WEBVTT - 10 Outrageous Private Equity Predictions for 2020

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Jason

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<v Speaker 1>Kelly on Bloomberg Radio. All right, so let's talk a

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<v Speaker 1>little bit about the world of private equity. It's always

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<v Speaker 1>fun to catch up with this next guest this time

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<v Speaker 1>of year because it's around the time that he puts

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<v Speaker 1>out his big, bold predictions, his outrageous predictions for private

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<v Speaker 1>equity for the coming year. We're talking about Antandrian, chairman

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<v Speaker 1>of Triago. He's here with us in our Bloomberg Interactor

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<v Speaker 1>Broker studio. He says he's based in Paris, but he's

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<v Speaker 1>really a global citizen all over the world on a

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<v Speaker 1>plane or something everywhere in Berlin due buy all of

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<v Speaker 1>these different places, because this is the global industry, to

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<v Speaker 1>say the least. Great to see you, thank you, Happy

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<v Speaker 1>New Year. Related, um, so talk to us about some

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<v Speaker 1>of these predictions. My favorite actually is the first one.

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<v Speaker 1>Uh and I'll tell you why, because it's Blackstone raises

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<v Speaker 1>billion dollars in a month. And you know, Carol and

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<v Speaker 1>I have a joke because we spent all that time

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<v Speaker 1>with Steve Schwartzman. One of the things he likes to

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<v Speaker 1>do is say go big, and why wouldn't they raise.

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<v Speaker 1>It's not the craziest idea. It may be crazy for

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<v Speaker 1>the next year, I mean for this year, but I

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<v Speaker 1>mean I guess that in the next years this is

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<v Speaker 1>going to happen. And this actually may not. It may

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<v Speaker 1>not need a month, it may need a minute. Uh.

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<v Speaker 1>The reason why is that private equity is obviously interesting

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<v Speaker 1>too many now, including the retail market, and uh, as

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<v Speaker 1>you know, the SEC will be putting out some new

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<v Speaker 1>rules that basically allow the public, maybe not all of

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<v Speaker 1>the public, but a lot of it, to actually invest

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<v Speaker 1>in private equity funds. And that's a reason to go

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<v Speaker 1>I guess that's another reason to go big. One of

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<v Speaker 1>the other things you point out, and this is a

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<v Speaker 1>this is one very close to something we talked about

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<v Speaker 1>a lot is soft Bank. Uh. And the Vision Fund

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<v Speaker 1>and how when we're you know, sort of getting more

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<v Speaker 1>into the world of venture capital here momentarily but a

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<v Speaker 1>moment but uh, you know, you have a bold, outrageous

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<v Speaker 1>prediction that they'll raise a hundred fifty billion dollars. I mean,

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<v Speaker 1>they've raised huge amounts of money uh so far. I

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<v Speaker 1>mean the first Vision Fund was a hundred billion. Indeed,

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<v Speaker 1>it was actually the largest and it's still I guess

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<v Speaker 1>the largest fund out there, and a hundred and fifty

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<v Speaker 1>billion would obviously be the new largest fund out there.

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<v Speaker 1>It's actually four times the number two funds fund. I

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<v Speaker 1>think it's twenty six. So yes, they already have a

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<v Speaker 1>lot of money, and they should have more. I love though,

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<v Speaker 1>as a caveat to this is I mean a lot

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<v Speaker 1>of that money comes what specifically from state connected entities

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<v Speaker 1>in China. Correct, Yes, there's a nice little circle there. Yes, indeed, indeed,

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<v Speaker 1>and then that's uh, you know, that's because of what's

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<v Speaker 1>going on in this world. I mean, China is obviously

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<v Speaker 1>taking a big piece of the of the action. And

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<v Speaker 1>I guess they want to put money into private equity

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<v Speaker 1>every air They've been buying Africa basically through private equity

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<v Speaker 1>and and other other areas. So I mean, yes, yes, yes.

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<v Speaker 1>You also talk a little bit about c p p

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<v Speaker 1>i B, the Canada Pension Plan Investment Board, one of

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<v Speaker 1>the most admired I think investors out there. They really

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<v Speaker 1>pioneered in many ways, along with some of the other

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<v Speaker 1>Canadian pensions, this direct investment model, and I think you

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<v Speaker 1>and I have talked about that over the years. What's

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<v Speaker 1>the what's the sort of outrageous prediction there, and what's

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<v Speaker 1>underneath it? The prediction is that they will put out

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<v Speaker 1>a fifty year fund. Many people in this space feel that,

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<v Speaker 1>you know, investing for five years or ten years is

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<v Speaker 1>not enough, and that if you find a good investment

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<v Speaker 1>you should keep it. Uh and some other people, you know, pensioneers,

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<v Speaker 1>feel that if if they can put their money at

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<v Speaker 1>ten percent a year forever, that's obvious be good. Hence

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<v Speaker 1>this prediction not so outrageous. Actually so okay, I find

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<v Speaker 1>this little outrageous. Warren Buffett's Berkshire Hathaway say launching a

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<v Speaker 1>private equity division. I had to remind myself. I knew

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<v Speaker 1>he had made some comments that were critical of PE.

