Alternative Allocations: The World Rewired—AI, Private Markets & the Future of Investing

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To kick off our fourth season of the Alternative Allocations podcast series, I sat down with John Bowman, CEO of CAIA Association, to explore the massive changes underway across our industry. John and I discussed CAIA’s seminal paper “The World Rewired,” and the implications for private markets. The paper was a compilation of key findings from eight global leadership roundtables with CEOs of asset management firms, CIOs of limited partnership (LPs), and Managing Directors of general partnerships.

I asked John to summarize the takeaways from his listening tour. He noted that there were three primary areas of focus.

“One was a macro push and a macro shift, as we called it. The other was a kind of industry shift, product architecture related, and finally was an organizational shift, which had to do with talent and a brand new radical to thinking about building a talent map. So it was basically geopolitics, structure of product set and taxonomy within the industry, and then ultimately the types of people on the org chart, and perhaps even a combination of humans and agents on the org chart.”

I was curious if there were differences in the regional roundtables. John noted, “I would say in Asia in particular, there was greater adoption and anxiety around AI [artificial intelligence] in the org chart. The conversation about AI's invasion and tension with the human came up everywhere to be clear, but I think it was most acute and most consistent in Asia.”

John discussed the growing opportunity and interest in the Middle East, an area that Franklin Templeton is partnering with CAIA to develop specific programs. John referred to the Middle East as the “new capital of private capital.”

Since the roundtables focused on product evolution, and even the tokenization of private markets, I asked John about the current concerns about redemptions in evergreen funds. I had suggested that the industry needs to do a better job explaining the illiquid nature of private markets, and that the evergreen fund structure has worked as designed—meeting 5% quarterly redemption requests.

“I agree with you that the majority of this is misunderstanding. It is the way that we, as an industry, have articulated this to advisors and Main Street—that these are long-term assets, but if you want your money back, you can kind of have it.”

The reality is private markets are long-term investments. The evergreen structure provides liquidity provisions for changes in client circumstances, but in order to capture the long-term illiquidity premium, advisors and investors should view them as patient capital.

In the roundtables, CEOs and CIOs discussed tokenization and leveraging blockchain more effectively. “The specific application of tokenization and blockchain rails was about perhaps we're having the wrong conversation. We're debating the merits, the struggles, the poor communication, the need for more education on these 5% liquidity mechanisms. Is that really the best we've got? Aren't there other ways to have a continuous window that are peer-to-peer that are not as maybe psychologically alarmist in their nature? And there's price discovery that can happen a little bit more real time.”

While the geopolitical discussions took up the most time in John’s global roundtables, he noted the most passion was about the changing impact of AI, and the implications for staffing. John stated that “I had an Indian CEO put it this way at the Mumbai round table. He said the era of skills training is over. It's time for systems thinking.”

“So systems thinking, if you've got this kind of collision of public and private, if you've got geopolitics and kind of the balkanization of the world, and you've got AI, which is what your question was, amongst other themes all coming together, then what you need is somebody that can think laterally. That's what a Toronto LP said. We need lateral thinkers that are multidisciplinary, that are flexible, that are nimble in the way that they think.”

John and I discussed the large initial public offerings that are reshaping the investing landscape (SpaceX, OpenAI, and Anthropic), private markets in 401(k) plans, and the convergence of public and private markets. It is both a challenging and exciting time for our industry.

I would encourage everyone to check out the full episode Alternative Allocations Podcast, and please subscribe so you never miss an episode.