Episode 145 - Marks on the Markets: The State of Faith Driven Investing
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Faith Driven Investing has been around for much longer than this podcast and ministry.
It is an international movement of leaders deploying capital for Kingdom impact. Our host John Coleman likes to joke that it’s been around for at least 5,000 years.
But even with its rich history, there has been an obvious uptick in activity in recent years.
Today’s Marks of the Markets episode functions as a “state of the movement” with two long-time advocates and practitioners of Faith Driven Investing: Henry Kaestner and Ross Roggensack.
Check out the full episode to hear how the movement has evolved and where these leaders think it will go next.
All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies and securities discussed. This podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization.
Episode Transcript
Transcription is done by an AI software. While technology is an incredible tool to automate this process, there will be misspellings and typos that might accompany it. Please keep that in mind as you work through it.
John Coleman: Welcome back to the Faith Driven Investor podcast. This is John Coleman and this is our monthly marks on the Markets episode. However, we have a unique twist on marks on the markets this month. Typically, we just check in on the state of markets, some of the underlying dynamics in financial markets. But today is a very special episode on the state of faith driven investing here at the beginning of 2023. And we have two very special guests as a result. First off, is a longtime friend of Faith Driven Investor, as well as a leader in the faith driven investing movement, Ross Roggensack, who's the founder and CEO of Oak City Consulting, which advises institutions, religiously aligned institutions on how to allocate their capital and invest both for performance as well as for faith integration. And then we have on the other side of the podcast, mic today taking a step away from Faith Driven Entrepreneur Henry Kaestner, the founder of Faith Driven Investor, founder of Faith Driven Entrepreneur, founder of Sovereign's Capital and Bandwidth and a longtime leader in the faith driven investing movement. Ros Henry, it's so great to have you all on today.
Ross Roggensack: Thank you.
Henry Kaestner: What a great treat. Its co-founder. I love that you're making me sound so important. Special this morning. It makes me feel good. And yet it is the case that there are some amazing people around that have been instrumental in starting Faith Driven Entrepreneur and Faith Driven Investor. And when I think about people who have gotten this movement from the beginning, I can't thank much beyond Ross Roggensack, I get to know Ross maybe a decade ago or so, which feels like a century ago in dog years in terms of the movement. But for me to be doing this podcast with both of you is really special. Thank you. Thanks for having me.
Ross Roggensack: Yeah me too hear here.
John Coleman: Well, Henry, I want to tee up right where you just started. You and Ross have been longtime leaders in the faith driven investing movement. Give us a little bit of that history for listeners who are unfamiliar, both of you, I'd love to hear how you got started in faith driven investing and what got you motivated to get involved.
Henry Kaestner: Yeah, maybe I'll go first, Ross and then you pile on, please. So from my perspective, my experience is that I was an entrepreneur and worked on Wall Street, came to North Carolina in 1998, came to faith, most importantly, and then together with David Morgan, started bandwith. I had a company based on the foundational values of faith first and family, then worked in fitness and got six, seven years into it. Dave and I realized that through the grace of God and despite making a lot of mistakes along the way, we were able, through God's providence to be a witness to His love for us and endeavor to run the business a bit differently and and saw, of course, how business can be used as a means for sharing Christ's love, making a redemptive product and service, doing things differently. And the question was, well, what might we do outside of Bandwidth to encourage more of that with others we'd met and the idea was maybe we'd go ahead and start a fund. So that was the beginning of Sovereign's Capital six years in, maybe we realized that we were say no to most of the companies who are coming to us for financing. And since we got into the business because we wanted to be an encouragement to faith driven entrepreneurs, if you say no 99 out of 100 times, not really being an encouragement to them. So we started the ministry called Faith Driven Entrepreneur then, and Faith Driven Entrepreneur is known for a content and community blog, podcast conference, monthly groups. But two years in to that, I got a call from a guy from Uganda and he said, Listen, I actually Rwanda. Sorry, he said, I'd really like for you to invest in my business? I said, Well, we can't because we don't invest in Africa, but we've got this other ministry. I realized that in talking to him, while he appreciated the different offerings that we had at Faith Driven Entrepreneur, we really weren't scratching his head. He was still, at the end of day, he's still looking for investment capital. And we decided then that we would start a ministry called Faith Driven Investor on one hand, Yes, to help some of these entrepreneurs from around the world to find like minded capital. But then more broadly, what might it look like to encourage the development of a larger movement of faith driven investing, especially in private markets, especially in [....] to be clear, there had been a lot of work done for a long time in lots of different sectors of investing, particularly in public markets. But not a lot had been done on the outside. And so we felt led to start Faith Driven Investor as a complement to Faith Driven Entrepreneur. And it was gosh, four and a half, five years ago I think we got together with Ross in Park City, Utah, to talk about what it might look like to create a movement or almost an industry trade group, but really, really a movement, just men and women coming together that were stewarding institutional capital. How might, we're motivated by our Christian faith, allocate that capital in a way that might honor God. How might we encourage faith driven entrepreneurs? How might we encourage the thoughtful deployment of capital in segments like real estate and all sorts of different asset classes? But it's been unbelievable over the course of the last five years how much supply there now is across virtually every asset class. Dozens of players in the space on the supply side with excellent track records. It's unbelievable. And there are hundreds and hundreds of families that are looking to deploy their capital consistent with their faith. Thousands, really, and dozens and dozens of institutions that are getting really, really serious about it, too. So it's been a beautiful run. But I'm eager to hear about Ross's background because I've seen Ross and I can't, I can tell you this is a means to further introduce Ross. I can't think of another individual that has got in this space of faith driven investing more than Ross. Ross How that become the case.
