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Radio shows a Broadcom did give some juice to the trade, and it continues to soar. It's pretty much saying at its best levels of the session of twenty two percent, the stock hitting a one trillion dollar valuation for the first time after predicting a boom in demand for its artificial intelligence chips. So with what you need to know, we've got an incredible duo. We lean on them so much.
Really, the most popular guys today.
I don't even know if they got any sleep.
Man.
I've just seen every time I look up at Bloomberg TV or I look at the radio studio, they are talking to folks. Kun John Sabani, senior semi Coonductor alys at Bloomberg Intelligence and also with us is Ian King, US Semiconductor and Networking reporter at Bloomberg is. We are so lucky to call them hours. So we get to lean on them both. Joining us from our San Francisco bureau. Ian, I do want to start with you Broadcoms quarter. What is the nut that investors are so excited about? Is
it the outlook? Is it the AI? What is it?
Well, I mean, I'm suretent will give you better analysis than I could, but really the report was kind of okay, the forecast was okay. But what happened on the call was that the CEO gave a long term projection for its kind of most important AI product that is kind of off the charts, and that really got everybody very excited about the future of this company and kind of pointed to it as a whole different company in terms of the scale that it can achieve.
Cujohn, come on in here, because we spoke to you yesterday after the numbers came out. Chairs we're kind of all over the place. Actually fell for a second, but about up about two percent, nothing like what we're seeing this morning.
Certainly, there were.
Some price targets that were raised, but it was all about what was said on the call, right.
Yeah, it was all about AI.
I mean, just to put things in perspective, they did twelve billion in AI revenues, I mean beyond Nvidia. When we look at the size of AI chip revenues, there's nobody else. Even AMD is lagging if you just look at pure AI numbers. Right, and we've been talking about A and D for a while as the number two GPU provider when they gave all this guide. Now estimates are going somewhere between twenty five to thirty billions in
three years. Again, that size of that growth for a company like this, that's something we have only seen happen just with one name so far.
So Coon John, you know, and I know we talked about this with you and Ian I believe yesterday, but I want you to put it out for the Bloomberg audience again. Where is Broadcom in the AI chip puzzle?
Yeah, so they have two big AI businesses.
One is called the custom asex or the custom silicon, where they helped these large cloud and hyperscale customers like Google, Meta, Amazon, Microsoft designed their own chips, which we have seen a trend that everyone is adopting. And the second piece is the AI networking and connectivity. So think of the iOS, the basically highways and the pipeline that connects all of these GPU and CPUs together. In the data center.
Hey, Ian, come on in here, because, as you point out in your story, Broadcom got to where it is today by making a series of acquisitions.
Over the last few years.
More acquisitions in the future now that we're seeing the value of Broadcom continue to surge, give us a brief history of how it got to where it is today, and then what you think could come next when it comes to acquisitions.
Yeah, I mean Hogtan started off this company by basically with the small division of what was spun off from originally HP years ago and sort of made this kind of sequence of deals where he got bigger and bigger and bigger, and that eventually even branched out into software. And now we've got one of the world's largest chip companies on it's pretty high ranks of software makers as well. And as we learn yesterday, he's not finished.
You know.
It makes me think about you know, and I know, and we've talked about this with you a lot, Kunjan Tuo, just like what's going on with Intel, and then you look at some of these other chip companies. Having said that, I feel like we've started to talk about Nvidiom people going after that. Who does Kunjohn let me bring you back in here. Who does Broadcom have to be worried about or do they not have to be worried about?
Is their position in a pretty good place ahead of maybe their competition at this point.
Yeah, so specific to AI, I mean it has been usually a diopoly in this market between Broadcom and Marvel. Broadcom has usually held somewhere between say sixty to eighty percent market share. We think that's going to stay in the same rage in the future. Again, Marvel is another up and comer here who is making strides with the same customers that Broadcom is announcing, or the same set
of customers, I should say. So we expect these two to continue dominating the AI customs and the AI networking space going forward.
And yeah, go ahead, Well I come on in on that too, like how you see it in terms of you know what I asked Kunjan as well, if you have anything to kind of add to that.
Yeah, no, there was a it was a that was a key part of the call yesterday. I mean, they gave this market size as well, maybe as much as ninety billion, And people are like, okay, so you've got these two new customers that you're not telling us who they are, How does this all fit factor together? Is this happening on your existing customers, You've got two new customers. Are you going to have one hundred percent of this?
