1
00:00:09,400 --> 00:00:12,960
Speaker 1: This weekend on the podcast, another extra special guest from

2
00:00:12,960 --> 00:00:16,840
Speaker 1: the world of private markets. The Partners Group is probably

3
00:00:16,920 --> 00:00:21,000
Speaker 1: the largest private equity firm you've never heard of, perhaps

4
00:00:21,040 --> 00:00:25,680
Speaker 1: because they were originally headquartered in Zook, Switzerland. They're the

5
00:00:25,800 --> 00:00:31,200
Speaker 1: largest listed buyout firm in Europe. They also have headquarters

6
00:00:31,280 --> 00:00:36,000
Speaker 1: here in the US in Colorado. They are decidedly not

7
00:00:36,320 --> 00:00:40,360
Speaker 1: your typical private equity firm, not your typical Wall Street firm.

8
00:00:40,720 --> 00:00:44,080
Speaker 1: They have a very thoughtful approach and a very long

9
00:00:44,200 --> 00:00:49,519
Speaker 1: term approach to making investments in the private markets. I

10
00:00:49,640 --> 00:00:53,160
Speaker 1: found David Layton, CEO of the firm, to be very

11
00:00:53,240 --> 00:00:59,480
Speaker 1: thoughtful and very much different in how he thinks about risk, reward, liquidity,

12
00:01:00,720 --> 00:01:06,399
Speaker 1: various market sectors, processes, just the whole gestalt of we

13
00:01:06,560 --> 00:01:10,200
Speaker 1: are a steward of capital with our clients and we

14
00:01:10,200 --> 00:01:14,560
Speaker 1: are aligned with those clients. It was really a fascinating conversation.

15
00:01:15,600 --> 00:01:19,080
Speaker 1: I think you'll enjoy it. With no further ado, the

16
00:01:19,160 --> 00:01:24,520
Speaker 1: CEO of Partners Group, David Layton. I'm Barry Ritults. You're

17
00:01:24,560 --> 00:01:29,040
Speaker 1: listening to Master's Business on Bloomberg Radio. My extra special

18
00:01:29,040 --> 00:01:32,120
Speaker 1: guest this week is David Layton. He is the chief

19
00:01:32,160 --> 00:01:36,680
Speaker 1: executive officer of the Partners Group, which is Europe's biggest

20
00:01:36,920 --> 00:01:40,440
Speaker 1: listed private equity and buyout firm, with a market cap

21
00:01:40,520 --> 00:01:43,600
Speaker 1: of about twenty five billion dollars. They run over one

22
00:01:43,680 --> 00:01:48,360
Speaker 1: hundred and thirty five billion dollars in assets. David is

23
00:01:48,560 --> 00:01:52,840
Speaker 1: on the Global Investment Committee. He leads the executive team. Previously,

24
00:01:52,960 --> 00:01:57,040
Speaker 1: he headed the firm's private equity business. He has been

25
00:01:57,080 --> 00:02:02,600
Speaker 1: with the firm his entire career. David Layton, Welcome to Bloomberg.

26
00:02:02,800 --> 00:02:05,240
Speaker 1: It's a pleasure to be here. So let's talk a

27
00:02:05,240 --> 00:02:07,600
Speaker 1: little bit about that. That's kind of unusual these days.

28
00:02:07,600 --> 00:02:10,440
Speaker 1: You went straight to the Partners Group after you got

29
00:02:10,600 --> 00:02:14,240
Speaker 1: a bachelor's in finance from Bringham Young University and the

30
00:02:14,320 --> 00:02:17,799
Speaker 1: Marriott School of Management, and you've stayed there your entire career.

31
00:02:18,360 --> 00:02:21,200
Speaker 1: Seems kind of rare these days. Tell us about that. Yeah,

32
00:02:21,320 --> 00:02:27,920
Speaker 1: so I found Partners Group out of school. I was

33
00:02:27,919 --> 00:02:35,440
Speaker 1: actually running the investment banking club at BYU, and you know,

34
00:02:35,520 --> 00:02:38,880
Speaker 1: thought I was interested in that, interested in going to

35
00:02:38,919 --> 00:02:43,919
Speaker 1: Wall Street. I was. I was tentatively committed to to

36
00:02:44,280 --> 00:02:48,560
Speaker 1: go to Lehman Brothers. And there was a one of

37
00:02:48,560 --> 00:02:50,920
Speaker 1: the Partners Group founders. It was on campus and I

38
00:02:50,960 --> 00:02:53,640
Speaker 1: went to convince him why he should come and be

39
00:02:53,720 --> 00:02:56,440
Speaker 1: a part of what was called the investment banking boot

40
00:02:56,480 --> 00:02:58,239
Speaker 1: camp that we were doing at the time to get

41
00:02:58,840 --> 00:03:01,839
Speaker 1: students ready to go to Wall Street and do their interviews, etc.

42
00:03:02,520 --> 00:03:04,560
Speaker 1: And I went to pitch this asset management guy on

43
00:03:04,600 --> 00:03:08,200
Speaker 1: why he should come be a part of that process,

44
00:03:08,200 --> 00:03:11,400
Speaker 1: and he Jiu jitsued me, and he ended up we

45
00:03:11,480 --> 00:03:16,840
Speaker 1: ended up talking, and he was just this fascinating, bigger

46
00:03:16,880 --> 00:03:21,920
Speaker 1: than life personality, and we ended up hitting it off,

47
00:03:22,440 --> 00:03:25,839
Speaker 1: and I got linked up with Partners Group directly out

48
00:03:25,840 --> 00:03:29,000
Speaker 1: of school. Yeah huh, that's really intriguing. You joined as

49
00:03:29,000 --> 00:03:31,920
Speaker 1: an analyst, That's where you began. I joined as an analyst.

50
00:03:31,919 --> 00:03:35,040
Speaker 1: I got an offer to Partners Group's New York office,

51
00:03:35,080 --> 00:03:38,360
Speaker 1: and that's where I thought I was going. And I

52
00:03:38,400 --> 00:03:40,800
Speaker 1: got a call not that long before I was supposed

53
00:03:40,840 --> 00:03:43,200
Speaker 1: to start by one of the partners there who said,

54
00:03:43,200 --> 00:03:45,600
Speaker 1: wait a second, Dave, you're not going to New York.

55
00:03:46,120 --> 00:03:49,160
Speaker 1: He said, you're coming to Switzerland for like a year,

56
00:03:49,240 --> 00:03:51,440
Speaker 1: maybe three years, until I tell you you're ready to

57
00:03:51,480 --> 00:03:54,240
Speaker 1: go to New York. He said, how can you go

58
00:03:54,360 --> 00:03:58,400
Speaker 1: join us in that market before you know anything about us? Right?

59
00:03:58,440 --> 00:04:00,480
Speaker 1: How can you represent us in that mark before you

60
00:04:00,480 --> 00:04:05,160
Speaker 1: know anything about us? Um uh. And so it was

61
00:04:05,440 --> 00:04:07,720
Speaker 1: I hook up the phone and had an interesting conversation

62
00:04:07,800 --> 00:04:11,520
Speaker 1: with my wife about go to Switzerland. But that was

63
00:04:11,560 --> 00:04:16,080
Speaker 1: the firm's philosophy at the time. It was Switzerland was

64
00:04:16,120 --> 00:04:20,600
Speaker 1: the center of gravity. UM, that's where the cultural um

65
00:04:20,800 --> 00:04:25,720
Speaker 1: ethos was kind of formed and Zug. You went to

66
00:04:25,800 --> 00:04:30,520
Speaker 1: Zoog Switzerland and UM and in that environment, you know,

67
00:04:30,760 --> 00:04:34,200
Speaker 1: through proximity to the firm's founders, people kind of get

68
00:04:34,320 --> 00:04:37,520
Speaker 1: culturally integrated. And then you went to different from the

69
00:04:37,560 --> 00:04:41,720
Speaker 1: Swiss or German or French. UM. I took some some

70
00:04:41,839 --> 00:04:46,640
Speaker 1: German lessons before I went there, and then I found

71
00:04:46,640 --> 00:04:49,080
Speaker 1: out the Swiss German is a little different, and I

72
00:04:49,120 --> 00:04:53,280
Speaker 1: didn't end up very different. It's a little different. It's

73
00:04:53,279 --> 00:04:56,560
Speaker 1: a little different. So so, but everybody there speaks English.

74
00:04:56,680 --> 00:04:59,360
Speaker 1: Everybody there speaks English. I was in an English speaking

75
00:04:59,440 --> 00:05:02,720
Speaker 1: environment for sun up to sundown. It was very dynamic.

76
00:05:02,760 --> 00:05:05,040
Speaker 1: My wife actually picked up more German than I did

77
00:05:05,040 --> 00:05:08,320
Speaker 1: because she was out in the community. But in our

78
00:05:08,320 --> 00:05:11,839
Speaker 1: context we had we had an English speaking environment in

79
00:05:11,920 --> 00:05:15,719
Speaker 1: the office. So how does one get from analyst in Zooch,

80
00:05:15,960 --> 00:05:20,560
Speaker 1: Switzerland to CEO in Colorado. Yeah, so when I started,

81
00:05:21,640 --> 00:05:25,000
Speaker 1: after a couple of days, um my wife asked me,

82
00:05:25,040 --> 00:05:28,160
Speaker 1: how do you like your boss? And I told her, look,

83
00:05:28,680 --> 00:05:30,599
Speaker 1: I don't know how to answer that question. I have

84
00:05:30,720 --> 00:05:34,640
Speaker 1: twelve people that tell me what to do. Bosses. It's

85
00:05:34,760 --> 00:05:36,960
Speaker 1: that that was the I was just the youngest I was.

86
00:05:37,000 --> 00:05:38,880
Speaker 1: I think it was the youngest person that they'd ever

87
00:05:38,960 --> 00:05:41,800
Speaker 1: hired up until that point. And so I was just

88
00:05:41,880 --> 00:05:46,119
Speaker 1: kind of sweeping up and doing whatever needed to be done.

89
00:05:46,480 --> 00:05:49,599
Speaker 1: And it was so much fun working with different people

90
00:05:49,680 --> 00:05:52,360
Speaker 1: in different groups, and I got a lot of good

91
00:05:52,440 --> 00:05:55,760
Speaker 1: experience doing that. So I was, you know, when the

92
00:05:55,760 --> 00:05:59,880
Speaker 1: firm launched its debt business, I was an analyst putting

93
00:05:59,880 --> 00:06:02,680
Speaker 1: together some of the credit analysis on the first couple

94
00:06:02,720 --> 00:06:07,320
Speaker 1: of loans that we had written. At the time, we

95
00:06:07,360 --> 00:06:11,280
Speaker 1: had a group that was doing small growth capital investments

96
00:06:11,400 --> 00:06:16,200
Speaker 1: in Germany and Switzerland at the time, fun doing secondaries

97
00:06:16,279 --> 00:06:19,280
Speaker 1: and funds, and the senior people were more specialized, but

98
00:06:19,320 --> 00:06:21,880
Speaker 1: as young people were just getting a very dynamic set

99
00:06:21,920 --> 00:06:24,960
Speaker 1: of experiences and it was a lot of a lot

100
00:06:25,000 --> 00:06:29,359
Speaker 1: of fun. And it sounds like a baptism by fire

101
00:06:29,480 --> 00:06:31,440
Speaker 1: that you're just thrown right into the thick of it.

102
00:06:31,440 --> 00:06:35,080
Speaker 1: It was a baptism by fire in a very entrepreneurial culture,

103
00:06:35,080 --> 00:06:39,240
Speaker 1: and that very much aligned with who I was and

104
00:06:39,320 --> 00:06:41,919
Speaker 1: what I was interested in. You gained a lot of

105
00:06:41,960 --> 00:06:45,760
Speaker 1: experience fast, and so from there I went to New

106
00:06:45,839 --> 00:06:51,159
Speaker 1: York helped to build up the firm's business in the Americas.

107
00:06:51,640 --> 00:06:56,440
Speaker 1: We were really transitioning from back then outsourcing a lot

108
00:06:56,440 --> 00:06:59,040
Speaker 1: of the investment content that we had done with other

109
00:06:59,120 --> 00:07:01,520
Speaker 1: managers to bring a lot of that in house. And

110
00:07:01,560 --> 00:07:03,320
Speaker 1: I helped to drive a lot of that in the

111
00:07:03,360 --> 00:07:08,720
Speaker 1: America's early on. And then in twenty sixteen, we are

112
00:07:08,760 --> 00:07:11,400
Speaker 1: thinking a little bit more strategically about our business in

113
00:07:11,440 --> 00:07:14,960
Speaker 1: the Americas, and I championed this project to open up

114
00:07:14,960 --> 00:07:19,280
Speaker 1: a headquarters for the firm in Colorado and away from

115
00:07:19,360 --> 00:07:23,320
Speaker 1: the street, away from Wall intentionally away from Wall Street.

116
00:07:23,640 --> 00:07:26,119
Speaker 1: And that's that's a part of the partners groups secret

117
00:07:26,160 --> 00:07:29,080
Speaker 1: of success. I do think a lot of people ask

118
00:07:29,160 --> 00:07:31,480
Speaker 1: us how we've been so successful in terms of innovating

119
00:07:31,520 --> 00:07:35,640
Speaker 1: our business and evolving our business over time, and I

120
00:07:35,680 --> 00:07:39,040
Speaker 1: think being in zoog early on helped with that. I

121
00:07:39,040 --> 00:07:40,520
Speaker 1: was talking to one of our founders, he said, look,

122
00:07:40,520 --> 00:07:42,960
Speaker 1: a lot of people think we're in Zoog for tax reasons.

123
00:07:43,400 --> 00:07:45,480
Speaker 1: He said, we're here because this is where my mother lived.

124
00:07:45,600 --> 00:07:48,320
Speaker 1: This is where I wanted to spend my time and

125
00:07:48,320 --> 00:07:51,080
Speaker 1: live my life. And isn't that how private equity locates

126
00:07:51,120 --> 00:07:55,960
Speaker 1: its headquar It's like where's mom? Great stop? And there

127
00:07:56,040 --> 00:07:59,120
Speaker 1: are there that much tax advantages to be in Switzerland

128
00:07:59,120 --> 00:08:02,960
Speaker 1: if you're operating throughout Europe. UM, I mean it's not

129
00:08:03,480 --> 00:08:07,280
Speaker 1: Monaco or Lichtons. No, it's not like that. But it

130
00:08:07,400 --> 00:08:10,080
Speaker 1: actually had nothing to do I don't think with the origins.

131
00:08:10,080 --> 00:08:12,960
Speaker 1: It was all about this is where he wanted to

132
00:08:13,000 --> 00:08:16,960
Speaker 1: live his life, and his founders agreed. And what that

133
00:08:17,000 --> 00:08:20,200
Speaker 1: meant is that everybody that joined Partners Group at that

134
00:08:20,280 --> 00:08:22,960
Speaker 1: time wasn't just a butt in a seat in a

135
00:08:23,040 --> 00:08:26,720
Speaker 1: capital market changing jobs. They were moving their family somewhere

136
00:08:26,880 --> 00:08:30,720
Speaker 1: and being and becoming a part of something, and that

137
00:08:31,240 --> 00:08:35,959
Speaker 1: has created this very tight culture within our organization. We said,

138
00:08:36,040 --> 00:08:37,800
Speaker 1: let's do the same thing in the Americas. Let's find

139
00:08:37,800 --> 00:08:41,600
Speaker 1: a place where our people genuinely want to live their

140
00:08:41,640 --> 00:08:45,800
Speaker 1: life and raise their babies and make that the center

141
00:08:45,920 --> 00:08:48,360
Speaker 1: of our system. We decided to do that in Colorado.

