Space, AI, and Private Equity Trends

If you have an interest in getting exposure for you or your clients to private innovation or innovation in general, you have to look outside listed markets because by the time they go public, if they go public, you've missed out on a substantial run-up in value. And then on top of that, to make things worse, two-thirds of venture-backed companies, for example, get acquired. So a public investor never even has a chance at investing in that business unless they hit certain suitability standards.

so i'm watching the news today and uh the crew from artemis is all over the place they are they were on the morning show and then they were on i think they were at the stock exchange Did you get into that at all, following the Artemis crew to the far side of the moon? You know, we're actually fortunate. We were on spring break with our kids a few weeks ago, and we were able to see the launch, which was really neat. Excited to see people excited about space again.

And I think it's an interesting time because it's - there's this kind of transference, if you will. I don't know if that's the right word, from kind of just a purely government-supported thing. So now we're seeing more commercialization, more private commercialization of things related to space. Yeah, yeah.

I think clearly it's attracting more attention, which is a net positive. You know, I think the reality is, you know, the private industry, as you know, has been driving most of the innovation and advancements in launch, right, communication, things like that. probably almost 20 years, if not even more. So it's nice to see, you know, a bit of a balancing act happening now.

I think it's kind of funny you hear different perspectives on those who participated and watched the Artemis launch and were commenting on how the coverage was so different versus what you see if you ever watch a SpaceX launch and, you know, how much they still have to catch up on just aspects of that. So the whole media aspect on how they video the launches, how they record and discuss the launches kind of real time. I think it's a net positive for the entire ecosystem. Yeah, yeah.

I mean, SpaceX plays into this. We'll talk a little bit about that too. Without further ado, let me introduce my guest today. Thanks for joining Trends with Benefits.

We're going to do a deep dive on private markets. It's a, what, $22, $24, $20 asset class or market today. And my guest has spent his career at the intersection of institutional investing and access and allowing more people and more investors to access strategies that were perhaps the realm of high net worth investors only. And with that, Christian Munafo, thank you for joining us on Transwith Benefits.

Yeah, it's great to be here, Ed. Christian is a recent portfolio manager at VanEck. He's a portfolio manager of private growth strategies. And I'm really excited to have him on.

And I think this will be great because I think what you do and the types of companies that you look at are just those companies perhaps on the cutting edge of things to come. And I'd love to learn a little bit more about how you think about different trends in the industry and companies that are playing into those. Great. Looking forward to it.

Perhaps we can talk about why we're even talking about private markets. Just kind of the state of the industry, if you will, or the state of the markets, if you will, public and private. It seems like private everything has really come on stronger over the last few years. and in your mind why is that there's been these trends that we talk about you know kind of the title of your podcast trends right trends with benefits i mean there's been a pretty major trend over the past you know a couple decades in particular where you know private companies have just continued staying private for longer and they've been scaling outside of listed markets where the average investor you know historically has been able to access things like innovation much earlier on in the development of those businesses, earlier on in the growth and scale of their operating metrics and market caps.

And so as these companies have continued staying private for longer, they're scaling outside of listed markets. On one hand, that kind of creates a bottleneck for accessibility because private markets historically have been reserved for institutional-grade clients, high net worth clients, so the suitability has been restrictive. there's also challenges to being illiquid, right? Not every investor, quite frankly, is built to hold illiquid investments.

The minimum investments have also been like very high. So there's been a lot of constraints that have prohibited a lot of investors for accessing these private companies. And that, as a result of that, just spews up a lot of demand. And so as you have this kind of conversion from public to private markets, right, Because a lot of these companies historically that would have gone public 10, 15, 20 years ago are now private.

On one hand, you have this constriction, if you will, on this ability for these companies to be made available to the public investors because they're scaling more in the private markets. And on the other hand, if you're an investor in a private company or if you're an employee or a founder, an entrepreneur, staying private for longer also creates all sorts of friction because not everyone has the same liquidity timeline. Right? And so if your average company today in that world is staying private for 12, 14, sometimes 20 plus years versus 20 years ago, right?

We think of the Microsofts even back further, the Amazons, the Googles. Those companies would go public within four or five years from inception. So you have this kind of demand that's been building up for investors outside of traditional private markets, so non-institutional investors that want in, and rightfully so. And over the past, I'd say, five years in particular, to your point, there's been the advent of more of these accessible vehicles for investors to gain exposure to private markets, kind of, if you will, broadening the accessibility through different types of fund structures.

And we can kind of talk through that. So from a regulatory standpoint, it's making things more accessible. I think investors are seeing a lot of innovation that's not happening in the listed markets, and there's greater and greater demand. So I think that's just kind of fueling all this demand and excitement for these private markets.

