WEBVTT - Man Not Bird 0:00:02.720 --> 0:00:09.000 Bloomberg Audio Studios, podcasts, radio news. We talked last week 0:00:09.039 --> 0:00:12.880 about we're so excited. I don't get out of the 0:00:12.880 --> 0:00:13.360 house much. 0:00:13.480 --> 0:00:15.160 Oh my god. The weather in Vegas, though, it's going 0:00:15.240 --> 0:00:16.160 to be like high eighties. 0:00:16.560 --> 0:00:18.400 I don't know what the weather in New Orleans is. 0:00:18.960 --> 0:00:20.720 It's gonna be great, it's gonna be great whatever. 0:00:20.960 --> 0:00:23.599 Yeah, it will be good, humid. Drink a hurricane. 0:00:24.680 --> 0:00:26.240 I feel like I'm gonna drink a hurricane. 0:00:26.560 --> 0:00:28.400 It's not good. We'll make you feel good. 0:00:28.520 --> 0:00:30.520 No, I think the last time I was in New Orleans, 0:00:30.600 --> 0:00:35.879 I was. I was in high school, okay, And in 0:00:35.960 --> 0:00:39.519 high school I was on the quiz Bowl team, all right, 0:00:39.760 --> 0:00:44.239 which is like surely no surprise to anywhere. And we 0:00:44.320 --> 0:00:48.440 call for some sort of national championship tournament in New Orleans, 0:00:48.960 --> 0:00:52.839 of course, and I was, you know, seventeen. We definitely 0:00:52.880 --> 0:00:53.760 drank hurricanes. 0:00:54.040 --> 0:00:55.560 That's pretty cool. 0:00:55.680 --> 0:00:58.360 Actually, like teacher chaperones are like took us to Bourbon 0:00:58.440 --> 0:01:00.440 Street and we're like, we're going to walk this way. 0:01:01.040 --> 0:01:03.680 Wow. Did anyone have a fake idea or was it 0:01:03.760 --> 0:01:04.280 just like. 0:01:04.480 --> 0:01:06.480 As I recall, no. 0:01:07.040 --> 0:01:09.280 Or was it like one kid and he was like. 0:01:09.959 --> 0:01:11.840 This is a similar time in New Orleans. 0:01:12.080 --> 0:01:14.240 God. Yeah, he just. 0:01:14.280 --> 0:01:18.720 Wiped up bar and you were sixteen seventeen years old 0:01:18.760 --> 0:01:21.240 and you said I'd like a hurricane, and they're like, 0:01:21.760 --> 0:01:25.319 nobody who's not underage wants a hurricane. So here you. 0:01:25.280 --> 0:01:28.160 Go, man, Well you can recreate that. 0:01:28.360 --> 0:01:31.240 I'm going to recreate that experience. That's it, like, honestly, 0:01:31.280 --> 0:01:33.200 like the m and A conference and the quiz Bowl 0:01:33.440 --> 0:01:37.919 National Championship, very similar. Probably probably people. 0:01:38.000 --> 0:01:39.280 Yes, that's cute. 0:01:40.480 --> 0:01:42.800 Hello, and welcome to the Money Stuff Podcast. You're a 0:01:42.800 --> 0:01:47.280 weekly podcast where we talk about stuff related to money. 0:01:47.960 --> 0:01:50.040 I'm Matt Levian and I Wade the Money Stuff column 0:01:50.040 --> 0:01:51.000 for Bloomberg. 0:01:50.600 --> 0:01:55.120 Opinion, and I'm Katie Greifeld, a reporter for Bloomberg News 0:01:55.120 --> 0:01:56.760 and an anchor for Bloomberg Television. 0:02:04.880 --> 0:02:06.440 Friend of the Pud Bill Ackman is doing. 0:02:06.560 --> 0:02:09.920 The show Lackman returning not as a bird but as 0:02:10.040 --> 0:02:10.600 the manager. 0:02:10.720 --> 0:02:13.119 So I forgot that was a sensitive subject. A friend 0:02:13.160 --> 0:02:17.400 of the show, Bill Ackman Man, not bird is the 0:02:17.440 --> 0:02:21.000 thing that he likes to do. Yeah, launch large clothes 0:02:21.240 --> 0:02:23.920 funds or try or try He's going to get at 0:02:23.919 --> 0:02:26.280 one of these days. He filed for the IPO of Well, 0:02:26.320 --> 0:02:31.080 the IPOs of Pershing Square USA, which is the closed 0:02:31.200 --> 0:02:34.079 end fund that he tried to launch in twenty twenty 0:02:34.080 --> 0:02:37.280 four and then pulled because he didn't there was very 0:02:37.320 --> 0:02:40.640 much money. But also the Pershing Square, Inc. Which is 0:02:41.280 --> 0:02:44.239 the new form of the Pershing Square Hedgehund management company. 