Speaker 1:
From the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, welcome Inside the ICE House. Our podcast from Intercontinental Exchange is your go-to for the latest on markets, leadership, vision, and business. For over 230 years the NYSE has been the beating heart of global growth. Each week we bring you inspiring stories of innovators, job creators, and the movers and shakers of capitalism, here at the NYSE and ICE's exchanges around the world. Now let's go Inside the ICE House. Here's your host, Lance Glinn.
Lance Glinn:
Translating a sports mindset to asset management draws on the parallels between the strategic thinking, discipline, and resilience that are essential in both fields. In sports success requires thorough preparation, a clear understanding of the competition, and the ability to execute a game plan under pressure. Similarly, asset managers must perform rigorous analysis, analyze market dynamics, and make informed decisions in high-pressure environments. Nowhere were the qualities of strategic thinking, discipline, and resilience more crucial than at the onset of the COVID-19 pandemic as markets plummeted and global uncertainty surged. Wealth managers were tasked with rapidly determining how to best position client portfolios for success amid a once-in-a-generation crisis. During the spring of 2020 V-Square Quantitative Management, a global asset manager with thematic and differentiated capabilities, was not only focused on client portfolios, but also on establishing its own foundation for success. Co-founded by today's guest, Mamadou-Abou Sarr in April 2020, V-Square launched during one of the most uncertain and tumultuous periods in American history.
Now, four years later, Mamadou joins us Inside the ICE House as V-Square celebrates reaching a significant milestone, one billion in assets under management. Under Mamadou's leadership V-Square not only endured through the pandemic, but emerged stronger, thriving in a challenging market. In a moment Mamadou and I will discuss the challenges of establishing an asset management firm in April 2020 and the successes that followed. We will explore how the asset management industry has changed, and detail how V-Square is being set up for short-term and long-term success. Our conversation with Mamadou-Abou Sarr, co-founder and president of V-Square Quantitative Management is coming up right after this.
Audio:
To prove that there is such a thing as free money, we gave people a little sample of Ibotta.
Hi, could I interest you in a sample from Ibotta?
What's going on?
It's just money.
Ibotta is an app that gives you cash back every time you shop.
What is it?
It's money.
So I can just take this?
This is real?
This is insane.
What's the catch?
There's no catch. It's just cash.
Get cash back every time you shop with Ibotta.
Lance Glinn:
Welcome back. Remember to subscribe wherever you listen and rate and review us on Apple Podcasts so that others know where to find us. Our guest today, Mamadou-Abou Sarr is the co-founder and president of V-Square Quantitative Management, an asset management firm specializing in financial innovation and thematic portfolios, and a subsidiary of Valor Equity Partners. With over 20 years of experience in asset management, Mamadou co-founded V-Square in 2020 after an accomplished career while working for global financial services companies across the U.S., Europe, Middle East, and Africa. Mamadou, thanks so much for joining us Inside the ICE House. Welcome back to the New York Stock Exchange.
Mamadou Abou-Sarr:
My pleasure.
Lance Glinn:
First off, I have to say congratulations on V-Square's recent milestone of reaching one billion in assets under management. It's obviously a achievement that many firms strive for, but that not all obviously are able to reach. As V-Square also celebrated its fourth anniversary earlier this spring, just dive a little bit deeper on the firm. What is V-Square and the mission you aim to achieve?
Mamadou Abou-Sarr:
Sure. Well, thank you. And I think one billion is both symbolic but also important in the journey of an asset management firm. And so, the vision we had at V-Square at inception was to build a firm that is differentiated. You may wonder why building a firm when you have 11,000 asset manager firm in the U.S. doing asset management across the board? Different style from quantum to fundamental to ETF providers. And when you pose that question, you're kind of force you to think about how can you be unique and differentiated? And so the vision we had for V-Square, the co-founder and I, was to build a firm that is global, because we happen to be global, that is differentiated, that can bring added value to the marketplace. But also bring a different perspective and the different length and thematic investing. That's kind of how we formulating the vision to build a firm that is additional to the marketplace and can win and grow along the way.
Lance Glinn:
And you said there's so many asset management firms, excuse me, out there. Why build an asset management firm? You built it in 2020, in April of 2020 and the months leading up to it, which for all those who remember, was right as the COVID-19 pandemic was really taking hold here in the United States. What was that journey like? Because it definitely couldn't have been easy. There were obviously so many obstacles, unforeseen obstacles, I'm sure when the journey and when the vision first started. What was that journey like of having to deal with this once-in-a-generation pandemic while also trying to now build this asset management firm?
