WEBVTT 1 00:00:00.709 --> 00:00:01.751 - Tawfik, welcome. 2 00:00:01.751 --> 00:00:03.128 Just outline for me, if you would, 3 00:00:03.128 --> 00:00:04.462 some of the challenges facing the 4 00:00:04.462 --> 00:00:07.424 private equity industry at the moment. 5 00:00:07.424 --> 00:00:09.467 - The private equity industry 6 00:00:09.467 --> 00:00:11.469 is coming off two incredible decades, you know. 7 00:00:11.469 --> 00:00:13.930 We called it the golden age of private capital, 8 00:00:13.930 --> 00:00:15.056 but a lot of things have changed 9 00:00:15.056 --> 00:00:18.226 in the last 12 to 18 months after the pandemic, you know. 10 00:00:18.226 --> 00:00:19.769 We have high interest rates, 11 00:00:19.769 --> 00:00:22.772 which means that leverage is not easy to get, you know. 12 00:00:22.772 --> 00:00:25.567 We don't have free money basically to do deals. 13 00:00:25.567 --> 00:00:27.736 Inflation puts a lot of pressure 14 00:00:27.736 --> 00:00:29.738 on companies to continue to improve 15 00:00:29.738 --> 00:00:31.865 their cost performance in particular. 16 00:00:31.865 --> 00:00:33.783 We have dislocations of the supply chain 17 00:00:33.783 --> 00:00:36.411 a little bit of a reversal of globalization. 18 00:00:36.411 --> 00:00:38.496 So there's no shortage of challenges 19 00:00:38.496 --> 00:00:39.998 that the industry is facing. 20 00:00:39.998 --> 00:00:42.876 On top of that, the fundraising environment 21 00:00:42.876 --> 00:00:44.836 has been a little bit harder, you know. 22 00:00:44.836 --> 00:00:47.005 Some funds are still able to raise 23 00:00:47.005 --> 00:00:48.339 significant amounts of capital, 24 00:00:48.339 --> 00:00:50.633 but others are finding it a lot tougher 25 00:00:50.633 --> 00:00:52.510 than it was a year and a half ago. 26 00:00:52.927 --> 00:00:54.512 - What are the key trends 27 00:00:54.512 --> 00:00:56.598 that you are witnessing at the moment? 28 00:00:56.598 --> 00:00:58.016 - So we see a few trends. 29 00:00:58.016 --> 00:01:01.186 The first one is that big capital suppliers 30 00:01:01.186 --> 00:01:03.146 are looking for big customers. 31 00:01:03.146 --> 00:01:04.731 And this is no different than any industry 32 00:01:04.731 --> 00:01:07.484 where suppliers and customers come together. 33 00:01:07.484 --> 00:01:10.278 The second one is some of the new strategies 34 00:01:10.278 --> 00:01:11.321 that are emerging at scale. 35 00:01:11.321 --> 00:01:13.156 Think about private credit for example. 36 00:01:13.156 --> 00:01:16.159 This is a great time to have a private credit strategy. 37 00:01:16.159 --> 00:01:18.161 Infrastructure, which is an asset class 38 00:01:18.161 --> 00:01:21.790 where most providers of capital have been underallocated, 39 00:01:21.790 --> 00:01:23.666 continues to see a lot of appetite. 40 00:01:23.666 --> 00:01:26.419 And then we have other parts of the private capital world 41 00:01:26.419 --> 00:01:27.712 that are a little bit more challenged. 42 00:01:27.712 --> 00:01:29.839 Commercial real estate would be one of them. 43 00:01:29.839 --> 00:01:32.175 Venture capital is another where I don't think 44 00:01:32.175 --> 00:01:35.303 we have recovered from the highs of 18 months ago. 45 00:01:35.303 --> 00:01:37.430 So it's a little bit of a story of haves and have nots 46 00:01:37.430 --> 00:01:40.558 within what we commonly call private equity. 47 00:01:40.558 --> 00:01:42.685 - Which of those trends do you think 48 00:01:42.685 --> 00:01:45.480 presents the biggest opportunities? 49 00:01:46.356 --> 00:01:47.899 - I think the credit strategies. 50 00:01:47.899 --> 00:01:49.442 I mean, you know, when you think about the last 51 00:01:49.442 --> 00:01:51.402 20 years, low interest rates. 52 00:01:51.402 --> 00:01:53.863 So when you have money that's quasi-free, 53 00:01:53.863 --> 00:01:56.825 you can make any valuation work. 54 00:01:56.825 --> 00:01:58.868 I think we've entered a different era 55 00:01:58.868 --> 00:02:01.121 where credit strategies are going to become crucial 56 00:02:01.121 --> 00:02:02.747 and balance sheet optimization 57 00:02:02.747 --> 00:02:03.915 is going to become important again. 58 00:02:03.915 --> 00:02:07.127 And so the ability to provide capital up and down 59 00:02:07.127 --> 00:02:09.712 the capital structure becomes really attractive. 60 00:02:09.712 --> 00:02:12.799 That also gives a little bit of diversification for the LPs. 61 00:02:12.799 --> 00:02:15.093 So my bet is on private credit. 62 00:02:15.093 --> 00:02:17.011 - Will the good times ever return? As they were? 63 00:02:17.011 --> 00:02:19.139 - I think so. I think so. 64 00:02:19.139 --> 00:02:21.558 I'm not sure we will see as good times 65 00:02:21.558 --> 00:02:23.893 as we have seen maybe in the last few years. 66 00:02:23.893 --> 00:02:25.937 But this industry has a role to play 67 00:02:25.937 --> 00:02:28.231 in capital formation. 68 00:02:28.231 --> 00:02:30.567 We have public markets. We have private markets. 69 00:02:30.567 --> 00:02:34.362 I also think that a lot of appetite exists within retail 70 00:02:34.362 --> 00:02:37.365 to actually provide capital to private equity. 71 00:02:37.365 --> 00:02:39.617 So it might not be as good as it was a few years ago 72 00:02:39.617 --> 00:02:42.203 but I'm very bullish on the industry for the next decade. 73 00:02:42.203 --> 00:02:44.289 - Tawfik, thank you so much. - Always a pleasure.