This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have an extra special guest. His name is Greg Fleming and he is currently the CEO of Rockefeller Capital Management, formerly the family office of the famous Rockefeller family fortune.
Greg is one of these people that a lot of folks who are not in the industry may not know his name but he’s been instrumental in shaping an — really shaping Wall Street. He’s done a number of incredible deals that are starting out with BlackRock and the purchase of Merrill Lynch’s wealth management sides or asset management side.
That was really quite fascinating deal that allowed what was essentially in-house Merrill Lynch assets to be sold to anybody who wanted to buy them. You can imagine prior to that transaction why people at other firms, let’s say UBS or Morgan Stanley, wouldn’t want to buy a Merrill Lynch product. Once it went to an outside party like BlackRock, that changes the dynamic and eventually led to BlackRock becoming an $8 trillion asset manager.
He also was instrumental in the sale of Merrill Lynch itself to Bank of America in the midst of the financial crisis and he has been an adviser on a number of other deals, too numerous to mention., most recently the sale of the Miami Marlins to a group led by Derek Jeter who he’s been working with and has known both personally and professionally for decades.
This is really a fascinating conversation with someone who is as knowledgeable of the business of investment banking and wealth management and financial planning as really anybody in the world. So, with no further ado, my conversation with Rockefeller Capital Management’s Greg Fleming.
VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
RITHOLTZ: My special guest today is Greg Fleming. He is the founding CEO of Rockefeller Capital Management, which essentially is a re-envisioning of the Rockefeller family office that has been around for quite a long time. He comes to us from both senior positions in Merrill Lynch and Morgan Stanley where he worked as an acclaimed investment banker. Welcome to Bloomberg.
GREG FLEMING, CEO, ROCKEFELLER CAPITAL MANAGEMENT: Thank you very much, Barry. It’s great to be here.
RITHOLTZ: So, I mentioned you began your career as an investment banker. I know you were at Merrill Lynch in the 1990s. How do you transition from consulting with one set of clients to finance with somewhat different set of clients?
FLEMING: In some ways, it was a pretty seamless transition in the sense that I was providing strategic and management advice to multiple clients at Booz Allen Hamilton and then I was also providing strategic tactical and financial advice to clients as an investment banker.
So, I do think that that training helped me to position myself more quickly to be able to counsel senior executives and CEOs on whether I would do a deal of fire with them or were we recommending something and helping them to think through what are the next steps in their businesses.
So, when I left — I left Booz Allen in late 1992 and joined Merrill Lynch. And frankly, one of the reasons I left, Barry, was because I wanted to get closer to the followup, the execution, and I found — eventually, I went from being an investment banker and an adviser there to leading businesses, which I like the most and I’ll get to that.
But when I went to Booz Allen — when I went to Merrill Lynch from Booz Allen, my thought was to get into a company and get closer to being able to actually see through the vision that you work with clients on as a management consultant.
So, Merrill Lynch in the early ’90s was a tremendous place. It was taking off as an institutional firm. It had been a retail-focused firm for decades really from its founding early in the 20th century. In the 1990s, they had done a series of acquisitions that had positioned them well to build an institutional business.
I found the culture to be meritocratic, performance based. If you did well, you could move quickly. I joined in late 1992. I started more on the management side within municipal finance helping run that business and then I moved to investment banking and the financial institutions group and I started working directly with clients, particularly interestingly enough in the asset management space where I really spent the first years of my career as an investment banker advising asset management companies on potential sales and public offerings, including, and we can get to this, BlackRock.
RITHOLTZ: Let’s stay with Merrill before we move forward to BlackRock because I want to talk about your transactions especially some of the ones that really reshaped Wall Street in a bit. The 1990s were pretty wild go-go time on Wall Street. What was the atmosphere like at Merrill Lynch? Did people have a sense of how unique that decade was or did it just seem business as usual?
FLEMING: When you’re in a decade like that or really now that I’ve worked through multiple decades, when you’re in it, you don’t necessarily stand back and say, this is unique and all the following ways. You have a sense of it. You might observe some of them.
But as you said, it was a very positive environment for the American economy. As you recall, I think Bill Clinton was president from 1992 to 2000. By the time 2000 came, we had a balanced budget, we had tremendous growth in the country. Trade was growing all over the world and new countries were starting to enter the capitalist realm, including toward the end of that period China is coming on the horizon.
So, it was, as you said, a very vibrant time in the United States and around the world from an economic standpoint. Merrill expanded into Europe, bought a company called Smith New Court, expanded in Japan and Canada and many different places.
We continued to build out the investment banking business and really started competing directly with the firms that had been successful in that farther back and longer like Goldman Sachs and Morgan Stanley. So, it was, as you say, with hindsight a tremendous decade and even in it, you had the sense that this was a robust time and Merrill Lynch was a place that was on the move and going in a very positive direction.
RITHOLTZ: So, you eventually become chief operating officer at Merrill, a title you held right in the middle of the great financial crisis. That had to be madness. What was that experience like? Just a few short years after the go-go ’90s, ’07, ’08 must have just been insane.
FLEMING: It was a very challenging time, Barry. I have to say I’ve had great success and luck in my career and the latter is important for everybody. And because of working hard and doing well your getting opportunities, I moved quickly into different positions of increasing responsibility at Merrill and I was named the co-president and co-chief operating officer in April of 2007.
That turned out with hindsight and pretty quickly actually to have been in a challenging time to step into that because by the fall on the fixed income side of Merrill Lynch, there were significant challenges as there were throughout the industry, particularly with subprime assets.
So, that whole period turned into one of the most intense and stressful of my career, probably of many careers. I worked for Stan O’Neal leading up to the fall of ’07 and then he was replaced with John Thain who became my new boss. And John and I raised a lot of capital to help Merrill Lynch deal with these balance sheet challenges, literally turning the capital base of the company almost over, I think we raised north of 25 billion in capital on a company that, going into all this, had approximately 30 billion in capital.
