Earnest Sweat 0:02
Welcome to Swimming with Allocators. The VC podcast from the LP perspective, with your hosts, Alexa bins and Ernest. You ready? Let’s dive in. So in today’s episode, we’re blessed to have Quincy Brown. He’s based in Cincinnati, with 29 years at Fe G Investment Advisors. He currently leads their values aligned investment platform with a focus on responsive investing, faith based and diversity aligned strategies. And he’s going to share with us today how FEG integrates those values and ESG principles into manager selection and portfolio construction. Also he’s going to share the firm’s long standing commitment to diverse and emerging managers and how Fe G approaches pushback and maintains conviction in today’s macro climate. So with that, we welcome Quincy Brown,

Quincy Brown 1:05
Thank you, Ernest. I appreciate it.

Earnest Sweat 1:09
Quincy. I always like to start off before we start jumping into what exactly the allocator does in their day to day and their thoughts on the market. We like to jump into the actual, like, talk about the person and so question, could you tell us a little bit of just like, how your career path has led you to this point?

Quincy Brown 1:30
Alot of times when I talk about how I started, I often get a wow, or you can’t be serious. You don’t look that old. But as you mentioned, I’ve been here at f e g for 29 years, and it’s essentially, you can all call it. My entire career has been at f e g. So my background though, I went to the Ohio State University that also evokes some response in a lot of instances, and I was part of their student investment team, and that really was one of the next steps from what I thought my career was going to be. I wanted to be on one of the coasts, kind of like what you are today, and however, family circumstances anchored me to this area, and so finding something that fit the profile of that investment background here in the Midwest was not as straightforward. But then, just like we’re having this conversation today about allocators of the consulting industry, was foreign to me, and it still is to a lot of people not in this space, and finding and discovering the idea that you’re really not selling anything other than your intellectual capital was appealing in the investment side, and so back in 1996 joined F, E, G as one of their first analysts and Springboard my career to where we are Today.

Earnest Sweat 3:00
You really found something that matched because you’ve been there for almost three decades. What has it been about the company, the role and the opportunity that’s kept you

Quincy Brown 3:39
there? Being employee number 20 something, can’t even remember at this point now, there was that definite entrepreneurial spirit. We’re doing things again, that whatever we did impacted clients in terms of being on the ground floor the industry and those relationships, and even from the heritage of the firm’s founding. Our principal founders came from pension consulting, and they were very much so involved in their community and recognized there was a gap in what they were, what they were, how they were being served. And so the energy of that entrepreneur, entrepreneurial spirit, being on the ground floor of that process and being connected to those organizations that really needed you, really appeals. And we do have a very trusting atmosphere here at F, E, G, very good people who work hard. And so that angle is really the anchor, if you will. That kept me here at F E G for this long

Earnest Sweat 4:47
now. Could you tell us, the audience, about F e g and its history, what it does, and I saw, you know, in the research, in our prep call, it’s a very interesting group that they serve. As well,

Quincy Brown 5:00
Our original principles came from Prescott ball and turbine was a pension consulting and they also were associated with nonprofit groups themselves and recognized that those organizations weren’t being served. And so they spun out from that organization and founded Fe G at that time. And so what we are beginning to do is a non discretionary consulting firm, and today largely non profits. About 90% of our clients are non profit in nature. So that includes higher ed, colleges and universities, community foundations, health care systems, private family offices and foundations, religious or faith based organizations, as well as charitable organizations. And so that service back in 2003 we were one of the first consulting firms to step into the discretionary space or outsource CIO and that was from recommendation from a client who essentially asked us, What would you do if we just let you take the reins? And so that was the impetus of that section of our firm. And then from there, we continue to do both non discretionary discretionary services, as well as research services, where we provide back office research for registered investment advisors, banks, insurance and private family offices.

Earnest Sweat 6:32
Those groups are, you know, going through a lot of different challenges over the last, definitely the last 30 years. How have you all been able to stay in tune to what their needs are, and then also still wear that OCIO hat where you need to look, you know, two decades ahead on providing them not only what they need today, but what they’ll need their organizations will need for the next couple of decades.

Quincy Brown 7:09
I often state that we’re in the trust business, because that’s I mean, we’re dealing with money, right? Yeah, most people have some sensitivities about money, but even more so for organizations, and it’s given the large amount of our clients or nonprofits, there’s heart strings attached to that as well. So building that trust begins with understanding those organizations, what their missions and objectives are, and so that helps give you insight and maybe see around the bend to understand, what are their sensitivities? How should we be positioned? How do we best navigate or structure their investment strategy in order for them to sustain those organizations over time? And so we have very long tenured client relationships, and I think that’s from the foundation of building trust, and then that gives you a little bit of foresight into how to navigate various markets and make sure everyone’s on the same plane.

