One of the most striking things about Joseph Zidle is that he personally replies to emails sent to his address — and swiftly. There is no executive assistant with a yoga instructor’s velvety voice, no phalanx of communications professionals running interference, and no cadre of compliance officers ensuring that anything said adds up to one big equivocation. It’s just Joe.
And when his next appointment encroaches on his media interview before the inquisitor has finished asking questions, he offers to schedule another interview date.
It is a very personal level of engagement for a guy with one of the most daunting assignments on Wall Street, helping Blackstone, the hottest name in private equity, expand into a force among individual high-net-worth investors.
It gets more intimidating: Zidle was hired for the job by Wall Street legend Byron Wien as his hand-picked successor, as Wien, vice chairman of the firm’s private wealth solutions group, edges toward his version of “retirement” — a five-day workweek.
“I have been incredibly fortunate to be working alongside Byron for the last year-and-a-half,” says Zidle, who was officially named chief investment strategist in January. “Having him sitting next to me is incredible, because he is a library, he is a walking history of financial markets.”
Wien’s pre-Blackstone pedigree includes a stint as chief investment strategist at Pequot Capital Management and chief U.S. investment strategist for Morgan Stanley, as well as co-authoring a book with George Soros on the legendary investor’s life and philosophy. In 1998, First Call named him the most widely read analyst on Wall Street, and in 2000 he was ranked the No. 1 strategist by SmartMoney.com based on his market calls during that year. In addition, New York Magazine named Wien one of Wall Street’s 16 most influential people in 2006, while the New York Society of Security Analysts presented him with a lifetime achievement award in 2008.
Zidle makes a point of meeting with Wien daily as part of the process of absorbing his 50 years of finance industry experience and benefiting from his network of contacts and sources. The two men also collaborate on many client presentations, as well as co-hosting quarterly webinars.
“Byron has got an incredible number of followers who absolutely love his work, and my job is to expand that, to continue building investment strategy at Blackstone — not only to help our deal teams in terms of acquisitions and dispositions, but also to make sure that Blackstone is a place that people are going to turn to when they want to understand what is going on in the world.”
Wien is one of two mentors in particular whom Zidle credits with having mightily contributed to his professional rise, the other being Richard Bernstein, whom he worked for at Merrill Lynch during Bernstein’s tenure as chief investment strategist. When Bernstein left Merrill Lynch to start his own firm, Richard Bernstein Advisors, he brought Zidle along to serve as his second in command as the firm’s investment strategist and a member of the firm’s investment committee.
ONE GIANT MISMATCH
Blackstone, already a heavyweight among institutional investors, has launched a major push to capture and compound assets belonging to high-net-worth individual investors, a space where Zidle says the percentage of alternatives and real assets is pitiably low.
“Among individual investors, their allocations to alternatives still are much lower than they should be,” he says. “It’s going to take an industrywide effort to educate people on the benefits of illiquidity. Even a long-term investor with no interest in selling seems automatically averse to locking up an investment for X number of years when introduced to an investment like private equity.”
The problem? People do not understand the benefits of illiquidity offered by alternative investments, tending to favor public equity over private equity. Private equity offers the ability to affect change in ways not possible with public equity, according to Zidle. On the public side, even an activist investor, at most, might get a board seat and be able to force out an ineffectual CEO. But on the private side — where a private equity firm such as Blackstone might acquire a company outright — it has the ability to reach deep within the company in ways that go beyond the executive suite and right into the organization’s middle management, lines of business, operational processes, supply chains and so on. Though investors surrender liquidity, Zidle points out that in return they garner the ability to re-
engineer and improve companies’ operations and market value.
“That is just an example of private equity,” he adds. “In real estate, our funds buy a property, fix it, sell it. We will improve properties, which further unlocks value. We invest capital expenditures to improve tenant occupancies and experience, and really turn around buildings and hotels.”
Still, many investors are averse to notions of illiquidity because they do not realize the premium they get in return for being patient with their money. This is especially unfortunate in the 401(k) space, where many participants will not be accessing their money for decades, and yet many rules and decisions made about the management of 401(k)s leave them devoid of alternatives and illiquid investment vehicles.
