028: Unveiling Investment Strategies of Family Offices

Marco Quevedo (00:00:00) - I feel fortunate to be able to execute a very broad investment mandate investing in public equities, private equity, all different industries where LPs in some funds meet, lots of different people who have lots of different experiences, who are running different strategies. You get exposure to different business models and different industries and solving different problems and different levels of risk. And so there are always new things to learn, new people to meet.

Christopher Nelson (00:00:33) - Welcome to Tech careers and Money Talk. I'm your host, Christopher Nelson. So how do we learn about money and how it works at a bigger level? Here we are technology employees. We're looking to grow our wealth. We want to become ultra high net worth individuals, right? Worth millions of dollars. But how do we understand how to manage the money around it? Well, the easiest thing to do is talk to people who are managing that money. And I have a great friend of mine, his name is Marco Quevedo, and I'm going to introduce you to him today.

Christopher Nelson (00:01:05) - And he's the chief investment officer of a private family office, meaning that he is the lead investor for a family that's worth nine figures. So it's so important that we spend time talking to people and understanding all of the nuances that go into it, the strategies and also the tactics. And so today we're going to dig in deep. I want to explore Marco's journey of understanding money as he started off like myself. We graduated together with degrees in computer engineering. And then he went on a journey to go into investment banking and become this chief investment officer. I want to send this spin in the second half to really start exposing you to what it means to manage a large portfolio, because what we see and what we hear in the media is really for people that are in the middle class in much smaller portfolios. But what does it mean to manage millions of dollars worth of equity, and how do you think about structuring that and setting up around that? Excited to share this episode with you. Let's get into it.

Christopher Nelson (00:02:12) - All right. Welcome to this episode of Tech Careers and Money Talk. I'm excited to introduce everybody to my good friend Marco Quevedo. Marco is the Chief Investment Officer at a single family office, where he is managing a portfolio of nine figures. And the great thing about Marco is one of us. He actually started off as a software engineer. We went to UC San Diego together, spent plenty of time in the dungeon, as we call it, the computer, the computer science lab back in the day. And he's got a great story of how he went from a software engineer to now a chief investment officer. And I'm excited for everybody to meet Marco Quevedo. Welcome.

Marco Quevedo (00:02:52) - Thanks for having me. Appreciate it. Excited to be here.

Christopher Nelson (00:02:54) - Well, good. Well, let's mean let's dig right in. I think one of the things that's really on on people's minds, you know, as we think about your journey of software engineer and now chief investment officer is, you know, what do you see and understand now about just investing in money management that you didn't see as a, you know, software engineer just coming out of school like myself, you know, middle class with some of the the understandings of our parents.

Marco Quevedo (00:03:23) - I think there's a level of sophistication that goes along with managing an ultra high net worth sort of portfolio. You know, eight, nine, ten figures somewhere in that range that you don't appreciate when you're not in the mix. And in the middle of it, there's a lot of different considerations. There's a ton of different investment opportunities and levels of risk and ways to think about things. So you really do get exposure to different ways of approaching money and capital and investing when you're kind of in it versus when you're not. And certainly there were important skills that I learned and was able to develop as an engineer and computer science person that now translate well into, you know, kind of what I'm doing here. But yeah, I think just kind of being in the middle of it, you get a different appreciation for the level of sophistication and types of opportunities that are out there that, you know, may or may not be accessible to people who, you know, invest with their own personal capital and have kind of a different level.

Marco Quevedo (00:04:27) - But it's a pretty interesting perspective to kind of be in the seat.

Christopher Nelson (00:04:30) - So, you know, we got out of school and I remember we moved to the Bay area and at one point, man, we were running the streets of SF together, San Francisco together. But what was the real impetus and drive for you that had you starting to think about grad school in, you know, something different?

Marco Quevedo (00:04:50) - Yeah. So I've been thinking about grad school since before college, you know, whether that was something I wanted to do or not. You know, when we were in college, you know, you'll remember it was 1998, 99 kind of time frame. And if I'm being honest, my plan at the time was I'm going to get this computer science degree and maybe even before graduating, I'm going to IPO some sort of tech company and retire by the time I graduate. I was planning to just, you know, be done. And the world changed and kind of oh, one and and that plan didn't work out as I thought that it would, which is pretty natural and normal.

Marco Quevedo (00:05:22) - Now, having been sort of longer alive. Um, and so, you know, I always had this interest in finance and investing. Growing up, my dad was a stockbroker, so I had some exposure to that when I was younger and after I graduated and spent, you know, for years as an engineer before going back to business school, I kind of felt like I, towards the latter end of that four year period is I was working for Goldman and kind of this hybrid quantitative analyst type function that I really enjoyed. The finance and investing end of the exposure was getting more than the engineering and software development end of that exposure. And so I thought, if I want to make a sort of career transition or change here, you know, the best way for me to do that is going to be to go back to business school or to grad school. And so I decided to go back to business school. And that was kind of the path, the pivot that I made in my career, from an engineer to more of a finance investor type, was really going to school and having the opportunity to, from there, move into a completely different function than engineering.

Christopher Nelson (00:06:26) - Well, and it's, you know, and knowing you mean we've known each other well over 20 years now, believe it or not. And I didn't really even think about the fact that you, like, you had a role at Schwab, you had this role at Goldman Sachs from a software engineering side. So you were always drawn towards, oh, I want to do software engineering around finance. It wasn't, oh, I want to go build the next Facebook or the next, you know, beat a company like you always. There was something about that subject matter that really drew you in.

Marco Quevedo (00:07:01) - That's true. And, you know, I think part of it was just circumstance and luck. You know, when I started working for Schwab, I actually interned there during college for two summers and that and, you know, they gave me the opportunity to come back again when I graduated, which I did. So yes, it was the combination of an interest in finance and investing with what I was studying in computer science, but it wasn't like I was necessarily seeking out a role at an investment bank or a financial services firm to combine with my engineering.

Marco Quevedo (00:07:32) - It kind of just worked out that way, but fortunately for me, it did, because really getting that extra exposure from a professional standpoint, you know, to investing in finance and portfolios and that sort of thing, it really kind of sparked my continued interest in finance and ultimately led to my decision to kind of pursue it more professionally via a transition through business school.