0:02:44.280 --> 0:02:46.800 So his actual hedgehund firm is going to go public 0:02:47.280 --> 0:02:50.760 simultaneously with his clothes end fund for the simple reason 0:02:50.840 --> 0:02:53.079 that if you buy shares of the clothes then fund, 0:02:53.080 --> 0:02:56.560 you're gonna get shares of the management company as a 0:02:56.600 --> 0:02:58.320 sweetener to induce you to buy shares of. 0:02:58.320 --> 0:03:00.880 The clothes twenty shares the management company. 0:03:00.960 --> 0:03:03.440 Right, everyone reported this, and I'm like, you can't be 0:03:03.560 --> 0:03:06.320 like twenty shares. If you buy one hundred shares of 0:03:06.360 --> 0:03:08.320 the Pershing Square USA, you get twenty shares of the 0:03:08.320 --> 0:03:10.639 management company, So you get one fifth as many shares 0:03:10.720 --> 0:03:13.480 of the manager company. But like shares are a meaningless concept, 0:03:13.560 --> 0:03:15.320 you can divide a company into as many shares as 0:03:15.560 --> 0:03:17.799 you want. This is true, and so I haven't looked 0:03:17.800 --> 0:03:19.880 at it, and going to be four dred million shares 0:03:19.919 --> 0:03:24.120 of Pershing Square ink the management company. So basically, if 0:03:24.160 --> 0:03:26.480 you buy a fifty dollars share of Pershing square USA 0:03:26.720 --> 0:03:29.400 the clothes un fund. You get fifty dollars worth give 0:03:29.440 --> 0:03:32.840 or take of the clothes unfund plus zero point two 0:03:32.880 --> 0:03:36.160 shares of the manager company, which is one two billionth 0:03:36.240 --> 0:03:38.880 of the management company, which you know, what's the management 0:03:38.960 --> 0:03:42.200 company worth? Two years ago or a year and a 0:03:42.200 --> 0:03:45.640 half ago, they did offering, they raise money at about 0:03:45.640 --> 0:03:48.520 a ten billion dollar valuation, and they would argue that 0:03:48.560 --> 0:03:51.480 it's more now. So you know, if the managing company 0:03:51.560 --> 0:03:55.560 is worth ten or twenty billion dollars, then your bonus 0:03:55.720 --> 0:03:58.280 as a investor in the clothes unfund is worth five 0:03:58.360 --> 0:04:01.440 or ten dollars or so that is I think they 0:04:01.480 --> 0:04:04.800 hope enough of a bonus to overcome the tradition that 0:04:04.840 --> 0:04:08.920 closed un funds trade a discount. And in fact, but. 0:04:08.880 --> 0:04:11.800 There's a rich history of closed un funds trading at 0:04:11.800 --> 0:04:12.400 a discount. 0:04:12.800 --> 0:04:15.760 The rich history includes right Bill Ackman's closed up fund 0:04:15.760 --> 0:04:20.240 in europ, which is their discount is very complicated because 0:04:20.279 --> 0:04:24.039 like there's this thing coming. But you know, if you 0:04:24.080 --> 0:04:26.000 started from that as a starting point, you'd be like, well, 0:04:26.480 --> 0:04:28.679 twenty five percent discount means if I put fifty dollars 0:04:28.680 --> 0:04:30.440 into persons through a USA, I'm going to get back 0:04:31.279 --> 0:04:33.880 thirty seven fifty worth of stock, and then you need 0:04:33.960 --> 0:04:36.240 enough of the management company stock to make it worth it, 0:04:36.279 --> 0:04:37.280 which maybe this does. 0:04:37.640 --> 0:04:40.440 Yeah, So we were talking a little bit about this 0:04:40.520 --> 0:04:43.080 earlier and then we quickly stopped ourselves because we should 0:04:43.120 --> 0:04:45.520 save it for the POD. But it's interesting when it 0:04:45.520 --> 0:04:49.640 comes to IPOs of companies, there's this stigma around trading 0:04:49.640 --> 0:04:54.520 below your IPO price. Does the same stigma exist if 0:04:54.560 --> 0:04:57.880 you IPO closed and fund and immediately traded a discount. 