P10, Inc. (PX) Earnings Call Transcript & Summary

All right. We [ are at ] good afternoon by now? Good afternoon, everyone. Welcome to our next fireside chat here with P10. If anyone doesn't know me, I'm Ben Budish. I cover the U.S. brokers, asset managers and exchanges. And we've got from P10, Luke Sarsfield, CEO; and Mark Hood, Chief Accounting Officer -- Administrative Officer, sorry. Gentlemen, welcome...

Thank you for having us. It's great to be here.

Thanks, Ben.

Just to kick it off, Luke, it's been nearly 2 years since you were appointed CEO. Could you reflect a little bit on your tenure? How would you describe the firm's progress? Where do you see the greatest opportunities for continued growth?

So a great question. And you're right, I'm getting a little introspective myself because it will be 2 years in October. And I really -- it's a great time to just look back and reflect on I think the tremendous progress we've made, and I think the opportunity that we think is still really robust that exists ahead of us. And so when I came in, I always kind of talk about how one of the things that really attracted me to P10 and the P10 story was the incredible investing prowess across the platform, the consistent and persistent track record of alpha generation across all of the different strategies that existed at P10. At the time that was 7. Subsequently, we've obviously done the Qualitas deal and added an eighth. And I always feel like when you're an investment manager, you need to start with great investing performance. There's a lot of other things you can optimize in terms of platform, in terms of infrastructure, in terms of industrializing, but you start with that great investing prowess. And one of the things that I'm really excited about is we've been very successful in continuing to maintain the team and maintain that investing prowess. And we've really gone from strength to strength on the alpha generation side, acting on behalf of our limited partners. And so I feel really, really good about that. When I came in, what I was focused on was really optimizing and upgrading all the enabling functions to allow, enable and frankly, accelerate that investing prowess across the platform. And so we wanted to make sure we had all the right infrastructure in place. And so I envisioned a structure where we would have kind of 4 different spheres of excellence. The first focused on finance, accounting, legal, compliance and other oversight across the platform. And we've built that out very ably under our CFO, Amanda Coussens. The second was everything operationally in terms of data and technology, in terms of human resources, in terms of operations and shared services. And Mark as our CAO and EVP of Ops has just stepped into that role and done an amazing job of building out and running that team. The third thing that I thought we needed that we didn't have was a true strategy and business development function. And so I was very lucky to be able to hire Arjay Jensen onto the platform. Arjay runs that team, has really built a systematized process-driven approach to M&A, focusing on our areas of interest and then really a proactive outbound focused cultivation approach to find the right opportunities to continue to add to the platform. And then ultimately, it's about partnering with clients. That's what this business is about. It's about having clients trust us with their capital. And so we built out a whole client solutions team under the leadership of Sarita Jairath. She joined us from Blackstone about a year ago. She's been a tremendous add. She's building out her team. They're focused on capital formation. At the broad level, they're focused on coordination across the platform, working with the existing strategy teams to go deeper with our existing clients and also cultivate new clients and then thinking about things like new product design, new product development and all the things that we can do there to be able to better meet our clients where they are. And so the really good news is I feel like we've put the right structure in place. I feel like we've assembled a world-class senior leadership team. We've also done some great work, I feel like, in terms of enhancing the Board of moving to a majority independent Board, very excited about that. I see one of our directors in the room today, glad he could join us. And really focused on making sure that we have a world-class governance structure and that everybody knows we are just laser-focused on the clients and laser-focused on executing against the platform in a world-class way. Now we're doing a lot of the work in each of those verticals, right? Whether it's this year, we're going to have to be -- we're going to have to meet the standards for 404(b). We came out as an emerging growth company, and Amanda and her team are laser-focused on that. We've built a great compliance infrastructure around that to boot. In Mark's team, we've hired a new Chief Technology Officer. We've just appointed a new Head of HR. And so I think all of our strategies are really seeing the power of the platform and the power that we can deliver to them to help them enable and accelerate their businesses. Obviously, in Arjay's team, we announced our first M&A deal in Qualitas. We closed on that back in April. That has just gone great gangbusters. We can talk about how that integration works and some of the very positive upside we're seeing there, but really excited about that. And then finally, in Sarita's world, we integrated all our CRM systems. We've reconciled and sort of made sure that all the data is now in a way that we can query all the CRM and client data across the platform. And we're looking at ways we can deepen and broaden client relationships. We're looking at new product design and ways we can meet the clients where they want to be met. And I think you're really seeing that in terms of our engagement across capital formation, which feels like it's very positively accelerating. And so I feel great about what we've done across the platform to date, but obviously very, very focused. Now that we've laid the strategy, now that we've built the frame, now that we have the team in place, it's about executing and it's about holding ourselves accountable for execution. And so we wake up every morning, go to bed every night thinking about how do we execute on behalf of our shareholders.

