From Startup to Success: Bob Fraser’s Journey in Private Equity

Dylan Silver (00:01.304)
Hey folks, welcome back to the show. I’m your host Dylan Silver. And today it’s my pleasure to have Bob Fraser on the show. Bob is CFO and chief micro macro strategist for Aspen funds a fund sponsor in multiple asset classes, including private equity, commercial real estate, distress debt, energy and others. Bob is also a former magna cum laude USC Berkeley, computer scientist, tech startup founder.

Bob Fraser (00:13.304)
Ha ha ha ha

Dylan Silver (00:28.588)
and Ernst & Young Entrepreneur of the Year award winner, Bob, welcome to the show.

Bob Fraser (00:34.958)
Yeah, pleasure to be here Dylan.

Dylan Silver (00:36.784)
That was about half the bio. said, I gotta look at this. One of the more impressive people that, yeah, mean, one of the more impressive that I’ve had on this show here. said, it’s really an honor to have you here. You mentioned before hopping on here, you co-authored a book with John Maxwell.

Bob Fraser (00:40.802)
It’s all the good stuff. Yeah, thanks for leaving out all the bad stuff.

Bob Fraser (00:54.966)
Yeah, yeah, it’s a book called Invest Like a Billionaire. And it’s all it’s cracking the billionaire code. So the big boys, they invest differently from everyone else and they make higher returns and they take less risk doing it and they pay less taxes. And so it’s really unpacking the entire the entire billionaire models how they think how they work how they invest and making it available to the little guy.

Dylan Silver (01:18.83)
And so, you I always like to start these podcasts off at the top, right? So you’re in the private equity space. How did you get get into the real estate space?

Bob Fraser (01:27.904)
Yeah, well, and it’s interesting. Yeah, you mentioned your tech founder startup. Well, that didn’t end well, right? I, you know, raised $44 million in venture capital, became this hyper growth business, employees in Kansas City in the late 90s. And then the tech wreck happened and blew up. And then I started I started in professional investment business for a while. And did investments. I was super talented at kind of, you know, investing and

made great returns for five years, then in 2008, the great financial crisis lost everything again. And so the public markets, I just got so sick and tired of the public markets. They’re intractable, they’re extremely volatile, they’re nonsensical, and I wanted something more controllable.

Dylan Silver (02:08.624)
Yeah.

Bob Fraser (02:17.098)
you know, you you some of your listeners, may buy a, you know, flip a house. Well, it’s very controllable, right? You can look at here’s what I’m going to pay for it. Here’s what I’ll put into it. And here’s I want to sell it for. And it really doesn’t matter what the stock market does, does it? If someone says the stock market is going up or down or, you know, it just doesn’t really matter. You’ve got control. So that’s, that’s what I finally said I am, I’m going to find something outside of the public markets.

that I can control and started building private equity funds. And it’s been off to the races ever since. And that’s, by the way, a lot of what the book is about. It’s getting away from the public markets into things that are far less volatile and far more controllable.

Dylan Silver (02:55.46)
Would you say that you have a lot of expertise in raising capital? So for someone who may be starting out, I was thinking about this myself the other day. said I’ve had so many guests on the show who’ve raised capital, specifically someone like yourself who may have gone from sort of the stock.

Bob Fraser (03:00.762)
yeah.

Dylan Silver (03:14.614)
market area, you know, raising capital from investors that type of way to then moving and transitioning into real estate. And I think most people think about like bootstrapping and having to put all the capital up themselves. But actually, you know, investors and people with money don’t have economy of time the way that some other people may have. And so it’s actually maybe more feasible than some people think to raise capital.

Bob Fraser (03:37.982)
absolutely. Absolutely. You know, other people’s money, you know, it’s how I got started. And just bootstrapping, you know, by yourself, it’s not easy. But raising capital isn’t easy either. No one’s going to stroke you a hundred thousand dollar check, you know, out of the blue. And those first checks are hard to get. You know, at our stage now, we’ve been around for so long, we’ve got such a long track record. You know, it’s very easy right now.

to raise capital, you know, but it doesn’t start that way. You’ve got to really focus on building a great product and a great track record and doing absolutely doing what you say and executing on it.