And all of these kind of flurry of questions, and hot Tan was basically that the CEO is basically smiling and saying, well, there's a room for everybody, but we think we're going to do quite well within that. And he's right. I mean, as Kunjin said, they are the best game in town, the kind of default choice. If you want a custom chip for your own data centers, you're going to go and ask them to help you to do it right now.
Yeah, we should not Marvel Technology upright now by nine point three percent in sympathy with Broadcast results, but Marvell only about a one hundred billion dollar company, still about neck and neck when it comes to performance this year. Both companies up about one hundred percent so far this year.
Kon John Wighan on the idea of acquisitions moving forward for broadcom Ian mentioned that, and he mentioned in the story too that this is a company that got where it is today as a result of making acquisitions.
At Bloomberg Intelligence, are.
There any names that are on your radar about companies that could be acquired by Broadcom in the future.
Not at this moment. I mean, look, Ian answered it spot on. I also come originally from Broadcom. I was part of the acquisition mahan Hawk acquired Broadcom. So I mean we do expect him to continue staying acquisitive. That's
how he's really made his name. But when you look at the size of the past acquisition, each larger than the previous one, they don't tend to go and do small tuckins, right, so they I think at this moment, like Ian said, they are going to focus on paying down debt first and then start collecting a bigger pile of cash, which which they can then go out and
do a bigger deal. Now, when you think about candidates with that size, there's not a loft left in the semi space, and regulation, at least in the semi so far, has not been as generous.
Hey, So Kunjan, wait a minute, did you just drop a ball on us? Like, did you work for Broadcom? How did we not know this?
I did in my past life.
I was an engineer and I used to work for broad Com.
So what do we need to know? Any inside stories?
Here not anymore fair enough?
Fair enough, Hey guys, what are the things I thought about after this quarter? And this is what we do, right, We get one earnings that we get an outlook, we get a call and they were like, okay, next quarter. So Ian, does what we got from this company make the next quarter or next couple of quarters even tougher in terms of expectations.
He was very careful to set expectations appropriately and said, look, these are just big customers, and these big projects take time and they are frankly lumpy. So that's why they gave this twenty twenty seven target. And then he kind of gave us sort of a soft target for the whole of next year, which wasn't a massive increase from you know, sort of fifteen to twenty in terms of
the available market. It was very vague, but there was some very careful signaling there to sort of say, hey, look, you need to keep your eyes on the long term gross potential here, not get sort of too tied up in the quarterly sort of machinations that we're going to see going forward.
We never do that. We never do that, Kunjan, just saving you twenty seconds here, how are you thinking about what's going to be on your radar when it comes to this company in particular.
I mean, like Ian said, I don't think investors should look at this quarter to quarter. I think we've just gotten a bad habit of what Nvidia has said a precedent. I mean, these these are again handful of customers, like you can count on your one hand, right, their buying patterns will go through, which is very normal, through some kind of timing and digestion. So we should look at it again from a year to year milestone.
All right, some good advice, because it's true we get kind of caught up in day to day stuff and sometimes you have to do the longer term perspective. Guys, thank you so much. Have a wonderful weekend. Kun John Sabani, senior Semiconductor analyst at Bloomberg Intelligence, along with Ian King, US semiconductor and networking reporter at Bloomberg News. Incredible on the space, both of them and joining us there from our San Francisco bureau.
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All right, we do want to get to today's Bloomberg Big Take. It's a story that is part of several on the global fertility industry that our Bloomberg News team has been looking into. To tell it, it took an
editorial village of Bloomberg reporters. The tale. The reality included following a teenage girl in India lord into selling her eggs, a model in Argentina whose genetic makeup is prized, a mother in Greece told by police that our eggs were stolen, and two girls from Taiwan who have put themselves at risk to earn money in the United States. We had a lot of questions, and I bet so do.
You Yeah, so stop what you're doing because you know you want to know more. The entire read it is a long one, It is worth it, and it is with good reason. It can be found on the Bloomberg terminal and at Bloomberg dot com slash BusinessWeek. Here with us is Bloomberg BusinessWeek Senior investigative reporter, Susan Burfield in our Los Angeles bureau. Susan, We're living in really interesting times because the whole idea that this medical process can
be undertaken is actually relatively new. Here, let's take a step back and just give us an idea of the fertility industry here in the US globally and what it is, how big it is, and then we'll get into some of the details in the story.
