Nov 24, 2025 · 1h 4m · capital-allocators
Michael Kelly – Democratizing Access to the Middle Market at Future Standard (EP.473)
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In this episode of Capital Allocators, host Ted Seides interviews Mike Kelly, Co-President and CIO of Future Standard, to discuss the firm's growth into a $90 billion alternative asset platform. Kelly explains how Future Standard democratizes access to institutional-quality private credit and middle-market private equity for the wealth channel through structural innovation and operational value creation.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 23.3% of the talking time here. How this is scored →
Ted as informed peer 4.7 Guest teaching 3.6 Guest disagreement 0.5 Ted pushing back 0.2
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 44:00 The days of financial engineering are over
Mike forcefully declares that the era of driving PE returns via leverage multiples and multiple expansion is finished, asserting that operational value in the middle market is the only remaining driver of outperformance.
Hardest push from Ted ▶ 45:21 Ted challenging return expectations for retail clientsTed pushes back on the optimism around private equity, noting that end clients lack historical market context and risk severe disappointment if forward returns fail to meet backward-looking marketing pitches.
Biggest teaching moment ▶ 38:20 Explaining structural wrapper nuances across alternativesMike educates the audience and host on the exact structural and regulatory distinctions among BDCs, interval funds, tender offer funds, and REITs, explaining how asset cash flows dictate the optimal wrapper.
Ted holds their own ▶ 53:28 Ted probing institutional crowding and allocation frictionTed applies his deep institutional allocator background to press Mike on how the avalanche of retail wealth capital directly impacts and potentially displaces existing institutional LP positions.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Thanksgiving Reflections and Team Appreciation | 0 | 0 | 0 | 0 | Ted opens with a solo Thanksgiving reflection and team appreciation. As a monologue without guest interaction, all dynamic scores are zeroed. | |
| Sponsor: Intapp DealCloud | 0 | 0 | 0 | 0 | Sponsor ad reads for AlphaSense, Intapp DealCloud, and Admired Leadership. Monologue ad content with zero host-guest tension. | |
| Early Career and Breaking Into Alternatives | 4 | 3 | 0 | 0 | Ted prompts Mike to share how he broke into hedge funds in the 1990s. Mike recounts cold-calling Lee Cooperman and transitioning from Tiger to Frontpoint Partners in a warm, narrative style. | |
| Mentorship Lessons: Intellectual Flexibility and Variant Perception | 5 | 4 | 1 | 0 | Mike explains key mental models from Cooperman, Robertson, and Steinhardt, focusing on intellectual flexibility and variant perception. Ted interjects with context about David Swensen and early institutional adoption. | |
| Pivoting from Macro Investing to Asset Management Business Building | 5 | 4 | 1 | 0 | Mike explains why he shifted from macro investing to asset management business building, noting few people deliberately try to become firm builders like Larry Fink. He discusses Frontpoint's institutionalization of transparency and incentive alignment. | |
| Transition to Private Wealth and Joining Franklin Square | 5 | 4 | 0 | 0 | Mike describes seeing an untapped opportunity to bring institutional alternatives to retail and mass affluent investors, drawing an analogy between Franklin Square's distribution pipes and Netflix moving from DVDs to original content. | |
| Expanding the Product Suite and Merging with Portfolio Advisors | 5 | 3 | 0 | 0 | Mike outlines the expansion of Franklin Square from a single BDC with GSO into a multi-strategy platform through direct team hires and the merger with Portfolio Advisors. | |
| Criteria for Strategic Manager Partnerships and Risk Orientation | 6 | 4 | 1 | 1 | Ted probes why taxable wealth clients sought income-generating private credit post-GFC. Mike explains the search for yield when traditional fixed income had high duration, low yields, and tight spreads. | |
| Fee Alignment and Leveling the Playing Field for Wealth Investors | 5 | 4 | 1 | 0 | Mike describes how Future Standard eliminated fee-on-fee structures historically charged to retail investors by building strategic partnerships with single-layer fee sharing, backed by 140 dedicated distribution professionals. | |
| Buy versus Build in Middle Market Private Equity | 5 | 4 | 0 | 0 | Mike details the rationale behind acquiring Portfolio Advisors, highlighting their 300+ middle-market GP relationships that offer multifaceted strategic partnership advantages across secondaries, co-investments, and debt. | |
| Expanding Credit Capabilities: Partnering with KKR vs. Building In-House | 6 | 5 | 0 | 0 | Ted asks about vehicle mechanics and product wrappers. Mike delivers a detailed tutorial comparing the structural constraints, leverage limits, and liquidity trade-offs across BDCs, interval funds, tender offer funds, and REITs. | |
