April 30, 2025 • 35 mins
In this BONUS live edition of Masters in Business, Barry Ritholtz speaks with Harvey Schwartz. He's the CEO of the Carlyle Group. They talk about his New Jersey roots, how his mentors helped him grow on Wall Street and how geopolitics will play a critical role in investor fortunes.
They speak at the Future Proof Miami conference on March 18, 2025.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
Business with Barry Ritholts on Bloomberg Radio.
Speaker 2 (00:16):
I'm Barry Ridtolts. You're listening to Masters in Business on
Bloomberg Radio. We have a bonus Masters in Business for you.
Live from future Proof Citywide, Miami. I sit down with
Harvey Schwartz, the CEO of the Carlisle Group. He has
a really fascinating and somewhat unconventional path to Wall Street.
(00:38):
We talk about he's just a news Jersey kid who
didn't know what he wanted to do and had a
hard time figuring out his life goals. And you know,
thanks to people who took an interest in him and
a couple of good breaks, plus a whole lot of
smarts and hard work, he ended up really creating a
(00:59):
career from ELF, not only at firms like Goldman Sachs,
but eventually getting tapped to become CEO at Carlisle. I
find Harvey to be an absolutely fascinating guy. He is
a no holds barred, blunt speaker, truth teller, really really
interesting person. I thought this conversation was great. You can
(01:21):
tell I'm having a lot of fun with no further
ado our special bonus Masters in Business Live with Harvey Schwartz,
CEO of the Carlisle Group. I am just so thrilled
to introduce you all to somebody that not only are
you gonna know more about in the coming years, but
(01:43):
it's been my pleasure to get to know over the
past couple of months. Harvey Schwartz is CEO of Carlile.
He comes to finance in a rather unusual way, and
I'm gonna let Harvey tell's story. Let's start right there.
You have a really unconventional Well before we go there,
(02:04):
Carlisle Private Equity, private credit, been doing this for a
long time. Chairman is David Rubinstein. Tell us a little
bit about Carlisle First, what do you guys do? How
much do you manage? Just give us the thirty second version.
Speaker 3 (02:20):
Sure. Well, first of all, Barry, thanks for doing this.
Great to see you again, everyone, Fantastic to be here.
This is such an amazing venue. So Carlisle today is
about four to fifty billion of assets spread across private equity,
real estate, infrastructure, credit, insurance and secondaries and co invest.
For all of you in the audience, there are a
(02:41):
number of solutions you can show your clients see tech
which is the best of credit cap them. I'm sure
we'll get into some of this which is our secondary's
co in best business, and towards the end of the
year we'll be launching our private equity solution. But I
would say, you know, for me, been Carlo for two
(03:01):
years has been an incredible privilege. The firm was founded
in nineteen eighty seven by David Bill and Dan who
really have created a culture which is extraordinary in terms
of the people. We're twenty three hundred people today. Zach Foreman,
I don't know if Zach Forman is in the crowd anywhere. Zach,
can you stand up? Zach leads our effort down here,
(03:24):
so everybody should go to Zach afterwards, and then we
have a boot. So hey, that's I'm done with my
advertising for the day. But I feel like I've accomplished.
Speaker 2 (03:32):
So let's talk a little bit about your background. You know,
when I look out at the world of finance and
see who are CEOs of companies that are two hundred billion,
half a trillion, a trillion plus, I don't want to
say they're all alike, because they're not. But there's a
certain background that you tend to see a certain type
of college and business school and career path. You're just
(03:56):
a guy from Jersey. How did you sort of full
ask bawards into finance?
Speaker 3 (04:02):
Well, I mean there are other successful people from New Jersey.
Speaker 2 (04:05):
Barry John Stewart.
Speaker 3 (04:07):
Yeah, no, Bruce Springsteen. Now there's a couple. But you
know what Barry's getting at, is it a little bit unconventional.
I mean, everybody has the complexity of their life story.
But for me, uh, I did. Grew up in New Jersey,
I too, uh parents who were quite educated, but tragically
they suffered from severe mental illness. My mother suffered from
(04:29):
what we would call today by polar disorder, and my
father suffered really quite tragic schizophrenia which sort of over
time really just completely consumed him. And this is, you know,
many decades ago, and so treatment wasn't as good, an
understanding wasn't as good. The stigma of mental health related
(04:49):
issues and severe mental health is still an extraordinary problem
everywhere in the world, certainly in our country, but back
then it was even much worse. And so my mother
passed when I was fourteen. I don't want you all
to feel like you have to go to therapy with
me and Barry. By the way, but my mother passed
when I was fourteen, and then it was me and
my father, and it wasn't a particularly healthy environment, and
(05:12):
so I basically ended up doing really, really badly in
high school. I didn't I barely graduated by the time
I was a senior. I think it was like right
around Christmas. When I was a senior in high school
in New Jersey, I'd missed twenty seven days of school, which,
by the way, if you actually do the math, is
super hard to do. And so there was a good
(05:34):
chance I wasn't going to graduate. I didn't apply to
any colleges, but I got super fortunate. And you know,
Chris was really generous when she introduced me. She referred
to as a mentor, and I think you do have
mentors for hopefully everyone here as mentors in your life.
I had people that were more like angels that really
like intervened for whatever reason they did to help me
(05:55):
at certain crazy pivotal times in my life. And one
was a woman named Linda. I had plot. She encouraged
me to apply to Rutgers. I wasn't going to college.
I applied, I didn't get in Linda, who's like not
an influential person.
Speaker 2 (06:08):
Let me, let me stop you. There wasn't there a
brief sojourn to California post high school.
Speaker 3 (06:13):
Yeah, well that was like one of the early earlier angels.
So when I never really talked this much about this publicly,
So I apologize if anybody finds it not interesting. But
when I when I realized I had missed so many
days of school, there was a chance I wasn't going
to graduate. Certainly, my grades were not doing well. My
father and I were deteriorating pretty quickly. And when I
(06:35):
turned eighteen in March of that year, it was my
birthday last week, by the way, In March of that year,
I signed myself out of high school and I had
called some friends in California. I asked if they were
let me come live with them, and so I moved
to California. I actually graduated high school out there. Those
were like there were a lot of angels, but that
family was an extraordinary angel. They took me in, but
(06:55):
I didn't apply to any colleges and then and then
eventually Linda came up long and encouraged me to apply
to Rutgers.
Speaker 2 (07:02):
That was the next time that that was back in
New Jersey.
Speaker 3 (07:05):
Yeah, so I come back and by the way, full.
Speaker 2 (07:07):
Disclosure, I mac on New Jersey. I grew up in Teaneck,
New Jersey. So I feel like I'm allowed to make
fun of the Styeah.
Speaker 3 (07:15):
No, of course, and yet another successful person from New
Jersey right here live the so now it was. It
was a complicated, confusing time I had to come back.
I lived with my father. That wasn't great. I was working,
as for those year old enough, a health instructor at
a squash club in Chatham, New Jersey for the New
(07:38):
Jersey and there was a thing called Nautilus. I was
the person that trained people in the gym, which is
a sort of hard feed to imagine looking at me today.
But I had hair, thinner, better, more fit and but anyway,
uh Lynda and her husband used to come through and
I just got to know them, and she said she
was a Rutgers graduate, but she wasn't an influential person
(08:00):
like you berry, and she encouraged me to apply. I
didn't get in because of my track record in high school.
