1 00:00:00,080 --> 00:00:06,040 Speaker 1: M This is Mesters in Business with Very Results on 2 00:00:06,240 --> 00:00:10,480 Speaker 1: Bluebird Radio. This week on the podcast, I have an 3 00:00:10,480 --> 00:00:15,360 Speaker 1: extra special guest, David Conrod. What a fascinating career in 4 00:00:15,400 --> 00:00:20,160 Speaker 1: the world of capital raising and private equity from Googgenheim 5 00:00:20,239 --> 00:00:24,320 Speaker 1: Partners to Focus Point Capital. He really has seen just 6 00:00:24,440 --> 00:00:28,200 Speaker 1: a little bit of everything and is very, very knowledgeable 7 00:00:28,240 --> 00:00:32,360 Speaker 1: about how that side of the investment world works. If 8 00:00:32,440 --> 00:00:35,879 Speaker 1: you're at all interested in a variety of diversified and 9 00:00:36,000 --> 00:00:40,720 Speaker 1: non correlated strategies, what it's like raising capital for both 10 00:00:40,760 --> 00:00:44,720 Speaker 1: emerging and existing managers and playing in the world of 11 00:00:45,360 --> 00:00:51,240 Speaker 1: credit lease back's, music industry, royalty funding, as well as 12 00:00:51,280 --> 00:00:55,520 Speaker 1: traditional private equity, you're gonna find this to be absolutely fascinating. 13 00:00:55,560 --> 00:01:00,040 Speaker 1: With no further ado, my conversation with Focused Point of 14 00:01:00,240 --> 00:01:07,080 Speaker 1: Capital Groups David Conrad. This is Mesters in Business with 15 00:01:07,240 --> 00:01:12,319 Speaker 1: Very Results on Bloomberg Radio. My special guest this week 16 00:01:12,520 --> 00:01:16,000 Speaker 1: is David Conrad. He is the co founder and CEO 17 00:01:16,319 --> 00:01:20,560 Speaker 1: at Focused Point by the Capital Group and Lansing Investments. 18 00:01:20,959 --> 00:01:24,960 Speaker 1: He played a key role in sourcing six separate Googgenheim 19 00:01:25,200 --> 00:01:30,200 Speaker 1: sponsored UH strategies. Collectively those raised over six billion dollars 20 00:01:30,240 --> 00:01:33,400 Speaker 1: of limited partner money He also helped to establish the 21 00:01:33,440 --> 00:01:37,360 Speaker 1: Guggenheim Private Fund Group with more than seven billion dollars 22 00:01:37,360 --> 00:01:42,480 Speaker 1: in fund allocations. David Conrad, Welcome to Bloomberg Verry. Thank 23 00:01:42,520 --> 00:01:46,000 Speaker 1: you glad to be here. So, so let's start in 24 00:01:46,040 --> 00:01:49,240 Speaker 1: the middle. You've been working in the asset management industry 25 00:01:49,240 --> 00:01:51,640 Speaker 1: for a long time, but let's start with your role 26 00:01:51,720 --> 00:01:55,320 Speaker 1: at Guggenheim Partners. You were there when the firm was 27 00:01:55,400 --> 00:01:58,880 Speaker 1: formed in two thousand. Tell us about your role in 28 00:01:58,920 --> 00:02:03,360 Speaker 1: what you did for them. Sure, I left HSBC Group 29 00:02:03,360 --> 00:02:07,120 Speaker 1: at the end of and UH. Some friends of mine 30 00:02:08,080 --> 00:02:11,679 Speaker 1: that I'd known a long time had came on came 31 00:02:11,680 --> 00:02:14,760 Speaker 1: out of the fixed income side at a number of 32 00:02:14,800 --> 00:02:19,240 Speaker 1: investment banks, generally UH, top I, I Rated Mortgage Research 33 00:02:19,320 --> 00:02:25,160 Speaker 1: and more traders fixed income salesman and UH. To raise 34 00:02:25,240 --> 00:02:30,160 Speaker 1: third party capital a broker dealers required. So I established 35 00:02:30,160 --> 00:02:33,880 Speaker 1: the little fundraised up group at this small broker dealer 36 00:02:34,520 --> 00:02:38,560 Speaker 1: and UH with the knowledge that we were going to 37 00:02:38,680 --> 00:02:41,639 Speaker 1: try to create a financial brand out of a museum name. 38 00:02:42,560 --> 00:02:45,920 Speaker 1: And one of the founders of the broker dealer was 39 00:02:46,040 --> 00:02:49,720 Speaker 1: very close to the Guggenheim family, the father and the 40 00:02:49,840 --> 00:02:55,320 Speaker 1: son that were owners of this brand. And we spent 41 00:02:55,600 --> 00:02:59,119 Speaker 1: a little bit of time during two thousand and October 42 00:02:59,160 --> 00:03:03,400 Speaker 1: two thousand, we merged the broker dealer with the Googgenheim 43 00:03:03,440 --> 00:03:07,680 Speaker 1: brothers created Googenheim Partners, and then also in the same 44 00:03:07,720 --> 00:03:10,400 Speaker 1: month closed on I believe it was twenty eight million 45 00:03:10,440 --> 00:03:13,359 Speaker 1: and working capital, and then we and then we had 46 00:03:13,360 --> 00:03:16,200 Speaker 1: a reverse merger also in the same month with a 47 00:03:16,240 --> 00:03:19,680 Speaker 1: commercial paper conduit in Chicago by the name of Liberty Hampshire. 48 00:03:20,280 --> 00:03:23,639 Speaker 1: And the CEO and founder of Liberty Hampshire, Mark Walter, 49 00:03:23,840 --> 00:03:28,440 Speaker 1: is still Googgenheim CEO today. That's quite interesting. How did 50 00:03:28,520 --> 00:03:32,799 Speaker 1: being at Guggenheim when it was founded affect both your 51 00:03:32,880 --> 00:03:36,760 Speaker 1: career and the way you think about private equity. I 52 00:03:37,120 --> 00:03:40,200 Speaker 1: was exposed to private equity when I was at HSBC 53 00:03:40,360 --> 00:03:44,520 Speaker 1: Group after business school and UH that's where I was 54 00:03:44,520 --> 00:03:48,160 Speaker 1: exposed to it in the early nineteen nineties. UH, when 55 00:03:48,160 --> 00:03:52,600 Speaker 1: I HSBC was on an acquisition Binge in the late 56 00:03:52,640 --> 00:03:56,320 Speaker 1: eighties early nineties and acquired some asset management businesses in 57 00:03:56,320 --> 00:04:01,200 Speaker 1: the US, and when I graduated business school, UH joined 58 00:04:01,320 --> 00:04:06,600 Speaker 1: join them and I was generally calling on institutions raising 59 00:04:06,720 --> 00:04:11,640 Speaker 1: long only Southeast Asian equity mandates and at that time 60 00:04:11,720 --> 00:04:16,520 Speaker 1: only the largest pageant funds and institutional investors would make 61 00:04:16,520 --> 00:04:19,880 Speaker 1: an allocation to such a narrow strategy, and so it 62 00:04:20,000 --> 00:04:23,880 Speaker 1: got me. Uh, it allowed me to start a dialogue 63 00:04:23,920 --> 00:04:26,800 Speaker 1: with some of the largest institutional institutional investors in the 64 00:04:26,880 --> 00:04:31,680 Speaker 1: United States marketing those products. And through that I was 65 00:04:31,720 --> 00:04:36,200 Speaker 1: introduced to an individual that owned twent of a management 66 00:04:36,240 --> 00:04:40,440 Speaker 1: company and HSBC owned of where. He had two small, 67 00:04:41,279 --> 00:04:46,000 Speaker 1: thirty five million dollar private equity funds focused on Southeast 68 00:04:46,040 --> 00:04:51,000 Speaker 1: Asia and China. Performance looked pretty interesting and his goal 69 00:04:51,040 --> 00:04:55,479 Speaker 1: in ninet I believe ninety three was to try to 70 00:04:55,560 --> 00:04:59,080 Speaker 1: raise some capital from the United States. And was that 71 00:04:59,240 --> 00:05:02,719 Speaker 1: your entree into the private equity Yeah, that was my 72 00:05:02,960 --> 00:05:07,000 Speaker 1: entree into and we went down to I think it 73 00:05:07,040 --> 00:05:11,599 Speaker 1: was Mary Lynch to talk to their fund placement. My 74 00:05:11,720 --> 00:05:13,760 Speaker 1: boss was the CEO. There were six of us in. 75 00:05:13,800 --> 00:05:18,320 Speaker 1: The CEO told the general partner, a guy named David Patterson, 76 00:05:18,640 --> 00:05:22,680 Speaker 1: you know, take myself down there, and I saw the 77 00:05:22,720 --> 00:05:26,200 Speaker 1: fees that were uh that Mary Lynch would earn on 78 00:05:26,279 --> 00:05:29,200 Speaker 1: raising a private equity fund versus the fees you know, 79 00:05:29,240 --> 00:05:32,520 Speaker 1: I was getting raising the long only and that was 80 00:05:32,560 --> 00:05:37,080 Speaker 1: an easy decision. Uh. From my standpoint, this looks really interesting. 81 00:05:37,120 --> 00:05:40,119 Speaker 1: If I can raise you know, two or fifty million 82 00:05:40,160 --> 00:05:43,240 Speaker 1: dollars at a two percent fee, that looks that looks 83 00:05:43,279 --> 00:05:46,520 Speaker 1: pretty interesting, and you know, maybe I know some of 84 00:05:46,520 --> 00:05:48,680 Speaker 1: the people that might take a look at this, and 85 00:05:48,760 --> 00:05:51,120 Speaker 1: so that's how it started. And you raised a little 86 00:05:51,160 --> 00:05:55,240 Speaker 1: more than two little bit. We so we we raised 87 00:05:55,279 --> 00:05:57,839 Speaker 1: I think it was the largest Asian private equity fund ever. 88 00:05:57,960 --> 00:06:01,159 Speaker 1: We closed it and I think December twenty second, nine 89 00:06:02,080 --> 00:06:06,159 Speaker 1: four and we raised two hundred fifty and then we 90 00:06:06,240 --> 00:06:09,760 Speaker 1: raised the six fund in India. In the mid nineties, 91 00:06:10,200 --> 00:06:13,960 Speaker 1: HSBC spotsored the team to invest in India and South 92 00:06:14,000 --> 00:06:17,560 Speaker 1: Asia is probably one of the earlier ones then. Um 93 00:06:17,880 --> 00:06:21,640 Speaker 1: I remember a drive with an advisory board meeting from 94 00:06:21,680 --> 00:06:26,000 Speaker 1: Agra to Jaipur. I think it took eight hours. Would 95 00:06:26,000 --> 00:06:28,640 Speaker 1: be the equivalent of driving from New York to Hartford 96 00:06:29,279 --> 00:06:33,480 Speaker 1: eight to eight hours. So not exactly. India has changed 97 00:06:33,560 --> 00:06:35,800 Speaker 1: quite a bit from their the mid nineties. And then 98 00:06:35,800 --> 00:06:41,000 Speaker 1: we raised a successor fund for Asia. After the taype 99 00:06:41,000 --> 00:06:44,839 Speaker 1: Ot crisis in Indonesia, Rupaia went from I think two 100 00:06:44,880 --> 00:06:48,560 Speaker 1: thousand to twenty thousand overnight, and then the U S 101 00:06:48,600 --> 00:06:51,479 Speaker 1: firms came into Southeast Asia. You know, and saw that 102 00:06:51,520 --> 00:06:55,000 Speaker 1: as a big opportunity. How did those funds do because 103 00:06:55,560 --> 00:06:57,520 Speaker 1: when I think of Asia, I can't help but think 104 00:06:57,560 --> 00:07:00,599 Speaker 1: of the peak in Japan in a D nine and 105 00:07:00,680 --> 00:07:04,320 Speaker 1: that's subsequently done poorly. I guess when you're doing private equity, 106 00:07:04,480 --> 00:07:08,039 Speaker 1: you don't care about those marta markets. You're working off 107 00:07:08,080 --> 00:07:11,120 Speaker 1: a working business. A lot of the funds that were 108 00:07:11,120 --> 00:07:15,320 Speaker 1: fully invested by the time of the tay Bot crisis 109 00:07:15,360 --> 00:07:18,760 Speaker 1: and the currency crisis in late ninety seven early nine 110 00:07:18,840 --> 00:07:23,600 Speaker 1: JANU we're really hurt. You know. They were generally borrowing 111 00:07:23,680 --> 00:07:27,840 Speaker 1: in U s dours and their revenues now were reduced 112 00:07:27,880 --> 00:07:31,840 Speaker 1: by you know, ten ten times, and so it was. 113 00:07:32,160 --> 00:07:36,360 Speaker 1: It was tough. So once we raised the successor fund, 114 00:07:37,080 --> 00:07:40,040 Speaker 1: uh the America, all the US private equity firms started 115 00:07:40,040 --> 00:07:42,520 Speaker 1: to come into Asia forming groups. All all the big 116 00:07:42,600 --> 00:07:46,520 Speaker 1: names started to hire teams to take advantage as they're 117 00:07:46,560 --> 00:07:51,080 Speaker 1: trying to expand their footprint, and uh HSBC stayed in 118 00:07:51,120 --> 00:07:53,920 Speaker 1: the I would say the lower mid market. Raised another 119 00:07:54,040 --> 00:07:58,120 Speaker 1: fund in two thousand to two thousand three. Uh I 120 00:07:58,240 --> 00:08:00,760 Speaker 1: was at Googleheim at that time and they became a client. 