Exploring Private Market Investing with Cole Pearson

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And how would you go about it? Cole Pearson is here today to break it all down for us. And then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. Well, it's great to have our friend Cole Pearson back with us. He's president of investment solutions at One Ascent, a family of companies dedicated to helping you align your investments with your Christian values. One Ascent is also an underwriter of this program. And Cole, it's great to have you back with us. Thank you, Rob.

Great to be with you guys. So, Cole, this may be the first time the topic of private markets has come up on the program, so we probably need to start with a definition. What, in fact, is private market investing? Rob, private market investing, quite simply, is just investing in companies that are privately held, as opposed to companies that are listed on public stock exchanges. So, you could think of the local hardware store or a manufacturing plant in your area that you know is a privately held business.

You know the business owner versus a large company where shares are traded back and forth on the stock exchange. These private investments, they tend to focus on rapidly growing for-profit businesses that we believe can serve as powerful economic engines for growth, but also have significant potential for positive impact. And so, private market investing, when you hear about that, you might hear terms like private equity or venture capital or private credit. These are just, again, accessing companies that are typically at earlier stages in their development, and they give some unique opportunities for investors to support those for-profit businesses and, again, have potential for making impact.

Yeah, that's a helpful definition. Now, when we hear some of those terms you just threw out, private equity, especially venture capital, that may conjure ideas that are a little scary to investors and that these carry more risk. So, why, in your view, are public markets more accessible and considered safer for mainstream investors? Well, public markets certainly have been more accessible. If you think of the mainstream investors, that's because of enhanced regulatory oversight, greater liquidity than private markets tend to provide. And so, yes, public markets can tend to be thought of as safer, but we do need to remember all investments involve risk. So, we need to, for your audience, we need to remember when we're investing, whether it be in public or private, there is risk involved. But private markets, including venture capital, they offer unique advantages that can complement public market strategy. So, we think you should think of these in tandem, how they can complement one another. And it's just, again, investing in a company earlier in the process of the life stage of that company.

Yeah. Now, still many think private markets are more sophisticated and perhaps riskier than public markets. So, is that true in your view? Well, I think it's true that private markets, including venture capital and private equity and other forms of alternatives, they are considered more sophisticated. This is why you've seen institutional and ultra high net worth investors, they've been involved in private markets for decades. In fact, the average institution has about five times more invested in private markets than the average retail or mainstream investor. But that perception doesn't tell the whole story.

Again, sophistication isn't necessarily a bad thing. Part of the reason why institutional and large investors have accessed private markets for decades is because they can offer enhanced return potential. There's a higher potential due to inefficiencies in the market and less competition and a larger pool of companies for that matter. A quick stat that I found interesting in the US alone, Rob, there's 4000 publicly traded companies that have revenues greater than 10 million dollars annually. They're doing 10 million of revenue in the private markets.

There's one hundred and eighty two thousand companies above that threshold. So you have a large opportunity set in the private markets that these institutional investors have been trying to get access to. But they also can provide diversification benefits. Again, why do institutional investors historically, why have they included private markets in their portfolios? It's because they offer lower correlation to public markets, different return streams, company specific valuation drivers, as opposed to things that might affect the whole market and have kind of headline risk, if you will. And so these different private markets allow investors to build a more diversified portfolio. Yeah, that's really helpful, Cole. And I think it just highlights the opportunity as we seek to be diversified and, of course, investing in alignment with our age and goals and risk tolerance.

Perhaps that private markets have a place, especially if we can integrate our faith into these as well. We'll get to that and more just around the corner. Cole Pearson with One Ascent with us today.

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But other children are still waiting. Make an eternal impact on a child now with a sixty two dollar gift at cross international dot org slash faith. Thanks for joining us today on faith and finance with me today, my friend Cole Pearson, he's president of Investment Solutions at one ascent, a family of companies dedicated to helping you align your investments with your Christian values. One Ascent is also an underwriter of this program. You can learn more at capital dot one ascent dot com. That's capital dot one ascent dot com, and that's specifically the website that one ascent around the private markets and private market investing.

