Preferred Return Podcast

Waiting on the World to Change


In this episode, I’m joined by Holden Lee: a strategic leader and investor focusing capital to drive meaningful change in the world. His career has been a methodically intentional attempt at developing the unique viewpoint that he has on the next major opportunity in capital markets: Impact and ESG.

Having first seen the opportunity in 1992, he explains how he has orchestrated his career to develop the expertise that he has, having spent time at TPG, Cambridge Associates, and now through his current role as CFO & CIO of the Jewish Community Federation of San Francisco.

He helps define terms like “Impact” and “ESG”, makes a compelling case for why it’s so interesting, shares what market leaders are already doing to be ahead of the curve, provides help on how to develop an ESG plan, and we marvel at the role technology is likely to play in the transformation into a modern, multi-dimensional investment management continuum that — in his own words — is mind-blowing. Listen to me agreeing with him as — with actual mind blown — I realize we’re talking about something completely different and much bigger than I could’ve comprehended, even having heard him say it before.



Jeff Williams

Ladies and gentlemen, it’s Jeff Williams for Preferred Return. And we have got a gem of an episode for you today. I’m extremely grateful to be joined by Holden Lee, and Holden’s day job is as the Chief Financial Officer and Chief Investment Officer of the Jewish Community Federation of San Francisco. But probably more appropriately, I’m going to read word for word his LinkedIn headline.


It’s strategic leader and investor focusing capital to drive meaningful change in the world. And extremely excited. We’re going to be talking about ESG, impact, all of the things that are big topics here the market right now. And so without further ado, Holden, thanks again for joining us.


And why don’t you take a minute and tell us about your background. Tell us about your experience as an individual, but then also over the course of your career, as well as tell us a little bit about the Federation. 

Holden Lee

Jeff, so first thanks so much for inviting me to speak. So I’m calling from sunny San Francisco, where I’ve been for the last 20, some odd years. My career as the LinkedIn profile mentions, I’ve had a long-time career interest in innovation at the intersection of the public, private, and philanthropic capital markets. And my career has been a deliberate sitting in different seats to get a 360 view of the investment ecosystem.


So I’ve been a fund private equity fund investor. I’ve been an institutional portfolio manager, chief investment officer, operating chief financial officer of an advisor to boards and to funds and to families. So really try to get that view. And my current day job is chief financial and investment officer of the Jewish community Federation of San Francisco.


We’re a $2 billion philanthropic platform serving the Jewish community in the Bay area. And we make about $200 million in grants annually. So it’s a very large diversified platform. In addition to traditional institutional investing, we have been trying in the last few years to find innovative ways to push assets in the community to have impact.


And that includes finding some innovative ways to deploy money. For example, in the last year with COVID-19, we’ve been trying to push money to deploy assets, to community micro lending, as well as community development, finance institutions. So that’s my background. It’s an exciting and a very challenging time to be an investor, but I’ve found that those times generate tremendous opportunity as well.

Jeff Williams

Holden, I think you’re you’re being. You’re holding too much of your own credit from us here. You started your career well arly on in your career, spent some time with TPG, went on to be a managing director at Cambridge associates. And I think, the first time that you and I had the opportunity to meet and talk, I asked you when the first time you really started to think about impact investing.


We’re getting to, defining these things here. But, I think you said that was probably about 1992, if I recall correctly. And that was this moment where it was the gravity of that moment was pretty intense. So, maybe tell us a little bit about that. Very early on in your career where you started to see something that.


I think 10 years or so is the awareness of this that I have. And certainly doesn’t go back to 1992, but it’s an incredible sort of vision that you had. Tell us a little bit about that. 

Holden Lee

Sure. So I, it’s funny. I studied politics as an undergrad and was always interested in multilateral efforts to move big issues.


So that, that kind of government kind of thing, United nations and all that kind of thing. And I actually ended up very fortunately working for a developer of private infrastructure in Asia in the early nineties. And so there, the point was that developing countries couldn’t afford large scale infrastructure projects, like power, toll roads and things like that.


And the way forward was to actually bring in private investors on long-term 30 year concessions to actually build, own, and operate these assets, pull in billions of dollars of capital from the world bank, from the Asian development bank, from export credit agencies, and the developer would actually harness all those sort of government and the funds banks, just traditional funding, into these projects and would actually build these and run these assets on a private basis with a government contract.


