Mining Private Equity Unmasked (Fraser Perry)

Summary

Today we’re going deep into the world of mining private equity, with Fraser Perry. If those words don’t mean an awful lot to you, …

Transcript

If it can be built and ramped up, yeah, everyone can get paid. It's great. You have your capex blowout. Management team can't deliver. You don't get the commodity price tailwinds you were expecting and all blow up pretty quickly. Fraser, welcome, mate. How are you? >> Hi, guys. I'm good, thanks. Fraser Perry JD is our guest joining us on mic today. Frase is a well to start off with, you're just a great bloke. Love talking to you. You give us so much energy, mate. Some of the books on his bookshelf were kindly donated to you, but that's not your biggest credential. Um, you've come out of just a a career in private equity, a mining engineer. Um, these days you're working in corporate development at a at a at a growing minor, ASX minor. What we're going to talk about today is the role that private equity plays in the mining sector, financing mines into de development, the the ways that private equity or that pool of capital is changing over time, the um the challenges that the the model has and the opportunities it presents, the the the incentives along that. We're going to kind of open the curtain on what's been a bit of a mysterious pool of capital to us, to our listeners, and um we're delighted to have your your expertise kind of peeling back the curtain on some of these big topics. Fantastic. Yeah, pleasure to be here, guys. Um, look, private equity was a black box to me. Um, yeah, before I I joined um my last role which was at RCF Resource Capital Funds. I remember um you know, working as a mining engineer applying for this job with RCF. I'd seen on um LinkedIn and thinking what is private equity trying to Google what they what they even do, what the structure is. So, um thankfully I've learned a huge amount of how it operates and how mining private equity funds are set up. But yeah, there is very little information you can sort of glean um yeah publicly. So happy to share what I can from my experience on the inside. >> It's a big it's a big player in in our market and it's an even bigger player in in global investment markets. It gets huge capital allocations from endowments specifically in the US. But I'm super keen to unpack it because we obviously speak with heaps of investors on this show but we never speak with private equity investors because they're a bit koi. They're a bit shy. They're not allowed to because the money comes from US pension funds and they're bound by all these SEC restrict restrictions and so >> RCF no different. >> RCF no different. Yeah, we never we I don't think we've ever had a private equity group that has said yes, you can voice my comments. It just doesn't happen. >> I think you're spot on. But we need to pull back the curtain because they are still very present in our space. We have spoken so much about like recent deals. You know, Cana is one that comes to mind. Great bit of action them going at it for for New World. So, we're we're really excited to to peel back the the curtain, understand what you learned on the way, how your thoughts after the fact change from what you thought you were you were jumping into. And I think for a lot of punters out there, just understand the the role that they play, the return expectations that people have, and what the industry is going to look like in in five years, in 10 years, and beyond that. in in a in a like a a theoretical sense like the model should should work well because you're marrying patient capital with a with a with a cyclical kind of uplift like there's a cyclical nature to commodities businesses. So like in theory there's a lot of merit to this this this model. The actual empirical data of returns from private equity asset class in mining however has been on balance pretty pretty pretty below average. Would you agree with that? Yeah, look, pretty mixed history. Um, and perhaps we'll get to that, you know, performance as we you the conversation evolves. Perhaps a good spot to start is probably the structure. So, you know, you've had lots of great guests come in. Um, you know, fund managers manage these, you know, long long or long short public equity funds. Private equity funds set up quite different differently. You know those funds are you closed end funds you they have typically a 10-year lifespan where the fund manager goes out to you prospective investors who are the limited partners. You know they ask for capital commitments and that is effectively raising the fund. Once the fund's raised they have you a short amount of time to deploy. It's typically you first five years of that 10-year fund and then they have to distribute the capital back to the investors on the back half of the fund there as well. The investors in the fund will pay you fees for that privilege to be part of that fund. So there's a management fee you paid you know to the fund manager and there's also a performance fee. You if the fund can perform above a hurdle rate you'll pay a performance fee to the fund manager as well. So it's this fixed time frame that probably creates most of the constraints and where it's you most different to to other funds that you know can go in and out of things all the time can recycle capital all the time. If you have a private equity fund, you they're typically, you know, five to 10 very concentrated investments in that fund. You within 10 years of the life of that fund, you know, finding opportunities can take a few years. Executing on the deals can take a few years. You know, seeing the value creation in those investments, you know, grow and mature can take more than a few years. And then finding an exit and getting liquidity can take a few years, too. So, it's really hard to get everything done timing wise, you know, in that 10-year period. And especially so in mining in commodity markets which are really volatile you know to get one you know to come in at the bottom of the cycle and then get your timing right to exit at the top of that cycle and time it perfectly in that 10 year period is really hard. >> Yeah I I couldn't agree more. Private equity used to be called leveraged buyouts and it sort of evolved and changed names. But the concept came from having a small bit of equity, borrowing a lot of money, taking a company private, uh optimizing how it kind of runs, operates, you know, think of an industrial type business and then sell it back out, IPO it, but the the model has changed massively. And when we look at private equity companies in the mining space, they don't all have the same strategy. Can you share a bit of detail on on what you've kind of picked up on on the various types of strategies that these PE groups have? >> Look, fundamentally, what are these private equity funds trying to do? Well, like everyone on on the buy side, they're trying to make money. Um the target returns for these funds are typically that, you know, two to three times um multiple on invested capital. Private equity likes to talk talk in multiples um you know, less so irr um that you know, public equity markets talk about. And that's probably because it's typically in private markets. It's a long period of time. The investors that that come into private equity and allocate into this asset class are thinking of it slightly different to you know people that are trading on a lot more regular basis. So >> that multiple invested capital frame that that that is measured from the time that the the capital is deployed. So let's say you a fund they raise a billion dollars, right? and they've got five years to deploy that billion dollars and they're incrementally doing that with different opportunities that come up. Each one of those mult like the multiple invested capital is sort of measured from the point in time at which >> there's lots of ways capital >> lots of ways to cut it. So um in private equity you typically hear you know funds or or managers yeah the fund managers called managers the GPS you talk about things in terms of gross and net. So you the gross multiple uh is you know the multiple from the day you make a capital call to your LPs. So you know you found this great deal you've got a term sheet that's you know ready to go. You'll make a capital call to your LPs uh so that you can fund the deal. >> Y >> the day that capital comes comes in that capital starts acrewing a preferred return that the fund manager is going to have to beat at the end and that's the day these multiples start ticking. Is that the same day they start also earning a a a fee? >> That's right. So the fund manager can start can start clipping a fee there, you know, to manage that, you know, aum there. >> So as time goes by, eventually, you know, get towards the exit. Um again, you know, you sell the business, you're waiting for the capital to come in, the capital