In this podcast episode, Steve Chen interviews Ryan Van Gorder from Opto Investments, discussing the rise and role of alternative investments. Ryan shares his journey from an accounting background to working in finance and technology, including his time at BlackRock. He explains how Opto Investments helps advisors confidently invest in private markets by providing advisor-aligned, efficient, and top-tier investment opportunities. The conversation covers the increasing accessibility and efficiency of private markets, the importance of diversification, and the evolving nature of liquidity. Ryan highlights Opto’s benefits from being part of the HC ecosystem and stresses the enduring value of human relationships in financial advice, enhanced by technology. The episode concludes with resources for further learning about private markets and a reminder to explore financial planning tools on NewRetirement.com.
Introduction (00:00):
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Steve Chen (00:18):
Welcome to today's podcast. Today we're excited to have Ryan Van Gorder from Opto Investments joining us. He's an expert in alternative investments and we're going to dive into what his company does, how that market works, why these kinds of investments are growing in popularity for retail investors. They've been very popular with institutional investors and a little bit about what's happening more broadly with financial planning and technology since he's part of a family of companies that's very tech enabled. So with that, Ryan, great to have you join us and appreciate your time.
Ryan VanGorder (00:48):
Thanks for having us, Steve. Excited to be here.
Steve Chen (00:51):
Yeah, so we'd like to open up with a little bit about your background, but we'd love, I know you're coming to us, I think remotely from Phoenix, but yeah, just a little bit of your background and what got you interested in financial services in the first place.
Ryan VanGorder (01:01):
Yeah, so I'm dialing in from almost 10 degrees here in Arizona, but has nothing to do with why I got into financial services. I grew out of college with an accounting degree and fell into technology, joined a finance group for a company in Seattle that was going public at the turn of the century. It really opened my eyes to the scale and efficiency that software could add from a finance perspective. So seeing how we're building our business and what was going on there. But as everybody's aware, that chapter in our exciting economy ended with a bust, and I exited the software development space and went directly into a hedge fund of funds, private equity boutique that also had an advisory shop associated with it. So I really cut my teeth on seeing how the capital markets were working from an alternative perspective, and that was this hedge fund space. We were running a hedge fund of funds, which allowed me to see what the universe of hedge funds look like and what private equity was doing, particularly in terms of returns and the power law and what it looked like at the upper end of the investment scheme. And it really got me excited about what was, and still is a really inefficient space and got me excited to dive a little bit deeper.
Steve Chen (02:15):
And I think you went from there to BlackRock, is that right?
Ryan VanGorder (02:18):
Yeah, that's right. So as a company that firm's name was Quellos and we ended up growing the investment management business to about 23 billion in assets under management as well as running a very successful wealth management boutique. And BlackRock came in and did an asset purchase agreement of the funds in that company, and I went with the funds into BlackRock into what was the beginning of a very acquisitive stretch for BlackRock and building their alts platform. So they were just coming off in the Merrill acquisition and getting into equity and then they were going into alt. And so I got to see the Bolton of a lot of inorganic activity at BlackRock and see how they built private markets and alternative assets from the inside of BlackRock. That was sort of my entre into larger scale capital markets and seeing how businesses were ran across the whole suite of assets and offerings at BlackRock, which was very cool.
(03:11):
Got to see not only Alts but the formation of the multi-asset business. Got into index, basically ran finance for the iShares unit after the acquisition of Barclays Global International. Really the growth from about 600 billion to about 2 trillion in assets under management. Just shy of that while I was running the finance function there and then headed off into Asia and got to basically end my stint there. Running finance for BlackRock in Asia, which was about north of 800 billion in assets under management across 13 different jurisdictions, building businesses in places like China and really enjoying the complexity of that business.
Steve Chen (03:51):
I think the big custodians are asset managers and holders are BlackRock, Fidelity, Vanguard, and Schwab. Is BlackRock a little bit different in that it holds a lot more private or a more eclectic set of assets?
Ryan VanGorder (04:03):
Yeah, I would say they're unique in that their mandate is much broader and wider than a lot of their competitors. If you think about index exposures, they're going to compete with Vanguard, think about privates, they're thinking they're competing more against smaller offering. So you look at leaders in the space and Al you see them competing against people who are leaders in infrastructure or have a niche private equity offering or are large mega cap credit sponsors that can come out and compete. And BlackRock tried to do that, compete across the broad swath of mandates.
Steve Chen (04:37):
That's pretty interesting. So what led you from BlackRock to Opto?
