Alt Goes Mainstream: The Latest on Alternative Investments, WealthTech, & Private Markets
00:25:11 · Michael Sidgmore
[00:25:11] S0: I think that brings rise to a really interesting question. So when you talk about private equity being so different than private credit when it comes to valuations, my mind goes to Howard Marks, the co founder of Oaktree. His most recent memo, he writes these memos, you know, every month roughly. The most recent one was on asset allocation. And what he was basically saying was that there's only two principles in investing, really think about. There's equity and there's debt. Because debt is fixed income. Equity is you're not getting a fixed return. You might have more upside, but there's also downside. And those are two fundamentally different ways of thinking about things. And I think that's a really interesting concept to think about when it comes to valuations and when it comes to thinking about what the atomic unit of value is with valuations. I'll bring in another analogy in private markets is Carta has done this on the cap table side. They started their atomic unit of value was the company's equity. How do you think about the concept of the atomic unit of value in the context of valuation? And to bring it back to the Howard Marks example, the difference in how you'd actually go about thinking about the atomic unit of value when it comes to equity. So all the private equity valuation work you do versus debt, private debt valuation work you do.
00:26:29 · Yann Magnan, Michael Sidgmore
[00:26:29] S1: I'm probably a bit biased in the way I'm looking into this thing. And the reason why I'm a bit biased is because we have developed a technology that can virtually, and in reality actually, extract any type of data point in any type of document and attach a label to it. What that means is that we can collect from a board deck that a venture capital fund would receive. Like if there is 1,000 data points in there, we can collect 1,000 data points. We can put that in the data lake. We can attach a label to it. We can standardize this information. So the reason why I'm saying that I am biased is that to me, the atomic unit of value in this industry is that level of granular data. If you have all this data, there's nothing that you can't do. [00:27:15] S0: Whether it's equity or debt. Whether it's equity [00:27:18] S1: or debt is an instrument, but if you're getting that data from the get everything you need for sure and more. And that's why we start thinking, well, I get all these data, actually, I can probably do much more with that data.
00:27:18 · Yann Magnan, Michael Sidgmore
[00:27:18] S1: or debt is an instrument, but if you're getting that data from the get everything you need for sure and more. And that's why we start thinking, well, I get all these data, actually, I can probably do much more with that data. [00:27:31] S0: So that brings up a really interesting follow-up to that, which is you're working with both the private equity side of certain firms as well as the private credit side of these firms. There are obviously different valuation methodologies, and you have different structures and processes for the products that you sell to each business unit. Is there any crossover connective tissue in terms of sharing some of that data with... Obviously, only within a single fund or firm, but where it may actually help that firm on the private equity side or the private credit side if you have data from the other perspective business unit based on what you just said?
00:27:31 · Michael Sidgmore, Yann Magnan
[00:27:31] S0: So that brings up a really interesting follow-up to that, which is you're working with both the private equity side of certain firms as well as the private credit side of these firms. There are obviously different valuation methodologies, and you have different structures and processes for the products that you sell to each business unit. Is there any crossover connective tissue in terms of sharing some of that data with... Obviously, only within a single fund or firm, but where it may actually help that firm on the private equity side or the private credit side if you have data from the other perspective business unit based on what you just said? [00:28:11] S1: The answer is yes. I would say in theory, because in practice, there might be situation where even within the same GP, you can't share information from one phone to another one, as simple as that. But in practice, is doable is that once you have collected all these data, once you have allocated to the portfolio companies, something that could be called like a unique identifying number or something like that, then if one party agrees to share that data with another party because they have an interest to do it, can can just be done automatically. It's just there. It's not just that you're sharing the data, by way. You're sharing the data with the underlying source document with all the audit thread that goes with it. The amount of time saved, plus the comfort that you give to your LPs and to your auditors is just massive.
00:28:11 · Yann Magnan, Michael Sidgmore
[00:28:11] S1: The answer is yes. I would say in theory, because in practice, there might be situation where even within the same GP, you can't share information from one phone to another one, as simple as that. But in practice, is doable is that once you have collected all these data, once you have allocated to the portfolio companies, something that could be called like a unique identifying number or something like that, then if one party agrees to share that data with another party because they have an interest to do it, can can just be done automatically. It's just there. It's not just that you're sharing the data, by way. You're sharing the data with the underlying source document with all the audit thread that goes with it. The amount of time saved, plus the comfort that you give to your LPs and to your auditors is just massive. [00:29:01] S0: Brings rise to a really interesting concept, which is another trend we're seeing in private markets is the big firms are getting bigger. They're adding different investment strategies or funds to their platform, and they're becoming multistrat. So the ability to actually leverage all the data they have across the different business units, I imagine, would be helpful over time.
00:29:01 · Michael Sidgmore, Yann Magnan
[00:29:01] S0: Brings rise to a really interesting concept, which is another trend we're seeing in private markets is the big firms are getting bigger. They're adding different investment strategies or funds to their platform, and they're becoming multistrat. So the ability to actually leverage all the data they have across the different business units, I imagine, would be helpful over time. [00:29:24] S1: It's not that it would be full. I think that's going to be the next gold mine of industry. That's where definitely size will matter. I mean, matters on many things, but in particular on that, the bigger you are, more investment you have done, the more various use cases you've been able to see. If you have all this data and you have standardized that data and you can use that with proper set of calculation, algos, however you call that, then you're getting so much smarter than your competitor. As simple as that. Smarter, faster. If you're capable of informing your investment team few weeks earlier than your competitors, hey, we are saying something here, there's a pattern, there might be a risk that is coming up, you should speak to that company. I mean, that's invaluable, I think. [00:30:12] S0: Brings up a really interesting question, which is, do you think the automation of a lot of this data will benefit the larger firms more than the smaller firms