And she was so incensed by this that she called
the university and basically convinced them to interview me and
write an essay about why I was such a screw
up in high school and Rutgers, which is an incredible institution,
(08:24):
changed their selection allowed me to go to school. And
that's why you know, Linda's an angel and the more
family's an angel, and these people like really intervened in
my life, I think in ways that are kind of
hard to conceive. And Rutgers today, I think the stats
are well over half the students still get financial aid,
sort of one in three or first ever go to
(08:46):
college and their family. It's an amazing institution and for
someone like me gave me all the opportunity in the world.
That's great.
Speaker 2 (08:54):
By the way, don't take the lesson that if your
kid doesn't get into Princeton all up and yell at
the emissions department. That's not the lesson we want you
to take from this. So sore, you're now coming out
of Rutgers. You don't have the traditional Ivy League business
school background. How do you find your way into the
world of finance?
Speaker 3 (09:16):
Very clumsily. I didn't know Rutgers, certainly back then, much
better now. I didn't know there were JP Morgan's in
the World or Morgan Stanley's or Goldman Sachs I had.
I didn't even know where Wall Street was. I'd never
been to Wall Street. First time I went, I was
surprised it was such a little street. I just make
sure a much bigger street. So it's pretty naive, about
(09:38):
as naive as you could get. And then through a friend,
I took a job at a firm called JB. Hanour
For those of you're old enough, it was a municipal
bond firm back in the day. This is nineteen eighty seven,
and just show a hand. So how many people know
what it means to work on a draw? Yeah? So
(09:58):
I worked on a draw, which means you got paid
one thousand dollars a month, but effectively it was alone
and you owed it back, and you cold called, and
you tried to build your book of business. And I
proved to be uniquely bad at this. Yeah, uniquely bad
at this. Yeah, maybe a little bit was timing. My
first day coming out of the training program was the
(10:22):
day the stock market fell. Yeah, October nineteenth, down five
hundred eight points. There I was like naively cold calling people.
By the way, back then there were like real phones.
You had to actually push buttons and stuff, and I
had this little cushion thing you would keep your head
like this, and you were mostly crippled by the end
of the day. But so, yeah, it was a bad
(10:42):
time to try, and I didn't do very well at it.
I had no money. I owed everybody in the world money.
I had borrowed a lot of money to go to school, friends,
anyone I could find, And you know, it was pretty stressful.
Speaker 2 (10:57):
So how do you make your way from cold calling
into either asset management or firm white management. You've run
your way through a lot of different departments. How do
you go from just being a smiler and dialer to
somebody larger in charge.
Speaker 3 (11:16):
Well, I got really fortunate. I was. I was at
a tough point. My daughter was one year old, and
I was kind of really running out of money. At
one point, I thought, jeez, I might have to file
for personal bankruptcy. But I didn't really know what that meant,
but I knew it was a thing you did when
you ran out of money. And again, a friend to
(11:40):
me a huge favor and got me a position in
the what they referred to as the back office at
City Bank. In nineteen eighty nine, and that was really
the first time I'd say I was on a track
that would begin to look more conventional, although obviously starting
in these I was hard as a temp I eventually
(12:02):
became a full time employee, and then I went into
the credit training program at City Bank. But I will
say right around that period I asked someone I worked
with them at City Bank, and I was so impressed
with how intelligent they were. And this will give you
a sense of how clumsy I was still And we
(12:22):
went out one night and I said something the effect
of Jees, you're so smart. I would have thought you
would have accomplished more by now in your life, which
is a horrible, cringeworthy thing to say to someone. But
he was so gracious taught me a lot in that
moment because he was gracious about it, didn't get offended.
And he said, you know, Harvey, you'll learn in your
(12:44):
life careers are fifty percent luck, fifty percent skill. And
that always stuck with me, buried because I don't know
that it's fifty percent luck. But for me, I got
to say, like, there are days it feels mostly ninety
ten or ninety nine to one that it's luck. And
I think along the way people, every time you're given responsibility,
somebody's making a leap of faith giving you that responsibility.
(13:07):
And along the way people did, whether it was at
City Bank. Then I went to Goldman Sachs. I had
some incredibly uh, some incredible experiences of Goman Sacks. I
moved around quite a bit after leaving Goman Sacks in
twenty eighteen. Ultimately, Carlisle called Carlisle calling, is luck? Right?
(13:28):
It's just a random thing that I end up sitting
here with you, and so I think that it's really.
Speaker 2 (13:32):
Hard to I'm going to pull out the yellow card
and call on that, because lots of luck up to
this point. But you're a Goldman for a while, and
you're developing a reputation, you're improving what's already a very
well oiled machine. When Carlile called you, it wasn't let's
randomly call somebody and see if we can find a
(13:54):
new CEO. They knew who you were.
Speaker 3 (13:57):
Yeah, that's true. I don't want to overweight the luck.
Speaker 2 (14:03):
Thing.
Speaker 3 (14:03):
People would say to me when I say that, Well,
you can make your own look, and that's true to
some extent. You can influence your luck through hard work.
But okay, everybody in this room just by being here.
You everyone here, there's prerequisites, right, you're all smart. Everybody's
hard working, because that's like prerequisites, that's just table stake stuff.
(14:24):
I do think luck and randomness play a lot in life.
You know, I'm sixty one. I was born in nineteen
sixty four. In my life, that's a really good time
to be born. Like, I don't think you can not
acknowledge some of these things. And so, but I will
say my early experiences, if anything, I would say I
(14:48):
was so insecure because I didn't get into college and
I barely got out of high school. I think it
just motivated fear, scared, insecure, and I think all that
kind of compounded into feeling like, wow, I am alongside
all these people who went to these extraordinary schools, and
(15:09):
the only way I could compete, I kind of felt
was to just work a lot. I always felt like
that was my thing, and to this day, that's kind
of what I think, although obviously I've had a set
of experiences now which give me more confidence.
Speaker 2 (15:24):
So Rutgers to City to Goldman. The next question is
what draws you to the private side of the markets.
You could have done public fixed income, you could have
done equities for the rest of the career. You made
a hard pivot to private markets. Tell us about why
and what that experience has been like.
Speaker 3 (15:45):
Well, after leaving Goldman, I was in a really unique
position in my life because I was so fortunate that
I didn't have to work right away, but because as
you said, I had a nice resume, people knew with me,
I got a lot of opportunities. None of them were
compelling until Carlisle came. And Carlile was compelling for very
very simple reasons. One, I knew the firm. They had
(16:05):
been my client when I was at Golmen Sachs. We
committed a lot of capital to all those big firms,
So I knew the firm. I spent a lot of
time with the founders. They're incredible people, David, Bill and Dan,
both as professionals and as also just generous human beings
and leaders. And then I knew the industry and the
(16:27):
secular trends and cyclical trends in this industry in private
capital are extraordinary, and they've been this way for well
over twenty years. And so I knew the industry I
knew Carlisle's rolling it and it was really too much
to pass up.
Speaker 2 (16:45):
So I know David a little bit. I don't know
the other co founders, and he is legitimately one of
the most amazing people I ever met my entire life.
And I've done, you know, five hundred and fifty of these.
But let's bring this back to the private equity side.
Speaker 3 (17:02):
So that would be your favorite, this would be your second.
Speaker 2 (17:06):
I didn't say my favorite. I just remember leaving that
conversation and saying, Jesus Christ, this guy every space he's in.
