So, I want to start off—we'll get to practical things, I promise—but I did want to start off a little bit philosophically. I was watching a business news channel that shall not be named this morning, and they had the author of a book called Doom Loop on. It strikes me that the economy has been in a doom loop of geopolitical tension, shocks of all types, but the market has kept progressing in so many ways. Has the nature of investors, the market, and investing changed over your experience in this business?
Yeah, obviously things have changed. I would say the markets were up 20% here and 30% internationally. I think people looked through some of the geopolitical tensions and other issues like tariffs, and they saw the strength in the market being driven by seven stocks. So if you look at the value creation in the market, it was the Mag 7 that had a disproportionate amount of value creation. Then you have this bifurcation where the big companies are getting bigger; the bottom 200 stocks are less than 10% of the S&P 500 now. So those big tech giants and all the economic activity going on in the future have lifted the market even though a bunch of the market is being left behind.
Right. So, do you think investor behavior has caught up to that, or has it become so efficient that people are already trading far enough in the future?
I think what's happened is that if you look at the markets, 50% are now passive, so it's a loop: if Facebook, Amazon, Netflix, Google, Nvidia, or whoever is going up, the index rebalances, and more capital flows in, which is another structural component. But I'm actually more optimistic—I wouldn't say there's a doom loop. There are hot spots geopolitically and tariffs, but growth was underestimated: $600 billion in investment from seven or eight companies building data centers and AI. Plus, the big beautiful bill and deregulation. Today, growth is causing the Fed to pause; they didn't lower rates, and that drives the market. Financial conditions are tightening, so you sometimes see the opposite of what you expect. The market was trained by COVID and the financial crisis that Fed money improves fundamentals, so it looked through volatility. Now, things are choppier, with assets like Bitcoin trading off. There's $7 trillion in money markets waiting to come in.
Now I'll ask you the Kevin Walsh question: your reaction to his being nominated for Fed chair, if it changes how you look at opportunities or addresses concerns about overall policy.
Yeah, so first of all, I think he's a good pick. Solid private sector background, but also public sector having served on the Fed. He's sensible. His history is a little bit hawkish, though some comments have been different. I think the market's looking through that, and it removes an uncertainty from the market, which is helpful. Treasuries and money markets didn't react much, which is positive. The FOMC is 12 voting members, and you need seven to do anything. Even last week, they didn't lower rates, and there were two dissenters. The Fed is 10-2. Even if the chairman changes, he has to coalesce the institution; he's one vote. I'm glad for a steady hand—I know him, and he'll look at data and be smart about decision-making and running a process.
Great. Now a little bit about 26 North and the gaps in the market and the ideas that led you to start this firm. We were talking about semi-retirement backstage. What got you back in the game? Is the thesis you started this firm with still pretty much intact? What is it, and where are you seeing opportunities these days?
Yes, so first, personally, I did a startup at age 55—some people love to work and build amazing institutions, and I enjoy it. You got to do something you love. As a business matter, when I started at Apollo, there was the fixed income group, equity group, and alternatives down the hall. A few people were doing private deals, incredibly alpha-oriented, generating risk-adjusted returns. Now, alternatives is a multi-trillion-dollar business with huge firms, hundred to $300 billion market caps. There's been a bifurcation in the alt space; it's institutionalized. Big public companies are now the beta of alts. Anything below a $20 billion business isn't worth their time. So the size of private equity funds and credit vehicles is now 5, 10, 25, 30 billion, leaving a vast array of companies less focused on. On the other side, they're not getting funded. Between 2008 and COVID, interest rates went down, and there was demand for alts, so firms became asset managers. I decided to build a next-generation alts firm with Apollo-style talent, an integrated platform, alpha creation, debt trading, industry expertise, and a strategic partnership with McKinsey, deployed in areas with less developed ecosystems. I'm the largest investor, paying the same fees, and our economics are structured around returns, not size. Talent is key—people eat strategy for breakfast. This attracted the team, and we're now at $30 billion in 3 years, growing responsibly.
Right. Do you find are there any sectors or asset classes in particular that are catching your eye these days that are more interesting and haven't been saturated with capital?
Yeah, so I think digital infrastructure—there's a middle and small size of that market with huge demand for capital. Whether lending or investing in smaller data centers, there's opportunity. The middle market itself, below the top 10 firms, has no capital. Of our six deals, four have been from private equity funds at the end of their 10-year life. The public markets have bifurcated—now about 4,000 public companies down from 8,000, with thousands of private companies ignored. So you can do private equity-style deals buying cash flow cheaply. Hybrid areas are interesting too. Private credit continues to be 200 to 300 basis points better than levered loans or high yield, though some headlines are overblown.
Right. Do you think—let's talk about private credit for a second. We've seen a washout today in some private equity players big on private credit and software. I guess you're happy you're not publicly traded today, but do you think the momentum and frenzy have pushed this market over its skis a bit?
