#74 - Alan Waxman: Sixth Street, Leadership, Outlook

25:38And Alex, I think you know us pretty well, but we're constantly sort of those solutions can vary by company. But we're trying to work with those companies. And there's a large amount of companies to work with to find win-win solutions and sort of solve what they're trying to do, whether it's get money back to LPs or sort of do a major acquisition. But I would say that is a that is a real theme sort of across really across asset classes. Another one, asset-based finance. Again, this is this whole idea. There's more and more stuff happening sort of outside the commercial banks. Asset-based finance, very similar to direct lending, but a lot bigger than direct lending and a lot higher barriers to entries.

26:16That's a big theme. Again, the way we like to, everyone likes to do it differently. The way we like to do it is there's a lot of different heterogeneous components of asset-based finance, and we don't want to do one or two. We're constantly just looking across all of them to figure out at this point in time, is it consumer? Is it resi? Is it commercial? Is it some type of equipment finance? We're constantly looking across the ecosystem about sort of where the best relative risk reward is. But that's a big thing. And the other one, which has gotten a lot of attention and probably too overhyped right now, is just the whole sports and live entertainment.

26:51Why is it interesting? Look, as more people get into their phones, they value experiences more. We saw that during COVID, but you think about what's happened in AI. And fortunately, a challenge with a lot of the younger generations where they're in their phones, they value experiences more. So they're looking for more and more experiences. And you've seen that sort of reflected in the valuations. For us, we try to approach it as a strategic. We're partnered with some of the biggest sports brands in the world. So it's like Real Madrid, Barcelona, Dallas Cowboys, New York Yankees, San Francisco Giants, San Antonio Spurs.

27:27And that creates a network effect that allows us to sort of just, although there might be maybe too much hype right now in sports, allows us to see, sorry, BFC, our women's soccer team, also to be able to see things in a different way. I mean, most of the things we look at in our sports and live entertainment, people are coming to us because they want us as their partner. They're not running big processes. And that's sort of the way we like to do in sports. So those are three of the areas. But really, it's an interesting time right now. And I expect there to be a lot more activity because a lot of built up commerce or transaction volumes have been depressed for the last really two years.

28:05And assuming there's no more surprises, it feels like there's going to be a lot of activity coming towards the back half of this year. So you obviously operate across a wide range of asset classes. But how do you maintain excellence and focus across such a broad investment platform without diluting your edge? First of all, it's because what we've done our entire careers. This is all we've done. is most of the firms that have the big public firms, they started off, they were born or birthed as a private equity firm, or they were born as a very specific asset class. Because we were the way we grew up at Goldman Sachs, because we didn't have outside LPs, we could literally do anything as long as we didn't lose money.

28:49We just grew up as investors. We weren't private credit or private equity or real estate or so we're just investors, but looking across all the asset classes. So I think the first thing is like, this is what we've done literally since this is all we've known as investors that flexible comparing relative risk reward as economic and credit cycles and within sector secular trends happen. So that's, I think that's the first thing. The second thing is culture is an investor first culture. Like that's embedded in everything we do. We just did our five-year strategic plan. It's literally the centerpiece of our five-year strategic plan.

29:27As an investor first model, we can talk about what's happening in the industry, but it's gotta be in the bloodstream. And then the third thing is like any business is something, you know, going back to when I started running businesses at Goldman is you gotta have the right people in the right seats. You gotta have the right people in the right seats and they're talking to each other. They feel as one team and you gotta be marching up the mountain together. And right now, all the people in all those seats are people we've worked with, or I've worked with between 10 and 25 years, buying to the culture, buying the investment policy.

29:58And most importantly for us, they're countercultured at fiefdoms and silos. They have to talk to each other, compare nodes, share relationships. And that's really what Sixth Street's all about. Would you talk about your cross-platform capabilities, how they're unique and how your approach helps position you to potentially have that first mover advantage? Yeah. So look, Sixth Street, we see about 400 to 550 deals a month coming to Sixth Street. Like it's a machine. There's stuff coming in. And a lot of times there's deals come into the right sort of group where that's a team that would execute the deal.

