Jillian Jaccard Murrish - Alternative Credit
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Bill: Ladies and gentlemen, welcome to The Business Brew. I'm your host, Bill Brewster. This episode is brought to you by Stream by Mosaic...So, Jillian, how are you doing today?
Jillian: Oh, I'm so good. How are you?
Bill: This is now what take three or take four? I'm not sure.
Jillian: Well, one of the-- yeah, three or four, I think.
Bill: Eventually, in this podcast will actually happen.
Jillian: It will. I think, this is the take.
Bill: Yes.
Jillian: I think, this is the one.
Bill: So far, so good.
Jillian: Here we are. We've done it.
Bill: Indeed. We've probably done a couple of podcasts in total now trying to do one podcast. So, we'll see if this one can actually be the one that goes to release or not.
Jillian: I hope, I hope.
Bill: Yeah. So, let's see.
Jillian: How was your weekend?
Bill: My weekend was okay. We were going to record on the day that Qurate released results that sent the stock down 30%, and I needed to get my mind correct. You didn't have a particularly great week either. So, you rain check that.
Jillian: No.
Bill: Were you able to have a decent weekend?
Jillian: I was, lot of family time, we got to a one-year-old's birthday party.
Bill: There you go.
Jillian: Yeah. I spent part of the day at the beach. So, yeah, not too bad. Can't complain. How was yours?
Bill: Mine was okay. I also had a children's birthday party actually, but I showed up a little bit a turnt up. I had had one or two IPAs in a Long Island iced tea before I went.
Jillian: Oh, too, funny.
Bill: So, I told my wife that I-- [crosstalk]
Jillian: You were the clown, you were the entertainment?
Bill: No. I was not the entertainment. I ended up actually behaving myself quite a bit. I threw a football with my kid, and then, I was a hero because it was on the beach and the kids were dropping balls onto the beach and I was saving them. But I did have to Uber. I thought that I would drive and be there on time and the day changed.
Jillian: I hear ya. Can turn in a flash. Well, smart to Uber.
Bill: Yes. I don't know. I had a long week. Sometimes, you got to blow off some steam, you know?
Jillian: I hear ya.
Bill: Do you guys do that in California? Do you just go for long walks and get better looking?
Jillian: [laughs] Oh, you're so funny. I was going to say for me, my equivalent is like a jog on the beach or going hiking. [laughs]
Bill: Yeah, that makes very Manhattan Beach answer.
Jillian: It is. You know, I do enjoy a nice glass of red wine in the evening sometimes. So, I can't pretend that I'm all health and high and mighty over here. I can partake too after a hard week.
Bill: You'll get stressed and eat kale.
Jillian: Yes. [laughs]
Bill: That's not how we do it on the East Coast.
Jillian: Oh, so funny. I do have a kale salad waiting for me in the fridge for lunch. So, yes.
Bill: There you go.
Jillian: Too funny.
Bill: Kale is my least favorite of the lettuce derivatives, but it's also the healthiest.
Jillian: [laughs] I prefer spinach and I think spinach is up there with nutrition. So, my daughter, she's nine months old, her new favorite breakfast and you're going to just die is a spinach smoothie. Spinach-
Bill: I get that.
Jillian: -blueberries, bananas, and she loves it. So, she's going full California with me, I guess.
Bill: Now, we used to do that for our first, my first had like crazy pureed meals and it was all beautiful. And then, the second started to eat baby food, and then, the third, I think, he just ate whatever he was given.
Jillian: He just started with pizza, right?
Bill: That's right.
Jillian: That's the third.
Bill: Yeah, that's right. To figure out how to chew without teeth, we don't care. We're not making anything special.
Jillian: [laughs] Exactly. [crosstalk]
Bill: How's being a mom?
Jillian: Oh, it's the best. It's my favorite job I've ever had. She is the greatest joy. Her name is Margo. She's nine months old and it actually gets better every day. People told me that, I was like mourning the loss of my one-month-old, my two-month-old like, "Oh, she's never going to be this small again, these are the best days," and it gets more fun every day. This morning, we went out for a walk and she's obsessed with birds, she just looks up at the sky, here's a caw, and just searches the sky, and follows them and tracks them, and it's just so fun to see the world through her eyes, just discovering everything and loving it, and it's the best.
Bill: Does she like construction at all?
Jillian: Loves. So, we have a ton of construction going on in the neighborhood, which is fantastic. Obviously, revitalization and you know making the neighborhood look nicer. There're huge tractors, there're big diggers, and yeah, we started on one yesterday and she just loves it. So, we tease, we're like, we're going to have a construction birthday party for her in the coming months.
Bill: Let's see, I guess, my first so we were having our second. We lived in Lincoln Park in Chicago and on our block, six buildings got torn down. So, he could watch and there's like these videos, these twenty trucks videos, they're fantastic. Some guy in Scottsdale put some together. He's like super nerd. Sorry, if you listen, dude, I'm not trying to take shots at you.
Jillian: [laughs]
Bill: But also, it is kind of nerdy. He's got all these songs for different trucks and they're fantastic. They're great songs. So, that was-- [crosstalk]
Jillian: What's the name of it?
Bill: It's twenty trucks.
Jillian: Twenty trucks. Okay, I've got to look it up.
Bill: It's now up to like 30 trucks, but you don't change your brand once you're deep in twenty trucks. It's great stuff.
Jillian: Okay. Good intel. Thank you.
Bill: You're welcome. This is the hard-hitting reporting that people come here for.
Jillian: Yeah, exactly. Learning all the kid shows [crosstalk] with.
Bill: Indeed. So, I guess, how do you want to start this on the fourth time, we'll say, what do you do, and where are you located, and then we'll take it from there?
Jillian: That's a great place to start. So, I think everyone's gathered. I'm in Manhattan Beach. It's a town in Los Angeles. We have our office here, my home is here, my business partner Connor Neu, his house is here. So, it turned out to be just the right spot to run the company. We started this firm about five years ago, and the whole impetus was to bring fixed income yield to investors, when really the environment hasn't been producing any for investors for a number of years. So, the way that we do it is by investing an alternative credit, which we define is all non-bank lending, where the loan sizes are under $250,000.
For a bank, I'm sure you know, it's really expensive for a bank to make a loan. It's not profitable for a bank to make a $100,000 loan. The last stat I heard was that, it costs about $12,000 for a bank to originate one loan. And to make the loan with compliance costs, and headcount, and brick and mortar shops, etc. Really, this segment of small dollar lending has really been abandoned by banks. So, imagine if you're a small business, and you want to go buy a new tractor, speaking of construction, how're you going to finance that $100,000 tractor? You have to go to a non-bank lender to get a loan. It doesn't mean you're not bankable. You may have a 750 FICO and you have great business income, but banks won't make those loans. So, this whole ecosystem of non-bank lenders popped up to serve all of these segments. And it's hundreds and hundreds of lenders, everything from that small equipment lender all the way to these large behemoths that originate loans through the internet. So, alternative credit covers up whole ecosystem, whether it's offline, equipment, small lenders, all the way to a billion-dollar online originator like LendingClub, or Prosper, or those names that you've heard of.
