WEBVTT - Broadcasting Live from Bloomberg Invest (Part 2) 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, radio News. 0:00:07.520 --> 0:00:11.239 You're listening to Bloomberg Business Week with Carol Masser and 0:00:11.320 --> 0:00:13.720 Tim Steneveek on Bloomberg Radio. 0:00:14.080 --> 0:00:16.159 Let's get to our first guest, because with us is 0:00:16.160 --> 0:00:18.400 Michael Harris and hy I see, vice chairman and global 0:00:18.400 --> 0:00:22.200 head of Capital Markets, who has been very patient as 0:00:22.239 --> 0:00:24.320 we set up this final hour. It has been such 0:00:24.320 --> 0:00:27.600 an interesting day. You were looking at the market close, Michael, 0:00:28.240 --> 0:00:31.000 a fair amount of volatility. What does that do for 0:00:31.120 --> 0:00:32.479 your environment your world? 0:00:32.600 --> 0:00:34.320 Yeah, well, first of all, thanks a lot for having me. 0:00:34.360 --> 0:00:36.239 It's great to be here. And you know, I think 0:00:36.360 --> 0:00:39.120 Lynn said it best in terms of don't panic. Obviously, 0:00:39.159 --> 0:00:41.720 I think we're in the middle of a volatile market environment. 0:00:41.760 --> 0:00:43.800 But again, you know, I think this is something that 0:00:44.159 --> 0:00:47.760 we anticipated when you have the backdrop of a lot 0:00:47.800 --> 0:00:52.440 of political, geopolitical uncertainty, and so that impacts not only 0:00:52.479 --> 0:00:54.840 the secondary markets, but it also can impact the primary 0:00:54.880 --> 0:00:56.560 markets too, as we think about companies that are in 0:00:56.600 --> 0:00:59.320 the process of raising capital or seeking to raise capital 0:00:59.360 --> 0:01:01.800 in the future. You know, when we look at our 0:01:02.120 --> 0:01:03.680 environment and we look at some of the companies that 0:01:03.720 --> 0:01:05.640 we speak to in the capital markets, I think there's 0:01:05.680 --> 0:01:07.800 a couple of big picture themes that we kind of 0:01:07.840 --> 0:01:10.440 look at, and I characterize the market right now as 0:01:10.520 --> 0:01:14.200 being favorable but with some challenging conditions in the backdrop. 0:01:14.840 --> 0:01:16.920 From a favorable standpoint, the thing to think about is 0:01:16.920 --> 0:01:18.840 that we're still at a run rate which is actually 0:01:18.880 --> 0:01:21.679 above where we were last year, and also above where 0:01:21.760 --> 0:01:23.880 we were in the kind of pre COVID years, so 0:01:24.480 --> 0:01:28.520 kind of normalized environment in many respects. That backdrop is 0:01:28.520 --> 0:01:31.000 also fairly normalized in terms of the types of companies 0:01:31.040 --> 0:01:33.600 that are coming to the marketplace, so pretty diversified set 0:01:33.600 --> 0:01:34.160 of issuers. 0:01:35.840 --> 0:01:38.200 So after some crazy years of was it twenty twenty 0:01:38.200 --> 0:01:40.679 one where we saw a record number of IPOs like 0:01:40.840 --> 0:01:42.840 those and I know Lin was talking about this, that's 0:01:42.840 --> 0:01:45.440 an outlier, absolutely, So pre pandemic is really what you 0:01:45.480 --> 0:01:47.400 need to think about is asmal. 0:01:47.120 --> 0:01:49.560 Absolutely, especially in an environment which has a much higher 0:01:49.560 --> 0:01:52.400 cost of capital than we saw during those years, So 0:01:52.640 --> 0:01:55.280 you are seeing kind of a much more normalized environment. 0:01:55.360 --> 0:01:57.720 You're seeing also the pipeline of companies that are coming 0:01:57.760 --> 0:02:01.520 forward that are fairly diverse, a lot of them coming 0:02:01.560 --> 0:02:05.600 with fairly older assets from the sponsored community. Those assets 0:02:05.640 --> 0:02:07.800 are like going to be much larger in size. That's 0:02:07.880 --> 0:02:09.680 good for a lot of buyers that want to look 0:02:09.720 --> 0:02:13.080 at getting larger allocations in the marketplace as well. 0:02:13.880 --> 0:02:14.560 So those are some. 0:02:14.520 --> 0:02:16.920 Of the positive things that we're seeing in the market. Obviously, 0:02:17.000 --> 0:02:18.880 