Why do you think companies are staying private for longer? When you talk about their scaling in the private markets, do they have to? Is it more beneficial for them to do so than to go public? Is it a market environment type thing, kind of where interest rates are and things of that sort?

Or what's going on, do you think? Those are certainly some of the, I think, the drivers for it. But if you just kind of step back, you know, to be a public company, right? I mean, it comes with a lot of regulatory requirements, right, which is burdensome.

It comes with substantial administrative and reporting requirements, right, which can be expensive. And some of these companies that we focus on in our world, I mean, these are like highly disruptive, innovative companies that are trying to change the world. They're not necessarily focused on, you know, hitting their quarterly earnings by a penny, right? And so the framework of public markets and the way that research analysts and public investors view them isn't always a great format for companies, right?

And then you have dynamics where there's just been this massive amount of private capital that's been unlocked the past couple of decades that have made it easier for companies to access capital outside of listed markets, outside of public capital markets. So you think about it simply. You have regulatory, I think, reasons. You have administrative and kind of reporting reasons.

And then you just have the reality that you have more capital. And the companies - think about if you're an operator, Ed, of an innovation-driven company and you have an option to kind of continue to just manage it privately under the radar of everything I just talked through, I mean you probably would consider that seriously as well. Yeah, yeah. I mean do you think if there was a major change in regulations that would spur a new IPO market or do you think that's the biggest roadblock to go to public?

I mean we've heard in the past six months or so the idea that they may reduce the quarterly reporting requirements, for instance, maybe to twice a year or perhaps even once a year. And so that in itself is attractive, right? And it may reduce potentially some of the volatility you have quarter to quarter when everyone is on the edge of their chair kind of biting their nails waiting to see, as we saw this past week, right? Where all the kind of mega cap tech earnings are going to come in.

and what they're saying kind of directionally about how they think things are changing going forward. So I think there's aspects like that that could have a more positive impact on founders and operators of businesses to say, hey, that's a positive development that puts us in a situation where we can continue to manage our business for the long term, right, and not have to manage as tightly quarter to quarter. But let's also be honest. I mean, if you look at the IPOs over the past one or two years, one, there haven't been many for a lot of reasons, right, which we can talk about today.

But the IPO window has remained fairly closed, right? It's opened up a little bit. And most of the companies that have gone out in the tech world haven't traded all that well over the past, you know, 12, 24 months. I mean, there's been a handful that have.

And one of the reasons they haven't, I think there's a couple reasons. I mean, one is a lot of the growth and alpha generation has already been harvested as a private company. Again, this is what we talk about a lot. If you have an interest in getting exposure for you or your clients to private innovation or innovation in general, you have to look outside listed markets because by the time they go public, if they go public, you've missed out on a substantial run-up in value.

And then on top of that, to make things worse, two-thirds of venture-backed companies, for example, get acquired. So a public investor never even has a chance at investing in that business unless they hit certain suitability standards. So I think let's see what happens, right? I think we're starting to see positive momentum.

M&A has been picking up. We have a number of companies that have filed for IPOs, which is positive. I think the public market investors and in general public markets want to see best in class companies going public, not maybe second tier or third tier companies. And the setup kind of going into the second quarter and second half of this year, as we all know, is there are some very high profile companies that may very well be coming out and that could have a very positive impact.

And yeah, we talked about one at the very beginning in terms of SpaceX, for instance, and Elon Musk's company filed for one of the biggest IPOs ever. Do you think that's a catalyst for more IPOs? And what does that say to you about the potential for SpaceX in the public markets after your statements about most of the value was captured in the private markets? Yeah, well, look, it's going to be fascinating to see.

And I just keep using the word if because we never quite know, right, especially with Elon. But it's also a challenging macro right now. So if any company were to determine that it might be appropriate to further delay an entry into the public market, I think many people would probably understand why. All that said, it seems to be tracking full speed ahead.

Look, I mean, SpaceX is a 20-plus-year-old business. They've raised many billions of dollars. from investors, right? They have an essential monopoly, right, on launch, all kind of communication orientation, what they did with XAI, right?

They're becoming like an AI company now, the announcement of what they're potentially doing with Cursor. So it's a fascinating business. Elon has a tendency to play chess when others are playing checkers. So we'll kind of see what happening We hear a lot of rumors about aspirations for potential future combinations with Tesla So what does it mean though What does it mean It means that a lot of investors who been in this thing for a long time may finally have a broader opportunity to get liquid right There's been no shortage of demand for SpaceX as that values run up, right?

To most recently - the most recent markets publicly announced was the merger, right, with XAI, which set a market combined $1.25 trillion. So there's been tender offers and ways for investors to get liquid. There's been a lot of demand for it, but there hasn't been like a ubiquitous conversion where you have a freely tradable stock you can get out of.