We started a firm that invests in that corner of the world. It's a niche corner, there's lots of ways to invest in it, and we've really found two strategies that have served this corner and have made our LPs quite happy. The two things that we really focus on are buying loans in the secondary market. So, say that equipment lender makes a bunch of loans, they have them on their balance sheet, and they're growing really quickly, and they need to offload some loans off their balance sheet. They would call us and we would buy them. Maybe, it's a fund manager in New York that has aggregated a pool of $100 million of real estate loans. And they need some liquidity to go work on this next deal, they would call us and we could buy loans from them. There's a wide variety of secondary market opportunities that present themselves and we are there as that liquidity provider with a bid to buy those loans quickly and efficiently.
Then, the second strategy is where we actually go directly to the loan originator, and we write a line of credit for them. Again, going back to the equipment lender, we will give them a $10 million credit facility to go make equipment loans. Those are both of our trading strategies. They're all under one roof of a special opportunity strategy. The common theme between both of those is that, we are shortening duration while increasing yield. We can shorten duration by buying portfolios in the secondary market. The loans are well seasoned, maybe it's a 12-month portfolio or six months in, and we're buying it with six months left. From an investor standpoint, how do you decrease duration risk in a rising interest rate environment by going into the secondary market in this space. Sorry that was a long-winded answer what we do, but I could talk about strategy for an hour straight.
Bill: Well, that's good, because we're about to do that. So, when I hear you say shortened duration offer the same or higher yield than typically you could find in the credit markets, and then I hear you say, non-bank lending, the biggest flag that comes up for me is, are these riskier loans? Why does this opportunity exist without accepting more credit risk?
Jillian: Great question. I touched on briefly earlier the whole regulatory and compliance environment of a bank that makes it very expensive for a bank to make a loan. So, if it costs a bank $12,000 to make a loan, they're not making a $50,000 loan. It's just not profitable. There's not enough interest in it. So, simply, from a size perspective, a bunch of borrowers who want to borrow less than $250,000 are precluded from going to the banking system. So, you can have very bankable prime borrowers utilizing non-bank lenders. For example, you're going in and you're getting dental veneers put on. So, fake teeth that make your mouth look nice and it cost $20,000. You have $220,000 of income, a 780 FICO, and you walk into your dentist's office, you sign up, and you get your teeth done. There's an iPad there that says, "Hey, would you like to finance this and pay it over 12 months instead of all upfront?" You might go, "Oh, sure. It sounds good. No problem." You look at it, and there's actually a 0% interest rate. Okay, why would I pay it all upfront? Time value of money here. I'd rather pay it over time. I'm in. You sign up for that loan. So, what does that look like on the back end to the alternative lender who made you that loan? You're going well, "That's not interesting, you're making 0%. Why would a lender want to give you that one?"
Bill: Yeah.
Jillian: They're not. So, the lender is going to the dentist. It cost the dentist $5,000 to put in your veneers. They're charging you $20,000. This lender said, "Hey, dentist, let me put an iPad in your office. I will pay you $18,000 or $16,000 up front, maybe at $16,000. I'll pay you $16,000 up front right now and let me make a $20,000 loan to your patient. I'll just pay you today and you don't to have risk that anyone's going to pay you or not." The dentist says, "Absolutely, I love to have you do this. Because you know what, I lose a few patients every other week because they see the price tag and they walk out of the consult and they don't get their veneers. I'd rather take $16,000 and capture those clients than take $20,000."
Bill: By the way, I don't have to manage the credit risk.
Jillian: Oh, absolutely. There's a whole set of doctor and dentist organizations that are giving loans off their own balance sheet and managing that process, and it's an antiquated nightmare. For some dentists you identified, this is just a solution where they had already been doing this off balance sheet and they're just offloading the risk, they're offloading the processing, the two employees they have doing it. If you see as the alternative lender here, you're making a loan for $20,000. But your cost your dollars that are in is only $16,000. So, you already have this built-in first loss and this interest that's there to make it worth your while to lend. So, we actually had provided a credit facility to this alternative lender.
As an example, I won't say their name because I haven't cleared it with them to talk about it publicly. But we provided them a $15 million credit facility. They went out and made a bunch of loans to these individuals, and these individuals pay off their loan over time, and it's been a fantastic return for us and return for the lender, a big win-win all around, we try to target double digit yields for those sorts of investments.
Bill: Are you then using a line of credit to fund the line of credit that you're extending?
Jillian: We don't use any leverage. We take LP capital and we invest it in transactions like this. But we don't use any leverage, we don't have a bank facility. I think, as I shared, we have really short duration investments. So, that duration was 12 months. If we buy loan portfolios, sometimes, they only have three months duration left on them. Imagine trying to put leverage on an asset base that cycling that fast. We buy pools of thousands and thousands of loans, like these small consumer loans, where maybe there's only $100 of principal left. Imagine that changing borrowing base for credit facility. It would just be really cumbersome and pretty expensive.
Bill: Yeah.
Jillian: Any financing option for this for us would be at like L plus six or seven.
Bill: Okay.
Jillian: That's decent. We could still produce additional yield off of that because there is room between what we target and what we would be paying. But again, we're just not interested in the additional risk of taking on leverage. So, we just use equity capital.
Bill: That makes sense. And you said, you're lending out to this company, I assume it's fixed and you said double-digit return. So, it's pretty good.
Jillian: We are now instituting a SOFR floor. So, SOFR is the new LIBOR for those who've been paying attention to these really nerdy--
Bill: Yeah, that's right because LIBOR got gamed, right?
Jillian: LIBOR did. So, now, it's SOFR and we use a SOFR floor for all of our deals now, when we're writing credit facilities. If we're in a rising interest rate environment, we think that it makes sense to have a floating rate. Again, the transactions that we're getting into are such short in duration that max we would be exposed to some sort of interest rate issue for six months or a year, whereas other folks who are entering into three or five or seven yearlong transactions, which is a lot of the direct lending space. Those folks are really subject to interest rate risk in this environment that's the interesting game to try to figure out. I don't claim that I know what's going to happen with rates. I know there's only one way for them to go.
Bill: Ah, they could go negative. Don’t be fooled.
Jillian: [laughs]
Bill: Who knows? I've learned enough over my life on this planet to know I have no idea what is possible. Things I never thought was possible, actually materialize. So, who knows?
Jillian: Right, I know.
Bill: I do tend to that with you. Logic would dictate that they should only have one way to go. But I'm not sure logic applies here.
Bill: So, it seems to me that that lending base is a good lending base, right? You're serving in this hypothetical, high income earning people with the access to credit to get a surgery that they value, and they're probably not going to default because this hypothetical person's probably not looking to really tank their credit. I'm sure that there are defaults. But as a group, I would think these loans are fairly decently performing. Is the interest rate as high as it is because of the size of the borrower that you're lending to, like, why is that interest rate set appropriately?
Jillian: For that specific example, there're two borrowers here. There's the borrower, which is the actual end consumer who's getting the veneers.
