#82 - Tony Davidow: Alternatives, Education, Bridging Investor Gaps

26:08Time horizon, right? Time horizon of liquidity is somewhat related, but do we have a significant time horizon? Can I allocate capital for 10 years? If not, that's going to be a little bit of an impediment. Do we understand the structure? And it's complicated. They're not mutual funds. Evergreen funds are not mutual funds. There are constraints in how we get out. The paperwork's a little bit more complicated. You experience this a lot more than I do, but that's what I hear from advisors, the operational burden. It's a little bit more challenging. So clearly there are challenges out there. I think if you look at research from Cerule and others, it kind of points to the same sort of challenges.

26:48We need to understand how the strategy works. We need better help with processing the paperwork and just getting the account set up and all of that. We need to make sure that our clients understand what's going on and that these are long-term investments in nature. I think all of the studies are really saying the same thing, which is we need to educate. An informed investor is going to have a much better experience than somebody who has sold a product that doesn't understand these things until afterwards. But with all that said and done, I still think there's such a compelling reason to look at these investments because of the attributes that they provide.

27:25Opportunity for higher returns, the opportunities for higher income, the opportunity to have diversification when it matters the most, especially with market volatility. And something we don't talk a lot about is the ability to head to the impact of inflation. Those four levers are really what we're always thinking about when we build client portfolios. We actually get those in very discrete ways with our allocation to alternatives. And you touched on this earlier, but it's an education process that it's a lifetime of learning. And the point is, is to start that process. And in many ways, it becomes self-reinforcing because you start it and you dip your toe in, you learn a little bit, you learn a little bit more with time, you learn through good periods, you learn through bad periods.

28:09and maybe you go from 5 % to 10 % in a few years and then you gradually increase over time as you learn more. But it's not about having an education session, getting it and then jumping all of a sudden. Yeah, Alex, you and I are 100 % aligned on this and you and I are both lifelong learners. We both enjoy learning. We've invested in ourselves. We're involved in organizations that continue to challenge us to think about how to serve the needs of clients. And I think that's a really important attribute, I think, in this environment. I do think that there's some people who are resistant to change and kind of shy away from things that are hard.

28:48But I think for you and me and I suspect many of your listeners, we embrace it. That's what makes this industry so exciting. It's not a one and done. Exactly to your point, it's not a one and done. It's something that continuously evolves. The reason at my age and my career vantage point, I continue to do what I do is I love it. I love it because it's constantly changing. It provides both challenges and opportunities. The landscape is changing. The menu of options available to you is changing. The market environment, some of the geopolitical things happening outside of our borders provide challenges and opportunities.

29:25So to me, it's something we will continue to evolve, continue to engage with. And to your point about there's not just one thing. So we didn't talk about it, but I think you and I were talking about a little bit before we got started. Franklin Templeton hired me originally to develop all of our alternative education. And I think what they recognized about halfway through my assignment was this isn't a one and done. This isn't putting a whole bunch of training modules on a shelf and expecting everyone to be better off because of it. We recognize that's a start, but we needed to have that constant sort of drip.

30:02So things like white papers and blogs and podcasts like this. And I happened to write a book because I like writing. And I really felt there was a need for kind of a more comprehensive story out there. But all of those things are tools to help advisors wherever they are in their journey. And you and I were talking about it earlier. Not everyone's on the same point in time, and we have to figure out how do we communicate with them. Folks like you and I like reading white papers and maybe reading a book while we're on an airplane. Others like to consume podcasts and blogs. So we want to create things that are digestible for however and wherever an advisor wants to consume information on their journey.

30:42The other element of that that I'm hearing more and more of, and I suspect you are as well, is investors want to understand. And I was surprised when I launched my book that I had a lot of advisors reach out to me and say, would you do a client event? Because in your book, you're actually reinforcing a lot of the things that I've been telling them for years. So I don't think we can lose sight of that second order discussion. Advisors, by and large, understand the need for private markets. It's something that we've been asking for for decades. We now have access to it. But the discussion with the client can sometimes be challenging because they're not in this business like you and I are every day or your listeners.

