Montserrat Serra-Janer: Hi, I'm Montserrat Serra-Janer, global head of private market sales for PFS and SS.

Larry Wise: And I'm Larry Wise, global structuring head of our private fund financing business. Good to see you, Montse.

One of the things that I know you asked today and you thought it'd be good to talk about for our audience is what exactly is a private asset?

Montserrat Serra-Janer: Yes.

Larry Wise: And I think that's relevant, because people have been talking about private assets for a very long time.

Montserrat Serra-Janer: And they don't know what it is.

Larry Wise: Well, and people aren't consistent in what they mean. So let's try to be consistent for our audience for-

Montserrat Serra-Janer: Please tell the audience what private assets are.

Larry Wise: So private asset I think about as something that doesn't trade readily on an exchange, where the information is not easily accessible to the entire market. Now, that doesn't mean that it doesn't trade, that doesn't mean that you can't get information on it. It just means that those things are generally closely held. And most importantly, private assets are across the entire market. Probably the original private asset is real estate, because only one person get on a house.

But today, when people talk about private assets, I think they think private credit, private equity, venture capital, infrastructure, and all those things are private assets. And one of the things that's really been interesting the past few years is there's been an explosion in people actually trading private assets are banks originating private assets. And that's changed the definition, because private assets used to be things that never traded, are things that banks were not involved in, but obviously we're both here because banks are involved now. So have you seen the evolution of private markets in the last few years?

Montserrat Serra-Janer: If you think about private markets originally were just companies, the pharmacies of the world, the cinemas, from an infrastructure perspective, you will have the breaches and like the oil-

We're surrounded by private equity and private markets, and private assets. What I think people get it wrong is the definition around all these things that you just mentioned. So people talk about private markets, but they don't really know what the private markets on its own mean. Private markets can mean private equity, can mean to your point, credit strategies, infrastructure, VCs, venture capital, be leveraged buy out. So it means a lot of things. I remember in the past, to your point when originally you were talking about private assets, people would only refer to the strategy private equity. But we have been evolving. We have now become this amazing hybrid, more complex private markets environment that everything is getting convoluted. Like you and I talk about private equity that now is evolving into getting into credit fund strategies and now real estate, to what you were saying.

Larry Wise: 15 years ago we started lending against private assets and it was a very narrow slice of the world. I think private credit was 150 billion plus or minus. And now depending on who you ask, it's roughly 10 times that big. But people are expanding that to mean IG private credit. And then you see numbers that are 10x that size thrown out. So what's been fun as a bank is we have clients that we've evolved from working with them on private credit, and now we have clients that those same people are buying public assets from us.

And they're not just borrowing against their private credit pools, but we'll work with them on infrastructure or private equity, our fund stakes. But the space is evolving in the bank is definitely evolving with it. And one of the cool things about working with you the past year or so, maybe the last year and a half, is we used to just spend our time talking about GPs, who are managing the assets, but we spent more of our time talking about LPs who are investing in the assets. And I think that's actually where a lot of the evolution is taking place.

Montserrat Serra-Janer: And I agree with you, because when I started on the private markets eight years ago, it was very much the GPs, so the general partners from close ended funds and that was really very much cookie cutter, very defined strategy and it was really the GPs were calling the shots. But now we have been seeing for the past few years that the LPs, the asset owners, the asset managers, all those insurance companies, all those traditional asset managers, they have become very smart looking for alpha and they're demanding more things. And those are the ones that are in a way to, in my opinion, they're shifting the trends that originally was just the private equities, the VCs of the world to evolve into a different animal, to seek for more alpha, because these guys, these LPs are demanding more and more returns.

Larry Wise: And that's hard though in an environment-

Montserrat Serra-Janer: It's incredibly hard.

Larry Wise:... where there's more people investing in private assets and at the same time the real economy has to figure out what to do with them. But one of the bright spots in that for us is we have seen a lot of the things that you're talking about, LPs come in and saying, "Where's my liquidity?"