Earnest Sweat 8:09
What are typically the profiles of these organizations? Like, how big, small are they? Typically nonprofits and faith based organizations?

Quincy Brown 8:18
We work with a large range in that standpoint, upwards of close to 10 billion in size, down to 10 million. So it is a broad spectrum and different classifications. And so you get a lot of different perspectives. You have those that have committees or boards that are very in tune with the investment landscape, and you have those that really don’t have a background and just want to support the organization that they have some association with. So it has become such a wide spectrum and you have to manage expectations, is probably the best way to serve each one of those organizations in the most meaningful way.

Earnest Sweat 8:59
Yeah, you spoke about how we’re in the trust business, where we’re also in the framing business, Inn the investment business, you’re selling your ideasAnd how you think, to that point, you know, saw that, you have responsive investing as a terminology. What does that mean to Fe G in

Quincy Brown 9:25
practice? So let me take a step back and even go above that. Our values align. Investment team covers responsive investing, as you mentioned, as well as faith based and diverse manager initiatives and responsive investing really covers the forum that you could think of as sustainable or even just ESG area, and so the evolution of our strategies in that space really goes back to the primary segments that we serve you. And large non profit, those organizations tend to have missions and values that are biased or may lean in that direction, and so from the outset, again, going back to building that trust and understanding, those organizations helped us navigate or structure strategies and find investment solutions that meet their needs and align with their missions.

Earnest Sweat 10:24
Are you seeing any common themes when you look at those, those organizations, of like, okay, different buckets, whether it’s like, financial inclusion, environmental,helping those in kind of like that are not in the middle class, get into the middle class. Curious on what kind of themes of values that you’re seeing come from those organizations?

Quincy Brown 10:54
Sure, and I think it, it also stems from the profile, yeah, of those organizations. So within the faith based space, for example, you have some that may be more restrictive in terms of what they want to exclude exposure to. But also in that space, there are perhaps more environmental sensibilities across what transpires here on the planet. I think what we’re starting to see more of, particularly in the charitable and perhaps private foundation space, is healthcare is an area, real estate, sensitivities, affordability, and then also just those areas or communities that are underserved or underrepresented. You see those types of trends within those segments, and that’s where we’ve seen most of the interest. And you mentioned in the venture space, there’s been a more acute focus to perhaps leaning into venture and private equity to be more impactful across those categories. I just referenced

Earnest Sweat 12:01
I worked at a nonprofit consulting firm, and so usually, seeing the model of people really using grants to really make their influence within those different areas that you kind of mentioned, their healthcare, environmental, you know, racial justice, whatever it might be. But now I’m starting to see a shift, now that I’ve been a decade plus in venture, these same organizations, seeing the importance of of going into venture and private equity, because emerging technology is having such an influence on culture and those industries, is this kind of you think someone of the tail winds on why venture and private equity has been acutely focused. Is there kind of a reframing of, kind of theory of change?

Quincy Brown 13:20
There’s kind of a melding happening between the traditional investment portfolio and your PRI program related investments, or your MRI mission related investments. And those are kind of converging, whether it’s from a resource standpoint or a philosophical intention. And then venture is on the ground floor of that. And so you’re almost doing double the work, if you will, or double the impact, perhaps, in that you’re on the ground floor where people have their hands on the pulse. But at the same time, within the Investment Program, there’s a niche, if you will, that meets an objective or values segment to what the organization may be trying to do. And so that’s where you see a little bit more of that mentality or kind of mindset moving in that direction. The momentum is happening. Now, I can’t say it’s a tidal wave, but you can see it burgeoning in various organizations about their thinking in space.

Alexa Binns 14:22
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Earnest Sweat 15:19
Since you, since you mentioned kind of the diverse and emerging manager being kind of also focused as well. How does your team identify and assess, get access to these diverse and emerging managers in your pipeline?