Ross Roggensack: Oh, my goodness. That's so scary to walk into that area, but I'll try. I started in the business in 1989 as a stockbroker, very traditional, you know, broker dealer selling Cracker Barrel stock. And Ginnie made collateralized bonds to anybody who would answer the phone and just kind of just dragged along until one day I was just pulled into a Christian foundation who needed help. And really, it was just I think the Lord just dragged me in. It really wasn't any sort of a grand master plan. I wish I could say it was, but it wasn't. And that was back when I was at a wirehouse on a team. A great team. Still love those people and still loved working there. But in 1999, I came to know the Lord. He captured me on a rooftop on a mission trip in Mexico. It's a long story. I won't tell it. But he gripped me and shook me and it took me a while. But finally, in 09, after the crash, after a lot of things revealed themselves to each other, I just decided it was time for me to go off on my own and to live out my faith in a way where we could serve only Christian institutions. So we really don't do any financial planning. We don't help people save for a beach house, We don't do retirement planning. All we do is work with faith led Christian institutions to try to help them invest capital. And so that's all that we do. The kind of the start of it was really you know, I'm a hockey fan. I love to watch hockey, and I'm always muttering under my breath when I'm watching my team play, like shoot the puck, shoot it, shoot the puck, because you can't you know, you can't make a shot, you don't take. And so we just shot a lot of pucks, you know, we just tried a lot of stuff and some of it looked right or felt right but wasn't right. Some of it we couldn't quite tell what we were doing, but it just took a while until we finally, I think, started finding things, found us, and now I think we have a pretty good handle on what we're trying to do to help institutions do different things. You know, you're not going to look any different if you do everything the same. So we try to encourage institutions that are faith led to allow themselves to be faith led, you know, allow it to happen.
John Coleman: When you both talked through your legacy in the area and I like to joke with people, you know, Faith Driven Investor thing is at least 5000 years old if you think about the history of Judaism. But it does seem to have accelerated quite a lot over the last decade since you got in Ross In 2009. Henry Since you founded Sovereign's Capital in 2012, what has changed and what are you most excited about here at the beginning of 2023? And maybe, Ross, we can start with you.
Ross Roggensack: Well, I mean, maybe part of it is my own understanding of what it is when you think about what is it me preaching to the choir. Now I'm looking at Faith Driven Entrepreneur on the screen. When I think about what's faith driven, what is faith, you know, and faith is action. Faith is when the woman touches Jesus's garment. You know, nothing really happened until she did that and nothing really happened until Abraham took Isaac up on the altar and began to sacrifice him. You know, that was action. And so I think for me, what's changed is that we're becoming more active and we're seeing more action, which is faith. Right. And it's fun to watch people who are stepping out in faith, people that have real investment chops, you know, people that are leaving Goldman and leaving big firms, smart firms that are saying, I want to do this. You know, I think about Victor Hu, people like that that just they could make a killing. Right. If they just stuck right where they were. But they are acting on their faith, their faith driven and they're moving. And it's just so fun to find them and to watch them. And I make the correlation that when my girls were growing up, which was a long time ago because I'm old, but we started to try to find Christian music for them to listen to. And trust me, in the year 2000 or so, it was Sandi, Patty and Michael W Smith, and that was it. And so it wasn't that encouraging to find music for them to listen to. But as time grew, as the movement grew, you know, there's now there's lots of high quality options to choose from. And it kind of feels like we're getting there on the investment side. There's we're not conceding all the time or dreaming. We're finding stuff. It's great. So I might have gone on too long. Sorry.
