00:09:57 · Ben Haber
[00:09:57] S0: Sure. That makes sense. And so as you're building out 73 strings, your clients, you're selling into sort of the the managers. Right? The the venture funds, the private equity funds, the credit funds. And and they have the challenge that you touched on, which is they have to collect data from their portfolio come. Yes. Right? So what what what are you guys doing on that front in terms of the actual data collection? What is sort of the adoption that you're seeing from portfolio companies to actually report their data into the into the fund managers?
00:10:25 · Yann Magnan, Ben Haber
[00:10:25] S1: Yeah. We... So we have developed a a set of technology that basically helps feed any type of document as I explained previously. Yeah. The documents, we are not... We are leaving the the choice to the GP to decide how they want to collect these documents from their portfolio companies. So it can be for any type of box sharing type of process, could be for email, could be, you know, for other type of technology solutions like like you guys collect these... Collect the documents. What we are doing is reading these documents and extracting the the relevant KPIs. We are not doing just that. We're collecting these KPIs, but we're also keeping a full lineage and audit trail audit trail from the numbers and KPIs that we collect to the original source document because we as original source documents are the source of truth for our clients, and our clients have fiducial identities. We need to be able to prove that everything that they have done or every number that they have used in their process is sourceable. So we are keeping that full audit trend to be to be source document, which means that we also become the source of truth on our side once we have that. [00:11:27] S0: And is the data that's getting sort of fed into the system generally self reported from the portfolio companies?
00:11:27 · Ben Haber, Yann Magnan
[00:11:27] S0: And is the data that's getting sort of fed into the system generally self reported from the portfolio companies? [00:11:34] S1: Yeah. Most often. Most often. So... Yes. So the the data is self reported, depending on the strategy that our clients is focusing on. The investment team might have a view whether these KPIs that are reported should be adjusted. If a reported EBITDA should be adjusted for whatever type of pro form a adjustment like acquisitions or these type of things. So it's a combination of the documents, the information that flows from the popular company, and then some level of judgment that comes from the from the investment teams on top of that. Definitely very, very much so for private equity, maybe a bit less for private credit. Depends on strategy. [00:12:17] S0: Sure. That makes sense. You you mentioned evergreen funds. So, obviously, all of this activity in the industry is occurring against the backdrop of more retail exposure to private markets and and more demand from advisers and and individual investor clients to get access to evergreen funds in particular, but also some drawdown strategies as well. How has that shift impacted the role of the GP in portfolio management reporting and and data collection? How is that impacting 73 as a business?
00:12:50 · Yann Magnan
[00:12:50] S1: That's that's another very, very good question. So if I take a step back, before Evergreen, valuation is... Was a reporting exercise. I'm a GP. I have received capital from, you know, various LPs. They need a reporting every quarter. I'm going to provide them a report. There might be sometimes from time to time secondary transactions are pending on these on these holdings. But, basically, the number they have to report is a number that goes into the LP financial statement, and they have their own regulatory requirements. So they have to report their value. So it's it's very important. Don't get me wrong, but it's a reporting exercise. What's happening with evergreen type of strategies, retail investors coming into the mix, and probably even more so tomorrow with four zero one k plans, is that actually these investors are transacting now on this valuation. So valuation is not just reporting exercise. It's not just a number. It becomes transaction grade. That's by far the most important transition that's happened. The second transition that has happened is that the world was basically quarterly... Mostly quarterly reporting, again, you know, for the purpose of financial statements. Now if you want to get retained investors to invest into your fund and your GP, you typically have to offer these investors to be able to enter at any point in time, to exit mostly at any point in time, which means that you have to offer a higher frequency in terms of reporting, a higher frequency of the evaluation process as well. So that's the other... The sudden impact that we've seen happen in the past two years.
00:14:30 · Ben Haber
[00:14:30] S0: You mentioned reporting to LPs was historically on a quarterly basis with evergreen funds becoming more real time. Apollo as a firm has been public and very vocal about moving their evergreen fund valuations to daily daily NAVs. It seems like that is the direction of travel for the industry. But in your opinion, how long do you think it takes for alternative investments as a whole to move to daily pricing for Evergreen Funds?
00:14:58 · Yann Magnan
[00:14:58] S1: Oh, so we are... We already have clients that are doing daily pricing of of of their alternative assets. I think it's going to move pretty fast, especially on the back of the four zero one k plan potential evolution. Four zero one k plans will require the evaluation, same as will require the evaluation. So a significant chunk of the market is going to move in that direction. And four zero one k... Alternatives into four zero one k class might take a bit of time to to get up to speed. There will be some hesitancy, I think. But the other thing is that is that if you are a manager, if you are a GP, and you expect to raise only... Even only 20,000,000 from from four zero one k plans in the next year, anyway, you have to be able to run the labor ratios across your portfolio. So that is going to happen pretty fast. So that's a trend that's going to happen. I think that's not the only trend that is going to happen as well. Clearly, as we go down that path, what that means, I think, I mean, that's my personal personal view is that private capital is definitely meant to be private, but I think it will become less and less private in the sense that there will be a need as well for more transparency in terms of not just the valuation, but the underlying data. That's the only way that you can create the trust that will really drive significant capital influx into into that part of the industry.