Thank you, and what amazing advice we have all been the beneficiaries of, not just most recently from Adam U, but this morning. I thought I'd come at this my own way, and when I tell my organization, "Don't be defensive, be curious," change is a constant. We as investors, we in financial services, I think have consistently underestimated the impact of change. We've been resistant to change, we've denied change, we stick to the status quo, and I thought I'd just maybe share some examples of change and how impactful it is.

So this is now my 40th year doing this, and I tell my team I look back over 40 years, and when I started, no high-yield bonds, no leverage loans, no ETFs, minimal securitized product. Now those four products are incredibly dominant in our financial landscape. Why do we think they're going to be here in five or 10 years? Why do we build investment strategies on them? Are the circumstances that allowed them to essentially take hold still the circumstances today? I don't know.

I look back again over 40 years, and I think we've lived in a period of tailwinds for my career. I think I've been very fortunate. I think most of you have been very fortunate. We've had four tailwinds: rates have gone from high to low, we have printed an awful lot of money, we have borrowed forward future demand through fiscal borrowing almost everywhere in the world, and we've had the benefit of globalization. Are any of those four things true going forward? I don't know. I think there's a healthy debate as to whether they are headwinds, but I would argue I think we're in the absence of tailwinds.

Why would we think the investment strategies that work for the past 40 years would work going forward? Is there actually any value to track record over the last 10 years, or should we just completely throw it away? We all as investors take great comfort in looking at the last five years, the last 10 years. What are the chances that we're going to print in the US another $8 trillion, and everything will go up and to the right? Why would track record be relevant?

I think a healthy skepticism. You were in 2019 the best investor in the world. You left Norway and you moved to Austin, Texas, and all you bought in Austin, Texas, was multifamily, and you bought multifamily in all the right locations, and your buildings are now 100% occupied, your rents have been growing 10% a year, you took out your 60% mortgage at 3 and a half percent. You were feeling great, you were the best investor in the world.

What's your equity worth today? It's a math problem: rents up, cap rates up, your equity is worth 50 cents on the dollar. Were you a good investor? Well, in '19 you were a really good investor, in '20 you were a good investor, in '21 people were not so sure, in '22 you went to the bottom of the barrel, and in '23 people are pretty convinced you were lucky, not smart. Maybe we should use the words "enterprise software" instead of "Austin, Texas." Maybe we've been living in tailwinds, and we have to learn to accept change.

I know in my organization a lot of the things that Adam just said we do. There's active encouragement of intellectual insubordination, which I distinguish from outright insubordination, because that makes it difficult to run the business, but there is no hierarchy for a good idea, there is no ability to feel uncomfortable. This is something we actively promote. I gathered my partners in January. Every couple of years we get together and we talk about the future, and I started with Apollo in 2008. Apollo in 2008 was $40 billion of AUM. Apollo in 2023 was $650 billion of AUM. We outgrew 14 times. We outgrew Apple, we outgrew Microsoft. I think we outgrew everyone other than Nvidia, by the way, all organic.

Next question: were we lucky or smart? Come on, you guys know this, we were lucky. You can't possibly expect to grow a financial services business at 14 times. We were smart only in that we were in the right place to prepare for change, and change happened. Think about the trends that drove us from $40 billion of AUM to $650 billion of AUM: financial crisis in 2008 weakened most financial institutions, they were playing defense; rates going to zero pushed investors who had made promises to retirees to look for alternatives. Those are the factors that drove our growth.

And so, sitting in the beginning of 2024, I'm looking out and I'm saying to myself, "Where's change coming from? How do we first accept that the success that we've had is based on a series of things that no longer exist? How do we prepare the organization to accept change? What happens if we're wrong?" I think I'm wrong at least 40% of the time, which would make me, in baseball terms, the most productive player ever. Well, let's create an organizational culture that accepts that you can fail and fix your mistakes quickly. Let's not fire people for making bad decisions; let's fire them for making no decision. And that's, I think, what we've done.