Quincy Brown 15:37
So let me take a step back and also reference that we define diversity a little bit differently than a lot of organizations. Obviously, ownership is probably the paramount, but we’re thinking, at least we believe. We’re thinking that we’re looking forward to the future. How do we make change, perhaps 510, 20 years from now and so beyond, looking at ownership, we also look at leadership of the firm, as well as portfolio management of the firm. And so in that realm, we think that it builds towards the future, because ultimately, firms are often formed from a portfolio manager that left their original organization and branches them around. if we’re behind the portfolio manager that we identify that falls into that category, it becomes a springboard, perhaps, to that firm forming in the future. Similarly so from the leadership standpoint, if you have a diverse person in leadership more often not. The rest of the firm is more diverse and encompasses a lot of different parties and thinkers. And so that’s the the outset of how we look at diversity a little bit differently, not only thinking about it today, but thinking about in the future. But ultimately, we do it in pretty much the same avenues that we’re doing any other investment managers, we’re going into conferences where a lot of managers may be represented. We’re using databases as well as we’re sending out questionnaires to managers to try to understand who and what they are and what their principles may be. And so that helps inform and expand the universe. But again, going out to conferences, meeting people, having conversations like today, you end up making those connections and associations that develop into coming into the process of how we evaluate investment managers.

Earnest Sweat 17:36
You mentioned that you also define it by ownership. Is there a certain target you look for for ownership? Yeah,

Quincy Brown 17:44
there’s two elements we look for, and this is across the board. So on the discretionary side, we’re looking at a 50% threshold for ownership, a 50% threshold for leadership, or a 50% threshold for portfolio management so those who put their hands on the steering wheel. On the non discretionary side, we come down to about 40% to kind of make sure that we have a starting point for those organizations who may be first stepping in that but we’ll meet a client wherever they perceive their threshold to be and and provide education around how they’re pursuing various policies or engaging on the topic.

Earnest Sweat 18:28
I always like to ask, when we have someone from a consultant or OCIO perspective, are there any quirks, you know, challenges or opportunities that emerging managers can take advantage of to get connected to organizations like yourself.

Quincy Brown 19:03
I try to have these conversations with diverse and emerging managers on that exact question, as much as obviously the attention is going to be growing their organization, building the assets, it helps those individuals to understand who they’re going to be serving. For example, there’s often a distinction between the board, the staff and the Investment Committee, and the more you can observe that those three levels of the organizations are tied together that will help inform you on how you can approach them. The other thing is understanding how you might fit in their investment program. So can then in those two realms, you can speak their language, and they can learn to trust you going back to that, or in the trust business sooner, and those relationships can develop a little bit faster. I.

Earnest Sweat 20:19
Could you talk a little bit about how the research team plays in developing the relationship and trust and how they make their recommendations,

Quincy Brown 20:31
We have close to a 30 person dedicated research team. It is a kind of career path here at Fe G and they’re doing many of the same things I mentioned. They’re going out to conferences, they’re reading all the latest information to make the connections, and they’re kind of the gatekeepers. And so within my Group, we help make those introductions to help expand the universe of the investment managers they may be pursuing, but they’re the gatekeeper in terms of setting up or doing those introductory meetings, a lot of due diligence that goes into that process. And then we produce research reports that are then presented to our Investment Committee for potential approval as a recommended manager on our approved list, if you will, and then internally, we’re using that as the basis for how we’re making recommendations to our clients in terms of fulfilling their investment program.

Earnest Sweat 21:34
Could you talk about the diligence process and the things that you look for for those who might have a track record versus those who don’t have your traditional sense of track record?

Quincy Brown 22:18
I think you’re maybe referring to oftentimes with emerging managers, the size of the organization, or the assets they have under management, the years of founding, are some of the things. And so in terms of looking at emerging and diverse managers, we take those in consideration. And oftentimes it’s also about building relationships. Youou may not, if we’re talking about venture or private equity, you may not get into the first fund with that manager, or perhaps you get into the second. And that also aligns with our philosophy, if you will. Oftentimes, our view is that the best performance from particularly on the private capital side, comes from funds two to probably six. And in fact, we also have some principles that you know, even though size is getting outsized in the markets over the last several years, yeah, we tend to gravitate towards funds that are less than a billion. So it ends up being parallel sweet spots for emerging managers to some degree. But coming back to your point, we’re aware and sensitive to the fact that emerging managers have those hurdles related to asset size and track record, and so sometimes it just becomes about building that relationship. So when they turn that corner, it’s less of a glide path, or that runway is shorter for us, recommending them to some of our institutional relationships.

Earnest Sweat 23:52
Within those two to six Do you have trend lines of, you know, it’s usually two and three versus kind of four, five and six. Do you have any data around that?

Quincy Brown 24:07
No, I think it really comes down to where the organizations are, perhaps, from a business standpoint, if they’ve been able to build up their infrastructure earlier on, versus doing that simultaneously through that six, two to six window that oftentimes may need to be the distraction that may have some deviations in performance. But ultimately, we think the energy, the focus, the hunger, all the things that you’re trying to build a good business around, tends to happen in that realm. Now, obviously it’s not always the case, but at the same time, we’re watching what you’re doing from a business and organizational standpoint, are you able to keep or grow talent? Yeah. How’s your back office being served? Whether that’s outsourced or building it internally. All those different things kind of tell us about organization, about managers and. How they think about not only running their business, but how they’re investing. I think some of those things can run parallel and be attractive or warts that we want to monitor.