And that was the aha in my mind is this is a way to actually put together actors and sources of capital that wouldn’t normally go together to really push and move the needle. And that was where I got hooked. And 10 years later, I actually started adding philanthropic dollars to the mix. In a different context, it was actually land conservation, same idea, all these different flavors of money, different actors that wouldn’t normally work together.


But the need presented the opportunity for people to actually find ways to harness it together. And that to me has been my career. And I’ve, it’s been exciting and interesting. 

Jeff Williams

Actually incredible. I got goosebumps just now hearing that. And we were talking ahead of time just a minute ago.


So I want to come back to. This kind of concept, and I love the way you framed it. It was like government together with some kind of private capital and expertise and stuff and frame how changes affect that. Let’s pause that for a second. And first off for, I think, hopefully there’s listeners we have with us today, where it might be a little bit unclear.


The topic of our conversation today is, kind of impact, ESG, JEDI, kinda more recently. And from my perspective, I think that there’s been a couple of iterations of this, right? You’re talking about very early iterations that you saw. And I think that today there might actually be a little bit of confusion on what’s what, and what the distinctions between these sorts of things are.


And there might even be a case for, oh, it’s all the same thing. And by the way, hold on. I’m gonna anoint you the godfather, your origin of this. So let’s get it. Your help in distinguishing those three terms that are used is what’s what, why is it important to distinguish them and then we’ll come back to that previous point.

Holden Lee

Right, so there’s definitely a lot of alphabet soup around impact investing, social return, Sri MRI, all that, but generally the terms that you threw out so ESG, environmental, social governance, that’s what it means is just those considerations in investing. JEDI is justice, equity, diversity, inclusion, which are our other considerations, and impact is just a general term for basically what you want to accomplish.


And the way I think about those terms, the common through line it’s really two dimensional. One is that impact generally is either an end goal or a means to an end. So it’s either an investment strategy or it’s actually an end goal in and of itself and different people enter into this work for different reasons.


You could want to generate more equity in the world as a social impact. Or you could say that by using social impact, social equity strategies, you could actually generate more money, more actual financial returns. So it’s either a strategy or an end in it of itself. That’s one idea. And then the other idea is that it really is, it’s become an additional investment dimension.


So if you think about a traditional risk return spectrum, Now you’re thinking from two to three dimensions, risk, return, and impact, and it blows the mind on how you hold all this stuff simultaneously. But that’s the way I would actually up frame this kind of this world. 

Jeff Williams

Thank you. That’s an amazing way to do it. I think that we’ll all be better off for you having made it so concise there, but it’s also, you can also, despite the distinctions, see why it’s just this general sort of a bucket of things that get grouped together. And I think that it’s appropriate to a certain extent because.


We’re living in a time where it’s unprecedented, in many ways, but certainly it just feels like change just generally. And so you group the things together. So I’m curious about your take on how we got here. Again, I’m conscious of, we’re going to end up getting back to this sort of government and effecting change and what have you, but where are we in this sort of timeline of things? How did we get to today, March 2021? And why are, why is it so important to be talking about this stuff? Or why are we hearing so much about it? 

Holden Lee

Yeah, no, I think, I think the main driver is that the issues facing the world broadly are just as big, if not bigger than they were at any time in recent history.


So things like climate change, things like social cohesion. Those are all very topical and very big. I was reminded by this because we just passed the 50th anniversary of Milton Friedman’s statement in 1970. Basically the summary is that the only objective of business should be profit as a business, as business.


And I think there’s a recognition broadly that just siloing the world that okay. Business, you do your thing, government, you do your thing. Philanthropists, you do your thing. It’s not actually enough to address some of these big problems. Some of the work that I did in the early days in the nineties, privatization is a recognition that these different actors and these different tools need to evolve and work together to solve those big problems. So that’s, I think in a nutshell, that’s what’s driving this push towards social and impact investing. 

Jeff Williams

Yeah, no I totally agree. And you’ve perfectly brought us back to this point. So I think that we have the golden age of information. We’ve never had access to information like we do now. And I think that in many cases there’s a new generation of people that are being enabled with information and modern ways that are younger than historically we’ve ever had.