142
00:08:48,960 --> 00:08:53,079
Speaker 1: So that's interesting because UM Colorado obviously in the Rockies.

143
00:08:53,760 --> 00:08:56,520
Speaker 1: Zoog is very much you know, how far are you

144
00:08:56,600 --> 00:09:00,800
Speaker 1: from from the big ski resorts? That's a la side town.

145
00:09:00,960 --> 00:09:04,880
Speaker 1: Some of the photos I saw quite charming. What was

146
00:09:04,960 --> 00:09:10,000
Speaker 1: life like in Zoog? And any coincidence that Colorado is

147
00:09:10,000 --> 00:09:12,400
Speaker 1: about as close as you're going to get to Switzerland

148
00:09:12,440 --> 00:09:15,680
Speaker 1: in the US. No, you're you're in close proximity to

149
00:09:15,720 --> 00:09:20,240
Speaker 1: the mountains there. It is an idyllic setting there in

150
00:09:20,320 --> 00:09:25,000
Speaker 1: the postcard. In the postcard setting there in Zoog very charming.

151
00:09:26,760 --> 00:09:28,600
Speaker 1: But you're on your own a little bit. As it

152
00:09:28,640 --> 00:09:36,240
Speaker 1: relates to your ability to plug into the broader financial community. Right,

153
00:09:36,280 --> 00:09:39,280
Speaker 1: so every client that we have, every asset that we own,

154
00:09:40,000 --> 00:09:42,200
Speaker 1: is a result of somebody getting on an airplane and

155
00:09:42,280 --> 00:09:45,880
Speaker 1: building a relationship. It's created a culture being there where

156
00:09:45,880 --> 00:09:48,360
Speaker 1: we don't expect anything to come to us. We are

157
00:09:48,400 --> 00:09:52,520
Speaker 1: an outbound driven firm, right, We're from that identifies opportunity

158
00:09:52,520 --> 00:09:55,920
Speaker 1: and we hustle and get in front of it. And so, yes,

159
00:09:56,000 --> 00:10:01,160
Speaker 1: beautiful setting there in the in the Alps. Yes, that

160
00:10:01,280 --> 00:10:07,120
Speaker 1: did inform our choice with regards to location. Being in

161
00:10:07,160 --> 00:10:11,120
Speaker 1: the mountains was important to us. We wanted to have

162
00:10:11,200 --> 00:10:14,120
Speaker 1: that continuity of culture, if that makes sense. And and

163
00:10:14,240 --> 00:10:20,440
Speaker 1: how does the business split between Switzerland and US. Are

164
00:10:20,440 --> 00:10:23,880
Speaker 1: they the same types of business just different geographies? Is

165
00:10:24,000 --> 00:10:27,680
Speaker 1: what is the division from from Colorado to Zook. Yeah,

166
00:10:27,720 --> 00:10:31,360
Speaker 1: we are a global firm. Our teams, many of our

167
00:10:31,400 --> 00:10:36,960
Speaker 1: teams are organized on a global basis. We have most

168
00:10:37,040 --> 00:10:42,440
Speaker 1: of our clients from Europe, that's our biggest market, and

169
00:10:42,520 --> 00:10:46,280
Speaker 1: most of our investment activity is in the Americas. Um

170
00:10:46,400 --> 00:10:49,160
Speaker 1: it's been about fifty five percent of our investments that

171
00:10:49,160 --> 00:10:51,440
Speaker 1: we've made are in the and that is an evolution

172
00:10:51,559 --> 00:10:53,559
Speaker 1: that it hasn't always been the case. You know, a

173
00:10:53,600 --> 00:10:57,360
Speaker 1: lot of people think of US as disproportionately European or Swiss,

174
00:10:57,760 --> 00:11:00,640
Speaker 1: and they're surprised to learn that over the last decade

175
00:11:00,679 --> 00:11:03,280
Speaker 1: we have invested most of our firm's capital into the

176
00:11:03,360 --> 00:11:05,800
Speaker 1: US market. This is a big market, important market. And

177
00:11:05,840 --> 00:11:07,960
Speaker 1: when you look at the economy for the past decade,

178
00:11:08,040 --> 00:11:11,520
Speaker 1: or at least as judged by the public markets, Europe

179
00:11:11,559 --> 00:11:13,840
Speaker 1: seems to have been a little sleepy the past decade,

180
00:11:13,880 --> 00:11:16,719
Speaker 1: the US was where all the action was. Yeah, is

181
00:11:16,760 --> 00:11:20,000
Speaker 1: that true in private markets as well as public markets? Well,

182
00:11:20,040 --> 00:11:25,480
Speaker 1: we have a global relative value approach to investing, which

183
00:11:25,520 --> 00:11:28,559
Speaker 1: means that our firm will hold up an investment opportunity

184
00:11:28,600 --> 00:11:34,000
Speaker 1: from the US alongside opportunities from Europe, alongside opportunities from Asia,

185
00:11:34,120 --> 00:11:37,800
Speaker 1: and we will fight about where we see the best

186
00:11:38,360 --> 00:11:42,520
Speaker 1: relative value. And as indicated by the mix that I

187
00:11:42,600 --> 00:11:47,000
Speaker 1: just described, we have found better relative value in the

188
00:11:47,120 --> 00:11:50,520
Speaker 1: US markets. Not just about activity, but it's about relative value.

189
00:11:50,960 --> 00:11:55,600
Speaker 1: Now we have still been active in Europe. We're actually

190
00:11:55,679 --> 00:11:58,920
Speaker 1: bringing all of our investors to Vienna in just a

191
00:11:58,960 --> 00:12:02,160
Speaker 1: couple of months, our biggest investors, for an investor conference,

192
00:12:03,000 --> 00:12:05,920
Speaker 1: and I want to bring them to the most European

193
00:12:06,080 --> 00:12:09,280
Speaker 1: of cities to send a reminder that even though there's

194
00:12:09,280 --> 00:12:11,160
Speaker 1: a lot of people that are down on Europe at

195
00:12:11,160 --> 00:12:16,760
Speaker 1: the moment, that's when a long term investor, and that's

196
00:12:16,760 --> 00:12:19,280
Speaker 1: where private markets I think, can take a long term

197
00:12:19,320 --> 00:12:23,520
Speaker 1: perspective and continue to find opportunities when others aren't looking.

198
00:12:23,720 --> 00:12:27,640
Speaker 1: So I'm intrigued by the concept of relative value, looking

199
00:12:27,679 --> 00:12:32,000
Speaker 1: at it globally by geography, how much is it the

200
00:12:32,080 --> 00:12:35,240
Speaker 1: value of the company or investing in how much is

201
00:12:35,360 --> 00:12:42,280
Speaker 1: the perspective market size, as well as how robust local

202
00:12:42,280 --> 00:12:48,600
Speaker 1: economy is and by local I mean Asia, Europe or US. Yeah,

203
00:12:48,800 --> 00:12:53,480
Speaker 1: I would say that this has evolved over the last decades.

204
00:12:54,760 --> 00:12:57,160
Speaker 1: So it used to be within private markets that you

205
00:12:57,160 --> 00:13:00,400
Speaker 1: would find a good business, apply quite a bit of

206
00:13:00,559 --> 00:13:03,080
Speaker 1: leverage to it, at least in the private equity business,

207
00:13:03,520 --> 00:13:06,199
Speaker 1: and be able to make a pretty good return by

208
00:13:06,240 --> 00:13:09,520
Speaker 1: buying good, solid businesses as they are. That has changed.

209
00:13:09,720 --> 00:13:13,960
Speaker 1: Leverage levels have come down materially. You're investing majority equity

210
00:13:14,160 --> 00:13:17,559
Speaker 1: in most of the transactions that are occurring today. And

211
00:13:17,600 --> 00:13:21,240
Speaker 1: it's all about the future. It's all about what are

212
00:13:21,240 --> 00:13:23,679
Speaker 1: this company's prospects, How are you going to steer this

213
00:13:23,760 --> 00:13:26,959
Speaker 1: company to be able to maintain its market position, What

214
00:13:27,000 --> 00:13:29,960
Speaker 1: can we do with this business over the coming years.

215
00:13:31,000 --> 00:13:33,760
Speaker 1: So it's much more about potential and how you can

216
00:13:33,880 --> 00:13:38,080
Speaker 1: drive market leading strategies than it is necessarily about just

217
00:13:38,160 --> 00:13:41,080
Speaker 1: buying good business and leveraging it up. So we're going

218
00:13:41,160 --> 00:13:43,240
Speaker 1: to talk a little more about partners Group in a bit,

219
00:13:43,280 --> 00:13:46,400
Speaker 1: but I want to stay with the investments. You guys

220
00:13:46,400 --> 00:13:49,600
Speaker 1: seem to be very long term. You're not just buying something,

221
00:13:50,000 --> 00:13:52,120
Speaker 1: putting a fresh code of paint and then flipping it.

222
00:13:52,679 --> 00:13:55,640
Speaker 1: You buy companies to run them and manage them for

223
00:13:55,720 --> 00:13:59,520
Speaker 1: the long haul. Tell us a little bit about the

224
00:13:59,600 --> 00:14:03,640
Speaker 1: giant portfolio of companies you guys are managing. Yeah, so

225
00:14:03,679 --> 00:14:08,360
Speaker 1: we manage a portfolio of several dozen companies. When you

226
00:14:08,440 --> 00:14:13,400
Speaker 1: add together all of our portfolio companies, it's effectively one

227
00:14:13,480 --> 00:14:16,760
Speaker 1: hundred billion dollar enterprise when you add all of our

228
00:14:16,800 --> 00:14:21,800
Speaker 1: companies together across multiple sectors, and it's global in terms

229
00:14:21,800 --> 00:14:27,080
Speaker 1: of its breadth and scope, and quite a few employees also. Yeah,

230
00:14:27,160 --> 00:14:30,200
Speaker 1: So if you look at our business, we have about

231
00:14:30,200 --> 00:14:33,560
Speaker 1: eighteen hundred people at the management company, and then across

232
00:14:33,600 --> 00:14:37,920
Speaker 1: our portfolio over two hundred thousand employees of our various

233
00:14:38,120 --> 00:14:45,359
Speaker 1: portfolio companies. So we are a large owner of assets,

234
00:14:45,600 --> 00:14:49,040
Speaker 1: and I think we take that stewardship very very seriously.

235
00:14:50,040 --> 00:14:53,120
Speaker 1: That's one of the reasons why we really haven't identified

236
00:14:53,320 --> 00:14:57,600
Speaker 1: ourself as a financial firm or as a money management firm.

237
00:14:58,000 --> 00:15:01,440
Speaker 1: That's not the proper lens through which to view Partners Group.

238
00:15:01,760 --> 00:15:05,040
Speaker 1: I think we are very much an owner of assets.

239
00:15:05,160 --> 00:15:09,680
Speaker 1: We're a builder of businesses, and we're a steward of

240
00:15:09,720 --> 00:15:13,800
Speaker 1: these companies, and we take that very seriously. So I

241
00:15:13,800 --> 00:15:16,400
Speaker 1: wouldn't be surprised in the future if you didn't look

242
00:15:16,400 --> 00:15:19,640
Speaker 1: at us and we looked more like an industrial conglomerate.

243
00:15:19,720 --> 00:15:23,360
Speaker 1: That's where like a private equity firm. That's really interesting.

244
00:15:23,800 --> 00:15:26,480
Speaker 1: You sit on the board of directors on a number

245
00:15:26,480 --> 00:15:29,400
Speaker 1: of portfolio companies. Tell us a little bit about what

246
00:15:29,520 --> 00:15:34,400
Speaker 1: that experience is like. You own them, but yet they

247
00:15:34,440 --> 00:15:37,680
Speaker 1: manage themselves and you guys are involved in that. How

248
00:15:37,680 --> 00:15:39,760
Speaker 1: does that operate? It sounds like there's a lot of

249
00:15:39,800 --> 00:15:47,240
Speaker 1: independence amongst all these different holdings. If you think about

250
00:15:47,480 --> 00:15:52,040
Speaker 1: the role that we play as owners, it is a

251
00:15:52,120 --> 00:15:56,760
Speaker 1: real responsibility that we have to develop these companies over time.

252
00:15:57,120 --> 00:16:00,400
Speaker 1: The role of the board years ago maybe isn't that

253
00:16:00,560 --> 00:16:04,920
Speaker 1: critical or wasn't that important Today, it is absolutely paramount

254
00:16:05,240 --> 00:16:09,080
Speaker 1: to your success as an investor. And so we are

255
00:16:09,360 --> 00:16:12,800
Speaker 1: very very focused on making our boards the center of

256
00:16:13,000 --> 00:16:18,800
Speaker 1: vision and strategy and accountability. Our board members work more

257
00:16:18,920 --> 00:16:23,360
Speaker 1: intensively with our companies, have a greater time commitment than

258
00:16:23,440 --> 00:16:26,160
Speaker 1: most board members are used to. This is not come

259
00:16:26,200 --> 00:16:28,760
Speaker 1: together once a quarter, eat chicken dinner, and rubber stamp

260
00:16:28,760 --> 00:16:30,760
Speaker 1: a couple of things. But this is really roll up

261
00:16:30,800 --> 00:16:34,880
Speaker 1: your sleeves and have a commitment to helping to chart

262
00:16:35,760 --> 00:16:39,440
Speaker 1: the appropriate path moving forward. And I have always taken

263
00:16:39,520 --> 00:16:44,040
Speaker 1: that stewardship very very seriously and h and that that's

264
00:16:44,040 --> 00:16:47,880
Speaker 1: the culture that we're creating is to take those board

265
00:16:47,920 --> 00:16:51,680
Speaker 1: assignments very seriously. Yes, there is a lot of of

266
00:16:51,960 --> 00:16:55,680
Speaker 1: steering of individual strategy that goes on in the portfolio companies.

267
00:16:55,680 --> 00:16:59,560
Speaker 1: At the same time, Partners Group is developing a business

268
00:16:59,680 --> 00:17:03,200
Speaker 1: system STEM that we are looking to apply across our

269
00:17:03,240 --> 00:17:08,040
Speaker 1: portfolio companies. We're looking to create a culture that is

270
00:17:08,119 --> 00:17:11,200
Speaker 1: similar with regards to how we set strategy, with regards

271
00:17:11,200 --> 00:17:13,719
Speaker 1: to how we create accountability on that strategy, with regards

272
00:17:13,720 --> 00:17:16,160
Speaker 1: to how our boards get involved in driving that strategy.

273
00:17:17,240 --> 00:17:20,359
Speaker 1: And that's something that we think is essential to differentiation

274
00:17:20,800 --> 00:17:25,720
Speaker 1: in the future. Really interesting Gear headquartered in Colorado. How

275
00:17:25,760 --> 00:17:28,560
Speaker 1: often do you get back to Switzerland. I'm in Switzerland

276
00:17:28,600 --> 00:17:32,080
Speaker 1: about a week a month. Oh really that much? Wow,

277
00:17:32,760 --> 00:17:35,160
Speaker 1: that's a lot of travel from Colorado. That's a lot

278
00:17:35,200 --> 00:17:39,400
Speaker 1: of travel. Yep, that comes with the territory. Quite interesting.