Dylan Silver (04:19.214)
Let’s talk about how Aspen has grown. I know you mentioned that you’re getting into or doubling down on oil and gas before we hopped on here. Did it start there? I imagine it was a different starting point.

Bob Fraser (04:31.606)
No. Yeah, different starting point. Well, you know, so, you know, we don’t have kind of a standard playbook, OK? We look at we’re data driven investors. We look first, where should money be placed? Right. I remember sitting in 2009 in my desk and watching Miami Beachfront condo selling for thirty five thousand dollars a pop. And at the time, I didn’t have two shuggles to rub together, you having, you know, just just fresh off these big losses. And.

And those are the kind of deals we want to find. What are the deals that just are screaming buy me? now, and no one could sell those dumb things, right? What was the deal? Well, we got started in distressed debt. We bought defaulted mortgages at a time when they were selling for pennies on the dollar. And guess what? We made a ton of money. We figured it out. We cracked the code. We really didn’t know how to model them.

We didn’t know anything. We started a beta test fund and I had enough credibility with a handful of investors to convince them to just throw money at me even though I couldn’t really build a model for them. I had no idea what the legal costs were going to be. had no idea what the timelines were going to be. I had no idea what the returns were going to be. I couldn’t. We had no data. But we did a beta test and then we had the data and then we went and became one of the largest distressed debt buyers in the United States.

Dylan Silver (05:51.94)
Distress that, for myself, fair degree of ignorance on this. think of like, notes. Is this what you’re doing? You’re basically buying people’s distress. Yeah.

Bob Fraser (05:58.574)
Yeah, notes. Yeah, buying notes that aren’t being paid. So yeah, we buy a defaulted second mortgage, $100,000 second mortgage behind a $275,000 first mortgage on a house that’s worth $300,000. Okay, and we paid $6,000 for this $100,000 note.

Dylan Silver (06:20.634)
So then you then have to go through the process of, for lack of a better word, like litigating this, right?

Bob Fraser (06:28.78)
Yeah, you work it out. we had seven exit strategies we developed and a huge amount of financial kind of metrics because there’s a lot of calculus that needs to go. It’s like 40 chess, right? To figure out how to actually fix this. we trained up, we built some incredible models and trained up whole crop of asset managers to be experts in doing this and just minted money for a while. But like all things, well, that’s dead now. I mean, that’s, you can’t buy these notes anymore.

Dylan Silver (06:40.666)
Yeah.

Dylan Silver (06:55.62)
Yeah.

Bob Fraser (06:57.588)
And so like all things, right? It’s a good thing for a while, then it’s not a good thing anymore. And so you always have to find what is the next thing. There’s nothing that just works forever, right? Nothing.

Dylan Silver (07:06.628)
That’s the hallmark. No, that’s the hallmark of a real estate operator I’ve seen. know, people who did real estate in the early 2000s and are still here today involved in real estate in some capacity, they had, there’s just no way, there’s no possible way that they did the same thing for the whole time. And they’ve had to pivot and they’ve had to pivot probably multiple times. And you you talking about second position distress.

Bob Fraser (07:12.876)
Ha ha

Bob Fraser (07:27.138)
Right.

Dylan Silver (07:34.916)
debt super nits down right and then having a pivot out of that having alerts like oil and gas in second position distress that could probably not be more different you know what I mean

Bob Fraser (07:35.597)
Right.

Bob Fraser (07:42.722)
They don’t have much in common. What they do have in common is financial underwriting. That’s where we’re very, very good, right? As financial underwriters, we’re very good macro strategists. So we figure out what is the long game? Number one, then what is the strategies, the ways to deploy capital that we can make for sure money on and take very little risk and make good returns, right? Where are the places?

And my research led me, you know, a few years back, you four or five years ago to look at fossil fuels. And fossil fuels is one of the most hated asset classes. It’s massively underpriced right now and incredibly necessary. I mean, people are shocked when I show them a chart that, you know, last year we were 81 % fossil fuel usage across the United States energy usage. 81%. That’s after 50 years of going green.