That age keeps coming down. And so you do start to get these sort of young, younger folks more interested in some of these kinds of societal level topics. And I think to your point, there’s oftentimes a tendency by anyone of any age to assume that this is stuff that the government should be figuring out for us, and certainly logical, but it’s a little bit more complicated than that.


And that’s what you started to put together early on, right? 

Holden Lee

No, definitely. I think, the more I thought about it definitely it’s a generational thing where the millennial and younger generations are taking an interest in this. And it’s creating a part where there’s definitely a pull for this kind of investment.


So between the millennials, the generational shift in wealth that’s happening right now. And then along with even a recognition by government that they need to access broader toolkits. So if you think particularly about the European governments sovereign wealth funds, pension funds, they are taking an active interest where they are starting to value values in the investment strategy.


And that’s important. So when you hear about some of these shifts from shareholder as being the sole constituent to stakeholder constituency, or recognition or broader recognition that’s really important. And I think it’s also important to think about this as a spectrum.


So it’s not, it’s no longer either, or it’s no longer profit or values, it’s actually profit and values is blended return on investment. And in the most powerful cases, it’s actually by incorporating values and value strategies, impact investing, into the investment strategy itself. You actually generate better financial returns.


So that there’s, it’s a back to this risk return impact continuum. It’s definitely, you should think about it that way. And there are ways to do better and there are ways that are just not as powerful. 

Jeff Williams

Yeah. And certainly I think government is an important part of this, the tendency to think that only government can do this is you’re missing a big piece of kind of risk really.


And that’s where we play within private capital markets. There’s an important role capital dynamics and strategies, and expertise, and large amounts of capital that come together in this equation. You mentioned something interesting.


My first go around with what at the time was primarily being called impact. About 10, 15 years ago. It was interesting. I think that there was a lot of buzz. There was a lot of excitement about the spirit of it. Let’s see, the way you put it was let’s affect something, like let’s set a declaration about, how we want something to be and let’s go make it happen.


And it felt to me as if it, maybe stalled out a little bit. And I’ve always wondered if that wasn’t because it wasn’t fully mature and the dynamics there have to be, it can’t just be about impact if you’re going to bring a complicated ecosystem of characters together.


Because I think that I recall hearing things like, we can lose all of the money. So long as we’re affecting a change. And frankly, as a software vendor, we did happen upon people that I’m convinced, would have lost all of the money. It was like the spirit of what they wanted to do is great.


The expertise perhaps was lacking a little bit. And I think that’s the difference now is that you’re actually finding that the expertise in the coming around to the spirit and a perfect mix of, hey, we can do this, we can do it a certain way. And the evidence is starting, we’re maybe in the early stages of it, but we’re starting to see that indeed, like in the, publicly available ETS, that some of these ESG funds are starting to outperform.

Holden Lee

No, definitely. And so I think, again, this idea of continuous very important risk for return impact. So again, just like any other market, what are you trying to accomplish? What is your profile is very important when you’re matching capital to opportunity; broadly speaking, you want to make sure there’s a match, right? There’s an expectation.


And I think the most exciting thing that’s happened in the last five years or so 10, five, 10 years is a recognition that the strategy can actually very reinforcing this blended ROI that there are, it’s a tool that these kinds of strategies or tools. When you actually blend financial return with some of these impact strategies and they’re self-reinforcing and outperforming, then you get this interesting flywheel where it’s like, why not?


It makes sense. Like, why wouldn’t you do it this way? For example, at a corporate level, if you can develop packaging strategies that use less resources, and take less money to ship. And it’s good for the earth. Why wouldn’t you do it? This is your bottom line. Why wouldn’t you do it? I said, I think that is an aha that is driving some of the most exciting work where it’s a very natural fit and where it’s very natural, then dollars will flow and you get this flywheel going.

Jeff Williams

Yeah. And in some of these markets, early in my career, I spent some time in venture capital during the housing crisis and subsequent to it. The clean energy thing, and the reality is from the viewpoint that I had, I saw a lot of money get lost, and it, at the end of the day, it was a simple dynamic, subsidies were required, the market dynamics of the cost of, traditional sources versus not.


