WEBVTT - Day One, Part One at the Milken Global Conference 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business. Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.800 --> 0:00:22.440 If I do want to get to our guest, because 0:00:23.320 --> 0:00:25.480 eighteen months ago our next guest held our Bloomberg team 0:00:25.520 --> 0:00:28.560 that it was the golden age of private credit. Dun 0:00:28.680 --> 0:00:31.280 Dun Dunn with us as Mark at NASIO. He's managing 0:00:31.280 --> 0:00:34.519 partner at the Global Alternative Credit Investment from Crescent Capital 0:00:34.560 --> 0:00:37.720 Managing Partners. They had some forty billion in assets under 0:00:37.760 --> 0:00:39.919 management as the end of twenty twenty two. Mark also 0:00:40.000 --> 0:00:43.479 chairman and owner of the Milwaukee Brewers baseball club. 0:00:44.000 --> 0:00:45.920 Hello, very nice to see you again. 0:00:46.000 --> 0:00:47.720 It's great to see you again. You know, I had 0:00:47.720 --> 0:00:50.000 a question and we were talking over here. What's easier 0:00:50.040 --> 0:00:53.760 owning an MLB team, investing in today's environment or growing 0:00:53.840 --> 0:00:55.520 up in New Jersey and telling people that you're from 0:00:55.520 --> 0:00:58.880 New Jersey. I can say that because I'm from New Jersey. 0:00:59.400 --> 0:01:00.680 No playing with you. 0:01:00.800 --> 0:01:04.080 It's always nice to connect with the fellow Jersey its. 0:01:03.960 --> 0:01:07.479 I love New Jersey. Tell us about today's environment versus 0:01:07.520 --> 0:01:08.560 a year ago. 0:01:09.120 --> 0:01:12.440 So I actually bothered to go back and listen to 0:01:12.480 --> 0:01:15.640 my broadcast and both on television and radio. You have 0:01:15.640 --> 0:01:18.880 to see how badly I screwed up. You did not. 0:01:19.640 --> 0:01:22.440 And I think the golden age of credit was almost 0:01:22.440 --> 0:01:25.440 eighteen months ago I talked about and last year I 0:01:25.520 --> 0:01:28.399 was worried about stagflation, and fortunately we didn't get that. 0:01:29.200 --> 0:01:32.160 And so the environment for which we will discuss, the 0:01:32.240 --> 0:01:35.240 environment for private credit is still is still quite good. 0:01:35.840 --> 0:01:38.759 Actually for all levels, for all types. Because it's interesting. 0:01:38.800 --> 0:01:40.920 I just gave up a real estate panel and they're saying, 0:01:40.920 --> 0:01:45.959 you know, for valued properties, trophy properties, Class A properties, 0:01:46.160 --> 0:01:48.320 you know, you're still seeing interest when you go down 0:01:48.320 --> 0:01:51.840 the scale. It's not so much private credit, no distinctions 0:01:51.960 --> 0:01:52.480 or yeah. 0:01:52.520 --> 0:01:56.520 So real estate credit and including real estate private credits 0:01:56.520 --> 0:01:59.280 a whole different animal than corporate credit, which is what 0:01:59.360 --> 0:02:02.000 we focus on, right And there's a number of structural 0:02:02.400 --> 0:02:05.720 challenges in real estate. There's a maturity wall in CMBs 0:02:05.720 --> 0:02:09.520 that's coming up very fast with funds that will be 0:02:09.720 --> 0:02:11.959 you know, needing to have liquidating and even have buyers, 0:02:12.000 --> 0:02:15.720 which we don't have. Celos for the most part have 0:02:16.240 --> 0:02:20.040 extended maturities now, and you know, I think also, and 0:02:20.080 --> 0:02:21.560 it's easy for me to say and they'll say the 0:02:21.600 --> 0:02:24.799 same about us, but I'm not sure. And I participated 0:02:24.800 --> 0:02:27.200 in a lot of conferences like this and managed to 0:02:27.240 --> 0:02:30.600 oversee a couple of endowments on charitable side. I'm not 0:02:30.600 --> 0:02:32.440 sure the real estate marks are in the right place 0:02:32.560 --> 0:02:34.880 just yet, not yet, So that needs to sort of 0:02:34.880 --> 0:02:39.000 work its way through. And so it's challenging to