Great. Maybe talking a little bit higher level, talking about the macro environment. On your last earnings call, you highlighted some structural advantages you see for the middle and lower middle markets. There's a common perception that small companies are more vulnerable, more risky than large. Can you remind us, why do you think this is a misconception? What's your current outlook for the segment where P10 is most active?

Yes. So it's a great question, and it's one we get asked a lot. We are dogmatically focused, I would say, in a very disciplined way on executing in the middle and lower middle market. It's who we are. It's what we do. It's the lineage and legacy of all the component strategies, and it's really something that we think has held us in really good stead. And you're right. I think there is this archetype at times that, oh my gosh, big companies, they're larger, they're more stable, they have more resource. And so definitionally, smaller companies must be less stable and more risky. And I would tell you that might be true at the individual company level, but you've got to look at the dynamics of the marketplace. And so when you look at that upper part of the market, what do you have? You have a lot of capital chasing a limited number of opportunities. There are not that many large companies, and there is an enormous amount of capital that's been raised and looking to be deployed against that opportunity set. Generally, those deals tend to be very competitive. They're often intermediated by sophisticated advisers or otherwise, and that makes them more difficult to access. Oftentimes, they've either been owned in context where their operations have already been optimized, either they've been public companies or they've been owned by other large sponsors who have done a lot to professionalize the operations of those companies, and so you'd argue a lot of the low-hanging fruit has been picked. Generally, they tend to have pretty aggressively wound capital structures with a lot of leverage. And because of all those dynamics, lack of competition, intermediation, they tend to have come to the market and been purchased at pretty robust multiples. Now let's look at our part of the market, right, which I think is really differentiated. The first thing I would say when you look at the lower part of the market, there is a lot less capital, a lot less capital, like 5 to 10x less capital chasing 5 to 10x more opportunities. So you just have a very target-rich environment to start, and you don't have large, sophisticated entrenched competitors like you see in that upper part of the market. We're actually one of the big players in this part of the market, and so we have the competitive dynamic of size and scale and insight and longevity in this part of the market. The second thing, these are generally founder-operated businesses, so you're buying them from the founder. So there's just definitionally tends to be more opportunities for value creation across that platform, investing in technology and infrastructure and operations in ways that a founder can't do. The transactions tend to be less intermediated. Maybe there's nobody involved, maybe there's a business broker involved. But if there's not some large, sophisticated institution looking to extract the last dollar of value, so you tend to buy them at lower multiples. And you can see that durably over time, middle market transactions happen at lower multiples than transactions in the upper market. And they tend to happen with much less leverage. If you look at the upper part of the market, 6 to 7x leverage, you then become very sensitive to the rate cycle. And since we've been in a rising rate cycle, capital structures have gotten repriced, have gotten more expensive. That's put a burden on the equity holders. In our part of the market, typically, it's about 3x leverage. And so obviously, things have gotten more expensive, but they're just not wound. Those capital structures are not wound to the same degree that they are in the upper part of the market. The net effect of all of that, if you look across the cycle, is two things. One is the returns over the last period of time, last several decades have been better in the lower middle market than they have been in the upper market to the tune of about 200 to 300 basis points on average. So that's just the average to the average. And when you look at the opportunity for real outperformance because we'd like to think our job is to select the best-in-breed managers, the ones that are going to outperform and really be in that top quartile, top decile, there's a much greater chance that they are generating meaningfully higher returns in the middle part of the market than the top managers in the upper part of the market. And so you have a wider tail with a higher middle to start in the middle of the distribution. It's just more -- and it's a more attractive place to be investing. And if you have the team, the track record, the data, which we have over a period of decades to be able to pick the best of the best in this more attractive part of the market, it's going to lead to a great investing outcome. And that's why we're so passionate about the middle and lower middle market.

