Alt Goes Mainstream: Yann Magnan on the Opportunity for AI to Automate Private Markets
Episode Date: January 8, 2025
Host: Michael Sidgmore
Guest: Yann Magnan, Co-Founder & CEO of 73 Strings

Episode Overview

This episode features Yann Magnan, co-founder and CEO of 73 Strings, in conversation with host Michael Sidgmore. They explore the transformation of alternative investment valuations and portfolio monitoring, examining how artificial intelligence (AI) and automation are driving efficiency, transparency, and growth in private markets. Key themes include the balance between automation and human judgment, the rise of evergreen and retail investor-focused funds, the growing importance of data standardization, infrastructure readiness for high-frequency reporting, and industry trends toward technology-enabled transparency.

Key Discussion Points & Insights

Yann Magnan’s Background & Motivation

• Journey to 73 Strings: Yann shares his 25-year background in valuation at EY and Duff & Phelps, where he saw firsthand the inefficiencies of manual data work in private markets.
  • "Everything was manual. Manual as in Excel, Google search, and email... and I thought that's very inefficient." – Yann Magnan [04:01]
• Genesis of 73 Strings: Frustration with repetitive manual tasks, especially for highly educated consultants, led to founding a SaaS business leveraging AI and automation for valuation and portfolio monitoring.
  • "We are like-minded people thinking how to progress, how to make things evolve... knowing the industry and the pain points really well." – Yann Magnan [05:25]

Inefficiency & Automation in Valuation

• Manual Data Collection: Real-life example of assembling benchmarks taking days, highlighting inefficiency.
  • "It's going to take three days...I thought, I mean that's nonsense. How can that happen?" – Yann Magnan [06:41]
• Introduction of Data Vendors (CAP IQ, FactSet, Refinitiv) and still the gap for nonpublic data.
• Potential of AI: AI’s promise: automating identification, standardization, and extraction of key KPIs from varied and unstructured documents.
  • "AI should probably be helpful there actually. That’s one of the starting points." – Yann Magnan [08:10]

Standardization vs. Human Judgment

• Limits of Automation: While automation accelerates processes and standardizes inputs, core valuation analysis relies on human expertise.
  • "A significant component of any valuation process is actually the view management... your human judgment is going to be very important." – Yann Magnan [09:07]
• AI and Qualitative Judgment: AI could improve, but key outcomes still require human accountability.
  • "Will AI get there? Potentially. But the key thing will be for LPs, auditors, and regulators to be comfortable... Someone must be responsible and accountable for that." – Yann Magnan [10:59]

Data Infrastructure & Technology Adoption

• 73 Strings' Approach: Ingests a variety of document formats and automates KPI identification and standardization—even against highly varied reporting formats across companies.
  • "We have 98.6% accuracy when we do that—it's just massive." – Yann Magnan [14:06]
• Automation helps, but doesn’t eliminate human oversight: Automation reduces repetitive labor, allowing professionals to focus on higher-value work.

Trends: Wealth Channel, Evergreen Funds, and Private Credit

• Growth of Retail Investor Access: Rise of open-ended (evergreen) funds and private credit increases reporting frequency (quarterly → monthly → potentially daily).
  • "Retained investors wanting to invest into private... you have to change a lot of the processes you operate on." – Yann Magnan [17:59]
• Industry Transformation: The infrastructure is adapting quickly, with the largest asset managers leading change.
  • "On a pure technology standpoint, the implications are just massive... The industry is very resilient—it’s moving really fast." – Yann Magnan [19:56]

Working with Industry Leaders (e.g., Blackstone)

• Enterprise Partnerships: Blackstone’s partnership with 73 Strings drives faster, higher-frequency valuations and consolidates standardized data for broader strategic use.
  • "The main roadblock in terms of getting the information ready is actually the valuation process...unless you digitalize it." – Yann Magnan [21:46]
• Extensibility: 73 Strings’ platform is built to address multiple asset classes (private equity, private credit, infrastructure, secondaries) with adaptable workflows.

Data as a Competitive Edge

• Atomic Unit of Value: Data itself—extracted, labeled, and standardized—is the fundamental building block across both equity and debt.
  • "The atomic unit of value in this industry is that level of granular data." – Yann Magnan [26:28]
• Data Sharing: With standardized data, GPs can share insights across funds/business units—subject to internal confidentiality rules—improving efficiency and performance.

Benefits for Large vs. Small Firms

• Large Firms Win on Scale: Big players benefit more from automation and data aggregation, increasing their competitive advantage.
  • "The bigger you are... if you have all this data standardized and you can use that with proper calculation algos, you’re getting so much smarter than your competitor. Smarter, faster." – Yann Magnan [29:24]
• Smaller Firms: Still see value/cost benefits, especially for resource-stretched teams, but must ensure their data sets remain competitive.

