In this episode of Influencers, Andy is joined by Eldridge co-founder and CEO Todd Boehly as they discuss his investment in the LA Dodgers, monetary inflation, and the polarized political environment in Washington.
ANDY SERWER: Warren Buffett popularized the model of a big successful holding company but Todd Boehly is on his way to making it his own. He's the billionaire co-founder and CEO of Eldridge, which holds stakes in dozens of businesses and boasts a market capitalization of $7.5 billion. Its long list of investments includes the Los Angeles Dodgers, production company A24, and news sites like the Hollywood Reporter and Variety. On this episode of Influencers, I speak with Todd about investment opportunities in a reopening economy, the threat of inflation, and why he doesn't worry about the Biden administration's proposed tax hikes.
Hello, everyone, and welcome to Influencers. I'm Andy Serwer. And welcome to our guest, Todd Boehly, CEO of Eldridge which holds stakes in dozens of companies from insurance, to tech, to media. Todd, great to see you.
TODD BOEHLY: Thank you very much for coming.
ANDY SERWER: Yeah. Thanks for hosting us here. It's a nice location in Greenwich, right?
TODD BOEHLY: Yeah. Great views, great weather. Time of year you want to be in the Northeast.
ANDY SERWER: It's looking good. So I'd like to start off, Todd, by asking you to tell us about Eldridge. Explain to us how it operates and what it does.
TODD BOEHLY: So simply put, it's a holding company that makes investments. We have a team of about 85 people that sit at Eldridge and we oversee a platform that has about $40 billion of assets. And it's got approximately 7.5 billion of market cap. So we're continuously looking for new businesses and entrepreneurs to back.
ANDY SERWER: And it has an insurance operation that funds investments and maybe operating businesses. Can you get in that a little bit more? And it sort of reminds me of Berkshire Hathaway, is that too far a stretch?
TODD BOEHLY: Well, obviously that's an inspiration to be thought of that way. But I think that's exactly how we think about it. You know, we're in eight lines of business, we're continuously looking across capital structures as well as across industries in order to find good investments. And ultimately, you know, that's really our goal. We're a life and annuity platform, so we think about how do we compound for a very long period of time. And ultimately, you know, we don't have liabilities that come staging in because our liabilities convert to annuities that payout over long periods of time. So we think we have a fantastic funding base to grow a very good long-term compounding investment platform the same way Berkshire's done.
ANDY SERWER: Right. So you take the cash flow or the float from the insurance operations and invest it in other parts of Eldridge. And what are some of the companies, the types of companies that you invest in? There's as I said media, tech, what else-- how does that work?
TODD BOEHLY: So if you look at the kind of base, the first thing we thought a lot about was all right, how are we going to get platforms set up that can take care of investing parts of the balance sheet. Because if you own an insurance company you have a couple of choices, right? The first question is who's going to run the balance sheet. Some companies go out and they outsource it to Apollo and they hire managers and you know, those managers then really have kind of control over the underlying assets for as long as you know, the insurance companies decide that those are going to be their managers.
We think about it really simply, we're funding in the retail markets with our policy and we're investing in the institutional markets competing with and investing alongside a lot of the managers who manage other insurance companies money. And if you look at like what AEL has come out and said, they're now AEL 2.0. You know, I would submit that AEL 2.0 is Security Benefit 1.0 and we're now on Security Benefit 3.0 as we continue to evolve. But we have equipment leasing platforms, we have real estate lending platforms, we have middle market credit businesses, right, because one of the great things about the platform is we need to make rates of return at the insurance company. So when we allocate to, CBAM, which is one of our asset managers, they go out and they buy a portfolio of senior secured loans, Eldridge put in the equity capital in order to get CBAM up and running, so Eldridge benefits from the investment return that's made at Security Benefit, as well as the enterprise value creation that is afforded to us by growing CBAM.
ANDY SERWER: You mentioned Apollo, I think I've heard of that company recently.
TODD BOEHLY: Yeah.
ANDY SERWER: So I want to ask you about some of your higher-profile investments, things like the Dodgers and entertainment and how do those investments fit with the capital structure and the investment thesis that you were just describing?