And we thought by the summer of ’08 we had worked the funds through it but there were continuing challenges in the fall of ’08. So, we ultimately sold the firm to Bank of America in a very stressful weekend in September of 2008, a memorable weekend. And we closed that deal in early ’09 and I left the firm and went on to other things.
Lessons from that time for me and I have three children that are in their early 20s. We talked about many different things and we have a quote of the day on our text chain and lots of advice across different topics.
But the primary lesson from that time from my vantage point is that when you’re in a position of responsibility and authority and things are happening around you, you need to step up. There were times during that time because I had moved quickly in my career where seven or eight years earlier, I was a senior investment banker running the financial institutions group at Merrill Lynch and now, I was front and center on making decisions as to whether we would stay independent and could we get it sold and under what circumstances.
And one of the things that I say with hindsight and moving forward is somebody’s going to be in that position. So, don’t spend any time wondering where everybody is and why the pressure is on your shoulders. It’s there and you need to react to it and you need to rise to that occasion and try to do the right thing by the many people that are depending upon you. And that is one of the major lessons I took away from that time.
And fortunately, we did get Merrill Lynch into a good spot and I think it’s prospered under Bank of America. I think it could have been an amazing company if it’s beta (ph) and on a standalone basis but that wasn’t ultimately the result that was in the cards.
RITHOLTZ: My special guest today is Greg Fleming. He is the CEO of Rockefeller Capital Management. He has been really at the center of some pretty amazing deals that help to reshape finance as we know it today.
Let’s discuss some of them and will start with the sale of Merrill’s money management business to BlackRock. That was something like a $9 billion deal, ultimately led to a number of aspects of BlackRock, including iShares and on and on down the road that allowed them to become one of the great power houses in finance. Tell us what was behind that deal.
FLEMING: Barry, I had a long history with BlackRock at that point in time. In fact, it went all the way back to the mid-90 when I worked with them on raising some closed-end funds that they went to Merrill Lynch’s retail business to be part of.
I got to know their leadership team, Larry Fink, the CEO, and some of the other senior executives there, Rob Kapito, Rob Goldstein. When we took it public Barry, the stock was at $14 a share and it’s obviously many, many years ago and had done tremendously over that time and is where it is today, $600 a share or more.
So, that transaction cemented a relationship that I had already been building with them and I stay in close touch with them. I really was one of the strategic advisers that Larry and team relied upon. And that’s what led to the Merrill Lynch deal.
We were thinking about what we are going to do with our asset management business. It was a very good business, primarily equity base and retail base in the U.S. And BlackRock was looking for both of those things to fill out what was still at that time a primarily fixed income institutional manager.
So, we started a negotiation and a dialogue. On this one, I actually represented Merrill Lynch and my boss at that time, Stan O’Neal, and Larry Fink had his financial adviser who, interestingly enough, was Gary Shedlin who’s now his CFO.
And we put that deal together in 2005 and created the BlackRock that really was positioned because it then had broad-based product capabilities, equity and fixed income. It had a broad-based retail access and distribution. We positioned BlackRock to really go on the run that has gone on since then. Obviously, Larry and team have executed brilliantly.
Merrill Lynch took back a 49 percent ownership stake in BlackRock. That was the part of the magic of the transaction. Larry continued to control the company but he had a very big partner.
I went on the board of BlackRock and stayed on the board until I left the Merrill Lynch in 2009. So, I do take pride in having helped BlackRock at multiple key points along the way in this company becoming the amazing company with I think approximately 8 trillion in assets under management in 2020.
RITHOLTZ: Truly astonishing. You mentioned previously the transaction that brought Merrill Lynch to Bank of America. That was quite the abbreviated process. Is it true that was essentially completed over a weekend?
And just to remind everybody, that transaction took place in the fall of ’08. You had AIG and Lehman teetering on bankruptcy. The world looked like it was going to hell. How did that transaction happen and how did it happen so quickly?
FLEMING: Well, it did take place over a weekend and we announced it the Monday morning of that weekend was September 15th, I will never forget it. But we had — Bank of America had been interested in Merrill for some time and I had had dialogue in the months leading up to it with some of the senior executives at Bank of America and with a lawyer who does not get enough credit for having put this transaction together, a friend of mine named Ed Herlihy at Wachtell, Lipton.
So, it wasn’t like we talked to Bank of America for the first time on Friday and announced the deal on Monday. They had done a tremendous amount of work on Merrill Lynch over the years as a prospective partner and they were aware that circumstances might come to pass where we could potentially be interested in a transaction with Bank of America.
So, that backup I think is important. But the reality is that it did come together in the final analysis that quickly. On Saturday morning, September 13th, very early in the morning, John Thain and I had multiple conversations about him reaching out to Ken Lewis, the CEO of Bank of America, and saying, we should talk this weekend.
I was very focused on trying to get the transaction done on the weekend because I thought that Lehman had no partner that was on the grapevine. Everybody was wondering what was going to happen to Lehman. And I believe if Lehman did file for Chapter 11 as they did on Sunday night that the markets on Monday would be a disaster and Merrill Lynch would quickly come under pressure as the next smallest securities firm that was still in existence.
So, I knew this is one of the benefits of the training as an investment banker. I knew the value of a weekend and I was pushing John Friday night and Saturday morning to initiate contact and he ultimately did. And Ken Lewis flew to New York on Saturday and had a meeting with John Thain early Saturday afternoon and they agreed on us allowing them to do due diligence and starting a dialogue around the potential transaction.
In that dialogue, I think John was thinking maybe a minority investment. Ken Lewis was really thinking he would buy the firm. Later that evening, we started due diligence in an intensive way. We were on one floor at Wachtell, Lipton and Bank of America was on another. Wachtell was the adviser — the legal adviser to Bank of America at this point in time.
And on Sunday morning, a man named Greg Curl who was the lead negotiator for Ken Lewis and I met very early, I think it was 7 a.m., to discuss the terms of the transaction. I remember having gone back to the hotel I was staying in a couple of hours earlier and take new shower. Nobody was sleeping. We hadn’t slept in terrible days.