find, 0:02:40.520 --> 0:02:42.600 you know, the right part in the capstack to invest 0:02:42.600 --> 0:02:45.359 in real estate now, Whereas you could argue the same 0:02:45.400 --> 0:02:48.200 thing with corporate credit, and it's easier to go senior 0:02:49.000 --> 0:02:51.800 because right now senior loans you yield over ten percent, 0:02:52.360 --> 0:02:55.799 which isn't you know, it isn't bad right with with 0:02:55.840 --> 0:02:58.760 the new you know for you know, so for you know, 0:02:58.960 --> 0:03:00.560 close to five now. 0:03:01.320 --> 0:03:05.360 Well, so it's interesting, so does that does this environment continue? 0:03:05.440 --> 0:03:07.080 I'm like, I'm just curious. I think we're at this 0:03:07.280 --> 0:03:10.040 juncture mark where we're trying to figure out, you know, recession, 0:03:10.040 --> 0:03:12.799 no recession. We'll see what that we get from the 0:03:12.840 --> 0:03:14.240 Fed this week. I mean, like, first of all, with 0:03:14.280 --> 0:03:17.440 the Fed, how closely do you watch in terms of 0:03:17.480 --> 0:03:20.240 what they're doing interest rates. We always does it matter 0:03:20.320 --> 0:03:20.679 to you? 0:03:21.040 --> 0:03:24.480 So moment to moment it doesn't. Now, once you've had 0:03:24.680 --> 0:03:26.520 you know, four and a half, you know, four hundred 0:03:26.520 --> 0:03:29.280 and fifty bases point, you know, increase in in the 0:03:29.960 --> 0:03:32.560 you're right in the last year, you have to start watching. 0:03:32.560 --> 0:03:34.520 And so but now everybody's on the edge of their 0:03:34.560 --> 0:03:37.760 seat about whether the Fed's gonna hike and pause or not. 0:03:38.600 --> 0:03:40.480 And you know, one of the things we talked about. 0:03:40.520 --> 0:03:43.760 There's a private panel here yesterday for uh they called 0:03:43.800 --> 0:03:49.320 them finance leaders, but so I I crashed that party, 0:03:50.320 --> 0:03:54.640 no part of it. But but you know, Mike Milkin 0:03:54.720 --> 0:03:58.440 came in and yeah, the tone for the conferences and 0:03:58.520 --> 0:04:01.240 the theme is somewhat optimism. Yeah, but he came in 0:04:01.280 --> 0:04:02.880 and talked to us about how we need to have 0:04:03.040 --> 0:04:06.840 realism and so it really we all know the first 0:04:07.440 --> 0:04:10.920 priority for the FED is to fight inflation, and they're 0:04:10.960 --> 0:04:13.560 going to have to beat inflation almost at any cost. 0:04:14.200 --> 0:04:16.920 So that if that's a when we're rate hike or 0:04:16.960 --> 0:04:19.360 even two in a pause, that's great. If it has 0:04:19.400 --> 0:04:23.560 to keep going, that starts to get into creating real 0:04:23.640 --> 0:04:27.440 credit issues, not only in you know, corporate credit obviously, 0:04:27.480 --> 0:04:29.280 but also in obviously in. 0:04:29.200 --> 0:04:31.000 Real estate, Well, how problematic could it be? 0:04:32.320 --> 0:04:36.599 Well, it's it's very problematic, depending on So I was 0:04:36.680 --> 0:04:40.279 at a gathering JPM morganhead that Jamie Diamond spoke at, 0:04:40.920 --> 0:04:43.719 and he was optimistic too, and very bullish on America, 0:04:43.760 --> 0:04:45.560 which we all you know, I think everyone here is, 0:04:45.600 --> 0:04:48.000 which is great, and we have a global audience here. 0:04:48.440 --> 0:04:51.520 You can feel it, you can feel it, right And 0:04:52.080 --> 0:04:54.880 obviously the fact I think you know that the takeover 0:04:55.040 --> 0:05:00.440 today by JP Morgan on ufr C definitely it's okay. 0:05:00.440 --> 0:05:03.240 Now we're over that hump, you know. However, he left 0:05:03.279 --> 0:05:04.920 us with the thought everybody should go back to their 0:05:04.960 --> 0:05:07.960 offices and budget for you know what happens if short 0:05:08.040 --> 0:05:11.279 rates go to seven percent? Well that is that would 0:05:11.279 --> 0:05:14.240 put you know, right now, in our credit portfolios, for example, 0:05:14.560 --> 0:05:17.080 we have a handful of credits that are not you know, 0:05:17.200 --> 0:05:20.520 within are not covering the cash flow. Yeah, you'll hear 0:05:20.520 --> 0:05:23.560 a lot of managers like us say, like our portfolio is, 0:05:23.600 --> 0:05:27.440 for example, the average credit quality of free cash flow 0:05:27.480 --> 0:05:30.960 is one point six times plenty of cushion. But the 0:05:31.080 --> 0:05:34.320 question is how many credits are at when times or below? 