Mamadou Abou-Sarr:
Well, thanks for asking, and never judge my market timing, I think. If you judge buy that it's pretty poor market timing. But it's a gift and a curse. I'll start with the gift in itself. When you build a firm in time of crisis it forces you to think about who you would like to become given a new set of obstacles. I will start by thinking that regardless of the environment, building a startup from scratch and building a firm from scratch is hard. And if you take that as a hard exercise with a high probability of failure, your goal as an entrepreneur is to de-risk a big part of it. And that's what I call the controllables. Now, the curve ball that comes in is the uncontrollable piece, and the pandemic was one that never forecasted in my business plan that I presented to my business partners.
Now, when it happened, I remember vividly sitting in my home and thinking, "Oh boy, it will be a rough ride." But then the blessing is the following. It forces you to think more about your own identity as a firm. How you would like to spend your capital, internal resources and efforts? And ultimately what matters to you as a firm. And I must say that when we launch V-Square, before even building the full platform we put a big emphasis on our values as a firm. And our values were summarized in three words. Passion, humility, and dedication. Now, the funny part is as you assemble it does the term PhD. And I'll tell the story behind it. My data has two PhDs, a professor as sciences, professor of molecular genetics, and I have no PhD to claim. I'm an outcast in a family, a complete failure. So, I use the acronym as a joke to tell him, "Hey, I didn't get my PhD-
Lance Glinn:
[inaudible 00:07:22] your PhD.
Mamadou Abou-Sarr:
... but here's my PhD. But then the passion for me is what drives and fuels us every day to do what we do. It's hard enough, but if you don't bring the passion into it's impossible to thrive. That's the number one. Now, the markets will keep you humble, performance will keep you humble. And then once generation like crisis will also keep you humble. And so, once you understand that humility is a cornerstone of a value system that I do adhere to, and all the partners at V-Square, every day we show up ego is at the door and we understand that for us to win, someone has to lose. For us to win, someone has to trust us. So, never get it twisted. Sometimes people equate the success of their own merit. Of course, there is our own merit and hard work, but there is also a lot of factors, a lot of trust, a lot of goodwill that help you do what you do.
The last part is dedication. You need to be relentless. And the COVID tested us as far as how can we raise assets? No more face-to-face meetings. No more RFPs, no more new friends for consultants. How do you build trust virtually on a Zoom call? How can you raise assets when there is less opportunities where your asset class is out of favor? So, all these factors forces us to adapt to a new norm. I'll call it the gift, because it allow you to become more versatile. Now, the curse [inaudible 00:08:43] hard to raise. It's as simple as that. And especially when you start with a lower denominator, I.e. zero assets.
And I had a couple of friends calling me and say, "This is a true definition of insanity. How would you bring that up from zero to where we are today, a billion?" And for me the key term is basically being unreasonable. And being unreasonable, I will tell you what I mean by that. There's a great quote by George Shaw and it says that, "The reasonable person adapt himself to the world, the unreasonable persists in adapting the world to himself. Therefore, any changes rely on the unreasonable." And when you build a firm, you have to be unreasonable, you have to be impatient, you have to believe into what people don't see yet. You have to be willing to fail, and you have to be willing to get more nos and yeses along the way. So, that notion for me of being impatient, having that drive, feeling that we can make it, is what help us to get where we are today.
Lance Glinn:
With that being said, I may know the answer to this question before even asking it, but were there any trepidations or was there any reluctance as you get ready to launch V-Square in April of 2020 with the pandemic really grabbing hold in mid to late March of 2020, was there any thought in your mind of, "Maybe I need to take a step back. Maybe we need to delay starting until we really figure out what this whole COVID-19 thing is all about."
Mamadou Abou-Sarr:
And the answer is a direct no. Matter of fact, we showed up every day, pandemic or not, at the desk. With masks, with all the quarantine needed we're still at the desk, so the answer is no. But then we were also blessed to be a partner with Valor Equity Partners, Antonio Gracias and Jon Shulkin and the team. They've seen crisis along the way. And when I asked them for guidance and advice, they gave me the best advice and say, "Stay lean and do what you do best." Right? And so yeah, as a capital N in a big no, we were determined to be successful. But then we were also fully aware that it may take longer than expected. So, you're not shifting your vision, vision is the anchor. But you're adapting what you're doing to the environment that you're dealing with. And being that versatile and being a boutique allows you to do that.
This is a very important part, right? Part of the characteristic of being a boutique, it's your ability to pivot. And the pivoting can happen because of the market condition, the product feeds, the client feedback, macroeconomic factors, market factors, name it, idiosyncratic factors, all of them matters a lot. But if you are able to pivot, you tend to be most successful along the way.
Lance Glinn:
So, one thing I have to ask right off the jump, what is the name V-Square? What inspired it? Why V-Square?