Business-Building & Strategic Investment

• Enterprise Focus: 73 Strings started with large, multi-asset managers because they could fulfill complex, multi-use-case needs from day one.
  • "We chose to work with the larger firms because we could afford to... We had developed the platform... to cover multiple use cases." – Yann Magnan [31:58]
• Trust and Experience: Deep industry ties and decades of domain experience helped win early institutional clients.
• Strategic Investors: Blackstone and Fidelity International bring more than capital: strategic advice, network, domain expertise.
  • "They have experience and expertise in helping grow companies like us that is massive." – Yann Magnan [35:33]

Industry Collaboration & Standardization

• Need for Industry-Wide Technology Standards: Strategic involvement by major firms as customers and investors accelerates industry standardization.
  • "Anything that can be done to get these things done faster anyway is in the interest of the industry." – Yann Magnan [38:00]

Technology Readiness & Market Timing

• Could 73 Strings Have Been Built Earlier?: Not likely, due to high costs and immature technology 5-10 years ago. Recent advances in cloud architecture, security, and data integration made current business models viable.

Looking Forward: Benchmarks, Transparency, and Retail Investors

• Future Value of Data: Standardized, anonymized data could power private market benchmarks—analogous to public market indices (e.g., MSCI, BlackRock initiatives).
  • "Could you aggregate and anonymize that data, create benchmark indexes to inform back the market? That’s going to develop in the next few years." – Yann Magnan [40:41]
• Convergence with Public Markets: Private markets are likely to evolve toward more frequent, transparent, and standardized reporting akin to public markets.
  • "The way to grow the private industry is to attract more investors... as transparent as possible, as frequent as possible." – Yann Magnan [41:39]
• Liquidity, Volatility, and Retail Participation: Openness, frequency, and transparency are crucial to bring in retail investors—even if it brings challenges of volatility familiar to public markets.

Notable Quotes & Memorable Moments (with Timestamps)

• On Inefficiency in Valuation
  "Everything was manual. Manual as in Excel, Google search and email... that's very inefficient." – Yann Magnan [04:01]

• On AI’s Role and Limits
  "A significant component of any valuation process is actually the view management... your human judgment is going to be very important." – Yann Magnan [09:07]
  "Will AI get there? Potentially. But the key thing... will be for LPs, auditors, and regulators to be comfortable... Someone must be responsible and accountable for that." – Yann Magnan [10:59]

• On Data-Driven Infrastructure
  "We have 98.6% accuracy when we do that—it’s just massive." – Yann Magnan [14:06]

• On Competitive Advantage through Data
  "If you have all this data standardized and you can use that with proper calculation algos... you’re getting so much smarter than your competitor. Smarter, faster." – Yann Magnan [29:24]

• On Business Building with the Largest Firms
  "We chose to work with the larger firms because we could afford to... we had developed the platform... to cover multiple use cases." – Yann Magnan [31:58]
  "For our first clients, it's a lot the question of trust. Trust that we understand their pain points and deliver on what we promised." – Yann Magnan [34:13]

• On Strategic Investors
  "They have experience and expertise in helping grow companies... that is massive." – Yann Magnan [35:33]

• On the Future of Private Markets
  "The atomic unit of value in this industry is that level of granular data." – Yann Magnan [26:28]
  "If you want to grow private, the only way would be that it's closer and closer to public in the way it operates." – Yann Magnan [41:39]

Timestamps for Important Segments

• 04:01 | Yann describes inefficiency in manual valuation work
• 06:41 | Early realization—data collection as a bottleneck
• 09:07 | The role and limits of automation and human judgment
• 10:59 | Will AI ever deliver the qualitative side? On accountability in valuation
• 14:06 | The challenge and solution in standardizing metrics
• 17:59 | The impact of evergreen funds and retail capital on reporting frequency
• 19:56 | Infrastructure requirements for monthly/daily valuations
• 21:46 | Working with Blackstone—the effect on platform robustness
• 23:29 | Applicability of valuation automation across asset classes
• 26:28 | The "atomic unit of value" is granular data across equity/debt
• 29:24 | Why data aggregation will be the next gold mine
• 31:58 | Why 73 Strings targeted large firms first
• 35:33 | The value of strategic investors
• 38:00 | Industry participation as a path to standardization
• 40:41 | Using standardized data for market benchmarking
• 41:39 | The convergence of private and public market practices

Takeaways

• Automation in private markets saves time and resources, but human expertise and accountability remain crucial.
• Retailization, evergreen funds, and private credit trends are accelerating the demand for robust, high-frequency reporting infrastructure.
• Granular standardized data is becoming both the “atomic unit of value” and a strategic gold mine for large platforms, driving smarter, faster investment decisions.
• Industry-wide standardization and collaboration, often catalyzed by strategic investments from market leaders, are necessary for the next phase of growth.
• Going forward, private markets are expected to resemble public markets more closely—ushering in more transparency, standardized data, and frequent reporting—to attract a broader investor base.

This episode provides a masterclass in how technology, data, and industry structure are intersecting to create the future of private market valuations and reporting.