0:05:34.960 --> 0:05:36.599 Right now, we have just a handful and those are 0:05:36.640 --> 0:05:39.160 the ones we focus on. If you get another two 0:05:39.240 --> 0:05:42.280 hundred basis points built into the system, there's gonna be 0:05:42.279 --> 0:05:43.920 a lot more than a handful of credits. 0:05:43.680 --> 0:05:44.760 That have com lismore. 0:05:45.800 --> 0:05:49.039 I think it depends on Uh, you know, we've always 0:05:49.120 --> 0:05:51.839 lent to six times cash flow, so I think you 0:05:51.880 --> 0:05:54.200 know or under so I think we'll be okay. But 0:05:54.640 --> 0:05:56.960 the broader market has already stretched out to seven and 0:05:57.120 --> 0:06:01.520 recent transactions you've seen seven times and maybe a pick 0:06:01.560 --> 0:06:05.200 component which right, pick toggle, which you'll pick toggle go 0:06:05.320 --> 0:06:05.560 back to? 0:06:06.560 --> 0:06:07.279 It all comes around. 0:06:07.320 --> 0:06:09.880 It's like the usc UF. You know, student body left, 0:06:09.880 --> 0:06:11.479 student body right off tackle play. 0:06:11.720 --> 0:06:13.839 How likely is it we get another two hundred basis points? 0:06:13.880 --> 0:06:16.599 Does that even make sense? I mean, the FED certainly 0:06:16.640 --> 0:06:19.039 seems like they're on this mission, but you you you 0:06:19.160 --> 0:06:20.239 have to ask at what cost? 0:06:20.600 --> 0:06:23.720 Here's where you get worried. Right, everybody is lined up 0:06:23.800 --> 0:06:26.080 on the side of the trade that that's not going 0:06:26.160 --> 0:06:29.560 to have everybody. You talk to everybody the in fact, 0:06:29.600 --> 0:06:31.359 the only person I have said you heard raise that 0:06:31.560 --> 0:06:35.000 is in this private session that Jamie Diamond had and 0:06:35.000 --> 0:06:39.760 and so you know, I okay. It creates all kinds 0:06:39.760 --> 0:06:42.799 of prompts for the deficity. There's the whole domino effect, 0:06:43.120 --> 0:06:45.520 well beyond what you know I do in my day job, 0:06:45.720 --> 0:06:48.440 right and and so uh, but they've got to be 0:06:48.480 --> 0:06:48.880 they can't. 0:06:48.880 --> 0:06:51.800 They've got to beat inflation, all right, they have to 0:06:51.800 --> 0:06:56.800 beat inflation. It's interesting, all right. So so if they 0:06:56.839 --> 0:06:59.200 continue on the course, which they seem to do, I mean, 0:06:59.279 --> 0:07:01.919 are you anticipate a recession? I mean, it's interesting this 0:07:01.960 --> 0:07:03.800 panel I just came off of, and you know, I 0:07:03.839 --> 0:07:06.200 said a year ago, what's surprised you about what happened 0:07:06.200 --> 0:07:09.280 over the past year. And one of the individuals, David 0:07:10.440 --> 0:07:13.800 who is over at hind So Global Corporate real Estate, 0:07:13.800 --> 0:07:16.200 are global real estate of all kinds, and just said, 0:07:16.200 --> 0:07:18.600 I really thought we'd be through the recession at this point. 0:07:19.120 --> 0:07:21.240 So I'm just curious how you see it. 0:07:22.640 --> 0:07:28.520 That's real estate realist colored classes. So it keeps getting 0:07:28.800 --> 0:07:33.280 pushed out, right, And look, we can manage through a recession. 