Ackman on AI & IPOs, Climate Costs, Paramount’s Debt Raise

>> LIVE FROM BLOOMBERG WORLD HEADQUARTERS IN NEW YORK CITY, WE ARE TRACKING THE KEY PLAYERS, THE MAJOR MOVES, AND THE CAPITAL FLOWS SHAPING GLOBAL MARKETS. THIS IS "BLOOMBERG DEALS." DANI: WELCOME TO ANOTHER EPISODE OF "BLOOMBERG DEALS," THE ONLY SHOW DEDICATED TO THE CORPORATE ACTION RESHAPING MARKETS. BILLIONAIRE INVESTOR BILL ACKMAN WILL BE JOINING US TODAY. AMONG HIS LATEST PROJECTS, AND NEAR MAJORITY STAKE TO GROW HOWARD HUGHES OF THEIR SHAREHOLDER MEETING. AND THE LEADERS OF OPENAI AS THEY SEEK A NEW ROUND OF FUNDING. A GROWING NUMBER OF COMPANIES DELAYING THEIR IPO, INCLUDING OURA. HOWARD HUGHES HAD ITS ANNUAL SHAREHOLDER MEETING, THE FIRST SINCE PERSHING SQUARE TOOK A NEAR MAJORITY STAKE IN MAY. THE VISION IS TO TURN OUR HUGHES INTO SOMETHING OF A MINI BERKSHIRE HATHAWAY. WE ARE PLEASED TO BE JOINED BY THE FOUNDER AND CEO, BILL ACKMAN, TO DISCUSS THAT SO GREAT TO HAVE YOU STOP BY. BILL: THANK YOU SO MUCH. DANI: YOU HAD YOUR HOWARD HUGHES INVESTMENT DAY. THE BIGGEST ACQUISITION WAS RECENTLY CLOSING CENTER VANTAGE COMMAND WITHOUT YOU GET FIREPOWER BEHIND YOU TO INVEST. WHAT ARE YOU LOOKING AT? BILL: SURE, SO IF YOU FOLLOWED MR. BUFFETT FOR 60 YEARS, 61 YEARS, INCREDIBLE CAREER, HOW DID HE CREATE SO MUCH VALUE AT BERKSHIRE HATHAWAY OVER TIME? HE DID TWO PRINCIPAL THINGS. MAYBE THREE. FIRST, AS HE LANDED DOWN THE TEXTILE OPERATION, HE TOOK AT THE CAPITOL AND BOUGHT AN INSURANCE COMPANY, AND YOU MANAGE THE ASSETS DIFFERENT FROM A TYPICAL INSURER. HE TOOK THE SURPLUS AND INVESTED IN COMMON STOCKS. HE DID A GOOD JOB MANAGING THAT PORTFOLIO. YOU COLLECT MONEY UPFRONT AND YOU PAY IT OUT IN THE FUTURE. AS A RESULT, BERKSHIRE WAS ABLE TO GROW AT A VERY RAPID RATE, COMPOUNDING THE INSURANCE COMPANY'S ASSETS, EARNING A HIGH RETURN ON CAPITAL WITHOUT HAVING TO ISSUE STOCK. BERKSHIRE HAD A MILLION SHARES OUTSTANDING FOR MOST OF ITS LIFE UNTIL THE JANUARY REACQUISITION. THE CULMINATION OF A VALUABLE BUSINESS INSIDE A COMPANY--COMBINATION OF A VALUABLE BUSINESS INSIDE A COMPANY AND NOT ISSUING STOCK AS YOU GROW. WE ARE TAKING A PAGE FROM MR. BUFFETT. WE CLOSED IN JUNE. IN JULY WE ANNOUNCE THAT THE FORMER CEO OF ARCH CAPITAL GROUP, ONE OF THE BEST PERFORMING INSURANCE COMPANIES THE LAST 25 YEARS, CO FROM EIGHT YEARS, AT ARCH FROM INCEPTION. HE RECRUITED DAVID GINSBERG, HIS PROTÉGÉ. THE FORMER VICE CHAIR AND GENERAL COUNSEL OF AIG. WE BROUGHT AN ENORMOUS COURSE POWER WHAT WAS AN ENORMOUS PLATFORM. WE ALREADY HAD A GOOD TEAM. WE MAY DELETE S--WE IMMEDIATELY SOLD THE FIXED INCOME ASSETS. WE INVESTED MONEY IN SHORT-TERM TREASURIES. 65% OR SO. 35% OF THE ASSETS INVESTED IN A COMMON STOCK PORTFOLIO. OUR GOAL IS TO BUILD A HIGH ROI SPECIALTY INSURANCE COMPANY LED BY A SUPERB TEAM WITH US MANAGING ASSETS, AND GROWING HOWARD HUGHES -- DANI: ON THAT NOTE ON SELLING LONGER-DATED TREASURIES, WHICH TO WAS A PRESCIENT MOVE, WAS THIS AN ENVIRONMENT WHERE YOU WOULD BE AVOIDING DURATION, BE IT HOWARD HUGHES OR ANY OF THE OTHER INVESTMENTS? IS THAT BOND MARKET UNTOUCHABLE RIGHT NOW? BILL: I'M NOT REALLY AFFIXED-INCOME INVESTOR-- A FIXED-INCOME INVESTOR. I NEVER FOUND THE RISK-REWARD INTERESTING. I LIKE RISK-FREE OR I RETURN -- HIGH RETURN. DANI: ON THE EQUITY PORTION, HOW MUCH CAN YOU INVEST INTO EQUITIES? BILL: WE WILL RUN A RELATIVELY LOW LEVERAGE INSURER. MOST COMPANIES WRITE A PREMIUM EQUAL TO THE EQUITY OF THE CAPITAL OF THE INSURER. WE WILL WRITE LESS THAN THAT. MOST INSURERS INVEST IN SOMETHING LIKE 2.5 TIMES THEIR EQUITY IN ASSETS AND REINVEST LESS THAN THAT. WE WILL TAKE A ZERO RISK FOR THE BULK OF THE INSURANCE COMPANY ASSETS. SHORT TERM TREASURIES, THAT FREES US UP FOR FLEXIBILITY UNDER THE CAPITAL WILL HAVE SOMETHING AT 40 TO 50% -- APPROACHING 40% OF THE ASSETS, 45% OF THE ASSETS IN COMMON STOCKS. DANI: THE VANTAGE ACQUISITION, AND THE OTHER TRANSFORMATIONAL ACQUISITIONS YOU ARE LOOKING AT? OR VANTAGES IS DONE AND YOU CAN SET ASIDE? BILL: IT IS CERTAINLY NOT DONE. BUT WE ANNOUNCED SOMETHING ELSE OF SIGNIFICANCE. I TWEETED ABOUT IT AND WE TALKED ABOUT IT TODAY. HOWARD HUGHES HAS BUILT AN EXPERT IN A TEAM, HAS AN AMAZING ELECTION OF ASSETS AND MARKETS WHERE PEOPLE WANT TO LIVE, AND THE BUSINESS IS SELLING TO HOMEBUILDERS IN THESE CITIES THAT WE MANAGE, THE COMMERCIAL REAL ESTATE, THE LAND, ETC. IT IS A BUSINESS WE FINANCED ENTIRELY WITH OUR OWN EQUITY THE LAST 15 YEARS. WE ARE GOING TO A MODEL WHERE WE BRING IN THIRD-PARTY INVESTORS. THINK BROOKFIELD. THINK BLACKSTONE. THE TYPICAL REAL-ESTATE INVESTOR TODAY PUTS A VERY LITTLE OF THEIR OWN MONEY. WE WILL HAVE A LOT OF SKIN IN THE GAME. TODAY WE HAVE 100% OF THE EQUITY. WE WILL BEGIN A PROCESS