And it just didn’t, it was too forced. And I think that to your point, you know that now we’re starting to come around to see that, like you said this earlier, that some people will actually pay more for that. And that seems to be this very important shift because when people are committed to the spirit of something, that on its own, isn’t always enough.


You do need some sort of market force here. And the fact that we’re starting to see the transfer of generational wealth to millennials, the fact that they will make different buying decisions and stuff. Maybe that’s just the spark, they sort of needed because it may not have always been the case that kind of more sustainable packaging would have been cost-effective to all of the businesses, at all times. 

Holden Lee

I think there’s been a shift as well, a recognition that this kind of work like any other investing requires discipline and data.


So just because you’re trying to do good, you lose any of that discipline. Classically for investment, any investor is going to want us to verify what is the opportunity set and what’s the strategy? Do I have the team and the expertise to actually find the opportunities, assess the risks, build a portfolio, nurture that portfolio all the way through and then make the calls around exit as well.


It’s the same. Regardless of whether you’re doing an impact strategy or not, you need to follow those same steps, be disciplined, look at the data. And then as you said, as the industry is maturing, not only will you have the data on performance, but we’ll also have benchmarks as well. And it takes time, it takes information, but there is a no quote unquote right way to do it. That is just that follows traditional investment discipline. 

Jeff Williams

Yeah. It’s a perfect segue. I want to talk about two things there. Data benchmarks. So at the end of the day Altvia is a technology provider, private capital markets.


And this whole conversation we’ve had to this point was thinking it sounds like technology there. It sounds like technology there. And then, perfect segue with data and benchmarks. So I want to talk a little bit about just technology generally. But this is not to talk about where Altvia plays and where we don’t.


I’m more interested in anything that can be rounded off here in technology. We got this momentum and technology can step in and create a quick bridge to, avert a disaster. Let’s find it. Right away off the top of my head, when I think about ESG, I think about MSCI.


I think a lot of people tend to think that maybe they’re a leader in the technology and the data benchmarking side of ESG specifically. But I want to actually step back for a second from that and just say where is technology and this? We’ve seen the need for like-minded investors to find like-minded projects that set up for an exchange like dynamic that technology does, pretty well. Where is technology in this world? 

Holden Lee

Yeah, I thought of the problems in a couple of ways, one is just, as you said, being able to measure. You can only value what you measure. So the impact world has been struggling to find standards for measurement that will be meaningful and that could be captured in data systems and standardized.


So there are a lot of different standards that have been developed. A lot of good work has been done. Everything from the B labs setting up the B corporation. There are a lot of different standards like gears and the people were just getting used to using them, because I think the big one, one extreme is that you’ve measured like we’re going to measure a hundred different metrics.


And it just gets overwhelming and is even worthwhile? So that we’re going through generations and iterations of that and definitely technology, and I think big data and analytics will help with that. And certainly the indices like MSCI are helping as well because it’s, you have to measure it at different levels, harvest traditional at the fund level all the way down to the project and or company level as well.


So I try to build ways that information can flow in a standardized way from the specific activity, what the company or project all the way up to a portfolio. So that’s one chunk of the meat. And the other one that you mentioned, which is near and dear to my heart is this idea of trying to match investors to opportunity.


And this is something that I’ve thought of it’s like the industry has gone through a shift, much like the music industry, where before you had to buy your set album with the 10 tracks and we went and, years ago to the, the Apple playlist, we could customize it to drag and drop exactly what won and that’s been heading in the investment world on the private side.


Think about it. Investors want it the way they want it. They don’t necessarily want your standard portfolio. And so that’s why you have all this stuff around, the fund to fund industry co-investments variation. And I know fund sponsors, it drives them crazy.


It’s very hard to manage zillions of customized investor portfolios when all you want to do is punch out your standardized portfolio. Yeah. So that’s the other challenge. I think. 

Jeff Williams

We see that quite a bit. It seems like there’s just so many creative ways these days to access capital. Obviously, we’re living through the SPAC craze, but perhaps even the end tail of it.


For maybe a year or so I’ve just really noticed this uptick in creative ways to access capital, a lot of special purpose vehicles, co-investments, parallel raising of three strategies, core opportunistic, and I guess I hadn’t necessarily boiled it down to something that concise, but I think you’re right.