Great. Bringing back to P10 more specifically. At your first Investor Day last year, you talked -- you introduced a $50 billion AUM target by 2029.

Free-paying AUM. Free-paying AUM.

On your most recent earnings call, you kind of started elaborating a little bit about engaging with new and larger pools of capital. Can you unpack this a little bit more? How much of this opportunity lies with existing LPs versus new business development to attract new LPs?

It's a great question. And I would say, simplistically, the answer is yes. We need to do both of those things, right? And so when you really think about the opportunity for us to continue to grow and scale our businesses, it's going to happen on multiple vectors. It's not an either/or, it's a both. But clearly, let's start with our existing LP base. We have a very robust group of now almost 5,000, over 4,900 LPs. And these are institutions, these are pensions, these are insurance companies, but these are also a lot of very wealthy individuals, E&Fs and groupings of other wealthy individuals, whether it's in an RIA structure or otherwise. And so -- and what we have right now is, and we talked about this at Investor Day, well less than 5% on of our LPs are LPs across multiple strategies. So they tend to be LPs of one of our strategies. They're an LP of TrueBridge or of Hark or of WTI, but they're not -- and they have not historically been LPs across the platform. I think one of the big opportunities for us, it's always easier to grow your relationship with somebody who already knows and likes you than it is to find a new client and convert them to be a client of the franchise in the first instance. And so these are -- a lot of these are allocators who have looked at our platform and have decided, proactively, they really like what we do. They like our focus on the lower middle market. They like our structure and operationally, how we can execute and deliver on behalf of them. And hopefully, they've had a great investing experience with us already. So they're feeling favorably inclined to the platform, given our track record of alpha generation. And so the ability to engage with them in an appropriate and client friendly way to introduce them to the breadth of the P10 platform, not just a single strategy they currently have a relationship with, but the other 7 strategies across the platform. And it's not a one-size-fits-all thing. It's not like, hey, here's all the things we can do. It's really getting -- making sure we're leveraging our knowledge and insight on that client to know, look, they're interested. They're investing with us in Strategy A. We happen to know, based on our knowledge and privity, that they're invested with some of the other things that we can do across the platform. And so it's simply introducing them to the P10 alternative to whatever that strategy is that they're doing maybe with a competitor or maybe with somebody away from us and really looking to deepen and broaden that already great client relationship that we have in the first instance. And so I think that's a big opportunity. We're using data and insights from the data. As I mentioned, we took the time to really integrate our CRM platform across the P10 entities. And now we can really look at it and query it and look at who's doing what with whom, both with us and away from us, and then really go in, in a very customized and client-friendly way to make those connections and introductions. And so that opportunity to deepen our existing client relationships is a big opportunity and one that the team is really focused on executing against. But there are other parallel opportunities, as you know. One of those opportunities as well, if you look at how we built our client base and why we have 4,900 clients, we've kind of built our client base with folks who write checks, many in the $5 million to $25 million or $50 million range, really important clients. They've been great fans of the platform. We're very lucky to have them on the platform. But as we've gained breadth, as we've gained scale, as we've gained now global remit, we can do things certainly for those clients now and in the foreseeable future, but also with potentially a new set of larger global clients. And so one of the opportunities for us is to cultivate some of those larger global clients who, as I just talked about, I think, are waking up to all the positive differentiated attributes in the middle market and say, I've got lots of exposure and lots of partners in the upper part of the market, but maybe I don't have as much here. And oh, by the way, it's a more complicated, opaque, fragmented market segment to begin with, and I need somebody who's really going to help me navigate that journey who's going to be my partner and my guide along the way and work with them. And we've talked about some of the early wins in that. We partnered with a very large sovereign wealth fund. We talked about that on our first quarter earnings call where we were able to help them navigate kind of that lower middle market equity space. And I hope that that's something like that we can replicate in many places. And then I think the third vector of this is making sure we have the product offering to meet our clients where they are, right? And if you look at the historical kind of P10 product offering, it had been 85-plus percent traditional delayed draw commingled funds. Now I want to make sure everyone understands. We think there's a big growth opportunity in traditional delayed draw commingled funds. We're seeing real growth in many of those offerings. We can talk about some of that. But we think there are things in addition to growing that, and we think it's very much in addition, there are other vehicles that others have used very successfully and we believe we can use, whether it's insurance wrappers, whether it's some certain client-friendly wrappers, whether it's evergreen or other kind of long-lived vehicles to meet our clients where they are with what our clients want matches our investing ability and our investing prowess. And so we're thinking about that. We announced, obviously, in our Enhanced strategy. We launched our first evergreen fund within the 4 walls of P10. And I think there are many more opportunities, not necessarily just an evergreen fund, whether it's a BDC, whether it's an access fund, whether it's something else, to really marry our investment prowess with where our clients want to be met. And so I think we're really excited. And so if we do all those things, we go deeper with our existing clients. We find great new clients who want to come on the platform and benefit from our strength, our expertise, our investment insight and we design products to meet our clients where they are. I think we now have the team and the capabilities to do all 3 of those things, and we're really focused on executing against that.