So one, I think it's going to unlock tremendous capital that's been tied up in this ecosystem, which could theoretically be returned to investors and also recycled back into the economy. It could go back into the next wave of space-related innovation, defense communications. On the other hand, it's now going to create more accessibility for investors who haven't had the benefit of accessing this company due to, again, suitability standards and minimum investments, regulatory things like that.

So then that's also positive, right? It's going to give, I think, the average investor an ability to invest. So, yeah, so we'll see. But I think it could be positive.

And it seems like a lot of index providers are looking to find ways to incorporate SpaceX into an index relatively quickly. And at the size that they're coming to market, that people expect them to come to market, most investors might get access to SpaceX whether they wanted to or not if they're in an index fund. Yeah. Yeah.

Yeah. I mean, we often talk about the companies that we look at at this later stage, the growth stage of the private market development. we kind of typically have thought about them as proxies to small mid-cap growth companies that you used to see in listed markets. And if you actually look at listed markets today, which by the way, the number of listed companies has essentially been cut in half over the past 20 years for the reasons we discussed about this staying private for longer and perhaps in some cases forever trend.

But when you have a trillion dollar plus company, right, that's now going public, that's not a small mid-cap company, right? And so the goalposts have really been moved. So I think SpaceX is a bit of an anomaly. There's a couple of other ones, right, that we know that are out there that are following a similar trajectory.

But yeah, on average, the way I typically think about the companies in this later stage segment is they should have already been small mid-cap listed companies, but they're not for the reasons mentioned. I was just thinking about the SpaceX example. They'll come out to the market large enough to end up in a lot of big index is and a lot of people will have access, so they'll have some inherent support there. But everybody else, like when do you know a company is ready to go public?

Yeah. So there's a few things. Some are quantitative, some are qualitative. And these are, you're asking for guidelines, right?

So I mean, there's no, I don't think there's like a crystal ball. I won't hold you to it. Yeah. Yeah, yeah, exactly.

So look, I think from a quantitative standpoint, the market this day and age wants to see companies doing typically at least 200 million in revenue, right? And they want to see predictability to that revenue, right? So I think the forecastability of these companies means a ton because if you're not good at forecasting, you're exposing yourself to a world of painful idiosyncratic market volatility, right? Growth rates typically you want to see on that revenue north of 30%, right?

In many cases, I think the market wants to see growth rates in excess of that. The market also wants to see that you're tracking towards profitability if you're not yet there. I think there's a broader understanding that growth at all costs is not positive, but also low growth and high profitability is not necessarily something everyone wants as well. So I think it's finding the right balance between a strong kind of stable revenue base, multiple product lines, strong growth metrics with predictability, strong margins, at or approaching profitability, and of course that you're going after a large addressable market.

That's important. So those are some of the quantitative aspects. Then on the qualitative side, you need to have companies - I mean the best practices that I see for these companies, maybe four minimum but more like six to eight quarters in advance of companies that are going public now, they've already been operating and reporting internally almost as if they are a public company. So they've gotten their accounting, their auditing, and their reporting, their forecasting hygiene, if you will, in a very good state.

So they have an ability, right, to understand directionally how things are going to look when they go public. So some of those things are more, you know, we put them under the IPO readiness category. And I think best practice is companies typically are looking at that pre-IPO readiness, checking those boxes, a minimum of four quarters today in advance of an intended listing. So those are some examples, I think.

Those are great. That's fantastic. If you're an investor in a fund or in a company, a private company, you were lucky enough to get access to that. Do you want to go public?

Do you want to go public as soon as possible? Or do you - sometimes if you're in a fund, that fund has a certain lifespan to it, private lifespan to it. Do you want to just extract as much value out throughout that lifespan before it goes public? What do most investors want?

Yeah. So if you're an average retail investor, you want it to go public so you can access it more readily, right? So let's set that aside. If you're an existing investor, let's say in a fund or you're a portfolio manager like myself and you've invested in a company in this category, I think, one, you want to make sure, first of all, that it's ready.

You want to make sure it's ready so that it doesn't kind of get out and just flops. You also want to be in hope that management, board, et cetera, are being thoughtful about working with capital markets not to kind of set the bogey too high. Worst thing that can happen is you set a price, a clearing price that's just too high, hits the market, hits the tape, and it just tanks. So I think a lot of that setup is really important.

But if you're a portfolio manager of a fund, which has a bunch of investors, and let's say you're in year seven or 10 of your fund, these are typically in our world like 10-year life funds. And if the average company is now staying private for 12, 14 plus years, herein lies a problem, right? Because you as a fund manager now need to be thoughtful about how you're going to generate liquidity for your clients. So it all depends, are you an early stage investor, mid stage, late stage investor?