finally comes back into the fund. The fund can perhaps recycle a little bit or it can distribute it back to the LP. the day it comes back in, you crystallize, you know, that that investment and you can see what the the growth multiple is there. The net multiple takes out all the fees there that the fund manager clips. So, you know, that management fee that was, you know, taken along the way. Perhaps it's diligence costs and things like that. So, you'll see a spread between the gross multiple and the net multiple. >> What's the typical spread between the two? uh depends how far you are along in in the fund life you know um how far that preferred returns acrewed but yeah probably like 20% difference >> and just quickly for for people listening you've got the GPS who are the ones that manage the money they invest the capital >> the general partner the fund manager >> and then the LPs are the ones that give their money to the fund most often the endowments >> yep the commit the commitment y so the limited partner makes this commitment and you limited partners you'll get to that that's changing ing who they are, but typically your pension funds, endowment funds, etc. those those sorts of groups um that you know within their portfolio they're allocating to real assets you know um sometimes there's a specific bucket for you know alternative alternative assets and you know there's a private equity bucket but typically for mining PE funds they're sitting in the real assets bucket you know where there's you know there might be investments in um you know other PE funds that do infrastructure or just you direct investment into some infrastructure projects as well and things like that >> for those LPS those endowment funds is the actual model like private equity model just a very familiar model and they have like a you know kind of a regimented understanding of like the private equity model and then they're just porting that over to to mining sort of expecting absolutely similar >> yeah remember I mean PA's been around generous PA for a long time you know multiple decades mining PE is probably a newer thing you know there's uh in in ballpark numbers sort of you know 15,000 or so you know PE funds that you aren't fully closed you know they're still still out there right I would say, you know, mining's probably 40, 50 of those. Um, and how do you call it mining? Some do, you know, oil and gas and a little bit of mining. Some are generalist with like one mining investment in the whole portfolio. So depending how you cut it, maybe there's a few hundred that would ultimately do an investment in natural resources, but mining P is still such a very small part of the whole PE landscape. So for these asset managers, yes, it's a very familiar um you business model and asset class for them. you know, mining PE is something that's probably more unusual. >> Can we talk about the the the theory of making money in private equity in mining? Is it as simple as like I'm going to buy something at a at a discount to NAV and then like um that that asset is going to get developed over time and and I'll be able to sell it at a at a lower discount to NAV or or is it about turnarounds? Is it is it a bunch of the above? Is it countery? >> Lots of different strategies so that you got that target return of, you know, two to three times um you money. So get two to three times ideally you know a net mo multiple invested capital. How do you get a get a 2x? Well couple couple of different ways to do it. U the the traditional private equity model likes to talk about deals in terms of you know growth value. Um yeah the growth model which is typically um in in mining is building a project. You know projects that sit in that development stage. you know the Lison curve just like your logo here things have a deep discount you know we're in that development phase and then as they're derisk taken through construction successful ramp up after that we'll get a rer rate you know depends which commodity which point in time which stage you're at but generally you know development stage project you know with a study sitting at you know.5 nav build the thing successfully ramp it up it should be close to a one times nav now you know that can change all the time but in principle yeah That's how you get your 2x return. You provide some capital to a development stage project to allow it to be built. You oversee the construction and the ramp up and then and then sell on the other side and then you get your 2x. That's your typical growth strategy and that's I would say a hard strategy to execute on. You know, there's lots of things that can go wrong through construction ramp up. Um, we can get to that later, but it's a pretty hard strategy. Other strategies, I think you could broadly turn them sort of value strategies. Um so that could be a turnaround opportunity. You know that could be an operating asset you know that's in the fourth quartile and it's struggling and you know you need to change management and you need to change operating practices and you can turn it around and you know change change the cash flow significantly there um and then flip it that that that can work. Uh there's a consolidation strategy where you know there's M&A to do you know we got uh perhaps stranded you know mining assets without a processing solution. Great example there was sort of Genesis acquiring Lenora assets from St. Barbara. You know Genesis had Ulysus project at that time. You know St. Barbara had Guia process plan as well as Golia mine. Yeah some very logical synergies there. You know putting you know the ore in a mill something simple that or it can be more broader you know rollup strategy across a whole region where there's a lot of subscale deposits um that collectively you could run a hub and spoke strategy and get it to achieve critical scale things like that. So, that's the, you know, consolidation strategy there. Um, or roll up strategy it's called in generalist PE or bolt-on. Um, but you know, I've seen that work quite a few times. Um, and I guess there's also the the special situations, um, you know, that are quite nuanced and they're all situation specific. Um, those ones are probably harder to plan a fund around in terms of, you know, we're going to do so many of these types of deals. they they come up. But yeah, all of the different fund managers will be thinking about this in a certain way. Some are thinking, yes, we're going to focus large portfolio largely on building projects, provide that construction financing. Some others are, you know, just focusing on, you know, development stage assets, you know, d-risking them, you know, with technical work and then ultimately finding an exit there, too. So, lots of different ways to still get your two to 3x. So, one of the other ones we've seen, Fraser, is what uh Tempbo have done a few times, and that's minority stakes. And that that's a real point of difference versus traditional PE. They're not buying the company outright. They're taking a call it maybe a 20% stake in a in a public company. What What do you kind of think of this point come to mind? Yeah, >> point. Another one. >> This strikes me as a bit more of a a more recent revelation. >> Private equity. Yeah. Is it? Yeah. So how do you kind of connect those dots and think of them in in the PE context? >> Sure. Yeah. And and that and the strategies can can be at right ends of the spectrum. So for example, you some of those investments I'm familiar with with that TMBO's made are probably more like a you know public long equity fund, right? Um you know they're minority. They're in listed vehicles. They're pretty liquid as well. They might not necessarily have a lot of influence and control in the investment as well. the the challenge is for the fund manager when they're raising these you know funds you know their pitch to LPs is you know their value ad and typically that's going to have a degree of sort of influence and control in their investments you know they're not passive investors they're you know active investors that want to be you know on the board inside the business and having a seat at the table on a lot of operational strategic decisions so yeah there's there's a huge spectrum perhaps we can sort of talk through the mandate of these funds um and you'll get a sense for how they're different in terms of the strategies and and where they allocate to. What are the what are these the is the mandates like just what the when when you go out and raise a fund here's the mandate or do the the LPS themselves actually have like you know you've got to follow these these certain criteria in order to raise the money in the first place like who dictates this mandate >> the fund manager when they're going to raise the fund this is the mandate for that specific fund um you know some managers might have multiple funds in the market you know different strategies like a private