Rowan says hybrid business at $30 billion is structurally underallocated by institutions focused on highest returns.
“This thing called hybrid, which is $30,000,000,000 is actually really interesting because it is neither yield nor opportunistic. It is never going be the highest rate of return.”
Rowan states public companies halved to 4,000 while 80% of large companies are now private.
“We now have 4,000 public companies. People think most of the action is in public markets. 80% of companies over 100,000,000 of revenue and 80% of employment is in private companies.”
Rowan notes active equity managers failed to beat the market 93% of the time over twenty years.
“Here are people who have spent their whole lives becoming good investors, and they as an industry have failed to beat the market 93% of the time for twenty years.”
Rowan predicts investors won't distinguish between public and private investment grade credit within 18 months.
“Eighteen months from now, I do not believe investors will actually know the difference between investment grade public and investment grade private.”
Rowan contrasts the private markets landscape forty years ago with today's more diversified options.
“Forty years ago, private was three products, Private equity, venture capital, and hedge funds. All can be good investments, but all have risk. And public were 8,000 public companies, diversified portfolios of stocks and bonds.”
Rowan explains all financing comes from only two sources: the banking system or the investment marketplace.
“At the top of the house the fundamental trends are retirees, need for income and what we're building here because financing comes from only two sources.”
Rowan identifies retirement insurance companies and traditional asset managers as third and fourth markets now accessing private investments.
“We now have a third market, which is retirement insurance companies. People have seen what we have done by accessing private investment grade, and others are doing it. We now have a fourth market.”
Rowan attributes active managers' failure to beat indexes to market structure changes, not lack of skill.
“Most active managers have failed to beat the index 90% of the time for twenty years. I don't think it's a result of lack of effort or intelligence.”
“The vast majority of the private market is investment grade. There's a $40,000,000,000,000 market, and 99% of the headlines are focused on a little slice of a trillion and 0.5 called levered lending.”