The transcript from this week’s, MiB: Joan Solotar, Blackstone’s Global Head of Private Wealth Solutions, is below.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
RITHOLTZ: This week on the podcast I have an extra special guest. Joan Solotar, she’s the Global Head of Private Wealth Solutions at private investment giant Blackstone. They run about $684 billion in assets. the Private Wealth Solution group runs over $100 billion. And man, this is — name it. If you’re interested in any sort of alternative investment from private equity to real estate, to non-traded REITs, to debt and credit, you’re going to find this to be absolutely fascinating.
Joan has had really an amazing career from — from research to – she helped bring Blackstone public. She’s just got a — a tremendous background and is incredibly knowledgeable about the space. I strongly suggest listening to this twice because a lot of stuff goes by quickly.
With no further ado, my conversation with Joan Solotar.
VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
RITHOLTZ: My special guest this week is Joan Solotar. She is Blackstone’s Global Head of Private Wealth Solutions. She has been named one of the 100 most influential women in finance, several years running. Blackstone is the world’s largest alternative asset manager with $684 billion in assets.
Joan’s department, the Private Wealth Solution, manages over $100 billion in assets. Before joining Blackstone in 2007, Ms. Solotar was Head of Equity Research at Bank of America Securities and a highly ranked institutional investor, all-star.
Joan Solotar, welcome to Bloomberg.
SOLOTAR: Thank you. Thanks for having me.
RITHOLTZ: My pleasure. So let’s talk a little bit about your career. You were at Credit Suisse and DLJ as a highly ranked analyst. What — what did you cover? What was your space?
SOLOTAR: I covered financial services, pretty much anything non-bank. So, I started in insurance and then wound my way to, you know, mortgage insurance companies, eventually really focused on the brokerage industry and asset management.
RITHOLTZ: Very interesting. And then you end up at Bank of America Merrill Lynch Securities. You were Head of Research there.
RITHOLTZ: That — I know lots and lots of folks from old mother Merrill who were either strategists or in the research department. How did you leap from there to Blackstone?
SOLOTAR: So, when I was at DLJ I worked on the firm’s public offering. We were spun-out of Equitable. And Tony James was president of DLJ, very senior Credit Suisse, and then he went over to become President of Blackstone and called me when they filed to go public to see if I would join to help them with that process and run Shareholder Relations and Strategy, which is what I did initially.
RITHOLTZ: Huh. So — so how do you transition from Shareholder Relations to Private Wealth Solutions?
SOLOTAR: So, I — I’ve held a few different roles at Blackstone. I’d say the — the common theme among them is that I’ve always worked across the entire firm. And in private wealth, I was asked to move in and — and really create a scale global business. And so, I took the skillset that I had around being a strategic thinker and being able to manage teams of people, which I did at — at BofA and really apply that here …
SOLOTAR: … the last six years.
RITHOLTZ: So — so you were there pre-IPO.
SOLOTAR: Two weeks pre-IPO.
RITHOLTZ: Oh. Okay, so that counts a little bit.
SOLOTAR: It counts a little.
RITHOLTZ: I was going to ask you what the difference was at working at a private company versus a public company, but I don’t know how much that would apply. You’ve mostly been at public companies your whole career.
SOLOTAR: Yes. Well, DLJ was subsidiary of Equitable, which was a subsidiary of AXA, so until itself went public, it didn’t feel like that. It felt very much in a — in a lot of similar ways to Blackstone like a partnership. And — and even Blackstone when I first joined, you know, fewer than 1,000 employees it — it was — it — it felt like a partnership, still small.
RITHOLTZ: So, it’s a mutual. and now it’s considerably larger than — than 1,000 employees, isn’t it?
SOLOTAR: Correct, so probably not as big as many think, but we’re about a little more than 3,000 employees globally. That — that’s — that’s quite a chunk.
So, Blackstone has made a very large bet on the individual focusing on $1 million to $5 million clients through investment advisors. Tell us a little bit about the thinking behind that move because I — I think when most people think of — of Blackstone, they think big institutions not individuals.
SOLOTAR: So, you have to really go back in time, and I’ll put my strategy hat back on. During the financial crisis, we were thinking a lot about where money was coming from for our funds. And we were very heavily dependent upon U.S. pension funds who are still quite an important …
SOLOTAR: … set of clients for the firm. And at that time, we made the decision to expand internationally both Europe and Asia, and then also start to think about how we would approach private wealth.
So, we started distributing through the big wire houses initially and really focused on qualified purchasers, so those $5 million and above who could invest in the traditional private equity funds. But more and more, we were getting inquiries, well, how do we give access to good products, good service to more people. And for that, we began creating bespoke funds to address that market.
RITHOLTZ: Huh, and these are accredited investors are somewhat more sophisticated than the average investor.
When I was preparing for this, I’ve came across the Business Insider column that described what you — you said was your AHA moment that totally changed your career. Tell us what was that aha moment.
SOLOTAR: I believe you’re referring to when I was at DLJ.
SOLOTAR: And one of the — we call them principals, like partners, came into my office and said, “Hey, you know, I’m going to this dinner tonight for principals and — and you really should be there, but you need to tell people that becoming a principal is important you.” And that just never occurred to me. I just thought like you put your head down, you do your job and someone is like, “Oh, let’s make — let’s make her a principal.” And I’m sure that often is the case, but it certainly isn’t always the case.
And so, I went into the office of Head of Research and just said, I think I deserve to be principal for the following reasons. It is something that’s very important to me. And I was named principal that year.
RITHOLTZ: So, let’s talk a little bit about Blackstone. They’ve created a tremendous amount of wealth for their limited partners and employees, as well as their shareholders. What do you have to do to stay ahead of the pack. This is a hypercompetitive space with billions and billions of dollars looking for an edge. What does Blackstone have to do to keep its leadership role?