I think it’s that it’s starting to be about chopping the CD up into the songs, and getting access to the songs you like and, being perfectly happy and putting that together into this sort of little playlist, that’s actually a perfect analogy. I love that. I will just insert to that, that we are a B lab company.


In fact, I think last year we had one the best in the world award, which is really I think, top 10 or something, according to the measurements. But I think I want to come back to this idea of measurement at the portfolio company level as a B lab certified company, we have someone who weighs our compost every week with a scale, and we have to recertify every week, every year and the process by which we, submit data and, qualitative stuff as well is extremely onerous.


We do it happily. We believe strongly in the cause. And so it’s not necessarily that we have any problem doing it, but just at an infrastructure and logistics level. It’s no wonder that this is still one of the challenges. There’s 1800 metrics, I think, in the gears framework. How do you choose, a hundred is way too many. This remains a little bit of an issue. And so to even down to the companies, how do you collect it from some of the companies?

Holden Lee

And I think, in the end where the industry needs to go is, can you prove that you’re weighing the compost makes you a better company? Whatever that means, does that mean you’re a better, more effective, better citizen and all that. And there might be data, like five years from now, that actually weighing the compost is not the right measure. You can actually let that go.


And it’s these other three metrics that are actually the metrics cause data comparison to know thousands of B corporations. This is the one that better predicts. And that’s going to take a little bit of time, but that is also the promise of technology and data analytics to get us collectively there over time. What actually will make the difference. 

Jeff Williams

That’s amazing. I really hadn’t given too much thought to that, but a really interesting thought just in the sense that we’re thinking a lot today about this sort of measurement of it, and the capture of how much compost it was. And then there’s this kind of next phase. We weren’t just focused on measuring compost. We were focused on impact.


And now with the data on the compost to see, that’s not the thing that we should be measuring at all. And that’s extremely powerful when you’re not just focused on capture, it’s what did what you capture, tell you about what you should be capturing or not?

Holden Lee

So it’s the ROI. So taking another thing we’ve talked about, these JEDI for equity and inclusion. What actually correlates to success? So it’s important to, there’s a lot of, and a lot of discussion. Does diversity equal better decision-making, better resource allocation, better return, even financial return. Put aside societal return, but even financial return.


So being able to say, is it just having a minimal presence? Meaning checklists, we have one or two fill the box or do you need to go deeper? Does there need to be a certain sense of inclusion, which someone recently reminded me. Inclusion is a very different concept than just saying we have X percent of our team is, is a certain category.


So just correlating that and understanding how that actually results in results, is the next step. We just need to keep pushing them. 

Jeff Williams

Yeah, it’s incredible. Again, I think there’s a nice segue in there.


We hear so much. We talked to many GPS and I mentioned seeing a lot of creative ways to access capital is certainly one of them. That’s the front lines of that of, oh, we’re a first time this or we’re about to do that. And it, the fact that after 15 years myself feeling like, oh, I’ve never seen somebody do something like that lends to, wow, it’s getting very creative.


One of the things that remains and which is probably accelerating quicker, no matter what way that people are trying to access capital and private markets, is there’s almost always this question of what about ESG that we get? And I feel like the question being asked when we’re asked that is. What do we do for that?


And I’ve dug into it, a handful of times. And I think in many cases, there’s this dynamic where LPs are perhaps not for the first time, it’s the first experience for the GP getting it. And they’re saying can we take a look at your ESG policies?


And I comically imagined that, the GP runs off and Google’s like how to, craft it and ESG policy now, to be fair. I don’t think that there’s no judgment from me in that. I actually believe that people can be well-intended with ESG and still not quite know where to start.


And your experience here is tremendous. I know you have even still today, you advise funds on this. Where does somebody start? Who’s starting to hear for the first time from LPs or from prospects that they’re trying to raise capital from, that they want to get into ESG, or they want to see ESG policies?


Don’t start with Google. I tend to tell people like, step back, think about what you know is being asked for. Think about who’s asking it, what’s the sort of spirit that it’s coming from and actually be intentional about it. Don’t just be reactive. What do you say to that? How do people get started with that? 

