00:00The panic over what retail is doing, institutional demand still looks incredibly strong for this
00:04asset class.
00:06Yeah, it's blessed relief for the private credit managers that both you and I speak
00:12to. I think it does speak to a growing divergence between the retail part of the market, which
00:18has grown particularly concerned about software exposure and all of the things that we've
00:22spoken about before, and institutional investors that are still going through a kind of broader
00:27shift in allocation away from public markets and balancing towards private, but also seeing
00:33this in some instances as a buying opportunity. A little bit of volatility is quite an attractive
00:40time to invest in private credit.
00:42One of the things that I immediately thought of when I saw this study was, isn't it the
00:46case, Silas, that because returns have been low, investors haven't been getting their cash
00:51back, that they've kind of curtailed how much more they want to put into private markets.
00:55Is that not the case anymore?
00:58Yeah, so there's a fierce debate going on within private equity, where private equity
01:03funds are not wanting to sell their prized assets at depressed values, but also simultaneously
01:10wanting to fundraise and get more money from their LPs. The LPs want their money back before
01:14they give more. So that sort of debate is rattling on. In private credit, due to the kind of nature
01:20of refinancing credit loans, it's less of a debate on the credit side. But yes, that's
01:26still a debate in full force.
01:29So what are we seeing from the fundraising numbers we've gotten so far from some of these funds,
01:33Silas? We need to wait for the next earnings cycle to come through, but do they still look
01:38very healthy? Yeah, so I think you're also seeing a bifurcation in private credit, as well as
01:48actually private equity as well, of the leading firms that are, I guess, have the longest tenure,
01:55but also strong performance, getting larger and larger funds. You're seeing that in Europe
02:00and the U.S., and then a kind of tail that are flattening out. I think big LPs are looking
02:06to consolidate their GP relationships and choose, I guess, like back the winners. And
02:11they're normally defined as the largest players with the strongest track record. And so I think,
02:16you know, if you speak to the likes of Blackstone or Aries or some of the kind of top tier
02:20managers,
02:21you'll see that they actually, you know, have very, very strong fundraising cycles at the
02:27moment. If you go further down the pack, I'm pretty sure that's probably not as rosy.
02:32Yes. Clear divergences in these different managers, Silas. But one of the other divergences
02:39I'm wondering is just like how much AI exposure these funds have. And if those are the winners,
02:45I mean, in the story, they cited a Middle Eastern sovereign wealth fund that basically said,
02:49I'd rather play AI through private markets than public markets.
02:53Yeah. So I think, you know, again, I mean, we're speaking about great transitions and,
02:57you know, transitions from public markets to private markets. But I think also private markets
03:02are also going through a transition themselves away from legacy software SaaS, which redefined
03:08the last decade of investing both in private equity and private credit to more AI driven
03:13opportunities. And I mean, that's a somewhat kind of counterintuitive idea because one industry
03:19is seeking to disrupt the other. But ultimately, yes, I mean, I think it's probably fair to
03:25say that the next five or 10 years in private markets will be defined by how the industry
03:30can handle and attract opportunities from the AI industry.
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