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<v Speaker 1>I just had to remember. But in the past he

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<v Speaker 1>has said, specifically, we have seen a number of proposals

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<v Speaker 1>from private equity funds where the returns are really not calculated,

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<v Speaker 1>a matter that I would regard as honest. If I

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<v Speaker 1>were running a PENCHEON found it would be very careful

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<v Speaker 1>about what was being offered to me. So is he

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<v Speaker 1>saying I'm going to do a private If he does this,

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<v Speaker 1>he's going to say I can do a private equity

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<v Speaker 1>fund that is more transparent and better than the ones

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<v Speaker 1>that are existing. I mean, this is kind of interesting

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<v Speaker 1>to this, you know thought. I think what he's doing

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<v Speaker 1>is already private equity, right, he is already buying control

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<v Speaker 1>positions in companies that need, you know, something, and this

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<v Speaker 1>is what people are doing. So here, the prediction is

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<v Speaker 1>that he would change, you know, the format of of

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<v Speaker 1>this fund, but that's it. I mean that, I guess

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<v Speaker 1>the business itself would would basically be the same. So wait, wait,

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<v Speaker 1>so would this be a fun that others can then

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<v Speaker 1>tap into? I guess so yeah, sure, yeah, well and

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<v Speaker 1>open to others yea. And look, I mean he's partnered

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<v Speaker 1>with three g I mean he's gotten into the private

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<v Speaker 1>equity business at least from an arm's length perspective. One

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<v Speaker 1>more outrageous and then we're gonna take a break and

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<v Speaker 1>come back. Chuck Schwab buys KKR. I love this one.

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<v Speaker 1>Chuck being Henry Kravis's boss, I don't quite see it,

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<v Speaker 1>but go on. Well, I'm not sure this is the

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<v Speaker 1>main idea. The main idea is that may you know,

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<v Speaker 1>main mainstream asset managers want to become big also in

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<v Speaker 1>private equity, and that the best way to get there

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<v Speaker 1>quickly is to buy something that's there, and some buy

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<v Speaker 1>something that's big. So that's that's the reason you're listening

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<v Speaker 1>to Bloomberg Business Week Carol Masser along with Jason Kelly.

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<v Speaker 1>Our guest at this hour Antoine Drean, chairman of Triago.

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<v Speaker 1>M Antoine, I feel like I did doesn't go by,

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<v Speaker 1>We doesn't go by where there is certainly some concern

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<v Speaker 1>about the growing power of the private markets in which

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<v Speaker 1>private equity plays. Um. What does the private equity industry,

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<v Speaker 1>what what's on their mind? What do they need to

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<v Speaker 1>be concerned about in regards maybe future legislation or regulation.

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<v Speaker 1>There's going to be more regulation because there's going to

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<v Speaker 1>be more people involved and and and more uh, you know,

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<v Speaker 1>more of the retail side. So there is going to

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<v Speaker 1>be more. There's already a lot actually, and I think

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<v Speaker 1>this is an industry where LPs play a big role.

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<v Speaker 1>LPs are I mean investors in this asset class, are

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<v Speaker 1>you know, big pension funds or other institutions of the

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<v Speaker 1>same type. And they they come with their own regulation

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<v Speaker 1>and it's actually quite tough, um, and they're and they're

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<v Speaker 1>upping the pressure. It sounds like right. I mean they're

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<v Speaker 1>demanding more transparency around fees, around the ultimate investments that

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<v Speaker 1>funds make, right Yeah, I mean they want to understand

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<v Speaker 1>what their money is is used for and uh and

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<v Speaker 1>where they invest, etcetera. Just to make sure that they

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<v Speaker 1>can you know, invest with the same groups over and over. Um.

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<v Speaker 1>So yes, they are doing that. So in terms of

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<v Speaker 1>anything new that might come down, how do you see it?

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<v Speaker 1>What what specifically might come down as more regulation on

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<v Speaker 1>the industry, more transparency for sure. Um what does that mean,

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<v Speaker 1>like in terms of reporting or like what? Yeah, more

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<v Speaker 1>more more reporting, more more thought behind valuations. Uh, it's

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<v Speaker 1>already much much better than ten fifteen years ago. You know,

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<v Speaker 1>ten fifteen years ago you had different prices for the

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<v Speaker 1>same asset, but at the same time in different reports.

