A (5:06)

And last time we chatted, you said something that was quite shocking. You said that the number one reason that RIAs don't invest into alternatives, 40% of RIAs is operational complexity. Double click on what you meant by that.

B (5:19)

Sure. So it's not just one polar survey. You know, in every industry survey, poll after poll, survey after survey, individuals, family offices, RAAs, they overwhelmingly cite operational complexity as the number one reason they don't do more alternatives or it's the number one hindrance to them doing more. That's a consistent problem they have. What's interesting is earlier this year, I'll give you an example, Case and Mercer put out their annual survey, 48%, almost half cited Operational complexity is the number one hindrance they have to their private markets. Interestingly, a third, almost a third cited due diligence complexity as their biggest challenge. And so, you know, we'll talk about that later on as well. But bottom line is this is a real problem. It's very widespread. But what's interesting about it is it's more acute and more urgent today. And the reason why is because the audience of the future in the private markets is not the big institutions of yesterday, it's individuals. And that's, that's where the market's going, that's where the industry's going. And they need better tools. It has to be technology that solves these problems for them. Right. They don't have the big resources, the big staffs and things like that to manage them effectively like big institutions have. And so technology has to be it. But ultimately this is a widespread problem in the industry. And again, the unlock here, the opportunity is if you do solve this problem, I think you're unleashing a much broader wave of alternatives.

A (6:44)

Adoption said another way, somewhere between 40 to 50% based on the surveys of RAs, are not investing in private markets. Why does that matter? Two reasons. One is they're leaving alpha on the table for their investors. The Yale endowment model relies on 40% for zero in privates and many high net worth investors are roughly at about 2 to 5%. And two, perhaps even more importantly specifically for, for the audience, is if you're not providing these alternative investments for your clients, someone else will. So they're going to the cocktail party or the Zoom meeting or their kids school and they're learning about these alternatives and they're learning that they're losing alpha in the market. They're not going to be very happy. Obviously RIAs want to get into alternatives, but they have this problem that we identified as the complexity problem. How do you go about solving the complexity problem?

B (7:34)

Sure. As I mentioned, the complexity in the private markets has always been a problem. It's not new. The challenge is, and what's different about today versus historically is historically, institutions who made up the LP base in the private Markets. They had large staffs, they were very sophisticated, they had a lot of resources. They could also afford six figure software platforms to help them manage the complexity problem. Today's investors don't. So let's talk about what the complexity problem is. And I'll be super clear. Unlimited AI, our company, our mission is to solve the complexity problem for individual investors. That's our mission. We intend to do it. So what is the complexity problem? So there are really four buckets to talk about. First you have access complexity. How do you find these investments? How do you get into them? What are the minimums? You know, finding information publicly available about them is very challenging. You have the marketing rule in the regulatory sense, which makes it challenging to find information, makes it harder for them to find you. And so first you have access complexity, then you have legal and regulatory complexity. Legal, you have lengthy PPMs, you have lengthy LPAs. They're written by some of the most sophisticated securities law firms on Wall Street. And individual investors lack an understanding of that. And candidly, sheepishly, most LPs in the individual space admit that they don't even read them. On the regulatory side, you have the marketing rule. You have limitations on how many investors can be in a vehicle. And so those are huge, huge challenges. And then you have reporting complexity. So in the tax sense, you have K1s. I know everyone here loves K1s. If you vest the private markets, your tax reporting is late, it's delayed. Quarterly statements, they come maybe 45 days after the quarter, sometimes monthly. You get them two weeks after the quarter. It's a real challenge. It's a real challenge actually. Also, valuations aren't standardized, so you get a NAV statement. Well, what made that NAV up? What data points went into that? There's not enough standardization in the industry. And finally, and I think the one that most people think about when they think of complexity is liquidity complexity.

A (9:34)

I get your money back.

B (9:35)

Yeah, well, not only that, David, but when are you going to call capital? When do I have to fund this? When am I going to get out of this? What's the valuation? What am I going to exit at? All of these are massive challenges that people have in investing in the asset class. But I think what's so encouraging is even in spite of all this complexity and in spite of all these challenges, private markets are booming with RAs, with individuals, with family offices. In the last five years, family offices by some counts have quintupled their ALT allocations, RAAs just in the last year. And I would argue is A fairly bearish market for private markets. It's still seen double digit growth in allocations in the RIA space.