121 00:08:01,000 --> 00:08:04,240 Speaker 1: So it worked out well that not only the group, 122 00:08:04,920 --> 00:08:07,120 Speaker 1: the group in Asia that we raised capital four. But 123 00:08:07,360 --> 00:08:11,160 Speaker 1: HSBC had a group in Latin America and also a 124 00:08:11,200 --> 00:08:14,800 Speaker 1: group in in Europe that spun out and as later 125 00:08:14,880 --> 00:08:19,080 Speaker 1: rebranded themselves Montague. But we UH, we raised a little 126 00:08:19,080 --> 00:08:24,000 Speaker 1: over two point two billion from Montague in early two thousand's. 127 00:08:24,040 --> 00:08:27,920 Speaker 1: So you you start focus Point Private Capital in two 128 00:08:29,120 --> 00:08:32,160 Speaker 1: How was this different from what you've done previously in 129 00:08:32,200 --> 00:08:36,720 Speaker 1: your career? And what services does focus Points shall provide? Yeah, 130 00:08:36,920 --> 00:08:40,880 Speaker 1: so we learned a lot at HSBC. We had it's 131 00:08:40,880 --> 00:08:43,679 Speaker 1: a minority shareholder, is a A A is an assurance company, 132 00:08:43,760 --> 00:08:46,240 Speaker 1: and that that seated a number of the funds that 133 00:08:46,320 --> 00:08:50,160 Speaker 1: we raised at Guggenheim. So in addition to using the 134 00:08:50,960 --> 00:08:54,680 Speaker 1: broker dealer at Googgenheim to raise third party capital UH, 135 00:08:54,800 --> 00:08:57,960 Speaker 1: Googenheim was a principal and a number of different strategies 136 00:08:58,360 --> 00:09:03,480 Speaker 1: H and we we would identify the management team, the 137 00:09:03,520 --> 00:09:07,400 Speaker 1: insurance company, would would provide some seed capital to get 138 00:09:07,400 --> 00:09:09,520 Speaker 1: some investments completed, and then we would go out to 139 00:09:09,559 --> 00:09:13,520 Speaker 1: the market and raise the initial fund and UH and 140 00:09:13,559 --> 00:09:16,400 Speaker 1: then we would generally raise a follow on fund two 141 00:09:16,480 --> 00:09:20,680 Speaker 1: or fund three. UH and a number of credit related 142 00:09:20,720 --> 00:09:24,480 Speaker 1: strategies as well as well as some equity UH. Following 143 00:09:24,520 --> 00:09:29,559 Speaker 1: the financial crisis and oh eight UH Googenheim, I would say, 144 00:09:29,640 --> 00:09:33,640 Speaker 1: less interested in in seeding new managers and more using 145 00:09:33,679 --> 00:09:37,480 Speaker 1: the balance sheet that they were building to act more 146 00:09:37,520 --> 00:09:42,520 Speaker 1: as a direct investor. UH. Middle of a lot of 147 00:09:42,600 --> 00:09:47,319 Speaker 1: us on the capital raising private fund group inside Googenheim 148 00:09:47,400 --> 00:09:52,520 Speaker 1: became independent. We're still still very close with a number 149 00:09:52,559 --> 00:09:55,720 Speaker 1: of the people that were there when we we were there, 150 00:09:56,320 --> 00:10:00,600 Speaker 1: and UH focus Point raises capital for price it funds 151 00:10:00,640 --> 00:10:06,000 Speaker 1: and direct transactions. And I would say it's similar to 152 00:10:06,920 --> 00:10:09,080 Speaker 1: what we're doing at Guggenheim and that we were all 153 00:10:09,679 --> 00:10:15,560 Speaker 1: we're continually meeting with investors in general partners. One dynamic 154 00:10:15,640 --> 00:10:20,080 Speaker 1: I'm noticing is increasingly the capital raising business we're acting 155 00:10:20,200 --> 00:10:23,679 Speaker 1: like almost like a search firm, because we're continually meeting 156 00:10:23,720 --> 00:10:29,680 Speaker 1: investment talent, whether it's talented UH investors inside a private 157 00:10:29,679 --> 00:10:35,959 Speaker 1: equity firm other other independent sponsors that are more comfortable 158 00:10:36,200 --> 00:10:39,520 Speaker 1: or confident in their ability to find profitable transactions. And 159 00:10:40,120 --> 00:10:42,199 Speaker 1: I've been unable to convince them to do a fund 160 00:10:43,240 --> 00:10:48,079 Speaker 1: or talented limited partners that have been you know, investing 161 00:10:48,120 --> 00:10:50,280 Speaker 1: in the asset class for a number of years. And 162 00:10:50,520 --> 00:10:53,880 Speaker 1: UH we continue to see it evolved but you know, 163 00:10:53,960 --> 00:10:57,560 Speaker 1: looking back, you know we've probably raised capital for over 164 00:10:57,600 --> 00:11:01,959 Speaker 1: twenty first time funds and which requires a lot of work. 165 00:11:02,080 --> 00:11:05,600 Speaker 1: But the reason you do it is for the successor funds. 166 00:11:05,880 --> 00:11:08,880 Speaker 1: So let's talk about that, because I tend to think 167 00:11:08,920 --> 00:11:12,960 Speaker 1: in terms of venture capital doing a seed round and 168 00:11:12,960 --> 00:11:14,839 Speaker 1: then a follow up a round, or a B around 169 00:11:14,920 --> 00:11:18,079 Speaker 1: or C round. When you talk about successor funds, are 170 00:11:18,120 --> 00:11:21,400 Speaker 1: you going back to the same funds you seated or 171 00:11:21,480 --> 00:11:25,480 Speaker 1: is it different projects, different investments. I'll give you an 172 00:11:25,520 --> 00:11:32,240 Speaker 1: example at at Guggenheim for example. So we following early 173 00:11:32,280 --> 00:11:39,920 Speaker 1: two thousand's after after nine eleven, uh low air traffic 174 00:11:40,000 --> 00:11:44,360 Speaker 1: was way off and UH A lot of the airlines 175 00:11:44,440 --> 00:11:47,600 Speaker 1: went from a wide body to narrow body. You notice 176 00:11:47,640 --> 00:11:50,440 Speaker 1: that when you fly across country now it's a single aisle, 177 00:11:50,520 --> 00:11:54,200 Speaker 1: not at double aisle. And we were introduced to a 178 00:11:54,280 --> 00:11:57,480 Speaker 1: group that spun out of British Aero Space and they 179 00:11:57,480 --> 00:12:01,240 Speaker 1: had been buying commercial aircraft on their own account UH 180 00:12:01,280 --> 00:12:03,520 Speaker 1: and engines that power them. And they were backed by 181 00:12:04,640 --> 00:12:08,400 Speaker 1: big high net worth family on the West coast that 182 00:12:08,440 --> 00:12:12,080 Speaker 1: would was the equity partner. It would be impossible to 183 00:12:12,160 --> 00:12:13,880 Speaker 1: go to a bank to borrow money to buy a 184 00:12:13,920 --> 00:12:17,800 Speaker 1: seven forty seven without you know, revealing who the sourcery 185 00:12:17,880 --> 00:12:20,680 Speaker 1: or equity was. So they had to institutionalize their business, 186 00:12:21,480 --> 00:12:26,040 Speaker 1: and so Guggenheim did that and by committing some initial capital, 187 00:12:26,080 --> 00:12:29,199 Speaker 1: we went out and uh, the team went out and 188 00:12:29,600 --> 00:12:33,560 Speaker 1: got some investments completed, and it was as the load 189 00:12:33,640 --> 00:12:36,880 Speaker 1: factors were off. Uh, they were buying a lot of 190 00:12:36,920 --> 00:12:40,439 Speaker 1: wide body seven four sevens and converting them into freighter 191 00:12:41,000 --> 00:12:43,880 Speaker 1: to take advantage of the global supply chain moving from 192 00:12:43,960 --> 00:12:46,880 Speaker 1: just to just in time delivery. So component parts and 193 00:12:46,960 --> 00:12:50,480 Speaker 1: things like that coming out of Asia to the West wanted, 194 00:12:51,559 --> 00:12:54,600 Speaker 1: you know, so there was a demand for seven forty seven. 195 00:12:54,720 --> 00:12:59,640 Speaker 1: So we the team recognized that opportunity and did it. 196 00:13:00,000 --> 00:13:04,560 Speaker 1: And UH, it's actually a big job to convert. You know, 197 00:13:04,640 --> 00:13:06,240 Speaker 1: you have to cut a hole in this drill a 198 00:13:06,280 --> 00:13:08,200 Speaker 1: big hole on the side of the aircraft. It's got 199 00:13:08,200 --> 00:13:13,120 Speaker 1: to be structurally sound, strengthen the floor. But we were 200 00:13:13,120 --> 00:13:16,720 Speaker 1: pretty successful with that raised. Uh got I think six 201 00:13:16,800 --> 00:13:21,280 Speaker 1: investments completed, proved out the thesis, and we raised seven 202 00:13:21,320 --> 00:13:24,760 Speaker 1: million for fund one and the successor fund. Get around 203 00:13:24,840 --> 00:13:29,240 Speaker 1: answering your question is, UH, was seven thirty seven. We 204 00:13:29,520 --> 00:13:31,800 Speaker 1: got up to seven forty one. We couldn't quite get 205 00:13:31,840 --> 00:13:35,040 Speaker 1: to seven forty seven in capital, and so we backed 206 00:13:35,040 --> 00:13:38,400 Speaker 1: it down to seven thirty seven and through story and 207 00:13:38,640 --> 00:13:42,880 Speaker 1: uh but and now what did the fund investment? They 208 00:13:43,200 --> 00:13:45,800 Speaker 1: did more. They they the market had changed, and so 209 00:13:45,840 --> 00:13:49,680 Speaker 1: they started doing some new aircraft. Boeing came out with 210 00:13:49,720 --> 00:13:53,800 Speaker 1: a new seven four seven dash eight and uh, so 211 00:13:53,840 --> 00:13:57,240 Speaker 1: they put in an order for some new ones. Uh 212 00:13:57,320 --> 00:14:01,680 Speaker 1: and uh the existing fund one, the tire portfolio was 213 00:14:01,720 --> 00:14:06,320 Speaker 1: sold to a another private equity firm had a listed 214 00:14:06,400 --> 00:14:11,560 Speaker 1: vehicle to do aircraft leasing and they they needed to grow, 215 00:14:11,640 --> 00:14:14,120 Speaker 1: so they just bought the entire portfolio. So we had 216 00:14:14,160 --> 00:14:17,280 Speaker 1: a we we generated a nice return in a very 217 00:14:17,320 --> 00:14:20,760 Speaker 1: short period of time, proved that that had a nice 218 00:14:20,800 --> 00:14:24,840 Speaker 1: track record, which enabled us to raise fund too. Let's 219 00:14:24,840 --> 00:14:27,280 Speaker 1: talk a little bit about some of the asset managers 220 00:14:27,320 --> 00:14:30,760 Speaker 1: you work with and help raise money through. What walk 221 00:14:30,840 --> 00:14:35,600 Speaker 1: us through that process from due diligence to investing. What 222 00:14:35,800 --> 00:14:39,320 Speaker 1: is that process like? It's it's a lot of detail, 223 00:14:39,360 --> 00:14:41,920 Speaker 1: and it's a lot of work, but it's also uh, 224 00:14:42,040 --> 00:14:45,240 Speaker 1: you know, having done it a lot, it's pattern recognition. 225 00:14:45,960 --> 00:14:50,760 Speaker 1: And so we've met thousands and thousands of general partners 226 00:14:50,920 --> 00:14:55,920 Speaker 1: looking to raise looking to raise capital, whether it's a 227 00:14:55,920 --> 00:15:00,400 Speaker 1: new team that's spinning out from a larger invest a firm, 228 00:15:00,600 --> 00:15:04,040 Speaker 1: or it may be a team that's proven themselves and 229 00:15:04,040 --> 00:15:07,240 Speaker 1: they're looking to raise capital and they'd like to meet 230 00:15:07,280 --> 00:15:09,880 Speaker 1: some new investors. On the due diligence side, there's a 231 00:15:09,960 --> 00:15:11,640 Speaker 1: number of things to do. We we make a lot 232 00:15:11,680 --> 00:15:15,000 Speaker 1: of reference calls, talk to the CEOs of the companies 233 00:15:15,040 --> 00:15:18,240 Speaker 1: that they've backed to verify the track record that they're presenting. 