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Sheryl.vtt

English

{{00:00:06}}
Sheryl, thank you so much
for coming to join us here at

{{00:00:08}}
Super Return North America.

{{00:00:10}}
Thank you.

{{00:00:10}}
Great to have you in the studio.

{{00:00:12}}
It's great to be here, especially Miami.

{{00:00:14}}
Absolutely nice to get out of the
cold weather, but the sun is shining

{{00:00:18}}
and you've got lots of people to talk
to about the climate that we're in.

{{00:00:21}}
Economically as well.

{{00:00:24}}
That's a good opportunity for you.

{{00:00:25}}
Obviously somebody's worked in the
private equity world for a very long time.

{{00:00:29}}
How do you see the retail market
evolving and what's driving the

{{00:00:34}}
bulk of that growth at the moment?

{{00:00:37}}
There's.

{{00:00:38}}
A lot of factors, tailwinds that
are driving the move to opening

{{00:00:44}}
the market to the retail market.

{{00:00:46}}
It's a combination of
demand and regulation.

{{00:00:50}}
Demand is coming from the gps who
want additional sources of capital to

{{00:00:58}}
supplement the institutional investors
who are currently limiting their exposure.

{{00:01:05}}
To, especially to new names, but
to all names because they're not

{{00:01:10}}
getting distributions back and they
are overexposed to the asset class.

{{00:01:18}}
And then there's also demand
coming from the retail market who.

{{00:01:24}}
Wants access to an asset class that
can both offer potentially higher

{{00:01:29}}
returns and also diversification
from other asset classes.

{{00:01:34}}
And then there are regulatory tailwinds,
that are encouraging the regulators to

{{00:01:43}}
consider other structures and options.

{{00:01:46}}
One of the biggest.

{{00:01:48}}
Drivers of that is the movement over the
last 20 years of the US pension funds

{{00:01:54}}
from defined benefit plans to defined
contribution plans and the defined.

{{00:02:03}}
Benefit plans had large exposures
to private markets and alternatives.

{{00:02:09}}
And so the underlying beneficiary,
which was the retail market,

{{00:02:14}}
indirectly had exposure to the
asset class through defined benefit

{{00:02:19}}
plans, and with the elimination of
many of the defined benefit plans.

{{00:02:27}}
The regulators recognize that giving
another form of access, particularly for

{{00:02:33}}
retirement capital, might be a good idea.

{{00:02:37}}
So they're open to the idea of.

{{00:02:41}}
Being more flexible.

{{00:02:42}}
So we see the picture
evolving there over that time.

{{00:02:45}}
And what are you seeing now in
terms of the impact of what's

{{00:02:47}}
potentially coming out of Washington?

{{00:02:49}}
We seem to have different
headlines every week, don't we?

{{00:02:52}}
So how's the market coping with that
and how are investors coping with

{{00:02:55}}
that?

{{00:02:55}}
I've always been in private
long term asset classes and

{{00:02:59}}
we take a long term view.

{{00:03:02}}
So we don't let, political wins.

{{00:03:07}}
Remember there's always another election
cycle in two years and things always

{{00:03:13}}
change, so we don't allow political wins
to have material impact on long-term asset

{{00:03:18}}
allocation strategies in alternatives.

{{00:03:23}}
There's going to volatility and
there's certainly a lot of surprises

{{00:03:27}}
and far be it from me to be one
who can forecast, those things.

{{00:03:33}}
But when you take a long term view.

{{00:03:37}}
And you, invest based on themes and
you back strong proven investors and

{{00:03:45}}
management teams, and you're willing
to hold through the volatility.

{{00:03:51}}
I think right now is
just a time to lay low.

{{00:03:54}}
And what you described there is
expertise and, experience in the

{{00:03:59}}
market actually coming into play
in those sort of environments.

{{00:04:02}}
People who've been there and seen
those challenges before, potentially,

{{00:04:05}}
well actually private equity when it
does best, it's periods of dislocation,

{{00:04:12}}
and the ability to make investments.