John Coleman: No, the only objection I have is in 1990s kid, Ross's the notable exclusion of bands like Jars of Clay and Audio Adrenaline from the 1987.
Ross Roggensack: That was on purpose John.
John Coleman: Music. But Henry, what about you? You've been in for a decade now really thinking about this consciously. What's changed and how do you feel about the current state of the movement?
Henry Kaestner: Oh, so much has changed. So many things to point to. I think about selection and entrance in the space. I think about professional fund managers getting together to encourage and worship God together. I think about what's going on overseas. So those are three broad categories. Maybe we don't [....] all in the same question. So maybe I'll just hit the selection first. You know, when we started, it really wasn't a whole lot going on in the private and the alt space. There was quite a bit of work done on the negative screen space, which is let's not invest in companies that might advocate for adult entertainment, abortifacients. A whole bunch of different things had been around for a while, and yet this concept of Christ followers would be knowing what they're for rather than just what we're against wasn't really built out at all. And especially, again, not in the old space. You fast forward though, five years on and it's really amazing what's out there. So I'd put that in three broad categories. One is I'd say that there are fund managers that existed that we just didn't know about five years ago, and I think quite a bit quite a few of them are on the real estate side, multifamily ten or 15 years ago, Apartment Life, which is a great ministry out of Dallas, started partnering with Secular fund managers and Christian fund managers. But to put apartment chaplains in place in communities where there are a couple hundred spaces, finding that by doing so that they were decreasing the turnover, which means increasing the profits of these multifamily apartment holdings. And so I didn't even know that that existed. I think back to the way we were investing funds out of our family office. We had a lot of real estate investments, but we didn't have any. And these fund managers, I just didn't know they existed. Well, we know that they exist now and there are dozens of them, and it really is amazing. I love this is one of the things I think needs to characterize the movement is that you get better returns when you love on the people that live in your properties. And that was really neat. That was a bit of revelation. And the next one is funds that has started over the course the last five years. So Ross mentioned one of them. Victor Hu left Goldman Sachs. He had started the education technology practice at Goldman, was there for a decade left and with Goldman Sachs as his largest LP started Lumos Capital to invest consistent with his faith with a chaplain on board. So what is consistent with your faith mean, well, it can mean a lot of different things in this movement. A faith driven investing is not meant to be prescriptive or presumptuous. It's got to be X, Y, and Z. It is, however, about us getting down on our knees and asking God, how would you have us deploy the capital you've entrusted with? An outcome for somebody might be to invest in solar farms in the divided desert because you're called to creation care for somebody else who might be investing in Faith driven entrepreneurs in Africa. There's no right answer other than the process by which we ask God how we might steward the capital that He's entrusted us with. So you've got people like in this case, though, with Victor, he sees an opportunity to love on these entrepreneurs that are really setting themselves out there. You know, they've delivered a hockey stick type of projection in their PowerPoint presentation. There's a lot of stress in being an entrepreneur as you try to deliver on what you promise. You're trying to do a good job of leading your family in your community, in your company, and you're always selling something to somebody, you are selling something to your customers, your employees to come on board or sometimes your employees to stay. You come home from work and your spouse says, Honey, how is it at work today? And and they're like, Well, it is great. And because your spouse thinks he knows you left a great job, you headed IBM or fill in the blank. Right? And so Victor realized that he had an opportunity to really love on these portfolio CEOs. So to be able to offer chaplaincy up in an anonymous way in an environment where mental illness is five X among entrepreneurs, suicide rates are two X among entrepreneurs is doing a countercultural thing by saying, you know what? There is an opportunity to be able to have a chaplain in place and gosh it is amazing. If you think about [....] Wang, who left Warburg Pincus to get a $575 million fund. Zuckerberg Chan, one of his largest LPs, excellent health care investing. So a whole bunch of funds that have been started with people who have come into this space, having had great track record, so important that this movement is characterized by excellence. And I think of dozens of funds like that. And then maybe my favorite section of funds are the funds that have been recast, reinvented, if you will, in light of the Faith Driven Investor movement. A good example. There's good water capital, good water with more than $3 billion under management, a great consumer technology venture capitalist [....] Chen, Eric Kim, guys who invest in some of the biggest names ever [....] was the first institutional investor in Facebook way back when. And these guys got together and said, You know what, We started our fund eight years ago. We knew we were serious about our Christian faith but didn't really know what that meant. And what's not really clear that our portfolio and what that meant or our employees. And so we're going to go ahead and have a little bit of a restart. We're going to go ahead and recast our fund in light of Micah six eight. We'll let everybody know and I'm going to go ahead and take Dave Gibbons, one of the most popular pastors and speakers on Christian faith in the marketplace out here on the West Coast, going to have Dave Gibbons be our corporate chaplain so that we can be intentional about how we bring God's love into the work we do. And so, gosh, that's one area. Maybe we'll talk about some of the other things going on in other places later, but that's a big development that none of that happened aside from some of those real estate funds I mentioned. But five years ago it looked a lot different.