31:23So the more that we can help simplify, give them digestible sort of things to think about, the better it is for us in the long run. So I'd argue it's not only the education of the advisor, but it's how do we educate the underlying investors so they know what they are getting into. Obviously, education has been a big part of your career. what are the most common misconceptions investors have about risk? And how do you help bridge the knowledge gap regarding alternatives? I think I try to simplify things as much as possible. I think that you're 100 % right. There's a lot of myths out there and misconceptions.

31:59Sometimes it comes from a lack of knowledge. Sometimes it comes from misinformation. There are people out there, and I see it every day, who are spreading things that aren't true, who are saying that they're riskier than they should be. I try to simplify it as much as I can. And I use a lot of case studies. And look, Alex, you and I are storytellers, right? Anyone at our stage of the career, you've recognized that you need to have stories to kind of tell that can be translated back into an advisor understanding this in a more relatable fashion. So when I think about it, again, I try to use case studies to talk about in visual security.

32:36They use the Google example talk about the size of the universe. So people are concerned about with so much money going into private markets, are we concerned that the illiquidity premium goes away? And I said, well, I would if it was a static, right? But we have to recognize kind of the market environment and we need to be armed with the information. The public markets are shrinking. So the public markets today are half the size they were two decades ago. There were 8 ,000 companies two decades ago. There's about 4 ,200, 4 ,300 companies today. The private markets are growing. There are roughly 20 ,000 companies in the US alone with 100 million more in revenue.

33:16That's a growing pie. That's a growing opportunity set. By the way, there's 100 ,000 globally. So there's a growing opportunity set. So we need to think of what those challenges are, what's the pushback, and then be armed with the information. The reality is the private markets are a growing and richer opportunity set. and they represent a lot of great companies with great ideas. I'll give you one example I often use with advisors. And I think it would work with individual investors as well, which is, we often think it's the household names that are the companies that we want to have in our portfolio because they're safe and they're secure and all of that.

33:53And we all often feel uncomfortable. And to your point about risk and misconceptions, it feels risky if I don't know the name of the underlying companies. I'll give you an example of an underlying company that most individual investors are familiar with, SpaceX. SpaceX is a private company, and don't hold me to the number, but I think a$50 billion valuation or something of that magnitude. Do you think Elon Musk wants to bring another company public and go through the public scrutiny that goes with somebody looking over your shoulder quarter after quarter? So my guess is he's going to actually keep SpaceX as a private enterprise for as long as he can.

34:33And there are other private companies that have decided to go down the same path. There are public companies that have actually gone private who will stay private. So to me, private and public are just different structures of owning pieces of a company. I think that private market universe will continue to grow. And I think the public market universe will continue to shrink. So to me, it's just a richer and deeper opportunity set. The big difference between the two, obviously, is liquidity. And it seems that many investors overemphasize daily liquidity, even when it may not be necessary. And I guess part of that is just, it's not that you need 100 % of your portfolio to be liquid daily, but it's the opportunity to change your mind should you so choose.

35:20How should individual investors rethink liquidity needs as they move into alternative strategies? Yeah, I think it's an opportunity for advisors to, again, to kind of lean into it and say, you know, how much liquidity do you really need? You're right that, you know, everyone's going to say they're a long-term investor, and then there's a bump in the road and they want to head to the exits with all of their money. That's not a prudent thing to do. I'm sure you're cautioning clients against doing that all the time. So what if during our discovery process, we just carve out a portion of them, We're going to call that our illiquidity bucket.

35:53We're going to treat that pool of capital completely differently. I think that would actually be a good thing. And I think that would go a long way to teaching investors to be truly patient capital allocators. And then with the other pool of capital, again, if they feel risk in the market or they're uncomfortable things, you could be more tactical with your traditional allocation. And again, I think that makes a lot of sense. And it provides a little more comfort for the individual investor because they don't need to be 100 % liquid. they just need to have access to money in case they need it.