That's what we're talking about today. This is simply investing in companies that are privately held as opposed to companies that are listed on public stock exchanges and aligning your faith with those same investments. Cole, before the break, you were talking about some of the reasons why we might want to invest in the private markets in these more sophisticated types of investments. You talked about an enhanced return potential, a potential for higher returns due to a number of factors. Also what you called non correlated diversification, this idea that we can have a more diversified portfolio by investing in things that have low correlation to the public markets for a variety of reasons. There's other reasons to invest in, particularly just the growth potential of these companies, right?

Yes, absolutely. When you look at public companies today that were at one time venture backed, that's one way we can look at this. Today, they make up roughly half of the universe, so half of all publicly traded companies in the US today were at one point venture backed or in the private markets. But what's interesting is they make up for about 77 percent of the market cap or the value. So that means that these once private companies now public are worth more than their counterparts.

They're growing faster. And what's interesting, they also account for 92 percent of the research and development spend. So that means they're still focused on innovating and committing to spending on growing and innovating new technologies and new things. Another benefit for us that we we see, I want to send is the ability to make direct positive impact. Again, these are privately held companies where we can have a larger say and a larger stake in the management team and the board and the direction of that company, making sure that those companies are bringing blessing to people and not using business or technology as a means to potentially cause harm.

Let's unpack that a bit more. What opportunities exist specifically in the private markets called for investors who truly want to align their holdings with their Christian values? Yeah, this is a growing space. Again, it's growing and more more fund managers, more companies are coming to market. And so there's a number of them that exist out there.

Want to send is one of those. We have funds in the market, both for for high net worth investors, but more recently, even an interval fund, which is a fund that's like in some ways a mutual fund, but invests in private equity. It allows for liquidity at certain intervals. It's meant to be a long term investment, but we're very grateful that this space is growing, giving access to mainstream investors. Let's talk about that, Cole, because one of the barriers historically for the average investor to get into the private market space has been accessibility. It's typically reserved for those that are institutional or high net worth.

Is that the case here? And how does the interval fund solve that? Yeah, for certain interval funds, it does break through those barriers. There are lower minimums. So rather than having a two hundred or five hundred thousand dollar, even a million dollar minimum, you can invest for as little as five thousand dollars.

Another barrier was the cumbersome process. A lot of times private equity investing required lots of paperwork, sometimes required filing tax return extensions. You'd lock up capital for for 10 years or more. And again, the interval fund structure allows for investors to access this at lower minimums with a simpler process and a ten ninety nine vehicle from a tax reporting standpoint. And again, you have that quarterly liquidity intervals depending on the fund.

That's really helpful. Now, we've covered some of the reasons why an investor might want to consider having private market investments in their portfolio. But let's lean into the opportunity with faith alignment here, unpack that a bit more, because I know there are some unique opportunities for faith integration in the private markets.

Yeah, absolutely. Robin, it starts with our really our philosophy, if you will, that we believe genuinely that rapidly growing for profit businesses are one of the most powerful engines that God's given us to make impact in the marketplace. When you think about private investments, again, we are providing capital directly to the company.

We're not trading it with another investor on an exchange. We are supplying the essential funding that these business leaders who have values alignment and faith alignment with us so that they can accomplish their business objectives. They're developing cultures in their workplace. They're building technologies and and different things that are making a positive impact in our world through the marketplace. And so that's what's really exciting for us as private investors, the the potential for positive impact where we can do that in a close alignment with business leaders.

Think about maybe just even think about the big publicly traded companies that you know of, the household names. What if the management teams behind those companies were believers? What if they had capital that was behind them aligned with them, helping them accomplish what it is God put in their heart and in their mind to bring into the marketplace from a business standpoint? And it could be as exciting as a new health care or medicine, creating a cure for cancer, or even as basic and simple, but no less important as a steel company that's providing infrastructure for roads and for buildings and for houses.

What if we can equip those management teams with capital that's aligned to further God's kingdom through the marketplace? That's what's really exciting for us. And the private markets offer a really unique opportunity for us to be at the table engaging with those types of leaders. Yeah, that makes a lot of sense. And it is an exciting opportunity.

All right. Now, you mentioned that One Ascent, you all have one of these funds that is actually available, not just to ultra high net worth investors. So give us an overview of what's there for private market investing at One Ascent. Yeah, we recently launched the One Ascent Capital Opportunities Fund.