John Coleman: Yeah, and that was one of the surprising things for me when I came out of mainstream asset management a couple of years ago and joined sovereigns, Henry was just, I did have questions. We did joke about the Christian music problem. Ross And just if we were going to do this, we had to do it really well, right? If we were going to do this, that all the faith driven products needed to be at least as good as their mainstream counterparts. And we thought that that was possible because being faith driven, abiding by those values actually created the kind of cultures that could outperforming companies or in real estate developments and hopefully serve both the interests of investors for whom you're a fiduciary as well as the kingdom through faith align impact. And I've just been continuously surprised by the breadth of different offerings that are out there and continue to believe that there's almost no asset class where you can't have some sort of faith driven impact. I'm sure there are a few we can snipe over time, maybe gold commodities or treasuries or something like that. But it feels like most of your portfolio can get there. Before we dive into portfolio construction, I want to pick up with you, Ross, on a thread that Henry mentioned and then get both of you to weigh in. Henry had mentioned not just the managers, which we've just talked about a bit, but also the community. Talk to us a little bit about how you've seen the community around faith driven investing broaden and get more active. I know, Ross, you hosts parts of that community at various times. Henry you do as well. Ross what's happened to that small community of Faith Driven Investor over time?
Ross Roggensack: I think it's growing. It feels like it's growing. COVID was certainly a, you know, slowed everybody down in terms of momentum. So it was a little hard to gauge where people are at. I kind of feel like more and more are understanding it, but yet there are many that don't. And we kind of joke in our shop kind of sometimes we meet with potential clients and you can just tell they're not engaging. And it's more a matter of just shaking the dust off and going to the next one instead of trying to coerce or convince someone. I think you either you either grab this or it grabs you or it just passes you by. And so we are more and more satisfied that the Lord will just lead us to people that want to do this, that embrace this, that are looking for ways to do this, to activate and engage their faith in the way that they actually invest money. So I think it's growing. It feels like it is it's moving past the negative screening into the positive impact. I think ESG has had a great influence on us, not that we're becoming ESG investors, but I think we've sat back and watched ESG and thought, Oh, I'm wonder if we could do that on our side now. And I think a lot of us and a lot of that talent that Henry was talking about has seen the same thing. And probably thought, man, if they can do that on the social governance side, surely on the faith driven side, we can do it. And so I think it's growing. I feel like it is. You know, there are moments of discouragement for all of us, but there also are moments of great joy when we get to connect with somebody who says, yeah, let's go for this, or we engage a new client that two years later says, This is even better than what I expected it to be like this.
John Coleman: I agree Ross.
Ross Roggensack: more joyful than where I thought it would be.
John Coleman: I think the ESG movement in particular has woken people up to the idea that they can invest according to their values and that there are a set of Christian values that are not necessarily running totally contrary to those expressed in ESG, but are probably distinct from those in that there's an opportunity for Christians to identify those values that they want to see expressed in capital specifically. I mean, Henry, you've created two of the biggest ministries in this space, and especially with Faith Driven Investor, you've co-founded a ministry that's seeking to expand the community here domestically and internationally. Talk to us about what you're seeing on the community side.