Mamadou Abou-Sarr:
Sure. So we are Quant, the co-founder and I. Abib is an actuary with physics, statistic and financial mathematics degrees and I'm an econ and finance degrees. And we met in the mid-two thousand at HSBC Quant. And we kept in touch along the way. And we always agreed that one day let's build something together. That's kind of the back end of V-Square co-founders. Now, the V of V-Square, we looked at each V stand for value, valor, velocity, and we look at it as basically a square, because each V, as you put them together, give a shape of a square. That's why we call it V-Square and not V-Squared, right? Now, in the name for us, what is in the name is also our notion that your value system allow you to be persistent. Your velocity allow you to deal with ups and down. And then the values is what we believe we are helping investors adapting in their portfolios to the lens of thematic investing. So, that's how we labeled the V-Square story.
Lance Glinn:
I mentioned previously that you just reached one billion in assets under management. Did you take a moment, could you take a moment to celebrate the accomplishment, look back on the journey that's been and realize the ups and downs, the trials, tribulations, struggles, successes? Or was your mindset, "We hit the one billion, now let's get two, now let's get three, now let's get four."
Mamadou Abou-Sarr:
I'll give you an ex-ante and an ex-post answer. Ex-ante, yes, in my mind if we reach a billion, I would have thrown a big party and it would've been epic. Ex-post I was on a Zoom call with the team between meetings in a different city and we reached a milestone. We high-fived virtually. I got home at 11:00, sit down in my garden, looked at the stars and felt empty. Because we gave everything, the tank was just empty. So, the thing that came into my mind was that, "Okay, let's just pause." I still have to pause and recognize the milestone. But I was more geared towards the one to five, the five to 10 and the next phases. It is healthy though to checked in with yourself and appreciate such journey. Celebrate in any shape and form, but as you run, somehow you're always banking in what you hoped and move on for what is next. So, it's kind of a very tumultuous journey as you go through it. Our eyes are all onto scaling the platform and raising additional assets.
Lance Glinn:
I want to now pivot a little bit to your background, your journey. You were born and raised in Paris, French and British roots, Senegalese descent. You initially had a dream of becoming the next Carl Lewis, the admiration of becoming the next Carl Lewis. And then I'm assuming that the asset management firm was maybe in the back of your mind, but you ran, or excuse me, you participated in the triple jump. What drew you to Carl Lewis and wanted you to follow in the footsteps of this nine-time Olympic gold medalist?
Mamadou Abou-Sarr:
Well, yes, I was an athlete and I had hair at the time, believe it or not, I had the same haircut then Carl Lewis, right? I started track young, I was pretty good at it, right up to the national level, winning a lot of medals, and I kept all the medals at home. And yes, I wanted to become an athlete. Now, I'm from a family of scientists, politicians, CEOs of listed companies, and basically a lot of high achievers in the family. And so I get to a point where my dad sat me down and say to me, "Look, I understand that you have a gift and you run fast and you can triple jump, but at the end of the day I want you to be focusing on science. Because it has a higher probability of holding you up and further down the field, right?"
But a true passion for track and field, my event was triple jump, and I know it's not a very popular event, but I like to joke that triple jump is life. And I'll tell you why I believe triple jump is life. Triple jump is about three phases. It's about speed. Without speed, impossible to leap over. It's about tempo. Without tempo, impossible to get the speed translated into leaping further out. And it's about balance. And the balance is that you have to leap three times, and if you're out of balance, you aren't likely to achieve that. And I find a lot of analogies and similarity to any life path. Speed is critical, especially when you do business or any endeavors, speed matters. The other part is the tempo. And tempo for me, I'm asked often, "How is the life balance of an entrepreneur?" And I often say that, "There is no life balance as an entrepreneur. I define that as more like running an orchestra. It's about harmony."
There is days where V-Square drum are so loud that the drum is the biggest part of my life. There is days where my kids are taking over and there's mothers that are at the table where the symphony has to be rebalanced to an harmony of a piano or solo. And there is days where I have to make the whole orchestra work the same day, the same moment. So, the tempo part of that is something I've learned by doing triple jump. Now, the balance, for me the balance is that you translate your speed and your tempo into an outcome. I'm very much goal driven. So, yes, I started as a tracker, but then I've used the same playbook to translate my passion for track into my passion for investing, into my goal setting, and then the past that led me to build V-Square. So, very much of a translation factor, as opposed to, "You're a track guy and now you're an investor."
Lance Glinn:
But I have to ask as well. So growing up in Paris, as I said before, French and British roots, Senegalese descent, was what I call soccer, what you call football, a big part of your life. We spoke before, you said you were most recently in Russia when France won the World Cup a few years back. I'm assuming while you were a triple jumper, soccer, football was a big part of your [inaudible 00:17:37]-
Mamadou Abou-Sarr:
I'm glad you ask, because I have a funny story. In many ways, so I was born in a town called Orsay Ville, but I grew up in a town called Leslies and don't ask a lot of folks in the states to point out in a map, and luckily they will. It's an outskirts suburb at the south of Paris, about 20 miles of Paris. Now, the city is known because we had three folks from our neighborhood going and winning the World Cup. One was my neighbor, Thierry Henry. I grew up in a small neighborhood called Les Amont, and I could claim that yes, Thierry was actually my neighbor. We kept in touch still, he became too popular actually. But I'm sure, Thierry, if you listen to that podcast, please recognize me. My reputation is just on that.
