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news.

This is Masters in Business with Barry

Ritoltz on Bloomberg Radio. This week on

the podcast, wow, another great

conversation. Lawrence Calcano really

has built I Capital since 2013 into

what's become the dominant financial

technology platform for alternative

investments for wealth managers for

advisors for banks. Uh I found this

informative and really quite interesting

and I think you will also with no

further ado my discussion with I Capital

CEO Lawrence Kalcano. Thanks Barry. It's

great to be here.

>> It's great to have you. I've been

looking forward to this for a while.

Before we get into your time with I

Capital. I want to sort of work back

through your career. Starting with you

get a bachelor's from Holy Cross and an

MBA from Dartmouth. Talk. What was the

original career plan?

>> Boy, I I don't know that I had one

coming out of the gate. My uh you know,

my dad was raised in an orphanage. his

dad had died when he was two and and so

he was in an orphanage orphanage till he

was 18. he went into the army and then

he came out. Um, and he had to sort of

put himself through school. And so he

didn't have a regular sort of path that

would sort of lead him to say to me as a

as a teenager, here's the way to do it,

you know, and so we were he was learning

and I was learning a little bit. I was a

hockey player and I did get recruited to

Holy Cross to play hockey. Um, and when

I was there, I was an economics major

and a theater minor. Spent a lot of time

doing theater there as well. Um, and

then I went off to Morgan Stanley and

um, that was a really interesting

decision because I was in a professional

play and had sort of been asked to be in

a second play and I had a little bit of

a career crisis, if you will, early on

in terms of

>> What was the first play?

>> Uh, it was called The Murder Room. It's

a James Sharky Slapstick

uh play and I played a young Texas

millionaire who was engaged to a wealthy

British woman and we were the play takes

place at her father's manor in in the

UK. It was full of sight gags and jokes

and so forth

>> on Broadway or off Broadway.

>> Yeah.

>> Um anyway, it was it was a lot of fun. I

was uh offered a role as per in the

diary of Anne Frank as a follow-up and I

had also at that point gotten an offer

to go to Morgan Stanley and and I was

sort of in an early tradeoff mode and um

ultimately figured I needed to eat. I

had a lot of student loans um and I

decided to go off into the world of

finance.

>> So you spent a few years at Morgan

Stanley. What were you focused on while

you were there?

>> I was at mortgage finance. So we were

both helping SNLs to raise capital, do

M&A and also structuring some of the new

products like uh you know some of the

Genie May securities, Fanny May

securities, Ramik CMOs, things like

that. A lot of the structured type

investments um

>> this is uh late ' 80s early 90s.

>> This is late ' 80s. Yeah. 80 85 to 88.

Um and then I put in one application to

business school. um a good friend of

mine who was an analyst before me left

and went off to Tuck. I visited him. Um

I had an offer to stay on at at Morgan

as a as an associate. Um but decided

that after my weekend at Tuck that would

be a a good thing for me to kind of

stop, reassess, figure out what I wanted

to do and and I went off to Tuck.

>> So So I have to ask this obvious

question. And there's a whole industry

helping students figure out which is the

right schools for them, their first

school, their safety schools, their

reach school. It's a whole side

industry. You apply to one MBA school.

>> I applied to one MBA school and part of

the reason for that is I had accepted

the job to become an associate and I

went off to to the visit as I mentioned

and I just had this sort of feeling like

I was making the wrong decision. Mhm. I

I just staying was the role. I I loved

Mor. It was a fantastic firm, but I just

had this sort of sense that maybe that

wasn't sort of the right thing to do and

going off to business school for two

years would be the right decision

>> and I loved it. I mean, it was an

incredible two years. I'm on the board

of Todd type,

>> but okay, but why just apply to one

school? If you're deciding, hey, this

path isn't exactly how I I want to get a

MBA.

Uh, if you're applying to Dartmouth, you

could apply to Stern, to Colombia, to

wherever.

>> Yeah.

>> Why only one school?

>> You know, I just was sort of wrapped

with it. You know, I went up there. It's

a small school. When I was there, there

were 160 or so in the class.

>> Um, is very focused on team, you know,

study groups and teamwork and so forth.

And I it's hard to say I just felt

really like it was the right place for

me. And, you know, I I wasn't too

worried about it if I didn't get in. I I

was going to become an associate at

Morgan Stanley. So, it wasn't like I

had, you know, it was putting all your

eggs in one basket, so to speak.

>> Huh. Really, really interesting. How did

you end up at Goldman Sachs? Was that at

uh while you were in business school or

afterwards?

>> Yeah. So, when I went to business

school, I sort of said to myself, I'm

going to think about all the different

things I can do. And after about, you

know, two months, I said to myself, you

know what, I really did like finance a

lot and I want to go back there. Um and

uh so I applied for summer internships

and had a few offers

>> more than one.

>> I I did I applied to all the summer

internships and and and obviously coming

out of Morgan Stanley was pretty helpful

to my candidacy.

>> Uh ended up getting an offer to be a

summer associate at Goldman which I took

and uh was fortunate and pleased to have

an offer to come back on on

postgraduation which I did and spent

obviously a long time there and and you

know had a very very good experience

there. So, I'm really curious. Um,

they're such large and yet such

different firms. Uh, what was the

culture differences like? What what did

you learn from each?

>> Yeah. So, so they are different and and

by the way, you know, there are a lot of

different ways to skin the cat, right?

You know,

>> Goldman had a a very team oriented

culture and I and I think Morgan Stanley

does too, but but Goldman it's sort of

right there in front of you. You know,

they they've got 14 business principles.

The first of which is our clients come

first. By the way, you think about what

are the things you learn early on in

your career.

