00:20:19 · Ron Biscardi
[00:20:19] S0: Bitcoin? So, I will say, like, digital currencies have been a wild ride in my world for, like, five years now. We saw the, you know, the huge spike that happened and then the nuclear winter of, of crypto. I would say institutions have been curious about this for a long, long time. I think, generally speaking, where, you know, five or six years ago, there was a huge percentage of them who just thought Bitcoin is snake oil. Like, this is not real. This is never really gonna be an investable asset class. That has completely changed. I would... I don't really know anyone who says anything like that anymore. I think people now see that it is a completely legitimate asset class, but I I think a huge disappointment, frankly, of the Trump administration has been the inability to get regulations passed to make it institutional grade. You know, if you're if you're a portfolio manager for a sovereign wealth fund or for, you know, a multibillion dollar endowment or foundation, you need guardrails. You know? You're... You don't wanna put certainly a large amount of capital at risk into an asset class that you don't know has the proper guardrails. Like, our our public markets are incredibly well functioning. They're the best public markets in the world largely because, I mean, obviously, capitalism at the core of our system is the main driver, but you... They wouldn't be as successful as they are if it wasn't for the regulatory infrastructure that also protects investors and that sets up... You know, it's like you can't have a football game with no referees on the field. You know, you need rules and you need a system for all the players to play within. It needs to be fair. And we thought the Trump administration was gonna make more progress, I think, in this regard to to create that for the crypto industry. It hasn't happened. I think if it did happen, you would see a massive influx of institutional money come into this asset class that frankly, I... Will they dabble in it and throw small small checks, you know, small percentages of their overall portfolio into it? Sure. So, like, get more familiar with it. But... And it it is popular at our cap intro events. Know, we'll have 50 to a 100 funds that are in crypto or at least have a significant amount of their investment strategy in crypto.
00:22:56 · Ron Biscardi, Anthony Pompliano
And they get a lot of meetings with investors, but I don't hear the next step, which is stories of how those investors are writing billion dollar checks to go into those funds. There are some funds who have reached scale like that, but I think most of their capital is coming from family offices and individuals more so than pension funds and foundations, endowments, sovereign wealth funds, groups like that. We just need that regulatory infrastructure. And if we could do it, I think the asset class would absolutely explode. [00:23:32] S1: Now when you think about unlocking that capital, is it just a matter of, like, regulation and and kind of government related things, or are there other aspects that are important for for that capital to flow?
00:23:32 · Anthony Pompliano, Ron Biscardi
[00:23:32] S1: Now when you think about unlocking that capital, is it just a matter of, like, regulation and and kind of government related things, or are there other aspects that are important for for that capital to flow? [00:23:43] S0: I I think that is the number one issue right now. I think, you know, five years ago, they had... There was just a lack of information and education and understanding of the space. I think that has largely changed. I mean, I'll tell you in... I think it was in our 2022 event, we had... It was only 16 or 17 digital asset funds in our event. They got 800 meetings among them. That's when it really kind of hit my radar, and I said, wow. There is a tremendous amount of interest in this particular space. And what we... We went to the investors who were in these meetings and said, what was your interest there? And across the board, they were using these meetings to bring themselves up to speed. You know, everyone was curious about it. Everyone wanted to get educated on it. They still get, I'd say, like their fair share of meetings and our events, but but I think the number one thing investors are waiting for are these guardrails to give them comfort that they can invest safely. And then, of course, you know, like, the the recent Binance news is not doing the industry any favors. You know? It's it's... You... You've gotta you've gotta set up a system where things like that just can't happen.
00:25:00 · Anthony Pompliano, Ron Biscardi
[00:25:00] S1: Yeah. What I find interesting is on the retail side, the inflows to Binance have been higher than the outflows post event, which normally you wouldn't expect. But I do think that there is an, reinstilled confidence because Binance backstopped all the losses. So in a weird way, it's like Yeah. By by backstopping the losses, it's almost like Binance has like a self insured, you know, kind of fund that is gonna go. And and now, wait a minute. Well, if somebody else got hacked, they might not have backstopped the losses, but Binance is gonna do it. You know, there's precedent for that. And so maybe I'm safer trading on Binance because they're gonna backstop losses. It's a very weird psychological thing for the retail investor community. I don't think the institutions think that way though. Right? [00:25:42] S0: No. I think if you're an institution and you see that headline, that's terrifying. I mean, I have... Like, I can't think of an equivalent event in our mainstream markets. Right? Like, has a bank or [00:25:55] S1: a brokerage Silicon Valley Bank, like, going under or something? Going under, yes. Right?
00:25:55 · Anthony Pompliano, Ron Biscardi
[00:25:55] S1: a brokerage Silicon Valley Bank, like, going under or something? Going under, yes. Right? [00:26:01] S0: The government stepping in maybe? I I think you always have the risk that a a business can be mismanaged and and go out of business. Right? Like, bankruptcy is is a possibility. Whenever you're making an investment, you're you're underwriting that risk to some degree. But I don't... I can't think of a scenario where a major investment firm or bank was hacked and money was literally stolen out of their accounts. I I can't think of any scenario where that's happened. So I think if you're an institutional investor, you've got to report to an investment committee, a CIO, then the overall board has to approve it. I just think it's incredibly hard to do if you can't say, well, my assets are gonna be custodied at Goldman Sachs or Morgan Stanley or JPMorgan. You know? When when those guys are in the space in a big way, then I think you're gonna see the institutional investors have a much higher degree of comfort. But you're not gonna get those guys in the space in a big way until this other problem is solved. [00:27:07] S1: Yeah. I think that, I think that makes sense. Let's talk about private credit. Private credit obviously had some negative headlines. People were worried there for a little bit, but seems to have kinda cooled off in in some of that concern. What are you seeing there?
00:27:18 · Ron Biscardi
[00:27:18] S0: Totally overblown, and and I kind of said it as it was happening. There there... So what I like about private credit is that there's not a tremendous amount of leverage in the private credit funds. You know, they may have two or three to one leverage. But where you see real, like, systemic level blowups is when an asset class starts levering 30 to one, 40 to one, 50 to one. Right? Like in the in the financial crisis in o eight, you had... A lot of these banks were levered at those kind of numbers. That's when you can take down the system. Private credit funds are making loans to operating businesses. They're filling in a void that exists where where banks are not servicing various segments of the of the middle market in particular very effectively. And private credit has stepped in to fill in that void and they've done a great job of it. As investments, I think they're pretty great. You know, you put money into these funds, they make loans to operating businesses, and those operating businesses make payments on those loans which result in cash flow back to you as an investor in the fund. There were a few funds who probably got a little bit too aggressive in their lending practices and they had too many failures in the portfolio and that started to impact their ability to hit the investment returns that that were targeted. I... Most of the stories that I've heard is that a lot of those funds were able to sell their portfolios ranging from 60¢ on the dollar to 90¢ on the dollar. You know, that is far from a major crash. And it wasn't even really industry wide. It was it was a handful of the biggest players who experienced it, but I can tell you that my institutional investors are still completely focused on the asset class. Like, the whole blue owl thing was playing out in q one of this year. At my event in Miami in late February, private credit funds had 3,000 meetings. Out of a total, we ran about 20,000 meetings in the event this year. So for one asset class to have 3,000 meetings, I'm... I mean, I think it was the... It was in the top three, I would say, asset classes in terms of meeting performance at the event. So I haven't seen any real slowdown. I think it has become a huge part of investor portfolios. It became a huge part, by the way, because, your traditional bond portfolio couldn't generate the returns that it used to.