36:24But most people don't need access to 100 % of their pool of capital. And in fact, if they did, they'd probably make the wrong decision at the wrong time. I just go back to all these Dow bar studies that you and I have looked at for decades and decades. And it always shows that the client experience is dramatically lesser than being in the market. Why? Because they chase where the returns were. They get out of things when they should be staying in them. And by the time they get back in, a lot of that run-up has already occurred. So if we can instill a portion of that disciplined patient capital in their portfolio, I think that'd be a really good thing.

36:58So to me, I wouldn't shy away from it. I'd lean into it and say, it's just a feature. It happens to be a feature that will reward us generously if we're prudent and we do it appropriately. But I think it's something we should address head on. So let's dig into alternatives a little bit. So when you're building a diversified portfolio with alternatives, how do you think about this concept of a separation of alpha and beta? And what I mean by that is distinguishing between the drivers of returns. Part of it is the market and what the market provides, and part of it is generated by the skill of the manager.

37:39So how should investors think about this within alternative investments? I'm sure you've seen the data on this. And, you know, again, it's something that I think certainly gets advisors' attention. I'm not sure for the individual investor level, I'll appreciate it as much. But we all know the difference, the dispersion of return between the top and the bottom. Global equity fund is a couple hundred basic points. I would spend a lot of time and energy on it. Picking the fund isn't necessarily going to be your winning solution. And it's certainly not how you add the most value to your client. But the dispersion of return between the top and the bottom private equity manager could be 3 ,000 basis points, 4 ,000 basis points, depending on the time period that you look at it.

38:22So to me, there's a big difference. And that's where I want, that's where my alpha is. It's the alpha not only that the manager generates, but it's your alpha. Your ability to find those managers who are at the top is how you add a lot of value to your client versus with my traditional investments. I'm going to get a market return. Nothing wrong with a market return, by the way. I just don't want to pay a lot to get a market return. I don't want to pay alpha prices for beta results. If I'm not paying a lot of money and I'm getting a pretty consistent experience, then my asset allocation decision is much more important.

38:54But I'd argue when we look at the private markets, there's two levels of alpha. It's the alpha that those managers provide, and it's the alpha that you as an advisor can provide by allocating appropriately. And one of the things that is a little bit different than the way that we typically would look at traditional investments, we all know if we look at traditional investments and we look at the SPIVA persistence scorecard, the top manager often becomes the bottom manager. If we haven't looked at the data, we know it by experience. You do all this due diligence. You select the best manager. They have this really attractive dot plot on a piece of paper.

39:26And as soon as you select them, they become the bottom. What we find with private markets, and it's somewhat intuitive, is the top often stays the top. And the reason is the best managers are the ones who gets the best access and the best deals. So we do see more persistence of those top managers over the long run. So to me, that's where the alpha is to be had. And the way that Swenson would think about it is it's really in those illiquid, inefficient assets where the greatest opportunities come from. Right. And another way of saying that is public markets tend to be more efficient. Information is readily available and private markets much more fragmented.

40:04There are many corners where there's a lot of inefficiencies where you could theoretically achieve outsized returns for the risk that you're taking that should not exist, but they do because the markets are less efficient. That's exactly right. And that's exactly David Swenson's position on this. It is that inefficient side of the market where the opportunities are to be found. And maybe just, again, to throw some data at you, I spent a good portion of my career looking at what Swenson was doing, recognizing it's not necessarily translatable to individual investors. But the Yale Endowment, through much of his tenure, had a 70 % to 80 % allocation to alternatives.

40:40That certainly got the headline. What might not have got the headline, because you didn't look under the hood, is he typically had a 5 % or less allocation to U.S. public equity. What was he saying? Right. Exactly to your point. It's a very efficient part of the market. The real opportunity is where there's inefficiencies, where there's some skill to be had. Right. And you could also argue that some of that exposure can be found in the private market segment, because if the S &P is up 10%, then the private markets that operate in that same space probably receive the same benefit that allowed the S &P to be up 10%, plus some active management excess return above that?