some of the challenges that we're seeing are much more 0:02:18.880 --> 0:02:22.360 macro focused and some of that's playing out today. I 0:02:22.360 --> 0:02:25.560 think the uncertainty that you see in the marketplace is 0:02:25.560 --> 0:02:28.440 in kind of two different areas. So on one hand, 0:02:28.520 --> 0:02:31.720 I think the teriff uncertainty, obviously is the concern that 0:02:31.800 --> 0:02:34.560 you're seeing a lot of the market participants to react to. 0:02:35.160 --> 0:02:37.880 When you talk to corporate issuers, I think what they're 0:02:37.919 --> 0:02:40.240 really focusing on is really just trying to run their business, 0:02:40.600 --> 0:02:42.799 and they're really focused on trying to make sure that 0:02:43.120 --> 0:02:46.640 the predictability of their business models is intact and that 0:02:46.680 --> 0:02:50.520 they can try to forecast for companies and analysts and 0:02:50.600 --> 0:02:53.720 for the buy side community as best as possible. And 0:02:53.800 --> 0:02:56.760 when you have an uncertain geopolitical environment, that does got 0:02:56.800 --> 0:02:58.440 some challenges and that's what they're working through. 0:02:58.600 --> 0:03:00.000 Let's talk a little bit about that because we did 0:03:00.080 --> 0:03:02.400 speak a little earlier to Ryan Tolkien over at the 0:03:02.480 --> 0:03:07.280 multistrat Hedge Fund Shownfeld Strategic advisors. He talked about that uncertainty, 0:03:07.600 --> 0:03:09.720 and I'm wondering, if you're a company that wants to 0:03:09.760 --> 0:03:13.440 go public in an environment and you see the uncertainty 0:03:13.520 --> 0:03:17.480 emanate from Washington, DC about tariffs, Okay, there's questions about, like, 0:03:17.639 --> 0:03:20.320 who wants to spend on capex in an environment where 0:03:20.320 --> 0:03:23.440 we don't really know what things look like from regulatory 0:03:23.600 --> 0:03:27.399 perspective in the future. Does that delay IPOs. 0:03:27.360 --> 0:03:30.519 I think it becomes a company by company story, and 0:03:31.080 --> 0:03:34.400 for some companies where they may not be as impacted 0:03:35.080 --> 0:03:37.680 in terms of the tariffs, that may not be as 0:03:37.720 --> 0:03:40.120 much of an issue. I think if you're a manufacturing 0:03:40.120 --> 0:03:42.880 company or industrial based company, that probably will be more 0:03:42.880 --> 0:03:43.560 of an impact. 0:03:43.680 --> 0:03:44.600 I think the. 0:03:44.480 --> 0:03:48.080 Broader picture, in the broader consideration is really how you 0:03:48.160 --> 0:03:51.000 explain that to investors and to the extent that you 0:03:51.000 --> 0:03:54.040 can provide a story that's reasonable in sound and again 0:03:54.160 --> 0:03:57.960 goes back to being able to talk about dependable and 0:03:58.120 --> 0:04:04.840 reliable and predictable earnings and revenue. From a business model perspective, 0:04:05.040 --> 0:04:07.720 that's really what investors are going to focus on. Ultimately, 0:04:07.760 --> 0:04:11.040 from their perspective in a more conservative environment, they're much 0:04:11.120 --> 0:04:13.760 more focused on management teams that can actually come up 0:04:13.800 --> 0:04:16.799 with a story that they can deliver on and also repeat. 0:04:17.279 --> 0:04:19.359 And so to the extent that there is the ability 0:04:19.360 --> 0:04:22.520 for management teams to do that, that gives them greater comfort. 0:04:22.640 --> 0:04:24.120 I mean, how great is it? And this is one 0:04:24.160 --> 0:04:25.719 of the things I talked about with Lynn. But to 0:04:25.800 --> 0:04:29.000 have you know, Core Weave filing for its IPO, I mean, 0:04:29.000 --> 0:04:33.520 that's a big deal. We're talking about a company that 0:04:34.000 --> 0:04:36.240 had revenue that was a good, positive thing, and that's 0:04:36.279 --> 0:04:38.960 probably why they're feeling more comfortable. But you're talking about 0:04:38.960 --> 0:04:41.920 maybe evaluation greater than thirty five billion dollars in it's 0:04:41.920 --> 0:04:44.840 an IPO. I mean, is that the kind of IPOs 