Wealth Podcast Post

Absolute Return with Kyrill Asatur

George Grombacher May 14, 2022

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Absolute Return with Kyrill Asatur

LifeBlood: We talked about absolute return investing, taking a hard look at the traditional 60/40 portfolio, how to invest like an endowment or hedge fund, adding alternative asset classes to your portfolio, and how to make it happen, with Kyrill Asatur, CoFounder and CEO of Centerfin.  

Listen to learn why now could be the time to revisit your overall investment strategy!

You can learn more about Kyrill at CenterFin.co, Facebook, Instagram and LinkedIn.

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Our Guests

George Grombacher


Kyrill Asatur

Episode Transcript

Unknown Speaker 0:00
Come on

george grombacher 0:11
one level, this is George G. And the time is right. welcome today’s guest strong, powerful chiral, esoteric chiral. Are you ready to do this?

Unknown Speaker 0:20
I’m ready. All right, let’s go. Carol is the co founder and CEO of center fin. They’re an organization providing institutional quality wealth management solutions to everyone. Carol excited to have you on, tell us a little about your personal life more about your work, and why you do what you do.

Kyrill Asatur 0:39
Sure, thank you for having me on towards. So on a personal level, I was actually born and raised in the former Soviet Union, what is now the Ukraine, which is why this conflict that’s happening there, right now, this war that’s going on is very, very personal to me, and I pray every day, for some sort of peaceful resolution they’re about when I was nine years old, my family moved and settled in Queens, New York, which is kind of the melting pot of the world. You know, my parents being Russian, Ukrainian immigrants, wanted their son to be a doctor eventually. And so I was originally a pre med student in college, discovered Wall Street, kind of on my own by accident, got obsessed with it, decided that’s what I wanted to do, in terms of my career. And so it was fortunate enough to get my foot in the door, Goldman Sachs right out of undergrad. right around that time, I got obsessed with the hedge fund industry, which at the time, was fairly nascent. This has been, you know, 20 years ago, so, and decided that, you know, all the smartest minds in the world seem to be starting are going to work at hedge funds, and so why not align myself with that part of the industry.

Unknown Speaker 1:50
So I joined when Goldman, the prime brokerage business, which was solely focused on working with the hedge fund clients, all the that that Goldman had. So I spent the bulk of my career there

Unknown Speaker 2:03
in that business, the last couple of years in a group called capital introductions, which is basically kind of standing in between hedge fund managers and do call investors.

Unknown Speaker 2:14
That was a very cool seat. And that led me to one of my clients, actually, ex Goldman Sachs investors, who started their own fund Copart, a couple of years prior to my joining them, ended up hiring me to focus on kind of marketing, investor relations, business development, all sorts of non investment related stuff. So to move their time of the financial crisis, and, and have been on the buy side effectively ever since.

Unknown Speaker 2:44
And about six years ago, now, after being recruited into a handful of roles, that didn’t work out for a host, a whole host of reasons, decided to basically hang my own shingle and became a solopreneur, you know, really kind of bet on myself had my kids around that time and wanted to do something a little bit more entrepreneurial. So, you know, kind of six years ago, you know, stop to stop getting a W two, I’m sure you’re familiar with, you know, taking, taking those kinds of risks, and, and eventually had this idea for what is now center fin and decided to build that. And so the idea really came to me organically I my whole career on Wall Street, I’ve had friends and family coming to me over the years saying, you know, what do I do with my retirement money, what I do with the savings I got, and I’ve historically really had a hard time pointing them in the right direction, because as you’re familiar with the landscape out there for individuals is not great. And, you know, 20 years, you know, after I started the business that really hasn’t improved that much. And so, I spent the bulk of my career interacting with very sophisticated institutions like family offices, endowments, foundations, pension funds. And so I learned a lot about how these types of very sophisticated institutions and large investors manage money for the long term, which is very, very different than what’s available to individuals. And so the idea for center for nerds really came to me as a way to replicate that approach, but make it accessible. And so, you know, prior to starting this call, you know, we talked a little bit about disability that’s kind of part and parcel as to why startups benefit and we wanted to create a higher quality solution than what’s available out there, but make it available to a much broader audience. And so I put a team together right before the COVID crisis started which my timing as I always say is impeccable. But, but we we have a team that is now nine, kind of half technology, half finance investment backgrounds, very senior, you know, great, great team. And you know, we spent most of COVID here if you know me in New York City, kind of huddled in our in our apartment with two little kids but building what is now set

Unknown Speaker 5:00
And we actually went live at the beginning of this year, and already up to a couple of million dollars of AUM, and growing really nicely and really excited for what’s to come.