41:21Yeah, I think based on the data that we look at, and again, we do this analysis on an ongoing basis, we see a 300 to 500 basis point illiquidity premium nexus returning for private equity versus public equity. Now, we certainly have periods of time like we did in 23 and 24, where the US public markets actually outperform their long-term historical average. But if you believe in a reversion to the mean, which I certainly do, it probably means that there's going to be a period of time that they deliver returns below their long-term historical averages. But over the long run, exactly to your point, you're handsomely rewarded in that form of the illiquidity premium.

41:59Right. And that goes back to the definition of long-term. I think in the real world, one to five years is a long time. In the investment world, it's not a very long time. And that difference, I think, causes a lot of confusion as well. You think of alternatives the way you've described it so far as private markets. Would you talk about how you think about that and the way you consider different types of structures within alternatives? Yeah. So just from a private markets perspective, we actually ascribe different sort of roles with all of the strategies. So I typically think about allocating to private equity because I want to get that incremental return.

42:38I want to capture that illiquidity premium for the long run. When I think about private credit, I think private credit as a replacement for fixed income where I can get higher income. Historically, I've also received higher return, but I can also get higher income there as well and some diversification benefits. I think about real estate as being a pretty versatile tool where I can get attractive growth and income in my portfolio. out. But what's interesting about real estate, both real estate equity and debt, is they both have delivered low to negative correlation to traditional stocks and bonds.

43:11So I actually got that built in diversification, especially when things get difficult. And they're also able to hedge the impact of inflation. So they're an inflation hedge in our client portfolios. And the reason I just frame it broadly like that is then when I start to solve for what am I doing with my client portfolios, I know the role that I'm playing and maybe I'm going to have a higher private equity allocation to that younger investor who's more focused on growth and maybe a higher allocation of private credit or private real estate for those investors who wanted more income in their portfolio.

43:42So that's kind of the simplistic way that we start our discussion. And then we can do all sorts of modeling to show the impact of adding combinations of those to client portfolios. What excites you about evergreen structures like interval funds or tender offer funds, private BDCs, and private REITs? And how do these compare with traditional drawdown structures? It's not one versus the other. It's really the drawdown fund. Again, remember that was only available to 5 million or more in investable assets. They often had high minimums, like a$5 million minimum to get a good private equity fund. So it limited our ability to actually use very broadly.

44:23And what evergreen funds have done is has helped us because they're typically available, accredited investors or below. They typically have lower minimums, 2 ,500 to 25 ,000. They're evergreen in nature, meaning they're on the shelf all the time. So for you, you can actually allocate to all of your clients across the board. When a new client comes in the door, they can get the same allocation. Whereas you know, with a drawdown structure, you're somewhat limited. You have a finite period of time to sell the fund. You need to get your client comfortable and understand what's going on in a finite period of time where that window closes and they miss out on it.

44:59Well, not everyone learns and absorbs information in the same timeframe. So I think Evergreen is a much more scalable solution across the board. One of the things that we do, again, we don't have a horse in the race. We're just trying to provide education to advisors is we've actually looked at the combination of the two, where I think that's kind of an interesting sort of thing. And what I found from a lot of my industry friends and from my podcast series is that family offices and institutions are actually using combinations of drawdown and evergreen. If you think about it intuitively, it makes a lot of sense.

45:34If I allocate capital in my drawdown fund, let's say I allocate a million dollars today, I realize that that's likely going to be drawn down over a period of time, three to four years, where my Evergreen Fund, I'm actually getting that immediate exposure. So from an asset allocation perspective, that Evergreen Fund gives me the immediate allocation, which helps me for my client. And maybe I'm going to use the two of those in concert with one another because certain strategies are going to fit better in a drawdown structure. But I recognize it's going to be a period of time because I'm before I'm fully allocated there.

46:08So we hear more and more sophisticated advisors, multifamily offices, institutions using both drawdown and evergreen in concert with one another. And I think it makes a lot of sense. As private markets have expanded over the last decade or two, a new market has essentially emerged secondaries. Do you think the growing secondary market could eventually allow for trading in private assets similar to public markets? You know, I don't. First of all, I would say that our highest conviction idea from an investment perspective and a structural perspective is a secondary market. And it kind of makes a lot of sense, right?