0:04:44.880 --> 0:04:46.240 you're anticipat seeing a lot. 0:04:46.120 --> 0:04:46.640 Of this year. 0:04:47.120 --> 0:04:49.200 There's a lot of companies, so a pretty broad range 0:04:49.200 --> 0:04:51.520 of companies, you know. I think when you have an 0:04:51.600 --> 0:04:54.280 asset of that size, that's obviously going to be impactful 0:04:54.400 --> 0:04:57.839 just for the overall pipeline and obviously, you know, without 0:04:57.880 --> 0:05:00.800 going into details on any one particular company or one 0:05:00.839 --> 0:05:03.240 particular issue WERK, I think it's safe to say that 0:05:03.279 --> 0:05:05.479 as you have larger sized companies that come to the 0:05:05.480 --> 0:05:09.040 marketplace where we have a broad participation of buyside firms 0:05:09.040 --> 0:05:12.960 that are participating those offerings. The success of those deals 0:05:13.120 --> 0:05:15.040 is going to be important for the overall health of 0:05:15.120 --> 0:05:16.120 the IPO pipeline. 0:05:16.160 --> 0:05:17.599 It does a lot, right, it does a lot in 0:05:17.640 --> 0:05:18.320 terms of juicing. 0:05:18.320 --> 0:05:19.440 Maybe SUTURE offers. 0:05:19.200 --> 0:05:23.320 Absolutely Caeryl mentioned Core Weave. It's going public on the NASDAQ, 0:05:23.480 --> 0:05:28.320 not the New York Stock Exchange, the big rivalry between 0:05:28.440 --> 0:05:30.800 the two firms. There certainly is no question how do 0:05:30.839 --> 0:05:33.640 you win more of the business coming from AI. Yeah? 0:05:33.680 --> 0:05:36.840 Sure, Look, I think we offer a wide range of 0:05:36.839 --> 0:05:39.760 things that we compete on in many different respects. So 0:05:40.080 --> 0:05:42.760 on one hand, there is a unique business model that 0:05:42.800 --> 0:05:45.680 we offer for our companies. From a liquidity perspective, the 0:05:45.720 --> 0:05:47.880 way that stocks trade on the New York Stock Exchange 0:05:47.920 --> 0:05:51.279 is different than on any other exchange venue globally. We 0:05:51.360 --> 0:05:54.760 think that offers for both investors but also for issuers 0:05:54.880 --> 0:05:58.800 lower volatility, better liquidity, and also the best environment for 0:05:58.839 --> 0:06:02.440 both their stakeholders and also for investors. But it's competitive, right, 0:06:02.520 --> 0:06:05.480 But it's highly competitive. But we also can also cooperate 0:06:05.480 --> 0:06:07.239 in a number of different areas. You know. I think 0:06:07.600 --> 0:06:09.479 if you speak to folks at NASDAK, you speak to 0:06:09.480 --> 0:06:11.520 folks the New York Stock Exchange. You'd probably find that 0:06:11.520 --> 0:06:13.640 we agree in many respects in terms of the US 0:06:13.640 --> 0:06:16.520 markets as a whole being the best place for capital formation, 0:06:16.720 --> 0:06:19.440 and that's one reason why you're seeing, for instance, companies 0:06:19.480 --> 0:06:21.839 from other parts of the world that are gravitating to 0:06:21.880 --> 0:06:23.320 the US markets to list their security. 0:06:23.360 --> 0:06:24.800 We've done a little bit of reporting over the last 0:06:24.800 --> 0:06:28.240 few months at Bloomberg News on the Texas Stock Exchange 0:06:28.400 --> 0:06:31.680 and the idea of this. It hasn't launched yet, but 0:06:32.200 --> 0:06:36.640 the idea of creating capital markets center in Texas. How 0:06:36.680 --> 0:06:38.080 do you look at competitions such as that. 0:06:38.440 --> 0:06:42.520 Yeah, well, look, we actually are starting an exchange in Texas. Well. 0:06:42.560 --> 0:06:44.680 We reported on that too. Well there's two. There's the 0:06:44.720 --> 0:06:46.520 Texas Stock Exchange and then there's one that you guys 0:06:46.560 --> 0:06:48.200 are doing as well. But is that a direct response 0:06:48.240 --> 0:06:50.039 to what the Texas Stock Exchange? Is it something that 0:06:50.080 --> 0:06:52.920 we have been actually working on for a bit. Some 0:06:52.960 --> 0:06:55.760 of the largest number of companies that are listed on 0:06:55.800 --> 0:06:58.599 our exchange are actually based in Texas. If you look 