279
00:17:39,960 --> 00:17:43,360
Speaker 1: So let's talk a little bit about the firm. It

280
00:17:43,400 --> 00:17:46,680
Speaker 1: has a market cap over twenty five billion dollars. That's

281
00:17:46,800 --> 00:17:51,679
Speaker 1: bigger than Credit Swiss, which means you're a pretty substantial entity.

282
00:17:52,760 --> 00:17:56,240
Speaker 1: Tell us a little bit about the corporate culture, which

283
00:17:56,320 --> 00:18:01,880
Speaker 1: is decidedly different than the typical Wall straight bank. Yeah, first,

284
00:18:01,960 --> 00:18:06,040
Speaker 1: let me put into context some of our views with

285
00:18:06,119 --> 00:18:09,480
Speaker 1: regards to how our industry is evolving, and that'll help

286
00:18:09,840 --> 00:18:14,199
Speaker 1: to inform some of the decisions that we've made with

287
00:18:14,240 --> 00:18:17,760
Speaker 1: regards to how to set our company culture. The private

288
00:18:17,840 --> 00:18:23,399
Speaker 1: markets is not a young industry, necessarily been around for

289
00:18:23,640 --> 00:18:28,360
Speaker 1: for forty years. But the skills, the talents, the attributes

290
00:18:28,520 --> 00:18:31,400
Speaker 1: that allowed people to be successful in this industry historically

291
00:18:31,400 --> 00:18:34,879
Speaker 1: are not necessarily the attributes that are going to be

292
00:18:35,400 --> 00:18:38,560
Speaker 1: successful in propelling firms in the future. If you think

293
00:18:38,600 --> 00:18:42,600
Speaker 1: about the way private markets functioned twenty years ago, twenty

294
00:18:42,640 --> 00:18:48,040
Speaker 1: five years ago, people would with a transactional skill set

295
00:18:48,560 --> 00:18:53,600
Speaker 1: provide access into an inefficient asset class, right. They would

296
00:18:53,640 --> 00:18:56,920
Speaker 1: do that by buying and selling things, and they were

297
00:18:56,960 --> 00:19:00,639
Speaker 1: able to make a good living doing that, and that

298
00:19:00,720 --> 00:19:05,640
Speaker 1: this transactional skill set is something that was praised. You'll

299
00:19:05,680 --> 00:19:09,479
Speaker 1: hear teams call themselves deal teams. You'll call individuals call

300
00:19:09,560 --> 00:19:13,400
Speaker 1: themselves deal professionals, and this deal side of the business

301
00:19:13,520 --> 00:19:16,200
Speaker 1: is really what was emphasized. Now I want you bring

302
00:19:16,240 --> 00:19:18,960
Speaker 1: that up. I have to ask a question. I kind

303
00:19:18,960 --> 00:19:22,520
Speaker 1: of read a shocking thing. You guys banned the word

304
00:19:22,680 --> 00:19:26,680
Speaker 1: deal from the company. Explain that if fits into context.

305
00:19:26,720 --> 00:19:30,960
Speaker 1: It's because the things that made people successful, that deal

306
00:19:31,520 --> 00:19:34,440
Speaker 1: doing mindset is not the things that are going to

307
00:19:34,520 --> 00:19:37,040
Speaker 1: make us successful in the future. We meaning the over

308
00:19:37,119 --> 00:19:41,280
Speaker 1: emphasis on transactional drop a ticket, get the next trade

309
00:19:41,320 --> 00:19:45,160
Speaker 1: in flip it as opposed to building something exactly. Our

310
00:19:45,280 --> 00:19:50,200
Speaker 1: business is no longer about doing deals and providing access.

311
00:19:50,680 --> 00:19:55,000
Speaker 1: It's about building businesses, and so we don't want to

312
00:19:56,200 --> 00:19:58,879
Speaker 1: we don't want to put too much emphasis on the

313
00:19:58,920 --> 00:20:02,320
Speaker 1: transactional side of things. We think that's been overdone historically.

314
00:20:02,680 --> 00:20:06,720
Speaker 1: We really want to emphasize the rolling up your sleeves UH,

315
00:20:08,320 --> 00:20:12,920
Speaker 1: strategy setting, building businesses side of things. And because of that,

316
00:20:13,119 --> 00:20:17,480
Speaker 1: we've we've asked our people to change their terminology. We've

317
00:20:17,920 --> 00:20:20,439
Speaker 1: done things like change our job titles. We don't have

318
00:20:20,680 --> 00:20:23,400
Speaker 1: senior vice presidents, you know, twenty five year old senior

319
00:20:23,480 --> 00:20:28,440
Speaker 1: vice presidents running around anymore. That's the terry level position president.

320
00:20:28,680 --> 00:20:32,600
Speaker 1: We've we've we've changed that. That's again a reference to

321
00:20:32,680 --> 00:20:35,320
Speaker 1: kind of Wall Street culture, and that made sense maybe

322
00:20:35,359 --> 00:20:37,639
Speaker 1: years ago when you had to sound important on the phone,

323
00:20:38,240 --> 00:20:40,600
Speaker 1: but in today's environment, we don't think it's you know,

324
00:20:41,080 --> 00:20:42,959
Speaker 1: it makes a lot of sense. And so the culture

325
00:20:43,000 --> 00:20:46,720
Speaker 1: that we're creating is a more industrial culture focused on

326
00:20:46,840 --> 00:20:50,240
Speaker 1: rolling up your sleeves and building businesses. And that's reflective

327
00:20:50,280 --> 00:20:53,480
Speaker 1: of we think the environment moving forward. So so now

328
00:20:53,520 --> 00:20:57,119
Speaker 1: I understand why your headquarters in Colorado has a sign

329
00:20:57,160 --> 00:21:01,879
Speaker 1: on the wall that says this is not Wall Street. Yeah,

330
00:21:01,880 --> 00:21:05,359
Speaker 1: so not only are you locating the firm two thousand

331
00:21:05,440 --> 00:21:08,359
Speaker 1: miles away from from Wall Street, you are making a

332
00:21:08,480 --> 00:21:13,320
Speaker 1: very conscious effort to behave very differently. And by the way,

333
00:21:13,320 --> 00:21:16,720
Speaker 1: when you walk through the door, it's immediately apparent to

334
00:21:16,760 --> 00:21:21,040
Speaker 1: you because when you walk through that that office in Colorado,

335
00:21:21,400 --> 00:21:26,160
Speaker 1: it is brick, steel stone. We have built a more

336
00:21:26,520 --> 00:21:31,159
Speaker 1: industrial business building feel that is in direct contrast to

337
00:21:32,160 --> 00:21:35,800
Speaker 1: what you you see in most places within our industry.

338
00:21:35,880 --> 00:21:39,440
Speaker 1: So where are you in Colorado? So we're just outside

339
00:21:39,480 --> 00:21:43,240
Speaker 1: of Boulder in a town called Broomfield. Really interesting. So

340
00:21:43,320 --> 00:21:48,520
Speaker 1: you are knowing near val Or some of the sheshier

341
00:21:48,600 --> 00:21:51,440
Speaker 1: parts of Colorado. Is that is that a fair state? Yeah?

342
00:21:51,440 --> 00:21:54,720
Speaker 1: We're down the mountain um, which is a good three

343
00:21:54,760 --> 00:21:59,280
Speaker 1: hours depending on the depending on the weather, in the traffic,

344
00:21:59,680 --> 00:22:02,959
Speaker 1: it can be a bit um. But let me tell

345
00:22:02,960 --> 00:22:07,639
Speaker 1: you something. When we first decided to move to Colorado, Um.

346
00:22:08,320 --> 00:22:11,960
Speaker 1: Uh it was you know, in a way, UM, a

347
00:22:12,080 --> 00:22:15,520
Speaker 1: part of this whole move um away from Wall Street.

348
00:22:16,119 --> 00:22:19,920
Speaker 1: UM create an environment that's somewhat similar to the Zoog

349
00:22:20,640 --> 00:22:22,920
Speaker 1: you know culture that we came from. You know, we

350
00:22:23,119 --> 00:22:25,480
Speaker 1: talked a little bit about being in Zoog. One of

351
00:22:25,520 --> 00:22:28,320
Speaker 1: our founders grabbed me one time and said, hey, UM,

352
00:22:28,480 --> 00:22:30,280
Speaker 1: why don't you figure out where you want to live

353
00:22:30,320 --> 00:22:34,080
Speaker 1: your life and see if people want to move there also,

354
00:22:34,280 --> 00:22:37,280
Speaker 1: right and follow you? And and uh, you have any

355
00:22:37,880 --> 00:22:41,560
Speaker 1: nexus with with Colorado? Or was this just hey, big country,

356
00:22:41,640 --> 00:22:47,120
Speaker 1: let's go here. Um. It's just a fantastic environment. Uh.

357
00:22:47,160 --> 00:22:50,000
Speaker 1: And the and the people that are there, um are

358
00:22:51,080 --> 00:22:53,240
Speaker 1: so happy. It's the one of the highest quality of

359
00:22:53,280 --> 00:22:58,560
Speaker 1: life uh anywhere, um that you'll find. And I think

360
00:22:58,600 --> 00:23:01,800
Speaker 1: that makes a difference. Right when we first opened up,

361
00:23:01,840 --> 00:23:03,359
Speaker 1: people are kind of scratching their heads what are these

362
00:23:03,400 --> 00:23:06,679
Speaker 1: guys doing? Today we get more resumes into our Colorado

363
00:23:06,720 --> 00:23:10,680
Speaker 1: office than our next six offices combined. It really has

364
00:23:10,720 --> 00:23:13,639
Speaker 1: set us apart and is something that's quite unique. And

365
00:23:13,680 --> 00:23:17,280
Speaker 1: it's also directly in line with what we've been talking

366
00:23:17,320 --> 00:23:21,439
Speaker 1: about it. It's different from Wall Street. It creates an

367
00:23:21,480 --> 00:23:26,840
Speaker 1: environment for us where we can be independent thinkers and that.

368
00:23:27,359 --> 00:23:30,800
Speaker 1: So let's drill down into that a little bit. I

369
00:23:30,840 --> 00:23:34,760
Speaker 1: was reading about the firm and its investment process, and

370
00:23:34,920 --> 00:23:37,719
Speaker 1: it seems like you guys can spend as long as

371
00:23:37,800 --> 00:23:41,840
Speaker 1: five years studying a company before you make an acquisition,

372
00:23:42,720 --> 00:23:47,560
Speaker 1: Whereas in most of finance it's competitive and sometimes you

373
00:23:47,640 --> 00:23:49,639
Speaker 1: need to make a decision now or someone else is

374
00:23:49,680 --> 00:23:53,719
Speaker 1: gonna outbid you. How do you go about kicking the

375
00:23:53,760 --> 00:23:56,800
Speaker 1: tires of a company for three or four or five years.

376
00:23:56,840 --> 00:24:01,120
Speaker 1: That seems to be inormately lengthy compared to the way

377
00:24:02,280 --> 00:24:06,680
Speaker 1: traditional finance operations. Yeah, when I came up in the industry,

378
00:24:06,720 --> 00:24:09,280
Speaker 1: when a company would come up for sale, we would

379
00:24:09,280 --> 00:24:14,399
Speaker 1: have four or five months to research that business and

380
00:24:14,600 --> 00:24:18,120
Speaker 1: to do due diligence and to meet the management team

381
00:24:18,119 --> 00:24:21,040
Speaker 1: and to build our models. And that's enough time to

382
00:24:21,240 --> 00:24:23,040
Speaker 1: get to know a space, and to get to know

383
00:24:23,080 --> 00:24:26,600
Speaker 1: a sector, and to get to know a company and

384
00:24:26,680 --> 00:24:28,919
Speaker 1: decide if you want to make an investment or not.

385
00:24:29,160 --> 00:24:34,000
Speaker 1: With the competition that's increased within our space, it's more

386
00:24:34,080 --> 00:24:36,679
Speaker 1: like four or five six weeks that you need to

387
00:24:36,720 --> 00:24:40,000
Speaker 1: make that decision, okay, And you just can't do the

388
00:24:40,040 --> 00:24:41,960
Speaker 1: type of work that you need to do to write

389
00:24:42,000 --> 00:24:45,359
Speaker 1: a large check in four or five six weeks to

390
00:24:45,359 --> 00:24:48,560
Speaker 1: buy an entire company. And so we have really put

391
00:24:48,600 --> 00:24:54,160
Speaker 1: emphasis to our team on doing work well before a

392
00:24:54,160 --> 00:24:56,560
Speaker 1: company sale process to make sure that when that company

393
00:24:56,640 --> 00:25:00,800
Speaker 1: comes up for sale that we are expert on that space,

394
00:25:01,200 --> 00:25:06,240
Speaker 1: we're expert on that subsector, and we're doing confirmatory work.

395
00:25:06,400 --> 00:25:11,040
Speaker 1: We're not starting from scratch. That's something that's really emphasized

396
00:25:11,080 --> 00:25:15,120
Speaker 1: within our culture. And you know, if you think about

397
00:25:15,160 --> 00:25:21,320
Speaker 1: the current environment, right rates have changed, leverage levels have changed,

398
00:25:22,119 --> 00:25:24,679
Speaker 1: and that means there's a couple hundred basis points of

399
00:25:24,760 --> 00:25:28,719
Speaker 1: returns that's come out of our industry if you're just

400
00:25:28,800 --> 00:25:31,320
Speaker 1: doing things the same way. So you need to be

401
00:25:31,359 --> 00:25:34,480
Speaker 1: investing in a different profile of business. You can't just

402
00:25:34,520 --> 00:25:37,399
Speaker 1: hope to lever up a good company and generate a

403
00:25:37,480 --> 00:25:41,159
Speaker 1: return that way. Today you have to find sectors that

404
00:25:41,200 --> 00:25:46,080
Speaker 1: are transforming right businesses that we can transform through active

405
00:25:46,080 --> 00:25:49,120
Speaker 1: ownership in order to generate the same type of returns

406
00:25:49,240 --> 00:25:50,800
Speaker 1: that have happened. And we think that that's going to

407
00:25:50,880 --> 00:25:55,480
Speaker 1: be a critical part moving forward. So we put all

408
00:25:55,520 --> 00:25:59,639
Speaker 1: of our emphasis today from a sourcing and origination perspective

409
00:26:00,160 --> 00:26:05,400
Speaker 1: around around thematic work that's a big topic. We're gonna

410
00:26:05,440 --> 00:26:08,520
Speaker 1: talk a little more about sectors later. Now I have

411
00:26:08,600 --> 00:26:14,600
Speaker 1: to ask you mentioned the time horizon for evaluating companies

412
00:26:14,880 --> 00:26:19,919
Speaker 1: and the competitions. Your size puts you in the same

413
00:26:20,760 --> 00:26:25,760
Speaker 1: league as private equity firms like Blackstone and Aries. How

414
00:26:25,800 --> 00:26:30,000
Speaker 1: often are you bumping into competition when you're kicking the

415
00:26:30,080 --> 00:26:33,440
Speaker 1: tires on a company for a couple of years, when

416
00:26:33,840 --> 00:26:36,160
Speaker 1: those guys tend to write a check after eight weeks. Now,

417
00:26:36,600 --> 00:26:39,880
Speaker 1: I often look at the public markets and a little

418
00:26:40,000 --> 00:26:42,960
Speaker 1: green within the sometimes to be honest, because in the

419
00:26:42,960 --> 00:26:45,719
Speaker 1: public markets, you find a sector that you like, they

420
00:26:45,840 --> 00:26:48,480
Speaker 1: find a company that you like, you hit the buy

421
00:26:48,600 --> 00:26:53,120
Speaker 1: button and you create that exposure for yourself or your clients.