SOLOTAR: I think it’s a great question. Steve Schwarzman often says that there’s nothing patentable in finance, meaning everyone in the world can see what you’re doing and they’re …
SOLOTAR: … apt to copy it if it’s successful, so you have to keep moving.
And for our firm, that means continuing to find new areas where we see great investment opportunities, where others aren’t as competitive. And that might mean, you know, we are, for example, the biggest real estate investor in the world. So, from a scale perspective, there are transactions we can do that no one else can do. And building that kind of scale in life sciences, in direct lending, in private equity just a bit more competitive, but again not at the scale that we’re at, that’s been a huge advantage for us especially in — in this environment.
RITHOLTZ: Huh. So — so you’re running the Global Private Wealth Group. Tell us about that role and what your responsibilities include.
SOLOTAR: So, it’s been just terrific to be involved in the building of this business. So essentially, we are running private wealth as an end-to-end business rather than a sales organization. And — and what does that mean? It means everything from product development on the front end to providing education for advisors and marketing material using data analytics to better focus our sales people and having a robust investor services team on the backend, and doing that globally.
So, serving your clients in Japan with folks who are on the ground speaking Japanese and having websites in native language, which may sound obvious, but takes a lot of people, a lot of effort. And we’ve been able to continue to vault ahead of the competition.
RITHOLTZ: So you mentioned investors and clients, who are the clients? Tell us about a typical PWS investor.
SOLOTAR: So, I’ll divide the clients into really three buckets. At the wealthiest and our family offices, which are often run like institutions with the chief investment officer, et cetera, but really won a single point of contact into all the Blackstone offers. The next tranche would be qualified purchasers, so folks — also very wealthy individuals with $5 million or more, and they really are by SEC standards allowed to invest in anything.
A big part of the market is what we call accredited in the U.S. It has different names all over the world, but essentially investors with $1 million to $5 million who want and historically have not had access to great product. And we also do serve investors who are below the million-dollar level, but not with that many products that are suitable for them.
RITHOLTZ: And — and so one to five, five plus, I tend to think of family office as a — a 50 plus, but I know that number. Some people say 25, some people say 100. How — how do you look at family offices typically?
SOLOTAR: We really haven’t defined it that way, but I think your 50 million is probably a good place to start.
RITHOLTZ: Good — good ballpark. So now an investor has $5 million or $10 million in a total portfolio, and I’m just spitballing here. They have a million in munis, they have another $6 million, $7 million in traditional active and passive funds, and they have a couple of million dollars lying around that they’re looking for a little more non-correlated, maybe a little alpha. How do you feel that gap for that client? Are — are you selling that through RIAs or are you selling it direct? Tell us little bit about what that slug in that portfolio looks like.
SOLOTAR: So, we are absolutely partnering with RIAs and with advisors again around the world whether they’re in global banks, private banks, big wirehouses or independents. And, you know, to — to your question about where people are invested now and what they’re looking for at the moment, historically, you would say, oh, you know, our clients are — are really looking at portfolio that’s 60-40, something like that, the traditional mix.
And I would say today, given the search for yield …
SOLOTAR: … which is very hard to find everywhere in the world, the need for a private credit is greater. Given where market valuations are, private investing is more attractive because you have more control over the asset, you’re not subject to the whims. And we’re not investing in the market per se, we’re choosing the neighborhoods we want to be in.
So, you know, I’m — I’m fortunate in that the performance of Blackstone funds across all the alternative asset classes has been good over a long period of time, so we have a lot of material to work with, and then we meet the individual needs. So it could be that your client as an advisor, you know, wants to put 20, 25 percent of her or his assets into alternatives and they want a diversified portfolio, we have a product that matches that or they’re earning, you know, X percent, three, four percent on the municipal bond portfolio, and we have other funds in real estate in credit that can return much more that are also floating rate, which gives them better inflation protection.
RITHOLTZ: So, some of what you’re doing is a non-correlated substitute for traditional equity. Hey, equity prices are, let’s call it, fully valued. Some people think it’s gone beyond that, although we seem to be having delightful earnings this quarter, so maybe this market can grow into its valuation, but that’s one alternative.
You — you referenced yield and — and what — what investors are looking for. If someone says, hey, I want a higher return, I want to take a little more risk, but not — I don’t want to run into the same problem we ran into with subprime, what sort of products you have for — I’m going to peel some of my 40 off to — to something that is going to do better than 1.2 percent than I’m getting on — on my treasuries. What do those fixed income-like products look like? Are they structured notes? Are they real estate? Tell us a little bit about that.
SOLOTAR: Sure. So, for example, one fund right now that has a lot of traction is our non-traded REIT, which invests in high-quality U.S. real estate, again the same teams that we’re investing in for the institutional fund and the same team, importantly. So, areas like multifamily housing where there’s a supply-demand mismatch or logistics playing on a very long-term theme around e-commerce, which is only accelerated during COVID.
RITHOLTZ: Tell us a little bit about the credit side you mentioned.
SOLOTAR: So, there’s a secular trend in private credit that really started in the financial crisis where banks no longer wanted to hold on to risk, and we’re syndicating out. And it also, at that time, became clear that they were less willing to lend to middle market companies. So originally what began as a middle market industry in private credit emerged, and we were certainly one of the leaders in that. But I would say today because of the scale that we have, we’re actually able to lend to much larger companies.
So, it’s an industry that has real secular tailwinds in terms of the demand for private credit, and we’re able to deal with, you know, large companies, complex transactions, unitranche take the whole deal. And we’ve been able to create funds around that for individuals that deliver good returns. And importantly, we’ve been able to create structures that also work outside of the U.S.
And so, both of these areas, whether it’s private real estate or private credit, have appeal right now in the U.S., in Europe, in Latin America, in Asia. And, you know, we’re able to service those folks because of our businesses of scale on the private wealth side and also of scale in terms of how much we can invest.