0:06:58.640 --> 0:07:03.159 at the movement from the state's perspective in terms of 0:07:03.200 --> 0:07:06.159 attracting new companies to list it within the state, we 0:07:06.240 --> 0:07:08.760 think that's a great thing in terms of being able 0:07:08.800 --> 0:07:11.320 to get just more companies that are interested in growing 0:07:11.360 --> 0:07:13.680 their businesses. We want to be a part of that. 0:07:13.760 --> 0:07:16.400 We're hearing and really responding to what our clients are saying, 0:07:16.640 --> 0:07:19.120 and so we are obviously trying to respond to that. 0:07:19.800 --> 0:07:22.360 We're fortunate in terms also of having a lot of 0:07:22.920 --> 0:07:25.680 our own employees that are actually based in Texas and 0:07:25.920 --> 0:07:27.960 most importantly based in the Dallas area. We're going to 0:07:28.000 --> 0:07:30.280 have the headquarters, So we have over one hundred employees 0:07:30.320 --> 0:07:32.000 that are going to be based there and we're going 0:07:32.040 --> 0:07:34.080 to be building headquarters there very shortly. 0:07:35.240 --> 0:07:37.480 All right, just real quickly. Does that mean that there's 0:07:37.480 --> 0:07:40.120 going to be more like could you see other exchanges 0:07:40.160 --> 0:07:40.960 in other states like. 0:07:41.040 --> 0:07:42.640 A Silicon Valley exchange or something I. 0:07:42.640 --> 0:07:44.800 Don't know, or Florida. There's so much happening in Florida, 0:07:44.880 --> 0:07:46.280 wait and see see. 0:07:47.120 --> 0:07:48.120 All right, great stuff. 0:07:48.480 --> 0:07:51.080 Thank you so much, really appreciate Michael Harris, NYSC Vice 0:07:51.160 --> 0:07:53.240 Chairman and global head of Capital Markets, Thanks so much. 0:07:53.320 --> 0:07:55.760 Thanks for having me Carol Master along with Tim Stanoviek 0:07:55.800 --> 0:07:59.000 live at Bloomberg invest in downtown Manhattan. We want to 0:07:59.000 --> 0:08:00.720 get to our next guest. We do want to mention 0:08:00.720 --> 0:08:02.920 though some headline just crossing the Bloomberg turm on. This 0:08:02.960 --> 0:08:05.400 is coming from the Commerce Secretary, Howard Lutnik. 0:08:05.480 --> 0:08:07.880 Yeah, he's saying in an interview that Trump to move 0:08:07.880 --> 0:08:12.080 with Canada and Mexico. But I'm just getting pulling these up, 0:08:12.200 --> 0:08:15.640 but not all the way. Tariff's compromise announcement likely tomorrow. 0:08:15.840 --> 0:08:19.760 Lutnik says Trump is considering relief for USMCA compliant goods. 0:08:20.160 --> 0:08:23.000 And Howard Lutnik, the Commerce Secretary, saying Trump may roll 0:08:23.080 --> 0:08:25.680 back Canada and Mexico tariffs tomorrow. 0:08:25.840 --> 0:08:27.239 I was looking at a s A P five hundred 0:08:27.280 --> 0:08:29.000 e mini features to see any kind of movement. They're 0:08:29.000 --> 0:08:30.400 still down about four tens of a percent in the 0:08:30.480 --> 0:08:32.440 after market, so we'll continue to watch. Let's get to 0:08:32.440 --> 0:08:36.840 our guests, because this individual is watching the investment landscape 0:08:36.920 --> 0:08:37.400 very closely. 0:08:37.520 --> 0:08:38.719 And I do just want to say, this is an 0:08:38.720 --> 0:08:39.840 interview on Fox Business. 0:08:39.920 --> 0:08:42.280 Okay, good good Good Aria's management. We want to talk 0:08:42.280 --> 0:08:45.000 about them because they're publicly held. They're a global alternative 0:08:45.000 --> 0:08:47.559 investment manager. They've got more than a fifty one billion 0:08:47.600 --> 0:08:49.800 dollar market cap and about four hundred and eighty four 0:08:49.800 --> 0:08:53.080 billion dollars in assets under management. They raised a record 0:08:53.120 --> 0:08:55.760 almost ninety three billion dollars in new capital last year, 0:08:55.760 --> 0:08:59.200 which was a twenty five percent increase from twenty twenty three, 0:08:59.280 --> 0:09:03.440 driven by direct lending, opportunistic credit, and also diversifying its 0:09:03.480 --> 0:09:07.000 distribution through wealth channels, which brings us nicely to our 0:09:07.000 --> 0:09:09.599 next guest with us here at Blomberg Investor is rajdnd a, 0:09:09.640 --> 0:09:12.800 Global head of wealth management at Areas Management. How are you. 0:09:13.120 --> 0:09:13.800 I'm great, Carol. 