Dylan Silver (08:36.069)
Hmm.

Bob Fraser (08:39.502)
and 91 % in transportation. You simply, there’s no electric airplanes. You’re not gonna go fly for 18 hours to Australia in an electric airplane, okay, ever. There’s just not enough power, the batteries don’t have enough power density. And so there’s an issue, and anyhow, so I saw this massive underpricing, and so best investment ever last year, know, earning north of 30 % returns unlevered.

Dylan Silver (08:49.168)
can.

Bob Fraser (09:09.55)
You know, it’s insane. Yeah, we’re buying oil fields. Yeah, and we’re doing what’s called non-op working interests. So non-operated means we’re not the operators. These are operated by, you know, public operators, know, Devon, Marathon, Continental, the big guys, the billion dollar guys who are this is all they do and they’re experts at it. And we were by participation, so we own the land.

Dylan Silver (09:10.352)
And so you with Aspen buying wells.

Bob Fraser (09:36.43)
we buy the land positions and then we own a part of the wells. And so we own in this latest acquisition we had last year, 180 wells. own about 5 % of 180 wells. These are very, very, very large wells. And we don’t operate it. you know, hey, 30, 35 % returns, cash flowing at nearly 20 % cash flow. I mean, it’s insane.

Dylan Silver (09:39.823)
Amen.

Dylan Silver (09:57.57)
Now, when you’re looking at these deals, what’s the risk in them? Because you’re mentioning right now it’s undervalued, right? So you saw the opportunity. Of course, you have to have the capital to deploy here. when you’re underwriting these deals, what’s the risk?

Bob Fraser (10:11.488)
Well, that’s what you have to determine in your underwrite. And so there’s a hundred different strategies that all have different risks. Well, the strategy we’re using is we’re buying what’s called PUDs, sorry, PDPs. So proven, developed, producing, which means the well has already been drilled, it is already producing, and all you’re doing is just cashing the checks.

Okay, there’s very little risk there except commodity price risk. It’s what you’re having now, or what if oil prices go down to nothing, right? And I’m happy to take that risk. And in fact, we hedge, we do some commodity price hedging so that if it goes down, we don’t care because we’ve pre-sold some of the production, enough of the production to keep, you know.

where the costs are being paid. So we’ve had that risk. So honestly, there’s very little risk. Now, if you’re drilling, you’ve got geologic risk, you’ve got engineering risk, and you’ve got operator risk, right? So you’ve got a lot more risks. The way we’re buying it, we’ve got very little risk.

Dylan Silver (11:18.52)
Now, when I think about real, I’ve known two real estate investors who’ve gone from single family, multifamily commercial to oil and gas. And they’ve said, you know, it’s a totally different world, totally different world. And once you think you’re in the biggest room that you could be in, there’s a room that’s like five times the size of you, you know. And so I’m curious, you’ve now participated in what I would say are three very unique areas from, you know, public traded markets to

Bob Fraser (11:30.66)
yeah.

Bob Fraser (11:35.786)
Ahaha, so true.

Dylan Silver (11:48.368)
Real estate investing, single family and second position distressed liens to now oil and gas. In each pivot, how did you move into the new arena? Did you have connections previously? Did you have to find new connections? How did this transpire?

Bob Fraser (12:07.342)
Yeah, and the oil and gas one is a bit of a reach. You know, some of our pivots are natural. We’re doing a lot of industrial, large industrial development, big box industrial development. We’re doing a lot of multifamily. Those things are very easy for us, very natural. We had expertise in-house. Now, the oil and gas, even though one of our partners is an oil and gas engineer, we were not deep enough, did not have a deep enough bench to do that. So we found a guy who was a

firm in town who had a 40-year track record of managing oil and gas assets for private equity. They’re an engineering and geology firm. Like I said, I’ve been doing it for 40 years and have never made less than a 30 % return.

So we partnered with them and convinced them that we were worthy of partnering and it was a great match. So I think either you solve the problem, it’s like if you don’t have the bench yourself, well go partner with someone who does. And if you have the bench or just need a little bit of training, then go get that. So it’s really whatever is the best way, but I’m not afraid to build new partnerships.