{{00:04:16}}
And wait out the cycles and private
equity knows how to work with their

{{00:04:21}}
companies and their management teams
through market dislocations, and they

{{00:04:27}}
generally have additional equity capital
that they can inject into the portfolio.

{{00:04:34}}
During periods, like during COVID
private equity companies they, gave

{{00:04:40}}
them the private equity sponsors, gave
their portfolio company's support,

{{00:04:45}}
both in terms of guidance and leeway.

{{00:04:50}}
Additional capital and flexibility
in order to wait out the cycle,

{{00:04:55}}
which is why you didn't have many
companies default during that period.

{{00:05:00}}
Granted also, COVID didn't last that long.

{{00:05:03}}
It felt like an eternity when we were
living through it, but the companies

{{00:05:08}}
themselves, it wasn't like as long
as people thought it could be.

{{00:05:12}}
It wasn't like polio when that came about.

{{00:05:15}}
That was like a decade.

{{00:05:21}}
The cycle was relatively short in the
context of other calamities we've had.

{{00:05:27}}
But the point is that private
equity has always provided, support.

{{00:05:33}}
And patient capital and the
ability to write out cycles.

{{00:05:37}}
And while they may take a temporary
pause, particularly now when there's

{{00:05:42}}
so much uncertainty, so maybe the
banks might not be lending either.

{{00:05:47}}
There might be a little lull, but
they'll seize the opportunity.

{{00:05:51}}
With.

{{00:05:52}}
What could happen is the uncertainty
will lead to decreased valuations.

{{00:05:58}}
And private equity has a lot
of dry powder and can take

{{00:06:02}}
advantage of that opportunity.

{{00:06:04}}
I was gonna move on to that next
really, 'cause what you're describing

{{00:06:07}}
is that it's an industry that
can see opportunity despite the

{{00:06:10}}
dislocation as you described it.

{{00:06:12}}
So where do you see those opportunities
lying, and what new products

{{00:06:15}}
are you seeing that are emerging
that might be able to capitalize

{{00:06:18}}
on that sort of environment?

{{00:06:20}}
The new products that the retail
market that started before this current

{{00:06:26}}
cycle of uncertainty, let's call it.

{{00:06:30}}
But you know that the
private equity firms, there.

{{00:06:39}}
Some of them are sector specialized,
so they focus on certain sectors

{{00:06:43}}
and they know those sectors well
and they're seizing opportunities

{{00:06:46}}
and those others are diversified
and they, but even the diversified

{{00:06:50}}
ones have sector specialized teams.

{{00:06:55}}
And are, there I don't, I haven't heard
of any major pivot in their strategies.

{{00:07:03}}
I'll tell you one thing which started
even before the current, climate was the

{{00:07:11}}
Onshoring trend and that was, that started
before, now it's being accelerated.

{{00:07:17}}
So yes, they're gonna pivot and
change their supply chain and,

{{00:07:23}}
probably invest in us, more
to have more US businesses.

{{00:07:32}}
There'll be another election in two years.

{{00:07:35}}
So that's political factors
playing into the, to the picture.

{{00:07:39}}
Do you see any kind of regulatory
factors playing in as Well

{{00:07:43}}
There has been a long-term trend,
to come up with new structures

{{00:07:50}}
and create new ways of creating
products that the retail market can.

{{00:07:57}}
And there's new distribution of that.

{{00:08:00}}
And there's also education and
more knowledge and more awareness

{{00:08:06}}
on the part of the retail market.

{{00:08:07}}
So they're asking for the product.

{{00:08:11}}
So there's a lot of
things coming together.

{{00:08:15}}
Certainly the access to information
that is being accelerated through AI

{{00:08:21}}
also is leading to, increased demand.

{{00:08:27}}
40% of all venture investments last year.

{{00:08:30}}
We're an AI only.