0:09:13.840 --> 0:09:14.480 Good to be here. 0:09:14.640 --> 0:09:16.840 It's great to have you here on a day where 0:09:17.200 --> 0:09:20.720 there's just an interesting market story. Again, if you will, 0:09:21.280 --> 0:09:23.680 I am curious about the market volatility and what your 0:09:23.679 --> 0:09:26.000 read is on that, and I am also curious your 0:09:26.080 --> 0:09:28.960 client base is a day like this disturb them? 0:09:29.440 --> 0:09:32.680 A day like this is actually the poster child for 0:09:32.840 --> 0:09:36.760 the value proposition of the private markets. The advisors we 0:09:36.880 --> 0:09:40.920 talk to and their clients are really frustrated by this 0:09:41.080 --> 0:09:45.120 type of volatility. You know, we're essentially where we were, 0:09:46.360 --> 0:09:50.960 you know, early November, right in the public markets, and 0:09:51.000 --> 0:09:57.559 that backdrop makes it really hard to work diligently on 0:09:57.640 --> 0:10:02.920 a portfolio that has above at or above target returns. 0:10:02.920 --> 0:10:06.640 And at the end of the day, individuals have almost 0:10:06.720 --> 0:10:09.760 as much wealth as institutional clients, they've just never had 0:10:09.760 --> 0:10:13.320 the access to the private markets, and that's starting to change. 0:10:14.000 --> 0:10:16.280 A lot of our discussion is not just should they 0:10:16.320 --> 0:10:21.160 invest in the private markets, but it's how all that said, 0:10:21.400 --> 0:10:25.080 A day like today is distracting at a minimum, because 0:10:25.120 --> 0:10:27.560 most of our clients still have eighty or ninety percent 0:10:28.000 --> 0:10:32.600 in the markets, and the headlines and the volatility are 0:10:33.840 --> 0:10:35.880 going to certainly be a distraction at a minimum. 0:10:36.240 --> 0:10:39.840 So would you say that yesterday's a poster child certainly 0:10:39.880 --> 0:10:43.640 of why people invest in privates, But would you say 0:10:43.679 --> 0:10:47.120 it's also a reason why people should consider allocating more 0:10:47.160 --> 0:10:52.320 of their portfolios to privates. I would, and I think the. 0:10:54.520 --> 0:10:58.840 Investment thesis is what really comes out at a time 0:10:58.960 --> 0:11:04.440 like this. We're quite clear that the private markets are illiquid. 0:11:04.480 --> 0:11:06.439 That's why you got to higher risk adjusted return. 0:11:06.720 --> 0:11:10.000 You can't just call up and sell when you want to. 0:11:10.160 --> 0:11:10.240 And. 0:11:12.760 --> 0:11:15.120 The top advisors that we work with will tell you 0:11:15.160 --> 0:11:19.480 that keeping their clients invested can be challenging, particularly again 0:11:19.559 --> 0:11:24.320 at times like this. Imagine if you sold earlier today 0:11:24.920 --> 0:11:29.160 and then the headlines tonight potentially reverse some of the 0:11:29.200 --> 0:11:31.440 momentum behind the down trade, right, that would just be 0:11:31.880 --> 0:11:36.400 a really tough day. But the private markets in twenty 0:11:36.480 --> 0:11:41.560 years have changed completely in terms of the breath of solutions. 0:11:41.559 --> 0:11:45.120 You can invest in sports and media assets, you can 0:11:45.120 --> 0:11:49.000 invest in real estate and infrastructure. You can have some 0:11:49.080 --> 0:11:53.400 durbal income solutions from private credit. So the way we 0:11:53.440 --> 0:11:56.320 think about it is you should have equity exposure. You 0:11:56.320 --> 0:11:58.120 can do that in both the public and the fixed 0:11:58.120 --> 0:12:02.080 income markets. You should have some kind of credit or income. 0:12:02.280 --> 0:12:05.720 You can do that in public and private markets. And 0:12:05.720 --> 0:12:07.520 then you should have some real assets. You should own 0:12:07.559 --> 0:12:11.840 some real estate, you should own some form of infrastructure. 