30:38But a lot of times they come in, you know, a deal that might be a growth equity deal comes into our direct lending business or comes into our infrastructure business for whatever reason. And in a lot of firms, like when that happens, that deal dies or it's slow to get to the other groups. At Sixth Street, like that's built into our technology. It's built in our culture. That's like simultaneously, because when you talk to one person at Sixth Street, it doesn't matter what team you're talking to, you're delivering the firm. And that's literally something I think we've set up from day one. I think a number of competitors who are really good competitors, but they've tried to reverse engineer that because they started as this type of firm or that type of firm.

31:20And then they bought a bunch of businesses or they built things over time just because they started a lot before us. It's possible to reverse engineer it, but it's much easier to do it when literally from day one in your business plan, everything you've done, every person you've hired is deliberate and intentional for that specific culture. And that's how we've done. And then the last thing I'd say, and this is really, really related to culture is, you know, just constantly talking about it all the time. We always say like, you got to talk about culture until you're literally tired of talking about it.

31:53You can't talk about it enough. Cause even though, even like, that's like the one lesson we've learned because you're constantly bringing new people. You're constantly developing the next generation of talent. And it's got to be in the bloodstream. Otherwise, cultures can be destroyed very quickly. And that's sort of how we do it. But ultimately, it starts with leadership and having the right people in the right seats. So you talked about this notion of an investor first firm. Would you describe how that's different from what I've heard you referred to in the past as a factory model? Yeah. So go back 10 years ago, every firm and alternatives, well, most firms and alternatives, the good ones, they were all investor first firms, period, like investor first.

32:38And when I think of investor first, it's, you know, a deal comes in, you sort of turn it over, you look at it, you know, you're not thinking about your deployment pace. If it's a good deal, you're going to do it. But if it's not a good deal, there's no pressures to sort of do it. And there's a time and you're constantly just turning it over. I think over the last four years, and there's nothing wrong with this, but increasingly a number of firms have decided that they want to be more deployment factories. And again, there's nothing wrong with this. It's just a different business model. But setting targets, we're trying to hit those targets.

33:21It's in our view about investing. And I sat up in front of our investors in 2017 and 2019. And I said, listen, if you want a deployment firm, like just literally like just like we're going to invest with a certain pace. That's not us. Like we're investors. If you want that, there's other people you should do that. But that's just not who we are as investor first. And I think right now there's like a fork in the road. And I think some firms are choosing to sort of stay true to their original ethos of investor firm. first. And I think others are sort of going more down the deployment factory. And again, there's nothing wrong with it.

33:58It's just a different business model. But for Sixth Street, and what we're all about, we love investing. Like we love investing. Like for us, you know, it's very clear. And like I said, it's sort of plastered all over our five-year strategic plan. It's like investor first firm in the service of our clients, which are our capital partners, which are LPs. And that's sort of what it is. But again, the industry is going through rapid changes. There's lots of dynamics, some of which you understand really well, being in sort of the wealth ecosystem. But that's kind of how we think about an investor-first firm.

34:35I'm going to share the way I think about it and tell me if it makes sense to you. I think of it as there's a spectrum. On one end, there are managers in the business of generating returns for their clients. That's their pure focus. On the other end, there are, at the other end of the extreme, there are managers who are purely in the business of gathering assets and growing their revenues. And most firms are somewhere along that spectrum. And I think of investor first being more on the side of, we want to do what's best for clients always. And then the other firms that maybe are more product oriented, I know you don't use the term product, but many do, and are kind of have standardized mass production systems in place are probably more on the growing assets under management.

35:16And by the way, again, there's nothing wrong with that because when you run a deployment factory, it allows you to offer things at the cheapest cost. So if you're an LP and your only consideration is literally the cheapest cost, it's easier to get the cheapest cost from a deployment factory because it's a factory. Like they're designed to deployment at scale and you can do things on a cheaper basis, but that's not what we're all about. How are you going to grow the next five to 10 years? What's the plan? We think out more in terms of capabilities. So for us, the capabilities, we've got 10 investment platforms.