234 00:15:19,480 --> 00:15:22,880 Speaker 1: The reason we do that it's almost a triangle to 235 00:15:22,920 --> 00:15:26,280 Speaker 1: see if they actually do have a story straight. Uh, 236 00:15:26,280 --> 00:15:29,440 Speaker 1: these gps are all smart, clever guys, and they're gonna 237 00:15:29,480 --> 00:15:31,800 Speaker 1: tell us about all the great deals that they've done 238 00:15:31,840 --> 00:15:35,560 Speaker 1: and their track record and all that, and then verifying 239 00:15:35,600 --> 00:15:38,680 Speaker 1: that by speaking to the CEOs to confirm that these 240 00:15:38,680 --> 00:15:41,000 Speaker 1: are the guys that actually did the deals. And then 241 00:15:41,360 --> 00:15:43,680 Speaker 1: we try to look at their files to the files 242 00:15:43,720 --> 00:15:45,960 Speaker 1: track with what the CEO told us and what they 243 00:15:46,040 --> 00:15:49,600 Speaker 1: told us, and if those three things match up, they 244 00:15:49,600 --> 00:15:53,160 Speaker 1: probably do have a process and it's probably it's probably okay. 245 00:15:53,520 --> 00:15:55,640 Speaker 1: Then when you when you say GP, you're talking about 246 00:15:55,680 --> 00:15:58,280 Speaker 1: the general partners who are running the fund correct as 247 00:15:58,280 --> 00:16:01,240 Speaker 1: opposed to the LPs, the limited partners, the people putting 248 00:16:01,600 --> 00:16:07,200 Speaker 1: the capital investing. That's that's exactly right. And so you know, 249 00:16:07,240 --> 00:16:09,240 Speaker 1: I tell we one of the things we do is 250 00:16:09,280 --> 00:16:12,160 Speaker 1: we tell the gps, the general partners that you know, 251 00:16:12,240 --> 00:16:16,200 Speaker 1: they're in the automobile industry. They're selling cars. Every every 252 00:16:16,240 --> 00:16:18,560 Speaker 1: GP that comes in to see us is a smart, 253 00:16:19,080 --> 00:16:23,120 Speaker 1: very clever guy. And these LPs can buy any car 254 00:16:23,200 --> 00:16:25,920 Speaker 1: they want, you know, and they're probably gonna do fine 255 00:16:26,680 --> 00:16:29,920 Speaker 1: and uh and so so the question is why should 256 00:16:29,920 --> 00:16:33,000 Speaker 1: they buy your car? Correct? Our job is to try 257 00:16:33,040 --> 00:16:36,280 Speaker 1: to identify that investor that is looking for a differentiated 258 00:16:36,360 --> 00:16:41,400 Speaker 1: strategy where it's additive to their portfolio to bring in 259 00:16:41,440 --> 00:16:46,400 Speaker 1: another middle market buyout firm. Right now, everybody or a 260 00:16:46,440 --> 00:16:49,560 Speaker 1: lot of growth equity and the software firms are doing 261 00:16:50,160 --> 00:16:56,360 Speaker 1: very very well. Most funds are doing well over three x, right, 262 00:16:56,520 --> 00:16:59,560 Speaker 1: and eyes glaze over almost with these limited partners. To 263 00:17:00,280 --> 00:17:03,640 Speaker 1: try to convince a limited partner to do more work. 264 00:17:04,119 --> 00:17:06,960 Speaker 1: And you know what, I need you to substitute your 265 00:17:07,000 --> 00:17:10,320 Speaker 1: existing manager for this new group. Uh, and I want 266 00:17:10,359 --> 00:17:13,600 Speaker 1: you to take six months of extra work on your 267 00:17:13,720 --> 00:17:17,120 Speaker 1: end to get the same return. Is a ton That's 268 00:17:17,119 --> 00:17:19,359 Speaker 1: a tough one, you know, I need to have a 269 00:17:19,440 --> 00:17:23,439 Speaker 1: manager that's got a differentiated strategy that is additive to 270 00:17:23,520 --> 00:17:26,520 Speaker 1: their portfolio, because that's what a lot of what a 271 00:17:26,520 --> 00:17:30,440 Speaker 1: limited partner is thinking about. How can I improve diversify 272 00:17:30,840 --> 00:17:36,160 Speaker 1: UH portfolio makes a lot of sense. So hypothetically, you 273 00:17:36,359 --> 00:17:40,239 Speaker 1: run these managers through UM your process, you check off 274 00:17:40,280 --> 00:17:44,359 Speaker 1: a lot of boxes. Once the LPs put capital to 275 00:17:44,440 --> 00:17:47,760 Speaker 1: work with these gps, what are your responsibilities? Do they 276 00:17:47,880 --> 00:17:50,320 Speaker 1: end at that point or is it an ongoing relationship. 277 00:17:51,440 --> 00:17:55,159 Speaker 1: Generally it's you know, if they're handed off to the 278 00:17:55,200 --> 00:17:57,280 Speaker 1: g P. You know, our job is to manage the 279 00:17:57,359 --> 00:18:02,359 Speaker 1: process from the initial contact with the prospective investor. I 280 00:18:02,400 --> 00:18:08,040 Speaker 1: think there there are suspect before their prospect and so 281 00:18:08,440 --> 00:18:13,200 Speaker 1: we we go out to several thousand investors, probably initially 282 00:18:14,000 --> 00:18:17,440 Speaker 1: to try to identify in some prospects, and then once 283 00:18:17,480 --> 00:18:21,440 Speaker 1: we have an initial meeting or initial video call, we 284 00:18:21,680 --> 00:18:25,359 Speaker 1: uh it's our job to help manage that process and 285 00:18:25,400 --> 00:18:28,639 Speaker 1: move the investor through the different stages that they're gonna 286 00:18:28,640 --> 00:18:33,120 Speaker 1: be thinking about, you know, towards making a positive decision, 287 00:18:33,240 --> 00:18:36,160 Speaker 1: and that could be a second meeting to meet other 288 00:18:36,240 --> 00:18:39,160 Speaker 1: members of the management team, getting access to a data 289 00:18:39,240 --> 00:18:42,800 Speaker 1: room to look at due diligence files, look at the 290 00:18:42,880 --> 00:18:48,080 Speaker 1: portfolio performance, make some reference calls. UH. Probably will do 291 00:18:48,640 --> 00:18:52,520 Speaker 1: a visit on site to visit visit the offices. You know, 292 00:18:52,600 --> 00:18:57,960 Speaker 1: that was an issue during when people weren't traveling. UH. 293 00:18:58,119 --> 00:19:01,320 Speaker 1: You know, how does an institutional investor modify their investment 294 00:19:01,359 --> 00:19:05,520 Speaker 1: policy procedures to make a commitment to a fund UH 295 00:19:05,600 --> 00:19:08,240 Speaker 1: when they're unable to visit the office if that's part 296 00:19:08,240 --> 00:19:10,520 Speaker 1: of their policy. So a lot of those policies were 297 00:19:10,520 --> 00:19:15,960 Speaker 1: amended UH and or replaced with more reference calls and 298 00:19:16,040 --> 00:19:19,320 Speaker 1: things like that. So that raises an obvious question. During 299 00:19:19,359 --> 00:19:24,080 Speaker 1: the lockdown, were you doing everything by zoom? We were 300 00:19:24,119 --> 00:19:28,720 Speaker 1: people going out and actually meeting the GPS and person 301 00:19:28,760 --> 00:19:31,720 Speaker 1: of person. The GPS were, of course, you know, they 302 00:19:31,720 --> 00:19:35,400 Speaker 1: have one one objective, which is to get funded, and 303 00:19:35,480 --> 00:19:39,920 Speaker 1: so they will go ready, willing and able to go anywhere. 304 00:19:40,960 --> 00:19:44,880 Speaker 1: But a lot of the limited partners, especially the institutions, 305 00:19:44,880 --> 00:19:49,639 Speaker 1: were generally in the first six months of the pandemic, 306 00:19:49,800 --> 00:19:53,440 Speaker 1: you know, not really willing to meet or they weren't. 307 00:19:53,600 --> 00:19:56,119 Speaker 1: There's an age gap there, right. The GPS tend to 308 00:19:56,119 --> 00:19:58,959 Speaker 1: be a little younger and hungry, and the LPs are 309 00:19:58,960 --> 00:20:03,440 Speaker 1: a little older. And more seasoned. I'm I I'm their stereotype. 310 00:20:03,720 --> 00:20:06,080 Speaker 1: That's not bad. I think you're you know that the 311 00:20:06,160 --> 00:20:08,679 Speaker 1: younger guys, would you know? We had some meetings in 312 00:20:08,920 --> 00:20:12,960 Speaker 1: uh it's a Miami. We had some family offices. We 313 00:20:13,040 --> 00:20:18,600 Speaker 1: had meetings outside. UH. We did convert uh some in 314 00:20:19,160 --> 00:20:23,600 Speaker 1: I think admittedly the year it was tough though April May. 315 00:20:23,640 --> 00:20:27,720 Speaker 1: April May was you know, everybody was on adrenaline, not 316 00:20:27,840 --> 00:20:31,200 Speaker 1: really knowing what was going to happen, but a lot 317 00:20:31,240 --> 00:20:36,160 Speaker 1: of zoom. It was very exhausting. But you know, it's 318 00:20:36,280 --> 00:20:41,280 Speaker 1: getting people are traveling again and taking meetings. So it's 319 00:20:41,320 --> 00:20:46,600 Speaker 1: so this raises another interesting question. Were there any lasting 320 00:20:46,760 --> 00:20:51,119 Speaker 1: changes to the industry or how you do business because 321 00:20:51,240 --> 00:20:54,240 Speaker 1: of what we learned during the pandemic. So lots of 322 00:20:54,280 --> 00:20:56,879 Speaker 1: people still working from home, lots of people are being 323 00:20:57,520 --> 00:21:00,679 Speaker 1: more selective in their travel. Do I really have to 324 00:21:00,720 --> 00:21:02,520 Speaker 1: go to l A or can I just make this 325 00:21:02,560 --> 00:21:06,359 Speaker 1: a zoom call? How has this impacted your business? How 326 00:21:06,440 --> 00:21:09,240 Speaker 1: has the pandemic impacted the way you operate today? I 327 00:21:09,240 --> 00:21:12,439 Speaker 1: think it's making uh. I think it's making it a 328 00:21:12,440 --> 00:21:16,639 Speaker 1: little bit more efficient now with annual meetings. UH, there's 329 00:21:16,680 --> 00:21:19,400 Speaker 1: always going to be a remote option. And so these 330 00:21:19,440 --> 00:21:22,920 Speaker 1: limited partners where before and you know, months of May, 331 00:21:23,080 --> 00:21:29,119 Speaker 1: June and uh September, October, November, you know, most of 332 00:21:29,119 --> 00:21:33,080 Speaker 1: the time of those let's say six months, they would 333 00:21:33,080 --> 00:21:35,840 Speaker 1: be out of the office, Yeah, spending a day or 334 00:21:35,880 --> 00:21:39,560 Speaker 1: two days traveling across country to attend an annual meeting. 335 00:21:39,680 --> 00:21:42,640 Speaker 1: Now they can watch it on zoom for an hour 336 00:21:43,080 --> 00:21:45,639 Speaker 1: and be much more efficient sitting at their desk. And 337 00:21:46,000 --> 00:21:48,240 Speaker 1: I think that development, the fact that there is a 338 00:21:48,280 --> 00:21:51,960 Speaker 1: remote option is allowed UH general partners and and for 339 00:21:52,240 --> 00:21:57,439 Speaker 1: and capital raising firms like ourselves uh more more a 340 00:21:57,440 --> 00:22:02,040 Speaker 1: better probability of getting too a prospective investor that's in 341 00:22:02,080 --> 00:22:05,719 Speaker 1: the office where they're not wasting time traveling or wasting 342 00:22:05,720 --> 00:22:08,639 Speaker 1: a half a week traveling to annual meetings. So it 343 00:22:08,720 --> 00:22:12,160 Speaker 1: proved the efficiency. Does that give everybody a wider net 344 00:22:12,200 --> 00:22:16,360 Speaker 1: they can cast your your geography isn't limited to your 345 00:22:16,359 --> 00:22:19,200 Speaker 1: local city or even your local coast. You can pretty 346 00:22:19,240 --> 00:22:21,679 Speaker 1: much go anywhere. I think that that has helped. But 347 00:22:21,760 --> 00:22:25,320 Speaker 1: these limited partners are probably being bombarded by more and 348 00:22:25,359 --> 00:22:30,160 Speaker 1: more emails incoming uh and so it's still more valuable 349 00:22:30,200 --> 00:22:34,520 Speaker 1: to have the one on one in person. But when 350 00:22:34,560 --> 00:22:39,000 Speaker 1: that is not available. We we definitely try for the 351 00:22:39,080 --> 00:22:43,640 Speaker 1: video call. And UM, I'm curious as to these gps 352 00:22:43,720 --> 00:22:46,760 Speaker 1: why come to a firm like yours as opposed to 353 00:22:46,840 --> 00:22:50,600 Speaker 1: just hiring a team to raise the capitol themselves to 354 00:22:50,720 --> 00:22:53,200 Speaker 1: hire a team, train a team. You know, it's it's 355 00:22:53,200 --> 00:22:57,880 Speaker 1: a big expense and makes sense. It's you know, it's 356 00:22:57,920 --> 00:23:01,639 Speaker 1: people and that's management cost and overhead and time and 357 00:23:01,720 --> 00:23:05,680 Speaker 1: lack of expertise. Correct. Uh So so you mentioned people 358 00:23:05,680 --> 00:23:10,800 Speaker 1: are looking for strategies that differentiate from everything else they have. 359 00:23:11,400 --> 00:23:15,040 Speaker 1: What are some of the newer differentiated strategies or fund 360 00:23:15,080 --> 00:23:18,280 Speaker 1: types uh that you're seeing more and more of that 361 00:23:18,680 --> 00:23:22,640 Speaker 1: aren't as widely held as let's say, commercial real estate 362 00:23:22,720 --> 00:23:25,720 Speaker 1: or structured notes or things like that. What's the new 363 00:23:25,760 --> 00:23:28,680 Speaker 1: new thing these days? Right? I think one thing we've 364 00:23:28,680 --> 00:23:32,560 Speaker 1: seen the last couple of years is music royalties. Almost 365 00:23:32,560 --> 00:23:35,760 Speaker 1: every month there's a new group targeting that. And you 366 00:23:35,800 --> 00:23:41,080 Speaker 1: know that emerged because these songwright these artists were unable 367 00:23:41,119 --> 00:23:44,560 Speaker 1: to tour and so that was a big source of 368 00:23:44,560 --> 00:23:47,280 Speaker 1: their income. Is to being able to tour, and now 369 00:23:47,320 --> 00:23:53,520 Speaker 1: they're uh looking to sell some are all of their copyrights, uh, 370 00:23:53,680 --> 00:23:56,480 Speaker 1: to cash out. That's really interesting. Because the old days, 371 00:23:57,080 --> 00:23:59,400 Speaker 1: people would tour to promote an album and they made 372 00:23:59,400 --> 00:24:02,400 Speaker 1: the money from sales. Now it's the opposite. They put 373 00:24:02,400 --> 00:24:05,520 Speaker 1: out an album in order the tour. Once that shut down, 374 00:24:06,000 --> 00:24:07,960 Speaker 1: they had some trouble. There's not a lot of money 375 00:24:08,400 --> 00:24:11,560 Speaker 1: in streaming, is there? From most No streaming saved the 376 00:24:11,680 --> 00:24:14,320 Speaker 1: music