0:12:11.880 --> 0:12:16.240 Is a really tax efficient solution. So and you can 0:12:16.280 --> 0:12:18.360 do all of that in both the public and private markets. 0:12:18.400 --> 0:12:20.680 You couldn't do that twenty years ago, even ten years ago. 0:12:20.960 --> 0:12:24.080 I am curious. You know, we're so Washington focused right now, 0:12:24.080 --> 0:12:25.920 and you can understand why, right because there's so much 0:12:25.960 --> 0:12:28.240 that's coming down, and some of it does impact the markets. 0:12:28.559 --> 0:12:31.119 You know, we mentioned the headlines from the Commerce Secretary 0:12:31.600 --> 0:12:35.800 Howard Lutnik that the present may now lower Canada exee 0:12:35.920 --> 0:12:38.760 terras tomorrow and so this is our world where it 0:12:38.760 --> 0:12:42.040 can turn oneint eighty in less than twenty four hours. 0:12:42.080 --> 0:12:45.520 We're going to actually be talking to the Commerce Secretary 0:12:45.520 --> 0:12:49.080 tomorrow on Bloomberg. What I'm curious about is when it 0:12:49.120 --> 0:12:53.880 comes to private markets, are there constructive conversations you guys 0:12:53.920 --> 0:12:57.280 are yet having with the administration or that you think 0:12:57.640 --> 0:13:00.560 have to be had when it comes to private markets. 0:13:02.440 --> 0:13:05.520 There are certainly conversations to have with any administration around 0:13:05.880 --> 0:13:08.640 the evolution of the private markets and how to make 0:13:08.679 --> 0:13:11.520 it easier to invest in the private markets. Areas has 0:13:11.559 --> 0:13:14.040 been in business for over twenty five years, and so 0:13:14.120 --> 0:13:17.640 we've worked with many administrations. This one is just getting 0:13:17.679 --> 0:13:19.920 their feet on the ground. 0:13:20.240 --> 0:13:20.760 It's early. 0:13:21.160 --> 0:13:25.400 They're certainly pro growth and pro business, and so some 0:13:25.520 --> 0:13:30.080 of that narrative we support and are happy about, but 0:13:31.360 --> 0:13:33.720 I would say they haven't yet really dug in on 0:13:35.040 --> 0:13:36.679 the type of change that would have a day to 0:13:36.760 --> 0:13:38.160 day impact on what we're doing. 0:13:38.280 --> 0:13:40.240 And maybe a smarter question, as you're right, it's early on, 0:13:41.800 --> 0:13:45.040 but I mean, what would you like to see in 0:13:45.160 --> 0:13:49.439 terms of what happens for oversight in terms of private markets. 0:13:49.559 --> 0:13:51.920 You and I talked ahead of this conversation, and one 0:13:51.960 --> 0:13:54.560 of the issues is the transparency issues, and I know 0:13:54.600 --> 0:13:56.280 you talked about what you guys do in terms of 0:13:56.320 --> 0:13:58.640 I guess spreading around risk, Right, It's not like you're 0:13:58.840 --> 0:14:03.360 one investment in one particular investment. When it's the private markets, 0:14:03.400 --> 0:14:06.560 it's multiple investments. But what do you think needs to 0:14:06.559 --> 0:14:11.559 be government oversight or what you provide transparency to your investors? 0:14:11.960 --> 0:14:13.600 But does there need to be something more? 0:14:14.640 --> 0:14:16.120 Well, I'd step. 0:14:15.840 --> 0:14:20.160 Back because you're going to get something that's sort of 0:14:20.160 --> 0:14:23.640 paramount to any type of investment approach, which is manager 0:14:23.720 --> 0:14:28.800 selection and the diligence that goes into an investment firms 0:14:29.880 --> 0:14:35.280 track record. And so as the private markets grow and 0:14:35.320 --> 0:14:39.280 as there's a significant amount of new entrants, there are 0:14:39.320 --> 0:14:42.040 going to be firms that may not have a twenty 0:14:42.040 --> 0:14:45.680 five year track record or may not be able to 0:14:45.680 --> 0:14:49.520 speak to prior periods, whether it was the GFC or 0:14:49.600 --> 0:14:53.960 the emerging markets or other challenging times. So we definitely 0:14:54.000 --> 0:14:57.920 think in any of the whether it's private credit, or 0:14:57.960 --> 0:15:02.200 real estate or secondaries, all