Introduction (voiceover or host)
Welcome to the Global Market Outlook 2023 brought to you by RBC Capital Markets. In this audio cast you'll hear insights from Graham Tufts, Harold Varah, and Ram Amarnath, Co-Heads of our Financial Sponsors Group as they talk about their outlook for the year ahead.
Graham:
Great to see you guys again. So Harold, how are you feeling about the outlook for the next year in light of the macro at the moment?
Harold:
Graham, that's what everyone's asking. And the short answer is, I'm not sure. ‘21 was such a phenomenal year on so many levels, but it's hard to see it replicating ‘22 is actually in a lot of ways, much more normal if you actually look at the numbers. And so if you think about, let's just level set before we talk about ‘23. So ‘21 was kind of that the perfect conditions, right? Fiscal, monetary stimulus policy, so conducive to deal making, low interest rate environment, a lot of pipeline and backlog from covid. Yeah, issuers sitting on the sidelines, private equity firms wanting to sell assets waiting, all of a sudden, they saw that window.
Graham:
Plenty of financing, liquidity,
Harold:
A lot of financing. And then at the same time when private equity firms saw how conducive it was to deal making as they thought about exits, they brought forward things that assets they probably wouldn't have sold for a year. And so ‘21 was just this confluence of unbelievable conditions. Everyone knows the numbers coming to ‘22, no one expected it to repeat ‘21. However, I don't think we all expected what we have had in this year, which this year has just been incredibly volatile. And everyone knows that it's not just about the stock market, it's about it from our asset class, from our client base. Private equity firms have tried to navigate these waters and what we've seen is 800 billion of deal volume, which is other in the last 10 years. That's the highest that we've seen other than last year. So still a very strong year on the m and a front, very strong year on our clients deploying capital on the exit side.
Harold:
That's really where we saw a major difference in 2022 where the conditions were not conducive to monetizing some of the previous investments similar to ‘21. We'll talk more about that in the podcast. As I look forward to ‘23 I think, and this is what we should spend some time talking through, it's gonna come down to global, the global economic environment and what that outlook is. I think if we start to see real headwinds and signs of a deep recession, I think it's really gonna impact the ability of our clients to monetize those assets. And even with dramatic amounts of dry powder, have the conviction and deploy. If we see a little bit more of a leveling off of the fed interest rates geopolitical environment in Europe calming down a little bit. I think there's a lot of opportunity.
Graham:
It's interesting isn't it, that reduced velocity of capital and assets changing hands at a big knock on effect. And then when you overlay the macro outlook, it becomes a lot harder to predict what ‘23 holds.
Ram:
Yeah, I agree with both you guys. Graham and Harold are great points and great introduction. Harold, looking into ‘23, what's actually interesting about our client base though is if you look at the history, not just ‘21, but you look at the history of a lot of our clients where they've made some of their best returns and some of their best investments is going into environments like we're about to go into. So on the one hand, there's a lot of uncertainty with respect to everything that you just mentioned. On the other hand, I think you're gonna see a lot of our clients look at a lot of opportunity because while some of the numbers that you mentioned are very large, our clients are sitting on 4 trillion of dry powder today. So I think with this kind of environment, I'm curious how you guys think about, well what are they gonna be doing now and where are they gonna be putting all that money?
Harold:
Yeah, no it's a great point. And I'll tell you, the tagline on all these advertisements that says the past is not a predictor of the future. I think that to your point, I think that does not apply to the statement that private equity firms, if you look at the vintage of funds deployed during periods of economic uncertainty or economic pullbacks, always outperform funds deployed during periods of calm or economic growth. And to your point with the dry powder, but more importantly also I would argue with the diversification of asset classes certainly versus where the industry was, let's say a decade ago. Right now the private equity industry is 11 and a half trillion, trillion dollars and that's now cut across all kinds of asset classes that quite frankly didn't exist a year 10 years ago. Whether it's obviously the traditional buyout, but just think about infrastructure, think about credit, right? Real estate, growth. And so to your point, Ram, as they think about opportunities and ability to deploy across all those different asset classes, pools of capital they didn't have even during the last financial crisis, I think it's a really compelling time for a lot of them.
Graham:
It definitely is. And I think that one of the interesting features as we move forward into ‘23 is kind of big, the ingenuity that they show and it's an invest class that historically has always been very innovative at dealing with the challenges that the markets throw up. I think the challenge for us as bankers is to continue to find the right ideas to continue to find ways to finance these deals because the barriers to getting some of these transactions done are actually more based around the financial aspect of it than necessarily the amount of money that they have to deploy.
