressed and event-driven strategy, which was largely around trading.

At that point in time, it was the early 2000s. You had a number of bankruptcies going on. We were analyzing all sorts of things. And I really enjoyed the analysis around that and then had the opportunity to speak to the folks at Babson, which was one of the predecessor firms to Barings.

And they were really down there running a leverage loan and a high yield business, again, which was fit really nicely with what I was doing. They were moving into more event driven strategies as well and had the opportunity to go over there and start working with them at the time. Babson had about.

20-some-odd people in Charlotte. We can talk more about this later, but we're up to over 700 now, so there's been a tremendous amount of growth there. But really, in 2005, I made that shift to Babson and really still doing what I was doing, focused on fundamental fixed income analysis. It's kind of fascinating because you almost defensively said how much you enjoy

accounting, but if you're a good accountant, you look at a balance sheet, you can imagine what's going on in the company, where their growth areas are, where their problem areas are, where they're spending too much money. I would imagine that would lend itself very well

to distressed asset investing and leveraged asset investing. Tell us a little bit about that. Yeah, I think it has. And I do. I say this to folks and folks in other industries when you talk about the excitement of analyzing a financial statements and going through. But it does tell a story. I mean, if you know how...

how income statements and cash flow statements translate into balance sheets, it will tell a story of how companies are doing. And if you have the intellectual curiosity to dig deeper into it, you can really get a full picture of who's got a sustainable business, who possibly doesn't. And so you couple the fundamental analysis that with some general understanding of a business, and I think it's an exciting combination and one that I really had –

had passionate route and enjoyed doing. So again, was very fortunate to find myself in many roles which allowed me to do that. And you mentioned Charlotte. My firm has an office in Charlotte. I seem to visit Charlotte like every few years. And every time I show up, it's like, oh my God, this place is double the size it was 18 months ago. The growth in Charlotte is really quite amazing. And it's become this giant finance hub.

Tell us a little bit about, and you've been there your whole career, right? Yeah, I've been there largely. I started out in South Carolina. I went to school, Furman was in Greenville, South Carolina. So I really started my work there. But then ultimately the majority of my time since 1999 has been spent in Charlotte. And to your point, it continues to grow at a rapid pace. It is a financial services hub. It's certainly not New York City, but it's definitely the top two or three in terms of large financial services. We had the benefit of,

having Bank of America be located there, Wachovia and First Union, the predecessors to now Wells Fargo, had a headquarters there. They do continue to keep a large presence there. But what's interesting about it is when we first started going around and marketing to the world and our institutional clients, we would often get questions, how do you retain talent? How do you attract talent in Charlotte? And the response was, just come see it. Oh my God. First of all, it's beautiful.

Second of all, everything is very reasonably priced. And you have great barbecue and the NASCAR museum and headquarters. Really, there are worse places in the world. And the weather is like...

and reasonable. And you sound like you're working for the Chamber of Commerce. Well, we have an office there and every time I go down there, it's very funky and hip. It feels like a southern version of Brooklyn. And so I don't see attracting and retaining talent as very difficult in Charlotte. It's become an asset for us to be located there for sure. And we've...

The talent's there, and so you've seen a number of smaller financial services firms start up around there because – and financial services firms like yourself have moved down there because that's where talent is and that's where people want to live. So it's been great. It's been nice to see the growth, and there's a real commitment to the city there. So I think we've got a few more years of growth for sure. Yeah, no, to say the very least. There's a bright future there. So I want to talk a little bit about leadership, especially leadership at a large investment firm.

First, what was the transition like going from being on a training desk and managing portfolios to running the complete organization as CEO? Yeah, it was a – I stepped in in November of 2020 because a lot of things were going on during that period of time. So it's a change. But I was fortunate. As I said before, I came from an accounting background. I was also at the hedge fund –

I was involved in the operations early day of getting things up, understanding how settlements work, things of that nature that is in the... They call it the back office today, but it's increasingly important and complex, candidly, when you move into different types of asset classes. So I had some familiarity with that. I did have a stepping stone from when I was managing portfolios to before I took over the CEO. I briefly, for about...

eight months sat in the president's role, which gave me also oversight over investments. I had the investments, the sales, technology, and operations. And while a brief period, it gave me an appreciation for things I didn't know well, and I think actually provided me a pretty good roadmap for

starting to rely on other people because you're not going to know everything about everything. I was investments. That's in my background. But running a company requires a lot of other people to do a lot of other things and making sure that you are comfortable. And we'll say it in this way, letting the plumbers fix the sink.

So I wasn't an expert in technology. I wasn't an expert in operations. So I had to rely on and make sure I had people there I trusted to make the decisions. And I think that was one of the things I learned early on was I should probably make few decisions as the leader of the company and entrust my people to make a lot of them. But make sure you've got the right people there to do it. And then the transition is it's different. Managing money and managing people is dramatically different.