Ryan VanGorder (04:41):
It's sort of a circuitous story, but the tail end of it is that I had had a conversation with somebody who was interested in me and what I was doing and the skillset that I had, and I had told her that I had a great job at BlackRock and I was interested in what I was doing and that there was only one thing that would really sort of pique my interest and allow me to have further conversations. And that was something that existed at the intersection of private markets, software development and advisors in America because where I'd come from, what I'd seen in terms of portfolio manufacturing and I would say what is an underserved part of our market at that intersection? And I think she thought that I'd given her a little bit too precise of a spot that would interest me. She hadn't really heard of that, but I had told her that in a June July timeframe and by the end of October November, she called me back and said, Hey, that thing you mentioned, I actually found it and I didn't believe her. And she said, well, you got to talk to the team that's building this, introduced Joe Londale to me and the group of founders. And so I evidenced her claim and it turned out they were addressing the same problem that I'd seen and I was really excited about helping them solve the problem.
Steve Chen (05:52):
That's super interesting. Was this person like a headhunter? Like a recruiter basically?
Ryan VanGorder (05:55):
Yeah, she is. She's based on the peninsula, very good at what she does. She's a good listener and sort of took it to heart.
Steve Chen (06:02):
It's kind of the reverse. So she was talking to you as like, Hey, here's a super talented person and lemme just find out what Ryan wants to do and then I'll go look around and see if there's a good fit versus there's some job opening at so-and-so and I want to go find the person that is doing, I mean, I guess that makes sense. You're the scarce resource
Ryan VanGorder (06:18):
To a certain extent. She had a specific job that she thought that I would be a fit for, and that's where I sort of said, no, that might not be the role for me, but if you actually wanted to hear what I as a potential client am interested in applying myself to and inserting into my journey Opto fit, and she heard it. So pretty excited about that.
Steve Chen (06:39):
And that was in 2022?
Ryan VanGorder (06:41):
That was in the summer of 2021.
Steve Chen (06:44):
Of 2021. Okay, perfect. Yeah. Well, can you give us just a couple of minutes on what Opto does and then I'm curious about Joe Lonsdale and all the rest of it.
Ryan VanGorder (06:51):
Yeah, absolutely. So Opto is a tech enable platform to really allow advisors to have the confidence to invest in the private markets. And when we look to provide that confidence, we're building on the foundation of what's taken place in the advisor marketplace, which is extension of portfolios from public into private, and really looking for an alpha engine within portfolios and having seen it sort of face to face personally and knowing that that's what the private market exposures and alternative non-correlated exposures can do. It's exactly what we're building for. I should say maybe in conjunction with that, Optos build on three foundations. The first and foremost is that we're advisor aligned, and so what that means is we're very much taking an advisor perspective. We are getting paid by advisors in the end clients and not by any of the fund sponsors in the marketplace. So we're avoiding conflict for all intents and purposes.
(07:50):
We're also using our balance sheet to invest next to our clients and guiding them into and throughout the private markets. Another foundation that we're building our platform on is scale and efficiency. So that's to allow advisors to invest on behalf of tens, hundreds, if not thousands of their end clients into the private markets in an efficient manner. A big hurdle to get over when making investments in this space is the inefficiency and the burden that comes with that. And then lastly, I'd say that we're guiding advisors to top tier and exclusive like investments. So we're making sure that they're getting differentiated strategies that fit within their portfolios and fit with their client strategies.
Steve Chen (08:29):
So is the high level thesis on alts and more less liquid investments that public markets are pretty efficient? There's a lot of information out there. There's a lot of liquidity, so prices kind of generally adjust pretty quickly, but with earlier stage or less well-known or highly traded thing, investments, you can find inefficiencies and therefore greater gains.
Ryan VanGorder (08:53):
I would totally agree with that. Maybe I'll just say it back a different way through regulation and the maturity in companies that post on a market or exchange, we have a pretty good framework, efficient and scalable framework to look at companies and make opinions on those companies, whether or not they're good companies, they have growth potential and what that looks like, whether or not it fits within our portfolio within the private markets, because it's way less regulated, if not unregulated to a certain extent, it's harder to look at those companies and or managers with strategies that invest in those companies as making good decisions or investments. It's just harder because if you're looking at fund managers, you need to align on things like their strategy. Does their strategy have a potential outcome that aligns with where you or your client portfolios are going, the structure of the investment that they're making the investments into and what the people who exist within that fund manager profile have done in the past and are doing and are bringing to the table in the form of subject matter expertise. So it's a very different algorithm that goes into the investment or investments that you'll be making. With that comes a lot of inefficiency and ability to sort of wrap those investments and put 'em into your client portfolios gets a little bit harder.
Steve Chen (10:11):
Do you see the private markets or the alternative markets getting, I would assume they're getting more efficient over time, though
Ryan VanGorder (10:17):
Hands down private markets are getting more accessible and more efficient. I would say that historically there is a story about democratization, which is something that we don't really say. I would argue that private markets are democratized. We've gone from zero to one. People have access in all different shapes and sizes. What I would also say to follow that is most people have a very difficult time either saying, here's under the hood and here's what I'm actually investing in or having an opinion on this is a good investment in the private markets or this is a bad investment in the private markets, and that's a big piece of the confidence that we're trying to build in advisors and that sort of still exists in the marketplace has inefficiency.