A (10:11)

So.

B (10:11)

So people are still very hungry for these investments in spite of that. But we think that solving the complexity problem can unlock an even broader adoption curve in the alt space, which will be transformative.

C (10:21)

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A (11:13)

I interviewed the CEO of iCapital as well, Lawrence Calcano, and he predicts 150 trillion from what's called retail, which is people over $5 million in the context of billions of dollars will be going into the asset class. You talk about operational complexity, tax reporting. Another thing that people don't talk about is the asymmetry of information. If you're not a big institutional investor, how do you know as an RIA that you're not being adversely selected? Talk to me about that. And how do you solve for that?

B (11:42)

So in the private markets, at the end of the day you have a counterparty transaction, right? You have GP and lp. And I went to law school. I'm not blind to the fact that GPs and LPs should be different and have different levels of information. That being said, we've never had a greater asymmetry of information between GP and LP in the history of the industry. So let's talk about that. Historically, in the private markets you had large institutional LPs, insurance companies, pensions, university endowments, things of that nature. Very sophisticated parties with lots of resources on the LP side. On the GP side, in the early days you had Blackstone, KKR, in the early 80s doing deal by deal strategies. And largely you had sophisticated, fairly equal counterparties. There was quite a bit of equilibrium. Fast forward to today, you have Blackstone managing $1.2 trillion KKR, about 700 billion. And your LPs are now about to invest through their 401ks. We think that that's an asymmetry that needs to be solved. And it's an urgent need, I think, because again, consumers in this instance need to have better tools to manage them because of the lack of human resources at the individual level in the LP space. There's got to be a technology solution. Technology has to solve these problems for the LPs to level the playing field. And we think that AI is really the inflection point that's going to do that.

A (13:06)

AI, AI is just. You feed in data, you get data back. How could it actually solve the unknown unknowns? How does it solve asymmetry?

B (13:12)

Sure. So one of the biggest challenges in the private markets is just that it's always been very private LPs and often times don't even know who the other LPs are in the fund they're in. They don't share a lot of information. There are no public sources for. There's no Morningstar in the private markets. And so what AI can do is a lot of that data that's so siloed, it's largely unstructured in PDFs. You can now use AI to extract that data, but not just extract it, it's. What do you do with it? You integrate that, right? You integrate it in your database. And if you do that, you make it queryable, you make it right at the tip of your fingertips with a click of a button. You can chat with it, you can interact with it, and also on the reporting front, you integrate that data and then you have much more deep, much more integrated performance data. You understand your exposures better, you understand your obligations better. And so we think AI is really, really, truly an inflection point. And look, everyone talks about AI today, how it's going to change the world, and I think it will. But I think there are so few industries that are more ripe for disruption than the private markets with AI. I think it's a tool with a real application case. There's such a use case. Right. It's not a novelty, it's not just a fun tool. It really is going to change the way we do things. And I think it's ultimately going to make the industry so much better as a result.

A (14:32)

There was recently a study. They put the top doctors that evaluate whether someone has cancer against AI. And I only scored 90%, but the doctors were at 82%.

B (14:41)

Yeah.

A (14:41)

So a lot of times you have, sure, AI is not infallible, but neither are humans. I think there's this kind of false comparison. So let's talk about something that even puts me to sleep and I'm like the biggest finance nerd. Due diligence management sounds like the most boring topic. Why are RIA so focused on that? And how does AI help with that?

B (15:01)

Sure, as I mentioned earlier, in the case of Mercer's study this year, almost a third of people said concerns about due diligence. That was the number one reason why they didn't do more alts. While I think there's been a lot of technology advancements in the space, particularly on the access side, that was really the first space to get disrupted. Due diligence still lags behind most individual investors. Ras, I call it their scavenger hunt for documents. Maybe the IR person affirm, if you're going directly has to follow up with you. You're like, oh, where's that document? When's the closing? It's super, super fragmented. Over the past year, as me and my team have been going around talking to ras, talking to family offices, talking to investors about what they were looking for with technology to help them be better private markets investors, we were actually really shocked about how much due diligence came up and how often that came up. And what does that mean? I think people want to be able to make better decisions. Their data is very siloed. They're not making decisions with the complete picture, not only of their portfolios, but with the market and what's out there. Now, you can integrate that data. You can extract data out of all the manual documents, your decks, your PPMs, et cetera, and you can integrate that. But also you can track your decision making. You can use comparative analytics between funds, between managers, you can use comparative analytics between your own decision making. Do I make better investments on Thursdays than Mondays? Things of that nature. So AI and technology can now integrate that. And we decided to really focus on that in addition to doing consolidated balance sheet reporting, because at the end of the day, people wanted that. And there's another reality here that people don't talk about. That's really one workflow, okay? From access to exit, it's really one workflow. And so our mission is companies to orchestrate that entire chain for people. Because once again, when you make an investment, you don't just stop there, then you go report on it, right? And then you need to manage it, and then eventually you want to exit.