But as a portfolio manager, one, you want to make sure your clients are happy, right? And as this world has become, I think, more efficient, the role of secondary investing has created opportunities for portfolio managers like myself on one hand to trim a position before liquidity events. So we may want to hold it longer term because we think there's a lot of value yet to unlock before it goes public or gets acquired. But maybe we want to lock in a gain.

And maybe we want to distribute that partial gain to our clients, right, to give them a good experience. And it also helps us de-risk the position. Investors obviously want their money back typically as fast as they can, and they want the highest possible returns on that money. That's kind of easier said than done.

And then the companies themselves, right, they want to make sure that they're given enough runway to build and execute upon why you originally invested in the company. So it's a very simple question, but it's unfortunately like a very nuanced response because it just depends on a lot of factors, right? Is there good alignment? We hope there is between the management and the board.

From an investor-based perspective, when did most of the investors come in? Did they come in 10 years ago? Did they come in within the last three to four years? Employees, again, a lot of the companies in our world, they don't have the ability to issue these tender programs to kind of manufacture liquidity for their employees.

And we all know it. There's a shortage of talent. And when you have publicly listed multi-trillion dollar mega cap companies that have liquid stock and the ability to outpay you on a cash basis to your employees, you have a risk of those employees getting poached. So you also have the ability to work with the companies on these like tender programs.

But as a manager of a company, you also need to be aware of that fact and try to make sure you're not losing your top talent because you're just staying illiquid. Or for such a long period of time. So again, the great thing about markets, public or private, is efficiency comes in and there are solution providers. We're one of them, right?

Like we try to help people solve for their liquidity needs. So anyway, yeah, very nuanced response, unfortunately. It was great. Maybe we could talk a little bit about secondaries and the development of the private markets.

I mean, private markets is not a monolith. It's not just one thing. It's not you're in it and then you're necessarily stuck. But it seems like there's been another market that has developed within private markets, and that might be continuation vehicles and things of the sort.

Can you talk a little bit about some of those types of vehicles or maybe not exits but ways that people continue to keep exposure? Yeah. So if you take like a giant step back, the simplest way to think about the private markets, whether you're in venture capital or buyouts or infrastructure real estate is you typically have a fund that's structured. And the fund is managed by a general partner.

portfolio manager. And then that underlying fund invests in a variety of portfolio companies that could invest in other funds, right? We call these fund of funds. And there's terms that are associated with all of these types of vehicles.

Not everyone though ultimately ends up having that same liquidity timeline, right? There could be an institutional firm that also maybe there's a public market shift and there's a re-rating event up or down. And a lot of these pensions, endowments, things like that, they have specific benchmarks and levels on how much they can hold in liquid or illiquid securities. And so if you have like a valuation dynamic, we often call it a denominator effect.

Let's say your public portfolio depreciates meaningfully in value. Well, then the value of your liquid portfolio, your alternative, your private market, whatever we want to call it, may exceed the thresholds that have been set by key trustees. And that may force an institution actually to have to sell, not because there's anything wrong with the investment, but they need to maintain proper portfolio construction guidelines. You can also have people have life events, right?

You have family offices, there's life events, right? There's transitions, there's things like that. So people have desire and need for liquidity. So the secondary markets basically can come in and they can say, hey, Ed, you're an investor in a fund.

You have a desire or need for liquidity. Well, hey, we can buy your interest in that fund and get you out of it. And we could step in and take on any of the commitments that come along with that investment. And you can give your existing investors an option to either roll into that continuation vehicle with an extended timeline or they can get paid out today, right, at a value.

we mutually determine is attractive. So the easy way to think about secondary markets is they basically try to provide liquidity solutions for structurally e-liquid instruments. And there's a variety of different formats and structures that can be utilized to achieve that. Yeah.

And it seems like that market has grown substantially. I just, given by the nature of companies staying private for longer, right? Yeah, without a doubt. So I mean, and I'll just use myself as an example.

So I got involved in secondary markets in the early 2000s. And back then, the average secondary transaction volume that was reported was around $5 or $6 billion per year. And the majority of those were just simply buying a stake in a fund. So Ed needs to sell his LP stake for his endowment, Christian buys it.

They kind of play musical chairs. If you fast forward that to today, largely because of this staying private for longer trend, we now have, I think last year was over $200 billion in reported secondary transaction volume. We're tracking well in advance of that this year. And more than half of that volume is driven by solutions that have nothing to do with buying a simple LP interest in a fund.

It these fund restructurings these recapitalizations wind downs letting funds borrow against their assets continuation vehicles company level secondary solutions So that why I say when the market has gotten more efficient and creative to try to solve for these matters, as private markets grow, as assets stay private for longer, you're going to continue to see growth and evolution of secondary markets and strategies as well. And how do you as a portfolio manager learn about different opportunities?