Henry Kaestner: Well, I think it's exploding. I mean, I think it's I'll tell you some of the things we've seen. So we decided the hallmark to the Faith Driven Entrepreneur ministry over the last two years has been groups, groups of faith driven entrepreneurs to get together and look at content, community gather. So we have just great storytelling mini documentaries coupled with teaching from a guy named J.D. Greer, and it's groups of 12 or 15 entrepreneurs getting together over eight weeks and then every month going forward and these different types of groups. And we've been really, really encouraged by the growth of them. We now have more than 10,000 entrepreneurs that have gone through groups all around the world. So huge growth that we decided based on the success we'd seen with content and community, that we would go ahead and create a beta product to see if we could do something on Faith Driven Investor. So we put together some content from some friends of the movement. We had Tim Keller do a talk for us on the identity of an investor. Andy Crouch on one on God and Mammon. Greg Lernihan on the framework of how to actually go ahead and deploy capital consist with Faith Driven Investor and had 650 folks go through a beta last year and total and we had 400 go through just this most recent nine week cohort. And so it just is growing. So we're going we're doing 400 a quarter over the course of this coming year. And we decided that we might take some of those that are going through these groups that are institutional investors. You don't need to be an institutional investor to go through a group, just need to be an investor. And we tend to bring together groups of accredited investors and groups of peers coming together. We have groups for advisors, but we had some of my friend I live in Silicon Valley, so I've got some good friends of mine that are Christian, that are in venture capital. So I had some of them go through a couple of groups that I led, and we decided to do a reunion of sorts out at the Rosewood Hotel out here in Palo Alto. And long story short, we had 164 Christian general partners of venture capital funds and private equity funds at the Rosewood Hotel three weeks ago. And these are people from Andreessen Horowitz from Madrona, Good Water, as we talked about some of the biggest names in the world of private equity venture capital. Most of these in secular funds, but all of them very committed to their Christian faith. And how is it manifests itself at their otherwise secular fund? How does it manifest itself as they work with secular CEOs of portfolio companies? What does that look like? How can we praise God together? How can we pray together? How can we share what God has done in our life together? And this is the first time that most of these folks had ever gathered with other Christians in their profession. And yet there is 164 of them. And then ten days later, we did the same thing in Nairobi, where we had 55 Christian fund managers getting together. And these are I don't know what the audience is thinking of right now in terms of what a an African fund manager looks like or does or invest in. But we're talking about people like Richard Okello came out of Bridgewater. He was a partner with Ray Dalio. He's running just about $400 million in a fund of funds out of Johannesburg, South Africa. Top tier, you know, [...] who I met when he was at Wharton, running a couple hundred million dollars, investing in Africa. You know, we're talking about a continent with greater GDP growth than any other continent in the world and with the demographics. So I could talk about Africa forever. I think it's amazing. But 55 of these Christians, all of whom are fund managers, getting together to worship together and say, gosh, what does it look like in light of ESG, in light of where God has us to come together and community and to encourage and challenge each other as we allocate capital? And then and to be clear, they're fiduciary. So they're not all themselves just investing in faith driven entrepreneurs, though some are. But how do we recognize that God has placed us where he has not just to make a ton of money for our clients or for ourselves, but to be his hands and feet and to be a blessing in the market place, what does that look like? So I'm extraordinarily encouraged by the uptake. And then we've had thousands of families come in through the Faith Driven Investor website to go to the marketplace to say who are some of the funds that are out there? And then increasingly, the big question is knowing that we have the supply now and we have the demand. Who are the fund advisors? Who are the river guides out there? They kind of know how to make this happen, understand a family's need for income or interest in a market or an investment class, and put that together. And that's what we're focusing on most in the movement over the course of the coming year. How do we help fund advisors who are, you know, back to Ross in the hockey thing, who understand where the puck is going and seeing that Christian families, Christian institutions are going to get more excited about participating in this space. How do we help them come along, particularly with individual families?
John Coleman: Yes.
Henry Kaestner: Because alts have been difficult for many individual families and then Faith Driven investing has been difficult. But Ross has done such a good job to position himself as this institutional fund advisor that Ross, my prediction is that this is going to be very good year for you.
John Coleman: Well, and Henry to pile on that, I think another question I had coming into the space a couple of years ago is how our clients going to find these products, right? Because almost everything in investing happens through an intermediary like Oak City Ross. And it is encouraging. I mean, Ross is stewarding capital through Oak city for institutions. There are big wealth managers like Ronald Blue Trust and Eversource that are now explicitly serving faith driven communities. We're seeing firms like LPL develop model portfolios for faith driven investors. I think they have 1000 kingdom advisors now on the LPL platform, and we've even seen big firms like NCF recently introduced faith aligned model portfolios for its investments through its donor advice funds. And so a lot of these intermediaries by which individuals or institutions access the market are becoming a lot more open to faith driven investing, even if they are mainstream institutions like LPL. And I think the call to action we probably have for anyone out there is if you're getting advice, seek out someone who's going to offer you these options like Ross or lobby the place that you're at to try and introduce those. I know we've got a lot of active discussions going through FDI, through sovereigns and others with big firms that are seeking to serve their Christian clients better. And a part of that is introducing them to the ideas of faith driven investing. Ross, one thing I wanted to dig in on, because you've got such a good view of this from where you set your advising a number of different clients with complicated portfolios. You've both talked about how we've drifted away from just negative screening into some sort of positive engagement, and we hear a lot of frameworks [....] around. We hear avoid, embrace, engage, for example, there are some other frameworks out there. Ross as you think about faith driven investing in 2023, what framework are you introducing to clients to understand that?