And this is the people business. Our asset is our people. It's an incredibly valuable asset. And then running something that's global.

creates a whole other set of challenges. We're in over 20 countries, and when people talk about culture, we have different cultures, candidly, in different regions because there's different behaviors and things that are done there. But I will say what we do when we describe it is we have a set of philosophies, a set of principles, and a set of values that are consistent with

And understanding that and recognizing what works in Charlotte, North Carolina may not work necessarily in Seoul, Korea, was actually a pretty big learning curve for me. Yeah, I can imagine. So it's interesting. Your background is at M&M, started out with five people. At PricewaterhouseCoopers, or even back in the day when it was just Liburn and Coopers. Coopers and Liburn. Coopers and Liburn. They're giant. They're thousands and thousands of people. Right.

What did the experience at both a small firm and a giant firm, how did that shape your leadership at Barron's? Yeah, I think working at a small firm, you begin to appreciate how effective Barron's

quick decision making can be. But understanding working at a large corporation that you need to have controls, you need to have some element of controls and process that goes along. And so balancing those two out and creating an environment where you're empowering people to make relatively quick decisions

And failing fast as well. Make decisions to invest, make decisions to go grow businesses, to acquire businesses. And if things don't work, let's be intellectual honest about it and move quickly. So I think the balance of those two and marrying those two together – and while we're a large company, we're around 2,000 people, again, in over 20 countries –

It's big enough where it requires certain process. You can't have the decision makers all sitting in a room every single day just making them. It does require some ability to decentralize the decision making process. And as I said earlier,

As you move further and further up an organization, you probably should be making less decisions. And you're empowering. You make the big decisions, the ones that are critical to the survival and effectiveness of the company. But outside of that, really relying on your team to do a lot of that. So I think working at both and having the experience of both gave me the appreciation for both. So you've spent about 20 years, maybe a little over 20 years, at the same company now? Yeah.

increasingly becoming a rarity. Everybody seems to move jobs and companies pretty regularly these days. Tell us what keeps you at the same firm for so long. Yeah, so it's coming up on 20. I've been over 19 years now, so we're coming in on 20. And I was very fortunate to find myself working at Babson at the time.

in a place that fit my personality and my skill sets well. It was very much a team-based approach. It was very much a collaborative approach. It was built on fundamental analysis, which fit my skill set well. And so I think when you're fortunate enough to find an environment where your skill set can be amplified by those around you and by the business process or the culture that's there,

It works. And I was, again, very, had an opportunity to take on a lot of responsibilities. I was entrusted with things early on in my tenure there and was able to start new products, to go out and market those products, to see how things worked.

And so I've I hopefully have have created what I enjoyed or at least fostered what I enjoyed so much when I joined the legacy company Babson. And it's allowed me to stay there. And again, I can't thank my predecessors enough for giving me the opportunity and chance to really to really grow as a person, but but also grow the business. Last question in this section is.

You alluded to something that I'm kind of fascinated by, and I've observed it in a number of different companies. I'd love to get your thoughts on this. As a company grows, as you add more assets, more people, more divisions,

exactly what you said about you making the critical decisions, but being willing and able to delegate decision-making authority to people underneath you. I have heard a number of people talk about how challenging that is to let go. Tell us a little bit about your experience with it. Yeah, I think one thing I'm...

fortunate and blessed to have is self-awareness. I know what I don't know. And I've been proven, that's been proven to me a number of times through some mistakes, but I have the scars to show it. But knowing what you're good at, and we all have very good gifts and we all have weaknesses. And I think it's okay to accept that and say, I have a gap here. I need to build people around me who fill in that gap. But it's hard because I think inherently most of us believe that we make the best decisions.

And so you do have to start moving that. And I try, what I'll tell when new people join the team or when I take over a new, in the past when I've taken over a new team is, because often what happens is people are making a decision, they're looking to their boss, well, what kind of lean would you go? I'm not looking for an answer, but just kind of give me a direction of where you go and maybe that's where I'll go. But I've often said, you'll have 10 decisions to make this year. They're your 10 decisions. Eight of them I'll support 100% and I'll love them.

Two of them I may hate, but that's okay because they're your decisions and they're probably better than I would do because you're closer to it. And I have to remind myself of that, too, because there's sometimes when I get uncomfortable, I want to go back to the areas where I'm comfortable and everyone hates to see me sitting on the trading desk because then they're like, oh, here he goes.

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So let's talk a little bit about the modern version of Barings and a little bit of history. What people think of as Barings Bank from the 90s and 2000s, ING bought them after their little mishap. And then some years later, MassMutual purchased them, the big insurance company.

And eventually MassMutual put together Babson Capital, Barings Asset Management, Cornerstone, and Woods Creek. Do I have that more or less right? Yep, that's right. So tell us...

What did this combination of four firms do? Tell us about the reach and capabilities and why mash up four fairly substantial investment firms. Yes. At the time, MassMutual was really, you saw the value in asset management, not only for its general account, but also to be a third party business and at times was opportunistic in purchasing up assets.

smaller asset management at the time. Um, bearings was one that was purchased from ING as, as you mentioned to really be, it was the multi-asset international equity business. Um,

There was also Wood Creek, which you mentioned, which was a real assets business. Think of it in music rights, royalty streams, infrastructure type things that have tractor trailers that have longer term cash flow profiles. And then there was Babson Capital, of which I was a part of, which was the largest. And Babson...

was actually the predecessor to that was D.L. Babson, the equity manager. MassMutual had purchased that and then ultimately had spun out what was the MassMutual investment management into Babson Capital. And so we had four affiliates at the time. There was actually five affiliates because MassMutual at the time also owned Oppenheimer Funds.

which has subsequently been sold to Invesco. But we made a decision to combine the four brands, the four aforementioned brands together under the new Barings. And Babson was actually the largest. It was the fixed income manager, but it was the largest in terms of AUM. But what we recognized was the Barings brand actually carried more value than the Babson brand, certainly internationally where our presence was very well known.

