WEBVTT - American Dream: EDR, BIS, PILOT 0:00:02.720 --> 0:00:07.200 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.280 --> 0:00:10.600 What if Matt and I talked super fast, but then 0:00:10.640 --> 0:00:12.840 you slowed it down to make the podcast longer. 0:00:13.200 --> 0:00:17.320 You could pitch me down, so I sounded like this. God, 0:00:17.680 --> 0:00:19.079 wouldn't that be good? 0:00:19.400 --> 0:00:20.759 You sound like a fancy man. 0:00:21.360 --> 0:00:22.280 I am a fancy man. 0:00:22.440 --> 0:00:22.720 Wow. 0:00:24.320 --> 0:00:26.920 Hello, and welcome to The Money Stuff Podcast. You're a 0:00:26.920 --> 0:00:30.680 weekly podcast where we talk about stuff related to money. 0:00:31.320 --> 0:00:33.440 I'm Matt Levin and I write The Money Stuff colmed 0:00:33.479 --> 0:00:34.360 for Blueberg Opinion. 0:00:34.640 --> 0:00:37.040 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:00:37.080 --> 0:00:38.440 an anchor for Bloomberg Television. 0:00:40.080 --> 0:00:41.560 What are we talking about today, Katie? 0:00:41.720 --> 0:00:46.360 We're going to talk about wrestling and fighting, and we're 0:00:46.360 --> 0:00:50.919 going to talk about private credit ETF liquidity I frequently 0:00:51.000 --> 0:00:53.519 visited topic on this podcast. And then we're going to 0:00:53.520 --> 0:00:56.840 talk about the mirage of the American Dream. Yes, exactly, 0:00:59.240 --> 0:01:02.200 So let's go right into it. This is complicated. We're 0:01:02.200 --> 0:01:05.440 talking about Endeavor, we're talking about TKL, we're talking about 0:01:05.480 --> 0:01:08.200 Silver Lake. Can you explain first all the ownership structure 0:01:08.280 --> 0:01:09.119 of what we're talking about? 0:01:09.200 --> 0:01:13.280 Okay, So Endeavor is like a talent agency slash media behemoth. 0:01:13.440 --> 0:01:16.000 It's like Ari Emmanuel's talent Agency that became a giant thing. 0:01:16.280 --> 0:01:18.000 And one reason it's a giant thing is that it 0:01:18.160 --> 0:01:23.039 owned WWE World Wrestling Entertainment, which then merged with UFC 0:01:23.160 --> 0:01:27.280 the Ultimate Fighting Championship to form a giant fighting complex. 0:01:27.959 --> 0:01:31.000 And that fighting complex is called TKO is the name 0:01:31.040 --> 0:01:33.319 of the company, and it's now a public company, and 0:01:33.480 --> 0:01:35.640 Davor owns a little more than half of it, And 0:01:35.720 --> 0:01:37.399 so Endeavor is a company that owns a little bit 0:01:37.400 --> 0:01:39.959 more than half of another company. They're both public. Endeavor's public. 0:01:40.240 --> 0:01:43.959 TKO as public, Endeavor is like seventy percent owned by 0:01:44.040 --> 0:01:46.880 silver Lake, the private equity firm. Right, silver Lake has 0:01:46.920 --> 0:01:49.720 this ladder. It wants to take Endeavor private. Let's buy 0:01:49.960 --> 0:01:53.360 the shares that it doesn't already own, and it negotiated 0:01:53.360 --> 0:01:55.919 a merger with the board of directors and it agreed 0:01:55.960 --> 0:01:58.920 to pay twenty seven to fifty per share for the 0:01:58.960 --> 0:02:02.200 remainder of Endeavor. That happened like a year ago. It's 0:02:02.440 --> 0:02:05.280 they're working to get closing. And what has happened in 0:02:05.320 --> 0:02:08.600 the interim is that the stock price of TKO has 0:02:08.639 --> 0:02:12.600 gone way out. So what that means is that in 0:02:12.680 --> 0:02:15.360 Deeva runs more than half of TKO has become a 0:02:15.360 --> 0:02:17.600 lot more valuable. That means that Endeavor has become a 0:02:17.600 --> 0:02:19.520 lot more valuable, or you would think that would be 0:02:19.520 --> 0:02:23.160 the case. And so all the shareholders of Endeavor who 0:02:23.200 --> 0:02:25.519 are not silver Lake say, well, you agreed to pay 0:02:25.560 --> 0:02:27.600 twenty seven to fifty a year ago. The company is 0:02:27.639 --> 0:02:30.079 more valuable. Now we want more money. Silver Like I 0:02:30.120 --> 0:02:33.040 said no, they agreed to the deal twenty seven to fifteen. 