Brothers in Finance: Exploring Treasury with Arturo Aguayo & Fidel Aguayo

This week's show, I've got a bit of a treat for you because I'm delighted to be joined by my first ever twin brothers that I'm interviewing on the show who are both in treasury as well. I'm joined by twin brothers Arturo and Fidel Aguayo. Arturo is assistant treasurer, California Institute of Technology. So Caltech Institute of Technology is a world renowned science and engineering research education institution. 124 acre campus, Pasadena, California. I will get Arturo to talk a little bit more about Caltech, but Fidel is currently serving as Vice president of treasury and Investment at Loyola Marymount University. They are Pacific Ocean and Downtown LA. 60 major programs, 55 undergrad degrees, everything else. But I'm going to get the guys to explain this. I actually found these guys through an amazing article which we'll put a link to in the show notes about how the both Fidel and Arturo had got into treasury, which is amazing. Both doing the similar things, but different through a, an article dot com. So we'll put that in the show notes, which is great. But I'm gonna hand over as always. And it's just great having two treasurers, the twin brothers. Yeah, I couldn't make this up. I will hand it to you guys. Arturo, the microphone is yours for now and then you can wrestling later. Back to Fidel, it's over to you.

Yeah, thanks for having us, Mike. One thing that I wanted to add was not only are we twins in treasury, but we're actually in the same sector in the same industry. So we're both in public finance and we both ended up in higher education. My career really started with a summer program that the purpose of the program was to keep young people off the streets and get them work experience. And for me that what was initially a three month internship type of summer job actually ended up being eight year stay at. The organization that I worked at at the time was the city of Long Beach. And in Long beach is where I really got exposed to a lot of different things in Treasury. And I remember when I was asked to that summer program, I had choices to work in different departments within the city. Working at the water department, working at the, the oil department. And then I came across working for the city treasurer. And at the time I had no idea what that meant, but it just sounded like gold or like a lot of jewelry or something where they do it. That kind of got me inside about learning about money and what the city did with their funds. And so I selected that specific job for the summer and it was interesting because my life could have completely been a different route had I chosen another department. And I. So I started working there and I started learning a lot about how the city operates from a financial standpoint, working closely with the cfo, working with the city treasurer, and I started learning treasury operations, cash management, debt administration, investments, and also compliance. We financed the Aquarium of the Pacific and did a lot of different financing for the police station and other city big city projects within those three areas. I really fell in love with debt. I just was attracted to the bankers would come in, do a sales pitch and I just found it fascinating. They're doing different financing, different structures, and at the same time you could do pretty well for yourself. So I got excited there and I'm like, I'm going to try that. I want to try that. When I graduate from college, I want to try that. Because it was. I was working there part time while I was going to school. And so I graduated and prior to graduating I had already booked it to a lot of people in the industry about what it, what the industry entailed and how to be successful in that industry. Then through my network and having good people around us that were supportive, that were very interested in seeing us grow and do well and succeed in life, we were able to both land jobs and land jobs specifically in the missed in banking and public finance. I went to a small company based out of Chicago and actually I stayed there for a couple of months training with the Southern trading people, doing some training on different type of financing projects like the city of Chicago. And they're. They have a large school district, they have a large park district. And then I came back and they said, okay, now you're coming back to home where we want you to create a presence in California for our firm. And there I was. And so I was at the time, I was like 25 years old. I had a company credit card, had. They got me a BlackBerry and off I went calling client. I was doing cold call, I was networking, I was doing all kinds of different things just to get my foot outdoor to meet clients. So that was an amazing experience for me because I was able to really learn how the industry worked and how to get to see clients and more importantly, how to get deals. How do you get into getting deals? Which is a very difficult thing about public finance because you have to go through an RFP process and a lot of the clients already have their bankers. In 2009, where, as you recall, Mike, there was the economic meltdown and in that we remember there was a lot of folks that were losing their jobs. And there was a lot of uncertainty around companies profitability and stuff like that. I was worried because I was the newest member of the company that I worked for. So all along while I was working at this company, I every few months, several months, I would get calls from recruiters and different companies. And so at the time, because of that uncertainty, I said I think I want to go into a company that's really stable right now. So I made a move to work for a consulting public finance consulting company that did the compliance side of issuing debt. And that was also a great experience because I got to learn a lot of the legal aspect of public finance. I was doing a lot of reading on the trust indentures, the arbitrage certificate, all the different legal documents that go into doing a deal and. But it was very boring, right? It wasn't what they would admit it to you that it's not the sexiest thing to do. But after a couple years there, I again was recruited to go back into investment banking and did that for, for a little bit again. And then that company got bought out again. We're dealing with a lot of, you know, uncertainty and a lot of changes in the industry. There's acquisitions, the consolidation of companies. I got a call from a recruiter at the University of Southern California and that was very enticing to me because I thought to myself, this is great. Not only will I be working in what I like to do, but I'll have some purpose helping the university grow and prosper. And then on top of that I get, if I wanted to, which I did, is go back to school. And so I was able to get my master's in business administration from the University of Southern California. Now this is a cool story that I that no really, really knows about this. But so the way it works when you're a staff member of a university, and not all universities have this benefit, but USC did they have a benefit where they do provide, they cover you some educational expenses. And so now the coverage is a fixed percentage and the rest you have to find out to yourself, but it's not a hundred percent finance as a benefit. However, my chief or financial officer that that hired me covered the difference essentially to get my MBA. Now this is the interesting story. So one I get a call one day from my CFO's office and his assistant said, Pier Arturo, we want to pay your tuition bill. And it was like some large amount of money. And she said to me, archisto only allows for full numbers, but it's X amount plus change. Yeah, that's it. Maybe. So I'm thinking, okay, what's, what are you trying to tell me here? I'm so sorry to ask you, but can you please pay the 50 cents? We more than longer pay the 50 cents for $150,000 education.