Unknown Speaker 5:12
Nice. Well, I’d certainly appreciate, appreciate stepping out on your own. And you know, from the moment you decided that to now having a team and your your, the thing that you wanted to create is now out into the world. So certainly congratulations to that. And also for surviving COVID in an apartment in New York City with two little kids, because I’ve got two little kids. And I know how hard that is. So, way to go on that one. Kyra?

Unknown Speaker 5:39
Thanks. Thanks. And you too. It’s been a wild one last couple years for everybody. So talking about the problems with with with what’s currently available, or what was currently available before you launched, walk me through what what you saw as some of those issues?

Unknown Speaker 5:57
Yeah, it’s a great question. And it’s one I’m very passionate about and talk about it for a long time. But I think it just comes down to the fact that when, you know, when you look at options available to individuals, the vast majority of them are rooted in an approach that is referred to broadly speaking as 6040. Right. So some combination of,

Unknown Speaker 6:19
of assets that are largely stocks and bonds, a mix of stocks and bonds, and then it’s implemented in various ways, you know, certain certain folks will use, you know, ETFs, and lower the fees, certain folks will use mutual funds, you know, to try to have active management. But at the end of the day, it’s really the same asset mix. And the difference between that and what, you know, some of these larger institutions that I’ve been facing off with for for my whole career is that they don’t only get access to those types of assets to get access to other both alternative investment strategies and alternative assets.

Unknown Speaker 6:55
And so that’s what we wanted to do with center fingers, we wanted to replicate that approach as closely as possible by providing people not just your traditional stock and bond mix, but an actively managed mix of both traditional assets, like stocks and bonds, but also alternative assets and alternative investment strategies. And so

Unknown Speaker 7:17
and so we, you know, for instance, and this is, you know, this kind of varies depending on the market environment we’re in. So, for instance, to kind of give you an example of how things have worked in real time, at the end of last year, we already running portfolios for a while, and we decided that, it became pretty evident that we were going into a different regime change as it pertains to interest rates, the Fed had signaled it, you know, time and time again, the market was still not really appreciating it. But our view on the fixed income portion of client portfolios seems pretty significant mean that they became all of a sudden very risky, right. And so the part of client portfolios historically that people look at the quote unquote, safe part of the portfolio is actually in our mind became highly risky, because of the interest rate risk. And so what we did is we pared back, you know, almost all traditional kind of fixed income exposure and client portfolios towards the end of last year, leaving only a very small amount of exposure in kind of intermediate term treasuries and tips,

Unknown Speaker 8:21
which, you know, are really a risk off asset and inflation protected asset. And what we did is we reallocated a lot of that exposure into assets that we thought could benefit from a an inflationary environment with, you know, at the time, if you recall, even the Federal Reserve was still discussing as being transitory, but we viewed the probability of inflation as higher than that. And so we wanted to make sure we reflected that in client portfolios. And so that meant an allocation to gold, silver, copper and crypto equity as an asset.

Unknown Speaker 8:54
And, and so, you know, that’s, that’s actually played out really well to kind of start 2022 If you’re familiar with,

Unknown Speaker 9:01
I’m sure, you know, it’s probably the worst starts to kind of a traditional 6040 stock bond portfolio and, you know, maybe ever, you know, 40 years if not ever, and, and having assets like gold, silver, copper, crypto has not worked in this in this kind of inflationary regime yet, but it’s actually it’s actually worked out worked out well.

