Well, today's capital market segment is brought to you by Alpaca. Now private markets are navigating a fundamental reset. We are looking at synchronized macro shocks from AI disruption, higher interest rates to geopolitical fragmentation, all hitting assets in different ways. Now, HarbourVest calls this a market where broad benchmark investing no longer works, and outcomes depend entirely on asset level quality as well as operational execution.
At the same time, artificial intelligence is shifting from a pure tech story to a massive physical infrastructure buildout. While private credit, secondaries and evergreen funds are reshaping both institutional as well as individual investors access to liquidity. Joining us live this morning to break all of this down for us, as Scott Voss, partner and chief market strategist at Harbor Best Partners.
Scott, great to have you here. Thank you so much for joining me.
Thanks, Remy. It's great to be here.
Well, here we are. And we're keeping a close eye, not just on global bonds as well as yields, but everything that is affecting monetary policy as well. So for our viewers out there who may not be familiar with this term idea synchronicity, tell us what it actually means.
So it's actually a word that we invented at Harbor Best. And as we were trying to come up with one word that described this complicated world that we're living in and trying to invest into, we couldn't come up with one word. So we used two words. And those two words are meant to connect both the macro and the micro.
So as you alluded to, whether it's tariff policy, interest rates, inflation, global geopolitics, this thing called artificial intelligence, when we look at the macro, all of these things are playing out in kind of a coordinated way. There seems to be a sequence about them, whether they're connected or not, they're there synchronous or there's a synchronicity about them.
But when we connect what's happening there back to our portfolios, the underlying positions that we hold, it's idiosyncratic. The implications are different depending on the asset that you own. The best example we talked about software business model disruption earlier this year. Well, when you looked at the underlying companies, you had to ask yourself what is the software business model?
How durable is it in the face of artificial intelligence, and is it nimble enough to pivot if it needs to? But beyond that, the owner of those software companies, what did they pay for them? How did they capitalize them? These are the questions that you need to ask to understand what your exposure is. It's the idiosyncratic piece.
So synchronicity and idiosyncratic. The word is synchronicity.
Yeah. And Scott, I almost feel as though a song should accompany that term, perhaps akin to Mary Poppins, perhaps, or Sting. Yeah, absolutely. When we're talking about all of what's affecting US markets as well as markets around the globe, there are so many factors, as you mentioned, and artificial intelligence is a key component of this.
And as we continue to monitor the AI trade, give us your sense of what you're seeing right now and what the outlook is.
Yeah. So it's fascinating. AI for all of us for a long period of time was this science fiction that lived on the big screen, and then it became reality in Q4 of 2022 when ChatGPT was released, it became a sector, an industry. And I would argue that it's increasingly becoming an asset class that's consuming all other asset classes.
And just to kind of put perspective around that, if you look at the venture industry that's investing in the innovation layer around AI, of the venture capital that was invested in the first six months of 2026, nearly 90% of that capital was invested in ideas that were central to artificial intelligence.
So venture capital has become synonymous with artificial intelligence, or vice versa. And then on the infrastructure layer or the physical layer, the build out that's required to run this manufactured thinking over the next five years. McKinsey projects 5 to $10 trillion of invested capital into the infrastructure layer.
Just two weeks ago, PwC came out with a number that projects over 30 trillion invested by 2050. So these are massive numbers that are defining these broad asset classes. And when you look at the capital markets, it's kind of becoming a singular trade, whether it's public or private markets that we're looking at.
Yeah. And I do want to expand on what you just said. So what does Operational Alpha actually look like?
Yeah. So in private markets, when I describe to somebody what private equity investing is, it's taking economic interest in a private company that's not available through the public markets, but it's also the promise of delivering value. Add to that company where the investor might sit on the board, work with the team, a capital markets activity or acquisition activity.
And so increasingly going forward, this value add is going to be required in order to generate outperformance or alpha in portfolios looking backwards, you could do financial engineering. Debt was cheap, so you could borrow money for nearly nothing. And that could drive your performance.
I don't think that's the case anymore. Companies are going to need to grow revenue, increase profitability. And I think this AI idea that we're talking about will be able to help many companies become much more efficient with their businesses.
Yeah. And Scott, we do not have a crystal ball. So we don't know what's going to happen when it comes to artificial intelligence, the growth as well as the progress in this ecosystem. But when it comes to evergreen funds as well as secondaries, tell us what you're seeing as we head into the final months of 2026.
So these are important innovations within the private markets. Evergreen funds have been around for a long time, but they have not been asked for by the traditional institutional investor. Private markets is now being made available to the individual investor, but that individual investor wants to invest in a package that looks and feels more like their public equity security that they own.
And evergreen is the solution for that. That being said, I think there's a responsibility of the industry to educate that investor on exactly what they're buying inside that evergreen fund and what that Evergreen Fund is going to deliver for them versus not, but clearly evergreen is a growing share within private markets equally secondaries.
So it used to be that you would get liquidity through a private market investment through either an IPO or an M&A event. And when those aren't available, there needs to be another solution that comes into the market. And there's this strategy called secondary that allows investors to gain liquidity on an asset that's generally illiquid through a secondary trade.
Yeah. And finally, before I let you go, for our viewers out there who are watching at the nation's airport gates as well as business challenges, what would you say is your outlook as you look beyond the end of this year and into 2027 and beyond? Especially given the environment we're in right now.
So I think in the outlook because of this complexity that we're dealing with. The only thing I can tell an investor is, is that they're thinking about building out their portfolio. They need to be really thoughtful about their asset allocation, how they participate across asset classes that are subject to this complexity that we're facing.
They need to focus on diversification. And that doesn't mean just add more things to your portfolio. It's invest in ideas that are not uncorrelated. And you really need to scrutinize your investment at the asset level so you know how that investment is going to behave when some of these uncertainties enter the decision.
That's not an outlook. It's kind of guidance on how you need to allocate during this very complicated environment.
Well, Scott, I appreciate your time. Thank you so much for joining us here at the New York Stock Exchange. And thank you so much for sharing your insights as well as your perspective.
Thanks for having me. It's a pleasure.