422
00:26:53,840 --> 00:26:56,520
Speaker 1: In the private markets, you find a sector that you like,

423
00:26:57,080 --> 00:26:59,239
Speaker 1: you do your research, you find a company that you like,

424
00:26:59,760 --> 00:27:02,800
Speaker 1: You have to wait for years until an event comes up,

425
00:27:03,160 --> 00:27:06,960
Speaker 1: and then there's only one firm that's allowed to create

426
00:27:07,040 --> 00:27:10,080
Speaker 1: that exposure. Okay, and you have to go up against

427
00:27:10,080 --> 00:27:13,800
Speaker 1: some of the most aggressive, smart individuals that you will

428
00:27:13,840 --> 00:27:16,439
Speaker 1: ever come across in your life, and you have to

429
00:27:16,480 --> 00:27:20,840
Speaker 1: differentiate yourself and partners group has I think done a

430
00:27:20,880 --> 00:27:23,000
Speaker 1: good job of winning more than its fair share of

431
00:27:23,000 --> 00:27:26,920
Speaker 1: transactions in the market by being a differentiated kind of firm,

432
00:27:27,119 --> 00:27:31,800
Speaker 1: a differentiated kind of owner, one that's a true partner

433
00:27:32,760 --> 00:27:36,919
Speaker 1: to industry, a partner for growth, and that's helped to

434
00:27:37,040 --> 00:27:41,160
Speaker 1: distinguish us against some pretty stiff competition. Not a coincidence

435
00:27:41,200 --> 00:27:44,040
Speaker 1: that you're named Partners Group. That didn't happen by act. No,

436
00:27:44,280 --> 00:27:47,320
Speaker 1: not by accident at all. So let's talk a little

437
00:27:47,359 --> 00:27:51,879
Speaker 1: bit about some of your closed end funds. Typically, most

438
00:27:51,880 --> 00:27:54,680
Speaker 1: private equity or buy out funds tend to be a

439
00:27:54,760 --> 00:27:58,080
Speaker 1: quarter million dollars or more. You have a fund that

440
00:27:58,160 --> 00:28:02,240
Speaker 1: requires a minimum investment of fifty thousand dollars. Tell us

441
00:28:02,280 --> 00:28:07,399
Speaker 1: the thinking behind making access to this sort of investing

442
00:28:08,640 --> 00:28:11,480
Speaker 1: easier for people who might not have a quarter million

443
00:28:11,520 --> 00:28:16,040
Speaker 1: dollars lying around. Yeah, so, if you're an institution investing

444
00:28:16,080 --> 00:28:20,480
Speaker 1: one hundred billion dollars today or fifty billion dollars or

445
00:28:20,600 --> 00:28:24,840
Speaker 1: ten billion dollars, private markets is already a big part

446
00:28:25,200 --> 00:28:30,639
Speaker 1: of your portfolio. But for individuals, historically there have not

447
00:28:30,800 --> 00:28:36,960
Speaker 1: been great options to invest into private companies. It's been

448
00:28:37,000 --> 00:28:40,240
Speaker 1: one of the best performing asset classes for decades, and

449
00:28:41,200 --> 00:28:45,640
Speaker 1: there's a real democratization of access to private markets and

450
00:28:45,640 --> 00:28:48,080
Speaker 1: we're one of the firms that's been leading that. Look,

451
00:28:48,080 --> 00:28:53,080
Speaker 1: our parents all had pension funds, our kids are all

452
00:28:53,120 --> 00:28:55,360
Speaker 1: going to have four o one ks, and so the

453
00:28:56,760 --> 00:29:00,000
Speaker 1: sources of funds for our industry is going to change

454
00:29:00,200 --> 00:29:03,640
Speaker 1: as a result of that. It's been primarily pensioned historically,

455
00:29:03,920 --> 00:29:06,800
Speaker 1: it's been a lot of insurance and that sort of thing.

456
00:29:07,040 --> 00:29:12,400
Speaker 1: And the future is private individuals, and we think define

457
00:29:12,480 --> 00:29:16,520
Speaker 1: contribution programs and we're a firm that is really cutting

458
00:29:16,600 --> 00:29:19,960
Speaker 1: edge and leading with regards to providing the types of

459
00:29:20,000 --> 00:29:23,080
Speaker 1: solutions that those type of clients are. So, when you're

460
00:29:23,080 --> 00:29:26,480
Speaker 1: offering a fund to a smaller investor of fifty thousand

461
00:29:26,520 --> 00:29:31,640
Speaker 1: dollar investor, how does the ownership within what those folks

462
00:29:31,680 --> 00:29:34,680
Speaker 1: invest in? How does that compare to what partners group

463
00:29:34,720 --> 00:29:38,400
Speaker 1: at large invest in? It? Is it a particular strategy

464
00:29:39,000 --> 00:29:41,000
Speaker 1: or a multi strat approach? How do you how do

465
00:29:41,080 --> 00:29:45,160
Speaker 1: you think about that? Yeah, so our clients get access

466
00:29:45,240 --> 00:29:48,600
Speaker 1: to all of our investment content that that particular fund

467
00:29:48,920 --> 00:29:52,280
Speaker 1: is targeting. We have been really focused as a firm

468
00:29:52,720 --> 00:29:56,200
Speaker 1: on not creating silos, not having one team that just

469
00:29:56,240 --> 00:29:58,880
Speaker 1: works for this particular financial product, and this team that

470
00:29:58,880 --> 00:30:02,280
Speaker 1: works with this financial product but all of our investment

471
00:30:02,320 --> 00:30:06,520
Speaker 1: professionals work for all of our clients collectively, and that

472
00:30:06,560 --> 00:30:10,880
Speaker 1: gives us the ability to create a vehicle, for example,

473
00:30:10,920 --> 00:30:13,680
Speaker 1: for an individual client, of a spoke solution for an

474
00:30:13,680 --> 00:30:16,800
Speaker 1: individual client, or a structure for a group of like

475
00:30:16,960 --> 00:30:20,840
Speaker 1: investors like you know, private clients, and have them participate

476
00:30:20,960 --> 00:30:24,560
Speaker 1: in the exact same investment content that our other large

477
00:30:24,920 --> 00:30:28,880
Speaker 1: investors get access to. And so that vehicle it's you

478
00:30:28,920 --> 00:30:30,640
Speaker 1: don't have to worry about having the A team on

479
00:30:30,680 --> 00:30:32,960
Speaker 1: the big institutional money and the B team on the

480
00:30:33,000 --> 00:30:35,680
Speaker 1: retail money, which is something that some people do worry about.

481
00:30:35,680 --> 00:30:40,560
Speaker 1: Our investors get equal access to the opportunities that our

482
00:30:40,600 --> 00:30:42,720
Speaker 1: global teams. So in other words, I'm not liquid for

483
00:30:42,800 --> 00:30:45,320
Speaker 1: a billion dollars. I don't remember where I left that.

484
00:30:45,880 --> 00:30:48,280
Speaker 1: So even if I don't have a billion, I could

485
00:30:48,320 --> 00:30:52,400
Speaker 1: still participate similarly to an endowment that does have a

486
00:30:52,440 --> 00:30:55,719
Speaker 1: billion dollars. Yeah, that's the and I think that's the future.

487
00:30:56,080 --> 00:31:01,560
Speaker 1: You know, limited partnerships that have been the traditional structure

488
00:31:01,640 --> 00:31:04,720
Speaker 1: that our industry have. You these are archaic structures, right,

489
00:31:04,760 --> 00:31:08,200
Speaker 1: they were innovated in the nineteen seventies and eighties. Is

490
00:31:08,240 --> 00:31:12,360
Speaker 1: a tool for individual wealth creation and they have been

491
00:31:13,760 --> 00:31:17,160
Speaker 1: jerry rigged effectively to now made US ten trillion dollars

492
00:31:17,200 --> 00:31:19,800
Speaker 1: of assets, which is pretty incredible. They are a lot

493
00:31:19,800 --> 00:31:22,680
Speaker 1: of money. They are not the future, right. The future

494
00:31:23,040 --> 00:31:26,320
Speaker 1: is we think vehicles that have some structure to them

495
00:31:26,760 --> 00:31:30,080
Speaker 1: that allows for easier access. And so when you talk

496
00:31:30,120 --> 00:31:34,600
Speaker 1: about ten trillion dollars you have discussed you think this

497
00:31:34,680 --> 00:31:36,840
Speaker 1: is going to end up being a thirty trillion dollar

498
00:31:36,960 --> 00:31:39,840
Speaker 1: market place. Yeah, so if there's ten trillion dollars and

499
00:31:40,000 --> 00:31:43,640
Speaker 1: you believe it's structured in a way that won't work

500
00:31:43,680 --> 00:31:47,760
Speaker 1: for the average investor, where is the next twenty trillion

501
00:31:47,760 --> 00:31:49,720
Speaker 1: dollars going to come from? Is it going to be institutional?

502
00:31:49,720 --> 00:31:52,600
Speaker 1: It's going to be individuals, some combination. Where do you

503
00:31:52,600 --> 00:31:55,280
Speaker 1: see the growth here? Yeah, it's going to be some combination,

504
00:31:55,840 --> 00:32:00,320
Speaker 1: but individual investors and define contribution coming online more fully

505
00:32:00,440 --> 00:32:04,640
Speaker 1: is certainly UM an element of that. UM. You know,

506
00:32:04,680 --> 00:32:09,080
Speaker 1: our industry has been growing for a long period of time. UM.

507
00:32:09,120 --> 00:32:14,520
Speaker 1: It has grown across different rate environments UM and UH

508
00:32:14,880 --> 00:32:19,240
Speaker 1: and and we're big believers that it will continue to

509
00:32:19,240 --> 00:32:22,640
Speaker 1: to grow UM and UH and that this is going

510
00:32:22,680 --> 00:32:25,560
Speaker 1: to be an industry that continues to benefit from from

511
00:32:25,640 --> 00:32:29,200
Speaker 1: some of the tailwinds that that do exist. So I'm

512
00:32:29,200 --> 00:32:33,760
Speaker 1: surprised to learn you guys acquired Brightling, the big watch company.

513
00:32:33,800 --> 00:32:38,240
Speaker 1: Tell us a little bit about the thinking behind that acquisition. Yeah. Uh, Brightling,

514
00:32:38,400 --> 00:32:43,080
Speaker 1: I think is one of the coolest Swiss watch companies

515
00:32:43,240 --> 00:32:47,960
Speaker 1: ever with its aviation heritage and the partnerships that it's

516
00:32:48,000 --> 00:32:52,680
Speaker 1: done and in the automotive space and diving in space.

517
00:32:52,960 --> 00:32:56,720
Speaker 1: It's it's got such an incredible heritage and we're really

518
00:32:56,760 --> 00:32:59,680
Speaker 1: happy to be a part of it. Um. I saw

519
00:32:59,760 --> 00:33:04,479
Speaker 1: a pistachio dial chronograph that they put out that was

520
00:33:04,600 --> 00:33:07,840
Speaker 1: just unique and gorgeous. Really yeah, no, the I mean

521
00:33:07,840 --> 00:33:12,760
Speaker 1: the innovation at that company today is really really incredible.

522
00:33:13,160 --> 00:33:15,440
Speaker 1: And um, you know, there's a lot of people who

523
00:33:15,480 --> 00:33:17,680
Speaker 1: kind of say, what are you doing investing into a

524
00:33:17,760 --> 00:33:23,360
Speaker 1: consumer business? It's environment competitive, it's in an environment like this,

525
00:33:23,720 --> 00:33:26,040
Speaker 1: and that's a business you know, growing at twenty five

526
00:33:26,080 --> 00:33:31,880
Speaker 1: percent last year. It's got enormous potential in the in

527
00:33:31,920 --> 00:33:34,880
Speaker 1: the Asian and US markets where it's it's growing really

528
00:33:34,880 --> 00:33:39,160
Speaker 1: really strong. And um, and uh, you know people think

529
00:33:39,160 --> 00:33:43,080
Speaker 1: about as a very masculine company, but it's it's female segment.

530
00:33:43,840 --> 00:33:46,960
Speaker 1: Is has a tremendous amount of potential. And with some

531
00:33:47,000 --> 00:33:49,719
Speaker 1: of the innovation that they're driving, with some of those colors,

532
00:33:49,720 --> 00:33:51,960
Speaker 1: et cetera that you're talking about, it's a lot of that.

533
00:33:52,760 --> 00:33:56,320
Speaker 1: Not a timepiece, a lot of potential. Oh, it's a timepiece.

534
00:33:56,480 --> 00:34:00,680
Speaker 1: I mean, the mechanics are for sure, are fantastic. Um,

535
00:34:00,720 --> 00:34:02,960
Speaker 1: but but it's a fashion accessory. Well, it's a piece

536
00:34:02,960 --> 00:34:05,440
Speaker 1: of jewelry. It's a fashion accessory. It's more than just

537
00:34:05,640 --> 00:34:08,319
Speaker 1: telling time is perhaps a better way to describe it. Yep.

538
00:34:08,440 --> 00:34:11,799
Speaker 1: And so we're really excited about that, that investment in

539
00:34:11,840 --> 00:34:15,400
Speaker 1: that partnership. Quite quite interesting. There are some quotes of

540
00:34:15,400 --> 00:34:17,839
Speaker 1: yours that I really like and I have to ask

541
00:34:17,840 --> 00:34:23,120
Speaker 1: you about, starting with there is a Darwinian struggle ahead

542
00:34:23,600 --> 00:34:26,880
Speaker 1: for private markets. Tell us why you believe that is

543
00:34:26,880 --> 00:34:33,759
Speaker 1: the case. The world has changed, right, We are in

544
00:34:33,800 --> 00:34:38,359
Speaker 1: a new rate environment and many of the tailwinds that

545
00:34:38,440 --> 00:34:43,360
Speaker 1: have allowed many firms to be successful and generate strong

546
00:34:43,400 --> 00:34:49,160
Speaker 1: returns have turned into headwinds. Uh. And we had a

547
00:34:49,200 --> 00:34:53,239
Speaker 1: long period of cheap capital and high amounts of free

548
00:34:53,320 --> 00:34:57,279
Speaker 1: capital essentially and large amounts of leverage being available. That

549
00:34:57,400 --> 00:34:59,800
Speaker 1: was a tailwind. We had a long period of global

550
00:35:00,040 --> 00:35:02,480
Speaker 1: z right, where we could take costs out of our

551
00:35:02,520 --> 00:35:05,400
Speaker 1: portfolio companies, take them out into a global marketplace and

552
00:35:05,440 --> 00:35:10,400
Speaker 1: improve margins, strong macro growth environment, and many of those

553
00:35:11,600 --> 00:35:15,399
Speaker 1: factors have changed, and some of them have even turned

554
00:35:15,400 --> 00:35:19,319
Speaker 1: into headwinds. And so as a result of that, the

555
00:35:19,480 --> 00:35:22,680
Speaker 1: formula for success that I think many of these more

556
00:35:22,719 --> 00:35:27,239
Speaker 1: transactionally oriented firms are pursuing, we think is going to

557
00:35:27,320 --> 00:35:33,280
Speaker 1: be challenged. And as a result of that, you this

558
00:35:33,280 --> 00:35:35,880
Speaker 1: this environment that we're and is going to initiate a

559
00:35:35,960 --> 00:35:40,960
Speaker 1: period of natural selection whereby the strong firms will get

560
00:35:41,000 --> 00:35:47,000
Speaker 1: stronger and the weak firms will struggle and struggle to