business, save the business. But how much of that 377 00:24:14,359 --> 00:24:18,280 Speaker 1: falls to the artists? The artists? Uh, I think I 378 00:24:18,280 --> 00:24:20,280 Speaker 1: don't know the exact number, but I think every time 379 00:24:20,320 --> 00:24:24,040 Speaker 1: a song is downloaded on iTunes, a songwriter gets I 380 00:24:24,040 --> 00:24:28,560 Speaker 1: think it's eleven or twelve cents um. And but Spotify 381 00:24:28,680 --> 00:24:31,919 Speaker 1: with the streaming, you know, so the the younger artists 382 00:24:31,920 --> 00:24:35,800 Speaker 1: are doing well because the people listening to Spotify or 383 00:24:35,840 --> 00:24:40,680 Speaker 1: not my parents, right, Uh, And so the new classics 384 00:24:40,720 --> 00:24:46,399 Speaker 1: are probably performing much better and uh than some of 385 00:24:46,480 --> 00:24:50,919 Speaker 1: the Louis Armstrong is being downloaded or streamed. But I 386 00:24:50,960 --> 00:24:54,280 Speaker 1: think we've seen music royalties. We're working with a group 387 00:24:54,359 --> 00:24:56,880 Speaker 1: that not only does music, but they'll be coming out 388 00:24:57,280 --> 00:25:00,520 Speaker 1: they do. They specialize in film and TV royalties. Uh. 389 00:25:00,680 --> 00:25:03,720 Speaker 1: And that prior TV. Now you have a lot of 390 00:25:03,760 --> 00:25:08,479 Speaker 1: series that are picked up over and over, uh the 391 00:25:08,520 --> 00:25:12,320 Speaker 1: Netflix or HBO and gets picked up those you know, 392 00:25:12,480 --> 00:25:16,040 Speaker 1: those royalties behave in a similar fashion to a film 393 00:25:16,080 --> 00:25:21,200 Speaker 1: library with the TV series and uh so that that's 394 00:25:21,200 --> 00:25:26,320 Speaker 1: self liquidating uh mezzanine debt and so there's no capital 395 00:25:26,359 --> 00:25:30,080 Speaker 1: markets event required for an exit, and uh it's generating 396 00:25:30,119 --> 00:25:33,800 Speaker 1: a nice load of mid teens net returned to investors 397 00:25:33,800 --> 00:25:36,560 Speaker 1: in a zero interest rate environment. And so so let's 398 00:25:36,600 --> 00:25:39,119 Speaker 1: talk about that a little bit because that's kind of fascinating. 399 00:25:39,440 --> 00:25:44,560 Speaker 1: I know Dylan recently sold this catalog Taylor swift Um 400 00:25:44,600 --> 00:25:49,520 Speaker 1: allowed streaming, which we had previously Pink Floyd. What does 401 00:25:49,560 --> 00:25:52,480 Speaker 1: this look like when an artist said says, here's a 402 00:25:52,560 --> 00:25:56,280 Speaker 1: dozen albums I've created over thirty years. I want to 403 00:25:56,600 --> 00:25:59,320 Speaker 1: monetize this. Tell us about that. I think I saw 404 00:25:59,440 --> 00:26:02,600 Speaker 1: a song it's as steady state after a I believe 405 00:26:02,640 --> 00:26:06,399 Speaker 1: it's about six years. You know a good example, we 406 00:26:06,520 --> 00:26:09,600 Speaker 1: worked with a music royalty group. We've raised three funds 407 00:26:09,600 --> 00:26:13,240 Speaker 1: for them since so we've been at it for a while. 408 00:26:13,880 --> 00:26:16,520 Speaker 1: But uh and I think it was that during the 409 00:26:16,560 --> 00:26:21,920 Speaker 1: Olympics in the in London and two thousand and twelve, 410 00:26:22,880 --> 00:26:26,040 Speaker 1: uh call me maybe was on the radio every five minutes. 411 00:26:26,200 --> 00:26:28,840 Speaker 1: Now you never hear it, and uh so it took 412 00:26:28,880 --> 00:26:32,280 Speaker 1: about a song hits its steady state after about six years, 413 00:26:32,800 --> 00:26:36,520 Speaker 1: and they they can monitor, you know, they collect those 414 00:26:36,560 --> 00:26:41,439 Speaker 1: revenues globally now, so whether it's played on on the radio, 415 00:26:41,560 --> 00:26:43,760 Speaker 1: whether it's played in a bar, at a skating rink, 416 00:26:44,000 --> 00:26:46,520 Speaker 1: on you know, it's a set list at a concert 417 00:26:46,560 --> 00:26:51,760 Speaker 1: by a musician. Those UH artists received those royalties every quarter. 418 00:26:52,359 --> 00:26:55,200 Speaker 1: And UH, it's you're basically just doing a cash flow 419 00:26:55,240 --> 00:26:58,359 Speaker 1: analysis to see how it's gonna play out. But you 420 00:26:58,600 --> 00:27:03,919 Speaker 1: probably would be interested in It's a little risky prior 421 00:27:03,960 --> 00:27:06,199 Speaker 1: to six years because you don't know where it's going 422 00:27:06,240 --> 00:27:08,800 Speaker 1: to so in other way, that song is going to 423 00:27:08,920 --> 00:27:11,480 Speaker 1: hit its steady states, so to so after six years, 424 00:27:11,640 --> 00:27:14,119 Speaker 1: it's almost like the coupon on a bond, the yield 425 00:27:14,119 --> 00:27:16,639 Speaker 1: of a bond. You have an idea, Hey, at this 426 00:27:16,720 --> 00:27:19,719 Speaker 1: point it should yield X going forward. And not all 427 00:27:19,800 --> 00:27:22,520 Speaker 1: songs are created equal, not all artists are something I'm 428 00:27:22,560 --> 00:27:25,080 Speaker 1: gonna do two X or three X, but you don't 429 00:27:25,080 --> 00:27:28,680 Speaker 1: know that until six years in correct, something like, Yeah, 430 00:27:29,080 --> 00:27:31,840 Speaker 1: so you've done three funds that we did. We've done 431 00:27:31,880 --> 00:27:34,680 Speaker 1: three music funds with a group, UH, and we've done 432 00:27:35,280 --> 00:27:39,080 Speaker 1: two funds with another group that focuses on film and 433 00:27:39,119 --> 00:27:44,280 Speaker 1: TV royalties. But they're the most recent fund. Uh, there 434 00:27:44,400 --> 00:27:49,680 Speaker 1: wasn't a lot of new films being produced in one. 435 00:27:50,000 --> 00:27:53,760 Speaker 1: They dip their toe into music and uh so a 436 00:27:53,800 --> 00:27:57,320 Speaker 1: little more diversified. I think there'll be some good interest 437 00:27:57,359 --> 00:27:59,800 Speaker 1: in that next year when they come out with their 438 00:28:00,920 --> 00:28:04,360 Speaker 1: success or fund. How how large can this space to get? 439 00:28:04,400 --> 00:28:08,280 Speaker 1: There's only so many songs that that get produced each year. 440 00:28:08,320 --> 00:28:10,800 Speaker 1: It's only like ten million songs, but not all of 441 00:28:10,800 --> 00:28:14,000 Speaker 1: them make money. Um, how much room is there in 442 00:28:14,040 --> 00:28:19,200 Speaker 1: this little niche as a potential investment sector music? It's 443 00:28:19,840 --> 00:28:22,119 Speaker 1: I don't know how big it will ultimately get to, 444 00:28:22,240 --> 00:28:26,359 Speaker 1: but there's certainly long ways to go. And I think 445 00:28:26,480 --> 00:28:29,800 Speaker 1: the film and TV. The TV is really taking off 446 00:28:29,880 --> 00:28:32,679 Speaker 1: when you see the number of series created and the 447 00:28:32,880 --> 00:28:37,760 Speaker 1: and they're they're picked up from multiple seasons. So uh 448 00:28:37,800 --> 00:28:42,000 Speaker 1: and film is you know similar, Yeah, and you know 449 00:28:42,080 --> 00:28:45,080 Speaker 1: what's it's release theatrically, you know, in the in the 450 00:28:45,160 --> 00:28:47,440 Speaker 1: in the theaters in the US, then it goes to Europe, 451 00:28:47,480 --> 00:28:50,640 Speaker 1: then it goes to pay per view on demand, you know, 452 00:28:50,840 --> 00:28:53,920 Speaker 1: and you're still seeing The Godfather every every Christmas time, 453 00:28:54,120 --> 00:28:58,600 Speaker 1: you know, it's on four different channels, a classic Christmas movie. Yeah, 454 00:28:59,200 --> 00:29:05,120 Speaker 1: quite fascinated. Another interesting strategy that we've been we've done 455 00:29:05,120 --> 00:29:08,440 Speaker 1: three funds with a group focused on the sale, lease back, 456 00:29:09,280 --> 00:29:13,080 Speaker 1: and that of real estate, of commercial real estate. So 457 00:29:13,240 --> 00:29:15,320 Speaker 1: I'm a I'm an old world company. I own all 458 00:29:15,360 --> 00:29:18,560 Speaker 1: my real estate, all my buildings, and I'm tired of 459 00:29:18,600 --> 00:29:22,040 Speaker 1: depreciating them over time. I sell the building to you 460 00:29:22,120 --> 00:29:25,560 Speaker 1: and then do a fifty year lease. Not not quite 461 00:29:25,600 --> 00:29:28,640 Speaker 1: fifty years, but yeah, that's exactly it. So you have 462 00:29:28,760 --> 00:29:33,719 Speaker 1: the headquarters of a big pharmaceutical company and uh, they 463 00:29:34,360 --> 00:29:37,880 Speaker 1: they're looking to raise some cash. Maybe not a pharmaceutical company, 464 00:29:37,920 --> 00:29:41,280 Speaker 1: but some other business. Uh, it's a great non bank 465 00:29:41,320 --> 00:29:44,600 Speaker 1: source of financing. You can sell the asset and simultaneously 466 00:29:44,720 --> 00:29:48,240 Speaker 1: release it back for fifteen to twenty five years. You're 467 00:29:48,240 --> 00:29:52,480 Speaker 1: protected against inflation. The manager manager is because the rent 468 00:29:52,520 --> 00:29:56,240 Speaker 1: increases are built in contractually and you own the asset, 469 00:29:56,440 --> 00:29:58,680 Speaker 1: so you're actually in a better position than the bond 470 00:29:58,720 --> 00:30:03,400 Speaker 1: holders that own the same credit. And uh, we've done 471 00:30:03,440 --> 00:30:07,480 Speaker 1: three funds with this group. I think say at least 472 00:30:07,480 --> 00:30:10,520 Speaker 1: back the investment banks haven't been promoting it because they 473 00:30:10,560 --> 00:30:13,560 Speaker 1: probably this is just me a theory of mind. But 474 00:30:13,680 --> 00:30:16,640 Speaker 1: the investment banks would rather convince the CFO of these 475 00:30:16,680 --> 00:30:19,560 Speaker 1: corporates that do a bond offering or an equity offering 476 00:30:19,560 --> 00:30:22,920 Speaker 1: because the fees are higher than suggesting. You know what 477 00:30:23,400 --> 00:30:25,600 Speaker 1: if I look at your balance sheet, you know property, 478 00:30:25,600 --> 00:30:28,200 Speaker 1: plant and equipment is your largest line item. Why do 479 00:30:28,280 --> 00:30:30,480 Speaker 1: you why are you in the real estate business? Why 480 00:30:30,480 --> 00:30:34,400 Speaker 1: do you sell that, release it back and reinvest back 481 00:30:34,400 --> 00:30:38,320 Speaker 1: into the business. Another advantage for the company is to 482 00:30:38,440 --> 00:30:41,200 Speaker 1: do it is by entering into a long term lease, 483 00:30:41,320 --> 00:30:44,280 Speaker 1: they're going to get a below market rate, right, and 484 00:30:44,320 --> 00:30:47,080 Speaker 1: the manager gets to buy the asset at a below 485 00:30:47,120 --> 00:30:51,640 Speaker 1: market price. And uh so we've worked with a group. 