Bill: Yeah.
Jillian: And that person is seeing a 0% interest rate. They're charged $20,000 for the veneer. They either pay 20k today or they pay 20k over 10 months. So, they don't care. It's the underlying loan originator who's making all those loans. So, to clarify, we are not in the business of going and making these individual loans.
Bill: No, you're lending to the originator.
Jillian: Yep, there's a whole company that does that.
Bill: But if the originator is discounting something 30% and then, you're lending at $19,000, their levered IRR is great.
Jillian: Exactly. So, these operating businesses, this was my background. We haven't done backgrounds of who I am, but been running Pier for five years, and before this, I built and ran the capital markets practice at an online real estate lender. When I was in that seat running an alternative lending company is a specialty finance business. At the end of the day, that's all it is. People can try to claim that they're running a tech company, blah, blah, blah. Yes, that's important. But at the heart of what you're doing, you're lending out money, you're trying to recoup that money, and that's how you make your revenue and your profit is by being a specialty finance lender.
Bill: This may sound like a really stupid question, but I just want to make sure that we're having the same conversation. What's your definition of specialty finance?
Jillian: Oh, man.
Bill: Because it's broad, right? So, what you're talking about just non-banking, credit extension.
Jillian: That's all in specialty finance.
Bill: Okay.
Jillian: I was just making the distinction that a lot of companies that serve financial products through the internet try to shun their finance or specialty finance title, because all they want is a technology multiple in running their business.
Bill: [laughs] Yeah. See, Buy Now, Pay Later.
Jillian: Exactly. The business model that I was referring to and talking about what the dentist example is, Buy Now, Pay Later for service businesses. People don't think of their veneers as a product. It's a service and that's a huge-- not a new industry, but it's really starting to develop and become more mature is Buy Now, Pay Later for services. Those businesses are often using the internet, they're using technology to price your risk really quickly and price that loan and approve you or deny you, and they want to be called the tech company, and there is a big tech component. But again, at the heart of what they do, they lend money, there're defaults, they get their profit, and that to me is a specialty finance business.
Specialty finance is a hard definition that I won't try to make but even within banks, there're specialty finance groups, anything that's not traditional at a bank can even be specialty finance. The group at PacWest that does aircraft leasing, it could be under their specialty finance arm. The only definition I was trying to say is that these tech companies are also finance companies at the end of the day.
Bill: Yeah. I agree with that and I feel like such an idiot that I didn't make that connection that this particular product was just Buy Now, Pay Later for dental veneers. I always think of it as like a 0% installment loan.
Jillian: Exactly.
Bill: I don't even consider Buy Now, Pay Later. I just view it as lending. But that's not what the market says. But everybody's got to figure out how to market.
Jillian: And it's the fancy term these days.
Bill: Yeah, that's right.
Jillian: Yeah, Buy Now, Pay Later. You're not taking a loan. There's a lot of consumer rejection or it's a hot button to be taking on loans, or leverage, or using credit cards after the financial crisis, especially, in the millennial generation. There is a decent aversion to debt. So, Buy Now, Pay Later was beautiful marketing to get adoption from consumers to finance their products.
Bill: That's the thing that kind of upsets me.
Jillian: Imagine if it said, take a loan to pay for this t-shirt you're buying. They will be like, "Oh, I won't do that." But Buy Now, Pay Later, "Oh, yeah, no problem."
Bill: Yeah, that's right. To your point on the veneers, yes, it's 0% technically. But without this, it would be a lot less. We're all just building in the financing cost and hiding it, right?
Jillian: Exactly. Because the dentist is now accepting $16,000 of revenue instead of $20,000. And that's ultimately the cost that the borrower is bearing is that $4,000 for financing it.
Bill: Interesting. I like that we just broke that down. That makes me happy.
Jillian: Another interesting example, too, that we provided a credit facility for. It's a lender that lends to students who are going to coding bootcamp. So, if you go and do a 12-month program to become a software engineer or a coder, you would pay $10,000 a year. So, this lender goes in and says, "Hey, you can pay that over 12 months," and they went to all the schools, and the schools say, "Great, we'll take $8,000 today to guarantee that we're getting paid our tuition." And it allows more students to do it because they can finance it, and we capture more clients. So, it's a win for everyone.
Again, this is a business that already has a 20% buffer built in on day one. We provided financing to that business. This is actually one of my favorite deals we did because it's not simply an aggregation credit facility, where imagine we give them a credit facility, they make loans, the loans have to pay off, to pay us off or they have to refinance our facility with a bigger bank or Aries down the road. This model is different that the education lender used where they actually sell all of their loans off their balance sheet within a week or two of originating them. So, we only held those loans for a week or two, and then they cycle it. It's called the seasoning facility.
It's a pretty cool model. For that one, Goldman, I think, was on the other side buying the loans from them. But we seasoned them for a few weeks because of this really particular tax law, and I know you're nerdy Bill, so, I know you will love this.
Jillian: [laughs]
Bill: Because I like to figure out, why do these opportunities exist in this tax law is the reason?
Jillian: Yes, you're going to love this. So, if Goldman went and bought these loans at origination from this lender on day one, they would be taxed as an operating company like a lender. They're an operating business that they're in the business of making loans. If they buy these assets two weeks after origination, their taxes if they're buying an asset. Not making loans as an operating company. It's about half the tax rate.
Bill: Yeah.
Jillian: Essentially, all of these originator lenders have said, "If we're going to be selling our loans off balance sheet, we have to be holding them and we have to have capital to do it." So, for most of these lenders, that seasoning capital-- that we Pier, we provided that seasoning capital is simply an operational tool for them. They need that to hold the loans before they sell them as part of their operations. It's not where they're making money. Imagine if you're aggregating these loans over 12 months as a lender and then paying us off as those loans pay off, your spread between what the borrower is paying you and you're paying Pier is how you make your money. For these lenders that sell all their loans off balance sheet, they make their money really on the origination points, and then on servicing the pools over time. And that interim capital that they're having these loans on for two weeks, it's just that cost is pretty inconsequential. So, when prospective LPs ask me, "How are you able to target and charge these high double-digit rates to these lenders?" I say, "Because it's just an operating cost and it's very minimal compared to the points that they're making up front on these loans like, two weeks of interest is inconsequential."
Bill: Yeah.
Jillian: The way that we win these deals is by being operationally friendly to the business. The way that we do that is by making every credit facility we do unique to the underlying borrower. All of these big funds come out with, "Here's our credit facility product for specialty finance. Here's the term sheet, make it work for your business." We go in and we say, "Hey, how does your business run? Which funding account should we be sweeping from? Which day are you sending the collateral reports to Goldman when they're buying their loans? Why don't we put our reporting on the same day?" Just send the report twice.
We try to really fit into their operations, so that they're not creating new data for us, if there's already a source data that we can be plugging into. A, it reduces risk for us. B, it reduces operational burden for them. Ultimately, we're told time and time again, that our term sheets are the most expensive. But often we win these deals because of our operational ease of use, and really trying to get in and understand their business. I think it comes from my operator background because I was an operator before I started investing.
