WEBVTT - Boaz Weinstein 0:00:02.680 --> 0:00:10.520 Bloomberg Audio Studios, Podcasts, radio News. Hello and welcome to 0:00:10.520 --> 0:00:12.719 the Money Stuff Podcast. I'm Matt Levine. I'm here with 0:00:12.800 --> 0:00:16.160 Kitty Greifeld and our guest is Paus Weinstein of Sappa 0:00:16.239 --> 0:00:20.200 Capital Management. I feel like we've thought since the beginning 0:00:20.200 --> 0:00:22.000 of this podcast but having you on to talk about 0:00:22.000 --> 0:00:27.040 closed unfund activism, but man, closed unfund activism has in 0:00:27.080 --> 0:00:30.440 a new form gotten really hot. I want to talk about, 0:00:30.480 --> 0:00:36.720 like what your trade is. You're out with a tender 0:00:37.000 --> 0:00:41.400 to buy what five ten percent of OBDC two five 0:00:41.400 --> 0:00:45.319 percent of OBDC to the Blue Owl private BDC ive 0:00:45.360 --> 0:00:49.120 had a thirty five ish percent discount to marked Navy, 0:00:49.360 --> 0:00:52.680 So like, what's the trade here? Like, are you like 0:00:53.159 --> 0:00:55.200 going in the book and like doing detailed credit work 0:00:55.240 --> 0:00:58.040 and being like, we think this stuff is worth seventy 0:00:58.040 --> 0:00:59.880 five cents on the dollar, so we'll pay sixty five? 0:01:00.320 --> 0:01:04.360 Are you hedging the credit? Are you trolling? Are you 0:01:04.760 --> 0:01:06.240 what's the sort of basic trade here? 0:01:06.959 --> 0:01:09.240 Why? Matt, do you assume it's not all the above? 0:01:10.800 --> 0:01:12.480 It's just a lot. I'm going to start. I'm going 0:01:12.560 --> 0:01:14.839 to start with trolling. The reason to assume it's trolling 0:01:14.840 --> 0:01:16.400 and not all of the above is because I think 0:01:16.440 --> 0:01:19.720 I think you mentioned before we started, people's first natural 0:01:19.800 --> 0:01:21.360 question is do you think you'll get. 0:01:21.160 --> 0:01:25.320 Any Okay, so I've read some people suggest, oh, this 0:01:25.360 --> 0:01:28.679 is some sort of pr blitz, like like to get 0:01:28.720 --> 0:01:29.800 myself in the story. 0:01:29.959 --> 0:01:33.000 We actually had the tenders. It worked well. 0:01:33.520 --> 0:01:35.920 We actually had the tenders ready before the Blue Oul 0:01:35.920 --> 0:01:38.120 story became a huge. 0:01:38.000 --> 0:01:41.120 Said the tenders like for OBDC two or like do 0:01:41.200 --> 0:01:42.720 you have fifteen of these ready? 0:01:42.720 --> 0:01:45.400 Togain, We have a few ready to go. We started 0:01:45.400 --> 0:01:47.160 with two, so there was you mentioned one of them. 0:01:47.200 --> 0:01:50.960 The other is Starwood s Reid. Starwood when b Reid 0:01:51.000 --> 0:01:53.840 had its problems and be Read being an interval fun 0:01:53.960 --> 0:01:57.400 that a few years ago had very high redemptions and 0:01:58.000 --> 0:02:00.800 was able to actually cure this problem because it was 0:02:00.840 --> 0:02:03.800 somewhat in isolation. It was b read and s Read 0:02:04.000 --> 0:02:06.600 in part because of the rise and interest rates and 0:02:06.720 --> 0:02:08.440 the real estate portfolio is suffering. 0:02:09.000 --> 0:02:11.880 They were able to cure it. They did a special 0:02:11.919 --> 0:02:14.360 transaction with Calsters and the problem. 0:02:14.160 --> 0:02:17.240 Basically Calters bought shares at nav and they use that 0:02:17.240 --> 0:02:17.960 to cast your blood. 