Scott Wilson discusses capital allocation strategies (Part 4)

Net outflows a year of like 5%. Roughly 5%. It's, it's smoothed out over kind of rolling five year average. If you didn't have the required net outflows, would you do anything differently in terms of capital allocation? Oh, for sure. We would probably have 70, 80% targeted privates. Wow. Can you walk me through that thinking and just say I'm the board, Rationalize that for me, Scott. Yeah, well, your payout is a function of your liquid assets, right? Because you can't always convert your private portfolio and the payout is not guaranteed. Right. In theory, like, you know, some percentage of your private portfolio should become liquid every year, but you can never count on it when you actually need it. So if you have a 5% payout on and half your portfolio is liquid, that's 10% of your liquid portfolio that you're paying out every year. If you're paying out zero, well, you really don't have that constraint. And if you look at the relative performance, you know, over the last decade, we've probably compounded our privates by in the low to mid-20s and we've compounded, you know, our public equities in 10%. Did you always have this belief in privates being the value driver of a portfolio? No, I, I, but I do think like the markets are less efficient. What do you mean by that? I mean like you can get access to investments that are less picked over. Like there's always natural buyers and sellers. And I think it's much harder to create alpha in public markets than it is private markets. And I think this is, you know, well documented over the course of time. So if we take the 70 to 80% that could be in privates, how do we think about structuring privates? But today, obviously privates is a very large allocation in itself. You've got directs, you've got funds, you've got credit, you've got debt. How do you think about how private should be structured for you? The way we do it. So roughly half of our private portfolio is in maybe more than half right now is in kind of co investments and direct investments. So we manage it the same way we manage the public portfolio. So we find good partners. And to the extent we can, when they find something that's really interesting, we try and co invest or add capital directly to that single name. Do you have a separate direct team? No, no. Everybody on my team is a generalist. What would you advise another CI? You know, obviously I'm a manager. I have many LPs and they all say to me, you know, oh, we'd really like to do more direct, but we don't feel like we're equipped to do so we don't have the time to really do the work. What would you say to them? And how would you advise a CIO who doesn't really do directs today, but maybe should and could. Yeah, you kind of.