A (16:58)

It and you have to handle all of it. Because if you don't, then you have the same complexity problem. You're having three different systems work with each other. So you have to create the maybe.

B (17:06)

They integrate, you know, and what's interesting is I think a lot of feedback the industry gives to tech today is we have to have orchestrate or excuse me, we have to have integration. You know, lots of APIs, lots of integration. I think that's true. But I think if you kind of double click on that and you dig down, what they're really saying is we want a unified platform. We want something that we can stay in one place and make a lot of decisions and really track investments throughout that life cycle. Right. Because again, you don't just want to look at the investments you made and how they're doing, you want to look at the ones you passed on.

A (17:39)

So let's level set a little bit. I mentioned this number that Lawrence Galcano CEO capital used 150 trillion. That's 150 billion. It's an absurd amount of capital. Why is so much capital entering the market? Tell me about some of the variables behind that. What's leading to that kind of capital move from public to privates?

B (18:02)

I'll talk specifically about our audience because that's largely who's here today. I think that a lot of the old paradigms from public versus private are a bit outdated today historically with institutional investors largely investing third party capital. Right. It's a fairly scientific abstract exercise. It's all about performance. Do the public markets outperform? Do the privates against public benchmarks, et cetera? And I think that that misses the point of today with individual investors being the future of the private markets, there's a much deeper yearning for the private markets. Really. I can boil that down and synthesize that into what is often termed the psychology of money. People investing their own capital care a lot more about the volatility of their money. They care a lot more about certainty with their money. And I'm not here to knock the public markets. The public markets are great. But that being said, I think there's been a lot of volatility and people don't want to watch their net worth whipsaw every day based on news they see. I think Warren Buffett's also done a really good job of convincing people that investing passively in the public markets is really advantageous. Therefore, I think that people are looking to the private markets for alpha. I think it's a differentiator. I think through manager selection, through good due diligence, I think people think you can generate alpha in the private markets. And now I'm not sure people think they can do that actively today in.

A (19:24)

The public market just to Put some meat on that. I had the professor, Steve Kaplan, who's the leading researcher, University of Chicago, and he created this Kaplan Shore Index. And they found that anywhere from 350 to 400 basis points of private equity outperformed S&P 500 over three decades. They also did on venture also outperformed 350 to 400 basis points. Doesn't take a math genius to realize how quickly that compounds portfolio. What do you think is keeping RIAs really from taking that? Is it fear? Is it lack of knowledge? Is it tools? Talk to me about the psychology of why RIAs are not pushing alternatives more.

B (20:00)

I didn't mention this on the last question, David, but you know, I think we wouldn't even be having this conversation if the returns weren't really attractive. Okay, so the psychology of money matters. But I also think the returns more often than not do outperform. And you can cherry pick data, right? Of course there are times when the public outperforms the private markets. But that being said, by and large, it's very competitive. Right? And so when you combine that with low volatility, some predictability, it becomes very compelling. Now, with RAs and why they're not doing more, I think there are a lot of reasons. I think a lot of RAs struggle to understand the private markets. As someone who got into this space a decade ago, there's a big learning curve. It is complex. There are a lot of platforms doing a really good job to educate people on that. We think education is a critical aspect of this, but I think education's critical. I think also just people understanding that these are, you can predict portfolios better. And I think that raas by and large also are going to recognize over time they're going to have better tools to do it. And when they do have better tools to do it, they're going to feel a lot more confident. It's that simple. But you're already seeing it. I mean, I think 90% of RIAs in a recent survey said they intend to do alternative investments for their clients over the next year. Year. I mean, it's really astounding because when I got into this space 10 years ago, you know, alts were kind of the wild West. And R.A. has viewed them as very, you know, off to the sidelines.