0:02:18.040 --> 0:02:21.320 Or is that they got to earn a very attractive 0:02:21.400 --> 0:02:24.760 yield for I think supplying liquidity as needed and sort 0:02:24.760 --> 0:02:27.040 of just that there wouldn't be a kind of run 0:02:27.080 --> 0:02:30.359 on the fund, calm things down, and actually redemptions went 0:02:30.400 --> 0:02:34.800 below that five percent cap. But s Reat Starwood, this forady, 0:02:34.800 --> 0:02:37.440 almost four years ago is still gated and they at 0:02:37.440 --> 0:02:39.840 some point suspended and now they led out a certain 0:02:39.840 --> 0:02:42.360 amount of a month and that amount was increased, and so 0:02:42.600 --> 0:02:44.919 four years later it's still gated. And so the way 0:02:44.960 --> 0:02:47.799 this all happened, sorry that it's not trolling, Okay. The 0:02:47.840 --> 0:02:51.320 way it happened was we learned from some rias, some 0:02:51.720 --> 0:02:55.560 private wealth advisors that there was a block of twenty 0:02:55.600 --> 0:02:58.400 to thirty million from a single group of advisors of 0:02:58.560 --> 0:03:00.480 s REET that just wanted to sell. They wanted out, 0:03:00.520 --> 0:03:03.480 they didn't want to wait potentially multiple years. And s 0:03:03.600 --> 0:03:05.960 Read actually we felt like, you know, the nav's actually 0:03:06.000 --> 0:03:08.280 probably pretty good. It doesn't have the private credit problems. 0:03:08.320 --> 0:03:10.880 It's real estate. B Read has seen their NAV go up, 0:03:11.360 --> 0:03:14.520 and we felt like people need liquidity. They've waited now 0:03:14.560 --> 0:03:17.360 four years, they only gotten partial and so and the 0:03:17.360 --> 0:03:19.519 percentage that's you know, in the queue to redeem is 0:03:19.600 --> 0:03:23.160 very high. And so as that was happening, we also. 0:03:23.160 --> 0:03:25.440 Did you get the call because like you do close 0:03:25.480 --> 0:03:27.320 on fund activism. 0:03:26.639 --> 0:03:29.800 Like, yes, so they are. They are not close cousins, 0:03:29.800 --> 0:03:32.320 they're literally like brother and sister. You might even say 0:03:32.320 --> 0:03:34.880 they're like identical twins, but like there's one thing different 0:03:34.880 --> 0:03:36.920 about them, you know, the redemption rights. This kind of 0:03:36.960 --> 0:03:39.400 like history we have in closed in funds is not 0:03:39.520 --> 0:03:43.080 just like tangentially helpful. It is front and center the 0:03:43.120 --> 0:03:45.720 more or less the same. There were forty act products 0:03:45.880 --> 0:03:47.920 that manager is the sec to deal with if they 0:03:47.920 --> 0:03:50.960 don't treat their investors properly, we can avail ourselves of 0:03:51.000 --> 0:03:53.600 the courts as we have in closed end funds. And 0:03:53.640 --> 0:03:58.000 so I had tenders ready for Starwood and for Blue 0:03:58.000 --> 0:04:00.560 Owl because I was aware of outflows. Then the Blue 0:04:00.560 --> 0:04:03.640 Houl story took like three legs worse and we went. 0:04:03.640 --> 0:04:05.240 Right in Blue Ouse. So you were like aware of 0:04:05.240 --> 0:04:07.400 out those in particular. Yes, so were like I'm ready 0:04:07.440 --> 0:04:10.480 for the private credit industry generally or like Blue out particularly. 0:04:10.520 --> 0:04:12.640 I heard of some arias who went out. 0:04:12.800 --> 0:04:14.400 It was both because it was more like where do 0:04:14.480 --> 0:04:17.680 you start, you know, and prove the concept. And my colleague, 0:04:17.680 --> 0:04:21.240 my partner, Kieran Goodwin, has been ranting on Twitter in 0:04:21.279 --> 0:04:23.440 a good way for two and a half years, three years, 0:04:23.680 --> 0:04:27.919 about how the BDCs and interval funds have over promised 0:04:27.960 --> 0:04:30.560 liquidit either investors, you know, you have fire insurance in 0:04:30.600 --> 0:04:32.719 a sell off that you can get out, but it 0:04:32.760 --> 0:04:34.359 doesn't work if there's actually a fire. 0:04:34.520 --> 0:04:37.280 What is overpromise me? Because like I think a lot 0:04:37.279 --> 0:04:40.919 of them would say, we promised five percent tenders and 0:04:41.000 --> 0:04:42.520 we're doing five percent tenders. 