00:00Let's turn to private equity, EQT, lining up a $3.2 billion deal for Kola Capital as the booming market for secondaries heats up.
00:07Joining us now is Per Franson, the CEO of EQT, the world's second largest private equity firm.
00:12Per, good to see you, sir. Congratulations on the deal as well.
00:15What is it about the secondaries market that's really taking off at the moment?
00:19Well, the secondaries market is one of the fastest growing segments in the private markets,
00:24and there's a number of structural forces driving that growth.
00:27One of them, of course, is the lack of distributions that we've seen in the last couple of years coming out of the industry.
00:35But then there's a number of other more long-term underlying structural forces,
00:40such as the convergence between private and public markets.
00:45But then also, you know, the whole industry becoming more mature, bigger, more complex,
00:51and that is driving the need for private market investors to also rebalance and restructure their portfolios.
00:58And that's why this part of the market is growing so fast.
01:00Often if you ask people for the distinction, the difference between public and private,
01:03one thing they might point to is liquidity.
01:05Are you seeing liquidity improve and with it price discovery?
01:09In the private markets?
01:10Yeah, I mean, there's a lot of innovation happening right now,
01:13and the whole evolution around the secondary part of the market is an important element in this.
01:20There's the trend around continuation vehicles,
01:23but then also the emergence of many, you know, private wealth-focused open-ended structures
01:29that also provide liquidity on a more regular basis.
01:32But I would say if you enter the private markets as an investor,
01:36you should be prepared to be invested for longer.
01:39Is there a greater degree of skepticism as you meet a growing number of investors,
01:44whether it's in the Middle East or elsewhere, about investing in private equity
01:47because there haven't been the same kind of exits that they had been expecting?
01:50There weren't the same kind of dividends that they were promised at the outset,
01:53particularly for the 2020 and 2021 vintages.
01:56It's funny, right?
01:58I mean, every time there is a downturn in the private equity markets
02:03and in deal-making, people are questioning the model, right?
02:06But, you know, the way we think about it at EQT,
02:10the private equity market is a long-term growth market, right?
02:14And the ownership model in the private markets is a very attractive one,
02:18and you can drive a lot of value creation
02:21that is not necessarily correlated with what's happening in the public markets, right?
02:25And so that's why we believe that the private markets
02:28and the private equity model will also be very attractive in the future.
02:31You're a Scandinavian-based company.
02:34Scandinavia very much front and focus this Davos for a lot of reasons.
02:37I just wonder if you compare what we're hearing among businesses,
02:41enthusiasm, excitement for deals, and what we're hearing in politics,
02:45which is the divergence and moving away from the United States,
02:48if you're in Europe, and trying to diversify.
02:50Do you see that kind of tension playing out in your business?
02:52I mean, it's been great to be here in Davos from that perspective, right?
02:56To engage with business leaders, leaders in politics.
03:02And I'd say the tone has been surprisingly positive, right?
03:06Both from business leaders and from political leaders.
03:12And you mentioned, like, the focus on deals and transactions.
03:17That's been one element, but also the realization that, you know,
03:22the regions also outside of the U.S. need to get their act together,
03:25need to drive a more business-friendly and innovation-friendly agenda.
03:29And those have been some of the conversations that I've had.
03:32And there's a number of really exciting initiatives here.
03:35And I'm in particular excited also about, like,
03:39the interest in public-private partnerships from some of those political leaders.
03:43So I think all of those are aspects in relation to what's happening in the world.
03:48Given what's going on in Washington and some would call unpredictable policies,
03:52do you actually find that you are getting more investors excited about you?
03:56Because to Lisa's point, you are outside the U.S.
03:58Do you have a leg up now on U.S. competitors?
04:02So a trend that we're definitely seeing is that there's more focus now
04:07as a result of the geopolitical uncertainty and volatility among private market investors
04:13to achieve a better diversification in their portfolios, right?
04:17And that's geographically, but also, like, across strategies, across asset classes.
04:24And that is also one of the trends why the consolidation in the private markets
04:30will continue and accelerate, right?
04:31Because you need to have the scale, you need to have the geographical reach
04:36to be able to engage with investors and help them achieve their strategic portfolio objectives.
04:42But given the mood music, are you still on track for the $250 billion investment into the United States?
04:49We continue to be positive on the U.S., right?
04:53I mean, there's a lot of economic growth, a lot of innovation happening in the U.S., right?
04:58And also in my conversations with investors, that's not really the topic or the point, right?
05:04It's more about having an appropriate diversification in your portfolio, right?
05:09But that the U.S. should always be an important part of any public or private market portfolio,
05:16that's unquestionable.
05:19Can you help us understand how you achieve thematic diversification and achieve scale at the same time
05:25when it feels like if you want to do both, you end up in the same place,
05:28which is a story surrounded by AI and data centers?
05:32How do you get away from that and achieve scale?
05:34Well, I do think that AI is one of the most attractive themes of our generation, right?
05:42And you want to be invested in that theme.
05:45But you can also do that in different ways, right?
05:47At DQT, we can invest into that theme out of our early stage funds and native AI opportunities,
05:55but also at the infrastructure layer, right?
05:56And I know that there's a lot of talk about excessive valuations or potentially like overcapacity being built up
06:05at that infrastructure layer.
06:06That is not what we are seeing at the infrastructure layer.
06:09We continue to have a lot of conviction on the opportunity in that part of the AI.
06:13Do you still see more constraints than overcapacity at the moment?
06:16And where do you see constraints?
06:17We, you know, the constraints are in terms of access to power, right, and access to energy.
06:22So at DQT, we're also one of the largest investors globally into energy.
06:27And so combined with some of the data center investments that we have,
06:30we can, like, have really strategic conversations with some of the hyperscalers.
06:34And the demand for AI compute, I mean, vastly still is much higher than the capacity that we see in the market right now.
06:42It's amazing how quickly these tech companies have just become real estate developers, isn't it?
06:46Well, that's what a lot of people say, particularly for some of the neoclads, et cetera.
06:49The question is, will all that real estate be necessary in the same kind of way, maybe in 10 years?
06:53And are they the right guys to manage it, given they haven't managed assets at all, really, for the last decade?
06:57I think they can find some people who will manage it for them.
06:59I think that they probably can't here.
07:01I get it.
Comments