Yeah. You're like, you're okay. I'll stretch to that.

Yeah. So that was a big, I think it was a very big positive thing that happened in my life. Right. Getting an entire education paid for. Because as you hear now with a lot of things going on in the United States, with politics that they want to, the administration wants to forgive loans because it's a big issue. Right. It's very expensive and it continues to get more and more expensive every year. And so that to me that was just a life changing experience for me because I basically free of cool loans and that was an awesome experience as well. Learned a lot in school, met a lot of cool people through the program, got to travel at the same time.

You were going into the listeners as well. You were working in the central treasury for the University of Southern California. So you weren't, you were studying. That was great. They were paying your tuition and that's great. But you're actually doing a Treasury role as well. And you talk there about purpose led treasury, which is quite an interesting one. Between that and corporate treasury, we've come onto this with Fidel as well a bit later on the show. But for you rejoining university, why was that so powerful to you? Did you feel that then or was it, hey, but it's all right, I'm getting my tuition or how did you feel about it? That's it.

That's a combination of all the above. One part is one, it was a stable organization. USC is one of the largest universities in the country. They have probably 60,000 students plus they have a fairly large endowment of I think now close to 10 billion. And so it's a stability, the ability to go to school. But also we or in public finance, we could have chose corporate finance. Looking back at it, maybe that would have been an interesting option too. But when we were growing up, because of our background, growing up in lower income community, we felt that it was important for us to somehow give back. And so this sector, public finance is one that allows you to be involved both in the community, the communities that you serve, as well as doing pretty well for yourself. I should say mentioned too that before we got into public finance, I was interested in politics. Again, it was all the combination of all Those things. But public finance allowed us to stay in touch with our communities.

Yeah, with that as well. And then you're a C for seven years and then bring this up today because I want to give Fidel as well. Some of them are not too long, but just given some of the time.

But you then been with, you've been.

With Caltech nearly five years or how did you make that move? Or was it just a natural thing that you wanted to stay or how's it developed?

Yeah, after about seven and a half years at usc, I was in a place where I felt like I had done everything I could in my role. And at the same time there was a position that was available at Caltech and Caltech is a world renowned research institution. Not only a promotional opportunity, but for me it was a role where I can continue to learn and grow. Because even though it's also an academic institution, it's in my opinion primarily a research institution. And so it gave me an opportunity to learn a different type of organization. I've been here close to five years, four and a half years and I've learned a lot of different things. We manage a lot of banks here and we have eight lines of credit. We have a swap in place. These are some of the things that I wanted continue to learn and or did not have exploitatory for. I really enjoy my job here and it's a smaller organization than it was my prior institution. But with that I did have a lot more flexibility to streamline things opposed to like the layers of approvals when you work for guard your organization.

And we're going to come back to those of you working within institutions like you do and universities and things like that. And that's also of interest because just talking about some of the nuances there, but we're going to hand across to Fidel. Fidel, do you want to explain exactly?