credit strategy and a private equity strategy so they'll >> you know be very explicit it in these documents as to what they're going to go after, >> what they can and can't do. >> Yeah. So, capital position in the capital structure is is a great one. You is it going to be focused on debt um and and have security there? Is it going to be you subordinated in the capital structure? Um or is it going to be equity as well? Um or maybe you know there's going to be a portfolio approach where you know one-third of you know the fund might be this and that the other but that's probably the biggest point difference is you know where they are going to be in the capital structure. you know, um, groups like Orion, particularly in their, you know, mine finance fund, which is the traditional sort of, you private equity fund. Yeah. They're typically financing projects in the constructions phase, and it's typically debt at that point. Yes, there are some nice management teams that like and they'll go do an equity investment for part of that fund, but, you know, the fund is largely focused on on debt. And >> if they can get a royalty on the back end, happy days, too. >> Yeah. And and look, they're still targeting similar returns, right? Um there's debt style returns and equity style returns, but these debt style returns are pretty close to equity style returns. You're still targeting a 2x, you know, um IRS that are in the, you know, double digits as well, right? >> Well, you know, in project finance, like generally, you're taking equity like risk because if the mind doesn't work, then >> yeah, >> it can be it can be a pretty bad case for the for the for the debt. >> I've seen lots of these, you know, very exotic structured term sheets for sort of preferred equity. Um and yeah, lot lots of bells and whistles on these terms sheets, but effectively it's a binary outcome, right? You know, if it can be built um and and ramped up, yeah, everyone can get paid, it's great. But, you know, if you have your capex blowout, management team can't deliver, you don't get the commodity price tailwinds you were expecting, yeah, it can all blow up pretty quickly. So um I think it's it's a false sense of security depending on you having this position in the cap structure. You know there's there's a lot of examples of you know projects have been financed by private equity that have been refinanced you know straight after construction or um or or or even later as well. So yeah capital structures a big one. Jurisdiction I think is also a good one to talk about. Um you you talked about Timbo and investments um here in Australia with you Spartan, Greatland and others. Um you know they're groups that will solely focus on you western mining friendly supportive jurisdictions like you know Australia, Canada, US. Um you can a good example there exclusively focused on on those places versus other groups that you know will you have a bigger risk appetite to go in more difficult jurisdictions. um you to speak to some of the examples from RCF's portfolio in the PE fund. I mean they built um you know the RG gold project in Kazakhstan um there've been investors in Ozone uh which is in Bikina Faso. So I mean West Africa to you know central Asia complete other ends of the spectrum as well. So um that's an important point and and as we get to sort of how P is evolving I do think you know the the jurisdictional focus is becoming quite important to some LPs that are very focused on you know western supply chains and being able to specifically allocate to that thematic as well. >> We've got to talk about that later because the interlock with government these days is a huge step forward that we've seen in some of these funds and what they're doing going forward. But when we keep going with with the mandate, we've kind of talked about the stage of the asset, but I think we really need to dive into this one. And I'm I'm curious to hear what you think, Fraser, about how this is evolving as well because taking that risk, as we kind of said, for a project that is going to go into construction. That's a huge amount of risk. Like that is a a very large uh step to take. And that's why I think we've seen the likes of Canara say, "Hey, we want to take this from point 4 nav to 6 nav and and sell it >> and keep it in development stage. So what are the other stages of assets you see and maybe if there's a few examples that come to mind that are that are being targeted out there? >> Yeah, sure. Um, look, there there are the strategies that fit into this, you know, broad PE box of um, you know, taking assets as far as sort of early stage exploration where again, you know, really like the exploration team, their their history, um, you know, the the package they've put together and, you know, the targets they're showing. So you know RCF had a strategy called the RCF opportunities fund that you know did allocate to things as early as that um and then more advanced you've then got you know strategies that focus on those development stage assets you know finding things as a pre-study that that look promising that you know it's quite simple to do a study or take it from say a PFS study all the way to FID and do a lot of the heavy lifting there on you know DFS feed work um getting you know um engineering companies engaged quite early um taking it through permitting, you know, removing a lot of the big overhangs that that follow with a development stage project. >> And and one of the big things here, right, is the signaling that comes from future investment because mining is such a capital hungry industry that if you take it from A to B, but then say you're no longer going to going to fund it. What does that kind of signal to the market? So, you're actually on the hook to to continue in in certain cases the the check writing. Yeah, look um speaking from experience, I think that strategy on taking things through early stage development to FOD is a hard one. Um you're probably more rellyant on you commodity tailwinds and general, you know, hype around the commodity um that that gives you liquidity and drives your returns there. Um you know, this is the real heavy lifting work that you'd typically see someone do it if it was a pathway to building it. Um yes it's so companies in that development stage and they can write an equity check the PE fund can write an equity check early that it will fund that d-risisking and get it to investment decision and then they've got a seat at the table to be in you prime position to provide financing to construct it as well. So I think you know just using um the development stage and the valuation is quite an attractive entry point to set yourself up for follow on funding as it goes through you know construction and and then start to play a little bit higher across the capital structure you bring in other co-investors as well. It's really um a way of having some somewhat of exclusivity on you the project financing piece which might be you know bigger more meaningful for the PE fund there. >> Yeah. And and when these groups think about diversification across the fund, I'm I'm really curious to hear your thoughts because you might get some that are targeting critical minerals or or Western minerals, but the the correlation between some of these tends to be much higher. So what have you kind of learned from how the the PE groups spread their bets across different you know asset types against different commodities against different jurisdictions within a fund to to make sure that they're not all betting on the same one thing. >> Yeah. I mean portfolio allocation and particularly how you know you think about commodity strategy is is absolutely critical I think to having sort of you know a fairly diversified you know portfolio and something that can deliver through the cycle. uh look I haven't seen any specific um you know language in in mandates and strategy but I think everyone's thinking the same way you know commodities that are really volatile um are are really hard to to build right you know if you know if it takes you know quite a few years to finance a project build it ramp it up and you're in a volatile commodity like lithium you know you might miss your window to exit that and and you're in a 10-year fund you might not have another window there as well. So for really volatile commodities um you you think lithium you tin um and other things like that perhaps you know having you know an equity strategy you know pretty like small minority stake in in a listed vehicle might be a better way to play that because you can go in and out quite quickly. Um yeah look I mean RCF made an investment in Pilra Minerals when it acquired you know Alur lithium operation there. um that was from memory 7 8% um equity investment yeah in a public company you know when lithium ran yeah straight after that in a very short amount of time it was a pretty liquid investment that they could exit