He moves the needle in Congress, in markets, in philanthropy
and sports, like he doesn't touch something and not leave
it better than how he found it. Yeah, it's really
(17:27):
it's inspirational, and I don't want to be I don't
want to make this about David.
Speaker 3 (17:31):
It's about you.
Speaker 2 (17:31):
But you get to work with him.
Speaker 3 (17:33):
Yeah, every day.
Speaker 2 (17:35):
So you mentioned the private market side. We have interest
rates that crash to zero in the early two thousands,
then following the financial crisis, we get ZIRP for almost
fifteen years. How does that environment lead to Carlisle, which
hasn't always been almost half a trillion dollars. It started
(17:58):
out at a much more modest size. How does the
past twenty year market environment lead to Carlisle really becoming
the eight hundred pound gorilla in the room.
Speaker 3 (18:10):
Yeah, so I think you mentioned some really key factors
which I think are contributing. It's always going to be
the case that whatever the market environment is, wherever interest
rates are, it's going to be the case that that's
a contributing factor to how markets evolve. I don't think
that's the key driver. If you go back to two thousand,
(18:31):
I'll get these numbers slightly wrong. I think there was
something like sixty two hundred public companies. Now that number
is closer to three thousand. This trend of public companies
shrinking and private companies staying private for longer, this has
been in place for decades. If you think about the
evolution of capital broadly, and you go back to the
(18:53):
fact that Carlisle was founded by David Bill and Dan
They were literally driving past the Carlisle Hotel and decided
to name at Carlisle in nineteen eighty seven. There really
was the birth of private equity, which they were part of.
And you had venture capital, so you had buyouts, and
you had seed opportunities. What systematically has happened over the
(19:15):
thirty plus year period and certainly from two thousand when
you now have companies staying private, is the capital available
has just continued to grow. So, whether it's direct lending,
asset based finance, integration with insurance, the opportunity set and
the capital providers have just continued to expand, whether it's
pension funds now all of you participating in wealth. It's
(19:39):
the capital that is creating the opportunity for companies to
stay private. It's not as though companies woke up one
day and said, geez, I wish there was private capital.
I'd like to stay private. And so this evolution of
the capital markets, I think is just part of a
broader evolution. We didn't have ETFs back in the of
such significance. If you went all the way back to
nineteen eighty seven, I can remember two thousand, I think
(20:01):
it costs you five cents or so to trade a
share a stock. So this is all part of the
evolution of the capital markets, and the trend to staying
private is substantial. Now. Having said that, we took at
Carlisle in the past six months, we took three companies public.
We took Standard a Republic in the United States, which
is an aerospace defense MRO, and that was the third
(20:22):
largest IPO of the year. We did the largest private
equity held IPO in India a few weeks ago, Hexaware,
and then we did the largest ever privately held company
IPO in Japan last year with Goaku. So the public
markets are still a fantastic opportunity to provide capital, but
the option to stay private for longer exists. But the
(20:45):
capital that's coming in is creating the opportunity. Obviously, then
you get this flywhee effect.
Speaker 2 (20:51):
And to put some numbers on at the famous Wilshire
five thousand is about thirty four hundred stocks, right, Yeah,
So let's talk about the different areas of opportunity. You
guys are active in growth equity and private credit and
private debt, of which there is a slight difference, and
of course private equity. Tell us about the big growth
(21:12):
areas that Carlisle sees as an opportunity, and tell the
advisor sitting in the audience what the sort of outlook
is for this space relative to what we've been seeing
in certainly in public credit, and if you want to
talk about public markets, you can. That's the cherry on top.
Speaker 3 (21:31):
Yeah. So I think again for everybody here, for the
wealth advisors here, I don't do what you do. And
as I said earlier, I was kind of uniquely bad
at it back in nineteen eighty seven, and not that
that was the same thing. But if you can't sell
tax free municipal bonds at twelve percent tax free, you're
pretty uniquely bad at something.
Speaker 2 (21:50):
Let me let me interrupt you. I have this vision
of you cold calling people. Hey, it's Harvey Schwartz. Market's
down twenty two percent today, great entry point. Can I
buy you some stuff?
Speaker 3 (22:00):
Yeah, you did what you had to do. I think
the most the most dials I ever made was five
hundred and eight uh in a day with not a
lot of yield. But I would say that just like
certain stocks are not great for every client on the
well side, and certain other forms of investment are not
(22:21):
great for your your wealth clients, I think you have
to first make a determination about whether or not this
is appropriate for your client and where does it fit
into your toolkit. I think that there is a really
unique role, whether it's in asset based finance, which is
a very fast growing section of the marketplace. We did
(22:42):
the largest transaction last year discover Card, which is an
asset based finance transaction. Whether it's that part of the market,
or how insurance companies are coming into the marketplace, or
whether your clients have an interest in getting access to
Japan where we raised the fund last year, or if
your interest, for example, is shifting to defense. One of
(23:05):
the first transactions Carver did Carlo Ever did in nineteen
ninety was in the defense sector. We've been doing this
for over thirty years. You wouldn't have necessarily said five
years ago this would be the topic around the world
given what's happening geopolitically, Europe now committing to spend a
trillion dollars. What does this mean the US has to
replace their supplies, our supplies. And so I do think
(23:30):
that the capital demand is so high. And while we
tend to focus a lot on wealth in the United States,
because I do think the United States has been the
leader in terms of private market adoption, I can tell
you everyone in the world I go wealth is focused
on this space. Half of all the assets in the
world are controlled by wealth, the other half by institutions.
(23:53):
Institutions have been participating in private capital for as long
as we can remember, and so this shift feels quite now.
I just think as an industry we have to be really,
really thoughtful about making sure that your clients in the
end they that we all on our side and are
part of the industry. What we say we do, we
delivered to you. So you delivered to your clients. Because
(24:14):
I do think this is we're in the early days
of a transformative capital shift.
Speaker 2 (24:18):
So let's talk a little bit about private credit, which
has been one of the key growth drivers of Carlisle
as well as the whole private side. What are you
seeing there, what's the future look like in terms of
the business, and I'm not asking you for a rate forecast.
How do you see that business developing? And what can
(24:38):
our clients do to participate?
Speaker 3 (24:40):
So I would say, well, first of all, the Carlisle
Carlisle Insurance credit platform is the largest part of the
business today, which most people are surprised by because of
the history and private equity. That's the largest portion of
our business almost two hundred billion in assets. We're the
largest COLO Manager super proud of the team. They just
(25:01):
were awarded COLO Manager of the year, it's about fifty
billion of assets. So we've been in this business for
quite a long time. I would say that first, I
think we should dismiss what I think are some misunderstandings
about private credit. There's a lot of discussion about the
growth of private credit being potentially systemically risky. I actually
(25:23):
think the distribution of capital across private credit banks and
other providers of capital actually is systemically reducing, not increasing.
But I think that debate is kind of that discussion
has kind of been tested. Right. We went through Silicon
Valley Bank. We went through nearly five hundred basis points
of raised in interest rates and increases by the FED,
(25:43):
and private credit has been quite durable. I think when
you have a lot of capital going into a space,
you have to ask yourself, are the people who are
storing that capital making the marginal capital commitment thoughtfully or
is there too much capital? But I think that's about
a performance question, not as systemically risky question. And so
I think that again, if you think about the trajectory
(26:06):
of how capital evolves, it really evolves over decades. Barry. Now,
there's a lot of excitement in alternatives, and particularly for
the largest firms like ourselves because it's a growth area.
