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Alt Goes Mainstream: The Latest on Alternative Investments, WealthTech, & Private Markets
Bridgepoint's Xavier Robert - building a "middle market global champion"
00:41:12
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- [00:12]
A
Xavier, welcome to the Oculus Mainstream podcast.
- [00:15]
B
Thank you so much. Thanks for having me.
- [00:17]
A
Well, no, thanks for having me. It's great to be in your office. I think so much of doing this kind of conversation, especially in a firm's office, really matters today for a few reasons. One is, I think you walk into a firm's office, you really get to understand a little bit about the DNA, the culture, Y. I think it's a great place to start too, because one, Bridgepoint was built out of and born out of NatWest.
- [00:45]
B
Yeah, absolutely.
- [00:47]
A
You joined right around that time when Bridgepoint has became an independent business and did a management buyout from NatWest. So I'd love to hear your perspective of one, what it was like at Bridgepoint then, and two, how spinning out of a bank has informed the culture and the DNA that you see today.
- [01:10]
B
Yeah, yeah. So it's true, actually. So Bridgepoint was founded about 40 years ago as the private equity division branch of the NatWest Bank. So basically, a bank will lend money to its client, but sometimes a client will need some equity injection. And that's what we were doing with the balance sheet of the bank. And I think it probably brought two things to us. The first thing is NatWest decided to expand into Europe very early on. So we really benefited from that because basically they billed, they paid for the network that we have today across Europe. So very early on, at the beginning of the 90s, we opened the Paris office, the Madrid office, that was 35 years ago. Then we opened the Frankfurt office about 30 years ago, then the Stockholm office 25 years ago, etc. So we really benefited from basically the investment that went to has put into building very early on a European network. Then I think the second topic, second thing that we are a bit different is we were never a single founder firm because we were billed as managers, executive, as part of a bank. So there is a culture at bridgepoint that is really founded on working together as a team, very collegiate. In a bank, you're not at the top of the food chain. So you're humble, you're trying to do your best. And that's really something that we kept and which I like really, really much. Just to give you an example, when we spun out of NatWest in 2000, so 25 years ago, we gave shares to everybody. Even the receptionist had shares. And when we IPO'd the business five years ago, we did the same. We gave shares to everybody, which I think nobody else has done, if you look at all the other private equity firms. So it really, you know, created this, I think, you know, this great culture. Now what I really like about not being at Landwest anymore and why we want it out is, you know, getting rid of the sort of corporate, you know, the processes and all of that. We wanted a much more entrepreneurial story to be able to, you know, grow a firm.
- [03:33]
A
Well, the other interesting aspect, and this kind of brings us to today as it relates to the evolution of alternative asset managers as businesses, is now that's kind of come full circle. You mentioned being part of a bank. You didn't just lend money, you provided equity capital to companies in the middle market. Now today you do equity, but you also do credit infrastructure. You added secondaries with the recent acquisition of Newberry Partners. So it's interesting, you kind of have come full circle and you can be a platform provider to the middle market. As you think about, I want to touch on the culture piece because I think that that is reflective of how firms partner with companies and particularly in the middle market where maybe it's a founder led company has not necessarily had outside capital. So maybe an entrepreneur thinks about who they partner with differently. How has the culture of ownership at Bridgepoint reflected itself and how you think about partnering with companies and executives?
- [04:34]
B
Yeah, I think the values that we have often resonates very well with the partner because fundamentally, Bridgepoint is an entrepreneurial story. We've been building ourselves and an independent company for 25 years and even if we are listed today, we still control the company. So in a way we have external shareholders that we respect and we want to do the best for them, but we still own it. And that resonates with entrepreneurs. People often think that these big private equity or private market firms, they're sort of big institutions, but they're not. They're people. And it's a really very successful entrepreneurial story. But at the same time, this culture I was talking about, it's really anchored around we do what we say, we want to try to do the right thing. And it was really interesting. We do every year we have a big AGM with all these and we like to bring some of the CEOs on stage. And I can't remember who was interviewing that person, but he said, why have you chosen Bridgepoint? Why did you partner with them? And he said, well, because they were very consistent. They always told me something you and they delivered and they were on message. And I felt I could trust these guys. And it's doing what you say and doing the right thing.