um if you were to be building a new project say um yeah in theory it was another lithium mine and you provided debt at the same time you know it uh would have just started to repay that debt just as lithium had created you know two years after that and you'd probably be refinancing that or you know it could potentially be bankrupt as well. So getting the strategy right for the commodity is really important. Um yeah we haven't touched on it all but yeah these returns are all generally driven by commodity price tailwinds. You've got to have some support there from the commodity and that a big piece is just you know having a strong view on the fundamentals of that commodity over you the whole period whether that's sort of you know 3 to 5 years that you're going to be in a better position there from the commodity wise. So if things like capex blow out, you management don't work, you know, if those things move against you, at least you've got something that might might see you get close to a 1x. >> Yeah. And that's why like I challenge the merit of a diversified commodity fund like in some respects. Like you'll have a a small number of commodities that you're bullish on in that window of time. Like you're That's right. you're not going to like if it's if you're only bullish on gold and copper and and call it what and one other commodity in that like in the five years you have to deploy it like you don't want to be making sure you've got diversity of everything because I'm think it's a cyclical industry you're trying to ride >> yeah and and you and and that's your pitch right you know the fund manager in in this mining PE fund is a specialist in this commodity they've got you a lot of deep insight in these commodities so they're making very concentrated targeted investments for these commodities um you know RCFs fund seven fund in the P fund there. I mean that had three major gold investments. I think you would have been close to half their portfolio would have been allocated to gold at one point. And you know look where the gold price has gone that's been a fantastic bet for them in that regard. Um so you allocating accordingly to how strong your views are on the commodity is is critical. Some other funds you know do like to you know their returns are driven more by that rer rate through construction. So yeah, they'll be not agnostic to the commodity, but they'll happily do industrial minerals. Um, and there's some examples there. Look, you Orion's, you know, funded, you know, construction for, um, projects in salt and gypsum there. Um, mineral sands as well. So again, commodities where you probably see less huge tailwinds there, but you if the construction, you know, go goes well on time, on budget, you ramp up, you can still get your return there from that rerate. don't necessarily have to have these, you know, phenomenal oddity price tailwinds as well. >> Trav, you know what private equity loves? They love an easy win. They love being able to goose that RR with a nice easy win, be it a producing asset or a development stage project. And I've got a little one that comes to mind. I'm curious if you're thinking the same thing when it comes to mining private equity. >> Easy win. Swap out your ground support regime or what whatever was in the spreadsheet before, be it development or otherwise, and put in Sanvic ground support. the biggest turnaround optimizer you could ever think of because Sanvic ground support, the reliability, mate, the the cost efficiency, the the the ability for it to be customized to whatever your operation is, the the short timelines it takes to get to you from from whatever manufacturing facility there is globally, the ability to speak with wonderful people like Derek Herd and the Samic ground support team all over the globe. It's it's it's a no-brainer for a project uplift. Money miners out there, rest assured, Travis and I have actually gone and done a bit of DD on our very own Sanvic ground support. We've seen them galvanize the equipment out at site. So, we know firsthand that it's great quality. It's going to save you money in the long run. So, go buy yourself a Christmas gift, put an order in for Sanvic ground support and make your and the team at Sanvic Ground Supports Christmas. >> I'm galvanizing my Christmas presents this year. >> Another no-brainer. Go Sanvic. Thanks Sam for grat support >> to to the point of concentration I think it would be the perfect time to speak about incentives because as we know they they drive almost everything and there are so many different kind of incentives from the different parties involved here but they're a huge driver of the way these PE funds act so can you break down management fees performance fees and then we can kind of get into how these shape the behaviors >> sure uh well look most most all PA funds will management fee. Um you know that's keep the lights on, pay staff and that's probably no different to um other you managed you public equity funds as well. So you that that that's salaries um you know typically 2% we're starting to see that come down for some newer funds you maybe it's 1 and a half% of you assets under management and that's you know those fees acrew on capital that you've called from the investors as well doesn't start day one stays starts the time they start coming in and if you distribute the capital back you know you're not acrewing fees on that as well. So that's that's pretty part for the course. The real incentive in the private equity model is the performance fee. So that fund manager you know that is that is the huge leverage they have uh is is getting the performance fee if the investment goes right. So you know that is a performance fee. Um it's typically you know uh a large percent of you know profits above a hurdle rate >> two and 20 the prevailing model or >> that that's typically what it's been but again it you know it can change it's very yeah you know it's confidential amongst all all the different funds but you know you there is some push back now I think you know there's >> you that's been a traditional model but um yeah a lot of investors starting to push back on that and and funds are you know managers are starting to offer slightly lower fees in some cases as well. But yes, typically the performance fee is you know around 20% of you know profits above the hurdle rate. So that >> what's the typical hurdle rate? >> Um probably 7 8% something like that. >> Um so the the GP the fund manager there is really incentivized to do two things. get a great multiple um and get it really quickly and and distribute that capital, you know, quickly back back to the LP there. Ultimately, the the PE fund manager is in the game of distributing capital. They're raising capital for these funds and distributing it, you know, ideally as fast as you can. Th those that have been successful in raising lots of funds and having a lot of uh longitivity in the industry I think um aren't necessarily focused on the perfect outcome getting the highest multiple. Uh it's all about providing liquidity. So you know you might be leaving something on the table but you know um finding an exit or or taking the exit if it's on the table and there's liquidity there and and providing a distribution back to LPS is really important. So time time is everything and uh you really do have to you know work hard to get there. So that's what motivates the fund manager. You know people who sit inside you know the fund manager um who might have carry that's generally you know most senior people um you know there might be >> having carry is exposure to that 20% performance. >> That's right. Yeah. So the fund manager you contributes to the fund and that's what aligns them. So in the in the two and 20 model, you know, they'll contribute 2% of the capital into that fund. So that that's their skin in the game effectively. It's the leverage they'll get from the performance fee on the way back. If assuming you know some nuances to it, but assuming the fund does a 2x um and and then it's all paying carry above this hurdle rate that you know 2% of capital that that came in, you know, is effectively a 10x for the carry holders there, right? So huge leverage for them if it goes well. >> Yeah. >> On on the contrary, if it doesn't go well, you know, they've put capital into the fund and might not actually see a return on it as well. So that is, you know, the model's way of aligning, you know, the fund manager to the LPS in there um and incentivizing them with this huge leverage, you know, to make it go well. C >> can I can I peel into some parts of that um model a little bit too? So, so the 2% that is uh like the management fee and and that gets that gets triggered from the point that the the capital call happens but that's 2% on funds deployed not not mark to market of what whatever the portfolio is worth at that at any point in time because you can't mark to market in