There were several things from that

experience that really stuck with me.

Starting with business principle number

one, your client's interests always come

first. And then secondly, broadly, just

the importance of working as a team. And

I, you know, my my wife used to make fun

of me because I would be in the office

early and if there were a party or some

social event, I was always the last to

leave and she would say to me, "Dude,

you don't have to actually be there till

the end." And but it was just I was I

just I loved it so much. Um, and it, you

know, I just thought that camaraderie

was so it was powerful, you know, smart

from a business perspective, but mostly

as a person, it was just fun. I mean, it

was really fun being in that group of

folks. So you end up co-leading

Goldman's global technology banking

group. Um was your focus on tech and

financial technology uh deliberate or

that just evolved organically over time?

>> It just evolved. I I was a generalist in

corporate finance. It was then called

global finance actually.

>> And uh my Morgan Stanley friends used to

make fun of me and call it intergalactic

finance. Um but it was global finance

and I did that as a generalist for a

couple years and then I was asked to to

start the East Coast Tech Group uh which

I did.

>> This is mid to late '9s.

>> This is early 90s. I was a thirdyear

associate.

>> Mhm.

>> Um and I did it and it was great. It was

sort of n late '92 early '93 and you

know we started to win some business and

as you recall the internet started to

really kick in with Netscape's IPO in

'95. Um and we went from having a really

good business to being on fire and

drinking, you know, from a fire hose

given all that was going on with the

internet.

>> Huh. Really, really fascinating. So, so

you're there right through the.com boom

and bust, probably the most

transformative technology of the last 30

years, at least before AI. Um, what did

that teach you about how capital markets

operate, the way investors behave? That

had to be a wildly instructive era. It

it was wildly instructive. Um and you

know it was all go it was all happening

so quickly and as you recall people were

trying to figure out how do we even

value these companies you know but there

was one thing we used to we had a a

great team of folks the research team

the salespeople the bankers we all

worked really well together and we would

go out and we'd sort of make

presentations to potential clients and

we'd always talk about where we saw the

market going um apart from valuation so

what did we think the adoption was going

to look like. And we had these what what

then was viewed as wild assumptions

about internet adoption. You know, at

the time people were afraid to put their

card numbers in a computer, you know,

for to buy anything, right?

>> Um but what what happened was for a

while techn the valuations

sort of kept pace and at times exceeded

the the sort of hysteria, if you will.

But even though the valuations came back

at the end of sort of mid '01 the the

internet valuations came down mid 02 the

comp techch valuations came down

>> um the reality of what was happening was

even wilder if you will than what our

projections suggested i.e. the adoption

rate of the internet and how it would

fundamentally change people's lives, the

way they bought things, the way they

reviewed things, the way they

communicated with each other. It was so

powerful. And you know, we we saw that

wave, you saw the communications

equipment wave. Now we're obviously

looking at a different wave. And and for

me, there are several like massive

lessons there. One of which is you're

never safe. When I started, the big

technology companies were called Deck

and Wang. You remember those companies?

Oh, sure. probably most

>> Wang computer uh not not Wang who own

computer associates Wang computers

>> Wang computers not Charles Wang see

that's right so those companies all got

replaced you know first by client server

then a lot of the client server

companies got displaced with the

internet um and now you're seeing

another interesting potential risk of

displacement and and I think one of the

big things is you cannot be afraid of

new changes and technology waves, you've

got to adopt it. You can't, by the way,

some some companies, if you remember

back when when Amazon was growing and,

you know, many of the borders, the

bookstores, the music stores, etc.,

you know, hope is not a strategy, right?

You can't hope this is going to go away.

You got to adopt it even if it means you

got to change your business. even if it

means your your business model has got

to sort of change and and and maybe your

margins aren't going to be the same as

what they were, you've got to adopt to

new technology. Now, the one thing I

would say is this always takes a little

longer than people think. You know, it's

not like you snap your fingers that the

the hype is always ahead of the reality.

I think there's a little of that right

now. Um, but AI is is a massively

important trend. Uh, we're spending a

lot of money on it. Uh, as are lots of

companies. Um, but I think you've got to

be willing to sort of adopt or run the

risk of of dying.

>> You know, if if there's any lesson to be

drawn from Elon Musk and Tesla, it's

either or or maybe the lesson comes from

uh Amazon and Jeff Bezos that you your

margin is my opportunity and if you

don't pivot hard, they're going to come

along and eat your lunch. It it happens

so regularly.

>> Yeah.

>> That the cycle never stops. never stops

turning. Um, so, so at what point did

you decide, hey, I could do a lot with

this technology and various platforms.

What led you to move from Goldman to uh

helping to build and lead I Capital?

>> Well, the the the real story is I left

in 07

>> and with one of my former partners, we

were going to start a technology buyout

fund. Um, you may remember there were

some events in 07 and08 that were not

too pleasant. Something like the GFC

blurry. Oh, that.

>> Yeah, it reminds me of the Leslie

Nielsen joke in airplane. I picked a bad

month to stop sniff and glue. Uh, so it

was a little of that. We we went off to

start a private equity fund in the

middle of the GFC. Um,

>> so you should have started a distressed

asset fund

>> probably. We weren't smart enough to

figure that out, but we uh so anyway, so

we put that on pause and um you know,

actually it was a little bit of an

unplanned cleansing in a sense that I

coached my kids football teams and

lacrosse teams and you know, I worked

kind of from home and um and it was it

was actually very exciting. Did a few

entrepreneurial things. Um but then with

with a great group of folks um we looked

at what was happening in the independent

space. you a space you obviously know

quite well.