0:07:33.440 --> 0:07:35.360 That's not an issue. And I think there are a 0:07:35.400 --> 0:07:38.360 lot of other things now that are much greater fears 0:07:38.360 --> 0:07:41.880 that seem to be surmounted. Every banking executive here we 0:07:41.920 --> 0:07:45.200 had a dinner last night. Did Jane Frazer spoke at Yeah, 0:07:45.240 --> 0:07:48.040 you know, the US banking system globally is considered the 0:07:48.080 --> 0:07:50.840 strongest in the world. She pointed out this forty seven 0:07:50.960 --> 0:07:53.600 hundred banks in our country, and there's three that have 0:07:53.640 --> 0:07:57.360 had issues, and so we don't have you know, the 0:07:57.880 --> 0:08:02.559 financial system is strong. And so the question is whether 0:08:03.040 --> 0:08:06.080 either rates get so high that they and we still 0:08:06.120 --> 0:08:09.760 have growth, right and pretty much everywhere, right, Labor costs 0:08:09.800 --> 0:08:12.560 are high in certain sectors by chains actually sort of 0:08:12.560 --> 0:08:14.080 figured out. So if it just ends up being a 0:08:14.680 --> 0:08:18.080 slow down, that would be okay. And that's surmountable for 0:08:18.320 --> 0:08:20.480 I think for everything, for not only for corporate credit, 0:08:20.520 --> 0:08:22.320 but for real estate as well. 0:08:22.480 --> 0:08:25.400 So when you look at investments, most attractive is it 0:08:25.440 --> 0:08:27.480 high yield? Is it bank loans, direct lending? 0:08:28.920 --> 0:08:32.120 So we you know, we're the high yel market is 0:08:32.160 --> 0:08:36.319 finally high yield. Interestingly, you know, the generic high yeal 0:08:36.400 --> 0:08:40.199 bond market is yielding only quote only eight percent. We're 0:08:40.240 --> 0:08:43.280 delighted with that. Yeah, anything we have floating rates ten 0:08:43.320 --> 0:08:47.840 percent plus. So for investors, you know, we now have 0:08:47.960 --> 0:08:51.800 concerns about credit, so we can't call it the golden 0:08:51.840 --> 0:08:55.480 age anymore. Yeah, but for our embedded portfolios, which are 0:08:55.480 --> 0:08:58.199 in really good shape, and investors are getting hundreds of 0:08:58.240 --> 0:09:00.400 basis points more in yield now than they did eighteen 0:09:00.440 --> 0:09:02.080 months ago. Our investors are. 0:09:01.960 --> 0:09:05.520 Happy, not too shabby, Brewers. What can we expect this year? 0:09:06.120 --> 0:09:07.280 Is that easier? 0:09:07.400 --> 0:09:07.480 No? 0:09:07.800 --> 0:09:09.520 And I'll tell you that I got involved in English 0:09:09.520 --> 0:09:11.280 football in the last six months. I know you, and 0:09:11.320 --> 0:09:12.640 I was going to tell you. If you say, well, 0:09:12.640 --> 0:09:16.800 what's harder investing? I love that one, Brewers or growing 0:09:16.880 --> 0:09:19.360 up in New Jersey, the answer would have been English football, 0:09:19.360 --> 0:09:22.199 it's harder. And Todd Bowley may have a perspective, and 0:09:22.240 --> 0:09:26.720 then I'm clearly a Chelsea I'm sure it doesn't. But 0:09:27.960 --> 0:09:30.440 so look we're off to a good start. We're eighteen 0:09:30.480 --> 0:09:33.760 and ten. It beats ten and eighteen like like with credit, 0:09:33.840 --> 0:09:37.640 you just worry about everything. We've had a number of injuries. Yeah, 0:09:38.480 --> 0:09:41.320 but the team looks you know that. You take a 0:09:41.360 --> 0:09:45.880 lot in sports from the feel of the clubhouse. Yeah, 0:09:45.920 --> 0:09:47.160 and our clubhouse feels great. 0:09:47.600 --> 0:09:49.480 Well. I have to say it was great to catch 0:09:49.559 --> 0:09:51.320 up with you again. Thank you for giving us all 0:09:51.360 --> 0:09:55.000 so much time, Mark, ad Andasio again. Wow, good to 0:09:55.040 --> 0:09:56.240 see you all. 0:09:56.320 --> 0:09:56.440 Right. 0:09:56.440 --> 0:09:58.600 You are listening and watching Bloomberg Business Week. We're live 0:09:58.600 --> 0:09:59.120 at Milkin. 0:09:59.440 --> 0:10:03.040 You're listening to the Bloomberg Business Week podcast. Catch us 0:10:03.040 --> 0:10:06.439 live weekday afternoons from three to six Eastern Listen on 0:10:06.480 --> 0:10:10.520 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, 0:10:10.800 --> 0:10:12.600 or watch us live on YouTube. 