World’s Best Private Banks 2023 Rankings from Global Finance

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BEST PRIVATE BANK IN THE WORLD

J.P. Morgan Private Bank

A multiyear Global Finance award winner, J.P. Morgan, with client assets of $1.9 trillion, has again been selected as the Best Private Bank in the World. On average, the powerhouse firm brings on a new client with more than $100 million in investible assets every other business day.

“The most sophisticated clients in the world continually turn to us to solve their financial needs and to find a signal through the noise, especially in volatile markets,” notes Mary Callahan Erdoes, CEO of J.P. Morgan Asset and Wealth Management (AWM). This past year, J.P. Morgan invested in talent with 377 new analysts, 162 new client advisers and more than 280,000 hours of training conducted across AWM.

BEST PRIVATE BANK FOR WOMEN CLIENTS

SCOTIA WEALTH MANAGEMENT

The Scotiabank Women Initiative is a signature program designed to increase economic and professional opportunities for all women and nonbinary people, now and in the future. It’s meant to inspire and empower women to take charge of their financial futures. Scotiabank offers creative financing solutions tailored to women’s strategic priorities. Offerings include working capital and inventory financing; and funding for capital projects, expansions, M&A and more. The Scotiabank Women Initiative, launched for Global Wealth Management, followed a successful pilot program. The program was built on the foundation of Scotia Wealth Management’s Total Wealth Plan offering and has transformed the ways in which it serves women clients. The program offers advisers in-depth training, perspectives and strategies to help better support women’s unique wealth management opportunities.

BEST PRIVATE BANK

DIGITAL SOLUTIONS FOR CLIENTS

Hana Bank

South Korea’s Hana Financial Group has stated its mission to become a leading global digital financial enterprise, aiming to transform itself into a “customer-centric, data-driven information company” via the digital innovation of products and services. Its efforts have fast gained critical mass.

Hana has won accolades for its innovative approach to digitization, with its My Branch app proving wildly popular with clients after its launch in April 2021, thanks to the efforts of Hana’s IT development team. The team worked with branch managers—more familiar with the traditional paper-based mode of operation—to create the app, which has originated $1.6 billion of personal loans.

That app and its user-friendly functionality provided a road map for the direction of travel in the private banking franchise. The same flair for digital innovation was displayed by Hana Private Bank’s My PB app, which launched this year and has also proved to be a huge hit with private banking clients.

My PB—particularly tailored to millennial users’ demands—allows clients online access to relationship managers and various services such as deep analysis of all portfolio assets. Hana Private Bank is working to further develop the app and broaden usage for different age groups within its asset management division.

BEST PRIVATE BANK FOR SUSTAINABLE INVESTING

BBVA

Last year, BBVA’s Global Sustainability Office, created in 2020, formed a global sustainability area to design a strategic sustainability agenda for the bank, supporting endeavors for global transformation and developing new sustainable products. The bank has committed to aligning its business activity with the objectives of the Paris Agreement. Private banking clients with their own sustainability objectives now benefit through a variety of new ways in which BBVA has integrated sustainable values into its processes and activities, from screening and weighting in-house investment products or third-party funds (including the sustainability of individual companies invested in) through ensuring that its private bankers have all had sustainability training—preferably with an external certification—to continue advising clients.

BBVA is keeping well ahead of the EU’s Sustainable Finance Disclosure Regulation and other recent European sustainable finance regulations. For example, sustainability-risk information is incorporated into precontractual documentation sent digitally to clients, the objective being to ask clients about their sustainability preferences when making investments, so that an appropriate portfolio can be assembled. Client reporting has also been enhanced to include environmental, social and governance (ESG) criteria with digitally sent data on the sustainability of the client’s portfolio and individual holdings.

In-house fund management is committed to impact investing, through engagement with companies and voting at shareholders meetings, while at the same time investing directly in companies aligned with the UN’s Sustainable Development Goals (SDG). Private bank clients can also benefit from BBVA’s rapid rollout of sustainable financing, including loans for electric or hybrid mortgages and favorable conditions for homes with better energy certification.

BEST INTERNAL USE OF TECHNOLOGY BY A PRIVATE BANK

BTG Pactual

Wealth Management

BTG Pactual understands that investing in learning and continuous employee development is a non-negotiable value. Last year, the bank released an internal training platform, BTG Campus, which, in addition to suggesting specific development paths for different functions, offers self-service training themes. The available topics range from broader subjects, such as communications and corporate grammar, through behavioral finance, to a more targeted approach focused on specific purposes such as onboarding programs developed exclusively for the wealth management team. This way, the company ensures that every new member of the team understands how the area works, how it relates to partner areas and what the new role’s main activities are.

BEST BOUTIQUE PRIVATE BANK IN THE WORLD

Fieldpoint Private

Winner again for the Best Boutique Private Bank in the World, Fieldpoint Private stands out from the crowd. With $5.4 billion in assets under management (AUM) in 2021, and $1.4 billion in bank assets, it is among the top 12% of US banks.

The bank services high net worth  individuals (HNWIs) and ultrahigh net worth individuals (UHNWIs) and businesses. The company has also been investing in technology and digital experts to drive growth. This team has built a digital tool suite to manage all interactions between the private bank and registered investment adviser (RIA) partners. These tools enable every adviser within each RIA partner to initiate a transaction or loan on a client’s behalf and to track progress throughout its life cycle. This provides advisers with full, real-time transparency into the status of all banking business and ensures that the adviser can remain at the center of these critical components of their clients’ financial lives.

MOST INNOVATIVE PRIVATE BANK IN THE WORLD

DBS Private Bank

DBS aims to best the competition by transforming itself into an “intelligent bank” via the combination of predictive analytics with artificial intelligence and machine learning (AI/ML) technology used to transform data into relevant, intuitive and hyper-personalized insights delivered to each client.

The bank has embraced the digital-asset revolution via its Digital Exchange, or DDEx, which provides investors the ability to tap into a fully integrated tokenization, trading and custody ecosystem for digital assets alongside the opportunity of tapping alternative capital raising through security backed tokens. These are secured through financial assets such as shares in unlisted companies, digital bonds and private equity funds.

“We take a high tech, smart-touch approach to working with our clients, rooted in the belief that technology can greatly enhance the human touch in wealth management,” says Joseph Poon, group head of DBS Private Bank in Singapore.

“Take, for example, our intelligent banking capabilities to curate insights that are hyper-personalized for our clients’ needs,” he says. “We are well positioned to be at the forefront of delivering value in today’s digitally disrupted world, where key challenges lie in building new ways of engagement to support clients’ evolving needs.”