0:04:42.600 --> 0:04:46.200 Yes, here's what I think over promised is. And maybe 0:04:46.279 --> 0:04:49.680 the docs even say this, But to say in a 0:04:49.760 --> 0:04:52.440 large sell off or in some scenarios where there's a 0:04:52.480 --> 0:04:55.400 lot of fear, it's going to take you potentially years 0:04:55.440 --> 0:04:58.080 to get your money back, you know, like where we say, 0:04:58.200 --> 0:04:59.880 you know you have those long disclaimers and then you 0:05:00.000 --> 0:05:02.360 actually say no assurance can be made that an entire 0:05:02.400 --> 0:05:05.040 investment won't be lost, and you're like, really, like we're 0:05:05.040 --> 0:05:06.440 going to lose one hundred do we have really to 0:05:06.480 --> 0:05:06.800 say that? 0:05:06.960 --> 0:05:08.080 I mean, maybe they did. 0:05:08.320 --> 0:05:09.600 I don't have a dog in the fight of like 0:05:09.640 --> 0:05:12.159 how good were their disclosures. I might need to remodel 0:05:12.200 --> 0:05:14.160 my house, I might need to I might need the money, 0:05:14.200 --> 0:05:16.080 And they say, well, look for the last twenty quarters, 0:05:16.080 --> 0:05:17.720 you would have been able to get out of all 0:05:17.760 --> 0:05:19.960 of it, because as long as it's under five, you're good. 0:05:20.240 --> 0:05:22.280 If it's ten, and that's a lot, you can get 0:05:22.279 --> 0:05:25.200 out of half five out of ten. But what happens 0:05:25.200 --> 0:05:27.120 if it's forty. You know what happens, You're getting out 0:05:27.120 --> 0:05:30.039 of an eighth of it. And then of course the 0:05:30.600 --> 0:05:32.679 you know, I was going to bring my George Sorows 0:05:32.720 --> 0:05:35.680 Reflexivity book because what about the reflexivity? You know, a 0:05:35.800 --> 0:05:38.400 term that was overused in finance very long ago, but 0:05:38.440 --> 0:05:42.000 I think it's very apropos here the reflexivity of falling 0:05:42.080 --> 0:05:46.239 naves leading to larger outflows, leading to fores selling, leading 0:05:46.240 --> 0:05:48.360 to falling naves and then you're out in three or 0:05:48.400 --> 0:05:51.960 four years. I don't believe that the retail investor understood that, 0:05:52.000 --> 0:05:53.720 And I wonder if it's even disclosed. 0:05:53.320 --> 0:05:55.560 Because I assume that like roughly none of these redemptions 0:05:55.600 --> 0:05:57.720 are people trying to remodel their houses, and like roughly 0:05:57.760 --> 0:05:59.520 all of it is like people worried about knaves. 0:06:00.080 --> 0:06:03.560 No, no, no, for sure, there's just the general people. Some 0:06:03.600 --> 0:06:06.960 people have cash needs, right, and yes, do they have 0:06:07.000 --> 0:06:09.640 cash needs? And they're like, how should I satisfy it? Okay, 0:06:09.640 --> 0:06:11.280 there's this thing I'm a little worried about, you know. 0:06:11.440 --> 0:06:12.960 I mean some like I don't want to answer all 0:06:13.000 --> 0:06:14.599 of the above to a lot of the either ords 0:06:14.600 --> 0:06:16.440 that you ask me so, but I do think in 0:06:16.480 --> 0:06:19.800 this case there's a percentage of people that want their 0:06:19.839 --> 0:06:22.120 money back because they need the money. I think when 0:06:22.160 --> 0:06:24.479 you go to like cliff Water, the shocking number of 0:06:24.560 --> 0:06:28.000 fourteen percent, which was only four percent, let's say, the 0:06:28.040 --> 0:06:31.000 quarter before, you can easily argue that extra ten or 0:06:31.040 --> 0:06:33.960 people worried about their naves or worried that the gate's 0:06:33.960 --> 0:06:37.320 going to shut. That an interval fund can't actually suspend 0:06:37.360 --> 0:06:41.479 a BDC can. So the products are not the same, 0:06:41.880 --> 0:06:45.159 but for sure they feed into each other. And the 0:06:45.200 --> 0:06:48.560 retail investor, I don't believe, understood that the liquidity of 0:06:48.680 --> 0:06:51.120 the underlying does not at all match the liquidity of 0:06:51.160 --> 0:06:51.760 their investment. 