Where Private Markets Meet Reality | Secondaries Explained | Nigel Dawn | Fund Shack Ep. 85

Speaker A: Secondary market is 2% of the AUM in the market. It's only going to go up. So what that means for you is there's going to be lots of opportunities. This is joining an industry which you know is in the very, very early innings of growth. Also, secondary market is about innovation. This is the most innovative, the most interesting place to be.

Speaker B: You're listening to Fundshack. One way of looking at secondaries is that it's a segment of product private markets, it's a sub asset class to get a different type of exposure. Another way is that it's where private markets confront reality. It's where portfolios get priced, it's where liquidity is found. It's where the manager's published nav confronts with the reality of executable price. And my guest today sits at the forefront and in the center of that process. Not just observing, but actually helping to shape the those transactions. Nigel dawn is global head of private capital advisory at, uh, Evercore, which has the largest private capital secondaries advisory business in the world by some margin. Nigel, I've just made the case that if you really want to understand private markets, a good place to look is the secondaries market. The problem is for most of us, the secondaries market is pretty opaque. You know, you don't see those transactions happen really in public. And so I wanted to start by asking, given your perspective, how do you view the current public media narrative around private markets and what's it kind of getting wrong? Where's it off point?

Speaker A: I think. Well, firstly, appreciate the invitation to come today, um, on this podcast. I know, uh, you have a very good listenership.

Speaker B: Uh,

Speaker A: I, um, think that, um, if you want kind of stepping back, I think that private markets has obviously grown hugely over the last few years. Notwithstanding that the information in terms of the details is still not as transparent as maybe the public markets is. So I think when there is some lack of transparency, um, a narrative can be generated which is always not true. So I think it's improving, it's improving hugely just as the markets grow. And I think that around, for example, the secondary market, which I'm most familiar with, with private assets, I think the media's got a lot right in that it's a big market, it's growing and it's a needed market in terms of liquidity for folk who want to sell assets that they bought, expecting originally to keep for longer, but they want some liquidity, they want to sell. So I think the media's got that right in that it is a big Market that's growing, it's important and is relevant really to any market to have a secondary market where if you want to sell, you have the ability to get out at the time, which is appropriate to the investor.

Speaker B: Yeah, because in the beginning there was something of a stigma around secondaries, wasn't there? But now is it becoming something more like an everyday, uh, liquidity tool without that stigma, or is that pushing it too far?

Speaker A: I think the stigma's largely gone. I think when I started, like I've been advising here over 20 years, I mean, when I started the secondary market was 6 billion. And the last count last year was 225 billion. So a huge increase. And I think originally there was very, very little transacting in funds. And for an investor to call up a general partner and ask to transfer the funds, you know, it's almost like asking for a divorce, your spouse, it was that bad. I think now general parties expect limited, uh, partners, institutional investors, to manage their own portfolios as actively as they manage their own portfolio. So this is, I think, regular way. And many investors use the secondary market strategically to change their allocations from perhaps they want more buyout, less venture, more growth, maybe less real estate. So I think the market is now liquid enough and efficient enough that investors can utilize it as a portfolio management tool, whereas I think previously it was, or, uh, when the market started off, it was really a liquidity tool. So much more strategic than it used to be and accepted by general partners as an appropriate way for a limited partner to manage their risk.

Speaker B: What's the range of sophistication among LPs with regards to the use of secondaries? And how does that kind of manifest? What does a sophisticated seller look like?

Speaker A: Yeah, I would say the range is wide to start with. Um, a sophisticated seller. So if we think about our business, right, we're about 50% market share in what we think about the LP secondary market, which is institutions selling, um, endowments, foundations, public pensions, uh, sovereign wealth funds. Uh, we think about a sophisticated investor. And of our clients last year, 50% were repeat sellers. So it is someone who thinks about managing their portfolio actively thinking, uh, about the risk they have, how they want to move that risk around. But also, um, we find that many investors, for example, want to sell their older vintage funds to recycle the capital into new assets where on a relative value basis they're probably getting better returns. So it's a much, we think about much more active management. Whereas private assets used to be used to buy them and, um, put them in the cupboard. M. You know, 15 years later you would get the final K1 from the GP. Now it's a case of like, do I like the exposure, do I like the return where the returns are going, or do I want to sell and recycle into something that may be more attractive?