>> We saw a lot of firms, a lot of advisers

sort of going off and starting their own

firms and and that trend was

significant. there were, you know,

hundreds of billions or early trillions

of dollars that were now being managed

by these independent RAAS. And one of

the things that we we looked at was

almost by definition, the biggest firms,

the firms who were leaving were the

firms with the largest asset bases and

generally speaking the largest clients

and those clients typically invested in

alts. And so as we thought about it, we

thought

>> meaning like family offices, ultra high

net worth.

>> Yeah. Like think about some of your

clients and and what types of products

they're interested in buying. So when

you leave the the warehouses did a

phenomenal job and still do of providing

outstanding products, support services,

they do a great job. And so when

somebody leaves to be independent, they

don't have a platform. So we felt like

we could create a platform to help

advisers have access to alts in the

right way. And and it's different

because at that moment in time there was

no technology. Investing in alts was a

highly manual process

>> in a to a large degree it for a lot of

firms it it still is. It doesn't seem

like the various funds all play well

together.

>> Yeah. I I think I think there's a big

and we'll come back to this experience

point but we felt like firms that were

independent really needed a technology

chassis. They needed access to product.

They needed education, diligence, and

they needed a technology platform. We

felt like we could build that, you know,

end to end, not just the diligence or

not just, you know, fund sales or

whatever. It was the whole endto-end

solution. Um, and we started to build

that out and we realized that, you know,

it was something that clients really

needed. The other really interesting

thing that we found out along the way,

and I would say this was not a pivot as

much as an expansion, we had assumed

that the wirehouses had absolutely

everything they need because they knew

every manager in the world. They had

close relationships. Um, what they

didn't really have at the time was much

technology. They had a lot of people who

were doing a great job serving

adviserss, but they didn't have

technology. And so, we felt like we

could offer them a full technology

platform. and and we basically sort of

rethought our role, if you will, in the

ecosystem to be one where, you know, we

were going to serve adviserss wherever

and however they choose to, however they

chose to practice, we wanted to be able

to serve them end to end. And that's

allowed us, I think, to be able to serve

advisers at the warehouses, advisers who

are RAAS or at IBDs, um, and and really

help create a great experience for them

and for their clients. Coming up, we

continue our conversation with Lawrence

Kalcano, CEO and chairman of I Capital,

discussing how he built the firm out to

a trillion dollar platform. I'm Barry

Rholz. You're listening to Masters in

Business on Bloomberg Radio.

I'm Barry Rhaltz. You're listening to

Masters in Business on Bloomberg Radio.

My extra special guest this week is

Lawrence Kalcano. He is the chairman and

chief executive officer of I Capital

where he has been helping to build the

firm since 2013. They now service over a

trillion dollars in client assets on

behalf of uh adviserss and other

professionals. So, how should a

traditional 60/40 investor thinking

about uh some allocation to private

equity or private credit? How do they

access your platform? Is it directly

through uh their advisor? Te tell us

what the process is like.

>> Yeah, it's really it's very much an

advisor business. We are very focused on

helping financial adviserss serve their

clients. It's not a BTOC model. It's

it's it's a B2B TTOC model and so really

all the clients at I Capital are

advisers you know andor obviously the

GPS that are trying to reach those

adviserss and so for financial adviserss

um if they're large we can build a whole

white label capability for them so they

can in effect have an operating system

to run their alts structured investments

or annuities business as well as the

data aggregation that they they have to

do for clients with with information

that's everywhere.

for for advisers that are maybe a little

smaller that don't have sort of a

persistent need um they can come to our

marketplace and see a menu of hundreds

of funds where they can avail themselves

of those funds for their clients.

>> Really really interesting. So I like the

description of I Capital as the world's

alternative investment marketplace for

advisors and and wealth managers. when

when you joined in 2013, what problem

were you trying to solve?

>> Yeah, we were trying to help the

advisers who had left as I mentioned um

left their their uh their homes to start

off their new businesses and we felt

like we could actually create for them

an investment platform to allow them to

be able to service their clients, you

know, consistent with how they had

previously served them. So the part of

the problem we've seen with alternatives

over the years, they all seem to be a

slightly different widget. They don't

all fit on a platform easily, especially

you have to onboard the assets and and

align the capital with it. You have to

go through subscription documents and

capital calls and uh custodian and

performance reporting and then all the

analytics.

they all seem to be a little different

and it's a big lift. How have you

addressed this issue at I Capital?

>> So, we think technology is essential to

actually creating an experience that

allows you to deal with all of those

things uh effectively and in a way that

will be encouraging to you to do the

business with your clients where it

makes sense. So everything from what

happens before you make any decisions,

education, maybe you as an adviser on

the asset class, uh maybe education for

your client, um the tools to help you

build a portfolio, research to help you

learn about funds, um and then once

you've worked with the client and

develop a portfolio perspective, tools

to help you subscribe, and then

automation to help you manage all the

things that happen post investment,

capital costs, distribution,

redemptions, transfers, reporting,

etc. Um, and and help create an

experience that as an adviser will give

you time back to serve the client and

spend time with the client. Um, we feel

very strongly about going through

adviserss cuz we feel like, you know,

there's so much about a client that an

adviser will know that a platform will

never really be able to know. You know,

what is their real feeling towards ili

liquidity? You know, I think one of the

issues the industry is dealing with

today is is the question of ill

liquidity and and people's expectations

about that. Advisers have a better

perspective and a deeper perspective on

how a client really feels about that.

So, we want to make sure we're partnered

with advisers uh in in bringing the

solution to the market.

