Ignite LP: Chris Schelling on Behavioral Finance and the Future of Private Markets | #122

Ignite: Conversations on Startups, Venture Capital, Tech, Future, and Society

In this episode of the Ignite Podcast, host Brian Bell interviews Chris Schelling, Managing Director of Private Investments at Caprock, to explore his vast experience in alternative investments. With over two decades in the industry and expertise in behavioral finance, Chris delves into the intersection of psychology, statistics, and market behavior that fuels his passion for finance. He highlights how his academic background and early career experiences shaped his perspective, emphasizing the importance of creativity and disruption in alternative investments. The discussion transitions to the dynamics of private markets versus public markets, focusing on the predictability and persistence of returns in private equity and venture capital. Chris explains how the behavioral aspects of market participants influence outcomes, particularly in less liquid markets, where value creation takes precedence over sentiment-driven volatility. He also discusses the evolving nature of fund management, with a shift from brand-based success to the importance of individual deal attribution and team dynamics. Brian and Chris further examine decision-making frameworks, touching on mitigating cognitive biases and the value of structured diligence processes. Chris introduces his "Three I" framework—integrity, intelligence, and intensity—for evaluating fund managers and discusses the role of intuition honed through extensive pattern recognition. The conversation also explores strategies for fund scaling, aligning fund sizes with strategies, and leveraging market mispricing for outperformance. The episode concludes with Chris sharing insights into his role at Caprock, where he supports democratizing access to private markets for high-net-worth individuals. He emphasizes the need for patience and long-term commitment to maximize returns in private markets. Brian and Chris end the session on a note of optimism, highlighting current opportunities for disciplined investing in private markets during uncertain times. Chapters: Introduction and Chris Schelling's Background (00:00 - 02:00) Venture Capital Insights (02:00 - 05:00) Challenges of Venture Capital (05:00 - 08:00) Transition to Caprock (08:00 - 12:00) Advice for High-Net-Worth Individuals (12:00 - 16:00) Sourcing Fund Managers (16:00 - 20:00) Behavioral Finance in Investment Decisions (20:00 - 25:00) Opportunities in Private Credit (25:00 - 28:00) Mitigating Cognitive Biases in Due Diligence (28:00 - 32:00) Impact of Institutionalization on Private Investments (32:00 - 36:00) Negotiating with Fund Managers (36:00 - 40:00) Adapting Criteria for Fund Managers (40:00 - 44:00) Personal Anecdote: Private Detective Experience (44:00 - 47:00) Conclusion and Final Thoughts (47:00 - 51:41)