Speaker B: So it's grown hugely. Are we approaching some form of ceiling? Is there a natural ceiling? How large do you think secondary market should be relative to a primary market?

Speaker A: Good question. Right. Is that if you actually look at the secondary market, last year was about 225 billion in transaction volume. That's about 2% of the NAV. That's outstanding in private markets. So in the value of private market,

Speaker B: it's actually tiny then?

Speaker A: It's tiny, yeah. In some ways I think it's pathetic because I think, uh, a secondary market, if you look at public markets, it'd be Significantly more than 100% of what the primary market is. Private markets are upside down. Well, you would expect that to be because they are illiquid assets. So the idea is you're not trading in and out of them. It's just if you have to, we think they could grow significantly more. Uh, my view is maybe not some of the breathless estimates that some people in the market have said. The governor of the side of the market is really the amount of capital that is raised to invest in the secondary market. So that's investing in dedicated pools of dedicated funds that are being raised by specialists or institutional investors who are now, uh, investing in the asset classes or new entrants. For example, um, primary general partners who have decided to participate in the continuation vehicle market and have set up a specialist continuation vehicle fund as part of their strategy in addition to primary buyouts.

Speaker B: Right. So that's the new, relatively new GP LED market where they're basically looking to tell me if I got this right, manufacture liquidity for their existing investors around either single assets or whole portfolios, giving them the option to either get out or continue the journey beyond the natural 10 year, that is.

Speaker A: That is right. And I think there's two flavors. When you say it's generally it's the general partner doesn't want to sell the asset. Now, if it's a single company, but feels the asset is at a point they would like to return liquidity to their investors, give them an option, Usually it's a great asset, there's a lot of upside. So they're like, let's go around the track again. And those who want to come on the journey with me again Come around the track again. So usually there's a lot of growth. And in the past, the general partner felt compelled to or had to sell the asset to help with their fundraising. Whereas now they said, well, you know, and particularly with the growth of sponsor to sponsor transactions, they were saying, well, wait a minute, why would I want to sell my best asset to a competitor so they can do the next round if I can do it myself? So the continuation vehicle market. And I did my first continuation vehicle, I think in 2005.

Speaker B: Right.

Speaker A: For a Spanish group. So, uh, so that was it.

Speaker B: Was it even called a continuation vehicle then? Because I hadn't heard.

Speaker A: Certainly not. Yeah, the, the original, you know, one of the original, um, names was a fun restructuring which had actually had a worse connotation. Yeah, it went, but. But the technology was the same. But, you know, what's really changed is that, you know, we had this first round of what people call zombie funds, essentially managers who had almost got to the end of the fund life, but still had the assets, but they didn't have any incentives to continue in that they had no management fees and they were underwater in a sense. So that was the first wave. Um, where we are right now is managers almost like taking the best assets they have, which have the most upside where they want, you know, where they know, the underlying management teams and, you know, they want to continue on the journey of, you know, value creation rather than selling it into, you know, selling it to a competitor, like I said.

Speaker B: Okay, so I think this answers my next question, although I'm not sure. Are continuation vehicles, um, something that you would expect to see in a market like this, where it's difficult to exit, uh, the valuation that you want. And so it's the pushing, kicking the can down the road, let's say. Or is it something that you would expect to see continue in some form, even in, in better times? And, uh, I'm interested in that because of what you said about fundraising. You're right. People used to have to sell and crystallize in order to fundraise. But if that's not the case, then,

Speaker A: yeah, I think that it's typically a good asset with a lot of upside where the sponsor needs, uh, to continue growing the asset and they may need fresh capital to do that. So continuation vehicles usually have some blind pool capital that can be invested in the growth, uh, plan for the assets. That's a little bit different. Right. And I think the reality, it's hard to find really great companies to invest in. So if you already have one and it's usually one or two in a fund. I mean it's not 10 out of 10, right. That you would say, well I'll take that one. And usually it's at a point where the asset's ready to exit. So they GP's thinking, you know, I really should be, it's time. But it's so good, you know, I don't want to let go of it. So it's almost more like a refinancing rather than an exit. So you know, the exit comes down, you know, the road after you've gone, like I say, around the track again, you've executed your continuation fund, you've almost like finished the value creation plan and then you exit at that point. And that could be an exit to the public markets strategic. It could even be a sponsor to sponsor transaction. But the idea is the um, initial sponsor is capturing all the value rather than having someone else um, realize it.