And we have had found some ways to help with that together in pretty good size. We've also seen some bright spots. I was looking at, we get this weekly note on our private credit business, and a few years ago we thought about what's going to happen when rates go up and defaults going to go back to COVID bubbles or what are we going to see? And things capped out at maybe two and a half percent, not just defaults, but any real stress in the system of people who are having covenant modifications. And that's been, this private credit has been this nice bright spot for us, whereas our private equity clients have been coming up with increasingly creative means to get money back to LPs.

And then, infrastructure is super interesting too. So I think that the reason why I like working there is there's been this focus and you see what's happening in New York airport now. There's so many use cases for that and we work in finance, but at the same time it's nice to be able to see the proceeds of what your clients are doing. So we have clients that are working on building biogas plants, we have clients that are working on pipelines and those kinds of things. Just having the concreteness behind what we're doing is helpful too.

Montserrat Serra-Janer: Yeah, we're seeing things that we never saw before. From our side, we are seeing things like a pure private equity. Now getting into my favorite subject, which is a secondary. To your point, everybody's looking for liquidity or everybody's looking for some type of return back to their LPs. And to me, the secondaries market, which by the way, we should really define what secondaries market means

So I will do that, because I am obsessed with secondaries, but I think that secondaries would be of huge trend because you were just saying we have all these clients that are becoming very smart about what they want to do, working with our bank, looking for financing, looking for liquidity, ways to bring it back to their LPs. But on the other hand, the LPs that are becoming smart, they are also looking into ways to now tap into these saturated markets where portfolio companies are not being exited and trying to buy them at the huge discount rates.

So the LPs are the ones in our opinion that will be driving the secondaries market, not so much to what we have seen before. That was more the GPs. Again, back to who was calling the shots before. Now the asset owners, the asset managers who are really the LPs from a private market's purposes, they are the ones saying, "Okay, let's get into GP stakes, let's get into this portfolio companies."

If you think about in 2008, the assets from exited companies in the world was about $600 billion. And that comes from public information from the Bain Company 2024 report. Now fast-forward, that's 3.7 trillion that is saturated, that is not exited, that there's not going to be any IPOs anytime soon and that's about 30,000 companies. So somebody has to take advantage of this.

Larry Wise: I think that's why the secondary market has raised so much liquidity recently. You spent a lot of time talking about institutional piece and they're definitely the ones who've been calling the shots. My favorite story was a guy who turned up, he I guess works in a public pension, turns up someone's AGM who had fairly low capital set back to investors, and he had a T-shirt that said, "DPI is the new IRR."

And that was the thing in 2023. But I feel like we're back there again, the difference this time is lots of fund managers are funding increasing ways to set up evergreen funds and obviously the helpful part from a fund manager perspective if you have an evergreen fund is the money has to go back when the investors asked for it back, which could be locked up for three years, it could be locked up for 10, but it just gives the manager a lot more flexibility.

So I think we're seeing more of that. And interestingly, it's not just institutional LPs that are investing in evergreen funds. So we see I'd say more retail fund formation than we have previously and we also see that across private markets, and I think that's helpful. I mean, democratization of all, it shouldn't just be that institutions can own these assets. There should also be wrappers and safe ways for retail to invest in them. But again, my favorite is the DPI is the new IRR t-shirt.

Montserrat Serra-Janer: I really like that one. So on the subject of secondaries, you were also mentioned retail and I think that we might argue a little bit on that, because you are coming from the retail perspective that you think it's a very good option for high-end individuals, but not only that more like the pops and the moms to be able to invest, but I'm going to challenge you there. Don't you think that also that's almost putting a band-aid into the big problem, which is what I was saying before, there is a huge saturating issue here? There's like $3.7 trillion that are sitting and they're not being action, they're not being put into any IPOs. There's a huge need for secondaries. And the reason is because mathematically we cannot have almost $4 trillion sitting without doing anything. But I want to know your opinion from the retail space, because I have my two cents of that.

Larry Wise: It's a smaller market and that is true, and I don't think we necessarily need one source of liquidity to help managers out. I think all these companies are operating in the real economy and so as their prospects diverge, and as there's dispersed performance, there will be exits. Why I think this is interesting is what we, going into high networth channels, we typically would see as the more cash-filling type of private asset, very heavily diverse, pretty low leverage, structures that allow the managers to invest for a long period of time and give a little bit of money back.