And walking back to Wachtell, Lipton, which is in the Midtown, it was very quiet and thinking if I didn’t get this negotiation right, we have 65,000 employees, this firm has been around for almost 95 years, and a lot hang on what happened in the next 24 hours, and I did feel the pressure of that.
It was the — will always be the most pressured moment of my career, I think. When somebody will come into my office today or at any point since then and say, we’ve got a big problem, I’ll say to them, I’m sure we have an issue to deal with but a big problem is being the president of a 95-year-old firm with a brand like Merrill Lynch, 24 hours before market may open and put you in a very difficult position.
The stress was frankly almost unbearable. I had colleagues on our team saying to me, just get it sold at almost any price. I remember having a debate at two or three in the morning, and Andrew Ross Sorkin had this in his book “Too Big to Fail,” with one of my colleagues about whether anybody ever find something that they really want to buy, if you stay to them, you can virtually have it for nothing.
My view was Merrill Lynch was an incredible firm. We had the best wealth management business in the industry at that time. We owned 49 percent of BlackRock. We had a first-class investment bank. They’re, as I said, 95 years in the making. Bank of America should pay for all that.
And ultimately, they did. And to their credit over the ensuing years, the deals worked up tremendously for Bank of America. We negotiated the sale of Merrill Lynch for $29 a share that Sunday morning. It did close on Friday at $17 a share. That will still be one of the negotiations I’m proudest of for my whole career.
Again, I do think that it was fair value for Bank of America given the quality of the people, the franchise, the brand that they bought at Merrill Lynch.
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RITHOLTZ: Now, the deal definitely worked out for everybody involved. Take a look at a recent deal that I don’t believe you are involved in but it involves one of your old chops. You were senior at Morgan Stanley. They just purchased Eaton Vance for about $7 billion. How does a friendly deal under terms where there isn’t any sort of economic crisis or real financial stress? Clearly, we’re going through — 2020 is going through its own crisis. But in terms of asset managers, it’s nothing like 2008 or ’09. How does a deal like Morgan scooping up Eaton Vance differ than what you guys had accomplished with Bank of America and Merrill Lynch?
FLEMING: Well, it happens in a more traditional fashion. So, the leadership of Morgan Stanley, James Gorman, my old boss with whom I continue to stay in close touch, would be interested in building his asset manager business and would be thinking about different firms that might enhance their capabilities.
And he might have dialogue — none of this, by the way, am I repeating first hand. This is just what happens in cases like this. He would have dialogue in different potential directions about firms that might be a good fit and it would proceed that way.
And a firm like Eaton Vance might be thinking that they’ve had a good trajectory but they could have their growth and capabilities enhanced by the right partner. That’s the typical dance that occurs in an M&A situation and that’s been true for a long time and will always be true.
And frankly, that is the value of experience in investment bankers who act more as advisers and counselors and this will eventually lead me to — we’ll talk about Rockefeller later. But one of the things we’re trying to do at Rockefeller Capital Management, whatever the business, is to act as an adviser or counselor to client.
And I like those words. I think the connotation coming out of that is an important part of how the client starts to trust and rely on the judgment that you provide. So, that’s how a transaction like that would occur in an environment like this in almost any environment.
Frankly, Barry, the 2008, 2009 time in my career is unique because the stresses in the financial system there were greater than anything we’ve seen before or likely to see for a long time. 2020 is its own unique crisis because of the breadth of the problems and the fact that COVID affects everybody and its economy wide.
But in terms of the financial sector in particular, ’08, ’09 really was the reckoning. So, transactions that were occurring then — Bank of America-Merrill Lynch in some ways, as I said, there was some lead up to it even though a lot of it was that weekend. But there were transactions that were talked about and occurred or didn’t occur. We don’t have to go to the list of very big banks in the weeks and months that followed that were suggested quickly and looked at very quickly, including the biggest names in the space.
And that was because there was a real sense of almost panic even up on the part of the regulators to make sure these big financial situations were going to emerge from that crisis safely and you weren’t going to have any more financial institutions go the path of Lehman Brothers.
RITHOLTZ: It’s funny you say that. I have a vivid recollection of my wife’s Washington Mutual ATM card and that transaction with them and JPMorgan Chase also took place over the weekend and it seems so seamless that on Friday, it was a Washington Mutual card and on Monday, you could use it at any Chase ATM without being charged the non-bank fee for a different account. The transaction was that fast and that seamless.
So, clearly, that period was unique in M&A history. I want to ask you about two more transactions before we move on to our next set of topics. One is the sale of SkyBridge for Mooch, for Anthony Scaramucci who took a position in the White House. What was that like in the midst of all of that politicking and having the government look over your shoulder due to national security concerns? What was that SkyBridge transaction like?
FLEMING: I’d known Anthony for a long time way back to — after he left Goldman Sachs. He started a company that was sold to Neuberger Berman and I represented him on that and helped him get that sale done right around September 11th. And actually, the president of Neuberger at that time was a guy named Bob Matza who went on to become a good friend and counselor to Anthony as well.
So, I don’t know, whatever was 15 or 16 years later, I had left Morgan Stanley and Anthony called me and asked me if I would help with the sale of the business and I said I would do that for him. And we basically did what we always do, we put some material together describing what SkyBridge is and why it would be an attractive opportunity and I had a team working with me and we contacted prospective buyers and we took first-round bids.
And then, we ultimately were on the path to negotiated transaction with a Chinese buyer and we announced bid and we signed it. And then it was early 2017 and President Trump took office and it ultimately never got all the regulatory approvals it needed to and the deal didn’t go forward.
So, from my vantage point though, it was more of an ordinary course transaction where I was helping Anthony put his business in new hands. The notion was that they were going to leverage that SkyBridge product base outside the U.S. and bring distribution particularly in Asia. It was all kind of more of a logical regular transaction.
RITHOLTZ: So, let me ask you about what might be a totally different type of transaction. You were involved in several variations of the deal to sell the Miami Marlins ultimately and ended up in the hands of a consortium of people that, if I recall correctly, included both Derek Jeter and Michael Jordan. Tell us about the Marlins transaction and what was some of the early iterations of that like.