Unknown Speaker 9:24
And so that’s kind of the that’s kind of one of the difference the the other the other important differences, we actually believe in active management, where it makes sense and so the reason why active management has not worked for a whole host of

Unknown Speaker 9:39
for a whole host of folks out there historically we believe is because the

Unknown Speaker 9:45
the industry is largely tied to kind of some sort of benchmark. And so you know, if you look at mutual fund, mutual fund, we’ll have a benchmark the you know, the honestly cannot raise money until they have

Unknown Speaker 10:00
Three year track record, if they’re not outperforming their benchmark, they’re gonna have a hard time raising money. So forces them to kind of have that benchmark this has been talked about for decades and decades still goes on today. Our view is that active management actually makes sense if you take more of an absolute return approach, and you’re a part of markets that are less, right. So, you know, a global stock mix is probably really hard for an active manager, but a small cap manager that’s talented and knows what they’re doing can can probably do a really good job outperforming whatever benchmark there is. Same goes for other parts of markets, like, you know, for instance, I spent a long time in what a distressed debt hedge fund. So you know, some parts of the credit markets are really ineffective. And that’s where active management can make sense. And so so we wholly believe that and that’s where we want to use active management and client portfolios.

Unknown Speaker 10:57
Well, that, that makes a lot of sense. To me, that doesn’t make sense, to your point, when we have a large cap mutual fund that’s actively managed, like, okay, like, really, this needs, I need to pay a lot extra to have you pick between Coca Cola and, you know, Apple, I don’t think that that makes any sense. But in the different spaces that you’re talking about, I think that there is a massive advantage and opportunity to be able to find that concept of absolute return. Could you talk a little bit more about what what what that is?

Unknown Speaker 11:31
Yeah, I think it has to do with the mindset of the manager themselves. And this is, this is kind of where our history, you know, on the on the kind of investment finance side of the team, you know, we all come from the kind of hedge fund alternative investment world. So

Unknown Speaker 11:45
it’s decades of experience and relationships. And, and I think that, you know, in partnering with managers that are used to managing more,

Unknown Speaker 11:56
ultimately, what are we historically referred to as alternative investment strategies, or absolute return oriented strategies is, is really where we think, you know, you can find a high quality returns. And so what that really means is just, you know, going back to the well of kind of the hedge fund space that we’ve been in all of our careers, and finding, you know, not finding but you know, knowing having relationships with managers, that are super good, and kind of what they do. And so, like I mentioned, you know, the two areas that are immediately of focus and, and make sense to us, or small caps, and, you know, certain parts of the credit world, like the highly leveraged company universe, you know, these are areas where we know, we’ve seen time and time again, certain managers that we know, can generate excess returns consistently.

Unknown Speaker 12:46
So, so that’s, that’s kind of, broadly speaking, the other areas that we, that we really focus on are, you know, sector specialists Within equities.

Unknown Speaker 12:56
And really on, you know, most of what we know is Berkeley’s long story, but we would, we would gravitate towards a long bio strategy. And so that’s another area of focus. And then you know, longer term, you know, as we as we scale, there are really other, you know, really cool things that we can do, including, you know, potentially things like private equity, even for, for, you know, individuals, which allows you to have that that’s not really accessible these days.

Unknown Speaker 13:24
No doubt. Nice. So,

Unknown Speaker 13:27
can you compare contrast center fin to

Unknown Speaker 13:33
what an ordinary investors idea of a robo advisor is?

Unknown Speaker 13:37
Yeah, so Saturn is definitively not a robo advisor. So robo advisor is generally a portfolio of low cost ETFs, again, kind of, you know, very much built in, in that, you know, modern portfolio theory 6040 kind of equity bond mix. And it’s, you know, it’s

Unknown Speaker 13:59
the robo part of it is, is, as I think referring to largely the fact that the portfolio is quote, unquote, managed, which means it’s just rebalance at some predetermined period of either time, or, or, you know, percentage of weighting of the portfolio. We actually think that’s a disastrous approach, right now, because the world, you know, we’ve entered into a different kind of regime since the financial crisis very recently. And, you know, just having a preset portfolio could could have very, very bad results. So, you know, we, we think of it closer to

Unknown Speaker 14:33
the 1970s, where, if you had just set up kind of 6040 stock bond portfolio, you know, you lost, you know, over the decade you lost, you know, between 30 and 50% of your money it was it was really devastating for people. And so we don’t think you can have a kind of set it and forget it approach. We think things need to be actively managed based on what’s going on. And so that’s that’s one big difference.

Unknown Speaker 14:58
And the other differences is obviously

Unknown Speaker 15:00
He’s kind of active in alternative strategies and assets that, you know, none of these, you know, robo advisor platforms

Unknown Speaker 15:08
have at all.