Bill: Let me recycle what you just said to me to make sure that it got in my head. So, there is a lender that you are providing credit to. That lender is going to originate a series of loans and syndicate it out to the market. Goldman is the buyer, they can't buy immediately because then they're an OPCO, and they'd rather have the taxes at the asset level. So, you're able to come in and basically, the lenders business is to get syndication points. So, they'll charge 30 basis points on the entire portfolio or something as a fee, and then, they get a 1% or 2% servicing fee, whatever the terms are, and you are giving them two weeks of credit.
Because that two weeks of credit is pretty minimal and the overall cost of say, a 36-month loan or something like that, it gets them to the point that they need to get to, and then, they sell the loan, so you're funding their business. And the reason they're willing to pay you is that, you actually really care about what they need and you're structuring the product in the way that they need it to be structured. Is that a fair summary of what you just told me?
Jillian: Beautiful and I'll add one thing. We make it what they need it and it allows them to scale and sell more loans. Because they're not dealing with all this operational burden and headache of managing our credit facility.
Bill: I like that.
Jillian: They're like, "Hey, it's just sliding right into our operations. It's really easy. We can sell twice as many loans, we can process twice as many with the same headcount we have." Other credit facilities, when you take that on as a lender, you may have to hire someone whose only job is to run that credit facility, day in day out, because it's completely outside of your operational ecosystem. We do a tremendous amount of work upfront, where we'll sit and we'll get read-only-access to their current CRM. Their actual CRM that they're using will get read-only-access. We can scrape data for our own borrowing basis. We're in there with actual source data instead of what someone is regurgitating into our format. That's just one example of how I think, we protect our investors and also make it easier for our lenders. Again, that just comes because I was an operator trying to jam the square peg of a credit facility into my round hole of a business and it was just banging heads against the wall getting everything to work.
Bill: No, it makes perfect sense. Because then, if you're willing to work with them to your point, yes, you may pay a little bit more interest for an additional week. But maybe you don't need to hire somebody that would have cost you 80 to 100 grand a year all in or whatever just to manage your credit facilities and all your reporting requirements.
Jillian: Yeah, or it frees up time. Say, someone was managing our credit facility before, it frees up their operational ability to go process more loans. So, it cannot only save cost, but also allow for expansion. We usually start with a smaller credit facility and then, scale up with our originator over time. So, we like to be with them through the growth lifecycle. We can write a credit facility as small as $5 million and as big as $40 million. Those are our bands in terms of sizing. And we've stayed with lenders where we start with five all the way until they graduate to being a $40 million credit user. For us, that again, reduces risk because we've seen this business for a number of years, and we're able to grow over the lifecycle with them, and that's another competitive advantage. You could use a smaller firm and pay a lower interest rate or you could get plugged in with us where you have the wherewithal to scale, and we can reduce interest rate a little bit as you scale improve out your credit quality.
Bill: How do you think through the idea of how these loans will perform in a downturn? We haven't had a real bad credit cycle in a very long time. How do you test what a down credit cycle might look like? The only peak we got it when the government came in and bailed most people out. So, it's hard to model I would think.
Jillian: We try our best and we model every which way to Sunday. So, every portfolio we buy or every originator, we finance we take those loans and we stress the heck out of them at the loan level. Imagine we are working with that patient financed lender. We would look at that cohort of borrowers. It was a really high prime cohort. We stress every portfolio. I like to use examples because it brings our strategy and how we do things to life. So, as we talked about, there's that dental veneer example and the borrower is a super prime borrower with a high FICO Score and high income. We look back over billions of dollars of data sets that we have on consumer credit. You can look at credit card charge offs, and there's other data, but we really like to use credit card receivables. That's some of the best data that we have to understand consumer behavior over long periods of time.
If you look back at the great financial recession and you look at this high prime borrower, they actually had the highest increase in baseline defaults of any consumer segment. Think about this. If you are a subprime borrower and you're defaulting at a 20% rate, the whole group of subprime borrowers with low income, low FICO, they default about 20% of the time. During the recession, you stress that at about 1.25x. You went from 20 up to like 25-ish. So, if you look at the high prime borrower, they're defaulting at sub 1%. Those defaults increased to about 3% or 4% for the worst quarter of the financial recession and it only lasted a quarter at that elevated level. So, if you're modeling a really big default scenario for a high prime borrower in the consumer segment, you should be stressing your baseline default expectations by 3x to 4x. If you're stressing your default expectations, you can stress them over the whole life of a loan, like if it's a 12-month loan, you could stress your expected defaults for the entire time. That would be really, really conservative because, again, the highest peak in expected default stress during the recession only lasted a quarter, but again, you can apply it to the whole portfolio.
Bill: What about subprime? What do they normally do? I've heard they're more resilient because they're more used to living on the edge.
Jillian: Way more resilient. So, in a typical downturn, the subprime borrower performs great. If you're building a recession proof portfolio, subprime consumer, as long as you really understand those default rates and you really understand how they behave, it can actually be a pretty decent place to be investing.
Bill: It's got some stink on it, that's the only problem.
Jillian: It does and the COVID crisis was a unique example that showed that cohort really struggled because they were hourly workers working in the service industries, working at hair salons working at hourly service jobs, and that cohort got hit pretty hard. So subprime fortunately, performed fine through COVID because of the stimulus. But without the stimulus, it could have been a pretty big bloodbath. So, that gets down to my philosophy. Should we be investing all of our capital into subprime consumer or prime consumer, and how should we be pricing it?
We don't think there's a bad band of credit to invest in, but there's bad pricing. So, if you're buying credit at the right price, even in really big default stress scenarios, you're going to be okay. But the way that I view it is diversification, diversification, diversification. That is the best way to protect around the unknown. Like you said, our interest rates are going to go negative, who knows? Are all hourly workers going to lose their jobs and be unemployed overnight because of a virus? Who saw that coming?
Bill: Yeah.
Jillian: You would normally have said, invest in subprime consumer for a downturn, because that's a great place. But the COVID crisis without stimulus, that would have been a really challenging segment to be invested in.
Bill: Yeah.
Jillian: And so for us, our biggest protection against that is diversifying. We don't like any part of our portfolio to be more than 10% of our holdings, and that's across consumer small business and real estate debt. So, I don't even know if I gave our pitch. I think, I did briefly at the beginning of what we do.
Bill: Well, give it again.
Jillian: But we invest in consumer small business and real estate debt, and we buy it in the secondary market, and we lend against it at the originator level via credit facilities or seasoning facilities. So, for us, we diversify across those three bands. If consumer was hit really hard in any sort of downturn, there're some unique dynamics, or maybe small business and maybe real estate would be more resilient. Then, within all three of those buckets, you have different credit spectrums. Like you said, you have high prime, you have really subprime, and you have collateralized loans like equipment and uncollateralized general unsecured consumer loans. So, there's this vast swath of ability for us to diversify and that's my only insurance on this investment strategy is simply diversifying across asset type, and credit type, and credit quality.