Yeah, thanks so much. So the fertility industry globally is worth about thirty five billion dollars and it's growing. And you know that's in part because there is new technology that allows eggs, in particular, to be frozen, to be stored, to be transplanted, to be transported, and to be transplanted. And at the same time, as you know, probably a lot of people know, women are delaying having kids and
that makes it harder to get pregnant. And that's because human eggs decline in number and quality in a woman as she ages, and so that is one reason that the demand for eggs from younger fertile women has been growing. And that's what we set out to try to capture. Who's you know, who's providing those eggs, who's buying those eggs, and how the flows work transnationally.
All right, So I am curious about how you guys went about finding these individuals and when you talk about you know, eggs, when you're younger, you know, being much more productive. Right. This story gets into though, tapping into or accessing very young women girls right to get access to their eggs. I mean this has become a commodity, and as you guys say, a premium commodity.
Yeah, I think you know, one way to think about this, and it probably you know, makes some people uncomfortable, and I think that's fair because this is a really emotional issue where people, especially you know, those trying to get pregnant, are at their most vulnerable. These aren't easy decisions to make for anybody involved. But you know, what we found is that because there is an increasing demand for eggs, you could consider them a very precious and scarce resource.
And as with any resource, that presents opportunities for both people to benefit, you know, and by that I mean both the women who voluntarily sell their eggs to make money to help people. Obviously they would be parents who are getting the eggs and the chance to have a bite, but it also presents opportunity for exploitation and that's also what we documented well. And when you're talking about young girls. That's what you're talking.
About exactly, and I want to get into and to be fair, I think we've all been on a subway and seen the posters that said, you know, you can sell your eggs essentially, and we were actually having a conversation in the newsroom around your story. So to be fair, there's a legal you know, everything's on the up and up, and then there's some that you get a little bit questionable. Let's go into because it does seem like often when we're looking at i don't know, tapping a precious resource,
it often leads us to emerging markets. And that's one of the things that struck me about this story because this does as well.
That's right. So you know, what we found is that for some clinics, for some parents, for some agents, you know, the people who are connecting these donors, we call them donors, though you know most of them are getting paid, but the term the industry prefers is donors.
And you know, because people can.
Make money selling their eggs in the US and elsewhere, you know, it opens up the possibilities for what you could say is like economic coercion. And I think what we were trying to look at is you know, how does that play out in countries where you know, the both the chance or the necessity to sell your eggs can bring more money than women might be able to make in lots of other ways, and that brings a pressure that you know, we wanted to explore.
Can you talk a little bit about how the story opens and the one of the first chapters about a young girl in India and her story, and then we can talk a little bit about how this story totally spans the globe and the Bloomberg newsroom and how a global newsroom is able to capture stories.
Such as this.
Sure, so you know, the the young really teen, the teen in India who we write about, agreed to sell her eggs but really was too young to understand what she was doing even still doesn't quite you know, understand that there, you know, could be children out there who were born from her eggs.
She h you know herself says that.
You know, she wanted a mobile phone and was offered a way to make the money by other women who were agents and who were recruiting women or young women like her to sell their eggs. And you know, this is I think a pretty egregious case. You know, teenagers are not supposed to be donating eggs in India or where she lives. You know, the law requires women to be twenty three. But she was kind of recruited into a network of women mostly who had set up an
entire way to almost fool the clinics. It was probably also incumbent upon the clinics to ask more questions than they might have or to probe the answers a little bit more than they were getting from the young woman. But you know, you know, she didn't do this.
On her own. She was recruited into a network.
You know.
One of the other stories that you get to is and I feel like this is where Bloomberg and BusinessWeek does so well, is that you get very specific and you tell what has happened to these individuals. You talk about a woman in Greece, Maria, she goes by a pseudonym, but again was harvesting eggs for herself, right right, And then it turned out she found out that wasn't just the case.
Yeah, this was you know, Maria, as you said, was seeking IVF treatment for herself. You know that included, as it often does, the kind of stimulation process that egg donors go through, which is, you know, about ten twelve days of regular hormonal shots to increase the number of eggs that a woman can produce, called superovulation. So Maria went through that, went through the retrieval process which you
requires going under Anesesia and her eggs were extracted. She was told that she produced a certain number of eggs, and ultimately she did give birth as a result of this extraction and the retrieval and the IVF. But later she was told by the police that some of her eggs were given to another woman, and the clinic at
the center of this is under an investigation. So Maria doesn't know and doesn't know who the woman is, doesn't know the result of it, but she knows that some of her eggs were given to another woman without her consent.