BEST PRIVATE BANK FOR SOCIAL RESPONSIBILITY

Bank J. Safra Sarasin

One of Bank J. Safra Sarasin’s sustainability objectives is to achieve commercial success while reducing its ecological footprint. It therefore seeks to increase energy and resource efficiency and reduce energy consumption and carbon emissions. J. Safra Sarasin extends opportunities related to these goals across the bank’s operations. The bank captures greenhouse gas emissions and has participated since 2013 in a program of energy efficiency and carbon reduction targets with the Business Energy Agency in Switzerland to reduce its carbon emissions. As a pioneer in environmental protection, the bank installed its own Swiss photovoltaic system on the roof of its Basel head office in 1993. It aims to contribute to goals such as the UN’s SDG and the Paris Agreement. As an engaged supporter of the Science-Based Targets initiative, the bank is committed to setting and externally validating such targets

BEST PRIVATE BANK FOR PHILANTHROPIC SERVICES

Bank of America

Bank of America (BofA) ended its second quarter with more than $117 billion in philanthropic client assets.

Commenting on the bank’s win as Best Private Bank for Philanthropic Services, Jennifer Chandler, head of Philanthropic Solutions for Bank of America Private Bank, notes, “Last year, we had record growth in philanthropic balances. We are on track to bring in another $6 billion this year. We continue to add foundation, endowment, trust and investment professionals to our team to ensure we can provide a bespoke experience to help families effect meaningful change. We doubled the number of philanthropic strategists and continue to invest in our platform.”

The Private Bank’s team of philanthropic specialists works with individuals and families across the Private Bank and Merrill to achieve clients’ personal philanthropic and legacy goals. The bank’s clients have embraced the Philanthropic Solutions group’s services, resulting in 40% growth in sales and 65% growth in AUM in the past five years. BofA saw a record in 2021 for the endowment and foundation investment management business with inflows and commitments of $10 billion.

BEST PRIVATE BANK FOR INTERGENERATIONAL WEALTH MANAGEMENT

Bradesco Private Bank

Bradesco Private Bank’s main event, entitled Family Forum, aims to strengthen its relationship with large clients’ heirs, sharing trends, visions and ideas through lectures with experts offering high-level content and topics addressing relevant issues. Along with that, Bradesco Private created a strategic front to target the Next Generation, aimed at serving the Y (millennial), Z and Alpha age cohorts by understanding their different needs and contexts, and bringing increasingly innovative solutions to management. One of the pillars of this initiative involves educational paths structured to promote development at each stage of life and support families on themes such as family, society, the individual and business.

BEST PRIVATE BANK FOR BUSINESS OWNERS 

BEST PRIVATE BANK FOR NEW CUSTOMER SEGMENTS

PNC Private Bank

PNC Private Bank finds itself in not one, but two winning categories among the World’s Best Private Banks 2023. The bank had AUM of $103 billion as of June 30, 2022, and showed positive total gross flows of $62 million, an increase of 185% from 2021.

The bank, which has been integrating its purchase last year of BBVA USA, saw its client base diversify into emerging ($1 million to $3 million investable assets), established HNW ($3 million to $20 million investable assets) and multigenerational UHNW (more than $20 million investable assets).

“The demographics of wealth are changing rapidly,” notes Don Heberle, head of PNC Private Bank. “Sophisticated clients from increasingly diverse backgrounds are turning to PNC Private Bank to help identify and achieve the values, goals and purpose behind their wealth. We consider ourselves to be more than just advisers to clients—we’re confidants, recognizing that each client is unique; and our approach to serving clients reflects that.”

As for its win as Best Private Bank for Business Owners, PNC’s nationwide community-focused delivery model works for individuals, families and business owners. “PNC Private Bank provides … a full personal-advisory services suite to help grow or transition a family business. Clients who are business owners also have access to specialized services that include business insurance, risk management, lending and more,” says Heberle. “Additionally, as part of the larger PNC Bank enterprise, PNC Private Bank works closely with our Corporate and Institutional Banking and our Institutional Asset Management partners on clients who may benefit from the services of those businesses as well.”

BEST PRIVATE BANK FOR ENTREPRENEURS

ICBC

The Chinese megabank’s private banking and wealth management division enjoyed a near doubling of AUM during the period under review and is able to summon the vast heft of its parent as the core of its business model.

ICBC Private Banking (ICBC PB) intends “to deliver financial vitality to the real economy and serve the entrepreneur group and the real economy they represent,” according to Li Baoquan, general manager of the Private Banking Department of ICBC. The bank aims to build an entrepreneur-focused service ecosystem, to strengthen the real economy with comprehensive services, and to develop strength in charitable trust services to assist the succession of business-built wealth.

In September 2021, ICBC PB officially launched the Entrepreneurs Service Center, a sharing service platform to “invite entrepreneurs in.” By the end of this year, there will be 400 such centers, covering 140 cities and regions in mainland China, to provide platforms for entrepreneurs to exchange ideas and create business opportunities.

ICBC PB last year released the Report on ICBC Entrepreneur Wealth Health Index jointly with world-class research centers, establishing in the process the first quantitative wealth health research system for entrepreneurs in China. “During the past 15 years, ICBC PB has always put clients first and played to its advantages to support the development of China’s economy,” says Qian Wei, section head at ICBC PB in Beijing. Looking forward, ICBC PB will continue to improve its service for entrepreneurs, to build a corporate-private integrated service platform and to promote sustained ESG-aligned development of enterprises.

BEST PRIVATE BANK FOR FAMILY OFFICE SERVICES

Northern Trust

The winner for Best Private Bank for Family Office Services for 2021 and 2020, Northern Trust has again taken the top spot in this category.

The bank tells Global Finance that it has “a dedicated Global Family and Private Investment Office (GFO) practice [that] provides a focused set of financial, banking and advisory solutions to the world’s wealthiest families and the family offices that serve them. Today, the GFO’s clients stand at more than 500 families who are situated in more than 30 countries worldwide. In addition, we serve 25% of the Forbes 400 ranking of the wealthiest Americans. The team has more than 265 dedicated service professionals in the US, Europe, the Middle East, Singapore and Australia.”

Besides a suite of wealth management and estate planning services, Northern Trust GFO also has family office technologies that provide comprehensive asset pricing, automated allocation services for accounting purposes, and anchor analysis, providing reporting and data visualization tools.

BEST PRIVATE BANK IN EMERGING MARKETS

OTP Bank

Compared to some regions, Central and Eastern Europe may be small and fragmented, but this emerging region’s growing wealth is yielding an increasingly attractive private banking market. And in OTP, the former Hungarian state savings bank first established in 1949, currently managing more than €9 billion (over $9.3 billion) in client assets, it has produced a nascent global champion, a standout in a region dominated by large Western European banks’ local subsidiaries.