FLEMING: Well, actually, Barry, I represented the group buying Marlins …
FLEMING: … because of friendship I have with Derek. When I left Morgan Stanley, Derek had retired and he was very focused on being an owner of a major league franchise. He and I have been friends back to my early years at Morgan Stanley about 10 years now.
So, we were looking at different baseball clubs that we might be able to buy. The Marlins were for sale. Derek was focused on different parts of the country that he’d like to own a team in and Miami was certainly on that list.
So, we put a group together to buy the Marlins and ultimately, we’re the winning bidders. I advised the group, I advised Derek. He and I, as you know, continued to work closely together today. I’m one of the owners in the Marlins although one of the smaller owners and I do sit on the board and continue to advise Derek on a range of things. One of the things that we’re proud of with the Marlins is that the franchise has been a really good spot having gone through two or three years of turnaround here. Derek is the CEO of the Marlins. He runs the whole club, baseball and business.
He’s put his own team in place and you saw he made a terrific hire last week, the first female general manager in major league baseball history who Derek, and this says a lot about who Derek is, thought was the best person for the job, but he also was pleased to see a barrier like that broken. So, that was announced just last week.
So, the — I’m not going to comment on who other owners are. It is a private club and the names of specific owners are — it’s up to them to say whether they’re an owner or not. But Derek has many, as you know, friends across the landscape and lots of people rooting for him and supporting him. And he’s done a terrific job leading this club so far.
And you saw that we — the Marlins were in the playoffs last year. They were the surprise team. They have one of the top farm systems in baseball now. Derek put that together with people he hired, Gary Dembow who was at the Yankees. And we expect the Miami Marlins to do well year in and year out for a long time under the enlightened leadership of Derek Jeter.
RITHOLTZ: Quite fascinating. Let’s talk a little bit about your current place of employment. The Rockefeller family office has been around for a really long time. What was the thinking behind transforming this into Rockefeller Capital Management?
FLEMING: Barry, let me walk you through how Rockefeller Capital Management came into existence and it will provide some color on the Rockefeller legacy. So, in March of 2018, we bought Rock & Co. and Rock & Co. was originally the family office of John Rockefeller, Sr., the guy, the one who started it all way back in 1882.
It became a multifamily office in the 1970s and when we bought it in March of 2018, we rebranded it, renamed it Rockefeller Capital Management because we wanted to be clear that we were in partnership with the Rockefellers but that we were taking care of clients across a broad spectrum of clients. So, we thought Rock & Co. sounded more like a specific family office.
So, it’s Rockefeller Capital Management. We are in partnership with the Rockefellers though. Many of them are our clients. Two of them sit on our board, David Rockefeller, Jr. and Peter O’Neill. They are part owners of Rockefeller Capital Management, the family, and they’re partners and they care about what we do with their iconic name and how we treat it.
And the name has been spectacular. It is a name that is respected in every corner of the United States and around the world. What the family has done over decades, over many decades, in philanthropy in the United States and in different parts of the world, there’s a hospital in Beijing that the family started in 1921 but still there and highly regarded.
The Rockefeller started Spelman College way back in the 1880s. The reach of the Rockefellers in terms of the imprints that they’ve made in a positive sense on society, the philanthropy, they were one of the earliest in sustainable investing. In fact, the Rockefellers coined impact investing at one of our sister organizations, Rockefeller Foundation.
So, the Rockefellers are an amazing part of the United States history, an iconic name around which were building our business. So, our business is really advising and counseling clients across wealth management, strategic advisory, investment banking and asset management, and all of those different pieces fit together well.
The wealth management is the business that the predecessor company was in and it’s really what we’re putting a part of Rockefeller Capital Management. And what we’ve been working on, Barry, in the last two and a half years is building from scratch.
A private wealth business focused on best-in-class private wealth advisers taking care of clients as they do throughout the industry and marrying that to a family office that has capabilities, including trust companies and other things that the business that we bought bring to the table to create a holistic offering for clients.
We’re trying on the wealth management side to take care our clients across all of their needs, not just investments and asset allocation but generational work. We’re taking care of seven generations of Rockefellers. We have two trust companies. We’re integrally involved in helping clients figure out what they do with their money for follow-on generations.
So, that’s our wealth management platform. In addition to what we do for those clients in the wealth management side, we do have a strategic advisory business and this was intentional. This comes out of my background and it was part of the vision that we had for Rockefeller Capital Management.
In the United States, much of the wealth for families comes from starting business. That’s the defining characteristic of the United States and to this day, there’s so many private businesses that are started by families that get built up.
So, wanted to make sure that we had the capabilities to advise those families on what they should do with those business, whether it’s to continue to invest in them and run them and keep them private, whether it’s potentially to sell the business or take it public, so we have a Rockefeller Strategic Advisory which is there to provide that kind of advice to the family.
We obviously do a fair amount of investment banking work away from just taking care of our families and we have some of the most senior and seasoned investment bankers, advisers, counselors, as I like to say, working at Rockefeller Capital Management with us.
And then our asset management business often serves those wealthy clients on the wealth management side but we’re also building our asset management business through institution and intermediaries, so it’s a standalone opportunity for clients outside of our wealth management business.
Our asset management business focuses on ESG investing. They’ve been doing it longer than most firms because the family, the Rockefeller family got into this sooner than many. So, we’re focused in our Rockefeller Asset Management Business sustainable investing and were raising assets around the world and things like the ocean engagement and climate solutions and other strategies that are increasingly getting a following, not just among millennials and Generation Z, but mainstream investors.
RITHOLTZ: I would imagine clients like the Rockefeller family or other people of great wealth that have been managing that well for many generations are going to demand a certain level of service and as I was kicking around your website, I noticed that some of the services were really kind of interesting. Obviously, philanthropic advisory service is pretty standard in the wealth management space.
But you also do things like private health advisory and personal security. Tell us a little bit about some of these concierge level services that you’re offering to the ultra-high net worth investor?