Christopher Nelson (00:07:54) - So the transition from Schwab to Goldman Sachs, was it a Goldman Sachs, or when did you start understanding that, wait, this institutional level of finance is played in a completely different way than some of the things that are being fed to, you know, to us in the mainstream?

Marco Quevedo (00:08:13) - And, yeah, I think it was probably around the time that I was at Goldman. You know, my role at Schwab was, I'd say pretty, pretty purely a software engineer. And the development role didn't get a lot of exposure to other elements other than pure software development. You know, I ended up moving to Goldman Sachs because a headhunter reached out and, you know, told me about this opportunity and kind of one of the groups there.

Marco Quevedo (00:08:37) - And I was interested in moving to New York. I was young, it sounded cool. I decided to do it. But while I was at Goldman, there was another element of my job that was just beyond engineering, which I was thinking about. I was working in a group where, you know, we were building software applications, portfolio performance analysis tools for major hedge fund clients of Goldman Sachs. And so really got some exposure to what kinds of investments that these hedge funds are making? How are they thinking about their portfolio specifically from a performance standpoint? And that kind of really allowed me to get some extra exposure that I wasn't getting at Schwab. That allowed me to think, okay, you know what? Thinking about the portfolio construction and performance, end of hedge funds and how they build their portfolios and how they think about allocating capital like that was pretty interesting to me. And so I really kind of took that and ran with it, you know, as my journey to kind of finance started through business school afterwards.

Christopher Nelson (00:09:34) - And so you take that, you go into business school and then was like in business school. Did you understand? I think I think there's a decision for all of us. We realize at some point that we're either going to go, you know, try and buy equity. So you want to get high paying jobs so you can get in, participate in some of these investments, or you go build it and you go start a company. When you went into business school, was your mindset that you wanted to come out and get into AI banking, or was there a point that you thought you might build a company?

Marco Quevedo (00:10:06) - You know, I think that's an interesting question, actually, I.

Marco Quevedo (00:10:11) - You know, the.

Marco Quevedo (00:10:12) - Traditional business school roles for graduates are consulting and investment banking. I think something like half or maybe more than half of the graduating class goes in one of those two routes. And that was kind of just what I fell into pretty early is a first year business school student. You get exposure to the recruiting process and, you know, you kind of pick the path that you want.

Marco Quevedo (00:10:36) - Big and major investment banks come on campus, they give presentations and they start recruiting. I'd say within the first 4 to 6 weeks of being there, you're already kind of thrown into it for summer internships and that sort of thing. And so it kind of decided like investment banking was a way for me to get exposure to finance that I was kind of looking for, but also didn't require me to have any real significant prior experience to be successful in that role. And so it allowed me to start in a career with no real formal finance training beforehand, but be able to have the opportunity to build the skill set that now are foundational in my job that I'm doing today. So through kind of my exposure at Credit Suisse, which is where I worked after business school, I learned how to think about industries, how to think about structuring transactions, how to do diligence on businesses, how to think about risk versus reward, how to think about, you know, mitigating risk and that sort of thing, which are all now skills that I use on a daily basis at work today.

Marco Quevedo (00:11:40) - And so spending three years as an investment banking associate, you know, slept under my desk. I worked 100 hours some weeks. It was pretty traditional from that regard, but it really was just an amazing foundational learning and professional experience for me. I met some great people. We're still friends today, and I use a lot of those skills kind of as a they were my launching pad to go from, you know, sell side investment banking, pretty traditional leveraged finance role to more of a buy side oriented portfolio kind of manager of a portfolio of assets on behalf of an ultra high net worth family model.

Christopher Nelson (00:12:15) - Yeah, it sounds like it was almost like a, you know, investment selection process, right? You think of the Special Forces, you had this three year assignment that, okay, if you get through this, you're going to have the skills that now you can go apply where you want.

Marco Quevedo (00:12:30) - I think that's generally true. You know, there are plenty of people who continue along the investment banking journey.

Marco Quevedo (00:12:36) - I kind of decided it wasn't for me and wanted to explore some other things. And, you know, I'm glad that I did. I think it was the right move for me, but I really owe a lot to that experience in terms of the knowledge and skills that I gained. I tell people all the time that if it weren't for the three years of investment banking that I spent, I don't think I'd be able to be as successful as I've been in my current job. And you'd be able to even land the current job that I have and have had around by side and family offices.

Christopher Nelson (00:13:06) - And I think, you know, so interesting because, you know, I think about and we can relate because we're in school together in undergrad and you try and figure out like, where are the programs that are very meaningful, where if you spend a period of time and I feel honestly like our experience at UC San Diego in the computer engineering department was incredibly useful, I felt like it set us up for success going and working in technology.

Christopher Nelson (00:13:32) - And then it sounds like, you know, and again, I don't know exactly where the maybe the MBA is actually the entry to get into the AI banking, but it sounds like that AI banking that three years, you know, really hardened some skills for you and set you up for success in this phase of year of your life and career.

Marco Quevedo (00:13:50) - I think there's no question about that. I would totally agree with that. And, you know, I have a bit of a non-traditional background. I would say, you know, many people that find themselves in private equity or hedge funds or that type of job they have a or have historically had a bit of a different path than, than I had, you know, they kind of graduate from undergrad and immediately go into investment banking and an analyst program and then spend a couple of years in private equity and then maybe go to business school and continue their journey from there. I went a different route, spending four years as an engineer before going to business school.

Marco Quevedo (00:14:23) - But business school is really this opportunity for someone to really transition careers, whether it's from software engineering to investment banking or being a journalist to working in marketing or whatever it happens to be, it's this opportunity to kind of hit the reset button. So for me, it meant going from engineering to finance, but really, depending on what your interests and goals are, is just a great opportunity for anyone to really hit the reset button. Think about how I can make a transition here? If you wanted to do that, I really don't think if I hadn't gone to business school, I would have been able to successfully transition from engineering to finance, or at least not not in the way that I have in my career so far.