0:06:52.040 --> 0:06:54.440 Well, you mentioned brokers and something that I've been wondering 0:06:54.440 --> 0:06:55.960 about in all of this. I mean, Matt and I 0:06:56.040 --> 0:06:58.360 were discussing on a recent pod that, like, we live 0:06:58.400 --> 0:07:02.440 in a disclosure based society, and I'm sure that these 0:07:02.480 --> 0:07:06.120 disclaimers were laid out in the perspectuses, et cetera. But 0:07:07.160 --> 0:07:10.560 I wonder where the failure of communication was, whether it 0:07:10.680 --> 0:07:13.960 was on the brokers, on the salespeople putting their clients 0:07:13.960 --> 0:07:16.560 in this. And because it does feel like there's some 0:07:16.720 --> 0:07:20.200 structural mismatch of liquidity expectations here when it comes to 0:07:20.280 --> 0:07:22.000 retail investors in these products. 0:07:22.160 --> 0:07:24.720 Yeah, so one thing is and it's kind of why 0:07:24.760 --> 0:07:28.000 I have such a hard time getting the manager sometimes 0:07:28.000 --> 0:07:29.960 of closed in funds to do what I think is 0:07:30.000 --> 0:07:32.080 to do the right thing. It's like, and if I 0:07:32.120 --> 0:07:34.160 say to them, hey, you should turn this closed in 0:07:34.200 --> 0:07:35.360 fund into an open ended fund. 0:07:35.560 --> 0:07:37.600 And if you're am ninety five. 0:07:37.440 --> 0:07:39.800 Percent of it or open ended products and five or 0:07:39.840 --> 0:07:42.160 ten or are these closed ended products, whether they be 0:07:42.440 --> 0:07:45.000 BDCs or actual closed in funds, why do they fight 0:07:45.040 --> 0:07:47.800 me so hard? The C suite will fight me because 0:07:47.800 --> 0:07:50.160 the value the stock market will ascribe to an ETF 0:07:50.200 --> 0:07:52.000 where in theory you can get your money back tomorrow, 0:07:52.760 --> 0:07:54.480 and a closed in fund where in theory you're locked 0:07:54.520 --> 0:07:58.120 in forever. You know, other than my activism is so different, 0:07:58.280 --> 0:08:01.120 and so the lure, the kind of the drug of 0:08:01.240 --> 0:08:03.400 permanent capital. It sounds so good not even have to 0:08:03.400 --> 0:08:06.760 deal with investors. I mean, Bill Lackman, you know, benefited 0:08:06.800 --> 0:08:10.480 so greatly by this structure where he moved his hedge 0:08:10.480 --> 0:08:12.440 fund to be a closed in fund, because when he 0:08:12.480 --> 0:08:15.120 went through his draw down and he did great, you know, 0:08:15.200 --> 0:08:18.960 since eighteen people couldn't leave, and they left the by 0:08:19.040 --> 0:08:21.720 way of a twenty five to thirty five percent discount, 0:08:21.960 --> 0:08:24.040 which he also stopped up by buying back a quarter 0:08:24.080 --> 0:08:27.120 of the shares, something you don't see fs doing with FSK. 0:08:27.360 --> 0:08:31.800 So the thing is the reason you ask about the disclosures. 0:08:32.200 --> 0:08:35.000 It's kind of on the one hand, the sales commissions 0:08:35.240 --> 0:08:37.480 were so large to draw people to want to sell 0:08:37.520 --> 0:08:40.559 it the private wealth, and that, you know, that I 0:08:40.559 --> 0:08:42.600 think is a scandal. I think it'd be nice if 0:08:42.640 --> 0:08:46.839 the clients know, expost, what their trusted advisor was paid 0:08:46.840 --> 0:08:49.000 for putting them into this thing. My grandmother used to 0:08:49.040 --> 0:08:51.760 call drek. I don't know if that is a technical term, 0:08:51.760 --> 0:08:54.360 but if anyone understands Yiddish, they know what I mean. 0:08:54.840 --> 0:08:56.880 And so there are gonna be those questions how much 0:08:56.880 --> 0:08:58.520 were you paid? What were you paid? 0:08:58.840 --> 0:08:59.160 Oh? 0:08:59.200 --> 0:09:01.840 You know, and so that's interesting. And then the second 0:09:01.880 --> 0:09:04.440 part of it, you know, is that maybe there was 0:09:04.480 --> 0:09:08.800 some like benign you know, ignorance, but really the seeds 0:09:08.840 --> 0:09:12.560 of the destruction