So I mean, I definitely get challenges on that, but one of them is not it's too small. I think some people come at it from an it's too big and should investors have this perspective? And I don't think anything is going to really bring out the liquidity other than continued sustained performance in the market. The other piece of this is, I think people can just hold their breath a bit, because you're talking about pre-GFC, how much value there was in portfolio companies in the sector. Private equity was sub a trillion dollars until 2007 and now it's almost five.

So it's natural as there's evolution, there are going to be differences in approach and that just goes back to what we were talking about earlier, which is private asset managers not just doing equity, but also doing credit. And the fun things, there's some fun stuff that they're intervening in too. I mean, we've seen more interest in sports teams recently.

Montserrat Serra-Janer: Amazing. It's incredible, because the regulations have changed recently here in the US in Europe. There's already been trends there, but you're right here, it has evolved.

Larry Wise: So we've seen that taking place. So we're seeing capital go in different areas. I mean, ultimately I guess one of the biggest trends has been sponsors turning into insurance companies, which some have done extraordinarily successfully, but others have looked at the space and said, "Well, if we go back to our super expansive definition of a private asset," really anything that's closely held, where information is a little bit tighter, where it's not rarely traded on exchange. Insurance company balance sheets can be full of that kind of stuff. So the evolution of the private asset space to include insurers, and the intersection of sponsors and insurers I think has been a lot of fertile ground for us and our clients

Montserrat Serra-Janer: And even some of our credit fund clients, they are not getting into reinsurance and they're not crossing the ocean and getting into Europe on those type of insurance businesses, which you never saw this. If somebody had asked you five years ago, you would've said absolutely not happening. And I think it goes back to the theme of this conversation, which is every day there's something more evolving. Like you were talking about sports, I am always thinking what else is the sports going to bring? There's going to be other situations.

Larry Wise: Oh, there's so many derivatives of-

Montserrat Serra-Janer: Exactly.

Larry Wise: ... media and stadiums, but just bringing it all out, this conversation started talking about liquidity. There's things that are not kicking off liquidity sufficiently for investor expectations. What's happening is that investors' expectations are being reset. So many of the institutional funds and the retail high net worth funds are evergreen and managers actually think about insurance companies the same way. It's nearly permanent capital. Imagine you're running a life insurance company, how long are your liabilities? Hopefully pretty long. And if you think about all of these things as a quest for more permanent AUM, then I think you're really in the mindset of the GPs that we're talking to.

Montserrat Serra-Janer: Yeah, but also think about another way of saying this. We're kind of merging a lot of worlds at the same time, a lot of strategies and to an extent you are merging the traditional side from the asset owners, the endowments, the insurance, the pension funds with private equities. And that mentality from an illiquid perspective, and that requires a lot of knowledge and there are not that many banks out there that can have or provide those knowledges.

Larry Wise: I think that's why we've set up our teams the way that we have. It's not just that we're agnostic to the specific sector of alternatives that our clients say that they're in, because many of them are in more than one. It's that they're also global. So one of the things I like about working with your team is have some of the same interactions with the folks who sit in London as the folks who sit in New York. 

Montserrat Serra-Janer: The way we see it is that we are in sync on how we can provide I what's called the ecosystem of JP Morgan. It's not just one tunnel vision, one service. When we talk, as you just said, we can talk about the manager that is in a three-year vintage or a manager that is just launching, or is a manager that has a credit component in an evergreen fund. There's so many new components that not that many vendors out there or banks out there can get it, because if you think about it's almost, really a full circle of all the things that depending on where you are in the life cycle from a private fund perspective and what you need from that moment, you will need something in that ecosystem.

Larry Wise: Let's go through that life cycle, but I mean, your team is there really at the beginning of a life cycle. That's at least how I think of you guys.

