Mike Kelly – Democratizing Access to the Middle Market at Future Standard

**Michael Kelly** (0:00)
The days of financial engineering, your way to higher returns, in my view, are over. Where you're really going to see the outperformance in private equity are going to be faster revenue growing companies, lower multiple entry points, more fragmented ecosystem private companies, and where you can add operational value. That just simply tends to be more in the middle market than in the large and mega cap private company market. Franklin Square, the analogy I use is Netflix. They were packaging and distributing other people's contents, in this case, GSOs, middle market lending, practice for BDCs. It's a little bit like red envelopes and DVDs. They had built this incredible distribution engine and pipes into all of these individual investors through the broker-dealer market. It had been my background to build out asset management companies, and I thought, well, just like Netflix, eventually came the conclusion that building your own TV and movie studio and putting it through your own pipes might be a good idea, as long as the quality content is high. I thought, we can do that here.

**Ted Seides** (1:08)
I'm Ted Seides, and this is Capital Allocators.
Our continuing exploration of the intersection of private wealth and alternatives takes us to Future Standard, one of the largest distribution platforms bringing the wealth channel exposure to the middle markets. My guest is Mike Kelly, Co-President and Chief Investment Officer of Future Standard, a $90 billion alternative asset manager focused on private middle market strategies for the wealth channel. Mike has been in the alternatives industry for three decades, starting as an analyst under Lee Cooperman and Julian Robertson, helping build FrontPoint Partners, which began the institutionalization of hedge funds, serving as CEO of Orix USA, where he led the acquisition of $250 billion global asset manager, Robeco, and for the last decade, turning to the democratization of alternatives.
Our conversation covers Mike's path from working in hedge funds to building alternative asset businesses, including lessons about incentives, leadership, and culture. We then discuss his pivot from the institutional market to the wealth channel, and the growth from a single strategy at Franklin Square, with $12 billion in assets, to a full suite of strategies under the rebranded Future Standard, with $90 billion across private credit, private equity, real estate, infrastructure, and multi-asset investing. Mike also shares his views on performance expectations and what the flood of new capital means for the institutional market. Before we get going, it's that time of year when we turn to traditions. Like the tradition of Thanksgiving, gathering family and friends to share what we're thankful for. One of which is the ability to eat enough turkey and tryptophan to fall into one of the best slumbers all year. That nap on the couch while watching football. While I'll spend the turkey days with my family, I'm particularly grateful this year for the incredible team of professionals that brings together what you hear and experience with Capital Allocators. That's Hank, our CEO, Morgan, our head of ops, Tamar, our head of business development, and Liz, our head of content. I put our starting five up against any NBA All-Star team. Off the court. Our values of quality, entrepreneurial spirit, intellectual curiosity, respect, generosity, and fun win championships. Although I can't say the same on the court for my getting dunked on, as at 6-1, I'm the least vertically challenged of our starting five. Outside the office, I'm grateful for you, for listening, engaging with our guests, and sharing kind words all year long. This podcast is the gift that keeps on giving. So before you start the mad year-end dash to calculate performance, conduct 360 reviews, and shop, take this time to be grateful for the many gifts in your life. As my friend Dasha Burns recently shared on the occasion of my 55th birthday, may the best of your yesterdays be the worst of your tomorrows. While you're feeling all warm and fuzzy, don't forget to spread the word about Capital Allocators to those closest to you, to give them the gift that keeps on giving. Capital Allocators is brought to you by my friends at WCM Investment Management. WCM has the courage to back future histories not evident today, informed by their unrelenting focus on mode trajectory and elevated by insights on corporate culture. WCM's deep roots in public markets set the foundation for its approach to private investing. They didn't just want to enter the private markets, they wanted to improve the investing model itself. Build something better aligned, more thoughtful, and truly long term. As a firm owned by its people and grounded in Laguna Beach, WCM is built for alignment and independent thought. Rather than chasing a scoreboard, WCM invests with a partnership mentality to build meaningful relationships with founders reimagining their industries. They show up earlier, stick around later, and let value compound over years. WCM's style is their edge. Authenticity over formality, two-way learnings over checklists, and stories over slide decks. To learn more, visit wcminvest.com.