IMMEDIATELY TO BRING IN PARTNERS TO REDUCE OUR EQUITY COMMITMENT TO OUR REAL-ESTATE BUY AS MUCH IS 80% ENTERED HOWARD HUGHES INTO MORE OF AN ASSET MANAGEMENT --AND TURN OUR HUGHES INTO MORE OF AN ASSET MANAGEMENT BUSINESS. WHEN YOU BRING IN THIRD-PARTY CAPITAL, THAT WILL ENABLE US TO TAKE $2 BILLION, $3 BILLION OF EQUITY OVER THE NEXT -- SOME TIME BY THE END OF NEXT YEAR, CAPITAL WEEKEND REDEPLOY. WHEN YOU--WE CAN REDEPLOY. WHEN YOU GET A TALENTED TEAM, YOU WANT TO PUT CAPITAL BEHIND THEM. IT WILL ACCELERATE THE DEVELOPMENT ASSETS THAT IN THE CONTEXT OF THE COST OF PUBLIC COMPANY CAPITAL WORK DIFFICULT TO ACHIEVE, DIFFICULT TO JUSTIFY, AND NOW BECOME MUCH MORE ATTRACTIVE. DANI: YOU BOTH LAUNCHER IPO WITH PERSHING SQUARE AND PERSHING SQUARE USA. WHEN IT COMES TO THE CLOSED-END FOND, ERASED RAISE $5 BILLION AND IT HAS FALLEN 25%. IT TRADES AT A DISCOUNT OF $.25 TO A DOLLAR -- BILL: BOTH OF THOSE OTHER SOMETHING. DANI: YES, CORRECT. [LAUGHTER] YOU ARE CLARIFYING MY CLARIFICATION, SO I'M PLEASED WITH THAT. YOU CALLED IT RIDICULOUS, THE DISCOUNT IT IS TRADING AT. WHAT DO YOU DO TO TURN IT AROUND? BILL: AMONG OTHER THINGS WE GO ON BLOOMBERG TV TO TALK ABOUT IT. DANI: SO WHAT'S GONE WRONG? BILL: WE DID A LISTING AND AN IPO. WE HAD A CLOSED-END FUND, A VERY DIFFERENT CLOSED-END FUND. TYPICAL CLOSED-END FUND DOES NOT HAVE A GOOD TRACK RECORD. IT IS A FINANCIAL PRODUCT THAT IS SOLD TO FINANCIAL ADVISORS AND THE CLIENT IS NOT PARTICULARLY INVOLVED. THE MAJORITY OF THE INVESTORS, THEY MADE AN INVESTMENT TO INVEST WITH PERSHING SQUARE. HISTORICALLY TO INVEST WITH PERSHING SQUARE ASW A U.S. CITIZEN, YOU WENT TO INVEST WITH US PRIVATELY IN A FUND WITH A 20% INCENTIVE FEE, AND YOU HAD TO LOCK UP YOUR MONEY OVER A LONGER PERIOD OF TIME. THIS IS A LIQUID PUBLIC VEHICLE THAT DOES NOT CHARGE AN INCENTIVE FEE. LARGEST HEDGE FUND IN THE WORLD. 19% COMPOUNDED, NEARLY 23-YEAR TRACK RECORD. TRACK RECORD OF THE LOWER FEE STRUCTURE OF THE ENTITY. TRULY LIQUID ALTERNATIVE AT THE LOWEST FEES. WE FOCUSED SINCE THE APPEAL AND DEPLOYING THE CAPITAL. OUR FIRST PRIORITY WAS PUTTING THE MONEY TO WORK AND WE ARE FULLY INVESTED AT PERSHING SQUARE USA. WHAT WE HAVEN'T DONE, WHAT WE ARE BEGINNING, IS -- DANI: SO THIS IS JUST A MARKETING ISSUE? BILL: IT IS A MARKETING ISSUE. IF YOU WANT TO INVEST WITH PERSHING SQUARE -- I KNOW PEOPLE ALL THE TIME SAY, "BILL, I WOULD LOVE TO INVEST WITH YOU, BUT I CAN'T." NOW YOU CAN. SPENT $39 -- DANI: IF I CAN PUSH BACK ON THAT, BECAUSE IN YOUR MOST RECENT REPORT FOR PERSHING SQUARE USA, YOU SAID THE ASSET VALUE FALLEN MORE THAN 8%. BILL: OK. DANI: ISN'T THERE SOMETHING WITH THE UNDERLYING STOCKS, TOO? BILL: I THINK IT'S DOWN ABOUT 3% FROM THE APPEAL, 240 BASIS POINTS OF THAT IS THE COST OF THE IPO. WE ARE BASICALLY FLAT. WE DEPLOYED $5 BILLION OF CAPITAL IN STOCKS WE LIKE THAT ARE COMPELLING AT CURRENT VALUES. I WOULDN'T WANT SOMEONE TO JUDGE US -- THE BEST WAS HELPFUL TO US AS WE WERE DOUBLING CAPITAL SUCKS, WE WERE GOING DOWN--CAPITAL STOCKS, WE WERE GOING DOWN. WE WERE BUYING META AS IT WAS GOING DOWN. WE OWN A PORTFOLIO OF SOME OF THE BEST WHAT WE CALL SUPER DURABLE GROWTH COMMITTEES IN THE WORLD. BUSINESSES LIKE AN S&P GLOBAL THAT YOU COULDN'T TOUCH AT 21 TIMES EARNINGS. A BUSINESS LIKE THE INTERCONTINENTALEXCHANGE, AMAZING BUSINESS WITH ANY CREDIBLE TRACK RECORD. YOU COULDN'T OWN IT 24 TIMES EARNINGS TODAY. IT IS A MARKET THAT IS A VERY NARROW MARKET. I'M SURE YOU KNOW WHERE THE MARKET'S ATTENTION IS FOCUSED. IN THE KIND OF BUSINESSES WOULD LIKE TO OWN, WE OWN BUSINESSES BASED ON HOW WE EXPECT THE RETURNS THE NEXT FIVE YEARS. NOT FIVE MINUTES, NOT NEXT 90 DAYS. DANI: IT IS AN INCREDIBLE HE CONCENTRATED MARKET, AND WE ARE AWAITING MORE BIG IPO'S -- BILL: ALTHOUGH IT SEEMS LIKE THEY'RE FALLING OFF A CLIFF. DANI: THIS IS INTERESTING. WHAT DO YOU THINK ABOUT THAT? WE ARE EXPECTING ANTHROPIC? OPENAI DELAYS. IS SOMETHING GOING ON? BILL: I DON'T UNDERSTAND THE OURA DELAY BASED ON THE PUBLIC REPORTS. APPARENTLY THEY HAD OVERSUBSCRIBED OFFERINGS. I'M ASSUMING THAT'S TRUE. DANI: THEY SAID THEY COULDN'T GET THE VALUATION THEY WANTED. IS THERE SOMETHING TO THIS MARKET THAT YOU CAN'T GET THE VALUATION YOU WANT? BILL: THE MARKET IS VERY NARROWLY FOCUSED ON SPACEX, ANTHROPIC, AND THE PICKS AND SHOVEL THAT SUPPORT -- DANI: IS THAT A PROBLEM, ESPECIALLY ANTHROPIC -- WE SHOULD REMIND EVERYONE, ON THE 22ND YOU PUT OUT SOMETHING SAYING ARE WE GOING TO SEE ANTHROPIC'S S1? BY THE WAY, THERE IS A 10% CHANCE WE KILL HUMANITY. THERE WAS A LARGEISH PART OF THAT PROSPECTUS THAT SAID HERE IS WHAT THE HARM WE MIGHT CAUSE. WHAT DO YOU MAKE OF AN IPO WITH THAT SORT OF THING IN IT? IS THAT A COMPANY YOU WOULD BUY? BILL: ANTHROPIC IS PERHAPS THE GREATEST BUSINESS STORY I'VE EVER SEEN IN TERMS OF FROM DE NOVO TO $2 TRILLION, AS A SIGNIFICANT NEED THE REVENUE RAMP OF THE COMPANY, THE QUALITY OF THE PRODUCT. WE USE CLOTH INTERNALLY. IT IS CLEARLY -- WE USE CLAUDE INTERNALLY. IT IS CLEARLY AN AMAZING COMPANY. QUERY WHETHER THE FRONTIER COMPANIES MAINTAIN THE MARKET PRESENCE IN LIGHT OF THE POWER OF OPEN SOURCE AND OPEN WITH MODELS. DANI: YOU WOULDN'T BUY BECAUSE YOU ARE SCARED OF THE COMPETITION? BILL: WE LIKE TO BUY THE WHAT THEY WILL LOOK LIKE FOR A LONG TIME, BORING THINGS LIKE MICROSOFT, VISA, MASTERCARD. WE ARE LESS LIKELY TO BE AN INVESTOR ON A FAST GROWING BUSINESS THAT IS CONSUMING A HUGE AMOUNT OF CAPITAL AND BETTING ON THE LINES CROSSING IN THE FUTURE. DANI: IS THERE A RECKONING TO BECOME -- BILL: PERSPECTIVE HAS BEEN FILED -- DANI: WE HAVE TO WAIT ON THE PROSPECTUS. BILL: I THINK JENSEN HAS MADE THIS POINT WELL -- IF YOU ARE A $2 TRILLION COMPANY AND YOU HAVE A SERVICE THAT CAN CAUSE ENORMOUS HARM, YOU ARE GOING TO BE CAREFUL ABOUT RELEASING A PRODUCT TO THE MARKET. I FEEL LIKE YOU DON'T NEED, AT LEAST FOR THE ANTHROPICS, OF THE WORLD, DON'T NEED LEGISLATION OR THE GOVERNMENT TO PROTECT THEM FROM DOING SOMETHING STUPID. YOU WOULD HOPE YOU WOULDN'T. IT IS A BIT LIKE A PHARMA COMPANY. YOU DON'T RELEASE OF DRUG TO THE WILL -- MAYBE IN THE CASE OF A DRUG YOU HAVE GOVERNMENT OVERSIGHT.THERE IS HUGE DISINCENTIVE TO PUT OUT A PRODUCT THAT WILL DESTROY THE WORLD. DANI: DOES THAT MEAN YOU ARE LESS CONCERNED ABOUT THE AI WORST-CASE SCENARIO? THEY WILL SELF-REGULATE OK? BILL: I'M LESS CONCERNED ABOUT ANTHROPIC AND OPENAI. I'M MORE CONCERNED ABOUT A BAD ACTOR, ROGUE ACTOR, WHO DOES NOT HAVE THE SAME CONSIDERATIONS, USES THE RESOURCES OF AN OPEN-SOURCE MODEL TO CAUSE ENORMOUS HARM. I THINK THAT IS A VERY SIGNIFICANT RISK. I WOULD RATHER THAT THE BEST FRONTIER LABS, INCREDIBLY POWERFUL SO THEY CAN PROTECT US, APART FROM THE ROGUE OPERATOR USING A LESS POWERFUL AI. DANI: I WANT TO CHANGE DON'T HERE JUST FOR A MOMENT, BECAUSE YOU HAVE BEEN VERY PUBLIC-- CHANGE TONE HERE JUST A MOMENT, BECAUSE YOU HAVE BEEN VERY PUBLIC ON INCREDIBLY DIFFICULT YEAR YOU HAD. YOU POSTED A MISSIVE ON X -- NOT A MISSIVE -- I ENCOURAGE EVERYONE TO READ ABOUT YOUR DAUGHTER LUCY WHO HAD A BRAIN HEMORRHAGE AND WAS TAKEN TO THE HOSPITAL, AND HAD A SIGNIFICANT OPERATION THAT EFFORT UNABLE TO SPEAK, TO WALK. IT IS SOMETHING YOU ARE DEDICATING A LOT OF YOUR TIME TWO. MOST IMPORTANT QUESTION, HOW WAS HER--HOW IS HER RECOVERY? BILL: SHE WAS DOING REALLY, REALLY WELL--SHE IS DOING REALLY, REALLY WELL. IT'S A JOURNEY, FROM WHERE SHE STARTED, SHE IS THE SYMBOL LUCY. SHE HAS THE SAME FRIENDS, THE SAME SENSE OF HUMOR. SHE IS LEARNING TO WALK, LEARNING VALS AGAIN, LEARNING CONSONANT-- VOWELS AGAIN, LEARNING CONSONANTS AGAIN. SHE VERY GOOD AT SAYING NO. VISION,, EVEN VISION THIS MITOCHONDRIAL THERAPY, FIRST HUMAN PATIENT, SHE HAD ZERO ABILITY TO SEE LIGHT. 20/2000 AND ONE OF HER EYES, WHICH IS NOT GREAT, AND WE DON'T KNOW IF IT WAS THE MITOCHONDRIAL THERAPY, BUT WE SUSPECT IT MIGHT'VE BEEN HELPING HER. WE USE HER AS PATIENT ONE, WHAT CAN BE ACHIEVED IF YOU PUT EVERY RESOURCE, EVERY TECHNOLOGY, ANY CREDIBLE THERAPY AND CARE, NUTRITION--AN INCREDIBLE THERAPY AND CARE, NUTRITION. ONE OF THE FORTUNATE THINGS ABOUT OUR ECONOMIC CIRCUMSTANCES IS WE CAN PROVIDE THE CARE FOR, BUT WE THINK IT SHOULD BE AVAILABLE FOR EVERYONE. CONTEMPORANEOUS WITH LUCY'S RECOVERY, WE ARE BUILDING AN INSTITUTE THAT IS GOING TO BE NOT JUST ANOTHER BRAIN RESEARCH INSTITUTE THAT STUDIES THE BRAIN, BUT IS FOCUSED ON DELIVERING CARE TO PATIENTS. DANI: I DON'T THINK IN THE MIDST OF THIS, YOU WERE ALSO IN THE MIDDLE OF TWO IPO'S. WHAT WAS GOING THROUGH YOUR MIND AT THE MOMENT? >> IT WAS A GOOD DISTRACTION. BUT AS I'VE MENTIONED, I VERY FORTUNATELY WAS ABLE TO RENT THE HOSPITAL ROOM NEXT TO HER. THEY REMOVED THE BED. IPO'S ARE DONE BY ZOOM TODAY, REALLY. VERY FEW IN PERSON MEETINGS. THAT KEPT ME BUSY. SHE WAS RIGHT THERE AND YOU REALLY CAN'T BE WITH SOMEONE 24/7 SO IT WAS MY INSPIRATION FOR GETTING THE IPO DONE. >> YOU MENTIONED YOU AND YOUR WIFE HAVE NO START OF THIS INSTITUTE. YOU SAID BEFORE THAT YOU FELT THAT YOU WERE DESIGNED TO HELP HER, THAT EVERYTHING IN YOUR LIFE BASICALLY LED YOU TO THIS MOMENT. DO YOU THINK IT HAS CHANGED AT ALL WHAT YOU SEE DOING WITH THE REST OF YOUR LIFE? >> I ALWAYS HAD THIS VIEW THAT A SIGNIFICANT LIFE IS HAVING ONE IN WHICH YOU HAVE THE LARGEST IMPACT ON THE LARGEST NUMBER OF PEOPLE, LARGEST GOOD IMPACT. IN A WAY THIS FITS INTO THAT MANDATE. I THINK THIS INITIATIVE CAN HAVE A HUGELY FAVORABLE IMPACT ON A VERY LARGE NUMBER OF PEOPLE. I ALSO DON'T KNOW