Holden Lee

The first thing to recognize is that this is, it’s definitely not a checklist exercise. I think what we started this conversation is this, is the market place. Capital’s saying we value this and we think this is an important part of value creation.


However you want to define value creation. It could be a blend. It could be a blend between financial return and or outcomes we talked about before, but the marketplace is saying, increasingly we place a value on this. It’s saying, 20 years ago, what is your cost of capital? It’s just an inherent part of what investors are asking for.


So to that end, it is beyond just a checklist. It’s actually saying the investors were asking, how are these factors infused in your investment strategy? So one example is if you think about some of the environmental question, it is, how do you think about climate change as a risk factor in your strategy?


So if you’re a real estate fund, have you thought about flooding and flood zone at all? Or it’s just it’s so at a minimum, and there are different ways to think about it, at a minimum it’s because you’ve incorporated it as a risk consideration. And along the spectrum, it’s all the way proactively, have you even taken advantage of some of these opportunities that are coming out?


Because we as investors see that there are opportunities. If you think about the venture side, as we said, COVID-19, there are opportunities in reaching the bottom of the pyramid through FinTech opportunities and tele-health in ed tech and things like that have been driven by societal, environmental, governance type situations.


So I’ve even thought of that. So it’s more about really just, investors are saying, we see this as part of the world what’s going on. Do you see it as well? And start from there? 

Jeff Williams

I think that’s great. It’s not a checklist exercise. And I think there’s a tendency when one feels like they’re reacting to something they didn’t get ahead of. As if to Google, to find someone else’s checklist and use that as a template, we’ll tweak it enough to make a difference, it’s just different things. This is, being intentional and it’s a missed opportunity in that case. 

Holden Lee

We talked earlier about what’s driving this. Broadly speaking in the private markets, it really is about opportunity. We’re as institutional investors or even not institutional, just investors, we are all looking for return in a world that is, their valuations are high.


Now, you know that the public markets are high. There’s been a lot of money pumped into the system by the government. How do we sort through all that to find solid opportunities? That’s what we all want. And increasingly we are identifying this as a sector that is differentiated and potentially ripe for that opportunity.


So that’s what a lot of this conversations is around, not just for the financial return, but also as a possibility to solve a lot of the issues, current issues that we’ve been talking about, societal, environmental, governance as well. 

Jeff Williams

Wow. Yeah, that’s an incredible way of framing that, you can look at this from so many different ways.


And one way that I think is fair for a GP that feels like they’re reacting to this is, oh, a request for this. And what they would be missing is that there is this amazing opportunity and that’s the grounding for why people are interested in understanding how you will or how you will not be taking advantage of this, not because of politics or any reason, except that the combination of the desire for financial return and for social impact, is this extremely important sort of wave we’re entering into, and this is the way we’re going to start getting the inputs to get it. Incredible. 

Holden Lee

I think what we said earlier, it is a very exciting and interesting time. So I think, the other trends that I see in terms of talent development, young people, young professionals are very jazzed by this. And there’s been, there’s so much creativity and excitement and increasingly the industry is training in that direction, business schools and all that.


So there’s a lot of young talent that’s extremely motivated by this. And if you look at the innovation in terms of strategies, vehicles that we talked about, how do you actually deploy the capital structures that we talked about? It’s all wrapped up in this movement as well. And your end goal is to try and meet the needs better.


And so for investors, point of view, from a foundation, as I represent now, a foundation that’s trying to generate more financial, and impact for the world. We’re looking to these solutions to do that. And many other investors are doing the same thing. 

Jeff Williams

Another thing that was interesting in there, I think if you’re a GP and you feel like you’re reacting to developing an ESG policy, wait until you feel like you’re reacting to hiring talent. It’s that big, everything’s changing. This isn’t about the ESG policy. It’s about the type of talent you will be having, coming into your firm pretty soon. 

Holden Lee

As I said before, this is the marketplace I’m calling the marketplace, it’s not just the capital, but it’s also the talent. And then. Partnerships who you can actually partner, partner with. People are seeing this as being seen as a core competency, as well as an infinity. And so I think the challenge for GPs is how to position yourself, given this marketplace change.