Ram:
I Think Graham, that's a great point and that goes back to the points I think that Harold was making before as well. When you look into environments like this and some of the client base that we're talking about, ingenuity, innovation has always been important and the classic LBO and just making returns on leverage I think is not gonna be the playbook it hasn't been. But I think going into this environment it really won't be. So some of the other things that our clients can bring to the table with respect to operating expertise or other forms of capital or other ways to really drive those returns are gonna be paramount in terms of differentiation. Yeah
Harold:
That's a great segue and Graham to talking about what we're gonna see in 2023, that's how you first began, Graham with the question mark you had is like what's the new normal, what's the deal environment? I think we've established that our clients are pretty excited about, especially the ones that have their fundraising in the rear view mirror. And we can talk about fundraising a little bit later, but those that have the dry powder and there's many of them and much of them are the mega funds are certainly excited about going into this year. But I think we should talk about the types of deals because and that creativity around how they're actually gonna get them done because just simple math, we've seen senior secured cost of debt pretty much double this year from 5% to 10%. Yeah, you can do the math. At the end of the day our client base is looking to make the right returns.
Harold:
And so one of two things has to give one you over equitize transactions, at least in the near term, right? Because you cannot handle the catch interest burden is what it is. So you fundamentally are gonna have to have conviction that you can recap and take equity out after the fact or buy cheaper. Our clients would rather pay less. But what we've seen so far, and that's why ‘23 is really interesting and love your views Graham Ram, which is when are we gonna see a little bit of a give because I'm pretty enthusiastic about take privates, I'm pretty enthusiastic about corporate car votes for 2023, but it's all gonna come down to meeting of the minds around valuation and boards tend to be a little bit stuck. Private valuations tend to be slower to adapt. And so I'd love your views on how you think about the deal environment and where we can we'll actually see activity.
Graham:
Yeah, it's really interesting Harold, because when you think about those opportunities that you've just talked about, I think about the P2P opportunity, I think it's a fantastic opportunity. I think it's certainly the challenge that we have at the moment is how long do those valuations stay where they are and how long do the debt markets remain relatively dormant and inaccessible help create some to help finance some of those transactions. Ultimately that comes back to finding different pockets of capital, whether that's the private debt capital market or whether it's the bank balance sheet market. Again, if we look at other dislocations historically when the market comes back it tends to be the best credits that come out first rather than the worst. That's an obvious statement, but you tend to see lower leverage, you tend to see greater bank balance sheet usage in some of those transactions. And of course we now have this pool of private debt providers that can also support those transactions. So we're an interesting sort of inflection point as to when the confidence comes back to make those buy decisions, whether they're public to privates or other transactions, when the confidence does come back, is the financing market gonna be available?
Harold:
So we should talk about the debt markets you want. I mean we should talk about, because that's to your point, especially on the larger side for the largest transactions if you don't have a well-functioning syndicated leverage finance market, just difficult for a client base to transact even with the private capital you mentioned.
Ram:
Yeah, I totally agree, and I think a lot of these points are interrelated. I mean we're talking about when are the credit markets gonna come back and be well functioning, the lag and the dislocation between buyers and sellers with respect to valuation and confidence. If we boil down the three things that I think I just heard, you guys talk about and all those will be important for a well-functioning market next year. And on the point on valuation, I mean we've seen this over and over again. There's always a lag between valuations kind of normalizing, but with time, 52 week highs go by on the public side, liquidity will be required on the public side, on the private side. So I think that should come through. Look on debt markets, I think my view and I'd be interested in each of your views is that there will be a new norm. These markets will come back. We talked about liquidity and people having to put money to work I think will come back. I think just when there's a little bit of stability on where rates are going and there's a little more of normalization of okay, this is where things are. I think we're gonna see debt markets like we did guys five or 10 years ago, which is good markets maybe not as robust as before. Rates higher in terms a little bit more stringent but still well-functioning. That's the key word.
Harold:
I completely agree. It's all about how well functioning they are and you're absolutely right. The new normal, the cost of capital. When we see stabilization around where the Fed is going with rates, I think that's exactly when it's gonna be right for deal making. Graham spot on quality always leads us out of dislocation. And so you should expect there to be well capitalized, well-structured, and just unbelievably strong credits. And I think tends to be on the larger side as well. These are proven companies, companies that maybe have been private equity owned before that are now public. And that's I think assets that are being carved out that maybe are non-core from investment grade rated corporates looking to kind of shore up their own balance sheets or have dry powder for their own m and a and divesting non-core assets. So I think we all agree that we're gonna see a return of the leverage finance markets both high yield and leverage loans.
