Eric: Welcome to this special edition of Financial Commute. I'm Eric Seltzer, Senior Partner at Morton Wealth, and I'm here today with Meghan Pinchuk, our Chief Investment Officer. Today's topic: where does our investment research come from — or put another way, how do we make our investment decisions? We're pulling back the curtain. Meghan, why should clients care about this?
Meghan: (noting for the record that Eric is her father and she reserves the right to be tougher on him than she is on Chris) We have a very rigorous process for picking investments, and getting to a buy decision typically takes a long time. Ideas come in two ways — either something comes inbound and we run with it, or we identify a specific space we want exposure to and go scour the universe for the right managers.
Eric: What triggers you to go looking for something new?
Meghan: Usually a market dislocation. A good current example is private lending — we've been watching the headlines, and one of our first questions was whether some of these assets are in better shape than the press suggests, and whether forced sellers might create an opportunity to buy in the secondary market at a discount. That specific opportunity isn't quite there yet, but that's the kind of angle we're always thinking about: can you earn extra return by being a liquidity provider when everyone else is running for the exits?
Eric: Do most ideas come from inside or outside the firm?
Meghan: It's a mix. A lot comes from us watching the world and saying "that's interesting, let's dig in." But we also have strong networks where people are pushing ideas to us or we're swapping notes with peers on what they're finding. That external sourcing is especially valuable for niche strategies that aren't making headlines — healthcare infrastructure, specialty lending, things that are a little under the radar.
Eric: I assume you're approached constantly by fund managers who think they have the greatest thing since sliced bread.
Meghan: Everyone thinks their product is the best product ever created. That's fine — they can have that level of confidence. And then we make that decision for ourselves. (Translation: "Thank you so much. Don't call us, we'll call you.")
Eric: Walk us through a recent example — from initial idea to investment decision.
Meghan: A good one is a manager we just finished funding. They focus on equipment leases and buying loan portfolios in the secondary market — sometimes equipment loans, sometimes a little real estate — but the core thesis is finding inefficiencies where banks are sellers or you can originate leases on essential equipment. We'd liked the equipment lending space for a while and were actively looking for more exposure.
This particular group kept coming up in conversations, but the process took 18 months to two years — longer than usual. The reason: I loved the actual loans they were doing, but the fund structure didn't make sense to me. They had short-duration loans packaged into a long-term structure that locked up capital for seven years. That defeated one of the main advantages of the strategy. I tried to explain that, they pushed back, their institutional investors wanted it the way it was — so we went back and forth for a long time. Eventually they created a separate vehicle structured the way we wanted, while keeping their original structure for institutions. We ended up seeding that new vehicle. It took a long time and a lot of legal back-and-forth, but we got there.
Eric: So the "wrapper" — the fund structure — matters as much as the investment itself?
Meghan: Post-Madoff, absolutely. Before 2008, due diligence was mostly about the investment itself — the structure was secondary. Now, operational due diligence — understanding the wrapper, the third-party oversight, the controls — is as important as, if not more important than, the investment thesis. I want to know what happens when things go wrong. I want managers to be creative about how their structure could fail and show me the controls they've put in place to catch problems early. It's less about bull's-eyes and more about game theory.
Eric: You're known for being tough on managers. What's your philosophy?
Meghan: I don't like the phrase "trust but verify" — I think trust is a loaded word in this context. It's more like: you hear them, you think it sounds true, and then you verify it. And then you keep verifying it on an ongoing basis. I've been surprised by the number of large institutions that rubber-stamp things or say "oh, you're in it, so you must have done the work." We don't take shortcuts in the process.
Eric: How does conviction factor into position sizing?
Meghan: The asset class itself drives a lot of it. In our internal fund of funds, we prioritize asset-based lending — loans backed by hard assets or something monetizable if things go wrong. Those get sized larger. We also do necessity-based lending in healthcare and food — industries that are uncorrelated to the broader market — but those are smaller positions because the conviction level is different. And then there's the experience factor: if we've been with a manager through ups and downs and seen them handle problem loans well, conviction builds and we'll potentially allocate more.
Eric: How has AI changed your research process?
Meghan: It's starting to. The biggest impact will be data organization — streamlining the time analysts spend putting manager data into spreadsheets, tracking it, and verifying historical information. That's going to be significant. The part I'm not counting on AI to replace is the people assessment — figuring out how a manager will behave when things get hard. It's easy to have integrity when everything's going well. How they respond when it isn't — that's what matters. I don't know how AI helps with that yet.
Eric: How important is patience in your process?
Meghan: Very. I actually have a lot of patience when it comes to investments — less so in other areas of my life, but this isn't a therapy session. If we're not totally comfortable, we wait. The equipment leasing example is a perfect case: the investment was great but the structure wasn't right, so I waited. Eventually they came back, and we found something that worked for both of us.
Eric: How do you fire a manager?
Meghan: It's usually not a surprise. We have ongoing conversations throughout the relationship, so if we're not happy with the direction things are heading — even if performance is fine but the strategy is drifting — we've typically flagged it multiple times before pulling the trigger. When the moment comes, I'm direct about the reason.
Eric: Most outrageous claim you've heard from a manager?
Meghan: There's one niche in alternative assets where there are maybe half a dozen groups, and every single one of them claims they invented the space. I'll leave it at that.
Eric: Does the personality of the manager and team factor into the decision?
Meghan: Absolutely. The numbers have to work, but people are everything in this business. You need to believe they'll do the right thing when times get hard. And life's too short to invest with people who don't feel right or who genuinely rub you the wrong way — that's a deal breaker.
Eric: Last question: with markets strong over the last decade, how many of your managers have actually been tested?
Meghan: It varies by asset class. Commercial real estate has been heavily tested since rates started rising in 2022, so we've seen those managers work through real challenges firsthand. Equity-oriented strategies? Not much testing at all. And honestly, that's a challenge from an underwriting standpoint. If a manager tells me they've never had a problem, I'm not sure what to do with that — because there will be a problem eventually. Having an example or two of where they struggled, worked through it, and can articulate what they learned is actually really valuable in due diligence.
Eric: Thanks for joining us, Meghan. We'll see you at the next one.