Christopher Nelson (00:15:03) - One of the things I want to touch on is because you had the engineering background, because it. Was nontraditional, and you think of a lot of the investing that does happen inside of technology today. Do you think that that background gives you an unfair advantage?

Marco Quevedo (00:15:23) - Maybe to a certain extent, you know, I think so, because I do have a different perspective than a lot of my peers do.

Marco Quevedo (00:15:30) - I, you know, alluded earlier that there were several skills that I learned as an engineer that are helpful in my job today, that I think other people maybe just didn't have or have different paths to. So things like problem solving is a major one. As an engineer, you're constantly thinking through how do I solve these problems? And thinking about compartments, compartmentalizing different things? And how can I break a problem down into different steps and boxes? You know, that process has been really helpful for me in investing and thinking about how to make good investments and how to think about investing. So there certainly were many skills as an engineer that I learned that I think are applicable in what I do today, and I feel fortunate to have been able to take the path that did.

Christopher Nelson (00:16:11) - Do you feel that your experience as a software engineer gives you any more insight when you are going in? Vetting technology companies to ask broad questions about tech stack and how they're managing different things? Is that something that you not stay current on, but at least stay abreast of and you can relate to maybe a little bit more?

Marco Quevedo (00:16:31) - Absolutely.

Marco Quevedo (00:16:32) - You know, our investing strategy at the family office that I lead is very broad. And so we are looking at lots of different industries. Technology is certainly one of them. And having a technical background does allow me to connect with stakeholders, whether that's founders or whoever it happens to be on a level that they're accustomed to. You know, I haven't been in the weeds of technology now for, I guess, close to 15 years. So it's not like my programming skills are necessarily as good as they once were, that I'm, you know, the best Python developer ever. Because when we were in school, it was Java. You know, it was different. So it's not right. I'd say at a high level, it's been very helpful to think about it and kind of understand how they're building their business from a technical standpoint. But clearly when they're talking about, you know, the nuts and bolts and in the weeds of their technology, I'm not quite as I'm not there. Guess you could say.

Christopher Nelson (00:17:22) - Yeah. So what do you think coming out of business school, AI, banking, what were some of the soft skills that you learn that really helps set you up as an investor? Because I think, you know, I want to start teeing this up as we start thinking about the next part of the conversation, you know, getting more into family office structure and investing. But there is a set of skills that I think most people don't think about when they think of investing at, you know, a more sophisticated level. And what are some of the soft skills you think that you pulled from those years?

Marco Quevedo (00:17:59) - I think that you know people underestimate and under. Under index around the value of relationship building and being able to connect with people. I think that's true in a lot of different ways. It's true for finding opportunities that are compelling to invest in. You know, you leverage a lot of times, your existing relationships and network for that sort of thing, and getting people to trust you and build trust around your team, you know, helping everyone drive towards the same goal and figuring out people's motivations.

Marco Quevedo (00:18:30) - So I think just generally connecting with people, figuring out how to do that is really important. You know, I think that and a family office, you know, I really think of it as I have one client, it's the principal or patriarch of the family that I work for, and it's my job to really connect and understand that person and think that as an investment banker, for example, it was sort of similar as an associate, you know, the people that needed to make sure that I was had a good relationship with and understand what they needed and wanted were my managing directors. And so being able to manage up to that person as a young associate really was important. And now being able to connect with and have the right relationship with this principle that I work for on a daily basis, just understanding how they think about the world, how they approach the world, what their goals are and what their approach is, and being able to kind of take my way of doing things and adapt it as needed to really form a strong, trustworthy, really long term relationship with the principal.

Marco Quevedo (00:19:32) - Think more than anything, more than my skill as an investor, more than my, you know, network of people and opportunities. It's my relationship with him that matters more than anything else. He trusts me implicitly and I trust him. And it's that foundation, I think, that allows us to be successful. So I think really connecting with people is kind of the key, the key skill in that regard.

Christopher Nelson (00:19:55) - Well, and I think that also translates to a lot of the operators that you work with. Right? When you get into private equity investing, you know, the one thing that I, I blew me away and I know you got exposure to this a lot earlier than I did is two things. Number one is how private it still is, how many of these transactions are still based on word of mouth. Nobody's posting about it on the internet. People are doing these transactions and reaching out to people that they know, and there's a high volume of transactions that many people don't know about unless they know the right people.

Christopher Nelson (00:20:30) - And then. Ordering as those transactions are ongoing and you're in these, you know, illiquid investments that have ongoing relationships, that managing those relationships through the ups and downs of the economy, through the ups and downs of the investment is critical, is critical to it.

Marco Quevedo (00:20:50) - I think that's true. I think that's true. You know, certainly finding compelling opportunities a lot of times comes down to who, you know, the best opportunities are the ones that everybody's chasing, and there's often not enough room in deals for everyone who wants to participate. And so what are the things that separate you as a potential investor or partner? There are a lot of factors, but one of the most important ones, I think, is your relationship with the founder or, you know, the person who's running or in charge of the opportunity. And so certainly so that's the case.

Christopher Nelson (00:21:25) - Well, great. Well, you know, thanks, I think this. Its story and understanding. Software engineer to chief investment officer. I think there's a lot of takeaways from there.

Christopher Nelson (00:21:37) - What I want to do is I want to take a pause right now, and in the second half of our show, I want to dig in and help people understand what a family office is, what are some of the main functions, and then also talk a little bit about portfolio strategy. So we're going to take a quick break and we'll be right back. All right, welcome back. We're here with Marco Coverdell. And he runs investments for a single family office. Help people understand what is the high level definition of a single family office, and what are some of the functions that it performs for these families?

Marco Quevedo (00:22:12) - Sure. So there is a saying in the family office world, which is that if you've seen one family office, you've seen one family office. And the implication is that really they're all different. Right. And so I think you can make some generalizations, but at a high level, a family office is an organization that has one function, which is to serve the needs of, generally speaking, in ultra high net worth families.