Bill: How do you follow that many different markets and make sure that you understand where the right pricing is at any given time? Because it's a lot of different markets to cover.
Jillian: It really is. The first way we do it is by splitting it off the top between my partner and I. Connor Neu is the Chief Investment Officer of our firm, he is a consumer and small business credit expert, he ran a fund before this that had purchased over half a billion dollars' worth of consumer and small business loans, where he had underwritten over $20 billion in these loans. So, for him, his whole day in day out is building credit models and stressing them around these cohorts of consumers and small businesses. Off the top, that's Conor and then I take the real estate side. So, at least there are two brains starting from the top. But there's still a lot to unpack underneath everything.
The one thing I'll say is if you look at all these niche segments, so if you look at equipment loans. An equipment loan is really a small business loan. We have a lot of SBA data that goes back a decent number of decades on how small business is performed during different environments. We can boil that loan down to, will this small business be able to pay us off. And that's your first pricing level is, okay, let's just look at it like a general small business loan. Okay, if that bid won't clear and we can't buy it just off that pricing, let's get more specific. Let's look at the last $2 billion worth of equipment loans that we've seen data tapes and see what are residual values, and what are residuals been on collections. We really can rely on special servicers for that. So, if there's a loan servicer that all they do is service equipment loans, and they've been servicing billions and billions a year, we can ask like, "Hey, we'll give you this portfolio to service if you can help us understand what residual values or tractors selling out right now."
Bill: Yeah.
Jillian: And okay, maybe we can price a little bit of value into the collateral on this portfolio of small business loans. Maybe, we can. That's how we build pricing is from the bare level of general small business or general consumer, and then, you can layer in more specificity if you will. But if we can't get more specific, say, it's a firm that only lends against dental x-ray machines, and somehow, we don't have a good data set on that, maybe, we'll just have to put in a bid as if we're assigning no value to that collateral, as if it's just a pure unsecured small business loan.
Bill: Yeah, and then the collateral is your margin of safety.
Jillian: Yeah. And if that bid clears at a price that we're comfortable with no collateral behind it, fantastic. Any collections are just gravy. That's how we deal with it. Either we are super specific and have tons of data behind it and we can get very specific with the bid, and if we can't, we have to go to the lowest common denominator of where we have certainty and that's where the bid starts. Does that make sense?
Bill: Yeah, it makes perfect sense. When I was at the bank, we always used to think about probability default, exposure at default, and loss given default. If you're not assigning any collateral value then your loss given default is probably overly conservative in your underwriting and therefore, you're realized outcome is probably better.
Jillian: Can you answer that question for me? You were much more eloquent than I was.
Bill: I don't know about all that.
Jillian: That's exactly what I was trying to say but in a more casual way than you said it.
Bill: You explained it to people and I took it to banking terms. I like how you think about stuff and I like how you said that you structure the facilities to match what the client needs. When I was at the bank, I worked for this guy, Mark Pressler. Mark, I hope you listen, if you do, what's up?
Jillian: [laughs]
Bill: He said something to me that I'm not sure if other people tried to say it to me or if I just needed to hear it from him, I don't know. But he was like, "Look, your job as a banker fundamentally is to make the equity holders as rich as possible while protecting the bank's capital. In order to do that, you need to think about what do these people need to accomplish, how can we protect our capital, and how can we give them as much as possible?" I always liked how he put that because I really felt like it framed the job very well. It's super cool to talk to you because I think you're doing that in a, I don't want to say less competitive market because I don't think that that's fair. I think, all markets are competitive. But I like the niche that it sounds like you're carving for yourself. It's a very cool thing that you're doing.
Jillian: Yeah. And I recognize it is a very small corner of the world that I know it really well. Like you said with the bank, okay, let's make the equity investors as wealthy as possible while protecting the banks deposit capital. For me, principal preservation of LP capital is number one. So, heading into any sort of transaction that's at the forefront of what I'm thinking about and what I'm doing, it's this massive responsibility that I hold with such regard and so humbled that folks have chosen us to be putting their dollars to work. Being in this niche corner of the world, I can say with a lot of comfort and certainty, I really understand what I'm investing in and yes, we cover a lot of asset types, but the business models that these companies are running, it's a very incestuous industry where the head of capital markets--
One of the firms we used to lend to is now running a different company that we're lending to. A fund manager that's owning a loan of portfolios used to actually be the president of a lender two years ago that now, we're buying those loans he originated from a fund that she's running on Wall Street. It's probably like 200 or 300 really big players in the space that are moving a lot of the dollars, starting a lot of the companies because we know those people inside and out, have seen their historical work, have transacted with them in other capacities. It gives me so much comfort in that principal preservation first where in any financial industry, some of the biggest risks you can identify are fraud.
If you can get to be working with people that you've known that you've seen transact in ethical ways historically, they can reduce some of that headline concern. It's a big job and I carry it with a lot of responsibility and regard. We know this corner of the world really well. And it's our small niche place that we invest in and we know it well.
Bill: Well, the nice thing about credit is it's a deep enough market that you can make some decent money and some good niches.
Jillian: Yeah.
Bill: How do you think about being capacity constrained and whether or not you will be and how much you can expand, and how much do you even want to expand? I'm running this damn podcast. The amount of time I spend on administrative staff, I'm not sure I even like it. So, I'd imagine you're pretty busy day-to-day running the operations.
Jillian: That's a busy job. We're scaling infrastructure with our growth. We just put a new Investment analyst in place last quarter, who's doing fantastic. If you are listening, Kevin, we appreciate you and you're awesome. And that's increased my bandwidth a lot. He's taken off deal organization parts, and running data rooms, and checking initial files, and that's already expanded my bandwidth. We're in this infrastructure scaling mode right now, while the business is scaling quite significantly. We are twice the size than we were a year ago. The pace of growth continues to increase, which is really exciting. We do think about capacity a lot. This specific strategy where we're buying loans in the secondary market or writing credit facilities to these smaller, niche originators, it does cap out.
The strategy is probably $125 to $150 million to be hitting our target yields and duration profile. We look to the next phase of this business where we probably will extend duration a little bit and some sort of other strategy, whether that's taking duration out 24 months or 36 months, and working with more mature counterparts. It could make a lot of sense to still work with the same lender ecosystem, but be that final refinance piece for them. So, right now, we get refinanced out with like an Aries, or Nomura, or Victory Park, and they do that $50 million credit facility and they refinance us.
That type of strategy is a $500 million strategy and we have the pipeline of deals where we have credit history of a few years, we've been underwriting and working with the management teams. It really could be a great next evolution for the firm. It is not a near term objective. But it is in early stages of thinking about how do we scale our operating business and you hit the nail on the head. The current strategy does cap out and it's great. It's nichey, it's yieldy, investors love it, and it was a great place to start. Maybe, this next strategy of those larger deals with a bit more duration might be the next evolution we'll see.
Bill: Well, the nice thing about knowing a strategy that can potentially deliver double digit returns is, once you have enough personal wealth, it doesn't really matter if it caps out because if you get capped out of your personal wealth, you're doing pretty well.
Jillian: Exactly. Yeah, I mean, I would love to take the firm.