Speaker B: So it doesn't fit very well at all with the kicking the can down the road kind of media narrative of just delaying the fateful day. That's not what's happening at all.

Speaker A: No, because that's not a great story. Right. I think in the. Well, it's not a great story in terms of there's a lot of upside. Uh, but I think the investors who invest in continuation uh, vehicles are pretty smart. So they realize that they will see situations where um, a general partner might want to do that. We think about the secondary market generally for continuation funds to success of transactions brought to the market is about 50%. So 50% fail. Like we're fortunate Evercore. We work with the best sponsors on um, the best transactions and we like to think we do a pretty decent job. So our success rate is 90% plus. You know, part of that. We were early in the market, we got ourselves established and we have a very stable team. We do a good job. So there are situations where a GP might, for example, might have taken an asset to the market and they didn't like the prices they got. So they'll try and execute a uh, continuation fund to try and get the value up for a better day. The buyers on the other side spot that immediately and said, well, why didn't you get the value you want? And sometimes I've heard that a gp, a sponsor would say, well the market couldn't really understand the value of the asset. Well my view on that is the market's pretty smart and they did understand the value. It's just not where you're holding it. It's Below. So you find situations like that, I mean sometimes it's like it could be where you are in the cycle. It's just a bad time to sell that type of asset in that type of industry. And where we are right now, thinking about a war in Iran with sass apocalypse, uh, or whatever, the few expressions this certain, you know, not a great time to sell. Also that in an environment of uncertainty you probably don't want to be launching too many transactions, you know, because you're you know, the buyers on the other side. Well, you know, what's going to happen with Iran, you know the. Yeah, you know, geopolitically what's going to happen with interest rates and probably in an environment like this, interest rates, you know, probably not going down, you know, if we're expecting, you know, uh, potentially you're going to have an inflation spike, you know, uh, all that sort of thing. So there's other reasons why you might want to hold longer. But at the same time you're getting pressure from your own investors to get cash back. So you have, you know, for a general partner they have dilemma where I don't really want to sell it right now because it's the wrong time, but my investor is saying when am I going to get my money back? So continuation funds fill that or uh, address that need, you know, in a uh, you know a fairly neat way.

Speaker B: A 50% failure rate sounds very high to me and it sounds like one tactical thing you really shouldn't do is try and take something to market first and then go to. It sounds like you should go straight to a continuation vehicle, a scenario because otherwise you're setting a price that you can't, that you can't meet. It's difficult to justify.

Speaker A: I think that's right. That um, and also that there's a signal that the sponsor really wants to sell and they're executing a continuation fund because they couldn't get the price they want versus if you think your options through and you're saying it's a great asset, lots of upside, it's going to grow, it's a continuation vehicle. So I think you're right that uh, the motivation of the sponsor is an important diligence item for investors.

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Speaker A: Well I think that uh, ILPA a couple of years ago set out some really good guidelines which uh, we follow very closely in terms of how continuation fund transactions should be executed. So we follow those fairly in terms of, you know, we run a competitive auction process. Our job is to get best price. But also the ultimate uh, mitigant for a limited partner is they don't have to sell. So we give them the optimum. You can just continue um, you know, uh, rollover, continue being invested in the assets as if nothing happened.

Speaker B: Right. There's never any forced selling in.

Speaker A: You're not forced to sell. Now if you step back in other situations where a sponsor might sell a company to another sponsor, that's a situation where the limited partners don't get a choice. So there's an argument that this actually provides a better option or the, you know, for example, another conflicted transaction is when a sponsor may use their new vintage fund to purchase an asset from one of their old vintage funds. So a situation like that, typically there's a conflict on either side and typically there's no market process and the uh, investors in the selling fund don't get a choice. So arguably a continuation fund addresses some of the conflicts in what's called a fund to Fund transaction where it kind of has some of the similar conflicts.

Speaker B: Yeah, the way you've explained it, it uh, actually seems like there may be less conflict than some of those other alternative. But from what I read in the media, the regulators are looking, taking a close look at these structures. Do you think the regulators are understanding this?