You know, when I was reading this story, Susan, I was thinking about the different regulations in different parts of the world when it comes to this medical procedure. I mean, at the end of the day, we're talking about medical procedures. Here, we're talking about drugs, and the way that the industry is regulated is different in many parts of the world.
Here in the US, what do we look at with the regulatory environment and what should people think about here in the US who are listening to this, watching this have read this story when they learn about procedures such as these.
Yeah, like how do you trust your doctor who is doing the extraction he or she to trust that they're just taking eggs for yourself?
Well, so, you know, as you said, different countries do have different regulations both about what's allowed overall and you know, how donors are treated. You know, in some places, in some countries, donors must remain anonymous. In other places donors must be identified. In the US, you know, the f d AH does have some restrictions and on who can
donate and requirements for them. There is an industry trade group that puts forth guidelines for how, you know, for how care overall is supposed to be provided, how egg donors and sperm donors are supposed to be treated. You know, what we found is that you know, those are guidelines. They are widely accepted, but there isn't really a way to enforce those guidelines.
So we don't want to suggest that.
You know, the industry in the US is is dangerous in any way. What you know, what we were looking at is you know, cases where there had been problems abroad, and and just we want people to think about how this is all happening. Sometimes it's happening quickly. Sometimes you know, as rules or circumstances change in one country, you know, the entire market might shift to another country. And so I think probably we're all familiar with people who might
travel elsewhere more fertility services. You know, in part maybe it's cheaper, you know, in part because maybe they do have more access to eggs or to surrogates.
And so, you know, our our aim.
Is to kind of reveal this global network that exists and to how people think about you know, where you know, where this most precious resource comes from and.
Goes to an incredible read. You and the Gang Bloomberg BusinessWeek Senior investigative Reporter Susan Burfield. Check it out Bloomberg BusinessWeek dot com and on the Bloomberg terminal.
You're listening to the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business Ad. You can also listen live on Amazon Alexa from our flagship New York station just say Alexa playing Bloomberg eleven thirty.
So we've been talking a lot about big tech this week. We did see quite a rally as a result of the big megacap tech names tech. Also, we've been talking a lot about AI. Cisco is also an important company that we keep checking in with. It's the biggest maker of computer networking equipment of Bellweather for corporate tech spending. Last month, when it reported earnings, the company CFO saying that the company is seeing a strong rebound and spending
by corporations across all sectors and geographies. It's also benefiting from spending on the machinery needed to support AI computing. And then earlier this week we cut up with one of the senior members of the Cisco executive team, Francus Suitis. Today we have another member of that team joining us from San Jose, California, where the company is based, is Lilis san Toni, executive EVP and Chief Customer Experience Officer at Cisco Systems. Liz, good to have you back with us. How are you.
I'm doing great. Carol, good to be back as well. How are you.
I'm doing well. Trying to keep up with the news flow. There's a lot of AI stuff this week, which we're going to talk about with you in a moment. You do have a job change. You recently served as executive EP Chief Strategy Officer. You also GM of Applications at Cisco. You've been at the company a long time. You've got a new job. Tell us about it and what kind of vantage point this job now gives you and kind of builds on your other experiences.
Yeah, I almost twenty five years at Cisco and always in product of So this is absolutely new in terms of going into customer experience where it's not just developing a product, but it's also around how do we take the customer through their entire journey from how they use our product or how we support them. Customer experience is
about a third of Cisco's revenue. Probably not as well known, but we are involved in every stage of the customer journey, right right from when they purchase it to adopt it, to the renewal life cycle to supporting it as well.
So I am, I would say, is bringing in the product of opmini expertise, the relationship from product, bringing that into this phase of customer experience and going back as a full loop in terms of it gives me an opportunity to bring that experience but also be an advocate for the customer as they use our product and through you know, kind of the full life cycle, something usually I didn't get to see as much when I was in productive oppment.
I have to say, I remember when I first met you. What I loved about you is that you were in product development too, that you understood the product right, what goes into it, what's needed, you understand the core business, and then being able to now talk with you know, customers about what they need. What I want to ask you is how often when you have a conversation with customers does something AI related come up?
