WEBVTT - Forge Global CEO Kelly Rodriques on SpaceX and the IPO Outlook

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News. You're listening to Bloomberg

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<v Speaker 1>BusinessWeek with Carol Masser and Tim Steneveek on Bloomberg Radio.

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<v Speaker 2>SpaceX moving forward with an insider share sale that values

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<v Speaker 2>it at about eight hundred billion dollars. Bloomberg News reported

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<v Speaker 2>that in December, private markets, how much these companies are

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<v Speaker 2>valued very much of interest to investors. We spoke about

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<v Speaker 2>this with Rick Worster, the CEO of Charles Schwab yesterday.

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<v Speaker 2>He weighed in on it. In that conversation with us,

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<v Speaker 2>he discussed the acquisition of Forge Global, a marketplace for

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<v Speaker 2>buying and selling shares of private companies. Reminder, Schwab agreeded

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<v Speaker 2>by Forge back in November for six hundred and sixty

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<v Speaker 2>million dollars, and.

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<v Speaker 3>Our Forge acquisition was really about democratizing investments and alternatives.

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<v Speaker 3>We're now going to be able to bring it to

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<v Speaker 3>all of our investors in multiple different forms and allow

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<v Speaker 3>them to participate in private markets the way institutions and

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<v Speaker 3>the very wealthy have been able to. And we're thrilled

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<v Speaker 3>to bridge that gap and excited for what that could

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<v Speaker 3>mean for our client's wealth.

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<v Speaker 2>That was Charles SCHWAB'ZEO Rick Worcester, speaking yesterday with us

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<v Speaker 2>here on Bloomberg BusinessWeek Daily Back with Us. Kelly Rodriquez,

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<v Speaker 2>CEO of Forge Global. Kelly joins us from the World

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<v Speaker 2>Economic Forum in Davas. Kelly, I want to get to

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<v Speaker 2>Davos in just a second. But Rick's comment to you

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<v Speaker 2>and to all of us about what Forage is going

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<v Speaker 2>to bring to Charles Schwab, he's been talking about the acquisition.

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<v Speaker 2>How do you see yourself, how do you see your

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<v Speaker 2>company fitting into Schwab.

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<v Speaker 1>So, it's a really interesting time in the market. The

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<v Speaker 1>private markets, which have historically been thought of as an

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<v Speaker 1>alternative asset class, are really going mainstream now. This is

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<v Speaker 1>a year and the performance bears this out if you've

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<v Speaker 1>seen some of the recent data we've put out. But

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<v Speaker 1>I think Schwab and others are coming to the conclusion

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<v Speaker 1>that America's investors need to participate in this asset class.

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<v Speaker 1>And it's a really exciting time because they want to

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<v Speaker 1>provide access. That was our mission nine years ago when

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<v Speaker 1>we started, so they've been watching us for a while.

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<v Speaker 1>This is a really exciting development for investors and for Schwab.

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<v Speaker 4>Hey, my understanding is I guess that deal right?

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<v Speaker 1>We did.

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<v Speaker 4>We actually were at Schwab Impact on the day it

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<v Speaker 4>was announced and we talked with Rick about it. Then

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<v Speaker 4>it is expected to close in the first half of

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<v Speaker 4>twenty twenty six. Are you guys still on track for

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<v Speaker 4>that as much as you know? Yes, yes, okay, absolutely, Hey,

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<v Speaker 4>you know it is interesting too, And Tim and I

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<v Speaker 4>talk about this all the time in terms of private markets,

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<v Speaker 4>how much investors are certainly interested in that and that's

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<v Speaker 4>where they want exposure. I am curious about what are

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<v Speaker 4>the conversations you're having on the ground in Davos when

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<v Speaker 4>it comes to private markets, private interest.

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<v Speaker 1>Give us your take, So if you're talking to the

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<v Speaker 1>capital markets or investing crowd, this is a theme that

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<v Speaker 1>is a global theme. Our biggest growth this last year

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<v Speaker 1>came from our European and UK offices. But the other

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<v Speaker 1>big theme that's here in Davos is AI. AI is everywhere.

