Common Sense from Uncommon Investors | Global Conference 2025

Market Environment and Geopolitical Shifts

• The U.S. government has upended global trade, creating a fundamental shift in the geopolitical landscape as of May 5, 2025.
• Anne describes the current administration's strategy as built on four pillars: taxes, deregulation, trade policy, and immigration reform.
• Fiscal policy is currently the primary driver of market behavior, causing significant volatility after markets were "priced to perfection" earlier in the year.
• The 10-year U.S. Treasury yield is currently trading in a range of 3% to 4%, marking a transition period where investors must adapt to enhanced volatility in fixed income.
• There is a prevailing investor concern regarding U.S. fiscal debt, with debt levels at their highest recorded percentage of GDP in 200 years.
• Anne warns that Modern Monetary Theory has contributed to an outsized fiscal spending situation that risks crowding out other government expenditures.

Private Equity and Long-Term Value Creation

• Jonathan characterizes the private equity industry as a "$5 trillion sandbox," distinguishing it from public markets he views as "unreliable, dysfunctional, and broken."
• Unlike public markets, private equity firms can take a longer-term view to navigate crises and turn dislocation into investment opportunities.
• The primary challenge in the current private equity cycle is not finding investments, but finding exit strategies for portfolio companies.
• Jonathan reports a 25% increase in EBITDA growth within his portfolio companies and cites an average of over 100% organic EBITDA growth during holding periods.
• In a significant exit, Home Depot acquired SRS (a roofing distributor) for $18 billion; 9,000 of SRS's 11,000 employees shared $3 billion in cash, achieving financial independence.
• Private equity firms are increasingly broadening employee ownership beyond management teams to include rank-and-file workers, such as forklift drivers and clerks.
• Jonathan notes that while the industry has evolved from management buyouts, the core philosophy remains growing "boring" businesses to multiply value rather than seeking arbitrage on the buy.

Enterprise Software and Artificial Intelligence

• Robert identifies generative AI as the most transformative technology of the current generation, partnering with enterprise software to create "agentic" solutions.
• Vista's portfolio of 89 software companies currently generates over 625% ROI for customers, a metric expected to increase by orders of magnitude with AI integration.
• Robert predicts a shift from the "rule of 40" valuation metric to a "rule of 70" or "rule of 80" for AI-enabled companies demonstrating massive margin expansion.
• The firm has built a specialized "factory" to transition portfolio companies from on-prem to cloud, and now from cloud to agentic AI integration.
• Success in the AI era depends on a company's ability to leverage existing sovereignty over data and workflows to deploy trusted, safe agents.
• Robert estimates that 1 billion knowledge workers generating $40 trillion in salary are at risk from AI automation, raising significant policy and employment questions.
• Robert's firm is developing AI curricula for HBCUs and other colleges to ensure broader distribution of capabilities and skills.

Private Credit and Alternative Investments

• Mark states that the alternative investment industry thrives in volatile markets by providing capital independent of short-term market emotion.
• Private credit is described as a "pyramid" market where the largest players dominate the high-yield, large-cap segment, creating a "sweet spot" between specialization and commoditization.
• Blue Owl Capital manages approximately $140 billion in assets, with typical loan positions measured in hundreds of millions of dollars.
• The typical company in Blue Owl's portfolio has an average EBITDA of $250 million, indicating a focus on sizable enterprises linked to the private debt ecosystem.
• Mark argues that the maturity of private capital pools is changing economic cycles, allowing companies to navigate maturity walls without the distress seen in the 2008 financial crisis.
• Investment grade corporate credit is currently viewed as undervalued, with yields in the upper 60th to 70th percentile over the last 25 years.
• There is a noted slow uptrend in the quality of investment-grade credits, with improving leverage and interest coverage ratios despite static ratings.

Strategic Investment Opportunities

• Global infrastructure requires $5 trillion in annual investment, with a total need reaching tens of trillions over the coming years, creating a massive opportunity for public-private partnerships.
• Mark highlights the need for capital to build hyperscale data centers and power infrastructure to support the AI revolution, noting that private markets are essential to meet the trillion-dollar capital requirement.
• Strategic Value Partners focuses on under-managed businesses in sectors like consumer brands, manufacturing, and building materials, typically buying at 6-7x cash flow.
• Victor cites a specific example of buying a Texas toll road debt at 60 cents on the dollar and securing the Tesla Gigafactory site on that road as a growth catalyst.
• Anne advises investors to deploy capital into real estate, infrastructure, and private credit, noting that steady cash flows in these sectors provide base-load returns.
• The panel anticipates that the U.S. will continue to attract capital due to growth trends, despite the unstable fiscal story.

Firm Culture, Talent, and Governance

• Leonard Green & Partners has pivoted to mentor the next generation, teaching sales skills and judgment to a team of 20 other partners and principals.
• Jonathan states that the firm plans to pass responsibility to the next generation over the next 10 years, acknowledging that the founders "won't live forever."
• Victor reports growing Strategic Value Partners from 41 to 108 investment professionals in five years, requiring a shift from collegiality to more structured processes and weekly alignment meetings.
• Mark emphasizes that culture and character matter more than investment execution for creating organizational durability at Blue Owl.
• The panelists agree that "signal over noise" is the critical skill for investors, separating temporary market turmoil from long-term structural trends.
• Jonathan and Robert both stress the importance of teaching the next generation that investment success is driven by growing businesses, not just price arbitrage.