FLEMING: Barry, I’m glad you were going around the website and I’m pleased to get that question because it’s a part of what we’re trying to do for our clients and we believe it differentiates us at Rockefeller Capital Management because our exclusive focus is on high net worth and ultra-high net worth clients and families.
And what we’re trying to do with them is provide them holistic thinking and service. We want to solve their problems wherever they like and that includes conflict free advice on whatever they come to us with. It includes things like what you’re just describing. We call it Rockefeller lifestyle advisory.
We have relationships, joint ventures with different partners who bring things to bear that our client might be looking for along the way even if it’s not tied to investing and generational planning and the specific financial side. And I’ll give you an example.
I have a 20-year-old son who was traveling a years ago and we were a little bit focused, my wife and I, on security in some of the places he wanted to travel and we were putting the contact with the private security company who – which was run and we like this, the founder who was somebody who had expertise in the space and it was his firm.
And they gave us some advice on how to make sure that he acted safely in the places he was in. They offered a GPS chip to – that we could – we may keep an eye on where he was safely, things like that. And he took the trip.
There are many clients that that have family members that might benefit from that advice and they don’t know where to turn. They can turn to us. It’s the same thing on – we have a joint venture with a healthcare company. And even high-net-worth and ultra-high-net-worth clients, sometimes if they leave a job, they don’t have health care. We can help them get the health care in an efficient and cost-effective manner through our joint venture partner.
So, we want to be there for the client whatever the need and that’s one of the reasons why we put together Rockefeller Lifestyle Advisory. We deliver all of this, Barry, through the person who’s at the center of the relationship with the client. So, we’re having lots of different people reach out to the client. We have a private wealth advisor who is the point of contact for the client on all of these.
We’re just channeling this through to the private wealth advisor and the people focused on managing the client relationship so that they have access to all this but is delivered in a holistic, efficient, manner to this specific …
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FLEMING: … client.
RITHOLTZ: One of the things in that lifestyle grouping is philanthropic advisory and I have to note how many different boards that you yourself are either on or have been on. We mentioned Blackrock previously.
But you’re on the Board of Advisors for the Yale’s Law School Center for the Study of Corporate Law. You were former director at Colgate University. You’re on a Council of Foreign Relations, the Economic Club of New York, the Ronald McDonald House Board of Directors. How does that experience color the sort of advice you’re capable of providing to ultra-high-net-worth investors?
FLEMING: We do a tremendous amount of work with these ultra-high-net-worth investors in terms of both talking this through and then helping them setup the efficient structures, foundations, through which they can direct their wealth.
One of the things that I’m proud of personally, given my background and I’m proud of a lot of Americans is the notion of giving back. My father was the first one in his family to go to college. His father, my grandfather, graduated from the second grade and went to work. My mother’s father, my grandfather on that side, graduated from the eighth grade and went to work.
So, I feel incredibly lucky to have had the career and the life that I’m living and I want to do what I can wherever I can to have an impact on others and inculcating that in my children and they – they already feel that. We have so many client think that way and one of the greatest things about this country, lots of challenges in this country at this point in time, but one of the reasons I remain very upbeat on the United States going forward is because of the people in it, the breadth of talent, the desire to have a positive impact.
So, this is, Barry, a topic we spend a tremendous amount of time with clients including how to give back and where they want to give back and where they want to give back and what are they most interested in and how can we help them do that efficiently?
We also talk to clients about how to talk to their children about money because a lot of the money in this country is first-generation, maybe second generation and we want to make sure that the dialogue is occurring and is constructive away as possible.
Always factoring in the individual interests and the individual situation of a specific family. But these are very important topics for the people. Once they create wealth, what to do with it, how it impacts their children and grandchildren, what to do with in a society, where they can use it to have a positive impact on something they personally care about? That’s at the heart of the of the kind of advice that we’re giving our clients.
RITHOLTZ: We saw a report today about hedge fund underperformance. There’s been a lot of interest in private equity and venture capital but there hasn’t been as much alpha as a lot of ultra-high-net investors would’ve liked. Do you find this group of investors getting a little fed up for the expense of – for the expense of alpha chafers – chasers for the expensive alpha chasing or are they still willing to stick with hedge funds and venture capital or is it a pricey, let’s call it, underperforming asset class that people are starting to get a little run out of patience with?
FLEMING: Well, Barry, I’ll give a broader answer and then we can dig in to the different pieces. I think for wealthy investors, the traditional 64-year, 70-30 asset allocation rule might be less relevant as they might have lower liquidity needs and therefore can take a longer-term view, less impacted by what happens in short-term market movement.
So, they might not be focused just on equity and fixed income, but more on growth assets, income and asset protection assets as corollary buckets. And there’s no question that private equity remains a big component of ultra-high-net worth portfolios. And it has continued to perform well over cycles.
And actually, companies are increasingly staying private longer and this has allowed wealthy investors to do something called direct investing which is being part of capital rounds of private companies and that’s been a significant change in something that’s much more pronounced in recent years. So, it’s not just private equity, it’s also direct investing and we see a fair amount of appetite on the part of our clients for those types of opportunities as well.
And hedge fund, as you said, have struggled more in general and we have a private investment platform. We diligence many private equity firms and many hedge funds and you need to be careful in picking the sector and the strategy across alternatives that – that makes sense per client and manage you selection within that is a very important process making sure that client is investing in a manager that you’ve thoroughly diligence and you’re comfortable with the way they’re approaching the strategy and how they’re likely to perform overtime.
And we think you can – you could put together a diversified mix of top quartile managers and that doesn’t mean you’re not going to move some In-N-Out but there’s still significant demand from our wealthy investors for a broader cross-section of alternatives including, as I’ve said, direct investment.
RITHOLTZ: Let’s talk a little bit about something were discussing earlier, the transfer and advisements on generational wealth. Lot of complexities within each families, there are a lot of internal dynamics that nobody really wants to get in the middle of, how do you – how do you navigate all that? It seems kind of – could be challenging.