Harold:
We spend a little bit time talking about fundraising. It's always such an interesting topic to so many of people probably listening to this and just generally in our industry, right? Because it drives so much of what we're talking about, the dry powder numbers, Rama's throwing them out there in the trillions, they've been there for some time. I think what we've seen this year is interesting. I think the fundraising, when the year is settled, I think the amount of dollars raised will be comparable to last year. So you say, well that's the first time in this discussion we've actually said that ‘22 and ‘21 were comparable. So that must bode well and it does. But what's interesting is two thirds of those fund of the funds that launched in ‘22 will not actually have their final close this year. And so there's a lot that's been pushed out into ‘23 and that's because I think in the last few months we've seen a real slowing of ability of firms to raise and that's including the mega funds now most of them are done at this point and they're still like, again, they're working through and they've done first closes, but a lot of these smaller firms that thought that they would raise this year have not been able to.
Harold:
And so as you think about the deals that we're gonna see next year, I think we will see more of a bifurcation between these larger funds getting larger. They continue to be able to drive massive amounts of fundraising with huge IR functions across all their asset classes. Very diversified. Some of the smaller pure play buyout shops, mid-market in that market. Again, still robust. Still was a good year this year. It does pretend to be, and I'd love your views. I think it's again, very crystal ball. It's really hard to know. But what are the types of deals we're gonna see in ‘23 if you have a lot of these funds that just don't have the dry powder that they'd like to have to be able to deploy into maybe the middle market.
Graham:
I think just before we go onto that as well, I'd like to ask around, given all your closeness to a number of the big pension funds who are LPs and who are part of this fundraising process, they've all obviously got an issue at the moment with the allocation of capital across all of the different asset classes that they invest in. There's a denominator issue at the moment. What are you hearing from that client space around the fundraising aspect that we're talking about at the moment?
Ram:
It's a great question. On the one hand I would say Alts as an asset class are not going away because alts have actually served really well. And one of the advantages of alternatives and why I think we're gonna continue to see that growth going forward is it does offer a lot of the things that people like. It's not correlated risk. It actually is an inflation hedge. It has a lot of the attributes that any portfolio construction likes. So I think from that perspective I'm quite bullish. On the other hand though, this plays right into the point that Harold was talking about. There's no doubt that LPs are being a lot more discerning in where they put their capital and how they put their capital, both where they put it, but how they think about it from a strategic perspective too. Whereas I think you would've seen historically people spread those dollars out and think of diversification in that way.
Ram:
I think they're being a little more thoughtful of where they put the dollars and the diversification comes in the various types of asset classes that they can play within those complexes well. And so that is I think the trend that we've been seeing and it's really been magnified in the past year and I think we're gonna see that continue. So I think LPs aren’t going away. I just think they're being a little more discerning. So if I were also to make another wager on this podcast, I think the dollars towards private equity will continue to grow. The number of funds that we're going to see is going to slow down significantly.
Harold:
Yeah, no I think Ram, it's such an important point and it's the corollary, it's not just the dollars they're being deployed, it's where are they being deployed to. And I think what we've seen is that they're being deployed by pension plans and sovereigns and high net worth into names that they know into names where they previously invested. And so the number of first time funds is much is going to be, it's much harder to raise that inaugural fund unless you have a tremendous track record. So I do think that again, I think there's gonna be a place for younger funds and smaller funds.
Harold: But now let's talk about exits. We're gonna come in around 300 billion of exits this year that is in the last decade. Only two years have been lower than that and that's 2012 and 13. So we now established they're putting money into the ground because that's where our clients do they find ways to deploy their money. They don't like to sit on cash, we know that, but they're not actually being able to exit. And I think that's a nice segue also to think about what's, what's 2023 for the IPO market because you can't talk about sponsor monetization’s without an IPO market. And we've used the word, the term well-functioning with respect to the debt market. I think we can all agree maybe, I don't know if the IPO market just not, I don't know if it's not functioning, not well functioning, poorly functioning or just non-existent, but it feels like it's at least for most of 2022.
Harold:
And you also of course have an incredible amount, a huge class of 2021 IPOs that our clients did, and they haven't been able to do follow-ons. So you haven't seen the monetization’s further monetization’s for the ones that actually did go public because of the environment and because of where a lot of those stocks are trading. But that's their path of liquidity and of course haven't seen the pipeline grow into potential IPOs for next year, but it didn't happen this year. And how do you actually get your LPs to keep investing in your funds if you don't actually return capital to them at least on a timely basis.