- [06:07]
A
I think that's such A great segue to as a firm, how you think about investing. You've been very consistent about what you say you do, which is middle market. I'd love for you to unpack why you focused on the middle market. And what about the middle market is interesting or different to you as investors?
- [06:32]
B
Yeah, maybe two or three things. Sometimes, you know, we speak about middle market so people think these are sort of middle sized companies. It's not very big. We define the middle market as company in terms of enterprise value are below a billion, which is, you know, euros on the price point, which is sort of more or less accepted in our definition. That's 90% of the market. So what is great? First of all, it's a huge market. It's a much bigger market in terms of number of opportunities than the large cap. So the great thing about that is that you've got, you know, you can choose, you know, and so you can pass if something you don't like or it's too expensive, you have the luxury of choice if you get the right deal flow. So I think that's a big advantage. The second one is you're much more in control of your growth. If you buy a company that is not so big, you can internationalize, will be probably present, I don't know in France and Germany, but you can take it elsewhere in Europe, you can take it to the US or Asia. That's completely under your control. You're completely independent of the macro. You can accelerate the growth through M and A because the company is not too big, the M and A will have a much bigger impact. And then at Bridgepoint especially, we buy a lot of companies from founders, families. So they're usually great companies or good companies, but they're not perfectly run. So your capacity also to improve, you know, the governance and lots of aspect of the way the company is run is much higher. So you have a much higher control. And I would say the last point is also because the companies are smaller in terms of exit and as proven true, you know, the past couple of years, it's easier to sell because you don't need to IPO them.
- [08:30]
A
I think on that point that I want to hang on to that one because that's an interesting aspect of the current state of alternative asset management. So one is you have some of the largest funds in the world raising really large funds. You have the explosion of evergreen funds from many of the largest firms in the world that creates an environment where they need deal flow. And to your point, there's less companies that are not in the middle market than are in the middle market. Right. I think it's, you know, in the US it's 87% of companies with 100 million revenue or greater are in, are privately held. I think a similar stat 85 or 86%, 100 million euro companies in Europe. So there's a ton of companies to choose from. But then as they get bigger the bigger firms will need that deal flow. How has that dynamic impacted the way that a you invest and how you underwrite but then who and how you exit to? Has that market structure changed a bit? There's also been a challenge with, with exits in, in recent years. Yeah, but maybe more at the upper end of the market than the middle market.
- [09:38]
B
I mean the wealth, the wealth channel is still something that is relatively recent. So I think it's really too early to call that point. We have never, for example at Bushman we've never sold a company to open ended fund yet. So I think we'll need to see how it plays out. But potentially it could accelerate or improve the liquidity for us. But too early to tell.
- [10:12]
A
If you think about the different levers you can pull in the middle market, where do you tend to drive the most value? Is it you're able to buy lower And I think your EBITDA multiple entry price is like 12 or 13 times. And there's, there is something where it's if you buy low but the lower you buy then you'll probably be able to make money there. And multiple expansion is one aspect of it, but obviously not the only piece of it. Where do you tend to drive the most value when it comes to creating value for the business and then being able to sell at a higher price?
- [10:43]
B
Ultimately, yeah. So I think we need to be clear. I mean maybe 20 years ago you could buy a company cheaply that doesn't exist anymore. It may happen once in a while, but you don't build an investment strategy based on buying cheap. You can't especially if you want to buy a company of quality. So what you can do is avoid buying at a too high price. So that is very important because if you buy a company and then you have when you sell it 2 or 3 tons of EBITDA derating, it's awful. I mean you can do a simple Excel spreadsheet. I mean the entire work you've done has been made to compensate, you know, your derating so that that's what you want to avoid at all cost is overpaying. And that's why you know Having the luxury of choice, being able to find your own deals, you know, have the relationship with the entrepreneurs, the families, that that's how you avoid that. But once you've done that, how do you create the value? It's mostly through growing the company. So it's internationalizing it. That's a big factor for us. It's doing M and A. It's another big factor. And then it's all the improvement you can do in the way the company is run. So you can improve the pricing strategy, salesforce effectiveness, all this good stuff that everybody does.
