349. Deconstructing Asset Management: The Shifts, Opportunities, and Concerns feat. Brett Christophers

Oct 27, 2023

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Ever wondered about the growing presence of asset managers in all aspects of our lives?

Brett Christophers is a Professor in the Department of Human Geography at Uppsala University in Sweden and the author of several books. His latest work is titled Our Lives in Their Portfolios: Why Asset Managers Own the World, and next year, he has a new book coming out called The Price is Wrong: Why Capitalism Won't Save the Planet.

Brett and Greg discuss the migration from public equity to private, the rise of large landlords and infrastructure providers, and the outsourcing of public services to the private sector. The conversation takes a deep dive into the realm of asset management in the housing sector. Brett offers an enlightening perspective on what it means for tenants when asset managers are landlords. They unpack the mixed bag of potential benefits and disadvantages that could arise in this scenario. Brett and Greg also discuss the rising trend of ESG (Environmental, Social, and Governance) investing, and how asset managers are leveraging this wave.

*unSILOed Podcast is produced by University FM.*

Episode Quotes:

Are asset managers public service or a powerful rhetoric?

40:43: One of the main lines of defense that these investment managers, asset managers, rely upon when they come under attack from the likes of me, but not only the likes of me, politicians from the likes of Elizabeth Warren and so on in the U.S., is they'll say, "Look, you don't want to be attacking us because we're providing a public service in the way you just outlined. If our funds perform well, then that's all to the well and good because the money we're investing through those funds is the money of the firefighters, the teachers, and the nurses." And that's a very powerful piece of rhetoric. It's that rhetoric which sustains the business model in large part because people buy that rhetoric, and therefore, the business continues on its merry way.

The power of asset managers in infrastructure investments

33:50: If governments have increasingly persuaded themselves that the private sector is the answer in terms of infrastructure investment, then almost by definition they've persuaded themselves that asset managers are the answer. Because asset managers have the command of the greatest surplus capital today, if you're looking into the private sector to invest, then, essentially, you're looking to asset managers because they're the ones that have all the dry powder.

Are asset management companies publicly traded but still opaque?

23:40: Public ownership entails a certain degree of scrutiny that is still lacking in the cases of these asset management companies, even if those asset management firms are themselves publicly traded. Many of them now are the likes of Blackstone, which would be a good example of that. So yes, the firms themselves are publicly traded, but much of what occurs through the funds that they established is obviously still very, very opaque in a way that is not necessarily true of publicly traded companies.

Private equity and real estate investments use the same fee mechanisms and fund structures

03:41: Whether you're talking about private equity or real estate investment, what you find is that they're often using exactly the same kind of fee mechanisms, fund structures, and so on. So that's why I use that terminology, because I think that the most important thing to really draw attention to is this fact that, at the end of the day, most of the money that they're investing is not their own. And that's a key feature of this. But even though, of course, they're using different investment strategies, different fund structures, and so on.

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