Steve Chen (10:59):
So in the public markets we've got firms like Morningstar that have tons of data about every public product or investment out there and they're analyzing and rating and all that stuff. Are you building towards that or is there some other company that's doing this?
Ryan VanGorder (11:12):
To a certain extent, we're building towards that, particularly within the guardrails of the platform in that you want to have a standard and you want to have an expectation for what and how an investment's going to act. In the unregulated space, you get all sorts of unstructured data, you get all sorts of answers to questions that don't necessarily follow a narrative or answer a regulator's questions about certain activities or exercises of a company. So what we like to do is provide a framework for people to look at managers and be able to do that. But ultimately I think that transparency and efficiency are going to be the guardrails that answer the longstanding question and point to which you just brought up, which is are we building? Yes, because we're laying down tracks towards more transparency in investments you're making and more efficiency and inclusion and portfolios, access to making the investment and doing small things like getting it administered by a third party fund admin in a seamless way, having it registered with the custody agent so you can get a qip, having it turn up on your reporting platform doing all the things that advisors and clients expect.
(12:18):
At the end of the day, our goal would be to arrive at something that looked and felt like a public market trade. There's a lot of confidence in that.
Steve Chen (12:25):
Yeah, that makes sense. It would make it way easier. I mean, for what it's worth, I own a few alts right now, a couple of real estate investments and a friend's hedge fund, which I know it goes against a lot of what I talk here. I mean it's a minor amount of my money, but what's interesting is the administrative overhead is not insignificant. It's kind of like all privately reported, it's all this manual sending of stuff around what's the value of this and it's a custody aid and stuff like that. I mean, I am trying to move it right now to a larger custodian instead of smaller custodian right now just for simplicity, but making that easier to see would be great. So can you give us some examples of what are alts and what people are investing in when they're doing these, if they do these kinds of investments?
Ryan VanGorder (13:06):
So when Opto thinks about the space in which we're covering, we refer to it as the private markets which exist under a broader veil of alts. So I would say alts in general will include things like you just brought up, hedge funds, actively managed strategies, which might include long short positions, derivatives. You might see nuanced investments in there like artifacts or stamps or baseball cards. And then where we're going are private market investments, so investments in companies that exist within the private market. So for us, we invest through fund managers that have differentiated strategies in mandates that will be recognized by you in the audience in the form of venture capital, early pre-seed and series A stage later stage private equity credit, private real estate, and then private infrastructure are the mandates that cover the private markets wherein we're looking to help find managers with differentiated strategies that can produce alpha.
Steve Chen (14:02):
Yeah, it feels like there's a blurring of private to public. I mean, I know we're a venture backed company and for folks that aren't familiar, there's like seed series A, series B, series C, et cetera. You're raising money, you're getting diluted as you go, and hopefully you have to be proving hitting certain gates as you go, and then usually the exit is go public. What's been happening is private equity has been buying up more and more of the capital or the equity ownership in this country. It's gone from 5% of the equity in companies to like 40%. Now the number of companies that are public are smaller, so the exits for many private companies is private equity, but also you're seeing investors come in and take part in something called secondaries and they're basically, if you to be a later stage company and you have a bunch of equity in a company like Stripe or something that's not public but has a lot of proven value, there are exits and people that will buy some of your equity to give you as employee liquidity in the hope that, hey, it'll go public in the future.
(15:07):
But it seems like you could be part of that. I mean Opto I guess is playing in that ecosystem.
Ryan VanGorder (15:13):
Yeah, absolutely. I think that in conjunction with what you said, we're seeing less IPOs. We're actually seeing public to private conversion, and a lot of that I think is eaten up or covered by the fact that there's so much dry powder in the market or investible capital sitting in the private space that is with pooled investor money, large institutions, sovereigns, there's a lot of players in that. It's the evolution of our capital market into a place where there's liquidity in a lot of different forms. So when companies have access to that capital, it means that their incentive to not necessarily monetize, but get access to the capital for planned growth or something that might be in their future. They just have more outlets for that. So going public might not be the in target for a lot of people. So how do we play it? How does Opto play in that? It means that we're enabling more of the general public to participate in investments in the space that might contribute to that factor or might contribute earlier on in the stage of the investible life of that fund or companies within the fund, if that makes sense.
Steve Chen (16:22):
Yeah, no, it does. It's interesting. I mean, yeah, it used to be that hey, there's this gate of going public, so companies are growing and then go public and get liquidity, and then you get access to a much wider investment pool here. Now fewer companies are going public, they're going private. There's capital out here looking for opportunities. It's crossing that line and investing in the private markets. Great, you can get positions, but how do they get liquidity? What does that look like? It's exciting. Okay, I own a piece of stripe or whatever before it's out, but then I mean essentially that's the blurred line. Are you kind of semi-public? I mean, if there's enough liquidity, then you're creating a market in this non-public arena.
