Michael Woolhouse

So if we sort of tie together what the general partner says with what well-informed buyers see and underwrite and where the market data is beginning to come out, people are beginning to coalesce around this being a very, very attractive market.

This is why we see

groups following in TPG's footsteps to enter this marketplace because they see the attractiveness from the underlying companies and the track record of success that the sponsors have had with them.

They see the return opportunity being very attractive and the risk being low.

There is potentially, at least in theory, a conflict between higher returns and lower risk.

How is that possible?

I'd say there's three, maybe four things that are behind it.

The first is there is a significant supply-demand imbalance in this marketplace where there is an excess supply of deals.

and not enough capital and capability going after that.

So that is, perhaps that's a temporal thing, but I think that's gonna persist for quite a long time.

That's at the market level.

But if you look at the individual deal level, there are three things together, which I think result in this really attractive return relative to risk dynamics.

The first is what we call positive selection bias.

Remember the companies I've talked about here that are the purview of this market, they're the ones that are special.

They're the ones that, you know, a sponsor invest in,

15, 20, 25 companies in a fund.

They've owned them all for a period of time.

You never know really what the great one's going to be at the beginning, but after they've owned them for a period of time, they sure do.

And it's those special companies, we call it positive selection bias.

They only want to do these deals in the companies that they really think are what we call long-term compounders.