00:00 Speaker A
talk about a fasting chat with uh John Cortezi um on how interest rates are impacting private markets. like what’s your what’s your vibe on that? How do you see it impacting what you do?
00:08 Speaker B
Yeah. So, uh so look, the the client interaction is um is phenomenal. the kind of through their advisors and um and they they see uh Apollo as as a firm who has navigated market cycles, interest rate cycles over decades now.
00:30 Speaker B
And importantly, when we think about interest rates and the interest rate environment, we we do anticipate that interest rates will likely be higher for longer, which could create a headwind for the 60-40 portfolio and we certainly saw that in 2022.
00:46 Speaker B
And when we couple that with the concentration that exists now in in the stock market, you know, S&P 500, the ups and the downs really correlated as we know to kind of seven companies at at the end of the day. So the the need for private market exposure as a piece of public of the fixed income portfolio and the equity portfolio is really critical to make sure that our our clients and ultimately their portfolios benefit in many ways, which we can go into
01:17 Speaker B
uh that as the institutions have seen over decades now. So we we do expect an environment where interest rates will likely be higher for longer and that proves to be beneficial to inclusion of private markets in an overall 60/40 portfolio.
01:31 Speaker A
Does that concentration risk in the S&P 500? Does that worry you?
01:36 Speaker B
So, uh look, we’ve seen not only on the ups, but even on, you know, in the first quarter of of the year, how 95% of the decline in the S&P 500 was in fact based on those seven companies. So, the idea of replacing uh a percentage of an otherwise kind of public equity portfolio with more diversification, we believe provides that excess return per unit of risk.
02:05 Speaker B
When we look actually at all companies globally, 90% are in fact private. Yet, it’s still kind of a a very small percentage certainly of individuals that have that exposure in their portfolios. So in in our view, in order to create the diversification that the individuals and families deserve, you need kind of both levers, both the public and and the private in a portfolio.
02:37 Speaker B
And to your point, when you look, when you step back and look at the total size of public companies out there today, it’s actually half of what it used to be. So, I think, you know, times have changed and it’s it’s a moment for for our advisor community, the financial community to recognize and and question, you know, are are things in fact different today than they used to be.