Then Prati Sivaraj was in the class of my younger brother as well. And then you had Yaya Sanogo, and then Anthony Martial. So that small town is just geared toward my football and a lot of talent. So yes, playing football in the courtyard was just a big part. But somehow, even though I could play and kick the ball, I was fast and then the track just drew me. But it was amazing to see how many of my peers ended up becoming a very talented football player playing in the UK, playing around the world and ended up some of them winning the World Cup, so pretty awesome.
Lance Glinn:
So, neighbors of Thierry Henry, when you're young, do you understand the, I guess, significance of being the neighbor of Thierry Henry?
Mamadou Abou-Sarr:
In that kind of neighborhood it's an equalizer. The ball is an equalizer, being a good kid is an equalizer, so, was he talented? Absolutely. And I remember him coming back from Monaco one summer and I was playing a lot of basketball in the backyard and he came in and he saw me playing basketball and I could hoop jump with the track and I could dunk. And he was like, "Of course, I can dunk as well." And boy, he could leap.
Lance Glinn:
Yeah, I'm sure.
Mamadou Abou-Sarr:
And it was very impressive to see. And so we were laughing and it was probably around 18 at the time. So certainly you don't measure it, you're just happy and proud that someone that you know made it in a field. Now for me, with the family that I have, it was all about, "Okay, what about the math? What about the physics? You have to be the best." So, I geared towards school focused solely on that, but then I kept in touch with a lot of the friends that I have since my childhood.
Lance Glinn:
Beyond your role at V-Square, your triple jumping background, your being neighbors with Thierry Henry, you serve currently on the boards of the Andy Warhol Foundation for the visual arts and the Art Institute of Chicago. What sparked your passion for the arts and how are you and these boards working to foster greater interest, and share this passion you have with others?
Mamadou Abou-Sarr:
So arts, I'm being spoiled. I've been born in France, it's part of the curriculum, and there was a big emphasis on arts and culture. So, going to the museums and in a city like Paris, there's so many amazing institution that you got drawn to. I started collecting without using the term collecting, I was just drawn by images. And so photography was my initial medium. And so, I'll go to the markets and look at these photographs and starting with a very small budget, very, very small budget, pre-Euro, I'm talking French Frank, collecting and acquiring these images. And it grew into a broader collection. And what I had as an interest for photography as a medium is that the interpretation that you have is in the eyes of the beholder, based on your own lens, your own value system and so on. So that's what draw me to that piece of it.
And then with my wife, we ended up building a collection of arts and we posed and reflected at some point around what could be our legacy. And we realized that we're better off building a prize and awarding a prize to artists that we want to support as a mean, and also serving public service as a way to express our values. So yes, I'd like to volunteer to organizations. Art is one of the passion that I have, but also education. Financial literacy is another one. And so, serving in the boards is very humbling, because you are amongst peers that are achievers and also eager to give the time and money to support organizations. But also most first and foremost you're impacting the life of artists and individuals. And for me this is the main thing. Success not shared has no value. And so by doing so we hope to give time and resources and support other people.
Lance Glinn:
And your career has taken you across Europe, the Middle East. Now you're based in Chicago with V-Square. How have these diverse cultural experiences, the different interactions with different people shaped your approach to life, to asset management and ultimately your leadership at V-Square?
Mamadou Abou-Sarr:
We are a collection of images and experiences as human being. And I am lucky that I had to evolve in a global nature and travel around the world. And you actually borrow a set of cultures into every places that you live in. And so yes, I'm French-born and raised and happy Parisian, a bit too proud, but that's French traits. But I'm Senegalese as well and Beninese. And so my roots go deep into sub-Saharan Africa. And then I lived in the UK and I'm British as well. So, I lived there for 10 years. And then of course, I'm proud Brit.
But all these elements define my value system as an individual, but also my management style. I like to define my management style as being a French pragmatic investor, an American enthusiastic investor. And the two in the same sentence can bring a bit of dichotomy. So the French, there is no term for outstanding, amazing. We don't use these terms in our daily life. But when I move in the U.S. I realized that passion for innovation, the drive is translated, people are excited, people want to change things. And so, I'm a bit of a patchwork of being pragmatic, but also overenthusiastic. So, it may for my people, the people who are surrounding me may feel like I'm a bit of a hot boil water that comes in, because I have that high tempo speed, but then I'm very analytical and pragmatic. And so, all these experiences in my culture patchwork lead to that mosaic of values and things that I enjoy.