{{00:08:32}}
It's dominating the investment
market and then private equity,

{{00:08:37}}
while it's not there aren't many AI
only companies, they're using AI in

{{00:08:43}}
every aspect of their value creation
method with the portfolio companies.

{{00:08:50}}
In terms of sourcing and information and
customer interaction, and it's going to

{{00:08:55}}
create a lot of efficiencies, and that's
part of the whole value creation process.

{{00:09:00}}
And do you see there being any
regulatory issues with the speed

{{00:09:03}}
at which all of that's happening

{{00:09:05}}
there?

{{00:09:06}}
Yes, of course.

{{00:09:06}}
But every time there's an issue,
you get regulation to address

{{00:09:11}}
it, and then you have new issues.

{{00:09:12}}
So it's a constant, process of change.

{{00:09:17}}
And

{{00:09:20}}
the current administration ran on
a platform of reduced regulation.

{{00:09:26}}
And I think that was, the business
world was optimistic about that,

{{00:09:31}}
and we'll see what happens.

{{00:09:33}}
Watch this space.

{{00:09:34}}
So talking about watching this space,
what do you see as the key opportunities

{{00:09:38}}
being and what do you expect to see as
trends in the next say, 12 to 24 months?

{{00:09:42}}
With all of what we've just discussed in,

{{00:09:43}}
well, in environments of.

{{00:09:47}}
A lot of uncertainty
like we're in right now.

{{00:09:50}}
What tends to happen is
there's a slight pause.

{{00:09:53}}
Then the private equity firms do deals,
but they'll do deals with at lower

{{00:09:58}}
valuations and they'll do deals with
more equity in the deal, unless they'll,

{{00:10:06}}
it'll be more conservatively capitalized.

{{00:10:09}}
The other thing is that they'll structure
deals with some downside protection.

{{00:10:15}}
Like they'll have maybe the seller retain
an equity stake that's subordinated

{{00:10:20}}
to them, or the management will have
an equity stake that's subordinated to

{{00:10:25}}
them, and maybe they'll have a, pick
coupon that gets paid out before, like

{{00:10:30}}
they'll, be build protections more into
the structure for downside protection.

{{00:10:36}}
Protection structures.

{{00:10:38}}
In the private equity deals.

{{00:10:40}}
Yeah.

{{00:10:40}}
And just finally, when we're in an
environment like this, where you're

{{00:10:43}}
looking at what those ideas and what
those sec sector ideas and structure

{{00:10:48}}
ideas are gonna be, is it valuable for
you to come together at an event like

{{00:10:52}}
this to meet with your colleagues,
discuss what's going on here,

{{00:10:56}}
what their thoughts and ideas are?

{{00:10:58}}
I particularly like this conference
because they have three tracks.

{{00:11:02}}
They have venture credit.

{{00:11:03}}
And they also had a family office track.

{{00:11:06}}
And I find myself in a position
where I wanna go to all of them.

{{00:11:11}}
They have so many interesting topics,
but, it really draws a wide crowd

{{00:11:16}}
because they have different tracks that,
I'm, interested in a lot of things,

{{00:11:22}}
so I'd like, it's hard for me to pick.

{{00:11:25}}
But, and, then also I just like
to see everyone all at once.

{{00:11:31}}
It's a great way to get together
with people particularly.

{{00:11:34}}
Not New Yorkers.

{{00:11:35}}
Like New Yorkers.

{{00:11:36}}
I run into them and I see them.

{{00:11:38}}
Or I go to annual meetings
at private equity firms and I

{{00:11:41}}
see institutional investors.

{{00:11:44}}
But here you see the whole
gamut and a lot of people that

{{00:11:49}}
I don't otherwise get to see.

{{00:11:51}}
I'm sure they really appreciate seeing
you too, Sher, and I appreciate you

{{00:11:53}}
sharing your thoughts in our studio today.

{{00:11:55}}
Thanks so much for sharing.

{{00:11:56}}
Thank you.