46:51So for those who maybe aren't completely familiar with secondaries, secondaries are essentially buying existing positions. And what we've seen over the last several years, a lot of big institutions found themselves over allocated private equity. So they go to the secondary market. The secondary manager comes in and says, I'll take those positions off your hand, not necessarily paying 100 cents on the dollar. And ultimately, that secondary fund provides diversification. So there's a lot of inherent advantages with the secondary structure. The secondary fund is essentially shortening that J-curve and the period of distribution of getting my money back.

47:29I'm getting a diversified portfolio. So similar to the way that institutions allocate money, what I'm getting with a secondary fund is I'm actually getting diversification across vintage, geography, GP, and industry. So I'm actually allocating in a much more diversified way, which I think is a better way of getting exposure to private equity. So we'd argue that has become a vital cog in the overall PE ecosystem. It's gone from a relatively small niche industry to a very big part of it. We don't think that genie goes back in the bottle. We also know that big institutions have formal secondary programs where they're constantly selling positions.

48:06So we think that part of the market will continue to grow. You know, one example of that, I think it's been fairly well publicized that both Harvard and Yale were actually looking to lighten their private equity exposure. Unlike the public markets where you can say, I want to go to the public markets and I want to sell positions, they can't, right? There isn't a public market available to them. So they actually go to secondary managers, typically the biggest ones who are the only ones who are able to take on those size allocations, and they can negotiate terms and conditions that are appropriate for both sides of the equation.

48:41So I think, again, the secondary market looks really, really appealing here. But do they ever become tradable like the public markets? I don't know. And I don't know that I would want to go down that path because, again, what I think makes these underlying investments special is the fact that they're illiquid. And what makes them special is there's some skill involved in assembling them in portfolios. And if we all of a sudden made them daily liquid on a daily basis, I worry that we take away what makes them special. And it's kind of the same argument where I hear from advisors and investors, you know, could we put private credit in an ETF structure?

49:21We could, I guess. Do we need to? And do we want to? And again, I'd argue, I think with the evergreen structure, we've got all the basic tenants that we want in there. We also give the manager the freedom to allocate capital to invest for the long run. If we force it into a liquid structure, whether it's a mutual fund, an ETF, or some sort of daily trading, we probably take away what makes them inherently special in the first place. So I'm not a fan of pushing the envelope too far around that. I suppose the market could take it to a place where it's more liquid than it is currently, but not as liquid as public markets, because there is a buyer of those secondary interests because they're buying at a discount.

50:05And the more buyers there are, the smaller the discount. And you probably settle in a place where it's more liquid than illiquid, but it's not as liquid as daily. And maybe that brings in more investors. I think we've come a very long way in a relatively short amount of time. It may not seem that way for a lot of folks out there, but I would just be careful that when I allocate capital to private markets, I know it's illiquid. I know that's what makes it special. I know that's how I'm going to capture that long-term illiquidity premium. I need to treat that differently. I need to think about it differently.

50:38And I don't want to force it into a structure that doesn't make sense. To your point, will we make some modest changes on the margin to make them more liquid, make them more appealing to investors? I suspect we will. I hope we do it with constraints. And I hope we do it keeping in mind that we don't want to take away what makes this a special investment to start. But I think that's the nature of the industry. We're constantly challenging ourselves. Can we improve on what's available in the marketplace? So if you think about these private markets, being a patient long-term investor is a key component.

51:12With alternatives now making their way into defined contribution plans based on recent legislation, what trends do you anticipate in terms of democratization and investor education as you open up this massive pool of capital? Yeah, it's an opportunity that we're very excited about. We think, again, if we take a step back and we recognize that in defined benefit plans, pension plans, they've historically had pretty substantial allocation to private markets. And the reason was they recognize the long term attributes and the benefits that ultimately accrue to underlying investors. The reason it was challenging in the D.C.