0:04:58.040 --> 0:05:00.920 Well, two things. One, it's not a stigma, it's a 0:05:01.279 --> 0:05:04.560 total impediment. Like Bill Ackman last time he tried to 0:05:04.560 --> 0:05:07.359 take Pushing Square USI public, he just didn't. And the 0:05:07.400 --> 0:05:10.280 reason he didn't is because a lot of investors were like, look, 0:05:11.360 --> 0:05:13.960 this sounds great, but we think it'll trade at a discount, 0:05:14.000 --> 0:05:15.600 and we'd rather buy it at a discount on day 0:05:15.600 --> 0:05:18.600 two than buy it from you at par in the IPO. 0:05:19.880 --> 0:05:21.800 And if everyone says that, then you don't sell any 0:05:21.800 --> 0:05:23.520 shares in the IPI and you just don't go public. 0:05:23.600 --> 0:05:27.840 Right with a company, stuff is different. Right, Like a 0:05:27.920 --> 0:05:30.200 company like you set the IPO price at the price 0:05:30.240 --> 0:05:31.720 the market is willing to bear with. They closed, then 0:05:31.800 --> 0:05:34.760 fund if you don't raise money at NAV like you 0:05:34.839 --> 0:05:38.200 kind of can't raise money, so they pulled the IPO. 0:05:38.560 --> 0:05:41.200 It's anothery're coming back with this thing, which you know 0:05:41.240 --> 0:05:44.680 you ask, is there are a stigma if that trades down? Well, 0:05:45.080 --> 0:05:47.520 maybe I'm wrong, but it's going to trade down the way. 0:05:47.600 --> 0:05:49.560 The way you know that is because they're giving this bonus. Right, 0:05:49.600 --> 0:05:51.719 the management company shares and the closed un fund shares 0:05:51.760 --> 0:05:53.360 are going to trade separately day one, right, And there's 0:05:53.400 --> 0:05:55.760 just they're two separate companies. And if you buy shares 0:05:56.000 --> 0:05:58.680 of the closed then fund and the IPO, you get 0:05:58.720 --> 0:06:01.719 clothes unfund shares and separate management company shares. Yeah, and 0:06:01.760 --> 0:06:04.800 then day one they trade separately, and you hope the 0:06:04.839 --> 0:06:08.480 package will trade at above fifty dollars so that you've 0:06:08.480 --> 0:06:11.400 made money on the IPO. But if the package trades 0:06:11.440 --> 0:06:13.040 about fifty dollars, like the closed infund is going to 0:06:13.040 --> 0:06:14.960 trade down, it's just gonna trade down, and it's you know, 0:06:14.960 --> 0:06:16.440 it's not gonna be that much think aout because everyone 0:06:16.480 --> 0:06:17.640 like anticipating it. 0:06:18.200 --> 0:06:20.200 I'm glad you said it's going to trade down. 0:06:20.000 --> 0:06:21.760 Because maybe I'm wrong. 0:06:22.160 --> 0:06:24.000 I mean, maybe i'm wrong too, but that was my 0:06:24.080 --> 0:06:25.320 knee jerk reaction. 0:06:25.120 --> 0:06:27.360 Like, oh, every clothes Why that's why there's a bonus, 0:06:27.400 --> 0:06:29.080 because it's going to trade down, and so you get 0:06:29.080 --> 0:06:31.159 these extra shares and you have the package trades up, 0:06:31.160 --> 0:06:32.560 but the package trades up, it's a win, and so 0:06:32.640 --> 0:06:35.400 it's a good IPO. Yeah, maybe over time, like Bill 0:06:35.440 --> 0:06:38.200 Ackman has always made the case that like if he 0:06:38.920 --> 0:06:43.760 compounds the clothes End Fund at an above market rate, 0:06:44.279 --> 0:06:46.279 then you should be willing to pay more than Navy 0:06:46.400 --> 0:06:49.400 to buy into the clothes down Fund, and maybe over 0:06:49.480 --> 0:06:54.240 time that argument wins and that they want. 0:06:54.440 --> 0:06:59.000 Yeah, it's kind of interesting that Robinhood also just set 0:06:59.040 --> 0:07:02.159 sale on a close funds, a venture fund that holds 0:07:02.320 --> 0:07:06.360 private companies that iPod last week. I believe it also 0:07:06.880 --> 0:07:09.800 it opened at a discount or something like that, and 0:07:10.280 --> 0:07:13.560 I guess that sort of feeds into my long term 0:07:13.600 --> 0:07:16.800 thinking that okay, package aside, it feels like this close 0:07:16.880 --> 0:07:19.160 end fund is going to trade at a discount. Given 0:07:19.160 --> 0:07:22.720 that we've talked about how there is all this demand 0:07:22.720 --> 0:07:26.080 out there for private companies from retail investors, you would 0:07:26.080 --> 0:07:28.680 expect that they would be drawn to this Robin Hood 0:07:29.320 --> 0:07:32.160 venture funds. And then you compare that to the portfolio 0:07:32.400 --> 0:07:35.880 and Bill Ackman's closed end funds. 