ANYONE WHO HASN'T HAD A PARENT FOR GRANDPARENT OR A SON OR DAUGHTER OR A FRIEND WHO HASN'T HAD A MAJOR BRAIN-RELATED ISSUE. WHERE IT IS ALZHEIMER'S OR THEY WERE IN THE MILITARY AND THEY GOT IT WITH A BALLISTIC, OR THEY ARE RIDING A BICYCLE AND THE CRASH IN CENTRAL PARK OR PSYCHIATRIC ISSUES. THE FRAME IS SOMETHING -- AND WE STUDIED THE BRAIN, WE DON'T UNDERSTAND IT. AND WHAT MAKES THIS MOMENT UNIQUE IN HISTORY ARE THE ANTHROPICS OF THE WORLD ARE MAKING IT POSSIBLE. THE BRAIN GENERATES AN ENORMOUS AMOUNT OF DATA. THERE IS LOT THE DIFFERENT APPROACHES TO GETTING BASICALLY DATA FROM THE BRAIN AND SEEING EXAMPLES OF THE DATA BEING CONVERTED INTO HERE IS WHAT HE IS ACTUALLY TRYING TO SAY. HERE IS HOW YOU CAN SEE AGAIN, MAYBE A PAIR OF GLASSES WITH A CAMERA THAT TRANSMITS DATA DIRECTLY TO THE VISUAL CORTEX. WE ARE GOING TO LEARN A TON ABOUT THE BRAIN IN THE NEXT THREE YEARS, FIVE YEARS. AND HAVING A PLACE WHICH AGGREGATES EVERYONE INTERESTED IN THE TOPIC WITH THE APPROPRIATE VENDOR OF RESOURCES. >> GETS REALLY IMPORTANT WORK AND WE ARE SO LUCKY TO HAVE YOU SHARE SOME OF THAT WORK YOU'RE DOING WITH US. THANK YOU SO MUCH FOR THE TIME, WE REALLY APPRECIATE IT. COMING UP ON THE SHOW, OPENAI PUSHING BACK ITS IPO PLANS, BUT NOT SLOWING DOWN FUNDRAISING. THE STARTUP HAS A NEW GOAL IT IS AIMING FOR. YOU ARE WATCHING "BLOOMBERG DEALS." >> TIME NOW FOR A ROUNDTABLE OF THE BIG DEALS OF THE WEEK. SOURCES TELLING BLOOMBERG OPENAI IS AIMING TO RAISE AT LEAST A BILLION DOLLARS IN A NEW ROUND OF FUNDING AT $1.4 TRILLION. BLOOMBERG SPOKE TO THE CFO AND CEO OF THE COMPANY WITH SAM ALTMAN THING THE IPO WOULD BE ILL-ADVISED RIGHT NOW. >> WE JUST WANT TO GET AIR FEET UNDER US, MAKE SURE WE UNDERSTAND HOW TO OPERATE. THE ABLE TO MAKE SOME OF THESE DECISIONS WITHOUT THE PRESSURE OF BEING A COMPUTER COMPANY. >> WE COULD USE MORE COMPUTE IN 2027 SO I ALWAYS WANT TO MAKE SURE WE ARE WELL-CAPITALIZED SO THAT WE HAVE MAXIMUM OPTIONALITY IS A COMPANY. >> WE WILL BE PUBLIC AT SOME POINT, THERE WILL BE MORE NEW LEVELS BUT IT WON'T BE ALL AT THE SAME TIME. >> LET'S BRING IN ED LUDLOW WHO CONDUCTED THOSE INTERVIEWS. MAY NO IPO. PROBABLY THAT PUTS THE PRESSURE ON THEM TO GET FINANCING IN OTHER WAYS. ED: THIS IS INBOUND. THE INVESTORS ARE KICKING DOWN THE DOOR AND THEY WANT OPENAI TO DO THIS. THERE IS NO GREATER CAPITAL NEED. $30 BILLION RAISE, FOR TRILLION DOLLAR VALUATION, BUT WHEN I PUT THE REPORTING TO SARAH FRIER SHE BASICALLY MADE THE POINT THAT WE HAVE ONE HUNDRED BILLION DOLLARS OR MORE ON A BALANCE SHEET ANYWAY BUT SHE CONFIRMED THERE IS MARKET DEMAND FOR THEM TO DO THIS. EVERYONE IS RELAXED ABOUT BEING FURTHER OUT. >> AND AT THE SAME TIME YOU'RE GETTING MORE DETAILS ON VARIOUS REPORTING ON WHAT ANTHROPIC MIGHT LOOK LIKE. BUT THEY DID INCLUDE THAT WE MIGHT CAUSE HARM TO HUMANITY. >> I PUT THE QUESTION TO SAM ALTMAN AS WELL. IS IT INCUMBENT ON OPENAI TO DO EXACTLY THE SAME THING, AND IT WAS LIKE, IT'S INCUMBENT ON THEM TO DO IT ANYWAY. THE RISK IS REAL. LINE FROM OPENAI SAYS IT DOESN'T MATTER WHETHER IT IS A 10% RISK OR 1%, THAT RISK IS STILL TOO GREAT. HE EXPLAINED IT THAT JUST TRYING TO GET CONTROL OF THE SITUATION AND THEN THE IPO WILL COME LATER. BUT HE HIT ME PRETTY HARD WHEN I SAID IS BEING A PUBLIC COMPANY INCOMPATIBLE WITH THE SAFETY FOCUSES? HE'S LIKE NO, THAT IS NOT THE POINT. BEING A NEWLY PUBLIC COMPANY JUST MAKES IT HARDER. >> SOME OF THE OTHER BIG DEALS THAT WE ARE WATCHING, APPROACHED ABOUT POTENTIALLY BUYING SHARES, NOW DELAYED THE IPO, DECIDED NOT TO GO FORWARD BECAUSE OF CONCERNS INCLUDING THE HEALTH AND THIS COMPANIES TARGET VALUATION. ANTHONY HUGHES JOINS US NOW ON THIS. WHAT EXACTLY WAS THE PUSHBACK? >> THE MARKET HAS GOT TOUGHER HERE IN RECENT TIMES WITH THREE POSTPONEMENTS IN THREE WEEKS. THIS LACK OF CONVICTION AMONGST EARLY INVESTORS. THEY WANT THESE COMPANIES TO TAKE MORE VALUATION HAIRCUT. THEY HAD IT HAS A COMPLICATED CONCEPT IN TERMS OF MORE CHALLENGE FOR PEOPLE TO WORK OUT THE RIGHT VALUATION, SOME PUSHBACK AROUND THE LOCK OUT AS WELL AND ALL THE COMPETITIVE ISSUES AROUND SOME OF THE BIG PLAYERS GOING TO COME IN AND EAT THEIR LUNCH. THESE ARE ALL ISSUES WHICH CONTRIBUTE TO THE DECISION TO POSTPONE THE IPO. >> I GUESS IF YOU'RE A BIG PLAYER LIKE ANTHROPIC EVEN GO AHEAD BUT FOR EVERYONE ELSE, IS IT A LITTLE BIT MORE DIFFICULT? >> I REALLY THINK THAT VERY FEW OF THEM ARE GOING TO GO AHEAD. THERE'S DEFINITELY SOME OF THE AI-RELATED IPO'S THAT ARE NOT GIVEN THE GO-AHEAD IN THE SHORT-TERM. PEOPLE SORT OF EXCITED FOR THAT ONE, THERE'S A LOT OF UNCERTAINTY AROUND THAT AS WELL. >> THAT IS ANTHONY HUGHES ON A DELAYED IPO'S. AND INVESTORS ARE DRIVING STRONG DEMAND FOR PARAMOUNT BONDS AS THE MEDIA