0:02:33.040 --> 0:02:37.120 That's what we're doing. And the shareholders are revolting. They're 0:02:37.240 --> 0:02:40.200 saying they're going to demand appraisal, which is like in Delaware, 0:02:40.280 --> 0:02:42.800 if you don't like a merger price, you can go 0:02:42.880 --> 0:02:45.359 to a judge and say this was an unfair, too 0:02:45.400 --> 0:02:48.640 low price. I'd like more, and the judge can say yes, 0:02:48.720 --> 0:02:52.200 here you go. In recent years, it has been tough 0:02:52.240 --> 0:02:54.919 to win appraisal cases because usually the judges are like no, 0:02:55.560 --> 0:02:57.840 for complicated reasons you can get into. But here it's 0:02:57.840 --> 0:03:00.639 an unusually easy case because they're like, look, most of 0:03:00.680 --> 0:03:03.280 this company's asked are this public company. The shares have 0:03:03.320 --> 0:03:05.200 gone up, so we know it's worth more than the 0:03:05.400 --> 0:03:07.119 great deal, so you should give us more money. 0:03:07.200 --> 0:03:09.960 I have two questions here one is that I mean, 0:03:10.000 --> 0:03:11.520 you write and you just said that it used to 0:03:11.560 --> 0:03:15.760 be easier to win appraisal crisis. You wrote that it 0:03:15.880 --> 0:03:19.520 changed in twenty seventeen, which seems I can't like, I 0:03:19.560 --> 0:03:21.360 can't think of a catalyst, like why did it change 0:03:21.360 --> 0:03:22.239 in twenty seventeen. 0:03:22.680 --> 0:03:24.320 There's kind of two points here. So one is like 0:03:24.520 --> 0:03:28.200 Delaware judges or experts in corporate law and banking and 0:03:28.960 --> 0:03:31.800 mergers and see themselves as being expert in like knowing 0:03:31.800 --> 0:03:34.280 how companies work. And so it used to be you'd 0:03:34.280 --> 0:03:36.040 go to a Dellary judge and say this company is 0:03:36.080 --> 0:03:38.600 worth more than the acquirer paid for it, and you'd 0:03:38.600 --> 0:03:41.600 present like your discattered cash flow model, and the acquirer 0:03:41.600 --> 0:03:44.240 would present their model, and there'd be an argument, and 0:03:44.280 --> 0:03:46.320 the judge would think about all of this and be like, 0:03:46.760 --> 0:03:50.480 you're right, it's worth more. And people got kind of 0:03:50.520 --> 0:03:55.000 annoyed with that and said, why should a judge get 0:03:55.000 --> 0:03:57.680 to decide what the company is worth? And what happened 0:03:57.720 --> 0:03:59.920 is that, like twenty seventeen is like the turning point 0:04:00.080 --> 0:04:02.240 people point to you because it's a big case. The 0:04:02.720 --> 0:04:06.400 dell by a like Michael Debob Dell a judge said no, 0:04:06.520 --> 0:04:09.560 he underpaid for it, and he orded more money. And 0:04:09.600 --> 0:04:12.960 then the Delaware Supreme Court reversed that on appeal and said, basically, 0:04:13.000 --> 0:04:17.680 like you should give more weight to objective facts, like 0:04:17.880 --> 0:04:20.320 the company ran a merger process and the highest bid 0:04:20.480 --> 0:04:23.839 was what it got right, or the company's stock trades 0:04:23.960 --> 0:04:25.560 in the market and you can sort of look at 0:04:25.560 --> 0:04:28.520 the stock price and say that's a pretty good indicator 0:04:28.520 --> 0:04:31.000 of what the company is worth. So basically since Dell, 0:04:31.960 --> 0:04:35.159 there's been less of an emphasis on Delaware judges listening 0:04:35.160 --> 0:04:37.080 to arguments about what a company is worth and like 0:04:37.120 --> 0:04:39.760 making their own decision, and more of an emphasis on like, 0:04:41.000 --> 0:04:44.400 what the market says the company is worth is like, 0:04:44.800 --> 0:04:46.960 most of the time pretty good evidence. So it's not 0:04:47.000 --> 0:04:49.440 like you can never have appraise anymore. It's like it's 0:04:49.440 --> 0:04:51.440 just like a little bit like a higher bar to 0:04:51.520 --> 0:04:54.040 