Episode summary
Michael Kelly - Democratizing Access to the Middle Market at Future Standard (EP.473)
Capital Allocators with Ted Seides
· · Hosts: Ted Seides · Guests: Michael Kelly
Summary
Michael Kelly argues that the best opportunities in private markets have shifted toward the middle market, where companies are smaller, more fragmented, and easier to improve operationally. He says the era of “financial engineering” driving private equity returns is largely over, and that future outperformance will come from revenue growth, lower entry multiples, and hands-on value creation rather than leverage and multiple expansion. That view informs Future Standard’s focus on private credit, private equity, real estate, infrastructure, and multi-asset strategies for the wealth channel.
He traces his career from hedge funds to building investment businesses, saying he learned early to stay intellectually flexible and to pay close attention to incentives. That same lens shaped his work at Franklin Square and later Future Standard, where he helped move the business from a single outsourced income strategy to a broader platform with roughly $90 billion in assets and about 600 employees. The firm’s model emphasizes partnerships, one layer of fees, and access to strategies that had previously been reserved for institutions.
Kelly also sees structural demand supporting private markets: persistent yield scarcity, the migration of lending away from banks, and growing advisor acceptance of evergreen vehicles and other structures suited to private wealth. He expects private equity to remain more attractive in the middle market than in large-cap buyout land, while warning that the biggest risk is not a bubble but mismatched expectations around liquidity, returns, and access.
Key takeaways
- Michael Kelly says the “days of financial engineering” are over and expects middle-market private equity to outperform large-cap buyouts through revenue growth and operational value creation.
- He says Future Standard has grown from an income-focused platform into a roughly $90 billion business across private credit, private equity, real estate, infrastructure, and multi-asset investing.
- Kelly argues private wealth demand is being pulled by higher base rates, the search for income, and better product structures such as BDCs and interval funds.
- He thinks the biggest risk is expectations management, not capital flooding the space, because investors may underestimate illiquidity and overexpect returns.
- Kelly believes institutions should adapt to private wealth’s growth by partnering with it, seeding vehicles, or using secondaries rather than resisting it.
Notable quotes
“The days of financial engineering your way to higher returns in my view are over”
“Where you're really going to see the outperformance in private equity are going to be faster revenue growing companies, lower multiple entry points, more fragmented ecosystem private companies and where you can add operational value”
“The private wealth channel and individual investors deserve to get the same treatment as institutional investors”
How the episode opens
The days of financial engineering your way to higher returns in my view are over. Where you're really going to see the outperformance in private equity are going to be faster revenue growing companies, lower multiple entry points, more fragmented ecosystem private companies and where you can add operational value. That just simply tends to be more in the middle market than in the large and mega cap private company market.
Franklin Square. The analogy I use is Netflix. They were packaging and distributing other people's contents.
In this case, GSO's middle market lending practice through BDC's. It's a little bit like red envelopes and DVDs. They had built this incredible distribution engine and pipes into all of these individual investors through the broker dealer market.
It had been my background to build out asset management companies. And I thought, well, just like Netflix, eventually came to the conclusion that building your own TV and movie studio and putting it through your own pipes might be a good idea as long as the quality content is high. I thought we can do that here.
I'm Ted Sides and this is Capital Allocators. Our continuing exploration of the intersection of private wealth and alternatives takes us to Future Standard, one of the largest distribution platforms bringing the wealth channel exposure to the middle markets. My guest is Mike Kelly, co-president and chief investment officer of Future Standard, a $90 billion alternative asset manager focused on private middle market strategies for the wealth channel.
Mike has been in the alternatives industry for three decades. Starting as an analyst under Lee Coopermanman and Julian Robertson, helping build Frontp Point Partners, which began the institutionalization of hedge funds, serving as CEO of Orics USA, where he led the acquisition of $250 billion global asset manager Rabico, and for the last decade turning to the democratization of alternatives.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private wealth
- alternatives distribution
- middle-market private investing
- incentives leadership culture
- wealth channel capital flows
Companies and tickers mentioned
- Future Standard
- FrontPoint Partners
- ORIX USA
- Robeco
- Franklin Square
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Capital Allocators with Ted Seides, this episode and its artwork belong to Ted Seides – Allocator and Asset Management Expert. Octagon is not affiliated with the show; this page is an independent summary.