- [12:07]
A
Now, if you think about where Bridgepoint is unique and different in that regard, where do you think Bridgepoint has an edge as it relates to helping build great companies?
- [12:21]
B
I think the thing that differentiates us a lot in the middle market is we are the biggest platform in Europe for middle market. You know, full point, just factual. We've got 140 investment professional just dedicated to Europe middle market. And size is not, you know, is not what you want per se, but it's really important because it gives us two things, gives us the capacity to have probably the best deal flow in the industry. Every year we see almost 2,500 new investment opportunities. We only do 15 of them across the three private equity funds that we have. So a capacity to select is huge. Avoid overpaying, avoid a deal where you're not so sure. So we're never forced to do a deal because we have to do a deal. We have the capacity of choice. That's a big thing. And then the size gives us the capacity to have all the internal capabilities. So we have very strong sector teams. We are very strong, strong local presence, as we've mentioned before. And then we've also all the operational improvement capabilities, AI and all that. You find that if you go and look at Blackstone or other CVC or whatever, the large cap, they all have that, but we don't compete with them. We're in the middle market. And in the middle market, this is incredibly differentiated. So you go to see a founder, a family, and you tell them you want to go to the us we have an office in the us. You want to go to China, we have an office in China. You want to built AI, we have the specialist. That is a big differentiation for us. You know, compared to others, I think
- [14:06]
A
you hit on something else. That's an important nuance as it relates to the European market. It's a very local market. You need to be on the ground, understand the culture, whether it's on the investment side and deal sourcing or once you invest in helping these firms expand across Europe or outside of Europe. Talk to me about the European middle market and what's maybe less obvious, that people who are not on the ground every day here wouldn't understand that. You see being on the ground in these local markets as it relates to both deal sourcing and investing in the right companies.
- [14:46]
B
Yeah. So, you know, a lot of time people invest. If you take an LPN investor, they go and they invest in the US because it's much easier to understand. Europe is complicated, but if you can, it's complicated because you have 27 countries, you've got lots of different languages or cultures and you know, different legal system, etc. But if you can navigate it, if you have, you know, the experience, you're on the ground and you can navigate it. What's great about this market, it's much less perfect, you know, than the US market. Which means what? It means you can find your deals, you know, the relationship is much more important. It's much more perfect, much less intermediated. We at Bridgewind, we can do 2/3. 70% of our deals are bilaterals because we've been working developing relationship for years, you know, with these entrepreneurs, with these families. So you can find your deals like this. You avoid the auction from Goldman Sachs or whoever, J.P. morgan, so you avoid overpaying. And then because it's not as perfect, you usually pay less. So we've done the studies in terms of pricing between the US and Europe, you're usually one ton, one ton and a half of EBITDA lower in Europe. So the holy grail is you buy in Europe and then you sell to an American. That's, that's, that's the perfect combination.
- [16:15]
A
So two things there, I think that are interesting to unpack. One, you buy lower in Europe than you would in the us. That's reflected itself in returns. What are some things about European mid market private equity performance that people who are not as familiar with the European market might not know?
- [16:40]
B
So two things that may surprise people. The first one is everybody thinks the US private equity market is much bigger than the European one. It is true in value, but if you look at the middle market, so the deals below a billion of ev, actually the European market is bigger than the American one. And so actually the amount of opportunity is larger, almost the same, but slightly larger in Europe. And then if you try also to deconstruct the returns, I think the returns in the middle market in Europe are slightly higher than in the U.S. so there's a bit of a misconception, usually.
- [17:27]
A
Are European firms generally the ones doing the deals in the European mid market, or is it. And are you increasingly seeing US Firms maybe with a European office do those deals in the European middle market?
- [17:42]
B
So that is true. On the large cap side of things, you know, most of the time it's the very large private equity firms that are coming, you know, that they have come, they've been there for a long time, to be honest, and they're doing deals, but they play in the large cap space in the middle market. You don't see a lot of. You don't see a lot of American firms. And if you're a middle market firm in the U.S. i mean, entering the European market is really complicated. So, you know, I hear a lot about, you know, people deploying, are going to deploy more into Europe. You know, they're very welcome to come. I mean, I'm waiting for them.