prove that the company is worth something other than what 0:04:54.560 --> 0:04:56.440 the market says it's worth or what the merger says 0:04:56.480 --> 0:04:58.719 it's worth. And that's what makes this case unusual because 0:04:59.000 --> 0:05:03.840 here the disgruntled shareholders aren't saying, oh, we want you 0:05:03.880 --> 0:05:07.200 to take our evidence of value rather than the market's 0:05:07.200 --> 0:05:09.800 evidence of value, saying no, no, like the market price says 0:05:10.040 --> 0:05:12.200 this company is worth more than then silver Lake is 0:05:12.240 --> 0:05:14.159 paying for it. Yeah, and silver Lake is the one saying, no, 0:05:14.200 --> 0:05:15.120 the market price is fake. 0:05:15.800 --> 0:05:18.440 Well do you say that this is a pretty straightforward 0:05:18.520 --> 0:05:20.680 case of appraisal. But couldn't you make the case that 0:05:21.080 --> 0:05:24.320 silver Lake just made a good deal here that they 0:05:24.360 --> 0:05:26.080 saw that this company is It doesn't matter. 0:05:26.240 --> 0:05:29.760 That doesn't matter, Like, yes, absolutely in the ordinary course 0:05:29.800 --> 0:05:31.840 of things, Like they agreed this deal. If you're like, Okay, 0:05:31.880 --> 0:05:33.560 you agreed on a deal a year ago, and since 0:05:33.560 --> 0:05:35.760 then the market has gone up, you should get the 0:05:35.760 --> 0:05:38.640 benefit of yeah, and like, right, as a matter of 0:05:38.680 --> 0:05:42.400 like merger practice, endeavor shouldn't be able to back out 0:05:42.440 --> 0:05:45.120 of the deal now because the market went up, right, Yeah, 0:05:45.240 --> 0:05:47.080 But that's not how appraisal works. Like appraisal is just 0:05:47.080 --> 0:05:49.120 like a thing in the law, and the thing says, 0:05:49.480 --> 0:05:51.440 you know, the shareholders are entitled to the fair value 0:05:51.480 --> 0:05:53.120 of the company at the time of the closing of 0:05:53.160 --> 0:05:55.680 the merger, so like technically they're entitled to this. 0:05:55.960 --> 0:05:56.320 Okay. 0:05:56.480 --> 0:05:58.640 It's just like this is like a weird element of 0:05:58.720 --> 0:06:01.159 law that people like not to think that much about. 0:06:01.160 --> 0:06:03.000 Like the difference between signing and closing but here the 0:06:03.040 --> 0:06:04.800 company has gone up a lot between. 0:06:04.560 --> 0:06:06.880 Signing, and actually it's gone up so much that I 0:06:06.920 --> 0:06:10.520 did some reporting for this podcast. Usually I just show up, 0:06:10.600 --> 0:06:13.640 but in this case, I asked KEITHA. Rong Goanathan of 0:06:13.640 --> 0:06:17.480 Bloomberg Intelligence basically, why have TKA's shares gone up so 0:06:17.600 --> 0:06:20.080 much since Endeavor agreed to that deal with silver Lake 0:06:20.120 --> 0:06:22.760 It was in April twenty twenty four. Her answer was, 0:06:23.000 --> 0:06:25.440 they have a big UFC media rights deal with Disney 0:06:25.480 --> 0:06:27.760 that is expiring at the end of twenty twenty five. 0:06:28.120 --> 0:06:30.560 There's reports that are suggesting that they're asking for a 0:06:30.560 --> 0:06:34.359 doubling of yearly fees to a billion dollars, which would 0:06:34.360 --> 0:06:37.760 be substantial. There's also a little bit of a Trump effect, 0:06:37.920 --> 0:06:39.440 not to sure gaft. 0:06:39.839 --> 0:06:41.320 You know, it seems like the sort of thing that 0:06:41.400 --> 0:06:41.960 would thrive. 0:06:42.360 --> 0:06:45.000 Yeah, he's shown up at wrestling matches. I thought that 0:06:45.040 --> 0:06:47.520 was a little bit interesting because there's no one closer 0:06:47.560 --> 0:06:49.560 to Donald Trump right now than Elon Musk, and Elon 0:06:49.680 --> 0:06:53.400 Musk obviously has had the opposite experience in the public markets, 0:06:53.560 --> 0:06:55.479 at least with Tesla. 