of these products are really rooted in 0:09:13.200 --> 0:09:17.760 the desire for the manager to raise retail money, but 0:09:17.920 --> 0:09:19.559 having to do it in this way where retail says, 0:09:19.600 --> 0:09:21.080 am I gonna be able to get my money back? 0:09:21.280 --> 0:09:23.600 And you offer these clauses in these terms to bring 0:09:23.640 --> 0:09:26.320 them in because you want that permanent capital. Turns out 0:09:26.360 --> 0:09:28.600 it's not so permanent. And by the way, it's not 0:09:28.640 --> 0:09:31.600 so permanent because because it's a forty C product, the 0:09:31.679 --> 0:09:35.080 board could be replaced and they could fire the manager, 0:09:35.280 --> 0:09:36.880 just like just as we've done in closed infunds. 0:09:36.960 --> 0:09:38.120 Yeah, this is what I was going to say. Like 0:09:38.320 --> 0:09:42.120 when I first started writing about your Tilted Blue al, 0:09:42.240 --> 0:09:45.440 I got emails being like, he's gonna take over of 0:09:45.440 --> 0:09:49.840 the fund, replace the manager, get the fees. I feel 0:09:49.880 --> 0:09:51.760 like with a five percent tender, that's not like top 0:09:51.800 --> 0:09:55.360 of mind. But are you is that like a possibility 0:09:55.400 --> 0:09:55.679 for some. 0:09:55.679 --> 0:09:58.480 Of these drawing from the lessons of closed in funds 0:09:59.040 --> 0:10:02.040 in the same way that retail was in some cases 0:10:02.080 --> 0:10:05.560 sheepish enough to buy what was sold to them. You know, 0:10:05.559 --> 0:10:07.920 they didn't call their broker. As I've already said in 0:10:07.960 --> 0:10:10.800 a prior podcast, a famous president of a very large 0:10:10.840 --> 0:10:13.200 fund said these products are sold, not bought. They didn't 0:10:13.240 --> 0:10:15.240 call their broker to say, get me the latest interval fund, 0:10:15.240 --> 0:10:17.440 as if they even know what that nomenclature means. They 0:10:17.440 --> 0:10:19.360 were told this, you know you want yield, you're seventy 0:10:19.360 --> 0:10:20.640 three years old. This is going to give you a 0:10:20.720 --> 0:10:25.120 nice yeld, great manager. So they often will will even 0:10:25.200 --> 0:10:27.959 vote in a way that harms themselves, as bpr E 0:10:28.280 --> 0:10:30.920 just did in December. It just became a stock and 0:10:30.960 --> 0:10:32.520 they went from being able to get at NAV to 0:10:32.600 --> 0:10:36.520 now nursing a live thirty percent loss extra loss. So 0:10:37.080 --> 0:10:39.760 in order to actually take one of these over, you're 0:10:39.760 --> 0:10:43.120 going to have the manager tell the clients you shouldn't 0:10:43.160 --> 0:10:45.360 listen to them, and a lot of them are actually 0:10:45.440 --> 0:10:50.280 going to not listen to the activist. But imagine this, Matt. Okay, 0:10:50.840 --> 0:10:54.160 we say we're going to do no fees for a year. Okay, 0:10:54.160 --> 0:10:56.959 how do you like that? Client? And then as long 0:10:57.000 --> 0:11:00.280 as the fund is below a thirty percent disc out 0:11:00.320 --> 0:11:02.360 all cash flow, we will buy it back in the 0:11:02.360 --> 0:11:02.960 open market. 0:11:16.679 --> 0:11:19.720 You really want to talk about publicly listed close unfund activisms, 0:11:19.760 --> 0:11:21.240 but I want to talk about OBDC too. 0:11:21.480 --> 0:11:25.000 Okay, I'm talking about I'll stick with that I was 0:11:25.040 --> 0:11:26.400 not even talking about closed in funds. 0:11:26.440 --> 0:11:27.359 I was talking about. 0:11:27.440 --> 0:11:31.079 Public b dcs. Okay, find that stateless state, right, I 0:11:31.160 --> 0:11:33.440 might be buying some of them. Okay, fine, so let's 0:11:33.440 --> 0:11:37.839 stick You're right the thing we did yeah, so okay, 0:11:37.920 --> 0:11:40.200 So if we tendered and got more and more and 0:11:40.240 --> 0:11:42.040 more and more, the same thing at the same point 0:11:42.040 --> 0:11:42.520 would be made. 0:11:42.760 --> 0:11:43.800 I think in order. 