Speaker A: Uh, I think they're understanding it. I think the key thing is is it fair and is the investor selling investor treated fairly? And I think providing an option and I think as you said, not compelling them to do something is critical in this analysis and that um, having the limited partner advisory, uh, committee approving the conflicts which they have to do for every transaction. So there's a very clear process that we have to go through before we get to the investors. So there's a lot of vetting going on, there's a market price. So I think a lot of the concerns of ILPA and they were smart to put out these guidelines, um, address a lot of the concerns around conflicts.

Speaker B: So when you say fairness, are we really talking. Well, I'm sure we're talking about a lot of things, but one of the things might be information flow because obviously in private markets there's no insider trading rules. Let's say you still need to be a, particularly in this type of situation, treating everyone fairly with regards to the data that's put out there.

Speaker A: Yes. So that's important that uh, the selling, uh, investors get exactly the same information as the buyers on the other side, same access to the general partner. So that symmetry of information we think is critical. And like I say, the ultimate, um, in a sense the ultimate get out of jail free card is that the LP at the end of the day can just say, you know, I actually don't want to sell, I'll just roll over. You know, they have that option when

Speaker B: it comes to secondaries, either GP LED or the traditional LP sales. How in practice um, is, is the price found? How important is the manager's mark and what are the kind of, are there human elements that become involved? How's the, how's that rebuilt by a, by a sophisticated investor? For example?

Speaker A: Obviously the secondary market's been around for a long time. Very sophisticated investors able to evaluate assets, able to price assets. Also most investors are uh, invested in many GPs. So they will triangulate whatever information they get from this GP with all the other gps they know who have expertise in that sector, maybe even know that asset. So there's a lot of information going into this. They also have the valuation that is produced by the GP on a quarterly basis and that's audited once a year. So there's an audited value that is produced by the gp and that net asset value number tends to be the anchor which investors start from in terms of coming up with their price. But ultimately they will uh based upon their access to the underlying management team, their access to the GP will decide what they think is an appropriate price for the asset based upon the expected future cash flows. Like any investor uh, would evaluate an asset. So you know, although I think you know there isn't the full uh transparency of the public markets, there's normally a rigorous process that's gone through to determine what an appropriate price is for an asset.

Speaker B: Are you detecting any heightened skepticism with regards to managers navs among the investor community at ah present there's probably.

Speaker A: I mean you know one thing about managers uh in you know uh, for private markets valuations tend to go up slower than the public markets and they come down slower than the public markets. So the huge um, emotional swings you often see in the public markets, you know are not always reflected in the private markets because it can be a variety of fact. There's a variety of factors going to evaluation. It's not just what the public comp is. So some investors will say well the publics are trading at this level and your private company is trading you know m maybe at a different level. There could be a lot of factors that go into why that is, why that is an appropriate number given that there's a lot of emotion in public prices, you know and you know, so it, like I say it may not be appropriate for the private asset.

Speaker B: Uh one of the big changes in private markets in recent years. Well there's been two I guess with regards to capital flows. One is insurance money but the other is retail money which is both like the wealth ecosystem but also tapping into pension funds and secondaries I understand are particularly useful for things like semi liquid evergreen funds because of their shorter duration. Uh how is that kind of very significant inflow of capital? Is it affecting the secondaries market itself in terms of behaviors and pricing?

Speaker A: Yeah, it's a good question. I mean we think probably 10 to 15% of the capital in the secondary market is from these retail vehicles. Most of the vehicles are affiliated with an established secondary manager. So they were set up by Color Capital or Lexington Partners or Strategic Partners, Adyen or Harbourvest or one of these groups and they tend to invest alongside the flagship fund. So at, you know, go through the same process at the same price. So what we find they are important in terms of adding additional, adding additional capital to the market. But our experience so far in terms of pricing discipline, because they tend to invest alongside the flagship fund of the main sponsor, that our impression is not had a great, a great impact on pricing. One observation we do have is that they tend to focus mostly on very high quality assets. So think about buyout funds, fairly recent vintages, good managers with lots of upside because in these vehicles as well as capturing a little discount, they want to be able to show growth going forward because obviously how they compete with each other is on performance. So buying lower quality assets at a bigger discount is a poor way to show performance over time.