GIANT FINALIZES ITS ACQUISITION OF WARNER BROTHERS. INVESTORS HAD PLACED MORE THAN $109 BILLION IN ORDERS FOR THE DEAL ON TUESDAY, SHOWING DEMAND MORE THAN THREE TIMES THE EXPECTED SIZE. THEY ARE JUST ONE PART OF A $52 BILLION FINANCING PACKAGE. FOR MORE, WE ARE JOINED BY MICHELLE DAVIS. IT BASICALLY MEANS YOU GET THIS DONE TODAY IN ORDER TO AVOID TICKING FEES. >> THIS MIGHT BE ONE OF THE LAST TIMES WE TALK ABOUT PARAMOUNT ON THE SHOW. >> OH NO, I'M SO USED TO IT. >> IT'S $7 MILLION PER DAY, BUT SOURCES CLOSE TO THE MATTER HAVE TOLD US THEY ARE EXPECTED TO PROBABLY CLOSE WITHIN THE NEXT WEEK. THEY'VE AGREED TO A SETTLEMENT WITH THE STATE SO THEY CAN CLOSE THE DEAL BUT THEY JUST NEED A JUDGE TO BASICALLY GREENLIGHT THE SETTLEMENT IN THE NEXT DAY OR TWO. WHEN THAT HAPPENS THEY WILL BASICALLY TAKE ALL THIS MONEY THAT THEY'VE RAISED AND CLOSE THE DEAL, PAYING A FEW MILLION DOLLARS IN FEES BUT NOT THE BILLIONS THEY MADE HE HAVE HAD TO. >> GOOD FOR THEM, THEY GET THE DEAL DONE. HOW MUCH HARDER ARE THINGS FOR THEM NOW THAT THIS DEBT NOT ONLY IS QUITE HIGH AS IT IS, BUT HAS GOTTEN MORE EXPENSIVE CONSIDERING RATES HAVE MOVED AGAINST THEM? >> NOW THE HARD PART BEGINS. ONCE THE DEAL IS CLOSED THEY HAVE TO ACTUALLY FIGURE OUT HOW TO OPERATE THE COMPANY AND INCREASED REVENUE. PEOPLE IN THE INDUSTRY EXPECT A LOT OF THAT IS GOING TO COME FROM LAYOFFS, BUT THE COMPANY HAS SAID IT WILL COME FROM TECH AS WELL. THAT IS THE BIG CHALLENGE AHEAD AND EVERYONE WILL BE EAGERLY WATCHING TO SEE HOW THEY MANAGE THAT BECAUSE THERE'S NOT A GREAT TRACK RECORD WHEN YOU TALK ABOUT THESE MEGA MEDIA DEALS. >> THANK YOU SO MUCH, EXCELLENT REPORTING. I'M SURE SOMETHING ELSE BIG WILL COME OUR WAY. MICHELLE DAVIS, THANK YOU SO MUCH. COMING UP, WE BRING YOU OUR INVESTMENT COMMITTEE ON CLIMATE AS CLIMATE WEEK RAMPS UP IN NEW YORK CITY. YOU'RE WATCHING "BLOOMBERG DEALS." DANI: WELCOME BACK TO "BLOOMBERG DEALS. I AM DANI BURGER. UNDER PRESIDENT DONALD TRUMP, THE U.S. GOVERNMENT HAS AMENDED CLIMATE ACTION, BUT THE PRIVATE SECTOR IS STILL INVESTING IN CLEMENT TECHNOLOGY AND WAYS TO INVEST IN NEW ELECTRICITY SOURCES TO ME THE POWER NEEDS OF DATA CENTERS. NORAH MULINDA HAS MORE. NORAH: EARLIER THIS MONTH NEW YORK CITY HOSTED CLEMENT WEEK--CLIMATE WEEK. THE DATA CENTER BOOM DOMINATED DISCUSSIONS TO THE POINT OF DISTRACTION. THAT IS BECAUSE OF CONCERNS THAT AI AND DATA CENTERS ARE HUGE SOURCE OF GREENHOUSE GAS EMISSIONS ARE MISPLACED. HEAVY AIR CONDITIONING ACTUALLY CONSUME MORE ENERGY. ACCORDING TO THE INTERNATIONAL ENERGY AGENCY, DATA CENTERS WILL ACCOUNT FOR 3% OF GLOBAL DEMAND BY 2030. YET WITH POWER DEMAND SEARCHING, CLEMENT INVESTORS HAVE SHIFTED THEIR FOCUS AWAY--CLIMATE INVESTORS HAVE SHIFTED THEIR FOCUS AWAY FROM POWER GENERATION. SOME CLIMATE STARTUPS WHICH STRUGGLE TO GET FINANCING BECAUSE OF CANCELED FEDERAL GRANTS ARE PIVOTING TO CHANGE THE PITCH TO AI TO SECURE FRESH FUNDING. WITH THE U.S. RACING TO ADD NEW ELECTRICITY SOURCES, FUND MANAGERS TELL BLOOMBERG THAT ONE AREA THEY ARE OPTIMISTIC ON IS THE SOLAR INDUSTRY. THE NUMBERS BACK THEM UP -- SOLAR AND BATTERY STORAGE MADE UP 70% OF ALL ELECTRICITY-GENERATING CAPACITY ADDED IN THE FIRST HALF OF THIS YEAR. DANI: NORAH, THANK YOU SO MUCH. THAT SETS US UP PERFECTLY FOR THIS WEEK'S INVESTMENT COMMITTEE, WHERE WE TAKE YOU INTO BOARD DEBATES IN REAL-TIME. JOINING US IS THE FOUNDER AND MANAGING PARTNER AT THE POLLS FUND, THE HEAD OF AI INFRASTRUCTURE AND TRANSITION INFRASTRUCTURE AT EQT, AND THE GLOBAL HEAD OF SUSTAINABLE INVESTING AT BCG. THANK YOU FOR JOINING. I FEEL LIKE THIS IS THE PERFECT TIME TO HAVE YOU WANT BECAUSE YOU JUST CLOSED A $63 MILLION FUND. FIRST OF ALL, CONGRATULATIONS ON THAT. HOW DO YOU PLAN TO DEPLOY THAT? WHERE DO YOU FIND THE MOST ATTRACTIVE OPPORTUNITIES? >> THANK YOU, DANI. WE ARE LOOKING AT INVESTING CROSS SECTORALLY. FOUR MAIN VEHICLES -- PUTTING AGRICULTURE, MOBILITY--FOOD AND AGRICULTURE, MOBILITY, AND ENERGY. YOU ARE ABLE TO BETTER DERISK AND GET HIGHER OUTCOMES. CLIMATE STABILIZATION COMES AS A RESULT OF THE IMPACT. DANI: I HAVE A FEELING SOME OF THE OTHER PANELISTS MIGHT HAVE THAT BENT. OPERATING ON A SMALLER SCALE VERSUS EQT, YOU ARE INVESTING FROM THE INFRASTRUCTURE SIDE OF THINGS. HOW DO YOUR INVESTMENTS AND THE IDEA OF SUSTAINABLE AND RENEWABLE ENERGY -- WHERE DO THOSE COME TOGETHER? >> I THINK WE ACTUALLY OPERATE IN ONE OF THE MOST EXCITING TIMES AT THE MOMENT, WHERE EVERYBODY TALKS ABOUT AI, BUT IT IS DRIVING MASSIVE NEED FOR INVESTMENT INTO THE INFRASTRUCTURE TO RUN ALL OF THESE DATA CENTERS, AND IT CREATES A HUGE OPPORTUNITY TO OPERATE THE INFRASTRUCTURE AND DRIVE SUSTAINABILITY LONG TERM. SO WE ARE HEAVILY DOUBLING DOWN ON RENEWABLES, FLEXIBILITY