Lance Glinn:
And you mentioned the word innovation. Now, innovation often arises when there's a problem that needs to be addressed and whether something's been created for it in the past or nothing's been created for it at all, there needs to be something devised to solve and create a solution. How do you approach innovation when it comes to asset management and at V-Square to stay ahead and obviously meet all of these changing needs?
Mamadou Abou-Sarr:
And so innovation, I'm glad you asked. Innovation is my passion. I ideate at a fire space. And if you look at, if I were to show you in my folder, I have a folder called innovation. There's probably, I don't know, 25 products. Out of the 25 maybe two will see the light one day.
Lance Glinn:
Did the passion for innovation sprout from when you were young?
Mamadou Abou-Sarr:
Oh, since I was young. I think from my first interview, I have to go back to that. When I started I was 21, and the only thing I had in my CV was a summer job at Foot Locker-
Lance Glinn:
Okay.
Mamadou Abou-Sarr:
... selling Michael Jordan shoes. That was a pretty awesome [inaudible 00:25:14].
Lance Glinn:
Foot Locker was here recently at the New York Stock Exchange to actually ring the bell.
Mamadou Abou-Sarr:
Okay, so Foot Locker was my only experience. And I applied for a job as a trader for Citi. So, think about no experiences, Foot Locker sales guy applying for a internship at Citi on the trading desks. And so, my 21-year-old self thought about, "How can I impress these MDs?" I spent weeks building a deck, 22 slides about how I will innovate the FX market in sub-Saharan Africa. And so I showed up in London for the interview, took my Eurostar, started presenting and one of the MD pulls and say, "Do you have more time?" I say, "I do have more time." Wait in the room, wait an hour, they came back with three people. "Again, Mamadou, restart your story." Started my story again. "Okay, go for lunch. Come back at three p.m." Come back at three p.m. "Okay, tell us your vision for FX in sub-Saharan Africa and how can you use derivatives to arbitrage the interest rate and all that?"
Came with a story and what I believe was a way to arbitrage your currency. And at four p.m. they asked me, "Do you have a passport?" I said, "Yes, I happen to have a passport. That's why I'm here [inaudible 00:26:27] process." "Are you married?" "No, but I have a girlfriend, now my wife, that is in London." Okay, it was a Thursday. I kid you not, the Thursday at four p.m. "Can you be in Dakar, Senegal on Monday?"
Lance Glinn:
Wow.
Mamadou Abou-Sarr:
And without blinking I said yes. And that's the way I started as a currency trader. So, innovation is something that is my bug. It's something that I do. And to the detriment that my team members and partners feel like, "Hey, slow down, one product at a time." I ended up becoming the global head of innovation at Northern Trust before co-founding V-Square.
And so along the way, what I'm always passionate about is, solving the problem is one thing, but then a drastic change forces you to think about a shift or paradigm, a problem that is not yet there. This is the two cents of innovation, otherwise you're doing incremental changes. S&P five, you can do index plus. You could say, "Okay, I will just change the weighting." For me this is not true innovation. True innovation sit in a place where you are thinking about things that are not yet there. So, you have to translate yourself into your future, what you see ahead. And that's what drives me into building new products. I've built about 40-plus financial products from scratch. And most of them were innovative, not there before. How many of them are successful? Well, if my betting average is a good 10% of that, call it a fantastic way. And that's pretty much how you have to ideate and innovate. And in the V-Square I call that the need to innovate at the fist space, fail fast, but build fast. And so that's a passion of mine.
Lance Glinn:
And you have technologies like AI, blockchain, big data analytics. These are some of the newer advance. Now, obviously AI has been around for a while, but GenAI, the big GenAI boom is pretty recent. These are some of the technologies driving innovation across various sectors, not just asset management. How are these advancements fostering innovation in asset management and at V-Square?
Mamadou Abou-Sarr:
Let me give you first a picture of asset management. Because I think often it's seen as a opaque industry, and let me give you the sense. It's 120 trillion industry, okay, 120 trillion. And I'll just zoom into the U.S. that we're sitting here in New York. You have around 50 trillion in the U.S., assets managed professionally. Out of which you have a split between hedge fund around 4,000 players and asset management long only around 11,000 players. That's your anchor view. Then you have your traditional asset classes, your core equity, your core fixed income, your listed real assets, your liquid alternatives that gives you an allocation that investors are buying into. Now, it's a highly concentrated industry as the number is big, but then the larger players, the BlackRock, the State Streets, the Vanguard of the world are taking the lion's share of the assets, okay?