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<v Speaker 1>You cannot believe. It's in every conversation and if you

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<v Speaker 1>walk down the main strip in Davos, AI is the

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<v Speaker 1>theme of the conference for sure. And nineteen of the

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<v Speaker 1>largest AI companies are tracked by Forge because they're still private.

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<v Speaker 1>So the conversations are NonStop about the convergence of both

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<v Speaker 1>the AI sector.

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<v Speaker 2>Are any non AI companies getting any love right now?

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<v Speaker 1>Oh yeah? The number two sector is defense and aerospace,

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<v Speaker 1>and it was up one hundred and forty percent this year.

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<v Speaker 1>Is that just space that's oh no, that's SpaceX, that's Andrail,

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<v Speaker 1>that's Adventurer, there's there's a there's a whole bunch of

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<v Speaker 1>them in there, and they're really interesting to the global

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<v Speaker 1>audience too, do you know? Do do? Okay?

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<v Speaker 2>So I want to remind everybody what you do. You

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<v Speaker 2>you you basically take you allow people who own equi

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<v Speaker 2>in private companies to sell, to find buyers who are

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<v Speaker 2>credited investors to then buy the shares. So like, if

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<v Speaker 2>you're an early employee at Andrail, for example, and you

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<v Speaker 2>have equity and you want to buy a house, maybe

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<v Speaker 2>you want to get some liquidity, you can go to

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<v Speaker 2>Forge Global and you're going to prepare them with a buyer.

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<v Speaker 1>Correct. Yeah, that's one use case.

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<v Speaker 2>Okay, So are you having because the growth of these

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<v Speaker 2>companies has been so quick, are you having trouble finding

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<v Speaker 2>people who want to part ways with their shares because

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<v Speaker 2>they're like, hey, this is a rocket ship and I

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<v Speaker 2>want to hold on for as long as possible.

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<v Speaker 1>Yeah, depending on what company you're talking about, there is

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<v Speaker 1>a supply and demand dynamic that's always at play for

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<v Speaker 1>the most popular, high performing sectors, and that's AI, defense

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<v Speaker 1>and narrow space and fintech is up over one hundred

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<v Speaker 1>percent this year. Those companies are sought after, and you

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<v Speaker 1>do have supply and demand in balances. That's not true

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<v Speaker 1>across the entirety of the six hundred names or so

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<v Speaker 1>that trade on Forge, but in the hot ones, yes,

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<v Speaker 1>there's a lot more demand than there is supply.

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<v Speaker 4>What about what kind of activity are you seeing around

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<v Speaker 4>SpaceX specifically?

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<v Speaker 1>I mean SpaceX and the big AI names are the

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<v Speaker 1>top names that trade at Forge. They're in the top

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<v Speaker 1>ten and they have been. I mean SpaceX has been

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<v Speaker 1>a sought after company for the last five years, but

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<v Speaker 1>it's really been the last two years. Their broad base

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<v Speaker 1>of investors have really poured into it. You know.

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<v Speaker 4>I think what's fascinating, Kelly, and this again goes back

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<v Speaker 4>to something we've been talking about for the last two,

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<v Speaker 4>three four cone years and you see it at Milken

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<v Speaker 4>just the rise of private markets, private credit and the

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<v Speaker 4>ability of all this money that's out there that allows

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<v Speaker 4>something like an open AI to stay private longer, or

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<v Speaker 4>you know SpaceX or you know, pick your name. Do

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<v Speaker 4>you see that can continuing or tell me how you

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<v Speaker 4>figure out whether that continues.

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<v Speaker 1>The more participation there is in this market, the more

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<v Speaker 1>capital there is. And so at Forge we see these

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<v Speaker 1>two dynamics. One is liquidity. People want to sell their stock.

