Change Agent: Michael Underhill, Capital Innovations 

We’re talking to leaders about significant changes in the industry and their organizations – progress regarding product, process, technology, or culture. We’re curious about the how and the why. And we’re asking about what changes are next. 

We asked Michael Underhill, CIO of Capital Innovations and past president of ADISA, what recent industry advancement has impressed him the most and what changes he expects in the coming years. Underhill also highlighted what accomplishment within the organization gave him the greatest satisfaction and the elements required for success within his organization and industry. 

Charting a New Course: How do you navigate the transition from established practices to pioneering new frontiers within your organization?   

People are the product. Create a dynamic environment that embraces change that supports your team as life is a vertical learning curve. Provide resources for learning and development. Serving as a pioneer in the asset management industry has taught me a few things, one important lesson is that you can be out so far on the innovation curve that the pioneers get the arrows, and the settlers get the land. Pioneering new frontiers requires having a plan, a backup plan and a backup to the backup plan.     

A Triumph to Celebrate: What recent organizational accomplishment brings you the most satisfaction? What specific challenges did it overcome, and what key factors led to its success?   

On June 30, 2024, Capital Innovations celebrated its two-year anniversary in our partnership with Cantor Fitzgerald for the Cantor Fitzgerald Infrastructure Interval Fund. (CFIIX)    

We achieved significant progress in being the first firm in the U.S. democratizing infrastructure as an asset class to the wealth management channel. The fund provides investors with broad access to the infrastructure asset class through a diversified portfolio of private infrastructure investments. The fund has crossed the $150 million AUM milestone with numerous private infrastructure investments, including private infrastructure debt and private infrastructure equity spanning primaries, secondaries & co-investments.    

The challenges are educating the wealth management channel regarding infrastructure as an asset class from product engineering, portfolio constriction to client account implementation in asset allocation models. With the publishing of The Handbook of Infrastructure Investing in 2009, creating educational materials for EDHEC/CFA Alternative Investment Symposiums in 2011-2012 and the work I did as Infrastructure Workstream Chairman with United Nations Principles of Responsible Investment in 2022-2012 we helped institutional investors and now we are focused on the wealth management channel. We are developing a series of educational content through Capital Innovations Institute™.  

Catalysts for Change: What are the essential elements for significant progress within your organization and the industry?   

Clayton Christensen penned a book, “The Innovator’s Dilemma”. Christensen’s theory explained how large, established companies can be vulnerable to newer technologies that don’t immediately fit with the needs of mainstream customers but quickly go on to dominate a market. The first thing is to look at disruptive technology as a growth opportunity and not as a threat. Innovation and growth happen outside your comfort zone, so we work with our team on being intellectually flexible and adaptive, constantly embracing change.  

Industry Inspiration: What recent industry advancement impresses you the most, and why?   

The rise of AI technology and how it may influence alternative investing. The advent of ever more powerful artificial intelligence. The territory that remains unreadable to machines is shrinking, and patterns are emerging where, before, there was only noise. The scope for added value is significant, and growing quickly, both in terms of delegated investments and direct investment into high potential companies.   

The Road Ahead: Looking forward, what critical changes do you foresee for the industry in the coming years? What advancements do you hope for?   

Democratization of alternatives is real and here to stay in the wealth management channel. The industry has navigated a more volatile macro environment, a higher rate backdrop, and pro-rated redemptions at certain non-traded REITs over recent years. Still, the megatrend is intact for retail allocations to rise from low single digits today to upwards of approximately 15%. Product proliferation enables ease of access to alternative investments. Investments in education, distribution, and product innovation have furthered adoption of alternatives in the wealth management channel. Structures like evergreen funds and secondaries strategies remove friction for the advisor and end investor.  

Guiding the Next Generation: As we acknowledge the industry’s rising stars, what guidance can you offer them to become catalysts for positive change?   

Pay it forward, continue to mentor, teach and innovate. I have been doing it personally since I was in my late 20’s, visiting college campuses to help students with their career development with a focus on helping them understand the challenges that lie ahead. When they say, “how do I repay you?” My response is always, “when you are in my position, you must promise me you will do this for three other people, so we continue to growth the industry with like-minded professionals.” As my father used to say, you cannot create a storm in a bucket…   

The only way we can ensure growth and development of the alternatives industry is through nurturing the next generation of leaders and that begins with our college students as they enter the work force. One of the things we did at ADISA with board member David Wilson leading the charge in 2023, was structuring a partnership with the Milken Institute to accelerate financial services professional development with Historically Black Colleges and Universities. (HBCU).  

Pictured: Michael Underhill, CIO, Capital Innovations 

Click here to see the full Change Agents: Leaders Driving Progress series