00:00Co-CEO of Ardian. It's a private markets firm that manages 200 billion dollars in assets. But these markets I
00:09mean it seems like
00:10Groundhog Day when we get this kind of stuff. And yet we still react positively and then sell off slightly
00:15after it's dismissed. Yeah I think if you look at the
00:19markets today I kind of feel like we have this red light green light. You know red lights are what
00:25fat tail risk. To your point you have
00:28markets at all time highs. You have the VIX which is shockingly low. But we still have two wars going
00:36on. You know four months ago people were
00:38pricing in rate cuts. Now we're talking about rate hikes. So there's a big fat tail risk there. So that's
00:44definitely a red light. You know other red light I would say too is with what's
00:48happening is this K-shaped economy is just getting worse. Right. Because people are paying near highs for gas prices
00:55around the world around the
00:56country. You have stock markets at all time high on the other side of things. So where this is all
01:01going. There are green lights. The green
01:04lights are earnings. You know earnings in Q1 were very very strong. Green lights right. Big green lights. Not just
01:10in public markets but in private
01:11markets. In our portfolio across all of the assets that we own. We had about 13 percent last 12 month
01:18EBITDA growth which is huge. Right. So that's a very
01:20strong positive. Another strong positive that we're seeing right now is exits in private markets. That was kind of gummed
01:26up for a long
01:27time. That's coming back. You know we're getting back to normalized levels. And it goes back to the rate cycle.
01:32Because if you're not
01:33banking on a rate cut anymore. Why are you waiting? Maybe you're going to say let me sell some assets.
01:38We saw in Q1 alone assets that were what
01:41we call average quality assets in the market starting to sell at 400 percent uptick compared to Q1 of last
01:47year. That's a huge increase because people are saying why am I going to wait any longer. Time to push
01:51the
01:51button. Time to move forward. So I mean the green lights are apparently much brighter than the red lights
01:57right. We continue to hit all-time highs in equity indexes, IPOs. Regardless of what you think about the
02:04NASDAQ rule changes it seems like everybody wants shares in SpaceX right. Is the same true for the
02:10portfolio companies that you manage? Yeah I think look when we look at all of our private markets
02:16okay. So when it's private equity, infrastructure, real estate, private credit etc. You know I think
02:23we're entering into a new way of a new shape of value. And that's something I've been thinking a lot
02:29about. And it's changing. And what does that mean? So I really think there's three points that's driving
02:35it. First is this concept of experience matters. Because to your point, everything's changing so quickly.
02:43Investors, whether you're looking for your returns or whether you're looking to commit capital to a private
02:47markets manager, you want somebody who has, you know, we have a 30 year experience. The company was founded 30
02:53years ago.
02:53So we've seen a lot of different cycles over the years. That counts more and more because the world is
02:57changing so quickly.
02:58Next point I would say is diversification. You know diversification was almost a dirty word three years ago.
03:04For 15 years. You know our secondary business, I'll give you an example. Our secondary business is making a high
03:10teens
03:10net IR for 25 years with a less than 1% loss ratio. That's something we're very proud of. But
03:15four years ago I was
03:17talking to a private markets investor saying, hey you know what, my software portfolio made me 25% in the
03:23last 12 months.
03:24You know, what's high teens is less attractive. Now that's changing. People are saying, you know what, it's good to
03:29be
03:29diversified. You know, within Ardian we have infrastructure, we have, you know, private credit, we have private equity, etc.
03:35So I think this diversification point is very important. Last point, back to nuts and bolts investing. So banking on
03:42low rates,
03:43banking on inflow of capital being kind of cheap and quick and easy to raise is all gone. So what's
03:48going to drive returns?
03:49Adding value to companies. Helping them grow. You know, we just sold an asset where we helped it go from
03:55operating in one country to 11 countries. That creates value. And that's going to determine what creates value for the
04:02future.
04:02Talk to me about, and the viewer, about your secondaries business. Because it's one of the largest in the world,
04:09right?
04:09And this is something that I think the perception of secondaries has changed dramatically in the last five or ten
04:16years.
04:16From it was like a hot potato, you're just looking to move an asset that you couldn't get an exit
04:21from.
04:22To something where, like kids graduating from college today want to come and work in a secondaries business.
04:27That's right, yeah. It's definitely changed. It used to be a cottage industry when I started 20 years ago.
04:32Really kind of small in the periphery, people who needed to sell. Now it's a tool for someone to actively
04:37manage their portfolio more and more.
04:39If I take last year, the average U.S. public pension plan LP, 28% of their overall distributions came
04:46from secondaries.
04:47Either single asset deals or them selling their own portfolio. That's huge. That's a core part of what they're expecting
04:53now.
04:54And on the investor side of things, what we're seeing now is just this huge pickup in volume.
04:58I remember in 2014, which is ancient history, we reached $40 billion of annual volume.
05:04Everyone said, okay, that's the peak. It's due to regulatory sellers. It's going to go back down from there.
05:09You know, we're at a run rate of $250 billion. We could get to $300 billion in the next couple
05:14of years of annual secondary volume, which is massive.
05:18And so it's kind of bridging the gap of liquidity for investors and it's only growing.
05:23Yet, you know, the people playing in this industry, we've been doing it for 25 years.
05:27We're the largest secondary investor in the world. There are very few.
05:30You know, the top ten are still the same top ten. So it's undercapitalized and it's only growing.
05:35So it's a very nice buyer's dynamic.
05:37Speaking of kids graduating from college, the AI theme has been both promising and terrifying.
05:45How has it changed your business and how much do you need new talent, a human talent?
05:52Yeah, I think that if I look at how it's impacting our business overall, first of all, you have to
05:57adapt to the market.
05:59It's helping us do our daily job better.
06:02So we're doing it pretty well horizontally. We're doing it very well hyper-vertically.
06:07So if I think about our secondary business, you know, we're an investor in 1,600 funds around the world.
06:13The pool of data we have is enormous.
06:15So if you plug in the right tools to mine that data, extremely powerful.
06:20OK, so that's one aspect of it.
06:22If I look at the other big impact for us, our infrastructure business, it's a big beneficiary.
06:27Because if I look at what's happening in this market, it's only growing, right?
06:31If you think about, you know, power and energy use, if you draw the line of the estimations of adoption
06:38of AI in the next five years, in five years, just AI power needs are going to represent 60%
06:45of the world's power usage, which is impossible.
06:48It is actually impossible.
06:49So what does that mean?
06:50It means that energy storage, energy transmission, all sources of energy, renewables, all of that flywheel becomes more important.
06:58Then you have the whole impact of the data center investment theme, which is continuing to grow, so that our
07:04infrastructure business is just growing tremendously.
07:07And then investor demand.
07:09You know, if an investor was investing in SaaS companies four or five years ago heavily and they're saying now,
07:16well, I'm not so sure anymore.
07:18There's a lot of risks.
07:20Well, if you invest in real assets like Heathrow Airport, there's very little but positives that AI can bring to
07:27the table.
07:28So our infrastructure business is a big beneficiary from it.
07:31But the whole market is changing so quickly.
07:33You're still hiring.
07:34We're still hiring.
07:35We're still hiring.
07:36You still need fresh.
07:37We still need people.
07:38We still need human decision points along the way, but they can do things better and more quickly and keep
07:43up with the scale of what's happening in the markets.
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