Pretty much all the time, because I was just I just got back from New York late last night and spend a week with customers, mostly in the financial sector, and it really was, you know, every conversation is around AI because what they want is they want us to know them better than they know themselves, right, So what does that mean? It's almost like, hey, Cisco, you've got all of my data. We trust you with our data.
You've got this massive amount of data and you know I'm paraphrasing them, Carol, But they're looking for us to deliver like meaningful, curated and personal kind of purposeful experience that accelerate the value of the technology that they purchased from us. Right, So they're looking at us and going, yes, you've got chatbots, you've got AI assistance, but now with
jen Ai, those can get a lot more sophisticated. And they how do we enable them to get immediate and maximize the value from the technology, but also how we use this data that they have to keep their environments highly resilient and secure as well. So they're looking for, Hey, take the data, analyze in real time, contextualize it, give me a personalized, tailored experience just for me. Now, think about doing that across hundreds of thousands of customers, right, So,
a personalized experience, and that's what I hear from. You know, go beyond transactional, be more proactive, get ahead of my issues. You know, make the promise of predictive insights and recommendations work. Those are all the things you know, when we talk about the AI party. There's some real ROI driven both for customers and us well in terms of real use cases in AI.
Let me ask you what the financial folks that you are talking to certainly are bread and butter here at Bloomberg, and we think about the financial community so much. But having said that, are they starting to see return on investment in AI related purchases? Are they seeing it already? It depends.
It depends on the on the technology, on the use cases. And I would say it's a it's a mix, Carol, because you know, we did this. We did an AI readiness index last year. We just release or we will
release the new one a year later. And what we're seeing is that in the six areas of strategy infrastructure, whether it's data, governance, talent, and culture, only thirteen percent of companies are really were really prepared for AI in twenty twenty four, and that was a decrease from you can say, you know, it's a little bit of a decrease from twenty twenty three. So there is a gap between the needs and the expectations. And it's not just about the use cases. The networks are not equipped to
meet the AI workloads, so you've got to upgrade. Only twenty one percent of organizations say they have the necessary GPUs to meet the current and future AI demand, So it feels like there's intent there, but it's taking a lot longer to be able to implement it.
Hey Liz, good to see you again.
Tim.
Here I say, Tim, I'm curious about where you think we are in this tech cycle. Given your more than two decades of experience at Cisco. You weren't necessarily there, you know, in the in the bulk of the nineties when we saw the run up, but you were there during part of when the bubble popped.
And I'm wondering if you can see any.
Parallels to right now with AI or if you think this is something completely different.
I feel like this is quite different in terms of the pace at which the technology is being developed and being put out there. I haven't seen anything move at this level of speed. You know. I'm constantly experimenting with different kind of tools and capabilities, and I still feel I'm far behind and I'm in the in the depth of it it. But what I've seen is like with the vast majority of our customers, there is a gap between the technology that's available and going from experimenting with
something to real use cases. And I think that for the vast majority of our customers, they're still in that early part of the real use cases and does go on.
For a while.
List do you think there's this kind of experimental phase goes on for a while.
I would say twenty twenty five we should see some a little bit more of a you know, where there's a curated set of use cases, whether that's revenue generation, whether that's automation or efficient and see I would expect that to pick up Carol in twenty twenty five. Will it reach like a big hockey stick? I don't think so. I think it's now where we need to show kind
of how do we how we actually measured this? And not everything is quantifiable, but you need to have some quantifiable use cases along with the others.
And it's also the pressure from.
C suite and our boards as well, right they expect a lot of this to happen immediately, and some of this is long term, you know, return on investment?
How long?
Like are we talking years here? We talk a lot about CAPEX, especially with the hyperscalers, but when you think about other infrastructure investments, like you know, making an investment with a company like Cisco, how long does it take for something like that to pay off for your clients?
I would say in the areas of what we're talking about around customer support, for example, and how we're able to help keep their environments much more resilient. I see that in more for twelve to twenty four months, if you're looking at revenue generation and you know kind of how do you get more competitive for their end customers. I think that's a little bit longer. That's more in like two plus years out.
Hey, can I.
Ask you automation and efficiency? Yeah, I would say twelve to twenty four months for sure.