Having a global footprint allows you those opportunities. But our
team is seeing opportunities all around the world to deploy credit,
(26:27):
and actually, even before this sort of potential stimulus resurgence
in Europe, we were already seeing I would say, at
the margin, more opportunities to deploy credit in Europe than
in the US. Now at Carlisle you can all avail
yourself of c Tech, which is basically the best of
credit at Carlisle across a spectrum. And again Zach can
(26:49):
give you all the details after the show. But I'm
a customer. I on Sea Tech and I keep adding
to it, and so I think the opportunities are extensive.
I do think for again, generically for the audience, I
think picking vintages is not necessarily the smartest thing, just
(27:09):
like I don't think actually picking heis and lows in
the stock market is the easiest thing to do. And
I think if you're going to be a participant, you
want to be a participant over time.
Speaker 2 (27:17):
So I'm glad you brought up the FED raising interest
rates five hundred basis points in a year really being
a disruption. You have a unique perch to look out
over public equity, private equity, public credit, private credit. I
got to ask, it seems like everybody misinterpreted what the
(27:40):
Fed was doing, how they were going to do. There
was just an endless parade of forecasts. One of them
was one hundred percent chance of recession in twenty twenty three.
Why do you think so many people got what the
Fed did wrong? And how much or how little do
you care about short term shifts in federal reserve rates?
Speaker 3 (28:02):
Okay, so a lot in that question, So let me
unpack it a bit. So first, for those who don't know,
there's some incredible content that comes out of Carlisle based
on our unique portfolio. So up until recently we just
sold a couple of companies. We had close to a
million employees in our portfolio companies around the world, and
(28:23):
we roll up all that data. So it gives us
a very very unique perch into looking at what is
happening in the economy. And this is across all industries globally.
So I'm going to come back to that in a second.
But as a result, we're able to put out some
amazing content. You know, you mentioned, David, for those of
you arenor on it. David puts out something called from
David's Desk. He wrote this amazing document recently about pandas.
(28:45):
I know that seems a little far field, but all
your clients would love it. It's extraordinary. Did you know
that are panda's like the side when it's born is
the size of a stick of butter? If you read
David's piece on pandas. By the way, he's sponsored all
the pandas to your point that have come in from
China over the past I think decade. He pays for
the he pays the fees for the pandas to come
to America. Jason Thomas is our lead economist and strategist.
(29:08):
Jason puts out Carlisle Compass and I'm going to come
back to Jason in a second. And then we have
Admiral stap Ridez who does all the geopolitical work and
has a leadership series that he puts out, and he's
a partner at the firm. Why do I mention Jason?
Jason rolls up all these KPIs. And if you've been
reading Jason's material since I showed up at Carlisle two
years ago, he was one of the few, if not
(29:30):
the only one barrier that was saying, the FED is
going to keep rates where they are, and he has
nailed it. Now, he's nailed it because he's brilliant. I'm
honored that he's my partner. But he also has all
this data, and so when we roll up the data,
we get the look inside what's happening in terms of
portfolio company behavior, what's happening with input prices. So we
(29:52):
could see months in advance, if there was like a
one dollar input item when it was the supply chain problem,
if that went to two dollars in many cases it did. Right,
so we all see headline inflation when it was seven
eight nine percent, but there were input prices that were
going up fifty sixty eighty percent, and then we could
see that come off. So now to cut to your question,
(30:14):
coming into the beginning of this year, all the signals
were quite positive. We had EBITDAH growth across all the
portfolio companies in the US. It was up something like
fifteen percent. Last year. Our portfolio values went up by
billions because the global economy and the economy in the
US was so strong, and we were still saying rates
(30:36):
wouldn't come down. Now the market's caught up to that, okay.
I would say, now it's a question of with the
new administration, how do the policies ultimately take effect. I
think it's more difficult to say at this exact stage
what FED behavior will mean. I also would say, like
for example, in the January February data, what we're seeing
is what you'd expect we would see. We saw, for example,
(30:57):
a lot of immediate purchasing in advance of potential tariffs.
If you look at the Purchasing Managers index, I think
the component of inventories was up four percent. That's all
managers doing, all businesses doing what you think they would do.
They're basically saying, hey, prices are going to go in
the future, I'm going to buy now, which of course
brings price acceleration into the present. But right now we're
(31:21):
not seeing any marginal demand destruction. The data still looks
quite positive, and so we would believe that rates should
stay stable higher. But we really have to see ultimately
how the combination of tax policy, deregulation, tariffs, how all
this comes together. And I would say we're just at
(31:42):
an environment now with much more increased uncertainty and I
think when we came in the new administration, I think
there was this real sense of, hey, we have certainty.
We got through an election with certainty. Then we had okay,
we're going to get tax policy, deregulation, very pro business agenda.
And now it's sort of the conversation been consumed by
Tariff's uncertainty and obviously a lot of geopolitical uncertainty still.
(32:05):
And so I just think uncertainty is dominating the dialogue
right now, but we're not seeing it in the portfolio companies.
Speaker 2 (32:10):
Makes a lot of sense. Last question, on the private side,
the expectations are that private equity, private credit as an
asset class. End of the decade, you can choose your
preferred estimate two point seventy five trillion, three trillion. I've
even seen above that. How do you see the space
(32:32):
that the waters that you guys ply in, How do
you see the growth continuing? Are we getting close to
topping out or is this still early innings?
Speaker 3 (32:43):
No? Well, I think for the industry again, and we're
talking about an industry that's been around for forty years,
so in the scheme of economic history and business development,
it's quite short. And of course private credit. That's a
fifteen a teen, twenty year phenomenon. Even a shorter period.
(33:03):
Asset based finance becoming a big part of the industry
is an even more a newer phenomenon. I think a
lot of it will depend on really what does happen
with wealth. That is the pool of capital that's now
coming in, and I think it will continue to drive opportunities.
It will be super efficient the more capital is available
(33:26):
to the market, and companies will continue to take advantage
of it. So again, companies don't decide to stay private
because they just love being private. They decide to stay
private because they may like being private, but also because
it's the most efficient way for them to grow and
the most efficient way for them to source capital. This audience,
if any of these numbers come true, I've seen numbers
as big as ten trillion over the next ten years
(33:47):
ten percent. If any of those numbers are even remotely accurate,
the space will continue to grow. Now you're going to
need scale, sourcing, opportunity, reputation. We have to deliver on
what we say we're going to do. Technology we haven't
even talked about. We could do a whole session on
that technology. You have to be able to deploy technology
in very unique ways, especially with AI. So I think
(34:08):
this is going to continue to grow. It won't always
be perfect, but I do think again this audience at
the margin will shape the nature of private capital for
the next decade.
Speaker 2 (34:18):
That was my conversation with Harvey Schwartz, CEO of the
Carlisle Group. We're going to bring him into the studio
for a full treatment for the full masters and business
conversation where we're not fighting the sun and the winds.
It was really fun chatting with him. I learned a
lot about him and about Carlisle. There are a whole
(34:40):
bunch more questions I'm really excited to ask him. Special
thanks to Matt Middleton of Advisor Circle for helping put
this together. It really was a blast. If you enjoy
this conversation, well, be sure and check out any of
the previous five hundred or so we've done over the
past ten years. You can find those that Bloomberg, iTunes, Spotify, YouTube,
(35:02):
wherever you get your favorite podcasts. Be sure and check
out my new book, How Not to Invest The ideas,
numbers and behaviors that destroy wealth and how to avoid them.