So I sit out and I think about what the team said this morning, what you heard from Wellington, what you heard from Helman and Freeman, what you heard from Oak Tree, and I think all of it is true, and I'm going to add my gloss on top of it. I think we as investors are not mindful enough of the massive change taking place, and I think some of the change is predictable, so I'll give you how we are building our business based on change on things that we observe.

2008, we nearly destroyed the worldwide financial system. We implemented massive amounts of change. None of us, me included, have yet to experience any of that change, because right after we changed the rules, we printed $8 trillion, and everything went up and to the right. We've now had about 18 months of living with change.

So what could we observe? Easy one: are public markets liquid? I don't think so. Maybe on the equity side that's true, on the fixed income side, no. 2008 put an extreme penalty on market making capital in fixed income in particular. Market making capital is 10% of what it was today of what it was in 2008. Markets are three times their size. Yes, we are living with a 30th of the liquidity. It now takes five days to sell an investment grade corporate bond outside the top 20.

We've actually witnessed wholesale market failure, this cute little thing called LDI in the UK. This was not some crazy thing UK institutions were doing. This was a mistaken belief that they could sell AAA and AA obligations at or near the market price. They were wrong. They started selling, the price collapsed. Bank of England ultimately had to step in. Should we actually think on a go forward basis that this is the norm, that liquidity only exists on the way up, it does not exist on the way down?

Why do we want to be public? Why do we actually distinguish between public and private? What is actually the difference between public and private? It's not clear to me that there's any liquidity difference. Equity is aside.

Second big fundamental change: 2008, most of the regulation around the world, not just then, but continuing to today, has to reduce the role of banks in the economy. Everywhere in the world is going through de-banking at different rates. In the US, banks today are less than 30% of debt capital. Investors are the other percentage. Every regulator, every government everywhere in the world has two choices: capital can come from banks, or capital can come from investors. There's no third choice. Once you choose investors, you have two more choices: they can come from the daily liquid public markets, or they can come from institutional private markets.

Think about the priorities, particularly in Europe: energy transition, climate change, infrastructure. Everything I just mentioned is long-term. Why would we want that funded on a daily liquid basis? Wouldn't we want that funded in institutional markets to match liquidity? Where is systemic risk? Think about why banking is being disfavored. Banking is being disfavored in part because banks borrow short and lend long. Do we really want more borrow short, lend long by using more public markets, or do we want private markets?

This whole rethink of the role of a bank, the role of an investor, is a massive change. We as investors are going to experience products in the financial, excuse me, the fixed income space that we've never seen before. Risk rewards, products, returns that have been locked on the balance sheets of financial institutions for the last 40 years are on their way to you as investment products.

We're all going to have to overcome biases that we have about public and private. Other big change: indexation and correlation. Do we have price discovery in US markets? I don't know. 83% of the US market is S&P 500. 10 stocks are 35% of the S&P. Those 10 stocks trade at a 45 PE today. How many of us come in every day trying to buy 45 PE stocks? Probably none.

On the other hand, think of the largest pool of capital in the world today: $12 trillion sitting in 401K for us mid-market investors, people who really need returns. What are these people invested in? Daily liquid index funds for 50 years. Why? Why do we have people invested in daily liquid index funds for 50 years? And it'll go to where I think change is really coming.

We are going through an entire evaluation of public versus private. In my 40 years, I certainly grew up thinking public is safe, private is risky, and for most of my career that's been true. Private was three products: venture capital, hedge funds, and private equity. All three are risky. Public was safe. In the US, at least 8,000 public companies, diversified portfolios of stocks and bonds.

What if that's not the case anymore? What if private is both safe and risky, and public is safe and risky? How should we think about investing? How should we think about portfolios? Most of us, most institutions, operate with a private bucket or an alternatives bucket. Why don't you have a public bucket rather than a private bucket? Market: we went from 8,000 public companies in the US to 4,000 public companies, and I would bet that's going to go down, not up. Shouldn't we have half our money in private?