And so we made the decision to combine all four of those businesses together under what was now titled Barings. So how do you create and maintain a corporate culture when you're starting with four very distinct entities? Yeah, it's a challenge at times. And what was interesting is Babson itself had been

a series of acquisitions as well. I mentioned D.L. Babson was the first. There was a group called IDM, which was Institutional Debt Management that was purchased out of First Union Bank. It was really a CLO and loan manager. That was actually the group that I joined at the time. We also bought a business in the UK that was a

A parallel was a leveraged loan and mezzanine investor called Duke Street Capital Partners. So we had brought companies in together, all with the philosophy that we want to fully integrate these. And I'll talk a little bit about the philosophy on that and some of the challenges that come along.

But really, when the decision was to bring them together, we felt to get the most scale and the most long-term value to our ultimate owners, which are the policy owners of MassMutual, was to combine these businesses under one brand, under one operating model, and under one culture. Now, not everyone made the transition. I'd love to say that it was real easy to do, but what we decided to do was really have an investment strategy

committee-driven, team-based approach. And some of the portfolio managers of some of the firms were more driven towards the, I have sole discretion on everything I do. There's not a process. It's my decision to make these, and I have the support of a research team.

And that didn't always mesh up, but we made the decision to move to the one standard of investing and created what is now Bearings and have subsequently been able to bring in additional acquisitions, again, all under the idea of we want to fully integrate these. So we're talking about corporate culture. November 2020, you're elevated from president to CEO. Yes.

I recall lots and lots of CEOs talking about in 2020 and 2021, right in the midst of the COVID pandemic. Hey, how are we going to maintain a form of corporate culture? How do we keep everybody on the same page? What were your experiences like? Yeah, I would say communications was key. And it was much more regular speaking to the entire company as opposed to, you know, episodic. And we would do town halls on a...

I would say an infrequent basis, but you very much every week you needed to be out there speaking to the company. You know, one of the things that was fortunate, we were global to begin with. So we had an operating model that didn't have us fully face to face all the time. So semi-virtual. Semi-virtual. At that point, we had invested in some technology. It was amazing how quickly the technology took over at that point in time. But we did have regional heads that were able to continue to

to stay engaged with our teammates. And I think the communications was the big part. It was really making sure that you're constantly and consistently out there telling everyone what's going on in full transparency. And one of the things we've really tried to do throughout the company, and it's something that I've appreciated as I've worked my way up to my career,

is as much transparency as we can. I have always had this belief, and the folks at Barings have heard me say this many, many, many times,

I would rather know what's going on and know I don't like it than not know what's going on and think I don't like it. And I think it just creates a level of anxiety when people suspect something. And so when you're going through tough periods like that, having transparency as much as you can, there's certain things you can't share, obviously. But to provide that level of clarity to people, I think provides some level of ease and it makes them feel more that they're a part of

of what we're doing. And candidly, they are. They're a part of the solution. They're a part of the growth and they're a part of the success. So you guys are not that far away from $500 billion in assets. Let's talk a little bit about who your clients are. Obviously, Mass Mutual Insurer, as the parent company, is a big client. I'm assuming that's where the genesis of all these different asset management strategies came from.

Who are your other clients? Yeah, so MassMutual makes up roughly half of our assets, and that's for the general account. And then outside of that, we are predominantly an institutional manager at this time. We do have some penetration into the, we'll say, wealth and retail channel globally. Is that family office more like, as opposed to mom and pop investors? It's through some RIA relationships we have and then over –

internationally, we go through wealth as well through some of the larger banks. But we're definitely more skewed towards what we would consider an institutional or intermediary type relationship. But it's going to make up the full spectrum of that. Obviously, insurance is a big component of what we do, just given our heritage and our DNA. That's a large component of our third party business. But also sovereign wealth funds, family offices, pensions, really across the spectrum in terms of

where any institutional client, really globally, and that's one of the benefits we have. We do have client base that's split relatively easy amongst the three regions, I'll say, with the Americas, EMEA, and then Asia-Pacific and Australia. So I want to wrap my head around a large insurer like MassMutual as a client,

I would imagine very long-term in perspective, but I don't really grasp what sort of risk tolerance an insurance company has. I assume they don't want you swinging for the fences, but on the other hand, hey, they could buy treasuries without you. What is that sort of risk embracing like? How does that...

settle out, what are they looking for in terms of returns? Yeah. And so I would say not many of our clients want to swing it for the fences. And usually we're not the ones to hire to do that. We are more very much focused on fundamental long-term type investing. We do it all up and down and we do it within fixed income. We do it within real assets and we do it within what we call capital solutions.

But, you know, insurance companies, and I will say this, Mass Mutual obviously is a mutual company. And you mentioned a long-term horizon, I think is one of the best ownership structures we could have because they are owned by their policyholders who have a very, very long time horizon. At the current time, I think our oldest policyholder has owned a policy for 80 years. Wow.

