The Distribution by Juniper Square
00:00:00 · David Wachter
[00:00:00] S0: There were 7,000 private equity backed companies twenty years ago. Now there's 32,000. The number of exits per year hasn't grown at all. It's about 1,500 exits a year. So you've got a $5,000,000,000,000 market with liquidity that is a fraction of the scale of the industry. Pre 2021, the yield on NAV was about 20% cash on cash year over year. In the last four years, that's gone down to seven to 14%. So basically it takes you ten years to get your money back in the current environment. So the market needs more and more liquidity. Because with 32,000 companies and 1,500 exits a year, everyone has to learn how to generate returns without selling their businesses or taking them public.
00:00:55 · Brandon Sedloff, David Wachter
[00:00:55] S1: Welcome back to The Distribution by Juniper Square, where I sit down with leaders across private markets. I'm your host, Brandon Sedloff. On today's episode, I sit down with David Wachter, founder and CEO of W Capital Partners and partner in the private equity division of BNP Paribas Asset Management. W Capital is a pioneer in direct secondaries, providing liquidity to private equity shareholders and now sits inside a BNP Alternatives platform, managing about €300,000,000,000. David and I recorded this conversation at the IPEM Global Private Markets Conference twenty twenty six in Paris, France, which is one of the largest gatherings of private markets leaders in the world. During our conversation, we discussed why liquidity is a solution, not a sign of distress. We talk about the math behind the demand. There's now 32,000 private equity backed companies and yet only 1,500 exits a year. And we cover how direct secondaries differ from continuation funds. If you're interested in secondaries, the liquidity squeeze in private equity, or what it takes to partner with a global asset manager, this episode's for you. Let's get into it. David, welcome to the show. [00:02:04] S0: Thanks very much, Brandon. Thanks for having me. [00:02:06] S1: So as you know, we're recording this live at IPEM Global Private Markets Conference in Paris. We're gonna talk a little bit about your views there. But before we dive in, I always like my guests just to introduce yourself and your organization to set the context for our conversation today.
00:02:06 · Brandon Sedloff, David Wachter
[00:02:06] S1: So as you know, we're recording this live at IPEM Global Private Markets Conference in Paris. We're gonna talk a little bit about your views there. But before we dive in, I always like my guests just to introduce yourself and your organization to set the context for our conversation today. [00:02:19] S0: Well, sure. I'm David Wachter. I'm the founder and CEO of W Capital Partners. We've been around for about twenty five years. And about three years ago, we entered a strategic partnership with AXA IM and then, onward to BNP Paribas. So I'm a partner as well in the private equity division of BNP Paribas Asset Management. [00:02:42] S1: Excellent. Well, we're gonna talk a lot more about W Capital, what you do, how it all fits together. But because we're here at IPEM, I'm curious. You're recording this on the second day. Any takeaways from the conversations that you had yesterday, your meetings? Kinda what are you what are you hearing? What are you feeling from from the show?
00:02:42 · Brandon Sedloff, David Wachter
[00:02:42] S1: Excellent. Well, we're gonna talk a lot more about W Capital, what you do, how it all fits together. But because we're here at IPEM, I'm curious. You're recording this on the second day. Any takeaways from the conversations that you had yesterday, your meetings? Kinda what are you what are you hearing? What are you feeling from from the show? [00:02:58] S0: So huge energy this year. A lot of meetings yesterday, about seven or eight meetings. I also spoke on a panel. So I think there's a lot of energy. I'm most excited about the energy around the secondaries market. I started in this business a long time ago before secondaries were cool, and a lot of new data that was discovered during my panel yesterday. And our meetings are with everybody from large sovereigns in The Middle East to family offices around Europe. So the content is super interesting, and the engagement is very exciting. One interesting benchmark, which I was very excited about, is two of the largest investors I met this past week are looking to allocate 25 to 30% of their entire private equity book to secondaries. Wow. So a major, major growth in the amount of capital entering the market, which is kind of rewarding after a lot of years trying to pioneer and develop this market.
00:02:58 · David Wachter, Brandon Sedloff
[00:02:58] S0: So huge energy this year. A lot of meetings yesterday, about seven or eight meetings. I also spoke on a panel. So I think there's a lot of energy. I'm most excited about the energy around the secondaries market. I started in this business a long time ago before secondaries were cool, and a lot of new data that was discovered during my panel yesterday. And our meetings are with everybody from large sovereigns in The Middle East to family offices around Europe. So the content is super interesting, and the engagement is very exciting. One interesting benchmark, which I was very excited about, is two of the largest investors I met this past week are looking to allocate 25 to 30% of their entire private equity book to secondaries. Wow. So a major, major growth in the amount of capital entering the market, which is kind of rewarding after a lot of years trying to pioneer and develop this market. [00:03:59] S1: Yeah. And we're gonna talk about kind of the pioneering that you've done. But before we do, I just wanna go back to the beginning. And I always like to start with, you know, a little bit about you. How'd you get into the business? You know, go go back to the beginning. Did you grow up in a family where you knew you were gonna end up on Wall Street or that was your dream? Or what was your what was your personal journey?
00:03:59 · Brandon Sedloff, David Wachter
[00:03:59] S1: Yeah. And we're gonna talk about kind of the pioneering that you've done. But before we do, I just wanna go back to the beginning. And I always like to start with, you know, a little bit about you. How'd you get into the business? You know, go go back to the beginning. Did you grow up in a family where you knew you were gonna end up on Wall Street or that was your dream? Or what was your what was your personal journey? [00:04:17] S0: Wow. Okay. So I grew up on Long Island. My dad was a garment center guy. So he hustled. He traveled a lot and way before most of the world was sort of doing business globally. And he was an engineer. I went and was an engineer in school. And when I graduated, I finished business school and wanted to go into tech. So, I went to Lehman Brothers and said, want to do tech. And they said, well, we don't have a training program in our tech department, but we do in investment banking. Do you want to meet them? So I went upstairs and talked about tech with investment bankers, and they're like, you're hired. So I said, okay, I'm not going into tech. I'm going into finance. So ended up with a fifteen year career in investment banking and then always had the desire and the motivation to do something entrepreneurial. And after experiencing the growth of the IPO market and the tech market in 2001, I left Wall Street to start a firm to provide liquidity to the tech and growth market.