Definitely A Two-speed Economy: Ardian's Benedetti

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00:00And I wanted to play you this just because Ardian obviously has a huge portfolio and it's extremely

00:04global. So if anyone has a view into the state of corporate health, it is you. His concern,

00:09it's a two-speed economy. There are some companies in real pain that's going to trickle

00:13into the credit markets. Do you see evidence that that could come true? Look, I think that

00:18if you look through our portfolio and we have a big portfolio around the world, you know,

00:23focused mostly on the U.S. and Europe. If I look at just the trailing 12 months numbers,

00:27the overall picture is quite strong. You know, I was mentioning this to you before, but the trailing

00:3312-month growth rate on our private equity book of business or of portfolio companies is plus 15%.

00:40That's very strong. But to your point, it's not across the board. You know, there are some businesses

00:45that have big tailwinds. Either they're surfing some of the AI wave. They've redeveloped their

00:51business for the new economy. Now, if I go back to historical legacy retail, which is a very tiny

00:56portion of what we have, yes, there's some things that are struggling there. So it's definitely

01:00a two-speed economy. When the thing, the things that are struggling, again, you kind of don't see

01:04it on the surface because the winners are such winners. And I'm talking about generally the economy

01:08or not necessarily Ardian's portfolio. Again, going back to Victor Khosla, his point is that some of the

01:14high-profile bankruptcies we've seen are not ones off, that it's disingenuous to say it's just because

01:18of fraud, because there is some real pain. Things like subprime auto, really consumer-focused segments.

01:23Do you expect more pain to bubble up, especially as we work through some of the big blockbuster

01:28deals that were done in 21 and 22? Yeah. Listen, I think anytime you have a lot of capital put to

01:34work quickly, there will be some winners and some losers. You know, I was talking to somebody

01:38yesterday about a very big high-profile bankruptcy case with a dip loan that got priced three weeks

01:45ago that is already trading at 35 cents on the dollar three weeks later. So the market's moving

01:50quickly. There'll be some winners and losers, for sure. It's a portfolio. But I think to your point,

01:55if I come back to what that means for credit, it's very important to take a view over the longer term.

02:01And if I just take the number of credit firms that entered the market in the last five years,

02:07it's 500. Okay. So what does that mean? That means they haven't tested through a market recession.

02:13They haven't lived through the GFC. It is very important to have a view of what happens in those times,

02:19when times are good and times are bad, to see how a portfolio reacts and see how a manager reacts.

02:23The same could be said for private equity, right? One of my favorite things that's been said on

02:27Bloomberg TV, maybe all of 2025, is we had someone from KKR come on and said there are more private

02:33equity shops than there are McDonald's, which I think is so evocative. Is it time just to see

02:38consolidation in this space as a whole? And if consolidation is happening, what does it look

02:42like? Is it zombies? Is it funds getting bought out? Is it something completely different?

02:46Yeah. First of all, I think that institutional limited partners and limited partners generally

02:50are choosing firms much more carefully than they ever have before. So what do they want in this

02:56market? They want a steady pair of hands, someone who's been around for a long time, a broad product

03:01offering. And so you'll have specialized firms who are really good at the one or two or two or three

03:07strategies that they have that maybe are very specialized. Then you have firms that can offer many

03:11different products and can do so in maybe a packaged way to the investors. I think the middle

03:17is going to get pushed to one side or the other. One thing that we see in our business, if I went back

03:2215 years ago, our average investor was invested in about two of our products. Today, they're in about

03:26four of our products. So we're doing more with the same investors because they want to work with one

03:31group who they've known for a very long time, who they trust. I think you're right. There'll be some

03:36firms out there who can't raise the next fund, who have difficulty in their returns, and we'll have

03:41to see what happens to them. Yeah, there'll be some zombie firms. The good firms will get pushed to one

03:45side or the other. And earlier this month, just sort of highlighting that, you all said that you'd

03:50raise something that looks more like $20 billion so far this year. That is a chunky amount. Where is

03:56the demand? You're talking about people being in, you know, four different of your products. Is it

04:00across the board? Is credit looking more in demand? Is it real assets? What's kind of the star that

04:04LPs are flocking to? Yeah, I think one thing that we're fortunate about already, and we have a very broad

04:09product offering. But certainly if our biggest businesses are, you know, secondaries, we raised a $30

04:14billion fund. Infrastructure, we just closed on 20 billion euro, $20 billion for that fund as well. A lot of

04:22demand there. Private credit as well. We were speaking about that earlier. Real estate and then buyouts,

04:27especially in Europe. There's a renewed demand for buyout investing in Europe at the moment. And they want

04:32people want local investors to do so. So it's coming really across the board. I think that the

04:38growth is coming from different areas. You know, you have to be pretty global in today's market. We

04:42have investors all over the world, you know, 1,900 of them. But if I take last year's capital raise,

04:49more than 20% came from individual investors, retail investors, high net worth investors. That's up

04:55three or four fold over the last 10 years. It doesn't mean they're replacing the institutional

04:59limited partners. That's still the backbone of our business. But you have to go far and wide to find

05:05those. You know, if I take the U.S. public pension plan market today, the top 10 U.S. public pension

05:10plans who are over allocated to private equity are $50 billion over allocated. But if I go to Asia,

05:17or if I go to Middle East, they're allocating more. So they're picking up some of the slack that the U.S.

05:22is on investing. So if you have a global set of investors, you can really pivot to any corner of

05:27the earth where the capital is coming from. It's diversification within your investor base.

05:31On that retail portion, because whenever you get kind of more retail wealth,

05:35maybe regulation comes in with it. And there, there's been some really interesting developments

05:39just in the past week. Democratic Senators Elizabeth Warren, alongside another one,

05:43have been talking about stress testing private capital firms, something that some of them have

05:48agreed to do in the U.K. with the BOE. Changing bank regulations around leveraged loans that favor

05:53the banks over private credit. Is the regulatory environment going to start to get a lot less

05:59friendly or at least more stringent for private capital going forward? I think the fact that private

06:04capital is touching the individual investor, and I'm not talking just about the ultra high net worth

06:09or even mass affluent, but all the way to the retail investor, you will have more regulation,

06:14which is not a bad thing. I think it's very important for people to understand what they're getting

06:18into. You know, the risk and return that they're trying to go for, which means there'll be some

06:22good times and some bad times. On the flip side, though, if I take a 401k plan, is there any reason

06:29that you or I or anybody in this room needs to have daily liquidity on their 401k? No, that's not

06:36that's not something that you need. The plumbing is created that way. So that's the only reason why

06:41that's a requirement. But could five or 10 percent of that portfolio be in longer term assets that are

06:46a bit more illiquid? Absolutely. And that kind of long term return, long term stability, lower

06:52volatility of returns in private markets, that's catching the interest of the individual investor.

06:58So they're saying, hey, I want to be in there, too. So there's a lot of wrappers put around these

07:01products. You know, they're called semi liquid where they have liquidity windows. But that requires a

07:06lot of explanation to make sure investors know what does liquidity even mean? How liquid is it? Is it

07:12real or is it not real? When could it go away? When what could the return possibility be?

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