561
00:35:47,080 --> 00:35:51,880
Speaker 1: raise new capital. And this isn't dissimilar from what's happened

562
00:35:51,920 --> 00:35:55,560
Speaker 1: in prior eras within the financial services sector. I mean,

563
00:35:55,600 --> 00:35:59,799
Speaker 1: if you think about the public markets in the eighties, right,

564
00:36:00,600 --> 00:36:05,560
Speaker 1: you had stockbrokers that were driving ferraris right, and the

565
00:36:05,680 --> 00:36:09,560
Speaker 1: value system was built around transactions and transactional skill sets

566
00:36:09,600 --> 00:36:12,360
Speaker 1: then as well, Right, it was an inefficient market. People

567
00:36:12,360 --> 00:36:16,120
Speaker 1: would get their newspapers and read their ticker. They would

568
00:36:16,200 --> 00:36:17,960
Speaker 1: talk to their broker with no idea of where the

569
00:36:18,000 --> 00:36:21,880
Speaker 1: market actually was at that moment, and the whole incentive

570
00:36:21,920 --> 00:36:26,799
Speaker 1: system for the industry the public markets at that time

571
00:36:26,880 --> 00:36:29,440
Speaker 1: was around how much transaction volume can you generate in

572
00:36:29,480 --> 00:36:34,919
Speaker 1: an inefficient market? Think about ten years later, right, it

573
00:36:34,960 --> 00:36:39,040
Speaker 1: wasn't about individuals generating transaction point it's about which institutions

574
00:36:39,440 --> 00:36:43,560
Speaker 1: can build something that's truly differentiated, a platform with a

575
00:36:43,600 --> 00:36:46,080
Speaker 1: different way to engage with clients and have a differentiated

576
00:36:46,120 --> 00:36:50,480
Speaker 1: client engagement model. And we think that, you know, the

577
00:36:50,520 --> 00:36:54,080
Speaker 1: private markets may very well follow a similar path, and

578
00:36:55,080 --> 00:36:58,320
Speaker 1: the values of our industry need to shift from individuals

579
00:36:58,360 --> 00:37:03,319
Speaker 1: generating transactions and that being where the emphasis is towards

580
00:37:03,880 --> 00:37:07,520
Speaker 1: platforms that are building something truly differentiated. So there's another

581
00:37:07,600 --> 00:37:11,480
Speaker 1: quote of yours which I suspect could be related to

582
00:37:11,640 --> 00:37:16,560
Speaker 1: the Darwinian struggle, which is it's never been more expensive

583
00:37:16,640 --> 00:37:20,560
Speaker 1: to be naive. Explain that, because that's quite a loaded sentence.

584
00:37:20,960 --> 00:37:27,520
Speaker 1: Whether we're talking about investors or various firms, it's always

585
00:37:27,520 --> 00:37:30,640
Speaker 1: expensive to be naive. And you're saying it's as bad

586
00:37:30,680 --> 00:37:36,440
Speaker 1: as it ever gets right here. Well, you know, the

587
00:37:36,719 --> 00:37:42,759
Speaker 1: generalist investor model where you look for interesting businesses and

588
00:37:43,360 --> 00:37:47,440
Speaker 1: you know invest in them. You know out of a

589
00:37:47,480 --> 00:37:51,200
Speaker 1: generalist perspective is tough. It's going to be tough. We

590
00:37:51,239 --> 00:37:55,560
Speaker 1: think for a long time. If you think about what

591
00:37:55,760 --> 00:37:59,239
Speaker 1: is going to differentiate firms in the future, we think

592
00:37:59,239 --> 00:38:03,200
Speaker 1: it's going to be having a real perspective on the

593
00:38:03,239 --> 00:38:05,200
Speaker 1: way an industry is going to move and how it's

594
00:38:05,200 --> 00:38:08,680
Speaker 1: going to evolve. There's so much digital transformation occurring, so

595
00:38:08,760 --> 00:38:12,120
Speaker 1: much disruption occurring that if you invest into a space

596
00:38:12,680 --> 00:38:15,239
Speaker 1: not being a specialist in that area, we think it's

597
00:38:15,280 --> 00:38:17,680
Speaker 1: really tough. Our firm is putting a tremendous amount of

598
00:38:17,680 --> 00:38:22,600
Speaker 1: emphasis on thematic research. We want our people to be deep,

599
00:38:22,680 --> 00:38:25,560
Speaker 1: as we talked about before, spend a couple of years

600
00:38:25,680 --> 00:38:29,560
Speaker 1: on a space before ultimately investing into that space, to

601
00:38:29,600 --> 00:38:32,680
Speaker 1: make sure that they understand how that market's going to evolve,

602
00:38:32,880 --> 00:38:35,839
Speaker 1: who the winners likely are going to be. And we're

603
00:38:35,840 --> 00:38:38,040
Speaker 1: putting our emphasis not on what's the size of the

604
00:38:38,080 --> 00:38:42,200
Speaker 1: business today, but we put our emphasis around which company

605
00:38:42,280 --> 00:38:44,160
Speaker 1: is likely to be a market leader four or five

606
00:38:44,280 --> 00:38:46,759
Speaker 1: six years from now in that particular space. And that

607
00:38:46,800 --> 00:38:51,160
Speaker 1: takes work, that takes research. So you're looking out five years,

608
00:38:52,440 --> 00:38:57,319
Speaker 1: that means that sectors that are doing well today you

609
00:38:57,400 --> 00:39:01,200
Speaker 1: may have been thinking about five years ago pre pandemic.

610
00:39:02,160 --> 00:39:05,680
Speaker 1: Tell us what sectors today seem to be coming into

611
00:39:05,719 --> 00:39:10,120
Speaker 1: their own and what other sectors are beginning to look intriguing. Yeah,

612
00:39:10,560 --> 00:39:16,399
Speaker 1: and the COVID environment has actually accelerated some of those

613
00:39:16,480 --> 00:39:19,160
Speaker 1: themes that we were thinking about and have been thinking

614
00:39:19,239 --> 00:39:22,000
Speaker 1: about for a long time. So the digital trans the

615
00:39:22,080 --> 00:39:25,920
Speaker 1: digital payment space, for example, that's not a new topic, right,

616
00:39:25,960 --> 00:39:28,640
Speaker 1: There's been a transition to digital payment for a long

617
00:39:28,719 --> 00:39:32,520
Speaker 1: period of time, but COVID helped to accelerate that. And

618
00:39:32,600 --> 00:39:38,080
Speaker 1: so we invested into one of Europe's largest electronic toll

619
00:39:38,120 --> 00:39:40,840
Speaker 1: collection companies. Here in New York you have you have

620
00:39:41,000 --> 00:39:45,000
Speaker 1: easy pass and other markets there's sun passed and other

621
00:39:45,000 --> 00:39:49,640
Speaker 1: things like that. We invested into Europe's largest electronic toll

622
00:39:49,680 --> 00:39:52,520
Speaker 1: collection company. And that's an example of a trend that

623
00:39:52,560 --> 00:39:55,520
Speaker 1: we were watching for a long time and then COVID

624
00:39:55,719 --> 00:39:59,800
Speaker 1: helped to really accelerate that and I really stopped using cash,

625
00:40:00,080 --> 00:40:02,080
Speaker 1: let me tell you during that period of time. I

626
00:40:02,160 --> 00:40:04,400
Speaker 1: like the way you phrased it because a lot of

627
00:40:04,440 --> 00:40:10,600
Speaker 1: the things that have become very large existed long before COVID,

628
00:40:10,640 --> 00:40:12,640
Speaker 1: but they were kind of on the front. I just

629
00:40:12,680 --> 00:40:16,560
Speaker 1: signed a whole bunch of bank docs through document signed

630
00:40:16,600 --> 00:40:21,759
Speaker 1: on my laptop. That's been around forever, but it's ubiquitous now, Like, wait,

631
00:40:22,160 --> 00:40:24,640
Speaker 1: you want me to FedEx you documents to get a

632
00:40:24,640 --> 00:40:27,160
Speaker 1: wet signature on it and then have the other eight

633
00:40:27,239 --> 00:40:30,720
Speaker 1: people sign it and that sort of stuff. It feels archaic,

634
00:40:31,040 --> 00:40:32,880
Speaker 1: but just three years ago we were doing that but

635
00:40:33,000 --> 00:40:38,240
Speaker 1: right and the ability to do things. When I launched

636
00:40:38,239 --> 00:40:41,839
Speaker 1: my firm, me and my partners, we were national, so

637
00:40:41,880 --> 00:40:44,520
Speaker 1: we were always in the cloud and we were always virtual.

638
00:40:45,400 --> 00:40:49,239
Speaker 1: I found the pandemic kind of amusing for lots of

639
00:40:49,239 --> 00:40:55,200
Speaker 1: people discovered video chat and screen sharing. All these technology

640
00:40:55,320 --> 00:40:58,239
Speaker 1: is a decade old. How do you get ahead of

641
00:40:58,239 --> 00:41:01,759
Speaker 1: a curve when suddenly you have a two year just

642
00:41:02,120 --> 00:41:05,200
Speaker 1: rush into that space. How do you separate the winners

643
00:41:05,200 --> 00:41:09,120
Speaker 1: from the also rands? Yeah, Um, it's it's through a

644
00:41:09,280 --> 00:41:12,200
Speaker 1: lot of work, it's through a lot of research, and

645
00:41:12,239 --> 00:41:16,360
Speaker 1: it's by having people that specialize in that particular area.

646
00:41:16,480 --> 00:41:22,720
Speaker 1: It's about surrounding yourself with not specially not generalist consultants

647
00:41:22,760 --> 00:41:24,399
Speaker 1: that come in and tell you this market is big

648
00:41:24,440 --> 00:41:27,160
Speaker 1: and growing. Right. We want we want our teams to

649
00:41:27,320 --> 00:41:35,759
Speaker 1: engage with organizations um that uh that are specialized or

650
00:41:35,840 --> 00:41:39,680
Speaker 1: better yet, individuals that have been running companies in those

651
00:41:39,680 --> 00:41:42,719
Speaker 1: spaces and that have been there and done that and

652
00:41:42,800 --> 00:41:45,520
Speaker 1: know where the bodies are buried. Those are the people

653
00:41:45,520 --> 00:41:48,120
Speaker 1: that we want to align with as we're going into

654
00:41:48,160 --> 00:41:50,359
Speaker 1: due diligence. We want to you know, work with them

655
00:41:50,400 --> 00:41:53,520
Speaker 1: and have them join the boards of our companies and

656
00:41:53,520 --> 00:41:57,080
Speaker 1: and um, and so it comes by surrounding yourself with

657
00:41:57,120 --> 00:41:59,799
Speaker 1: the right people and the right kind of people, uh

658
00:42:01,400 --> 00:42:03,759
Speaker 1: as you go into researching these type of businesses. So

659
00:42:04,160 --> 00:42:09,040
Speaker 1: you mentioned earlier, the marketplace is changing. What was tailwinds

660
00:42:09,160 --> 00:42:13,720
Speaker 1: very often today are headwinds, which raises the important question

661
00:42:14,640 --> 00:42:19,759
Speaker 1: how important are private markets to the economy relative to

662
00:42:20,000 --> 00:42:24,560
Speaker 1: public markets. In fact, you had suggested public markets decoupled

663
00:42:24,640 --> 00:42:28,880
Speaker 1: from the real economy and now it's all about what's private. Well,

664
00:42:29,040 --> 00:42:31,879
Speaker 1: I wouldn't say it's all about what's private, but there

665
00:42:31,960 --> 00:42:35,920
Speaker 1: has clearly been an evolution that a lot of people

666
00:42:35,960 --> 00:42:40,040
Speaker 1: haven't been fully conscious of. It's been a shift in

667
00:42:40,280 --> 00:42:43,239
Speaker 1: roles really that the public markets are playing and the

668
00:42:43,280 --> 00:42:45,360
Speaker 1: private markets are playing. It used to be the private

669
00:42:45,400 --> 00:42:49,319
Speaker 1: markets where where you went to bed speculative investments. This

670
00:42:49,360 --> 00:42:51,840
Speaker 1: is where you went to get your risky venture capital

671
00:42:51,920 --> 00:42:55,279
Speaker 1: exposure or your highly leveraged equity exposure. It was called

672
00:42:55,320 --> 00:42:59,279
Speaker 1: an alternative asset class because you know, you were meant

673
00:42:59,280 --> 00:43:02,520
Speaker 1: to allocate maybe this small little sliver of the economy

674
00:43:02,560 --> 00:43:05,520
Speaker 1: and the public markets is where you go to invest

675
00:43:05,600 --> 00:43:09,520
Speaker 1: into bedrock companies that anchor the economy, household names, etc.

676
00:43:10,840 --> 00:43:13,880
Speaker 1: That has changed. If you look at the companies that

677
00:43:13,960 --> 00:43:17,440
Speaker 1: have been going public, the capital formation that's been occurring

678
00:43:17,480 --> 00:43:19,960
Speaker 1: within the public markets, a lot of people are shocked

679
00:43:19,960 --> 00:43:22,480
Speaker 1: when they dig into it and they learn that only

680
00:43:22,520 --> 00:43:25,600
Speaker 1: twenty percent of the companies that have been going public

681
00:43:25,680 --> 00:43:30,160
Speaker 1: more recently have an earning's history. Okay, the vast majority

682
00:43:30,560 --> 00:43:34,799
Speaker 1: are technology companies selling the dream or their shell companies

683
00:43:34,840 --> 00:43:38,080
Speaker 1: without financial substance. Those are the companies going public. There's

684
00:43:38,120 --> 00:43:42,280
Speaker 1: a lot more speculation happening in the public markets these days. Meanwhile,

685
00:43:42,320 --> 00:43:48,280
Speaker 1: the public the private markets have been increasingly relevant to

686
00:43:48,320 --> 00:43:51,960
Speaker 1: owning the real economy. If you think about the food

687
00:43:52,080 --> 00:43:56,319
Speaker 1: value chain for example, right, what are the types of

688
00:43:56,360 --> 00:43:59,960
Speaker 1: companies that are going public? Right in the food value chain,

689
00:44:00,560 --> 00:44:04,239
Speaker 1: you have the ones that have a big brand and

690
00:44:04,280 --> 00:44:07,400
Speaker 1: a network effect, right like a grub hub or something

691
00:44:07,400 --> 00:44:10,280
Speaker 1: along those lines like that that is in the public

692
00:44:10,320 --> 00:44:14,680
Speaker 1: eye and draws the interest of public investors. Meanwhile, if

693
00:44:14,680 --> 00:44:17,479
Speaker 1: you think about the rest of the food value chain,

694
00:44:17,920 --> 00:44:24,840
Speaker 1: right the agricultural businesses, the fertilizer companies and crop protection

695
00:44:25,040 --> 00:44:28,120
Speaker 1: protection companies that are out there, the logistics companies that

696
00:44:28,160 --> 00:44:30,080
Speaker 1: are out there, a lot of them are not appealing

697
00:44:30,120 --> 00:44:32,840
Speaker 1: to public markets investors because they don't have the sizzle

698
00:44:33,040 --> 00:44:35,960
Speaker 1: right and don't have it, so they're not marketing to

699
00:44:36,040 --> 00:44:38,640
Speaker 1: the end consumers. So the average person in those lives,

700
00:44:38,680 --> 00:44:42,160
Speaker 1: they don't know about them. So interesting. Interesting, a lot

701
00:44:42,239 --> 00:44:46,840
Speaker 1: of those businesses are now owned by private markets firms

702
00:44:47,480 --> 00:44:53,320
Speaker 1: ten trillion dollars of assets that are anchoring the economy,

703
00:44:53,560 --> 00:44:56,480
Speaker 1: and so there's been this shift in rolls where the

704
00:44:56,520 --> 00:45:01,359
Speaker 1: private markets used to be very speculative. Now that's where

705
00:45:01,400 --> 00:45:04,000
Speaker 1: you go to get exposure to the real economy. And

706
00:45:04,080 --> 00:45:07,360
Speaker 1: the private markets used to be you know, bedrock companies

707
00:45:07,360 --> 00:45:10,680
Speaker 1: that anchor the economy, and now it's a technology index

708
00:45:10,800 --> 00:45:15,399
Speaker 1: effectively for many investors. And I think that isn't well

709
00:45:15,480 --> 00:45:21,040
Speaker 1: known by a lot of investors, and it's one of

710
00:45:21,080 --> 00:45:24,799
Speaker 1: the things that's driving interest in our space by investors

711
00:45:24,840 --> 00:45:29,320
Speaker 1: that haven't traditionally had access. That's one of the reasons

712
00:45:29,360 --> 00:45:33,080
Speaker 1: why private investors, for example, are increasingly interested in private

713
00:45:33,120 --> 00:45:36,040
Speaker 1: markets is because that's the only way you can place

714
00:45:36,080 --> 00:45:39,120
Speaker 1: that you can go to access certain sectors. So that

715
00:45:39,200 --> 00:45:43,359
Speaker 1: raises a couple of really fascinating questions. The first is,

716
00:45:43,960 --> 00:45:48,160
Speaker 1: given that private markets were previously speculative and now you're

717
00:45:48,200 --> 00:45:51,839
Speaker 1: suggesting public markets are, the first question is what does

718
00:45:51,840 --> 00:45:55,080
Speaker 1: that mean in terms of how we value each of

719
00:45:55,120 --> 00:45:58,800
Speaker 1: those two types of investments? And then the related question

720
00:45:59,520 --> 00:46:04,359
Speaker 1: is how dependent are private markets on public market valuations?