The ticker is OACOX. You can find more information about that online, but it's real simply it's an actively managed diversified interval fund designed to deliver private market returns with positive kingdom impact. And what makes this fund unique is that it's accessible. There's no accreditation requirements. So, again, it's available to everyday investors with no subscription documents and paperwork.

It's got a five thousand dollar minimum. Obviously, it's aligned. That's core to everything we do at One Ascent. We want to further our values and our faith through our portfolios so that alignment is key. And this fund is also meant to be all in one. It's meant to be a diversified portfolio that invests across the private markets in equity and in real estate and in real assets and in private credit. And we're really excited to bring a brand new fund like this to the marketplace.

Yeah, it's a great development in the faith based investing space. Cole, for somebody who is working with an advisor and perhaps they've never had this conversation with their advisor about aligning values and their investments. How would you encourage them in your closing moments here together to introduce this idea?

What should that conversation look like? Yeah, if if I were speaking to a client of an advisor who wanted to bring this up, I might have them share that our portfolio matters. We certainly are trying to hit our financial goals that you're working on with your advisor, but your personal values matter as well. And so you might recommend to your advisor that it's important to us to know what we own and just ask questions. Ask your advisor, do you know what's inside of our portfolios, inside of the funds that we're owning?

And if not, can we take that step to go one layer deeper? That sounds great. Well, folks, if you want to learn more, whether you're sharing it with your advisor or for yourself, you can visit Capital.OneAscent.com. That's Capital.OneAscent.com. Cole, thanks for being with us. Thanks so much, Rob. That's Cole Pearson with One Ascent, a leader in values based investing. We're back with your calls after this.

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Soundmindinvesting.org. We're grateful to have you with us today on Faith in Finance. Take in your calls and questions. Lines are filling up, but we've got room for a couple of questions at 800-525-7000. Let's go to Oklahoma. Hi, John.

How can I help? Yes, sir. I really enjoy your program. Thank you for taking my call, sir.

Thank you. I am 64. My wife is 61. We recently got married. We're buying a home. We're putting down the earnest money down today, but it's for $230,000. And at our age, whatever the mortgage company we're going through, I don't understand how he's not really saying anything about putting anything toward interest, or he hasn't said like a down payment or anything, and I'm just really trying to need some guidance. You know, we have some money saved up, you know, between the two of us probably have like $300,000. This home is $230,000 plus your closing costs, interest rate of like $6.75.

But what would you recommend, sir? Yeah. Yeah, no problem.

Are you getting a 30-year mortgage? Yes, sir. Okay.

Yeah. And so you're putting the deposit down on the home, and then what are the other terms? Are you, how far off is the closing?

The closing will be within 30 days, 45 days, I think. Okay. All right. And you've already selected the lender? Yes, sir.

Okay. And did you get a couple of options, or did you just go with who the realtor suggested? The realtor, where we go to church, the realtor, we all go to the same church, and she recommended this man.

He seems like a very good Christian man, so, you know, we've both been away from that area for some time, so we wanted to, you know, get him to go with, but, you know. And is he an independent mortgage broker representing lots of companies, or is he just captive with one company? I would think independent, but I really don't know, Rob. Okay. Got it. And also, I was going to say, I'm 100% service-connected, so with my, what I received from the VA and my Social Security, I'm drawing about 5,650 or something a month. So what do I do?

What would you recommend? Yeah. And do you have, what do you have available to put down? Well, what I'm saying, I've got a CD, but it's walked in for probably two more months, or it's $50,000, but I've got probably, in one savings account, I have like, it's a money market, so it draws a little bit of interest. I've probably got $205,000 in that, and then she has probably right about $90,000 in the savings account. Okay.

All right. Well, I would put down a good bet. I mean, at a minimum, I'd put about $50,000 down, which would be about 20% of this purchase. That's just going to get the monthly expense down. I mean, you're going to get, for every dollar you put that you don't have to borrow, that's equal to a guaranteed 6.75% return, which you're not going to get in the CD, you're not going to get in the bank, you're not going to get that guaranteed in the stock market. So I think it's to your benefit to balance this idea of, let's avoid paying 6.75% of our money when we don't have to. But on the other end of that is, let's not use all of our liquid reserves, so it's all not tied up in the house. And so I think we need to find kind of a happy middle there, but your ability to put a meaningful amount down to save that interest and keep that payment low, just so it fits nicely into your budget.