a liquid mine that didn't work out cost based cost bas are there some cases where like a a fund might might have existed or whatnot and there's a few things in the portfolio that went pear shape But but because and so there's no chance of getting any carry, but there so there's but there's no real incentive to to not exit the portfolio because there's still there's still kind of 2% being paid on a on a much higher you know number than than you just get like a zombie fund that's out there. >> Yeah. Whether it's intentional or not, it's a different question. But, you know, finding liquidity for um you priv private companies and some of the niche commodities in far-flung places can be difficult, right? So, you know, you can't necessarily just, you know, go to market and sell these and find an exit whenever you want. Um, you might have a very small window and you might have to do a lot of work to get there. So, they inevitably sit there and yes, there is a management fee fee being like acred uh on on these on these investments that sit inside the fund. So again, makes it really hard for the fund manager to try and catch up on that. Um, you know, there is, you know, >> that's that's one of the interesting incentive like things I can see about the model. Another interesting incentive, I've got two more of these. Another interesting incentive thing I can see is like >> it's an issue. I agree. It's, you know, it could be abused or >> just something to be aware of. >> There's another one is like the the motivation to deploy very quickly. like if you're um you know like because you're like you I think like I think of the the Cana example as a as a great one like what what amazing motivation there is to to deploy dry dry powder as a as a freshly raised PE fund because you start earning money >> big management fees mean you can you build out your own team >> um you can assess more opportunities you know you build out the platform and the capabilities of the fund manager itself >> because you often see the next raise within a couple years as well >> and the faster you deploy and if nothing went pear-shaped then you can you can raise another fund before you have something in the portfolio that went pear-shaped if you know what I mean as well. So like >> fund two was less than two years after fund one. >> Yeah. >> Yep. That that's right. I mean if you can get momentum I think uh as a fund manager that's a great way to set up you know a sustainable business or give yourself a lot of runway um you know to to stay in the game right you know because there's going to be a lot of bumps along the way. And the last the last kind of incentive thing that I I wanted to raise was um so you've got five years to deploy right now. When that five years is is a is approaching and you actually haven't fully deployed the fund then like do you have you heard stories of do you ever observe like um >> um PE groups like that that may have actually they may have just like you know there might have been some asset that was financable but had been kicked around a very long time and then because because the the window was closing you know a deal. >> I can't think of any examples. Um I can think of some other examples um or funds the know of where you know it wasn't fully deployed. >> Yeah. >> Um which is not an issue at all. It it just means when you go to market to raise your next fund, they'll say you how much did you deploy from your last one? You say we only deployed 80%. It makes it hard to raise a bigger fund. >> Um it's all about can you fully deploy capital for this particular strategy. Um >> that's a function of the the opportunities that are out there as well. >> Yeah. Time in the market. That's right. and your risk appetite. So yes, there's incentives from the fund manager to to fully deploy the fund regardless of you the quality of the investments there. But, you know, you want them to be incentivized by that performance fee. >> Um, and then coming back to incentives generally, I think if they're, you know, first-time fund fund manager, you know, they're there to make it, you know, they're personally incentivized. Um, you know, it's not like, you know, they're made per se. um and somewhat of a you a lifestyle. Um yeah, those are the ones if I was investing in a PE fund. That's what I would be looking for. You know, someone who's personally, you know, got the most gain than anyone else, right? Um and it it is an important thing. U you LPs coming to funds do a lot of diligence on the fund manager themselves. um you even before there might be a portfolio of you know pipeline investments that they can show a lot of it's focused on track record and you the capabilities of you key people in in the fund. >> I think there's a good reason why Buffett set no management fee and a higher performance fee because he was pretty aware of these things back in the day. There's one more incentive I do want to talk about though and that is of the endowments. So we spoke about them allocating uh a small slither of the the massive amounts of money that they have um could be super funds here in Australia, but we we like to think of the the universities and other endowments in in the states. And I'd love you just to share a bit more color on how they might think about allocating to to mining. It being maybe a slither of an allocation that goes towards private assets and a slither of that is onwards passed to real asset investments, you know, commodity related type things. And maybe the incentive that they have for it to be a private asset that's not always going to get marked. It's not going to get marked on a on a daily basis. It's much steadier in the portfolio to make there, but returns look more balanced at least for a period of time. >> Uh well, I'll cave saying no no expert on on this subject. This is all, you know, secondhand. Not haven't been, you know, spending a lot of facetime with with those sorts of um asset managers. But what I could say is that, you know, they most of them don't understand mining. Um you know, in terms of finding those that understand mining, um that's quite rare. So a big part of the the marketing of a PA fund is probably just educating you know these LPS on why they should allocate to natural resources and commodities. Um so that that is a big piece. The second piece is those that do understand commodities um you are still you know need still pretty um simplistic in their their approach there. um you know all these PE funds in in mining have you know quite nuanced and and diverse approaches. So um you know they're receptive to to all of these and they're probably going to allocate to one maybe two of those but you know just finding those that you know want to allocate to mining is is is hard enough. Um so that's that's how they think about mining. If you go back a step, um, you know, they they have these enormous enormous funds where, you know, they're thinking more about, you know, how much they're allocating to, you know, private private markets. Um, that's a big decision as well. So yeah, minimizing volatility in the portfolio, having um exposure to private equity where there's largely like private asset classes that can be sort of markettomarket um you without the volatility of you know um movements in the macro environment. That that is a nice way just to smooth out their portfolio. That can be, you know, one of the reasons why they're entertaining looking at, you know, other private equity managers or increasing the bucket size that's going to to private equity and potentially like, you know, mining private equity funds. >> Yeah. Yeah. That that education component is I think that's prevalent for for all investors in the mining space as well, specifically the ones outside of Australia. I think in Australia we get it a bit more but even so there's been a a kind of der of equity managers in in the mining space as well and it's hard to get your allocations and perhaps that's just a a component of a bigger problem with with active management. Yeah, I think that's I mean more just a bigger challenge with the industry, right? It's a poorly understood industry. Um yeah, even in this country, but you know you know globally as well. Yet now I think as more awareness about supply chains, critical minerals, it's starting to get a little bit more you know visibility, but it is just a poorly understood industry um for what is quite meaningful in in most economies. Can I ask you a question about the opportunity um selection? Like in some respects like there's a very diligent investment process that you have to kind of go through to get a deal done um within these like >> we talked about construction risk and how concentrated the portfolios are. So you know the underwriting process for this is is got to be very very thorough. >> Yeah. And it's it it's thorough. It it I imagine can happen quickly but often might be like take a bit of time. Like