Ryan VanGorder (17:05):
And I guess I was addressing that we were helping to facilitate creation of a market for the corporate, and you might be implying for the employee within the entity, getting that liquidity that if you're an employee that owns equity in a company and the company you work for goes public and all of a sudden the shares of that company that you hold are exchangeable for cash. It's a big value obviously for employees of the company that partake in the risk of working for that company but also getting rewarded for that. What I was alluding to is we're sort of facilitating larger institutional and corporate components of the liquidity, and I think what's going on in the employee, there's plenty of private manufacturers and now there's pools and funds popping up where employees can contribute their shares in and get unit ownership of these funds and pools, but we're not participating in that piece of it.
Steve Chen (18:01):
Yeah, it's just interesting how it's forming, right? There's some access or increasing access to liquidity for the employee or some investor that got in at some point and earlier stage venture person was going along and a private equity firm might come along and say, I'm going to buy it out, take them out of that position. Is that secondary market for these various investors of these alts and private market participants getting a lot more liquid?
Ryan VanGorder (18:29):
Yeah, I would say it's getting more liquid because there's more people with eyes on it right now. There are more players in the game and there's more pools of capital that are building strategies based on buying a discounted exposure to specific managers or companies. And I would say also there's a lot of opportunistic investors that don't need liquidity that when they see somebody who raises their hand an entity, a fund, raise their hand and say, I need liquidity, then they ask them, how bad do you need it?
Steve Chen (18:57):
Is there any good high level benchmark or index that tracks the level of liquidity in these private markets as a trend over time?
Ryan VanGorder (19:09):
Short answer is yes, although it's not something that without making a couple of phone calls you and I can get a look at. Because what you have to do is there's a myriad of liquidity providers in the market. Some of them are people who just have Rolodexes. They might actually have physical rolodexes still and they just know who to call in terms of locating sellers and they know who to call to locate buyers, and they're working for a spread themselves, so they're making a market. There's actual digital marketplaces for this. So we've looked to partner with a couple, which for us won't be really a necessity for a couple of years when the positions that are on our platform are a little more mature and really it's just a backstop for clients that are making these type of investments. If they value liquidity enough or they feel as if their liquidity budget is sort of at capacity, then they might want to just say, do I have a backstop in case I need that?
Steve Chen (19:59):
I mean, the ultimate way of getting liquidity is the company goes public, but as there's more private investors in this market, you're seeing companies go later and later. I was actually just talking to one of our investors. He was at the tui, which is a big venture investor thing, and I guess someone was up on stage saying the benchmark to go public now is a billion dollars in revenue, and it's like that's a lot that a little daunting as your earlier stage private company.
Ryan VanGorder (20:28):
I agree. And that A, it's daunting, but B, as an investor, the way I think about that is the growth curve of a company prior to achieving a billion in revenue is pretty dramatic. And I feel like as it pertains to investors like you and me and folks might be listening is we would like to participate in that growth and fund some of it with our retirement money, with our discretionary investible assets. The further and further people get out or companies get out from listing on a public board means the more of the growth curve that gets skipped or omitted from investors' portfolios who are only investing in public securities in their portfolio.
Steve Chen (21:11):
Yeah, it's interesting to think about how this is changing as an investor that if you wanted to look at this space, is it easy to diversify or do you end up taking concentrated positions
Ryan VanGorder (21:23):
In the private markets
Steve Chen (21:24):
Markets in the private markets?
Ryan VanGorder (21:25):
I would say right now it's easier to diversify than it's ever been. I think that the skillset in that is locating what you or any investor might consider a good strategy that's differentiated and exists in the space that you want to invest fits in your portfolio. Now, if you've spent money on building the whole platform and infrastructure to go out and source deals and do the screening, then it becomes easier. If you've looked at north of 2000 pitch books over the last four quarters and you have an idea what those look like, it's hard to do that without making a real investment in people process and technology. We like to think that we've got just the thing for investors who are excited about doing that and getting access that fits into their portfolios and making it more efficient.
Steve Chen (22:14):
So I mean, mechanically in the past folks would say, oh, I'm going to participate in some commercial real estate syndicate, or maybe I'll do an angel investment. And depending on their wealth level, they might put in 25,000, 50,000, a hundred thousand dollars into an individual. I mean, this is if you have, depending on your wealth level, but you're piling into one investment versus as with your broader pool of investments, hopefully most of it you're buying index funds and just broadly diversifying in the s and p 500 or V-T-S-A-X or VTI or something like that. Do those kinds of vehicles now exist in the private markets where you can say, I just want to own a whole bunch of fintechs or something like that, or whatever, or a whole bunch of series A, b, C companies?