TODD BOEHLY: Well, you know, when we started looking at media a long time ago. It's really rights, you're buying and selling rights, right? So when you organize something so that you have a package of rights, that might look like a library or it might look like Dick Clark shows. You know, but ultimately, what you're doing is you have this intellectual property and you're figuring out how am I going to monetize it?
And so when we looked at the Dodgers we looked at that and said, wow, you know, we were thinking about buying it in 2012. In 2013 their media contract came up for renewal. So we spent a lot of time thinking about what was that media right contract going to look like when it came up for renewal and how valuable is it going to be. And of course, Time Warner Cable had just recently bought the LA Lakers' media package. So we knew that we would have interest from Fox, we knew we'd have interest from Time Warner Cable, we thought we might have one or two other interested parties but we thought that we had a really valuable investment-grade bond by selling the media rights and we knew we had a 25-year contract that we were thinking about.
So when we ended up selling it to Time Warner Cable, which became Charter, frankly, that went from being kind of an idea to you know, a long-term contract for selling the media rights, which starts to look like a bond. But the really nice thing about media rights is if someone doesn't pay you for them, you don't have to go through a long process, you can take the media rights back because they're intellectual property and just resell them to someone else.
So from our point of view, we looked at it as you know, a really interesting opportunity and something that was really kind of fun and exciting. And you know, I think we've won now eight NL West titles in a row. You know, we've got you know, our World Series ring this past year and you know, we want to keep winning, which is why we went out and hired Trevor Bauer and recruited him to come join us. So you know, I think it's been a great platform but you have to break it down into different components in order to think about what it all sums up to.
ANDY SERWER: But with the media rights that you were describing and the monetary flows that come from that being like a bond. I mean, that must not be lost on other people who would be interested in buying a property right. So what gives you the edge?
TODD BOEHLY: Well, I think we were a little early to thinking about this, right. I don't know that the world saw it the same way we saw it at the time. And you know, having a fixed income credit structuring background, it gave me kind of the way to look at it from a different lens, which was really kind of structured finance.
ANDY SERWER: Right. And do you think that the way you look at say, owning the Dodgers in the capital structure and deriving value from that investment is matched by a philosophy of actually managing the team because you know, I guess maybe if I were in your shoes you could argue, well it was successful here and it's successful there as well. Is there a connection between success on the field and success in the boardroom?
TODD BOEHLY: I think it starts from the governance and the culture. And you know, I think that you know, we've got a really good group of owners who understood that we have a great market and that this market wants to win. And having Earvin Johnson as our partner, he just pounded in on us all along like we have to win. If we're in LA you have to win, right. So you know and he came from you know, the most decorated franchise probably in the US. So having him as our partner continuously reminding having LA as a market, being able to then kind of get the team together, get the energy going.
We did a lot of transactions early on. We did the biggest trade ever with the Boston Red Sox, right? So we got Adrián González, Josh Beckett, Carl Crawford, Nick Punto, and that really was a jolt of energy because ultimately we wanted to get fans back into the stadiums. We wanted to feel passionate about winning. And you always just have to keep remembering that the fans' the center, right. And the second that you kind of veer, just go back to think about the fans, think about the fans. And if you're always wearing the fans' eyes, right, and thinking about it from that perspective and you have the good fortune of also having a major market like Los Angeles, those two things go together very nicely.
ANDY SERWER: Does having the financial wherewithal really help, Todd, because I mean, I would think it would because so many times you hear owners talking about trades oh, we needed to save the 3.1 million, and then the team tanks, and what do you got?
TODD BOEHLY: You know, we have a certain philosophy. And we have the good fortune of having a market like Los Angeles that goes really well with our philosophy. You know, we have 5 million homes in Los Angeles so we have a big market. You know, and if you think about the difference between baseball, basketball, and football, right, baseball is really as a team owner you own your local market.
In football. They negotiate all the media centrally and they share all the media revenue 1/32nd, you know but of course, baseball started you know, well before there was TV, right. So TV wasn't even contemplated when the league was put together. Football has a long history, but football really became successful in partnership with the TV.
ANDY SERWER: Right and that's the difference between the media rights and how that evolved over time that's fascinating. You sound like you're really, really hands-on.