35:54Those are the 10 investment platforms we want to have. We have six or 16 sector franchises. We're probably going to add one more sector franchise. So we'd like to be at 17. So 17 sector franchises. We're definitely have been pretty forward thinking on the engineering side and sort of AI side. And I would expect us to continue to sort of deploy more capabilities across our entire platform from the investment process to the non-investment process. Those are really sort of the key areas that we're focused on over the next five or 10 years. Are there certain problems that Sixth Street can solve for investors that others may not be able to?

36:33I think what we do, as well as anyone out there, is going back to the way we grew up, which is this whole idea of comparing relative value at different parts of economic and credit cycles, different sort of secular cycles within sector, sort of on a dynamic basis where the best relative risk award is. And that's one of our funds. Tau is the largest. We don't have any wealth investors. We don't have a lot of small investors. They're the hardest to get investors in the world. But that's the largest opportunistic fund in the world, private capital vehicle in the world that can do everything across Sixth Street.

37:08So that's about a$30 billion vehicle. And the reason why we have that vehicle is because it goes back to when we first raised our first fund at Sixth Street. And I said to people, and so did some of my other partners, if you don't think we can compare across all these different asset classes and all these different sectors, the best relative risk award at that point in time in a cycle today, six months from now, then you shouldn't invest with us. That's literally the first set of meetings we had. That's what we told people. So we've been doing this for a long time. And right now, particularly in the wealth space, but in general, I don't think anyone's got this scaled experience that we have.

37:47Some people might put it together and put different businesses together and offer products that look like that. But to do it sort of, and it's in your blood and it's in your culture, I think that's what we do that's different than ever in the world. And it goes back to the way that we grew up because, again, we were the most scaled player in the market back in the late 90s, early 2000s, mid 2000s, before everything got really big. And we were sort of doing this at scale. And we only had one investor. Had we grown up and we had a bunch of LPs that said you had to have this mandate and this mandate, we wouldn't have gotten that experience.

38:21But we grew up with that experience and we were able to grow up with that experience seeing 98, 2001, 2002, 2008, COVID. That's what sort of makes us a little bit different than I think what's out there. Again, I'm not saying better. People can be the judge of that. But no one can say that. I don't think anyone else can say that. You alluded to this a little bit earlier, but you've made some notable investments in sports franchises, including NBA, women's soccer, European football clubs. what's driving your conviction in this sector? You talked about a little bit, but if you could dig in a little bit more and how do you assess the risk reward when, at least on the surface, it appears valuations are so high?

39:03This goes back to themes. The way we got into sports, it was a mega theme because during COVID, we said, listen, the world was falling apart. What are the best franchises that are most impacted by COVID? One was Airbnb, which we did the Airbnb deal during COVID, which was one of the best deals done during COVID with Airbnb. Great company. And the other thing, we had a bunch of other themes, but one of those themes was sports, because obviously, you know, these are very recession-proof assets. You know, we were observing during COVID that, you know, people were in their shelters and seeking out experiences and getting in trouble for, you know, trying to go have experiences.

39:47So you're starting to see human nature at its core. And but none of the a lot of the rules in the leagues didn't allow us to invest in sports teams or sports leagues. And so this all of a sudden, like, how do we sort of get involved here? So we had a big white paper thinking about how we're going to do this. How do we do this where we don't look like a financial? We can look like a strategic. So we bought Legends, which is in the ecosystem of sports and live entertainment. They're one of the core parts of the sports and ecosystem. We're partnered with the Dallas Cowboys and New York Yankees. And then we started targeting leagues and teams.

40:26And the first deal we did was literally San Antonio. So I grew up in Austin, Texas, as I said. And we had a thesis around San Antonio and Austin, sort of that corridor is a growing corridor. It's a mid-market team, but it could really start to become sort of a major market team when you combine Austin, San Antonio, and everything south of that. So literally, the NBA changed their rules to allow institutional investors. And, you know, literally immediately, one of my colleagues, Austin Bowers, like emailed the Spurs. And they happened to be, you know, because every team at the time was looking.

41:01And that's sort of how we sort of got into Spurs. And from there, we just started to create sort of a network. If you look at the deals we've done, they're the best brands in the world. But this whole idea, and this is kind of it, is one, people are going to value experiences more, sports and live entertainment. You can see that in viewership. But this other idea that these teams used to be local market teams, but now the global brands have the potential to be global brands. And you start thinking about it not from a local basis, but from really a consumer perspective globally. Think about streaming.