0:11:43.960 --> 0:11:46.559 Make sure if you can think of a private yeah. 0:11:46.679 --> 0:11:48.880 I haven't really looked into it. So this all started 0:11:48.880 --> 0:11:51.560 with let me dip my toe in a space where 0:11:51.600 --> 0:11:53.520 people want to get out and they don't have a 0:11:53.559 --> 0:11:55.360 way of getting out in the pace they want to 0:11:55.640 --> 0:11:57.920 And we'll learn as we go and learn from the 0:11:57.960 --> 0:12:01.439 lessons of closed in funds. So yes, we had two 0:12:01.480 --> 0:12:03.840 of them ready before Blue Owl became a thing. We 0:12:03.920 --> 0:12:07.720 have others ready, and we in the market are super curious, 0:12:07.720 --> 0:12:07.920 are we. 0:12:07.920 --> 0:12:08.839 Actually going to get hit? 0:12:09.559 --> 0:12:10.720 Then you don't know if you're going to be hit. 0:12:10.960 --> 0:12:14.240 It's too early because first it's like this clunky process 0:12:14.240 --> 0:12:16.160 that makes it hard to get it. They have to 0:12:16.160 --> 0:12:18.760 get it mailed to them, and there's a long form 0:12:18.800 --> 0:12:20.280 to fill out, and the thing that arrives in the 0:12:20.280 --> 0:12:22.880 mail is accompanied. It's sent by the manager, and it's 0:12:22.880 --> 0:12:25.240 accompanied by letter from the manager saying don't do we 0:12:25.240 --> 0:12:26.240 don't recommend you do this. 0:12:26.480 --> 0:12:28.240 I thought you had said somewhere that Blue Awl was 0:12:28.240 --> 0:12:30.640 supportive of here, but like, is there some level of 0:12:30.640 --> 0:12:34.000 supportive between like saying you should do this in the 0:12:34.080 --> 0:12:35.959 letter and saying you shouldn't do that? Okay? 0:12:35.960 --> 0:12:38.400 So I'll look, I'm I'm on your podcast. I'm all 0:12:38.400 --> 0:12:41.400 about radical honesty or possible. So when I when I 0:12:41.440 --> 0:12:44.600 say that, so first s Reet has already said to 0:12:44.640 --> 0:12:47.920 their investors, we don't we recommend against okay, And so 0:12:48.000 --> 0:12:50.439 the letter of ours will be accompanied by theirs from 0:12:50.520 --> 0:12:52.080 them saying don't you know we don't think you should 0:12:52.120 --> 0:12:52.280 do this? 0:12:52.559 --> 0:12:53.720 What did I mean with Blue Owl? 0:12:53.800 --> 0:12:57.440 I know two of the founders pretty well, and and 0:12:57.480 --> 0:12:59.440 so when I did this, I happen to have written 0:12:59.440 --> 0:13:01.160 to them to say hate. By the way, as I 0:13:01.160 --> 0:13:03.240 go into this, I don't have an activist angle. I'm 0:13:03.240 --> 0:13:05.320 just here to provide a bid, and they wrote me 0:13:05.520 --> 0:13:07.080 you know I'm not giving away states herecause I'm only 0:13:07.120 --> 0:13:09.720 singing back saying, you know, let's continue to have a dialogue. 0:13:10.000 --> 0:13:11.960 You know, we like each other this and that, and 0:13:12.000 --> 0:13:14.440 so like I didn't get any hate or any anger 0:13:14.520 --> 0:13:16.480 or anything like that, and so that was that was 0:13:16.559 --> 0:13:19.240 my take. Now, as far as I know, they have 0:13:19.360 --> 0:13:21.040 not commented on whether. 0:13:20.960 --> 0:13:24.280 They can't really recommend, so they could stay silent live 0:13:24.720 --> 0:13:26.880 if they're marking it at one hundred right. 