Initial response questions

Some associates spend every day sorting through new deals—I don't; I spend every day analyzing funds (evergreen private markets funds, to be exact). The Ares Wealth Solutions business is responsible for $70B of capital across our eight flagship funds, but we are still only a small part of a growing market, so there are always opportunities to do more. That's where I come in: over the past two years, I've structured four funds (a tender offer fund, two UCI Part II funds for the European market, and an interval fund) and performed competitive research on nearly 100 others (including every fund in the Institutional Investment Strategy Fund's portfolio, from Carlyle to Golub to Hamilton Lane to Blue Owl). I know interval and tender offer funds like the back of my hand, and I can identify the distinctions in their terms, in their mandates, and in their performance like a well-trained sleuth; more than that, I know what terms are meant to obscure the truth and how to see what others will miss, since I have written that language myself (recent liquidity events come to mind).

But this is about more than just analyzing funds: my most recent opportunity was to build a fund. Ares Wealth Solutions' first fund was the Ares Private Markets Fund ("APMF"), a secondaries private equity vehicle that has since swelled to over $5B in assets. However, we didn't have an EU-compliant vehicle, so I had to figure out how to do so. Now, the easiest thing to have done would have been to simply create an EU feeder or parallel fund for APMF. The problem, however, was that the European market was already saturated: Coller had launched a vehicle, as had Apollo, and unlike in the US where we had a first-mover advantage, in Europe, raising capital for a single-asset-class strategy would have been a constant uphill battle. So, my thesis shifted: instead of simply copying what we'd already done, why not build something new?

In my experience, ultra-high-net-worth investors and their advisers like to pick from pure building blocks, and by that, I mean funds that invest in a single asset class. For most investors—especially the bulk of all retail investors—this pure approach does not work: just as they rely on expert asset managers to pick their individual investments, they need expert allocators to create their portfolios, too. So, how could I solve that problem for a European investor looking for private equity exposure? Well, I decided that it was worth proposing a blended fund, comprising both secondary and primary private equity investments. I built a model that showed not only that returns were likely to increase, but also that correlation to European public equities would drop through geographic diversification: both outcomes that we were already paying close attention to in a secondaries-only portfolio. Now, while I wish that we had properly analyzed the feasibility of a tactical allocation, in the end we decided on a simple percentage split between the two. A few months later, we filed the prospectus, and now I'm excited to see this fund come to life.

Through this whole process, it became clear that funds providing simple exposures to single asset classes are not the path forward: the wealth management of the future requires a broader perspective, the kind that can only come from a start-up with the sole goal of democratizing institutional investing for everyone, not just the uber-wealthy. I could not be more aligned with Ivy's mission and would love the chance to learn from you all, and to help take Ivy to the next level.

What's an asset class? To many, stocks and bonds may come to mind, real estate too—and now there are private credit, private equity, and even infrastructure, just to make it all more confusing.

The truth is that there are far fewer asset classes—five, I’d argue—based on the two atoms that make up every financial molecule: debt and equity. These may seem basic, but they're worth explaining.

Debt is a commitment to repay a loan—if you own a debt security, someone has borrowed money from you and owes it back, typically with additional interest. Equity, meanwhile, is a little less intuitive, but not by much. It's simply the value left over in a company after its debts have been fully repaid.

Each of these—debt and equity—comes in 'corporate' and 'real asset' flavors, depending on who issues them, and debt has an additional flavor: 'sovereign'. Corporate debt and equity are issued by companies; real assets are issued against the value of a physical good—a coffee bean, a bar of gold, or a house, just to name a few examples. Lastly, we have the fifth flavor: 'sovereign,' which means that a country, rather than a corporation or physical good, is backing the security. Ultimately, each of these five: corporate debt, corporate equity, real asset debt, real asset equity, and sovereign debt can be considered fundamentally different, meaning the ways in which we calculate their values are distinct.

Within each of these, you can have 'private' or 'public' securities. This distinction is simply a matter of how easy the security is to transact; public real assets are things like oil: they trade on an exchange, and their value is ultimately the aggregate of the opinion of everyone trading it. A private real asset, meanwhile, is something like an individual house: it's not listed on a national exchange, there are gatekeepers—real estate agents—who present offers, and the ultimate value is simply the shared opinion of just two people: the buyer and the seller, rather than an entire market all at once. Just as real assets can be public or private, corporate assets can be both, too.

What matters, throughout all of this, is selection: an excellent investor, with the best information, is able to choose the right assets and see value others miss. So, while asset classes are important to consider, information access matters most.