Jeff Williams

So then help us understand from what you’ve seen, you’re obviously far as I’m concerned, again, the godfather here and some amazing insights. And so you help advise GPs. And so what have you seen from the GPS that you have relationships with, or with whom you’ve worked to advise, what are some of the top ones? You don’t have to obviously mention specifics, but what is it that it makes you feel like, Oh, this is somebody who gets that. Who’s really saying this is an opportunity instead of something I have to go develop. 

Holden Lee

I think a word that you used I think underpins a lot of this work and the word is intentionality.


I come back to the original discipline in investing. It’s really about clearly identifying the opportunity set. More and more investors are looking for unique opportunities, right? So that’s something that we all would pay money for. It’s actually that sourcing stuff that you can actually, you can’t find anywhere else or the people who see things in a different way.


And then the discipline to actually follow through. It’s interesting. I can speak for my current work at the Federation. One thing that we are trying to do as a foundation is we’re trying to deploy money to underserved communities. That’s part of our mission, but we want to do it in a way that also demonstrates sustainability and financial return.


So we’re turning to community development, finance institutions, which are mission-driven banks, essentially. So it’s institutions that are not designed to maximize financial return, but to have a blend. And for us, that particular opportunity meets the need in a powerful way. And there’s a way to do it.


You underwrite the risk, just like you would any other investment. And you look at what you’re trying to do. And so for us, it meets the need. And so I think there are other needs that are being articulated by investors. And so the GPs that can actually find those interesting opportunities, and it doesn’t have to be purely mission-driven in the sense of, ‘I want to help people at the bottom of the pyramid for financial access.’


It could just be, there is a financial opportunity in trade finance, for example, because we see that as an underbanked underserved demand for capital. And I can design this strategy that will meet it, and I can demonstrate the x IRR, the x multiple of the term. And that will fulfill the need and it, and actually people can see that reinforcement cycle. 

Jeff Williams

Yeah no, that’s incredible. We talk a lot and we have a podcast episode even about, what will you see as the modern LP/GP relationship? And it’s modern and yet not modern at all.


And I say that because not modern at all, from the perspective of, it’s still about telling a story, it’s always been about telling the story, but historically it was largely, here’s this pitch stack, here’s our story here’s what makes us unique. And I’ll be honest, in many cases, having been at a fund to funds and it’s that, that doesn’t make you unique.


That’s what everybody says, right? The team’s been together for this long and all that stuff. And oftentimes there wasn’t even really a story at all, but you could start to develop yourself with a little bit of data, historical track record. Okay so turns out this team is pretty complete.


They do have proof that they’ve been doing this, there are enough companies, like the ones that they’ve done this with, to create value and all that stuff. That’s the old school, hey, communicate that in a slide deck and a lightweight kind of data package.


We believe there’s a more modern way to tell stories with data. And so even impact, focus or ESG, the ability to start to develop, hey, here is the type of company that, we do well with and looking for what you’re looking for in the data, but also letting the data, maybe show you that there’s actually the type of company that’s not in your pitch deck that you’re doing really well with too.


And that wasn’t something you were looking for, but here it is. When you step back and bring impact into this, the amount of data we’re talking about it, nearly blows my mind at what the story could be in and how it could be data-driven. It’s incredible. 

Holden Lee

It’s incredible. So it’s overwhelming on one hand. So you think of Excel spreadsheets with rows and columns of data, but I think, one thing is around visualization. I think it is going to be important. Some ways to tell the story simply. Data should be able to help back up the authenticity of the narrative.


I’m a GP, I support, diversity, equity, inclusion. How many people on my board are the first populations, that’s one data point, but does it actually translate down? So telling that authentic, awesome, authentic stories can be important. The other thing I know that’s been debated and challenging about impact, is what is the direct versus indirect impact?


I invest in a company that employs 50 people. What is the downstream upstream ripple effect of that? I think it is also a potential down the road for technologist solution. I’ve often thought here, people have said we can’t trace where the dollar goes, like literally, but actually you can.


That’s actually what blockchain is, we don’t think of it that way, but you can imagine. The ripple effect you could theoretically see where it goes through a tagging. This gets into the privacy issues and all that, but that’s like way down the road, even not so we dealt with it. 

Jeff Williams

We’ve believed and we offer for some of these forward-thinking GPs a solution where they can actually proactively make data available to their LPs. No longer does the LP have to make this onerous request.