486 00:30:52,240 --> 00:30:56,400 Speaker 1: It's been a little difficult raising capital for it because 487 00:30:56,440 --> 00:30:59,520 Speaker 1: it's a hybrid. It's not quite credit because it's real 488 00:30:59,600 --> 00:31:03,440 Speaker 1: estate act and the credit guys don't understand corporate real estate, 489 00:31:04,040 --> 00:31:06,320 Speaker 1: and the real estate guys don't understand credit. And the 490 00:31:06,360 --> 00:31:08,920 Speaker 1: real estate guys think the market's gonna take is going 491 00:31:09,000 --> 00:31:11,600 Speaker 1: to continue to go up, and they're not looking at 492 00:31:11,720 --> 00:31:16,720 Speaker 1: the the importance of the credit. But that's the opportunity 493 00:31:16,760 --> 00:31:20,040 Speaker 1: when when nobody really understood when the players in the space, 494 00:31:20,400 --> 00:31:23,920 Speaker 1: it's it's adjacent not dead center. What they do, so 495 00:31:23,960 --> 00:31:27,080 Speaker 1: they don't really get it. Yeah, And so our job 496 00:31:27,240 --> 00:31:30,600 Speaker 1: is as a capital raiser for that is to identify 497 00:31:30,760 --> 00:31:35,160 Speaker 1: the prospective investor that might be a little more thoughtful 498 00:31:36,040 --> 00:31:39,640 Speaker 1: is looking for a product like this which is generating 499 00:31:39,960 --> 00:31:44,280 Speaker 1: you know, ten eleven percent cash on cash without a 500 00:31:44,280 --> 00:31:47,680 Speaker 1: lot of volatility and fairly safely. And during the pandemic, 501 00:31:47,760 --> 00:31:50,960 Speaker 1: they they actually this group collects their rent quarterly in 502 00:31:51,000 --> 00:31:55,200 Speaker 1: advance versus monthly, and so they never had an issue 503 00:31:55,240 --> 00:31:58,920 Speaker 1: all during the pandemic. So let's talk a little bit 504 00:31:59,000 --> 00:32:02,920 Speaker 1: about focus po lane. Um, what's its specialty? Where do 505 00:32:03,000 --> 00:32:07,280 Speaker 1: you really put your focus into focus point? Sure, we 506 00:32:07,400 --> 00:32:11,560 Speaker 1: we raise capital for private funds and direct transactions. The 507 00:32:11,720 --> 00:32:17,440 Speaker 1: typical fund strategies we are focused on are, I would 508 00:32:18,680 --> 00:32:22,440 Speaker 1: private equity managers in the mid cap space from two 509 00:32:22,840 --> 00:32:26,360 Speaker 1: fifty million to say two hundred billion, in in fun 510 00:32:26,480 --> 00:32:34,600 Speaker 1: size growth equity managers, minority or managers focused on control, uh, 511 00:32:34,960 --> 00:32:40,440 Speaker 1: some software, but all throughout the tech sector tech enabled services, software, 512 00:32:40,920 --> 00:32:45,680 Speaker 1: some hardware. Uh. And we've lately done a little bit 513 00:32:45,680 --> 00:32:48,760 Speaker 1: in the venture capital world, and we do a lot 514 00:32:48,880 --> 00:32:52,560 Speaker 1: in credit and income related strategies. And who hasn't done 515 00:32:52,560 --> 00:32:54,720 Speaker 1: a little something on the venture capital world these days, 516 00:32:54,760 --> 00:32:58,480 Speaker 1: it seems like there's just a ton of cash flowing 517 00:32:58,520 --> 00:33:03,280 Speaker 1: into that. But you mentioned equity growth are those private 518 00:33:03,320 --> 00:33:06,640 Speaker 1: Are you talking about hedge funds that are in the 519 00:33:05,520 --> 00:33:11,640 Speaker 1: These are UH private equity firms that are not seeking 520 00:33:11,680 --> 00:33:15,640 Speaker 1: control of the businesses. So they're generally it's generally backing 521 00:33:15,680 --> 00:33:20,240 Speaker 1: a management team bootstrapped and they're the first institutional money 522 00:33:20,600 --> 00:33:25,720 Speaker 1: going into the business. Companies are growing, you know, thirty 523 00:33:25,800 --> 00:33:29,400 Speaker 1: to fifty annually and they need some equity capital to 524 00:33:29,440 --> 00:33:33,080 Speaker 1: get to the next level. These growth equity managers provide 525 00:33:33,120 --> 00:33:36,720 Speaker 1: that with their guidance, get them to a hundred or 526 00:33:36,760 --> 00:33:39,600 Speaker 1: two hundred million in revenue for exact saying, and then 527 00:33:39,640 --> 00:33:41,880 Speaker 1: they show up on the radar screen of the larger 528 00:33:42,880 --> 00:33:45,720 Speaker 1: UH private equity firms that are looking to add on 529 00:33:46,800 --> 00:33:49,080 Speaker 1: you know, looking for a portfolio company to add onto 530 00:33:49,120 --> 00:33:52,880 Speaker 1: an existing platform. And so it's almost a food chain 531 00:33:53,280 --> 00:33:57,080 Speaker 1: that makes we're starting to see developed which wasn't as 532 00:33:57,120 --> 00:34:01,560 Speaker 1: apparent three to five years ago, but with the what's 533 00:34:01,600 --> 00:34:05,200 Speaker 1: happening in the world of tech, it's it's it's increasing 534 00:34:05,280 --> 00:34:09,920 Speaker 1: rapidly quite quite interesting. Let's talk about land sea investment. 535 00:34:10,440 --> 00:34:13,480 Speaker 1: It almost sounds like lands and Sea, but it's lands 536 00:34:13,520 --> 00:34:16,120 Speaker 1: and the letteracy. First, what does that name mean, and 537 00:34:16,160 --> 00:34:19,160 Speaker 1: then we'll talk about what it does. I've got a 538 00:34:19,160 --> 00:34:21,520 Speaker 1: son named Lucas, I've got a son named Alex, I've 539 00:34:21,560 --> 00:34:24,279 Speaker 1: got a wife named Nina. My name is David and 540 00:34:24,320 --> 00:34:27,040 Speaker 1: my last name is Conrad. So there it is, and 541 00:34:27,160 --> 00:34:30,520 Speaker 1: uh that that's the entity that owns the Focus Point 542 00:34:30,520 --> 00:34:36,560 Speaker 1: Private Capital Group. And we i'd say since twenty we've 543 00:34:36,600 --> 00:34:42,080 Speaker 1: been through the capital raising business. We meet some We 544 00:34:42,120 --> 00:34:46,480 Speaker 1: started meeting some talented independent sponsors that were confident in 545 00:34:46,520 --> 00:34:50,040 Speaker 1: their ability to get a transaction done where they I 546 00:34:50,120 --> 00:34:52,719 Speaker 1: was unable to convince them to do a fund and 547 00:34:52,800 --> 00:34:55,840 Speaker 1: so we would raise equity for them, and we started 548 00:34:55,880 --> 00:34:59,359 Speaker 1: to participate in the promote structure with them. So land 549 00:34:59,440 --> 00:35:04,160 Speaker 1: C owned a portfolio of ownership interests in some direct 550 00:35:04,160 --> 00:35:09,360 Speaker 1: transactions and on occasion we participate in the promote structure 551 00:35:09,440 --> 00:35:12,960 Speaker 1: with some first time funds as part of our compensation. 552 00:35:13,120 --> 00:35:15,960 Speaker 1: So when you say you participate, you get a slice 553 00:35:16,000 --> 00:35:20,480 Speaker 1: of the GP. Is that of the of the GP economics? Correct? Oh, 554 00:35:20,520 --> 00:35:23,520 Speaker 1: not the control, just the economics, just the cash flow 555 00:35:23,560 --> 00:35:26,880 Speaker 1: from that the part of the percent of their carried 556 00:35:26,920 --> 00:35:29,839 Speaker 1: interests for raising the equity and in some cases we 557 00:35:29,880 --> 00:35:34,279 Speaker 1: have invested in their GP one dint. One thing we 558 00:35:34,360 --> 00:35:37,400 Speaker 1: noticed is with independent sponsors when they do have a 559 00:35:37,440 --> 00:35:41,480 Speaker 1: direct transaction, the lenders want to see a fund that 560 00:35:41,640 --> 00:35:45,920 Speaker 1: the GP commit is generally two percent minimum. The lenders 561 00:35:46,080 --> 00:35:49,440 Speaker 1: on a direct transaction for a sponsor who does not 562 00:35:49,520 --> 00:35:53,560 Speaker 1: have a FUN are asking for ten to for a 563 00:35:53,600 --> 00:35:57,240 Speaker 1: GP commit and they don't always have that lying around 564 00:35:57,320 --> 00:36:01,520 Speaker 1: money and so being able to help them solve the 565 00:36:01,560 --> 00:36:07,320 Speaker 1: GP capital problem helps improve our economic sharing makes for example, 566 00:36:07,520 --> 00:36:10,600 Speaker 1: and that and that sounds like those are potentially lucrative 567 00:36:11,120 --> 00:36:15,680 Speaker 1: investments over time. That's that's our that's our that's the 568 00:36:15,719 --> 00:36:18,840 Speaker 1: object of the exercise, I guess right well as opposed 569 00:36:18,840 --> 00:36:20,720 Speaker 1: to saying I want to put money into this fund 570 00:36:20,719 --> 00:36:23,840 Speaker 1: that's gonna yield it or ten percent when you're putting 571 00:36:23,840 --> 00:36:28,040 Speaker 1: money into a direct investment, my assumption is those are 572 00:36:29,600 --> 00:36:33,560 Speaker 1: ordinarily attractive opportunities. Yeah, they're the investors are looking for 573 00:36:33,600 --> 00:36:38,520 Speaker 1: a higher return. Uh. And we've we've done some things 574 00:36:38,520 --> 00:36:42,160 Speaker 1: in the real, real stimulated in the hospitality sector, focusing 575 00:36:42,200 --> 00:36:45,880 Speaker 1: on the extended stay in the select service market with 576 00:36:46,239 --> 00:36:50,799 Speaker 1: the former former principal on at a large investment bank. 577 00:36:51,080 --> 00:36:54,040 Speaker 1: He had a twenty billion dollar portfolio he oversaw one point. 578 00:36:54,840 --> 00:36:57,600 Speaker 1: He's been operating at it as an independent sponsor for 579 00:36:57,640 --> 00:37:03,399 Speaker 1: ten years and we've done completed now six transactions with him, 580 00:37:03,440 --> 00:37:07,040 Speaker 1: and we have I guess ownership in you know, north 581 00:37:07,120 --> 00:37:11,319 Speaker 1: to sixty uh of those types of hotels. UH. We 582 00:37:11,360 --> 00:37:16,640 Speaker 1: recently identified a New York Stock Exchange listed insurance company 583 00:37:17,200 --> 00:37:23,799 Speaker 1: to invest in eight uh large shipping container vessels. That 584 00:37:23,920 --> 00:37:26,839 Speaker 1: hundred and seventy million is now worth north of half 585 00:37:26,880 --> 00:37:30,040 Speaker 1: a billion in only nine months, as the container market 586 00:37:30,160 --> 00:37:33,840 Speaker 1: is red hot right now. And this insurance company was 587 00:37:35,200 --> 00:37:39,040 Speaker 1: pretty savvy and recognizing that end of last year. And 588 00:37:39,120 --> 00:37:41,560 Speaker 1: these are all end of life ships, so they go 589 00:37:41,680 --> 00:37:43,799 Speaker 1: to scrap at the end of the charters that they're 590 00:37:43,840 --> 00:37:47,600 Speaker 1: currently on, so there's no exposure or risk of rechartering 591 00:37:47,640 --> 00:37:51,240 Speaker 1: them at the end of these and UH. The investor 592 00:37:51,320 --> 00:37:56,840 Speaker 1: at that insurance company clever guy uh actually ex colleague 593 00:37:56,880 --> 00:38:02,200 Speaker 1: at Google. Heim really really interesting. So I mentioned lands 594 00:38:02,800 --> 00:38:05,719 Speaker 1: coincidental it's really an anagram for you and your wife 595 00:38:05,719 --> 00:38:08,200 Speaker 1: and your kids. But let's talk a little bit about 596 00:38:08,239 --> 00:38:12,719 Speaker 1: triple netleases in real estate. UM, explain what that is 597 00:38:12,760 --> 00:38:17,040 Speaker 1: and what's the investment opportunity there. Yeah. UH. If you 598 00:38:17,080 --> 00:38:22,160 Speaker 1: look at UH most spalace sheets of most corporates, property, 599 00:38:22,160 --> 00:38:26,080 Speaker 1: plant and equipment is the largest line item, and we 600 00:38:26,800 --> 00:38:30,240 Speaker 1: there's an opportunity there too. It's another non bank source 601 00:38:30,239 --> 00:38:35,760 Speaker 1: of financing. So corporate could looking to raise capital, could 602 00:38:36,360 --> 00:38:39,719 Speaker 1: unlock some of that really get out of the real 603 00:38:39,800 --> 00:38:44,680 Speaker 1: estate business, sell, sell the asset, simultaneously release it back 604 00:38:44,760 --> 00:38:47,720 Speaker 1: for a long period of time fifteen to twenty five years, 605 00:38:48,440 --> 00:38:52,719 Speaker 1: and UH have the use of those proceeds to reinvest 606 00:38:52,760 --> 00:38:56,840 Speaker 1: in their business. I think it's hasn't been very popular. 