- [18:21]
A
They can do that at the upper end of the market above where you
- [18:24]
B
are, because you need to build the network. You need to. I was telling you, it took us 30 years to build that.
- [18:30]
A
Well, I think it's hard to ignore also the current time we're in where we live in a different geopolitical landscape. Do you think that European founders and companies will tend to go with European firms more as their partner going forward than they may working with US Firms? Or do you think that won't necessarily matter because all capital is screen?
- [18:55]
B
I don't, I don't think so. I think unless you're in very specific segments like defense or these type of things. No, I think, you know, the US Is still, you know, as people will welcome a US Investor in Europe, no problem.
- [19:13]
A
Does it also change how you think about internationalizing businesses?
- [19:19]
B
It does. You know, we tend not to try to, you know, change things linked to politics because, you know, it can change very quickly. But it's true what we're seeing today, you know, it's still the US Or North America in general, is, will be the natural expansion for companies in Europe. But we do see the Middle east actually growing. We've opened, actually Bridgeman has opened an office in the Middle east last year. And we see more and more of the companies actually doing business in the Middle East. That would be the sort of new, new region. But, you know, North America is still there.
- [19:58]
A
Would love for you to unpack that a little bit further. Why? Why the Middle east in terms of a new region to expand to? What have you seen there that it's
- [20:07]
B
Just the growth, it's just the growth of, you know, the economy over there. It's not even, you know, obviously there's, there's a lot of capital and we welcome a lot of Middle Eastern, you know, investors into a own funds. But it's the growth of the economy. I mean you go there, you see, I mean you feel it when you're there. So you know, whether it's a technology company or services company. We own a company that is one of the largest distributors of cybersecurity software in Europe. And we made an acquisition in the Middle East. We're the largest in the Middle east and that's the part of the business that is growing the fastest.
- [20:45]
A
I want to segue to somewhat related topic because you mentioned some of the LPs to how you've evolved your LP base so you've built and expanded your platform. We talked about that a little bit. Across different investment strategies or asset classes. You're now expanding into other types of investors. You've worked with the wealth channel in various ways probably since your heritage, many family offices, et cetera. But you now have a concerted effort to work with the wealth channel. You have an evergreen fund that you'll be launching as well. Yep. How do you think about building out a business to focus on the wealth channel? And how do you think about it specific to Bridgepoint? Because you have a very specific thesis, specific focus. Yeah.
- [21:33]
B
So I mean as you said, we've been working with that channel for a long time. We've had, you know, family offices and high net worth individuals in a classic closed end fund for forever. But you know, the reason why private equity is so successful is because of the returns. And this is why institutions are still increasing. Actually their allocation is the return. So what has worked for institution, why should it not work for individuals? And this is what is driving this trend. I mean this industry now private market is about 15% of the global AUM. So it is becoming. Look at the name of your podcast. Als are going mainstream. So this is exactly what's happening. So everybody's trying to benefit from that trend. Now I think you need to do it responsibly because these are, it's very different investing in a private equity fund or infrastructure fund or private debt fund fraud from owning stocks or bonds because of the liquidity. So with these type of products comes a lot of responsibility. You want to do it very carefully. Which is why at Bridgepoint we launched a fund called Bridgepoint Generations which gives you exposure to both private equity and infrastructure. And about 50, 50 Europe, U.S. but we're only targeting high net worth, sophisticated investors because you need, you need to be really careful with the risk of misrepresentation.
- [23:11]
A
I think you bring up a really important point which is there's nuances to building a product designed for the wealth channel that are related to structure, that are related to investment strategy, deal flow and just the broader platform you have. If we deconstruct some of the things that you thought about as you decided to build the wealth business, I think there's a few important aspects to this as it relates to evergreen funds. One is having the right size and scale as a platform, maybe having the ability, the balance sheet to be able to seed the fund. Certain firms are doing that. The right operational wherewithal to be able to handle all of the needs and requirements of investors, the liquidity element of it and then the distribution and marketing components. And for that matter too, there needs to be, I think, executive support across the entire firm. Everybody needs to be bought in.