TODD BOEHLY: You know, I think we've got a great team now. So the good news is you know, we just get to enjoy you know, kind of the output that they create. But you know, I think that early days when we were putting this all together, we wanted to make sure all the foundation was in place so then we could have success, we could look at budgets and ultimately say all right, you know, you're, Andrew Friedman you know what you're doing way better than I do.
And by the way, you're spending 24 hours a day, seven days a week thinking about it. You know, I've got 15 minutes on Tuesday. So you know, the whole idea that we can really insert ourselves there you know, we can make kind of changes and think about kind of the future and make sure we're on the right arc you know, but ultimately, you know, like any business you have to have the people that are in the business run the business you know, and really feel like they own the outcome.
ANDY SERWER: Put the managers in place and turn them loose and--
TODD BOEHLY: Yeah. You know, and then you know, let them run.
ANDY SERWER: Right.
TODD BOEHLY: You know?
ANDY SERWER: How do you choose where to deploy your assets? I mean, you've got this just broad array. You've got entertainment, sports, media, real estate, structured finance. So you just must get inundated with incoming calls and are you out there bird dogging as well, how do you pick?
TODD BOEHLY: You know, I think you're-- as we become more and more fortunate we get a better and better reputation about closing, doing what we say we're going to do, giving people quick noes. But I think that the larger your funnel and then your ability to curate your funnel is really what leads to the ability to outperform, right. Because I really believe that you know, out-performance or alpha you know, comes from you know, better sourcing, better origination, being there at the right time and you know, looking at it holistically, so you know exactly what the other partners want out of it. And if what you want out of it doesn't line up with what they want out of it, you know, just move on as friends, you know. But don't waste a lot of time, right. time's always the denominator. You know so we need to have good [? league ?] teams.
And when we start in things you know, it's almost like we're dating and that's why I love coming from the credit side right because we got to see so many different deals and you know, we were really not the-- there was cushion between you know, whether or not we underwrote it right and whether we were right, right. And so when you start in the lending business you know, let's just say simply put, you know, a company gets bought for $500 million and there's 250 million of debt on it and 250 million of equity, right. As long as the business ends up being worth 250 after it got traded for 500, your story won't be so bad, right. In the end, it's really about how much value is and then how much cushion but we got to date from the debt side so long and see so many different transactions. So we were able to take in all that information, build relationships, understand the industry, who's playing in it. And then now it's really about finding CEOs that can think about how to build their businesses and you start with something that you know, you start generally pretty small and when you see the probability shifting in your favor, that's when you want to be putting more capital behind a manager.
ANDY SERWER: And it sounds like you say no more often than you say yes?
TODD BOEHLY: Oh, you have to. You know, I think it just there's-- you can't say yes a lot, right. Because you've got to go deep, you got to do your work, you got to understand, you've got to develop rapport. So yeah, there's a lot of noes. And you know, the hardest part is figuring out. And sometimes it's easy because you're not interested, sometimes it's easy because the valuation expectations are way off. And you know, but I think the quicker that you can find your way to gather the information you need to execute what you're doing, the more successful you're going to be in this business.
ANDY SERWER: I want to shift and talk a little bit about the environment and markets and the economy right now. But let me ask you just first of all, how dependent is your model on the cycle?
TODD BOEHLY: Our goal is to make it not dependent. That's why we're so diversified. You know, I think being diversified you know, really helps us ride out the cycles. And you know, I think that with the stability of our funding base is so predictable, right. So you know, I think that the combination of being very diversified, not having event risk in the model and then having a really good funding base and a really good financial capital partner you know, with me, you know, really gives stability to the platform.
ANDY SERWER: But don't you take advantage of market conditions?
TODD BOEHLY: Oh, yeah. I mean, that's part and parcel if you look at what we did you know, in March and April, you know, the very first thing we started buying when the pandemic hit, yeah, we were buying AAA CLO bonds at $0.85 on the dollar.
ANDY SERWER: This is 14 months ago?
TODD BOEHLY: Yeah, sorry. 14 months ago. So you know, when March of 2020 when the world started really gyrating, you know, we had opportunities we were buying CLO AAA bonds at $0.85 on the dollar. Right, so when you kind of work through the math of what does that mean, right, generally, you look at these secured loans and they sit at the top of the capital structure, right?