Like, are there platforms that you use and trade on or is it network based? Yeah. So it's funny, you know, and I go back to like 20 years ago and, you know, there were these conversations which seemed quite realistic back then and said, hey, we're creating an exchange. We're going to make this all simple, right?

You could just do everything digitally. 20 years later, we haven't really made a whole lot of progress. Part of that is because private markets are like a very off-Broadway niche area where the portfolio managers of the funds and the management teams of the companies, especially the highest performing ones, they're highly restrictive of the ownership of their funds and of their companies. So they don't just let their fund interests or company shares freely trade.

So it's highly restricted and directed towards groups that they feel are appropriate to own them and that could theoretically be helpful to them. So that's kind of thrown a big monkey wrench in the idea of creating like more exchanges. You don't have a ubiquitous exchange to buy or sell. Now, look, I think it's inevitable.

Even though it hasn't really happened yet anywhere near its scale, there's been marginal improvements. So there's been an aspect of digitization to this process. But it's got a very long way to go. So a lot of our ecosystem, which is this venture growth, this Silicon Valley ecosystem, this is a very relationship-driven part of private markets, where it's not about necessarily how big your check is, it's about who are you, right?

What are you bringing to the table? Are you a preferred owner of our fund or of our portfolio company shares? So as a function of that, a lot of our deal flow comes from networks. It comes from tight network solutions we've helped create for fund managers.

Being looked at as a good steward of capital, a good player, someone who's helpful and constructive. You bring more than cash, right, and capital to the table. You can also be strategically helpful. You can make introductions to them that are helpful.

So a lot of our deal flow comes, frankly, from proprietary relationships we have with venture and growth managers, with serial entrepreneurs, et cetera. We also though like to talk to intermediaries. We want to see what brokers and dealers are working on. We want to - we talk to all the major investment bank houses.

They're moving more and more I would say like downstream for a lot of reasons, right? They want to get in front of these companies to try to get their hooks in for relationships and IPOs and M&A mandates and capital raising earlier than they have in the past because these companies are scaling so large. There's other reasons, right? They want to capture the wealth generation.

So a lot of these big platforms have big wealth management divisions. So it's beneficial to their overall business if they get in front of them to also identify how they can be helpful to newly crowned millionaires or potentially much more than billionaires. So we want to talk to the whole market, but the vast majority of what we end up really focusing on and executing on it is driven by these niche relationships we have within the ecosystem. Yeah.

Networks are important. And maybe to go off of kind of what you said is like, who are you in terms of investors looking for or companies looking for investors? Who are you? Where did you come from?

Before VanEck, how'd you get your start and develop the experience that you have now in private markets? I'll take you back. Like I aspirationally as a child always wanted to be an orthopedic surgeon, largely because I was always getting hurt playing sports. So I spent a lot of time in the doctor's office.

Yeah, and then at university, I just started taking some business courses to differentiate my kind of pre-med sequence. Where'd you go? So I went to Rutgers. I went to Rutgers University in New Jersey, and I was, you know, bio major, pre-med sequence.

And then I got an internship in the late 90s at Merrill Lynch during the tech boom. And it was like, wow, this stuff is pretty interesting. So we were seeing these kind of newly crowned internet behemoths. And I just got really - I got hooked, quite frankly.

And so I kind of started my career as an investment banker, as an analyst, just kind of working way too many hours on way too many projects. Learned a lot. And then I really started learning about the private equity world. because they were actually sponsors for some of the mandates we were working on.

And then, so yeah. And then, so then I basically, back in the early 2000s, got involved with venture capital and growth equity in secondaries. So I was one of the early folks to get involved in the secondaries industry and just fortunate. And so I kind of spent most of my career executing all sorts of creative deals.

I'm a deal junkie, love structure, love protecting our clients' downside while also trying to optimize for the upside. Most of the capital I've invested on behalf of has been kind of institutional capital in your typical private drawdown style funds. So globally, pensions, endowments, families, sovereigns. And then I had a great opportunity about seven, eight years ago to get involved with what's, there's a lot of different names for it, but it's essentially, it's a 1940 act closed end fund.

And it's like an evergreen structure. and it really lowers the barrier to what we were talking about earlier. There's greater accessibility. It's more designed for wealth-oriented channels, advisors, REAs.

There's lower minimums, right? So retail has an easier way to get access to it. And so I really spent the last seven, eight years understanding that whole world, which has been fascinating. Same strategies, so kind of executing upon very similar strategies but doing it through different fund structures and for different audiences.