Graham:
And it's an interesting dynamic as well, isn't it the IPO exit versus either a trade sale or a tertiary LBO. The more options that are on the table for our clients, the greater the arbitrage between valuations in those different exit routes. And without an IPO market you are left with a narrower exit route and to have an implication on valuation as well. So it's not a straightforward situation for our clients to have to deal with I chat regularly with the ECM guys in London. And certainly at the moment when you look at what could potentially come to the market in 23 or 24, they're skeptical, I think of the amount of demand that there might be for some of those names at the moment. Valuations that sponsors would want to sell at.
Ram:
Yeah, I mean this to me plays into a lot of the same themes actually that we've talked about in terms of when will a well-functioning market come back, what is required for that while functioning market to come back? I mean my personal view on the IPO market specifically, which is it comes into a lot of the factors we talked about with the credit markets and a little bit of stabilization will be required. And I think the point you made about the first big credit deals that come out are usually the best ones. I think that's the same in the IPO market. So the best companies will come out first and they'll usually have good discounts. IPO investors will make money and when they start making money again, you'll start to see more IPOs. So I think that market will come back.
Ram:
I think the bigger question I think that each of you I came out with is a very good one with our client base is there was a time when the public markets dwarfed the private markets. So that was an easy kind of way to exit. Today the private markets are comparable to the public markets, so there are only so many companies that can go public and that will be well received to go public over time. So that'll be just an interesting question as we think about that exit route, which used to be kind of the base case may not be the base case going
Harold: Forward.
Graham:
Harold, you raised it a little bit earlier, I'm seeing more inquiry around stakes in other public companies using strategic opportunities funds. To your point around the different asset classes that they can now invest in or partnerships with corporates, those types of approaches,
Harold: Minority,
Graham:
Minority, state, sales, those sorts of things becoming far more prevalent. Do you think we'll see more of that in ‘23 because of the dislocation? Is that a possibility?
Harold:
I mean I guess I would jump in Graham and just say that the proliferation of these strategic capital, flexible capital tech tactical opportunities, funds has exploded in the last few years. And I think if you're sitting as an investor in one of those funds right now, you're very excited about next year because that flexibility to solve problems for whether it's sponsors or corporates that they have in their charter, which a lot of the other funds do not have, I think they're gonna be overwhelmed with opportunities next year. And there's just gonna be a question of actually having to try to brush away all the opportunities to finger figure out which ones you actually want to spend time
Graham:
On. And I think you're absolutely right because I think to your earlier point, Rob, about the number of operational partners that are clients now have working within them and therefore the added value that they can bring to a corporate in terms of operational capability M&A capability is huge.
Ram:
And it also solves Harold's point, which is finding another way to do a transaction where one can see the exit a little bit differently than just selling to another private equity. So I think it fits all those things.
Graham:
There's lots of different challenges to the IPO exit route. And again, I think to your earlier point, I think that's why you see sponsors showing a preference for trading between each other as opposed to necessarily going to the public markets. You've got that certainty of valuation, it's a complete exit. Maybe if you really like the credit and you think it's got the underlying business and you think it's got further to run, then maybe you can co co-invest and roll forward as well through a continuation fund vehicle or whatever. So there are definitely different ways to look about it, but it also brings to mind some of the geographical differences that we see today in our markets. And I think one of the issues we have in Europe at the moment perhaps is I feel we're being hit a little bit harder perhaps in the US given our proximity to some of the major political issues that are going on in Europe, particularly obviously the Russia, Ukraine crisis, the knock on impact that that's had from an energy perspective. And I look at North America and see it as a little bit more insulated perhaps from some of those energy issues that we're facing in Europe. But it does I think mean that the immediate outlook in Europe for 2023 is highly volatile and potentially quite negative until we get through to a situation where we start to see some good news flow and we're not seeing a lot of good
Harold:
News flow. Well that's an interesting point and it's important point because again, back to what we were just talking about, the types of deals we may see in 2023, the one thing none of us have mentioned are those large cap cross-border transactions or combinations. And that doesn't mean there won't be, but when you have one, if our client base is looking through a lens which is much more rose colored in certain geographies versus others, it does probably pretend to the difficulty in seeing large scale European take privates by US firms or vice or combinations or the like. I actually, I love your views on that.