First of all, thank you very much Mike for having us. We really appreciate your time. But it's very interesting. Yes, we're twins and we are very close and we're always talking about kind of career opportunities and how we want to continue to grow as people and as professionals. But really how I started in the business is it's very similar to Turo. Coming out of high school, I ended up applying for a position with the city of Long beach as a recreation specialist. I started doing kind of recreational programs for the youth across various parts across the city. And during that time, Arturo, as he mentioned earlier, was working as an intern for the treasurer's office within the city of Long Beach. So he would come home and he would share a lot of his experience with me. He was saying how he was working on these multimillion dollar bond transactions. He was learning about cash management, he was learning about investments. And so I was very fascinated by that. And after a few years of me serving as a recruiter specialist, the city went into probably the biggest budget deficit in its history. I think it was something close to a hundred million budget deficit. At least that was the number that was being thrown around at the time. And what ended up happening is it started cutting my hours, right? So it started affecting my paycheck. I'm still, we're still at undergrad, trying to get school out of the way. So it was really positions for us to survive while we were going to school. And so when that happened to me, I said to myself, I need to get into something that I can use whether I'm going to a private, to the private sector or the public sector. And I said, everybody needs their finance folks, regardless of sector. You need your finance folks. And so that with the combination of everything Arturo was learning, really led me and pushed me to pursue a career in finance. So that's the story behind it. And once we graduated from undergrad, Turo and I already knew, as he mentioned, that we wanted to pursue careers as investment bankers, specifically in public finance. Before we actually graduated, we were meeting with people from the city of Los Angeles, people who were very influential in the city. And the city of Los Angeles is a really a beast when it comes to finance. They issue billions and billions of dollars of debt every single year across various different credits. They had their wastewater, they have their water and power department, they have the general purpose within the city of Los Angeles, their lease revenue kind of bonds. And we started meeting people and they started introducing us to those of small to mid sized firms, investment firms. So by the time we graduated, we were already trying to line up a position within the industry and through. And I would go back and forth, we would sit down and first opportunity.com I'm going to take it. And I told him I was going to take it because I didn't really have experience in finance. Okay, I had experience in, when I was with the city after serving as rec, I also worked in their administration side working with accounting and budgets. But it's not the same thing as financing. Very two very different worlds. And we can talk a little bit about that as this conversation continues. That's how we got the opportunity to break into the industry. We, we through both actually through and I both used to interview together for some of these small firms and we. I got the opportunity to join a firm. I started probably, I want to say two to three months after graduate from undergrad and then I probably took six to eight months. And then he joined an investment bank as well. So that's how our careers evolved into the finance financial world. And then I was with my, with the investment bank for almost 10 years. And then there was a big reorg within the organization. There was changes with the partners of the firm and it made me start thinking the organization was making a lot of changes. So it was really time for me to make a change. And so in that process I ended up, I too decided to go more to the client side. So you have the bankers who are the consultants, the professionals, and then you. We serve obviously all state and local governments who are looking to raise capital for the, you know, large projects. And so I ended up being deputy for a smaller city within Southern California. I was there for a little under a year before the opportunity to go back to the city of Long beach presented itself. It was the position of the debt manager for the city of Long Beach. And so I applied, I got the job. And then I was with the city for about six years in total. And then probably five years into it, I got promoted to city treasurer. Now, just to give you a little background about the city, so the city of Long beach happens to be the, I believe it's the seventh largest city in the state of California, second largest city in LA County. So when you talk about the amount of excitement that's behind an organization, when you talk about the volume of bond transactions, the volume of cash transactions and their, the sophistication of their investment portfolio, it's pretty big. It's a large one. The, on the debt side, the city had about one point when I was there, it had about $1.8 billion worth of outstanding debt and they had probably something like 50 to 60 outstanding bond transactions. On the investment side, I think it was a 2 billion investment portfolio. So there was a lot going on within the city while I was there. I oversaw cash management, debt administration and the investments. And so every single kind of function within treasury has, is its challenges, but they're all connected. They all impact each other. You do something on one end, it's going to impact the other. So that's. So I was there for six years and then interesting thing occurred. Dudu and I would always go back and forth in terms of, and we would talk about this and I would Ask him for advice whether I should continue to stay in. In a government setting or should I pursue a career in private higher ed? And so the longer I was with the city, the more I thought that it was probably a good thing for me to do is to join a private higher ed academic institution. And I, interestingly enough, I graduated from Loyola Marymount about, I want to say, 12, 13 years ago. And so when the opportunity presented itself, I was telling Arturo, actually, we talked about it. Right. We always talked about it. We said, okay, there's a couple positions out there that if they open up, we're going to apply for. And so Arturo always really thought that he would be treasurer of lmu. And so when we sat back and talked about it, I talked through, look, I graduated from. I have history there. And I. It's a better opportunity for me because it opens it up for me to go into the private higher ed space. So when that opportunity presented itself, I said, I'm going to apply. You're not going to apply.

