Dan Rasmussen on Private Markets, Intangible Moats, and Where Value Still Works

You had done some interesting work, I think we talked about it a few months ago, on the publicly traded managers of these funds and the listed funds themselves, which kind of give you a cleaner proxy, I guess, for kind of what's going on in the underlying assets.

What's the latest there?

Yeah, that was a fun one.

The essential argument is that, and one of the reasons everyone liked private equity was that they report on a quarterly mark basis.

And so they never had some sudden shock drawdown.

They never were down more than the market.

It always seemed manageable.

And And by the way, they reported a month after your reporting to your boss was due.

And so you could always say, hey, we don't have fourth quarter marks yet.

So there was always all these benefits to owning PE in that sense.

And one of the other striking things is that when you looked at the volatility of private equity on the reported numbers, it looked about as volatile as investment-grade bonds.

which is why everyone thought it was so safe.

And so we just did a simple fun analysis, which is that Richard Ennis and I did this together, which is that if you look at in London, there are a bunch of basically like LP interests in private equity funds that are publicly listed.

So HarborVest has one and Partners Group has one.

And so these are direct fund investments, right? It's not the manager.

It's not like Blackstone or KKR where the management company is listed.

These are fund interests that are listed.

And so what you can do is you say, well, how volatile are those, right? Those are mark-to-market PE funds.

How volatile are they? And it turns out their volatility is 24%, 25% annualized, which is just a little bit more than small cap.

And so you're basically like, what a shock.

Turns out private equity is a little bit more volatile than small caps, which makes sense because it's levered micro caps, so it should be a little bit more volatile.

And so I thought it was a really clever, simple argument.

And of course, those vehicles are doing horribly this year, along with private credit.

Right.

It's not only a way of looking at the volatility, but also the discount to NAV, right? You get a sense of what do people really think about the true quality of the underlying

You had done some interesting work, I think we talked about it a few months ago, on the publicly traded managers of these funds and the listed funds themselves, which kind of give you a cleaner proxy, I guess, for kind of what's going on in the underlying assets.

What's the latest there?

Yeah, that was a fun one.

The essential argument is that, and one of the reasons everyone liked private equity was that they report on a quarterly mark basis.

And so they never had some sudden shock drawdown.

They never were down more than the market.

It always seemed manageable.

And And by the way, they reported a month after your reporting to your boss was due.

And so you could always say, hey, we don't have fourth quarter marks yet.

So there was always all these benefits to owning PE in that sense.

And one of the other striking things is that when you looked at the volatility of private equity on the reported numbers, it looked about as volatile as investment-grade bonds.

which is why everyone thought it was so safe.

And so we just did a simple fun analysis, which is that Richard Ennis and I did this together, which is that if you look at in London, there are a bunch of basically like LP interests in private equity funds that are publicly listed.

So HarborVest has one and Partners Group has one.

And so these are direct fund investments, right? It's not the manager.

It's not like Blackstone or KKR where the management company is listed.

These are fund interests that are listed.

And so what you can do is you say, well, how volatile are those, right? Those are mark-to-market PE funds.

How volatile are they? And it turns out their volatility is 24%, 25% annualized, which is just a little bit more than small cap.

And so you're basically like, what a shock.

Turns out private equity is a little bit more volatile than small caps, which makes sense because it's levered micro caps, so it should be a little bit more volatile.

And so I thought it was a really clever, simple argument.

And of course, those vehicles are doing horribly this year, along with private credit.

Right.

It's not only a way of looking at the volatility, but also the discount to NAV, right? You get a sense of what do people really think about the true quality of the underlying