Dylan Silver (12:49.946)
Okay.

Bob Fraser (13:16.686)
Partnerships are risky and expensive and time consuming, but when you find good ones, boy do they pay dividends. I’m one of four partners in Aspen and it’s just absolutely wonderful because every partner brings their own expertise. It’s just awesome to partner, but it’s also horrible to partner when you get the wrong partner. it’s just the message is…

Don’t be afraid to partner, but boy, do your due diligence, do it right, make sure there’s no red flags and you know.

Dylan Silver (13:53.38)
then that’ll be a good partnership. know, I’m hearing partnerships, I’m hearing underwriting, and I’m hearing capital raising as really some of the major keys to your success and to Aspen’s success.

Bob Fraser (14:06.126)
Yeah, absolutely.

Dylan Silver (14:07.78)
You know, when I think about these areas and the ability for people to pivot and scale, there’s also the aspect of managing teams. But you’ve had to manage teams now maybe in a different capacity, right? Because you’re going from, you know, second position liens to oil and gas where you’re not operating the oil field. So how does managing teams work when you’re doing different types of investing?

Bob Fraser (14:31.63)
Yeah, and a lot of, know, it’s definitely a challenge. know, one of the things we’ve not done is gone highly vertical, meaning we get a soup to nuts kind of, you know, staffing and, you know, we’re going to do multifamily. Not only will we buy it and raise the capital for it, but we’ll also do the property management, do the construction and that. We’ve chosen not to do those things. Now in the notes, we actually did go fairly vertical. And it’s a problem that, you know, once the

once everything slows down and that’s what you have. But then a lot of those things, there’s crossover, for example, in underwriting and deal selection. Those are very, very similar kinds of deals. There’s a lot of crossover in asset management and in back office.

Dylan Silver (15:21.018)
I want to pivot a bit here, Bob, and talk about computer science and where we’re at right now. So I can imagine that although you might not be using this day to day, that it definitely colors your perspective of the world and gives you some unique vantage points. Specifically in the real estate space, I’m a newly licensed realtor. I can’t imagine another field. Maybe, I’m sure they’re out there, but.

Bob Fraser (15:25.762)
Ha ha ha.

Dylan Silver (15:45.208)
It seems like everybody who’s doing high level things in real estate is trying to get every advantage they possibly can using calendar booking tools and AI and different tools that will basically automate everything that they possibly do. And I’ve done other things before I sold real estate and I think real estate’s on right about the cutting edge of all of this as far as use cases of it. I’m curious, you no one’s got a crystal ball, but what do you make of all of this?

Bob Fraser (16:11.668)
Yeah, yeah, I’ve got a lot of friends that are busy building kind of marketing related businesses. And my daughter who ran a marketing agency, she does me other they said, Dad, nothing I do is relevant anymore. You know, my whole business, like, it’s it’s such a crazy world. And, you know, we’ve kind of gone the other way. I mean, you know, at Aspen, you know, we have almost 1000 accredited investors and

and it’s we answer the phone. You you remember a phone? You know what phones are? We answer that thing and we talk to people. We have a human that’s this person with flesh and blood and with a voice and a personality. And we have humans who talk to humans. And you know what? People love that. They love that. We do a damn good job with our reporting. We play our cards face up. You know, people want that.

People want the human touch. So we’re kind of going the opposite way. Now we embrace automation. We embrace technology. You know, I’m a computer scientist by background. you know, all of our stuff is automated and these kind of things too. You know, our systems are back offices. But yeah, I think let’s not forget that what people really want, they want a connection. They want a human connection.

Dylan Silver (17:28.9)
Yeah.

Bob Fraser (17:29.024)
And the truth is, if you invest everything in marketing, I know guys that are dying right now because all of a sudden their ads aren’t working anymore. And don’t bank on that. Do business the old fashioned way, which is meet people, meet great people, be a great person, do great things, do what you say, and they’ll come back to you.

Dylan Silver (17:51.098)
Do you still are you still involved at all with the other asset classes or is oil and gas the the. OK. So. So currently I’m based in Texas right now. We like to think maybe selfishly that we’re the best single family market in the country. But but you’re looking at it. I’m curious. You’re the person to ask where do you think is the best place for maybe a mom and pop investor or someone who’s got a W2 job and they’re looking at doing single family home investing. What’s the best.