Ross Roggensack: Well, we've used the framework of redemptive institutional investing, and it sort of stands on four pillars, one being that ownership, that God owns it all, that it's not ours, that we're just stewards, we're just managing it for him, for the ultimate manager. The second pillar is design, that our design is not nearly as good as his, that we need to get under his authority and under his design. Third is that capital has influence. So directed institutional capital towards a cause, towards a movement, can influence culture, can influence living conditions, can influence medicine, can influence housing, can influence clean water, whatever you want, but money can change things. And then last excellence matters that everything we do in word or deed, right? Everything is unto the Lord. And so we should do it really well. We should really focus not on just providing product, but on really solving the problems, both on the investing side and the impact side for institutions. So we call it redemptive institutional investing, avoid, embrace, engage. It's fine too there's lots of different monikers. But yeah, we especially believe that that institutional capital, when directed collectively, can really change the world. And again, back to ESG, we've seen it change the world some good, some not so good. But we think once especially larger institutions can understand this and grab it, we will, in our day, see change and it will be so great, now I am seeing some. But I'm really anxious to see more.
John Coleman: It's super encouraging. Ross and I want to zero in your fourth pillar was excellence, and both of you have talked about that a bit. You know, Ross, you're stewarding client money every day. Henry. You've stewarded your own capital as well as the capital of others in a way that's almost entirely faith aligned for some time. We've talked about how important it is that these faith driven investments perform at or above market, at least some of them. Some of them might be concessionary, but many of them you'd want to perform at or above market. Are we seeing that excellence materialize? Henry? Are you able to get the same types of returns in faith driven investments that you can get in mainstream investments today?
Henry Kaestner: Absolutely. So five years ago, I came back from this conference we had in Park City and realized that aside from sovereigns and the stock I had in Bandwidth and Republic, I didn't have any Faith Driven Investment. And so I thought that's that's a challenge. We had lots of secular fund managers because venture capital and real estate and so decided to put together a portfolio just of Faith Driven Investor across pretty much every asset class. And we hired of course in Kenny you're now works at sovereigns to do that for us. And over the course of two and a half years, you put together a portfolio and gosh. Maybe we've got 35 fund managers now that have some level of spiritual integration or written spiritual integration plan to talk about how they want to steward capital. And that goes across the spectrum. And you alluded to this just a second ago, and that is that faith driven investing doesn't just include market return capital, but really what we look at Faith Driven Investor is it includes a spectrum from market return capital through to patient or concessionary capital, where it's the outcome that's most important, not the return that's much more. With market return capital, the outcome, the return is the most important. Now it's table stakes. It needs to have some spiritual integration in it. And yet there are lots of opportunities, particularly in frontier and emerging markets, where the outcome can be the most important, where maybe it's employment or it can be the end of disease. And yet it's not philanthropy, which we'll talk about in a second. The best way to accomplish that intervention is through investing in innovation. And yet, in order to get the best maximum outcome, you might sacrifice some return. Maybe that's because of currency, maybe that's because of a long term investment in R&D. Whole bunch of different reasons that could be. And then on the other side, of course, there's philanthropy, all of that. I think that God, well God owns it all. In all, three of those tools are at disposal to be able to be faithful and obedient with number one, understand he owns it all. But then to experience the joy is another thing I want to make sure that our listeners here hear is that we're talking about an investment strategy that isn't just born out of faithfulness and obedience, and we're going to take up our cross and we have to die to self. And all those things are true in Scripture. And yet I think with faith driven investing, God's calling us into something much greater. It's a Technicolor existence, a participate in the work that he's doing in the world and experiencing his joy. But back to your point. Absolutely. Market return is a big, big, big piece of that. And we have found over the course of last five years that our market return investments that we classify as such when we invest in it, when the manager says I seek to meet or exceed that of the secular benchmarks and private equity could be endeavoring to be a top quartile fund, we found that those investments have done better than their secular alternatives. And so about, gosh, in the family office, maybe 50% of the funds that we run are just market return and they have outperformed their secular counterparts.
John Coleman: That's hugely encouraging. Henry And I know through Faith Driven Investor you actually help make available the holdings in that portfolio and things like that. And so that's something that others can dig into based on the research that you, Henry, are doing or you're doing. Ross As you think about and Ross, I want to turn to you obviously were pursuing excellence. There are some strategies that end up being more concessionary, but we're pursuing excellence. We've talked about a number of categories that are being built out. So public equities, negative screening has been around for quite some time. Henry You mentioned 164 GP's from private equity and venture firms dominantly gathering recently in the explosion of those funds. Where are you seeing gaps in a Faith Driven Investor portfolio right now and where are there asset classes that we need to further innovate to make excellent within faith driven investing? And Ross, maybe kick us off, if you would.