721
00:46:05,880 --> 00:46:10,520
Speaker 1: I think they're very closely linked in many regards. There

722
00:46:10,560 --> 00:46:15,879
Speaker 1: are some differences. The public markets did experience a lot

723
00:46:15,960 --> 00:46:21,359
Speaker 1: more hype in certain periods of time, and so a

724
00:46:21,360 --> 00:46:25,400
Speaker 1: lot of people look at the private markets and say,

725
00:46:25,400 --> 00:46:29,000
Speaker 1: shouldn't there be a correction in the private markets that

726
00:46:29,200 --> 00:46:32,120
Speaker 1: is on par with what we're seeing, you know, in

727
00:46:32,160 --> 00:46:35,000
Speaker 1: the public markets. And so let me just create a

728
00:46:35,000 --> 00:46:37,960
Speaker 1: little bit of context for some of the differences in

729
00:46:38,040 --> 00:46:43,480
Speaker 1: valuation that have been out there between you know, the

730
00:46:44,360 --> 00:46:50,480
Speaker 1: twenty eighteen time period and twenty twenty one. The public

731
00:46:50,560 --> 00:46:55,960
Speaker 1: markets experience multiple expansion on an EV to ebada basis

732
00:46:56,440 --> 00:47:00,319
Speaker 1: of about eleven twelve times historically, I think went up

733
00:47:00,320 --> 00:47:03,680
Speaker 1: to eighteen times at the peak, and it's come down

734
00:47:03,719 --> 00:47:06,720
Speaker 1: to thirteen or fourteen times or whatever it is more recently,

735
00:47:06,719 --> 00:47:10,440
Speaker 1: a pretty substantial kind of pullback. Over that same period

736
00:47:10,480 --> 00:47:15,640
Speaker 1: of time, the private markets, your average private markets company

737
00:47:15,719 --> 00:47:20,400
Speaker 1: increased in value from about eleven times to about twelve times. Okay,

738
00:47:20,719 --> 00:47:25,920
Speaker 1: And so you're not, you know, we pretty steady evaluation.

739
00:47:26,160 --> 00:47:28,520
Speaker 1: Not in every space, not in every sector, and not

740
00:47:28,560 --> 00:47:30,640
Speaker 1: for every type of company. You do see some big

741
00:47:30,680 --> 00:47:34,600
Speaker 1: valuations there, but on average, as an industry, our average

742
00:47:34,600 --> 00:47:39,360
Speaker 1: company didn't participate in the in the hype necessarily fully

743
00:47:39,440 --> 00:47:42,560
Speaker 1: that the private markets experienced, and so it shouldn't surprise

744
00:47:42,600 --> 00:47:46,040
Speaker 1: people that your average private markets company doesn't correct in

745
00:47:46,160 --> 00:47:51,960
Speaker 1: value at the same level. In addition to that, the

746
00:47:52,040 --> 00:47:55,440
Speaker 1: private markets has historically been pretty good at driving assets,

747
00:47:55,760 --> 00:48:00,800
Speaker 1: aligning interest with management teams having a pretty compelling business

748
00:48:00,880 --> 00:48:05,080
Speaker 1: case that they're driving. And so for example, our average

749
00:48:05,120 --> 00:48:10,000
Speaker 1: portfolio company has had double digit growth over the past year,

750
00:48:10,320 --> 00:48:12,840
Speaker 1: and that helps to offset some of the downward pressure

751
00:48:12,960 --> 00:48:17,680
Speaker 1: that you know, the markets bring. So I want to

752
00:48:17,680 --> 00:48:20,520
Speaker 1: get to the issue of alignment in a moment, but

753
00:48:20,800 --> 00:48:25,399
Speaker 1: I have to follow up on what you just hinted at,

754
00:48:26,120 --> 00:48:33,120
Speaker 1: which is why are the private markets so steady compared

755
00:48:33,200 --> 00:48:36,759
Speaker 1: to the ups and downs, the multiple expansion and contraction

756
00:48:36,800 --> 00:48:40,000
Speaker 1: that we see in public markets. And I know there

757
00:48:40,000 --> 00:48:43,920
Speaker 1: may not be any definitive answer. What's your theory here, Well,

758
00:48:44,120 --> 00:48:52,000
Speaker 1: you have a market that's driven by decisions by sophisticated

759
00:48:52,040 --> 00:48:57,359
Speaker 1: investors to invest or to divest. Okay, you don't have

760
00:48:57,480 --> 00:49:01,640
Speaker 1: a lot of fear based selling right going on within

761
00:49:01,680 --> 00:49:05,560
Speaker 1: the private markets. Um an advantage of not getting a

762
00:49:05,680 --> 00:49:10,399
Speaker 1: print every tech, every minute, every constantly to exact freak

763
00:49:10,480 --> 00:49:15,319
Speaker 1: people out. It's uh, and I think that is a

764
00:49:15,360 --> 00:49:17,440
Speaker 1: big part of it. We're always going to be an

765
00:49:17,440 --> 00:49:22,239
Speaker 1: asset class that puts emphasis on long term performance over

766
00:49:22,320 --> 00:49:25,719
Speaker 1: short term liquidity. It just is what it is. So

767
00:49:25,760 --> 00:49:30,040
Speaker 1: we don't feel pressure to sell things at all when

768
00:49:30,640 --> 00:49:34,080
Speaker 1: the markets start to bounce around, and if anything, there's

769
00:49:34,120 --> 00:49:39,200
Speaker 1: an a liquidity impediment to making those sort of decisions.

770
00:49:39,280 --> 00:49:41,799
Speaker 1: The old line is, you don't get a price on

771
00:49:41,920 --> 00:49:45,040
Speaker 1: your house every minute of every day. If you did,

772
00:49:45,160 --> 00:49:48,600
Speaker 1: you might get panicked out of it. You don't even

773
00:49:48,680 --> 00:49:52,040
Speaker 1: have that option of panic selling if you want in

774
00:49:52,200 --> 00:49:56,440
Speaker 1: the vast majority of your holdings. I'm going to assume, Yeah,

775
00:49:55,560 --> 00:50:00,800
Speaker 1: the panic selling is rarely a thing within private markets,

776
00:50:01,120 --> 00:50:03,920
Speaker 1: and it is sometimes a thing in the public markets,

777
00:50:03,960 --> 00:50:07,800
Speaker 1: and that's a big difference with regards to how people

778
00:50:07,960 --> 00:50:13,000
Speaker 1: think about their holdings between the two asset classes. That's

779
00:50:13,280 --> 00:50:16,920
Speaker 1: really very intriguing. So let's talk a little bit about alignment.

780
00:50:17,040 --> 00:50:20,840
Speaker 1: You have said we are fully aligned with our clients,

781
00:50:20,880 --> 00:50:23,800
Speaker 1: and I think of you as having two sets of clients.

782
00:50:24,280 --> 00:50:27,560
Speaker 1: One set are the outside investors who give you their

783
00:50:27,600 --> 00:50:30,680
Speaker 1: capital to invest. The other set of clients are the

784
00:50:30,680 --> 00:50:34,200
Speaker 1: companies you acquire and our partners with. How do you

785
00:50:34,239 --> 00:50:37,680
Speaker 1: align your interest with these two diverse sets of clients.

786
00:50:38,200 --> 00:50:43,600
Speaker 1: I think the private markets is a fantastic asset class

787
00:50:43,600 --> 00:50:47,040
Speaker 1: from an alignment of interest perspective. We win when our

788
00:50:47,040 --> 00:50:56,200
Speaker 1: clients win, and that comes from having our capital invested

789
00:50:56,239 --> 00:51:02,360
Speaker 1: alongside theirs and having very strict requirements for performance before

790
00:51:02,440 --> 00:51:05,000
Speaker 1: we get paid performance fees. And I think that alignment

791
00:51:05,000 --> 00:51:07,840
Speaker 1: of interest is something that is really really strong. In turn,

792
00:51:08,160 --> 00:51:11,680
Speaker 1: we then create the same types of relationships with our

793
00:51:11,719 --> 00:51:15,120
Speaker 1: management teams. So it goes all the way down the

794
00:51:15,200 --> 00:51:21,400
Speaker 1: chain with regards to alignment of interest, meaning the portfolio

795
00:51:21,480 --> 00:51:25,480
Speaker 1: companies their interests are going to be determined by their

796
00:51:25,480 --> 00:51:30,600
Speaker 1: performance as well. So from the investor to partners group

797
00:51:30,680 --> 00:51:35,320
Speaker 1: to the portfolio companies. Everybody is aiming in the same place,

798
00:51:35,320 --> 00:51:38,560
Speaker 1: and everybody gets paid when the results work for everybody.

799
00:51:38,600 --> 00:51:41,400
Speaker 1: And we're a very client centric firm. You know. We

800
00:51:41,480 --> 00:51:44,960
Speaker 1: talked a little bit about our Colorado campus and how

801
00:51:45,040 --> 00:51:47,239
Speaker 1: we've created a field. It's a little bit more like

802
00:51:47,239 --> 00:51:50,719
Speaker 1: a factory feel. You know. When I was a kid,

803
00:51:50,760 --> 00:51:54,080
Speaker 1: I remember my dad random manufacturing facility and I remember

804
00:51:54,080 --> 00:51:58,319
Speaker 1: being with him on the floor, you know, at the

805
00:51:58,320 --> 00:52:01,279
Speaker 1: manager's window or whatever, and him walking around that floor,

806
00:52:01,400 --> 00:52:03,600
Speaker 1: and I had in my mind, you know, the feeling

807
00:52:03,640 --> 00:52:06,120
Speaker 1: like there's no question in my mind who these people

808
00:52:06,160 --> 00:52:08,360
Speaker 1: work for. Like he walked that floor and he really,

809
00:52:08,719 --> 00:52:11,320
Speaker 1: you know, drove it. And I always loved that visual

810
00:52:11,800 --> 00:52:14,520
Speaker 1: of the manager's window, you know, in a factory. And

811
00:52:14,560 --> 00:52:19,319
Speaker 1: so on our floor, we have client conference rooms that

812
00:52:19,560 --> 00:52:27,160
Speaker 1: look out over our employees that represent a manager's window.

813
00:52:27,560 --> 00:52:30,200
Speaker 1: And so the message to our team, the message to

814
00:52:30,239 --> 00:52:32,600
Speaker 1: our people is it's the people in that room that

815
00:52:32,680 --> 00:52:35,480
Speaker 1: you work for. Those are the people that you report to,

816
00:52:35,719 --> 00:52:38,239
Speaker 1: Those are the people that you owe something to. And

817
00:52:38,520 --> 00:52:44,080
Speaker 1: we've really tried to create that sense of client centricity

818
00:52:44,239 --> 00:52:48,040
Speaker 1: and alignment with our clients, not just in our documentation

819
00:52:48,239 --> 00:52:52,560
Speaker 1: and with our incentives, but also culturally within the fabric

820
00:52:52,600 --> 00:52:56,800
Speaker 1: of our firm. Quite quite interesting. So let's talk a

821
00:52:56,880 --> 00:53:01,560
Speaker 1: little bit about this reallocation from public markets to private

822
00:53:01,600 --> 00:53:04,480
Speaker 1: markets that you think is going to lead to the

823
00:53:04,600 --> 00:53:09,000
Speaker 1: private market sector tripling over the next let's call a decade.

824
00:53:09,000 --> 00:53:12,879
Speaker 1: Am I being to conservative or is that about right? Yeah,

825
00:53:12,920 --> 00:53:15,319
Speaker 1: we'll see, We'll see how the environment plays into it.

826
00:53:15,360 --> 00:53:18,799
Speaker 1: But directionally we think that that's so where is this

827
00:53:18,880 --> 00:53:20,759
Speaker 1: going to come from? How much of this is going

828
00:53:20,800 --> 00:53:22,600
Speaker 1: to be individual? How much of this is going to

829
00:53:22,680 --> 00:53:27,440
Speaker 1: be institutional? And are we going to see four oh

830
00:53:27,480 --> 00:53:31,200
Speaker 1: one ks orfer the opportunity to make the sort of

831
00:53:31,280 --> 00:53:37,880
Speaker 1: private equity investment. Yeah, you know, I came from an

832
00:53:37,920 --> 00:53:44,719
Speaker 1: interesting client meeting this week, Fortune one hundred company that

833
00:53:44,920 --> 00:53:50,360
Speaker 1: is in the process of reclassifying some of their investment buckets,

834
00:53:50,840 --> 00:53:53,800
Speaker 1: and they're actually going to take their long term bond

835
00:53:53,880 --> 00:53:58,839
Speaker 1: portfolio and blend it together with their private credit portfolio

836
00:53:59,440 --> 00:54:04,120
Speaker 1: because they think that private credit offers better risk return

837
00:54:04,560 --> 00:54:07,960
Speaker 1: in the current market environment and not less risk, etcetera.