0:07:36.000 --> 0:07:38.240 Which is not not large cap stocks. 0:07:38.640 --> 0:07:39.440 What are you talking about? 0:07:39.640 --> 0:07:42.040 I said, I said, it's not not large cap stocks. 0:07:41.760 --> 0:07:43.600 Right in Bill Ackmans. Yeah, No, I'm not saying that 0:07:43.600 --> 0:07:46.440 it's not I'm saying it's all public large cap stocks. 0:07:46.440 --> 0:07:48.960 It's not like the shiny pre IPO. 0:07:52.400 --> 0:07:54.760 There's a reason for telling it this way. 0:07:54.920 --> 0:07:58.040 Yeah, I know. I'm just saying the portfolio, like if 0:07:58.040 --> 0:08:01.559 you're looking at this like shiny package of like data bricks, ramp, 0:08:01.640 --> 0:08:04.400 like a lot of companies that are expected to go 0:08:05.040 --> 0:08:09.120 public in the near future, versus you know, a close 0:08:09.200 --> 0:08:13.200 and fund of large cap perhaps the right public stocks, 0:08:13.200 --> 0:08:16.600 but still public stocks that might not like appeal to 0:08:18.160 --> 0:08:20.280 people in the open market who might want to buy this. 0:08:20.560 --> 0:08:22.280 Oh yeah, the thing you're selling in the clothes n 0:08:22.360 --> 0:08:26.600 fund is not like the underlying investments, which are kind 0:08:26.600 --> 0:08:30.680 of a NOLLA. The thing you're selling is one Bill 0:08:30.720 --> 0:08:34.880 Ackman's future ability to pick good investments, and then two 0:08:35.000 --> 0:08:37.360 just like his persona, right, I mean, like this is 0:08:37.360 --> 0:08:40.520 a like to some extent, he's a public figure. He 0:08:40.520 --> 0:08:42.560 tweets a lot, like if you're interested in that, like 0:08:43.440 --> 0:08:45.439 this is in the way that Tesla is a way 0:08:45.440 --> 0:08:47.400 to access Elmus. This is the way to access like 0:08:47.480 --> 0:08:50.760 his brand, and maybe some people will buy that. Yeah, 0:08:50.840 --> 0:08:52.280 I should say like that a lot of this is 0:08:52.280 --> 0:08:54.520 spoken for, Like they have two point eight billion dollars 0:08:54.520 --> 0:08:57.000 of like pre IPO commitments. 0:08:56.960 --> 0:08:59.120 And those people got thirty shares. 0:08:59.200 --> 0:09:01.559 They have thirty Yes, yeah, the extra bonus, but those 0:09:01.559 --> 0:09:04.360 people are like institutions and family offices and stuff. I 0:09:04.400 --> 0:09:05.559 do want to tell you a little bit about it, 0:09:05.640 --> 0:09:07.880 Like the management company is going public, right, so it 0:09:07.920 --> 0:09:09.800 seems like the management company is going public sort of 0:09:09.800 --> 0:09:12.840 out of necessity to do the to close them fund deal. 0:09:12.880 --> 0:09:15.360 But it's also like they're always talking about taking it public. 0:09:15.679 --> 0:09:17.520 They're not raising money for the management company. They're just 0:09:17.520 --> 0:09:20.480 taking it public to give to the closes unfund shoulders. 0:09:21.200 --> 0:09:23.800 But they have to do a perspectives for the management company. 0:09:23.800 --> 0:09:27.160 And so you can see things about like comp including 0:09:27.200 --> 0:09:29.520 Akman got one hundred and forty three million dollars last 0:09:29.559 --> 0:09:32.800 year and a lot of birds and Brian Israel who 0:09:32.880 --> 0:09:35.800 is the actual chief investment officer and got forty four million. 0:09:36.400 --> 0:09:38.559 I also I want to quote one of the great 0:09:38.559 --> 0:09:41.560 sentences go on and this is actually from Ackman's letter, 0:09:41.600 --> 0:09:44.000 I think to shelders not from the actual perspective, but 0:09:44.640 --> 0:09:47.720 he writes, with one of the highest ratios of fee 0:09:47.760 --> 0:09:51.520 paying assets to investment professionals in our industry, Pershing Square 0:09:51.559 --> 0:09:54.080 is also an economically attractive place. 