607 00:38:57,280 --> 00:38:59,640 Speaker 1: It hasn't been promoted a lot by the investment banking 608 00:38:59,640 --> 00:39:03,840 Speaker 1: commune because I think that the cynical side of me 609 00:39:03,920 --> 00:39:07,000 Speaker 1: says they're making more more money on a bond offering 610 00:39:07,239 --> 00:39:12,200 Speaker 1: or issuing some more equity than UH suggesting a sale 611 00:39:12,239 --> 00:39:16,239 Speaker 1: lease back for an asset. We came in contact, I 612 00:39:16,280 --> 00:39:20,960 Speaker 1: guess over ten years ago with a very talented team 613 00:39:21,680 --> 00:39:26,640 Speaker 1: from a guy who came out of a listed company 614 00:39:26,680 --> 00:39:31,680 Speaker 1: called w P Cary. He built their international business. UH 615 00:39:31,960 --> 00:39:34,840 Speaker 1: sold his share he had a shareholding in that business, 616 00:39:34,840 --> 00:39:37,319 Speaker 1: sold it back to w P. Kerry informed his new 617 00:39:37,360 --> 00:39:41,160 Speaker 1: firm ten years ago we've raised three sets of funds 618 00:39:41,200 --> 00:39:44,600 Speaker 1: for them, both in North America and Europe, and I 619 00:39:44,640 --> 00:39:47,600 Speaker 1: believe that firm probably is pushing seven or eight billion 620 00:39:48,160 --> 00:39:52,439 Speaker 1: in a U M huh uh, it's a great Yeah. 621 00:39:52,520 --> 00:39:55,000 Speaker 1: It's another non bank source of financing and a low 622 00:39:55,040 --> 00:39:59,200 Speaker 1: interest rate environment. Really interesting. And I'm curious about something 623 00:39:59,360 --> 00:40:02,520 Speaker 1: in the pub look markets. E s G has been 624 00:40:02,760 --> 00:40:07,799 Speaker 1: become really such a buzzword environmental, social and governance. You 625 00:40:08,040 --> 00:40:10,320 Speaker 1: do you see anything like that on the private side 626 00:40:10,480 --> 00:40:14,680 Speaker 1: or is it much more blocking and tackling less marketing 627 00:40:14,880 --> 00:40:21,000 Speaker 1: and you know, value based investing. It's it's I would 628 00:40:21,000 --> 00:40:25,120 Speaker 1: say most institutional investors definitely have an allocation to e 629 00:40:25,360 --> 00:40:31,960 Speaker 1: s G and it's it's really increasing significantly on the 630 00:40:32,000 --> 00:40:34,919 Speaker 1: private and the private side, and that's a big part 631 00:40:34,920 --> 00:40:38,880 Speaker 1: of their due diligence to go through. Uh. You know, 632 00:40:39,000 --> 00:40:42,759 Speaker 1: there's E s G consultants now that e s G 633 00:40:43,000 --> 00:40:46,919 Speaker 1: standards definitely in Europe. Uh, it is probably further ahead 634 00:40:46,960 --> 00:40:51,520 Speaker 1: than the US, but it is most of the managers 635 00:40:51,560 --> 00:40:53,560 Speaker 1: have to be aware of that. But I think it's 636 00:40:53,560 --> 00:40:57,480 Speaker 1: going to make their portfolio companies ultimately better because it's 637 00:40:57,480 --> 00:41:02,759 Speaker 1: all focused on innovation, and you know, innovation is technology 638 00:41:03,000 --> 00:41:05,879 Speaker 1: and these companies will just will be better and it's 639 00:41:05,880 --> 00:41:11,000 Speaker 1: going to bring about better international standards that these companies 640 00:41:11,040 --> 00:41:14,080 Speaker 1: have to operate under and say with these gps. UH 641 00:41:14,320 --> 00:41:18,799 Speaker 1: quite quite fascinating. So let's talk about the state of 642 00:41:18,960 --> 00:41:21,480 Speaker 1: private equity here in New York. It seems to be 643 00:41:21,960 --> 00:41:24,879 Speaker 1: hot as a pistol um. What do you see going 644 00:41:24,920 --> 00:41:27,239 Speaker 1: on in the industry and how has it changed over 645 00:41:27,239 --> 00:41:30,720 Speaker 1: the past couple of years. I think if I looked 646 00:41:30,719 --> 00:41:35,840 Speaker 1: at our roster of general partners that we were working 647 00:41:35,880 --> 00:41:41,680 Speaker 1: with back to say, probably we probably only had one 648 00:41:42,360 --> 00:41:47,560 Speaker 1: that had a tech technology element to it. Now everybody does, 649 00:41:47,760 --> 00:41:51,880 Speaker 1: even even a distress for control manager that we're about 650 00:41:51,920 --> 00:41:56,920 Speaker 1: to go to market with UH with a with an assignment, 651 00:41:57,280 --> 00:41:59,680 Speaker 1: and this is an individual that led the Creditor Group 652 00:41:59,719 --> 00:42:04,160 Speaker 1: to gain control of Circus sole A last year. UH. 653 00:42:04,239 --> 00:42:09,080 Speaker 1: Every every strategy has to embrace technology to improve their 654 00:42:09,120 --> 00:42:13,759 Speaker 1: businesses and take advantage of the innovation and the and 655 00:42:13,800 --> 00:42:19,439 Speaker 1: the competition is becoming increasingly fierce. So these are tech 656 00:42:19,520 --> 00:42:24,279 Speaker 1: components to non technology companies. Were not necessarily talking about 657 00:42:24,360 --> 00:42:28,840 Speaker 1: investing in semiconductors or software. These are more traditional businesses, 658 00:42:29,520 --> 00:42:31,799 Speaker 1: but technology is a key part of them. Yeah, and 659 00:42:31,840 --> 00:42:36,360 Speaker 1: I'd say absolutely software to make them more efficient. Uh 660 00:42:36,400 --> 00:42:38,719 Speaker 1: you know if if previously you may have had a 661 00:42:38,719 --> 00:42:43,600 Speaker 1: financial services investor that was providing balance sheet capital. Now 662 00:42:43,640 --> 00:42:50,960 Speaker 1: they're focused on payments and yeah, correct. But you're seeing 663 00:42:51,000 --> 00:42:57,200 Speaker 1: that in specialty industrial managers, health healthcare managers, you know obviously, 664 00:42:57,320 --> 00:43:02,920 Speaker 1: and venture capital it's obvious. But any type of strategy 665 00:43:02,960 --> 00:43:06,800 Speaker 1: there's a technology element that they need to be thinking 666 00:43:06,800 --> 00:43:11,360 Speaker 1: about it because the competitive intensity with their competitors is 667 00:43:12,840 --> 00:43:17,440 Speaker 1: only going to increase. Really really interesting. Um So I 668 00:43:17,480 --> 00:43:19,960 Speaker 1: don't know if that's an opportunity or a strategy. I 669 00:43:20,000 --> 00:43:22,719 Speaker 1: don't know how to think about that. What else are 670 00:43:22,760 --> 00:43:26,680 Speaker 1: you seeing that's different than five years ago? Besides the 671 00:43:26,719 --> 00:43:30,760 Speaker 1: impact of technology, I think the in the slow interest 672 00:43:30,840 --> 00:43:36,280 Speaker 1: rate environment, people are looking for yield an income and uh, 673 00:43:36,400 --> 00:43:39,200 Speaker 1: how do they have a they have a benchmark, and 674 00:43:39,320 --> 00:43:42,960 Speaker 1: when zero, when bonds are returning zero, you know they 675 00:43:43,000 --> 00:43:48,400 Speaker 1: need to look at other income related or alternatives. You know, 676 00:43:48,440 --> 00:43:51,480 Speaker 1: we've talked about sale least back, We've talked about music royalties, 677 00:43:51,760 --> 00:43:56,480 Speaker 1: talked about film and TV royalties, asset back, asset base lending. 678 00:43:56,560 --> 00:43:59,440 Speaker 1: In addition to just cash flow lending and leverage loans. 679 00:44:00,320 --> 00:44:06,600 Speaker 1: People are starting to see um uh, litigation finance strategies. 680 00:44:06,600 --> 00:44:11,279 Speaker 1: You've seen some of those. Last week I ran into 681 00:44:11,400 --> 00:44:14,759 Speaker 1: two new income strategies I had never thought of. I 682 00:44:14,760 --> 00:44:16,799 Speaker 1: don't know if they're scalable or we would do it, 683 00:44:16,840 --> 00:44:21,960 Speaker 1: but one is liquor license lending in California. Apparently in 684 00:44:22,000 --> 00:44:25,239 Speaker 1: the state of California, there are no new liquor licenses. 685 00:44:25,320 --> 00:44:29,160 Speaker 1: You have to buy an existing one of the purchase 686 00:44:29,239 --> 00:44:32,360 Speaker 1: price has to go in escrow. Why the due diligence 687 00:44:32,520 --> 00:44:35,640 Speaker 1: is completed on the new buyer. And that's a ten 688 00:44:35,719 --> 00:44:42,280 Speaker 1: percent business. It's small. We've seen uh, tax lean finance, 689 00:44:42,920 --> 00:44:46,480 Speaker 1: you know in different states, people buying the tax lin 690 00:44:46,560 --> 00:44:51,240 Speaker 1: and uh. You know, people are a lot of creative 691 00:44:52,200 --> 00:44:56,759 Speaker 1: people out there trying to come up with strategies that 692 00:44:56,800 --> 00:44:59,960 Speaker 1: will generate you know, an attractive you know, financial return. 693 00:45:00,640 --> 00:45:03,000 Speaker 1: So we try to work our way through that. But 694 00:45:03,080 --> 00:45:06,200 Speaker 1: you know, it's got to be scalable and the management 695 00:45:06,239 --> 00:45:09,279 Speaker 1: team has to be credible. Uh. And where there's a 696 00:45:09,320 --> 00:45:14,040 Speaker 1: process in place where it's systematic and repeatable. It might 697 00:45:14,040 --> 00:45:17,839 Speaker 1: be a little early in the growth cycle of this. 698 00:45:17,960 --> 00:45:22,480 Speaker 1: But are you hearing anything from clients about things like cryptocurrencies, 699 00:45:22,560 --> 00:45:25,759 Speaker 1: blockchain and f T s that that's the flavor of 700 00:45:25,760 --> 00:45:27,280 Speaker 1: the month. What what are you seeing on the private 701 00:45:27,280 --> 00:45:30,839 Speaker 1: equity side there? If anything? Yeah, absolutely, people are looking 702 00:45:30,920 --> 00:45:33,440 Speaker 1: at that and allocating resource to it. And when you 703 00:45:33,480 --> 00:45:38,520 Speaker 1: see the consultants also spending time and uh staffing up 704 00:45:38,560 --> 00:45:42,800 Speaker 1: to do some research. Uh yeah, it's probably here to 705 00:45:42,840 --> 00:45:45,880 Speaker 1: say some of the large some of the larger endowments 706 00:45:45,880 --> 00:45:49,200 Speaker 1: have already made some allocations in the crypto and the 707 00:45:49,239 --> 00:45:54,960 Speaker 1: digital currency world. So it's it's it's happening really really interesting. 708 00:45:55,400 --> 00:45:58,840 Speaker 1: So previously we talked about zoom calls and the efficiencies 709 00:45:58,880 --> 00:46:02,120 Speaker 1: that took place during a pandemic lockdown when there was 710 00:46:02,200 --> 00:46:06,440 Speaker 1: less travel. When COVID first was beginning, it looked like 711 00:46:06,560 --> 00:46:10,160 Speaker 1: a distressed assets cycle was going to begin. But it 712 00:46:10,200 --> 00:46:14,440 Speaker 1: seems to be the distressed assets cycle that never happened. 713 00:46:14,800 --> 00:46:18,880 Speaker 1: How are you looking at those sort of opportunities? In 714 00:46:19,160 --> 00:46:22,440 Speaker 1: the first and second quarters of we were thinking the 715 00:46:22,480 --> 00:46:27,960 Speaker 1: same thing we are. Uh. We we saw an individual 716 00:46:28,000 --> 00:46:30,840 Speaker 1: that we know well who led the creditor group in 717 00:46:31,400 --> 00:46:36,640 Speaker 1: March April of to uh get control of Circus. Right 718 00:46:36,719 --> 00:46:39,960 Speaker 1: if you think about that business, their sales stopped overnight 719 00:46:40,120 --> 00:46:44,399 Speaker 1: globally done and uh, he there was at one point 720 00:46:44,440 --> 00:46:47,080 Speaker 1: two billion of dead on that business, and this guy 721 00:46:47,200 --> 00:46:52,480 Speaker 1: created the company for and it actually relaunched it just 722 00:46:52,600 --> 00:46:57,279 Speaker 1: prior to Thanksgiving all over the world. And uh but 723 00:46:57,360 --> 00:47:00,560 Speaker 1: we we thought the same thing he's launched is fund. 724 00:47:00,680 --> 00:47:04,919 Speaker 1: He's got four positions completed, you know, since I'd say 725 00:47:05,000 --> 00:47:08,239 Speaker 1: two Q then he's probably up one point six. If 726 00:47:08,239 --> 00:47:10,839 Speaker 1: you think about Distress, you've got a management team that's 727 00:47:10,840 --> 00:47:14,520 Speaker 1: on a treadmill, and then the private equity sponsor every 728 00:47:14,600 --> 00:47:17,680 Speaker 1: quarter is telling them make the interest payment. And every 729 00:47:17,760 --> 00:47:20,160 Speaker 1: quarter the tilts going up and the speed is going 730 00:47:20,239 --> 00:47:23,400 Speaker 1: up on that treadmill, and these Distress investors are just 731 00:47:23,960 --> 00:47:27,080 Speaker 1: waiting for that amorization schedule to kick in, and at 732 00:47:27,120 --> 00:47:30,279 Speaker 1: some point that's gonna happen and they're gonna lose the company. 