FLEMING: You know, Barry, given what I’ve described you here which is that we see ourselves as advisors and counselors to our clients across all of the different needs that they have, this is an area that we spend a lot of time in. And we talked to clients about how to talk to younger generations about money.
We spent a lot of time talking to clients about how to direct resources into philanthropy and into specific areas of giving back that they’re interested in. And it varies from family to family. This is where you want to be thinking holistically, but bringing the Council on an individualistic basis. But it is something that is an important part of what we do for our client.
RITHOLTZ: So, there’s an old expression. It’s short sleeves to short sleeves in three generations that by the time you get that far away from the original founder’s creation wealth, it tends to get squandered, how do you manage around that issue? How do you – how do you prevent that third-generation from squandering all that wealth?
FLEMING: First of all, Barry, I’m sure there are examples of that being true, a third-generation having a challenge with money and there are examples where it’s not true. And I can tell you that we’re working now with the seventh generation of Rockefellers. So, they have been good stewards of the capital that John Rockefeller primarily was the creator of over many generations.
And they’ve done that while giving back on such a comprehensive basis. So, I think like a lot of phrases, maybe some truth in that, and not so in many cases. We do view ourselves as having a real role in providing candid, direct advice to clients on the amount of wealth and what makes sense in terms of our current consumption versus things they would like to do, in terms of, of leaving money to follow generations or setting up philanthropic organizations to give back during their lifetimes.
And it’s an important part of the Council that we provide on a regular basis. But I know so many of our clients and so many people that have done well in this society. And as I’ve said earlier, often, from creating a business and growing it and if you’re starting a business from scratch and growing it and this would be true even if you get all the way to where Amazon is, there are countless hours so hard to do.
So, there are a lot of admirable characteristics running through that successful business generation and that often gets transferred to the next generation, the generation after that, I know a lot of people with resources, many of whom I’ve created it for themselves and their families first generation, who are focused on how to raise their children, have an impact on grandchildren, so that they are good stewards of capital and are continuing to give back in society in generations down the line.
RITHOLTZ: Interesting. So, we- you mentioned briefly before that Rockefeller was – coined the phrase impact investing, we’ve been hearing about the rise of ESG, environmental, social, and governance investing but it doesn’t seem like the space has been capturing a lot of assets yet. How do you see this ESG investing develop? Where do you think this goes from here?
FLEMING: We think it’s a secular growth trend. And in fact, overtime, we think ESG investing could really become almost a rapper for all investing and I’ll tell you why. And first of all, on a geographic basis, the Europeans are ahead in this, they’ve been pushing this for a while. We’ve had real success in raising assets from clients in Europe.
But the reason that we think it’s a secular growth trend is simply because of the focus of the generations that are coming and how millennials and Generation Z are – they view this not as something transitory, but they’re not in the kind of feel-good part of their lives and they’re going to let it go.
The belief in investing in a sustainable way that takes into account the environment in which we live, the governance structure companies, the social issues in society.
When I started – when I came out of law school in the late 1980s, it was very clear that the mandate of the Corporation was to maximize profits for shareholders and to allow those shareholders to do what they will with those profits. Companies today are much focused on a broader cross-section of issues and they have been prodded there by society and it’s now been embraced on a much broader basis.
So, companies do think about constituents other than shareholders. How do they operate in their community? How do they treat their employees? What are they responding to in terms of things that are happening in society? And really, corporations are taking even the lead on some of these things were 30 years ago, they would have been dissuaded or frowned on from doing that.
So, that ripples itself all the way through to investing. Companies are focused on how they operate in society. Companies are being asked, tell us about your environmental footprint. What are you doing to make it better? Tell us about how you – your you’re governing yourselves. What does your board makeup look like? How are you working in terms of diversity?
All of this is tied together. And on the investing side, those millennials and Generation Z and I fancy myself an arm share expert here because I have three kids in their 20s, the first part of their 20s, and I know a lot of their friends and I think that these generations are going to hold on to this for their lifetimes.
And they’re about to be the dominant part of the workforce, of the capital structure, of the investing structure. That’s all happening. In fact, they’re also increasingly, as you know, Barry, influencing election. And the – the group between the ages of 18 and 39 were approximately 35% of the voting electorate in this election. That’s just going up every year now.
So, our view is it’s secular, it’s real, we were one of the frontrunners in developing these capabilities, on our asset management business, and we’re going to going to work hard to continue to grow those capabilities and offer them through to clients, both on the institutional and intermediary side of RS management business, but also across our wealth management client.
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RITHOLTZ: So, let’s stick with that idea and stay focused with both ESG and philanthropy. Wealth inequality has really expanded dramatically over the past few decades. But COVID and the pandemic lockdown has really had a giant impact. It certainly has hurt people who were at the bottom of the economic scale. And in some ways, it’s been helpful to a lot of industries at the top of the scale from finance to technology and even some of the of retail aspects that that are Internet-based, what sort of philanthropic steps do you see clients undertaking in order to address the ongoing issues generated by the coronavirus?
FLEMING: Well, first of all, as you said, Barry, the wealth inequality was and is the major topic for the United States and for all of us pre-COVID. COVID had certainly accelerated and reinforced that in some of the ways you talked about including the fact that a lot of the non-work from home businesses are more – there’s a broader section of workers that are affected in those businesses that that COVID has the biggest impact on.
So, this notion of wealth inequality is something that people are focused on across the spectrum from an age and demographic standpoint. The whole way that this country has tried and succeeded over generation is the concept that everybody has a shot, everybody, has a fair shot of creating an existence for them and their families that is better than the existence that they personally might have had.
And I was listening last week to – there’s a West Virginia senator who’s a Democrat, who is talking about a centrist agenda and that’s one of the things that I comment on coming out of this election. I think people really aren’t as bided as some of the pundits say that Americans want more centrist policies that – and then politicians whether, Republican or Democrat, to help solve problems.
And this – and as Senator Joe Manchin said that his constituents want to have an opportunity to take care of themselves and their families in the best possible way, education, skillsets, opportunities for jobs, that’s something that I think is held on a broad basis across the country.