ON THE GRID THAT ENABLES THESE RENEWABLES, AND SHORT-TERM METER GENERATION, STORAGE, COMBINING TECHNOLOGIES, COUPLED WITH TECHNOLOGY COSTS HAVING COME DOWN SIGNIFICANTLY BECAUSE OF BATTERIES DECLINE 40% LAST YEAR. THAT ENABLES A LOT OF THESE INVESTMENT WITH $4 TRILLION COMING INTO ENERGY FOR AI. IT'S REALLY AN EXCITING TIME FOR US. DANI: LET ME BRING YOU INTO THIS, BECAUSE JAN'S INVESTMENTS MAKE SENSE GIVEN THAT HE IS IN INFRASTRUCTURE. HOW MUCH OF YOUR TIME WHEN IT COMES TO SUSTAINABILITY AND CLIMATE IS DEDICATED TO ENERGY AROUND AN AI BUILDOUT? >> IT IS DEFINITELY A HOT SPACE, DANI. EVEN WITH THE POLICY ROLLBACKS, CLIMATE FUNDRAISING CONTINUES TO GROW NICELY. IN 2025 WE HAD A NEW RECORD IN TERMS OF CAPITAL FORMATION FROM SPONSORS LIKE THOSE PRESENT ON THIS CALL. THE WAY I DESCRIBED IT IS CLIMATE WENT FROM BEING THE TREND TO CLIMATE BEING THE BENEFICIARY OF THE TREND. ONE OF IT IS AI AND POWER DEMAND CREATING DEMAND DOWNSTREAM FOR NUCLEAR, COOLING TECHNOLOGIES, MAYBE CARBON CAPTURE, GIVEN THAT GAS GENERATION. THERE IS ALSO INVESTMENTS AROUND HARDENING OF THE GRID. THINK OF THE TRANSFORMERS, SWITCH GEARS, SUBSTATIONS. WHEN YOU THINK ABOUT THE TREND AROUND DOMESTIC MANUFACTURING, THAT IS CREATING DEMAND FOR CIRCULAR BUSINESS MODEL -- RECYCLING, WASTE MANAGEMENT PROCESSING. A BUNCH OF THESE TRENDS ARE MUCH MORE DURABLE AND NOT POLICY-RELIANT CREATING SECOND-ORDER BENEFIT FOR OPPORTUNITIES TO DEPLOY CAPITAL IN CLIMATE. DANI: THIS IS ONE OF YOUR THESES, IT CANNOT JUST BE RELIANT ON GOVERNMENT BACKING. >> WE ARE FINDING THAT TIME AND TIME AGAIN, DATA IS SHOWING THAT CLIMATE AS A PUBLIC STOCK HAS OUTPERFORMED THE MARKETS. LAST YEAR IT OUTPERFORMED THE S&P. THE S&P WAS 18% AND CLIMATE STOCK INVESTMENTS IN CLEAN AND RENEWABLE ENERGY WAS 47%. WE ARE FINDING THAT IN VENTURE CAPITAL. VENTURE CAPITAL AND CLIMATE TECH INVESTMENTS HAVE OUTPERFORMED IRR 9% FROM 2020 22024. THIS IS NOT JUST FOR ME AND US AS AN ECOSYSTEM. IT IS NOT JUST ABOUT HAVING BETTER CONSCIENCE. IT IS ABOUT DELIVERING BETTER FINANCIAL RETURNS. DANI: WHEN YOU ARE OUT FUNDRAISING, DO LP'S GET THAT? OR YOU CANNOT DO THIS IN A REPUBLICAN-CONTROLLED CONGRESS AND EXECUTIVE BRANCH? IS THERE STILL THAT STIGMA? TENZIN: I THINK IT REALLY DEPENDS. SOME INSTITUTIONAL INVESTORS HAVE A LEVEL OF NUANCE AND COMPLEXITY. BUT THERE IS A LOT OF EDIFICATION AND EDUCATION THAT WE AS CLIMATE INVESTORS AND THOSE ON THE FRONTLINES OF OPERATING AND FINANCING THE SPACE HAVE TO DO THAT EDUCATION PIECE. IT'S A MIXED BAG, BUT THIS IS THE OPPORTUNITY. I GO BACK TO NUMBERS BECAUSE NUMBERS NEVER LIE. DANI: JAN, I HAVE TO IMAGINE YOUR INTERACTION WITH GOVERNMENT IS MAYBE A LITTLE BIT MORE COMPLICATED BECAUSE IT IS NOT NECESSARILY JUST GOVERNMENT BACKING OF RENEWABLES, IT IS OUR LOCAL GOVERNMENTS PUSHING BACK AGAINST DATA CENTERS. THE LATEST REGULATIONS THAT IN ORDER TO BUILD A DATA CENTER, YOU NEED A POWER SOURCE ALONGSIDE WITH IT. HOW IS EQT THINKING ABOUT THE PUSHBACK IN ALMOST A FEELING THAT WE ARE BUILDING THE PLANE AS WE ARE FLYING IT, DISCOVERING THE POLICY PUSHBACK AND BUILDING THINGS AS WE ARE PUTTING THESE LITERALLY IN THE GROUND? JAN: THIS IS THE NUMBER ONE PRIORITY FOR US AS WE LOOK TO OUR COMPANIES AND WHERE WE INVEST. WE ARE WELL-POSITIONED TO COMBINE THE ENERGYSOLUTIONS -- I FIRMLY BELIEVE THAT ENERGY WILL BE ADDITIONAL, IF YOU BUILD A DATA CENTER, YOU PROVIDE ENERGY SOURCES THAT REDUCE OVERTIME THE COST FOR EVEN IMMEDIATELY REDUCE THE COST FOR CONSUMERS. CONSUMERS SHOULD NOT HAVE TO PAY FOR AI, OBVIOUSLY. NOT ONLY DO WE COMBINE THE ENERGY SOLUTION, BUT THE WATER SOLUTION. WE IN MANY CASES ARE ABLE TO IMPROVE WATER SUPPLY. WE WORK VERY CLOSELY WITH MUNICIPALITIES, LOCAL INTEREST GROUPS, TO SHOW HOW BUILDING DATA CENTERS FOR AI AND RELATED ENTITY SOLUTIONS HELP COMMUNITIES SHORT- AND LONG-TERM. DANI: I SEE YOU NODDING YOUR HEAD. TENZIN: I AGREE WITH JAN, AND ONE OF THE GREATEST GIFTS WE HAVE IS NATURE. IF YOU LOOK AT WHERE A MAJORITY OF BOTH VENTURE AND PUBLIC MARKETS HAS GONE, IT'S IN CLEAN ENERGY RENEWABLE. WHILE THAT IS A PRIORITY AN IMPORTANT, WE NEED TO UNDERSTAND THAT OUR GDP, GLOBAL GOVERNANCE SYSTEM, HALF OF IT IS DEPENDENT ON NATURAL ECOSYSTEMS. I DO BELIEVE THERE IS ANOTHER GAP HERE THAT IS AN OPPORTUNITY FOR US TO BE ABLE TO HAVE CIRCULAR INVESTMENTS. DANI: VINAY, DO YOU SEE THE SAME GAP ANYWHERE ELSE THAT IS LACKING FINANCIAL FIREPOWER THAT PEOPLE CAN GET INTO? VINAY: YEAH, LOOK, I THINK -- I JUST WANT TO COME BACK TO THE POINT ON DATA CENTERS. THE POINT IS NOT LOST ON INVESTMENT COMMITTEES THAT THERE IS A RECENT TREND OR SURGE IN SOME SENTIMENT THAT IS QUITE NEGATIVE AROUND THE CAPEX INVESTMENT. I THINK -- LOOK, BILL GATES WAS