Capital Allocators – Inside the Institutional Investment Industry

Chad Hutchinson – Professional Athlete to Professional Investor in Sports

Mon Nov 20 2023

SportsFinancePrivate EquityMental TrainingPersonal Growth

Description

This episode features an interview with Chad Hutchinson, a former professional athlete who transitioned to finance. Chad shares his journey from playing baseball and football to working in private equity at Arctos Sports Partners. He discusses the challenges he faced, the importance of mental training, and his insights on personal growth. The episode also explores Chad's role at Arctos and their investment strategies in sports and diversified opportunities.

Insights

Transitioning from Sports to Finance

Chad Hutchinson's transition from professional sports to finance was driven by his love for math, complex problems, and the competitive aspect of trading. He educated himself about finance while still playing sports and secured an analyst job at a big private equity firm after leaving sports.

The Importance of Mental Training

Chad Hutchinson emphasizes the importance of mental training in sports and finance. He follows a daily routine that includes practices like gratitude, identifying core values, neurofeedback, meditation, and cognitive behavioral therapy. He wishes he had developed a framework for mental training earlier in his career.

Building Everlasting Organizations

Arctos Sports Partners has a mindset of building everlasting organizations and taking care of young employees. They invest across multiple sports leagues and help teams build their platforms. Their focus is on core North American sports teams such as NBA, MLB, MLS, NHL, and potentially NFL.

Lessons on Personal Growth

Chad Hutchinson shares lessons he has learned from influential people in his life. He emphasizes the importance of personal growth, being authentic, and focusing on the journey rather than just outcomes. He believes that every experience is a learning opportunity.

Investing in Sports and Diversified Opportunities

Arctos Sports Partners invests in sports teams and adjacent businesses. They emphasize owning the intellectual property (IP) of sports teams and investing in areas like ticketing and backend geo compliance for sports betting platforms. They aim to create value for their teams and make a positive impact on communities.

Chapters

Introduction
Early Sports Career
Challenges and Mental Training
Mindfulness and Transition to Football
Introversion and Transition to Finance
Building a Successful Business
Joining Arctos Sports Partners
Investing in Sports and Diversified Opportunities
Life Lessons and Personal Growth

Summary

Transcript

Introduction

00:02 - 07:41

TenEast is an investment platform that offers access to private markets and allows co-investment opportunities.
The principles of TenEast have a track record of investing in various types of exposures across more than 350 transactions.
NetSuite by Oracle is a suite of ERP, financial, CRM, and e-commerce tools that help businesses grow and improve efficiency.
Chad Hutchinson, a partner at Arctos Partners, discusses his journey from professional sports to finance and his role at Arctos.
Chad Hutchinson played in both Major League Baseball and the National Football League before transitioning to finance.
Chad's mother raised five kids as a single parent and emphasized academics while they saw sports as an opportunity for success.
Chad's passion for baseball started when he was five years old after reading about players like Mickey Mantle.

Early Sports Career

07:25 - 13:30

The speaker developed a passion for baseball at a young age and dreamed of becoming a professional player.
They played pickup sports with their brother and enjoyed the fun aspect of sports.
The speaker was initially worried about their height and focused on academics instead of pursuing sports.
In high school, the speaker broke their hand but experienced a growth spurt, which led to them excelling in baseball.
They also had a rough start in football but received guidance from a coach who believed in them and encouraged them to continue playing.
Throughout high school, the speaker achieved success in three varsity sports and met with a prominent agent.
Despite being drafted by the Atlanta Braves, the speaker's mother emphasized the importance of education over pursuing professional baseball.
The speaker made the decision to attend Stanford University instead of signing with the Braves, which they consider pivotal in changing their life trajectory.
They played both football and baseball at Stanford, redshirting their freshman year in football while having an impressive freshman year in baseball.
As a redshirt freshman quarterback at Stanford, they initially struggled but eventually found success after facing challenges.

Challenges and Mental Training

13:15 - 19:56

The speaker had a challenging start in college football but had a breakthrough game against UCLA, leading to a successful season.
They also excelled in baseball and eventually got drafted by the St. Louis Cardinals.
The speaker attributes their success to a combination of natural talent and an intense drive to outwork others.
They experienced highs and lows in their professional baseball career, struggling with anxiety and mental challenges.
The speaker acknowledges the importance of mental training and wishes they had developed a framework for it earlier in their career.
They now follow a daily routine that includes practices like gratitude, identifying core values, neurofeedback, meditation, and cognitive behavioral therapy.

Mindfulness and Transition to Football

19:27 - 25:29

The speaker discusses the importance of meditation and mindfulness, citing authors like Adam Grant and James Clear who advocate for cognitive behavioral therapy.
They mention using certain steps to stay on track when they feel anxious, such as recognizing triggers and implementing habits like breathing exercises.
The speaker reflects on their past focus on production and end goals, but now values the journey and process of growth, especially in relation to their children.
They express admiration for Stoic principles like courage, justice, temperance, wisdom, resilience, love, humility, and loving one's neighbor. These values are regularly reflected upon and practiced.
The speaker talks about a book they are currently reading that explores how to equip children with the mindset that life is constantly changing and how to become comfortable with discomfort.
They share their decision to transition from professional baseball to football after realizing it was a regret they would have if they were to die tomorrow. Despite initial resistance from their agent, they pursued football seriously and held a successful workout that garnered attention from multiple teams.
Ultimately, the speaker signed with the Dallas Cowboys due to their positive experience meeting Jerry Jones and being drawn to his infectious personality and energy.
When transitioning from baseball to football, the speaker learned the importance of taking small steps forward rather than overwhelming themselves with grand expectations. However, their drive led them to start most of their first year in the NFL instead of building a solid foundation first.