And that's a long-term horizon. That policyholder loves to see us pay dividends and then wants us to be there to pay the benefits to their descendants. So it's really taking a long-term horizon, which allows us not only when we make investments on behalf of our clients, but we make investments in the business, which is equally important for the longevity and sustainability of our company.

We have a longer-term horizon. We're not necessarily worried about quarterly earnings or even annual earnings. We're fiduciaries of what we've been given, but we can take a long-term look. And in fact, our middle market direct lending business, we started building that in 2013, well ahead of a lot of the conversations it had.

knowing we may be a little bit early in terms of the acceptance from LPs to move into middle market direct lending of the size and scale it is. But we took a view that long term, we think this is going to be a valuable place to be. We also knew that MassMutual had a

an interest in the asset class, which helps us start new strategies. And so I think it's a good blend of that. And as we move further and further, insurance companies have been buying private or illiquid assets really forever. Forever, right. I mean, back in, MassMutual was almost 175 years old. 175 years ago, there wasn't a lot of public bonds that were trading outside of government bonds. So

They've been in this space for a long period of time, and now we're just somewhat showing it to other parties. So they're obviously skewed more towards higher-rated assets, just given the rating of the company as a AA entity.

But that being said, our business has other things further down the risk spectrum that allows us to grow and service other clients. I want to better define what capital solutions and real assets are. Let's start with real assets. So you mentioned music royalties and copyrights and things like long haul trucks.

What other real assets do you guys own? And is the goal we're just looking for a steady low volatility income stream? In most of our strategies, it's that. And so I would say real assets for us is broadly defined as real estate and infrastructure. And even infrastructure and real estate can blur at some point in time when you start to look at logistics and things of that nature there.

So when you say infrastructure, are we talking highways and bridges or are we talking trucks and rails? You think trucks and – it's all of the above. For us, it's more along the trucks and rails and towers, wireless towers, things of that nature that fits within there. Data centers can fall into either one of those type things. So that's –

It's the real assets, but we do have the capabilities. Again, we own trailers. We own an aircraft leasing business. And so those things that are longer term, more stable type cash flows.

Capital solutions really encompasses all of it, to be honest. It's more of a unique solution, a more bespoke solution for a client when it comes to it. It's not something that would – and certainly when we originate things in all of our private assets, there's some level of customization for those clients. But when you get into capital solutions, it's really –

a unique solution to a client who has a financing need of some side. It can be a preferred equity piece. It can be an equity or a debt piece with equity kickers, all sorts of things that fit within that that's slightly unique. And that will come more than likely with higher returns. It's a little heavier lift to be able to do, a little bit different analysis that goes along with it, but it's a higher returning profile. So I get the sense that there are some advantages to working with a large company

insurance firm, not just the longevity, but it seems like there is the freedom to do the sort of things that a lot of investors just don't have the patience to wait for. Yeah. And there's also an alignment. I mean, MassMutual is alongside our investors on almost everything we do. They're in the same strategies and varying sizes and scales. So there is a complete alignment from

where we're investing our parent company's capital as well as where we're investing our third party's. But it does help to have a parent company like this who allows us to seed investments, allows us to grow things. And you've seen more and more frequently

now the tie-ups of what we'll call alternative managers with insurance companies, because there is a need on the asset side as well as the liability side. So the liabilities coming from the insurance company, those assets or those liabilities, the cash that comes with those needs to be invested in assets that provide a return that meet that liability. And so there's naturally this move. Now, we did this 20 years ago. And so we're seeing a lot of this happen now. But this is something that we had done a long, long time ago and seeing that

A captive, which is what we started as, an captive asset manager for an insurance company can also be a great service provider to other clients as well. And that's really in 2000 when we started this focus of making what was Babson and the other brands more focused on third party as well as the parent company. And when you discuss liabilities for an insurance company...

Those future obligations are fairly predictable. I mean, there's some variability. Hey, you're working with annuity tables and things like that. But it's a pretty predictable set of obligations. How does that impact how you think about...

The risk tolerances and where you want to go with the investment dollars. Yeah. I mean, as with most fixed, all fixed income investing, candidly, it is you want to get your return, you get your coupon, and then you get paid back at the end of the day. So it really is. And then how things are measured in terms of duration, in terms of tenor and all those things. Really, that's something that we don't do as much. The parent company handles all the asset liability management side of things.

They give us asset allocations. We go ahead and invest those dollars. So we're the security selectors, if you will. But yeah, when you look at the liabilities of a number of insurance companies out there and you think of whether there's the life business, it could be term or it could be whole life.