JUST ON THE EZRA KLEIN PODCASTER TALKING ABOUT HOW WORRIED HE IS ABOUT RUNAWAY INVESTMENT OF THESE AI MODELS. I THINK THAT AS INVESTORS LEAN INTO THIS IS BASED ON THE POWER SIDE AND CHIP SITE AND CAPEX SIDE, HAVING A BIT OF NUANCE ABOUT WHICH OF THAT CAPACITY IS IMMUNE FROM A RANGE OF SCENARIOS IN TERMS OF ANTIMARKET DEMAND AND COMPUTE DEMAND VS. WHAT IS VERY TIED TO CAPACITY IN THE GROUND. IN TERMS OF OTHER BUSINESS MODELS, THE ONE AREA NOT GETTING ENOUGH ATTENTION BUT I THINK WILL, DANI, TO YOUR QUESTION OF WHERE ELSE CAPITAL WILL GO, IS EVERYTHING ABOUT PHYSICAL RISK. WE HAVE SEEN THIS ON WILDFIRES. WILDFIRE SOFTWARE BUSINESSES ARE GETTING ATTENTION FROM CAPITAL, BOTH STRATEGICS AND TRADITIONAL SPONSORS. I THINK YOU WILL SEE DEMAND FOR SOLUTIONS AROUND MORE RESILIENT BUILDINGS. WATER INFRASTRUCTURE IS GOING TO GET A LOT MORE ATTENTION IN THE YEARS AHEAD. IN THE LAST ONE I WOULDN'T SAY -- WOULD SAY, CIRCULAR BUSINESS MODELS AND THE WASTE MANAGEMENT OPPORTUNITIES. DANI: WE ARE GOING TO HAVE TO LEAVE IT THERE. I KNOW WE SCRATCHED THE SURFACE, BUT I APPRECIATE EVERYONE FOR JOINING. TENZIN SELDON OF PULSE FUND, JAN VESELY OF CONDITION INFRASTRUCTURE AT EQT, AND VINAY SHANDALOF BCG. THANK YOU ALSO MUCH. PE ASSETS HAVE SEARCH CLOSE TO $6 MILLION, GIVING RISE TO NEW FUND STRUCTURES FOR FIRMS TO IMPLEMENT. WE WILL DISCUSS THIS AND THE PE LANDSCAPE AND PRIVATE CREDIT. THE FORMER OF ALTERNATIVE INVESTMENTS AT JP MORGAN JOINS US IN OUR ALTERNATIVE VIEW. THIS IS "BLOOMBERG DEALS." WELCOME BACK TO "BLOOMBERG DEALS." I AM DANI BURGER. TIME FOR AN ALTERNATIVE YOU. -- VIEW. ACROSS THE INDUSTRY, BUYOUT FIRMS HAVE BEEN CLINGING TO ASSETS FOR LONGER AND ARE MOVING THEM INTO NEWLY CREATED CONTINUATION JOINING US NOW AS A WOMAN WHO KNEW THE INDUSTRY MUCH MORE VERY WELL. KK, GLOBAL HEAD OF ALTERNATIVE INVESTMENTS AT J.P. MORGAN. THANKS SO MUCH FOR COMING IN. I WONDER JUST HOW YOU ARE HAVING THIS CONVERSATION WITH YOUR CLIENTS OR WHAT THEIR UNDERSTANDINGS AND FEELINGS ARE ABOUT IT. THAT LIFESPAN JUST KEEPS BEING PUSHED LONGER AND LONGER. IS THIS JUST A PHENOMENON WHERE IT IS HARD TO EXIT THESE THINGS, OR IS THIS JUST THE NEW REALITY OF PRIVATE EQUITY? >> THIS IS AN INDUSTRY THAT YOU DON'T INVEST UNLESS YOU THINK YOU CAN GET ACCESS TO THE PAST, RIGHT? THIS DISPERSION THAT EXISTS IS SO WIDE THAT YOU JUST HAVE TO UNDERSTAND WHO OWNS THE ASSET, AND IF THEY ARE GOING TO MOVE INTO A CONTINUATION VEHICLE AND YOU DO SEE THEM SHIFTING MORE OUT OF TRADITIONAL IPO INTO THINGS LIKE THE SECONDARY MARKET, THE QUESTION IS HOW ARE THEY GOING TO CONTINUE TO DRIVE VALUE? I THINK IT DOES BRING ON THE RISE OF THE PRIVATE MARKET, THE FUNDS, WHICH ASSETS ARE STRUCTURALLY MORE EFFICIENT IN THOSE FUNDS. I WOULD JUST SAY ON THE SURFACE IT DOESN'T SCARE ME BECAUSE THIS WHOLE INDUSTRY IS ABOUT PICKING AND CHOOSING THE BEST MANAGERS OUT THERE THAT CAN DELIVER CONSISTENCY AND PERSISTENCY. >> DOES THAT MEAN WHEN YOU SEE THE USE OF THESE THINGS IT IS NOT IMMEDIATELY OH, THIS IS CAN- TICKING, BUT THE MANAGERS ARE HOLDING ONTO STILL GOOD ASSETS? KRISTIN: I REMEMBER A COUPLE YEARS AGO EVERYONE SAYS THAT THE DURATION IS SEVEN YEARS NOW OF PRIVATE EQUITY ASSETS IN THE GROUND. OK. IT USE TO ANNOY PEOPLE FIVE YEARS AGO THAT WOULD PRIVATE EQUITY WOULD SELL THE PRIVATE EQUITY. THE NEXT PERSON PRIVATE EQUITY WOULD MAKE ANOTHER FEW TIMES. WHATEVER VALUE THEY WERE CREATING. I DO THINK THE DEEPENING OF THE STRUCTURE OF THE MARKET IS ACTUALLY ALLOWING MORE DIFFERENTIATION AND HOW THEY HOLD THESE ASSETS. IT DIDN'T ALWAYS MAKE SENSE THAT 3, 4, 5 YEARS IN, YOU HAD TO START DIVESTMENT OF THE ASSET. I WOULD AGREE WITH YOU THAT ON THE SURFACE IT DOESN'T SCARE ME. YOU HAVE TO LOOK UNDER THE HOOD. IT IS UNDERSTANDING WHAT PEOPLE'S SKILL SETS ARE IN DRIVING RETURNS. >> TO A LOT OF THE MANAGERS HAVE FOUND THAT THE NEW WADE THE DRIVE VALUE IS WITHIN THE AI VALUE CHAIN. I WONDER IF THERE IS A RISK THAT THEY ARE DOING DEAL AFTER DEAL AROUND AI INFRASTRUCTURE, MAYBE EVEN DOING DEALS WITH THE HYPERSCALERS THEMSELVES AROUND FINANCING. ALL OF THIS IS OCCURRING WHEN WE JUST LIVED THROUGH A PERIOD WHEN THERE ARE FUNDS THAT WERE OVEREXPOSED TO SOFTWARE. IS THERE A RISK THAT WE ARE MAKING MAKING SIMILAR, NOT EXACTLY THE SAME, BUT SIMILAR MISTAKES OVER ALLOCATING INTO AI? >> PART ONE IS WHEN YOU THINK ABOUT THE MANAGER'S ABILITY TO GENERATE RETURNS, HOW MUCH CREDIT THE GIVEN? HISTORICALLY YOU WOULD SAY I'VE OVERSIMPLIFIED AN INDUSTRY THAT WOULD BE WILDLY OFFENDED BY WHAT I'M ABOUT TO SAY, THAT YOU WOULD LOOK AT MULTIPLE EXPANSION AND YOU WOULDN'T GIVE THEM THAT MUCH CREDIT BUT YOU WOULD IF THEY WENT INTO AN INDUSTRY THAT WAS UNDER LOVED. IN THE PART THAT WE ALWAYS FELT