And so I just consider myself incredibly fortunate. One, I love what I do. How could you not, right, in this world of, you know, kind of innovation and disruption, but also just working with so many great groups and trying to figure out ways to help them and get them access. And then, yeah, I kind of serendipitously crossed paths with Jan and the VanEck team about a year ago.

And as you said, recently joined and couldn't be happier. That's great. And we're happy to have you. Given your experience both on the institutional side and more of the retail side, how do you think that shapes your perspective of private markets today?

Yeah. I mean, I think it's been - I don't know that there's many people that have been as fortunate to see both sides, right? On one side, you're talking to the most advanced, sophisticated institutional investors that exist. And then on the other side, you're trying to explain to a financial advisor like what private markets are, this whole staying private for longer trend.

So it's just been fascinating and I think you learn a lot. You learn a lot about how to articulate the opportunity set, right? The challenges, how to converse with different types of investors. Neither is either better than the other.

It's just it's a different world. So I think that's been great. And then, frankly, managing different types of fund structures. There's pluses and minuses to everything in life, as there are in the industry, right, that you and I work in.

And there are - there's characteristics of a private drawdown fund that are challenging and there's aspects of managing like a more, I think, accessible evergreen style fund that are challenging. And so having the ability to kind of sit on both of those sides, one that's highly illiquid, one that has partial liquidity, but you're still sitting on highly illiquid investments and how to solve for that, how to manage cash, how to manage risk, how to know that the end investor there is not a super wealthy family, but it's your neighbor, right?

It's your neighbor that's ultimately in this fund either directly or through their advisor. I think it's just been - it's opened up my eyes a little bit. And I think it's helped to evolve how we think about, how we package, how we execute, how we construct, and how we risk mitigate. Yeah, it's been fun working with you and the team to figure out all the different structures that we could go, kind of depending on what the strategy is going to be, whether it's going to be an interval fund, a tender offer fund, you want to send a fee or not, all the different ways that you can structure things.

It's pretty cool. And then I guess given your background, having an understanding of what certain investors might want or might be receptive to I think is really helpful. Yeah. I mean it's not a one-size-fits-all.

Yeah. Right? I mean there's different reasons. Like some groups - so now we'll think more about these evergreen products, which I'm super excited about.

I mean, I think some are getting a bit of a black eye right now. Some of it's probably overdone, right? I think it puts more pressure on the portfolio managers, on the sales forces, on the wealth managers. Everyone needs to really make sure they're properly educated, right, to understand the pluses and minuses and challenges to these different products that are more accessible.

So everyone goes in eyes wide open. But there's also kind of great benefits to it, right? And the lack of having to go through 100-page subscription documents. You only can subscribe like once every few years, right?

And you can't - if you don't invest in that group's next fund, you're only getting exposure to what you invested in today, right? So the evergreen versus non-evergreen. The minimum investments, right, being much more manageable, right? The higher frequency of valuations, right?

There's always this ongoing debate about, you know, how stale valuations in private markets may be versus listed markets and how do we find common ground, right, to create more dynamic pricing without going crazy. Because at the end of the day, there still are structurally illiquid assets. Tax planning and tax preparation. So, you know, K1s, which are, you know, not for everyone versus, you know, 1099s.

So, yeah, it's been great. And I think there's just a lot of advantages to these evergreen structures. But everyone needs to know what they're getting themselves into. I think the managers have a responsibility.

I think the firms, the sales force, the underlying advisor of the client needs to make sure they properly understand how to present it. And everyone needs to also behave right in a commercial way. Yeah. Yeah.

And it seems to be a greater push by regulators to provide more access for retail investors, whether it's the executive order to put alternatives of 401ks and the SEC to look at co-investments and other things of that sort, or private sleeves within ETFs. Do you think that retail should have that level of access to private investments? Yeah, I think the reality is we're moving down that path. Whether or not I think it's appropriate, I think we're moving down that path.

And I think it's a net positive. I just get back to education. I think the industry needs to do a good job of educating everyone on what the pluses and minuses are. These are, at the end of the day, illiquid investments.

You shouldn't be looking at these, frankly, every day. And if you don't have X number of years to hold these positions, the reality is it's probably not a great fit for you. But the ability to kind of increase the percentage for these private assets and funds for other funds to gain exposure to them, I think is a positive. Retirement plans to have the ability - by default, retirement plans should be long-term, right?

Investors. Vehicles. It should be long-term investors. It seems like it should be a great fit for these types of strategies.

It's been like the holy grail, I think, for our industry for decades is how do we get into and create accessibility for these retirement plans, right? There just such a great alignment in terms of the time and incentives So yeah look I just by nature I trained to be a paranoid person right I think you want any portfolio manager to always be thinking about how things can go wrong, balanced with the upside. So I'm net positive on it. But again, I just get back to, I want to make sure, I think the industry wants to make sure that everyone understands both sides.