51:51world is, you know, partly education. Right. Do individual investors really understand the illiquid nature? Do they understand how the strategies work? If we merely put them on a menu, would they make the right decision for the right reason? There were concerns about, did we have the right structure? Because again, mutual funds are daily liquid. It's easy to move money from one fund to the next. Private market's not so easy to do so. And then of course, there's the fiduciary sort of issue where plant sponsors were concerned. Who is taking on that fiduciary responsibility? So what has been interesting, I think, over the last couple of years, and it's been a very slow process, very gradual process.

52:30I think we have definitely made a lot of progress and we're starting to see announcements of more private markets in DC plans. I think the natural sort of starting point are in targeted funds because they're a little bit more controlled constructs. And I think that's a very good thing for our industry. So we're excited about that opportunity. I'm actually participating on a KIA webinar on that. And we're exciting as we're talking about this. I don't think it's all of a sudden the switch turns and everyone does a day one. But I think, again, this gradual process is a prudent way of thinking about it.

53:05That clearly is one of the big trends in the industry. I'll throw out another trend. And that is something that I think we're starting to hear a lot more about is model portfolios. As much as you and I have talked about building and incorporating asset allocation models that include private markets, we understand that that can be challenging for some. So I think there's a growing interest in model portfolios where private markets are part of an overall model. And somebody who maybe that's their area of expertise is making those decisions on advisor and investor behalf. I think that's another trend that we're watching very carefully.

53:40But I'd argue that we're still in the relatively early innings of private markets in the wealth channel, and we're going to start to see more products, more granularity of products, more very discrete sort of products over time, potentially more combinations of public and private markets and single structures. So we're definitely in the early innings. There's going to be a lot of growth and innovation, and it's going to be a really exciting time for us over the next five to 10 years. We've talked a little bit about private equity and private credit, but would you share your perspective on the real estate landscape in both public and private markets and how investors should think about the inefficiencies and opportunities?

54:20Yeah, we actually like real estate quite a bit here. I think if we take a step back, the last couple of years have been very challenging for real estate investors. I think with the dramatically rising rates, that was a true headwind for real estate managers. I think with some of the concerns about the office sectors, there were certainly concerns about real estate write downs. But if I look at the real estate environment today, I think we've definitely seen valuations come down pretty substantially from their peak 2021. A lot of real estate is now available below their replacement costs. We think there are attractive opportunities.

54:59We don't necessarily think the office sector looks good, but we think areas like industrial, multifamily housing look really attractive to us. So I think if you can be smart about allocating capital and you can think about what are the attractive sectors I want to allocate to and what are the problematic sectors that I want to avoid, I think valuations make it a much more attractive discussion here today than it certainly has been over the last two to three years. Because real estate debt is a little bit of an interesting sort of play in the sense that we do believe that there will be some disruption going on in the marketplace.

55:32And sometimes it's better to be the lender of choice. And we recognize that historically the banks have been the lender to a lot of those institutions. They're not going to be there going forward. As we look at the data, there's this enormous wall of debt that will need to be refinanced in the real estate sector. We don't believe that banks will be stepping up to fulfill those needs. So we actually believe that private credit managers can choose to be the lender of choice where they can dictate the terms, the conditions, and the covenant. So to us, real estate, equity, and debt both look very attractive, but for different reasons.

56:08And they would be part of our top three ideas. So I mentioned our top three ideas are secondaries, which we like because of some of the disruption and all the capital that's gone into private equity. We like real estate because valuations have come down and we think there are really some interesting opportunities there. And then we like real estate debt, which can play on some of the need for lending in an area where the banks will be reluctant to do so. What distinctions would you make between private real estate and public real estate or REITs? Yeah, I don't have a formal view on publicly traded REITs, but I would point out kind of the obvious thing that I think sometimes gets lost in the shuffle, which is publicly traded REITs have a higher correlation to the equity market than they do to the real estate market.