Ross Roggensack: That's hard. I think that for us we've had a real focus on real assets and whether that be oil and gas, farmland, you know, even water. It feels like there's been some gaps there for us to be able to really bring a a redemptive faith led offering there, you know, growing food, growing it wisely. Protecting the environment are all really important things and they're redemptive in nature and they promote human flourishing for sure. But to be specifically faith driven, not sure there's a lot really offered outside of the real estate portion that Henry mentioned. In real assets, I don't see a lot, but Henry probably sees a lot more than I do there, there is probably a little bit of a gap. I wish there were more offerings in medicine. I don't see enough there. I wish there were more because I really think that's an area where we can really have great impact if we harness institutional capital towards that, I think we could really make a difference in drug pricing in lots of different ways that we could affect the marketplace. So those are probably two areas.
John Coleman: Henry, what do you seeing?
Henry Kaestner: Let me just say, I just love the fact that Ross used the word medicine. You know, it's so many institutional investing conversation and everybody's talking about pharmaceuticals. When I talk to my wife about needing something, I say, don't get a pharmaceutical firm. They're going to give me a medicine. I need medicine. And that's what we need in America and that's what we need overseas, which is where I think I'm brought to in terms of the way I think about gaps. And I suppose you could say that there are gaps in a bunch of different places. I remember actually thinking a guy called me up, said, I want to talk to you about this fund that we've got and putting together a spiritual integration plan for oil and natural gas. I'm like, How do you do that? I mean, you know, how are you sharing your faith with a barrel of oil or something like that and say that, thank goodness, Because he then talked about an incredible search integration plan about being able to provide ministry to the roughnecks out in the West, Texas, oil fields in the back and oil fields in North Dakota, and really, really impressive. We had a guy on the Faith Driven Investor podcast three or four years ago, Jimmy Song talking about Thank God for Bitcoin. I don't know that I completely get that yet. Maybe that's just a function I'm not smart enough to follow, but I don't know that there are huge gaps. I'll tell you, there's a gap though, that I see in the way that faith driven investors are looking to deploy capital. I don't think that we generally are looking at Africa or frontier emerging markets the way we could, and yet there are some really good fund managers there. I alluded to it a little bit before, but I think it's important that we as Christ followers look differently at risk. The traditional mindset, and I'll speak from the perspective of a family office for a second, the traditional mindset has been really that we want to make as much money as we possibly can and to just take whatever pile of money we have and to grow it. Now, if we're Christians, maybe we think about it a little differently. But you know, if we're looking to grow that, to what end are we investing our capital, especially if it's excess capital? Now, to be clear, college planning, retirement planning are incredibly important, and I don't want to minimize that. And that is the primary need for the vast majority numbers of Americans. And yet there are quite a few family offices that have excess capital, and they're managing excess capital and they're looking to get better return. But to what end is it to spend more? Is it to save, to build up for the next generation more? Maybe it's to give more of its give more. I would challenge us all to think about how we might actually place an investment capital now in a way that maybe philanthropy is not as needed in ten years. So say we want to go ahead. See, I think that you can make a really good case that investing in Africa makes a lot of sense. Right now, you've got GDP per capita growing faster than any other continent out there. You've got an age of political stability unlike the continent's ever seen before. Demographics are a huge issue. You know, you have these bulges of population. They're going to be producing and consuming because the average age in Africa is so young, more entrants in their marketplace in Africa than any other content coming up. I mean, there's lots of different reasons to invest in Africa, but say you can make the case that you could get a better risk adjusted return by investing in America, and maybe you could make that case. But again, to what end? If it's to give money to Africa in ten years, we should rethink that. Mm hmm. Philanthropy has not done very well in Africa. Not to say it doesn't still play an important role. Philanthropy is not dead. We need to be able to give to people who are in need of relief after floods and all sorts of different issues. We need to be able to give into some of the education infrastructure that's out there. There's a whole bunch of reasons for philanthropy. And yet if we're actually invest and there are some incredible funds run with excellence in Africa right now that 99.9% of Americans don't even know about aren't even investing. And if we can invest, maybe in investing in job creation, economic development and market forces now toward innovation, especially what's going on in fintech in Africa, leapfrogging over what we otherwise see in developing economies. Maybe if we invest it now in job creation, maybe you don't need our philanthropy in ten years.
