May 2, 2022 · 1h 0m · capital-allocators
Greg Dowling – Mid-Market Institutional Consulting at FEG (Capital Allocators, EP.248)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Ted Seides interviews Greg Dowling, CEO and Head of Research at FEG Consulting, exploring the evolution of mid-market institutional consulting, qualitative due diligence frameworks, and portfolio strategy across private equity, hedge funds, and real assets.
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 18.5% of the talking time here. How this is scored →
Ted as informed peer 3.8 Guest teaching 4.4 Guest disagreement 0.9 Ted pushing back 0.5
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 41:10 Greg calls out flighty crossover managers
Greg criticizes opportunistic crossover managers who rushed into illiquid late-stage VC rounds and abruptly vanished when market headwinds struck.
Hardest push from Ted ▶ 27:53 Ted presses on standardizing subjective culture evaluationsTed challenges Greg to explain how an allocator can achieve objective consistency when analysts assign arbitrary numerical scores to qualitative organizational culture.
Biggest teaching moment ▶ 18:15 Greg breaks down consultant inventory and capacity dynamicsGreg educates Ted on the operational realities of consultant shelf-space management, contrasting client product breadth with the heavy ongoing monitoring costs of unused manager inventory.
Ted holds their own ▶ 42:20 Ted establishes shared institutional memory of hedge fund cyclesTed frames the hedge fund discussion by citing his and Greg's shared decades-long experience across boom and bust alternative investment cycles.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Greg Dowling's Background and Journey to FEG | 3 | 4 | 1 | 0 | Ted opens with a lighthearted prompt about consulting as a career path, giving Greg full floor to recount his journey through AMG affiliate experience, CFA study groups, and entering FEG's hedge fund division. The dynamic is purely narrative and collaborative. | |
| The Evolution and Consolidation of Institutional Consulting | 4 | 5 | 1 | 0 | Ted prompts Greg on the industry's historical trajectory over the past two decades. Greg delivers a knowledgeable overview of how institutional consulting originated in the 1970s and 1980s out of bank trust departments and why demographic aging has triggered widespread industry consolidation. | |
| Maintaining FEG's Independence and Mid-Market Advantage | 4 | 5 | 1 | 1 | Ted probes how FEG maintained independent mid-market positioning while competitors sold out. Greg explains their unique ESOP ownership structure and details the competitive trade-offs between mega-consultants with actuarial scale versus nimble mid-market allocators. | |
| FEG's Business Model: Non-Discretionary, OCIO, and Hybrid | 3 | 4 | 0 | 0 | Ted asks for a breakdown of FEG's business model across discretionary, non-discretionary, and OCIO. Greg explains the emergence of hybrid models where institutions outsource administrative or private asset tranches while retaining broad governance. | |
| Client Discovery, Risk Tolerance, and Asset Allocation | 4 | 4 | 1 | 1 | Ted presses on how FEG turns qualitative risk assertions from client committees into quantitative investment parameters. Greg explains how questionnaires expose loss tolerance gaps and committee continuity challenges. | |
| Manager Selection: Inventory Management and Sourcing Networks | 4 | 6 | 1 | 0 | Ted asks about manager selection biases across asset classes. Greg uses a grocery store toothpaste aisle analogy to explain inventory management, capacity constraints, and sourcing networks via prime brokers and client networks. | |
| Due Diligence: Quantitative Analysis and the QER Framework | 4 | 6 | 1 | 1 | Ted asks for the detailed due diligence blueprint. Greg outlines FEG's quantitative factor attribution alongside their proprietary QER framework scoring six core tenets, devil's advocate reviews, and committee approvals. | |
| FEG's Research-Centric Organizational Structure | 5 | 5 | 1 | 2 | Ted probes how FEG aligns internal sector heads with clients and questions how qualitative cultural scoring avoids subjective bias. Greg explains why eat-what-you-kill compensation conflicts with collegial marketing claims and describes adapting diligence over Zoom. | |
| Sponsor Message: Ridgeline Cloud Software Platform | 3 | 4 | 0 | 1 | Following an ad read, Ted follows up on body language evaluation techniques and managing dysfunctional investment committees. Greg provides pragmatic advice on committee governance, relationship building, and managing hybrid meetings. | |
| Market Valuations and Lower Middle Market Private Equity | 4 | 5 | 2 | 0 | Ted invites an asset class deep dive. Greg presents a skeptical view on broad market valuations and explains why lower middle market private equity offers an arbitrage by building platforms to sell up into mega-fund dry powder. | |
| Venture Capital Dynamics and Crossover Fund Risks | 4 | 5 | 2 | 1 | Ted asks about venture pacing, access issues, and public-private convergence. Greg emphasizes that VC is strictly an access class and calls out crossover managers who jumped into early rounds and retreated at the first geopolitical sign of trouble. | |
| Hedge Funds and Multi-Strategy Outlook | 5 | 5 | 1 | 0 | Ted references their shared background in hedge funds. Greg explains why rising rates and dispersion benefit multi-strategy hedge funds, reframing realistic 6-7% expected returns as an attractive fixed income substitute in down markets. | |
| Process Evolution, Cross-Training, and Co-Investments | 4 | 4 | 1 | 1 | Ted asks about FEG's internal evolution and co-investment fee diligence. Greg explains cross-training hedge fund analysts in private capital and shares FEG's disciplined rule of passing on co-investments that charge both management fees and carry. | |
| Teaching Alternative Investments at the University of Cincinnati | 3 | 3 | 0 | 0 | Ted asks Greg about his teaching role at the University of Cincinnati. Greg explains educating MBA students on alternatives and career entry in the Midwest, bringing in visiting managers to run real-world case studies. | |
| The FEG Hockey Classic and Charitable Community Impact | 3 | 2 | 0 | 0 | Ted highlights being on-site in Cincinnati during FEG's charity event. Greg shares the founding story of the FEG Hockey Classic supporting Cincinnati Icebreakers, bringing together institutional managers and clients through charity hockey. | |
| Inflation Strategies, Real Assets, and Operating Without a Fed Put | 4 | 4 | 1 | 0 | Ted opens the floor for final market themes. Greg details managing inflation through diversified real assets and warns that younger allocators who only know how to 'buy the dip' face severe risks operating without an active Fed put. |
Statements from this episode (23)
Dowling: Institutional investment consulting is a transient industry
“It's a pretty transient industry.”