Speaker B: Mhm. So there's a slightly different strategy vis a vis the kind of limited partnership secondaries funds which might be able to take a slightly longer view is that.

Speaker A: I think that's right. Uh, retail is inherently probably shorter term focus on performance. These vehicles tend to raise capital maybe monthly or every quarter, maybe every half year. And so showing some performance obviously is important in terms of attracting clients. But it's got to be, you know, it's got to be the right type of performance because when numbers start going down in terms of performances then comparing to the, you know, the peer group of um, you know, either semi liquid vehicles or other retail vehicles, then it will be challenging to raise additional capital.

Speaker B: Um, I've come across this phenomenon of nav squeezing where, whereby the secondaries are put into um, the semi liquid evergreens and they're bought, I think it's at a discount but immediately marked up to the manager's nav. And that allows the manager to book a same day profit or a same day uplift. Do you have any views on the legitimacy of that?

Speaker A: Well, I think that uh, that's how the secondary market works, period. Right. In that you would go and buy an asset maybe at a discount from navigation, um, because that's the price. So the price and the value are different things. Right. The value is this, what is that worth today? Uh, versus the prices. Um, and what is that worth today? And what do I think it will be worth versus the price is? Ah, I need to build my return into that, you know as well. So that's the discount might be generate some of the return of the buyer. So um, that is normal course in the secondary market that you would value the uh, asset where the manager values it because that could have probably been through an audit process to come to that value. So value and price are different things and I think that's not always Appreciated in the market. For example, you may have a very mature asset, let's say the manager's holding at 100 and the uh, terminal value of that may be 110, 115. Now if a secondary investor wants to generate a return of say 130 on their money or 1.3 times or something like that, they'll need to take a uh, little bit of discount. So part of their return will come from the discount, part of the return will come from the growth in the asset.

Speaker B: I think this is, it's kind of conceptually quite difficult for people to grasp that idea, particularly when they've been immersed in public markets where there is no difference really between value and price.

Speaker A: That is correct, yeah.

Speaker B: Um, so in terms of Evercore you've been incredibly successful. I think you've been started out with the secondaries market and you've seen its evolution. So you've had a first mover advantage. Um, but it's a very competitive market.

Speaker A: Yes.

Speaker B: Uh, on the advisory side. Um, so how have you managed, how do you manage to retain your edge as a firm?

Speaker A: Well, appreciate those kind words to start with. Um, I think one thing, Evercore is a very, very good place to build a business and all banks are not created equally. So Evercore has a longer term perspective, it's very entrepreneurial. Um, and Roger Altman, who started it 25 years ago, had a view that you want to have the absolute best bankers you can have and build a team around them and give them appropriate incentives to make it a very interesting place to work and have transparency and have a long term view. That's a huge deal. And I didn't necessarily know that when I joined Evercore almost 13 years ago. But that is critical and I think if we'd have joined a different place, I think it would have been a different outcome. I mean that's just so one is a place. Second is I ah, think that we have a long term view on our team. Um, we want to have an environment where we think we have a very strong culture, have a very, very strong um, emphasis on talent and the absolute best talent in the market. And I think that if it's a good place to work, if people think they are treated very, very fairly, um, and have given great opportunities to grow, then I think that's a winning philosophy and it's not exactly rocket science, is it? So, I mean, so I like to think that. And we have almost zero turnover and of course it becomes the flywheel, as people like to say these days. Uh, Tends to spin faster and faster. But I think having the basics in place to manage a business and build a business and you know, and uh, and promote folk from within like most of our team have been promote, started as analysts or started as associates and being promoted completely through the ranks. And I think one thing I say to the team is that secondary market is 2% of the AUM. Um, in the market it's only going to go up. So what that means for you is there's going to be lots of opportunities. This is not joining a, uh, dying industry. This is joining an industry which is in the very, very early innings of growth. And I think that's exciting. I think also, also secondary market is about innovation. This is the most innovative, the most interesting place to be. I would, you know, sort of eight or 10 years ago, I very much doubt I would be invited to this podcast today. Right. So there wasn't the interest. You know, it's very backwater. But these days it's probably the most exciting place to be, I think, in private markets and the solutions we're working on, you know, we have a great, you know, securitization business. That business didn't really exist, you know, so manager securitization we started which is now the number one private credit secondaries business.