>> So, so I'm glad you brought that up

because every time there's some issue

with ill liquidity, um it seems that

people don't seem to really understand

what a lockup means. It it should be

fairly self-explanatory. We saw this a

couple of years ago with B rate where

which part of 7-year lockup was

confusing to you. It it's always and I

know what happened in 2022. The Fed

raised rates and people thought, "Hey,

let's get out of illquid real estate

before the marks reflect the reality of

of pricing relative to rates." Um, but

that's not how private investments work.

How do you educate investors and their

advisors as to what illiquidity means?

So, look, I think it's a it it is a

journey. It's not there's no one answer

to that question. And by the way, we do

we spend a ton of time and energy on

education and as do most of the GPS in

our system. When you when you look at

the documents around some of these

funds, it isn't on page 98 in small

print. the the sort of liquidity rules,

if you will, are on the front page,

right? So, it's, you know, I I I think

the reality is people want to hear what

they want to hear, right? the these are

illlquid securities whether ill liquid

investments whether they're wrapped as a

as a 3C7 private fund which are clearly

illquid or they're wrapped in an

evergreen wrapper you know registered

fund the underlying investments are

still illquid now some are are are

shorter duration than others private

credit is shorter duration than private

equity or real estate but the fact is

that private RIV credit investment is

still an illquid investment. The problem

I think is you when they get wrapped in

uh a rapper that says you can sell up to

or redeem up to 5%. That confuses

people. It confuses people. And I think

when the industry uses terms like

semiquid

it's really I don't even know what that

means semiquid. I I always I always

think of that 5%

gate as a widows and orphans clause. If

if somebody is suddenly no longer a

suitable investor for this due to the

person who made the investment passed

away, um now the wife and kids can get

out of it. It shouldn't be, oh, I could

sell 5% a quarter for as long as I want.

People should buy these make these

investments because they think they're

going to provide, you know, medium to

long-term positive impact in their

portfolio. If you're buying it to get

return this quarter or next quarter,

it's probably not the right investment.

You're a I'm not a financial adviser,

but but you need to buy these things

with the right duration in your mind,

and that's not a short one. Um, the the

products do provide what I think of as

liquidity features, opportunities if

things change in your life to

potentially

either redeem all of it if there's not a

big queue or redeem up to 5% if you need

to. Um, I think that's a a flexibility

and a liquidity feature in the wrapper,

but it doesn't mean the the product is

is liquid. And and people should invest

thinking that these products are going

to solve an investment need they have

that's medium to long-term, not

short-term. So, so let's talk a little

bit about the demand for this product.

We've seen, at least on the

institutional side, flows into alts now

exceeding a trillion dollars a year. um

as that scales what do you think are

some of the challenges and bottlenecks

for advisors

um to allocate more to privates?

>> So I think education is is still a very

important issue for adviserss and if you

think about where we are a lot of the

the uh advisers in the mix have been

doing it for a while. There's still a

lot of advisers who haven't really

gotten into these products yet. And so

they're going to need more education

point one. Point two, how they invest is

probably going to be different. So for

example, a lot of adviserss use models

with respect to their liquid portfolios.

Mhm.

>> We believe that that models will be a

very important way in which people

invest in alternatives and that might

mean models of just alternatives that

get married to an otherwise liquid

portfolio or models that include both

liquid and illquid investments together.

Um we have brought both those types of

products in partnerships with some

managers into the market as well as

partnerships with the the infrastructure

players. Um but I think models will

represent an important way in which

advisers allocate client assets to

alternatives.

>> So I've been hearing more and more about

um interest overseas uh in in a global

alternative platform. What do you think

is driving the demand internationally

versus what's driving the demand here?

Is the same thing or is it a sort of

different approach?

>> I think it's the same thing there. you

know, the the the adoption's a little

bit behind the US adoption. On our

platform, you know, in the alt space, we

have over $65 billion of alternatives

allocated from investors who live

outside of the United States. Um, we

half of our 20 offices are outside the

United States. We think it's a really

important growth area for the market and

and our business. Um but I think a lot

of the same things that drive advisers

to introduce these products to clients,

potential for incremental return,

portfolio diversification, etc. are the

same types of things that drive

international interest as well. So, so

let's talk a little bit about endtoend

technology. I know this is more than

just a menu of alternative funds. Tell

us a little bit about your your whole

tech stack and what it provides for any

of your clients. So, I think a lot of,

you know, a lot of what people want help

with out of the gate is is just how do

you build these portfolios? You know, we

talked about education, um, but but how

do you build the portfolio? How do you

construct portfolios that help match

what an advisor's uh, what a client's

goals and objectives are? So, we've

built technology to do that, which

include all structured investments,

annuities along with all the liquid

products that they might need. Um, and

then the the the ability, you know, one

of the things we've tried to do as an

organization is not only build an

end-to-end solution out for alts, but do

the same thing for structured

investments because those are important

products for for advisers and clients as

well as annuities and insurance. And

what's happening in the market today,

which I think is a really interesting

and ongoing trend, is people are are are

sort of looking at the different types

of rappers. um they could be ETF

rappers, insurance rappers, etc. you

know, wrapped around things like hedge

funds or private equity funds, credit

funds, etc. And so being able to help

advisers think about how the products

should be structured, how how could they

address client needs is a really

important part of what we're doing. Um

and then as I mentioned earlier, just

being able to automate the whole

workflow is really critical. I'll make

one other point as it relates to tech

and that is I I think one of the issues

for the industry is is around data

management. Um when you think about we

live in an ecosystem when we first

started the company people used to say

to me a you guys are so disruptive and I

would always sort of very politely

correct them and say we're not trying to

be disruptive we're trying to be

enabling. You know there are a lot of

infrastructure players out there that

we're trying to help sort of achieve

their goals. We're not trying to like

Amazon did to borders. We're not trying

to push them out of business. We're

trying to enable them to participate.

