00:00When you look at the quarter we're really proud of it because it showed we're an all weather firm.
00:05We had this 25 percent increase in distributable earnings. We had nearly 70 billion of inflows.
00:13But the real key driver is what you're hitting on which is the strength and performance which was
00:19driven by the focus on AI infrastructure. This massive build out that's underway. Eight of the
00:26top 10 investments for us in terms of performance in the quarter were around data centers LNG battery
00:32storage. And it's really rippling through our firm to your point. So it impacts our real estate
00:38business our infrastructure business our private equity energy business our asset based finance
00:44area. There's just so much need for capital to deliver this compute. It is really essential now
00:51to our firm and driving returns. And we see this shortage of compute and need for capital
00:56is really something that's structural now. So it's a big opportunity and is clearly the biggest driver
01:02for us today. And you clearly with 69 billion pulled in the capital to be able to achieve something like
01:07that. I wonder though on the more AI side of things John because we've heard a lot of different
01:12partnerships with private capital firms inking with Google with Anthropic. Just this morning we
01:16learned about CVC and Google. Are you partnering with any LLMs? Well we're not in a position to
01:22announce anything but obviously getting this diffusion to happen is very important. Getting
01:28this into our portfolio companies. So we're working on one of these opportunities. We want our portfolio
01:35companies to move quickly because we think it's a key competitive advantage. And what's nice about
01:40private equity firms particularly us with more than 270 companies. We can really move the
01:46needle. And I would say what's exciting is today we're seeing a 15 fold increase in large language
01:54model spending for our companies off of a small base. But I think it's still early days. There are so
02:00many opportunities to improve efficiencies to make content creation better. So big opportunity. The
02:07challenge is to change workflows. It's not easy to do but it can have a big impact on our companies.
02:12Well we
02:13will stay tuned for any announcements. I feel like that was a nice little teaser in there John. On the
02:17other side of this though there's the fear of AI disruption in software. I know your exposure is
02:22something like seven percent but you have seen some write downs. Do you think we've hit the peak of
02:27write downs or might there be more to come? Well I think there's a couple things to note. One of
02:33the things
02:34we've seen is these companies have continued to perform well and rightfully folks would say that's in the
02:40rear view mirror. But I think it's an interesting data point. I do think there's going to be some
02:45disruption here. It's not all going to be the same. I think the outcomes will be heterogeneous. If you
02:51compare it to maybe retail 25 years ago there were plenty of Sears and Kmart's Toys R Us but also
02:58companies like Walmart and Costco who are really more infrastructure like. And I think that analogy will
03:05hold in software. Many of these companies who are really systems of record. They're deeply embedded.
03:11I think they have a good position. But the management teams are going to have to adjust.
03:16So I do think we're going to see here this spreading out. I also think overall in the sector we
03:24we have seen a re-rating lower in multiples because there's more uncertainty. And it goes beyond software
03:29to information services professional services really the white collar world. So I do think
03:36we've seen a reset. And of course managers have to adjust valuations. We've done that in the software
03:41area. Multiples have come down quite a bit for these companies. So I think it's an evolving you know sort
03:48of playing field. And companies cannot sit still. They're going to have to move into an agentic world.
03:53And I know you were pretty early. Medallia for example in writing down the value of that loan.
03:58There have been reports that Tom Mabravo is handing back the keys to you and other lenders. Is that the
04:02case John? Well I can't talk about the specifics of the situation. Medallia has been well reported to
04:09be having challenges well before AI. I mean issues around this credit go back more than a year ago. I
04:21do
04:21think the other lenders lent less than I think a third of the total cost. The equity sponsors had
04:26to lose more than five billion dollars before you had a transfer here to the potential transfer to
04:33the lenders. But here again the lenders also have taken right down. So the valuation multiples are down
04:40very dramatically. The overall values down dramatically. I do think the business under a new management team
04:47can do much better here. But obviously they're going to have to pivot as well to this new world.
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