Montserrat Serra-Janer: We're like globally vintage zero, vintage five, vintage ten, but we tend to see the birth of the fund and then we follow, and almost every year we get more babies and all these funds keep getting older. So we get involved in the beginning from a fund admin perspective and then there's the financing aspect that your teams help us with. But then as the fund's life cycle keeps evolving, there's new needs from a markets perspective, from a private markets perspective that at the end of that vintage can become pure liquid markets opportunities.

So think about a vintage seven that they have been investing in great portfolio companies that actually went into IPO and they're sitting with some of those opportunities. Then that private equity has become a markets player and we as a bank, we can do those block tradings for them. It's almost beautiful to see how the private markets is evolving and how we as a bank have evolved with our clients, and we know long markets do one thing for them. We do financing, fund administration, custody, block trading, secondaries intermediation, portfolio administration for the fund of funds and secondaries. It's such a big offering and I'm forgetting a lot of those FX.

Larry Wise: What I like about this is, we thought about corporate bankers as helping clients run their businesses. What we are really doing is helping investors run their businesses. And they ask everything from who is raising the most money now and what channels, how are they setting up their funds to convince clients? Is that appropriate? Can I lever that? What kind of reporting am I going to need? What kind of reg requirements do I have?

They have so many questions about how they need to run their business that that's actually part of the satisfying piece of this. We are there for such a long period of time. I mean, sometimes in your business people talk about the duration of client relationships and the averages are like nine years.

But honestly the bank, that's what the bank is good at. And I think that's how we try to stand up and we try to get people on our team who want to do that. And watching the evolution, it's not quite like watching children, but one of the guys on my team in London got a call the other day from a client who was headed into a meeting, five minutes, "I need to know, I'm launching a US retail fund that buys equity investments. How do I do this?"

And I said, "Dan, this is why you sit on a global team, because we have a tracker of what we've seen." So you can provide generic color on what else is out there in the market, what kind of leverage facilities are used, what kind of redemption rights are offered. I mean, that kind of connectivity is really helpful. That's probably one of the most rewarding things in the job.

Montserrat Serra-Janer: Yeah, I agree with you. To me, it's like almost we're ambassadors of the firm on the private markets, like every day it's the same situation for you. We get a call from a client saying, "I want to invest in India. The LPs are coming from Asia, but the fund is going to be held in Luxembourg. How do I do that?"

And we get all the thinking hats together and then we're like, "Yes, we can do this and this and this, and then let's bring these other components."

So I think that's something very unique from what we're offering and it's something that, to your point, it makes my day. I'm very happy, happy experience. Another thing that I think we should also mention is when clients, to your point, clients are asking us, "How do you do this? How do you do that?"

As part of the evolution from a private market's perspective, think about the illiquid merging with the liquid. So most of these asset managers, asset owners, as well as the pure GPs, they're evolving into having liquid and illiquid positions. And that is when the data consolidation comes into place, that if you didn't think about it when your vintage were five years or seven years, and now you come in 2025 and you don't know how to consolidate your data, you now have a big issue as a GP.

And credit business in particular has made tons of investments in their data. I get these reports at the end of every week on what are trailing default rates looking like? How does that compare to other publicly available pieces of information? What about the assets that clients are putting in? And just that level of information has enabled us to make loads better decisions and just scale up more. So it's going to be fun to see. And it's ironic, because we talked a lot about private markets at the beginning and how you define private markets. We're trying to get enough information to make them clear to us.

No, because I think the theme of this conversation is the evolution, because it's a totally different market space than what it was before. And linked to what I just mentioned and the data, if you think about the fusion offering that we're having now at JP Morgan, our clients come to us saying, "How do we do this? We cannot spend the dollar amounts."

So to your point, any private markets player that needs consolidation of data, it can be either public or private. But now, because everybody's evolving into this hybrid animal, the need to consolidate data. Think about you're a fund manager and you're investing percentages in liquid. So in the market space and you're investing in, it can be portfolio companies, in liquids, so they're not in the market and GP stakes. You have a mix of everything and you've had that for the past, I'm making it up, seven years. So you have each fund, each year. So you have seven funds where you have been investing in all these places. What do you do with all that data? How do you consolidate the data, that you can become smarter as a GP manager, even to the point that if you have that data consolidated in this case through Fusion, you can even think about investors' behavior. You can be ahead of the game.