And I think one of the things that has

to happen now in the industry is all the

different big constituents have to work

together to help support clients. That

means administrators, transfer agents,

custodians, firms like I Capital,

advisers, GPS, we all work together. And

I think if we can get all of our systems

to be better connected, things like

tokenization and blockchain will help

with that. Um, it will end up paying

huge dividends for the adviser and for

the end client. So, it's funny you you

mentioned disruptive in 2013.

There was nothing to disrupt. It was

just a series of private offerings and

nothing really uh no umbrella, no

platform that really pulled everything

together. That That's right. it was

really a green field. Uh which is why I

say we're we're sort of enabling not

disruptive. Um and the truth is that you

know we're still scratching the surface.

I mean you know BCG does a report every

year and they look at global wealth. So

last year late in December they put out

a report that said there's $153

trillion

in wealth owned by individuals. Okay

that that's a huge number. It ri it it

rivals the size of the institutional

market. Um, so there is a massive number

of dollars that today, you know, in the

US, I think the estimates are something

like two 2 and a half% allocated to

alts. Outside the United States, it's

even less. There's a significant amount

of wealth that is going to be looking to

build even more sophisticated

portfolios. So tools, technology, AI,

tokenization, all of these things have

to evolve to create a great experience

for advisers and clients to make the

best decisions they can in in the asset

allocation world.

>> Huh. Really interesting. So, so let's

stay with technology and innovation. You

guys have built a number of fairly

innovative technologies. You've bought,

you've partnered. What is the calculus

like? How do you decide whether you're

going to buy something, build something,

or just partner with a provider in the

space to to build out the platform? It's

a combination of things. It's it's time

to market. It's culture. You know,

everything that we have purchased, we've

made 24 acquisitions. Um, everything

that we've purchased, we've integrated.

And and to me that's really important

because if the goal is to provide an

integrated solution for advisers and

GPS, if you don't integrate the things

you buy, you're not really doing that.

Point one. And point two, um if if the

people who join aren't integrated, then

it doesn't work either, right? It's not

just about technology. It's actually

more about the people. And so spending a

lot of time on culture and trying to

figure out how do you bring things

together? How do you create what I often

refer to as one eye capital is really

critical and I would say as as as time

has evolved um you know I I was always

very focused on culture from the very

start when we were a couple of people um

it's even more important than ever and

it probably continues to to to to occupy

a very significant percentage of my time

and trying to get people working

together put people in the right seats

for them to be successful. um and

creating simple ideas that people can

rally around. I mentioned this earlier,

clients come first. What is it we need

to do to help our clients succeed? And

everything we do, we have to do

together. Those two things are really

unifying to our culture. So, you guys

did a big capital raise in 2025

uh that valued you at a pretty

substantial multi-billion dollar um

level. What are you looking at for

further raises? How are you deploying

that sort of capital? Is it just build

build and eventually you become the the

biggest player in the space?

>> So, we've made we've we've announced a

couple of acquisitions since then. We we

we're about to close our acquisition of

Hexure.

>> Hexure provides an EAP for annuities.

So, as I mentioned before, kind of the

complete verticals. So, that helps us

complete our annuities vertical. Um, so

M&A will continue to be, you know,

important sort of use of cash. Um, and

we continue to sort of actively look at

what's out there. Uh, we continue to

grow organically, but the the the model

is self- financing. So, we don't need

outside capital to run our business. Um,

I'm a believer though when you think

about we talked about the duration of

these assets. When we talk to financial

adviserss, financial adviserss have to

know that we're financed to be around

for a long a long time. And so we we've

tried to finance ourselves in a way that

our our partners can look at us and say

they're going to be here to support me.

And so a lot of it is just making sure

we have a strong balance sheet to

support our clients. It's always

interesting when we see these big

private um entities go public in the

alternative and private space. H how do

you think about that? How do you think

about, you know, the the Blackstones and

and Cariles of the world and Apollo's

and whoever else?

>> Well, look, I I think, you know, go

going public allows firms to to have

access to capital to have, you know,

growth, you know, leverage their growth,

um provide sort of secondary markets, if

you will, for employees and and other

investors.

Um, you know, I think, you know, for us,

we spend very little time actually

thinking about that other than wanting

to make sure we run the company with the

discipline of a public company.

>> We we get our quarterly reports turned

around or our our monthly reports by the

second day of every month, quarterly

reports by the third day of of the new

quarter. Um, and we we turn the the

year-end results in a in a fairest

period of time as well. And so, you

know, public the process of being public

creates some disciplines that we want to

make sure we have, but but it's not, you

know, it's it's not something we're that

focused on. There there's there there's

two sides to every coin.

>> You know, when you when you go public

and the stock is going up, everyone's

really excited, everyone's really happy.

When you go public and you have massive

corrections, which we live through

pretty regularly, I'd say, and the stock

goes down. Now, you've got to deal with

the opposite of motivation. There's

concern and so forth. And so, you've got

to make sure your employees aren't

staring at the I was going to say

quotron, but only you and I would know

what that means. I

>> I you know, it's so funny. I had a buddy

whose firm got bought by Yahoo in 96,

and he would was telling me in 99 people

just refreshing the screen console.

That's all they did.

>> It's so I think there's an element to it

that's super unproductive. So that's why

we're in no rush to do that. You know,

we want to make sure, as I said, we have

a strong balance sheet, strong capital

structure. You know, equity is an

important part of our compensation for

everybody. You know, 100% of the

employees have stock at I Capital. To

me, that's a a big cultural point in

terms of bringing people together. Um

but but you need to if you're going to

provide that as part of someone's

compensation, there needs to be some

opportunity for people to get some

liquidity. So over our our history,

we've provided four such opportunities

for people to get a little liquidity.