Luke, a great example in this last quarter was we saw some new RFPs from RCP that we would have never seen before because now we've got the European business. So clients that would like exposure to U.S. middle market as well as European middle market, that's net new for us. So that's a business we never would have had a chance to be a part of. I think it's very exciting.

Luke, you answered -- I mean it was a very robust answer. You answered a number of my questions. But one of the things I wanted to ask you about, so you talked about moving upmarket to LPs that write bigger checks and new fund structures to serve them.

I want to be careful. I don't think of it as upmarket. I think of it as larger, larger. Love our existing LPs. I wouldn't want them to think [ we think of ] anything other than upmarket.

But you have a big family office business today. What are your thoughts on going the other way? What we've seen from your publicly traded peers is that the products that are more appropriate for the smaller retail investor tend to be more of these evergreen style products. Is that part of the strategy with Enhanced? Are you thinking about that in terms of like other kind of new product creation? How does that sort of fit into the strategy?

Look, I would say at the very highest level, we want to meet as many clients as we can with what we believe are incredibly positive investment opportunities wherever they are. But -- and there is a but here. We are a smaller enterprise. We have finite resources. And so we need to make prioritization decisions, right? Some of our friends in the industry can do a lot of things at any one time. We can do a lot of things in any one time, too, but we need to prioritize, right? And so we've always had a very robust ultra-high net worth business generally referred in many cases by relationships and word of mouth, right? Somebody becomes a client of ours, we deliver great investment returns for them, and then they phone a friend or 2 or 3 or 4 friends over time, and they become client of ours. It's the power of the platform. It's the power of the ecosystem. And increasingly, then that's led us to other places, right? RIA is, particularly ones focused on the alt space, wherever we -- family offices and multifamily offices, wherever we see groupings of these people who've seen what we can do. And so we want to continue doing that. Your point is, there is another part of the retail market, probably more in what one would call the mass affluent, high net worth to mass affluent part of the market where there are real opportunities. And I think some of our competitors have the wherewithal to really execute on that by themselves, right? Because they can invest in the distribution infrastructure, obviously. You're probably talking about a lot of human beings. There's probably a whole knowledge and information part of it. You probably are going into a lot of different offices and different venues where you're meeting with these people, whether it's through a wirehouse or otherwise and you're engaging with that client base. And we do do some work in that part of the market. But as we think about resources and where we spend our resources, it's probably not in our near -- it's definitely not in our near to intermediate-term blueprint where we're going to build a retail distribution force with tens, if not hundreds of people who are calling on corner offices at different -- whether it's the IBDs or the wirehouses or otherwise. And so we're going to do it the way we've always done it, which is focusing on the legacy strength of our client base and then the groupings of those clients. And if we do go broader based, we're probably going to need to find a partner who is going to be able to help us do that. And so we think about are there ways we could partner either with one of the platforms on a particular product offering or maybe with somebody whose model is focused on this high net worth mass affluent distribution. And so that would very much be for us. What I think we're probably not going to do at least in the near to intermediate term is build a lot of that infrastructure ourselves. We think we have so many other high value add, high ROI opportunities to go after where we can just see the opportunity and the need, and we're going to prioritize those first.