RITHOLTZ: Huh, that’s quite, quite intriguing. Let’s talk a little bit about ESG. Blackstone has said, as the world’s largest alternative asset manager, “We are uniquely positioned to make a positive impact through our investments.” Tell us a little bit about how you approach environmental, social and governance impact investing.
SOLOTAR: So, we’ve really taken a holistic approach both for our own company, as well as the companies that we own inside our various funds. And to start with the environmental, even going back, you know, many years now, we looked at efficiency around energy and water, et cetera. So, for example, if you owned hotels thinking about what kind of light bulbs, where do you set the temperature, things of that nature, flushers on toilets probably a little less sexy, but actually important
And today we’ve made a commitment that for any property or company that we control, we will reduce emissions by at least 15 percent. You know, we — we — I don’t know if you know, one of the portfolios we actually own StuyTown here in New York.
SOLOTAR: And we created the largest solar farm on any multifamily housing development in the U.S. there, just one example. And I would say around the other areas when it comes to governance and by that, I assume you mean diversity …
RITHOLTZ: Uh-huh, boards of directors and managers, yeah.
SOLOTAR: … on boards, et cetera, we have likewise a commitment there for at least 30 percent representation by women, underrepresented groups, and again for our own company as well as for our portfolio companies.
RITHOLTZ: So, let’s talk a little bit about PWS as it’s called internally. Your group runs over $100 billion. Tell us about some of the attractive places that you’re deploying capital today.
SOLOTAR: Sure. So, we tend to be very thematic at Blackstone, so a lot of research comes into play upfront. We figure out where we have the most conviction, and then we’re not afraid to go all in. And importantly, if you think about investing as pattern recognition and you think about everything we own, real estate companies, all different types all over the world, it’s just a lot of information flow that comes into play. So today areas off of themes like, you know, the digitization of everything. So, if you think about our investment in Bumble or Ancestry, it was on that.
In e-commerce, this has been a long-running theme through the firm over the last 10 years, so that informs not just what you invest in, but what you avoid. So, we — we have not been investing in closed malls, but we have been buying up warehouse assets, especially first mile, those that are closest to clients again everywhere around the world.
Housing, there’s a — a housing shortage really in a — in a lot of different regions and — and what — just meaning that there hasn’t been enough supply. And when you think about all of the delays caused by shutdowns due to COVID, it’s just exasperated those or exaggerated those trends even more so. And when you have supply-demand imbalances, that’s usually pretty good for appreciation, we, coming through the financial crisis, had created the largest single-family housing, you know, own-to-rent company and we’re continuing to invest in those types of assets.
We really like life sciences. You mentioned uncorrelated, that’s an area that is uncorrelated. And we partner with major pharmaceutical companies. We invest in their Phase 3 trials, which have very good high percentage chance of success.
Cloud computing — and there’s a lot of different neighborhoods that we like. And then I would say also, we like the industries that serve those. So, once we find a theme, something like life sciences, we’re also then interested in owning the real estate that’s catering to life sciences companies. So, the intellectual capital really moves through the firm and were able to whether its growth equity, private equity, real estate, life sciences, credit run that all the way through. And — and so you would find over the firm’s history and continuing today our various businesses may invest in a different part of the capital structure. They may invest in different companies, but they’re all focused on this idea of good neighborhoods.
RITHOLTZ: Huh, so that’s very intriguing. I — I always have a hard time drawing a bright line between what sounds a lot like private equity, but looks a little bit like late-stage venture capital. I hear cloud and life sciences, and Bumble and Ancestry.com, how — does that distinction make any difference to you guys? Is it really just an academic distinction or clearly, you’re not doing seed investing? We understand that. But what is the difference between Blackstone private equity and — and very late-stage venture investing?
SOLOTAR: So by and large, we have not been venture investors in the way that you’re thinking about in part because the outcomes are binary. And when we’re making an investment, we always try to think about protecting on the downside, and that’s quite difficult to do in a venture deal. So, I’m distinguishing that from growth equity because these are larger companies where the entrepreneur doesn’t want to cede control, but is attracted to what we can bring in helping her/him really scale the business.
So again, I’ll go back to a company like, you know, Bumble or where we made an investment in Oatly. And what is it we bring? We have this massive portfolio of companies and properties that we can introduce them to. We have a data science team of more than 30 people that we then deploy right onto these companies. We have a suite of highly talented former CEOs, executives who partner with those CEOs, who again are — are often entrepreneurs who may have not usually have not taken their company and built it into some major global institution.
So, I would distinguish it in a lot of those aspects. We’re coming in much later. We’re not saying this technology works or doesn’t. It’s already proven, and then we’re bringing something to much greater scale.
RITHOLTZ: Right. I like the concept of, hey, if it’s truly binary, then that’s much more like venture capital. If there’s a range of potential outcomes with a very, very low possibility that the whole thing goes to zero, that’s more private equity. That — that — that’s a really good framework for that.
So, let’s — let’s stick with — you mentioned the intellectual capital that moves around the firm. We’re kind sort of reopening; people a little nervous around delta. How did you guys operate during the pandemic? I assume everyone was working from home. And what are your plans going forward? How are you going to manage?
SOLOTAR: Yeah, it was certainly turbulent times. We acted very quickly. So, one thing that launched literally the week that we shut down in the U.S. is Jon Gray, our President and COO, launched a global call for all employees, which still happens every single week. And during that meeting, we hear about macro government, what’s happening in some of the portfolio companies, new investments and the basic trends. It was also just the best mechanism for everyone at the firm to know what was going on, talk about COVID and — and really around the world. And we do that on Zoom so that you’re present, and again this has now been going on since mid-March of 2020.