Earnest Sweat 25:12
Hw do you deal with kind of the at, you know, from outside perspective, at odds of performance versus kind of the mission alignment, where do each of those come in, within kind of your decision or diligence process?

Quincy Brown 25:32
From the outset, when the managers that we look at we’re looking for and looking at, we believe that you can do both. You can outperform and serve your mission. Now there are some investments, as I mentioned, we’re talking about the confluence, or merging, between traditional investment program and PRI and MRI investments, and some of those are dedicated, where you’re willing to forgo maybe financial benefits to align yourself with your mission, but the strategy under our values align investment team is to be able to both to align with your mission and values and produce performance. And so we’re acutely aware and focused. We apply the same tenants of how we evaluate managers with those that may be more mission or value align the focus, so there’s no deviation in terms of the due diligence or threshold that we’re pursuing, okay,

Earnest Sweat 26:33
and because you’re helping kind of the entire portfolio. Have you seen the kind of missions that align with certain asset classes versus others, right? Because you’re looking at venture growth and buy out and other stuff as well. Have you seen kind of like your nonprofits when they’re onboarding or when you’re having catch up calls with them, pushing for one asset class versus the other.

Quincy Brown 27:05
No, we’re typically leading the process on asset allocation. So that’s paramount. At the beginning of the relationship is developing that strategy through the investment policy in the asset allocation. I will say it’s more so where the opportunities most lie in terms of aligning mission. You’re going to see that mostly on the equity side. And we think of global equity, both public and private. You’ll see it a little bit on the fixed income side, but less so, and that’s more so lending, where you see a lot of an emphasis, but where we’re starting to see, and have seen, over the last few years, is more focus in the real asset space. And again, that goes back to real estate. Then you think about energy transition. These are in areas where we always see more viable investments that we can present, but the vast majority is going to be on the public or private side of the equity market, but you’re seeing other areas of focus start to poke their way through and gain a lot more energy.

Earnest Sweat 28:09
You know, as we do this interview, with respect to the kind of ideas of Mission Based Investing fordiversity, ESG, there’sbeen kind of a macro, kind of like backlash against a lot of those things right now. So I was curious, you know, from Fe G’s perspective, have you seen a client base that is a little bit more cautious, a little bit more frustrated, just curious on kind of how that is first starting with that point of how the client base is doing with all of these tidal waves coming at them,

Quincy Brown 28:59
It probably started two years ago, perhaps on the ESG side that really garnered a lot of attention. And so perhaps the acronym has changed, or they’ve relabeled it. We really haven’t seen any tail off to a material degree, maybe of plateauing as people try to recalibrate how they’re focused in that area. And similarly, so we’re now seeing the same thing as it relates to the diverse and obviously die has become the same kind of red flag as ESG was, and you’re seeing the same type of things occur where it’s just perhaps a shifting or rebranding now it’s going to be more distinctive in different segments. Colleges, universities, probably about a year to 18 months ago, had already begun to rebrand their programs in some ways, and now you’re seeing that spread out in different segments that may be doing the same, but the energy, for the most part, appears at this point to be. The same in terms of being committed to those spaces is just it may be called something different, but they’re doing the same things. And it again, goes back to where are the institutions aligned in terms of that board, staff and Investment Committee alignment, if those things are still stable and strong and they’re still on the same page, you’re seeing the same type of action in terms of what they’re trying to pursue. If there’s some deviation from vision or views amongst those three, then you see some pause or pull back, if you will, in terms of intentionality in some of those mission spaces.

Earnest Sweat 31:48
Is there anything that you could have learned from the ESG experience to now with the DEI experience that you can employ?

Quincy Brown 32:01
I think again, they run parallel in terms of how people are operating. I think again that nomenclature people are pivoting towards, and perhaps it’s not ESG, it may be more sustainable, unless I mentioned we call those that area responsive investing. Yeah, thanks. Similarly, so you’re seeing, as I mentioned, diverse manager programs are coming under the umbrella of emerging managers. Yeah. And so those are the things that are more significantly focused. And the other thing I would say that maybe separates the two is that on the diverse manager side, you’re maybe peeling back from quotas, per se, if you had them, it’s more so looking for growth in those areas, or it’s more distinctive on the like I mentioned before, the emerging manager umbrella. So those are the things I think are common in both areas as it relates to the philosophies or strategies and the investment managers themselves are doing the same things.Whether you’re talking from the LP or client side, the managers have migrated or shifted that kind of nomenclature in both of those areas.

