00:00I'm here with John Reddett of Carlisle after we learned of this very innovative fund that they have launched.
00:05John, thank you so much for joining. Thank you for having me.
00:08And shout out to Alice McNeely and the team for bringing us this story.
00:11And look, it has been a problem of LPs wanting returns, wanting distributions.
00:16So talk me through just what exactly this fund is doing and how you're sort of achieving this issue that
00:21the industry is.
00:22So first, I'd say we're incredibly proud of the structure.
00:26It's incredibly innovative.
00:29And, you know, look, it really came about talking to our investors, our LPs, and understanding the capital constraints they
00:38have and really leveraging the best of Carlisle across the platform.
00:42You know, we own Alpinvest, which is a great solutions business.
00:46And it's really a win-win.
00:49It's a win for Carlisle and it's a win for our investors.
00:51Our investors got liquidity, which a lot of LPs have capital constraints because of the lack of liquidity.
00:57And two, we raised $5 billion, is earmarked, for our next vintage U.S. buyout fund.
01:02So it's a great outcome.
01:04We're incredibly proud.
01:05And again, it really leverages our solutions focus.
01:10Alpinvest is really in the middle of reshaping the private equity industry.
01:14And I think the structure really reflects the tremendous expertise we have at Alpinvest.
01:18Right. I'm sure you've heard some of the criticism of not necessarily this vehicle, but of continuation vehicles, these things
01:23in natures.
01:24LPA, one of the biggest associations that represents sovereign wealth funds and pensions, the head of which I believe called
01:30it conflict vehicles.
01:31He's like, that's what CVs should be called.
01:32But it's all just can-kicking these different assets.
01:35What do you say to those criticisms that all these structures are just simply can-kicking?
01:38You know, look, I think we've been a bit of an outlier in terms of realizations.
01:44I'm quite proud of the investment teams.
01:48We're tracking well ahead of the industry.
01:50We haven't done a lot of continuations vehicles.
01:52We prefer to exit.
01:54You know, look, I think if you own a really good company and you want to continue to have exposure
01:59to that company and that investment is in an older fund, I think it's perfectly natural.
02:04I think it's a good thing to do is put that company in a continuation vehicle, get other investors' exposure
02:11to it.
02:12So I think some of the criticism is a little overdone.
02:14By the way, I know you've been very active with exits.
02:16You've also had some mega IPOs come into the market.
02:19But the overall statistics of private equity have been slower to start the year.
02:23And I just wonder where that's coming from.
02:25I was just talking to EQT before you who are saying the same thing.
02:27We're really robust with exits.
02:29All of your kind of big publicly traded peers are kind of all saying the same thing.
02:33Other people aren't exiting investments, but we are.
02:35So where is sort of the holdup?
02:38Where in this industry are we seeing some of those weaker numbers come through?
02:40So I think just taking a step back, and I think if you look at the last 24 months, I
02:47think it's actually quite impressive the amount of exit activity we've had.
02:51We've had to deal with Liberation Day.
02:53We have a war in Europe.
02:55We had an extended government shutdown.
02:57And now we have a conflict with Iran.
02:59And so I actually think when you look at the environment, the complexities of the geopolitical environment, actually, I think
03:06we've done a pretty good job as an industry returning capital.
03:08I think where you're seeing a lot of the logjam in terms of exits are the companies that our industry
03:15paid very high prices for in 2020, 2021.
03:19That's going to take some time to unplug.
03:21How does that get unplugged?
03:23What is the final thing that people decide, maybe I'm willing to take a discount and just sell this thing?
03:28Yeah, you know, it's interesting.
03:29When I was CFO, one of our shareholders said to me, you know, you guys have totally missed the software
03:37bandwagon.
03:38And I got beat up as CFO because, oh, you're not big enough in software.
03:44Today, not being big in software has been fantastic.
03:47So I think it's going to take some time for the people who are overexposed to software to unload these
03:53companies.
03:53By the way, just on that, and I know one of the kind of Carlisle mantras is diversification.