56:55When I look at the overall real estate ecosystem, private real estate is 90 % of the opportunity set. Publicly traded rates are 10%. So it's a very small piece of the pie. And they do tend to react much more like the equity market. So if I go back to 2022, when rates were going down, inflation was spiking, what did we experience? Well, publicly traded rates were down almost equivalent to small cap stocks. And private real estate was actually up. Why? Because they're actually responding to different fundamentals. So I view them very different animals. My focus is primarily on the private market side.

57:31So I don't have a formal opinion about publicly traded REITs, other than I think they tend to perform and act much more like small cap stocks than they do private real estate. With so much capital flowing into private credit, do you see this as a bubble? Yeah. And it's a question I get a lot. I think when I hear that question, I think it's important to kind of slow down and remind everyone. When you say the amount of money going into private credit, you're probably thinking the amount of money that's gone into direct lending. Direct lending has been the vertical that has really captured most of the assets.

58:04And we'd argue that when you think of private credit, we should actually think about direct lending, asset-based finance, and real estate debt. And we think asset-based finance and real estate debt in particular look very attractive here, partly because it's early in the cycle. We think there's an abundance of opportunities out there for real estate debt in particular. We know there's a wall of debt that will need to be financed. We know the private credit manager is going to have to step in to do so. So we think they're great opportunities. So while there's a lot of money that's gone into direct lending, those opportunities, we think, afford a lot of opportunities.

58:39With respect to direct lending, I think it's also important to characterize that not all direct lending is created equally. not all managers are going to have challenging times navigating the market. Some will be able to deploy capital. So we'd argue that there are a couple of macro themes that we're focused on, which is one is we think there's a difference in deploying capital today. We think anyone who deployed capital in 2021 valuations, you're paying peak prices for everything. That's whether you're talking about private equity, private credit or private real estate. And then the other sort of factor that we think is kind of a big macro theme for the next decade is there will be a larger dispersion of return between managers with the experience of navigating good times and bad, and those who maybe are a little newer to the dance and chase the opportunity without necessarily having the discipline along the way.

59:32I think being very disciplined and staying true to what got you to the dance in the first place, how did you deliver those long-term results, is very, very important. And Alex, even when we think about traditional investments as the same sort of thing, there's always that temptation to take that incremental dollar when sometimes you should say enough is enough. So we think we'll start to see a larger dispersion of return between the really good managers who have the deep and dedicated teams who can navigate through good times and bad and those who maybe were just a little too eager to take money.

1:00:02The point that I'd like to end on and the question for you is related to something you touched on earlier about storytelling. telling. What's your advice for advisors, fund managers, and investors on effectively telling the story of an alternative investment so it resonates, especially as more options surface in the marketplace? It's such a great point because I think for all of us, if you and I were sitting down to have a cocktail or a cup of coffee, you and I would very easily fall into the jargon of J-curve and draw it out and evergreen and all of these things that are very comfortable for us.

1:00:38I think we need to bite our tongue a little bit and think before we speak to say, do clients really understand what we're saying? The more we can simplify the jargon, describe it in terms that they understand, provide real examples of what private equity is and how it works, or private credit is just a different sort of structure than fixed income. The more we can make it relatable for investors, the more they're going to be willing to go on this journey with us. The more that we throw jargon at them, we make it more complex and we use terminology that's confusing, the more they're going to be turned off and they're going to say, not for me.

1:01:14So it's a great opportunity as we've talked about great products coming to the market. The market environment is demanding a more robust and reliable toolbox, but we need to make sure the clients are having an informed discussion with us. So we go on that journey together. So as challenging it is, the more we can simplify it, I think the better it is for all of us in the long run. Well, Tony, your commitment to investor education and practical portfolio solutions has helped reduce the gap between the sophisticated and everyday investor. Thank you for sharing your journey, your framework, and your views on the future of alternative investing with us.

1:01:53Thanks so much for having me, 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. And don't forget to forward today's conversation to others you think would enjoy listening. This podcast is provided for informational purposes only and should not be relied upon as legal, business, investment, or tax advice.

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