And as long as we stay private, we'll

continue to try to find a way. It's it's

limited, of course, but we try to find

way for people to get to get some

liquidity from their from their equity

holdings.

>> Really interesting. Coming up, we

continue our conversation with Lawrence

Calcano, CEO and chairman of I Capital,

discussing how he built the firm out to

a trillion dollar platform. I'm Barry

Rholz. You're listening to Masters in

Business on Bloomberg Radio.

I'm Barry Rholz. You're listening to

Masters in Business on Bloomberg Radio.

My extra special guest this week is

Lawrence Kalcano. He is the chairman and

chief executive officer of I Capital

where he has been helping to build the

firm since 2013.

They now service over a trillion dollars

in client assets on behalf of uh

advisors and other professionals. So, so

let's talk about what's going on today.

Obviously, alts have been very hot for

the past 10 years or so, increasingly

so. uh they've been in the news for

other reasons the past few months, but

but let's talk about the underlying

structural shift before we get to any of

the noisy stuff that's going on. How are

advisors and individuals changing the

way they access um alternative

structured investments, annuities, any

of the products on your platform?

>> Sure. So I I think for the if if I can

maybe make some divisions by wealth, the

wealthier clients have tended to, you

know, buy the private funds, you know,

perhaps they'll invest either directly

if they can make a $20 million

investment or if if not, you know, if

they're a million, 5 million or

whatever, they usually come through a

vehicle that that we'll set up for them

to access and then we aggregate that

capital and we look like one large

investor to the institution to the to

the GP. Um, so the wealthier clients are

tend to invest through those private

vehicles across the board. Um, and we we

think from a platform perspective,

the way you've got to build these

portfolios, you know, if you have a a a

credit and equity portfolio, debt and

equity portfolio, and you want to build

them or rebalance them, you can do that

with a few mouse clicks, right? With

alts, if you target an allocation, it's

10 or 15 or 20%. You've got to build

that. So, it's really important that you

>> takes time. In other words,

>> it takes time. You need to make sure

that you have sort of persistent access

to quality product across all the

strategies. So, equity, credit, real

estate, infrastructure, etc. Uh, hedge

funds and so so our platform tries to

provide that. Um, but but that wealthy

individual will probably use private

funds to build it. for the accredited

investor, they'll probably use the

registered funds to be able to build

that and they will either buy um

individual registered funds or they

might buy registered funds wrapped

together. Um, that's something that

we're seeing a lot of the market do

today where they'll wrap three or four

or five different funds together to give

people an exposure to maybe it's equity,

maybe it's a growth oriented uh product

where there's sort of a a buyout, a

growth, a venture kind of component or

maybe it's an income oriented product

where you've got, you know, credit and

real estate or maybe it's multiasset

where you've got all of that sort of

wrapped together. Um, we think there's

lots of different ways. Every individual

has a different set of needs and

objectives and so we think it's really

important that there's a lot of

flexibility in the system so people can

allocate precisely what's important to a

given client. So what you're describing

sounds fundamentally different from how

portfolios used to be constructed. How

significant are these changes um

compared to I won't even mention the '9s

but the 2010s? Look, I I I think what

what's what's happened, which is a good

thing, is is clients have access to more

products to potentially meet their

needs. Doesn't mean these products, by

the way, are right for everybody.

They're probably not right for a lot of

people. Um, but for those that have the

ability to make these investments, the

willingness to tolerate the iliquidity

we talked about before,

>> these products provide more

opportunities to build the right

portfolio. You think about the public

markets. I mean you you spent a lot of

time thinking about them. I know um you

know there are a there are probably

150,000 private companies with sort of

IBITA or revenues greater than hund00

million like and there are 5,000 4,000

public companies.

>> There are the the private markets are so

much larger than the public markets. As

you know, the public markets are

increasingly dominated by a small number

of stocks. And so, accessing the private

markets gives you access to a much

broader set of possible investments.

Again, not right for everybody, but for

those who are looking to build, you

know, more uh involved portfolios,

there's an opportunity that the private

markets uh enable you to to pursue that

you just don't get by just stocks and

bonds. So that's one compelling reason

you can access companies you wouldn't

get uh otherwise. Uh what are some of

sell us on the other reasons? Why else

should an investor or an advisor who is

um alt curious why should they explore

this space? Well look I I'm decidedly

not trying to sell anybody on anything

just to be clear. Um but I I think you

know it's like anything else in life you

know when we're all better off when we

have some more choices. Now, by the way,

there's a way in which those choices can

be bucketed to make it easier for you to

go through that decision-m process. But

I think if you have more choices to

build a portfolio where you're seeking,

you know, longerdated returns, you're

seeking more portfolio diversification,

um, these products provide you with more

flexibility to create a diverse

portfolio, potentially have a a higher

returning portfolio. Uh but ultimately,

you know, every person's got to make a

decision that that they can they can

live with the the products.

>> So, so during the 2010s, we had 0%

interest rate, ZERP, and QE, and all

that fund Fed stuff. Um, and I think

that's where private credit really

caught the attention of a lot of

investors and a lot of adviserss. What

do you mean? My bond portfolio is

yielding 3%. When all right, you're

trading off a little liquidity and you

get five, six, seven, 8%. Uh, that's

pretty attractive relative to to the

alternatives. Um, okay, you got to deal

with the K1, which nobody likes, but

still

your accountant will will deal with it

for double the the yield you're getting

in in traditional um treasuries or

corporates. um how has that moved from

just straight up credit to private in

infrastructure, private equity, private

real estate? It seems like that whole

world has opened up dramatically. It it

has and you know I would say that a lot

of the private credit uh investments you

could look at are floating rate.