You also then look at the annuities, the pension risk transfer. All of those have a set pension risk transfer, a much longer dated set of liabilities. But it creates an interesting opportunity in different asset classes to provide excess returns. And I think what folks are starting to see, and this is certainly the case with us, we have always recognized that we would be happy to pick up additional returns from

for an illiquidity premium without taking additional risk. And that's really what I think insurance companies have the flexibility to do is to take that illiquidity premium because they have a much better idea of what their liabilities look like and matching those up. And you're a member of the executive leadership team at MassMutual.com.

a little bit, if you will, what those conversations are like. It must be fascinating to sit on that board that's essentially overseeing your day job. Yeah, it was very insightful for me. I had some knowledge of the insurance industry and really just how it touched the asset management industry, but it does give me a bigger perspective on the industry as a whole. And I think more and more as you see, and certainly there are really people

deep cases of this where alternative asset managers, whether it's with reinsurers or insurance companies, have become one. We have a front row seat to how the two are managed. And so I think it's just given us a much better perspective. And I also think it's made...

bearings and hopefully myself as a better partner to some of our other clients is recognizing and have a better understanding of that. Really, really interesting. 89% of business leaders say AI is a top priority according to research by Boston Consulting Group. But with AI tools popping up everywhere, how do you separate the helpful from the hype?

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Before we get into the details of investment management, I have to ask you a question. There was a quote of yours that kind of grabbed me. You've self-described your own leadership style as confident humility.

Explain what that means. That's a fascinating phrase. Yeah, thank you for asking that. I use it a lot. I'm not sure where I picked it up, but I love it, and I think it describes how we operate at Barron's. It goes back to the element of having some self-awareness, and I think understanding we need to be confident in what we do. We make big decisions, whether we're on the investment team, making decisions for clients' portfolios, or whether we're in management or any other part of the business. We have to be confident in the decisions that we make, and we have to

you know, rebound from mistakes at times, but at the same time, recognizing with an element of humility, which I think is a gift for people to have that we don't have all the answers all the time and seeking counsel and seeking partnerships and seeking people to do that isn't necessarily a sign of,

of not knowing things. It's a sign of just saying, Hey, I need, I need a little bit of help here. So I, I use the phrase very frequently. I love it again. I'm whoever, whoever came up with it. I I'll attribute it to him if I find out. But it is, it is, it is something I think, and I hope I, I live by. And I think most of the teammates at bearings do as well. So let's talk a little bit about how the asset management industry is going to evolve over the next few

decade. You guys aren't very equity heavy, but you're much more focused on private markets, on anything that is a fairly regular income stream. How do you see...

not just insurance, but the entire asset management industry evolving in the future? Well, there's clearly a growth into what folks are calling private assets. I think that's definitely going to continue to be the trend. I also think in some of the more established private assets, there's a blurring of lines between public and private.

And what was in leveraged loan, the leveraged loan market is a pretty good market for that. You've got deals that are several billion, which are going to private credit firms. You've got deals that were started in the middle market space, which would have been 500 million. Like I said, now they're several billion. And so is that a syndicated market or is that a private market? So you're seeing the ebbs and flows of that. And I think that makes sense. There's relative values that change between public and private markets over the time.

But also more and more what you're seeing is kind of an emergence of

more private asset classes being purchased by individuals and probably more by institutionals, less by individuals at this time. But over time, you'll see that it's in the asset-based finance space, the securitization space, and things that were always somewhat in the private space but didn't come out into the public markets through QSIP actually coming off of banks' balance sheets. So I think that's going to continue, and you've seen any numbers of

$3 trillion to $5 trillion of how big the market can be. Really anything that's in a public market from a debt standpoint can really operate in the private market. And so it just depends on what borrowers are candidly looking for. Are they looking for...

some sort of certainty of execution. Can I get that better in the public market? Can I get it better in the private market? What terms can I get in each? Do I want my information in the public market? Perhaps I prefer to keep, I'm a closely held company, maybe I'd prefer to keep my information amongst a private and small group of lenders. So that's moving. You see newer things like portfolio finance, which is something we do on a large scale, which is

It's slightly different from NAV lending, but it is lending to GPs and lending to portfolios. It's a growing business, highly customized, highly bespoke structures that take a lot of heavy lifting to do. But I think more and more we're going to see that as people try to find, and I described it earlier, possibly take getting more...

Higher yields, higher returns, but not taking more risk, but picking that up through either complexity premium or an illiquidity premium. So you mentioned a couple of things earlier that I want to hit back on, which is...

how various markets have kind of moved up. And I see this across lots of different things, whether it's public financing or even public companies, whether they stay private or go public. It seems that everything has gotten bigger, higher assets, higher AUM, and it almost feels as if Wall Street has kind of abandoned...

that middle market. You mentioned things that used to be private at $300 million, $400 million, $500 million, are now still private at $2 billion, $3 billion, $4 billion. This seems to be going across every sector I look at. Is this just a natural evolution of capital markets, or have valuations and size just gotten so large that Wall Street can only service these giant markets?

and it creates this void in the middle underneath. Well, I think the ability for companies to stay private longer is a good thing, right? And I think it's actually, there's definitely a need for the public markets. We don't want to lose those all together and we don't want it to only be for the trillion dollar market cap companies. I think it's healthy to have a,

a moving market because people at times will want some sort of monetization event. They will want some sort of liquidity and you can get some of that in private markets, but it's not nearly the way you can get it in the public markets. But I go back to using the leverage loan and your example is exactly right. When I started out in the business, a broadly syndicated leverage loan deal

Could have been $500 million. A bank would have brought that deal and 10 people would have owned it and traded it. Now, that's not the case. You've got to be moving up. So I think it is an evolution of things. And I think your banking regulations have changed some of the bank's ability to do some of this type of lending. We'll see if that changes in the future. But the good thing about the capital markets is...

in general is it's efficient. And if there's a way for people to get excess returns, capital will flow into that. And over time, if spreads become compressed there, they'll move to other areas, which I think is overall healthy for a market.