are there any limitations or anything to do with with the with the way that that happens? Do you think private equity sees the best deals? Like or do you think the best deals sometimes don't even get seen by private equity? >> Yeah, that's a really good question. I >> selection bias here. >> Uh yeah, there there would be. I would say look you know when it's a really hot commodity uh it's in vogue you know you're you're moving you know the top ends of the cycle public equity is available look right now um in precious and you know arguably in some of these critical metals like you know rare earths as well you know companies are able to go and raise you significant quantum on on public equity markets right now they don't need to come to a private equity fund or alternative you know sources of capital and you pay higher fees or give a little bit more away to to bring that capital in the door. So, you know, the priv private equity is needed in in markets when, you know, you're at the bottom of the market and public equity can't be raised. You're in, you know, really niche commodities that are poorly understood that need a lot of work to to understand the fundamentals of those those commodity markets or they're, you know, far-flung places. you know, they might be great projects too, but you just well be outside the risk appetite for most, you know, public equity investors as well. So, do they see the best deals? You know, it depends. Yeah, there's there's great assets out there that um you had absolutely no love in in the public markets and picked up by, you know, PE funds. Um and then, you know, the markets turn, you know, a lot of work's done to derisk it. risk appetites change and these PE funds can find an exit um for these assets that are viewed very differently in a different market, different conditions and that is like the perfect you private equity investment. You find something unloved and at the bottom of the cycle um do some work and then you get the timing right and and it is recognized and there's huge value uplift there. >> So let's talk about the conditions now. You mentioned 15,000 private equity groups before. Obviously, only a small number of them are in the mining space, but there has been an increasing number over time. We've also seen more and more sources of capital in in the mining space. Be it sovereign wealth funds, be it the government coming in, be it streamers and royalties flexing their muscles and having greater allocations. How does the the landscape look right now perhaps contrasting with when you came in? And what do you see that looking like a few years down the road? >> It's a good question because it certainly is evolving and you know has been evolving for a long time. Um look there's I think lots more mining PE funds around now. You know there's th those that were early in the game um you know 15 20 years ago that now have multiple strategies that have been you quite successful sustainable raised multiple fund vintages in each strategy diversified across different strategies as well. And there's new entrance to the game as well. Um, people that have worked in one fund, they've gone out to stone start their own fund, uh, etc. So, there there's definitely more mining PE funds out there, but in terms of capital being allocated to to mining PE, uh, my gut feeling is it's probably hasn't changed that much. However, there's more competing sources of capital for the actual assets out there, as you say. So um you've definitely seen your sort of government step up and want to be involved more. They don't know how to do it um well and and try still trying to figure out you know the best strategy to allocate there but you know you are seeing them you have a greater appetite to move and and prepared to write checks now. Um and that's something that's changed and that's ultimately competing for c um a competing source of capital u for PE um you know that's getting might be squeezed out on particular deals particular commodities there as well the sovereign wealth funds as well um I think that's probably uh more on you sort of the stage you are in the value chain these commodities but certainly things that private equity probably didn't chase u things that were midstream or downstream where you know the returns are probably more industrial like you know singledigit percents. Um you there's not not great economics in these assets. Um but you know there's a lot of broader e um broad broader benefits you know in country building out you know skills whole supply chains etc. You're seeing those groups start to want have a bigger appetite to do that and get ready to step in there u and they're happy to to make these investments without compelling economics too as well. Um, and when you do go mid-stream downstream, obviously you need the upstream feed to come along there. So, you that's where you pay is starting to tie in with some of these groups that are looking to build out the midstream downstream in their countries in their regions as well. So, that that's definitely growing and I think it will continue to. And that's really just playing into this whole, you know, uh, onshoring of the supply chain thematic, you know, across the whole world. >> So, what does that mean for for private equity returns going forward? Well, I think it it just narrows the lane of where they can play. Um, again to these other groups, you know, with sort of streamers, royalties able to provide, you know, pretty low cost capital um to some of these assets just means the universe of assets that private equity might invest into is probably shrinking. And in terms of private equity being a competitive solution for these uh companies and assets that are trying to finance it, they're probably less competitive compared to what else is being um given to them right now as well. There's probably always going to be a need for you PE financing in in again difficult jurisdictions, obscure commodities, um you things that have got some sort of overhang there that you know needs quite a lot of effort to resolve. But the all the easy lowhanging fruit I think is is becoming financed by by others. >> Is there is there a procyclical nature to the ability of private equity funds to to to actually raise their own capital as well? Like do the endowments more forthcoming with with with you know you know big funds um at at very like you know cyclical highs in commodity markets and then you have to deploy it in the high times. Is there any procyclical element to to the history of private equity returns? I I think fundraising probably has a degree of proyularly. >> Yeah. Ideally, you raise the top and then you wait for the crash and then you deploy. >> Yeah. I mean the hardest thing um I think investing generally is be truly counteryclical. Not pay attention to to the noise and everything else going on. Um and I'd say you know whether it's you P manager, you know, you and I investing retail investors or even these enormous asset managers. Um it's no different. It's really hard to be disciplined. So I think certainly >> I don't know what you're talking about. I I've done more trades in a bull market. No. >> So certainly when when you're in a good market, you know, I think they're a lot more receptive to, you know, marketing conversations with P funds that that are fundraising and um again when it's it's probably the wrong time to be, you know, deploying, you know, they should have been there, you know, years ago so they could come in right at the bottom of the cycle. Um so yeah it is difficult because you know by the time a fund's raised and they're deploying you know you're potentially at the top of the cycle or you've missed it you for a particular commodities and you have to shift you know your strategy to other commodities as well. So yeah, it's a very dynamic process. Um, you know, in an ideal world, yes, you'd have a lot of dry powder, you know, a lot of capital committed to your to your fund that you hadn't called down on yet, and you could call it down at the very bottom of the market when you saw the very best opportunities. In an ideal world, that would be how it worked. But realistically, you know, things are doing well now. You have some fantastic exits in an older vintage fund. You're getting momentum there. Yeah, LPS are probably pretty receptive to putting money into new fund even though yeah, the commodity cycle and market is really at a different point in time like the alltime record, you know, best private equity deals in in the mining industry and stuff you get like you hear stories of when you when you join a P firm and like, oh mate, this such and such was the best deal ever. >> Yeah, look, there's there's there's plenty of those around. Um, you know, people talk about 10 baggers, but you know, I've seen quite a few of those. I know RCF had some phenomenal wins in, you know, rare earth um in the early funds with Mountain