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<v Speaker 1>Today you pretty much have the same number for one

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<v Speaker 1>main reason, and it's called the secondary market. Uh if

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<v Speaker 1>if if a fun trades on the market and the

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<v Speaker 1>discount is huge compared to others because marks are uh

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<v Speaker 1>you know, way up there. That's one reason. That's that's

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<v Speaker 1>one reason to to look very closely at your numbers.

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<v Speaker 1>And what about the political side. I mean we are

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<v Speaker 1>in a in a US presidential election year, we've had

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<v Speaker 1>Elizabeth Warren and others come out and call out private

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<v Speaker 1>equity specifically and by name. You know, she's talked about Blackstone,

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<v Speaker 1>uh and others. How seriously are the private equity managers

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<v Speaker 1>taking that? How seriously should they take it? In US?

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<v Speaker 1>I think they are. I've read word scapegoat somewhere today. Um,

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<v Speaker 1>I think they have to be aware that this is coming.

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<v Speaker 1>We had that in Europe already a few years ago,

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<v Speaker 1>so I mean, as as a European, I know what

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<v Speaker 1>it means. Um I did it change behavior in Europe?

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<v Speaker 1>I think it changed the way that private equity players

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<v Speaker 1>were describing and themselves and and their language, and and

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<v Speaker 1>they put a lot of you know, they put a

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<v Speaker 1>lot of work into showing the people how many jobs

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<v Speaker 1>they were creating, what value they were bringing to the

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<v Speaker 1>mark it, etcetera. So there were there were going they

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<v Speaker 1>were doing a good job in in showing people that

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<v Speaker 1>they were not bad. Right. Well, I think that's what's

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<v Speaker 1>hard about private equity the industry. Right, there's contrasts. I mean,

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<v Speaker 1>I think there's that side where they make investments that

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<v Speaker 1>other folks would not even touch, certainly not the traditional

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<v Speaker 1>banking world or financial world or even you know, the

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<v Speaker 1>public market. So there's that service and then there's the

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<v Speaker 1>other that feels like buy a property, clean it out,

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<v Speaker 1>get rid of all the costs, sell it, make a profit,

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<v Speaker 1>move on. So you know, there's that message that and

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<v Speaker 1>maybe a little bit there is a little bit of

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<v Speaker 1>both of that going on. Well, at the end of

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<v Speaker 1>the day, I think that private equity has indeed created

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<v Speaker 1>a lot of jobs and a lot of value. And

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<v Speaker 1>I think many studies showed that there are obviously a

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<v Speaker 1>few counter examples of private equity shops that didn't behave

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<v Speaker 1>very well. But if you look at it deeply, I

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<v Speaker 1>mean it's really a small number of firms and people.

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<v Speaker 1>The vast majority are doing a great job in providing

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<v Speaker 1>again value too to their investors and uh and and

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<v Speaker 1>two companies their their owning. And yet, you know, going

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<v Speaker 1>back to something you said, they do have a public

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<v Speaker 1>relations problem to to a large extent, because Elizabeth Warren

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<v Speaker 1>can catch a lot of attention. And maybe it's the

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<v Speaker 1>power of the language and the power of the rhetoric,

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<v Speaker 1>but the narrative does you know, this goes back to

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<v Speaker 1>a previous presidential election where admit Romney, you know, suffered

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<v Speaker 1>pretty mightily and it may have lost the election, you know,

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<v Speaker 1>owing to that association. I I think that they all

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<v Speaker 1>have to make sure that their communication is getting better

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<v Speaker 1>and that they actually tell people what they're doing and

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<v Speaker 1>people will understand that this is this is okay, right right, Well,

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<v Speaker 1>it'll be interesting to see too if private equity can

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<v Speaker 1>get ahead and be a part of at least this movement.

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<v Speaker 1>It feels like to companies and investors acting in a

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<v Speaker 1>much more holistic way, right, you know, and just thinking

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<v Speaker 1>about uh the end. Investor Antoine Dround always a treat

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<v Speaker 1>to catch up with you, Chairman of Triago. You can

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<v Speaker 1>check out online his outrageous predictions for private ecuty and

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<v Speaker 1>so I'm not so outrageous. So outrageous and they tend

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<v Speaker 1>to come at least partially true, some of them. So

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<v Speaker 1>check that out. Always grateful to him for stopping by

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<v Speaker 1>amid his world travel