Talk Your Book: Expanding Access to Private Markets

Episode Summary

Executive Summary: The episode features a discussion with Bob Long, CEO of Conversus, about C Prime—a tender fund that gives high-net-worth investors and advisors access to private markets (private equity, credit, real estate, infrastructure) with periodic liquidity. The conversation covers the structure’s appeal, the illiquidity premium, secondary and co-investment sourcing, data-driven underwriting, transparency, and how the vehicle aims to bridge daily-liquid public markets and long-lockup private funds.

Main Topics: Conversus and the C Prime fund structure (Priority: 5/5): Bob Long explains that Conversus is Stepstone’s retail arm, offering high-net-worth investors access to a diversified private-markets portfolio through C Prime, a registered tender fund that accepts monthly subscriptions and offers quarterly liquidity. Tender fund mechanics and liquidity management (Priority: 5/5): The fund provides quarterly liquidity for up to 5% of the fund with 90 days’ notice, aiming to solve the mismatch between long-duration private assets and investor demand for some liquidity while preserving exposure to private markets. Illiquidity premium and return dispersion (Priority: 5/5): The discussion debates whether illiquidity deserves a premium and why private markets may outperform, with Bob emphasizing information advantages and wide dispersion between top and bottom quartile managers. Sourcing returns through secondaries and co-investments (Priority: 4/5): C Prime relies heavily on secondary purchases and co-investments, often at discounts, while making smaller primary commitments. The fund also seeks shorter-duration assets to support liquidity needs. Data, scale, and transparency as competitive advantages (Priority: 4/5): Bob argues Stepstone’s large scale and heavy investment in data science and technology allow better underwriting of assets, cash-flow timing, and liquidity forecasting, while C Prime aims to be unusually transparent for a private-markets product. Private markets in the current macro environment (Priority: 4/5): The conversation covers how public-market volatility, denominator effects, supply chain dislocations, and higher rates may create attractive opportunities for private-market buyers, especially for evergreen funds with ongoing inflows.

Key Arguments: Private markets can be made more accessible to individuals without forcing them into traditional 10-15 year lockups by using a tender-fund structure. Illiquidity can justify a premium, but smooth quarterly marks can also function like a psychological benefit for long-term investors. The biggest return opportunities come from access, information, scale, and buying assets at discounts rather than from generic exposure alone. Secondary markets are often driven by institutional rebalancing, denominator effects, and portfolio changes rather than distress alone. Co-investments and secondaries can improve economics; some private-equity co-investments are available on a no-fee, no-carry basis. Private-market value creation today is increasingly operational, not just about buying low and selling high. Stepstone’s scale and data infrastructure improve asset selection, correlation analysis, and liquidity forecasting across hundreds of companies. A continuous evergreen vehicle can benefit from dollar-cost averaging into dislocated markets and potentially buy at more attractive valuations during downturns.

Data Points: Stepstone private-markets AUM: $570 billion - Bob Long describes Stepstone’s global private-markets platform size. Annual capital allocated to private markets: $75 billion - Stepstone’s annual private-markets deployment. Number of separate transactions annually: 400 - Stepstone’s annual transaction volume across private-market investing. C Prime fund size: about $600 million - Michael and Bob reference the fund’s rapid growth since launch. C Prime launch timing: first closing on October 1, 2020 - Bob notes the fund launched in the middle of 2020 during COVID. Quarterly liquidity cap: up to 5% of the fund - Tender-fund liquidity is offered quarterly on 90 days’ notice. Investor minimum: $50,000 - C Prime is available to accredited investors with a $50k minimum. Management fee: 1.4% - Bob says C Prime charges a 1.4% asset management fee. Promote/carried interest: 0% - Bob says there is no promote or carried interest. Tax reporting form: 1099, not K-1 - C Prime simplifies tax reporting for investors. Gross return dispersion in U.S. public equities: about 11% vs. 8% - Bob cites historical first-quartile vs. bottom-quartile public-equity manager returns. Gross return dispersion in U.S. private equity: 24% vs. 2% - Bob cites historical first-quartile vs. bottom-quartile private-equity manager returns. Liquidity supply on new fund: monthly subscriptions; quarterly liquidity - Tender fund accepts capital monthly and offers liquidity quarterly. Liquidity allocation example: about 12% discount to NAV - Bob cites a secondary transaction ('Project Tree Frog') bought at a discount. Fund growth contribution from realizations: about half of NAV growth - Bob says roughly half of the prior fiscal year’s NAV growth came from sales, dividends, or distributions. Private-markets operating team: 60 people - Stepstone’s data science and engineering resources supporting the strategy.

Pivotal Quotes: "What we do is take money in monthly, we provide liquidity quarterly, and so we manage the cash for investors." — Bob Long: Explaining the tender-fund structure and how C Prime balances private-market exposure with periodic liquidity. "There is a premium for illiquidity and that these markets are more opaque, and those who bring an information advantage." — Bob Long: Core rationale for why private-market returns can exceed public-market returns. "We think the investment in data and scale are really, really important." — Bob Long: Describing Stepstone’s competitive edge in sourcing, underwriting, and liquidity forecasting.

Implications: The episode suggests private markets are becoming more accessible, transparent, and advisor-friendly through structures like tender funds. For investors, the key tradeoff is easier access and smoother marks versus fees, limits, and reduced liquidity. For the industry, scale and data will matter more as access broadens.