Bob Fraser (17:56.236)
Yeah, we’re doing all of them. Yeah, we’re.

Bob Fraser (18:07.028)
Used to be.

Dylan Silver (18:20.366)
Metro in the country to be investing in.

Bob Fraser (18:22.39)
Yeah, definitely Kansas City, Midwest, Rust Belt right now. You’re seeing rent growth, you know, in the Dallas markets, Sunbelt markets, you’re seeing zero rent growth or maybe a couple percent. There’s huge vacancies. There’s been oversupply. The Midwest has never been oversupplied and Rust Belt states so. As usual, it’s the unsexy places that have the best numbers a lot of times.

Dylan Silver (18:46.746)
Yeah.

Bob Fraser (18:50.68)
So avoid the sexy and look at the unsexy and run the numbers. Be financial investor, you know, but it is always better too to do something closer to home, you know. Yeah.

Dylan Silver (19:00.758)
It is a lot easier. You got to then find contractors, you got to do this remotely, you know, and that’s that’s a logistical issue for a smaller, you people.

Bob Fraser (19:06.06)
Right. Yeah. Yeah. Which is, yeah, I tell people to go passive unless, I mean, you know, if you really want to go active, then go active, but you’re buying yourself a job. Make no joke. You know, make no mistake. And, you know, I made a mistake of trying to be a real estate investor, passive real estate investor when I was the guy that bought it, owned it, managed it. It’s like, it was not a good recipe. I’m not a good real estate owner. I’m a good fund manager.

Dylan Silver (19:18.224)
Yeah.

Dylan Silver (19:28.27)
Yeah, that’s not passive.

Bob Fraser (19:35.084)
You know, and so I’m gonna stick to my day job and let other people manage the stuff that I just never paid attention to.

Dylan Silver (19:42.224)
One final thing before we wrap, I’ve had multiple guests on this show, more than a handful, who are involved in syndications, fractional real estate investing, and even like fractional flipping. The multiple people come together and flip homes. I’m curious, what do you make of that? And would you…

When you’re looking at these deals, are you thinking this is a really great opportunity for people to get involved in real estate, who otherwise might not be able to? Are you thinking that’s a lot of risk for someone to put in when you don’t really know what’s going on?

Bob Fraser (20:16.534)
Yeah, I’d probably be more towards the latter unless you know who has got what, right? Who’s doing what and have they done it before and are they gonna do it or are they gonna drop the ball? And so many of the times, you know, we end up disappointed, right? And so I just be careful with a lot of those things unless you really know people and you know, I’ve invested in people that were unproven before, but they were.

They were people that I knew. I knew something about them. I said, all this guy needs is a shot. And I knew that I knew that I knew that that’s all they needed. And I was really disappointed with these guys. And the other thing I’ve invested with people that I thought, boy, they sure look good, smell good, feel good. And they dropped the ball. so remember, there’s a lot of risk. And it’s better to go up market, get a little more professional type.

Dylan Silver (21:00.485)
Yeah.

Bob Fraser (21:09.868)
type managers, professional sponsors, in my opinion, to get people that have, they’ve done this for a long time, they’re good at what they do, and they know how to do it, and they’re not gonna disappoint you. Maybe you won’t make exactly the returns you thought, but you’re not gonna lose money. And the most important thing is don’t lose money, right? First rule of investing, Warren Buffett, is don’t lose money. Second rule is, remember, rule number one.

Dylan Silver (21:30.384)
That’s it, that simple as that. Bob, where can folks go if they want to learn more about Aspen?

Bob Fraser (21:39.158)
Yeah, Aspen Funds, F-U-N-D-S dot U-S. And if you’d like to get a pre-order of my book, super excited about this book, it’s thebillionairebook.org.

Dylan Silver (21:50.33)
Bob, thank you so much for coming on the show today. It’s an honor to have you here.

Bob Fraser (21:54.734)
Pleasure to be here with you, Dylan.