733 00:47:30,400 --> 00:47:33,560 Speaker 1: And uh so, I think there's a number of positions 734 00:47:33,600 --> 00:47:40,040 Speaker 1: being built on these potential targets, but we haven't seen 735 00:47:40,080 --> 00:47:43,200 Speaker 1: the carnage that everybody anticipated a year and a half ago. 736 00:47:43,600 --> 00:47:47,240 Speaker 1: It's really really interesting. We haven't really talked about deal flow. 737 00:47:47,360 --> 00:47:49,759 Speaker 1: You've been doing this long enough that you know so 738 00:47:49,840 --> 00:47:53,040 Speaker 1: many people in the space, but what is it like? 739 00:47:53,080 --> 00:47:56,680 Speaker 1: How how do you find either the gps you want 740 00:47:56,719 --> 00:48:00,359 Speaker 1: to invest in, or the specific deals that you want 741 00:48:00,360 --> 00:48:04,319 Speaker 1: to directly invest in. Yeah, the the uh we have 742 00:48:04,400 --> 00:48:06,560 Speaker 1: been doing I have been doing it a long time, 743 00:48:06,600 --> 00:48:10,040 Speaker 1: and some of my colleagues at Focus Point, we're also 744 00:48:10,160 --> 00:48:15,200 Speaker 1: at Guggenheim. From the beginning or early on, we we 745 00:48:15,320 --> 00:48:19,239 Speaker 1: all have a pretty good network of people. We Our 746 00:48:19,280 --> 00:48:22,920 Speaker 1: sourcing comes from some of the experienced investors that we've 747 00:48:22,960 --> 00:48:26,080 Speaker 1: known a long time that maybe at some large endowments 748 00:48:26,160 --> 00:48:30,880 Speaker 1: or foundations that I have a good relationship with a group, 749 00:48:30,920 --> 00:48:33,480 Speaker 1: and maybe some of that team is spinning out to 750 00:48:33,600 --> 00:48:37,560 Speaker 1: start something new. Um, some of our deal flow comes 751 00:48:37,600 --> 00:48:41,279 Speaker 1: that way direct approach, where we go out introduce ourselves 752 00:48:41,320 --> 00:48:46,040 Speaker 1: and a general partner may have been working with another 753 00:48:46,920 --> 00:48:50,440 Speaker 1: capital raised partner for a number of years and might 754 00:48:50,520 --> 00:48:53,440 Speaker 1: be thinking about, you know, maybe I should try somebody 755 00:48:53,480 --> 00:48:56,520 Speaker 1: new and met a new getting introduced to some new 756 00:48:56,560 --> 00:48:59,400 Speaker 1: investors that I may not have met that are not 757 00:48:59,480 --> 00:49:03,160 Speaker 1: in the net work of the existing capital raiser that 758 00:49:03,200 --> 00:49:07,200 Speaker 1: I've been working with. So some of that, and uh 759 00:49:07,239 --> 00:49:10,040 Speaker 1: a lot we get emails all day long of new 760 00:49:10,040 --> 00:49:13,040 Speaker 1: groups looking to raise capital. So it's I think it's 761 00:49:13,080 --> 00:49:18,880 Speaker 1: a combination of all of it. Some incoming some proactive definitely, 762 00:49:18,880 --> 00:49:22,160 Speaker 1: we're always speaking to limited partners. What groups do you like? 763 00:49:22,280 --> 00:49:25,560 Speaker 1: Have you seen any strategies in this area? You know, 764 00:49:25,560 --> 00:49:28,279 Speaker 1: if I look at the market, there's three components to it. 765 00:49:28,440 --> 00:49:32,160 Speaker 1: I call it the trilogy. You've got the limited partners, 766 00:49:32,440 --> 00:49:36,319 Speaker 1: who are the investors. You've got the general partners, and 767 00:49:36,560 --> 00:49:40,080 Speaker 1: you have the intermediaries, which are the consultants and the 768 00:49:40,080 --> 00:49:43,240 Speaker 1: gatekeepers that work with a lot of the limited partners. 769 00:49:43,520 --> 00:49:48,640 Speaker 1: And we're constantly hitting the limited partners, and they're they're 770 00:49:48,680 --> 00:49:52,719 Speaker 1: meeting the salesforce, they're seeing us at conferences, they're getting newsletters, 771 00:49:52,760 --> 00:49:57,880 Speaker 1: they're reading about you in the press, uh and coll calls, 772 00:49:57,920 --> 00:50:01,320 Speaker 1: whatever it may be. They're constantly get ing introduced to 773 00:50:01,440 --> 00:50:06,000 Speaker 1: products that we have. The same with the intermediaries and 774 00:50:06,000 --> 00:50:09,520 Speaker 1: and also with the general partners. We're trying to get them, 775 00:50:09,560 --> 00:50:14,360 Speaker 1: but the intermediaries are going to influence the limited partners. 776 00:50:14,400 --> 00:50:17,480 Speaker 1: The limited partners may tell the gatekeeper the consultant, this 777 00:50:17,520 --> 00:50:19,279 Speaker 1: looks kind of interesting, I'd like you to do some 778 00:50:19,320 --> 00:50:22,520 Speaker 1: work on it. So those three things are constantly moving 779 00:50:22,960 --> 00:50:25,680 Speaker 1: and we it's we try, we say, we try to 780 00:50:25,719 --> 00:50:29,200 Speaker 1: do it with rhythm and repetition. Each one of these 781 00:50:29,480 --> 00:50:33,799 Speaker 1: market participants and how we spend our time. So we're 782 00:50:33,880 --> 00:50:37,400 Speaker 1: used to the two and twenty fees with either vcs 783 00:50:37,480 --> 00:50:40,040 Speaker 1: or hedge funds of private equity, You guys are in 784 00:50:40,080 --> 00:50:44,319 Speaker 1: a somewhat different niche. What does the fee structures look 785 00:50:44,400 --> 00:50:48,680 Speaker 1: like relative to to regular alternative investment. Yeah, that's that's 786 00:50:48,680 --> 00:50:51,960 Speaker 1: about right. So the rack rate UH for raising up 787 00:50:52,160 --> 00:50:55,720 Speaker 1: the capital for an established group is probably two percent 788 00:50:56,520 --> 00:50:59,920 Speaker 1: on committed capital, and then you're protected on the success 789 00:51:00,000 --> 00:51:05,239 Speaker 1: a fund with say half fee on the UH of 790 00:51:05,280 --> 00:51:08,600 Speaker 1: the fee that they paid last time up to their level, 791 00:51:08,640 --> 00:51:12,160 Speaker 1: and then maybe something a little more on the incremental generally, 792 00:51:12,200 --> 00:51:16,200 Speaker 1: and an investors is underwriting to do two funds with 793 00:51:16,239 --> 00:51:20,400 Speaker 1: a general partner, and then they'll re underwrite them seriously. 794 00:51:20,600 --> 00:51:23,279 Speaker 1: On fund three. There just won't be a lot enough 795 00:51:23,320 --> 00:51:26,240 Speaker 1: to come through by the time they're back in the market, 796 00:51:26,480 --> 00:51:30,799 Speaker 1: especially today when they're back every eighteen months. On the 797 00:51:30,800 --> 00:51:33,560 Speaker 1: credit side, the fees are a little less because they're 798 00:51:33,640 --> 00:51:37,160 Speaker 1: charging a little less because the returns are Yeah, and 799 00:51:37,239 --> 00:51:40,800 Speaker 1: so you know, i'd say rule of thumb if it 800 00:51:40,800 --> 00:51:45,160 Speaker 1: it's UH. If a credit strategy is returning say a 801 00:51:45,239 --> 00:51:48,920 Speaker 1: net net return of between eight and ten percent. The 802 00:51:49,000 --> 00:51:53,000 Speaker 1: managers probably can't charge more than one percent on invested 803 00:51:53,080 --> 00:51:58,160 Speaker 1: capital versus committed capital, and maybe it's a ten or 804 00:51:58,200 --> 00:52:02,400 Speaker 1: fifteen percent carried interests versus twenty. If the return is 805 00:52:02,480 --> 00:52:06,560 Speaker 1: say ten to twelve percent net, the credit manager might 806 00:52:06,600 --> 00:52:09,640 Speaker 1: be able to get one and a half percent, one 807 00:52:09,719 --> 00:52:12,160 Speaker 1: to one and a half on and invested you know, 808 00:52:12,239 --> 00:52:16,200 Speaker 1: maybe a fifteen percent carry and then north to twelve. 809 00:52:16,760 --> 00:52:19,480 Speaker 1: They're working their way closer to two and twenty. Is 810 00:52:19,520 --> 00:52:22,520 Speaker 1: there the same sort of fee pressure on the private 811 00:52:22,560 --> 00:52:24,839 Speaker 1: side that we see in the public side? You know, 812 00:52:24,880 --> 00:52:28,760 Speaker 1: you have Vanguard driving and others driving Grace to the bottom, 813 00:52:29,239 --> 00:52:31,880 Speaker 1: which which is great when you have scale, but everybody 814 00:52:31,880 --> 00:52:35,680 Speaker 1: else it definitely pressures them and they don't have the 815 00:52:35,719 --> 00:52:39,279 Speaker 1: same sort of economies of scale that Black Rock or 816 00:52:39,840 --> 00:52:42,440 Speaker 1: or Vanguard have. What are you seeing on the private 817 00:52:42,440 --> 00:52:45,759 Speaker 1: side with that? Definitely? Definitely that on the fund of 818 00:52:45,760 --> 00:52:49,840 Speaker 1: funds managers, right, the fund of funds generally, you know, 819 00:52:50,280 --> 00:52:53,040 Speaker 1: ten fifteen years ago could get away maybe with charging 820 00:52:53,080 --> 00:52:59,560 Speaker 1: one percent. Yeah, and now now on on a they're 821 00:52:59,600 --> 00:53:04,000 Speaker 1: all move being into trying to make money with co investments, right, 822 00:53:04,120 --> 00:53:06,439 Speaker 1: and so that's where they're going to make their that's 823 00:53:06,440 --> 00:53:08,759 Speaker 1: their bread and butter, and they're almost giving away the 824 00:53:08,800 --> 00:53:13,040 Speaker 1: primary investment. Uh. The fees that they charge on that 825 00:53:13,920 --> 00:53:18,480 Speaker 1: another interesting development, right, I think we'll see a lot 826 00:53:18,520 --> 00:53:23,640 Speaker 1: of fee fee pressure. Are the private equity secondary managers? Uh, 827 00:53:23,680 --> 00:53:27,279 Speaker 1: they've raised incredible amounts of money, tens of billions of 828 00:53:27,320 --> 00:53:34,440 Speaker 1: dollars UH from large, large LPs. UH. They're paying a 829 00:53:34,480 --> 00:53:38,239 Speaker 1: slight premium versus you know, following the financial crisis, they 830 00:53:38,239 --> 00:53:41,160 Speaker 1: were paying they were buying a lot of these limited 831 00:53:41,200 --> 00:53:44,680 Speaker 1: partners were out of balance when when they rebalanced their 832 00:53:44,719 --> 00:53:48,719 Speaker 1: portfolio when the stock market declined, they were way over 833 00:53:48,760 --> 00:53:51,880 Speaker 1: their targeted allocation to private equity. So they had to sell. 834 00:53:52,360 --> 00:53:55,720 Speaker 1: And these secondary managers did very well. They were buying 835 00:53:56,040 --> 00:54:00,520 Speaker 1: buying those positions at a steep discounts. Now, they continued 836 00:54:00,560 --> 00:54:05,800 Speaker 1: to raise money, but they're they're probably paying a slight premium. Uh. 837 00:54:06,040 --> 00:54:10,640 Speaker 1: And I think investing in a secondary manager UH when 838 00:54:10,680 --> 00:54:12,759 Speaker 1: there's a lot of liquidity doesn't make a lot of 839 00:54:12,760 --> 00:54:15,480 Speaker 1: sense to me. You know, I think investing in a 840 00:54:15,560 --> 00:54:18,360 Speaker 1: secondary manager when there isn't liquidity, they're going to be 841 00:54:18,400 --> 00:54:23,080 Speaker 1: buying in at steep discounts. And and and another dynamic 842 00:54:23,280 --> 00:54:28,919 Speaker 1: is you're seeing these continuation funds being UH formed, where 843 00:54:29,040 --> 00:54:33,560 Speaker 1: general partners now are basically creating their own secondary funds themselves. 844 00:54:34,120 --> 00:54:38,560 Speaker 1: So a GP will have their best asset their taxpayers, 845 00:54:38,960 --> 00:54:42,120 Speaker 1: and they'd rather just continue to compound and so that 846 00:54:42,440 --> 00:54:44,360 Speaker 1: without having to pull it out and without having to 847 00:54:44,400 --> 00:54:48,160 Speaker 1: sell it. Correct, and so they'll take their best asset, 848 00:54:48,920 --> 00:54:54,000 Speaker 1: put it into a continuation vehicle UH redeem out the 849 00:54:54,200 --> 00:54:58,000 Speaker 1: LPs that want their capital back, bringing a new new 850 00:54:58,040 --> 00:55:05,040 Speaker 1: capital provider. They keep going. And so I think we'll 851 00:55:05,040 --> 00:55:07,200 Speaker 1: see what We'll see how that shakes out with with 852 00:55:07,280 --> 00:55:09,839 Speaker 1: some of these secondary managers that have raised a lot 853 00:55:09,880 --> 00:55:14,000 Speaker 1: of capital. So that raises a really interesting question. We 854 00:55:14,040 --> 00:55:17,040 Speaker 1: seem to hear every couple of years a lot of 855 00:55:17,760 --> 00:55:21,680 Speaker 1: chatter about doing away with the carried interest loophole. What 856 00:55:21,760 --> 00:55:25,200 Speaker 1: do you think happens with that and how significant is it? 857 00:55:26,520 --> 00:55:30,440 Speaker 1: I I think it's gonna stay stay where it is, 858 00:55:31,040 --> 00:55:35,680 Speaker 1: and it is significant though, but that's what motivates these 859 00:55:36,840 --> 00:55:41,719 Speaker 1: you know, very talented investors and UH, especially on those 860 00:55:41,719 --> 00:55:46,319 Speaker 1: secondary funds where you don't have to UM redeem and 861 00:55:46,440 --> 00:55:50,680 Speaker 1: cash out. You can keep it running, yeah and correct. 862 00:55:50,760 --> 00:55:55,319 Speaker 1: Really interesting, So so we we you mentioned liquidity UM 863 00:55:56,000 --> 00:55:58,920 Speaker 1: when I look at the venture side, there's just so 864 00:55:59,000 --> 00:56:03,960 Speaker 1: much capital own and we've certainly seen a similar growth 865 00:56:04,000 --> 00:56:08,319 Speaker 1: spurt in the private equity side. Uh. What does that 866 00:56:08,440 --> 00:56:11,640 Speaker 1: do when you see all this cash and capital coming 867 00:56:11,680 --> 00:56:14,960 Speaker 1: into the space. In the old days to three four 868 00:56:14,960 --> 00:56:18,880 Speaker 1: billion dollars, Wall Street was happy to participate in that space. 