00:00I do kind of want to start just with what we've kind of been seeing in the markets lately because
00:03it's kind of been all over the place. And I am curious as to how investors, particularly on the
00:08retail side, sort of behave in these types of situations. Is there anything we can read into it?
00:14Yeah, I mean, I think generally, just from my experience all the way back at E-Trade,
00:18that investors are just looking for ways in which they can invest for the long term, right? Like
00:25you have your group of investors who are more hyperactive trading. You see it on some of the
00:30platforms that still exist today. But generally, what we saw was the evolution of customers really
00:36trying to figure out how they build wealth, right? And so whether they're thinking about ways to build
00:40a diversified portfolio in public markets, private markets, and, you know, there's a lot of noise out
00:46there. And I think that that's the part that confuses retail investors. With regards to like
00:50how people are positioning and allocating, and particularly in light of some of the recent
00:54developments with regards to the Treasury Department and the move in yields. You know,
01:00we've talked a lot on this show. Obviously, the traditional 60-40 kind of, you know, was put to
01:05bed a long time ago. There's a lot more allocation to private assets. Do you see people, particularly
01:10on your platform, reaching more for some of those private assets, given what we're seeing in public
01:16bond markets and the equity market, for that matter? Yeah, for sure. I think generally,
01:21my experience is that, you know, when it comes to our platform, investors are realizing that if
01:28they don't think about private markets, they're missing out on the opportunity to build long-term
01:33wealth, right? That's just that simple. And while the market has actually been on fire, as you guys
01:38have been talking about all the time, for a long period of time in the S&P and otherwise, it's
01:44still
01:44true that if you're trying to think about the diversification and ultimately building wealth over not a
01:49one or a two or a three-year horizon, but a five or a 10-year horizon, you really need
01:54to have access
01:55to not only public markets, but also private markets. I am curious, though, about the competition
02:00between yield. I mean, I guess one of the upsides of the increase, at least prior to today, that we
02:06saw
02:07in yields is, I mean, you get some pretty healthy coupons. If you are the kind of person who's going
02:10to buy and hold, you know, why not lock in 5% or 4.7 on a 10-year yield?
02:15But that also puts
02:16upward pressure on what private assets have to return. I mean, ultimately, people are buying
02:21the spread or at least looking at that spread and wondering whether it's worth their while.
02:25If we are in a higher for longer rate environment when it comes to treasuries and benchmark rates
02:31here, I guess how much more does private credit and private assets have to offer?
02:36Yeah, so I agree with you completely. You have to offer the premium for the illiquidity, right?
02:43At the end of the day, that's ultimately the issue between public and private markets.
02:48And so, but generally speaking, when you see behavior with retail consumers, so they're
02:53moving potentially away from public equities into fixed income because they want the coupon,
02:58the same thing happens in private markets. You'll see a move away from what would be
03:03traditionally private equity into private credit where there's yield. And then there's obviously
03:08a corresponding premium, as you were just indicating, that you're getting paid for for
03:13the illiquidity. But listen, I think it's also true that investors realize that there are great
03:18companies out there that are choosing to stay private for much longer. And so if they want exposure
03:24to the credit of that company and they're not public, then the only way to do it is in the
03:28private
03:28markets.
03:29I mean, why are they doing that? I mean, I understand why they were doing that maybe a
03:32couple of years ago when the path to a public market was a little bit less, I guess, smooth.
03:39But I mean, the IPO markets has pretty much opened up. I mean, we're probably going to go down in
03:442026. It's probably one of the greatest years for capital markets in quite some time. Why choose to
03:51stay private if you do have the opportunity to go public right now?