0:06:55.680 --> 0:06:59.359 Yeah, right, it's interesting, Like you think about like the 0:06:59.400 --> 0:07:02.039 stereotypical Tesla buyer from three years ago, and how they 0:07:02.040 --> 0:07:04.719 would feel about it. I mus, then you think about 0:07:04.720 --> 0:07:08.320 like the stereotypical wrestling thing. Yeah, that's a slightly different. 0:07:08.080 --> 0:07:11.160 Demographic, that's true, it's totally different markets. I just think 0:07:11.200 --> 0:07:14.600 about that too. We had Carson Block on Bloomberg Television. 0:07:14.760 --> 0:07:17.360 This is a non sequitor. We had him on television 0:07:17.400 --> 0:07:22.880 this week and I asked him, would you bet against Tesla? 0:07:23.160 --> 0:07:25.600 It's gone down a ton You said a month ago 0:07:25.640 --> 0:07:27.520 that you wouldn't And he said. 0:07:27.760 --> 0:07:31.720 Is he doing irreparable damage to the Tesla brand? I 0:07:31.720 --> 0:07:34.720 mean maybe, But again, this guy, for years and years 0:07:34.720 --> 0:07:37.800 and years has done nothing but pull rabbits out of 0:07:37.880 --> 0:07:38.320 the hat. 0:07:38.680 --> 0:07:41.600 So we'll see how long this Tesla draw down continues. 0:07:46.440 --> 0:07:48.840 But so, how does. 0:07:48.640 --> 0:07:51.720 This end up? This Endeavor Silverlake deal? You wrote that 0:07:51.760 --> 0:07:54.320 it closes in the next two weeks or so. Hasn't 0:07:54.360 --> 0:07:57.160 appraisal case actually materialized yet? 0:07:57.280 --> 0:07:59.680 No, No, you have to wait until they closes. There's 0:07:59.680 --> 0:08:02.560 a lot of technical requirements, one of which is that 0:08:03.360 --> 0:08:05.360 in this case, you need to have held your shares 0:08:06.440 --> 0:08:10.680 continuously from February fourth. So weird thing is that Endeavor 0:08:10.720 --> 0:08:12.880 is not trading like more than a dollar above the 0:08:12.920 --> 0:08:16.840 deal price, And if you're buying the stock now hoping 0:08:17.040 --> 0:08:19.720 to get more money in appraisal, that won't work. You 0:08:19.800 --> 0:08:20.880 have to have owned the stock. 0:08:22.720 --> 0:08:22.960 Ago. 0:08:23.360 --> 0:08:24.840 So I don't really know why the stock is trading 0:08:24.920 --> 0:08:27.760 like that high. Like I think one answer is there 0:08:27.840 --> 0:08:33.480 is some expectation that possibly silver Lake will raise the 0:08:33.520 --> 0:08:36.320 deal price, but they've said they won't. And they've said 0:08:36.480 --> 0:08:38.160 not only have they said they won't raise the deal price, 0:08:38.160 --> 0:08:40.839 they've said, if you demand appraisal, and like I read 0:08:40.880 --> 0:08:42.600 one estimate that like two thirds of shares are going 0:08:42.640 --> 0:08:46.200 to demand appraisal, they say, if you demand appraisal, we 0:08:46.280 --> 0:08:50.240 will not pay you anything at closing. We'll wait until 0:08:50.360 --> 0:08:53.600 years later when the appraisal cases is finished. And that's 0:08:53.640 --> 0:08:56.800 a little unusual. It used to be that that was 0:08:56.880 --> 0:08:59.160 the norm. If you demanded appraisal, you didn't get any 0:08:59.160 --> 0:09:01.439 money when the deal closed, waited until you went through 0:09:01.440 --> 0:09:03.719 your appraisal case. But one thing that happened is that 0:09:04.400 --> 0:09:07.680 when you brought an appraisal case years later, the judgment say, okay, 0:09:07.840 --> 0:09:09.559 the deal price was actually fair. You only get the 0:09:09.600 --> 0:09:11.520 deal price you get in this case twenty seven fifty, 0:09:12.040 --> 0:09:14.640 but you also get interest, and the interest is at 0:09:14.679 --> 0:09:16.840 a very high rate, like it' said five hundred basis 0:09:16.880 --> 0:09:19.520 points over fed funds. And so people would do appraisal 0:09:19.559 --> 0:09:22.360 cases thinking well, if I win, I get more money 0:09:22.400 --> 0:09:24.120 than the deal price, and even if I lose, I 0:09:24.120 --> 0:09:26.960 get the deal price plus like extremely high interest, so 0:09:27.000 --> 0:09:30.760 it's great for me. That became annoying enough that it's 0:09:30.760 --> 0:09:32.760 not become kind of the norm for buyers to just 0:09:32.760 --> 0:09:35.480 give you the deal price day one and say don't 0:09:35.480 --> 0:09:37.280 we won't pay you interest on that. If you later 0:09:37.320 --> 0:09:39.200 win the case, we'll give you the extra money, but 0:09:39.280 --> 0:09:42.240 like day one, you get the deal price and silver 0:09:42.320 --> 0:09:44.120 like case said they won't do that in this case, 0:09:44.200 --> 0:09:46.760 which I think people will perceive as like trying to 0:09:46.920 --> 0:09:49.880 smoke out week hounds, because if you're like a arbor 0:09:49.920 --> 0:09:52.000 treasurer and you have to finance the position for years, 0:09:52.000 --> 0:09:53.960 you might be like, yeah, never mind. Yeah, But here 0:09:54.000 --> 0:09:55.720 they're kind of insisting they're not going to raise the 0:09:55.720 --> 0:09:58.440 deal price. They're going to fight the appraisal case. They 0:09:58.520 --> 0:10:03.120 say that the price of TKO is artificial and like 0:10:03.200 --> 0:10:05.480 it's you know, has to do with arbitrage activity and 0:10:05.559 --> 0:10:07.559 it's not like a real price, which is not a 0:10:07.640 --> 0:10:12.680 lot of evidence for and Endeavor has itself been buying 0:10:12.760 --> 0:10:16.800 TKO shares, so there's some reason to think it's not 0:10:16.880 --> 0:10:18.959 a completely artificial price, and it has to do more 0:10:19.000 --> 0:10:20.680 with like tk's business. 0:10:20.480 --> 0:10:23.080 Has been doing well fundamentals, perhaps fundamentals. I don't know, 0:10:23.200 --> 0:10:26.760 I find myself sympathetic to this private equity company. 0:10:26.800 --> 0:10:30.600 Oh yeah, me too. It's weird that it's weird that 0:10:30.640 --> 0:10:33.000 you don't get the benefit of that, right and like 0:10:33.240 --> 0:10:35.960 right and again, like in the context of like if 0:10:36.000 --> 0:10:37.719 like Endeavor was trying to back out of the deal, 0:10:37.760 --> 0:10:39.720 you'd be like, no, you like you signed a deal 0:10:39.800 --> 0:10:43.280 like had like TKO gone down and Silver like couldn't 0:10:43.280 --> 0:10:44.679 get out of the deal TKO went up. You can't 0:10:44.679 --> 0:10:46.800 get out of the deal. It's totally like a reasonable 0:10:46.840 --> 0:10:48.200 thing for cilvill like to be like, look, we won't. 0:10:48.200 --> 0:10:49.480 We got the benefit of our bargain. 0:10:49.559 --> 0:10:52.280 But it's not how I feel like we're going to 0:10:52.320 --> 0:10:53.240 be talking about this again. 0:10:53.760 --> 0:10:56.800 Yeah, I don't know. I mean, one possibility is they 0:10:56.840 --> 0:10:59.560 will bump the deal price a little bit, but there's 0:10:59.640 --> 0:11:03.080 kind of a big gap between what the arbitragures think 0:11:03.200 --> 0:11:06.640 this company is worth and what so really I quanted 0:11:06.679 --> 0:11:08.199 to pay, So you know, they may just. 0:11:08.200 --> 0:11:28.840 Fight it for years years of content. Well, let's return 0:11:28.880 --> 0:11:31.760 to something that we have already talked about, sure, and 0:11:31.800 --> 0:11:35.520 that is private credit liquidity, specifically in ETFs. 0:11:35.880 --> 0:11:38.040 I feel like I spent years writing people are worried 0:11:38.040 --> 0:11:40.280 about bombacking liquidity and making a big joke of it, 0:11:40.280 --> 0:11:41.880 and now I feel like I've spent one year of 0:11:41.880 --> 0:11:44.760 this podcast talking every week about people being worried about 0:11:45.000 --> 0:11:47.920 credit liquidity, and here we are talking about private credit liquidity. 0:11:48.000 --> 0:11:51.240 That's true. Well, the b Bank of International Settlements is 0:11:51.280 --> 0:11:54.520 worried about social warriors. Yeah, they're coming out with a 0:11:54.600 --> 0:11:58.640 lot of concerns basically about exactly that liquidity. You have 0:11:58.760 --> 0:12:03.199 this rush for retail hash among just the asset management world, 0:12:03.200 --> 0:12:05.920 and they're worried that that's going to create vulnerabilities. 