Marco Quevedo (00:22:37) - That family could be, you know, a single individual. Maybe they have a, you know, maybe they have a family, a wife and some kids or a husband and some kids themselves. Or there could be a multigenerational kind of element to it. Maybe it's, you know, a family that made their wealth many generations ago and it's kind of been passed down. So but at a high level, a family officer serves the needs of a single family. And what does that mean? It could mean, generally speaking, you know, serving their investment needs. So you're deploying their capital. You're helping think about investment strategy. It could be tax needs help. And think about how to be tax efficient with their portfolio in their investments. Accounting. It could mean things like helping them, you know, with staff that they have and helping them manage that. If there's a private airplane or boat helping to kind of manage and take care of that. So really serving the needs of an ultra high net worth family in whatever way that that means for them and whatever their goals are.

Marco Quevedo (00:23:30) - But I think those are some of the areas that you know are fairly common across family offices, but family office structures are all different. They all have their own little nuances, and it's dependent on the individual family that they're serving and what the needs and goals of that family are.

Christopher Nelson (00:23:45) - And when you say you're managing this, I mean, you really are operating a business for the family. So when you're thinking of, okay, we're operating the the plane service or the travel service, you're going to be managing that all the way through to the PNL of that individual business and how that then rolls up into their their broader financial picture to try and create efficiencies throughout everything they're trying to accomplish.

Marco Quevedo (00:24:11) - Certainly, you know, I think there's certain, you know, estate planning elements that can be a function of, you know, different trusts and thinking about generations. And how does wealth transfer from one generation to the next? And there's really a lot of different elements to it. I think the most common one that you'll find is certainly on the investment side.

Marco Quevedo (00:24:28) - Most family offices have an investment function. All of the other things we spoke about, some family offices have all of those, some family offices have none of those, and some have some combination of them. But think more often than not, you know, serving the investment needs of a family is a pretty common function for a family office.

Christopher Nelson (00:24:46) - And I know in a previous role, I mean, you had to actually stand this up. So help me understand, like when you're going there and somebody says, I want you to take over investments. Because I think this maps to, in my mind, as is some of us as technology employees, we start accumulating wealth. We start thinking, okay, I want to be the CEO of my family office, that I'm standing up in my smaller family office. What? When you're thinking about standing up a larger one, what are some of the first hires that you think about making? If you're focused just on, let's say, investment in tax planning?

Marco Quevedo (00:25:25) - So from a higher standpoint, you know, think clearly.

Marco Quevedo (00:25:28) - Having someone in charge of the portfolio and capital allocation is one of the first hires that people will make. I think having someone who is able to leverage their experience from an accounting and tax standpoint to kind of work with outside advisors on tax planning, compliance work, accounting, you know, paying bills and that sort of thing, if that's a part of it. Also, or probably some of the early hires that you make, there's elements of setting up the legal entities and structures that, you know, kind of work in harmony with estate plans and other things that kind of protect the family and the principal's interest from a financial standpoint, from a legal standpoint and liability standpoint. So those are kind of some things that you think about early on defining what the investment strategy is. What kind of risk appetite does the person whose family the family office serves have? Are they a higher risk entrepreneur who started a business before and they understand they like swinging for the fences? Or is it someone who's more conservative and, you know, already has enough money and capital and wealth for their needs and really is more interested in just not losing money and generating income to, you know, serve to serve their life and their needs.

Marco Quevedo (00:26:43) - So it kind of depends on each family's goals and, you know, and desires for now, in the future, that help inform the early days of a family office formation.

Christopher Nelson (00:26:54) - And so that's that's really interesting. So is there a family office like charter or vision? When I think about some of the things you mentioned earlier, of the relationship that you have with the principal and serving them, is there then a strategy vision document that you're always referring to, that you may adjust so that you have yourself and other people that may be participating on the same page.

Marco Quevedo (00:27:20) - Yeah, I think that there definitely is. And there are, I'd say, varying documents or strategies for different elements. So, you know, there could be an investment policy statement which defines what the goals are and how you're going to go about achieving those goals. And that kind of serves to align, you know, the family and the people in the family office that everyone's kind of marching in the same direction, right? Like we're investing in the types of things that we agree upon ahead of time to meet your ultimate goals.

Marco Quevedo (00:27:50) - And then there's other, more governance oriented documents, like, do we have a board of directors? Do we have an investment committee? How do we make decisions? What are the ways in which, you know, the older kind of patriarch generation communicates with their family about wealth and learning? So there's an element of my role now where it's education and mentorship. You know, there's the next generation that's kind of rising and, you know, helping them get to the point where ultimately they can feel comfortable as being the new patriarchs of their family and that they're able to kind of act as stewards for the family wealth, you know, working with myself and the others in our team, kind of getting to that point also. So there's different elements that you think about. And when you put them all together, you sort of arrive at this place where you have the family office team and their functions, and all of those people work in harmony to ultimately achieve and reach the goals that the family has for themselves.

Marco Quevedo (00:28:46) - And kind of you approach it from that, from that lens. You know, one of the elements of my job that I enjoy the most is that it is very dynamic and every day is different. You know, I feel fortunate to be able to execute a very broad investment mandate. So we're investing in public equities. We're investing in private equity. We're investing in all different industries. We're investing in deals that are for minority positions, and we're investing in deals that are more control oriented positions where LPs in some funds. So you really do have a chance to meet lots of different people who have lots of different experiences, who are running different strategies. You get exposure to different business models and different industries and solve different problems and different levels of risk. And so there are always new things to learn, new people to meet. And one of the more interesting things about my job is just getting broad exposure to lots of different things, and I don't get bored, so I love that about it.

Christopher Nelson (00:29:46) - That's great. So I want to transition the conversation to, you know, when you're thinking about managing a really large portfolio. And one of the things that you mentioned earlier is it depends on the philosophy of the person's portfolio, or the principle of the direction that you're going to take it. But one of the things I want to expose people to is, you know what? What does that view look like? Because the majority of people that I speak to in technology, their portfolio looks like this. Generally speaking, 30 to 40% is going to be in a single tech stock, usually the company they work for. Then they're going to have maybe, you know, an additional 50% is going to be in the market, maybe in an index fund, and then the remaining portion is going to be in venture capital, if they're going to then be placing venture bets. Help us understand. When you're looking at a large portfolio, what are some of the major, you know, building blocks that you look at in the way that you analyze it to start putting together a portfolio strategy that drives asset allocation?