And you talked about the relative value as assets shift between public and private and back. How do you capture that gap, that difference? Is it just a function of all this capital flowing into private markets? There's no doubt public markets are historically pricey today, but it feels like so much cash flows.

chasing all these private assets, you're going to end up with a very similar situation. Yeah. I think one of the distinct differences is obviously the quickness or the rapidness at which a public market changes price, whether it's valuation- Second by second. Whether it's valuation or whether it spreads on yields going wider or going tighter, that's effectively real time.

It takes longer in the private markets because these deals take a long time to...

longer to originate, to close, and to move on. And so the reaction time is slightly there. And if it's a brief correction in the market, maybe the private markets get it right and the public markets just had a period of inefficiency. But over time, those two should converge and you should be getting a premium if you're moving into private assets. There's nothing to suggest that you should be getting tighter spreads in a private market, giving up your liquidity. And there's some liquidity, but that's nearly the case of the public markets. If

If you're giving that up, you should be getting a premium. So over time, there needs to be a premium given into the private markets over the public markets, which would also suggest that over time, companies who are looking to

as much as possible, reduce their cost of capital will gravitate to where the financing is most appropriate to them. And that may be in the public's and maybe in the private. So Barings has been in the space for decades now. It seems that certainly since the financial crisis and more intensely since the pandemic,

Just huge flows of capital are going to private. At what point does that become a crowded trade? What's the capacity like on the private side? Yeah, it's big because in theory you can start taking market share from the public side. And that's where I think some, you know, our direct lending business is really purely in the middle market space. And so think of us looking at companies globally.

So with 75 million of EBITDA and below, rather than the multi-billion, we don't currently traffic in that. And we traffic in the middle market and then we traffic in the syndicated space. But the direct lending space in between is somewhat of a white space for us. But I think that's what you've seen is as large capital allocators and aggregators grow,

have billions and tens of billions and 20s of billions to put to work it becomes hard to do that in chunks of 250 million much easier to do in 2.5 billion um and so there's a there's a tug of war between the public and private markets

Who's taking market share from that? All good companies. It's just what is your strategy necessarily looking to do? But without the private market seeing new deal volume, and so whether we start to see M&A transactions come back, whether we start to see club deals being formed for public companies and things like that. Club deals being formed.

Club deals being you get four or five lenders together and they take down a $4 billion deal and say it's a club of us rather than one person doing it on a bilateral basis. Not quite a syndicate, not quite a single person. It's that great, it's that white space in between that evolves in there that you've got. And so there'll have to be either new deal volume, as I said, or the private markets will have to take market share, continue to take market share from the public markets. So we're talking about institutional investors, right?

Do they want fewer but larger and more strategic relationships? What are they looking for in terms of capabilities and portfolio solutions from an investment shop like yours? Well, absolutely. And I think probably everyone is looking for fewer relationships. They have to deal with a lot of relationships and a lot of partners. So the more you can have a robust or a broad sense of capabilities, the more value you are to people. And I think what's interesting for...

And what we've tried to build and how we've kind of gone through acquisitions and how we've gone through organic growth is to really make sure we cover all of that. And so if you look at our acquisitions over time, if you look at what we've grown, we've tried to be global. And so we make acquisitions of things that are adjacent or tangential to our current strategies. Is that strategic or tactical?

That's strategic. And that's just the view that we take. We want to have global capabilities for what we do. And so if we do direct lending in the U.S., we do direct lending in Europe, and we do direct lending in Asia, Pac. And it's basically saying to companies, if you have the desire for a global portfolio, if you have the desire for us to determine where the best relative value is,

We can do that capability. You don't need to select three different managers to cover three different parts of the globe. Equally, we've done that with the liquid and illiquid side. And so if folks come and say, I want a leveraged finance product, I want something that's below investment grade, but I know...

at times high yields more attractive, at times leveraged loans are more attractive, and at times direct lending is more attractive, you determine where that best relative value is. And I think that's been a hallmark of how we viewed it. Let's do what we do well and let's make sure we do it globally and we have deep enough capabilities to service all those needs. You've been on the investing side of global high yield. How has your perspective been affected as CEO from your background in

as a trader or investor in that space? - Yeah, so one of the things that came out of it is I was a part of a US loan group originally. So a syndicated loan group was where I first started at Babson. We then made the decision of, you know, these are similar two sides to the same coin. High yield bonds and leveraged loans are often in the same capital structure. One just comes with a fixed coupon, one just got a QSIP, one's more private, but often it's the same company. So we decided to combine those two businesses together.

Then we went and said, you know what? What's unique about us is we've got great capabilities in Europe and we've got great capabilities in U.S. And so in 2009, we said, let's create a global high-yield platform, which was really one of the first of its kind. And so that...

That experience and perspective said to me, this is really something that's here. Clients will value our global perspective. They'll still may want to only allocate to one region or another or one asset or another. But who those are interested, let's take a look at that. And that...