I'm Barry Radhaults. You're listening to Masters of business on
Bloomberg Radio.
Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
Business with Barry Ritholts on Bloomberg Radio.
Speaker 2 (00:16):
I'm Barry Ridtolts. You're listening to Masters in Business on
Bloomberg Radio. We have a bonus Masters in Business for you.
Live from future Proof Citywide, Miami. I sit down with
Harvey Schwartz, the CEO of the Carlisle Group. He has
a really fascinating and somewhat unconventional path to Wall Street.
(00:38):
We talk about he's just a news Jersey kid who
didn't know what he wanted to do and had a
hard time figuring out his life goals. And you know,
thanks to people who took an interest in him and
a couple of good breaks, plus a whole lot of
smarts and hard work, he ended up really creating a
(00:59):
career from ELF, not only at firms like Goldman Sachs,
but eventually getting tapped to become CEO at Carlisle. I
find Harvey to be an absolutely fascinating guy. He is
a no holds barred, blunt speaker, truth teller, really really
interesting person. I thought this conversation was great. You can
(01:21):
tell I'm having a lot of fun with no further
ado our special bonus Masters in Business Live with Harvey Schwartz,
CEO of the Carlisle Group. I am just so thrilled
to introduce you all to somebody that not only are
you gonna know more about in the coming years, but
(01:43):
it's been my pleasure to get to know over the
past couple of months. Harvey Schwartz is CEO of Carlile.
He comes to finance in a rather unusual way, and
I'm gonna let Harvey tell's story. Let's start right there.
You have a really unconventional Well before we go there,
(02:04):
Carlisle Private Equity, private credit, been doing this for a
long time. Chairman is David Rubinstein. Tell us a little
bit about Carlisle First, what do you guys do? How
much do you manage? Just give us the thirty second version.
Speaker 3 (02:20):
Sure. Well, first of all, Barry, thanks for doing this.
Great to see you again, everyone, Fantastic to be here.
This is such an amazing venue. So Carlisle today is
about four to fifty billion of assets spread across private equity,
real estate, infrastructure, credit, insurance and secondaries and co invest.
For all of you in the audience, there are a
(02:41):
number of solutions you can show your clients see tech
which is the best of credit cap them. I'm sure
we'll get into some of this which is our secondary's
co in best business, and towards the end of the
year we'll be launching our private equity solution. But I
would say, you know, for me, been Carlo for two
(03:01):
years has been an incredible privilege. The firm was founded
in nineteen eighty seven by David Bill and Dan who
really have created a culture which is extraordinary in terms
of the people. We're twenty three hundred people today. Zach Foreman,
I don't know if Zach Forman is in the crowd anywhere. Zach,
can you stand up? Zach leads our effort down here,
(03:24):
so everybody should go to Zach afterwards, and then we
have a boot. So hey, that's I'm done with my
advertising for the day. But I feel like I've accomplished.
Speaker 2 (03:32):
So let's talk a little bit about your background. You know,
when I look out at the world of finance and
see who are CEOs of companies that are two hundred billion,
half a trillion, a trillion plus, I don't want to
say they're all alike, because they're not. But there's a
certain background that you tend to see a certain type
of college and business school and career path. You're just
(03:56):
a guy from Jersey. How did you sort of full
ask bawards into finance?
Speaker 3 (04:02):
Well, I mean there are other successful people from New Jersey.
Speaker 2 (04:05):
Barry John Stewart.
Speaker 3 (04:07):
Yeah, no, Bruce Springsteen. Now there's a couple. But you
know what Barry's getting at, is it a little bit unconventional.
I mean, everybody has the complexity of their life story.
But for me, uh, I did. Grew up in New Jersey,
I too, uh parents who were quite educated, but tragically
they suffered from severe mental illness. My mother suffered from
(04:29):
what we would call today by polar disorder, and my
father suffered really quite tragic schizophrenia which sort of over
time really just completely consumed him. And this is, you know,
many decades ago, and so treatment wasn't as good, an
understanding wasn't as good. The stigma of mental health related
(04:49):
issues and severe mental health is still an extraordinary problem
everywhere in the world, certainly in our country, but back
then it was even much worse. And so my mother
passed when I was fourteen. I don't want you all
to feel like you have to go to therapy with
me and Barry. By the way, but my mother passed
when I was fourteen, and then it was me and
my father, and it wasn't a particularly healthy environment, and
(05:12):
so I basically ended up doing really, really badly in
high school. I didn't I barely graduated by the time
I was a senior. I think it was like right
around Christmas. When I was a senior in high school
in New Jersey, I'd missed twenty seven days of school, which,
by the way, if you actually do the math, is
super hard to do. And so there was a good
(05:34):
chance I wasn't going to graduate. I didn't apply to
any colleges, but I got super fortunate. And you know,
Chris was really generous when she introduced me. She referred
to as a mentor, and I think you do have
mentors for hopefully everyone here as mentors in your life.
I had people that were more like angels that really
like intervened for whatever reason they did to help me
(05:55):
at certain crazy pivotal times in my life. And one
was a woman named Linda. I had plot. She encouraged
me to apply to Rutgers. I wasn't going to college.
I applied, I didn't get in Linda, who's like not
an influential person.
Speaker 2 (06:08):
Let me, let me stop you. There wasn't there a
brief sojourn to California post high school.
Speaker 3 (06:13):
Yeah, well that was like one of the early earlier angels.
So when I never really talked this much about this publicly,
So I apologize if anybody finds it not interesting. But
when I when I realized I had missed so many
days of school, there was a chance I wasn't going
to graduate. Certainly, my grades were not doing well. My
father and I were deteriorating pretty quickly. And when I
(06:35):
turned eighteen in March of that year, it was my
birthday last week, by the way, In March of that year,
I signed myself out of high school and I had
called some friends in California. I asked if they were
let me come live with them, and so I moved
to California. I actually graduated high school out there. Those
were like there were a lot of angels, but that
family was an extraordinary angel. They took me in, but
(06:55):
I didn't apply to any colleges and then and then
eventually Linda came up long and encouraged me to apply
to Rutgers.
Speaker 2 (07:02):
That was the next time that that was back in
New Jersey.
Speaker 3 (07:05):
Yeah, so I come back and by the way, full.
Speaker 2 (07:07):
Disclosure, I mac on New Jersey. I grew up in Teaneck,
New Jersey. So I feel like I'm allowed to make
fun of the Styeah.
Speaker 3 (07:15):
No, of course, and yet another successful person from New
Jersey right here live the so now it was. It
was a complicated, confusing time I had to come back.
I lived with my father. That wasn't great. I was working,
as for those year old enough, a health instructor at
a squash club in Chatham, New Jersey for the New
(07:38):
Jersey and there was a thing called Nautilus. I was
the person that trained people in the gym, which is
a sort of hard feed to imagine looking at me today.
But I had hair, thinner, better, more fit and but anyway,
uh Lynda and her husband used to come through and
I just got to know them, and she said she
was a Rutgers graduate, but she wasn't an influential person
(08:00):
like you berry, and she encouraged me to apply. I
didn't get in because of my track record in high school.
