The Ballast ‘Blue Ocean’
The genesis of Ballast came from many interactions with various people, firms and investment opportunities over a long period of time. However, one particular theme evolved during numerous conversations with Chad Carstensen. One such conversation took place when we were in Mexico celebrating my parent’s (his grandparent’s) 50th wedding anniversary. Chad was with Prudential, and I was with American Equity at the time. He managed money on behalf of individuals, and I managed money on behalf of institutions. During this conversation, it became abundantly clear that the process of managing institutional money was significantly different than how individual investors were having their money managed.
Examples of this are numerous – but some that come to mind are:
- Institutions build portfolios one investment idea at a time. – Retail advisors build portfolios through fund allocation.
- True investment management requires daily activity. – Retail investment management can be done in one day through fund allocation, with limited activity necessary until the next meeting.
- Security selection adds to the value proposition. – Retail advisors do not see many of the securities that trade in the capital markets every day.
- Fiduciary responsibility is something you embrace. – The retail industry would rather be up against a lower bar of ‘suitability’.
- Risk management at the institutional level is managed by assessing exposures relative to capital. – Retail advisors manage risk by diversifying funds. – (This latter is, in my mind, more a benefit to the advisor than the client, especially since it prevents the advisor from ever being too wrong, which could result in the client feeling compelled to leave.)
I could go on and on, but at the end of the day, it became clear there was a world of difference between the institutional investment process and the retail investment process.
From that point in time, forming an investment advisor that approached business from an investment perspective (buy-side) and not a sales perspective (sell-side) was on my mind constantly. However, constructing an investment team without having sales is a money losing proposition. It actually would be easier to sell an investment service without actually having to hire an investment team – which is how many business models are set up today.
So – to cut a long story short – a combination of friends, family and faith led me to create an investment organization that mirrors an institutional investment department. Our endeavor doesn’t jump into the ‘red ocean’ that the industry has established but rather we are creating a ‘blue ocean ’ opportunity that meets latent demand from an investing public that I believe is ready to participate in something different.