Ryan VanGorder (23:01):
Yeah, I think it's a little bit less. If you want differentiated earning capabilities, it's a little bit less. It's a lot less peanut butter spread over an exposure. I'm a big proponent of extra cheap beta in the form of access to markets and market exposures, as you just talked about. The other half of that barbell strategy is finding differentiated strategies that are alpha producing and thinking through how that fits means that you might not get a full mandate diversified exposure. What you should probably go out is pick a strategy that exists within a mandate you want to invest in and have some conviction behind. That
Steve Chen (23:41):
Makes sense. So today with Opto or for these kinds of investments, mostly people are going through their advisor who is going through a firm like Opto and the advisor might say, Hey, we're pulling up a bunch of people in our, so if the advisor's managing $20 billion or something like that on behalf of a bunch of retail investors, they might say, Hey, we're going to participate to the tune of a couple hundred million dollars through a firm like Opto, and then they get people to come together and be part of that, or how does that work mechanically?
Ryan VanGorder (24:14):
Well, what I should say first to start out with is I'm a strong believer in the fact that I think most portfolios, but not all, should have access to private markets and more illiquid type investments. And we've made a very explicit decision to work with advisors and fiduciaries to be the arbiter of whether or not portfolios are right for illiquid positions, really understanding what that means and what the end clients' needs and or risk return desires are. And as a result, we've chosen to work with advisors. The way advisors will access these exposures are they can come in, well, I should say there's a couple different ways. One is a more bespoke exposure, particularly on opto. You can come in and see where we've actually put our balance sheet behind a couple of investments. We syndicate those out with a hundred thousand dollars minimums for advisors to come in and see if these positions actually make sense for one-off clients.
(25:08):
And if they do, they're able to use our portfolio construction tools, our pacing models, our proposal tools, and get an idea for how those actually fit into their client portfolios. And what we're actually doing at scale right now, and where we found a lot of demand is for advisors to come in and build a white label custom fund that's being built around exposures that fit a majority of their client profiles. They might be running models or they might be running similar attributed clients that just, for example, might all have the desire for growth equity positions, which may be a little bit more longer duration, a little bit more risk, a little bit more reward, and it's an extension of the equity allocation in their portfolio. Then we could build a custom fund where they come in, we align on the strategy, we go to the market, we see what's actually in capital raise and fund formation in the market, and then we can propose the creation of a fund, which may or may not include some co-invest or have direct deals that will act as GP and due diligence for, and we'll create that for the advisor that then allows them to provide to their end clients.
(26:14):
It does a couple things too. You talked about differentiation. This is a point where I'd bring up, it allows an advisor to have more of an endowment style approach where they can actually launch a fund like this every two to three years, always have something in market called the Retirement 2024 Growth Fund where you're open and fundraising for 12 to 18 months, and then as soon as that's closed, then you launch your next vintage and it really diversifies. And private markets is maybe a little bit more salient is a vintage approach diversification because you're dealing with different market environments, different interest rate environments, different valuations. If you were deploying into VC in 2022, it's a different story than when you're deploying into VC in 2024
Steve Chen (26:55):
For sure. So you're creating a fund for the firm based on what the firm believes its investors want, and then they are filling it and they could fill it. So if I'm an RIAI could be like, okay, great. I want to create venture growth fund X, Y, Z or 2024 and I can keep it open for 18 months and I can just take investments into it. And that money just flows in through the fund and then through the fund to Opto and then to the actual investments, or is there a more limited timeframe?
Ryan VanGorder (27:27):
No, that's the timeframe in which we operate.
(27:30):
Okay. Usually about 12 months is what we'll sort of grant in the fundraise cycle for the underlying advisor to communicate with their clients appropriately, use some of our adoption material insight material to make sure their clients understand, Hey, this is where the fund's getting invested. A lot of times we'll spend time with underlying gps to talk about their strategy, what's going on in their fund, what they've done historically, who their people are, and it gets a little bit more salient. So it does that thing that I talked about, which is add confidence when you have certainty or maybe a little less uncertainty around where your money's getting invested, how it's getting deployed. Ultimately you have less anxiety and makes it easier to keep clients happy.
Steve Chen (28:09):
They can see and feel what they're invested in and kind of see what's going on with the companies. Okay. And then what happens? What's the halflife of these funds look like? Do they just exist? How does liquidity come back out of it later on?
Ryan VanGorder (28:22):
It's a great question. If you're not investing in the private markets and you're dipping your toe or getting into them, what you'll find is that there are mechanics and equals that have been created for more liquid strategies that are a little more administratively burdened, allow people to say, Hey, I have an alts investment, or, Hey, I have this private market investment. But what most people have found is that with these large pools, mega cap sponsored funds, what they're actually getting is private market beta. So what we're doing is bringing sort of the tip of the spear into market, which is saying, Hey, we're going to lock money up. We're going to invest in draw down funds that are going to be the traditional illiquid investments. And to your point, Steve, they're not necessarily completely illiquid because your commitments get called down over three years and then there's a return of capital profile and there's a return that will be in excess of the capital that you've drawn in if the fund does what it promises to do.