Through successful step-by-step expansion, OTP Private Banking (OTP PB) now has nearly 42,000 clients in 11 countries across the region. It retains around 40% of the Hungarian PB market and 25% of the AUM, but it’s also market leader in emerging market countries as diverse as Bulgaria (DSK Bank), Montenegro (CKB Banka) and Slovenia (SKB banka). Its strategy in Albania is characteristic. Banka OTP Albania was created out of Societe Generale’s local operation in 2019 and this year took over Alpha Bank Albania for €55 million. This strategy of takeover and merger has allowed OTP PB to grow and flourish and seems a template for expansion elsewhere.

BEST PRIVATE BANK OR WEALTH MANAGER FOR NET WORTH UNDER $1 MILLION

UOB

The wealth management business of United Overseas Bank (UOB) gained a shot of adrenaline with the appointment of Chew Mun Yew, formerly of Julius Baer and the Monetary Authority of Singapore, to head the bank’s private wealth division beginning in December 2021. His arrival at the bank marked the combination of its private bank and privilege reserve.

Under Chew’s direction, UOB is focusing on the countries in the Association of Southeast Asian Nations (Asean) as a top priority. To this end, last November it appointed Lena Tan—a 20-year UBS veteran—as Asean regional market head for UOB’s private bank, spearheading the bank’s expansion in Indonesia, Malaysia, Thailand and Vietnam. Meanwhile, a new department in the private bank, created in August 2021, focused on winning prospective HNW clients as well as developing innovative instruments and cutting-edge services.

To help muster his effort, Chew has almost 90 years of UOB’s presence in the region as well as its vast regional network—comprising 500 offices in 19 countries—and the bank’s ability to leverage the cross-sell via its open architecture will certainly make the competition stand up and take notice.

BEST PRIVATE BANK FOR NET WORTH BETWEEN $1 MILLION AND $24.9 MILLION

Scotia Wealth Management

Scotia Wealth Management offers strategic borrowing solutions, customized banking support, and a leading-edge concierge and travel management service. These have helped Scotia to become a prominent bank for HNWIs. Scotia’s Private Banker can set up a loan that allows the client to borrow against a combination of asset classes, all in one place with a single investment line of credit and, importantly, a single point of contact. Clients are able to access hands-on management of time-sensitive transactions in coordination with their other advisers; and they have access to a range of exclusive banking benefits, including preferred foreign exchange rates and certain annual fee waivers.

BEST PRIVATE BANK FOR NET WORTH OF $25 MILLION OR MORE

Citi Private Bank

Citi Private Bank dedicates its strategy to servicing the high end of the UHNW market and works exclusively with clients whose net worth is more than $25 million—well more, in fact. The bank’s strategy has been to focus on serving a smaller number of clients who have both great wealth (above $100 million, on average) and a high level of financial sophistication. The average net worth of new clients is up to $450 million.

One of Citi Private Bank’s key differentiating characteristics is its “globality.” Another is its ability to offer a full suite of solutions from traditional banking products to more-sophisticated offerings such as art advisory and aircraft financing, as well as offering its clients full access to Citi’s institutional offerings in Capital Markets and Advisory.

“Delivering effective high-quality products and services for our clients hinges on understanding their unique needs to help them move toward their short- and long-term financial goals,” says a spokesperson. “As a trusted partner and one of the world’s leading global private banks, we are well positioned to connect clients with the global networks at Citi that will help them navigate the continuing complex and evolving environment.”

FUND OUTLOOK FOR ’23

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Big winners in 2023 were commodities and macro funds with median returns of 12.99% and 10.75% respectively. The outperformance of these two strategies against the industry as a whole’s negative 3.5% performance will continue to catch tailwinds from Jerome Powell’s relentless rate increases, and continued price stickiness across the spectrum of commodities.

We all expect the rate increases to continue for at least the next 2 to 3 quarters and few see a quick pullback in inflation, thus fueling continued outsized returns in both strategies for ’23. The looming question is where does that land our economic growth as the tightening of financial conditions works its way through all facets of the economy, especially the employment sector. Do we see a soft landing, and what does that look like? The vast majority of managers we speak with share the view that a recession of some sort is due in 2023, with the differences of opinion varying widely as to its magnitude and its effect on fund flows.

So that begs the second question. Given these economic headwinds, what strategies will investors flock to in ’23 in addition to macro and commodity funds?  What opportunity gaps have these economic headwinds  created in the investment space, and which managers are poised to take of advantage of them?  First one that comes to mind is the private credit space. We all know that the tightening financial conditions are making it more difficult for private companies to borrow, and with $1.2T of AUM already under management and an additional $400B in dry powder available, it would seem an ideal opportunity for managers to scoop a wide array of emerging special opportunities in this ever-growing asset.

The challenge for fund raising, as is true in every strategy, still remains for smaller fund managers or new entrants, as the asset class is increasingly dominated by larger funds. As of this writing, for the first time in a decade, the top ten private debt funds represent half of all capital raised so far this year. Further illuminating this trend, Bloomberg recently reported that Ares Management Corp., Arcmont Asset Management and Carlyle Group Inc. are currently marketing large funds. That follows mega raises earlier this year by Goldman and Blackstone that accounted for 50% of the $172B raised in the first nine months of 2022. It would be helpful to see a platform emerge that could facilitate smaller and mid size funds marketing efforts into the institutional space to level this playing field. Until that occurs consolidation among the big players likely continues.

Investor inflows and outflows is always a fun guessing game among participants in the industry this time of year. The real data will start to provide us insight as we near the end of the first quarter.

BIGGEST TREND IN HEDGE FUNDS GOING INTO 2022 WAS FEMALE FOUNDERS. IT WILL BE INTERESING TO SEE HOW THESE NEW FUNDS CLOSE THE YEAR.

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Diversity is a key element of every conversation we have with our clients when launching a search. Every firm is interested in building a sustainable and competitive workforce that reflects society as whole. In short, an employee population that includes a range of individuals with various racial, ethnic, socioeconomic and cultural backgrounds.

Why is it important? Simple, by weaving together a workforce that is reflective of society as whole, you will produce results that will be attractive to the firm’s stakeholders and investors. Resulting in a growing and profitable enterprise.

So as recruiters in the hedge fund space for 35 years, who have who have witnessed what was exclusively an old boys club evolve into an industry with a rich and diverse workforce, we welcomed the launch of several significant female led hedge funds in 2021 and 2022. Talented investors such as Mala Goankar and Divya Nettimi have launched sizable funds in the last 12 months, attracting blue chip investors across the institutional spectrum. In addition to these two who have an investing pedigree that includes Viking, Lone Pine and Goldman Sachs, there are 78 other funds of various sizes run by woman. So not only is the industry becoming more diverse, the leadership/ownership is as well.

So, as part of our 2022 industry review we will be gathering the thoughts of some of these industry pioneers in early 2023 to hear their market views after a very challenging year, as well as have them reflect on what has been like to launch and run their own fund. Look for it here and on our podcast.