You know, Tim and I were recently at the Schwab Impact Massive financial conference out in San Francisco, and it was all with registered investment advisors and all of the companies that service them, and I was involved in a panel that was all on AI and one of the things that came up was autonomous agents, which is something I haven't heard about, and I feel like this is going to be something that's going to be a big
part of our conversation in twenty twenty five. We've got about a minute or so a minute and a half left here. What do we need to know about what that is in terms of AI and how that kind of fits it?
So think about use cases like summarizations very easy, right, Those are AI assisted. Think about like checkbots for example, those are augmented AI. Think about in the future where some of not just some of the tasks, but some of the jobs that are being done can be where you can where an agent can think, reason and make independent decisions, not doesn't need to necessarily say that you've trained it to make that it's almost human like and
could take actions. So I think that's an example would be is you know, we've talked about self heeling networks for a long time. You can identify potential issues and resolve them autonomously without any human intervention. We're experimenting with that right now.
How's it going?
I would say, is accuracy ethical AI? All of those become a much bigger deal when you're talking about autonomous agent without any human intervention. So I think that would take a little bit longer because we want to make sure that ethical AI plays a big part of it so that we can continue to keep what customers you know, to do. We want to hold their trust in us.
Yeah, listen, I just got chills up my spine. But I think about we had a conversation with our Linda Wanner earlier about the importance of an abundance of the right data to keep AI development moving forward, and especially when we talk about agents and AI. I think that's going to be super important. I know we'll be coming back to you. Congratulations on the new job, and look forward to next time. Listen, Tony executivice President, chief Customer
Experience Officer at Cisco Systems. Tim, we're driving towards the clothes.
I want a little chatbot that can kind of automatically do our script that we do every day.
I want that one. I'm hoping that I don't want one that can be oh, breaking news. Let me break it for you.
Exactly read us. We got to break the news.
Stick around everybody. You're watching Bloomberg Business Week. This is Bloomberg.
Mack journal about you.
Let me drive none please, I.
Don't want to drive.
It's a good question, a good time.
This is the drive to the Globe. Well on Bloomberg Radio.
All right, everybody, we are just under all about eighteen eighteen and a half minutes left in today's trading, So she's getting ready to wrap up the trade and the week. Yeah, we are, as Denise just mentioned, well, off our highs of the session. Still the Nasdaq one hundred the standout, thank you very much, Broadcom really giving the juice to certainly that name.
Marvel too.
Yeah, well everybody, right, the peers.
Well they're peers, yes, But as I will say in my decliners today, not everybody in this space is having a good day.
And some of the popped initially and then kind.
Of yeah, and media popped initially, but now it's down more than two percent. Marvel is up ten point six percent. This is a one hundred billion dollar company that has basically performed the same as a Broadcom this year.
Marvel interesting, right, Yeah, it's.
Really I feel like all of a sudden, there's like Chip related, AAR related company we haven't in the show, but that we haven't talked about a lot, and then all of a sudden, the Shepley front and center. Hey, another thing that's been front and center is private markets.
Yeah, kind of understanding what's happening with the private markets as we get into a new year, a new regime. Understanding interest rates next year, because that certainly has a big effect. Let's get to Eric Hirsh, co CEO at the investment management firm Hamilton Lane. It specializes in private markets. Eric joins us from Pennsylvania. Eric, good to have you with us this afternoon.
How are you great?
Tim Carrol, Nice to be with you.
Nice to see you and hear you again.
Hey, Eric, how are you thinking about what was the year before we get to twenty twenty five? What was the year that was twenty twenty four when it came to the alternative investments the private markets, Given that we didn't get as many interest rate cuts as many investors a year.
Ago thought we would, I think it was a mixed year. So I think if you look across the asset class, the private credit sector had a very strong year, a lot of capital raise, a lot of capital deployed.
Very very strong performance.
The equity side of the business has sort of lagged sort of the public markets. When the public markets are kind of on fire, as they've really been for the most of this year, private equity, again, longer asset class, longer duration, kind of struggles to keep pace. And you certainly saw that. So performance on a year to year basis relative to the public markets, I think was a
little bit disappointing. Infrastructure posted some good results, and so again if you look across the totality a little bit of a mixed situation.
Hey, you know, I think about this column especially when it comes to private equity, which has been under some pressure over the last couple of years because it hasn't been able to exit right. The exit strategy and the ability to return you know, money and returns to investors.