Marco Quevedo (00:30:56) - Yeah.

Marco Quevedo (00:30:56) - So I think there's a couple elements to that. The first is what are the goals that you're trying to achieve. You know, if you're looking to generate a mid-single digit kind of cash on cash return, the types of investments that you'll look at and make are different than if you're looking to generate a 20 or 30% kind of net IRR, right? So you kind of have to think about it from the lens of what my goals are. Another important element is the history of the family and their experience and their success. So if a family makes, you know, their money in real estate, there's a pretty high probability that they're just going to have comfort there and probably want to stay there. If a founder made their money starting a tech company, they may have a maybe a different perspective of the types of investments in the risk exposure that they're looking for. So you kind of have to figure out what makes sense for the current situation and people, and not just apply.

Marco Quevedo (00:31:52) - A general rule is kind of how I would sort of think about it. Right. So for us, we have a pretty broad view. You know, we have some portion of our portfolio that's allocated in the public markets. Most of our portfolio is in the private markets, and that includes direct investments in private businesses, commitments to funds, some real estate, the ownership of operating companies and more illiquid types of investments. And so we don't think about it as it's got to be, you know, such a real estate, such percentage, this industry, it's more around how much risk are we looking to take and what are our goals. So we have a portion of our portfolio that's more current income producing. So that would be things like multifamily real estate, private credit funds, things that generate cash. And then a separate kind of pool that's more illiquid capital appreciation oriented opportunities that have a different risk profile profile. They're more long term in nature. And so we kind of think about it from that standpoint.

Christopher Nelson (00:32:52) - And with that second bucket or that bucket you were talking about, because I think the way that I think about it sometimes is I think about three, three broad strokes of income, think about growth. And then I think about capital preservation. And what I think I heard you say is, there is that income component. Because if the family, if they're, you know, full time occupation as they're really managing the portfolio with you in the office, there is going to be a need for income to fuel the lifestyle. Then there's another component of the portfolio that you're then going to allocate a portion of it towards growth. And then I'm sure a portion that is sort of that defensive hedge that says, well, if we start having risk introduced to the portfolio because of economic headwinds and challenges, we want to make sure that we have something that is, you know, maybe has much lower leverage on it, you know, positioned in a way that we know that if things perform badly here, it's going to increase in value, those types of things.

Marco Quevedo (00:33:53) - Yeah, that's totally accurate. You know, the and think part of the income oriented side of a portfolio kind of depends on again, the family situation, if they're the owners of an operating company that generates a ton of cash and they can use that cash for their lifestyle or for other things, then maybe having investments that produce cash is not as important for them, right? But if they don't own an asset that produces cash, maybe they're leveraging their capital to produce that cash for them, and you allocate a portion of it towards more cash flow oriented opportunities. So it kind of depends, again, on what the goals of the family are, what the specific circumstances are and what their level of risk is. And you kind of go from there building a portfolio of opportunities, and that ultimately meets their goals.

Christopher Nelson (00:34:40) - And with your experience, you know, multiple years in the family office, do you find that as family events happen, these goals then then change and are the with the goals change be, you know, drastic or would the goals change be sort of oh no.

Christopher Nelson (00:34:56) - We're like we're going to go like maybe ten degrees in this direction or something. How is that?

Marco Quevedo (00:35:01) - Hopefully it's the latter mean it's a lot easier to move ten degrees in one direction versus making a wholesale shift, you know, and so I think especially when you're in investments that are generally illiquid, you know, if you're investing in an operating company, it's not necessarily so easy to get liquidity quickly. You know, maybe the market conditions aren't in your favor. Maybe there's not a buyer or a seller. Maybe there's not just an opportunity for you to get liquidity. So subtle changes and changes in strategy I think are manageable. If it's, hey, you know, we want a wholesale shift in what we're doing, that's a bit of a slower moving ship and not so easy to adjust quickly. And so I think that's why it's. Plan on the front end. Make sure that the goals that you set are actually the right goals, and those are the goals that are going to be the goals for a while, knowing that you can adjust slightly along the way if you need to.

Marco Quevedo (00:35:53) - But major changes are not impossible to implement, but they are very hard to implement quickly depending on the types of investments that you're in. If you're in completely liquid public securities, that's a lot easier than if you're in a portfolio of fully illiquid security. So you have to kind of be thoughtful about it at the front end. Think about how you would think about that.

Christopher Nelson (00:36:14) - And do you. Do you look at it? You know, and again, I'm not speaking about your specific role right now, but just at a, at a high level. Do you then look at capital allocation to new investments on a quarterly basis, on a monthly basis, or does that depend on sort of the cycle of the portfolio? Because I know with illiquid investments, if you're making a lot in a certain quarter of one year, then a few years later, all of a sudden those things can be coming to fruition and then you have a lot of capital to deploy.

Marco Quevedo (00:36:44) - Yeah, we don't necessarily have a set pace of capital that we have to deploy.

Marco Quevedo (00:36:50) - If we're not deploying X dollars per month, per year, per quarter, then we're not fulfilling our goals. We don't really think about it that way. To me, it's more around, you know, as a family office, one of the advantages is that you don't have to do anything right. We have no outside money. We're not a fund. We don't take LP capital, and we're not forced to put money to work because the structure says that we have a four year investment period and we have to have a 8 or 10 year life that we have to return capital by. So we don't have those kinds of pressures. So if we're not finding opportunities that we find compelling, we don't do anything. And if we find opportunities that are very compelling we will be more active. So we kind of leverage our flexibility as a family office, a single source of capital from a family that can do nothing or can be active, kind of depending on the macro environment, what opportunities we're seeing. And so it's less around.

Marco Quevedo (00:37:46) - We have targets of how much capital to deploy over a specific time period. It's more dependent on the types of opportunities that we're seeing and whether we find them interesting or not.