Introversion and Transition to Finance

25:13 - 31:27

The speaker reflects on their experience as a quarterback and how being introverted made it challenging for them to fulfill the extroverted expectations of the role.
They mention reading "The Power of Introverts" and realizing that they are actually an introvert, which helps them understand themselves better.
Despite feeling uncomfortable in positions that required extroversion, the speaker managed to overcome it by staying competitive and having a clear vision and purpose, such as providing for their mom.
The speaker transitioned from playing professional baseball and football to finance due to their love for math, complex problems, and the competitive aspect of trading.
They became voracious readers and educated themselves about finance while still playing sports.
After leaving sports, the speaker interviewed extensively and networked to secure an analyst job at a big private equity firm.
The transition from being an NFL quarterback to working long hours as an analyst was challenging, but the speaker is grateful that their wife stuck with them through it all.
When asked about the benefits of being a professional athlete, the speaker mentions access to people and opportunities but also highlights negative aspects like selfishness and a limited shelf life in sports.
The speaker emphasizes the importance of being well-rounded, serving others, and finding happiness beyond professional success in order to avoid struggles after retirement from sports.
They believe in peaking later in life rather than experiencing a slow decline after reaching success at a young age.
In finance, the speaker started as an analyst for a fund of funds before joining someone who had experience with distressed assets. Together, they raised money and bought distressed debt from local banks.

Building a Successful Business

31:05 - 37:18

The speaker and their team raised friends and family money to buy distressed assets, specifically distressed debt from local banks.
They built a successful business by underwriting and managing these distressed debt loans, buying 5,000 loans within four years.
Through this experience, the speaker gained valuable insights into risk-reward dynamics and human behavior in finance.
The speaker met Alan Waxman, who was building a successful business at TPG Sixth Street. Impressed by Waxman's vision, the speaker joined the company.
At TPG Sixth Street, the speaker had more freedom to pursue different investment opportunities across various sectors and geographies.
They worked on small balance loan deals as well as larger projects such as oil and gas investments and an agriculture business focused on water scarcity in California.
The speaker helped establish joint ventures with local partners in agriculture and grew their presence in avocado farming, organic farming, and off-take agreements with General Mills.
In addition to agriculture, they also pursued opportunistic deals like a convertible facility with Spotify during the COVID pandemic.
Alan Waxman's superpowers were his visionary mindset and his emphasis on understanding the underlying reasons for capital investments.

Joining Arctos Sports Partners

36:59 - 43:10

Private equity capital requires a catalyst to come into a deal, especially in a firm like Six-Reed.
Six-Reed focuses on attacking dislocations and will continue to do so until the dislocation dries up.
Alan, one of the leaders at Six-Reed, has the ability to quickly understand the why of a situation and determine if there is a need for their capital.
Understanding why the capital is relevant and needed is crucial before investing.
Experience in seeing many transactions helps in identifying different situations and assessing risk.
The decision to exit was driven by personal reasons, including wanting to be present with family during COVID.
Exploring new opportunities led to an offer to run a holding company for an NBA team and build it into a large platform similar to Fenway Sports Group.
Meeting Ian Charles and Doc O'Connor, who have valuable experience and different perspectives, was influential in joining Arctos Sports Partners.
Arctos can invest across multiple sports leagues and help teams build their platforms.
Despite initial reluctance, persistent communication from Ian convinced the speaker to move down to Dallas, Texas and join Arctos.
Arctos has a mindset of building everlasting organizations and taking care of young employees.
Leveraging previous experience in finance and connections within the sports ecosystem helped the speaker find their role at Arctos.

Investing in Sports and Diversified Opportunities

42:45 - 48:51

The speaker discusses the growth equity platform, ag platform, infrastructure platform, and BDC as part of their vision.
They emphasize the importance of owning the intellectual property (IP) of sports teams and investing in adjacent businesses.
The speaker mentions investing in a ticketing business called Sea-Keeq and a company called Geo comply that provides backend geo compliance for sports betting platforms.
They highlight the value of their operating advisors and operating platform in helping sports teams grow their businesses.
The speaker mentions their focus on core North American sports teams such as NBA, MLB, MLS, NHL, and potentially NFL.
They discuss the possibility of a growth equity business alongside their sports investments.
The speaker emphasizes the interdisciplinary learning between sports and diversified investing, particularly in understanding human behavior and risk assessment.
They stress the importance of discipline and rigor in investing, drawing parallels to the discipline required in team sports.
The speaker expresses excitement about creating value for their teams and making a positive impact on communities through thriving sports businesses.

Life Lessons and Personal Growth

48:34 - 54:44

Chad discusses the impact of organizations on people and the importance of making a positive impact.
He shares lessons he has learned from influential people in his life, including his coach Ed Burke, who taught him to consider how he wants to be remembered and the importance of being cognizant of one's own mortality.
Curtis Feeney, a successful investor and friend, taught Chad the value of perseverance and sitting through tough times instead of seeking quick fixes.
Alan Waxman taught Chad the power of asking questions in investing and understanding one's own investment duration.
Chad's favorite hobby is cycling, which he finds fulfilling both physically and mentally. It serves as a form of meditation for him.
Despite appearing extroverted, Chad reveals that he is actually an introvert who needs time alone to recharge.
His biggest pet peeve is when people are inauthentic and try too hard to be someone they're not.
The best advice Chad received was from Sy France, who told him to hold life loosely and accept things that cannot be changed with serenity.
His mother has had a significant impact on his professional life due to her resilience and vision. He also mentions other mentors who have been instrumental in his journey.
The life lesson Chad wishes he knew earlier is that every experience is a learning opportunity, and it's important to focus on personal growth rather than just outcomes.