Alt Goes Mainstream: The Latest on Alternative Investments, WealthTech, & Private Markets
00:17:59 · Yann Magnan, Michael Sidgmore
[00:17:59] S1: The answer to that is definitely yes. I mean, are seeing that happening, and we are seeing that happening actually really, really fast. When we started the 73 string journey, it was four years and a half ago. We were thinking, okay, valuation world is mostly is quarterly. Some clients are actually doing twice a year, but the entire market is going to move quarterly. Fast forward, four years later, four years and a half later, we've and seen an acceleration in the past year with all these funds targeting the retail investors in particular here in The US and retail investors wanting, by the way, to invest in private. There's very significant appetite. So it's market going towards a joint point of contact, [00:18:39] S0: so it's
00:18:39 · Michael Sidgmore, Yann Magnan
[00:18:39] S0: so it's [00:18:40] S1: perfect. But the issue is that you have to change a lot of the processes that you operate on a regular basis. And when it comes to what we do, what we are seeing happening is that if you want to attract retail investors into private capital, you have to make sure that they get the proper information, that they get this information in a frequent basis because as you said, the funds are evergreen. If you want to get retained investors, people like you and me to invest into private, you will have to offer us that we can get in when we want, we can get out when we want as well. So that's higher frequency. That's also a question as to the robustness of evaluation because there's going to be transaction. And again, it's real cash that is going to be transacted based on these valuations. So you need to be pretty sure that you have done the work properly, that you have documented the work properly, that if you have a regulator or an editor coming to you and saying, hey, what have you done here? You can very quickly share that information and you get the proper approval to get [00:19:36] S0: that done. Is the industry ready to handle this new way of doing things when it comes to things like evergreen structures? I mean, some of these structures may have daily tickers. Right? So there's daily, certainly monthly frequency rather than quarterly frequency with a lot of these fund structures. Is the industry ready to handle all that?
00:19:36 · Michael Sidgmore, Yann Magnan
[00:19:36] S0: that done. Is the industry ready to handle this new way of doing things when it comes to things like evergreen structures? I mean, some of these structures may have daily tickers. Right? So there's daily, certainly monthly frequency rather than quarterly frequency with a lot of these fund structures. Is the industry ready to handle all that? [00:19:56] S1: I think the industry will get ready really, really fast. But as you can imagine on a pure technology standpoint, the implications are just massive. Moving from quarterly to monthly, I mean, that's fine. This is largely doable. I mean, there's definitely a bit of extra stress on the infrastructure, bit of extra cost as well. Moving from monthly to daily, it's a totally different beast. And that's happening as well really fast, actually. It's not new daily evaluation. There's been mutual funds here in The US, UCITS in Europe, and they've been doing daily valuation on public assets for years, and they have started to guide private assets into the mix as well, maybe a bit more recently, but that's happening. But it's growing really, really fast. And you have to make sure that your technology infrastructure is capable of coping with that. And that's something significant. But look, I mean, the industry is very, very resilient. It's moving really fast, lots of very smart people. And what I'm seeing happening is that the guys that are at the forefront of this new trend, I mean, they are on top of it, and and they are doing what needs to be done really, really fast.
00:20:59 · Michael Sidgmore, Yann Magnan
[00:20:59] S0: Well, you mentioned some of the firms that are at the forefront of this trend. They tend to be the largest firms in the industry. One of those firms, the largest firm in the industry by by AUM, works with 73, Blackstone. They use 73 for various funds and valuations on those funds. How did that partnership come about? And when you think about working with a firm like them, what did it take to be able to work with them as well as when you think about what that means for how you construct the infrastructure of the business that probably cascades down to other customers. If you're working with Blackstone, you can work with other large alternative asset managers and then smaller. [00:21:38] S1: Yeah. I mean, very good question. And, of course, a bit difficult for me to answer because that question should be turned to Blackstone. [00:21:44] S0: I had the CTO, John, on the podcast. [00:21:46] S1: Yes. Yeah. Yeah. Yeah. And he's a great guy. Look, what I would say is that I [00:21:53] S0: think
00:21:53 · Michael Sidgmore, Yann Magnan
[00:21:53] S0: think [00:21:53] S1: for these very large clients, a lot is about getting these valuations done faster, but with a higher frequency as well. Faster as in, basically, if you want to report to your LPs, today, it's a common view that the main roadblock in terms of getting the information ready is actually the evaluation process. Everything else accounting and so on can be done as fast as possible at the end of the quarter or at the end of the month. Evaluation process, unless you digitalize it, is the one that will drag the reporting to the LPs the most. So clearly, that's one thing, how to get this process higher frequency faster than... The other thing that we're happening with these large clients, but not only the large clients, by the way, as well is that as we're discussing or like alluding to in the past few minutes, it's also a lot about the data. And what we are seeing happening with our early clients is that they want to make sure that they have a control on their data. They want to make sure that they get all their data standardized in one place to be able to use it for valuation, but for more than that as well. And that's also a key driver of this type of adoption. [00:23:11] S0: On that point, how extensible do you think creating a valuation methodology, leveraging technology and digitalizing that for private equity is then extensible to other asset classes like private credit or infrastructure or secondaries?
00:23:29 · Yann Magnan
[00:23:29] S1: I mean, the thought process is the same. The methodologies and the workflows would be very different from one asset class to another one. You're not thinking about monitoring a company and valuing a company in the same way if you are a large cap private equity investor as compared if you are a early stage venture capital fund, just to take two extremes. Private credit, again, totally different beast. So what I'm saying is that the full process is the same in the sense that you're still receiving data, you need to collect data, you need to standardize data, you need to use that for the evaluation process. But in the nitty gritties, things would be pretty different. And I think that's what enabled us at seventy three Strings to build a product that fits really well with the industry that actually we got into that as consultants. And we had seen many, many use cases. So day one, when we started pushing our valuation platform to the next level in 2020, 2021, what I told to my team, I want to build a platform that could be used for the entire marketplace. And I want to build a platform thinking if ever we are not successful being a SaaS company, we should be using the technology ourselves. And we would be having clients that would be private equity, potentially corporates as well, and private credit. So we need to be able to address all of these use cases. So day one, we built our platform so that it could work with all these use cases. But that meant that, I mean, we spent two years and a half building the platform because there were so many use cases that we have to develop. But... Yeah. So that's the the the coin. So within one specific industry, it's a bit more structured, I would say.