PE-ople crisis: ‘Everyone’s running out of candidates’ from PRIVATE EQUITY NEWS

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By

Sebastian McCarthy

Private equity houses have been on an acquisition spree in the past 12 months, but there is still one asset that many of them are struggling to obtain: people.

Buyout shops are racing to raise larger funds, expand into new markets and deploy vast warchests of capital, but the growth spurt has led to a dearth of new talent for hire and an upwards spiralling of salaries, according to industry executives and recruiters.

Intense competition from the technology sector is compounding the problem, with startups and Big Tech companies luring in young employees who typically come from private equity’s traditional hiring grounds of investment banking and consultancy.

London calling
The shortage comes after a frenzied spell of recruitment for the private equity industry.

US buyout giants have been at the forefront of those beefing up their teams across Emea, particularly in London. Blackstone’s headcount at its European headquarters in Mayfair had swelled to 541 employees by the end of last year, up from 364 at the start of the pandemic.

During the same period, KKR grew its Emea headcount to almost 400, up by 100 people since 1 March 2020, with around half of the newcomers joining its London office.

London teams have been growing in the wake of an acquisition spree in the UK last year: At £45.8bn, the cumulative value of the 235 buyouts of UK-based companies last year represented the biggest headline figure in the 35-year history of the Centre for Private Equity and MBO Research (CMBOR), surpassed on an inflation-adjusted basis only by the £44.1bn recorded in 2007.

The job boom also comes amid private equity’s expansion into alternative types of investment: be it credit, real estate, infrastructure or areas of personal finance such as private wealth.

“Everyone is hiring, so we’re finding it’s becoming candidate-scarce. Everyone’s running out of candidates,” Charlie Hunt, principal consultant and director of UK at Private Equity Recruitment (PER), tells Private Equity News.

Yet private equity firms are not the only ones looking to expand. Fast-growing tech companies are also on the hunt for young talent, and the two sectors are starting to compete for the same employees.

Hunt says: “You’ve now got technology companies being a new career path for people, either startups, fast growth tech or very established places like Google and Ebay. And then you’ve got more firms that have raised bigger funds or launched new vehicles, and when you put all of this together it’s incredibly competitive for people.”

Johnny Colville, a managing director in Houlihan Lokey’s financial sponsors group, is seeing appetite shifting away from less traditional PE career paths towards tech: “PE has consistently attracted the best talent from across the financial services eco-system on the premise of ‘jam tomorrow’. After the obligatory few years in banking or consulting, making the jump to the buyside offered the opportunity to be at the heart of the dealmaking action, with the prospect of considerable financial reward to follow.

“However, the PE industry is facing stiff competition from Big Tech, venture investors and an appetite for startup risk that was lacking in prior generations. The financial crisis continues to cast a long shadow and many ambitious employees are choosing roles within Big Tech, not least driven by a strong sense of moral purpose and brand association.”

PE funds which do not have a focus on tech “will almost certainly find it increasingly more difficult trying to find talent from the banking or consultancy pools, given tech seems to have such a strong pull for these professionals”, according to Kadeem Houson, who covers private equity recruitment at Kea Consultants.

That could be bad news for generalist buyout funds, he adds: “When we looked at buy side to buy side moves – people moving from fund to fund – we have seen a 10 to 15% increase in people going from traditional buyout generalist strategies going into venture, growth and tech-oriented investing.”

The double whammy of tech firms poaching talent and industry expansion is causing salaries to spiral.

Pay for junior private equity professionals in Europe has jumped by 52% over the past two years, according to analysis in October last year from headhunters Heidrick & Struggles.

Private equity investment professionals with up to two years experience across Europe and Africa earned an average of €178,600 (£152,000) in 2021, up by 11% compared with 2020, but up by 52% from the €117,300 paid out in salary and bonus in 2019.

Signs of a pay jump have emerged in the results of the listed private equity giants too: earlier this month Apollo Global Management said that its 2021 expenses for compensation and benefits were $3.49bn, more than triple the previous year, calculated using generally-accepted accounting principles, or GAAP.

PER’s Hunt says there is a “vicious circle of people looking over their shoulder saying ‘I need a raise now’’’.

While banking and consultancy candidates often wait to receive a bonus before moving across to private equity, some buyout shops are also now offering to pay it for them to speed up the process, according to Kea Consultants’ Houson.

“They are willing to pay people out of bonuses or offer sign-on bonuses just to get people out quicker given the need is quite intense. Also it offsets competition by taking them out of the market quickly,” he says.

LP pressure
It is not only general partners but limited partners who are feeling the pressure of finding new employees. For LPs, the shortage has been intensified by the fact that many of them are facing unprecedented requests for new capital commitments, according to Gabrielle Joseph, head of due diligence and client development at private equity fundraising advisory firm Rede Partners.

“Across the whole of the industry there is a squeeze on talent,” she says.

“The rise of tech is definitely causing some competition for talent…It’s a particular issue at the junior talent end where you are directly competing with tech. Separately, it’s to do with the overall boom in the industry creating a lot of job opportunities that are struggling to be filled at the moment and the intense competition to fill those positions at all levels.”

Be it GPs or LPs, with record volumes of capital flowing through the sector, the search for new talent is only likely to intensify in the months ahead.

There is a $400B Gap Between Private Equity and Private Credit

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Since 2008 the private credit space has grown exponentially as an asset class that attracted institutional investors. With the fast majority of the activity comprised of loans to private equity backed companies. These transactions were either additional investments provided by the original GP or a partnership between the GP and a private credit investment shop. By the middle of 2002 the asset reached an estimated $1.25 trillion in outstanding credit obligations.

Now, as we look at a confusing macro environment for 2023 with the Fed continuing to hike rates into an economy that is sending mixed signals as to its strength, private credit providers are eying each potential transaction with a more cautious eye. Part of the reason is the uncertainty surrounding the macro-economic conditions and what effect the current credit cycle will have on product and service demand for companies taking on private credit as a financing option. But more so, in our opinion, it is simple supply and demand. The capital competing for credit deals is the smallest it has been in years, putting lenders in a very favorable position to negotiate terms they were unable to achieve in the past. As of mid last year, $145B in dry powder was available in the private credit space, as opposed to $525B in private equity. An outstanding delta. Further, much of the new activity is being generated in the hard assets sub sector of the space as investors shift their allocations away from unsecured obligations. That will be at tend we expect to increase until we have some level of certainty around global macro economic conditions.

Top Three Community Banking Trends for 2022- Gabe Krajicek, Kasasa

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Competition in the banking sector has heated up over the past year as a result of the COVID-19 pandemic accelerating the shift to digital services.  But, as businesses and local communities re-engage with more in-person interactions, community financial institutions (CFIs) could be set for a period of growth. As financial services and banking technology providers plan for the rest of the year and into 2022 amid mixed pandemic recovery and uncertainty, these are the top trends in community banking that leaders should look out for.