- [24:08]
B
Yeah, yeah, absolutely.
- [24:09]
A
And even on the investment side. Right. Like the investment team needs to maybe doesn't change the way they do deals, but some of their fund might go into the, some of their investment might go into the Evergreen fund. So how have you thought about those things as you've built the wealth business?
- [24:23]
B
Yeah, so I think, I mean, I think you're right. It has to come from, you know, the top of the firm needs to decide this, something we want to do. I don't think this is going away, you know, and you know, people say, you know, 20, 30% of the money that are going to be raised by private market funds will come from the wealth channel. So you have to be in it. You know, you need a minimum size to be able to manage that infrastructure. But you know, Bridgepoint, close to, you know, $100 billion of AUM. So we can do it. Now you've got different ways to do it. We've chosen effectively. I like the word wealth that you're using. Not retail, because we don't do retail. We don't want to go there. So it is a wealth product and we've built it with a mix of equity infrastructure which is I think really interesting because infrastructure gives you yield. So you have this component which is interesting and then good diversification between the two asset classes, good diversification between us and Europe. So that you've got a product that I think is quite interesting and it's a middle market product and you don't have that many out there at the moment.
- [25:41]
A
Let Me ask too, because for context, you bought ECP as the infrastructure platform that's now integrated in Fantastic firm has been around for a long time. I think it was 40 billion or so when you bought it. To put it in context for people, different firms do infrastructure differently. Is there a reason why you decided to combine private equity and infrastructure? And I'm asking that in a specific context, which is some firms do more equity like infrastructure, which feels like private equity just happens to be infrastructure assets and there is a yield component. But is that why you decided to combine those two strategies together into a single product?
- [26:22]
B
Yeah. So, I mean, the two ways to answer their question, the first one is why do we want to grow in the first place? And that is actually, in my view, it is a necessity because the only weakness in our industry is that we don't have any pricing power LPs are not increasing the fees they're paying us. But if you want to stay at the top of your industry, you need to continuously invest in your capabilities. We talked about operational improvement, AI and all that stuff. And then you need also to pay your staff competitively because if you want to retain and recruit the best, you need to. So you're a bit squeezed. And so the only way to be able to do that is to grow your iom. So it is actually a necessity now. You need to find the right, when you do that, you need to find the right combination. We are a people business, clearly. So it's a bit like when you buy a flat or an apartment. The three criterias are location, location, location. When you buy a private equity firm, it's culture, culture, culture, which goes with the people as well. And obviously there's performance, but if there's no performance, you don't even look at it. But then it's all about the culture. But you're right, I mean, ECP that, you know, we acquired about two years ago is specialized in power infrastructure. So power generation, power storage, power distribution infrastructures in the us, but it's a value add fund, so it is very close, to be honest, to what you do in private equity. So there were a lot of commonality also in terms of how we operate and actually a lot of synergies because guess what, with the private equity funds, we also invest in energy in Europe, so we tap into the knowledge quite a lot. And they're just about to finalize the fundraiser of their last fund. They've done the first deal in the uk. We just bought the largest LNG terminal in the uk, so. So there's synergies for them as well. They can use the network that we have here.
- [28:36]
A
The other aspect of Evergreens, which I think is fascinating is does it change the way that the investment team thinks about how they source, how they underwrite, even just making the investment team kind of cognizant of or educating them as the cio you're responsible and work with all the investment team and think about where, where deals go as it relates to vehicle structure, etc.
- [29:03]
B
So not for us, not for us. There's no dedicated team to the Evergreen. It's just this Evergreen fund is taking a small slice of each of the deals. So there's no investment team linked to that fund. It's just if you invest in that fund, you get access exposure to every single deal. Every single deal of bridgepoint private equity infrastructure will have a little bit in that form.
- [29:32]
A
The other aspect, if we go from pre investment to investment and execution to post investment, is the portfolio management component.
- [29:39]
B
Yeah.