With my own team, I made great efforts to stay connected. Again, we were all on zoom, not telephone so you can actually see people. I personally added many more meetings than I had previously, regularly scheduled meetings with my sub-teams, with the leaders of my business to make sure we were connected. And we also added in a lot of virtual events. You know, whether they were virtual cocktail hours or lunches or breakfasts, we did a whole — I — my — my children make fun of me because I did the same cooking class like five different times, so I can now make an excellent, you know, pasta sauce.
But I — I think it was important not just to get the business done to prosecute the business. Of course, that’s important and serve your clients. But equally important was to keep the team together, have everyone with full information feel connected even though we weren’t physically in the same place.
And then I didn’t mention, but as importantly was staying connected with our clients. And so, we immediately launched webinars, conference calls about what we were seeing from a macro level in our portfolio companies, very transparent about what was happening in the funds, and just providing advisors and clients with the most up-to-date information that we had. And I think they — they appreciated that.
RITHOLTZ: Huh, quite, quite interesting. So — so within financial services, people like Jamie Dimon at J.P. Morgan Chase, Morgan Stanley, Goldman Sachs are all calling staff back to work, other places are talking about a hybrid model going forward. You’re in a couple of days a week, but it’s not Monday to Friday nine to five. Have you guys thought about what you want to do? And have — have you come out with any decision yet publicly?
SOLOTAR: Yeah, so we have — the investing teams have, by and large, been back full-time now for several months. For my team, I said we would remain flexible through the summer and then we’ll figure out the cadence, but the vast majority of my team comes in.
SOLOTAR: And there were several employees not surprisingly who were quite nervous. But the firm invested a lot in terms of creating our own testing, mandatory testing, distancing, tracing out that we have to keep open at all times …
SOLOTAR: … to make people feel safe in the environment that we were in. You know …
RITHOLTZ: A number — a number of big firms are mandating vaccines. Did you guys go that far also? I — it makes perfect sense to me, but I know you can get pushback from some quarters.
SOLOTAR: So just this week we told employees that if they’re not vaccinated they shouldn’t come to the office.
RITHOLTZ: Right. And if you’re not in the office, your career is probably not fast-track.
SOLOTAR: I — I hope that everyone will decide to take the vaccine just for their own health.
SOLOTAR: We have not said you can’t work at the firm, but I think it’s — it’s — in the interim, you can certainly do whatever you’re doing remotely, but you just — you lose the connectivity. And to me what — you know, one of the great parts of my job is actually being with the team interacting, exchanging ideas. I think that’s much harder to do when you’re a box …
SOLOTAR: … someone’s computer.
RITHOLTZ: So, you referenced earlier the impact of lower rates where clients were previously allocating money to the bond portion of a 60-40 portfolio. How are low rates impacting everything today? And — and what is Blackstone doing about it?
SOLOTAR: So, I think about the impact of low interest rates from two perspectives. One is how does it affect an investor — an individual investor or an institutional investor, and how does it affect Blackstone investing in companies and properties?
So, on the former, it is much harder to reach your goals whether their retirement or sending your kids to college or even just saving for the next few years at home, whatever, if interest rates are very low. You’re earning nothing on your bank account. You’re earning very little from your municipal bond portfolio, et cetera. So how do you create more wealth?
And for that, individuals/institutions have been seeking yield in private credit, private real estate, as we mentioned, where you could just get better returns where you can apply a bit of leverage. But you don’t have to extend all the way out on the risk curve to do that. You don’t have to be in highly levered funds. You don’t have to be in the riskiest assets.
And — and I’m often asked like do you like non-treated REITs, do you like private credit? And I always say it’s — it’s — for me, it’s really not the fund structure as much as it is, who is the investor putting the assets in? I mean, they’re certainly not all created equally, so you want to be with a very high-quality G.P. like Blackstone, if you will, but you want to, you know, really think about who you’re entrusting your wealth or your clients well with.
As it relates to Blackstone on the investing side — I’ll put credit aside for the moment — that means that you can borrow at much better rates.
SOLOTAR: And, you know, that certainly helps the return. But I would say really importantly, we always think about when we’re underwriting what will the next buyer have to borrow at to make it work. You don’t want to get lulled into this false sense of complacency where you’re like, oh, I could borrow for nothing and, therefore, well, this looks really attractive. Kind of similar to what happened to people when you think about, you know, the housing crisis where they were just taking on way too much debt. So, you know, it’s — it’s that toggle between, yes, we can borrow at very attractive rates, but that doesn’t mean that we want to inflate the price of the assets that we’re buying. So, it’s — it’s really quite a balance.
RITHOLTZ: So not the greater fool approach to investing.
RITHOLTZ: It — it — you’re looking for long-term. So, you mentioned equity, richly valued and bond rates at long time lows, when we look at both asset classes, they’re each at all-time highs. The one exception seems to be commercial real estate is, in fact, still at levels that are far below where we were during the pandemic. How attractive is commercial real estate?
And — and we know Blackstone is a big investor in individual homes, rent-to-own, et cetera. What about traditional commercial real estate?
SOLOTAR: So, there are two. You have to divided into sectors. So if you’re talking about offices, for example, today you would say, wow, well, like how could you invest in offices? Actually, not a big part of our portfolio, but with the pandemic in people working from home. And I would say you have to distinguish where you’re investing and the type of offices.
So, on the lending side in real estate, for us, you know, we think about are these high-end offices that are open plan that have a lot of amenities for tenants, those would be attractive. We look at office space for life sciences companies, for production studios because one of the big themes for us is live streaming, and how that’s increasing. We look at where regionally we’re investing.