Graham:
I think, look you're absolutely right. I spoke to a couple of clients in the last couple of weeks who've both expressed relatively negative views on Europe for ‘23 much more positive on North America, Canada. So there's definitely a view out there at the moment that there will be some regional variation. I think as we go through ‘23, I think Europe will come back. It's a robust financing market historically and if it will return and there's just as much dried power floating around the system in Europe to keep that market healthy. It's really a question of getting past this uncertain period that we're in at the moment.
Harold:
I don't think any discussion among the three of us could be complete as we think about the private equity industry, our role as bankers advising and financing our clients without at least some discussion on the private capital environment. And we've mentioned in passing as a way that our client base has thought about doing transactions, has used that pool of capital. I'd love your views as you think about ‘23 because we've certainly seen and up to the right in terms of dry powder that they've raised in those private capital pools, the penetration that they've had in the overall syndicated leverage finance markets kind of reaching about 25% I think at the top as we go into this period that we've all been talking about and potential uptick in defaults and some other problems that they could have with their portfolios. I've certainly heard some views about the same have and have nots. So we've talked about the private equity side. Could you see something like that with the private capital arena and what does that mean for sponsors as they look to more traditional financing sources? I guess I can call us traditional and sitting in a bulge bracket. I guess we're traditional, I don't know what that makes them, but I love your views on how you think about that world in 23.
Ram:
You're talking about debt private capital specifically? Yeah, I think you kind of answered your own question. My personal view on that is that market isn't going away. I mean that market's actually been growing for several years and we've seen, especially in this dislocated period, I think those folks really kind of play a big role. But I have a view that in the same way that we're talking about our equity clients, I think there's gonna be have and have nots. I mean on the one hand some people won't be able to raise funds again as my view, because I think you're gonna see defaults and some investments that may have looked good that probably aren't good now. But I think you're gonna see a lot of folks, by the way, some of our same private equity clients that are the ones that are the biggest sure folks in this asset class. And I think this goes back to the LP point actually because you asked me about where LPs are investing. I think LPs are investing in fewer funds but more complexes that can offer them more products. And this is an example, one
Harold: Stop shopping
Ram:
One stop shopping. So this is an example. So they're able to get the exposure to various asset classes including private debt. And so I don't see that going away.
Ram:
I think you're gonna see a more GP to GP activity going into next couple years. Some of our large multi-strategy clients are going to look out where they don't have or where there might be some very good niche GPS out there that will also look for a home because that's gonna help them with their LP fundraising. So we look into trends in the next couple years as we've already seen. There's been some big ones. I think you're gonna see more GP to GP to your point Harold.
Harold:
Yeah, I know and that's why we say their clients because our financial institutions bankers are thrilled to have that conversation I'm sure any day. And so I don't disagree at all. I think it's gonna be really interesting to see how that market, because if you think about it, it's still reasonably young, it's right, it's it, it's grown so quickly, it's matured quickly. But I still think that there's a lot more to, a lot more to come in that market And for us I think there's a lot of opportunity, there's a lot of ways that we can partner with them, advise them and to continue to compete with them on certain, certainly in certain sectors more than others.
Harold:
One thing I do wanna talk about as well before we close is as we think about the outlook is we haven't really gone into any sectors. We haven't talked about specific sectors and where we think activity is gonna be in the last five or six years I think we've seen that tech and healthcare have dominated the landscape for financial sponsors. They've been the number one and number three sectors respectively in terms of wallet and fees paid to the street industrials right there in the middle at number two. Graham, do you have any views, and I love the European perspective, as you think about opportunities and where our clients are gonna continue to deploy capital, do you think that those are the sectors that are gonna remain at the top of the heap? Do you think there's gonna be some variability there?
Graham:
I think at the start, as we talked about earlier, that you, you'll see the stronger segments come out first and healthcare and tech strong cash flow sectors, strong demand sectors will continue to function and therefore will draw a lot of attention. We've talked about multi asset strategy stuff. The infrastructure side of our world in Europe continues to perform and I think the infrastructure space will stay strong and I think that for all of the obvious macro reasons, the challenged areas are gonna be consumer retail leisure certainly in the near term. But at the same time that can create opportunity depending on the type of transaction you're trying to strike at that particular point in time. So I do think healthcare and tech will remain strong. I do think that we are in a strange such strange macroeconomic environment on the back of a Covid driven environment that was extremely healthy from a funding perspective for our clients. It's gonna be interesting to see where they want to deploy now with a few to maximizing return but perhaps minimizing risk.