So, we have a lot of clients that look for different ways of the impacting that, including giving money to universities to broaden their ability to admit different kinds of students.
I could give a whole laundry list of things that our clients are focused on to get to the heart of the inequality, of income issue, and the need for the United States to flourish for the next hundred or 200 or more years tied to everybody feeling like they’ve got the shot.
RITHOLTZ: Quite interesting. So, I have – before I get to my favorite questions, I have two last questions for you. The first is I got to meet Derek Jeter earlier this year at the inside ETF conference and I was taken by just how thoughtful and articulate and funny and warm he was. He really was a delightful speaker. I got to spend some time with them after the event.
But I noticed on your, again, on the Rockefeller website, Derek Jeter is the special advisor to the CEO which is you. What sort of advice does Derek Jeter give you?
FLEMING: Well, Derek and I spent a fair amount of time together and he provides me a lot of the important advice and I return the favor. So, he provides advice to me and to Rockefeller on a range of topics including strategic and personnel and on the things I’m doing. He’s got terrific instincts on that. He has built a first-class team at the Miami Marlins and has really taken an organization that had real challenges and put it on a whole different track.
So, I’ll bounce lots of things off of him. He also is very helpful with clients and client prospects as well as potential hires. He’s willing to get on the phone with virtually anybody and tell them why he’s affiliated with Rockefeller Capital Management.
We feel like we share a lot of the same values. When I first started getting close to Derek given the fact that he needs to be and he’s careful about those around him given how many people are looking for access for all sorts of reasons, I spent time with his parents. He met my children. His parents met my children.
We did – we went to different sporting events. My children are in their early 20s, they’ve known Derek for a decade. I know his family. The values are similar. The career path and the things that we’ve done, my baseball career ended with senior year high school.
We’ve done different things in life but have a lot of the things that matter to each of us in common. So, I would raise something with Derek around the key personnel issue and get his views because he’s got great judgment as a leader and great judgment as a motivator of people.
He does the same. So, it’s – it’s not – the relationship – he’s a special adviser to the CEO and it’s a – that’s an active, regular role that he provides and I talk to him on a very regular basis on the – on the Miami Marlins, on what’s happening there.
RITHOLTZ: Quite interesting. All right. Let me throw a curveball at you, speaking of baseball, for our final question. Anyone ever give you gratuity or throw you a tip at the end of a banking deal?
FLEMING: The only person who ever, I think, paid us more than what in a contract that I can recall and he’s reminded me of was Anthony Scaramucci, way back in the deal that we did around September 11th where we sold his business to Neuberger Berman.
We had a deal to sell the business and it was going close after September 11th and September 11th occurred. And Bob Matso (ph), the president of Neuberger Berman called me and he said that Greg, given everything going on here, I don’t know that we can do this deal on the same terms.
And I said, OK, Bob. We’ll adjust the terms but we want to have some upside if it works out as well as we think it can. And he agreed. I believe it might have been options in the – in Neuberger. I forget exactly what it was.
But we put something in place that provided some upside to Anthony and his team and he was elated and never forgot it. I think made us a investment banking fee to Merrill Lynch that was beyond what was negotiated.
RITHOLTZ: Quite funny. All right. So, I only have you for about five minutes. Let’s plow through our speed rounds. These are our favorite questions we ask all of our guest and it starts out with what are you streaming these days? Tell us what you’re watching on Netflix?
FLEMING: One of the things I want to say, Barry, at the outset here is I never, over the years, watched a lot of TV. They call it content today.
FLEMING: My wife and I, there were certain shows that we like, like “Seinfeld” and “Friends” and “The Office.” We typically like the edgy humor. And by the way, “Jeopardy!” And Alex Trebek, it’s such a sad thing for us is – and I was married in 1990 and he started that in the ’80s and I read that there are 8,200 shows that he did.
FLEMING: I think we saw half of them, at least. So, that was a fixture for us. And when I wasn’t travelling and when I was home, and I still do to this day, try to catch as many of the final ones here as I can. That was something we watched.
But not much beyond that. Content today, and this is one of the things I say to my kids all the time, the world today, there’s so much in it for young people and for people today and content’s an example but because it’s terrific.
So, from a streaming standpoint, we like the historically-based thing programs. So, we’ve watched “Chernobyl.” We watched something on the Challenger. We just – on the movie side, we just watched the “Trial of the Chicago 7” which was fascinating.
We also like some of the suspense-type shows. There was a BBC show called “Line of Duty” which we liked. I love the movie “Death of Stalin” which I thought was so well done.
So, there’s quite a bit in the streaming world that I do and we do find time to stay (ph) today and I give credit to the content makers. There’s a lot out there.
RITHOLTZ: Tell us about your early mentors who helped shape your early career?
FLEMING: There are two that I would highlight here. One is a guy named Jerry Kenney who is a Senior Executive at Merrill for decades and then he went and worked for Blackrock for about a decade, and sadly, died last year.
He’s been – he was a mentor to me and was part of my life for decades. He was an incredibly decent, high integrity man, thoughtful. He was on the Merrill board. He ran many of the businesses there. He was a scholarship athlete at Yale in the 1960s and I had several brothers go there as well. They all play football at Yale.
Just a tremendous man. He was a bit of a mentor to my kids, too. I have a couple children who – one who graduate and one who’s at Yale. And Jerry did things a certain way. He worked very hard. He wanted to win but he functioned a certain way and that had a big impact on me from the earliest time I knew him which was in the 1990.
A second person who’s been a mentor to me over many years is Larry Fink. I’ve known Larry since the mid’ 90s. I’ve known him since Blackrock was a company worth $1 billion, when we took it public in the late ’90s. Frankly, it was worth less than the that when I first part started working with him in the mid-’90s.
He’s been there for me in many critical moment when I left Merrill Lynch, after it had been sold to Bank of America. He was somebody I went to and talked it all through with. So, he’s been a mentor of mine and he’s a – he and Jerry are both about a click ahead of me in terms of generation.