Sheryl, thank you so much
for coming to join us here at

Absolutely nice to get out of the
cold weather, but the sun is shining

and you've got lots of people to talk
to about the climate that we're in.

Obviously somebody's worked in the
private equity world for a very long time.

How do you see the retail market
evolving and what's driving the

A lot of factors, tailwinds that
are driving the move to opening

It's a combination of
demand and regulation.

Demand is coming from the gps who
want additional sources of capital to

supplement the institutional investors
who are currently limiting their exposure.

To, especially to new names, but
to all names because they're not

getting distributions back and they
are overexposed to the asset class.

And then there's also demand
coming from the retail market who.

Wants access to an asset class that
can both offer potentially higher

returns and also diversification
from other asset classes.

And then there are regulatory tailwinds,
that are encouraging the regulators to

Drivers of that is the movement over the
last 20 years of the US pension funds

from defined benefit plans to defined
contribution plans and the defined.

Benefit plans had large exposures
to private markets and alternatives.

And so the underlying beneficiary,
which was the retail market,

indirectly had exposure to the
asset class through defined benefit

plans, and with the elimination of
many of the defined benefit plans.

The regulators recognize that giving
another form of access, particularly for

retirement capital, might be a good idea.

So we see the picture
evolving there over that time.

And what are you seeing now in
terms of the impact of what's

We seem to have different
headlines every week, don't we?

So how's the market coping with that
and how are investors coping with

I've always been in private
long term asset classes and

Remember there's always another election
cycle in two years and things always

change, so we don't allow political wins
to have material impact on long-term asset

There's going to volatility and
there's certainly a lot of surprises

and far be it from me to be one
who can forecast, those things.

And you, invest based on themes and
you back strong proven investors and

management teams, and you're willing
to hold through the volatility.

I think right now is
just a time to lay low.

And what you described there is
expertise and, experience in the

market actually coming into play
in those sort of environments.

People who've been there and seen
those challenges before, potentially,

well actually private equity when it
does best, it's periods of dislocation,

And wait out the cycles and private
equity knows how to work with their

companies and their management teams
through market dislocations, and they

generally have additional equity capital
that they can inject into the portfolio.

During periods, like during COVID
private equity companies they, gave

them the private equity sponsors, gave
their portfolio company's support,

Additional capital and flexibility
in order to wait out the cycle,

which is why you didn't have many
companies default during that period.

Granted also, COVID didn't last that long.

It felt like an eternity when we were
living through it, but the companies

themselves, it wasn't like as long
as people thought it could be.

It wasn't like polio when that came about.

The cycle was relatively short in the
context of other calamities we've had.

But the point is that private
equity has always provided, support.

And patient capital and the
ability to write out cycles.

And while they may take a temporary
pause, particularly now when there's

so much uncertainty, so maybe the
banks might not be lending either.

There might be a little lull, but
they'll seize the opportunity.

What could happen is the uncertainty
will lead to decreased valuations.

And private equity has a lot
of dry powder and can take

I was gonna move on to that next
really, 'cause what you're describing

is that it's an industry that
can see opportunity despite the

So where do you see those opportunities
lying, and what new products

are you seeing that are emerging
that might be able to capitalize

The new products that the retail
market that started before this current

But you know that the
private equity firms, there.

Some of them are sector specialized,
so they focus on certain sectors

and they know those sectors well
and they're seizing opportunities

and those others are diversified
and they, but even the diversified

And are, there I don't, I haven't heard
of any major pivot in their strategies.

I'll tell you one thing which started
even before the current, climate was the

Onshoring trend and that was, that started
before, now it's being accelerated.

So yes, they're gonna pivot and
change their supply chain and,

probably invest in us, more
to have more US businesses.

At SuperReturn North America Sheryl Schwartz, Co-Founder & CIO of ALTI, shared her insights on how private equity is navigating economic uncertainty, evolving retail markets, and the impact of AI. Discover the trends, regulatory changes, and opportunities shaping the future of investment in the next 12-24 months.