So they're the first thing to get paid off when the asset is sold. They've got change of control protection. So they're very well-situated, and you know, they're $0.50 of the value let's say. And so when you kind of bundle them all up and then the AAA tranche is 65% of the 50% And then when you can buy it at $0.85 on the dollar, you're kind of creating senior risk, [? that's a big ?] 20%, 25% LTV let's say, you know, at very low levels at nice prices because you were able to buy it at a discount.
So you know, when we worked through all of this, that was the first thing we saw. And then all of a sudden, you know, had the loan market start to kind of trade because what really happened is trading activity ceased, right. The velocity of money stopped moving right, and people started staying home. So everything dried up and then people started figuring out, OK well, how am I going to replace my velocity. So they then started selling assets, right. And if you're well-positioned to be taking advantage of those types of situations you know, we bought senior secured debt in Chuck E. Cheese and Cirque du Soleil. We bought LPQ and we went deeper on fintech and digital and you know, so I think if you look at what we put to work over the course of the last you know, 15 months, you know, we've probably bought over $3 billion of credit and we've probably sold over half of that already. You know, but we also then found a bunch of investments where we can convert the debt to equity. And then we also found things like Stash and PayActiv and you know, kind of fintech businesses that we think are really well-positioned around our themes.
ANDY SERWER: And so where do we stand now, what phase are we in, in terms of the recovery, and well there's a lot of questions to ask, are you concerned about inflation? What about fiscal and monetary policy? Give us your assessment generally.
TODD BOEHLY: Yeah, so you know, I think inflation's interesting, right. I think what you're having is labor costs are going to go up, period. And I think they should, right. So you know, I look at $15--
ANDY SERWER: Why do you think they should.
TODD BOEHLY: Because I think that for this whole partnership that we're all in together as the US, right, there should be more balance between kind of what people are getting paid. And ultimately, I think we're working on figuring out that balance. But you have a situation where there's going to be wage inflation because you know, $30,000 a year is not enough to live on.
So I think from our point of view we think there's going to be that type of inflation. But then when you look at the total market right, and you look across right, does that mean that your tech platforms are going to start charging you more? No. Does that mean that your banking platforms are going to start charging you more? No. Does that mean your media companies are charging you more? No. Right, so I think you know, when you start to dissect what part of the industry is likely to have inflation you know, and frankly, people talk about things like right now like steel and lumber and I'm not so sure it's actually the commodity itself that we're being starved of but it's actually the labor base that's manufacturing that process into the end unit you know, whether it's steel or whether it's wood, right.
I just think we need more people back working. So therefore, I think those types of costs are going to go up higher. So when you start to think about inflation, I think it's going to be attached to you know, the physical world where there's labor attached to the end product and that's going to be marked up. You know, and ultimately, that will then cycle through in the terms of the costs. So I think we're going to be paying more for hotels, and more for food, and more for restaurants, which frankly, we should.
ANDY SERWER: Right and can you have inflation in one part of the economy and not another part? And then ultimately, what does that mean, does that mean it's sort of a bout of inflation?
TODD BOEHLY: You know, I think it's almost like a mark-to-market correction you know, within a universe that is represented of a part of the economy. But I don't think it's going to be widespread.
ANDY SERWER: And what do you think about the policies coming out of the Biden administration? For instance, there are a lot of tax proposals on the table right now, Todd.
TODD BOEHLY: Yeah. No, I think I try to not get too wound up about things I can't control. And I think we're on a roller coaster. And taxes go up and taxes go down and taxes go up. And if you look at the history of the US, I think taxes during the Civil War were you know, 90%. So I just think you're on a ride and you know, as a human I don't get too worked up about it because I'm more focused on what I can control and you know, I'm not going to get bent around an axle on something I can't control, A, think it's worthless, and B it makes me frustrated so why would I want to do that to myself?
