00:00Tell us first what kind of redemption requests you got from from this fund and why you've decided to drop
00:06the gate on five percent.
00:10So we received redemption requests about nine point eight percent on our global value fund, which is a European fund
00:19with private markets content in it, primarily private equity.
00:23And and we have that's about an eight point six billion dollar fund.
00:30And so the the fund represents about four point eight percent of our asset base.
00:37And and indeed, you do see that some of this redemption pressure that started in private credit is started to
00:45make its way other make its way over into other asset classes.
00:52Institutional investors continue to make up 80 percent of our clients.
00:56Individual investors make up about 20 percent of our client base.
01:00And indeed, it's that it's that individual investor segment where you see most of this redemption pressure coming from.
01:08To be clear, it looks like, you know, from the research I've done here, David, you had about 15 percent
01:13liquidity in that fund.
01:15You have access to an undrawn credit facility equal to another 15 percent of the fund size.
01:21So you clearly could have met redemptions had you chosen to do so.
01:25What are you protecting investors from?
01:28Is it for sales? Is it valuation pressure, broader confidence problems in private equity?
01:37Well, one thing to keep in mind here is that over 90 percent of clients continue to give us the
01:44mandate to invest that fund on an ongoing basis.
01:48And so what you're doing is you're balancing the the the needs of certain investors, a small percentage of the
01:55fund that would like to get liquid with the needs of the remaining segment of the investor population that would
02:03like to see that fund continue to invest and continue to compound.
02:07And so this feature of capping redemption requests at five percent of the fund is a key attribute of this
02:16fund.
02:16It's one of the reasons why investors feel comfortable coming into a private markets fund with a semi liquid structure
02:23is the fact that it's known that in an environment where investors get a little bit more skittish like today,
02:31you won't see huge amounts of outflows that will be limited to a certain extent.
02:38And that fund can continue to invest and get exposure to the invest interesting investment content that we're generating today.
02:46You know, David, with with private credit, it was pretty clear what sparked the issues.
02:51You had a few bankruptcies with Tricolor and First Brands and then M.F.S.
02:58and and obviously the overexposure to software for which private credit has has become infamous over the last well over
03:06the Sasspocalypse.
03:07Is there a specific issue in in private equity or has this just crept over from one private asset class
03:14to another?
03:17I don't know. We have a very specific dynamic within this fund.
03:23We have a meaningful portion of our investors here from Asia Pacific and Australia in particular and that's actually where
03:33we see most of these redemptions coming from.
03:38In fact, if you look at our other evergreen funds in other markets, the U.S., for example, the redemption
03:44levels are notably less than you have in
03:47in this more European-oriented fund. And so I don't think that it's a broad generalization here.
03:56I think that there are some idiosyncratic factors for this fund in particular.
04:00But indeed, you do see that investors broadly, after having redemption pressure within private credit for a number of quarters,
04:09are now starting to redeem other asset classes as well.
04:14To what extent did the Grizzly short seller report contribute to these redemption requests?
04:21And I know that you have strongly denied the allegations of marks that are not on.
04:29But what do you think that has done to the confidence in your funds?
04:35Well, it certainly doesn't help to have an uninformed report like that come out and create uncertainty for investors.
04:45We've done our best over the past number of months and weeks to clarify for our investors that we have
04:54a very robust process for valuations
04:57and we feel very comfortable with the marks that have been put in place here.
05:01I don't know that – it's hard to tell how much of a factor that that has had.
05:08We don't think it's significant.
05:10But certainly it's one of the factors that's leading to increased redemption pressure in this fund in particular.
05:17I don't know if it's fair to say that – sorry, go on.
05:22I was just going to say, but again, I do think it's important to keep in mind that 80%
05:28of our investors are institutional
05:32and have structures that are very long-term.
05:35I think some investors seem to be confused as to the ripple effects that this might imply into other pockets
05:42of the firm.
05:43This is one fund that's 4.8% of our assets in particular, and you have a little bit less
05:50than 10% of the investors in that fund that are looking for liquidity.
05:54The vast majority of our asset base is institutional in very long-term structures.
06:01Well, that goes precisely to the question I wanted to ask.
06:04I mean, you have almost $200 billion in assets from what I understand.
06:08You essentially invented evergreen funds, or at least put your mark on that kind of vehicle in private equity.
06:18Do investors simply not understand semi-liquid assets?
06:25Well, some investors understand them very well, and others less so.
06:29I think one thing to keep in mind is that the gating provisions within these funds are very much a
06:37feature of the funds.
06:38We have, in fact, enacted gates in the past.
06:41For example, different share classes within this fund during COVID.
06:45We enacted gates in order to protect investors during that period of time when we saw investors acting irrationally,
06:54or we had elevated levels of redemptions during that period of time.
07:01And a lot of people don't understand what a gate means, essentially.
07:06But what you're effectively doing is you've simply received redemption requests of more than 5% in that particular quarter,
07:14and you create a queue for future quarters for people to get out.
07:18There's plenty of liquidity within these funds.
07:20It's not saying that the funds don't have liquidity, but it is saying that the funds have a mandate to
07:25continue to invest
07:27into new investment content.
07:29And that's specifically what we're trying to protect, is our ability to continue to refresh these funds,
07:36continue to deploy these funds, while meeting the demands of investors who would like to get out in a reasonable
07:44way.
07:45David, can I finally ask about how the assets in this fund specifically, and I guess across your holdings, look
07:53right now?
07:53Because it strikes me that some of the assets that were concerning in the private credit route that we saw
08:02have now turned around and started to gain in value, specifically software, you know,
08:06after we heard from Jensen Wong at the Computex Conference in Taipei.
08:12How do your marks look right now?
08:16Yeah, so one thing to keep in mind is that as a firm, we have less than 10% exposure
08:22to software across the platform.
08:25Our portfolio is global in nature, and it is very diverse across industries and asset types,
08:32but it's probably under-indexed to tech and to software in particular versus many other players that are in the
08:40space.
08:40And so we feel very confident that on a relative basis, you know, this software sector in particular,
08:47which is where a lot of the consternation plays, that our investors should, I think, be advantaged
08:56versus some other funds where you do see higher levels of software concentration that exist.
09:02Again, less than 10% of assets across the entire platform, including in many of these evergreen funds, are software
09:10related.
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