- [29:42]
A
How do you think about managing the Evergreen fund portfolio as it relates to ensuring distributions, exits, nav growth in an appropriate way? New assets have to come in. How do you think about that? Does that change anything you might do or think about as it relates to the, the exit timeline of the asset? Because the closed end funds will also own those assets.
- [30:06]
B
Yeah. So I mean listen for the moment it's, it's really early days for us because we launched the products three, four months ago. Yeah, we've already raised quite a bit actually. It's interesting. So we've started to invest actually. So this one I started to invest in, in all the new deals we've done. But they take, you know, the fund will take 3,5% of the deal. So we are not driven, we're not driving the investment strategy based on the Evergreen fund. It's, you know, we're driving a closed end fund and the consequence is what happens.
- [30:41]
A
You mentioned closed end funds. I want to touch on something there because I think there's an interesting nuance around the growth and success of your closed end funds that I think it's worth noting as I was looking at some of the data, you've increased fund size by 20 to 30%. Roughly speaking, I think on the closed end funds performance has either stayed consistent or actually in some cases actually increased. How do you think about that aspect of fund size? Because I think fund size to some extent drives strategy. And as you think about continuing to grow your closed end fund franchise, how do you think about the growth in fund size and continuing to maintain the performance that you have.
- [31:28]
B
So it doesn't really change the strategy, Michael. The reality is when you grow your fund by 20, 30%, you can put two more deals in your fund and increase your average ticket size by 10%. So instead of being an average ticket of 300, it's 300, 330. You're playing exactly in the same playground. So doesn't really change that. But the investment strategy, you know, you're right to say, actually the returns have increased fund after fund. If you look at the past four funds, that is because, you know, we've made some improvement, we've made some tweaks. And the key for us, I mean, how do you generate great returns? There's two. Two things. It's your asset selection, and then it's once you own the assets, how you accelerate the value. So asset selection, it's all about sector expertise. So what we've done, if you look at what we do now versus 10 years ago, we've eliminated some sectors. So we've reduced the number of sectors within each sectors. We are much, much more selective in terms of where we invest. And that creates a much deeper knowledge within the team, but also within the investment committee.
- [32:41]
A
Well, I think that's a good segue to what you're wearing today. Shirt that you obviously, as cio, you now have remit across the platform, but you still sit on boards. You've done deals, you've invested in the likes of Kyriba, you've invested in Efront, which was acquired by BlackRock, which is in the private market space.
- [33:01]
B
Yep.
- [33:03]
A
Is there anything from bringing a deal to life, your lessons learned from Kyriba? It was a success, successful outcome. What was perhaps the hardest part of building that business and then ultimately achieving a successful outcome?
- [33:23]
B
You. You talking about Caribou or Cariba? Caribou? The most difficult, well, the first very difficult thing was to get the deal done. Because the way it happened is that the company, it's a French company, originally French founder who had developed its company through rounds of VCs. And so he had an incredibly complicated board with, I don't know, a dozen of different VCs. And we approached him, we developed the relationship and we said, we can simplify all of that for you. We're going to buy all these guys and you just going to have to deal with us. And we're great, we're nice, we can help you. But negotiating the deal so he was completely off market. There was no investment banks, no nothing. He said, yeah, let's do that. Let's do that together. But negotiating the deal with 12 VCs, some wanted to sell, others didn't want to sell. And then some wanted to sell at that price, other wanted to sell. I mean, it took us a year to put this deal together, just the negotiation with the shareholders. So that was the first hurdle. And then I don't think it was difficult actually, but because that's what we do. Generally when you work with a founder, he has a certain way of doing things. And you know, Jean Luc Robert, who is the name of the founder, is fantastic guy, he's retired now, but you know, we spend a lot of time working with him, talking to him, saying, how do you improve your governance, you know, how do you improve your team, you know, enhance your team. A number of transformation we needed. So, you know, that's a lot of work, but that's, that's quite fun to be honest. That's the kind of thing you like
- [35:07]
A
to do to bring it to life. Because I see your eyes light up. What was the thing that most excited you about Kyriba when deciding to invest?