A (21:23)

I think in this case they're being pulled by their clients. They, you need to, in order to survive, you need to offer alternatives. Now you might decide whether you do Blackstone or whether you do a second or third vintage private equity firm. That's obviously much More complex. But I think they're coming to realize that privates are necessary to stay, stay in the game.

B (21:44)

Yeah, I'll tell you a really interesting phenomenon related to that. So we've obviously always seen a big trend certainly over the last five years of breakaway RIAs, people going independent, things like that. And therefore when they do that, they're open architecture. And I was talking to an RA here yesterday and it was very interesting. You know, a lot of the alts, sure, you have big platforms, you have big distribution channels through the, the broker dealers, through the banks, obviously big corporate RAs. What's interesting is he was telling me that most of the alts he ends up reporting on come from his clients. And so what a lot of people don't realize is people are doing alternatives. And I think advisors had to realize that. They're saying, my clients are doing these certainly in the high net worth space and ultra high net worth space. They're asking you to report on them. They're saying, I'm doing real estate deals with my friends.

A (22:27)

Different K1 exactly.

B (22:28)

Yeah, here's a K1. What do we do with it? And so people, it's actually coming from their clients. Right. And I'll also say that's why we think it's really critical to, to build a portal for the end user. One GP portal doesn't solve a problem for you because you're going to have eight of those and then you're going to have your clients asking you to report on the real estate things or they're doing deals with their buddies in the locker room. And ultimately you have to have a platform that is open such that you can report on all of that in one place. So that's one of the reasons why we think consolidated balance sheet reporting is so important at the LP level.

A (22:58)

The private markets, just like any market in the world, is being disrupted by AI. Everyone's talking about it. It's almost trite to say, but everybody has disagreements on the timeline. What needs to happen specifically for AI to disrupt the private markets?

B (23:11)

I think it's already coming. I'll say that it's got to take both sides of the equation to really unlock the potential of the private markets to get to 150 trillion if we ever get there. What does that mean? We need more standardization, we need more transparency. We live in an era where the private markets still operate largely like they did 10, 20, 30 years ago. But it's a very, very different environment. Blackstone's managing $20 billion in B REIT with thousands and Thousands of investors in that. Right. And the GP side can't have their cake and eat it too. They have to understand that if they want to democratize access to their platforms and their investments and they can't still operate in these siloed shadows, there's got to be more transparency. And ultimately investors just have to feel more empowered in their private markets portfolios. And so I think that it takes there on the LP side obviously I think that people need to build better technology for investors to access it. You and I are both very passionate about the LP side of the transaction. And again, I think that by building better tools and also I think community is important there. What's interesting, because of the siloed nature of the private markets, you don't have a lot of collaboration on the LP side. Right. @ the institutional level you have things like ilpa, but at the individual level, the family office level, like no one's really getting together and saying what should we demand of the other side? What should we expect?

A (24:37)

Highly fragmented.

B (24:38)

Exactly. It's super, super fragmented. And that's historically been by design. But ultimately for this next chapter of the private markets, that's got to change.

A (24:47)

A new standard. So you have an announcement for us today. What's the announcement?

B (24:52)

Well, I couldn't think of a better time to do this, but today unlimited AI is live. You can visit unlimited AI and our mission as a company is to empower limited partners in their private markets portfolios and we intend to do that. So please go take a look, sign up to do a demo and thanks very much.

A (25:10)

Yeah. Who is it? A no brainer to use unlimited AI, I'm guessing calipers here callsters aren't going to be your first two clients. But who really needs this and who's really asking for this product?

B (25:20)

That's right. So our first product, the one that launches today is for family offices and high net worth individuals. We are very passionate about solving the complexity problem for ras. We've gotten very strong interest and demand from ras. That tool will be ready in a couple months and we're very passionate about solving that problem for them. But that's coming soon. Today, individuals, family offices. We feel like it's a very advanced platform that orchestrates your private markets portfolios in a way that doesn't exist today outside of our platform. So we're really excited about it and candidly we're most excited about solving this problem for investors. Finally.

A (25:59)

Thank you, David.

B (26:00)

Thank you.

C (26:00)

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A (26:07)

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B (26:09)

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