0:12:06.240 --> 0:12:07.959 I feel we've talked about this on the podcast before, 0:12:08.000 --> 0:12:12.320 but I wanted to ask you. Yeah, okay, retail private 0:12:12.320 --> 0:12:16.880 credit vehicles have been a thing for years. Uncontroversially. There's 0:12:16.960 --> 0:12:20.360 a thing that's called a business development company or BDC. Yeah, 0:12:20.440 --> 0:12:22.960 it is a retail private credit vehicle. There are lots 0:12:23.000 --> 0:12:25.720 of them. They trade on the Stock Exchange, they have tickers. 0:12:25.800 --> 0:12:28.800 They're effectively closed down fund for like direct lending off 0:12:28.840 --> 0:12:32.000 in middle market like direct lending. And so you can 0:12:32.040 --> 0:12:36.280 buy a retail private credit fund in your brokerage account 0:12:36.520 --> 0:12:38.240 and that's not a liquidity worry. I mean it is 0:12:38.280 --> 0:12:39.840 a little bit like the BS A little bit worried 0:12:39.840 --> 0:12:43.160 about BDCs because they're levered, But fundamentally a BDC is 0:12:43.160 --> 0:12:45.040 a close doun fund, right Like you can put money in, 0:12:45.080 --> 0:12:47.040 you can't take money out. You can trade shares on 0:12:47.040 --> 0:12:48.880 the stock exchange, but you can't go to the BDC 0:12:48.960 --> 0:12:50.720 and say I want my money back. And so the 0:12:50.760 --> 0:12:54.840 liquidity where people have is like investors in liquid exchange 0:12:54.880 --> 0:12:56.960 traded private credit funds will go to the private credit 0:12:57.000 --> 0:12:58.520 fund and say I want my money back, and the 0:12:58.559 --> 0:13:02.040 private credit fund will have we have all these liquid loans. 0:13:02.040 --> 0:13:03.760 We can't give your money back. They're all tied up 0:13:03.760 --> 0:13:06.600 and loans and then like the world will come crashing down. 0:13:06.760 --> 0:13:08.280 But BDCs just don't have that problem. 0:13:08.400 --> 0:13:09.679 Yeah, go on. 0:13:09.800 --> 0:13:14.679 The BIS is worried because like there's one ets, just 0:13:14.720 --> 0:13:17.280 one et ETF. If you can go to the issuer 0:13:17.320 --> 0:13:21.160 and say I want my back, my question is why 0:13:21.160 --> 0:13:24.840 do we need the ETF. I understand that in your world, 0:13:25.120 --> 0:13:27.400 the best of all things is the ETF. And I 0:13:27.480 --> 0:13:29.880 understand obviously a marketing benefit, but like if you're a 0:13:29.960 --> 0:13:33.960 private credits you're like, you're like, okay, the right funding 0:13:34.000 --> 0:13:37.880 model is a permanent capital closed then fund funding model. 0:13:38.360 --> 0:13:42.960 That technology exists. We have billions of dollars in it. Yeah, 0:13:43.120 --> 0:13:44.400 why do we need to go to the ETF. 0:13:44.600 --> 0:13:47.880 You also have interval funds. You have had ways for 0:13:48.000 --> 0:13:51.000 retail to access privately. 0:13:50.880 --> 0:13:52.400 Like interval funds, like you might be a little worry 0:13:52.400 --> 0:13:54.520 about liquidity, is like a fully closed un fund. But 0:13:54.559 --> 0:13:55.960 like you're right, you have a lot of things that 0:13:56.000 --> 0:13:56.800 are not ETFs. 0:13:56.880 --> 0:14:00.640 Yeah, you do have ETFs. Does the world need private 0:14:00.679 --> 0:14:03.160 credit ETFs? I don't know. I'm not qualified to answer 0:14:03.240 --> 0:14:08.040 that question, but it just speaks to the desire among 0:14:08.160 --> 0:14:10.480 a lot of these issuers and a lot of these 0:14:10.520 --> 0:14:14.839 private market folks wanting to tap into this new source 0:14:14.840 --> 0:14:16.600 of demand. I mean, I know, but like, why. 0:14:16.480 --> 0:14:18.280 Is that a new source? Like to me, it's weaks 0:14:18.280 --> 0:14:20.680 to the desire of retail investors to have specifically an 0:14:20.720 --> 0:14:24.040 ETF and not a right I guess I get the 0:14:24.080 --> 0:14:25.720 ETF technology is a little nicer, but. 0:14:25.720 --> 0:14:28.960 It's like I think it's this is just one woman's suspicion. 