0:09:53.800 --> 0:09:56.640 To work, oh, which is like we're going to pay you. 0:09:56.640 --> 0:09:59.319 Like a great flax. Like it's like they have like whatever, 0:09:59.320 --> 0:10:01.880 they have like twelve employees and they run thirty billion dollars. 0:10:01.960 --> 0:10:04.640 They all get paid. It gets a great business. And 0:10:05.400 --> 0:10:07.360 the masging company is also interesting. They do a really 0:10:07.400 --> 0:10:10.480 interesting thing where they have, like most other hedgehn managers, 0:10:10.520 --> 0:10:14.080 they charge performance fees and they have what they call 0:10:14.120 --> 0:10:16.680 the preferred performance fee. It basically means the performance fee 0:10:16.720 --> 0:10:19.240 that they get on the first five percent of returns 0:10:19.280 --> 0:10:23.120 and their funds goes to the managment company to the 0:10:23.120 --> 0:10:27.480 shareolders basically and everything over that goes to employees. So 0:10:28.360 --> 0:10:31.080 one that incentivizes is employees because then get real or rich. 0:10:31.440 --> 0:10:35.120 And two they think they argue that it makes the 0:10:35.280 --> 0:10:37.839 management company a better investment because like the theory is 0:10:37.880 --> 0:10:40.320 that people don't like to buy shares of hedge fund 0:10:40.320 --> 0:10:43.760 companies because their returns are so variable. Because if they 0:10:43.760 --> 0:10:44.960 have a good year, they make a lot of money. 0:10:44.960 --> 0:10:46.800 If they have a bad year, they don't make any money. 0:10:46.840 --> 0:10:50.040 And so, you know, stereotypically, investors do not place a 0:10:50.200 --> 0:10:53.880 high multiple on performance fees and pushing squares. Theory is like, well, 0:10:54.000 --> 0:10:57.080 the first five percent, we'll get that every year, and 0:10:57.120 --> 0:10:58.840 so that's like almost like a management fee. It's like 0:10:58.880 --> 0:11:01.800 just like a guaranteed fee. And so investor shop plays 0:11:01.800 --> 0:11:03.319 a highmultiple on that. So they're like carving up the 0:11:03.360 --> 0:11:05.719 fees in a nice way where like shareholders place a 0:11:05.800 --> 0:11:09.199 high value on the low part of the fees, like 0:11:09.240 --> 0:11:12.000 the very predictable stuff, and employees plays a high value 0:11:12.040 --> 0:11:14.079 on the upside lottery tickets, and so we're going to 0:11:14.120 --> 0:11:16.000 carve it up so that everyone gets the piece they value. 0:11:16.120 --> 0:11:16.520 Mm hmm. 0:11:16.720 --> 0:11:18.559 So we'll see that works. But it's a good idea. 0:11:18.760 --> 0:11:21.200 I feel like we're going to be talking about this 0:11:21.760 --> 0:11:22.960 more as we get closer. 0:11:23.280 --> 0:11:24.480 Maybe yeh. 0:11:26.080 --> 0:11:41.840 Can something we've been talking about a lot which we're 0:11:41.840 --> 0:11:44.320 going to talk about more right now, probably credit. She's 0:11:44.360 --> 0:11:47.080 the Louis vibes are atrocious. 0:11:48.040 --> 0:11:51.839 Yes, I guess they're bad. Yeah, I guess they're bad. 0:11:52.080 --> 0:11:54.960 They're bad. Well, if you have an optimistic. 0:11:55.040 --> 0:11:58.120 Take the story about a golden executor who said at 0:11:58.160 --> 0:12:01.640 a conference with that so good credit glans, we're enjoying 0:12:01.679 --> 0:12:04.280 the war and Iran because at least the distracts from 0:12:04.440 --> 0:12:08.880 questions about gates and yeah, you really don't want to 0:12:08.920 --> 0:12:09.120 say that. 0:12:09.360 --> 0:12:12.480 I keep that. I feel like that also points to 0:12:12.520 --> 0:12:16.760 the vibes being atrocious. War. 0:12:17.920 --> 0:12:21.320 I guess. Actually, after we recorded last week, eah Lend 0:12:21.600 --> 0:12:27.800 the HPS slash black Rock Big Private BDC gated itself. 