869 00:56:19,440 --> 00:56:23,839 Speaker 1: Now it seems they're going further and further up the 870 00:56:24,000 --> 00:56:28,960 Speaker 1: skit size, going further and further up the deal size scale, 871 00:56:29,440 --> 00:56:31,920 Speaker 1: and what we used to think of as middle market 872 00:56:32,480 --> 00:56:36,880 Speaker 1: continues to expand. What's the result of all this capital 873 00:56:36,960 --> 00:56:41,440 Speaker 1: rushing into the space? I think in the mid market, 874 00:56:41,520 --> 00:56:44,240 Speaker 1: in the mid in the let's call it the lower 875 00:56:44,280 --> 00:56:49,240 Speaker 1: mid market to two fifty to a billion is probably 876 00:56:49,440 --> 00:56:52,239 Speaker 1: uh to fifty is the lower end you know, mid 877 00:56:52,280 --> 00:56:55,600 Speaker 1: cap would be I'd say between five hundred and a 878 00:56:55,640 --> 00:56:57,800 Speaker 1: billion and a half or five d and a billion 879 00:56:58,040 --> 00:57:03,440 Speaker 1: fund size. Uh, there's more exit opportunities when you're have 880 00:57:03,520 --> 00:57:06,879 Speaker 1: a company at that level than you have a five 881 00:57:06,920 --> 00:57:10,799 Speaker 1: billion dollar company, right, and so there's there's more there's 882 00:57:10,800 --> 00:57:15,239 Speaker 1: more options in terms of exit. You could potentially I 883 00:57:15,360 --> 00:57:18,600 Speaker 1: p O it, it might might fit for us back, 884 00:57:19,840 --> 00:57:23,040 Speaker 1: or there's a lot of larger private equity firms that 885 00:57:23,080 --> 00:57:26,800 Speaker 1: have raised, you know, significant amounts of capital, and they 886 00:57:26,800 --> 00:57:30,080 Speaker 1: have platforms and they're looking to grow, and I think 887 00:57:30,200 --> 00:57:35,560 Speaker 1: they're maybe some of them overpay for some of those assets. 888 00:57:35,800 --> 00:57:40,040 Speaker 1: And uh, is that valuation issue ongoing? Is all that 889 00:57:40,120 --> 00:57:43,560 Speaker 1: cash leading people to pay inflated values even on the 890 00:57:43,600 --> 00:57:46,400 Speaker 1: private equity side. I think I think they're some of 891 00:57:46,400 --> 00:57:48,440 Speaker 1: the larger firms are feeling the weight of the money 892 00:57:49,000 --> 00:57:51,600 Speaker 1: and they have to get the money invested, and so 893 00:57:52,280 --> 00:57:57,440 Speaker 1: they can't overpaying a bit. Yeah, they might. Uh. You know. 894 00:57:57,480 --> 00:58:00,680 Speaker 1: One anecdote for you is, I know a tech investor, 895 00:58:01,480 --> 00:58:05,480 Speaker 1: you know, probably sub one billion, a large, you know, 896 00:58:05,640 --> 00:58:08,200 Speaker 1: ten plus billion dollar firm was buying one of their 897 00:58:08,240 --> 00:58:13,960 Speaker 1: portfolio companies. Uh. Smaller firm was going to roll their equity, 898 00:58:14,840 --> 00:58:19,160 Speaker 1: uh roll thirty or their equity, you know into the 899 00:58:19,200 --> 00:58:22,680 Speaker 1: new new company. The larger firm kath And said, you 900 00:58:22,720 --> 00:58:24,400 Speaker 1: know what if we pay you a little extra, can 901 00:58:24,440 --> 00:58:27,560 Speaker 1: we just take all of it? He said, sold to you? 902 00:58:29,720 --> 00:58:32,640 Speaker 1: Sold to you? One of my favorite lines of all time. Yeah, 903 00:58:32,880 --> 00:58:36,160 Speaker 1: so I think you're seeing some of that. Um, that's 904 00:58:36,160 --> 00:58:40,400 Speaker 1: really that's really interesting. All right, So let's jump to 905 00:58:40,560 --> 00:58:43,680 Speaker 1: our favorite questions that we ask all of our guests, 906 00:58:44,240 --> 00:58:47,200 Speaker 1: starting with what are you streaming these days? Give us 907 00:58:47,240 --> 00:58:50,880 Speaker 1: your favorite Netflix or Amazon Prime. What's keeping you entertained? 908 00:58:52,640 --> 00:58:55,040 Speaker 1: My wife watches more than I, more of those than 909 00:58:55,080 --> 00:59:00,480 Speaker 1: I do. But one that I definitely liked was Serpent 910 00:59:01,320 --> 00:59:04,680 Speaker 1: The Serpent. The Serpent that was I think. It was 911 00:59:04,720 --> 00:59:09,440 Speaker 1: a BBC series about a French serial killer in the 912 00:59:09,520 --> 00:59:16,320 Speaker 1: seventies in Southeast Asia and uh interesting, it's uh amazing 913 00:59:16,320 --> 00:59:20,840 Speaker 1: and they finally they finally caught him. Well spoiler alert. Yeah, 914 00:59:20,920 --> 00:59:25,720 Speaker 1: but it's a that one I liked. You know, I've 915 00:59:25,760 --> 00:59:29,960 Speaker 1: seen a few few series like that, but that one, 916 00:59:30,160 --> 00:59:33,440 Speaker 1: that one stood out stood out. Who are your early 917 00:59:33,480 --> 00:59:37,760 Speaker 1: mentors who helped to shape your career. Yeah, I would 918 00:59:37,760 --> 00:59:42,480 Speaker 1: say it would be H David Patterson, who ran HSBC's 919 00:59:42,600 --> 00:59:47,120 Speaker 1: private equity business in China and Southeast Asia. He was 920 00:59:47,120 --> 00:59:51,560 Speaker 1: based in Hong Kong, and that's who introduced me to 921 00:59:52,280 --> 00:59:56,360 Speaker 1: private equity in nineteen two when he showed up in 922 00:59:56,440 --> 00:59:59,280 Speaker 1: our offices in New York with to thirty five million 923 00:59:59,360 --> 01:00:04,760 Speaker 1: dollar funds study invested in Southeast Asia and looking to 924 01:00:04,880 --> 01:00:07,960 Speaker 1: raise h a fund in the US with some of 925 01:00:08,040 --> 01:00:12,080 Speaker 1: US investors. Tell us about some of your favorite books. 926 01:00:12,120 --> 01:00:14,840 Speaker 1: What are you reading right now? What am I reading 927 01:00:14,920 --> 01:00:20,640 Speaker 1: right now? I just a cheap peak. Gave me red notice. 928 01:00:21,080 --> 01:00:23,760 Speaker 1: I came out of a couple of years ago Bill 929 01:00:23,800 --> 01:00:27,520 Speaker 1: Browder's book where he had I think he was the 930 01:00:27,640 --> 01:00:34,320 Speaker 1: largest foreign investor in Russia at one Yeah, and uh, 931 01:00:34,640 --> 01:00:40,160 Speaker 1: it's an amazing story. Once uh, once Vladimir Putin, you know, 932 01:00:40,520 --> 01:00:43,520 Speaker 1: seemed to cut his deal with the y'alligarchs and uh, 933 01:00:45,560 --> 01:00:48,800 Speaker 1: a strong willed guy. It's an amazing story. I think 934 01:00:48,800 --> 01:00:52,000 Speaker 1: it would be a great movie. Uh. And I just 935 01:00:52,840 --> 01:00:56,000 Speaker 1: recently read Elon Must. I read a couple of the 936 01:00:56,120 --> 01:01:00,240 Speaker 1: rocket billionaires, you know about the and then Elon. That 937 01:01:00,320 --> 01:01:07,160 Speaker 1: led me to recently read Elon Must's biography. Uh and uh, 938 01:01:07,200 --> 01:01:11,000 Speaker 1: you know, incredible, incredible what he's doing, you know, simultaneously 939 01:01:11,120 --> 01:01:14,600 Speaker 1: trying to disrupt the three most complex industries in the 940 01:01:14,640 --> 01:01:19,360 Speaker 1: world Aerospace, financial services with PayPal, you know when he 941 01:01:19,440 --> 01:01:25,520 Speaker 1: got involved there, and uh and automotive with Tesla simultaneously. 942 01:01:25,600 --> 01:01:29,480 Speaker 1: So you know, he he left South Africa, I think, 943 01:01:30,000 --> 01:01:33,960 Speaker 1: you know, at eighteen, I think a distant relative of his, 944 01:01:34,200 --> 01:01:37,480 Speaker 1: of his mom, you know, had had some there were 945 01:01:37,520 --> 01:01:44,000 Speaker 1: some relatives in Canada, and he went for it. A history. Yeah, yeah. 946 01:01:44,120 --> 01:01:46,800 Speaker 1: Say at least what sort of advice would you give 947 01:01:46,840 --> 01:01:49,480 Speaker 1: to a recent college grad who was interested in a 948 01:01:49,560 --> 01:01:56,520 Speaker 1: career in in private equity or capital raising. I would say, Uh, 949 01:01:56,600 --> 01:01:59,680 Speaker 1: I definitely get an internship where you can. We've we've 950 01:02:00,040 --> 01:02:02,240 Speaker 1: to try to take in two or three interns every 951 01:02:02,320 --> 01:02:06,880 Speaker 1: year and that certainly helps them when they graduate. Getting 952 01:02:07,480 --> 01:02:11,840 Speaker 1: getting a position at an investment firm. UH doesn't need 953 01:02:12,160 --> 01:02:15,960 Speaker 1: necessarily need to be a capital raising firm. I also 954 01:02:16,000 --> 01:02:20,640 Speaker 1: think getting experience and credit. I would recommend that to 955 01:02:20,880 --> 01:02:24,760 Speaker 1: anybody coming right out. I think that is a good 956 01:02:24,800 --> 01:02:30,880 Speaker 1: foundation that you that UH can be very valuable. Interesting 957 01:02:31,480 --> 01:02:34,040 Speaker 1: And our final question, what do you know about the 958 01:02:34,080 --> 01:02:38,360 Speaker 1: world of private equity and capital raising and credit today 959 01:02:38,400 --> 01:02:40,680 Speaker 1: that you wish you knew thirty years ago or so 960 01:02:40,920 --> 01:02:44,320 Speaker 1: when you were first starting out? I would say patients 961 01:02:44,360 --> 01:02:48,959 Speaker 1: and perseverance UH to use come up with a couple 962 01:02:48,960 --> 01:02:55,160 Speaker 1: of words that raising raising capital Uh, you can you 963 01:02:55,200 --> 01:02:57,880 Speaker 1: can never stop. You just have to keep moving forward. 964 01:02:58,560 --> 01:03:02,760 Speaker 1: Just like I I ski race. I still do the Masters, 965 01:03:03,000 --> 01:03:06,040 Speaker 1: and one of the coaches always tells me at the 966 01:03:06,080 --> 01:03:08,160 Speaker 1: beginning of the gates, you know, for a practice run 967 01:03:08,360 --> 01:03:13,080 Speaker 1: keep moving forward. And I think just raising cat things. 968 01:03:13,280 --> 01:03:16,000 Speaker 1: Things are gonna always happen. There'll be a key man event, 969 01:03:16,120 --> 01:03:22,680 Speaker 1: somebody will leave, UH, portfolio company will blow up, you know, 970 01:03:23,440 --> 01:03:27,800 Speaker 1: could be some others. You know, the Asian crisis, a 971 01:03:27,840 --> 01:03:30,400 Speaker 1: pandemic can hit. But you can never stop. You just 972 01:03:30,440 --> 01:03:33,000 Speaker 1: have to keep moving forward. And I would say, you've 973 01:03:33,040 --> 01:03:36,800 Speaker 1: got to be patient and you just continually have to persevere. 974 01:03:37,560 --> 01:03:41,200 Speaker 1: Really really good advice. Um, how your knees. Gotta ask 975 01:03:41,240 --> 01:03:44,840 Speaker 1: if your ski racing still these are good? I UH. 976 01:03:45,080 --> 01:03:48,640 Speaker 1: I had my reconstructive surgery from a soccer from a 977 01:03:48,680 --> 01:03:54,320 Speaker 1: soccer uh incident in nineteen ninety and they've it's still there. 978 01:03:54,320 --> 01:03:58,200 Speaker 1: It's still good. So far, so good. Thank you David 979 01:03:58,240 --> 01:04:00,560 Speaker 1: for being so generous with your time. I'm we have 980 01:04:00,680 --> 01:04:03,760 Speaker 1: been speaking with David Conrad. He is the co founder 981 01:04:03,760 --> 01:04:07,760 Speaker 1: and CEO at Focused Point Private Capital Group. If you 982 01:04:07,880 --> 01:04:10,640 Speaker 1: enjoy this conversation, We'll be sure and check out any 983 01:04:10,640 --> 01:04:13,840 Speaker 1: of the previous four hundred such discussions we've had over 984 01:04:13,880 --> 01:04:18,840 Speaker 1: the past seven years. You can find those at iTunes, Spotify, 985 01:04:18,960 --> 01:04:22,400 Speaker 1: wherever you get your favorite podcasts. We love your comments, 986 01:04:22,440 --> 01:04:26,400 Speaker 1: feedback and suggestions right to us at m IB podcast 987 01:04:26,480 --> 01:04:30,160 Speaker 1: at Bloomberg dot net. You can sign up from my 988 01:04:30,320 --> 01:04:34,280 Speaker 1: daily reading list of favorite articles each day at d 989 01:04:34,320 --> 01:04:37,560 Speaker 1: Halts dot com. Follow me on Twitter at rid Halts. 990 01:04:38,080 --> 01:04:39,720 Speaker 1: I would be remiss if I did not thank the 991 01:04:39,720 --> 01:04:43,600 Speaker 1: crack team that helps put these conversations together each week. 992 01:04:44,040 --> 01:04:48,760 Speaker 1: Mohammed Rumaui is my audio engineer. Alatico val Bron is 993 01:04:48,800 --> 01:04:52,760 Speaker 1: our project manager. Paris Wald is my producer. Michael Batnick 994 01:04:52,840 --> 01:04:56,480 Speaker 1: is my head of research. I'm Barry Hults. You've been 995 01:04:56,480 --> 01:05:01,080 Speaker 1: listening to Masters in Business on Bloomberg Radio Zero