0:14:28.960 --> 0:14:31.560 I think that's the driving force, is that the muscle 0:14:31.600 --> 0:14:33.600 memory is there people know how to get their hands 0:14:33.640 --> 0:14:36.800 on ETFs, that muscle memory might not exist or be 0:14:36.840 --> 0:14:40.520 developed when it comes to BDCs. This is the same thing, 0:14:40.640 --> 0:14:41.960 I know, but it's just it's nice. 0:14:42.440 --> 0:14:44.800 There's a lot of stuff that's like more like there's 0:14:44.840 --> 0:14:46.040 like publicly trader well. 0:14:46.080 --> 0:14:48.600 I talk to a lot of asset managers and a 0:14:48.640 --> 0:14:51.560 lot of asset C suites at asset management firms, and 0:14:51.560 --> 0:14:54.200 they always tell me we're rapper agnostic. We will pick 0:14:54.320 --> 0:14:57.520 the product that fits best with the asset class that 0:14:57.520 --> 0:14:59.880 we're talking about. And I have the suspicion that for 0:15:00.000 --> 0:15:02.800 a lot of retail investors or folks who started investing 0:15:02.840 --> 0:15:06.280 in the last five years or so, basically the post 0:15:06.280 --> 0:15:10.360 pandemic period, it's single stocks or it's ETFs. Like people 0:15:10.400 --> 0:15:11.600 know how to do that. They know how to go 0:15:11.640 --> 0:15:15.200 to Robinhood or Fidelity or whatever platform they use and 0:15:15.920 --> 0:15:17.600 buy an ETF. It's simple. 0:15:18.280 --> 0:15:20.080 It's just as simple to buy a BDC. 0:15:20.520 --> 0:15:23.680 I know, but I feel like the familiarity isn't there 0:15:23.960 --> 0:15:25.680 if you have an ETF that says I am a 0:15:25.720 --> 0:15:28.360 private credit ETF. Give me a name of a BDC. 0:15:28.640 --> 0:15:30.920 It doesn't read as cleanly. There's so many examples. 0:15:30.920 --> 0:15:34.360 It's true that the words BDC make it sound like 0:15:34.400 --> 0:15:37.040 something other than a close than private equity fund, private 0:15:37.040 --> 0:15:40.240 credit fund, so right, you could be confused by that. 0:15:40.560 --> 0:15:45.960 Yeah, there's so many examples of tickers that tend to outperform, 0:15:46.280 --> 0:15:49.400 even though there's a fund that offers the same exposure 0:15:49.480 --> 0:15:52.200 and it's priced lower. But it's just this fund has 0:15:52.240 --> 0:15:54.440 a nicer name, and it has a more intuitive ticker, 0:15:54.840 --> 0:15:57.880 and that's why it tends to get If you launch. 0:15:57.600 --> 0:16:02.080 A private credityf, then like people read articles about like yeah, 0:16:02.120 --> 0:16:03.680 the first private credity. 0:16:03.960 --> 0:16:07.120 And the SEC might write a letter basically saying how 0:16:07.200 --> 0:16:10.280 upset it is that this private credit ETF that they 0:16:10.320 --> 0:16:12.600 allowed to launch actually launched. 0:16:12.880 --> 0:16:14.640 Or the BIS might read a report. 0:16:14.800 --> 0:16:17.400 Something that I thought was interesting in the BIS report 0:16:17.480 --> 0:16:19.880 is that it's talking about, basically, it's worried that you're 0:16:19.920 --> 0:16:23.520 going if you introduce retail into this marketplace that you're 0:16:23.560 --> 0:16:26.280 going to one day see this exodus and then you 0:16:26.320 --> 0:16:29.280 see the illiquidity doom loop that people like to talk. 0:16:29.160 --> 0:16:33.520 About hotel redeemable retail, Right, Yeah, you have locked up retail. 0:16:34.080 --> 0:16:37.200 Yeah, I think that maybe they're worrying about the wrong 0:16:37.320 --> 0:16:40.560 cohort of investors because I don't know. I think about 0:16:40.600 --> 0:16:43.480 products that are really popular with retail, and I think 0:16:43.480 --> 0:16:47.240 about the average vanguard investor, for example, that sort of 0:16:47.280 --> 0:16:50.640 self directed mom and pop sort of said, or people 0:16:50.840 --> 0:16:54.040 who are working with financial advisors. There's a lot of 0:16:54.120 --> 0:16:57.760 sticky retail cash out there. It's more these ETFs that 0:16:57.800 --> 0:17:00.960 are used as like trading vehicles or liquids sleeves, what 0:17:01.080 --> 0:17:04.200 have you. That's where you tend to see more panicky 0:17:04.200 --> 0:17:07.040 outflows than you do with ETFs that are straight up 0:17:07.080 --> 0:17:07.880 retail products. 