- [35:15]
B
What did you see what was incredible in this company? So it's a horizontal software. So basically any company in the world can use it. It manages your treasury. So we use it at Bridgepoint now. So Bridgepoint has 2,000 bank accounts across the world. If you need to log into each of your single. I mean, it's a nightmare. And we used to do that on Excel, which is not very great. So now you have this system that is connected to all the banks and you can see in one platform all your bank accounts. You can transfer money, manage your currencies and all that, initiate your payments. It's a great tool. But when you have a horizontal software, usually you have a lot of solutions. Look at CRMs or ERPs etc. It's very rare to have a horizontal software with a dominant position. And that's what Kiriba had.
- [36:06]
A
How did they do that across different sectors? Because that, to your point, you see in the SaaS world, vertical SaaS is because you have to solve for the customer need. And that's very different across vertical.
- [36:18]
B
They developed, I mean they built a great product and nobody looked at treasury management. So they, you know, there are a few, but they really own this market. They're the dominant player, which is very rare in an horizontal software.
- [36:33]
A
So we zoomed in, let's zoom out. What in your mind right now is the most exciting aspect of investing in the middle market today?
- [36:45]
B
For me, it's still hugely Growing space. It's a space that is growing at 10% plus, which is great. And then the best firms are going to grow faster because they're also going to consolidate. So, so we're in this phase where you can, you know, we've built a company for 30 years. We are where we are. But there's so much more, you know, we can do. As you said, we added infrastructure. We've just bought secondaries. Business that's super exciting. We don't have real estate. You know, maybe we'll do real estate, but you know, we do infrastructure. But we do infrastructure in the us we don't do infrastructure in Europe. We do private equity. Private providing it in Europe, we're not providing it in the us. There's so much things we can do. And you've got the potential to build, you know, something very special, which in, you know, 10 years, 15 years will be, you know, a big firm, a huge success. That's what is exciting.
- [37:45]
A
I have to ask the follow up question because I think it's so emblematic of the evolution of the industry. Asset management as a business is evolving. I think we've gone from talk about 40 years ago. Many of these firms today were funds.
- [38:02]
B
Yes.
- [38:03]
A
Certainly none of the firms we know today that are public were public then. What you're talking about is the business of asset management of, of the business, what you're building yourself. Obviously you're serving entrepreneurs and executives and LPs. But what do you think is the most challenging aspect of building an asset management business today?
- [38:28]
B
I think, I think you need to differentiate different part of this asset management or private markets. You have this sort of high alpha and sort of lower alpha. I think where you need to be really careful is for the sort of high alpha products. So private equity, the value add part of real estate or infrastructure return is key. If you don't generate the returns, why would people invest in an illiquid product? So you need to be very careful on how you do it. It's not just scale, it's first returns. So you need to absolutely preserve that. The products that have a sort of lower alpha private debt because you know you're, you're less in control or secondaries. That is part of the business where you probably need more scale.
- [39:27]
A
You're a cio. If you were the CIO of a firm and you were looking at Bridgepoint as a business, how, how would you think about where, where this business should grow and where it should, and where it should just continue to preserve what
- [39:44]
B
it's really good at, I think. I mean, in the world of private market, we're still very small actually, so we have the capacity to grow everywhere and that's what we intend to do in every single asset class.
- [39:58]
A
I think that's such a great illumination of just how early we are. I think even the largest firms, firms that are five times plus your size, are still only single digitized by Google percentage points of the total TAM in that market, whether it's private equity, secondaries, credit, real estate, infrastructure, et cetera. So I think it's just such a great encapsulation of how early we are in private markets continuing to mainstream. But also then you take that to the middle market and how you invest and where you invest is there's still so much surface area to cover that if you have an edge, you can win.
- [40:36]
B
Exactly. And even these firms you mentioned that are five times or more bigger than us, they're still growing double digit. And our strategy is to do that in the middle market and be the global champion of the middle market. That's the goal.
- [40:49]
A
I think that's such a great full circle moment because we started there talking about the origins of bridgepoint in the middle market, how you've grown, how the industry has grown along with Bridgepoint. And I think that's such a great encapsulation of how things have gone and yet how much space there still is to go. So thanks so much, Xavier.
- [41:08]
B
Thank you. Thank you, Michael, thank you very much.