0:10:13.320 --> 0:10:16.520 We're at the Milkon Institute Global Conference. It's an incredible 0:10:16.559 --> 0:10:19.640 gathering of so many different individuals, and I'm delighted to 0:10:19.679 --> 0:10:22.040 have with us Sheila Patels, she's Vice Chairman to be Capital, 0:10:22.080 --> 0:10:25.080 former chairman of Goldman Sachs Asset Management. Because I feel like, 0:10:25.120 --> 0:10:27.160 first of all, great to have you here again and 0:10:27.200 --> 0:10:29.280 tell us to be here. I always feel like a 0:10:29.320 --> 0:10:31.440 great indicator of the economy is what's going on in 0:10:31.480 --> 0:10:34.280 the startup world, So tell us what you're seeing. Let's 0:10:34.280 --> 0:10:34.680 go macro. 0:10:34.800 --> 0:10:37.560 First of all, Well, look, I think the macro environment 0:10:37.720 --> 0:10:40.040 was already difficult for venture given what had gone on 0:10:40.080 --> 0:10:42.160 in tech, and then you layer on what's going on 0:10:42.240 --> 0:10:44.800 in banking, and it's a bit of a perfect storm 0:10:44.840 --> 0:10:47.120 when you think about what founders have to go through 0:10:47.559 --> 0:10:50.480 in normal times to start a company, much less today. 0:10:50.720 --> 0:10:51.760 So has it stopped? 0:10:52.240 --> 0:10:53.120 It hasn't stopped. 0:10:53.160 --> 0:10:54.320 Okay, it hasn't stopped. 0:10:54.360 --> 0:10:56.440 I think the good news is when you hear about 0:10:56.520 --> 0:10:59.920 dry powder, that's not a fake thing, that's real. 0:11:00.120 --> 0:11:00.560 Yeah. 0:11:00.640 --> 0:11:02.480 You know, we were fortunate enough with the capital to 0:11:02.559 --> 0:11:05.120 raise a large fund last year. We still have plenty 0:11:05.120 --> 0:11:07.480 of that to deploy with our existing companies and to 0:11:07.520 --> 0:11:10.960 look for new opportunities. I think that one of the 0:11:10.960 --> 0:11:13.880 things you see experienced investors say to us right now, 0:11:13.960 --> 0:11:17.840 people that have been LPs over many vintages, is they 0:11:17.920 --> 0:11:21.320 remember what happened after the global financial crisis. They remember 0:11:21.360 --> 0:11:23.640 what happened in the dot com bubble. The next four 0:11:23.679 --> 0:11:26.319 to five years after those were some of the best vintages. 0:11:26.960 --> 0:11:30.160 And once again we're in one of those periods, and 0:11:30.200 --> 0:11:33.079 we have a new series of technologies, one of them 0:11:33.080 --> 0:11:36.920 being generated of AI that could be so impactful to 0:11:36.960 --> 0:11:37.599 the good. 0:11:37.600 --> 0:11:39.280 I want to talk about that, Tilla, but I want 0:11:39.280 --> 0:11:42.560 to ask you. I am curious that Silicon Valley Bank, 0:11:42.920 --> 0:11:45.560 the collapse of that bank, which was so crucial to 0:11:45.600 --> 0:11:49.040 the startup community and out there in San Francisco, Silicon Valley. 0:11:49.440 --> 0:11:52.920 What impact did you see as a result of that specifically? 0:11:53.200 --> 0:11:55.280 Well, I think you know, one good thing saw was 0:11:55.320 --> 0:11:58.840 the community came together quite strongly, right behind their companies, 0:11:58.960 --> 0:12:02.079 together to try to work things out, to try to 0:12:02.120 --> 0:12:05.080 make sure people were making payroll and all the mundane 0:12:05.120 --> 0:12:08.319 things that you need to keep an ecosystem going when 0:12:08.360 --> 0:12:11.800 it's taken a big hit. I also think you saw recognition, 0:12:11.960 --> 0:12:14.480 and maybe the UK was a little faster to this 0:12:14.559 --> 0:12:17.760 than the US that the innovation economy has a huge 0:12:17.840 --> 0:12:21.400 number of jobs associated with it, so letting it flounder 0:12:22.200 --> 0:12:25.640 because of an issue like this is not about letting 0:12:25.720 --> 0:12:30.120 some tech bros suffer in particular zip. 0:12:29.920 --> 0:12:30.840 Code in California. 