Dowling: Very few mid-market institutional consulting firms remain
“Well, there's not a lot of us left.”
Dowling: Aging founders and asset-light models drive consulting consolidation
“Now, fast forward to the last decade or so, these people that started in their thirties and forties, you know, they're 60 and 70 years old, and they need a liquidity event, and even if they've passed down the partnership and expanded it, it's still hard for ju…”
Dowling: Smaller endowments have the edge investing in emerging managers
“They can invest in smaller managers, emerging managers. That's harder to do with a giant consulting firm”
Dowling: Billion-dollar institutions are now outsourcing via OCIO
“What's changed is the size of the institution that are outsourcing. It's pretty incredible. You have, you know, billion dollar institutions that are outsourcing.”
Dowling: Institutional clients claim long-term horizons until quarterly losses occur
“Everybody says they're long-term until there's losses, and then you're like, whoa, we're down 10% in a quarter.”
Dowling: Hedge Fund Sourcing Centers on Prime Broker Relationships
“And with hedge funds, the ecosystem revolves really around prime brokers. If you're a hedge fund, you need a prime broker. So instead of having to go out and talk to 9000 hedge funds, we can start by talking to the prime brokers and ask them who's launching in…”
Dowling: Quantitative manager metrics explain the past, not future performance
“Some are very, very quantitative, and we're quantitative too, but we would tell you that That explains how they did in the past. It may or may not explain how they do in the future, right? It's all backwards looking. And teams change and people change.”
Dowling: Due diligence should evaluate cultural alignment with strategy, not idealized culture
“The first thing I'd say is there's no one culture, and we're not looking for the exact same culture. We are just looking for a culture that is appropriate for the strategy and how they're set up.”
Dowling: Allocators should conduct virtual due diligence individually to read dynamics
“Do calls individually. It's really difficult to do a group Zoom or Teams call in terms of due diligence because you might have people talking over each other. You can't pick up on individual Brady Bunch boxes that when the senior PM talks, the number two rolls…”
Dowling: Allocator due diligence will permanently shift to hybrid virtual-in-person models
“You ask, where is it going? I think it's going to be a little bit of both. I think our meetings will be more meaningful, and that instead of doing a marathon all day meeting on site where we're exhausted and they're exhausted, or flying to Hong Kong and our ey…”
Dowling: Effective investment committees require a strong chair to align members
“They have very different personalities, and by changing one or two people, it can be night and day, and so a lesson is make sure you have good governance, make sure you have a really strong IC chair, make sure everybody's rolling in the same direction. If not,…”
Dowling: US has 30x more private $10M+ revenue companies than public ones
“There are 30 plus more companies on the private side with revenues over ten million dollars than the U.S. Public market.”
Dowling: Lower Middle Market PE Will Beat Public Equities
“You can pretty consistently make good returns, but I would say that these are lower returns than you got in the previous 10 years with private equity, but they're going to be a lot better than the returns in the public equity market.”
Dowling: Leave venture allocations unfilled if lacking access to premier managers
“It is a access class, not just an asset class, and so that means you may not be able to do as much venture. There's still great venture companies out there. It's the new breed, the people that leave the larger firms and start up and do great at a smaller size,…”
Dowling: Inexperienced crossover investors are moving into earlier venture stages
“The other issue is that because everybody's focused on the late stage area, which has become very pricey, they're moving down, down rounds into lower and lower levels that they've never played in before. Some have, some of the bigger ones have, but some of the…”
Dowling: Good multi-strat hedge funds can earn 6% to 7% in 2022
“I think a good multi-strat manager can earn six or seven percent, and that's nowhere near what it returned in the nineties, early 2000, but that might be pretty good this year.”
Dowling: Conservative multi-strategy hedge funds can serve as fixed income proxies
“So we've even said for some investors, maybe you think about having some of the more conservative multi-strat hedge fund managers and think about it as a fixed income proxy.”
Dowling: FEG passes on 95% of non-traditional investment ideas
“And I'd say 95% of the time we pass. We just pass. Because they might be interesting ideas, but no one's going to invest them. And it's not worth the missionary work.”
Dowling: Niche investments often carry hidden macro and GDP risks
“A lot of times I think that you have to be careful about is even though it's weird, It has a risk factor, and sometimes that risk factor is GDP, the economy. So you're like, oh, and this is really interesting. Aircraft securitizations, and like, well... Someti…”
Dowling: FEG usually passes on co-investments charging management fee and carry
“We pass most times when there's a management fee and a carry, because then it's just a fund of one idea, and that's not great.”