838
00:54:08,040 --> 00:54:12,320
Speaker 1: So they're they're they're thinking about opening up access to

839
00:54:13,840 --> 00:54:20,239
Speaker 1: a private credit out of this portfolio. So institutional investors

840
00:54:20,719 --> 00:54:24,600
Speaker 1: are thinking about how I think they can use private

841
00:54:24,640 --> 00:54:30,800
Speaker 1: markets more effectively within their portfolio, and individual investors, we think,

842
00:54:30,960 --> 00:54:35,719
Speaker 1: in many instances can benefit to having access to a

843
00:54:35,760 --> 00:54:40,399
Speaker 1: strong performing asset class like the private markets. Now, it's

844
00:54:40,400 --> 00:54:43,400
Speaker 1: certainly not for everyone, right. The amount of allocation that

845
00:54:43,480 --> 00:54:48,480
Speaker 1: people people put into private markets certainly depends on people's

846
00:54:48,560 --> 00:54:52,799
Speaker 1: risk tolerance. This is an a liquid asset class. We

847
00:54:52,920 --> 00:54:55,600
Speaker 1: can do things as an industry to make it more

848
00:54:55,640 --> 00:54:58,960
Speaker 1: convenient and to create some degree of liquidity and in

849
00:54:59,719 --> 00:55:01,840
Speaker 1: good times, but this is always going to be an

850
00:55:01,880 --> 00:55:07,399
Speaker 1: asset class again that prioritizes long term performance over near

851
00:55:07,520 --> 00:55:12,080
Speaker 1: term liquidity, and so it depends on the investor's desire

852
00:55:12,320 --> 00:55:14,840
Speaker 1: to do that. But by and large, the investors that

853
00:55:14,880 --> 00:55:18,920
Speaker 1: we talked to are looking to increase their allocations to

854
00:55:19,000 --> 00:55:22,360
Speaker 1: private markets because it is such an important part of

855
00:55:23,960 --> 00:55:27,120
Speaker 1: their allocation. So let's talk about private credit for a minute.

856
00:55:28,120 --> 00:55:31,359
Speaker 1: Back when interest rates were at zero and the ten

857
00:55:31,480 --> 00:55:36,400
Speaker 1: year yielded practically nothing, we saw a lot of institutional

858
00:55:36,480 --> 00:55:40,320
Speaker 1: interest in private credit. Hey, listen, we're getting some yield.

859
00:55:41,960 --> 00:55:45,600
Speaker 1: There's an illiquidity concern, but we know what our future

860
00:55:45,640 --> 00:55:48,680
Speaker 1: liabilities are and we can ladder that out so it

861
00:55:48,800 --> 00:55:52,840
Speaker 1: wasn't a challenge for a big institution. So the first

862
00:55:52,880 --> 00:55:56,120
Speaker 1: question is, now that rates have come up quite a bit,

863
00:55:56,239 --> 00:56:01,719
Speaker 1: FED is just coming up on five percent. Is there

864
00:56:01,760 --> 00:56:04,640
Speaker 1: still the same demand for that sort of private credit

865
00:56:05,080 --> 00:56:08,399
Speaker 1: when there is an alternative you're no longer competing with,

866
00:56:08,920 --> 00:56:11,000
Speaker 1: you know, a one and a half percent ten year

867
00:56:11,080 --> 00:56:15,960
Speaker 1: How does that play in? I think the private credit

868
00:56:16,000 --> 00:56:20,520
Speaker 1: industry has has really come into its own since this

869
00:56:20,640 --> 00:56:26,000
Speaker 1: rate hike cycle began, and demand for absolutely private credit

870
00:56:26,040 --> 00:56:31,480
Speaker 1: has increased disproportionate to a lot of other asset types

871
00:56:31,719 --> 00:56:33,840
Speaker 1: that are more dependent. And so if you think about

872
00:56:33,840 --> 00:56:36,080
Speaker 1: like the equity side, for example, I was sitting down

873
00:56:36,080 --> 00:56:42,440
Speaker 1: with a client recently and trying to illustrate the impact

874
00:56:42,560 --> 00:56:46,600
Speaker 1: that this changing rate environment would have, and I pulled

875
00:56:46,600 --> 00:56:50,360
Speaker 1: out an old model for an investment that they liked

876
00:56:50,360 --> 00:56:53,680
Speaker 1: in particular, and it was a twenty one percent return

877
00:56:53,760 --> 00:56:57,440
Speaker 1: that had been underwritten. And here's the here's the assumptions

878
00:56:57,480 --> 00:57:00,920
Speaker 1: that we had with regards to leverage levels, with regards

879
00:57:00,960 --> 00:57:04,880
Speaker 1: to rate, etc. And I punched in the new environment,

880
00:57:05,000 --> 00:57:07,560
Speaker 1: I just said, Okay, that six point seven times leverage,

881
00:57:07,640 --> 00:57:09,480
Speaker 1: you're not going to get that anymore, right, But that's

882
00:57:09,480 --> 00:57:11,319
Speaker 1: going to be more like four four and a quarter. Right,

883
00:57:11,360 --> 00:57:13,840
Speaker 1: we change that, and there was two hundred fifty basis

884
00:57:13,840 --> 00:57:17,400
Speaker 1: points to return gone because of that that element. Okay,

885
00:57:17,440 --> 00:57:20,560
Speaker 1: this cost of capital is no longer applicable, is more

886
00:57:20,560 --> 00:57:23,920
Speaker 1: like double that today, and that brought it down by

887
00:57:23,960 --> 00:57:28,439
Speaker 1: another one hundred fifty basis points or whatever. And then

888
00:57:29,360 --> 00:57:31,800
Speaker 1: and then we took a look at Okay, now you know,

889
00:57:31,920 --> 00:57:37,919
Speaker 1: within private credit you can lend at four four point

890
00:57:38,000 --> 00:57:42,240
Speaker 1: two five times EBITDA and gets in some cases a

891
00:57:42,280 --> 00:57:45,640
Speaker 1: double digit return doing that if you're kind of structuring

892
00:57:45,720 --> 00:57:49,720
Speaker 1: solutions for the right type of clients, and then you

893
00:57:49,720 --> 00:57:51,440
Speaker 1: have to wonder, you know, on the equity side, you

894
00:57:51,520 --> 00:57:54,720
Speaker 1: really have to work right to generate that out performance.

895
00:57:54,920 --> 00:57:57,240
Speaker 1: And so on a relative value basis, there's a lot

896
00:57:57,280 --> 00:58:00,680
Speaker 1: of investors that are finding private credit is a particularly

897
00:58:00,680 --> 00:58:03,480
Speaker 1: attractive place to invest right now. And we have a

898
00:58:03,480 --> 00:58:05,880
Speaker 1: lot of a lot of very interesting dialogue with our clients,

899
00:58:05,880 --> 00:58:09,800
Speaker 1: and especially considering the past decade, not counting twenty twenty two,

900
00:58:10,040 --> 00:58:13,080
Speaker 1: but the decade prior to that, you saw thirteen fourteen

901
00:58:13,120 --> 00:58:17,439
Speaker 1: percent a year in US equities, which is way over

902
00:58:17,960 --> 00:58:21,919
Speaker 1: his historical eight percent a year. One in surprise, if

903
00:58:22,520 --> 00:58:25,200
Speaker 1: you know five to six percent a year, six seven

904
00:58:25,240 --> 00:58:29,480
Speaker 1: percent a year, you're you're mean reverting, especially in the

905
00:58:29,480 --> 00:58:34,080
Speaker 1: face of higher rates and cost of capital. Wouldn't be

906
00:58:34,240 --> 00:58:36,920
Speaker 1: outrageous to make those of it wouldn't be outrageous. And

907
00:58:37,480 --> 00:58:41,240
Speaker 1: what that means is you really have to pick your spots.

908
00:58:41,800 --> 00:58:44,240
Speaker 1: It used to be you know that you know, you

909
00:58:44,240 --> 00:58:47,160
Speaker 1: could invest into a good grower and just assume the economy,

910
00:58:47,400 --> 00:58:49,560
Speaker 1: you know would would take care of some portion of

911
00:58:49,600 --> 00:58:52,240
Speaker 1: the value creation strategy. Today you have to be buying

912
00:58:52,240 --> 00:58:55,600
Speaker 1: companies that are growing really disproportionately strong in order to

913
00:58:55,640 --> 00:58:59,480
Speaker 1: go long equity. And so the average company that we

914
00:58:59,520 --> 00:59:03,280
Speaker 1: invested the equiside was growing at double digit growing its

915
00:59:03,280 --> 00:59:06,160
Speaker 1: earnings by double digits. And those are the type of

916
00:59:06,160 --> 00:59:08,880
Speaker 1: businesses that you can continue to generate strong returns on.

917
00:59:08,960 --> 00:59:11,920
Speaker 1: But it requires that thematic research to make sure you're

918
00:59:11,920 --> 00:59:14,440
Speaker 1: getting your spots really well, and it also requires an

919
00:59:14,480 --> 00:59:18,640
Speaker 1: ownership model that's quite intense to drive transformation. And on

920
00:59:18,640 --> 00:59:23,400
Speaker 1: the credit side, there's a real opportunity today to invest

921
00:59:23,480 --> 00:59:25,880
Speaker 1: at attractive returns. I see that in the investment committee

922
00:59:25,920 --> 00:59:28,800
Speaker 1: every week. Huh. Really interesting. One of the things we

923
00:59:28,840 --> 00:59:34,040
Speaker 1: haven't talked about if you're appealing more to individual investors.

924
00:59:34,680 --> 00:59:40,480
Speaker 1: Typically that comes along with regulation and compliance, standards and

925
00:59:40,600 --> 00:59:44,560
Speaker 1: oversight from the government, something that the world of private

926
00:59:44,600 --> 00:59:47,800
Speaker 1: markets really doesn't spend a lot of time with. The

927
00:59:47,840 --> 00:59:51,640
Speaker 1: assumption is, hey, these are big, sophisticated investors making big

928
00:59:51,680 --> 00:59:56,560
Speaker 1: investments into companies, and everybody here is an adult, and

929
00:59:56,600 --> 01:00:01,479
Speaker 1: so we don't need a paternalistic over Once you bring

930
01:00:01,560 --> 01:00:05,080
Speaker 1: in smaller I'm not even saying mom and pop, but

931
01:00:05,440 --> 01:00:09,520
Speaker 1: a credited investors or non institutional investors, there's a different

932
01:00:09,600 --> 01:00:13,360
Speaker 1: level of scrutiny that comes with that. How our private

933
01:00:13,400 --> 01:00:18,520
Speaker 1: markets and private equity going to manage that sort of regulation. Yeah,

934
01:00:19,120 --> 01:00:24,680
Speaker 1: So the industry as it's expanded from a small niche

935
01:00:24,720 --> 01:00:28,800
Speaker 1: industry years ago to an industry today already managing ten

936
01:00:28,880 --> 01:00:34,400
Speaker 1: trillion dollars of assets, already a fiduciary for the funds

937
01:00:34,400 --> 01:00:41,480
Speaker 1: of hard working capital. There's regulation has already increased substantially.

938
01:00:41,560 --> 01:00:45,680
Speaker 1: Compliance needs have increased substantially within our industry, and I

939
01:00:45,720 --> 01:00:51,440
Speaker 1: have no doubt that that trend will continue. We continue

940
01:00:51,560 --> 01:00:56,840
Speaker 1: to appeal, I think, to particularly sophisticated investors, and that

941
01:00:57,040 --> 01:01:02,040
Speaker 1: has to continue to be the case. This is not

942
01:01:02,160 --> 01:01:06,920
Speaker 1: an asset class that I think like retail retail investors

943
01:01:08,800 --> 01:01:10,840
Speaker 1: are going to allocate. You even in that fund that

944
01:01:10,880 --> 01:01:13,920
Speaker 1: you mentioned previously, where it's you know, a minimum of

945
01:01:13,960 --> 01:01:16,680
Speaker 1: fifty thousand or whatever it is, I think our average

946
01:01:16,720 --> 01:01:19,000
Speaker 1: investor there's two hundred thousand. So it's a it's a

947
01:01:19,040 --> 01:01:25,000
Speaker 1: sophisticated investors that's allocating. It's not a Robin Hood investor.

948
01:01:25,120 --> 01:01:28,600
Speaker 1: It's not absolutely not. And if you think about four

949
01:01:28,680 --> 01:01:32,320
Speaker 1: oh one K plans, for example, the place that our

950
01:01:32,480 --> 01:01:35,600
Speaker 1: asset class is going to be most relevant for the

951
01:01:35,640 --> 01:01:40,160
Speaker 1: near term is in the defined contribution portions of that

952
01:01:40,240 --> 01:01:42,160
Speaker 1: four oh one K market, where you still have a

953
01:01:42,200 --> 01:01:47,200
Speaker 1: sophisticated portfolio manager that's putting those portfolios together. I don't

954
01:01:47,200 --> 01:01:50,280
Speaker 1: think that anybody in the near term expects within their

955
01:01:50,520 --> 01:01:52,280
Speaker 1: four oh one K allocation to be able to go

956
01:01:52,320 --> 01:01:55,040
Speaker 1: in there and bounce to a big private equity fund.

957
01:01:55,160 --> 01:01:59,040
Speaker 1: That's not going to be the case. But you know,

958
01:01:59,200 --> 01:02:04,120
Speaker 1: we are going to attract demand from from an increasingly

959
01:02:04,480 --> 01:02:07,440
Speaker 1: individual set of investors, and that's going to come with regulation,

960
01:02:07,480 --> 01:02:08,920
Speaker 1: and the big firms will be able to deal with that.

961
01:02:09,080 --> 01:02:14,120
Speaker 1: So I have to ask one question related to the

962
01:02:14,480 --> 01:02:18,200
Speaker 1: interest rate environment. You mentioned the Darwinni and struggle the

963
01:02:18,280 --> 01:02:22,200
Speaker 1: changing environment. How zero cap cost the capital was a

964
01:02:22,280 --> 01:02:27,120
Speaker 1: tailwind before now rising rates are a headwind. You've talked

965
01:02:27,120 --> 01:02:31,120
Speaker 1: a bit in public about the Federal Reserve suggesting you

966
01:02:31,160 --> 01:02:34,000
Speaker 1: think they're going to overshoot on the rate hikes. You

967
01:02:34,120 --> 01:02:38,320
Speaker 1: have a unique perspective to observe this through your hundred

968
01:02:38,360 --> 01:02:42,120
Speaker 1: plus portfolio companies. Tell us why you think the FED

969
01:02:42,240 --> 01:02:46,320
Speaker 1: is going to end up going too far and overtightening. Well,

970
01:02:46,360 --> 01:02:53,720
Speaker 1: I think it's possible. The Fed had a choice of

971
01:02:53,760 --> 01:02:57,960
Speaker 1: either taking a big ratchet all at once, shocking the

972
01:02:58,040 --> 01:03:03,280
Speaker 1: market and changing behavior ye, or doing it slowly and incrementally.

973
01:03:03,760 --> 01:03:05,600
Speaker 1: I mean, it was a fast rate hike obviously, but

974
01:03:07,280 --> 01:03:09,480
Speaker 1: the first one anyone was a little shocking, Yeah, the

975
01:03:09,840 --> 01:03:14,800
Speaker 1: first one, but really doing something shocking to change behavior

976
01:03:15,680 --> 01:03:19,880
Speaker 1: of consumers, of people that are out participating in the market,

977
01:03:20,480 --> 01:03:23,600
Speaker 1: or making these incremental changes that are more or less

978
01:03:23,640 --> 01:03:26,600
Speaker 1: in line with consensus on what the FED should be doing.