Got it. Makes sense. Maybe moving back into something else you touched on earlier, this idea of kind of expanding to new fund structures, new fund styles. Thinking about the sort of the drawdown fund of funds business, which is sort of the historical bread and butter of RCP and a few of your franchises, there was another alternative asset manager, I think, maybe an earnings call or 2 ago, talking about some structural headwinds facing that model, specifically the drawdown fund of funds model. What's your perspective here? I think you've kind of indicated that it's perhaps a little bit less of the future. But is there -- do you see any other like issues with that model? Is it becoming less in favor with LPs? Or is there simply more growth elsewhere, but it is also still important...

No. So like everyone will have their own views. I don't know specifically what that competitor was referring to. I guess everybody kind of talks to their own book at the end of the day and they see their own experiences. But let me start here. As I said, we're going to do both. And by both, I mean, we think there are meaningful, robust ongoing growth opportunities in the traditional commingled fund of funds business. We see them every day. We manifest them. We just announced that we've closed on RCP XIX, which was our 19th fund, and we're launching RCP XX. In other places, we've seen it at our Qualitas business. We've seen it in our TrueBridge business. I would say, what's that old thing they say, rumors of my demise have been massively overstated. We don't see any impact. We see clients continuing to come back. If you want to get broad-based exposure to the very best lower middle market and middle market buyout firms around the world, if you want to get broad-based exposure to the very best venture firms across the world, people are continuing to come to us and continuing to manifest that investment thesis through our comingled fund of funds. And we see no slowdown. We see no impairment. We're continuing to grow those businesses. We've raised them historically. As I said, RCP, we raised Fund XIX, we're on to Fund XX, and we continue to see real client interest there. What we're going to do is in addition to growing the business, as we've always grown that business, we're going to do new products. We're going to do new wrappers. We're going to meet our clients where they are. So I don't think -- I want to be really careful and clear on this. This is not a reaction to some slowdown, either real or [ threatened ] that we're seeing, perceiving or even worried about in this part of the business. We have a lot of conviction in this part of the business. We continue to see allocators, and we continue to see our LPs put money against those strategies as they have in the past. We actually are continuing to broaden our LP base in many places. And so if anything, there's a secular growth trend in that part of the business. And then in addition to that core secular growth, in doing what we've done historically very successfully, we think we can add new growth vectors on top of that. But I want to be clear, we see no slowdown whatsoever in that fund of funds business.

Pardon me, maybe changing topics to the M&A side, which you've mentioned -- touched on a few times. So earlier this year, you completed the acquisition of Qualitas. How is that integration progressing? Mark, you mentioned earlier and as you guys have talked about before, sort of already opening up new opportunities. So how would you describe the current state of the integration, how else may new opportunities emerge now that, that business is part of P10?