“A 401(k) by definition is something that is not going to be touched for a long period of time, yet an investor in a 401(k) basically has all of their assets invested in things that are daily liquid,” Zidle observes. “There is a benefit to illiquids in retirement accounts. Pension funds and endowments clearly understand that, but the rules haven’t allowed individual investors to participate in the same way. That is a huge mismatch.”
BUY AND HOLD — AND HOLD
Many financial advisers divide their clients into two camps — those who like to spend and those who prefer to save. Zidle hesitates only slightly before labeling himself a “saver.” Maybe it’s his age (46) or his circumstance (married with children) that encourages him to handle money with far horizons in mind.
Fiscal conservatism was a chief reason Zidle joined the U.S. Army Reserve during his sophomore year at Emory University, enlisting as a reservist for an eight-year stint, which required six years of active duty and two years of active reserve duty. That commitment earned him the promise of education funds through the GI Bill, which he used to help pay his tuition at Emory University. Summers were spent at Fort Leonard Wood in Missouri, the Aberdeen Proving Ground in Maryland or Fort McPherson or Fort Benning, both in Georgia.
Beyond the need to pay his college tuition, Zidle says he has always had a “saver mentality,” an outgrowth of his upbringing in Hooksett, N.H., a suburb of Manchester. Though his father was gainfully employed with the U.S. Department of Labor, and his mother as a hospital nurse, it made for a modest lifestyle. The lesson was not lost on their son.
Yet, somewhat paradoxically, Zidle is a “risk tolerant” investor. The contents and management of his portfolio also have some of the hallmarks of paradox.
“I don’t trade — ever,” he remarks. “So, there is a degree of conservatism in my portfolio in that I have very little turnover. But I do buy risk assets and just hold them, probably to the frustration of my financial adviser team. It has probably been two or three years since I sold a security out of my portfolio. I want to be a long-term investor. I like to buy brands whose businesses I like, or that make products or services that speak to me. Then I will hold them.”
FROM DIRT TRAILS TO COCA-COLA UNIVERSITY
Perhaps his risk tolerance came early in life, extending to perils of the flesh-and-blood variety as Zidle spent his teenage years on dirt bikes and other off-road vehicles in New Hampshire’s sylvan countryside, eventually finding his way into motocross racing, risking limb and ligament, his first cycle being an 80cc Yamaha, before graduating to the Yamaha 250cc and YZ250.
Coming of age near Manchester, he became aware of the city’s importance to aspiring presidential candidates by dint of the state’s early primary. (Already, the Los Angeles Times has reported, a year before the 2020 primaries, “New Hampshire is bumper-to-bumper with presidential candidates.”)
“We have basically seen them all,” Zidle says in reference to presidential candidates over the years. “My dad would need to confirm this story,” he says, “but when I was a young kid he supposedly sat me on Jimmy Carter’s lap.”
From his motorized travels along the dirt trails of Hooksett, it was off to Emory University in Atlanta, one of the most esteemed institutes of higher learning in the Southeast — euphemistically dubbed Coca-Cola University because of the billions of dollars the soft-drink company has contributed to the university’s endowment. (Indeed, legend says Emory is a Pepsi-free zone.) It was there that Zidle demonstrated some early leadership skills by rising to the presidency of his fraternity, Beta Theta Pi. The vast bulk of his time was spent pursuing bachelor’s degrees in economics and history, motivated by his interests and passions rather than doping-out a path into the finance field. He never enrolled in a business, finance or accounting course.
Hmm…
Still, the foundation of economics and history — as well as his intense lifelong curiosity about how things work — would serve him well in the profession that would become his destiny.
“I have always had an intense desire to figure things out,” he says, “and in finance that has meant understanding trade and currencies and understanding how markets and asset classes work and behave.”
NO SHINY OBJECT HERE
Zidle and Blackstone are seeking to play a far greater role in the lives of high-net-worth investors by introducing alternatives at a scale individual investors have never had access to previously. Some work is still to be done there, however, and not only because of the aforementioned aversion most investors have to illiquidity. Blackstone’s clientele, by Zidle’s own admission, is largely risk averse, still stunned by the memory of the global financial crisis.