Bill: Like, if I'm ever at the point where I have too much money to make a lot of money, I think things are going fine. I'm not going to complain very much.
Jillian: It still feels very much like we're in building mode and it will be a big milestone the day that we have to close out strategy to new capital. We will be taking the team to a King's game or doing something fun for sure.
Bill: Yeah, that's cool. When you said that Aries will refinance you out, what does that look like? Because it seems to me that your primary source of repayment is just the credit profile paying you back. So, is your secondary source of repayment getting reified by somebody like Aries? Is that how you think about it?
Jillian: Oftentimes, if our lenders are scaling, maybe, it's a lender that's using our capital for seasoning. So, they're taking our capital for two weeks at a time. Maybe, they're turning it twice a month. So, they have a $10 million facility with us, they turn it twice, that's $20 million, times 12 months that would make them like a $250 million a year lender. We can provide that $10 million. If they want to become a billion-dollar lender, they're going to have to go refinance this out with Aries or Neuberger Berman.
Bill: Oh, okay.
Bill and Jillian: As they grow.
Jillian: Yeah.
Bill: Okay.
Jillian: Some firms don't scale, like they're not in growth mode, and we can just be their partner, and they either continue paying their interest or they pay us off over time if they want to wind down a business or stop strategy. But yeah, it's mostly refinancing is repayment strategy.
Bill: You've now been at this for five years, right?
Jillian: Yes.
Bill: What was it like you open the door, you've left your job, and you're starting this business, what is that process been like? How old are you when you started? Am I allowed to ask you that? Is that an [crosstalk] insensitive question?
Jillian: Oh, too funny. My answer to that usually is that a woman never tells her age.
Bill: This is why I'm asking.
Jillian: Yeah. [laughs] Too funny. Yeah. So, I left that firm that I was with the originator. We were really fortunate when leaving. We had a decent investor base, a decent pool of folks that were pretty excited about what we were doing. We went around and talked to our industry contacts and said, "Hey, we're going to start a fund that's fine in the secondary market and also providing credit facilities." We had a lot of initial support and excitement from lots of industry participants. When we started, we had a few big deals that were offered very early on. There was one large institution who wanted to give us $50 million, but take 30% equity in the operating company. Starting your fund any investment strategy with $50 million really gets you off the ground and puts you on the map right away.
As I shared earlier, I'm an entrepreneur through and through. I like building, I like following my own lead, and being able to build something in the way in which I want to. If you take on a 30% equity partner, that is a smart institution. That ability to actually run your firm independently goes away.
Bill: Yeah, you give that up a bit.
Jillian: You give that up and you have another boss. Again, so, you left and you took on all this risk, and yes, you're going to get more economics because you own 70% of the pie now instead of being an employee. But you still answer to someone and that eliminates your ability to steer the ship in the way you think best because there's someone else forcing you to make decisions in the way that they would want. So, we looked at that really closely and we were very excited and this partner, if you're listening, they're fantastic. They would have been such a great operating partner.
Bill: [laughs]
Jillian: No, they really would have, but we ended up not taking the offer and I'm so grateful we didn't. It was the right choice, and we built the firm independently, and it took a lot longer to get to the same point that we would have started at. But the firm is entirely ours and entirely our vision, and we get to run it in that way, and I think that means a lot for the long run. This business is a 30-year business for me and my partner. We see it as that and if not a legacy generational business where we build out the firm and after we go there are still people investing capital in a great fiduciary capacity.
Keeping it our culture and true to who we are was very important to us. Things like having a no asshole policy is really fantastic in finance, and it's really hard to keep that if you have a boss. You'd want to work with where you're making the most money. And for us, we've truly instituted that policy from time to time and we've left money on the table because it was true to our value and true to what we were trying to build for the long run.
Bill: Yeah, life's much better with that kind of a policy.
Jillian: I have a few stories there.
Bill: Assholes are not worth the time. You got to have the freedom to say that. Once you can have the freedom to say that, I think, that's a pretty important thing to be able to flex.
Jillian: Yeah, and for the team to protect our employees and to not be having the interface with folks who aren't great to work with and respectful and kind, we also take a lot of pride in building a place that people want to work. We hire very slow and we have the thought that if someone's not fitting culture, we can let them go quickly. We have a very small team today. It's only four of us, but we hope that [unintelligible [00:47:35] pretty dear to our heart.
Bill: Theoretically, since, I'm running an operation of one and a couple of outsourced people right now, I can't speak to it as well as I'd like to, but I do think that firing or letting people go depending on how you want to say it quickly is probably pretty smart because things get toxic when things get stale, I think. Things get stale when people aren't fitting, right? So, to be able to pivot and not get caught up in this, "Well, it took so long to hire this person or whatever" it makes a lot of sense. What makes a good partnership? How do you have a partner that you said this is going to be a 30-year business for us? I view partnership is like a work marriage. How do you make sure that that works and that you're on the same page?
Jillian: Connor and I, we spent probably six months or maybe nine months working together deciding if starting Pier was the right decision before we did it. So, some people call that co-founder dating, where you talk through your vision for the firm over and over again. You interview close people in their life, people from their spouses, all the way to prior employees. You really understand this person inside and out because we didn't have a history of being co-employees or working at the same firm for 10 years, and really getting to see how each other worked. We had only known each other's industry contacts, sat across the table trying to do deals before. So, I had good insight into how he conducted himself. He had a fantastic reputation across the industry ss a really good person, very intellectual, which I can confirm is the case that actually going in and confirming all of that was a long process for us.
I was an entrepreneur before this. I ran a business and then I went and was an investment banker and then, I helped start two companies, and I had known what that partnership is and how long it can be, and how hard it could be if it's not the right fit. So, we took a long time upfront. That's what I say is put in the work upfront to figure out if this is the right partnership. Don't try to figure it out after the fact. We spend a lot of time on it upfront. And then, these are very obvious things but think open communication number one. So, we over communicate. And then, number two is, the principle of positive presumption. So, I always grant Connor the principle of positive presumption.
Bill: I think, I'm going to like this.
Jillian: Yeah, so, if for some reason I can't get a hold of Connor in the morning and we're trying to get a deal closed or something. In my head, the first thing, I think is, "Oh, my gosh, something must be going on with his kids. I hope everything's okay. Not, oh, he must be sleeping in and relaxing today. Wow. He's not taking work seriously this week." It's a complete different mindset. You earn the principle of positive presumption between people. You've earned that over time is typically how it happens because you always are on your commitments, you're always truthful. We just grant it from day one, every scenario.
The third thing on top of that is shouting our mistakes. So, if I made a mistake or I didn't handle a deal, or I forgot to send something that I was planning to follow up on, it's an immediate phone call or Slack to Connor, "I messed this thing up. "Wow. Okay, here's how I want to plan, here's how I want to fix it. I think, we can get it in by the deadline. Anyway, I'm going to make two calls. Do you have any ideas?" Absolutely, shout your mistakes. And if you're shouting your mistakes, then your partner assumes that everything else that's going on is going on great. Everything's going well. That's how you preserve the principle of positive presumption.