Yeah. If you're a financial advisor listening to this right now, what do you think it is that they should really pay attention to and be thinking about now when it comes to private market allocations for their clients? Yeah. So look, it's the old 60-40 is probably no longer as relevant as it once was.

And I think we've gotten to a point where this broad alternatives category, a lot of people just get intimidated by it. And I think advisors too, like they need to understand what that really means. And I think most do. But alternatives doesn't mean it's this highly exotic hedge fund or some high-risk vehicle that - I mean it could be.

But it could also be a lot of other things. It could be that you're getting exposure to a highly diversified portfolio of private equity or venture capital or credit or real estate infrastructure properties. So I think on the one hand, I think advisors just need to make sure they understand what that word alternatives mean. They also need to think about from a construction standpoint, the markets have changed, right?

Again, there's been a 50% reduction of the amount of listed companies available today on major U.S. exchanges. Like that is a significant development.

So if you're not looking for new ways to get diversification and thoughtful construction for your clients, I don't think you're doing them a good service. So you need to be thoughtful. You need to look at obviously a lot of the parameters they look at, the wealth, the risk tolerance, ages, things like that. But within a portfolio, right, you need to be looking at whether private equity can be a solution, whether venture capital or growth equity.

Digital assets. I mean, digital assets can be a great solution for people. Private credit, right? Real estate infrastructure.

So I just, and I think most, I mean, we talk to a lot of these groups. I think they're doing a fantastic job. I would just say that the average advisor just needs to make sure that they're getting familiar with all of these kind of alternative strategies that aren't as exotic as one might think. Did you read that McKinsey report on private markets 2026?

and the idea that it's gotten harder now. What is it? The fog is burned off in the private equity world. And I guess just this concept of zombie companies.

I mean, I guess everything that we've said so far makes it sound like, oh yeah, companies are staying private longer. And so all the values in PE, so it makes it almost sound easy. But can you talk to that a little bit and how it is for you finding the right types of companies? Yeah.

And it's funny because like the zombie, the zombie terminology has been actually used like in our industry for a long time. Even going back to like the internet, you know, bubble, and you had all these like zombie companies that were left, you know, when the when the dust settled. So yeah, we're gonna have to come up with like a new word. Um, but, but yeah, look, I think the reality, like what it's really speaking to is the fact that you have a lot of companies that may not be as relevant as they were largely due to innovation.

Right. So we're at the, you know, the early innings, you know, depending on who you speak with, um, I think most still say and believe we're in the early innings of this AI revolution. Um, but the reality is it's changing. It's changing markets.

It's changing companies' business models. It's changing the need for employment, labor. And so I think the reality is that if you're not, you know, staying on top of things and moving where the puck is moving, you may very well be sitting in a situation where your company is going to be rendered obsolete. And so I think that's largely what this zombie terminology talks to is companies that they just haven't taken the steps or perhaps they just can't, right?

Perhaps they just can't evolve their business models enough to adapt. And as a result of that, they're pretty much like the walking dead. And there's absolutely, like my concern, and I think it's a real concern, is that there's probably going to be substantial capital destruction across both public and private markets. We've already seen re-rating across SaaS companies.

So as it's called, the SaaSpocalypse, we can argue whether or not it's overdone. It may be for some companies. There may be more room to go. for other companies.

There's typically a lag effect between public and private markets, but ultimately it's inevitable, right? And so if you're not already aggressively looking for ways to enable your business with technology, I think you're in trouble. The best position companies are those that are launching today, right? They're AI native, their workflows are built around AI versus most companies today who are trying to essentially use AI enablement basically on top of a workflow.

And, you know, that may very well be fine, but the ability to kind of build now companies in an AI native approach is something that I think most companies aspire to do. So, yeah, I think there's going to be a lot of capital destruction. I think there will be job losses. I do also think that if you look back to prior periods of transformational innovation, we can go back hundreds of years, we always had these concerns.

We always had these fears that there's going to be massive destruction of capital, companies are going to go away, jobs are going to go away. And I think some of that probably is warranted. But what we don't know is what new jobs and new careers are going to become needed in the coming years, right? So if you think about what you and I do today, think about what a lot of our colleagues do today, think about a lot of the products you and your family use today, right?

A lot of those, they didn't exist in many cases, 10, 20, 30, 40, 50 years ago. So I think the market adapts, the market adjusts, people will need to do the same. But in the end, I think it's going to be balanced. What trends are you particularly interested in right now as an investor that you're on the lookout for?