Pass. You know, that's that's a pretty well-known example. Um one of their other strategies in mining innovation, um you know, where they invest in a lot of different mining technology, uh they invested in company called um BMT, Blast Movement Technologies, these little um you balls with RFIDs that go inside blast holes and they can track the heave, you know, in open pit gold mine. So you can track where you know the the or was being distributed post blast. I mean that was a phenomenal investment. It was it's a sort of product that could be readably consumed low cost you at at gold mines globally. So um yeah another one of those you phenomenal returns you hear about. Um you know you got to be lucky but there's also a lot of work behind the scenes in identifying you know identifying you know the the right market the right product in that case as well. um being counteryclical, you know, making you a bold call to allocate, you know, significant capital at the bottom of a market when it's hated as well. Um so yeah, there's there's a lot of thought to it, a lot of work, a lot of diligence done too. They're very, you calculated, you know, risks that are taken. >> TMBBO and Spartan wasn't a bad bet and the RCF Pilra one that had a pretty pretty speedy returns, although in my mind they're just not private equity bets. You're buying a ST balance sheet turn around. It's like Yeah. >> Yeah. Yeah. Um yeah, I mean Alura was a distressed business. I mean every I mean arguably Pilra didn't have the biggest balance sheet at the time too. Galaxy, you know, needed >> um you raise capital at the time too. Um it was survival for all of the lithium players at that time. Um but you know, Pure I mean it was one or body and had a fence put over the middle of it. It really should have been you a single operator from day one. Um it was a very logical consolidation to do but uh yeah had the support of patient countercyclical money you know through RCF there to to underwrite you know the acquisition there which you know would have been hard to do um on that particular example you know there was other biders in there another you know listed company that needed to raise capital um that had a had a proposal there um but again contingent on raising you know public equity at the bottom of the market um for you close to its market cap would have been pretty hard to execute on versus you know a fully underwritten solution with you know private equity money there too. So yeah, there is definitely like a role to play on the M&A side and providing some funding. Um, shorty >> actual synergies in mining. That's amazing. >> There's a lot of these old bodies with fences across the middle. >> It's just too easy. They're layups for you. One last one for me, Fraser. I want to talk about the commodity traders and them stomping on the feet of of private equity. and perhaps they're just another player that makes the the uh the playing field a bit smaller for for private equity. But we've seen a number of these traditional oil commodity traders come in, build out metals and mining teams. A lot of them want offtakes and they're sort of finding their way in. Are they a competitor that you think represents a challenge to the the PE industry? >> Yeah, they are. Are they are right. Look, they've got, you know, enormous balance sheets that aren't particularly productive. So um you know low cost of capital you for them they can you know provide financing you know well that that's very competitive you know to any company that's looking for financing to build their project. So their balance sheets have grown their cost of capital is very competitive um and they're willing to deploy it now to secure product. So their their appetite to transact is a lot higher and the size of the checks they're willing to write for the equivalent amount of metal and product is probably higher as well. And there's more players in there. There's the conventional, you know, oil and gas, other types of commodity traders, um, that are now willing to to get into, you know, proper, you know, concentrate trading. And, you know, they're going to be quite aggressive on their terms to secure supply. Um, particularly as, you know, they're coming, you know, they're getting into the space. Um, they're trying to steal a little bit of market share from, you know, the incumbents as well. So that's definitely going to be you compet competing source of capital for PE. I mean if you know traffic cur comes in and does you know an offtake prepayment facility at sofa plus 2% you circa 8% well you know PE fund's not going to be able to get a return if they had an 8% coupon on their facility too. You they're probably going to be a lot higher. They need to find other ways to get the return. So really hard for for people to compete there. Um the trade-off is maybe giving away there's a bit of leakage on the terms of the actual offtake as well. That's somewhat of a black box too. Um hard to really know how much leakage there is. What is your market standard there but yeah they're certainly offering very competitive financing packages in parallel with with offtake there. At the same time, you know, some of these other groups um yeah, some of these other governments um and just even PE funds too are looking to secure offtake as well. Um it's no longer free up for grabs for everyone. Um there is a lot of demand for the actual product. The rights to that product are becoming more and more valuable. The the exits of private equity is just one thing I want to touch on too. if you've got a got a fund that's coming to the end end of life um well end the end of the 10 years like what are the options available if if some of the some of the assets that are within that portfolio maybe haven't been realized yet or or there's there's liquidity challenges to realizing them. >> Yeah, good good question because yeah, it doesn't always go right. Um, you know, you're in in something pretty niche, you know, diamonds in lutu, you know, pork siding, guinea, you know, you can't you can't just run a sale process and flip these things overnight. So, what do you do? Um, you can you can try really hard to to make the project more attractive and maybe that's an an expansion, it's consolidation with, you know, a neighbor, um, put vending it into a larger vehicle that's more diversified. Um and maybe you you'll you'll take a hit there on the valuation but you might have a pathway to liquidity eventually >> being another fund >> or uh well another another mining company there assets assets. So these are things you could do with the portfolio company the investment itself. >> If that fails what do you do? Well it's probably more a problem for yeah you see you see more in general PE but you see extensions to funds. Um, so they might extend the fund beyond those 10 years, but they're not, you know, getting a management fee on, you know, the the capital they're managing anymore. They're just, you know, trying to buy some time to get towards an exit or pending that not working. you do see uh what's called like private equity secondaries where they're effectively selling you know the individual portfolio companies or you know all of the portfolio to another fund and there's dedicated PE funds um that just go around mopping up you know these mature assets from um you know >> wow >> PE funds that are there for life and they'll buy them at a big discount um the pitch for them is that you know they're much these investments are much closer towards their exit there's been a lot of capital sunk, a lot of value added. They just need a little bit more time to get towards, you know, the exit. And so the prize is there and there are actually some examples of really successful funds that just do >> Sounds like a good >> secondaries. The the marking of how they measure those is pretty controversial. >> Absolutely. As well. >> Yeah. And and valuation across the board, you know, for private companies. You you talked we talked earlier about um you know, some funds, you know, raising funds very quickly. Yeah, >> you know, they've got all of these private investments. Um, you know, public company, they took private. What's it going to be valued at at 30th June? Well, it's it's a work of fiction. It can be whatever you want, right? Look, there is process to it. It is ordered, but ultimately, you know, there is some it's a narrative on valuation and, you know, commodity prices you're choosing. You every mining project's sensitive to that. You know, let's say it's it's a a market-based approach. you're looking at other comparables, transactions, you cherrypicking what you want there. Um, so you know, these funds can manage the valuation volatility by managing these private company valuations. Um, if your whole portfolio is private company investments, you can call it whatever you want. And, you know, magically in two years, you know, these they've been marked up really well. um