Our Allison Schreeger wrote a Bloomberg column over the summer, the private equity Bubble us about to deflate again, an opinion column, but she talked about, you know, whether valuations fall suddenly or gradually the industries do for a rect and the consequences for the economy or dire I mean, when you can't really price something in a market, that's a problem.
So let's break it down. I think the exit piece has been a little bit misunderstood. So why haven't we seen a lot of assets trading? The reality is is that because most of the assets are still relatively young.
If you think back when we saw a huge surge in deal volume, it was right in the middle of COVID and pricing wasn't cheap then, So you had a lot of assets that were acquired at fairly full valuations and if you think about our industry over a long time period, it's averaging about five year duration from time to buy to time to sell. So we really are
now just kind of coming into that window. And if you think about how private equity is actually generating returns right now, it's not that they're buying super cheap and it's definitely not that they're super leveraging these assets. They have to fundamentally grow earnings and that takes some time. So that, to me is really the biggest issue of why haven't we seen a lot of liquidity. It's because the assets just simply haven't fully ripened yet. I think
we will start to see more of that next year. Now, the second part I would say is you want more stability. This year has not been a particularly stable year. So let's leave aside where the public equity markets have performed strong. We've had tremendous amount of geopolitical uncertainty. We've had a
whole uncertainty in this country around the election. What was going to happen with that, and so buyers and sellers we're kind of having a bit of a standoff on is today today the pulled trigger and what you saw
was no it's not. I think now that we at least know the election outcome, now that you see some real signs that are encouraging on potentially ending some of the geopolitical instability, I think you're gonna see buyers and sellers get more aligned, and so I think you kind of combine all that together, coupling with the aging of the assets, and I think you're going to see a lot more exit activity next year.
All right. Interesting, you know we have heard about maybe an opticket M and a overall and getting out. Having said that, I mean we've had a you know, you look at the gains that we've seen in the major equity averages. I mean, it's been a really strong year. If that doesn't happen, and that's two strong years for the S and P five hundred and that doesn't continue in twenty twenty five, is that problematic for the exit.
I think one of the things we hear from investors is that everyone's getting a little bit more sophisticated, and so they're saying, well, the S and P five hundred, Yes, is an index, had an amazing run, but it's really driven by still a small number of businesses.
And I think when you look at kind of this.
Over reliance on index passive sort of cheap public equity strategies. I think a lot of investors are getting a little bit more sober on how concentrated their portfolios are on an underlying basis, and so I think the driving of the performance notwithstanding, I think there's some real hesitancy about the concentration.
That is.
One of the things we're seeing is a real drive into the private markets is that they're simply looking for diversity. It's not even so much that they believe that they're going to make way better returns. It's just simply they don't want all their eggs in one basket.
I will point out about three hundred and sixty two names in the S and P five hundred though or higher this year, and it's pretty broad. You know, we did see some broadening out of the market.
Yeah, we did. I wonder what things look like.
You already mentioned a new administration and some potential effects of that starting January twentieth. What about on the regulatory front and on the interest rate front? How does that look for your world in the privates.
So let's take those pieces.
I think on the interest rate side, I'm not expecting to see a ton of movement either way. I think you still are seeing some inflationary signs. Yes, it's cooling, but I don't think any of us would argue that the world has gotten cheap today, and so I'm not sure that we're going to see enormous pressure to kind of further cut rates or.
Cut them dramatically.
So I think that feels like we're in a bit of a status quo situation. On the regulatory side, I think where you could see some potential easing up, yes, around the M and a market. Yes, potentially around sort of a less onerous sort of merger doctrine that could certainly do a little bit around the edges. I think the space to watch is really what the administration does, if anything, as it relates to sort of opening up access to the asset class even more to the individual investor.
So I'm not even talking sort of.
A four to h one k access side, but even think about lightening up a little bit so that you could see a much more easy inclusion of private markets and things like target date funds.
Yeah, now, listen, you know people are constantly seeking for some outperformance. I think many would argue we a little bit more oversight too though, in transparency within the private markets, to make sure that you know everything is is clear, especially when you're talking about retirement.
Yeah, and I don't know if there's necessary you know, who is it. Warren Buffett always says, only invest in what you can understand. Yeah, and I think there are some concerns, Sir Peter want you to.
Say that, like a right fidelity too right? Yeah, interesting stuff that always appreciate his perspective. Eric Kirsh, co Chief executive Officer at Hamilton Lane.
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