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<v Speaker 1>If a company's been private for seventeen or eighteen years

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<v Speaker 1>and you'll work there for eight or ten, or even

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<v Speaker 1>if you were an early investor, you have a fund

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<v Speaker 1>that's got a tenured life for a duration, you need

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<v Speaker 1>to start providing liquidity so you can raise your next

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<v Speaker 1>capital raise. So there's a liquidity component to the market,

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<v Speaker 1>and then there's a capital raise. Open AI raised forty

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<v Speaker 1>billion dollars privately this year. Think about that within the

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<v Speaker 1>context of the IPO window and ask yourself this question.

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<v Speaker 1>If AI companies can raise that much money privately, why

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<v Speaker 1>are they going public? SpaceX has managed to raise billions

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<v Speaker 1>over the duration of their life, and so you're going

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<v Speaker 1>to continue to see this As Schwab brings forty two

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<v Speaker 1>million investors into this market and twelve trillion dollars that

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<v Speaker 1>capital is not just going to buy someone shares. That

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<v Speaker 1>capital will eventually find its way on balance sheets, so

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<v Speaker 1>that's what you're going to see.

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<v Speaker 2>So you're saying it increases, it changes the supply and

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<v Speaker 2>demand dynamic in your view absolutely.

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<v Speaker 1>Because you're not relying just on selling shareholders.

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<v Speaker 2>The Schwab investors that will have access to this do

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<v Speaker 2>they have to be accredited investors like I have to

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<v Speaker 2>have the rules like that accredit investors have.

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<v Speaker 1>So here's the interesting answer to that question. If you're

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<v Speaker 1>buying on platform directly into a company or into a

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<v Speaker 1>fund structure today in a single name, you have to

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<v Speaker 1>be accredited. However, in the next few weeks we are

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<v Speaker 1>launching and this will obviously be part of Schwab, the

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<v Speaker 1>first non accredited index fund that's got sixty of the

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<v Speaker 1>biggest private companies in AI fintech, all the sectors at

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<v Speaker 1>twenty five hundred dollars minimums for non accredited investors, so

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<v Speaker 1>you can get a slice of the hottest names in

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<v Speaker 1>the world through the Forged Megacorn Fund, which has been

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<v Speaker 1>in existence for accrediteds and for qps for a few years,

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<v Speaker 1>but now we're making it available as a publicly listed

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<v Speaker 1>fund that will be available in twenty twenty six.

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<v Speaker 4>And any rules in terms of moving in and out

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<v Speaker 4>of it or how liquid will that be.

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<v Speaker 1>It's going to probably have a quarterly liquidation option, isn't

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<v Speaker 1>It is an interval fund, so you'll be able to

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<v Speaker 1>get in and out of it quarterly, but it will

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<v Speaker 1>be available to everybody, every investor in the country.

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<v Speaker 2>What allowed you to make that shift? Is it a

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<v Speaker 2>regulatory change that allowed.

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<v Speaker 1>That The regulatory environment allows for interval fund structures. But

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<v Speaker 1>to actually pull it off, we acquired a really interesting

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<v Speaker 1>company this last year called Liquidity, whose mission was to

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<v Speaker 1>build publicly available funds that hold privates and they were

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<v Speaker 1>able to structure the fund in such a way using

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<v Speaker 1>Forge's data to get through the regulatory requirements to make

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<v Speaker 1>this a publicly listed fund. Now you have to have access.

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<v Speaker 1>So for this fund to be successful, we've got to

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<v Speaker 1>have access to a lot of supply. And that's what

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<v Speaker 1>I was answering earlier, Tim to your question about is

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<v Speaker 1>it just selling shareholders? It will be some combination of

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<v Speaker 1>selling shareholders as well as balance sheet capital.

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<v Speaker 2>Kelly, great, great conversation, Thanks for staying up a little

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<v Speaker 2>later over there in Davos and spending some time with us.

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<v Speaker 2>We're going to have to get you back on in

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<v Speaker 2>a little bit. That's Kelly Rodriquez, CEO of Forge Global,

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<v Speaker 2>soon to be part of the Charles Schwab Corporation.