Alt Goes Mainstream: The Latest on Alternative Investments, WealthTech, & Private Markets
00:24:03 · Michael Sidgmore, Yann Magnan
[00:24:03] S1: Is there a best way to be able to value a business or a company? You talk about the human element of judgment as it relates to valuing companies or assets. Is there a decidedly best way? [00:24:23] S0: Short answer is I don't think so. One thing that is best is consistency from my perspective. But outside that, when I was a junior guy, remember valuing certain businesses on some very weird multiples, but just because it made sense, The way I was looking at the business was totally grounded into the business model of a firm and then how the company was positioned on their market. Then from there you can come up with some pretty interesting ways, not that common, to derive the value from comparables. [00:24:55] S1: On that point, education is so critical, particularly as it relates to the wealth channel, investing in private markets. How do you think that the wealth channel gets educated about valuations? Because to your point, value in a NAV and a fund may be driven by the way in which certain GPs value those assets. How do investors in that, let's call it an evergreen fund, how do they understand how and why the GP got to that value and therefore that NAV in the fund?
00:24:55 · Michael Sidgmore, Yann Magnan
[00:24:55] S1: On that point, education is so critical, particularly as it relates to the wealth channel, investing in private markets. How do you think that the wealth channel gets educated about valuations? Because to your point, value in a NAV and a fund may be driven by the way in which certain GPs value those assets. How do investors in that, let's call it an evergreen fund, how do they understand how and why the GP got to that value and therefore that NAV in the fund? [00:25:30] S0: I don't know if the wealth channel has to be educated in terms of valuation and valuation processes. What they have to be informed about is how the GP actually operates their valuation processes, whether they have valuation policies in place, how do they deliver valuation against these valuation policies? Are they basically consistent and also do some kind of back testing. So basically, I received the valuation last quarter, what's happening next quarter, if there is an exit, how far was the previous valuation to the exit. So this type of information. So basically it's more like a back testing for me that will enable the GP to understand what's the valuation mindset of a certain GP. But I don't think you need to be educated in valuation to be able to do that.
00:25:30 · Yann Magnan, Michael Sidgmore
[00:25:30] S0: I don't know if the wealth channel has to be educated in terms of valuation and valuation processes. What they have to be informed about is how the GP actually operates their valuation processes, whether they have valuation policies in place, how do they deliver valuation against these valuation policies? Are they basically consistent and also do some kind of back testing. So basically, I received the valuation last quarter, what's happening next quarter, if there is an exit, how far was the previous valuation to the exit. So this type of information. So basically it's more like a back testing for me that will enable the GP to understand what's the valuation mindset of a certain GP. But I don't think you need to be educated in valuation to be able to do that. [00:26:15] S1: On that point about understanding and being informed about how GPs value assets. At seventy three Strings, you work with many of the industry's largest GPs, including the industry's largest GPs, also an investor, Blackstone being one, but you work with many of the largest GPs in the world. What do you see across the different customers that you have as to how they think about valuations and how much uniformity is there across their processes, methodologies, what they're using seventy three strings for?
00:26:15 · Michael Sidgmore, Yann Magnan
[00:26:15] S1: On that point about understanding and being informed about how GPs value assets. At seventy three Strings, you work with many of the industry's largest GPs, including the industry's largest GPs, also an investor, Blackstone being one, but you work with many of the largest GPs in the world. What do you see across the different customers that you have as to how they think about valuations and how much uniformity is there across their processes, methodologies, what they're using seventy three strings for? [00:26:46] S0: Definitely, we're seeing more and more consistency across, first over time and second across portfolio. And here's the thing with valuation again, it's a reporting topic and that's a very important one as well. That's one that if you mess it up, potentially you can be in trouble with your LPs. So being able to consistently demonstrate that you have valuation policies that you have abided to consistently and that you have been delivering, developing these valuations in a very, very consistent way with full traceability, auditability to the original source information is something that's becoming critical to our clients. [00:27:27] S1: How are many of these GPs thinking about augmenting technology or AI in the processes as they conduct valuations and monitor their portfolios?
00:27:27 · Michael Sidgmore, Yann Magnan
[00:27:27] S1: How are many of these GPs thinking about augmenting technology or AI in the processes as they conduct valuations and monitor their portfolios? [00:27:38] S0: So the answer to that question will depend a lot on where you go in the world. I would say The US is definitely very advanced and we are seeing a large chunk of the market moving out of Excel towards any type of solution to make sure that, again, they deliver valuation faster, better, more consistently. Other parts of the world might be a bit slower to embrace technology. Although we've just opened an office in Singapore a few weeks back, and I can tell you the demand there is just massive, Singapore and APAC actually, in terms of being able again to look at valuations in a different way. The market in The UK is moving really, really fast as well. We are seeing exactly the same... Very similar type of approach and mindset as what we are seeing in The US. Maybe Continental Europe is a bit slower on that respect. Not everybody, but still a bit more old school type of processes. [00:28:30] S1: What will it take for GPs to adopt technology in their processes? And does it benefit the larger GPs or the smaller GPs, one or the other more or less? Or does it benefit all GPs uniformly? They just might use it for for different reasons.
00:28:30 · Michael Sidgmore, Yann Magnan
[00:28:30] S1: What will it take for GPs to adopt technology in their processes? And does it benefit the larger GPs or the smaller GPs, one or the other more or less? Or does it benefit all GPs uniformly? They just might use it for for different reasons. [00:28:45] S0: I think my point of view is that it benefits all GPs in the same way. And there is a thing, mean, it's a pretty competitive fundraising environment out there. And what we are seeing from our clients is that first they want to be able to scale. They want to be able to create efficiency. They want to be able to deliver this valuation faster and better. And the other way around, of course, the first thing that matters when you are raising capital is your performance. But the other way around, you don't want processes that are not at par with the best practices out there to be a drag on your fundraising process. That's what we're seeing happening these days.