Now, it has been proven that boutique managers do have an advantage point when it comes to performance, when it comes to innovation and versatility. So, I strongly subscribe to the belief that boutique can add way more value than large player. I've worked at large firms, I made my most expensive mistakes there. And I decided to branch out to be able to innovate at a faster click. Now, I believe also that there is a lack of innovation and there is a big inertia in the industry. We still think that the best way to get exposure is market cap weighted. We tried factor base, it kind of diluted a bit. But I feel like we haven't had any drastic product innovation in a long time. And I'm qualifying that by saying that, of course, we've seen new products, but I remember when I started in finance it was all about 130-30 products and then LDA was big, and then it's kind of going to phases.
But what I think is likely to happen with the advance of AI is that you're likely to see way more innovation coming into play in our industry. I welcome that application of AI as an ability to extract data and allow you to test, crush test at a faster pace, and then innovate along the way, so that's a good application. Now, we have to have a right kind of set of boundaries to make sure that we're not using that to blindly buy stocks and tell the clients and blame it on an algorithm. That's a bad application of AI. But when it comes to data gathering and ability to decipher, harmonize, and normalize data, it's a welcome tool. So, we're using it already and that's something we were likely to use more, but we don't use that to make investment decision. It's only part of our operation platform to look at a large set of data sets and make investment decisions through our own factor model, as opposed to just blindly taking the data and the outcomes.
Lance Glinn:
And I want to ask about the manager to client relationships, because really since the pandemic, and you can say since the pandemic, since V-Square was founded in April of 2020, there's been this shift right from face-to-face was the way to now everything's being done over a Zoom, over Microsoft Teams, over any sort of technology that allows you to be behind a computer talking to someone miles and miles away. How has this decrease and this erosion in interpersonal communication on a face-to-face level affected asset management and your own approach to client interactions?
Mamadou Abou-Sarr:
We grew in that world as far as we've experienced a pre-pandemic and we went through a pandemic and therefore we had to adapt to the new norm. Now, I'm a people person, you could tell. I like to shake hands. I like to feel people and get a sense of their eyes cues and body languages. And so it was hard for me to sit in front of a screen, always struggle with coming out of Zoom and entering Teams, I'm still struggling with that part. And I think it takes away the people touch that for me matters a lot in building a relationship.
Now, as someone who's managing portfolios and also raising assets, it's harder to raise assets on a Zoom call, because building the trust requires more touch point. And also, if you are an allocator or a consultant intermediary in the middle, your likelihood of taking more meetings group higher, because guess what? Easier to set up a Zoom call. But then your eagerness to switch managers probably dropped over the past four years. So, as a new firm we experienced the limitation of a virtual world and the same advance that social media changed the nature of natural personal relationships. So, we've experienced a longer latency when it comes to raising assets with the virtual world. Now, I feel like we're back to more in-person meetings. I travel the world from Australia to the Nordic region and across Europe and here in the U.S., I'm on the road every other week, so I feel like it's coming back.
Now, for the younger generation aspiring to get into the industry, I felt bad for them, because I realized that I grew in the industry and I managed to move up the ranks by having face-to-face relationships. By bumping into my MD in the cafeteria and smiling and, "Can I drop you an email? Can we go for coffee?" That helped me build relationship and grew through the ranks by just having that. Now, if you don't have that and you set up a Zoom call and people have multiple screens and they have one eye on something else and they're trying to engage, it's harder to be authentic. The key term is authentic. You can build a relationship through Zoom, of course, but it may be less authentic than just shaking hands and spending time with your phone in a bag and engaging face to face. So, that's the limitation of the virtual model.
Lance Glinn:
And do you think, it seems like, again, I know the answer to this, but there's now become an over reliance on those virtual conversations rather than the face-to-face? You say that face-to-face interactions coming back, all of your travels from north, south, east, west. But you did just say that for the younger generation trying to get into the industry there is this reliance on a Zoom. There is this reliance on a Teams, they're losing the ... I don't know losing the ability completely, but maybe the desire, maybe the understanding of just how important the face-to-face conversation is?
Mamadou Abou-Sarr:
We have an internship program and we are taking young interns from different university, and one of the first question in interviews is that, would it be virtual or in-person? And so I always encourage them to consider the in-person as the main option, because I strongly believe that sitting at a desk and seeing from the leadership team of V-Square how we work, how we operate, how we ideate, could only be positive for their own career path. So, that's something important. Now, there is also another element of it, efficiency and cost, travel costs went down as well. If you're focusing on your operating leverage and basically your profit margin, you may think, "Oh, I've spent less dollars into travel." But less travel expenses, if you raise less asset, doesn't make it a better operating leverage. So, you have to think about, "Okay, maybe the old model was actually very effective as well."
Lance Glinn:
And as we discussed this change in how people are interacting, there's also been, I would think, a change in what clients want and their desires. And I would think there is a growing demand or a growing desire to support sustainable investing, ESG, how have you seen these factors come into play? Are you noticing that more and more people are looking at ESG and sustainable investing in what they want in their portfolios?