(29:15):
So when you have at least an expectation for what that liquidity profile looks like, all of a sudden you're in control of more of that money. If you make a 10 million commitment to a fund, actually, let's say you make a $100,000 commitment to a fund, there's a general expectation that that'll get drawn down over three years, somewhat of a chunky flow, but you could say a third, a third, a third. And in that drawdown period, you're putting cash into your fund manager and they're taking that cash and deploying it into, and in some cases there's quick monetizations. In today's AI excitement, there's a lot of companies that are just born off the napkin and bought by another company who's raised some money and wants to take that idea and build on it. So you see in some even VC space where there's expectations of 10 to 12 years before monetization, you can see capital flow back in depending on the fund manager strategy and what the market space is. One of the things that we do is try to provide a little bit more certainty around what those cashflow profiles look like and really it's cash in over a number of years, and then you should expect cash out as the strategy is deployed and the manager monetizes or crystallizes investments, they'll return that capital. And the desire and hope is, and what we all read about in these private market investments that you're getting 10 x or you're getting some sort of extra large return in excess of the capital that you've contributed.
Steve Chen (30:37):
Got it. How does Opto measure itself? Are you measuring yourself in terms of capital raise and capital deployed per year?
Ryan VanGorder (30:44):
Right now we're thinking about funds, funds in the pipeline. We're thinking about really custom funds launched. We're thinking about assets in play from a perspective and the way that we're consuming that is how we're getting money to work for advisors.
Steve Chen (31:02):
And do you have any data yet? I mean, are you live, are you deploying money for advisors now?
Ryan VanGorder (31:07):
Oh yeah. So we're live and we've been pumping money through our pipes on the sort of single syndicated level and the custom funds for advisors for quite some time. Right now, we've got an extra large pipeline. We'll be launching funds at a pretty rapid clip on behalf of our clients, hopefully into perpetuity. That's a loose way for me to say. It turns out there's a lot of demand from advisors to sort of solve for their private market and alternative exposure needs. We're about three years off the napkin. We've hired a lot of people on the back of our fundraise, and we are building a platform that's going to enable advisors really execute on these transactions.
Steve Chen (31:54):
So can you give us kind of ballpark numbers, this might be confidential, but in 20 22, 20 23, 20 24 to date, how much money is being deployed through the Opto platform? Is that a way to measure it?
Ryan VanGorder (32:08):
That certainly is a way to measure it. So what I'll say is that if you look at our a dv, you'll see that we're well north of a hundred million in terms of capital as it's reported in that sense. I think a little bit more importantly in the way we're measuring flow is that we're currently launching funds and custom funds that are well north of a billion dollars. So in the next 12 to 18 months, we should expect to be in the market building funds to that extent.
Steve Chen (32:33):
Okay. You've been going for a few years, you've got a hundred million under management, you're launching funds for 1,000,000,010 x. What do you anticipate, what do you think the future looks like for the next five years from now?
Ryan VanGorder (32:43):
Well, the nice thing and a big piece of our thesis is that we're building for scale. We think that, and I particularly think that perhaps because I've been staring the beast in the eyes that this is a space that's been solved with people in process and a lot of precedent that nobody is coming off of. Pretty thankful for the fact that I'm aligned with all the founders employees of my company as well as the chairman and coming up with a solution that's software based. We also think that the market is extra large. Nobody has a monopoly on good ideas, and there's a lot out there. So we're not necessarily concerned with capacity, but what we think is we can build the rails for the advisor community to be building private market funds on with no problem at scale.
Steve Chen (33:27):
Got it. And so scale too is not, probably not tens, hundreds of billions of dollars, trillion dollars. I don't know. I mean, just to zip back, I think one of the big hypothesis here is that in institutional investors, it's like I thinks are 25% of their holdings, something like that. I mean, you probably know the number, right?
Ryan VanGorder (33:49):
Yeah, well, it depends on how you slice it and dice. It turns out you can skin a cat 99 different ways, but we should say just in general, institutional investors or savvy institutional investors are going to have exposures or portfolios with greater than 20% AL exposure in the more retaily individual advice space where south of 5%, there's a long way to travel. It's a big market and it's hundreds of billions of dollars. And we think we can positively impact the market and help advisors deliver returns and portfolios that their clients are demanding and that will help them find solutions.
Steve Chen (34:27):
So today where our people move between cash, fixed income and public equities, you envision a new slice, private alts, and people will be moving between those, rotating between those different sectors and alts could be. Do you guys have a forecast for how big you think Alts might be in the retail world? Do you think it's going to get north of 20%?
