Barry Ritholtz had asked what big institutions get wrong, and the AllianceBernstein CEO answers by describing how forgiving his own industry's economics are: almost no capital required, revenue charged as a percentage of assets. The line about making more money while destroying value is his own account of why the business can carry bad managers for so long. He goes on to say the industry as a whole has benefited from that tailwind.
…to focus on distribution, whether it's in private wealth and institutional and most importantly in retail. And we decided to go full focus on the insurance business because we saw that as a really important source of growth, both for our private credit business, but also our fixed income business.
…bit of hindsight that we know all the things that were going wrong with large active managers. But generally speaking, what is it about big institutions that they sometimes just don't see these things coming and stumble into the dark on these issues that clearly you identified as problematic?
Look, I think when the good Lord created business models, asset management was really blessed, right? You have no need for capital or de minimis need for capital working capital in the business. Your whole revenue stream is structured on advalorem pricing. So even when you destroy value and markets go up, you make more money. Kind of a wonderful thing. Right.
10% tailwind never hurts, right? Never
hurts. And we've certainly benefited, as is the industry as a whole, from that consequence. Thirdly, you get to work with some of the most interesting, if weirdest, people in the world. Absolutely true. And frankly, particularly when you have an RIA and you have to be focused on wealth management…
Yeah, there's an aspect of being a fiduciary that it seems so obvious today, but 15 years ago, the fiduciaries were a small minority. It took a, and I've been saying this for 30 years, and it's taken me of being wrong for decades before the industry caught up.