0:12:31.120 --> 0:12:34.680 It's about real companies that have been founded anywhere from 0:12:34.720 --> 0:12:38.760 Ohio to Jakarta, having a funding plan, having a business plan, 0:12:38.920 --> 0:12:42.160 having hired people, and not being able to fulfill their 0:12:42.160 --> 0:12:44.079 promises to their clients and their employees. 0:12:44.240 --> 0:12:46.839 Did you have any direct impact from the collapse any 0:12:46.840 --> 0:12:48.520 of your companies, your portfolio companies. 0:12:48.640 --> 0:12:52.560 You know, we've been very lucky we had We did 0:12:52.559 --> 0:12:56.680 not have anything particularly notable for ourselves or our portfolio companies. 0:12:56.760 --> 0:13:00.760 We've always encouraged and maybe it's because Howard Morgan has 0:13:00.960 --> 0:13:04.400 chair with his storied history and venture and me with 0:13:04.600 --> 0:13:09.240 my Goldmen background and that associated risk obsession, always felt 0:13:09.240 --> 0:13:13.000 that diversification was important and cash management was important, and 0:13:13.040 --> 0:13:15.400 so had given that advice, had taken that advice, and 0:13:16.280 --> 0:13:18.920 you know we're able to manage through it quite quite effectively. 0:13:19.000 --> 0:13:21.360 All right, So talk to me about opportunities that you 0:13:21.360 --> 0:13:23.520 guys are seeing of interest right now? What's coming your way? 0:13:23.559 --> 0:13:26.920 You mentioned AI, right, we're all just talking generative AI, 0:13:27.000 --> 0:13:30.280 and it's interesting. It's coming up. I'm sure a lot 0:13:30.280 --> 0:13:32.199 here in terms of panels. We're all trying to figure 0:13:32.200 --> 0:13:36.000 out how many opportunities are coming your way? Is it 0:13:36.720 --> 0:13:38.520 a lot of them? In terms of deals that you're 0:13:38.559 --> 0:13:39.000 looking at? 0:13:39.200 --> 0:13:40.840 Look, I think there's a number of things coming, but 0:13:40.920 --> 0:13:43.760 I think there's a number of companies we already invested in. Yeah, 0:13:43.880 --> 0:13:47.360 that people and appreciate that this is AI. You know, 0:13:47.400 --> 0:13:48.640 it's like, what is that? What is it? 0:13:48.760 --> 0:13:48.800 No? 0:13:48.920 --> 0:13:49.720 You have it already. 0:13:50.120 --> 0:13:52.840 It's why Google knows what you're gonna ask it before 0:13:52.880 --> 0:13:53.920 you've asked, right. 0:13:53.720 --> 0:13:55.800 You're type, it's right when it fills in a letter. 0:13:56.920 --> 0:14:00.240 They know your dress size when you're you know, have 0:14:00.280 --> 0:14:04.480 bought something a certain number of times. It's embedded slowly 0:14:04.480 --> 0:14:07.240 but surely in so many places. And so what we've 0:14:07.280 --> 0:14:10.360 seen that we're excited about is there are so many 0:14:10.440 --> 0:14:14.960 mundane ways AI can make businesses do better, can achieve 0:14:15.040 --> 0:14:18.040 cost reductions, which in this environment is probably one of 0:14:18.120 --> 0:14:20.200 the primary things people are looking for. It a way 0:14:20.240 --> 0:14:22.440 for your business to thrive. At the same time, everybody's 0:14:22.440 --> 0:14:24.240 worried about a recession. If you have a business that 0:14:24.600 --> 0:14:27.480 shows up that can save money, right, you're welcome with 0:14:27.520 --> 0:14:30.320 open arms, come in, help us, help us save money, 0:14:30.360 --> 0:14:32.800 or help us find places that are new revenue sources. 0:14:32.840 --> 0:14:34.760 So when you think of AI or what you're seeing 0:14:34.760 --> 0:14:36.720 in terms of you know, possible companies to invest in 0:14:36.840 --> 0:14:39.000 or you are investing, it is a lot more It's 0:14:39.080 --> 0:14:42.520 not kind of out there, right, it's much more simplistic. 0:14:42.520 --> 0:14:44.240 As you say, maybe it makes you more productive. This 0:14:44.280 --> 0:14:45.120 is what we're talking about. 