>> Mhm.

>> And so they still can provide

opportunities for you know for excess

return real alpha um because of the way

they float. In fact, it was interesting

in you know in the early part of this

century coming out of co of this decade,

you know, you had people to your point

very actively buying private credit and

then when interest rates went up to like

5%. Some people were earning like 10 to

12% on their private credit investments.

And so they were then looking not about

private credit versus public credit.

They were looking at private credit at

10 or 12% versus private equity. and and

and it being shorter duration, was that

the right, you know, mix for them? Um,

and then, you know, right now we're

seeing a lot more people focusing on

equity as well. But, but you definitely

had a period of time where private

credit was was very very attractive. And

I think where we sit today, I think a

lot of people are very anxious to

understand what the underlying credit

quality is in these products. And I

think, you know, there's certainly

disruptive forces from AI that that

we've talked about, um, the industry

talks about every single day. Um, it's

not clear to me that, um, it's the the

existing portfolios are are are really

in in in bad shape. I actually think the

portfolios are likely in better shape

than people think. Um, I've spent a lot

of time trying to talk to various

managers of of both equity and credit as

to what they're seeing in terms of

adoption. And while everybody is working

on how to implement AI, it's not like

existing software vendors are seeing

their businesses dry up. That's not

happening. And a lot of those are the

borrowers of of these private credit

assets. So, um, we'll we'll we'll need

to get more information over the next

several quarters on where we are with

private credit, but my guess is the

portfolios are in a lot better shape

than people think.

>> So, so we could talk about um navigating

some of the headlines, but you mentioned

AI, and now I'm legally obligated to ask

you a question. Um, what what are the

most meaningful near-term applications

of artificial intelligence uh within the

alternative space? Is it administration

and workflow? Is it identifying better

or less great um funds? Is it all of the

back office? H how do how is I Capital

using AI in in your business?

>> We're we're actually we have pilots

going on across what we do. So if you if

you take our tech stack there really two

ways to think about it. One of which is

the tech we use to empower clients and

the the technology that clients um

engage with and the second is the

technology we use to run our business

and there are big applications in both

and to give a couple of applications

when a manager comes to I capital to

raise a fund we we sort of build a

subdoc AI can build that subdock subdoc

for us very very quickly um when a

client comes to the site and wants to uh

they come to our marketplace place and

they want to describe to us what they're

interested in and they they hit toggles,

you know, etc. They go through a few

steps to kind of inform us what they're

interested in. AI can do that really

really quickly. Um there are a number of

ways the way we collect data. Um one of

the services we provide to clients is we

help uh advisers aggregate client data

because a client might have held away

data, you know, in lots of different

places that you want to aggregate. So

you can present a holistic picture to

your client. Um how we get that data,

how we retrieve the data, how we extract

data from documents and then how we

reassemble, AI can help drive a lot of

that. So the the applications of AI um

are sort of significant across our

entire platform. Huh. Really, really

interesting. And we've been dancing

around some of the negative headlines.

How are you helping advisors navigate

that? these days for the for the most

part it's a relatively small handful of

companies. Everybody knows their names.

Um but the cockroach theory has people

waiting for the next GFC to unroll. We

haven't really seen much like that.

>> Well, I I I I think this is such a a

smaller magnitude than the GFC. I I I

don't think that that we're anywhere

near those types of concerns. You know,

we're big believers in communications. I

made a point earlier about how the

ecosystem needs to work together. It

really needs to work together now

>> in terms of helping people, you know,

understand what's happening. I think

generally speaking that the industry,

and when I say the industry, I mean the

asset management industry has to be even

more transparent today than ever before.

And I think, by the way, that's a good

thing going forward. I think the the

alternative asset managers probably need

to be more uh more disclosive, more

transparent to clients uh over time. Um

but I think the being out in front of

clients helping them understand you know

the landscape and what's going on has

been a big part of how we've spent a lot

of time and one of the things we're

doing now is help is trying to bring the

organiz the organize the industry to get

people on the GP side working together.

I talked about transparency, getting

information, educational material, not

promotional material, but educational

material to try to help create again a

better and deeper level of understanding

about these products. So, I've been

hearing a little bit about convergence

lately between public and private

markets.

>> You're known as dealing with the private

side. Do you ever see a day where

private and public both ends up on your

platform um completely full wallet share

etc? I I I think for us you know we're

really focused on helping people have

very successful journeys with their

private investments their structured

notes annuities etc. And so I think the

way in which we will interact with the

with the public markets will be more

around these model portfolios I talked

about and collaborating and partnering

with the GPS and other sort of more of

the public company people who either

provide models or have public company uh

public investments and helping to create

these model packages for for investors

to be able to invest holistically in a

portfolio. I think that's probably how

we'll play the public space in in

partnership and in concert with people

who are experts in that area. M

>> makes a lot of sense. Last question

before our speed round. Give given all

these major technological shifts. What

do you think is going to help redefine

asset management going forward? Uh we

talked about you mentioned tokenization.

We hear about blockchain, AI, data

analytics. What what's the next big

thing? By the way, I think the next

biggest thing is the is the the deep

implementation of those technologies.

We're still scratching the surface.

Tokenization hasn't even hit private

markets in any meaningful way yet. AI,

same. Um, so I think there's significant

application of those technologies that

will be will be meaningful. And I think

really for the for the financial

adviserss, this reminds me to, you know,

10 years ago when when all the roos were

coming out, you really had and there was

this big debate, robo advisors versus

human adviserss

>> and and I I always thought that was a

false choice. I always thought the best

answer for clients was a great financial

adviser who leveraged technology to

create an incredible experience for

their clients. And I think the same is

true today. the best financial adviserss

are going to not be afraid of

technology. They're going to adopt it

and they're going to embrace it to

create an incredible client experience.