0:13:27.280 --> 0:13:29.240 Well, I think someone could say, while we think the 0:13:29.280 --> 0:13:31.959 portfolio is really attractive, we understand the liquidity needs of 0:13:32.000 --> 0:13:34.240 the clients may require for them to find a way 0:13:34.280 --> 0:13:37.040 to sell. You know, I think there's many ways to 0:13:37.080 --> 0:13:39.120 say you like something or you don't like something, and 0:13:39.320 --> 0:13:41.240 I think there is a world where they could be 0:13:41.280 --> 0:13:42.959 more neutral than Star War was. 0:13:43.000 --> 0:13:43.839 But we'll see what they say. 0:13:43.840 --> 0:13:44.280 I don't know. 0:13:44.600 --> 0:13:47.679 I am curious what you make of the marks when 0:13:47.720 --> 0:13:49.760 it comes to some of these blue offhons that you're 0:13:49.760 --> 0:13:53.040 tendering for, because the fact that you're going through with 0:13:53.080 --> 0:13:55.079 this trader you would like to execute it. I mean, 0:13:55.120 --> 0:13:58.240 does that imply that you know, you think that the 0:13:58.360 --> 0:14:02.720 naves are accurate or to just maybe there's somewhere between, 0:14:02.840 --> 0:14:05.840 you know, a sixty five percent discount and one hundred percent. 0:14:06.800 --> 0:14:11.320 I actually don't think we bid conservatively. I was was 0:14:11.360 --> 0:14:13.240 somewhere in New York last few year. 0:14:13.280 --> 0:14:15.000 You were initially announced it was twenty to thirty five, 0:14:15.040 --> 0:14:16.440 and then you're bid down thirty five. 0:14:16.520 --> 0:14:19.960 Well twenty little yeah, well I was capturing Starwood in 0:14:20.000 --> 0:14:22.880 there too, but because Starwd, I think we bid twenty seven. 0:14:23.120 --> 0:14:23.400 Yeah. 0:14:23.680 --> 0:14:26.880 So I ran into somebody who said you're gonna get 0:14:26.920 --> 0:14:27.480 hit on all of it. 0:14:27.560 --> 0:14:29.960 You didn't bid low enough because and he's like, you're 0:14:30.000 --> 0:14:32.280 focused on NEV, but you should be focused on GAV 0:14:32.320 --> 0:14:34.280 And you know it's really looking at like the gross assets. 0:14:34.400 --> 0:14:36.480 Yeah, you were saying this before. I think we were 0:14:36.680 --> 0:14:39.720 filming that a thirty five discount is not what it 0:14:39.720 --> 0:14:41.920 sounds like because these are levered funtons, right, you want 0:14:41.920 --> 0:14:42.680 to just sure. 0:14:42.760 --> 0:14:45.560 So some funds are very levered. Some areo point seventy 0:14:45.560 --> 0:14:48.040 five leverage, some are one point five levered. That means 0:14:48.280 --> 0:14:50.640 leverage on top of you know, a dollar of stuff 0:14:50.640 --> 0:14:52.600 for the dollar that was given. So let's just say 0:14:52.640 --> 0:14:54.720 it was, you know, a turn of leverage. If you 0:14:54.720 --> 0:14:56.920 buy saying a minus thirty, it's like you're buying each 0:14:56.960 --> 0:14:59.840 loan fifteen points below, not thirty points below. But then 0:15:00.120 --> 0:15:03.720 to your question, you have the fees, and some of 0:15:03.720 --> 0:15:06.040 them earn fees on like what's distributed so they could 0:15:06.040 --> 0:15:08.920 somehow even with all these price declines, still earn still 0:15:08.920 --> 0:15:11.320 earn fees. Some of them have high water marks that 0:15:11.360 --> 0:15:14.840 don't have catchups, some do, but there's the management fee 0:15:14.840 --> 0:15:16.480 that comes out of it. I think it's safe to 0:15:16.480 --> 0:15:18.800 say that we don't think that there's a lot of 0:15:18.800 --> 0:15:21.440 manager alpha these days in that space. So like those 0:15:21.440 --> 0:15:24.080 fees are going to be eaten away. Those are not 0:15:24.240 --> 0:15:27.560 like for their brilliance. And then you have on top 0:15:27.600 --> 0:15:29.880 of it, you have a knave that everyone knows is 0:15:29.920 --> 0:15:32.320 too high. Okay, so let's leave aside. Where does Blue 0:15:32.360 --> 0:15:34.840 Oil rank in that continuum? But I think I think 0:15:34.880 --> 0:15:37.760 I Apollo is the firm that I follow, and Blackstone 0:15:37.800 --> 0:15:40.840 the firms that I have incredible respect for. Blackstone also 0:15:40.920 --> 0:15:44.160 recently for how they treated their redeeming shareholders, and I 0:15:44.200 --> 0:15:46.640 have some a bunch of new counter examples, and Apollo, 0:15:46.800 --> 0:15:49.080 I think is considered the most conservative on the marks. 