03:55You know, it's interesting. You know, I remember years and years ago in the beginning of my career
03:59when I was building the bank, the telebank, you know, everybody wanted to go public and it was a
04:04mark of success. And today I think when you and one of the sort of truisms was that you just
04:10had a
04:11lower cost of capital. I'm not sure that's as true today. And so I think you have a universe of
04:16companies who feel like remaining private longer puts them in a better position. They can still get
04:22access to very inexpensive capital and it allows them to continue to invest in the business in the
04:27way they best see best fit over the long term. So I think you see it. I think there's a
04:32universe of
04:33of companies and as evidenced by this sort of movement today and all the hot stocks that have
04:38gone public at crazy valuations, it's because they have stayed private for so much longer and are really
04:43so much further along and advanced in their life cycle around earnings and otherwise. And so it's why
04:49they're commanding the kind of premiums that they are. This may be a dumb question, but I am curious
04:54about the duration issue with regards to the lockups that you see in the private space. If people in the
04:59public markets are kind of shying away from duration, certainly in public debt markets, and you're even
05:05starting to see that to a certain extent in the equity space where people are moving away from some
05:08of those long duration trades, does that become an issue for private markets if people are skittish
05:14overall about whatever the broader economic market situations that maybe they don't want to lock
05:19themselves in for five, six, seven years or whatever it is? Yeah. So it's a great, you and I've talked
05:24about this in the past and I agree with you, right? Like at the end of the day, when you
05:28saw, you know,
05:29the movement around redemptions and private credit, I think you and I were both saying at the time,
05:33it's not really a credit issue, which people were worried about. It's really a liquidity issue because
05:38there's a mismatch in expectation of what liquidity means. But I think you've probably seen it. Even
05:44in the last few weeks, you've seen asset management firms, one in particular, that just filed with the
05:49SEC to create a level of new enhanced liquidity. There are partnerships that are being built with
05:55companies today in the asset management side in NASDAQ and using technology. So I think just as I saw
06:02the evolution at E-Trade or in public markets, you're going to see in private markets where there really is
06:07going to be enhanced liquidity creation as an option, particularly around interval funds for
06:12retail investors who want to have access to private markets. I do want to ask about kind of
06:17this, you know, expansion of private markets to the individual investor into 401ks and the new
06:23Department of Labor safe harbor rules. I also just want to bring to your attention a report that just
06:29came out, I think it was on August 14th, out of Vanguard, where they basically recommended an
06:35allocation to private equity of zero. I am a little confused by that. I mean, I understand the risk
06:44associated with that. But you've built a company on the premise that there should be more of a meaningful
06:50allocation to that. Why do you think there would be some reticence to actually recommend that by, and let's face
06:58it, you know, Vanguard is the biggest one out there when it comes to managing folks' retirement money and
07:03their long-term capital. Why do you think they would be a little bit more reticent?
07:07Well, so remember, though, that at Willow, our platform really serves other qualified purchases or
07:13accredited investors. So by definition, we're serving a segment of the marketplace that wants access to
07:20private markets and has enough wealth, either in the form of income or net worth, to be able to bear
07:26loss.
07:26And so I do understand. Like, I do think that as you start opening private markets into 401ks,
07:33you're really reaching into more of what we served at E-Trade, more of, you know, the Main Street and
07:39mass affluent category. And it's true. I think there is a level there where you have to be much more
07:46cautious and you have to really lean into education so that the end consumer really understands
07:52the illiquidity of the investment and what the implication is, right? For us, it's slightly
07:58different because we're serving a different segment of the marketplace.
08:01Well, and as you serve that segment of the marketplace and this whole direct-to-consumer
08:05model, I mean, you don't have that space completely to yourself. I mean, you've helped to define it.
08:10But, I mean, you're seeing Blackstone and KKR and Apollo, basically the behemoths in this space,
08:15now start to sort of look a little bit down the line here. Does that worry you at all? Are
08:21you
08:21going to be complimentary to you? You're shaking your head, no?
08:24Yeah, no. Like, listen, I say this all the time. The big part of the amazing success we experienced
08:30at E-Trade was you saw us and Schwab and Fidelity and Ameritrade and all the others really trying to
08:38build a category and build individual brands within that category. And when you actually have
08:43others participating, it really validates the space and it often makes it much easier to really
08:50be able to grow your brand specifically within the category that's being established. And so
08:55I sort of welcome the opportunity for more people to enter into the space.
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