Well, look, I got to tell you, you always have a view going in of what things will look like. You do a lot of planning, you spend a lot of time road mapping it and scenario planning for different things. And I will tell you on this one, it's even gone better than we could have hoped. I mean, culturally, we always knew it was a great fit. And I think they've just come in and they've hit the ground running. They've been here since April, which I guess is just 6 months, but it feels like they've been there forever. And I mean that in the very best sense of the phrase. They're culturally aligned. They're working together with the other strategies. They help us kind of drive kind of this collective one P10 vision of how we can win together. And when we did it, when we analyzed the deal, we obviously had plans about what we thought we could do together in ways we could grow it. They had great relationships and had done work historically with RCP. They had done a lot on the NAV lending side with Hark, where they would do sourcing and Hark would do some of the credit underwriting. But we've actually already seen some new opportunities for collaboration specifically with RCP that we hadn't anticipated. And I'll give you 2 examples of that. One is there's an RFP that happened recently for an adviser on a global middle market solution. I can tell you, historically, 1 of 2 things would have happened. Either we wouldn't have gotten called that at all -- gotten called to that RFP because we were just viewed as a North American manager or we would have gotten called and they would have said, well, submit your proposal for North America, someone else will submit a proposal for Europe, and we'll try to pair you off, but your odds of winning go down meaningfully because how do you work together, where -- there's always kind of the intersection points and the friction points when you have 2 parties versus 1 where you just say, here's what we want, you guys figure it out. Now the LP said to us, here's what we want. You guys figure it out, and we have figured it out. And by the way, I think that is just a single example, but my guess is we're going to see multiple analogs of that where clients are coming to us and saying, "I want more of a global solution and now I know you, P10, through what you have with Qualitas and through what you have with RCP could potentially provide that on their behalf, so put your best foot forward." And so I think that and the future incarnations of that are really exciting. And then the second thing is we actually realized that we think there's a really big opportunity to -- we have great expertise in fund structuring and client relationships in Europe through the RCP team. And they continue to invest with RCP to get European exposure. But many of those European LPs want to get some U.S. exposure, but they want to do it not -- by the way, we talked about wrappers -- not in a traditional U.S.-style wrapper, but they want to do it in a wrapper that preserves tax and other attributes that one would have is a European investor investing in some of the European funds they've historically invested in like Qualitas. So guess what? Qualitas has the expertise in structuring the fund and the overlay and the fund administration. RCP has obviously the U.S. and North American investing chops and history and lineage. And so why don't we marry those 2 things together in an integrated product? And that's something we're working on right now. We have that probably further down the road map, we thought it might come someday. It came almost immediately. Like when we went out, when Qualitas went out and talked to their LPs, their LPs said, "This is awesome. Here's what we want from you." We said, "Great. We're hearing the client demand, we're going to accelerate that product offering, super exciting." Mark, I don't know if you want to spend a minute. We've also had -- they really share much of our philosophic approach to the business, which is being data-driven investors. And so the data we've been capturing in the U.S. around the broader market and the opportunity and leveraging that to be better investors, they've been doing very similar things in Europe. I don't know if you want to talk about some of that data [indiscernible].

So we've been so impressed with what they've built. They have an incredible platform. I think there's an awareness in that business of the power of that data. And I think in the same way that RCP built something special in North America, they're doing the same thing in Europe. I think we feel very good about that. In terms of the back office and the things that we're doing with integration that's gone better than expected. We've been very impressed. They're a great team. I think they over-index technologically to the things that we're trying to do, and they've been very helpful to us. The one thing I want to go back to that Luke was talking about, the other area, I think, that's been surprising for us is these guys have built such a great reputation in Europe. And I think for us, there's also M&A opportunities that come as a result of that great reputation. I think the second thing is we've got great private banking relationships. And I think we see the opportunity there to expand those across Europe as Qualitas Funds grow. So that is a really important business for us in Europe. We think there's a lot of opportunity for us, and I think that we're very excited about it.