Keep competitive with partnerships

he recent health crisis forced all financial institutions, big and small, to rethink their digital customer experience. Digital banking is not going to retract after the pandemic – this trend is even more important for community financial institutions (CFIs) who have traditionally relied on in-person services.

According to a 2021 eMarketer survey, 89% of US consumers say they use mobile banking channels, and 70% say mobile banking has become the primary way to access their accounts. Consumers will continue using digital banking solutions, as they now have plenty of familiarity and flexibility with digital banking.

In the past year, CFIs have increasingly partnered up with fintech service companies to build digital banking services without sacrificing the community investment benefits of local banking.

These partnerships were key to helping local businesses apply for Paycheck Protection Program (PPP) loans – more than 80% of businesses filed applications digitally with their banks. CFIs that were prepared for this digital shift with partnerships saw success in obtaining PPP loans for their customers.

We are sure to see future success from local banks and credit unions leveraging the digital power of fintech and pushing more capital towards product advancements through these partnerships.

CFIs that want to stay on top in the next 5 years should not plan to slow or stop these partnerships – they will be essential to stay competitive with the bigger digital brand power of larger banks.

Personal equals power

One aspect of banking where CFIs have looked to outshine the competition is customer service. Studies show consumers crave a personal connection with the brands they trust, and nowhere is trust more important than banking.

CFIs need to double down on reinforcing their personalised services over the next several years, reminding consumers that local branch experts can help much more quickly than bigger banks.

Accountholders should understand that they won’t forego modern digital capabilities when working with a community bank, as they have impressive digital experiences in addition to offering personalised, attentive customer service.

The good news is that consumer attitudes are open to shift after the pandemic – CFIs should be ready to gain ground.

Give back to the community after COVID

Banking local makes a huge economic impact on the community – when consumers keep their money local, community banks and credit unions can make more loans to the community, and in turn enable more job creation.

In fact, community banks fund 60% of small business loans nationwide. That’s despite holding only 15% of the assets across the country.

Local banks and credit unions are heavily invested in their local community – think about small businesses who sponsor the local youth sports leagues in your own community.

The local connection that CFIs have is similar, as they provide community resources that are deeply integrated into the community, such as financial literary classes.

As communities rebuild coming out of the pandemic, local financial institutions will be increasing their community outreach efforts and will look for more ways to invest in community growth.

We will see CFIs focus on making an impact with businesses and services that have struggled since the pandemic and re-committing to the transparency and accessibility that local community members trust CFIs to provide when banking.

On the community level, as people return to a more bustling pre-pandemic lifestyle, there is optimism for new opportunities and growth for CFIs, which have been bolstered by the digital tech inroads of the past 18 months.

Community financial institutions are now amply prepared to strike the right balance between personalisation and digitisation that consumers crave. For the sake of a diverse economy, it’s about time.

 

Tips From the Best Traders

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If you have done even a little bit of research into the world of trading, you will know that there are many books on how to become a better trader. One book that gets mentioned time and again as a trading classic is “Market Wizards: Interviews with Top Traders” by Jack Schwager. First published in 1989, it’s a collection of conversations with some of America’s legendary traders, who made millions from the financial markets. It’s well worth having on your bookshelf.

Here are tips from some of the world’s best traders featured in a book that really stands the test of time:

Find your trading methodology

Traders have different approaches, timescales and can trade across various markets. All successful traders have a methodology to analyse the markets that works for them – from short-term changes in price during the day to looking to catch major trends over months and sometimes even years. It is important to find an approach that fits your own “trading personality”. If you do not feel comfortable with a strategy then chances are that it will not be successful for you.

 

Have a sensible risk management strategy

All the traders mentioned the importance of risk control. There are a couple of elements to this. It is important to trade at a size that does not have a material effect on your account if you are wrong. It is also good practice to have a level in mind (or a stop loss placed on your trade). If this level is hit or stop loss triggered, you admit you are wrong and take the loss. Once again, it’s that familiar trait, or discipline, that played a major part in their success over the years.

 

Accept your trading losses

Linked to the risk control aspect is the acceptance of losses. Experienced traders know that taking manageable losses is part of the business of trading, but it is something that many of us struggle with in the beginning. A series of winning trades can easily be wiped out by one loss if you let it go on for too long. The traders interviewed had confidence in their approach of winning over the long term, so did not have a problem with admitting they were wrong and taking losses along the way.

 

Spend time understanding and analysing the markets

The traders took their market analysis and time devoted to executing and managing trades very seriously, often devoting large chunks of their waking hours to their work on the markets. They weren’t just having a punt now and again or trading on a hunch. There are no shortcuts when it comes to trading success, but the effort they put in was clear from their results.

 

Waiting for the right trade

Many of the traders interviewed said that patience played a big part – waiting for the right opportunity to come along. This ties in with a quote from another classic trading book: “Reminiscences of a Stock Operator”, written about a legendary trader called Jesse Livermore who was active in the 1920s. He said that it wasn’t his doing that made money, but his sitting on his hands. This applies to waiting for the right opportunity, and then holding the trade to maximise profits. Nearly 100 years later, it’s an approach still used by successful traders and one echoed by the many interviewees in Schwager’s book.

 

 

Hedge Funds Post Covid

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Hedge fund managers have faced a litany of unique challenges since the onset of COVID-19, and have learned a lot from those lessons. I recently sat in on a discussion hosted by BNY where top managers shared their veiws about what they learned.