that's being quite cynical, but you know there is a little bit of wiggle room uh you know you could have there and you know you could say hey my portfolio is is sitting at you know a 1.3x um mark tom market today based on my private company valuation so um yeah someone coming in say actually that that looks great I'll come into that fund or might even put some money into your next fund this looks great so there's you know the incentives are there for it to be a little bit abused I I think um it's tricky though generally genuinely are you know lots of private investments um within these portfolios and you know there is a bit of you bit of room to move on on a lot of these things um and and you pay funds have got a lot of conviction for these things too you know um so there's there's a a view out there it's a view that like we've we've said before or pared and it's even a view that we've we've heard from like, you know, massive massive capital allocators as well. And that's that private like like private equity and mining just doesn't quite work like the you know there there's a flaw in the in the in the funding model. The returns don't quite kind of get there. Do you disagree with that take? >> Yeah, I look I would say um you know there's pros and cons to you know this asset class and product you know um in in the context of this industry. Does it um provide capital to projects that wouldn't have otherwise be funded? Yes. I would say some of these you know niche industrial minerals um you know good quality projects in far-flung places you probably couldn't raise capital to build them u without you capital coming from PE. So yeah is there on the balance more projects built more supply because of it? I'd say yes. However, you know, there is, you know, there's a lot of leakage uh in the model um for investors that go into it, you know, through management fees, performant fees. You know, it's still a really risky asset class. You know, um you illquid generally illquid investments and it is really hard to to find exits for these things. Um you you might not get more than one shot to get your exit on, you know, what might be, you know, a few hundred million investment. Um yeah, so still it's not an easy game to play. Um there are some really good managers out there with a lot of experience and you who've learned how to navigate these and built sustainable platforms that that do it really well. you know when we talk about managers I mean you know the there's there's investment committees um the deep amount of in-house technical expertise um there is a lot of of people behind the scenes um you know thinking through you know what this might look like doing a lot of work very hands-on in managing these investments um you know through the way there it's not I think um you know a handful of people just you know pocketing a lot out of it there is some generally some heavy lifting to be done. Um and and that's why that the fees are there and there's incentives, but um it could yeah it could it's it's somewhat self- serving as well. If you were there and the capital was available and you and you raised all these funds, yes, you could have a lot of GNA. I if you were to like if you were an LP for example like is there a type of strategy or something that you would be like most um most favorable to like having having you know thought about the the model as deeply as as you have do you think there there are some some models that are like more compelling than not? Yeah, definitely definitely. I think um partnering is really important. >> I think you know being the only source of capital and having a control equity position means you know if there is risks uh and you have to follow on fund it's you know that could that could bleed you pretty quick. So having you know one or two other you know groups in there that are aligned and that might actually be some other PE funds that you know you're just co-investing on similar terms in the same parts of the cap structure. See if we do that with Aussie Super. Sometimes it'd be a >> Yeah, look. Yeah, Aussie Super was in there on Pil Minerals and in Genesis too. Um I think more on um some other projects have been financed where you know you see a whole group of PE funds there and similar parts of cap structure. So having some partners there um and and maybe it's even a trader there who has the offtake but also in similar parts of the capital structure as you you know someone uh who's also incentivized for the equity to do well as well. they're not going to give you aggressive terms um because they've got a bit of equity too. So having just everyone aligned and and having you the capital providers relatively diversified I think makes a lot of sense. The you know the average you know capital cost to build a project has been increasing and will continue to capital intensity is rising. You know there's inflation in the sector as well. So the ticket size that a lot of these funds write if they got a billion dollar fund and they do you know 5 to10 investments they're going to be 100 $200 million checks it's not enough to build these projects on their own anyway so you know partnering up I think makes a lot of sense keeping these things private through construction I think makes a lot of sense construction ramp ups are really tricky time for a project there's a lot of surprises um you know they don't go smoothly you know there's a lot of people are learning about the or body there's all body knowledge understanding, you know, the metalology, geomatology, the variations there, you how the plant performs, where there's debottlenecking needed. You know, there's a lot of things to iron out. You know, if you didn't have to do quarterly updates, you know, I think that'd be a great thing as you can, you know, ramp up this properly, get it set up, um, and then take it to the public markets. I think that would that would work great. Um, and that that would be a nice strategy. I think couldn't do that for your whole fund. Um, yeah, you don't want to take, you know, that sort of construction risk at the same time. You don't want to be building two projects at the same time. You probably don't want more than half your portfolio in construction. So just having a a blended approach to you doing construction projects but also finding these you know turnaround opportunities M&A opportunities finding you just great management teams you want to back and you cornerstoneing their next acquisition investment um things having a really diversified rounded out approach but uh you know mix of private investments in the fund would make a lot of sense partnering with other groups yeah just having a small amount in construction the rest in sort of operating strategies um have a little bit more, you know, different kind of strategic drivers there. Um that would be a great fund if I was doing it. >> I'm with you there. I'm sure there's a lot of managers out there that would love to not quarterly report as well. I think that'd be helpful for for a lot of folks out there. >> And the fees would be a little bit different. I think I would keep it pretty lean. I think um you know, if you can raise sort of a billion dollar fund uh and you're making 510 investments, you know, do you really need an enormous team? um to find opportunities. You know, I think that's probably an area where you can be very targeted in what you want to go after. So, you don't need a huge amount of resources there. Managing it. Yes, you definitely need, you know, a good team that to be involved with the portfolio companies there. Um but, you know, do you need to do in-house everything in terms of, you know, finance, accounting, legal? Maybe you can outsource a lot of that and just run with a really lean headcount. Yeah, maybe that that is model two. have a really lean management fee. Um, so you can keep a small small team and yeah, weight it towards you, your performance fee to really, you know, be incentivized. >> Yeah, that's a that's a real point of difference with just out and out equity investors. That the team size is a a huge point of difference. Fraser, this has been spectacular, mate. I've really enjoyed learning all about the the PE world and I'm sure all the money miners have as well. So, thank you for coming and and sharing all your wisdom with us, mate. >> Thank you. Just just a few gems, mate. That was uh that was unreal. >> A massive thank you to our wicked partners, Sanvic Ground Support, Intra Links. Check them out. Focus the platform by Market Techch. You should see over my shoulder most times. We've also got a big thank you mate to Exceed Capital. And last but not least, Switch Technologies. Check out our local engineers right here in Northridge, mate. >> Huroo, money. >> Huroo. Now remember, I'm an idiot. JD is an idiot. If you thought any of this was anything other than entertainment, you're an idiot. And you need to read out disclaimer.