Segueing into broader M&A, how you -- you've obviously been building out the team with Arjay and the work he's doing. How are you thinking about future opportunities, top priorities? Is it asset class? Is it geographic expansion? Is it moving -- we're not going to call it upmarket, but sourcing different new LPs? Or is it all of the above that you're looking for the right fit to kind of solves for multiple things?

Great question. So I would say, fundamentally, our framing approach to M&A hasn't changed. And we've always said it's got to check 3 boxes. And I'll come back to each one of them. It's got to be a strategic fit, right? It's got to be in areas that are relevant to us and relevant to our clients. Secondly, it's got to be a cultural fit. We have a very specific way we do deals. Others do deals in different ways. That works for them. But for us, one of the things we're really focused on is we want to buy great investing platforms and have the teams that have historically run those platforms continue to run those platforms. So if somebody just wants to hand off the keys and move on to something else, that's great. I'm sure there's a match for that, but it's not with P10. And then the third thing is, we are accountable, and we are stewards of capital on behalf of our shareholders. It's got to make economic sense for everybody, right? If it doesn't, it can be the best strategic fit, it can be the best cultural fit. But if we can't do it in a way that's accretive and value enhancing to our shareholders, we're not going to do the deal. And it's got to check all 3 boxes. It's not a 1 or 2 thing. It's got to check all 3. In terms of the strategy, we laid out at Investor Day, our areas of strategic focus in terms of M&A, and those have not changed, right? So one of them you mentioned, Qualitas is a great archetype of this, is the international analogs of our U.S. strategies. And so I really think about Qualitas as a great example of sort of the European RCP in many ways. We have 7 other -- we have 6 other strategies in the U.S., and I imagine for many of them, there are international analogs. And I also imagine there are analogs in Asia and other parts of the world, right? And so we still see a really, really robust international opportunity. And I think once you do your first deal that then makes you relevant and makes you kind of local in those geographies, you're better positioned to do your second and your third and your fourth deal. So we continue to think about that as an M&A strategy priority. The second, and we've talked about this, is we have a great private credit platform, and we have great kind of strategies within private credit. But we certainly have no monopoly across the waterfront of private credit. And we think there are big opportunities in certain parts of the private credit landscape that we have a real right to play and win in that we're just not in right now. But I think there's a lot of great firms out there focused like we are in the lower middle market and play in those spaces, and we're having a lot of really robust dialogue in that space. And then the third area we mentioned is real assets, both on the real estate side and also on the infrastructure side. And as Mark mentioned, if we can find something that has that kind of strategic manager approach that fits with our platform and fits with where we're going but also bring some distribution expertise, whether it's private banks or something else that will allow us to accelerate our working capital formation, more is the better. But our philosophy around what's attractive hasn't changed. It's got to meet strategy. It's got to meet culture. It's got to meet kind of economics. It's got to be in these core strategic areas we've identified. And the good news is, I would tell you, although I know there's all these questions about where is the broader M&A environment, has it picked up and everything else, I would have observed in alternative asset management, I'm not sure it ever really slowed down. And so we've continued to see really, really attractive opportunities. I think we've gotten our name and our reputation out there as an acquirer of choice. And I think for people who like our model, we're kind of at the top of their list. And so we're always looking at multiple opportunities and assessing them, and we're eager to find more attractive franchises to bring on to our platform.

With a little bit of time left, I wanted to ask about a few of the franchises that you've had. So before Qualitas, your most recent acquisition was WTI. The old venture space follows quite a bit of disruption following the collapse of Silicon Valley Bank and the broader slowdown in deal activity. So maybe can you provide an update on the current deployment environment and LP appetite maybe for venture debt? And then maybe we'll touch on TrueBridge afterwards [indiscernible] starting with WTI.