| The Mechanics and Trade-offs of Evergreen Private Equity | 6 | 5 | 1 | 1 | Ted asks about the surge in evergreen private equity. Mike lays out the mathematical trade-off: investors trade high-teens drawdown IRRs for 12-13% net returns in exchange for continuous compounding, immediate deployment, and J-curve mitigation. | |
| Calibrating Investor Expectations for Private Equity Returns | 6 | 5 | 2 | 1 | Mike firmly argues that financial engineering in private equity is over due to higher financing costs and already stretched multiples, insisting future outperformance will come exclusively from operational value and middle-market revenue growth. | |
| Competing with Mega-Cap Managers in Private Wealth | 5 | 3 | 0 | 0 | Ted asks how Future Standard competes against mega-cap alternative managers. Mike respectfully differentiates their focus on true middle-market companies from mega-cap peers managing corporate giants that would previously have been public. | |
| Assessing Systemic Risks and Liquidity Expectation Management | 6 | 5 | 1 | 1 | Ted asks about bubble risks from incoming capital. Mike rejects the bubble narrative by citing US GDP growth and bank retrenchment, arguing the primary systemic risk is mismanaged liquidity expectations among individual investors. | |
| Catalysts for the Recent Inflection in Wealth Alternatives | 6 | 5 | 1 | 0 | Ted asks why wealth adoption inflected recently. Mike explains the confluence of the 2021 end of ZIRP, maturation of fintech access platforms (iCapital, CAIS), and highlights long-term growth frontiers like secondaries and longevity investing. | |
| Navigating Market Regimes at Future Standard | 4 | 3 | 0 | 0 | Ted asks about future excitement, and Mike notes that navigating the new higher-inflation, higher-volatility regime will require discarding the old playbook to deliver diversification for clients. |
Statements from this episode (32)
Kelly: Buying Poor-Quality Companies Works if Improvement is Mispriced
“Somebody who says, well, I like to be long, high quality companies and short, poor quality companies. Well, I wouldn't mind being long a poor quality company if it's going to get better, if I have a variant view on that and vice versa.”
Kelly: 1990s Hedge Funds Were Funded Primarily by Family Offices
“When you're in the nineties, you're still at a point where it was mostly family office capital. Invest in these types of strategies.”
Kelly: Indexing and ETFs Killed Traditional Hedge Fund Information Edges
“As time went on, as we saw through the 2000, the passive indexation and ETFs and the capital markets changes in the public market rendered some of those advantages obsolete.”
Kelly: Building Asset Managers is Less Competitive Than Stock Picking
“There are a lot of people fishing in that pond, but actually building asset management companies and managing them, there seemed to be nobody that sets out to do that. I thought maybe that is my career path. If I can do that, there are a few people fishing in …”
Kelly: Investment management failures typically stem from misaligned incentive frameworks
“If you want individuals to act in a way where they are collaborating and working towards a client outcome, you have to appropriately construct those incentives correctly. That's often where in investment management things go awry. So I'm having a problem getti…”
Kelly: Wealth Platforms Should Evolve to Create Proprietary Alts Strategies
“Just like Netflix eventually came to the conclusion that building your own TV and movie studio and putting it through your own pipes might be a good idea, as long as the quality content is high. I thought, we can do that here.”
Kelly: Credit Managers Need Workout Capabilities Because Problems Always Arise
“As with all forms of credit. It's not just someone who can source and originate and underwrite credit, but also someone who can deal with problems when they arise and credit problems always arise.”
Kelly: Illiquidity and Complexity Premiums Drove Private Wealth into Private Credit
“To be able to complement that with credit exposures that were less liquid, that had higher credit risk, or a shorter duration through their floating rate characteristics, was a nice offset and balance to what was in the traditional fixed income portfolios, and…”
Kelly: Private Credit Yields Remain Attractive Post-Tax for Individual Investors
“If you look at the profile, the investments will often be put into a retirement account where taxes will be less the issue in factoring into the decision making. In other cases, even with A taxable account, the level of yield one can generate is oftentimes eve…”
Kelly: Individuals Now Access Institutional-Grade Alternatives at Institutional Fees
“It's a big sea change from the early days of those offerings and the access to those original investments to today where you have individual investors accessing the exact same investments as the largest, most sophisticated pools of institutional capital in the…”
Kelly: Few Alternative Investment Firms Are Well-Equipped to Serve Private Wealth
“Still to this day, there aren't many firms that are well equipped to bring their offerings to the private wealth market.”