Christopher Nelson (00:37:57) - So ultimately, it's it's the care and feeding of a single portfolio and, and then understanding what's what's the market like whether we're going to deploy it and then constantly, you know, figuring out, hey, if we have a lot of capital, what's the best place to store cash while we are, you know, looking for opportunities?

Marco Quevedo (00:38:14) - Yeah. So just to kind of give you a more concrete example, you know, I would say up until a year ago we were more active in venture capital style opportunities, earlier stage businesses that were in investment and growth mode. You know, those in our view, opportunities have become a bit less attractive recently for fairly obvious reasons. And so to replace that interest that we had then, we're now more focused on more private equity style businesses where there are operating companies that produce cash as opposed to consume cash that are in interesting markets and whose multiples have been compressed, just kind of given macroeconomic factors where maybe the same business might be worth 2 or 3 turns of EBITDA more, you know, 12, 24 months ago now they're kind of on sale, if you will, maybe for reasons that aren't related to the business, it could still be a very high quality business.

Marco Quevedo (00:39:13) - But general market valuations have come down and no business is really immune from that. And we can take advantage of that by having a long term perspective. You know, we're thinking about kind of making our money on the buy almost right. We're buying IT levels that are interesting for us today that maybe were less interesting 24 months from now or ago. Excuse me. And we don't have the pressure to figure out how we are going to generate a return in 2 or 3 or four years? If it's a strong operating company with a strong team that produces cash? We take the perspective that this is a long term investment, and we're open to exiting if and when the time is right, but we're not going to be forced sellers, for reasons that may be some other sort of structure.

Marco Quevedo (00:39:59) - Solved.

Christopher Nelson (00:40:00) - That makes complete sense, makes complete sense. And I think that, you know, I've been seeing the same thing in the market as well is that, you know, from tech companies moving towards private equity, thinking about a lot of these different businesses, different areas of the business that have been compressed or are actually seeing growth opportunities.

Christopher Nelson (00:40:23) - So. Being in private equity, being in a family office that doesn't advertise and put up a shop like, hey, come see us for investments. What is the way that you find deal flow?

Marco Quevedo (00:40:38) - That, I think, is a pretty interesting question. You know, everyone goes about that. Think different people go to conferences and meet people, people, you know, leverage their network to find deal flow. People will rely on intermediaries like investment banks or brokers to find deal flow. So we do all of those things. I think that the way that I personally, personally find most of my opportunities is through my network. It's an important part of my job to build relationships with people, whether those people are attorneys and accountants, whether those people are bankers, whether those people are managers of funds, whether they're other family offices, whether it's people from business school that I'm friends with who are out in the world doing very interesting, compelling things. You never know where the next opportunity may come from.

Marco Quevedo (00:41:30) - And so we see a lot of opportunities just through our relationships. You know, the family I work for has been very successful in business before. They have a long history and they're very well connected, and they get a lot of opportunities themselves too. So we kind of have this funnel of opportunities that we get most of the time through people that are connected to us in some way. And by the way, those are the kinds of opportunities that we generally spend more time on. We also get a lot of opportunities via cold outreach. People will get my email address somehow off of LinkedIn or the internet or whatever, and they'll say, hey, you know, we're raising money for this opportunity. Are you interested in taking a look? Nine out of ten times will ignore emails like that, because if they're reaching out to me, it's probably because they exhausted their own network already and they weren't able to be successful raising capital then. And so what? Why would I want to be the guy saying yes when 100 other people have said no ahead of me, you know, so and maybe there are diamonds in the rough.

Marco Quevedo (00:42:30) - I'm not saying that that can't be successful, but generally speaking, we tend to gravitate more towards opportunities that we have 1 or 2 degrees of separation to people we've invested with in the past or that we've built, we've been building a relationship with for a long time. Those are the kinds of investments that we tend to spend more time on, because who you invest with is important. You know, things don't always go great, and when things aren't going great, you want to know that you're in the trenches with someone, that you can have a good relationship with, that you'll be collaborative and be able to work towards a solution together and not add to problems. By having a toxic relationship with someone else who's at the table with you. So doing deals and finding opportunities through people that we know in some way is a lot of the way that we spend time on stuff. And then, of course, if we get opportunities that come our way through an investment bank or something, you know, it's generally a, you know, a bulge bracket bank who's speaking with other families, like the one that I work for, about an opportunity.

Marco Quevedo (00:43:32) - And so those are usually pretty high quality also. So we'll spend time on those two. But more often than not, we're trying to find opportunities where not everyone else is getting the same look that we are. You know, if it's an opportunity that we get because a close relationship of ours is sharing it with us first, those all else equal are generally more interesting because we're getting a first look. It's less competitive, right? And so we're trying to find stuff where the whole world doesn't have the opportunity to look at the same, same thing or make that investment. Those are the ones that are usually less interesting.

Christopher Nelson (00:44:06) - So thinking about right now, the market, some of the headwinds that we're seeing, you know, I'm curious from your perspective, managing single family offices, investments, you know what, how are you reading this environment? Are we really in a downturn or are we really, you know, as the economy sort of healthy. And then what type of assets, you know, are on your radar right now?

Marco Quevedo (00:44:29) - Yeah.

Marco Quevedo (00:44:30) - I mean, my view is that it certainly wasn't a challenging environment, but that I think provides opportunity. I kind of mentioned it earlier, you know, if we wanted to buy a $10 million a year EBITDA manufacturing business, you know, that might that business might have cost eight times EBITDA, you know, 2 or 3 years ago, that same business today, you might be able to get for 5 or 6 times EBITDA. And so the uncertainty in the macroeconomic environment, while certainly not worth ignoring, I think is also not worth not being willing to deploy capital into, because that's where the opportunities are in my view. So I think I alluded to it earlier in our conversation, but we at the moment are spending a lot of time on a private equity style strategy, trying to find businesses that are founder or family owned, who have been around for 30 or 40 years, whose founder is looking to retire for whatever reason and doesn't have a natural successor to leave the company to. And so they're looking to exit.