Larry Wise: Which is the thing that matters the most there.

Montserrat Serra-Janer: If you think about the consolidation from the merge of the liquid component and the illiquid-

Larry Wise: There's so many things that investors want to know about illiquid investments that they don't yet.

Montserrat Serra-Janer: I know.

Larry Wise: And that begets a lot of questions.

Montserrat Serra-Janer: And it gets more complicated if you have old vintages or even from an insurance perspective, or the asset owners that we mentioned before, that they are also investing in liquid and illiquid. So the Fusion platform, think about it's more like a consolidation of data, but it's very interesting for players that have both type of assets.

Larry Wise: Think about how you can use that. You can compare returns, you can compare credit stats, you can compare concentrations, and there's all sorts of things you can do with that.

Montserrat Serra-Janer: And not only compare, you can start thinking of how your investors behave. So like investors' behavior, we think about AI from a consumer's behavior, but Fusion can really down the line will help our clients with investors' behavior, which in a way is going back to what I mentioned before on the life cycle and ecosystem of helping our clients to be more efficient and to be better.

Larry Wise: Which is interesting, because you're talking about the fusion of liquid and illiquid markets. A long time that JP Morgan established this flows in liquidity publication a while ago. And one of the theories that the guy who ran business had was you need to invest where the flows are going. You guys are helping clients figure that out in private markets. And that's one of the things I really like about the platform.

Montserrat Serra-Janer: And not only private markets, also like the traditional players that are getting to the private markets. Back to what we said before, that everybody wants a piece of the private market scene now. When we started the business eight years ago, people didn't understand not even the definition that private markets was this, but now there's this buzz about private markets or secondaries or retail, and everybody knows that there's some alpha involved in any of these names. So people want to hear more, they want to learn more. The investors, the LPs, the asset owners, asset managers, they all want to have a piece of the cake. So tell us more about the insurance.

Larry Wise: I like to think about things in terms of why they exist and we talked at the very beginning of the session about liquidity, and how much actions we've seen from LPs, talking to GPs, talking to banks, this $3.7 billion of unrealized portfolio company value. The industry response has been to create fund types that don't have as much need to return capital in some short period of time. And that's been evergreen funds that we've seen. That's been a theme for I'd say at least six or seven years in private credit, and now increasingly in secondaries.

And part of that's going into high net worth, who should see alts as a permanent part of their allocation. The other place that's happening is GPs who are purchasing, investing in, sourcing assets for insurance companies. All of this is a sector that used to have capital for finite period to invest in a relatively narrow window of opportunities, getting sources of capital from different types of investors. We talked about high net worth good insurers, or ultimately in the broadest population are some companies and then finding more and more things to invest it in. So this is an industry that used to have shorter term capital flows. I mean, remember hedge funds when we started-

Montserrat Serra-Janer: Daily, in and out.

Larry Wise: Daily, monthly. I mean, there's this idea of redemptions that people were afraid of, but it hadn't really happened before. And then it happened obviously in 2006. And that sector's been similarly sized. But I love that evolution of private markets as something that's going to be around for a long period of time. Not just shorter funds, but matching life insurance liabilities that are 30 years long are evergreen funds that will exist perpetually in our portfolios.

Montserrat Serra-Janer: And an insurance subject is both ways. So insurances are getting into the private market space and now the private markets players are buying insurances. So we never saw these before. Before it was just-

Larry Wise: We have all these conversations on categorizing clients and they wind up being very challenging, because is the client more this or are they more that? And I think the response from our team is it doesn't matter what they call themselves. We're going to try to provide the same information, the same types of lending, the same types of advice that we would, irrespective of what they called.

Montserrat Serra-Janer: You're so spot on, because we can no longer call a client a sponsor or a private equity, or this and that. They're just private markets players, because everything has become so blurry, so hybrid, that is fascinating how our bank is able to, depending on the situation or the client type, we're able to act on it. And I think that's something that makes us unique.