Um, and that's sort of how I think the

market will will evolve in a

constructive and positive way. All

right, so let let's jump into our speed

round. These are really just quick

answers so people kind of get uh a

flavor of who you are. Starting with who

are your mentors who who helped shape

your career? Boy, I I had a lot of

mentors growing up, you know, and and I

think I I always tried to watch people

and and see what they did. There were

several senior people at Goldman Sachs

that I learned learned things from. I

remember the the head of investment

banking once told me when I was like a

young associate, he said, "The loneliest

job on the planet is the CEO's job."

>> So, if you want to be a successful

investment banker, make a friend of the

CEO and be a sounding board and you'll

have a good career. That was pretty good

advice. Um, but I I I remember um the

other piece of advice I got from another

senior partner in in banking was um you

you always have to be intellectually

honest. And a lot of people are afraid

to be intellectually honest because they

they're they're calculating what's

happening in the room versus, you know,

being true to what you think and saying

it and and and not being afraid to do

that. and and I've tried to to to really

do that in in in all the things that

I've done as I've as I've grown in my

career.

>> Really really interesting. Uh what are

you reading these days? What are some of

your favorite books?

>> I'm I'm overwhelmed with with work

reading right now between you know what

we're doing in our business and and

client and client stuff. I'm reading a

lot of stuff on AI that sort of if I

were to admit the the honest thing is is

I keep reading new AI books about, you

know, AI and technology, AI in general.

Um, there are a lot of incredibly

positive things about AI. There are a

lot of risks with AI. Um, and and a

couple of the books I've read recently

were were really focusing on the risks

around unemployment, um, around control

and governance. And when you get to

natural intelligence when AI reaches

sort of human intelligence, what happens

then? So there's there's a really

exciting and bright side and there's

really a dark side that's going to need

a lot of governance to to protect all of

us.

>> A lot of guard rails. Um so if you don't

have time to read, do you have time to

listen to podcast or watch anything?

What what are you streaming? one of the

so that I'm married 33 years and you

know and honestly you know the my wife

and I are just binge watching a series

of shows. We've we've gone through the

whole Yellowstone saga you know the

prequels and

>> did you get to Landman yet?

>> We finished Land Man. Love Land Man.

Looking forward to watching the Peiquey

Blinders movie which we haven't seen. Um

but probably you know when I get home

when I'm sort of when I put the work

down my wife and I tend to watch shows

together.

>> That that sounds fun. Uh, our final two

questions. What sort of advice would you

give to a recent college grad interested

in a career in alternatives or

investing? I I would say, you know, the

world owes you nothing. This is, by the

way, what I I have several kids, you

know, who have graduated college and and

what I've said to them and I'd say to

anyone at I Capital generally, the world

owes you nothing and what you get in

this life is a function of what you work

for. Um and and I think that people need

to be flexible. They need to have an

open attitude. Um and and that to me,

you know, at at a given level of

intelligence, you know, that's what

attitude makes the difference. Um you

know, it's funny. We all went through

this work from home during COVID and

now, you know, some people want to

continue to work remotely. Um and I when

you asked about mentors like a lot of

the mentorship that I got probably a lot

of people got was just being in the

office watching people listening to

people how do they act how do they treat

other people you know how do they behave

in meetings like that stuff that's super

valuable osmosis learning you don't get

when you're sitting in your apartment on

a zoom screen there's zoom screen is is

one-dimensional life is

multi-dimensional

And so I'm a huge my my some people in

the company love this, some people

don't, but I'm a huge work from the

office because I believe that that

multi-dimensional experience is much

more powerful and it's better for every

individual from a learning perspective.

>> Yeah, I couldn't agree more. Um although

I do love those Fridays from home. No,

no doubt. Um, and final question, what

do you what do you know about the world

of alternatives and investing and

technology today might have been useful

back in the mid1 1980s when you were

first getting started?

>> I I I think I think probably I'll

generalize that a little bit is

patience.

>> Um, you know, I I was sort of young and

just, you know, hard charging and so

forth and and and as a lot of us are.

Um, but you just you have to be patient.

You know, it's funny. I I we sponsor

golfers and and I I I watch golf. I love

golf. And you see people, they bogey

holes. Uh John Rom won the Masters a few

years ago. He double bogeied the first

hole. I remember I was standing there

watching it and I was like, it's over.

It wasn't over. It was one hole. And it

reminds me my my youngest daughter

graduated Dartmouth a few years ago and

Roger Federer was the was the speaker. I

recall that that that uh speech and it

was really amazing coming from him.

>> It was an amazing speech and one of the

things he said is in his career he's won

and I may get the number slightly off.

80% of his matches and 54% of his points

and and his point was it's just the

point,

>> right?

>> You know, and I think that's a huge

lesson. It's just the point. It

happened. You lost it. You won it. You

lost it. you move on. I think that's

great advice and advice I wish I had had

when I was younger. Lawrence, this has

been absolutely fabulous. Thank you for

being so generous with your time. We

have been speaking with Lawrence

Kalcano, CEO and chairman of I Capital.

If you enjoy this conversation, well,

check out any of the 650 we've done over

the past 12 years. You can find those at

iTunes, Apple, Spotify, Bloomberg,

wherever you get your favorite podcasts.

I would be remiss if I didn't thank the

crack team that helps put these

conversations together each week. Alexis

Noriega is my video producer. Shan Russo

is my researcher. Anna Luke is my

podcast producer. I'm Barry Reynolds.

You've been watching Masters in Business

on Bloomberg Radio.