these areas, a twenty twenty 0:15:02.200 --> 0:15:04.520 five year track record is really helpful, right, and not 0:15:04.600 --> 0:15:08.720 everyone has it today in the private markets, you know, 0:15:08.760 --> 0:15:14.360 we think the expectations related to transparency are no less 0:15:14.360 --> 0:15:17.560 than the private markets than the public markets. Institutional and 0:15:17.680 --> 0:15:20.640 high net worth clients expect us to provide them a 0:15:20.720 --> 0:15:23.880 significant amount of transfer today already today, So we don't 0:15:23.920 --> 0:15:30.040 think of what we do as changing that commitment to 0:15:30.640 --> 0:15:31.360 our investors. 0:15:31.400 --> 0:15:35.280 What do you think about private opening up to more 0:15:35.280 --> 0:15:39.160 retail investors and then does that change in terms of 0:15:39.160 --> 0:15:40.400 the transparency issues? 0:15:40.760 --> 0:15:43.800 Well, so, of course the growth that you reference that 0:15:43.840 --> 0:15:46.920 we talked about on our earnings call it areas. This 0:15:46.960 --> 0:15:50.400 sort of marriage of alternatives in the wealth channel, right, 0:15:50.640 --> 0:15:57.680 is a secular trend, democratization of alternatives. That growth is 0:15:57.720 --> 0:16:01.320 being driven primarily by in vigils with over a million 0:16:01.360 --> 0:16:05.960 to invest in the US, that addressable market is an 0:16:05.960 --> 0:16:09.120 excess of eighty trillion and grew beyond that last year, 0:16:10.080 --> 0:16:13.680 so that's plenty to do. They all are still struggling 0:16:13.720 --> 0:16:16.640 to grow an allocation. Some of the limits in their 0:16:16.680 --> 0:16:22.880 allocations are where you're going, which is there are state 0:16:22.960 --> 0:16:26.600 limits on how much they can allocate there or in 0:16:26.640 --> 0:16:31.280 some cases federal oversight that limits the allocation. Individual banks 0:16:31.280 --> 0:16:37.680 have their own suitability requirements, but fundamentally, this high net 0:16:37.680 --> 0:16:41.720 worth individual that has over a million dollars to invest 0:16:42.000 --> 0:16:46.440 gives us a massive runway to provide education and new solutions. 0:16:46.480 --> 0:16:49.760 So you're referring to accredited investors. Correct, that's right. There 0:16:49.800 --> 0:16:51.600 are some folks in your industry who say we need 0:16:51.600 --> 0:16:56.200 to essentially say, we need to get rid of those 0:16:56.320 --> 0:16:59.840 rules about accredited investors because it will give more opportunities 0:16:59.880 --> 0:17:04.120 to folks to get in on deals early and have 0:17:04.200 --> 0:17:07.520 more upside. It doesn't sound like you're actually saying that. 0:17:07.560 --> 0:17:11.119 You're saying that a credit investors, there's enough dry powder 0:17:11.160 --> 0:17:12.919 there essentially for you. 0:17:12.920 --> 0:17:13.000 No. 0:17:13.359 --> 0:17:16.360 I mean, I do think that over time, as we 0:17:16.440 --> 0:17:22.520 work to investors that even less to deploy lower sophistication, 0:17:23.600 --> 0:17:26.640 there's an opportunity to provide them solutions they don't get today. 0:17:27.240 --> 0:17:31.200 But you know, a big part of what we do 0:17:31.320 --> 0:17:36.159 is not just raise money but deploy it. And the 0:17:36.200 --> 0:17:40.760 fundraising and the growth in the private markets is you know, 0:17:40.880 --> 0:17:44.720 driving a lot of the headlines, but one of the 0:17:44.720 --> 0:17:48.320 things we want to make sure is it's deployed reasonably, thoughtfully, 0:17:48.359 --> 0:17:54.840 and ARES has got a a real commitment to local origination, 0:17:55.000 --> 0:17:57.360 whether in real estate or credit or any of our areas. 0:17:57.440 --> 0:18:01.199 And we were talking before the all about how important 0:18:01.200 --> 0:18:05.119 it is to build portfolios with small single investments so 0:18:05.160 --> 0:18:09.560 you're very diversified. ARCC, which is one of the largest 0:18:09.560 --> 0:18:12.720 public BDC's you know, the single name exposure there is 0:18:12.840 --> 0:18:13.959 two two and a half points. 