Kelly: 200,000 Private Companies Generate Between $10 Million and $1 Billion
“They've been operating in the middle market space of private equity, which the middle market's a broad definition of ten million to a billion dollars of revenues, private companies, there's 200,000 of them.”
Kelly: Middle-Market Private Equity Sponsor Networks Take Years to Replicate
“You could try to replicate this, but it would take many, many years to replicate this business, and you can't replicate several hundred relationships overnight.”
Kelly: Private Equity Capital Has Become an Undifferentiated Commodity
“There's a lot of capital out there, and capital has become more and more of a commodity. Everyone in that ecosystem, you need to prove why you're not just a commoditized Piece of capital.”
Kelly: BDCs Shifted from a Venture Model to Private Credit Post-GFC
“BDCs originally were created through a congressional act in 1980 as a way to bring capital into private businesses in the United States. The original BDCs back then was more of a venture capital model. It was really only after the great financial crisis that B…”
Kelly: Credit Fits Evergreen Fund Structures Better Than Private Equity
“In evergreen strategies, credit fits quite well into those wrappers because they're more cash flowing than private equity. You have cash income Refinancings, shorter duration, three to five year assets. Whereas in private equity, these are longer duration asse…”
Kelly: Evergreen Private Equity Will Yield 12% to 13% Net Returns
“The trade-off, and there's always trade-offs, include the fact that these are not liquid strategies, so they're in semi-liquid structures, that you're not going to generate The same level of returns in a private equity evergreen structure as you will in a priv…”
Kelly: Private Credit Floating-Rate Yields Will Fall as Base Rates Drop
“The expectations have to be base rates are coming down. Distribution rates and yields will come down in those private credit floating rate vehicles.”
Kelly: The Era of Financial Engineering in Private Equity is Over
“The days of financial engineering, your way to higher returns, in my view, are over.”
Kelly: Middle-Market Private Equity Outperformance Over Mega-Caps Will Accelerate
“So I do think that the outperformance that you've seen over time with middle market private equity funds over their large and mega cap peers Is only going to not just continue, but move even higher.”
Kelly: Defined Contribution Retirement Plans Hold $12 Trillion to $13 Trillion
“Defined contribution is 12, 13 trillion of assets.”
Kelly: 401(k) Plans Will Inevitably Integrate Alternative Assets
“Ultimately, we will see more partnerships between traditional asset managers and alternative asset managers that create structures like collective investment trust to be put into target date funds and for one K plans that have a mix of Liquid traditional inves…”
Kelly: Alternative Investments Are Not Inherently Superior, Just Different Trade-Offs
“Alternatives aren't better than traditional investments. They're different. They bring different trade-offs in liquidity and fees and complexity”
Kelly: Mega-Cap Alts Managers Finance Companies That Were Historically Public
“They're providing equity and credit capital to companies that 10 years ago would have been publicly traded. That is the upper middle market.”
Kelly: Retail Access to Blackstone, KKR, and Apollo is a Great Evolution
“But I think it's tremendous that individual investors now get access to the likes of Blackstone and KKR and Aries and Apollo. These are tremendous firms. It's a great evolution for all individual investors.”
Kelly: Private Credit Boom is Driven by Structural Demand, Not a Bubble
“If you look at the sheer amount of economic activity, US GDP going from 11, 12 trillion of GDP pre-great financial crisis to 30 trillion today. The number of banks and the consolidation in banks and their move away from lending to private companies and middle …”
Kelly: Unmet Liquidity Expectations Are Private Markets' Biggest Systemic Risk
“The bigger risks revolve around this idea of management of expectations, ensuring that why investors are embracing this match up with what can be delivered. It's awareness, education, and expectations management where it has the greatest surface area for risk.”
Kelly: Private Wealth Will Be the Fastest Growing Source of Alternatives Capital
“The demand from private wealth will be the fastest growing source of capital into alternatives for the foreseeable future.”
Kelly: Evergreen Funds Drive Secondary Demand for Endowment Private Equity
“If you take endowments that are looking at selling some of their private equity and venture positions, the primary demand for those secondary positions are coming from evergreen private equity vehicles.”
Kelly: The 1987–2021 Market Golden Era Ended with Zero Interest Rates
“In some ways, what I would call the golden era of the market backdrop that started in 1987 when Volcker stepped down, ended in 2021 with the end of zero interest rates. And thus began a cycle of more challenging backdrops for, say, stocks and bonds together in…”