And she was so incensed by this that she called
the university and basically convinced them to interview me and
write an essay about why I was such a screw
up in high school and Rutgers, which is an incredible institution,
(08:24):
changed their selection allowed me to go to school. And
that's why you know, Linda's an angel and the more
family's an angel, and these people like really intervened in
my life, I think in ways that are kind of
hard to conceive. And Rutgers today, I think the stats
are well over half the students still get financial aid,
sort of one in three or first ever go to
(08:46):
college and their family. It's an amazing institution and for
someone like me gave me all the opportunity in the world.
That's great.
Speaker 2 (08:54):
By the way, don't take the lesson that if your
kid doesn't get into Princeton all up and yell at
the emissions department. That's not the lesson we want you
to take from this. So sore, you're now coming out
of Rutgers. You don't have the traditional Ivy League business
school background. How do you find your way into the
world of finance?
Speaker 3 (09:16):
Very clumsily. I didn't know Rutgers, certainly back then, much
better now. I didn't know there were JP Morgan's in
the World or Morgan Stanley's or Goldman Sachs I had.
I didn't even know where Wall Street was. I'd never
been to Wall Street. First time I went, I was
surprised it was such a little street. I just make
sure a much bigger street. So it's pretty naive, about
(09:38):
as naive as you could get. And then through a friend,
I took a job at a firm called JB. Hanour
For those of you're old enough, it was a municipal
bond firm back in the day. This is nineteen eighty seven,
and just show a hand. So how many people know
what it means to work on a draw? Yeah? So
(09:58):
I worked on a draw, which means you got paid
one thousand dollars a month, but effectively it was alone
and you owed it back, and you cold called, and
you tried to build your book of business. And I
proved to be uniquely bad at this. Yeah, uniquely bad
at this. Yeah, maybe a little bit was timing. My
first day coming out of the training program was the
(10:22):
day the stock market fell. Yeah, October nineteenth, down five
hundred eight points. There I was like naively cold calling people.
By the way, back then there were like real phones.
You had to actually push buttons and stuff, and I
had this little cushion thing you would keep your head
like this, and you were mostly crippled by the end
of the day. But so, yeah, it was a bad
(10:42):
time to try, and I didn't do very well at it.
I had no money. I owed everybody in the world money.
I had borrowed a lot of money to go to school, friends,
anyone I could find, And you know, it was pretty stressful.
Speaker 2 (10:57):
So how do you make your way from cold calling
into either asset management or firm white management. You've run
your way through a lot of different departments. How do
you go from just being a smiler and dialer to
somebody larger in charge.
Speaker 3 (11:16):
Well, I got really fortunate. I was. I was at
a tough point. My daughter was one year old, and
I was kind of really running out of money. At
one point, I thought, jeez, I might have to file
for personal bankruptcy. But I didn't really know what that meant,
but I knew it was a thing you did when
you ran out of money. And again, a friend to
(11:40):
me a huge favor and got me a position in
the what they referred to as the back office at
City Bank. In nineteen eighty nine, and that was really
the first time I'd say I was on a track
that would begin to look more conventional, although obviously starting
in these I was hard as a temp I eventually
(12:02):
became a full time employee, and then I went into
the credit training program at City Bank. But I will
say right around that period I asked someone I worked
with them at City Bank, and I was so impressed
with how intelligent they were. And this will give you
a sense of how clumsy I was still And we
(12:22):
went out one night and I said something the effect
of Jees, you're so smart. I would have thought you
would have accomplished more by now in your life, which
is a horrible, cringeworthy thing to say to someone. But
he was so gracious taught me a lot in that
moment because he was gracious about it, didn't get offended.
And he said, you know, Harvey, you'll learn in your
(12:44):
life careers are fifty percent luck, fifty percent skill. And
that always stuck with me, buried because I don't know
that it's fifty percent luck. But for me, I got
to say, like, there are days it feels mostly ninety
ten or ninety nine to one that it's luck. And
I think along the way people, every time you're given responsibility,
somebody's making a leap of faith giving you that responsibility.
(13:07):
And along the way people did, whether it was at
City Bank. Then I went to Goldman Sachs. I had
some incredibly uh, some incredible experiences of Goman Sacks. I
moved around quite a bit after leaving Goman Sacks in
twenty eighteen. Ultimately, Carlisle called Carlisle calling, is luck? Right?
(13:28):
It's just a random thing that I end up sitting
here with you, and so I think that it's really.
Speaker 2 (13:32):
Hard to I'm going to pull out the yellow card
and call on that, because lots of luck up to
this point. But you're a Goldman for a while, and
you're developing a reputation, you're improving what's already a very
well oiled machine. When Carlile called you, it wasn't let's
randomly call somebody and see if we can find a
(13:54):
new CEO. They knew who you were.
Speaker 3 (13:57):
Yeah, that's true. I don't want to overweight the luck.
Speaker 2 (14:03):
Thing.
Speaker 3 (14:03):
People would say to me when I say that, Well,
you can make your own look, and that's true to
some extent. You can influence your luck through hard work.
But okay, everybody in this room just by being here.
You everyone here, there's prerequisites, right, you're all smart. Everybody's
hard working, because that's like prerequisites, that's just table stake stuff.
(14:24):
I do think luck and randomness play a lot in life.
You know, I'm sixty one. I was born in nineteen
sixty four. In my life, that's a really good time
to be born. Like, I don't think you can not
acknowledge some of these things. And so, but I will
say my early experiences, if anything, I would say I
(14:48):
was so insecure because I didn't get into college and
I barely got out of high school. I think it
just motivated fear, scared, insecure, and I think all that
kind of compounded into feeling like, wow, I am alongside
all these people who went to these extraordinary schools, and
(15:09):
the only way I could compete, I kind of felt
was to just work a lot. I always felt like
that was my thing, and to this day, that's kind
of what I think, although obviously I've had a set
of experiences now which give me more confidence.
Speaker 2 (15:24):
So Rutgers to City to Goldman. The next question is
what draws you to the private side of the markets.
You could have done public fixed income, you could have
done equities for the rest of the career. You made
a hard pivot to private markets. Tell us about why
and what that experience has been like.
Speaker 3 (15:45):
Well, after leaving Goldman, I was in a really unique
position in my life because I was so fortunate that
I didn't have to work right away, but because as
you said, I had a nice resume, people knew with me,
I got a lot of opportunities. None of them were
compelling until Carlisle came. And Carlile was compelling for very
very simple reasons. One, I knew the firm. They had
(16:05):
been my client when I was at Golmen Sachs. We
committed a lot of capital to all those big firms,
So I knew the firm. I spent a lot of
time with the founders. They're incredible people, David, Bill and Dan,
both as professionals and as also just generous human beings
and leaders. And then I knew the industry and the
(16:27):
secular trends and cyclical trends in this industry in private
capital are extraordinary, and they've been this way for well
over twenty years. And so I knew the industry I
knew Carlisle's rolling it and it was really too much
to pass up.
Speaker 2 (16:45):
So I know David a little bit. I don't know
the other co founders, and he is legitimately one of
the most amazing people I ever met my entire life.
And I've done, you know, five hundred and fifty of these.
But let's bring this back to the private equity side.
Speaker 3 (17:02):
So that would be your favorite, this would be your second.
Speaker 2 (17:06):
I didn't say my favorite. I just remember leaving that
conversation and saying, Jesus Christ, this guy every space he's in.
He moves the needle in Congress, in markets, in philanthropy
and sports, like he doesn't touch something and not leave
it better than how he found it. Yeah, it's really
(17:27):
it's inspirational, and I don't want to be I don't
want to make this about David.