Mamadou Abou-Sarr:
My answer will be region dependent. We have a global hat, so I could say Europe, Nordic region, across Europe and in Australia where I'm spending a lot of time, yes, yes, and yes to your question. In the U.S. we've seen a phase of strong growth pre-pandemic. Somehow the first year of the pandemic was the highest number of ESG ETFs launched in the marketplace. And ever since I tapered down with the term becoming more politicized. Now, I'm not here to play the arbitrage between views and strong views and values. That's just not what I do for a living. But what I can tell you is that clients and investors like choices, and ultimately the choices allow them to decide if they want to do sustainability or if they want to invest in AI and robotics, or if they want to have exposure to a firm that focus on global mobility.
And that's why our approach to be a thematic investor allowed us to care to that. What we've done at inception of V-Square, we thought about the evolution of the marketplace. When I started in finance running DCF models, the value of a company was pretty much, "This is your inventory. This is a captive value. This is how we think that you are either off a price, on the price." And that was one dimension of it. Today, 80% of the value of a company is basically intangible. And so if you think about that, you realize that companies go through a lot of phases and there is some key macro trends that could be harvested because they're not fully priced in. And we divide them into four buckets, human capital, technology, innovation, back at it, and sustainability.
To answer your question, do I believe that stability plays a role in that ecosystem? Absolutely. Is it an interest that we see a lot in a younger generation without any cliche? Yes, we see that. Now, it all depends on how they use it and how they apply that. We thought initially that it would become a commodity like you just buy the S&P and that's the way you do it. It's just not a commodity. Every investor who has a value lens would like a customized solution. And so, that's what we've seen is that our ability to customize has been a blessing, because investors can come and say, "I'm a foundation. I care about education, health, and other factors. Can you V-Square create a portfolio that aligns my grant-making value system with my investible portfolio?" Our answer is yes. And then it's about our forte into understanding the risk management of it, the drawbacks tracking here, all the elements that help us build a portfolio, but that hyper-customization is the way to go.
And I'm expecting this to continue. And my forecast when I started an industry was the opposite. I thought that it will become the uberization of the field, the supermarket world market approach where everybody buys the same thing. It's not the case when it comes to values, expression and thematic investing. Every investor wants their own views and values applied.
Lance Glinn:
The consulting firm, Cerulli Associates estimates that baby boomers and the silent generation are going to transfer a combined 84.4 trillion in assets to younger generations over the next two decades. We just obviously spoke to ESG and sustainable investing, as this wealth shifts and investors get younger and this money goes through those younger investors, how have clients approach to investing evolved since you first started back at Citi?
Mamadou Abou-Sarr:
It's a different approach. It's not an all boys club anymore. Yes, you may be making business on a golf course, and I still do that on Fridays, but guess what? It may not be the way that the younger generation would like to engage. They may not belong to a country club. They may not do the same thing. So, I will say that the biggest advance has been the digitalization of the field. Most of the younger investor I interact with, the first question is that, "Do you have an app, or where can I see the platform?" So, it's all about the digital delivery of the outcomes. They want to be able to see the stocks, see the values, click on a button and see an outcome. And so, we built a firm with what I call the last mover advantage. We knew that that was the need, so we're all about technology, delivery and the look and feel of the reporting. All that was part of our DNA. The last mover advantage allowed us to capture that from the get go.
Harder for legacy firms. If you started the old school way and you have to spend billions to readapt to a new world, it's a cap expense. And so for us, we see that the younger generation likes a different way of interacting. Your quarterly meeting by the fireplace and over dinner is not the way they like to be engaged. And so, you have to be able to evolve and be way more connected with them in that merit. And so, we realized that they like to pilot more, as opposed to be given a portfolio.
So, we created a questionnaire on their investment value system that we sent out prior to the first meeting for individuals where they can spend time and decide that, "I would like to have exposure to U.S. markets or emerging markets. I like fixed income or equity. This is my value system, this is the foundation I support by the way it has to be a tax-loss harvesting portfolio, and this is what my family owns and so on." And so we're using technology to capture the essence of what they want, and then you can use a UMA, unified portfolio, or you could use a SMA, separate managed accounts to deliver the exact outcome for them. For me, this is the main part will be the use of technology to adapt to the younger generation, but also understand that they're very savvy of new strategies invoke or basically.
My last few conversation's like, "How can I get exposure to space exploration, Mamadou, or how can I get exposure to AI and robotics? Or I care about global mobility, are there a way for me to get involved in that?" And everything they hear in the venture world or private equity world, the first question I'm asked is that, "Is there a product long only that does that? 10 years ago the answer was no. But nowadays there is an ability to go to the lens of thematic investing and capture liquid alts, capture infrastructure exposure and AI and robotics through long only. And we are at the heart of it at V-Square. This is one of our forte.