So, if you use data and see, you know, where — in which areas are the greatest number of ads for jobs, where are young …
SOLOTAR: … people going? You can get a feel for housing trends, office trends. And very importantly in real estate, because buildings don’t just pop out of the ground, you know, what supply is. And so, you’re always looking for supply-demand imbalance. And we typically don’t invest in new construction, and so we want to buy at a discount to replacement value. And that’s really the formula. It sounds simplistic, but it’s supply-demand, discount to replacement value. That is the mantra that Blackstone has stuck to everywhere in the world since the early 90’s.
RITHOLTZ: So, I’m hearing two things, I’m hearing data matters and what you pay for an investable asset is important.
RITHOLTZ: All right, that — that makes a lot of sense to me. Tell us what your clients are asking about today that you guys are not currently doing. What — what’s the next thing out there?
SOLOTAR: That’s interesting. You know, we — typically when we venture into a new area, it’s because we see an interesting investment opportunity, so we never think about it in terms of how much money can we raise, it’s always how much money can we deploy. But to your question, increasingly, investors are asking us about ESG investing.
SOLOTAR: And it started more so outside of the U.S., in Europe in particular, but I am increasingly asked about it in the U.S. And ESG is something that’s infused in all of our funds and investments. It’s not something that, to date, we’ve really carved out as a product, but it’s certainly something we’re thinking about.
RITHOLTZ: So that’s kind of interesting because the criticism has been ESG captures a huge amount of mine share, but no way near as much capital as you would imagine. And when we do surveys of who’s going to inherit the baby boomers’ money, it’s invariably women and younger people, and they’re both much more enthusiastic about ESG than the average investor. Is this something that you’re really seeing start to change or is that change still out there?
SOLOTAR: So, there are different elements to it. One is that people are mindful of ESG, but they don’t want to sacrifice on returns. So, when you talk to foundations and endowments, for example, very mindful of ESG, but the response is usually, that’s why we want to generate the greatest returns on the portfolio so that we can then …
SOLOTAR: … distribute the money, you know, to those causes. And when it comes to individuals, by and large, it’s the same. They want to support. These are topics that are important, but they don’t want to really detract tremendously from returns.
I — I don’t imagine Blackstone will ever create a copycat or Me Too product. We spend quite a lot of time at the frontend thinking about what will go into any of our funds. So, I think when we do launch something, it will be unique in the market.
RITHOLTZ: Huh, interesting. So, some people are quite worried about valuations not just in the public market, but there’s so much capital sloshing around, and it’s found its way into the private markets. How concerned are you about valuations? And — and what sort of advice do you have for investors about that?
SOLOTAR: So, I am a worrier by nature, and I worry when valuations are high, I worry when they’re low. And in my 14 years at Blackstone, I don’t think that I’ve really sat through a meeting where anyone thought the kind of investing we do is easy. There are always challenges. And either, you know, prices are low, but no one’s selling or prices are too high.
I think the key is not to buy a market and to focus on the sectors that you like, the companies where you think you can affect change. And this is a key in private markets versus public. So, we sign nondisclosure agreements, we get inside information, if you will, we have six months or whatever the time period is to do full due diligence. We have our portfolio operations team all over the company figuring out where we can make improvements. And, you know, when — in the old days, when those were industrial companies, there’s more about cost-cutting today, it’s much more about leaning in on growth.
SOLOTAR: Connecting our portfolio companies to one another, making them more tech-enabled, et cetera.
And that’s really the — the formula. You know, it’s taking the company or the asset and applying either capital or talent to it rather than relying on — on the market. If all you’re doing is paying more than anyone else, that’s a hard way to make money.
RITHOLTZ: To say the least. You mentioned 14 years at Blackstone, I remember the Blackstone IPO, and I — I’m — the pandemic has completely ruined my sense of time because I never would have guessed that was 14 years. But that was 2005, is that right?
SOLOTAR: Seven, 2007.
RITHOLTZ: Seven, that’s a long, long — it seems like a long time ago. One of the things I wanted to ask that I didn’t get to before was the liquidity or illiquidity premium. When someone puts money in a Blackstone funds, my assumption is they don’t have access to that the way they would a regular publicly traded stock for an extended period of time. What’s the typical lock-up without penalty like for — for your funds? And I — I’m going to also assume there’s a wide range and there is no one number.
SOLOTAR: So, for the typical private equity or private real estate fund, those are only accessible to qualified purchasers or institutional investors and you’re locked up for the life of the fund very deliberately …
RITHOLTZ: Which is …
SOLOTAR: … for the life of access.
RITHOLTZ: … seven years typically or …
SOLOTAR: It’s …
RITHOLTZ: … it could be anything.
SOLOTAR: … so it’s usually a 10-year fund.
SOLOTAR: It varies a little bit, but you control the timing going in and you control the exit, so you never want to be in a position where you’re forced to invest quickly or you’re ever forced to sell.
SOLOTAR: So, there is no early redemption. The redemption happens as you start selling down companies …
SOLOTAR: … or assets in that portfolio.
RITHOLTZ: Huh, makes a lot of sense. So, I — I want to circle back to you — you mentioned you’re a worrier. Everybody I know who worked in equity research is a giant worrier. They — like what did I miss, what’s going to ruin my investment thesis? How has the world of equity research changed from your perspective? You got to see it from the public side, from the private side and over a couple of decades of investing. Tell us a little bit about how research is changed.
SOLOTAR: Yeah, it really has evolved. So, in my earliest days, it was — first of all, we didn’t even have Excel. And there was, you know, no way to reach clients other than meeting with them or — or calling them or companies for that matter. And — but you were really an adviser not just to investors, but also to the companies that you covered. And — and that endured most of my tenure. It was what I enjoyed the most. Getting to know the management teams, understanding their strategies, working on — you know, I worked on dozens of IPOs, secondary offerings, M&A transactions. And there was nothing nefarious about it. I worked closely with the investment bankers to really, you know, help the companies figure out their strategy.