Speaker 3 (17:31):
It's about you.
Speaker 2 (17:31):
But you get to work with him.
Speaker 3 (17:33):
Yeah, every day.
Speaker 2 (17:35):
So you mentioned the private market side. We have interest
rates that crash to zero in the early two thousands,
then following the financial crisis, we get ZIRP for almost
fifteen years. How does that environment lead to Carlisle, which
hasn't always been almost half a trillion dollars. It started
(17:58):
out at a much more modest size. How does the
past twenty year market environment lead to Carlisle really becoming
the eight hundred pound gorilla in the room.
Speaker 3 (18:10):
Yeah, so I think you mentioned some really key factors
which I think are contributing. It's always going to be
the case that whatever the market environment is, wherever interest
rates are, it's going to be the case that that's
a contributing factor to how markets evolve. I don't think
that's the key driver. If you go back to two thousand,
(18:31):
I'll get these numbers slightly wrong. I think there was
something like sixty two hundred public companies. Now that number
is closer to three thousand. This trend of public companies
shrinking and private companies staying private for longer, this has
been in place for decades. If you think about the
evolution of capital broadly, and you go back to the
(18:53):
fact that Carlisle was founded by David Bill and Dan
They were literally driving past the Carlisle Hotel and decided
to name at Carlisle in nineteen eighty seven. There really
was the birth of private equity, which they were part of.
And you had venture capital, so you had buyouts, and
you had seed opportunities. What systematically has happened over the
(19:15):
thirty plus year period and certainly from two thousand when
you now have companies staying private, is the capital available
has just continued to grow. So, whether it's direct lending,
asset based finance, integration with insurance, the opportunity set and
the capital providers have just continued to expand, whether it's
pension funds now all of you participating in wealth. It's
(19:39):
the capital that is creating the opportunity for companies to
stay private. It's not as though companies woke up one
day and said, geez, I wish there was private capital.
I'd like to stay private. And so this evolution of
the capital markets, I think is just part of a
broader evolution. We didn't have ETFs back in the of
such significance. If you went all the way back to
nineteen eighty seven, I can remember two thousand, I think
(20:01):
it costs you five cents or so to trade a
share a stock. So this is all part of the
evolution of the capital markets, and the trend to staying
private is substantial. Now. Having said that, we took at
Carlisle in the past six months, we took three companies public.
We took Standard a Republic in the United States, which
is an aerospace defense MRO, and that was the third
(20:22):
largest IPO of the year. We did the largest private
equity held IPO in India a few weeks ago, Hexaware,
and then we did the largest ever privately held company
IPO in Japan last year with Goaku. So the public
markets are still a fantastic opportunity to provide capital, but
the option to stay private for longer exists. But the
(20:45):
capital that's coming in is creating the opportunity. Obviously, then
you get this flywhee effect.
Speaker 2 (20:51):
And to put some numbers on at the famous Wilshire
five thousand is about thirty four hundred stocks, right, Yeah,
So let's talk about the different areas of opportunity. You
guys are active in growth equity and private credit and
private debt, of which there is a slight difference, and
of course private equity. Tell us about the big growth
(21:12):
areas that Carlisle sees as an opportunity, and tell the
advisor sitting in the audience what the sort of outlook
is for this space relative to what we've been seeing
in certainly in public credit, and if you want to
talk about public markets, you can. That's the cherry on top.
Speaker 3 (21:31):
Yeah. So I think again for everybody here, for the
wealth advisors here, I don't do what you do. And
as I said earlier, I was kind of uniquely bad
at it back in nineteen eighty seven, and not that
that was the same thing. But if you can't sell
tax free municipal bonds at twelve percent tax free, you're
pretty uniquely bad at something.
Speaker 2 (21:50):
Let me let me interrupt you. I have this vision
of you cold calling people. Hey, it's Harvey Schwartz. Market's
down twenty two percent today, great entry point. Can I
buy you some stuff?
Speaker 3 (22:00):
Yeah, you did what you had to do. I think
the most the most dials I ever made was five
hundred and eight uh in a day with not a
lot of yield. But I would say that just like
certain stocks are not great for every client on the
well side, and certain other forms of investment are not
(22:21):
great for your your wealth clients, I think you have
to first make a determination about whether or not this
is appropriate for your client and where does it fit
into your toolkit. I think that there is a really
unique role, whether it's in asset based finance, which is
a very fast growing section of the marketplace. We did
(22:42):
the largest transaction last year discover Card, which is an
asset based finance transaction. Whether it's that part of the market,
or how insurance companies are coming into the marketplace, or
whether your clients have an interest in getting access to
Japan where we raised the fund last year, or if
your interest, for example, is shifting to defense. One of
(23:05):
the first transactions Carver did Carlo Ever did in nineteen
ninety was in the defense sector. We've been doing this
for over thirty years. You wouldn't have necessarily said five
years ago this would be the topic around the world
given what's happening geopolitically, Europe now committing to spend a
trillion dollars. What does this mean the US has to
replace their supplies, our supplies. And so I do think
(23:30):
that the capital demand is so high. And while we
tend to focus a lot on wealth in the United States,
because I do think the United States has been the
leader in terms of private market adoption, I can tell
you everyone in the world I go wealth is focused
on this space. Half of all the assets in the
world are controlled by wealth, the other half by institutions.
(23:53):
Institutions have been participating in private capital for as long
as we can remember, and so this shift feels quite now.
I just think as an industry we have to be really,
really thoughtful about making sure that your clients in the
end they that we all on our side and are
part of the industry. What we say we do, we
delivered to you. So you delivered to your clients. Because
(24:14):
I do think this is we're in the early days
of a transformative capital shift.
Speaker 2 (24:18):
So let's talk a little bit about private credit, which
has been one of the key growth drivers of Carlisle
as well as the whole private side. What are you
seeing there, what's the future look like in terms of
the business, and I'm not asking you for a rate forecast.
How do you see that business developing? And what can
(24:38):
our clients do to participate?
Speaker 3 (24:40):
So I would say, well, first of all, the Carlisle
Carlisle Insurance credit platform is the largest part of the
business today, which most people are surprised by because of
the history and private equity. That's the largest portion of
our business almost two hundred billion in assets. We're the
largest COLO Manager super proud of the team. They just
(25:01):
were awarded COLO Manager of the year, it's about fifty
billion of assets. So we've been in this business for
quite a long time. I would say that first, I
think we should dismiss what I think are some misunderstandings
about private credit. There's a lot of discussion about the
growth of private credit being potentially systemically risky. I actually
(25:23):
think the distribution of capital across private credit banks and
other providers of capital actually is systemically reducing, not increasing.
But I think that debate is kind of that discussion
has kind of been tested. Right. We went through Silicon
Valley Bank. We went through nearly five hundred basis points
of raised in interest rates and increases by the FED,
(25:43):
and private credit has been quite durable. I think when
you have a lot of capital going into a space,
you have to ask yourself, are the people who are
storing that capital making the marginal capital commitment thoughtfully or
is there too much capital? But I think that's about
a performance question, not as systemically risky question. And so
I think that again, if you think about the trajectory
(26:06):
of how capital evolves, it really evolves over decades. Barry. Now,
there's a lot of excitement in alternatives, and particularly for
the largest firms like ourselves because it's a growth area.