41:34You know, back in the day, you couldn't watch your favorite soccer team in Europe. Now you can literally be anywhere on your phone, watch it. And you can be in Australia watching the Dallas Cowboys or in France and watching the Santos Spurs. And you're literally just walking around. You have it on your iPhone. So that opens up just a whole nother set of consumer engagement and all the associated opportunities with that. So that was kind of the big sort of idea. And then from there, like anything in investing, once you have a platform and you build a network, instead of you having to go try to get deals, deals come to you because people want to partner with you.

42:10And that's literally most of our deals have been just literally bilateral conversations. People want to come talk to us. And that's kind of how we're set up. Also, I suppose if that space is open to institutional capital, there's a big advantage to being early in that cycle. No question. But just stepping back, Alex, like that's kind of what Sixth Street does is we have, I mean, remember, we have tentacles all, you know, we have just under 300 investment professionals. We're in 16 different sectors, 10 different investment platforms. We all have relationships. We've also all done this for a long time.

42:44Like the amount of information coming in, like we can get a pretty good mental model of kind of the world and where the world's going. and our job as investors. And again, this goes back to the question you asked is the group thing question is we're not thinking about like what the world is or was. We're thinking about what it could be. And that's kind of how we think about things. And that's sort of where theme development comes from. And it's top down, it's bottoms up. But again, it's something we've been doing for 27 plus years. That kind of circles back to be independent thinking. Don't just follow the herd and build the culture of people that are oriented that way and also build a flexible platform so you can take advantage of potential opportunities.

43:28Yeah. And this is Sixth Street. This is kind of who we are. You look at wealth. Like we have 10 investment pipe. We're not putting a whole bunch of strategies on the shelves. Like we've been, we hired a head of wealth, I think two years ago. And we've, you see, we haven't really done anything because we like to watch, we like to be methodical so we can do it right and do it our way and not just try to follow what everyone else is doing. Like, that's just not, that's not the way our mental model works. That's not the way our culture works. Like our culture, you know, we have a bunch of aspects to our culture.

44:00One of them is like, you know, what we talked about earlier, like facing the tiger. So facing the tiger with uncertainty, which is for us is like when problems happen, that's what destroys culture. So when that happens, instead of pointing fingers or running from problems, we run from things together. But the other thing we have like four or five components to culture, but the other one is entrepreneurs. And an entrepreneur is not thinking about what everyone else is doing. We're trying to think about how we're going to do it our way that's comfortable for us. And that's really just how we approach theme development.

44:29It's how we approach business building. It's how we approach investing. And it's just sort of in our bloodstream. You just brought up the wealth management market. How would you describe kind of how you're thinking about it right now? We've been on basically a two-year listening tour, just listening and really trying to listen to what the end clients want, what the financial advisors and can we do something in a way that solves solutions for them and their portfolio, but does so in a way where what's comfortable for Sixth Street. And we're trying to find those concentric circles. You know, we have a one of my another one of my mentors besides David Vineyards, Jamie Gates.

45:12Jamie Gates is we call him the godfather at Sixth Street. He's one of the original founding partners of Sixth Street. And he he taught me something early on. He said, you know, just because he can raise the capital doesn't mean you should. And that was kind of an ethos that's been across Sixth Street. So we could like spray all our products on there. But, you know, or what we call strategies by thinking the wealth, it's called products. But that's just not how we do things. So we've been on a listening tour, trying to figure out if there's sort of a consensus circle that works. But over time, I think there are ways to drive or offer something that it's a solution.

45:49And again, for us, the thing that we do is different than really just because we've done it for so long. It's that whole sort of relative value across a bunch of different asset classes. If we do something, it will probably be somewhere in that investing philosophy. That's what we'd bet. But again, we're still in our listening tour. Well, you start every investment with a blank piece of paper that you talked about. But how do you do that and scale? Meaning, how does your bespoke approach scale over time? And is it just adding people or is it more than that? We don't really think about it like that.