Lance Glinn:
And so, given the impact of these new technologies, these potential new investing habits and these new investing desires, what trends are you foreseeing as you project the next 12, 24, 36 months that could both shape the future of the industry, as well as shape what you do at V-Square?
Mamadou Abou-Sarr:
We realized that now fixed income was a bit out of favor and obviously with the Fed clawing back on interest rate, we could expect that that asset class will come back in fashion with a lot of appetite. It ties me back to innovation. If there is one asset class that needs a proper reboot, it's certainly fixed income, I think this is where we've seen less innovation over the past decade. What I'm expecting now is that the lens of a multi-asset class portfolio will be even more popular. What I'm hearing from clients is that they like the more diversification within a multi-asset class length, as opposed to mink with your own sleeves. And so that's something I'm expecting to grow more. I've seen a lot of interest for liquid alts, and I think this is likely to be the big part of the next, call it 18, 36 months that you've mentioned.
Because we realized that the value creation on our private market is not accessible for a lot of individuals and retail investors, and therefore the appetite to have a translation into public market, it's huge. And we've seen innovation for the likes of Morningstar and Refinitiv into branching out, and we are working on that at the moment at V-Square.
Last but not least, there is a term of tokenization of ETFs that is out there where you could buy an ETF or bundle ETF, but then through the lens of a token. And it's still early days, but I think this is likely to transform our industry if you were to be able to buy ETFs through the lens of a tokenization process. And there is some early stage in Europe around that, also in the U.S. in certain areas. But for me, the tokenization of the ETF markets, the use of liquidity alts as a way to get exposure to venture and growth themes and then the multi-asset class length are the big three themes that I see are likely to play out in the next few months.
Lance Glinn:
Mamadou, as we wrap up, with V-Square, as I mentioned before, recently reaching one billion in assets under management, and approaching next year its five year anniversary. How are you planning the firm's growth over the next 5, 10, 15 years to achieve the milestones that we talked about before that two billion, that three billion, that four billion, and on and on?
Mamadou Abou-Sarr:
Sure. It's something we think about, and obviously, it was part of the everything has to be planned. And then there is another disclaimer, everything has to be adaptable as well. You plan for growth, that's a part that you have to do. Even when we were smaller than that, we were already planning for growth. Growth is impacting two major lever. One is the talent and the people management piece of it. So, we are in hiring mode and looking for talents, but then we're not looking for talents as a first exercise. We've maintained relationships and we entertained conversations for the last few years with a lot of people in the industry and now we're in a place of looking at talents and adding more people. That's the number one part of it.
And also, your operation platform has to evolve based on the growth trajectory. And then that's something that we always think about, the operational part of it, the compliance part of it. So, we are pacing ourselves into growing the operational platform to make sure we can adapt to the next five, 10 billion to come, because they will come. And for us it's all about that planning exercise and delivery of technology to be able to accommodate for that.
Now, my motto is always, "When there is a will, there is a way," and you plan for the best outcome. For us, if I reflect on why I think we're able to grow fast despite outflows in the industry and a pandemic and high inflation and no new friends in the industry, it's because we are differentiated. Back to my first comment, it's because we bring value, and also because we never thought of ourselves as a startup. We always felt we were an upstart. We've done it before, we've built before, we've done it at scale, we failed in large shops, we've managed people, P&L. And then we came to the conclusion that we wanted to do it independently and also with the support of a product equity firm, Valor, that is an outstanding partner for us. And so, that's why we felt we were in a way earning the right to grow. And notion of earning the right to grow is basically a phase, right? You plant a seed and then you wait for the harvesting season.
For a guy like me who is not a true gardener, I don't understand the seasonality of it. "Oh boy, I want this to grow tomorrow." Every morning I'll come in and say, "Where are we? We need to raise more. We need to raise more." And a lot of that is also on me going out there. So yeah, I've been intense and I'll remain to be intense, but also appreciate that things play out. Like when you play chess, they play out over a longer cycle. Your first few moves may not lead to the main outcome that you thought initially. So, adapting to the market changes, adapting to the consumer changes is a critical piece of our growth journey. And boy, we learn a lot.
Lance Glinn:
Mamadou, when you hit that five billion, excuse me, when you hit that 10 billion, that 15 billion, we look forward to having you again Inside the ICE House. Thanks so much for joining us.
Mamadou Abou-Sarr:
Oh, my pleasure. And I will mark the calendar already.
Speaker 1:
That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen, and follow us on X @ICEHousePodcast. From the New York Stock Exchange we'll talk to you again next week Inside the ICE House. Information contained in this podcast was obtained in part from publicly available sources and not in independently verified. Neither ICE nor its affiliates make any representations or warranties expressed or implied as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.