You stole his envelope away.

Quick.

Put that to one thing. Yeah, yeah.

He was afraid of me applying because I probably would have been, I think.

I'm pretty sure you would have. Who's going to say no to someone who had the background of usc? It's just such a big. It's such a big institution. It's known across. I don't. It's known across the nation, and it's probably known across the world.

Yeah.

Because it's so big, a lot of times employers, what. They look at it, they look. They don't only look at what you do, they look at where you did it.

Yeah.

And so the bigger organization, the more exposure, the more experience you're going to have. So naturally, he would be a front runner, and he's already in that space. So I knew that if he applied for it, even though I felt that I was more experienced, he would probably get.

And that's debatable. My.

Yeah.

Don't work.

So that's.

I'm glad you're not in the same room. There you go. You don't have to arm wrestle. I just want to dive in for a moment about. You went from city financing to education and hiring, and you both got that exposure. You both talk about it and everything else. How would you. If someone's listening today, how would you contrast them between city financing, big numbers, and looking after lots of different projects versus education? How are they different? How do they differ in your mind?

I think for me, obviously, is the service that you're providing is pretty much the big one, I would say. The other thing that's very different is the way the organizations are ran. And this is what I mean by it. At least within the academic institution here at Loyola Maramont, the organization is ran a little more like a business opposed to a government setting where it's really politically sensitive, highly politically sensitive. And so the directives come from the governing bodies and the elected officials. They decide how the city should be ran, what projects should be financed, that type of thing. And so I think those are probably the biggest differences. They're not so much on the financing side. One of the things that I believe is treasury, regardless of where you do it, that's not going to change. The practices are the same. Right. That's not going to change. It's more of how the organizations are ran. That's my opinion.

Yeah. And I think for me, top in addition to what Fidel just mentioned. So if you think about Fidel mentioned the board members and the elected officials, you're really working with two way different types of governing bonds. Right. One is politicians elected officials, and the other one is the board of academic institutions are wealthy individuals that make millions of dollars of donations to the school. So you're talking about very successful wealthy individuals that a lot of them are business savvy, a lot of them have different companies versus an elected body that those are people that live in the city that are just. They run for elected office. Some may be business people, some may be in real estate, some may be in education. More.

They tend to be focused more on the social.

Yeah, it's more of a social career.

Someone's listening today. They go, hang on, how did you. As you've gone through this and you've.

Your.

Your twin brothers. It was. This is why it came out. This must be really quite. It's quite cool because you can both talk about the crossover between your jobs and you've both got the same experiences. But also, do you sometimes go, hang on, how do we end up here? Or what did you think as you were discussing it over the time?

Yeah, absolutely, absolutely. Sometimes I think back, I'm like, how did we end up here? Remember? Yeah, I shared I had three opportunities within the city. Right, right. One was for the water department, one was for oil properties, and then one was for the treasurer's office. So when you think about that, our both our lives would have been way different because the reason Fidel knew about finance was because of me. And if I don't get that, if I don't choose that treasurer role within the city. Who knows where we would have ended up. I feel fortunate sometimes because not only did we get to learn finance, but also helps in our personal life, right? How we manage our own funds. And so it's been a unbelievable career that I feel like we've had an unbelievable career so far. And the thing is, we're still fairly young. Who knows where we'll be five years from now.