0:14:45.240 --> 0:14:48.120 A great example is a company we invested in a 0:14:48.160 --> 0:14:54.120 while ago, not recently, but that does document analysis and management, 0:14:54.200 --> 0:14:57.880 basically information management for the contracts that a company might have. 0:14:57.920 --> 0:15:00.800 And you think about a huge multinational if thousands and 0:15:00.840 --> 0:15:03.320 thousands of contracts, right, who knows what's in them, who's 0:15:03.320 --> 0:15:05.600 managing them like supply chain, who's checking them? 0:15:05.840 --> 0:15:06.040 Right? 0:15:06.080 --> 0:15:09.640 And that became important during COVID because of disruption clauses. 0:15:10.000 --> 0:15:12.840 What's important now, well, we've done some projects with that 0:15:12.960 --> 0:15:15.960 company and our good friends at BCG with whom we 0:15:16.000 --> 0:15:18.400 have a special relationship, work with them as well, and 0:15:18.440 --> 0:15:20.840 we realized, you know, for one of the special projects 0:15:20.920 --> 0:15:25.000 they did, a company they were pitching had CPI clauses 0:15:25.040 --> 0:15:28.160 embedded all over the place in their deals that they 0:15:28.160 --> 0:15:31.720 hadn't executed on. So they were owed higher fees for 0:15:31.800 --> 0:15:34.560 their services and they had never claimed those fees. They 0:15:34.600 --> 0:15:37.840 had never asked their clients to act on the CPI 0:15:37.880 --> 0:15:40.960 clauses that had been embedded because they they forgot what's 0:15:41.000 --> 0:15:41.800 in the thousands? 0:15:41.840 --> 0:15:44.360 Do you think about something like filtering through right? 0:15:44.440 --> 0:15:47.120 AI can find things like that in a systematic way, 0:15:47.120 --> 0:15:49.880 as opposed to you're just relying on who's the person 0:15:49.920 --> 0:15:52.440 that's most on top of their clients to figure that out. 0:15:52.680 --> 0:15:56.240 So in this environment, are is there a valuation reset 0:15:56.320 --> 0:15:58.320 that you're seeing in terms of some of the deals 0:15:58.320 --> 0:15:59.360 and when it comes to funding. 0:16:00.040 --> 0:16:03.800 Yeah, Look, I think everybody bandies are about different percentages. 0:16:03.880 --> 0:16:05.920 Probably the most common I think that people are seeing 0:16:05.960 --> 0:16:08.600 across his face is down forty to fifty percent. Right 0:16:09.640 --> 0:16:13.960 In terms of valuation significant, it's significant. I think it 0:16:14.040 --> 0:16:16.120 very much depends on the stage. I think you've seen 0:16:16.160 --> 0:16:19.320 a lot more weakness in late stage. Within the first quarter, 0:16:19.360 --> 0:16:21.440 only about eight percent of funding going to late stage, 0:16:21.480 --> 0:16:24.960 sixty seven percent went to early stage, and funding there 0:16:25.080 --> 0:16:29.280 and valuations there are much less challenged. I also think 0:16:29.360 --> 0:16:32.000 that a lot of people were reliant and hoping that 0:16:32.160 --> 0:16:33.760 M and A would come back quickly, and I think 0:16:33.800 --> 0:16:36.880 it's much slower go because even corporate M and A, 0:16:36.960 --> 0:16:40.920 even companies that were looking to maybe acquire as their 0:16:40.960 --> 0:16:43.680 source of innovation, because it's still hard for companies to 0:16:43.680 --> 0:16:46.640 innovate from within. They can afford to wait a bit, 0:16:46.720 --> 0:16:48.760 and they can afford to push on valuations or push 0:16:48.840 --> 0:16:49.760 some unique terms. 