Marco Quevedo (00:45:32) - These are businesses in all different kinds of industries that might produce between five. 20 million of EBITDA. That kind of range, it's a lower middle market strategy. And so those are the kinds of things that we find to be compelling right now because it serves several needs, right. They produce cash that we can use to fund other investments and fun lifestyles. And also they're compelling from a valuation standpoint. And so there are those areas that we're finding opportunities right now. We have exposure to the public markets, but it's generally pretty passive. We also have some exposure to credit oriented opportunities that are more private credit in nature. But we're not saying we are staying away from things that are more venture oriented, that are businesses that are consuming cash because a business might raise money today, they might have a 12 or 18 month one way, but if they need to raise money again in the future, what will the environment be like then? Will the market be willing to provide capital for them? Hopefully the answer is yes, but maybe not.

Marco Quevedo (00:46:32) - And so being in a business that produces cash, you don't have to worry about what the market will be like then? Because I'm self-sufficient at that point. You know, maybe you're looking to grow and maybe you wish you could borrow money or you could take outside capital, but you don't need it to survive. Those are the areas that we're spending time in and find to be most compelling right now.

Christopher Nelson (00:46:53) - Yeah, that's really interesting. I was just at a venture Texas conference recently and, you know, just talking to a lot of founders. And I think that that was that was the general consensus of of LPs like myself in the room is, you know, right now when there's headwinds in the environment, we want to look for things that are going to be economically viable on their own for the long term, because right now we're not in an environment where, like we were at the end of the last cycle, where you have investments and things that are generating a lot of capital, so you can support some of these investments that are capital intensive, that also have tailwinds behind them.

Christopher Nelson (00:47:32) - We have headwinds. We have to play it more conservative from our investments. Agreed. Yeah. Agreed. The other thing that I heard you say is that I thought was just really interesting is, you know, is right now from a family office perspective, when you do have, you know, a nice larger capital position to play from, it really is, you know, buying opportunity, buying beneath the market and playing the long term, you know, becomes a real foundational strategy that you think about a multigenerational portfolio, you know, that you know, that play in different types of assets, you know, consistently will set that up for success, because you do ultimately make your money when you buy.

Marco Quevedo (00:48:17) - Yeah, I think that's true. And I think, like you sort of said, you know, having the right time horizon is another important element, having the flexibility to have a longer term horizon, if that's what is best for a specific opportunity. Not being forced to make a decision because of some structural element is an important differentiator for a family office.

Marco Quevedo (00:48:40) - You know, we're not raising capital from outside parties who are expecting to get their money back, you know, in 5 or 7 or ten years because the life of the fund has that governance around it. We're building a portfolio for a family that has a multi-decade perspective. You know, the second generation are in their mid 20s right now. They've got a long way to go before they're kind of at the, you know, sort of the patriarch kind of level. And they have their own kids. Right. So we have a multi kind of decade perspective on stuff potentially if we need it, it makes sense. We also don't have to do that if we if it doesn't make sense if we buy a business today and in two years we got an offer that was too good to refuse, we have the flexibility to act on that also, so we can be as flexible as they come in terms of our structure and our approach. And I think from, you know, from the sellers of businesses like the ones that we're looking at, that's an attractive element because part of what they're looking for is legacy, right? They want to see their business be successful in the hands of someone new for the long term.

Marco Quevedo (00:49:45) - They want people who are going to take care of their employees, who are going to be good actors in the community, who who don't have the pressure of needing to make decisions because need to generate a return in three years so they can go raise my next fund. You know, we don't have that kind of sort of pressure. So I think from that standpoint, buying a family business is great for us because ultimately we're a family business too, right? So there's alignment between those sellers and us buyers that think kind of, you know, in certain circumstances anyway separates us.

Christopher Nelson (00:50:16) - That's great. Well, it also sounds like overall from a macro perspective in the portfolio, the liquidity and the size and the liquidity provides the flexibility. Right. And this is one of the things that goes back to sort of this portfolio that I drew out in the beginning, I just always try and caution people, is that if you have if you have a poor. That is not diversified or too rigid, meaning that you're going all these long term investments that are cash flow intensive.

Christopher Nelson (00:50:46) - You just have to be very careful because a liquidity, a liquid or an income producing or liquid part of your portfolio is going to provide the flexibility that helps you manage through the downturns.

Marco Quevedo (00:51:00) - Agreed. Yep.

Christopher Nelson (00:51:01) - Yeah. Well, Marco, I could go on and geek out on this all day long, but we got to put a bow on this thing. And so we usually end up and we're going to do that today. We end up with a fire round. I'm going to ask you five questions and just fire off your answers.

Marco Quevedo (00:51:15) - So let's do it.

Christopher Nelson (00:51:17) - It. Let's do it. Let's go. So what was the worst career advice or what is the worst career advice that you've ever received?

Marco Quevedo (00:51:26) - That's a good one.

Marco Quevedo (00:51:27) - Um.

Marco Quevedo (00:51:28) - I would.

Marco Quevedo (00:51:28) - Say.

Marco Quevedo (00:51:29) - Probably. The advice goes along the following lines. Don't leave a job unless you have another job already lined up. To me, that's bad advice. Generally speaking, assuming you have the ability to be flexible and not have a job for a little bit.

Marco Quevedo (00:51:50) - You know, I think being afraid to leave a job because you don't have something else lined up. Puts you in a position where you might not be able to explore. Opportunities that you would otherwise. So in my case, you know, I worked for a family office for six years, kind of in the 2014 to 2020 timeframe. I ended up leaving that job right at the end of 2019, and three months later it was Covid and I had nothing lined up. Right. So I was in this period of, what am I going to do next? You know, did I make a mistake? And having the confidence in myself, in my ability to meet people, to communicate my skill set, to talk with people about what their goals are and be willing to explore opportunities that come my way, I think really allowed me to ultimately land where I did, which I couldn't be happier with the family that I work for. They're just great. But I left the first one without having something lined up and thought, if I would have waited until something was lined up, I might have missed out on this one.