As much as the investing side of it was there, it was really the business side of it, I think, which has helped me in my current role. So I keep reading and hearing about new credit asset classes. What's the appetite like for that? Yeah, it's becoming more and more popular. I think it's really on the asset-based side of things. So there's a lot of different things that can fall into that category. And you're talking about origination platforms.

whether it's a mortgage origination platform where someone will take all the mortgages originated by that and package it into something. So as more and more, it becomes more and more accepted to have a portion of your portfolio in illiquid assets. And I don't think it's just for insurance companies. I think insurance companies are well equipped to do that because their liabilities are fairly well known. But pensions also have a bucket for things that are illiquid. And I think historically they've used them for higher yielding things.

But I suspect going forward and where a number of our conversations are taking place is around the IG portion of their portfolio, the investment grade portion of their portfolio. That if I can pick up an additional 100 to 150 basis points of spread or yield in a private market, I don't need all of my assets back.

in my portfolio to be on the liquid side. That's usually the bucket I use for liquidity is in my investment grade and government bond side of things. But maybe I move a little bit into illiquid assets and pick up additional yield for that portion because I don't need 5% I can sacrifice for illiquidity purposes. So it sounds like there are a ton of tailwinds for the private credit and debt sides. What do you think is the next step

What's the next area that's ripe that perhaps hasn't really been well explored? Yeah, we've canvassed a lot of it. I mean, I think there's a lot, but I do think the private investment grade side of the market is really going to be the area where it's going to grow. And when people talk about- Investment grade that's private, not public. Yes, and so I think when people originally, even as early as last year, when you have said direct lending or private credit,

everyone would have moved to middle market corporate direct lending. And that's what was in everyone's mind. And that was a component of it. It's a component of it, but it's actually one of the smaller components of it, candidly. When you expand to all the other types of lending that can be done and has traditionally been done by banks and is being done by asset managers and insurance companies,

The opportunities are vast. And so I think that's going to be an area that continues to grow and continues to offer investors on the institutional side. And I suspect it will start to gravitate more and more towards the individual and wealth side of it, business as well. Really interesting. So you mentioned in passing some previous acquisitions. I know Altus and Griffon most recently acquired.

What are your plans? Are you thinking about more acquisitions? Is this deliberative or is it merely opportunistic or a little bit of both? It's really strategic. I think we have looked at and we love the portfolio of capabilities that we have. We're willing to expand on those both organically and inorganically. We've had a history of building out teams. I referenced earlier we started building our middle market team.

in 2013. At that same time, we built our emerging market debt team at that time. But also, as you referenced, we've just made two acquisitions. Both happen to be in Australia, but they were extensions of capabilities we had. One was a real estate business, which gave us more of a global real estate presence. And the other was a securitizations business, which gave us global capabilities and securitizations. So hopefully you're seeing a theme here that

that we really want to continue to have the global. And so we are very much open and looking for acquisitions. As I mentioned before, we want to fully integrate those. And so this is a people business. And so when you're looking at specifically principally owned businesses, businesses that are owned by a founder,

you've got to make sure your interests are aligned there and that there's an expectation that this is going to be an over time, an integrated company. Now, what we don't do is we don't mess with the investment process. That's what's got them there. What we do look to do is integrate operations, integrate sales to get a globe. We have a global sales force. We think it's best to leverage that way. But we're absolutely always looking for good opportunities and good things that hopefully will all fit within the strategic lens. So we're not going to be looking to buy something

that doesn't fit with where we're going as a company, but certainly there are a lot of good companies out there and we're looking at a few now and hopefully be able to have a few more to announce over the coming years. Really, really interesting. Let me throw you a curve ball. All right. So you oversaw sales, operations, technology. You were on the investment side.

Now you're CEO and chairman. How do you think about artificial intelligence affecting your business? What is the future of the sort of very personal relationships, very specific types of credit you guys swim in? How is AI going to impact that?

It is going to impact, for sure. And so what we've created, we have an innovation team that really focuses on this because I think the use cases for AI and for all of these technologies is going to come throughout every one of our teammates. It's not necessarily going to be me sitting at the top of the organization saying this is how we should use it. The applications are yet to be determined exactly how the art of the possible is here. I think one of the things we're finding is

is the data, especially in the private markets, has become so, so important. And right now, a lot of it is unstructured data.

from historical and everyone's doing a better job of cataloging that data today. But the ability to use these machines to make decisions really depends on the access to data. And our data on private companies and others' data on private companies is very, very valuable to help inform investment decisions and inform business decisions. But if it's not in a structure that works,

It's not in a structure that can be accessible. It's of no value. Not machine-ready quite yet. Look, the technology is getting better to go out and find unstructured data and bring it in, but it's still a ways away. The public markets have done an incredible job of bringing things together and having it to be able to mine that information. But really, the private data that exists out there

is so large and it's, in many cases, certainly the historical data is very unstructured. Really interesting. So let's jump to our favorite questions that we ask all of our guests, starting with,

What's keeping you entertained these days? What are you watching or listening to? Yeah, in terms of streaming, I've just finished or almost finished with season two of Silo. Oh, really? Yeah, it's an interesting one. Sci-fi that's on Apple. It is sci-fi. It's on Apple. It's entertainment for sure. I watched Three-Body Problem a while ago as well. So good. Yes. I'm waiting and anxious for the second and third season of that to come up. So I get my fiction...