You know, as you guys are starting out in your new marriage and living on a fixed income with plenty of resources, but you know, I think that's probably the key. So I wouldn't wait for his lead, I would decide between the two of you how much you want to put down, and then go ahead and do it and just let him know. And in fact, if you're putting down a bunch, I'd see if you could get a little better interest rate on that. And I would prefer that you get two to three bids from two to three lenders before you landed on this. I mean, this is, you know, one of the biggest transactions you'll have in your life. And I think having multiple offers from a couple of different companies competing against one another is never a bad idea. Does that make sense, though? Okay.

Yes, sir, it does so much. One option would be you could check with our friends at Movement Mortgage, which is a Christian mortgage company. You go to movement.com slash faith, or you could just work through this individual and tell him, hey, can we get a couple of other options in here just to consider? And then I think the two of you, you and your new bride, you all sit down and think and pray through how much do we want to put toward the house?

Because again, there's meaningful savings there in the saved interest, and it just keeps your lifestyle in check so you don't have this big monthly payment every month that you have to try to absorb in your spending plan. John, I hope that helps. Congrats on your new marriage, sir. And thanks for calling today. Brandon, Florida. Bob, go ahead.

Hey, Rod, thanks for taking my call. Quick question. My son has $7,000 that he had thought he put into a high yield savings, but the bank that he put it with, I think it was online, they got merged into another bank and he found out that the interest rate is not like 0.1%. So he's looking to pull it out and wants to know where can he put that money to earn a good interest rate? Yeah, so if he's looking for a bank product and a good interest rate, I think one great option would be our friends at Christian Community Credit Union.

You would know that it's a banking partner that's aligned with your values. The only requirement to join CCCO is you have to be a Christ follower, and they have what's called a welcome CD that's paying, I believe, 5% up to $5,000. You could learn more at JoinChristianCommunity.com.

That's JoinChristianCommunity.com. That could be a great option for him. Beyond that, I would say if he's looking longer term and he's okay taking some risk, and this is not something that has FDIC insurance, I would say starting to invest in stocks would be a great option. But if that's not on the table at this point and it's really just high yield, I would say either our friends at Christian Community Credit Union or he could head to Bankrate.com and just kind of compare among the online banks who's the highest rated with the highest interest rate. Okay, awesome.

Thank you so much. Alright, those two websites again, JoinChristianCommunity.com would be the first place I would go. And then Bankrate.com, he'd just click on high yield savings and he would see a list of the four plus star rated online banks and it would show you that they're FDIC insured, what their current interest rate is, and whether or not there's any fees or minimums.

At Christian Community Credit Union, it's called the Harvest High Yield Savings, and that's what's paying 5% right now. Bob, thanks for your call today. We appreciate it. Well, folks, we're about out of time today. We covered a lot of ground.

You know what? I love being invited into your stories each day. It's an incredible privilege.

It's the thing I most look forward to when I wake up every morning is just talking to our listeners because you want to be found faithful. You realize God is incredible. And boy, what a gracious gift he's given us, starting with found salvation before even the first dollar. We are rich.

We have an abundance. But then beyond that, he gives graciously differing amounts. But our charge is just to be found faithful, to enjoy what he's given us and to manage it wisely and to give it generously and to help others in need along the way.

And what a privilege it is. Well, the whole goal of this program each day is just to help you do that. Come alongside you and say, you got this, you can do it. Maybe we've made some mistakes in the past, but going forward, let's make those wise decisions that align with the heart of God and the Council of Scripture. I hope that's been true about this program for you today, and I hope you'll come back and join us tomorrow. We'll do it all over again. On behalf of my team today, Adam Sunneth, Pat Montague, Devin Patrick, Jim Henry and the rest of the team here at FaithFi, I'm Rob West. Hope you have a great day and we'll look for you back here again tomorrow. Faith and Finance is provided by FaithFi and listeners like you.