Marco Quevedo (00:52:53) - And I couldn't be happier that I made that decision. So think about being willing to take a little bit of risk, believe in yourself, believe it, and be confident in your ability. And if you feel that you need to change, be willing to do that without necessarily having something else to jump to right away.

Christopher Nelson (00:53:08) - That's great. That's great, I love it. How so? In this diverse environment, how do you keep learning?

Marco Quevedo (00:53:16) - I read a lot. I talked to a lot of people. I try to get as many perspectives on different things as they can. You know, people who work in private equity might have a different perspective than someone who works in private in a, you know, in public equity at a hedge fund. Or they might have a different perspective than someone who works at an investment bank or someone who approaches it from a legal perspective. So I think constantly talking to people and reading, I think just my seat naturally affords me the opportunity to keep learning. Because we do have such a broad mandate.

Marco Quevedo (00:53:46) - We're looking at new industries, new business models, new structures, and so there's always the opportunity to learn something new. But I think that that has to be innate, right? You have to love learning. You have to want to invest the energy to make yourself better in some way. And I think that's an important element of sitting in a seat like this is the world is always changing. There's always something new to look at and do. And if you're not willing to constantly learn, then I think you're you're you're not affording yourself the best opportunity to be successful.

Christopher Nelson (00:54:19) - And in that answer, you touched on something that I really try to tell people all the time, especially as they're trying to move into private equity investing, is you don't go at it alone. Like, but when I look at an investment, I'm, I'm talking to 5 or 6 people minimum. What do you think? Hey, let me get your eyes on this. Or have you seen/have you worked with these operators? And in too many people that I know, you know, sit in the dark room, review A and go, okay.

Christopher Nelson (00:54:49) - Yes. Versus having multiple conversations. So it's a great way to learn. And it's also a great way to vet ideas.

Marco Quevedo (00:54:57) - Absolutely.

Christopher Nelson (00:55:00) - When thinking about when you went to work in tech, what's some advice that you would give your younger self going to work in tech?

Marco Quevedo (00:55:08) - You mean based on where I sit today and kind of my goals now. So I would say, you know, and this is true whether you're working in tech or you're or you're not, but think when you're younger, you're maybe just not as confident in your ability as you should be. Right. And so I think having self confidence is really important. I think as you get older that self confidence tends to naturally grow, but finding a way to trust yourself and your instincts when you're younger, not being afraid to take some risk, whether that's speaking up in a meeting, making a career change or whatever it happens to be. But, you know, you have to trust yourself. It's your life. And I think that, you know, if I could go back and kind of give myself my 20, you know, early 20 year old self, some advice it would be, you know, don't be afraid to try to stand out a bit.

Marco Quevedo (00:56:02) - You know, you can do well in your job, but you can do even better by being confident in yourself and your ability and not being afraid to find ways to show that.

Christopher Nelson (00:56:13) - You love that man. You may think you already answered this, but what's the soft skill that has helped your career the most?

Marco Quevedo (00:56:20) - Yeah. Think we talked about that. You know it's certainly on the relationship side. You've got to be able to connect with people for even the reasons that you said. Like when we look at a new investment opportunity, one of the first things we'll do is we'll think about who that we know is an expert in this, who can reach out to and try to get a quick read. Who do I know that might know these people and has some experience or exposure to them already? Right. So we try to reach out to people and say, hey, we're looking at a supermarket business and you happen to come from the supermarket space. Talk to me about this opportunity. What, you know anything about this that I should be worried about? You know, from a macro standpoint, what's going on? Like what are valuations like today? Like talking to someone who is all they do because we're a generalist.

Marco Quevedo (00:57:03) - We look at lots of different opportunities. It's difficult for us to be an expert in everything, but we do leverage our network to find those people and use those data points to help inform our decision making process as we go forward. So I think building relationships and connecting with people is certainly one of the more important skill sets that you can build.

Christopher Nelson (00:57:22) - All right. Here's the last and final one. And I know you're going to love this. What's the worst investing or money advice that you've ever received? Wow.

Marco Quevedo (00:57:30) - That is another hard one.

Marco Quevedo (00:57:32) - Yeah. Oh yeah man I would say people who.

Marco Quevedo (00:57:35) - Give advice to young people and tell them that they don't need to start saving and investing now because you still have a lot of time ahead of you, is some of the worst advice that you can get? I think that time as an investor is one of your best friends. The longer you have in the market, the better off you'll be, and so the earlier you can start saving, the earlier you can start investing.

Marco Quevedo (00:57:59) - Even if it's just a little bit of money, the better off you'll be in the long run. And it's simple math at the end of the day, right? The 30th year of your 8% return is going to be significantly more important than the first or second, or 10 or 20 eighth years of that 8% return. And the 31st year will be even that much more important. So you've got to be able to survive and get to that point where you've been in the market for a long time, you've been in your investments for a long time, and the power of time and compounding allows you to build that wealth. And so starting early is, I think, the best way to do that. And it doesn't have to be a lot, but it's building the right habit to be able to sacrifice a little bit in some areas, maybe to think about your future. And so time, I think, is critical. And so my advice to people who are kind of just getting started would be, don't listen to those guys who say you have your whole life ahead of you.

Marco Quevedo (00:58:55) - You don't have to worry so much about saving and whatnot. Today, I would say the opposite. You know, while you have the flexibility today, you don't have a family to worry about. You're young, you can allocate capital to saving and investing, and as time goes on, you will not regret having made that decision. So start early. Guess it would be my advice.

Christopher Nelson (00:59:16) - Well that's a mic drop moment man. You got so fired up and focused. And I know that we both have kids and talk to them a lot about money. So I felt a Marco dad moment there which was completely awesome. Love it. Cool. Well thanks so much for joining us today, Marco. I know I got a ton of value out of this. I know other people really appreciate the time.

Marco Quevedo (00:59:36) - Appreciate our friendship. Thank you so much for your invitation. Anytime can be helpful. Don't hesitate.

Marco Quevedo (00:59:41) - We'll do. Thanks.

Marco Quevedo (00:59:43) - Take it easy.

Christopher Nelson (00:59:44) - Thank you so much for listening. I would ask that you do one thing.

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