“There is a concept called ‘recency bias,’ where you take what happened in the recent past and you apply it to the future,” he says. “Since March of 2009, we have seen individual investors continuing to sell equities, both equity mutual funds and equity ETFs, and we have seen this massive rotation into fixed-income because of risk aversion. A lot of people have been waiting for equity markets to crack.”
Despite the obstacles, Zidle expects over the next five to 10 years the private wealth industry will continue to democratize access to the types of real assets and other alternative investments that have traditionally been the preserve of institutional players.
“Soon everybody will have that access,” he says. “Think about asset allocation over time. If you go back 20 years it was really just stocks and bonds and cash. Look at asset allocation today and you have got alternatives and illiquids, and a number of ways to access them.”
Interestingly, Zidle admits that before joining Blackstone he did not have much experience with alternatives.
“Getting here and understanding how our private equity real estate and credit divisions work, for me, has been an amazing experience, watching how we use private equity to buy companies and really affect outcomes through operational improvements. I am gaining a greater appreciation for what we are doing on the private equity, real estate and credit side,” he explains. “I don’t want to say my new favorite asset classes is alternatives because I don’t want to sound like I’m the cat chasing the shiny object, but the more I learn about alternatives in the real asset space, the more I think they are a critical component of a well-balanced portfolio.”
THE APPLE AND THE TREE
Zidle developed into a balanced fusion of his parents — and not only chromosomally. Like mom, Zidle is a prolific reader, ingesting a collage of two or three books simultaneously. Like dad, he was imbued with a propensity for mathematics and is regularly challenged by his children to accurately conduct calculations in his head — never mind the mathematical demands of his job at Blackstone. Though dad is now in his 70s, Zidle admits he cannot come close to matching his father’s aptitude with all things numerical. If there is any competitive tension between father and son, it clearly has not generated any animus: Joseph Zidle tapped the senior Zidle to be his best man at his wedding ceremony.
Almost as though tipping his hat to both parents’ influence, Zidle is currently reading The Man Who Knew Infinity, the true story of Srinavasa Ramanujan Iyengar, a brilliant mathematician from India who died at age 32, but not before developing mathematical proofs still being decoded today and used for space travel. All this from a man who never received any formal schooling or math training, Zidle marvels. He has also read the five-book Game of Thrones series of novels, running thousands of pages and hundreds of characters in total.
WORDS FAIL ME
Zidle’s workday routine begins with a commute by train into Manhattan, during which he rifles through copies of The Wall Street Journal and The Financial Times. On weekends he adds Barron’s and The Economist to his menu of periodicals. That is followed by a visit to the gym, where he changes into jogging gear for a run through Central Park before showering and heading to his Park Avenue office, where the first activity involves examining sell-side research reports.
“My early morning is understanding what is going on in the macro-environment, picking up those different points of view, including contrarian viewpoints. I want to read things and talk to people that can challenge my own views.”
He finishes the day deleting emails.
“I may be a little OCD in that I don’t like to have a lot of open or unattended emails,” he says. “My happy place is below 100 emails. My very happy place is if I can get to 50, but I will start the day in the hundreds.”
At the moment of that discussion with Real Assets Adviser, Zidle counted 234 emails waiting in his inbox, the result of having been in meetings most of the day and unable to focus on email divestiture.
Even though Zidle finds himself in countless meetings and is responsible for publicly articulating his views on global macro issues — including appearances on CNBC and other media outlets, in addition to industry events and Blackstone webcasts — he declares himself a “total introvert.”
“My job duties force me to be public-facing and behave as an extrovert,” he says, “but my comfort zone is reading quietly and not engaging with people.”
There has been nothing quiet about Blackstone’s monster financial performance for many years running, and if Zidle can match that performance on the private wealth side of the firm, he can take solace in the adage that actions (and returns) speak louder than words.
Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser. Follow him on Twitter
@mikeconsol to read his latest postings.