Harold:
What about Canada? Because certainly sitting in the US a lot of our clients and they obviously turned to us as RBC but are always really interested in being able to play across sectors in Canada. Do you have a view Ram as to tech, I mean Canada tech energy, what do you think?
Ram:
I don't think it'll be massively different than what we've seen previously. Obviously, Canada is an op-ed for energy and resource sectors, but I think to your point on tech and healthcare, the trend in Canada has followed suit with what we've seen in the rest of the world and the last few years we talked about IPOs and a lot of companies going IPO maybe a little bit too early or catching the wave, but there's still a lot of good companies. So I think when we talk about P2P opportunities in Canada, I actually think a lot of them will be in healthcare and tech and that there is a tremendous amount of opportunity there. The other sector in Canada that won't surprise you is I think there's gonna continue to be a lot in the infrastructure kind of services area where there's a lot of opportunity for our clients to put money to work.
Harold:
Yeah, I think that's well said and certainly we're all very bullish on infrastructure. It's just been proven incredibly resilient, and we've seen that this year that should continue. And I don't disagree is I think about sitting in the us, healthcare tends to be viewed as a cyclical and that's obviously an area where you know want to deploy and if you have the ability to do it and you actually have the know-how operating partners, you can look really smart buying healthcare right now. And so I don't disagree, I think ‘23 should be a very busy year. I think healthcare services will probably take a bigger piece of the pie versus maybe even healthcare tech where there's been so much HCIT deployment the last couple years.
Graham:
What will be interesting I think is the industrial spaces we come out of what I think we all expect to be a bit of a recession or environment, particularly across Europe in the near term in’ 23 and what valuation opportunities that creates for people. There's been a big supply and demand imbalance that people have been living with for quite some time now through the impact of covid on the supply chain. I do think that there will be some industrial opportunities, some aerospace and defense opportunity that come out of that as spending goes back into those segments and demand in those segments recovered. So there's a lot to be positive about I think as far as ‘23 is concerned.
Harold:
No, I agree. And the one thing we've learned with cyclicals, it's all about when you buy.
Another area where I think we're gonna continue to see focused. To your point, Harold is on energy transition. I think there's a lot of money that's been put to work from our LPs expecting our clients to think of ESG in everything they do. And there are some dedicated funds in that respect. And there's also just part of the overall flagship fund strategy. So more money's gonna go into places where you're gonna try to reduce carbon footprints and things of the sort. And that's a good place, to your point earlier, Graham, where capital can be put to work where it's needed for corporates as an example where that capital isn't there today, but there's a lot of pressure to do so. And I think that plays into valuation. So that's not a sector in and of itself, but I think it's a theme that's gonna play into a lot of sectors.
Harold:
I think it's a theme and I think it's critical going, tying back into everything around that we've talked about around fundraising. LPs are demanding that there's an ESG strategy, they care about it, they're asking about how our clients are thinking about it. Some of our clients are actually having ESG dedicated funds. Some are just thinking about it in the context of how they're deploying capital and the types of transactions that they're typing they're doing with clean energy or otherwise governance big areas. I think what we'll hopefully see in ‘23 is more of an industry wide definition or standards of ESG. I still feel like most of the clients I talk to define it differently, which is makes sense, is still relatively new in terms of how they're thinking about it and how they're thinking about the sectors that actually qualify or they can characterize as ESG. And I think that will be interesting to watch because it's a big part of, I think where our clients are gonna focus on in the years to come.
Graham:
I agree. And look, all our clients have dedicated ESG teams now, not just working at the GP level, but helping at the portfolio level with the company management teams and helping drive their, their ESG functions and their ESG responsibility. We've seen debt deals with ESG ratchets. There's a lot going on in that space. It's here to stay. It's a huge area for consideration going forward. We'll see a lot more of it and it's nice for us. I think RBC and we have dedicated energy transition teams across the globe now. There's a conference in London in the new year on EV transition and battery technology. There's a lot happening in that space. And when you link it back to some of the mining expertise that we have within the firm as well and what that means in battery technology and things like that, it's a massive theme.
Harold:
Absolutely a hundred percent. So listen, I think what we can all agree on there won't be any wages on this, is that we we're very fortunate to be able to lead private equity coverage at a global firm like ours. And we cover some of the most exciting and innovative sponsor clients who are gonna absolutely look to put money to work in this environment. And of course we're well situated to help them. So I think the one thing we can say regardless of geography or sector is that we're incredibly bullish about our client base and our client base's ability to make money, continue to raise capital and continue to hopefully use us on everything that they do because that's what gets us excited about when we wake up in the morning.
Closing (voiceover or host)
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