0:12:27.960 --> 0:12:31.000 Investors requested to a breading about nine percent of their 0:12:31.040 --> 0:12:34.480 shares and HPS says, nope, our cap is five percent, 0:12:34.559 --> 0:12:36.400 so we're not giving you back the rest of your money. 0:12:37.320 --> 0:12:39.360 They didn't have their employees pitch in, they. 0:12:39.240 --> 0:12:43.280 Didn't have their pitch in, and they basically said the 0:12:43.320 --> 0:12:48.000 correct things, which are the point of private credit, is 0:12:48.080 --> 0:12:51.880 that you accept some illiquidity in exchange for expected higher returns. 0:12:52.360 --> 0:12:54.520 And because we own a liquid stuff, we can't just 0:12:54.600 --> 0:12:57.120 cast you out whenever you want, and so we set 0:12:57.160 --> 0:12:58.800 a limit of five percent so you can get some 0:12:58.840 --> 0:13:00.680 money out if you need it, but we're keeping them 0:13:00.679 --> 0:13:01.520 limit a five percent. 0:13:01.600 --> 0:13:02.840 Tough cookies, And. 0:13:03.280 --> 0:13:05.000 It's funny you say the vibes are bad the vibes 0:13:05.040 --> 0:13:06.559 are not good. But a lot of people in the 0:13:06.559 --> 0:13:08.880 private credits you're like, they did the right thing. The 0:13:08.960 --> 0:13:11.080 gates are to prodict the clients, and you want to 0:13:11.120 --> 0:13:14.360 not have a run on the bank and you say, nope, 0:13:14.360 --> 0:13:16.400 the bank is closed. Then you do prevent that at 0:13:16.400 --> 0:13:19.720 the cost of getting awkward questions and getting bad headlines 0:13:19.760 --> 0:13:21.520 and having bad vibes. But I think it is like 0:13:21.600 --> 0:13:23.320 people in private credit, is the right thing to do? 0:13:23.480 --> 0:13:26.400 Was it Blackstone that the employees pitched? Yeah, maybe the 0:13:26.440 --> 0:13:30.200 employees a Blackstone forked over some cash to meet the 0:13:30.280 --> 0:13:32.520 x ex redemptions. We're like, God, I wish that black 0:13:32.600 --> 0:13:34.920 Rocket done that a week earlier so we wouldn't have 0:13:34.960 --> 0:13:36.640 had to pay off very possibly. 0:13:36.880 --> 0:13:39.080 There are like differences in numbers that are kind of 0:13:40.080 --> 0:13:43.000 kind of matter a little, Like Blackstone got seven point 0:13:43.080 --> 0:13:45.320 nine percent redemptions, which like you can kind of do 0:13:45.400 --> 0:13:47.200 seven percent in your ten to offward then it's like 0:13:47.840 --> 0:13:50.679 zero point nine, Well, we'll find the money somewhere, whereas 0:13:50.720 --> 0:13:52.719 like HP has got nine point three, where it's like 0:13:53.480 --> 0:13:55.720 nine point three really got to do something, And there 0:13:55.760 --> 0:13:57.400 have been since then. There's like cliff Water had a 0:13:58.480 --> 0:14:00.280 fourteen percent Yeah, and you. 0:14:00.200 --> 0:14:03.640 Gotta shut Morgan Stanley as well. Yeah, it just feels 0:14:03.679 --> 0:14:05.320 like if you haven't, the whole thing. 0:14:05.200 --> 0:14:07.800 Has been kind of like the numbers have been creeping 0:14:07.880 --> 0:14:09.880 up because this is all kind of cumulative, right, Like 0:14:10.200 --> 0:14:11.640 you go out and you say how many people would 0:14:11.640 --> 0:14:13.480 like to redeem, and like seven percent say we'd like 0:14:13.520 --> 0:14:15.880 to redeem, and then you announce that and they're bad headlines, 0:14:15.880 --> 0:14:17.240 and then like the next fund that does it, it's 0:14:17.280 --> 0:14:19.480 like eight percent, you know, and so it keeps getting worse. 0:14:19.360 --> 0:14:21.680 Kind of like a vicious cycle or feedback loss. 0:14:21.800 --> 0:14:25.360 Yeah, it's it's just people get nervouser and nervouser, and 0:14:25.640 --> 0:14:28.560 these redemption numbers are index of nervousness. But I don't 0:14:28.600 --> 0:14:30.280 know how much this has to do with like fund 0:14:30.280 --> 0:14:33.120 by fund like performance or like trusting the matters, and 0:14:33.120 --> 0:14:35.360 how much of it is just like each fund gets 0:14:35.400 --> 0:14:37.280 a little bit more redemption requests than the fun before. 