Jerry was 20 years older than me and Larry’s a little more than 10. And Larry has had a big impact on me as well. He’s tenacious. He works so hard. He’s the same as Jerry. He’s going to do things a certain way but he is, frankly, obsessive about doing it well.
He cares so much about BlackRock. He’s treated it like it it’s his firm for – it’s been public for over 20 years and he still treats it as if it’s all his money.
So, these are two terrific human beings who had a big impact on me.
RITHOLTZ: Quite fascination. Let’s talk about everybody’s favorite question. Tell us about what books you’re reading either currently or some of your favorites.
FLEMING: Yes. I’ll give you some of my favorites. Long-time favorite, Barry. They’re the traditional ones, “The Fountainhead” probably very high in the list, “Pride and Prejudice” is definitely my wife’s favorite book and it’s up there for me.
So, I do read a lot. I always have. All five of us do. I have three children and my wife, my father read the Times still at the age of 87.
I like nonfiction a lot. So, “Team of Rivals” by Doris Kearns Goodwin was one of my favorites. Lincoln was just incredible and the ability to still treat people a certain way even if they were challenging or difficult to him.
I read her biography. This is published 25 years ago. But I just read recently the book on the Roosevelts. It was really focused on Franklin but there’s a lot about Eleanor in there that I didn’t know and she was frankly a tremendous first lady and the first one really actively involved in her own space which was not surprisingly controversial in the ’30s and ’40s.
I read a fair amount of suspense as well. A book that I finished not so long ago was called “I’ll Be Gone in the Dark” by Michelle McNamara which actually helped authorities capture the Golden State Killer and he’s in jail and serving life sentences now and this woman wrote this book which was both made you uneasy and she really researched it. And sadly, she died just as she was finishing it.
I read recently a book on endurance – called Endurance, Ernest Shackleton. That story’s incredible story. So, lots out there in the space. I’m not surprised it’s a favorite question for people.
RITHOLTZ: It definitely is. We actually had a client who gave everybody in the office a copy of the Shackleton book and it’s amazing. Some of these nonfiction books, they read like thrillers.
FLEMING: It is amazing, Barry. I mean, that’s his life, too. And he has a quotation that I love where he said true moral courage is optimism. And I repeat that and I talk to people about that.
Leadership, at least, for me and I think for the best leaders like Lincoln is positive motivation. You have to be the one who’s still standing there and saying this can get done and that’s really a lot of leadership and Shackleton capture it so well. So, it is those – it’s a page turner, that book, and his life was.
RITHOLTZ: Yes, to say the least. Let’s talk about recent college graduates, what sort of advice would you give them especially if they were thinking about a career in finance?
FLEMING: I would tell them two things on a broader basis. And I do give a lot of advice, some of it, I told you I’m raising three children who are in their 20s. So, probably, some -they get more than they even like.
But one of the things I say to young people over the place is work for great people. And then when you get in a position to do this, hire great people. It sounds easy and it hardly happen.
People want to make sure they’re the most impressive in the room. They want to make sure that they’re in control. I’ve been able to do so much in my career because I’ve hired people that are better than me in so many things and so many examples along the way.
Hire great people. Motivate them and watch them flourish. And when you’re young, find great people. There’s a great Mark Twain quote that I love that I repeat all the time and my three children could repeat it readily for you. Twain said keep away from people who try to belittle your ambitions. Small people always do that but the really great make you feel that you, too, can become great.
So, that’s one piece of advice I give to young people. And then the second thing I say is it’s a long run. I hear people say to young people now, you’re so disadvantaged, 2020 is such difficult time. There’s so much unemployment, COVID, all of that’s true. But people in their 20s, if they take care of themselves and they exercise and they eat well and live for 70 or 80 years, have careers for six decades or more, people work into their 70s and 80s now.
When I was at law school, I was a second-year law student in 1987 and there was a stock market crash, like 22% in ’87. And I remember somebody say to me and I thought they were right. It’s a terrible time for us to be coming out. That was a blip.
Look at – we talked about it. We started, Barry, where you asked me about the ’90s. I may have come out into the best decade to come out in the last five or six or since World War II and yet we were fussing about the stock market crash in ’87. So, it’s a long run. There’s going to be a lot that’s going to happen that you won’t see, couldn’t possibly see, one step leading to another. So, play it that way.
Just get up every day and go after it because it’s a 60, 70 years is a long time and there’s a lot that’s going to happen.
RITHOLTZ: Quite interesting. And our final question, what do you know about the world of finance, investment management, investment banking, that you wish you knew 30 years or so ago when you were first getting started?
FLEMING: That’s a great question, Barry. What I would say is the following. I didn’t think this true then. I certain didn’t act with it but now I realize that markets, like everything, are driven by people. And therefore, they’re not always in the near-term accurate or right. They overshoot.
I was with – in 1999, I had a client named Sanford Bernstein which was ran at the time by Lou Sanders who is the CEO, who is a great investor. And Lou’s still running an investment organization today.
And they were value investors. And I remember saying to Lou, now I was 36 at the time and he was – he’s been around much longer, but I was saying, why don’t you sprinkle in some value Internet companies or something, just mix it up a little bit because they were getting crushed on a relative basis. And Lou said to me, Greg, it’s a bubble and it’s going to pop and he wasn’t going to deviate. And ultimately, he was right.
So, markets are also tied to human beings who get emotional, who get caught up in trends and therefore, they’re not always going to be necessarily aware of pragmatic analysis which they should be. And if you’re looking for that, you’re making a mistake. You need to understand these are organic, too. And I’ve learned that probably the hard way over many years.
RITHOLTZ: We have been speaking with Greg Fleming. He is the founding CEO of Rockefeller Capital Management.
If you enjoyed this conversation, well, be sure and check out all of the nearly 400 previous interviews we’ve conducted over the past almost seven years. You can find that at iTunes, Spotify, ACA, Stitcher, wherever your favorite podcasts are found.
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I would be remiss if I did not thank the crack staff that helps us put these conversations together each week. Reggie Brazil (ph) is my audio engineer. Michael Boyle is my producer. Atika Valbrun is our project manager. Michael Batnick is my head of research. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.