But ultimately I think that you know they're doing a good job of kind of managing a complex puzzle, right. And the reality is you know I know like how many things can go wrong in my own businesses every day with thousands of people. And then you think about like you managing a country. I don't think it's a small feat. So I think that they're doing a good job. And you know, again, I'm just happy to be an American. So you know, I think there's no matter what when you start to look at the opportunity set we get and all the benefits that are ascribed and there's no guarantees that you were born in America and a lot of us ended up holding cards that you know we were born with, right. So you kind of have to start with that mentality at least from my point of view and then figure out how you can continue to make things better. How do you keep evolving, right.
And I think we're in such an exciting time. You know, with evolution kind of changing so dramatically, so quickly and across so many different things. So you know I think we're lucky to be alive and we're lucky to be American and you know, I'm happy to have a president that you know I'm proud of.
ANDY SERWER: Yeah. Well, that's refreshing to hear about taxes in particular because I've heard a lot of people in your position just get all bent out of shape about 200 basis points of taxes and I look at them and I say is that really going to crimp your lifestyle, man? That kind of thing.
TODD BOEHLY: You know, to me, it's just part of the trade that we're fortunate to be in.
ANDY SERWER: Right.
TODD BOEHLY: Right, which is as Americans.
ANDY SERWER: Well put. So given all this macro-environment we've been talking about, what are the best opportunities for Eldridge right now?
TODD BOEHLY: You know, we're continuing to look for all things kind of fintech. You know we think that--
ANDY SERWER: What's so attractive about that?
TODD BOEHLY: I just think the legacy platforms have so much legacy cost. And I think when you look at how I think about opportunities set, you know, you have installed bases of employees at major financial institutions which really aren't incented to change, right? So you know, because they own the downside and they don't own the upside, right. So you know, managers are continuously thinking about how do I make little incremental change, when really you know, the whole world's gone to the cloud, right? They're still thinking about how are we hauling around these old servers. And you have a system where things are starting to move so efficiently. I mean, if you look go back to try to think about media for example, right. In the media world, it used to be that Fox had to go out and buy lots of nodes, right, before they even bought rights, right? So they would go out and buy all these nodes and they'd spend hundreds of millions of dollars putting together a distribution system, right.
Now you have the ability to fire up off an internet you know, and basically be connected into the world for almost no money down, right? Think about what that's doing to this next generation of entrepreneurs that are starting businesses you know, because they have access to the internet, which has just been such a game-changer, right. 20 years ago you couldn't be a kid starting a business out of your dorm, right. How do you do that? Where do you get the capital to buy the distribution nodes? Where do you get the capital? But now there's so much that's kind of capital-light that you can start a business up without a lot of expense and start to build something very valuable and very big. We're trying to figure out how do we find ourselves in those conversations early on.
ANDY SERWER: Quick question, the follow-up question on fintech, aren't there too many players, isn't it very saturated business?
TODD BOEHLY: Listen, I think that the, you know, I don't know. We're still seeing good opportunity, you know. So but again I think that you part of the fun about showing up with Eldridge is I show up and we have an amazing platform that we can offer all of our entrepreneur partners, right. So you know we're not a fund investor, you know, we're here for-- and by the way, I tell the management teams all along, if you want to go public, go public. If you want to stay private, stay private, right. I don't want to be the one to dictate the outcome because they're the one that has to do the labor, right. So from my point of view, we have such flexibility you know and if we're just compounding and growing and things are great, great. If you want to go public, go public great. You know, whatever you want to do right. And ultimately just keep the lens on what's best for your business.
ANDY SERWER: Right. Right. Let me switch and ask about you a little bit, Todd. You were not the greatest student at William and Mary I think you've said, right. And so how did you sort of get back on track and find yourself in this position?
TODD BOEHLY: Hard work, right. So I think that it came down I was a senior and I was trying to figure out what I was going to do and I went back to my geometry professor at Landon. And we were chatting and I was saying I really want to figure out how to get into finance. I've been reading a lot of books and my grades had started to come strong my junior year and I felt like I had good momentum. But William and Mary didn't really have a pipeline into the financial community. So ultimately, he told me, this guy Steve Sorkin, said there's a thing called a BUNAC Blue Card. You know why don't you go figure out a BUNAC Blue Card, you're going to London, you're going to be in the middle of the largest global financial, at least European marketplace at least, and you know, you should figure out how to get a BUNAC Blue Card and work.
