00:00So it turns out you've already been publishing reports on private companies since back in 2017.
00:04That's right.
00:05What's with the feedback from clients and how did that change how you are expanding your coverage today?
00:10Sure. So Morgan Stanley's strategy is really straightforward.
00:14We help our integrated firms raise, manage, allocate capital.
00:19And we do that across the entire life cycle of corporates.
00:24As you said, we've been publishing on private companies since 2017.
00:28But since then, the number of unicorns, private companies worth over a billion dollars, has increased by 5x.
00:37So it's critical for our teams to cover both the private companies and the public companies,
00:45particularly alongside the big themes that we see driving alpha in the market.
00:49Right. And you have star analysts like Adam Jonas, who is well known for covering Tesla,
00:53now covering companies that embed AI into robots and machines.
00:57Are you going to be hiring more people?
00:59Are you just going to be moving people from the public markets coverage to private markets coverage?
01:04We're we're investing on a number of vectors.
01:06So our approach is a bit different than our competitors in that we believe the existing sector analysts,
01:13the domain experts are the right thought leaders to cover both private and public companies.
01:21And and so we're investing to expand capacity within those teams, both human capital and efficiency tools,
01:28so that they can go broader and deeper into private markets.
01:31So that's one vector. Another vector, as you pointed out, is we really dominate in in thematic research.
01:38We have four big key themes that we highlight for investors where we believe the majority of alpha will happen in the market.
01:46This is longevity, tech diffusion, investing in multipolar and future of of energy.
01:53When we see a mega theme, particularly where there's a lot of private company formation,
01:58we have pivoted some of our best analysts to go deep on on those themes.
02:03So Adam Jonas is a great example.
02:05Stephen Byrd is the dominant leading voice on powering AI as as another example.
02:10And then the third vector of investment is our conferences and events.
02:15We are scaling the number of private companies at our conferences.
02:19Think financials, health care and and technology.
02:24And really what the what we do is we bring together the innovators, the investors and the analysts that uncover unique insights.
02:31And so we're differentiated and we're investing in both the sector depth, the thematic research and the conferences and and invest events.
02:41There are already publicly traded companies that invest in some of these private assets like private credit.
02:46I'm thinking about business development companies, which have actually underperformed the S&P 500 this year.
02:51These BDCs pool private credit loans for small to medium businesses.
02:54And I think about how BlackRock TCP capital this week marked the private debt.
02:59It lent to a home builder, Renovo Home Partners to zero from 100 cents on the dollar previously.
03:05And there are only three analysts with ratings on the company.
03:08Will you be covering business development companies as well as part of your expanded coverage?
03:12We we don't at this point.
03:14And and really, again, you know, those four big themes that I outlined, that tends to be the majority of where we focus,
03:22because increasingly the front line of innovation is private markets and these themes is where we see the most alpha generation.
03:31And so the analysts who, again, whether it's energy or defense in multipolar world or robotics around A.I., energy storage in in in power,
03:43that tends to be where we're spending a lot of our time and resources where we see significant value appreciation.
03:50So I appreciate the broad themes, because I think there's a lot that people don't quite understand or really under appreciate about how broad and how how long of a tail some of these industries and themes have.
04:02But we do know that when it comes to private markets, there's no public financials or there's limited public financials.
04:08So how granular will the analysis get?
04:12I mean, you don't have the numbers that you can apply the way you do to public companies.
04:16You can't really derive that evaluation in the same way.
04:18That's right. And so with with private company coverage, when we publish on single companies at this point, we don't have formal forecasts, ratings, price targets.
04:30But we do believe that some of these privates will eventually tap public market equity.
04:37And as an investor, wouldn't you want an analyst who has covered that private for years really understands the model, the roadmap, the management team.
04:48And as these companies get, you know, get closer to to to being public entities, we will then transition to having ratings and forecasts.
04:57So can you give me a sense of the parameters that you'd be using for which specific private companies, which individual private companies you would provide coverage on?
05:06How do you determine which startups, for instance, or which unicorns to cover or not cover?
05:11Right. Again, remember, we really lean on our sector analysts.
05:14They have managed through multiple market cycles.
05:18They bring significant domain knowledge to the table.
05:22So we really lean on those analysts.
05:24If you look at our private company coverage, just this year we published 65 reports.
05:29And that ranges from going deep and mapping private company formation in an industry or in a theme.
05:35Single company deep dives just last week we published on Sironic and One X as an example in defense and robotics.
05:44And so it really comes down to what our sector analysts are seeing on the ground and where they see potential growth, disruption and long term value.
05:55So it's leading it to the experts really to make the call.
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