That all changed. If you remember Eliot Spitzer came in, looked at research — this was during the — the tech bubble — and found that there were conflicts of interest that maybe investors didn’t know about, maybe they did, but really hived off equity research from every other part of the business. And in many ways, I think it diminished the value of the equity analyst. And, you know, by and large, there’s folks who had studied — really probably knew these industries better than many of the management teams, if you will, working in them because they had such a good feel for the competitive landscape as well.
And at the same time, you had the proliferation of the hedge fund industry, so a lot of research analyst went to the buy-side, left the sell-side. You’ve had compression of commissions, et cetera, making cash equities a less profitable business that it once was. And so, while I still know very many talented research analyst, I think it’s unfortunate that what they’re doing has been so restricted.
RITHOLTZ: Makes a lot of sense. What about social media? Has that disrupted sell-side research?
SOLOTAR: That is a good question. I don’t know that social media has disrupted as much as information comes generally much more quickly than it ever did, and the expectation to have an immediate response.
You know, when I go back in time where you really had the time to think through and crunch numbers and, you know, form of an opinion, today it’s much harder. And like — you know, with social media, to — to your point, everyone is out there with a view, with an opinion, it probably does make it much more challenging.
RITHOLTZ: So, let me switch up gears on you a little bit. I want to ask you about Blackstone’s Women’s Initiative, which I know you’re involved with. Tell us about that.
SOLOTAR: So, I was involved in the formation of it. And at the time that I joined Blackstone, only about 10 percent of the analyst applications — applicants were female, and about 15 percent of the class was female. And so, I was really interested in how we can improve that. There was a perception that somehow private equity alternatives isn’t a great career for women, not true. And so, you know, I was trying to figure out what — what we could do.
So, at the beginning, we really focused on educating young women — sophomores, juniors in college — inviting them in, teaching them, you know, what you need to know, figuring out, you know, why they weren’t applying, why we weren’t hiring more and going for those solutions. Today, it’s light years ahead of that, you know, between 40 and 50 percent of our class is female now.
RITHOLTZ: Wow, that’s good, yeah.
SOLOTAR: Yeah, so big improvement there. And a lot of focus on professional development, and networking, and really trying to find common derailers for women and addressing those.
RITHOLTZ: So there’s a quote of yours that I very much like because it’s a philosophy that could apply to a lot of different people, but I like, quote, “get comfortable being uncomfortable.” Explain what that means.
SOLOTAR: It means that many women, especially young women, are comfortable doing the things that they know well. And unless you’re willing to stretch, you’re just never going to grow in your career. You don’t have to know it all on day one. It’s all learnable. You know, nothing that we’re doing in — at least in — in the roles that I’ve had is rocket science.
So if you apply yourself, if you ask questions, if you really want to learn it, you can learn it, but you have to be willing to push yourself a little bit and know that the first time you do anything whether it’s, you know, speaking in front of a large group or presenting to senior people at the firm, whatever it is, it’s not going to be as good as the hundredth time you do it, and that’s OK.
RITHOLTZ: Is that a gender specific difference? And my flavor of sexism is dudes are just reckless and we — they are not smart enough to think, “I don’t know anything about this, so I’m just going to plow ahead anyway.” I get the sense that women tend to be a little more circumspect than thoughtful or is that, you know, a — a stereotype and it’s not accurate.
SOLOTAR: So there have been studies showing that, for example, women will not raise their hands for the promotion unless they think they can tick off every single skillset, whereas men may have very few of those skills …
SOLOTAR: … but they raise their hand, say I could do it, so that’s definitely a gender …
SOLOTAR: … difference.
RITHOLTZ: Uh-huh. Hold my beer. That’s a — that’s a dude thing. So, this leads me right into tell us about Truth for Our Daughters.
SOLOTAR: So, my daughter Lindsey (ph), at the time, was a freshman in college. She was a math major, so very few women …
RITHOLTZ: Already, you know, breaking barriers.
SOLOTAR: Exactly, in some of her classes although, I guess, increasingly there a lot of women majoring in math now. And she had applied for a leadership program and called me in tears and said, “I just got called for the third round and I’m not qualified.” And I said, “You’re a freshman in college. What qualifications do you think you need?”
SOLOTAR: But it really made me sit back and think here is this daughter of mine who is so capable, and she’s showing all the insecurities that I, of course, also had and that I’ve witnessed so many other women had. So, it — it really caused me to put pen to paper sort of a — if I knew then, you know, what I’ve known now. And — and it was — she — she loved it. So, it was — it was worthwhile.
RITHOLTZ: And some of this — some of the bullet points were pretty straight forward and — and not a big surprise, but some were giant surprises that when I — when I read through this, be ready for anything. That’s good advice for anybody in finance. Be confident. I see the gender-specific, but — reasons for that.
But — but some of the suggestions speak twice as loudly as you think you need to. And I have a problem, I know here how loud I speak, so I speak too loud. Why is that advice necessary for women to tell them you have to speak loudly if you’re in a room full of people?
SOLOTAR: So again, if you are generalizing, women tend to speak more softly and, therefore, don’t come across as having as much conviction in their ideas even if they do. And it really, you know, harken back to when I was in a room filled — it was a boardroom and I was presenting on something I actually knew a lot about. And someone said, “Oh, can you speak up? I couldn’t hear — you know, I couldn’t hear you.” And it just set me back and I thought this will never happen again.
SOLOTAR: I — I also think there is sometimes a tendency when someone is speaking softly for someone else in the conference room to just come right over the top …
SOLOTAR: … and, you know, interrupt, and that doesn’t happen when you’re forceful.
SOLOTAR: So, it’s one of the basic things I tell any mentee I have, any women that I’m meeting with just speak loudly, make your voice heard.