I think we've looked to private markets for rate of return because we've always perceived it as more risky, therefore more return is desired. I think we're going to look to private markets for diversification. I think to escape indexation and concentration. I think we're going to look to private markets. I think we're going to rethink the whole notion of risk and reward, the things that we've taken for granted: that public is safe and that private is risky, that banks are a sort of debt financing, that daily liquid. By the way, why do we have daily liquid funds? I don't know. Why does an institution with a 20 or 40-year time horizon concern itself with liquidity? I don't know. These are we are breaking taboo.

Investors right now are confused, and they're confused because they're looking back at history and they're saying, "This worked," but what they're not yet willing to do is to question the fundamentals. Is the system totally different? Have things changed? Are we in the absence of tailwinds? Am I willing to revisit underlying assumptions?

Think about the following, like coming back to the notion of price discovery. Active management of equity is a really difficult business. Very few people do it really well, have the discipline, have 60 teams. If I told you there was a market where for 20 years 93% of the participants failed to beat the index, you would be concerned. Did these people get stupider? I don't think so. Well, has the structure of the market changed? I think the structure of the market has changed. I think the whole notion of daily liquidity is going to change. We are betting on that. We've built a business that is $650 billion today, which will be twice its size in five years, based on a bet that investors are going to revisit how they think. It is already happening.

So if you take the typical investor, and I'll take your portfolio, but then I'll simplify it. A typical institutional investor that invests with us is 50-ish percent invested in public equity, daily liquid, 30% invested in fixed income, daily liquid, and 20% in everything else. Why? No one knows. That's what we've done, that's what's worked historically, and we're actually watching this change in real time. And the place it's changing first is in fixed income.

A single A-rated private security, is that an alternative or is that fixed income? I ask CIOs this question all the time. It can stump them for an hour because we've all grown up thinking this thing doesn't exist. We are watching institutional investors look at their fixed income portfolio, and they are moving their fixed income portfolio not into public and private, but into alpha and beta.

We are going to watch a turnover of the fixed income portfolio of institutional investors move into private markets. And the reason that's happening is there's an arbiter, there's a rating agency. Someone can say, "This was A-rated, this was A-rated." You can pick up 200 basis points of yield for moving. Therefore, we should move since we don't need the liquidity.

What about if the same were true in equity? What if people took their 50% equity bucket and they actually thought about diversification? They thought about the number of public companies, and rather than think about private equity, because private equity, and I know the debate is taking place in this country in real time, private equity is levered equity. It's in a fund structure. It produces some binary outcomes. What if we talked about equity that's private, rather than private equity? That's going to be a harder move for people because there's no rating agency yet that is willing to allow people to talk across the spectrum of public and private and equal risk. But that's the world we live in today. More companies are going to be private. People who are not invested in equity that is private are missing out on half of the marketplace. They are concentrating their portfolios.

The notion that their public portfolios have performed well in the past does not surprise me. We are indexed and correlated. We have been driven by money flows. We've printed $8 trillion in the US. 100% of last year's return was essentially 10 stocks. Everyone has woken up and discovered that they own Nvidia, Apple, and Amazon, and Microsoft, and it's levered the same way. It's not clear to me that that's sustainable.

And for me, as a leader of a business, I think Adam's notion of humble confidence is actually a really good one. We all are confronted with change. We're all confronted with uncertainty. But while we do the little things to deal with change and uncertainty, and we reflect contrary opinion, and we allow for intellectual insubordination, how many of us actually force the organization to fundamentally rethink whether the things we think are true are true? I want to challenge that. I want all of you to think about that.

I don't think what we've grown up in exists anymore. I don't think the financial system works the way we think it does. I think liquidity is different, the sources of debt are different, indexation and correlation are different, the whole notions of public and private are different, and I don't think the strategies that we've employed over the past 40 years are going to work going forward. That's a really uncomfortable thing for us to deal with, because we're all used to doing due diligence and looking at track record, looking at historical correlations. It's not clear to me that that is any value. Thank you, this has been great.