  • Transparent communication is key: Given the continuing and all-permeating air of uncertainty, it has become increasingly important to continue to share experiences with colleagues and partners in the industry. A CCO of a $2B long/short equity fund points out that extra transparency and robust communications are key. That goes not only for communication with investors, but also managers talking with each other. As a manager in the current environment, there is no one person or one service provider who can tell you how to handle all issues of COVID flawlessly. When a leading hedge fund experiences significant losses from changing market dynamics and then liquidates, the entire industry can be spooked—and dropping even the suggestions of secrecy will help avoid unintended consequences.
  • The pros and cons of virtual connections: For better or for worse, today’s managers are more available thanks to more flexible working hours, limited travel and an array of virtual conferencing tools that have allowed our industry to largely continue with business as usual. However, one panelist pointed out that it is not uncommon to be receiving emails at 10:00 p.m. and that virtual meetings tend to lead to more follow-ups. One best practice to optimize the flexibility that technology currently provides is to split due diligence meetings over two or more days. More participants can be involved in real time and open items can be answered more efficiently, as well as providing the time to make everyone more familiar with each other.  One word of caution: virtual meeting fatigue is just as real as the fatigue in our prior lives. Be cautious of being too ambitious with meeting marathons. While your counterparts may appear more available as less time is spent commuting and more time is spent in front of the computer, it’s important to find the right balance of virtual meetings and calls to respect the bookends of a traditional work day.
  • Technology will never replace everything: A fiduciary’s job must continue even if there’s a global pandemic. But after it’s safe to travel again, it’s highly unlikely that the “new normal” will not include onsite due diligence visits, especially when it comes to relationships where investors have never met a particular manager in person. When it comes to technology in general, there is an added emphasis placed by investors and consultants on getting further into the weeds to learn more details about a firm’s systems, especially as they relate to business continuity. When a prospective investor can’t see the servers in person, it’s more comforting when they know details about the infrastructure. Anecdotal consensus from allocators points to the resurrection of the onsite walkthrough, suggesting that while virtual due diligence has largely been beneficial to maintaining the industry’s usual pace for now, it cannot replace the real thing. “They want to get out onto the road again,” said one panelist, proving that the last ten months has shown us once and for all that we do ultimately work in an industry built on human relationships.
  • Hedge funds have re-asserted their worth: According to HFM Insights’s September report titled “Capital raising in a crisis,”1 76% of surveyed investors felt that hedge funds were delivering value for money in 2020. Still, there has been a notable dispersion in performance across strategies. For example, quants (and CTAs in particular) have on average failed to show an ability to perform in unusual market environments, whereas long/short equity strategies have seen a spike in investor interest. It was also recommended that managers stay abreast of co-investments as an area of growing interest from investors, and that emerging markets are approached with caution given a complex global macro environment shaken up by COVID-19, geopolitical tensions, and unique due diligence demands. With record issuance levels of convertible securities this past year, renewed attention also is being paid to convertible arbitrage strategies, which is one of the best-performing strategies in 2020 (HFRI Indices showed their convertible arbitrage index finishing 2020 at roughly +12%2).
  • Still, fundraising requires an innovative approach: Way back in the spring of 2020, when the market was struggling in the initial months of the pandemic, nimble fund managers amended their plans for the year. They reasoned that later stage fundraising situations were easier to wrap up than those in early stages. Data from HFM3 corroborates this, showing that investors were much more amenable to increasing existing allocations in Q3 2020, rather than starting new relationships during lockdown and virtual due diligence processes. Investors also paid close attention to the size of the firms in question. Even in the 12 years leading up to the pandemic, fundraising tended to be more of a challenge for smaller managers, and the current situation hasn’t helped their predicament. One solution presented suggests that those managers leverage existing investors as referral sources. Such an “informational shortcut” could lead to new opportunities and help a manager perform through this environment.

Publicly Traded PE Firms Post Record Q3 Numbers

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All four publicly traded private equity firms just reported unprecedented financial results for the quarter just ended. They also reported huge inflows of assets from their limited partners. Check out the numbers:

KKR,  private equity portfolio climbs 9% in the quarter, posts $1.1 billion in net income. Distributable earnings of $925 million, a 104% yoy.

Apollo Global Management, Distributable earnings of $752 million, despite its net income falling to $249 million in the quarter compared with $263 million in Q3 2020.

The Carlyle Group, net income up over 80% to $533 million in Q3 vs same period the previous year, total AUM now at $293 billion YTD. Distributable earnings of $731 million, that is 4X last year’s number at thistime of year.

Blackstone, total AUM increase to $730+ billion, a 25% increase year over year,  and had a private equity inflow of over $7.4 billion in the third quarter. The firm nearly doubled its net income in Q3, taking in $1.4 billion.

These numbers are enorumous. The Covid and Post Covid era may mark the period of greatest wealth growth in modern times.

Top 10 Elon Musk Productivity Secrets for Insane Success..Guest Article by Dan Silvestre

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I read Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future over the summer. It’s a fantastic read and a detailed account of the ups and downs of one of the biggest visionaries of our time.
It also gives you a sneak peek into Musk’s work ethic and productivity secrets he uses to run multiple companies.
Now, Elon Musk is smarter than an average individual with enormous ambition and drive. But I think that us–mere mortals–can incorporate some of his productivity secrets into our daily lives.
Here are the top 10 productivity secrets of Elon Musk and how you can apply them:

#1 Start the Day with Critical Work

As the CEO of three companies — Tesla, SpaceX, and Neuralink — Elon Musk has a lot of things to stay on top on a day to day basis.
That’s why he starts his day with his most critical work. For Musk, this means dealing with important emails that he needs to address in order to unblock other people’s work and progress. He typically starts the day at 7 a.m. and replies to critical emails for at least half an hour. Musk is careful to filter anything that is not deemed critical, focusing on only the most important items.

In his own words at the USC Commencement Speech:
“Focus on signal over noise. Don’t waste time on stuff that doesn’t actually make things better.”
Apply This Productivity Secret: Find your most important task (MIT) for the day and tackle it first. Your MIT should be the one thing that creates the most impact on your work.

For example:
My most important task is writing awesome content. That’s why I always start the day by sitting down and writing. I won’t move on to the next task before writing at least 1000 words. What’s your most important task? Use the 80/20 rule to help you figure it out and get in the habit of doing it before moving to anything else.

#2 Use Feedback Loops

Musk has a very tight schedule, often working at different locations on any given day. That’s why he’s constantly trying to optimize his time.While admitting he hadn’t read any books on time management, Musk shared some insightful advice on how to become better:
“I think it’s very important to have a feedback loop, where you’re constantly thinking about what you’ve done and how you could be doing it better. I think that’s the single best piece of advice: constantly think about how you could be doing things better and questioning yourself.” Musk incorporates not only his own feedback but also of others: he urges entrepreneurs to seek preferably negative feedback. While it might be hurtful at first, you normally end up getting a lot more out of it. He also focuses on hiring the best people in any field that can provide consistent and truthful feedback. Shortening the feedback loops lead to increased efficiency, faster implementation, and a better-finished product.

Apply This Productivity Secret
The great thing about this particular Elon Musk productivity secret is that it works for both your professional and personal life.
Gather your team and solicit feedback about a particular product, feature, management style, business process, or anything that you are currently trying to improve. “Don’t tell me what you like, tell me what you don’t like.” You can do the same exercise with friends. And while the negative feedback may be wrong, you know they are simply trying to help you and it’s well-intentioned.

#3 Reason from First Principles

A first principle is a basic assumption that can’t be deduced from any other proposition. It’s the only sure thing in a complex problem.
Musk reasons from first principles, rather than by analogy (such as previous experiences). This way you build your reasoning from the ground up: “You look at the fundamentals and construct your reasoning from that and then see if you have a conclusion that works or doesn’t work. And it may or may not be different from what people have done in the past. It’s harder to think that way, though.”
Here’s an example of first principles reasoning, from Musk himself: “What is a rocket made of? Aerospace-grade aluminum alloys, plus some titanium, copper, and carbon fiber. Then I asked, what is the value of those materials on the commodity market? It turned out that the materials cost of a rocket was around two percent of the typical price.” Instead of buying a rocket for millions of dollars, Musk decided to purchase the raw materials for cheap and build the rockets himself in his own company. And SpaceX was born.