SHOULD DRIVE TWO THIRDS OR THREE QUARTERS OF A RETURN SHOULD BE ARE THEY GOOD OPERATORS? CAN IMPROVING THIS BUSINESS? WHAT I WOULD SAY IS YOU HAVE TO LOOK UNDER THE HOOD. I KNOW I'M SOUNDING LIKE A BROKEN RECORD NOW, BUT YOU HAVE TO LOOK UNDER THE HOOD AND SAY HOW MUCH OF THIS AI IS REPEATABLE, BECAUSE A LOT IT MIGHT BE A ONE TIME THING. I THINK THE SECOND PART OF YOUR QUESTION IS HOW MUCH AI RISK MIGHT BE EMBEDDED INTO WHAT YOU ARE INVESTING BEHIND. THAT I DO THINK IS A SEPARATE TOPIC WHERE I THINK A LOT OF CLIENTS AND FAMILIES THAT A MEETING TODAY, FOR 20 YEARS I WOULD MEET THESE FAMILIES. THE SAME PERSON BELIEVES IN THE INNOVATION OF AI AND ALL THE IMPLICATIONS THAT IT HAS FOR OPPORTUNITY AND THEY ARE ALSO WORRIED ABOUT THE CONCENTRATION IN PUBLIC MARKETS RIGHT NOW SO THEY'RE LOOKING TO PRIVATE MARKETS, LOOKING INTO NEW ASSET CLASSES, NEW STRUCTURES TO ACTUALLY BE LESS CORRELATED THEN WHAT THEY ALSO LIKE. SO IT'S THIS VERY INTERESTING CONVERSATION WHERE WE ARE SEEING OUR CLIENTS BE ON BOTH SIDES OF THE TRADE AND TRY TO THINK THROUGH THE RISK-REWARD OF EACH OF THESE THINGS. >> DOES THAT MEAN THERE IS A PREMIUM, WHETHER LITERALLY OR METAPHORICALLY A PREMIUM FOR MANAGERS WHO ARE DELIVERING RETURNS THAT ARE NOT JUST BECAUSE OF AI? >> YES. I WOULD SAY EVEN IN MORE RECENT HISTORY WHEN WE THINK ABOUT A PRIVATE EQUITY, A TRADITIONAL PRIVATE EQUITY MANAGER, THE APPETITE FOR OUR CLIENTS RIGHT NOW IS THAT THEY WOULD PREFER THE MANAGERS THAT CAN DELIVER TOP QUARTILE RETURNS WITHOUT MUCH IF ANY EXPOSURE TO TECH. YOU HAVE TO KNOW HOW TO INCORPORATE IT. YOU REALLY DO HAVE TO THINK THROUGH WHAT IS ASSISTING MY PORTFOLIO AND HOW MUCH ARE THESE RISKS CONCENTRATED IN ONE AREA OF A MARKET OR ONE AREA OF VALUE CREATION? >> WHEN IT COMES TO PRIVATE CREDIT APPETITE FOR ALL OF THESE THINGS, IT HAS GONE FULL FORCE AHEAD. IT CAN'T JUST BE DONE IN IG MARKETS. I WONDER HOW YOU SEE UNDERWRITING SHAPING UP. WE DID JUST LIVED THROUGH THIS. IT'-- THROUGH THIS PERIOD OF BIG PUSHBACK. >> ESPECIALLY OVER THE LAST COUPLE OF YEARS, YOU COME OUT OF 2022 WHERE THE PRIVATE LENDERS SORT OF STEPPED IN, SPREADS WIDENED OUT MORE RECENTLY, IF YOU LOOK A YEAR AGO, BUT I WOULD SAY IS IF YOU LOOK A YEAR AGO VERSUS TODAY, YOU HAD SPREADS THAT GOT AS TIGHT AS MAYBE IN THE SENIOR CORPORATE SPACE AND FOR BUSINESSES NORTH OF 300 MILLION DOLLARS, UT SPREADS. THAT IS WIDENING GIVEN THE LAST YEAR BY ANNETTE 50 BASIS POINTS. BASE RATES ARE HIGHER AND MOVING HIGHER SO YOU HAVE TO THINK ABOUT HOW DOES THAT CHANGE THOSE COMPONENTS. BUT I DO THINK A LOT OF THE FEARS THAT EXISTED IN THAT MARKET, IT IS JUST A HEALTHY MATURITY. WHAT I DO THINK IS INTERESTING IS WHAT IS EXPANDING BEYOND THAT. IF YOU'RE GOING TO LEND TO A DATA CENTER, YOU JUST HAVE TO BE SURE WHAT RISK YOU ARE TAKE ARE YOU TAKING TECH RISK OR NOT? WHAT IS GOING TO HAPPEN AS WE CONTINUE TO MOVE FORWARD IN THIS CYCLE OF AI IS THAT PEOPLE HAVE SPENT A LOT OF TIME FOCUSING ON HOW MUCH DEBT IS BEING GIVEN IN THE DATA CENTER BUT FOR EVERY DOLLAR COST, IT COST ANOTHER THREE OR FOUR DOLLARS TO ACTUALLY OPERATE THE DATA CENTER. WHO IS GOING TO STEP INTO BE THE CHIPS FINANCIER OR THINK THROUGH THE POWER AND THIS SECURITY THAT IS NEEDED AROUND THESE THINGS? THAT MIGHT NOT EVEN BE -- WE TALKED ABOUT HOW MONEY SHIFTED FROM THE BANKS TO THE PRIVATE LENDERS. I HAVE A FEELING THAT MIGHT ACTUALLY SHIFT EVEN FURTHER INTO PRIVATE MARKETS IN IT MIGHT BE THE GROWTH EQUITY OR THE VENTURE MANAGER THAT UNDERSTAND THE TECHNOLOGIES START STEPPING INTO GET THEM STRUCTURAL PROTECTIONS AROUND THESE THINGS. >> WE WILL TALK ABOUT THE DEEPENING MARKETS. WE COULD SPEND ANOTHER HALF HOUR ON THAT. COMING UP, A WAVE OF EXITS A POTENTIAL SHIFT FROM A BUYOUT FIRM TO A FINANCIAL SUPERSTORE. THIS IS BLOOMBERG DEALS. THIS IS BLOOMBERG DEALS, I’M DANNI BURGER WE HAVE SEEN A WAVE OF EXITS AT BLACKSTONE AND BLOOMBERG’S SALLY BAKEWELL HAS BEEN COVERING THE FIRM. AND JOINS US NOW. THERE’S REPORTING THAT AS BEEN GOING ON FOR A FEW YEARS NOW AT BLACKSTONE. WE'VE BEEN KIND OF WITNESSING THE END OF THIS START INVESTOR ERA WERE A FEW LEGENDARY RAINMAKER TYPES BUILD UP A FEW WITHIN THE FIRM. THEY ACTUALLY ARE SPREADING THE RESPONSIBILITIES ACROSS THE WIDER GROUP OF SPECIALIZED CHIEFS. SO WHAT PRESIDENT JOHN GRAY IS DOING NOW IS SORT OF TURNING THE WORLD AGAINST ALTERNATIVE ASSET MANAGER INTO THIS INSTITUTIONAL FINANCIAL SUPERSTORE THAT CATERS TO RETAIL INVESTORS BECAUSE IT IS TRYING TO BOOST RETURNS. >> THANK YOU SO MUCH FOR JOINING. GREAT TO HAVE YOU. THAT DOES IT FOR TODAY'S EDITION OF "BLOOMBERG: DEALS." STAY UP TO SPEED EVEN AFTER THE SHOW. SUBSCRIBE TO THE NEWSLETTER. BUT FIRST, UP NEXT IS "BALANCE OF POWER" LIVE FROM WASHINGTON.