00:00Well, Danny, it's actually core to our education. I was talking to a top advisor this morning and manager selection has always been at the forefront of our narrative. I think in these markets, you'll see a higher dispersion of outcomes. You'll see the best managers and through history, the best managers are the ones that can discern between between noise and fundamentals.
00:26And we think this is the time when you're going to be able to you're going to need to do that. And you're going to need to be with managers that have been doing it for 30 years, have broad deployment and and can deliver the investment experience that they targeted.
00:41So how has underwriting changed now versus, say, 2021? Are there terms you're just not willing to give that you see competitors doing?
00:50You know, the underwriting process hasn't changed. And we benefit at Aries from a significant amount of our loans being with incumbent borrowers.
01:00Over half of what we do is with a borrower we've known for many different cycles or through different cycles.
01:06And so our our approach has been consistent and we've been fortunate that our credit portfolios are healthy, highly diversified, and they're they're they're built for environments where you get this idiosyncratic noise.
01:22By the way, in terms of this environment, it's not just this noise, but it's the fact that we're also about to embark on a rate cutting cycle, too.
01:29And, you know, we spoke to John Gray about this that I did just mathematically. It means that returns start to shrink for private credit.
01:36How much more difficult is it then to find alpha in an environment where you get that compression?
01:42Well, so I'd step back. Our approach to the private markets is to build an investment solution that's for all markets.
01:50Private credit in particular, the tailwinds to declining rates are pretty substantial.
01:56You get wider spreads, you get more deal flow, you get higher fees.
02:01And so actually, private credit will benefit from a lower rate environment.
02:05But what we're trying to do is present the suite of solutions.
02:09We think there are opportunities in real assets, there are opportunities in sports.
02:14We think that the important role we play is to take that four or five percent allocation most investors have today to the private markets
02:26and grow it to a level that an institution or a large, sophisticated family office might have, say, 15, 20 percent.
02:35By the way, the one of the strengths that you can have versus others isn't just your underwriting or the ability to attract capital,
02:42but also to offer those solutions to the to the borrower. Right.
02:46And to work with the borrower to make sure that those businesses succeed.
02:50You've got the experience. How do you do that?
02:52No, that's exactly right.
02:53So having long term capital and having a large portfolio management team that can work through difficult times with borrowers is core to our practice.
03:04And as I said, this is where having been through the financial crisis, the credit crisis in Europe, COVID,
03:11we've developed a pattern and an ability to recognize where we can be patient, where we need to move on.
03:19And that's helping us significantly.
03:22By the way, I know we have Ted Maloney waiting in the wings, the CEO of MFS Investment, who had one of the first mutual funds.
03:29And we're going to talk to him saying that for everyday investors, for retail, for wealth, public markets are better.
03:34Part of that, it's an argument that Cliff Asnes has talked about, too, that it is this illusion of an illiquidity premium.
03:40But what you're actually getting with that is when these blowups happen, it's not as transparent.
03:45That it's just frankly not as transparent markets. And that's not right for the investor class that you're working with every single day.
03:51What do you say to that criticism?
03:53Well, I think they're missing the broader picture.
03:56So the the asset class is clearly illiquid.
04:01And that also means that it can play an important role in a portfolio.
04:05The top advisors don't want to have their clients trying to trade during every turn in the markets.
04:13And so, again, the context is important.
04:16If you have five percent of your portfolio that's illiquid, that's incredibly reasonable.
04:22You have 95 percent where you can enjoy the volatility, if you will.
04:27So it's it's your starting point and it's the the investment outcome you're looking for.
04:33We think investors are looking for a risk adjusted premium to the public markets.
04:38The private markets have delivered it through many, many cycles.
04:42And as I said, you can do it in infrastructure, you can do it in real estate, you can do it in sports, you can do it in private credit.
04:48The breadth of those solutions is really what's at the foundation of the dialogue we're having.
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