Bill: I like that. I had an issue on this podcast. There's a man that helps me, Matthew Passy. Shoutout to you, Matthew. We, as a team leaned heavily into audio. The videos have started to roll out. Some of the audio edits didn't quite make it to video. For instance, there's one episode that the kids were making a fair amount of background noise and my guest, Chris Bloomstran, he was a total pro. I didn't realize the mute button wasn't on and I'm yelling to the kids. I'm like, "Go away." [laughs] You can hear it in the video for the YouTube. And Matthew, he wrote me this weekend and he's like, "I just want you to know that I was watching one of these videos for editing and I think that people may hear you tell your kids to shut up."
Jillian: [laughs]
Bill: It actually cracked up when he told me that. But for him to care enough to say that to me, I just don't have enough time to check all these things. I get the audio format, the video, I'd be doing it all day. So, for him to say, "Hey, this was an issue," I have mad respect for that. To your point, if he's saying that about that issue to me, then I'm not worried that other things aren't getting done-
Jillian: Exactly.
Bill: -like I know they're getting done. The product speaks for itself that things are going mostly well, but that was kind of a funny blooper to keep in. So, now, we're going video first, and then, the audio portion will sort of take care of itself.
Bill: Oh, I thought of one other useful tip. If anyone is in that co-founder dating phase where you're figuring out if someone is a good business partner for you, this was not something that I recognized before we partnered but looking back is why it's been such a successful partnership for these five years is that, we actually have similar risk tolerances. We have vastly different skill sets, we like to do very different things, which I think is just helpful from a day-to-day standpoint. I love meeting with investors, I love doing podcasts, I like going and speaking on panels. Connor really loves doing the deep analytical work on certain credit books that we look at. It's great that I can send him something and be like, "Hey, I'm heading off for this meeting, I'm working on negotiating the structure of this deal. Can you look at the credit while I go figure out what terms we're going to do?" We're both the happiest doing each different task.
That works out great, but we both have very similar risk tolerances. So, we come at problems thinking in very different ways and bringing up different problems that we see with something or risks that we see, and then, we can sit there and say, "Okay, we've identified this big universe of risks and problems, here's how we're going to mitigate them. Do we want to move forward or not?" If you all see the same facts and you brought up this big universe, and you have very different risk tolerances, your answer most of the time are going to be different on what you do for a business if you move forward with something or not. For us because of that similar risk tolerance, we look at a broad set of a variety of viewpoints between the two of us, and often are coming to the same conclusion. In situations where we actually fall on different sides of the fence, it's usually a no. Like, hey, if we're both not in on this, it's a no.
Bill: Yeah, that makes sense.
Jillian: Unless there's a decision that falls more in one of our areas of expertise, we would probably defer to the other saying, "I know that you have more expertise. If you're landing on a different side. I trust that that's the right way to go." I guess, I'm now identifying another thing besides similar risk tolerance is having tremendous respect for your business partner. If you don't really respect and revere that person's abilities and talents, the partnership will, I think, deteriorate over time, each other won't feel valued, or you won't have enough conviction in your partner to be making the right choices. Respect, admiration of their abilities and skills is also important.
Bill: I wonder if this is why family businesses end up after generations having some problems. I ran a pathetic excuse for a flooring company for a little while once upon a time.
Jillian: Nick would be so proud of you.
Bill: Yeah.
Jillian: [laughs]
Bill: It was interesting. My business partner was my best friend for a long time. But I think, he and I could do something. I don't think we would do something again, but I think, we could do something in the right area. I think, that was the wrong place and the wrong partnership. But it almost ruined our friendship. It was terrible but we got through it. Thankfully, another friend said, "Stop being idiots." So, we needed that.
Jillian: Yeah.
Bill: When it goes south, it sucks.
Jillian: So far, so good, Connor, if you're listening to this. We got this.
Bill: Oh, yeah, I've seen how you to interact. It's very admirable. That's why I wanted to ask you about it. Because when you talked about him in the past, and when you talked about your partnership, it's very clear that it works well. You're a new mother, and 2020 was pretty jarring. It's a lot to go through in the last 18 months as business partners. How's life been over that time?
Jillian: Surprisingly, I feel so fortunate that the last year and a half has actually been pretty great for us as a firm. We fortunately, had a great year of performance and a great year of the business growing and expanding our infrastructure and team. So, I know there were so many hard times for so many people and family tragedies with health and business tragedies with closures. We have close friends who own big restaurant groups, and that was devastating for their family businesses. So, now, I just felt so lucky that we could do everything remote. We didn't have disruption to our business. We grew to be twice the size.
If the business hadn't been doing so well, it would have been a really challenging time for me. It was challenging enough becoming a new mom, figuring out that balance of raising my kids, going to the office, running this company, still trying to achieve my dreams is the toughest balance in the world. The work-life balance comment is a joke. They're never going to balance it. It's always like one thing is crashing into another, and everything's flying every which way. There's no elegant way to do this at all. I mean, if someone's figured it out, please find me on Twitter.
Bill: Jillian, that's not what the books tell me and what the self-help gurus tell me.
Jillian: Please DM me on Twitter-
Bill: [laughs]
Jillian: -and tell me if you figured it out. Any other moms out there running companies because it is crazy and amazing, and some days, where I feel like I'm just not being enough of a mom. I'm so grateful that I'm building my business, and I can show Margo, when she's old enough to understand, this is what I work on, mommy uses her brain to think of really hard problems, and solve them, and build something that matters, and I just can't wait to make her really proud. So, I try to lean on that if I'm feeling like I'm being a failure mom. If I wasn't able to get to enough things that day because I was spending more time with my daughter. I'm just grateful Connor's there. He picks up the slack. That's great. That's also the amazing part about having a partner. Being a solo founder would be really hard. I look back, I'm so grateful. I'm not a solo founder running this business. That's the only way to do it as a new mom.
Any solo founder females, moms out there, wow, I have huge, massive kudos to you. That's phenomenal. Because I trust Connor fully with decisions of our firm. So, if there ever was a day where I couldn't step in and spend enough time on something, thank goodness, there's someone there as my equal to handle it. So, thank you, Connor. He had to step up in a big way this year while I was figuring out how to be that new mom. The first six months are very demanding on the mother. Obviously, things like breastfeeding, being in physical proximity to the baby is really critical to the health for mom and baby, and all of those biological needs and emotional needs.
Now, being on that nine-month mark, I say the clouds are lifting, and I can see the blue sky, and it's not such madness around here, but I hear that as soon as I start feeling that way, it's going to change and become chaos next week. But this week feels pretty sane. I'm feeling pretty sane today, which is great and relaxed.
Bill: I like the nine-month age.
Jillian: Yeah.
Bill: Is she walking around, is she toddling?
Jillian: She hasn't started yet but she tries.
Bill: I mean, like hang on stuff.
Jillian: Oh, yeah, she's doing that whole like the monkey business just grabbing everything, climbing as best she can. It's so cute.
