Big investors in 401(k)'s are 'retail investors,' not always 'sophisticated' investors: Todd Stankiewicz
By Todd Stankiewicz | CIO, SYKON Capital | Portfolio Manager, Free Markets ETF (FMKT)
On Making Money with Charles Payne, Todd Stankiewicz discusses the risks of bringing private equity into 401(k) plans, warning that many retirement investors are retail participants who may not fully understand the liquidity trade-offs.
Check out the article mentioned in the video:
Private Credit: Separating Hype from Reality in a Booming Market
Understanding Liquidity in Private Credit Funds: A Primer for Investors
About Author
Todd Stankiewicz | Chief Investment Officer, SYKON Capital
Todd Stankiewicz is the Chief Investment Officer of SYKON Capital, a fee-based registered investment advisor with offices in Westchester County, NY and Jupiter, FL. He is a recurring guest on Fox Business and the Schwab Network, where he discusses markets, portfolio strategy, and investor behavior. Todd is also the portfolio manager of the Free Markets ETF (FMKT).
Learn more at www.sykoncapital.com
Transcript:
Now, my first guest has been sounding the alarm for months. Want to bring it out from SYKON Capital, president and, CIO Todd Stankiewicz. Todd, so let's talk about this because you wrote a piece about private Equity back in November 25th last year, separating the hype from reality.
In a booming market with funds, companies aren't telling you. What weren't they telling us? Well, we were hearing all the good stuff, right? We were hearing about private credit. Private equity, Right. Particularly private credit. When we were talking about equity, like returns, a bond, like, volatility, we were hearing about how we're uncorrelated to the public markets.
Right. We're hearing that same thing with private equity as well. And really, at the end of the day, you got to ask yourself, if this is all great, what's the trade off? Right. And a lot of the trade off had to do with liquidity. Right. In fact, you've written about that several times. More recently, you also wrote about it.
We'll share the headline with the audience. And before we even get to the liquidity part about it, one thing that I've always been concerned about is the sort of opaqueness of it all. But it didn't matter because you had to be an accredited investor. Well, if there are things they weren't telling us right now and the way it's been acting right now, should we rethink private equity going in?
401ks, we need to rethink that whole space going in the 401ks in general. Because at the end of the day, when we look at who's investing in 401ks, the big investors in 401ks are a retail investor. It's not always sophisticated investors. And when they look at it the way they pick funds, sometimes it's just what has the largest return.
Well, and the returns of these funds have actually been good over the past couple of years. The other thing we're learning here in the last week or so, particularly this trade off that you've written about, right? The trade off between yield, liquidity and risk. Listen, if I have a 401k and I need my retirement money and you tell me I can't have it, I'm in trouble.
Yes, very much so. Very much so. And we often see mutual funds in 401ks as well. But we have to remember back to the fact that in 2015, there was a fund, Third Avenue Focused Credit, that was an open ended mutual fund that it actually gated redemptions because they had exposure to ill liquid credit assets and they couldn't redeem.
And a lot of people didn't realize that could happen. So even in mutual funds that can be the case. And so for 401k investors, some of the headlines of Blue Owl, I'm not sure if you can get people to get money back or not because the CEO keeps going on TV saying you can, but the headlines keep saying you can't. I want to ask you, speaking of which, so, you know, we kind of lump them all together today.
They're all taking a pretty good hit. Apollo the biggest hit. But year to date, Apollo's down the lease over the last one year period, Blue Owl down over 50%. Is there a name in here that you're looking at that maybe. Okay, stands above the rest. Maybe it shouldn't be down as much as the others. Yeah, when we look at these names, they're not all the same.
And I think that's a great observation because the reality is you look at Blue Owl, Blue Owl is very heavily focused on private credit, which has had some of the biggest headlines and some of the biggest liquidity right now. But some of them, like Blackstone, which, full disclosure, we do own that in One of the ETFs that I run, it is, more diversified.
So it's not just private credit, private equity, real estate and certain things like that. So I think if you're looking at these names, you want to find the ones that may potentially have more diversification. Right. And Blue Owl, everyone's staying away from it for right now. Just too many question marks. It depends if you listen to the management, they're trying to really encourage investment there, but it's risky.