So look, we have always thought, and we continue to think that the venture debt space is a really attractive one, and it's incredibly attractive from a risk/return profile. I know sometimes people think, well, gosh, like the simple but incorrect narrative is, aren't you taking kind of -- if you're taking venture risk, shouldn't you get venture returns? And the reality is you're not taking venture risk. If you look at this on a risk-adjusted basis, we're running a diversified portfolio of best-in-breed companies with legion structural protections to be able to protect our return. And so -- and the beauty of WTI, by the way, is they have been the innovator in this industry of many of the structural protections that allow you to on one hand, be a good partner to the portfolio companies, but also allow you to protect that return, protect and enhance that return profile on behalf of your investors, whether that's taking warrant coverage or having other structural protections built into the deal. And so they've been a real innovator in that. When you look at their risk-adjusted returns, they're very, very compelling, and they continue to be very, very compelling. And then you're right, what you saw was, over the last couple of years, a real dislocation in the venture landscape, I think, both on the broader macro, but also particularly in the venture debt space with one of the large competitors going through a period of uncertainty. And so we've been in a position to really take advantage of that. And we've always -- our investing philosophy has always been, it's not about -- we're never going to be kind of the very best pricing terms lender. It's about a relationship. It's about all we can do on behalf of our portfolio companies. And so if you want that kind of relationship and if you want that kind of partnership, you come to WTI. If you just want to maximize last dollar, you tend to go to somebody else. And the industry, I would say, bifurcates probably fairly naturally in many ways. And so we've had a network of relationships with some of the leading venture firms. They continue to refer to us because they view us as a partner of choice for their portfolio companies. That's been very powerful and very successful. We're in the market with WTI Fund XI, and we continue to raise there. And I would say, if anything, over the last 6 months, we've seen an increase in both the volume and frankly, in many cases, also the size of really attractive investment opportunities. So we're really excited about what that platform is, and we're really excited to see how it plays out over the next few years because we think we've got a lot of clear water in front of us.

We've got just a minute left. I've got a bunch of questions. I'm going to try to group a couple of them together that are similar in theme. So there's a couple of strategies where you've seen very meaningful fund over fund scaling that perhaps doesn't suggest that you need open-ended vehicles to keep growing, at least for now, TrueBridge, RCP, secondaries, Bonaccord Fund I to Fund II. I guess how do you think about -- maybe there's the questions. How do you think about sort of the limits to scale for Bonaccord Fund I to II to III to -- at what point you sort of max things out? Or do you just see like a very, very long runway? I mean those funds aren't particularly large, but what are the constraints maybe to be considered of?

I mean, again, we always come back to -- one of the other things that I maybe didn't talk about in my middle market answer was people say, oh, middle market, it must be small. If you look at kind of the appendix we added in our latest quarterly presentation, we talk about the size of that middle market. We think we're executing against a $3 trillion market opportunity. And I remind you, we have about $40 billion of assets under management. So we think we can grow and grow meaningfully in the categories we're in. That doesn't mean there's a lot more categories we can expand into. But we are by no means even scratching the surface of being capacity constrained in virtually every one of our strategies. And you're right, Bonaccord Fund I to Fund II, meaningful, more than 2x increase while maintaining great returns, by the way, right? I know that sometimes size can be the enemy of return, not in this case. You talk about some of the things we've seen at RCP in terms of our direct strategies. You talk about all the things we're doing inside of TrueBridge in terms of their successor funds have been meaningfully larger. You look at Hark, Hark IV over Hark III. In virtually every instance, we think that there is a robust market opportunity out there for us where we stay focused on our knitting, but we can grow meaningfully doing what we're doing. And then you layer all these other growth vectors on top of it, going deeper with existing clients, garnering new larger clients, working with different wrappers and different strategies. Those are all incremental and additive to the core growth rate of continuing to execute.

Unfortunately, we need to leave it there. Gentlemen, thanks so much for being here...

Thank you so much for having us. We really appreciate it. Good to be with you.

Thanks, Ben.

Thanks.