46:27We think about how do we drive outcomes for our clients? And if we can drive differentiated outcomes, that's what we try to do. So we're not thinking about deployment pace or how to – that's just not how we think. We think in terms of culture. We think in terms of our investment philosophy. And then the other thing, as we talked about, think in terms of capabilities. Because if we have the culture, we add a capability, that just makes us better holistically, better investors, because that adds another stool to overall algorithm of how we sort of go through our investment process. So that's kind of how we think about it.

47:03I mean, it's a very, you know, everything we do is pretty artisanal. You know, we're constantly turning things over and trying to, you know, what we would say is like whiteboard. Like we're not like, oftentimes companies come to us or, you know, someone showing us a deal comes to us and they say, hey, here's what it is. And what we often say is, look, We'll show you that. But here's something else you might want to think about that's a win-win that we think is better. But if you want to do that, we'll do that. And we're probably generally not the best person on that other thing because there's 27 people that want to do that.

47:40But we try to use it. We call it right brain thinking. We try to use our right brains to try to come up with something different. And often what happens is when we come up with an idea that's a good idea, then we get on a whiteboard and we start mapping it out and try to really solve for the CEO or the management team across the table. And that's what we do. And look, if there's one knock against us, it's, you know, we're not a deployment factory and we're not solving for that. But again, it goes back to who you are. And for us, what we're all about is investing. It's what we love to do. It's in our ethos.

48:13and, you know, but it's certainly not as scalable as a deployment factory. What would you say is your overall economic and market outlook looking ahead? We don't think about volatility. We think about the real economy. The real economy, like it feels there will be some damage because there's definitely a slowdown and sort of consumer behavior, corporate boardroom behavior, wasn't stoppage, but a real slowdown or thawing. And that did a little bit of damage, but I don't think it's major damage. Like ultimately, everything, particularly in the U.S., is about the consumer. Everything related to the consumer is about jobs.

48:50And again, there's some slight weakening. But in general, it feels that feels pretty good. There's some risk on the horizon. We can talk about some of those risks and some of the early indicators we look at. But in general, that feels pretty good from an investment environment perspective. And we're pretty constricted. There's a lot of things to like about the U.S. Obviously, you have to watch the bond market. The bond market's got a voice here. So obviously, that's something we're going to pay attention to. But there's a lot on a relative basis. The US is in a pretty good structural position, as long as there's a little bit of certainty sort of on the environment.

49:30The reality is, and I referenced this earlier, transaction volumes have been depressed for really two-ish years. and there's a lot of just commerce or deal activity that's been waiting at the gates to happen that everyone thought was going to happen at the beginning of the year. So that's all starting to happen. So in general, I think you have a pretty constructive outlook. There are definitely risks. The real economy feels pretty good because it's really going back to the consumer and the job market. And as a result, now this commerce that we think is going to happen or transaction activity, which we expect to really accelerate going into the second half of the year, like it feels pretty good what are the risks you know risk number one you gotta obviously you know looking at the bond market you have to pay attention to the bond market you know failed treasury auction in a very material way like there's some treasury scare moving assets you know you know to non-dollar assets that's obviously something we're watching And again, we'll see how that evolves.

50:33The second thing is just the whole AI. How's AI, as it starts to really sort of roll through sectors, how's that going to impact the job market? Obviously, everyone's sort of spoken about it theoretically, but you haven't really, you've had two parallel economies. You've had all the AI companies raising a lot of capital, hiring a lot of people. So you've almost had two different economies, an AI economy and a real economy, but you haven't started starting to see the disruption. And I think you're starting to see, you might be starting to see a little bit of it. And I think one thing to watch out is like, you know, unemployment rates for undergraduates.

51:12Like that started to tick up a little bit. That's like an early indicator. Unemployment rates for graduate students. So that's starting to tick up a little bit. So those are early indicators. But it's definitely a big watch out because when you think about these big transformations, I mean, the Agrarian Revolution, I think, took place over 150 years of rebalancing the economy. The British Revolution took place over, I think, 70 or 80 years. The Electrical Revolution, call it 50 years. This is probably going to be less than that. It just takes a while for the economy to rebalance. And actually, the first AI person I've seen publicly speak out about it was actually today, the Anthropics CEO.