979
01:03:27,160 --> 01:03:30,640
Speaker 1: And they've chosen to go in a more or less

980
01:03:30,680 --> 01:03:34,440
Speaker 1: consensus driven pattern for most of the changes. And so

981
01:03:34,480 --> 01:03:37,000
Speaker 1: what that means is opposed to shocking the market and

982
01:03:37,120 --> 01:03:40,800
Speaker 1: changing behavior through setting a tone up front, they need

983
01:03:40,840 --> 01:03:44,680
Speaker 1: to wait for the impacts of those rate hikes to

984
01:03:44,720 --> 01:03:47,200
Speaker 1: flow through, and that just takes some time. So I

985
01:03:47,280 --> 01:03:51,720
Speaker 1: have no doubt that it will take some time for

986
01:03:51,760 --> 01:03:54,520
Speaker 1: the full impact of many of these hikes to be

987
01:03:54,560 --> 01:03:57,800
Speaker 1: felt into fully changed behavior, and therefore there could be

988
01:03:57,840 --> 01:04:02,320
Speaker 1: the potential of over deering or overshooting as a result

989
01:04:02,360 --> 01:04:06,080
Speaker 1: of that curveball question. You guys are very much the

990
01:04:06,200 --> 01:04:11,000
Speaker 1: anti Wall Street, both in location and by design. You

991
01:04:11,160 --> 01:04:15,080
Speaker 1: almost ended up at Lehman Brothers. Did you you know,

992
01:04:15,240 --> 01:04:17,880
Speaker 1: did you dodge a bullet there? What would have happened

993
01:04:17,880 --> 01:04:21,200
Speaker 1: if you ended up going into Wall Street proper given

994
01:04:21,280 --> 01:04:25,360
Speaker 1: your current philosophy. Yeah, I absolutely dodged a bullet there.

995
01:04:25,800 --> 01:04:30,160
Speaker 1: Um and uh, And I'm grateful every day actually that

996
01:04:30,240 --> 01:04:35,680
Speaker 1: I landed in a place in a culture that is thoughtful, right,

997
01:04:36,040 --> 01:04:40,240
Speaker 1: that is thinking towards the future. That's that's a little

998
01:04:40,280 --> 01:04:43,560
Speaker 1: bit more humble and able to navigate an environment to

999
01:04:43,680 --> 01:04:48,240
Speaker 1: suppose of getting lost in an ego. Um, I absolutely

1000
01:04:48,760 --> 01:04:52,120
Speaker 1: am grateful every day that I dodged a bullet there. Uh,

1001
01:04:52,320 --> 01:04:55,320
Speaker 1: no question, great answer. I know I only have you

1002
01:04:55,440 --> 01:04:57,920
Speaker 1: for so much time, So let me jump to my

1003
01:04:58,000 --> 01:05:01,720
Speaker 1: favorite questions that we ask all of our guests starting

1004
01:05:01,760 --> 01:05:04,360
Speaker 1: with what do you what do you do for entertainment

1005
01:05:04,400 --> 01:05:07,240
Speaker 1: out in Colorado? What have you been streaming and watching

1006
01:05:07,840 --> 01:05:10,360
Speaker 1: over the past couple of years? Tell us what's kept

1007
01:05:10,400 --> 01:05:15,440
Speaker 1: you in the family entertained. So my wife owns the

1008
01:05:15,520 --> 01:05:20,560
Speaker 1: remote at home, and so if we're streaming something, it's

1009
01:05:20,680 --> 01:05:25,080
Speaker 1: usually something about British baking or Indian dating or something

1010
01:05:25,080 --> 01:05:30,440
Speaker 1: along those lines. I really love this Mandalorian series and

1011
01:05:30,840 --> 01:05:34,080
Speaker 1: getting into that. I think season three comes out later

1012
01:05:34,120 --> 01:05:37,880
Speaker 1: this year. Yeah, yeah, looking forward to that. That's intriguing.

1013
01:05:38,040 --> 01:05:40,680
Speaker 1: Tell us about some of your mentors who helped to

1014
01:05:40,720 --> 01:05:44,720
Speaker 1: shape your career. Um, well, I think my parents had

1015
01:05:44,760 --> 01:05:49,520
Speaker 1: a big influence. My dad was a business person and

1016
01:05:49,760 --> 01:05:55,720
Speaker 1: I had a tremendous work ethic. My mother's an unbelievably

1017
01:05:55,800 --> 01:05:59,640
Speaker 1: loyal person and helped to inspire that in me. I've

1018
01:05:59,640 --> 01:06:02,960
Speaker 1: got a couple of partners, in particular, one Walter Keller,

1019
01:06:03,480 --> 01:06:08,640
Speaker 1: who he is just an elephant memory right every way

1020
01:06:08,680 --> 01:06:10,640
Speaker 1: that we've screwed up as a firm. He's got it

1021
01:06:10,680 --> 01:06:12,400
Speaker 1: in his head and he brings it up and he

1022
01:06:12,480 --> 01:06:15,040
Speaker 1: keeps us out of trouble to the point where actually

1023
01:06:15,640 --> 01:06:18,480
Speaker 1: close to my office in the campus for everybody to

1024
01:06:18,520 --> 01:06:21,280
Speaker 1: see everybody on the floor. I have all of the

1025
01:06:21,360 --> 01:06:24,240
Speaker 1: lessons learned of the firm every way that we've lost money,

1026
01:06:24,240 --> 01:06:27,360
Speaker 1: and that's largely a download out of Walter's head for

1027
01:06:28,000 --> 01:06:30,240
Speaker 1: the rest of our colleagues to kind of understand the

1028
01:06:30,320 --> 01:06:32,400
Speaker 1: lessons that we've had over time. And he's been a

1029
01:06:32,480 --> 01:06:36,920
Speaker 1: great mentor, and our three founders have all been in

1030
01:06:36,960 --> 01:06:39,720
Speaker 1: their own way real mentors to me as well. Tell

1031
01:06:39,760 --> 01:06:42,000
Speaker 1: us about some of your favorite books and what you're

1032
01:06:42,000 --> 01:06:49,520
Speaker 1: reading right now. So I just finished Bono's memoir Surrender.

1033
01:06:49,760 --> 01:06:51,840
Speaker 1: I usually read something a little bit more light and

1034
01:06:51,880 --> 01:06:55,000
Speaker 1: a little bit more serious. There's also a book called

1035
01:06:55,000 --> 01:06:57,880
Speaker 1: The Weirdest People in the World that was a really

1036
01:06:57,920 --> 01:07:02,680
Speaker 1: interesting read. I recall hearing about that. Yeah, it's interesting.

1037
01:07:02,680 --> 01:07:05,640
Speaker 1: I've got a couple in the chamber when my wife

1038
01:07:05,640 --> 01:07:07,920
Speaker 1: gave me that's called This is Your Mind on Plants,

1039
01:07:09,040 --> 01:07:12,800
Speaker 1: and then one called chip War by Peter Miller that

1040
01:07:12,840 --> 01:07:15,640
Speaker 1: I'm looking forward to getting into. What sort of advice

1041
01:07:15,680 --> 01:07:18,680
Speaker 1: would you give to a recent college grad interested in

1042
01:07:18,720 --> 01:07:23,640
Speaker 1: a career in either investing or private markets. Yeah. So

1043
01:07:23,720 --> 01:07:27,160
Speaker 1: I do spend quite a bit of time with our hires,

1044
01:07:27,160 --> 01:07:29,280
Speaker 1: our new hires, and I think we're gonna hire fifty

1045
01:07:29,400 --> 01:07:31,960
Speaker 1: five kids out of school this year directly into our

1046
01:07:31,960 --> 01:07:35,040
Speaker 1: analyst program where they rotate across their different things. And

1047
01:07:35,120 --> 01:07:38,880
Speaker 1: I always set the tone first day of training when

1048
01:07:38,920 --> 01:07:41,040
Speaker 1: they come in, and one of the things that I

1049
01:07:41,080 --> 01:07:45,720
Speaker 1: tell them is that this is no longer a young

1050
01:07:45,920 --> 01:07:49,520
Speaker 1: asset class, right. This is an asset class. It's been

1051
01:07:49,520 --> 01:07:51,880
Speaker 1: around for a little while. And it might have been

1052
01:07:52,040 --> 01:07:55,640
Speaker 1: the fast money lore of doing deals and kind of

1053
01:07:55,680 --> 01:07:59,200
Speaker 1: transactions that got you interested into this space. This is

1054
01:07:59,200 --> 01:08:02,400
Speaker 1: an asset classic. You can have a tremendous impact as

1055
01:08:02,440 --> 01:08:05,000
Speaker 1: an owner, but you've got to be prepared to roll

1056
01:08:05,120 --> 01:08:08,120
Speaker 1: up your sleeves and work. So we're spending sending many

1057
01:08:08,160 --> 01:08:11,360
Speaker 1: of our young professionals to work in our portfolio, right

1058
01:08:11,520 --> 01:08:14,480
Speaker 1: to get experience how to run projects and how to

1059
01:08:14,560 --> 01:08:18,320
Speaker 1: run businesses, and send them to work for our CEOs

1060
01:08:18,360 --> 01:08:22,320
Speaker 1: as much as they spend time working, you know, within

1061
01:08:22,400 --> 01:08:25,720
Speaker 1: our halls. And I think that's something that young professionals

1062
01:08:25,720 --> 01:08:29,120
Speaker 1: need to be aware of the needs of young talent

1063
01:08:29,200 --> 01:08:32,559
Speaker 1: or changing get some operating experience. And our final question,

1064
01:08:32,920 --> 01:08:36,800
Speaker 1: what do you know about the worlds of private equity investing, buyouts,

1065
01:08:36,880 --> 01:08:40,519
Speaker 1: private markets today that you wish you knew twenty plus

1066
01:08:40,640 --> 01:08:42,839
Speaker 1: years or so ago when you were first getting started.

1067
01:08:43,880 --> 01:08:48,640
Speaker 1: I would say that investing is a team sport. I

1068
01:08:48,680 --> 01:08:50,880
Speaker 1: always maybe thought about it growing was more of an

1069
01:08:50,920 --> 01:08:54,760
Speaker 1: individual pursuit. You know. I had a client recently who

1070
01:08:54,840 --> 01:08:58,479
Speaker 1: pulled out my track record. They were in a due

1071
01:08:58,520 --> 01:09:01,479
Speaker 1: diligence session. They said, Dave as a fantastic track record,

1072
01:09:01,880 --> 01:09:04,880
Speaker 1: what's the secret of your success? And I thought, that's

1073
01:09:04,920 --> 01:09:08,479
Speaker 1: a that's an ego affirming question, right you kind of

1074
01:09:09,120 --> 01:09:12,160
Speaker 1: you'd like to hear that to some degree, get that

1075
01:09:12,160 --> 01:09:15,439
Speaker 1: little tingle up your spine. And I thought about how

1076
01:09:15,479 --> 01:09:20,360
Speaker 1: to answer it. And what I told or was, what

1077
01:09:20,520 --> 01:09:24,400
Speaker 1: you don't see on that list is company A, company B,

1078
01:09:25,160 --> 01:09:28,720
Speaker 1: company C D. Those are all companies that I had

1079
01:09:28,880 --> 01:09:34,200
Speaker 1: under exclusivity at some point during my career. But my partners,

1080
01:09:34,520 --> 01:09:36,479
Speaker 1: people that used to be my bosses that are today

1081
01:09:36,520 --> 01:09:43,320
Speaker 1: my partners, wouldn't let me invest. And I'm telling you,

1082
01:09:43,360 --> 01:09:46,200
Speaker 1: if you average together those investments that I didn't make

1083
01:09:46,840 --> 01:09:49,479
Speaker 1: together with the investments that we did make, I would

1084
01:09:49,520 --> 01:09:53,080
Speaker 1: have a much more average track record. Those investments were

1085
01:09:53,160 --> 01:09:55,640
Speaker 1: done by other firms. I've gone back and looked at it.

1086
01:09:56,200 --> 01:09:58,880
Speaker 1: They were not as successful as the ones that did happen,

1087
01:09:59,360 --> 01:10:02,519
Speaker 1: and so rounding yourself with partners that are going to

1088
01:10:02,680 --> 01:10:05,519
Speaker 1: challenge you and push you and cover your blind spots

1089
01:10:06,040 --> 01:10:08,360
Speaker 1: is something that's really important. There's a lot of investment

1090
01:10:08,400 --> 01:10:12,519
Speaker 1: firms that get founded by an individual and they have

1091
01:10:12,560 --> 01:10:14,559
Speaker 1: a type of transaction that they're known for, and they

1092
01:10:14,560 --> 01:10:16,840
Speaker 1: build a financial product around themselves, and they build a

1093
01:10:16,840 --> 01:10:20,120
Speaker 1: team around themselves, and that type of a strategy works

1094
01:10:20,200 --> 01:10:23,439
Speaker 1: until it doesn't work. And we at Partners Group have

1095
01:10:23,560 --> 01:10:29,280
Speaker 1: really tried to build a culture where it's about the debate, right,

1096
01:10:29,360 --> 01:10:34,040
Speaker 1: It's about the fight, it's about challenging each other, it's

1097
01:10:34,080 --> 01:10:38,799
Speaker 1: about diversity of perspectives when you're making those investment decisions,

1098
01:10:39,400 --> 01:10:43,559
Speaker 1: and that is an absolutely critical part to investing that

1099
01:10:43,640 --> 01:10:47,160
Speaker 1: far too many people think about and talk about. Thank you,

1100
01:10:47,240 --> 01:10:49,600
Speaker 1: David for being so generous with your time. We have

1101
01:10:49,720 --> 01:10:53,200
Speaker 1: been speaking with David Layton. He is the CEO of

1102
01:10:53,400 --> 01:10:57,040
Speaker 1: Partners Group. If you enjoy this conversation, well you can

1103
01:10:57,120 --> 01:10:59,880
Speaker 1: check out any of our previous five hundred or so

1104
01:11:00,000 --> 01:11:04,040
Speaker 1: such discussions we've had over the past eight plus years.

1105
01:11:04,080 --> 01:11:10,000
Speaker 1: You can find those at YouTube, Spotify, iTunes, wherever you

1106
01:11:10,080 --> 01:11:13,639
Speaker 1: like to get your podcasts from be sure and check

1107
01:11:13,680 --> 01:11:16,000
Speaker 1: out our daily reading list. You can find that at

1108
01:11:16,080 --> 01:11:20,080
Speaker 1: Riholtz dot com. Follow me on Twitter at Rihaltz. You

1109
01:11:20,120 --> 01:11:25,280
Speaker 1: can follow all of the Bloomberg podcasts on Twitter at podcasts.

1110
01:11:25,880 --> 01:11:27,680
Speaker 1: I would be remiss if I did not thank the

1111
01:11:27,720 --> 01:11:31,360
Speaker 1: crack team that helps put these conversations together each week.

1112
01:11:31,640 --> 01:11:35,400
Speaker 1: Justin Nilner is my audio engineer, Atiko val Bron is

1113
01:11:35,439 --> 01:11:38,599
Speaker 1: my project manager, Sean Russo is our head of research.

1114
01:11:38,960 --> 01:11:42,719
Speaker 1: Paris Wold is my producer. And an extra special thank

1115
01:11:42,720 --> 01:11:45,320
Speaker 1: you this week goes out. If you like the new

1116
01:11:45,439 --> 01:11:50,599
Speaker 1: music that is our audio signature, we just change that.

1117
01:11:51,080 --> 01:11:53,200
Speaker 1: Thank you so much to Leo Sidron who did a

1118
01:11:53,240 --> 01:11:56,559
Speaker 1: great job on creating that, and thank you to Jackie

1119
01:11:56,640 --> 01:12:00,559
Speaker 1: Kessler Lebliner who helped us with our new Masters in

1120
01:12:00,600 --> 01:12:05,439
Speaker 1: Business artwork. I'm Barry Ridolts. You've been listening to Masters

1121
01:12:05,439 --> 01:12:07,519
Speaker 1: in Business on Bloomberg Radio.