John Coleman: Before we conclude today, I wanted to kind of circle back to the broad topic of faith driven investing and in kind of 30 or 60 seconds or less, I wanted to hit two questions. The first. What are your big predictions for FDI in 2023? Ross, What do you think you might see this year that's different for FDI?
Ross Roggensack: Oh. Not sure about different. I know that in 22, biotechnology did very, very poorly. And our firm, we think in five and ten year increments. So we don't really try to think in one year predictions. But I do think medicine and biotechnology specifically are huge themes for us. And we still believe there's going to be breakthroughs, maybe even because of COVID, because of the money that was generated. But I think that we'll see. I think we're going to see great breakthroughs in medicine, especially in biotechnology this year.
John Coleman: Henry, what's your prediction for 2023 in FDI?
Henry Kaestner: I think the biggest opportunity out there is investing in lower and middle markets. When you can get in and partner with some really great companies that are making profits right now and get in and attract the multiples, I think we're going to see a little bit of a cooling with some of the high fliers in the technology sector and venture capital. Venture capital remains a great place for faith driven investors to look at or with a long term horizon. Short term, just incredible opportunities in lower and middle markets.
John Coleman: All right, last question and then I'm going to ask you all to just give us a verse that you've been meditating on recently or something you've learned from scripture. Very quickly, a lot of folks are on the sidelines right now, or they've relegated Faith Driven Investor thing to a small impact bucket in the larger portfolio that they have. What's your advice to someone who just wants to get in the game Ross?
Ross Roggensack: Well, I guess my advice would be much like the woman who touches the garment. Like I mentioned before, I think just act on your faith. If you want to be faith led, then move yourself to action. And I don't think the Lord is going to bless the performance, but he's certainly going to bless us if we act. And so don't be afraid. You know, just move, act, act in faith. And I think that just too many people have bought into the lie that it doesn't work. And I think that people just need to act.
Henry Kaestner: Jon, knowing that your last question is going to be about what is God teaching us through his word, I'll combine the two answers into one and then maybe you'll finish with Ross with asking what he's hearing from God in his Word. So for me, the thing that's really been sobering as I go back through the Old Testament is the lessons from the Good Kings of Judah. Of course, in the bad kings of Judah. Well, don't do what the bad kings of Judah did. But interestingly, you know, don't do what the [.....] share of the Good Kings of Judah did as well, which is that just about every one of them didn't ask God before they went off into battle or did a trade deal. And these are men that had great common sense, were godly people. They were men after God's heart, Scripture tells us. And yet, at a critical venture, they didn't seek God. And so that's a sobering lesson for me. I think back over the last year about how many decisions I made without seeking God first. And I want to endeavor to do that. And so absolutely, as I look to allocate his capital, I got to get down on my knees. I guess I got to ask, God, what would you have me do practically that would be the most important thing, followed by looking to find a good river guide. There are lots of different options now, and that's the good news. But it does present a little bit more of a challenge. What is the right strategy for the pool of capital that you've been asked to steward? And we're not meant to do this alone. So finding a good river guide.
John Coleman: Yeah. Ross Henry's right. He introduced this question and knew it was coming. And we try and conclude every podcast with just what God is teaching you through scripture that you want to share right now. Any thoughts on your end?
Ross Roggensack: Well, I meditate often on first Timothy six two, which is a verse that means a lot to me. It basically is Paul is really encouraging us to. It says rather, they must serve all the better since those who benefit by their good service are believers in beloved. If we are serving fellow believers, I think it's required of us that we should serve. It says all the better that people should not do this expecting Christian results that they should expect for us to serve them even better because they're believers and beloved. And so I think that what we do can really have great impact because the Lord's with us and because he expects us to do it all the better. So, yeah, I think that Paul's words really ring in my ears often to really serve all the better.
John Coleman: What an awesome way to conclude the podcast. Ross. Ross. Henry, Very grateful for you all. As a relative newcomer to the space, I'm still learning at the feet of giants here like you too. Ross You're certainly conducting a great ministry through your work at Oak City.
Ross Roggensack: I'm just old John I am just old John
John Coleman: Appearances wise, weathered and wise. And Henry, of course, deeply grateful to be your partner, business partner, as well as to see the ministries at FDE FDI flourishing. And we're grateful to you all for your leadership in the space. Thank you for coming on the FDI podcast today.
Ross Roggensack: Thank you, John.
Henry Kaestner: John, thanks for your leadership. Great doing with you guys. Thanks Ross.
Ross Roggensack: You bet.