0:14:37.360 --> 0:14:39.800 Well, the private credit titans would tell you that this 0:14:39.920 --> 0:14:45.040 is totally disconnected from fundamentals of the portfolios. Apollo trying 0:14:45.040 --> 0:14:49.360 to maybe combat that by offering more frequent. 0:14:49.440 --> 0:14:51.440 Marks, more frequent marks. 0:14:51.520 --> 0:14:53.360 That was one of the stories out this week. 0:14:53.440 --> 0:14:55.720 Yeah, no, they're going to mark their stuff more frequently. 0:14:55.360 --> 0:14:57.320 Monthly with ambition to get to daily. 0:14:57.480 --> 0:14:59.280 Yeah, and also with ambition to get third party marks, 0:14:59.280 --> 0:15:01.440 which I think is interesting, right, Like if you're a 0:15:01.480 --> 0:15:04.200 hedge fund and you're just like, well, we think all 0:15:04.200 --> 0:15:06.040 our stuff is worth one hundred cents on the dollar, 0:15:06.400 --> 0:15:08.640 Like that's bad. You can't do that. Like someone's like 0:15:08.680 --> 0:15:10.760 you're supposed to have like some sort of third party 0:15:10.880 --> 0:15:13.120 justifiable marks. If you're private credit fund, you're like, yeah, 0:15:13.120 --> 0:15:15.520 it's our loans. We think it's good. And I think 0:15:15.520 --> 0:15:18.520 that Apollo certainly sees it shifting to a world war. 0:15:18.600 --> 0:15:23.280 You have third party evaluations and you can say no, 0:15:23.400 --> 0:15:26.240 these marks are right. The value of that is like, 0:15:26.240 --> 0:15:30.960 like why are people redeeming One reason might be they 0:15:31.000 --> 0:15:32.960 want to quit it to Another reason is they think 0:15:33.000 --> 0:15:35.880 things worse, But like it does sort of seem like 0:15:35.920 --> 0:15:38.600 part of it is that people don't trust the marks. Yeah. 0:15:38.680 --> 0:15:43.160 You see stories about like private credit funds carrying a 0:15:43.160 --> 0:15:44.680 loan at one hundred cents on the dollar and then 0:15:44.680 --> 0:15:46.960 marking it down to zero, Like that's like it's like 0:15:47.040 --> 0:15:49.920 kind of no step, that's kind of like that kind 0:15:49.920 --> 0:15:52.240 of makes sense, Like yeah, in terms of like, yeah, 0:15:52.240 --> 0:15:54.040 you're a lender, like either paying the loan or they're not. 0:15:54.080 --> 0:15:55.560 If they're paying, it's worth a hundred. If they're not, 0:15:55.600 --> 0:15:58.480 it's maybe wor zero. Yeah, But like that's not how 0:15:58.480 --> 0:16:00.880 people in public markets think. And so you kind of 0:16:00.920 --> 0:16:04.520 want the intermediate moves. And so if you have some person, 0:16:04.680 --> 0:16:07.320 some outside person saying yeah, today it's worth ninety seven, 0:16:07.640 --> 0:16:10.240 that like might inspire some confidence among your investors. 0:16:10.320 --> 0:16:12.480 Well that's what I was wondering. What the hope from 0:16:12.560 --> 0:16:15.400 Apollo that you know, we show you your marks more frequently, 0:16:15.840 --> 0:16:18.800 you can see that this portfolio isn't actually going down 0:16:18.840 --> 0:16:21.200 the tube, so you'll be less likely to redeem. 0:16:21.360 --> 0:16:24.840 Yeah. And also just like redemptions are like a nav arbitrage, 0:16:24.880 --> 0:16:29.200 Like if you think the fund is worth ninety five 0:16:29.280 --> 0:16:31.520 and the fund says it's worth one hundred, then you 0:16:31.520 --> 0:16:33.640 should redeem because they'll give you one hundred for something 0:16:33.640 --> 0:16:35.880 you think is worth ninety five. And if you're right, 0:16:35.960 --> 0:16:39.680 that's really bad for the investors who stay in because 0:16:40.120 --> 0:16:42.080 they're giving you one hundred for something it's worth ninety five. 0:16:42.120 --> 0:16:44.560 And so like everyone else has less, and so it's 0:16:44.560 --> 0:16:47.440 a run on the bank, right, And if Apollo is 0:16:47.480 --> 0:16:49.880 really confident and it's marks, then doesn't have to worry 0:16:49.880 --> 0:16:51.040 about a run on the bank because you can pay 0:16:51.040 --> 0:16:53.080 people at what it thinks is it the right value. 