So could you give us this and that, they’re being met with a consumer like, experience, they’re oh wow. I could actually self-serve here. Visualization is the mode for that. And so I could choose a geographic region, and companies that meet that profile and all that stuff.


And there’s certainly an ability in terms of trace, if you define tracking each dollar, just simply at that level. And not, in a ledger for the public to see in blockchain. It still feels many GPs are anxious at that idea and I totally understand why I have conversations with them oftentimes.


And I say, when it’s hard to develop your own story around what’s going on, because you don’t have the data to support it. Then you feel very anxious about letting somebody look at that data. As soon as you start to put it together, you actually start to find some pretty interesting things there.


And again, understand the sort of anxiety of it, but I’ve always looked at it as an opportunity to let your LPs find that story for you, it’s in there. And if it weren’t, you probably wouldn’t still be doing this. And you mentioned how impact almost adds a new dimension.


I’m going to say, it’s going to add this new data dimension in this dynamic, to where if you can wrangle all of that data. And you can make it available to impact focused LPs. They’re going to find some really interesting stories in that, that they want to back and which you may not be actually telling them about proactively.

Holden Lee

You’ve raised a good point. My own take on this is that data is becoming more commoditized and universally available. And you think about any industry, travel industry, whatever, end consumers can access that information directly. So they will, just increasingly they can access directly as an intermediary.


Any intermediary you have to prove your value add. And so for the GP the value add is a unique take on the world, making sense of the noise, and then demonstrating a strategy, which is to your unique take and ability to execute on that strategy. So that’s the back to the narrative.


I think as having sat in the seat of a gatekeeper as an institutional investor, I want to hear how you see the world and can actually respond to that. And in a unique way, making sense of all the commoditized data. 

Jeff Williams

Yeah I’ll tell ya I could keep going all day. I won’t, I know you probably could. Cause I can just see on your face, this is truly the thing that gets you fired up, and I’m going to go out and make the prediction that this episode of this podcast will be the most listened to episode ever, because what you’re saying makes so much sense.


And I just don’t think that people have been able to size up something. Fair enough, right? This is this big thing. It’s got different definitions. It’s overwhelming. It feels like we’re reacting to it. And it seems that, in a short matter of time here, you seem, even for me to have put this so concisely and flipped it.


To being an opportunity, it really is incredible. What happens next? Here we are, you’re going to help everybody figure this out. And in five years, what will we be living through? You’ve already predicted, going back to 1992, all this stuff. What’s your next prediction?

Holden Lee

I think we’re going to see some very cool strategies already that we can’t even imagine. And so I think that will be exciting. Like any other investment trend, there will be maturation. There’s going to be disillusionment.


There’s going to be players who will ebb and flow and all that. But I think it’s here to stay. Definitely. And hopefully what we develop is better tools and better information to allow us to move that maturation along, so that the solutions become more and more powerful than it.


That’s my hope and my prediction as well. There’s a lot of room for people to participate in that. That’s what makes it so exciting. It’s not set. 

Jeff Williams

Yeah. Wow. Listen, Holden, I really can’t thank you enough. This is not only, like I said, something that gets me fired up and stimulated, but when you and I had first talked, we were funny that we ended up here this way.


I think you had said something about, you had been feeling lately like you wanted to, say stuff and share knowledge and stuff like that. So it’s my hope that we go on, to share this with the world and people, get that from it.


It’s incredible. The experience that you have. The sort of expertise, the vision too. And I am tremendously grateful that you’ve shared it with us. I think so many people are going to find this so helpful. 

Holden Lee

No, I appreciate it. And thanks for having me on.


Closing thoughts:

Jeff Williams

Thoughts here, what an amazing conversation, what an amazing man. And I just want to express, again, my gratitude towards Holden for having shared his insights with us. I also was thinking about how we would wrap this episode up in music and couldn’t help, but notice a couple of points that jumped out to me, the continuum on which risk reward is assessed in the three-dimensional angle that impact and ESG bring to that.


And of course, how we’re ultimately just waiting for the world changed. So with that, I’m going to send you out original, take on a well-known song. Look forward to having you join us next time. Thanks for joining us this time. Reach out with thoughts and until next time, talk soon.




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