Apply This Productivity Secret
Reasoning from first principles forces you to think differently. First Principles are about getting to the root cause of the problem. You have to break down the problem into its basic elements. There are three main steps to apply this thinking framework: Identify and define current assumptions: when faced with a problem, write down your current assumptions about it. Break it down into the fundamental principles: find the most basic truths or elements of the problem. Is Musk’s words: “Boil things down to the most fundamental truths and say ‘okay, what are we sure is true’…and then reason up from there.” Create new solutions: if you deconstructed the problem following the first two steps, you are now ready to create new solutions from scratch. If you want a deeper look into Musk’s mind and reasoning by first principles, read one of my all-time favorite articles: The Cook and the Chef: Musk’s Secret Sauce.

#4 Use Asynchronous Communication

The first productivity hack gave you a slight hint for this one: Musk prefers to communicate on his own terms. That means defaulting to email and texts, both asynchronous ways of communication. In his own words: “I do love email. Wherever possible I try to communicate asynchronously. I’m really good at email.” He also makes himself hard to reach for people outside his company by using an obscure email address. This lets him focus on actual work for his companies.

Apply This Productivity Secret
Progress comes from being focused and performing Deep Work. This means living as asynchronously as possible and with minimal interruptions from coworkers. Here are three solutions to start working on your terms (in order of difficulty): Turn off notifications: shut all notifications down on your phone, computer, and any other gadgets you use. If it’s truly important, people will call
Decline meetings: don’t agree to a meeting unless there is a clear agenda and you know the expected outcome; if possible, use email instead. Work remotely: a noisy office means distractions, whereas working from home is done in silence. If that’s not a possibility, ask for a private office. Minimize distractions in your daily life in order to make progress in meaningful work.

#5 Master Communication

When Musk is not building rockets or revolutionizing the automobile industry, there’s one place you can always find him: on email. He joked on a conference: “I do a lot of emails — very good at email. That’s my core competency”. He is extremely clear, concise, and direct on his emails. As an example, read the email sent to his entire staff about the use of acronyms aptly called “Acronyms Seriously Suck”. He frequently emails his entire company with updates, how to communicate, company visions and mission, and being more productive at work.
“People work better then they know what the goal is and why. It is important that people look forward to coming to work in the morning and enjoy working.” He is also a master at public speaking, converting complex concepts into easy to understand language using an authentic voice. Musk often uses the present tense when talking about visionary topics, a language trick that excites the listener into feeling the future is now.

Apply This Productivity Secret
According to a study of Carleton University, a third of the workweek of the “typical’’ knowledge worker is spent on email. That’s why mastering communication over email is an art form. You want to be succinct but also get your message across. In an email, every word counts. Here are some tips on how to master communication over email: Keep it short: don’t write ten sentences when two suffice. To practice, take an email you’ve already written in normal fashion and edit it down to half the words. Avoid squishy words: avoid writing “I feel”, “I’m not sure”, “perhaps”, using the passive voice, or any adverbs that waste time for both you and your recipient and create confusion and misunderstandings. Know what you want: think about the intended outcome of the email and outline it first in plain-spoken language. With practice, this outline IS your email. Bold the important: if you need a reply from a particular person on a thread with multiple people, put their name in bold with action items and timeline. Forwarding code of conduct: never forward along a massive email chain without a few bullet points as a quick summary at the top explaining why you’re sending it and action items you need from the other person

#6 Batch Tasks

Musk multi-tasks strategically. Whenever possible, he combines several tasks together in a productivity hack known as batching. For example, he answers emails while eating or having a meeting over lunch.
Here’s a quote from Elon on the subject:
“But what I find is I’m able to be with [my kids] and still be on email. I can be with them and still be working at the same time… If I didn’t, I wouldn’t be able to get my job done.”
Another example is going through emails and invoices while on phone meeting or interviews.
Apply This Productivity Secret
Studies have confirmed that multi-tasking is normally less efficient than single-tasking. The brain needs time to adjust when navigating different tasks, also known as task switching. Switching makes you tired and unproductive, not the tasks themselves.
But if you batch similar tasks that call for similar mindsets you can efficiently work on multiple tasks without losing your workflow. In other words, your brain is focused on one type of task at a time.
Here are a couple of examples:
Outlining all your blog posts for the upcoming week in one sitting
Processing all emails, Slack, phone calls, and other communications at once
Updating several related worksheets at the same time
To find more activities you can stack, write down all your general activities for the day and week and identify the ones that can be batched together. Try the batch a couple of times and rearrange tasks if necessary.
To process batches even faster, use the Pomodoro Technique.

#7 Scheduling

Running three companies is no small feat, which means time is of the essence for Elon Musk. He is constantly trying to optimize his time using feedback loops. Like many other ultra-productive and successful people, he follows a very detailed and specific daily schedule. He breaks his calendar into five-minute slots and finding your way into one of those openings is tough work. He prioritizes engineering, design, and manufacturing, spending 80 percent of his time at work on those areas. “I don’t spend my time pontificating about high-concept things; I spend my time solving engineering and manufacturing problems.” By splitting his day into 5-minute chunks, Musk manages to get more tasks scheduled into his work.

Apply This Productivity Secret
The most productive people work from their calendar instead of a to-do list. Calendars are finite and give you a better sense of time, making it easier to determine how much time you have to complete projects during your week. Breaking your days into small chunks and scheduling tasks on your calendar can boost your productivity. But you don’t have to use 5-minute chunks. I found that the most efficient way of organizing my work is to break the days into 30-minute slots. Find a timing that works best for you and your work.
And make sure that you schedule everything: checking email, calling clients, lunch, and meetings. Everything goes on your calendar.
Rip to-do lists and instead work from your calendar.

#8 Embrace Stretch Goals

Perhaps one of Musk’s most notorious character traits is his tendency to set incredibly ambitious deadlines for his companies’ projects. He uses stretch goals as a way to change perception: “The first step is to establish that something is possible; then probability will occur.”
Here’s a story from a former SpaceX executive: “It’s like he has everyone working on this car that is meant to get from Los Angeles to New York on one tank of gas. They will work on the car for a year and test all of its parts. Then, when they set off for New York after that year, all the vice presidents think privately that the car will be lucky to get to Las Vegas. What ends up happening is that the car gets to New Mexico — twice as far as they ever expected — and Elon is still mad. He gets twice as much as anyone else out of people.” (emphasis mine). The last sentence illustrates the power of stretch goals. Even in the face of failure, your goal was so outrageous, so impossible to achieve, that you celebrate the small achievements you made because you expected that nothing would come out of it. The initial plan of Tesla was to start shipping the Roadster in 2006. The company pushed that deadline back several times until the car actually became available in 2008. Even though they released its car almost two years after the deadline, Tesla delivered the first completely battery-powered electric car. In his own words: “I say something, and then it usually happens. Maybe not on schedule, but it usually happens.” Musk’s stretch goals have given us a world where one of the best cars you can buy is electric, and where we finally have reusable rockets: “When Henry Ford made cheap, reliable cars, people said, ‘Nah, what’s wrong with a horse?’ That was a huge bet he made, and it worked.”
Setting goals that maintain the status quo doesn’t get you reusable rockets.