03:57You're in many industries.
03:58You're big in health care.
03:59You have a new aerospace and defense fund.
04:02But it feels like this industry is really pivoting hard towards AI infrastructure, that everybody is launching some sort of
04:09strategy saying this is the future.
04:10This is where we're going.
04:12We just came through an era where we learned that over-indexing to certain industries is a mistake.
04:17Are we repeating history again with this?
04:19Look, I don't think anyone can sit here and say AI is not going to be the biggest technological revolution
04:26we've seen in our lifetimes.
04:27I don't doubt that at all.
04:29We at Carlisle, we really just prefer a much more diversified approach to investing.
04:35And, you know, that could be geographic diversity, industry diversification.
04:40It's just what we do.
04:41It's what we're good at.
04:42But, you know, I commend the investment teams because when we were getting criticized for not being big in software,
04:47we stayed true to what we're good at and we'll continue to do that.
04:52Diversification, in our opinion, is the best way to run a firm through the cycle.
04:56There will be points during the cycle where what we're investing in might be out of favor.
05:01But through a cycle, we feel very good.
05:03What about this idea, and I was talking to John Zito of Apollo about this, that just what is value,
05:07what's valuable in a company has changed, that asset heavy is what should be attractive now, that it's no longer
05:13about asset light, high cash flow, high margins, that this is a new world and it's driven by infrastructure and
05:18asset heavy assets.
05:20I agree with that.
05:21And if I think, like, what Carlisle is really good at in private equity, it is exactly that.
05:28Today's environment is almost perfectly suited to Carlisle.
05:32We are a leader in complex carve outs.
05:34We've done over 85 of them globally.
05:36We just hit our first carve out in Japan, industrial carve out, aerospace defense.
05:42You cannot go anywhere in the world and talk to LPs and investors who don't want more exposure to aerospace
05:48defense.
05:49We've been doing A&D for 35 years.
05:51So I do think the market has shifted and it's going back to asset heavy, industrial carve outs.
05:58We think you're going to see an acceleration in carve outs globally.
06:01So I feel very good with our focus.
06:03I think the firm's very well positioned on the private equity front.
06:06By the way, how are you also thinking in terms of wealth products?
06:08Because this is something that Carlisle has excelled at.
06:11I mean, you have an excellent brand, F1 helping with that brand.
06:14We will talk about the car at F1, the F1 car here, because we obviously have to.
06:18But how are you thinking about it as there's been this bigger pushback?
06:22Do you think that there is a desire to go back into products that are expressly illiquid, that this sort
06:28of like semi-liquid push is going to start to ebb?
06:32Well, first, I'd say I think the term semi-liquid is not a great term.
06:36I don't think our industry ever should have come up with that.
06:38But I think it should be called sometimes not liquid at all, illiquid, because they're not liquid.
06:43I mean, they are not.
06:44I think the documentation, the transparency has been very good.
06:49We never thought the wealth fundraising was going to go like this.
06:53We thought there were going to be bumps in the road, and we've hit a bump in the road.
06:56But I think when you look long term, it's going to be a tremendous source of growth for our industry.
07:01And we haven't even really penetrated the retirement sector as well.
07:05So I think it will continue to be an amazing source of growth, but it's going to be uneven at
07:10times.
07:10And I think we're in one of these uneven periods.
07:12It feels like this kind of vicious cycle of headline meaning more redemption requests.
07:16And those redemption requests mean another headline.
07:18And it kind of feels like we're stuck in this feedback loop.
07:21I just wonder what kind of breaks that.
07:23What takes the fire, the heat off of this industry?
07:26Well, I think it's more specific to private credit right now.
07:31When I look at our other wealth products, we're seeing pretty good momentum.
07:35Look, I think it is very much a loop, and we're in that loop right now.
07:39But when you look at the underlying asset quality, I don't really see any concerns.
07:44And when you look at these credit products, most of these firms, including Carlyle, have tremendous diversification.
07:49So I just think continuing to perform, eventually the headlines will go away.
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