RITHOLTZ: Huh. You don’t need to know it all on day one, very straightforward. You have no idea where your career will lead, very straight forward. Here’s another one that leapt out at me that I never would’ve thought of. Draw lines in the sand. Tell us what that means.
SOLOTAR: So, for me, as a parent, once I had kids, it was figuring out what I wouldn’t give up. I think there — many women are conflicted. They feel awkward saying, “I’m leaving the office because I have to take my child to the doctor,” or et cetera. And there were certain things I just wouldn’t give up.
I never missed a school performance or play. I never missed a parent-teacher conference, but was I able to go to the gym? Was I able to make it home for dinner every night? No. So figure out where your lines in the sand are.
Although I will tell you, after a year of work, my daughter was reflecting on those truths and she said, “I get it.” But as a …
SOLOTAR: … first year, I just have to put my head down to work.
SOLOTAR: I don’t have lines in the sand so that’s good, too.
RITHOLTZ: Well, it’s different when you’re 24 and single versus married with kids. Obviously, the obligations are different. Well — well, I found it to be really interesting, and I’m — I’m glad we got to talk about a little bit.
Let’s — I only have you for a limited amount of time, let’s jump to everybody’s favorite questions starting with — so tell us what you were watching during lockdown. What was your Amazon Prime or Netflix favorite shows?
SOLOTAR: I don’t know what this says about my emotional state so I’ve definitely evolved a little more, you know, high-brow versus where I started …
SOLOTAR: … is what I’ll say. So, at the beginning, I was watching shows like Love is Blind.
SOLOTAR: I don’t know. And …
RITHOLTZ: My version of that, by the way, was the Gilmore Girls. In the beginning of lockdown, my wife and I streamed the whole Gilmore Girls, which I should be embarrassed to admit, but I’m not, and now it’s evolved to something a little more sophisticated.
SOLOTAR: Exactly. And then I enjoyed shows like Ted Lasso and others. Right now I’m watching White Lotus on HBO.
RITHOLTZ: Literally teed up for tonight.
SOLOTAR: Is that right?
RITHOLTZ: I hear it’s hilarious.
SOLOTAR: Oh, I won’t — I won’t tell you (inaudible).
RITHOLTZ: Is it as funny as everybody says?
SOLOTAR: It’s — is it — it’s funny.
SOLOTAR: That is what I would say. You probably won’t like anyone on the show.
RITHOLTZ: Right, which is usually a bad sign like people love succession. I hate everybody on that show and I never got past the second episode.
SOLOTAR: I think you’ll find I hear similarities.
RITHOLTZ: OK. Whereas something like Schitt’s Creek, in the beginning, everybody is totally contemptible, but they all become lovable characters over time.
SOLOTAR: So, it’s funny you mentioned Schitt’s Creek. So — so my two go-tos when I need to just relax and laugh stressful day, Modern Family …
RITHOLTZ: So good.
SOLOTAR: … and Schitt’s Creek.
RITHOLTZ: So good.
SOLOTAR: I could just watch them over and over.
RITHOLTZ: Right. They’re both. So, I’m going to come back to Schitt’s Creek in a couple of years and re-watch it because like the night cap is — has been these classic sitcoms like 30 Rock and Community. It’s like a good way to — and — and …
SOLOTAR: Exactly, The Office I’d throw in there, too.
RITHOLTZ: … Modern Family is terrific. And there’s another one that, you know, it — it only lasted four seasons, but it’s so good called Life in Pieces. Tell us a story of a — an extended family in each episode is three vignettes, one about the parents, one about the kids, one about the grandparents, and they’re all interrelated.
If you like Modern Family …
SOLOTAR: Yeah, I don’t watch it. I’ll check that out.
RITHOLTZ: … try that. It’s like a — just a nice relaxing, and — and all the actors and actresses are — are great. And it’s just — it’s just a — sort of a show.
And I was like the last to Schitt’s Creek that my wife had to drag me kicking and screaming because the first episode, everybody is just so contemptible. But if you give it a little breathing room, they …
SOLOTAR: I agree, it’s worth it.
RITHOLTZ: … they — they grow out of it. Tell us about your early mentors. Who helped to shape your career?
SOLOTAR: So, I really had several. Unfortunately, I’m sure I’ll be leaving people out here because I — I really do feel like it — it took a village. But my first mentor was David Sypher (ph). He was an insurance analyst. He was the number one ranked equity research analyst at First Boston. That’s where I started.
He was not my first boss. I was working for someone else. And I was there one night and 10:00 at night. David had hosted a dinner for a company. I think it was Tokio Marine and came back to the office. I was the only one still there. And so, he said, “I need you on my team.” Literally, that was our connection. And …
RITHOLTZ: It goes to show you being …
RITHOLTZ: … in the office has — has …
RITHOLTZ: … could have positive results.
SOLOTAR: So, another female thing here. You know, historically, I would’ve said I was lucky now, I just say I’m fortunate. There’s the goodness there.
SOLOTAR: So, we connected, and I followed him to DLJ, but he really pushed me. He was the one who, when I didn’t feel ready, had me go meet with portfolio managers. And he used to say like, “You know all the numbers, you can answer all their questions.” You know, I — so I credit my career really to him.
And Tom Leddy who ran the morning meeting at DLJ. He’s a wonderful person, but he was very tough and very tough on me. And I’m ever grateful to him for that. He would let me come in super early. I would tell him what I was thinking of saying, and he would just say, “That’s not what you want to say,” you know, in a — in a pretty harsh tone, but it forced me to just get better and better at it.
So those are the two early, but you know, I have to say even my time at Blackstone I’ve learned a lot from just watching Steve, and Tony, and Jon, Byron Wien and some of my team and, you know, just the — the collective experience and different styles. So, you know, from all of them I would say just thinking big about building your business and, you know, not incrementally.