0:16:53.680 --> 0:16:55.760 And if you believe that as an investor, then you 0:16:55.800 --> 0:16:58.680 won't redeem because you're like, well, if it's worth ninety five, 0:16:58.720 --> 0:17:00.280 they'll give me ninety five, and so like there's no 0:17:00.280 --> 0:17:03.920 point in me redeeming and so so it's that right, 0:17:03.960 --> 0:17:05.800 it's to avoid the run on the bank problem. If 0:17:05.840 --> 0:17:07.960 you and all of your investors are confident in the marks, 0:17:07.960 --> 0:17:10.320 then you're less likely to have a run. The other thing, 0:17:10.359 --> 0:17:12.240 it is just like weird, like Apollo has like has 0:17:12.240 --> 0:17:15.080 a trading desk, Like they just have a different vision 0:17:15.080 --> 0:17:17.440 of what private credit will be than other people, and 0:17:17.520 --> 0:17:19.440 like they're, you know, they're trying to make their vision 0:17:19.480 --> 0:17:21.439 come true. And some of that is like if they 0:17:21.480 --> 0:17:23.399 can move the world to a marked to market world, 0:17:23.440 --> 0:17:25.280 then like their trading desk is going to have more business. 0:17:25.359 --> 0:17:27.040 They're going to be providing the third party marks to 0:17:27.080 --> 0:17:30.000 other firms, you know, So it's a differentiated business decision. 0:17:30.480 --> 0:17:33.920 Have we talked about the push to put private assets 0:17:33.960 --> 0:17:39.560 in retirement ETFs? Have we ever talked about that well, 0:17:40.160 --> 0:17:45.040 Apollo famously has an ETF with State Street that has 0:17:45.119 --> 0:17:46.480 daily marks, right, all. 0:17:46.480 --> 0:17:49.360 Right, put private credit and retirement funds? Have we probably 0:17:49.640 --> 0:17:51.200 probably I read about it a lot. 0:17:51.400 --> 0:17:53.359 I was thinking about it yesterday because there was a 0:17:53.359 --> 0:17:56.600 comment from Elizabeth Warren saying that, you know, we need 0:17:56.600 --> 0:17:57.840 to stop this push right now. 0:17:57.960 --> 0:17:59.960 It's just incredibly awkward time. 0:18:00.280 --> 0:18:03.440 We also heard from the Treasury Secretary of Scott Besson 0:18:03.560 --> 0:18:07.679 saying the DOUBLET no saying actually agreeing, saying. 0:18:07.440 --> 0:18:10.280 That we need to no one like no one's going 0:18:10.320 --> 0:18:12.840 around right this minute, being like, you know, what we 0:18:12.840 --> 0:18:14.840 need is to put more private credit in to retirement funds. 0:18:14.960 --> 0:18:16.240 Two weeks ago they were sure. 0:18:16.640 --> 0:18:19.360 But it's like it's kind of beautiful to right, It's 0:18:19.440 --> 0:18:24.720 like a bipartisan moment among our government, two leading figures 0:18:24.720 --> 0:18:28.240 in the US government uniting on this issue in this 0:18:28.320 --> 0:18:28.880 wrought time. 0:18:29.040 --> 0:18:31.000 And I've written this like structurally, it actually makes a 0:18:31.040 --> 0:18:33.119 lot of sense to put private credit and retirement funds 0:18:33.119 --> 0:18:35.440 because like your money and your retirement funds, you shouldn't 0:18:35.480 --> 0:18:38.159 need until you retire, so you can lock it up 0:18:38.200 --> 0:18:40.360 for a long time, right, And like you know, it's 0:18:40.359 --> 0:18:42.600 a percent interest or whatever, So it's nice to have 0:18:42.680 --> 0:18:44.800 been in a text the fur retirement account. 0:18:44.560 --> 0:18:46.680 But Elizabeth Warren is listening right now. 0:18:46.720 --> 0:18:50.000 But nobody believes that. And I do think that, like 0:18:50.160 --> 0:18:53.159 the last couple of weeks demonstrate why no one believes that, 0:18:53.200 --> 0:18:56.800 because like, in fact, retail investors do not want to 0:18:56.800 --> 0:18:59.919