0:17:09.040 --> 0:17:11.040 Yeah. I think, like in general, that people are worried 0:17:11.040 --> 0:17:14.360 about whatever. Liquidity worries are always like a little bit overblown, 0:17:14.400 --> 0:17:17.080 particularly it comes to retail. Now, ETFs are not a 0:17:17.119 --> 0:17:20.480 purely retail product, right, And you can imagine if private 0:17:20.520 --> 0:17:26.240 credit ETFs became a bigger thing, like some more institutional 0:17:26.240 --> 0:17:28.520 people allocating money to them for whatever reason is like 0:17:28.640 --> 0:17:31.720 you know, indexy private credit exposure and taking money out 0:17:32.280 --> 0:17:35.159 in a downturn. You can also just imagine retail panicking. Like, 0:17:35.200 --> 0:17:37.800 I agree with you that, like it's often stickier than 0:17:37.800 --> 0:17:40.040 like the worries that people have, but yeah, it's still 0:17:40.080 --> 0:17:46.200 a possibility to me. Like the solution to this worry 0:17:46.520 --> 0:17:50.760 is like, like, the reason I was never that worried 0:17:50.760 --> 0:17:53.280 about bomb market liquidity is because like, eh, that you 0:17:53.320 --> 0:17:55.080 can't trade your bonds, like the press will go down. 0:17:55.119 --> 0:17:57.159 It's not a deal. Yeah, that's not really true. In 0:17:57.160 --> 0:17:59.119 private credit, it's like not as true, right, because you 0:17:59.200 --> 0:18:01.120 kind of can't trade your private credit. But like one 0:18:01.119 --> 0:18:02.760 thing we've talked about a lot on this podcast is 0:18:02.800 --> 0:18:06.280 like that's gonna change. There's gonna be a private credit market. 0:18:06.520 --> 0:18:08.520 You'll be able to trade your private credit, and so 0:18:08.600 --> 0:18:11.399 there'll be some like outlet for it where if everyone 0:18:11.440 --> 0:18:13.200 does take their money out of the ETF, there's some 0:18:13.280 --> 0:18:16.399 way to you know, monetize the underlying hole things so 0:18:16.440 --> 0:18:18.480 that like the system doesn't freeze. 0:18:18.560 --> 0:18:20.160 Won't it be fun to find out though? 0:18:20.600 --> 0:18:23.920 Oh yeah, it'll be very fun to watch the development 0:18:23.960 --> 0:18:25.840 of private credit trading platforms. 0:18:26.160 --> 0:18:28.920 I was speaking to Mark lib Schultz of Blue al 0:18:29.119 --> 0:18:31.560 a couple of weeks ago at Bloomberg invest and I 0:18:31.680 --> 0:18:33.879 kind of like his stance. I mean, you have the 0:18:33.920 --> 0:18:36.879 Apollos of the world saying that the private markets are 0:18:36.920 --> 0:18:38.639 going to become the new public markets, and that's the 0:18:38.640 --> 0:18:41.160 theme you've written about a lot. His stance is more 0:18:42.000 --> 0:18:44.879 private markets should be private markets. They're not trying to 0:18:44.880 --> 0:18:47.439 build out a trading desk like Apollo. I believe that 0:18:47.480 --> 0:18:50.280 they filed for an interval fund for private assets, but 0:18:50.520 --> 0:18:54.000 they're not on board with this. You know, private should 0:18:54.040 --> 0:18:54.760 be out in the public. 0:18:55.200 --> 0:18:58.600 It is true that, like one attraction of private credit 0:18:58.680 --> 0:19:01.040 to a lot of borrowers is you will have a 0:19:01.119 --> 0:19:04.200 relationship with a small defined group of lenders rather than 0:19:04.280 --> 0:19:06.800 like who knows who owns your debt today? Right, Like 0:19:06.960 --> 0:19:09.199 that's an appeal to borrow Then that's undermined if you 0:19:09.280 --> 0:19:11.919 sort of a trading desk and want private credit to 0:19:11.920 --> 0:19:14.399