Speaker B: Right.

Speaker A: Last year, you know, I hired a partner from Blackstone off to the races. So like all these, you know, you know, you know, specialized areas, I would say in secondaries are only going to grow and really become their own very established verticals. So I think that, you know, you know, maybe back to your question. Like, you know, being at a place like Evercore, having a philosophy where we're going to grow the business over the long term and creating lots of opportunities for the most talented people in the industry seems to work.

Speaker B: I want to come back to Evercore, but something you said just sparked another thought, which is, yes, there are a lot of liquidity solutions out there. There's secondaries, but there's, you know, fund finance and nav lending and strip sales and things like that. Are these all, um, variations on a theme? Solving the same problem in different ways or are they solving different problems?

Speaker A: I think they're solving all the same problems in, they're solving the same problem in different ways. And the problem is how do I get cash back on my private investments? And the difference between them usually is the, um, cost of capital for, or the risk for the liquidity, for example. So if it's a nav loan, it's more like a credit risk if it's a continuation vehicle, it's again liquidity back, but it's an equity risk. So it's the type of risk, it's the type of liquidity you're looking for and the price for that liquidity. If it's a collateralized fund obligation, for example, if a limited partner says, I want to securitize this portfolio of assets, you, instead of selling at a discount, the senior notes that are sold to investors will be at a Treasury rate or a SOFA rate plus a spread. And then either the equity is sold, which is much riskier, or the issuer retains it. So the basic idea is I want liquidity for my private assets. What flavor do I want? And now there's lots of flavors to choose from. And this is going in the ice cream shop. I mean it's more than vanilla these days.

Speaker B: Which of these tools would you say is going to be the flavor of the next half of the decade or whatever? What really shows promise?

Speaker A: Well, private credit right now, obviously, because private, uh, credit, secondary market is pretty important. But private credit has grown into a trillion, multi trillion dollar business. Right. It's natural. There's a secondary market for it. And so secondary market in private credit is catching up. It's probably where private equity was five or six or seven years ago, but that's natural, I think securitized solutions for managers to allow them to raise capital through effectively the debt market, um, is going to grow significantly. Uh, part of this is because the institutional, um, fundraising market has been very tough over the last few years. So managers have had to look at, well, what are my other options? While I could go to the retail market, maybe I can go to insurance, affiliated vehicles, sovereign wealth funds who are coming online. So in a sense the tough fundraising market with natural institutional investors because of the lack of quote unquote DPI they've been getting back, has forced managers to be much more creative in going to other sources of capital to fund their expansion.

Speaker B: You mentioned private credit, and this takes me back to my very first question. There's a lot of concern about private credit out there. How do you see things given your visibility and private credit secondaries? I mean, I would assume that the discounts must be very, very deep given the narrative out there.

Speaker A: Yeah, I think the transactions we've executed recently for private credit managers, for mostly, uh, senior secured portfolios, and these are CV transactions that don't have a lot of software exposure, have been very, very healthy in terms of pricing.

Speaker B: But you're seeing they're by definition the best Assets, aren't they?

Speaker A: Uh, well, they're the most senior, yes. I think the thing is, if you take the private credit market, right, generally maybe 20% is software. So 80% is not software. These are uh, generally profitable, uh, companies, uh, producing cash flows to pay the coupon. This is a very healthy, good market. Software of course is in the public markets. It's software and it gets painted with the same brush. But when you dive down, vertically integrated software with businesses, very important to clients, critical to your clients, very different in terms of thinking about some of the, um, horizontal software plays, where it might be, I don't know, a CRM system. So if you've got a critical piece of software that completely integrated into your business that is key for your clients, you probably are not going to have analysts in the corner office saying, can you vibe code me a new something for this? So we can, so we can get. And in a sense that people with talking about AI thinking, you know, you worried about some, you know, analyst vibe coding away an industry, you know, we don't really know what's going to happen with AI. It's moving so quickly. But I think that um, companies will think long and hard before ripping out systems that work very well for unknown, um, solutions that could put their business at risk. So you have to parse it down. And so it's not all software, it's not all creatively. So I think the private markets can take more of a maybe sober view of what's available and a more rational view.