0:18:13.960 --> 0:18:18.400 It's not a concentrated set of bets really spread out. 0:18:18.640 --> 0:18:19.880 To build that type of. 0:18:19.800 --> 0:18:23.199 A portfolio, you need to be able to have a 0:18:23.280 --> 0:18:27.520 significant feet on the ground and origination. But yes, do 0:18:27.600 --> 0:18:31.399 we think that not accredited investors are a growth area 0:18:31.480 --> 0:18:34.560 for the firm. Absolutely, But we think we're in the 0:18:34.600 --> 0:18:40.160 early innings of the high net worth investor allocating more 0:18:40.480 --> 0:18:42.440 to the wealth channel, and there will be a time 0:18:42.520 --> 0:18:46.800 when you know, not accredited investors will also get access 0:18:46.840 --> 0:18:47.320 to what we do. 0:18:47.480 --> 0:18:49.359 Rus how much bigger do you think the private credit 0:18:49.400 --> 0:18:52.240 market gets? I mean, it's just an incredible kind of 0:18:52.280 --> 0:18:53.960 the explosive growth that we've seen just in the last 0:18:54.000 --> 0:18:55.640 couple of years. And you and I talked on the 0:18:55.680 --> 0:18:58.959 call any great context reminding us that still the public 0:18:59.000 --> 0:19:01.960 markets are so much larger. But does it get to 0:19:02.000 --> 0:19:05.159 a point where the private market's rival, certainly on the 0:19:05.200 --> 0:19:07.320 equity side of things or is that just crazy? 0:19:08.240 --> 0:19:10.879 Well, I think it provides a really attractive solution. It's 0:19:10.960 --> 0:19:15.439 floating rate. In ninety ninety six percent of the loans 0:19:15.440 --> 0:19:19.600 are floating rate. That's an important aspect because it minimizes 0:19:19.640 --> 0:19:23.040 the volatility that we've now seen with fixed income. Private 0:19:23.040 --> 0:19:30.520 credit is also higher yielding, and we're asked often, you 0:19:30.520 --> 0:19:33.080 know how much you know, what do we think of 0:19:33.119 --> 0:19:36.600 the growth? It's it's actually the growth is not really 0:19:36.640 --> 0:19:40.439 outsized versus private equity. It just has gotten a lot 0:19:40.480 --> 0:19:43.520 of attention in the last few years. Think about any 0:19:43.560 --> 0:19:46.640 sort of typical LBO, you need two quantums of debt 0:19:46.680 --> 0:19:52.160 for every amount of equity. So to have a proper 0:19:52.280 --> 0:19:57.479 functioning economy, the private credits have really Private credit has 0:19:57.480 --> 0:20:01.560 really stepped in and addressed some of the concerns where 0:20:01.640 --> 0:20:04.280 banks don't provide as much capital, where you don't find 0:20:04.320 --> 0:20:05.199 other solutions. 0:20:05.359 --> 0:20:07.639 So I was just going to say, there are there 0:20:07.640 --> 0:20:09.280 are some critics out there who say that, you know, 0:20:09.320 --> 0:20:11.480 there's not the same oversight with private credit that there 0:20:11.520 --> 0:20:14.200 is with traditional lending through banks. Banks. Would like to 0:20:14.240 --> 0:20:17.080 say that I'm wondering if on your radar there's concern 0:20:17.240 --> 0:20:19.520 that there could be more regulation coming for private credit. 0:20:20.480 --> 0:20:22.040 I worked at a large bank for a while, and 0:20:22.520 --> 0:20:27.679 I understand that there is not the same leverage with 0:20:27.760 --> 0:20:30.199 the investment managers as there is or there used to 0:20:30.200 --> 0:20:37.119 be with banks. There's also an appropriate matching of capital and. 0:20:38.840 --> 0:20:39.520 Deploying it. 0:20:39.640 --> 0:20:43.040 So we have investors that provide us long term capital 0:20:43.640 --> 0:20:46.359 and it can't be called on a short on the 0:20:46.359 --> 0:20:50.800 short term. So actually, the large players in the private 0:20:50.840 --> 0:20:54.560 credit markets are very very different than banks when they 0:20:54.560 --> 0:20:57.240 were lending, either at the peak or even after the GFC. 0:20:58.880 --> 0:21:01.120 They don't have the same leverage. You might have one 0:21:01.200 --> 0:21:05.560