Ryan VanGorder (34:51):
Yeah, well, maybe I'll just back up to what you said there. You had brought up a new slice in the allocation model. What I would actually say is a twist on that, which is maybe not a new slice, but a new outer rim to the allocation model and just extending that fixed income and equity allocation from Publix into private. So it's actually, you can have public equity, you can have private equity, essentially you're doing the same thing. One is listed on a board and got a lot of regulation wrapped around it, and one is caught up in a strategy with the manager that goes to individual funds or maybe direct investments directly into the business. We don't see an end to the 60 40. We see an extension of it from Publix into private, and we think that there's a lot of space travel there. So I would say that there's a monumental shift coming into privates. I would say that the duration in which it's going to happen is not going to be fast. There's human behavior. There's a lot of precedent, there's a lot of war wounds from people who know what private market investments should be doing. They know how they work, it's just that they're not working for them. So sort of making that jump into a space is going to require evidence of claim and some real trust in where they're going.
Steve Chen (36:10):
Okay, cool. I appreciate the color on Alts and I will link to your site and some of the resources about it. I wanted to shift gears for a second, talk about the family of companies that Opto is part of. So I know that I think Joe Lonsdale, when we were first in the preamble to this, we were talking about he's kind of the original founder for this and Palantir and add APAR and Affinity, a bunch of, he controls HBC, which is a venture fund. What do you see as the synergies there between these different companies and do you think that'll help accelerate opto and also just what you see happening here in this whole space?
Ryan VanGorder (36:49):
We are a part of the HC ecosystem. Joe Lonsdale, our founder chairman, runs ABC and they're at the heart of a couple of strategies. They're investing in FinTech, biotech, defense tech and Govtech. I think I've got 'em all. There might be some nuance to that. But what I would say is, and what is sort of near and dear to my heart is that Joe and his team like to tackle big complex problems and they have the wherewithal to apply their IP and find people who can help them to solve those big complex problems. And sometimes those big complex problems don't get solved with one shot or one attempt, and I think that there's these ecosystems around all of that. That make sense. So we exist, well, we exist in the FinTech space and we're a byproduct of the ABC Build program, which is a studio based program where ABC funds an idea, maybe not people, and then they staff it with executive in residence and the founding team.
(37:46):
And so we've got a lot of sister companies that we either draft off of or park next to and we really enjoy, I certainly as an operator really enjoy the ecosystem and the ability to look around and see where our VC founder is solving problems, maybe get some help, maybe have access to talent. It's nice that we've got grade A engineers at Opto building a program and a platform that are cutting edge, and the rate at which my crew works is mind blowing, not just to me, but to most people, and I'm very appreciative of that. So there's a lot of benefit there. I think maybe lastly what I'll say is, yeah, we're parked around a lot of names, some which rattled off. There's others in risk reporting, not only for advisors, but institutions. There's Luminary doing some sort of estate planning solution provision. There's standard metrics and there's this whole portfolio and the ecosystem, and it's really helpful to have people to bounce ideas off of and think through big complex problems.
Steve Chen (38:52):
Yeah, I've bumped into Luminary, I know they're like vanilla and wealth.com, right? Yeah, that's right. Estate planning. Yeah, no, it's pretty cool. So is there a big human capital flywheel that happens in this ecosystem where people move from Palantir to add APAR to Opto and so forth, or you're tapping into that network somehow? I could see that being a massive differentiator.
Ryan VanGorder (39:14):
I mean, I think probably an extra large amount of people that have been successful in ABC companies that know what the mandate is and how to operate within that construct. And we have a lot of people who've worked for Joe previously and they liked the environment, so it's certainly helped and there is a bit of a flywheel and a central hub to that, which I'm certainly thankful for and leaning into as much as I can.
Steve Chen (39:38):
Palantir in particular, I mean, I don't know what the market cap is, but I saw that they're doing a one and a half billion in revenue. It's public company Peter Thiel and Joe Lonsdale looks like Nathan Gettings, who I don't know, Steven Cohen who I think is a big hedge fund guy, right?
Ryan VanGorder (39:52):
Yeah, he's an investor
Steve Chen (39:54):
And Alice Karp, but obviously that has a ton of data insights. It's a big data analytics company and then Adipar has a huge amount of data about every kind of investment out there, so that must give you a lot of insights that you might not otherwise get as a standalone business.
Ryan VanGorder (40:10):
Yeah, it's a nice ecosystem to be a part of and I'm certainly thankful for it.
Steve Chen (40:14):
That's awesome. Do they bring the companies together? Do you guys meet up on a regular basis or the founders or management teams?
Ryan VanGorder (40:19):
Yeah, short answer is yes. I wouldn't say regular basis, but there's certainly a loose network. Joe does a really good job of keeping us connected and making sure that we're avoiding redundancy, not solving the same problem, trying to work well together, thinking through more holistic and macro level problems as an ecosystem, which is hard and you won't see it in many other places. So it's a nice group to be a part of
Steve Chen (40:41):
At some point. I'll have to try and see if I can get Joe Lonsdale on here. I would be curious what motivates someone like that. I mean, I imagine he has more money than he needs, and so he's got higher level problems he's probably trying to solve.