Having a global footprint allows you those opportunities. But our
team is seeing opportunities all around the world to deploy credit,
(26:27):
and actually, even before this sort of potential stimulus resurgence
in Europe, we were already seeing I would say, at
the margin, more opportunities to deploy credit in Europe than
in the US. Now at Carlisle you can all avail
yourself of c Tech, which is basically the best of
credit at Carlisle across a spectrum. And again Zach can
(26:49):
give you all the details after the show. But I'm
a customer. I on Sea Tech and I keep adding
to it, and so I think the opportunities are extensive.
I do think for again, generically for the audience, I
think picking vintages is not necessarily the smartest thing, just
(27:09):
like I don't think actually picking heis and lows in
the stock market is the easiest thing to do. And
I think if you're going to be a participant, you
want to be a participant over time.
Speaker 2 (27:17):
So I'm glad you brought up the FED raising interest
rates five hundred basis points in a year really being
a disruption. You have a unique perch to look out
over public equity, private equity, public credit, private credit. I
got to ask, it seems like everybody misinterpreted what the
(27:40):
Fed was doing, how they were going to do. There
was just an endless parade of forecasts. One of them
was one hundred percent chance of recession in twenty twenty three.
Why do you think so many people got what the
Fed did wrong? And how much or how little do
you care about short term shifts in federal reserve rates?
Speaker 3 (28:02):
Okay, so a lot in that question, So let me
unpack it a bit. So first, for those who don't know,
there's some incredible content that comes out of Carlisle based
on our unique portfolio. So up until recently we just
sold a couple of companies. We had close to a
million employees in our portfolio companies around the world, and
(28:23):
we roll up all that data. So it gives us
a very very unique perch into looking at what is
happening in the economy. And this is across all industries globally.
So I'm going to come back to that in a second.
But as a result, we're able to put out some
amazing content. You know, you mentioned, David, for those of
you arenor on it. David puts out something called from
David's Desk. He wrote this amazing document recently about pandas.
(28:45):
I know that seems a little far field, but all
your clients would love it. It's extraordinary. Did you know
that are panda's like the side when it's born is
the size of a stick of butter? If you read
David's piece on pandas. By the way, he's sponsored all
the pandas to your point that have come in from
China over the past I think decade. He pays for
the he pays the fees for the pandas to come
to America. Jason Thomas is our lead economist and strategist.
(29:08):
Jason puts out Carlisle Compass and I'm going to come
back to Jason in a second. And then we have
Admiral stap Ridez who does all the geopolitical work and
has a leadership series that he puts out, and he's
a partner at the firm. Why do I mention Jason?
Jason rolls up all these KPIs. And if you've been
reading Jason's material since I showed up at Carlisle two
years ago, he was one of the few, if not
(29:30):
the only one barrier that was saying, the FED is
going to keep rates where they are, and he has
nailed it. Now, he's nailed it because he's brilliant. I'm
honored that he's my partner. But he also has all
this data, and so when we roll up the data,
we get the look inside what's happening in terms of
portfolio company behavior, what's happening with input prices. So we
(29:52):
could see months in advance, if there was like a
one dollar input item when it was the supply chain problem,
if that went to two dollars in many cases it did. Right,
so we all see headline inflation when it was seven
eight nine percent, but there were input prices that were
going up fifty sixty eighty percent, and then we could
see that come off. So now to cut to your question,
(30:14):
coming into the beginning of this year, all the signals
were quite positive. We had EBITDAH growth across all the
portfolio companies in the US. It was up something like
fifteen percent. Last year. Our portfolio values went up by
billions because the global economy and the economy in the
US was so strong, and we were still saying rates
(30:36):
wouldn't come down. Now the market's caught up to that, okay.
I would say, now it's a question of with the
new administration, how do the policies ultimately take effect. I
think it's more difficult to say at this exact stage
what FED behavior will mean. I also would say, like
for example, in the January February data, what we're seeing
is what you'd expect we would see. We saw, for example,
(30:57):
a lot of immediate purchasing in advance of potential tariffs.
If you look at the Purchasing Managers index, I think
the component of inventories was up four percent. That's all
managers doing, all businesses doing what you think they would do.
They're basically saying, hey, prices are going to go in
the future, I'm going to buy now, which of course
brings price acceleration into the present. But right now we're
(31:21):
not seeing any marginal demand destruction. The data still looks
quite positive, and so we would believe that rates should
stay stable higher. But we really have to see ultimately
how the combination of tax policy, deregulation, tariffs, how all
this comes together. And I would say we're just at
(31:42):
an environment now with much more increased uncertainty and I
think when we came in the new administration, I think
there was this real sense of, hey, we have certainty.
We got through an election with certainty. Then we had okay,
we're going to get tax policy, deregulation, very pro business agenda.
And now it's sort of the conversation been consumed by
Tariff's uncertainty and obviously a lot of geopolitical uncertainty still.
(32:05):
And so I just think uncertainty is dominating the dialogue
right now, but we're not seeing it in the portfolio companies.
Speaker 2 (32:10):
Makes a lot of sense. Last question, on the private side,
the expectations are that private equity, private credit as an
asset class. End of the decade, you can choose your
preferred estimate two point seventy five trillion, three trillion. I've
even seen above that. How do you see the space
(32:32):
that the waters that you guys ply in, How do
you see the growth continuing? Are we getting close to
topping out or is this still early innings?
Speaker 3 (32:43):
No? Well, I think for the industry again, and we're
talking about an industry that's been around for forty years,
so in the scheme of economic history and business development,
it's quite short. And of course private credit. That's a
fifteen a teen, twenty year phenomenon. Even a shorter period.
(33:03):
Asset based finance becoming a big part of the industry
is an even more a newer phenomenon. I think a
lot of it will depend on really what does happen
with wealth. That is the pool of capital that's now
coming in, and I think it will continue to drive opportunities.
It will be super efficient the more capital is available
(33:26):
to the market, and companies will continue to take advantage
of it. So again, companies don't decide to stay private
because they just love being private. They decide to stay
private because they may like being private, but also because
it's the most efficient way for them to grow and
the most efficient way for them to source capital. This audience,
if any of these numbers come true, I've seen numbers
as big as ten trillion over the next ten years
(33:47):
ten percent. If any of those numbers are even remotely accurate,
the space will continue to grow. Now you're going to
need scale, sourcing, opportunity, reputation. We have to deliver on
what we say we're going to do. Technology we haven't
even talked about. We could do a whole session on
that technology. You have to be able to deploy technology
in very unique ways, especially with AI. So I think
(34:08):
this is going to continue to grow. It won't always
be perfect, but I do think again this audience at
the margin will shape the nature of private capital for
the next decade.
Speaker 2 (34:18):
That was my conversation with Harvey Schwartz, CEO of the
Carlisle Group. We're going to bring him into the studio
for a full treatment for the full masters and business
conversation where we're not fighting the sun and the winds.
It was really fun chatting with him. I learned a
lot about him and about Carlisle. There are a whole
(34:40):
bunch more questions I'm really excited to ask him. Special
thanks to Matt Middleton of Advisor Circle for helping put
this together. It really was a blast. If you enjoy
this conversation, well, be sure and check out any of
the previous five hundred or so we've done over the
past ten years. You can find those that Bloomberg, iTunes, Spotify, YouTube,
(35:02):
wherever you get your favorite podcasts. Be sure and check
out my new book, How Not to Invest The ideas,
numbers and behaviors that destroy wealth and how to avoid them.
I'm Barry Radhaults. You're listening to Masters of business on
Bloomberg Radio.
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