Earnest Sweat 33:21
Yeah, switching gears. Is there anything else? Is there one trend in venture or private markets that excite you right now?

Quincy Brown 33:36
That’s an excellent question that excites me right now. I would say the thing that excites me right now is how technology is shifting a lot of industries, and thus the opportunity set is that much broader. So ordinarily, from a historical standpoint, a lot of the venture was in tech, biotech, then, and so now you’re seeing, because of technology in general, the opportunity to go in different spaces, whether that’s in consumer manufacturing, food, things of that nature, and then obviously pivoting towards we talked about before energy transition. So yes, I think there’s, as we are, strategists, if you will, on behalf of our clients, we’re always looking for the next thing. And so I think technology has enabled the next thing to be in more traditional spaces. And so you don’t necessarily have to spend 20 years in a space to understand what’s happening. Technology, creative thinking, insight in different ways, and perhaps being disruptors, has enabled the opportunity to look in some new areas. And I think that’s only going to add value in terms of investment returns on behalf of. Of our relationships.

Earnest Sweat 35:01
I think it’s so true. It’s something that I’m excited about as well, where the ubiquitousness of technology is seeping through every industry, and it’s going to be in a world of more automation, with AI and consolidation. I think it’s going to be important for all the different worlds to bridge together, right? We can have more resilient nonprofits, more resilient manufacturing companies, more resilient name whatever industry, if we actually incorporate the human knowledge and human co creators who’ve been in those industries for a long time with the technology that’s actually going to take on a lot of the things that computers do much better off like being able to just keep working and take a lot of information, but then humans will be able to do The things that they do best is empathy, collaboration, creativity. So I think that’s the ideal, in my opinion, point of view. And so I like seeing all the worlds come together. If we all stay in silos, then I think the less appealing kind of situation happens where we just have a lot of automation that’s steam rolls, and then we have, we’ll definitely have to have UI in the entire society.

Quincy Brown 36:31
Yeah, I think you’re the last characteristic you reference, the creativity. I think technology enables the creativity to hit the ground sooner, and that will be beneficial in many avenues towards creating new industries and, quite frankly, returns, obviously, what we’re talking about, yeah,

Earnest Sweat 36:52
what’s some advice that you would give emerging managers who want to work with consultants like Fe G, yeah, it

Quincy Brown 37:01
kind of goes back to a point I mentioned before, about not only are you as an investor trying to grow your business, but who do you really want to partner with? And I think if we think about the history of some of the best or most well thought of investment professionals, it goes back to trust again. So I’m building an investment business. I want to find a partner who believes in what I’m doing, and so understanding the profile of who you want your investors to be. Now, again, I know it’s that sense of urgency of gathering assets and building your business, but the sooner you can identify the best type of profile that fits what you’re doing. There’s a better connection of resiliency as you go through perhaps bumps in the road, because you’re unified and your belief in Frank, quite frankly, one another, and so understanding the profile of who you’re going to pursue, whether that’s colleges universities, whether that’s community foundations, whether that’s private family offices, what the anchor of your investor profile is going to be, I think that is one thing I don’t think a lot of early investors really think about or pursue. Sure

Earnest Sweat 38:22
and any point of advice you love to give to other allocators, whether it be foundations, nonprofits, that are interested in building a more values aligned endowment or a book.

Quincy Brown 38:42
Well, the first thing I’d say is you can do both. I think oftentimes there’s a sensibility that they have to be distinct buckets. And I think given our track record and the relationships we’ve had for a long time, speaks to the fact that it can both be done and then understanding that you’re focused on a long range view, separating your human instincts and avoidance of pain, to recognize that you have to step out to make returns, and so realizing that you can do both that you need to have a long range vision and be committed to that. Obviously you want to revisit and make sure you’re headed in the right direction, but if those two things are succinct, I think you’ll be successful and committed to making it towards meeting your objectives for that organization.

Earnest Sweat 39:42
Well, Quincy, I really appreciate you sharing your story. Sharing the story at f e g, and if people want to get connected to you or your organization, how should they do it?

Quincy Brown 39:53
F, E g.com, is a way to check our website. You can reach out to me. Directly on LinkedIn. I’m out there. I’m not the most prolific poster, but I do check on it periodically, so that will be a way to connect. And I try to venture out to various conferences, but those are areas or ways you can pursue Fe G and as well as myself.

Earnest Sweat 40:19
Well, thanks, Quincy, thanks for being on swim with allocators.

Quincy Brown 40:22
I appreciate it. Thanks for having me later. Allocator