My team hears me say this ad nauseam. I did 100 this year, so next year I’m going to do 110. No, I want to think about how big can this be and how do we get there quickly. So that combination of, you know, thinking big, impatience, really focusing and just being a flexible thinker.
And — and, you know, in equity research, you certainly go through different cycles. But at Blackstone, I’ve really learned to not say like, well, when A happens, you do B or et cetera. It’s really — well, A happened, but I don’t know, maybe we should be thinking about X, Y and Z that no one else has done.
SOLOTAR: And so, it’s been expansive for me.
RITHOLTZ: Huh, very interesting. Tell us about some of your favorite books and — and what are you reading right now.
SOLOTAR: So, I just finished reading “Hamnet,” which I don’t know if you’ve heard of it …
SOLOTAR: … but it’s a — so it’s fiction, but it’s based on Shakespeare’s son Hamnet, notice connection to Hamlet …
SOLOTAR: … who died when he was 11 and — and around Shakespeare’s wife. The story itself is fictional because there’s just very little information on them, but it was beautifully written and fascinating.
I often also am drawn to biographies, either autobiographies or — or others. So, the Einstein biography and Steve Jobs, I loved Phil Knight’s book, “Shoe Dog.”
SOLOTAR: On audio, I listen to Ruth Bader Ginsburg, Obama. And I just love hearing one about — for none of them, you know, was any of this easy. They all had repeated failures. But also, Einstein, in particular, was this lightbulb went on that here’s a guy we all call a genius, he was, and we refer to people who excel in — in all different subjects’ geniuses. But he really excelled in one — he was maniacally focused on one area. He didn’t do well in chemistry, he needed language tutors. I just thought it was — I never really thought about that in that way.
RITHOLTZ: Uh-huh. Was that Walter Isaacson’s book?
SOLOTAR: It was.
RITHOLTZ: Because I know he did the Steve Jobs book as well.
SOLOTAR: And then I’d say the final category for me is just something that’s so beautifully written, so my favorite book of all time is crossing to safety. And it’s not a big story, sort of a — a quiet story, but the use of language is just wonderful.
RITHOLTZ: There’s an autobiography I read last summer by David McCullough on the Wright Brothers that if — if you’re an autobiography fan, I have no interest in that particular genre of flying or it’s just so well done. And if you like — if you like biographies …
SOLOTAR: Yes, I do.
RITHOLTZ: … everything McCullough writes is …
SOLOTAR: Oh, that’s great. I will check that out. I’m coming away with great recommendations. Thank you.
RITHOLTZ: Well, you know, that’s the beauty of where I sit is I get recommendations from some — everybody each week, and you’re getting the cherry picked versions of that.
Our last two questions, what sort of advice would you give to a recent college grad who is interested in a career in either private equity or investing or finance?
SOLOTAR: So, this is the advice that I’ve given my own adult children, and — and I give to their friends and anyone I speak to, which is when choosing not a job, think about the skillset that you want to acquire. Make sure you’re going to a place where you could really learn where you think it’s a quality firm and you’re going to learn from quality people.
But most importantly, just about how you act, how you present, you want to be the person that everyone says, “I want her on my team,” and what does that mean? It means you’re working hard, you’re willing to put whatever it takes to get the job done. You’re focused on the details. You’re reviewing everything. You know, what — what can your value be as a young person? And it’s that — you know, no one is expecting you to have the judgment of the partner. But whatever you’re doing, just make sure it’s as excellent as it can possibly be.
RITHOLTZ: Good, good advice. Our final question, tell us what you know about the world of investing today that you wish you knew 30 years or so ago — 30 years ago or so when you were first getting started.
SOLOTAR: So, when I look back and I think about all of the market disruptions during my career, so starting in the summer of ’86 when I began, shortly after that you had the stock market correction when 500 points seemed like you know a massive fund …
RITHOLTZ: Twenty-two percent in a day, that — that’s …
SOLOTAR: … yeah, in a day. That was pretty exciting.
RITHOLTZ: … can we call that a crash? That’s more than a correction.
SOLOTAR: That’s true, that’s true. That’s a crash. And then, you know, the S&L crisis, interest rate shock of ’94, the tech bubble rise and then deflation, the global financial crisis, disruption from a pandemic, I mean, it’s like wow …
RITHOLTZ: We get 100-year floods every couple of years, don’t we?
SOLOTAR: … but it’s pretty awesome. Exactly. So, in hindsight, it would have been wonderful to know that we get these floods and that you have to be nimble and flexible in your thinking and anticipatory, and understand that you have no idea what’s coming your way.
So I think the other thing is — which maybe I did know, but proved to be true, finance is, in my mind, one of the most fascinating industries because I mean, think about what I just mentioned and all of the — the derivative impacts of that and inputs from that, I mean, you have to be thinking about not just an industry, but what’s happening on the regulatory front geopolitically, secular trends.
You know we were talking about the Internet disrupting retail, you know, in the 90’s — the late 90’s. Now it took a while to — to really disrupt. But for someone who is intellectually curious, there is just so much going on.
RITHOLTZ: Huh, quite fascinating. Joan, thank you for being so generous with your time. We have been speaking with Joan Solotar. She is the Global Head of Private Wealth Solutions for investing giant Blackstone.
If you enjoyed this conversation, well, check out all of our previous interviews. You can find them at iTunes, Spotify, wherever finer podcasts are sold.
We love your comments, feedback, and suggestions. Write to us at email@example.com. Give us a review at Apple iTunes. You can sign up for my daily reading list at ritholtz.com. Check out my weekly column on bloomberg.com/opinion. Follow me on Twitter @ritholtz.
I would be remiss if I did not thank the crack staff that helps put these conversations together each week. Paris Wald is my Producer. Atika Valbrun is my Project Manager. Tim Herro is my Audio Engineer. Michael Batnick is my Head of Research.
I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.