Apply This Productivity Secret
The intention of setting stretch goals is to push yourself outside the comfort zone. Growth doesn’t happen when you keep doing what you’ve already done in the past. It comes from failing while trying to make progress. If you aim to achieve five great things and only succeed at two of them, you are outperforming all the people who never tried in the first place. Stretch goals demand more quantity and quality of work and forces you to innovate more often than ordinary goals. And in the pursuit of it, you grow your skills to where they need to be in order to get it done. At first, you won’t know how ambitious your stretch goals should be. Using trial and error, understand how much past your limits you should push. But the most important thing is to start trying and then adjust as you go.
Next time you are making plans for work, take a few extra minutes to include a stretch goal. Try to push yourself to perform 50% better than your normal goal requires. Go big and see if you can surprise yourself with incredible performance. Using this strategy is the first step towards smashing goals and reaching targets you didn’t even think were possible!

#9 Develop a Growth Mindset

In 2004, Musk called a supplier to get the price of an electromechanical actuator. The supplier quoted $120,000. Reasoning from first principles, Musk broke down the components needed and asked Steve Davis, now SpaceX’s director of advanced projects, to build one from scratch for under $5,000. Davis spent nine months designing and building the actuator for $3,900, which flew to space inside the Falcon 1 rocket. Elon Musk is never satisfied with where he is now. His companies have had enormous achievements, but Musk knows that there’s always room for improvement — in every area. There’s always a better, faster, or cheaper way to do things:
“You should take the approach that you’re wrong. Your goal is to be less wrong.”
This is what is called a growth mindset, an important skill that separates successful people from everyone else. When you have a growth mindset, you know you can learn anything if you put enough effort into it. And if you fail, you approach the problem from a different angle until you find a solution that works. You iterate until you get it right. In Musk’s words: “Failure is an option here. If things are not failing, you are not innovating enough.” The opposite is known as a fixed mindset, where the status quo is rarely challenged. Things will always be the way they are because “that’s how we do things around here”. Preconceived notions are taken as universal truths, instead of being questioned. Thus, people stagnate. On the other hand, developing a growth-oriented mindset brings progress to both our personal and professional lives. And even if you manage small gains each day are small, they compound over time. A 1% gain every day compounds to almost 38% increase over a year.

Apply This Productivity Secret
Growth comes from tackling difficult problems, questions, and challenges. In order to succeed, you need to train the brain to look at failures and struggles as progress, as getting closer to the solution. Here’s how you can start developing a growth mindset:
Continual learning: expand your knowledge with books, learn from your personal challenges, and from others; loading your brain with fresh knowledge enables it to come up with new ideas and solutions that add value to your job and life. Be persistent: shift your perspective to look at failures as minor setbacks and learning experiences in the great scheme of things; adapt and iterate your ideas so you can be successful on the next try. Live for challenges: if you have two choices, choose the harder; look at challenges as an opportunity to expand your skills and grow.Embrace failure: at some point in life, everybody fails; learn from failures by understanding what went wrong and how it can be improved and use that experience in the next try. Open to feedback: effective and timely feedback on areas to improve is a critical component of success; be more open to receiving feedback, even the non-constructive one
Celebrate others: “no man is an island”, so start supporting other people successes because they won’t dampen yours; when it’s your time to shine, they will celebrate with you.

#10 Develop a Wide Knowledge Base

According to his brother, Musk used to read 2 books a day at his early age. In other words: he devoured knowledge. This led to a wide understanding of many sciences, such as physics, math, engineering, and computer science. One of my favorite quotes is about how he describes knowledge: “It is important to view knowledge as sort of a semantic tree — make sure you understand the fundamental principles, ie the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang on to.”
Even when running his companies, Musk constantly tries to learn from the people around him that have more knowledge on a specific topic. Here’s a passage from the book: “He would trap an engineer in the SpaceX factory and set to work grilling him about a type of valve or specialized material. “I thought at first that he was challenging me to see if I knew my stuff,” said Kevin Brogan, one of the early engineers. “Then I realized he was trying to learn things. He would quiz you until he learned ninety percent of what you know.”
Over the years, Musk developed T-shaped skills: a lot of knowledge in one particular field and a substantial amount of knowledge in many other disciplines and topics. This allowed him to be world-class in one field (business) but also use his broad knowledge to innovate, find different solutions, be more creative, and collaborate with experts in other fields effectively.

Apply This Productivity Secret
Let’s start with a practical example: you want to be healthy. In order to be healthy, practicing just one sport isn’t going to cut it. You need to know a whole lot of skills: you need to learn the basics of a good diet, how to develop muscle, flexibility, different cardio, condition, etc. While you have deep knowledge in a particular field — the sport — , you also developed broad knowledge in many other areas which are the basis on being healthy. This is the T-shaped skills approach. Let’s look at someone who works in Marketing or Growth: deep knowledge in acquisition channels such as PPC, SEO, and viral loops, while also having broad knowledge over other topics such as statistics, some programming, design principles, and copywriting. Here’s how you can develop T-shaped skills in your area:
Draw a T and list the main skills, secondary skills, and base knowledge. If it helps, model a successful person in your field and their range of expertise. Now see where you stand in each of those areas. Improve your deep expertise by reading books, taking courses, reading about your industry, and learning from other people. Continually reevaluate yourself in the areas and adjust your learning to become T-shaped.

#11 BONUS: Showering
One of the most upvoted questions on the 2015 Reddit AMA with Musk was: “What daily habit do you believe has the largest positive impact on your life?” To which Musk simply replied: “Showering.”In another interview, Musk admitted the shower is where he normally comes up with the best ideas: “This sounds really cliche, but like, the shower is probably like the most… wake up, go shower in the morning and I think so what’s really happened is things have percolated in the subconscious and it’s not really occurring in the shower but you’re kinda getting the results from last night’s you know, computation, basically.” (emphasis mine). I think that’s the lesson in productivity from showering: your brain has been working all night for you, trying to come up with solutions in the background. It takes a few minutes to turn “on” and that can happen during the shower, helping you see challenges with more clarity.
It also provides you with quiet time to think right after refreshing your brain. You can use it to plan the day ahead or think about solutions for problems you might face during the day ahead, for example.
“I think it is possible for ordinary people to choose to be extraordinary.”
Stay blessed, and stay inspired!