So I went and ran around and figured out how to get a BUNAC Blue Card that allowed me to work. So I got a job at Citibank while I was going to London School of Economics and it was fantastic. And now I actually had something on my resume to go talk to people about. So while I was in London I met some folks at Credit Suisse-- who was CS First Boston at the time-- and was able to get a job working at CS First Boston in July of '96 back in New York. And then I was just really I just kind of lived with a simple mantra, if I said I was going to do it I'd get it done. And when you have a reputation for being able to get stuff done it's amazing what more stuff ends up, piling up in your inbox.
You know, so I started having you know lots of opportunities on the trading floor of Credit Suisse structuring CLOs, structuring CDOs, working on asset-backed financing programs. And ultimately met my future colleagues at J.H. Whitney and had an opportunity to go there. And then, you know, when Guggenheim was really coming together I had known Mark Walter and Whitney was kind of changing its position. So I was able to buy the credit business from Whitney, brought it over to Guggenheim, and then built the credit business for almost 15 years there.
And then had the opportunity to go transition and start my own business and that was always something that I dreamed about. So you know, I think it was you know, a good stutter step and a really good wake-up call in college and then that motivated me to figure out how to really make my resume look more marketable. Which was LSE, with Citibank, and that got me into Credit Suisse. So I think it was really a reflection of all right, you know, I need to change tacks now that you know, we're at the end of kind of the college experience. And so ultimately, I was able to come up with a game plan.
ANDY SERWER: What advice do you have for young people who are looking to get into financial services?
TODD BOEHLY: Well, I'm super active with William & Mary. And I was actually just on a call with a bunch of the students and they were asking these questions. And I'm like there's a couple of really simple things, right, when you don't know just say I don't know. Don't beat around the bush, don't waste everyone's time. Just say I don't know because there's such freedom in I don't know. When you actually tell someone you don't know, you know, it's like OK, that's great. Now the conversation is over. And you move on and do something else. You know, so I think just being honest and saying, I don't know but I'll come back to saves a lot of time and frustration.
And then also something that I mentioned earlier, you know, basically getting stuff done, right. Having credibility, right. Knowing that your work product you care a lot about. And you know, don't get too caught up in kind of the dynamics just have kind of blinders on about getting done what you need to get done and the more you get done the more opportunity you're going to be given so you know, don't start looking for opportunity, look for getting stuff done and then the opportunity just keeps coming.
ANDY SERWER: Great. And final question, Todd, what do you hope to accomplish personally and what do you hope to accomplish here at Eldridge? And maybe that's one in the same.
TODD BOEHLY: You know, I think at Eldridge we want to continue to grow a market-leading business and I want to have people look back in 30 years and say, wow, how did that happen, right. So that inspires me. You know, one of the things I'd like to figure out how-- you know I think that people have way more commonalities than differences. And I think figuring out how to get the commonalities to bind us and bring us together is something that is really important to me. And you know, I spend a bunch of time thinking about like you know, how does the 70% or 80% of us in the middle get torn apart by kind of I'll call the far left in the far right, both of which I don't think are practical, right. And you know, this whole idea that compromise is a sign of weakness. I mean, you know, when they built the first house that was a compromise, right.
So when you start to think about all progress is reflected in compromise because no individual can do that much on their own that they have to figure out how to be part of a shared purpose. So ultimately, you see things like you know, when you have kind of Republicans and Democrats working together all of a sudden their own parties turn against them they want to primary them in order to get rid of them when the collaborators are the ones that I want to be defending.
So I'm trying to figure out how can we protect the collaboration. How do we get a government that functions? So that you know you're not kind of at the mercy of the leadership within the parties because I think there's just, there used to be a lot more committee discussion, there used to be a lot more social interaction. You know, so to me how do you bring that part back into you know, what should be just a civil functioning kind of body that seems to thrive on alarming people, and that to me is something I'm passionate about.
ANDY SERWER: Well, we will be rooting for you to make that happen. Todd Boehly, CEO of Eldridge, thank you so much for your time.
TODD BOEHLY: Thank you very much, Andy.
ANDY SERWER: You've been watching Influencers. I'm Andy Serwer. We'll see you next time.