The other thing I would add to that as well is it's. It was a long journey, right? It was a journey of sacrifices. It was a journey of a lot of planning, a lot of discussion within our families, and it was a lot of really strategic planning. When I shared that story about, okay, who's going to apply for that and why should you apply for it, opposed to me. So those type of discussions really made sure that we put. We felt either the. Either one of us in front of an organization, right? We felt that it was either the right person, the best opportunity, and depending also on how. What's going on within our current positions, right? And if you're in a great place, why leave a great place? You love it there. You work with great people. Me or on the other side, on the flip side of the coin, you could probably say, I don't know if this place is for me anymore. Maybe you're right. Maybe you're right, Arturo. Maybe you should go for it. So that type of thing. So it, it was. Even though it was a. A, A very. What felt like a long journey, you, when you look back and you reflect on every single decision that we've made up to this point so far, has really worked well for us. But don't get me wrong, there was a lot of disappointments in certain parts of the decision process that we made. But at the end of the day, Arturo said it best. You end up where you belong.

I want to come back to something as well. You talk there about public finance and the drivers behind it with that social purpose and everything else. And now you're both in higher education. You're. So I was just making some notes there. So you're in essentially commercial organization, even though they're in it, but their education, they're more. You've brought in a sense of rigor. You've done all that. They're not as they were 30, 40 years ago, for the greater good and everything. Now they're very much more. You've got. When you go through the article we've got here, you've got multimillion pound 500 million century bonds. You've got all those different things you've done, which that's not your typical university financing. These are big numbers, these are big ticket items. How do you guys feel about that? What are your thoughts? How do you see the sector changing and growing?

There's been so many different things that made treasury and the industry are all very complex. Some things have to do with technology, some things have to do with the general economy and how, what's going on in the economy. There's been a lot of things that have happened our life that would be considered a once in a lifetime type of experience. Right. Like the mortgage crisis of the economic meltdown. Right. That never happened before 2008, 2009. So we experienced that as bankers. And so when you have clients calling you, hey, look, our variable rate debt has skyrocketed. It's. We budgeted 3% and now it's like at 14, 15%. We gotta get out of these variable debt and let's fix them out. So that was an experience, right? And then you have things like Covid, wow. Where the entire country shuts down for a week or two. It's whatever is going on in the world impacts a lot. Even let's say the stuff that's going on internationally with Russia and China and almost in the geopolitical environment that impacts not only treasury, but the schools we have international students. And so there's so many things that are outside our control that have changed the way that we manage Treasury. And then obviously technology. With technology comes a lot of automation, a lot of streamlining efficiencies. So those two things have, that I can think of my head have really changed and have also made it more complex in a lot of ways. Because it's not like you said before, I think you don't mention this. We don't work in a profession that is, let's just say business as usual. It's a profession where you come in to work one day and you don't know what, what's going to be that day. I've had, I've been in organizations where I come into the office and I get a phone call from our CFO, Arturo. We need $150 million. We're going to purchase that building across the street. How do we do it? How do we finance it? We could finance it a couple of ways. You can do long term debt, which take longer to do. If you needed a mediating, we can use some of our short term investments. We can do a bank loan, we can do a line of credit. There's multiple ways to do it. Right. But you have to do the analysis behind that. What's the best way to finance this? And then what's the long term goal then? I've been in organizations where our president has asked, do you want to grow? And the response is no, we want to get better. So that's a different way, a different strategy of managing your liquidity. One is you have to be ready for those calls that they may ask you for funds to acquire another company or purchase land or what have you. You have to have that liquidity available. And then on the other side is what we're not as aggressive growing. We can take some of our short term investments and really invest them a little out longer in the yield curve. Those are two different strategies. But you really have to understand the overall vision of our organization and that has to be communicated very well to the treasury folks. Those are all things that you have to really understand in order to really manage your treasury operations effectively.

Yeah. In addition to what Arturo just said, because he's absolutely right on every kind of point he mentioned, I would say some of the challenges I think that treasury is going to be facing in the future has to do a lot with fraud. A lot of people who kind of focus on trying to steal money from organizations have gone really sophisticated in their ways. Whether it's through email. Click on this link. You the email looks like it's coming from the President's office or the president himself. And they say, hey, click on this link. You need to send us a million dollars today. So that's one of the concerns that are right. These scammers are getting a lot more sophisticated. And also the other part of it is a artificial intelligence. So now you have people, when you pick up the phone, somebody could be recording your voice and now they can use AI to translate your voice and probably. Right. And try to get into your bank accounts. So that's another kind of challenge that I think treasury is going to be facing. I think that one's going to be something that people are going to need to start talking about more and certainly have to start addressing it because I think that's probably going to be one of the biggest ones. The other one that I think that in more current channels.