Bill: When my first was born, the night he was born, I'll never forget. Him opening his eyes is the most incredible thing that I will ever see in my entire life and I'm convinced that even if I get dementia, I'll still be able to see that. But after that, it was not the easiest thing for me to go through. I tell guys this and I don't say it to be-- I don't want to be a Debbie Downer about a situation, but I really felt like I didn't have a place in my own home for a while. Because my kid was with my wife, and my wife was, I think, she had a tough time after the first kid, and it was definitely really hard on her.
Like the birth was really hard. Took like 16 hours and we were in the ER, and number of times his heart rate had dropped, and it's just tough. I didn't feel like I even had a family really for five months or so. I just felt like, I was the person roaming around my own house. And that's maybe not totally true, but that was the feeling. But once he got older than the bond formed, and now, I've got three, and it's fucking madness over here, but I wouldn't give it up for anything. It's my favorite thing in the world.
Jillian: I think, that's a common theme with pretty much every dad and mom at the beginning. The mom feels like she's doing everything and no one can possibly help in the way that a mom needs. You are the food source, the life source of this child, and the dad physically can't provide that. It's just not possible. It's a constant thing. The dads feeling not valued and all. It's hard. I can't contribute in the way I want to left out almost between the mother and baby bond. Then, the moms going, "Can someone please help? Everything's on me."
Bill: Yeah.
Jillian: That was my experience was, my husband is the most involved in the world. You couldn't ask for a better husband. He was phenomenal. Even so, he couldn't substitute for me in those first six months because I'm simply the mom. There's a biological connection there between the mom and baby, and breastfeeding, and she just wanted me because she had known me. She'd been in my belly for nine months hearing my voice, smelling me, being a part of my body. So, it takes some time outside when they're in the world to get to know daddy, and really find that same bond. We're at nine months, and she's now in a phase where she actually prefers shame to me.
Bill: Yeah.
Jillian: It hurts my ego and hurts my heart. I'm like, "She remember those six months."
Bill: I get it.
Jillian: But I hear that changes week to week, too.
Bill: I got a four-year-old that won't even talk to me. So, I'm like, "Screw you, man. I'm out here keeping food on your table."
Jillian: Oh, yeah.
Bill: Oh, it's fine.
Jillian: It's hard. I know.
Bill: It's an interesting point in your life. You've got a business, that's your baby, you've got an actual baby, and then you had mentioned you were a little bit apprehensive to even tell people that you were pregnant, because you were worried about performance. That's a big year that you've had. So, I'm glad you're through a lot of it and it sounds like on the good side of a lot of it.
Jillian: Yeah, on that topic, it was pretty wild that I wasn't seeing people in person. I was Zooming for all of 2020. So, clients, borrowers, a lot of people just didn't need to know or couldn't see that I was pregnant. So, usually, I see my clients in person, and it would be impossible to hide that I'm pregnant. Frankly, it was quite nervous to shout that from the rooftops, and share that news, and looking back, I didn't really make it big and public on my Twitter or send it out in a client newsletter. Slowly clients are finding out now when I'm catching up with people like, "How is life?" "My daughter and I did this. It wasn't an intentional hiding but then it didn't come up really." That was the biggest thing in my life. But I think there was some hesitation on sharing it and it makes me sad thinking that I live in a type of business environment that might not be as supportive of that.
I think, times are certainly changing and everyone has been so supportive. So, that was legacy concern, I think, from the way times used to be. But finance, running a hedge fund and being an investor is a very male dominated space. There are a handful of women that reconvene and--
Bill: Yeah, how many were there? Like three?
Jillian: I think, maybe, five.
Bill: Okay.
Jillian: And he said, it's a massive push for next year. But the challenge is, I run a hedge fund. I know five women in the country who are founder CEOs and doing the investing activity for their funds. I had to hunt really, really hard. It's scary when there's not others that look like you or others going before you, but one of my dear friends called me out when she found out I was pregnant and she said, "You need to be more public about being a mom, sharing your journey, and think about an investment analyst who's reading your Twitter or learning about you on some podcast. They should be able to look and see a mom who's working at the highest level of this industry doing great and having a family and being happy."
Without seeing those examples, how do you know that you can do it. It's hard to know that or imagine it without envisioning it ahead of you. That was why I left investment banking part of it. I wanted to be an operator again. But I also looked at the female, there was like two managing directors at the bank I was with. And I looked at their life and said, I just don't want that. I really want to be a mom, and I just didn't really see the path there to be both.
Bill: Yeah.
Jillian: To run the firm, be a managing director, and be a mom. I chose that I wanted to go figure out a way to do both at the highest level. It's a tough, tough thing but yes, I am a mom, and I'm very proud.
Bill: Well, at least you get to set the parameters around your own firm, where like investment banking, my perception of what I saw there is it's more of a FaceTime game that you can create in your own life.
Jillian: Yeah.
Bill: I am not foolish enough. I know enough to know that when you think you own a business, your business owns you at lot of the time.
Jillian: Oh, yes. First, it felt like we were the business, like we were the business day in day out and it's really fascinating being at this place where we have a business like it's going to be running tomorrow, whether or not I'm in the office working. It's a real company.
Bill: Yeah, that's cool.
Jillian: That was a big shift. We've run it institutionally from day one, but now, it seems like it has its life. It's its own living being that we get to build instead of just being us.
Bill: That's dope. It's no longer a hustle. It's a legit business.
Jillian: It is, which is so exciting. It's so exciting coming up on the five-year anniversary.
Bill: I look forward to seeing what years five through 10 bring, and I have a sense that as we connect over the years that it's going to be bigger and bigger, and I look forward to watching.
Jillian: Bill, thank you. That means a lot. Well, this was really fun. I hope, we make this a regular thing. And if not on the podcast, at least, just catching up.
Bill: I'd love to and I look for any excuse I can have to get out to California. So, I will look you up when I'm out there. A nice walk and some kale salad. I'm down for that.
Jillian: Oh, I love it, love it.
Bill: All right, cool. Where can people find you?
Jillian: I am on Twitter @jillianmurrish, M-U-R-R-I-S-H. And our website is www.pieram.com, that's P-I-E-R, A as an asset, M as a management dotcom.
Bill: Is the Pier for Manhattan beach or is it just a different Pier?
Jillian: Manhattan Beach Pier? That was our inspiration.
Bill: Yeah, that's a dope Pier. Oh.
Jillian: It is.
Bill: Looking up, what is it? Is it north at the airport?
Jillian: It is just south of the airport. Oh, wait, looking from-- [crosstalk]
Bill: Yeah. No, if you're on the Pier, you're looking north, right?
Jillian: You are looking north. Yeah, sorry. I thought about Manhattan Beach. Yes.
Bill: It's my favorite view in the country. I love that.
Jillian: That sound pretty. We're so fortunate to be here [crosstalk]
Bill: Well, enjoy it. I hope you have a nice walk today and enjoy where you live. I look forward to speaking to you again soon.
Jillian: Sounds great. Thanks so much, Bill. Appreciate it.
Bill: All right, thanks for stopping. Bye.
Jillian: Bye.
[music]
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