0:15:49.280 --> 0:15:51.040 But the marks are falling as we speak. 0:15:51.280 --> 0:15:51.920 So if you have. 0:15:52.040 --> 0:15:54.400 Naves that are too high across the board, even if 0:15:54.400 --> 0:15:57.920 they're more than too high at certain places, you also 0:15:57.960 --> 0:16:00.200 have to take that out of the discount. So what 0:16:00.280 --> 0:16:02.320 is appeeling? Okay, So now that I've like said, what's 0:16:02.360 --> 0:16:04.040 really bad about it? You know, okay, you start with 0:16:04.160 --> 0:16:06.480 you have fifteen, and then it's after fees thirteen and 0:16:06.520 --> 0:16:09.520 then you have the markdown is that at least those 0:16:09.560 --> 0:16:12.000 funds do have the ability to get back five percent 0:16:12.040 --> 0:16:14.920 per quarter. So if they if they have only fifteen 0:16:14.960 --> 0:16:16.960 redeem you're going to get back a thirty your money 0:16:17.080 --> 0:16:20.040 in a quarter. But the way it's going, it was one, 0:16:20.120 --> 0:16:22.800 then it was four. Now Cliff order is fourteen. Boy, 0:16:23.000 --> 0:16:25.080 you know, someone should set up a poly market for 0:16:25.120 --> 0:16:28.200 what Cliffworter redemptions are going to be next quarter. And 0:16:28.880 --> 0:16:31.880 we are aware, I'm not sure how much detail it's 0:16:31.880 --> 0:16:34.720 worthwhile going into in this podcast, but we're aware for 0:16:34.800 --> 0:16:39.360 some managers of marks on chunky positions of second lean 0:16:40.600 --> 0:16:43.320 or you know, other things that are not first lean 0:16:43.680 --> 0:16:46.120 that are off by compared not to our model, but 0:16:46.240 --> 0:16:48.760 compared to other funds, how they mark as much as 0:16:48.760 --> 0:16:52.440 twenty five points between the way Jamie Diamond now has 0:16:52.480 --> 0:16:55.600 remarked the portfolio as well as fargo far behind. That 0:16:55.680 --> 0:16:59.200 constrains the manager on their leverage, their ability to leverage 0:17:00.080 --> 0:17:02.560 because of you know, the mark to market for the 0:17:02.960 --> 0:17:06.920 leverage facility. I really think this could be a systemic 0:17:07.480 --> 0:17:08.760 nightmare and in a. 0:17:08.680 --> 0:17:12.040 Sense of how cal constrainting the markdowns are for the 0:17:12.119 --> 0:17:16.480 leverage facilities, Like I gather these places are run at 0:17:16.480 --> 0:17:18.919 like less leverage than they could be and like have 0:17:19.000 --> 0:17:21.560 some headroom there, but maybe that's not true. 0:17:21.680 --> 0:17:23.240 Yeah, I think most of them are not near their 0:17:23.359 --> 0:17:25.639 leverage caps, so you would need a decent decline. But 0:17:25.720 --> 0:17:28.000 also just you can see the banks even just pulling back, 0:17:28.040 --> 0:17:30.639 and you know, why should they continue to land at 0:17:30.680 --> 0:17:33.479 the same levels or the same terms, you know, just 0:17:33.480 --> 0:17:36.160 like you saw in Wait where prime brokers pulled back. 0:17:36.240 --> 0:17:38.359 So you're probably right about that. But at the end 0:17:38.400 --> 0:17:40.359 of all that, so then why did we did because 0:17:40.359 --> 0:17:43.200 it was a place to start. We are short at 0:17:43.400 --> 0:17:47.119 you know, public debt at what I terms really optimistic levels, 0:17:47.119 --> 0:17:49.480 so buying it at down thirty five, even with these adjustments, 0:17:49.920 --> 0:17:51.760 it's probably going to be an okay investment. 0:17:52.000 --> 0:17:53.960 You say you're short public debt, like what like like 0:17:54.680 --> 0:17:57.640 like a match like how you'll debt against getting along 0:17:57.680 --> 0:17:59.840 this stuff? Or like is it I'm missing something like? 0:18:00.040 --> 0:18:02.800 Yeah, A huge part of our capital is to provide 0:18:02.800 --> 0:18:06.760