When I watch and I mostly read nonfiction. I'm just at the end. Well, we'll talk a little bit about books in a moment. Before we get there, I want to ask, who were your mentors who helped shape your career? Yeah. So I've used these two, and these two are really pivotal. One was my second boss at PricewaterhouseCoopers. What he taught me was really...

the caring nature of business and how it should, how people should view others and treat others. And it was an interest. I worked for them for only two years. And ever since I've left, I still get a call on my birthday. Without fail, I talked to him other times, but without fail, I get a call on my birthday and that's always resonated. I mean, working for someone for two years, but then for decades afterwards, they continue to remember something that is, you know, it's birthdays become come and go every year, but it was important enough to,

I was important enough to him as a person to make that call. So that's something I've tried to take away and be conscious of, that people care about those things. Talk about people skills and people business. It was an admirable trait, certainly. And then another one was a coach of youth sports, was really one who taught me that the individual will never be above the team.

And no matter how valuable someone is, no matter how important capabilities or skills that are, if they don't fit within the strategy of a team or the approach and philosophy of a team, it won't matter. It will be destructive. And so learning those on really, again, and I think my skill set and my personality fits well within a team-based structure, which is to your earlier question about how, why did I stay at, or how have I stayed at Barings for so long?

it was a fit. And so recognizing that always made me understand. And again, I think it pointed out to having some self-awareness that these companies and part of my job as a steward of the company right now. But MassMutual, as I mentioned, has been around for 175 years. As long as it owns bearings, it's going to be around many, many years after I'm gone. And I'm a steward of it currently at this, but my job is to bring other people along. And so therefore it has to be a team. Let's talk about books. What are some of your favorites? What are you reading

right now. Yeah, I'm just finishing up the Steve Jobs book by Walter Isaacson. He's fantastic. Before that, I read the Musk book and then actually read a book by him called Code Breakers, which was about the mRNA technology. So I read mostly nonfiction when it comes to that. So I'm going through those kind of juggle books at the same time. I just also finished 1776 by David McCullough.

Uh-huh. So that's really what I'm reading. But most of the stuff is nonfiction. Every time someone brings up McCullough, I have to bring up the Wright Brothers book by him. Amazing. Yeah, never. Okay. Well, we'll put that on the list. I haven't read it yet, but I'll put that on the list. And a good writer is so gifted. I mean, it's amazing what they can do with stories. So I've enjoyed reading.

reading those. Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either

private investing, insurance investing, or in general, if that was what they were interested in as a career? Yeah. I mean, first, it's a great industry. I love it. And there's a lot of aspects of financial services. And this is somewhat timely. I've got a sophomore in college now who I'm somewhat counseling on, although he listens less to me and more to other people. But I've always advised when we bring in two-year analysts out of college, we have a two-year analyst program when I'm fortunate enough to speak with them

it's,

Take it all in. You don't know exactly what you want to do today, but look around, ask a lot of questions. Intellectual curiosity is key. If you've got intellectual curiosity about something, you'll be better at it. But most importantly, find a place where you want to be working with who you want to work with doing what you want to do. And that to me is the key. If you find yourself in any of those three don't match up, I really think it's irrespective of...

How great you think the industry is, the prestige of it. You just won't be happy long term. And I think I was, again, fortunate. I loved public accounting, but I couldn't see myself doing that forever. I enjoyed it. And I was fortunate to find myself in a situation like this.

If you're not where you are with who you want to be with doing what you want, it'd be time to move on. And our final question, what do you know about the world of finance, credit, lending, and investing today? You wish you knew 25 years or so ago when you were really first getting started. Yeah, I think what I would say is what I knew back then or thought I knew back then that fundamentals ultimately are key is

you lose track of that sometimes when you see euphoria and you see bubbles and you start to get away from really long-term cash flows of things or what really matters over time. So I think...

It's not what I wish I knew then. It was what I wish I hadn't forgotten over time, because mistakes are made really when you lose sight of the fundamentals of things. And so I would encourage folks that long term valuations should be based off an expectation of growth, an expectation that that sooner or later will turn into earnings, which will ultimately turn into cash flows. And keeping that in mind, that that's the fundamental for all investments and what investments that are people are made in ultimately valuations.

Really, really very fascinating.

Mike Frino, thank you for being so generous with your time. We have been speaking with Mike Frino, chairman and CEO of Barings, which manages over $430 billion in global financial assets. If you enjoy this conversation, check out any of the 500 previous interviews we've done over the past 10 years. You can find those at Bloomberg, iTunes, Spotify, YouTube, wherever you find your favorite podcasts.

and be sure and check out my new book, How Not to Invest.

The ideas, numbers, and behaviors that destroy wealth and how to avoid them. Coming March 18th, 2025. I would be remiss if I did not thank the crack team that helps put these conversations together. Anna Luke is my producer. John Wasserman is my audio engineer. Sean Russo is my researcher. Sage Bauman is the head of podcasts here at Bloomberg. I'm Barry Ritholtz. You've been listening to Masters in Business on

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