Unknown Speaker 15:11
Yeah, that certainly does make sense. So from a from an investor experience standpoint, what is that process? Like? Yeah, so that’s, that’s a great question. So what what, when, when, you know, I set out to, to build center fan, I knew that it needed to have a modern

Unknown Speaker 15:31
technological approach. So that user experience needed to be today, you know, let’s face it, everybody uses their phones. And so we needed to build an app. And so that’s what we set out to build as kind of the web client and cracks center fin. And so, you know, we’ve created a process where, you know, right now we’re open for retirement accounts. So existing retirement accounts, and, you know, 401k, rollovers, you can open your account and get their transfer started in under three minutes in our app. And then you can, you know, basically see how your accounts be managed inside of the app, and we communicate with you via the app as well. And so one of the interesting things we learned is that about half of our client base, as we were, we started talking to people about center training before became live, really was fine kind of on their own, if they had, you know, if they understood what we were doing the refined downloading the app, you know, getting the transferred going in, and kind of seeing how their money is managed, and checking in for updates every once in a while, and about half of them actually do want to have some sort of human touch point. And so we said to ourselves, that’s fine. You know, if that’s what our clients want, we’ll make that available. And so there’s an ability inside the app to actually, you know, set some time up with our investment team. And it’s, it’s a little bit of a borrowing from kind of the hedge fund industry where, you know, there’s an investor relations function. And so we kind of think about it more like that. And it’s kind of an infill advisory function for individuals where, you know, if folks want to ask about why we’re positioned a certain way, or, you know, if they’re concerned about something that’s, you know, they read in the in the press, that might affect their portfolio, they can just schedule a time with us in the app, and they’ll actually, you know, have access to one of our investment team.

Unknown Speaker 17:14
Nice. And what are the what are the costs associated with it?

Unknown Speaker 17:23
So, good question. So

Unknown Speaker 17:26
we came up with a all in cost. So we have a rap fee program.

Unknown Speaker 17:32
Which means that, you know, all the kind of creating and administrative those photos be cost or are wrapped up in that, in that fee. That’s

Unknown Speaker 17:42
what happened 1% A year. So it’s 50 basis points annually.

Unknown Speaker 17:48
Nice. Got it. Beautiful.

Unknown Speaker 17:51
Well, Carol, people are ready for that difference making? What do you have for them?

Unknown Speaker 17:57
I guess I you know, kind of beating a dead horse. But I think, you know, people should really take a look at where you know, how they’re invested. And, you know, if you find yourself invested in that kind of, you know, 6040 approach, really, really take a look and think about whether or not that makes sense in this environment. Because we really do want people to understand that there’s,

Unknown Speaker 18:19
you know, we’re in a potentially very different time than we’ve been in a long time. And, and having a different approach having alternative assets and strategies. would, you know, I think be very helpful to most people.

Unknown Speaker 18:33
Well, I think that that is great stuff that definitely gets come up.

Unknown Speaker 18:36
Yeah, it is a it is, we have been conditioned, no doubt, to consume financial stuff, the way that we’ve always sort of consumed it. And it’s been packaged in that 6040, sort of plain vanilla or plain chocolate, however you want to think about it chocolate, vanilla wrapper, or container. And so getting access to alternative investments, and I feel like hopefully, hopefully, your timing is is is great with everything that’s going on in the world, because people are going to probably look around and say, Okay, maybe there’s a better way to do this. So speaking of that, Carol, how can people how can people learn more about center fin and how can they engage? Yeah, so you know, obviously, you can check out our website and sign up there at center fin. Co. and, and then me personally on Twitter, I’m trying to get more active on Twitter, my, my, my address is Wall Street, Hobbs.

Unknown Speaker 19:32
Wa, ll s t h o, BB s, and so always happy to engage with people there as well. Excellent. Well, if you enjoyed this as much as I did show chiral your appreciation and share today’s show the friend who also appreciates good ideas.

Unknown Speaker 19:46
Check out center Finn dot CEO C and trfin.co.

Unknown Speaker 19:52
And is the app just under center fin chiral.

Unknown Speaker 19:57
Correct. Okay, excellent and find them

Unknown Speaker 20:00
Wherever you download your apps and then follow Cairo on twitter as well under Wall Street, Hobbs, Wa l LSTH OBS we’ll link all those in the notes of the show. Thanks again, Carol. George. Thanks so much for having me. And until next time, keep fighting the good fight. We’re all in this together.

Transcribed by https://otter.ai

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