0:16:50.280 --> 0:16:52.640 Is it still like, you know, the goal is it IPO? 0:16:52.800 --> 0:16:54.520 I mean, we've talked about for years. I feel like 0:16:54.560 --> 0:16:57.080 that there was so much funding out there and abled 0:16:57.120 --> 0:16:59.080 startup companies to stick around for a little bit longer, 0:16:59.080 --> 0:17:00.800 which and some would argue was a good thing that 0:17:00.840 --> 0:17:03.760 they could really kind of develop themselves. But I'm just curious, 0:17:04.280 --> 0:17:07.000 what are your expectations in terms of IPO markets and 0:17:07.040 --> 0:17:07.720 what we might say. 0:17:08.080 --> 0:17:11.280 Look, I think inevitably they'll come back, they always do. 0:17:12.160 --> 0:17:14.440 But I do think it does serve as a wake 0:17:14.520 --> 0:17:16.320 up call as to is that the best route for 0:17:16.359 --> 0:17:20.240 every company. And so when you think about growth and 0:17:20.280 --> 0:17:24.240 you think about most founders' ambitions for their companies, I 0:17:24.240 --> 0:17:26.040 think IPO is the easy one that seems like, Oh, 0:17:26.040 --> 0:17:28.119 I'm gonna build this and I'm going to turn it 0:17:28.160 --> 0:17:32.920 into its standalone success. But for some companies it might 0:17:32.960 --> 0:17:35.399 make sense to stay private a lot longer and figure 0:17:35.400 --> 0:17:38.520 out your funding from that perspective. For some, you know, 0:17:38.680 --> 0:17:42.199 corporate M and A was something that was rejected two 0:17:42.320 --> 0:17:44.320 or three years ago that today they look at and say, 0:17:44.320 --> 0:17:46.959 maybe that makes sense. Maybe I'd have an installed client 0:17:47.000 --> 0:17:50.040 base of the ten thousand best customers around the world 0:17:50.040 --> 0:17:52.560 I need to ride away if I would just allow 0:17:52.640 --> 0:17:55.639 myself to become part of a bigger enterprise, right And 0:17:56.200 --> 0:17:58.600 I think more people have opened their eyes to those 0:17:58.680 --> 0:18:02.959 different types of exit opportunities or future steps for their companies. 0:18:03.080 --> 0:18:04.879 One thing I wanted to ask you guys, are playing 0:18:04.880 --> 0:18:09.760 an enterprise fintech, healthcare, bio. We talked there's a category 0:18:09.800 --> 0:18:13.080 opportunistic sort of an infrastructure tech for commerce and emerging 0:18:13.080 --> 0:18:17.640 markets and more. What's the most active area right now 0:18:17.640 --> 0:18:19.480 when it comes to investing for you guys. 0:18:19.560 --> 0:18:23.119 Well, it's interesting, I'd say it's much more about what 0:18:23.240 --> 0:18:27.240 are the most driven interesting founders. I wouldn't say a 0:18:27.240 --> 0:18:29.919 sector stands out the most. I do think, you know, 0:18:30.080 --> 0:18:34.160 enterprise and healthcare still have a fair bit of resilience, 0:18:34.240 --> 0:18:36.600 and that's been great to see. I mean, healthcare needs 0:18:36.640 --> 0:18:38.520 so much done and there's so much value there. I 0:18:38.520 --> 0:18:40.159 feel like there's a lot of activity right now, a 0:18:40.200 --> 0:18:42.120 lot of activity. Now you have to make sure it's 0:18:42.119 --> 0:18:46.040 at the right valuation. Enterprise and software as a service 0:18:46.040 --> 0:18:49.639 has been more resilient than we expected, and that's I 0:18:49.680 --> 0:18:51.840 think that's a positive as well. And then you know, 0:18:51.920 --> 0:18:54.360 one area that we've been spending quite a bit more 0:18:54.359 --> 0:18:56.639 time on that we already have embedded in some portfolios 0:18:56.640 --> 0:19:00.000 and we'll probably dedicate ourselves to in a standalone way 0:19:00.160 --> 0:19:01.000 sometime in the future. 0:19:01.080 --> 0:19:05.240 Is climate tech. Climate tech huge interesting. 0:19:04.760 --> 0:19:08.840 An AI plus climate we see what we learned there twenty. 0:19:08.640 --> 0:19:11.000 Seconds climate tech because of the money we're seeing from 0:19:11.040 --> 0:19:13.480 governments or what's changed because I feel like. 0:19:13.560 --> 0:19:16.000 A carrot and a stick. Do you have the governments 0:19:16.000 --> 0:19:19.840 that are demanding new rules, new regulations, companies that have 0:19:19.880 --> 0:19:23.560 to comply standards that are starting you unify from a 0:19:23.560 --> 0:19:27.240