51:53I'd encourage you and everyone else to read it of what we're watching. And just, again, there's risk. There's lots of opportunities, like bring down our deficit, health care costs. There's a lot of great things, but there's also risk. And again, it just needs time for the economy to rebalance. But I thought the Anthropics CEO did a pretty good job. It's in Axios. You can see it. but it's definitely worth your listeners reading just to sort of get into it. So put it all together, pretty constructive outlook. I think we're actually going to start to see real transaction volume, real M &A activity, real deal activity.

52:29And that's a good thing for our business. So, I mean, that's kind of how we see things, at least in the US. I know you look at the macroeconomic outlook, obviously, but you also do significant bottom-up investing. How do you combine the two? and how do you weigh the importance of those two, particularly in an environment where you potentially have an unusually wide range of outcomes? Our whole investment plan, this is why we didn't lose money in 0102 when everyone lost money. This is why we didn't lose money in 2008 is because our whole view is that if you're just a bottoms up investor, you miss the macro.

53:06If you're just a macro investor, you miss the micro. So our whole thing is we want to be sensitive to the macro. We do have a macroeconomist at Sixth Street, but we all consider ourselves amateur macroeconomists because we want to be sensitive to it. But at the same time, you don't want to overwhelm it. We don't want to be macro traders because oftentimes for us, it's bottoms up. There's a lot of structuring, a lot of cases for our deals. So again, it's all 90 % bottoms up, 95 % bottoms up. And I'd say sensitive to the macro. So that's where loss rates, you can have big loss rates. if you don't understand that.

53:41And I think one of the challenges in private credit, I think there's, you know, you can kind of see it in deals where risk pricing has changed, spreads go out and, you know, there's a big credit event or big macro event. And like in the direct learnings, some people just keep pricing deals as if nothing's happened. And that's just not investing. And it's because they're not thinking about the world, they're just thinking about it in a very tunnel-like way. Again, this goes back to investment philosophy. If you look over loss rates over time, not the last 16 years because the Fed's bailed out. Every time there's been a potential loss cycle, the Fed's bailed it out.

54:17But it's hard to do when you actually have inflation. It's hard to do when you have a balance sheet as big as the Fed's balance sheet. It's hard to do when QT hasn't worked the way that they thought it is. So I think when you look back and you study history, where people have gotten in trouble is like implicit versus explicit risk, but also just tunnel vision. And I think that's the problem with a lot of these strategy-specific sort of asset cloud. They're just looking at that, and they don't see everything happening. And that's where it matters, and that's where loss rates come in. That's why our loss rates are so low for the last 27-plus years.

54:54And I think that's why we say we always want to be sensitive to macro, which is, you know, that's kind of our investment philosophy embedded really from day one. One of the flaws that I've observed is investors will look back and say, in 2008, that's like the worst case scenario, we would have been fine. And I think that's missing the fact of what you just described, which is, yes, that was a period where you had a big drawdown, but you had Fed policy, fiscal policy that had ample room to stimulate. And looking forward, it may be very different. Maybe the next downturn isn't as deep, but it may last a lot longer.

55:31And that has very different implications. The challenge is there's been no loss rate experiences over the last six years because, you know, inflation has been low prior, obviously, until recently. And it's a real risk out there. And that's an embedded risk in the system. It's just a lot of participants in the market, they just haven't had seen cycles. And I'm not trying to do like the old guy, young guy thing, but it's a real thing, you know, watching what can happen. But a lot of times it happens is, and again, we saw it, you know, post, let's just say the volatility post liberation day. Literally, there were people still pricing deals the exact same way as if nothing had happened.

56:13And by the way, I saw that same thing in 08. And by the way, one of the reasons why we didn't lose money in 08, we didn't make any money is because we saw people still doing that. I'm like, hey, you want to buy this? We'll sell you this. Because people get that tunnel vision and they don't sort of see the macro. They're just not set up that way. And that obviously gives an advantage to the larger firms like ourself. But it's a real thing from an investment philosophy standpoint. It's, again, just look at the history. A lot of losses have made because, again, everyone, we have a saying at Sixth Street, everyone thinks their baby's the prettiest.