Ryan VanGorder (40:53):
Yeah, I might just say Joe has an innate and amazing ability to lock onto big problems and want solve them. And maybe that's what I think that I have very much in common with him is that I like to solve problems and it's clear by the shape of his portfolio and the companies that he's funding, that they're solving big problems. You don't go into government and govtech without wanting to solve a big problem. You don't go into the bio or health space without solving real problems. Palantir's a great example for solving big problems with data and software, and so he's got an ability to go zero to hundred really fast, and I certainly appreciate that he does that and he's got an opinion and he's a good leader and sort of role model for our company.
Steve Chen (41:41):
Awesome. That's great to hear. Alright, well look, I know we're coming up in time so I have one more area of questioning just if you have an opinion about as you work in with advisors and you're thinking about alts and obviously data, do you have an opinion or perspective on where you think advice is going and how technology is going to affect the individual investor in the future and advisors and just this whole ecosystem of investing overall?
Ryan VanGorder (42:05):
Yeah, 100%. I'm of the opinion that the human interaction and the relationship at the very end of this call it a chain or value proposition, will never go away. I say we collectively, I'd say my whole company agrees with this, is that the advice businesses built on a form of trust and it's also built on the ability to be a good listener and solve problems on behalf of one's client. And I think we as Opto will be a big part of the solution that sort of enhances that and augments an advisor's relationship with their end client because at the end of the day, advisors want to focus on being that trusted solution provider and think through all the noise on the tail end of that and be able to provide anything and everything from estate planning, tax advice, investment advice. There's probably a whole slew of other interpersonal advice that needs to be added there. I think that that's not going away, the relationship and trust component. And I think that what's here to say and what's here to solve is how to augment that. That's what Opto is looking to do. In hundred percent of the cases in which we're partnering with advisors, how we think about it, we're basically looking to augment their relationships but their in clients and allow us to take a lot of the inefficiency and make it go away.
Steve Chen (43:28):
Yeah, so I'd agree with you that advisors are not going away and that human element and trust is key, but I think there is increasing pressure on fees. And what's interesting is a lot of the basic blocking and tackling, or I would say all of the basic blocking and tackling that an advisor did 10, 15, 20 years ago is automated. So you robo investments, all that stuff, the basic investing is commoditized. What's not commoditized is hanging altogether. So how do you look at your portfolio, your whole portfolio, how do you think about taxes, invest insurance, estate planning, and then can you find other ways to diversify that a normal retail investor is not going to get access to because a retail investor is not going to do what Opto is doing, go out and look at the private markets broadly source deals, can diligence 'em, figure out how to invest, how much to invest, track, all this stuff. I think that makes sense that the advisor has to almost get super empowered to bring this value because their fees are very often pretty high. So it's like how do you justify that fee? You really got to put a lot of things together, I think, to make it good ROI for the end investor.
Ryan VanGorder (44:45):
Yeah, no, I agree. It's not an easy task by any means, but I think with the right partners, advisors are making good headway into making that easier. I would say that there's a lot, if I think inwardly and where is going, we're endeavoring to commoditize the stuff. When I say commoditize, reduce the noise in anything that is scalable and automatable. We're going to do that through technology. We're a software company and we're going to do our best to solve that and we'll bring in this sort of confidence to navigate in the private markets upfront. That'll be the big piece and it's a big piece of our value prop and it'll also come with the output of all that DD due diligence and market intervention and we're excited about it.
Steve Chen (45:30):
Alright, awesome. Alright, well look, as we wrap up here, any resources that our audience can look for if they're interested in all how to learn about what they are and how to invest in it that you would suggest?
Ryan VanGorder (45:44):
Yeah, visit our website and on there there's an insights tab and we spend some time out with fund sponsors talking about just generally speaking strategies, private markets, why private markets, the insights page is open to the public and it's a good place to get started and otherwise I'd say just poke around and don't hesitate to sign up at Optum Investments.
Steve Chen (46:04):
Okay, cool. Alright, well Ryan, appreciate your time. It's great to get your insights about alts and private markets and how they're working and evolving. It's been super helpful for me and also to just kind of think about this evolution of how capital flows through our ecosystem and how it's made available to these companies like ourselves that are on this journey and or in the private world trying to get bigger and do different things. And for folks listening, appreciate your time and energy here and all questions and feedback are welcome. Definitely check out, we'll link to Ryan's bio and to Opto in the show notes. And then if you have any feedback or reviews, we definitely appreciate that an all sharing of this is welcome. And then finally, if you need a financial plan, definitely go check out NewRetirement.com. Thanks a lot. Thanks Ryan, appreciate it. See
Ryan VanGorder (46:50):
Steve.