Speaker B: I wanted to come back to Evercore and your model. Now obviously you're a bit biased here, but I'm interested in the competitive landscape there because I think you compete perhaps with people like you, but also with integrated investment banks who will also be providing a package of financing, for example, with the advice. What are the pros and cons of that model versus yours?

Speaker A: We like to think we're a completely unconflicted model that's Evercore. When we set Evercore up originally, we don't have a balance sheet. So we want to give pure and conflicted advice to a, uh, client, uh, where we're not trying to lend them money as well. So if one of our solutions potentially involves a debt package, we want to be able to go to all the debt providers to get our client the absolute best package. So competition, we're always worried about competition. Um, you know, and it's certainly the very capable people out there, uh, you know, in the integrated banks, um, in the other independent, uh, groups. I think first mover advantage is important. Also, some of our clients, when we realize we have great clients, we've worked with them multiple times. And I think the difference between, for example, executing a continuation vehicle versus an M& a transaction, if you fail as a general partner in a continuation fund, you fail in front of all your clients. So if you went to, if you go and market one of your portfolio companies and you don't get the price you want, no one sees it. So a general partner will think long and hard before switching out an advisor who've delivered them successful outcomes and who understands their LPs, understands the sensitivities, and has had one success. I mean, we definitely do not, uh, rest on our laurels. I mean, it's very unusual on Wall street to have a 50% market share. We realize that. We don't take it for granted. Uh, we don't necessarily expect it to continue. Uh, but we're going to do what we can to try and continue

Speaker B: continuation. Great. I had one other for you, which is slightly conceptual, but I've always considered one of the secrets of private markets is its partnership approach, that it's relatively closed and long term and patient. Um, increasingly, of course, it's still the case in structure. People still invest out of those types of funds, but because of all these innovations, it's less so in spirit, it's less of a partnership thing. Do you agree with that and does that matter?

Speaker A: Look, I think part of what's going on is just an industry maturing in that, um, I think as most industries mature, the big get bigger and the small get very specialized and the middle tend to get squeezed. And I think private markets and private equity is still, I don't know, 30, 35 year old business really in terms of his scale. And what's happened here is the very largest groups are, uh, scale players now. They're publicly quoted. The analysts who follow them really focus a lot on fees. So maybe the alignment, some of the alignment with carried interest and profit sharing is maybe not as tight as it used to be. Investors, though, institutional investors are very smart and the number one thing they're always focused on is alignment. And for a continuation fund, uh, you know, bringing back, the investor really cares about alignment. What does alignment mean? If you look at the OPA rules, it's like, am I rolling the vast majority of any profits back into the company? You know, am I writing a new check? And then is the fee and carry, the incentive structure aligned appropriately to motivate the general partner? So that alignment, I think, when I think about, for example, the continuation fund market is still there, but I think certainly that um, some of the very largest complexes, which are really huge asset gathering businesses now is still, uh, very important for their underlying limited partners to feel that, you know, they're getting a sufficient amount of alignment which they have to, given they continue to back these great, you know, brands that are out there.

Speaker B: Well, you're about to go off on a bit of an Asian road show road trip, I guess. Tell me a little bit about the geographic, um, exposure of your, of your business and where that's headed.

Speaker A: It's probably similar to breakdown of nav that uh, you know, we're about 170, 180 people, so we've grown significantly. When I started at Evercore, we were nine. So, you know, a little bit of growth there. Um, you know, we probably have 2/3 of the folk in the US probably about a third in London. London's a big business here and you know, we're by far the number one group. Um, and um, we see Asia growing over time. If you look at Asia's about 2% of the secondary market right now. If you roll the clock back several years, m, it's more like five to 10. So when we look forward, uh, we're pretty bullish on Asia and from both a LP selling perspective, but also as a continuation vehicle market. But certainly, um, the secondary market generally is about 2/3. The US about a third Europe. Rest of the world.

Speaker B: So you're an Englishman, as everyone can tell, but you're normally based in New York.

Speaker A: Yes, I've been in New York for about over 30 years now and um, living in New York City.

Speaker B: Englishman in New York. Well, Nigel, thank you very much for sparing your time for fun Shaq, and uh, fitting us into your schedule.

Speaker A: I appreciate it, appreciate the impact. Thank you.