56:47Everyone thinks they're, if you just have an energy team, energy team's always going to think that they grow up and they've just done energy their whole life. They're going to think energy is the best thing. It's always better than everyone else in the healthcare, if that's all they've done. And that's why the, you know, sort of the way we've always thought about it, and we learned a long time, you put all these people together, but you recognize there's things beyond the tunnel. And it's not just about what's in your sort of your baby, but it's really looking at, it's probably the bad metaphor, but it's looking across everything to sort of compare relative risk award.

57:18But I mean, that's the syndrome. People get in the tunnel and they miss things. And again, when the Fed's bailing everything out, it's okay, but that's not investing. I would say that's just like a hope strategy that the Fed's going to continue to bail people out. Maybe they will, but again, that's not investing. It only matters when it does matter. And I think that's a lesson. I think, unfortunately, I think a lot of people are going to learn the hard way in the next cycle. You briefly alluded to private credit. How would you say the private credit landscape has evolved since you started and what improvements or risks do you see ahead?

57:55It's evolved a lot. When we first started Sixth Street, the name private credit didn't exist. It just wasn't like when we started Sixth Street, we raised our funds. It didn't exist yet. It It wasn't even a category. It started with opportunistic and then ultimately opportunistic became sort of private credit. And now it's kind of its own category within a lot of the big allocators. So I think the first thing that's set up, one of the biggest changes is that if you go back 16 years ago, we started, there's actually in almost every large pension fund or sovereign wealth fund, they have a private credit group.

58:34So that's a big change because now you've got sort of specified thing. The second change is everyone sort of thought private credit meant direct lending, even though we've always thought about, you know, it's heterogeneous, like 30 different subcategories. And I think the industry is getting more sophisticated that there's like 30 different parts of private credit. It's not just direct lending. So I think that's sort of an evolution. And then the next evolution is like who the investors are. As you probably know, there's a lot of wealth capital coming into the private credit, more the direct lending space, and that's changing the market structure.

59:14Typically, a lot of the private credit vehicles where you'd raise a drawdown fund, you invest it over three or four years, and with a lot of these evergreen vehicles, money comes in and you have to invest it. So just if you think about just as a manager, it's a different consideration versus you've got blocked up capital, you have three or four years to invest it. So that whole sort of just change of mindset is starting to come into really the direct lending market, less so other parts of, I'm just going to use in quotes, the private credit market, more broadly defined. So I think those are the big areas.

59:50And the other thing I'd say is, look, when we started the direct lending business in 2000, there were like three of us. It wasn't called direct lending back then. It was called hybrid lending. And it went from three to about 18 in 2008. And in 2018, it went from 18 to about five. And then it went from five to 1 ,000. So when you see that, just like you saw, again, it was a much smaller sample set. But when you think about from 2000 to 2008, you went from three to 18 to five, we've gone from, I don't know, there's five, I don't know what the number is, but a lot. When there's a cycle and there's losses and the skill of how that ultimately sort of turns over and what ruptures that leaves in the private credit universe, I think there's going to be a lot more dispersion of outcomes for managers than what people have seen over the last 16 years.

1:00:45really going back to what you said, because there's just less tools available because of all sort of the structural, not big inflation, but just it's not going to go back to 0 % interest rates. It's really hard to do that unless there's like a major recession. So those are some of the things that I think have evolved in the credit universe, but it's going to be interesting to watch over the next five years. Well, Alan, I've learned a lot in our conversation And one thing that I've learned is to take a firm from zero to 100 billion with significant growth potential even from there. I can see why your independent mindedness, having the grit of a college soccer player that can play with a broken ankle and break through walls and survive.

1:01:37Building culture and really putting investors first and keeping that culture even as you've scaled. I could see why you've had so much success. So I appreciate you sharing all those insights with us today. Thank you for having me. I enjoyed it and look forward to seeing you soon. Thanks, Alex. Thanks for listening. We hope you enjoyed this episode. Please visit our website at insightfulinvestor.org to access past shows and learn more about our podcast. If you have questions, feel free to email us at info at insightfulinvestor.org. And if you enjoyed the discussion, please subscribe to this podcast to ensure you don't miss future episodes.

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