73 Strings' Yann Magnan - the opportunity for AI to automate private markets

Automating private markets valuation, but not the judgment

73 Strings is building the automation layer for valuation and portfolio monitoring in private markets. Its co-founder spent 25 years valuing unlisted assets by hand at Duff & Phelps, now Kroll, and concluded that data collection and calculation can be automated while judgment stays with people. Demand is accelerating as private markets court retail investors through evergreen funds and private credit, and the documents those portfolios generate become the raw material for benchmarks.

Takeaways

• Valuation can only be partly automated. Calculation and data collection can be automated, but Magnan says human judgment is a significant component and should stay human. He would not bet on AI doing the qualitative side, which he says is years away.
• Software reads portfolio documents in any format. 73 Strings ingests what portfolio companies and borrowers send, including PDFs, board decks, spreadsheets and email, then extracts and standardizes KPIs at 98.6% accuracy. That saves GP staff two to three hours a night.
• Wealth capital pushes valuation toward continuous. Evergreen structures with daily or monthly reporting and growing private credit funds raise demand for valuation software, as does the industry's push for retail money. US mutual funds and European UCITS already value public assets daily and are adding private ones.
• Granular data is the atomic unit of value. A board deck at a venture fund can contain 1,000 data points, which 73 Strings collects into a labelled, standardized data lake. Sharing them across a firm's private equity and credit units is often barred between funds at the same GP.
• Anonymized benchmarks are the next gold mine. Magnan expects aggregated, anonymized client data to produce benchmark indexes over the next few years, and points to MSCI's purchase of Burgiss and BlackRock's purchase of Preqin. He says scale will decide who can leverage data across business units.
• Private and public markets will converge. Magnan calls the pursuit of retail investors the real revolution in how the industry operates and reports to LPs. Someone who can invest 10,000 and exit when they want will compare private returns with public ones.
• 73 Strings went after large clients first. It spent two and a half years building a platform covering many use cases before going to market, which let it serve large multi-strategy firms. Trust from Magnan's 25 years in valuation opened those doors.

Blackstone as client and investor

• Eurazeo, a French manager with €40bn under management, was 73 Strings' first client.
• Blackstone, the industry's largest firm by AUM, started as a potential client.