We probably talked about AI and other tech trends, but what if you could give a little detail? Yeah. So, I mean, from a sector perspective, I mean, we talked about space, right? I mean, space is a big area that we spend time in, whether it's kind of launched.

So, like the rails, if you will, as well as the infrastructure. technology communication, or will we not be able to do? Orbital data centers at scale, colonization, research development. So space is a big category.

Defense, right? Defense tech. So the disruption of the legacy prime models is a big area that we're spending a lot of time on. There's a lot of interesting companies.

We have a lot of geopolitical risk, as we know, and just geopolitical challenges around the world. And so I think defense is a growing theme for us, air, land, sea, and also space. So defense is a big area. Security, right?

Cybersecurity, I think there's not a day that goes by where someone or, you know, or you yourself may have been exposed to some type of a cyber attack. So I think security is a big area for us. You know, data, cloud data, you know, quantum data, computing, infrastructure is huge. We hear about all these data centers.

There's a lot of ground being moved and steel being kind of put up. on top of that are all this kind of these layers and layers of technology. If you go one step deeper, a lot of that technology, there's just more innovation happening on the kind of chip systems themselves, whether it's kind of moving away from optoelectronics into, you know, an area we're talking about with our team actually internally this morning about photonics. So I think areas about that, how to transfer information kind of more efficiently, the switching between kind of different racks, right, inside of these data centers is not happening fast enough.

Electrification, Ed, is a big theme for us. We at VanEck, as you well know, have a lot of interesting products there on the public side, right, in terms of nuclear alternative energy sources. It's an area we're spending time on as well. Then how can you not talk about, you know, healthcare, right?

The ability to try to use technology and AI to improve the healthcare system, which, you know, I think we all have experiences that are probably not great. So we're spending a lot of time thinking about how technology can also be helpful to the administration, to genomics, right? Solving, you know, horrible diseases. There's so many areas for us to look at, you know, technologies at its core.

But we're trying to use more, I would say, of like a rifle shot approach. We're really not trying to go out and just spray and pray. we're just spending a lot of time figuring out who we think are the category leaders in the largest, most compelling areas of disruption happening. And then we do our work to try to figure out how to access them.

That's great. So typically I ask my guests about one long-term trend they see playing out over several years. You just mentioned a bunch of them. But is there anything that you're particularly excited about just from a personal level that you just can't wait to see happen or to see play out?

Yeah, I mean, we didn't talk about it, but I mean, it's all related. It's just robotics, not, you know, robotics in your, you know, local Amazon fulfillment center, you know, which is great. Or I think it's, I was reading overnight, I think it's Tokyo. in Haneda.

They're going to have kind of robots kind of helping assist with, you know, luggage when it comes out of those turnstiles. But I think, you know, robotics just more as a part of, you know, human robotics, humanoids. I mean, I think that's going to be really interesting. I think it's still early days there as a lot of folks are figuring out.

A lot of money's gone in. I think we're still yet to see kind of meaningful improvements for commercial kind of scale applications. But yeah, I think just robotics in general, humanoids, I think is an area that we're kind of quite, quite interested in. As you said, you know, we hit on, I think a lot of the other categories where we're spending time.

Awesome. And as we close out, we do our speed round called Trend or FAD. You ready? Let's go.

All right, let's see. No, no wrong answer. Just your quick take gen z turning negative on ai trend or fad have you heard of that bad landlines or home home phones trend or fad coming back you should see my house um oh boy i mean i think it's a fad um interestingly none of these are investment related necessarily but uh there's the death of The McMansion, that's probably a good one. Trend or fad?

Yeah. I mean, they're certainly from a tax perspective not making it easy on anyone who may own those. Yeah, right. Right.

So, yeah. I mean, I think that's moving more towards a trend. And Froyo, trend or fad? Ooh, I mean, it's hard not to love a good Froyo, but yeah, you don't hear about that anymore.

I know. Yeah. I hadn't realized it'd gone away. Me neither.

Me neither. But I guess we got to put that in the fad category. Yeah, that's awesome. Well, Christian, thank you so much for your time and your insights.

I really appreciate it. Yeah, it's a pleasure. What's the best way for people to learn more about you and what you have going on? Well, thanks for asking.

Yeah. So we're in the early days of kind of building out our platform here in the late stage segment of private markets at VanEck. We have a website, VanEck Capital. We're in the process of building out all the functionality there to kind of give clients a sense of what it is that we're doing.

I have a presence on LinkedIn, you know, so you can kind of look me up, Christian Monofo. I tend not to be the biggest kind of tweeter out there, if you will. So you're not seeing me on those platforms just yet. I know we're probably going to be moving down that path, whether I like it or not.

But those are some ways. Fantastic. Again, well, thank you very much. And thank you for tuning in to this episode of Trends with Benefits.

Thank you.