[MUSIC PLAYING] This is Modern Capital. Conversations with the people accelerating the next generation of private markets. I'm Mark Andrew. The infrastructure of private markets is taking shape. Let's unpack it. Ben Haibar started building monarch markets as a sophomore at NYU. By the day he was supposed to graduate, he was closing on the assets of a bankrupt fintech instead. He skipped the ceremony to do it. And that deal became the foundation of his company. What he's building comes down to plumbing. Not a flashier app for private markets, but the rails underneath. The back end systems that led private funds run through the same brokerage and wealth platforms people already use every day. Right now, he's focused on evergreen funds, and a piece of infrastructure called omnibus that could finally bring them into every day portfolios. The same way ETFs did in the public markets. Please enjoy this conversation with Ben Haibar. Ben Haibar, welcome to the Modern Capital Podcast. Mark, thank you so much for having me. Ben, take me back a head-y distant five years ago. In 2021, when you're still an undergrad, I understand at NYU. And the world is seeing this incredible boom of consumer retail activity with Robin Hood taking off through the pandemic and crypto at white hot levels. And you decide to start a business that ultimately becomes focused on the underlying plumbing of private markets, not the interface, but the back end infrastructure. What was the genesis of what became monarch? How did you first start it? It's a really good question. We started our journey at monarch by looking and talking to a lot of the direct to consumer alternative investing platforms, sort of the Robin Hoods 4X private equity private credit real estate. There's a lot of real estate ones, for sure. And that was while I was still an undergrad. Really my sophomore year at NYU is when I started the journey. And then I met my co-founder Paul, my junior year. And we started working together. And I think it was valuable for us that we met a lot of these platforms, spoke to the founders, operators that were building them, met with a lot of the investors, VCs that had backed them. And we learned two things in that process. And that process took us about 18 months or so. I think the first thing that we learned was that there is real staying power in this idea that there is demand for access to private markets across asset class was done. And that's coming both from self-directed retail investors as well as the advisors that serve them. And so we got excited about that idea realizing that that was here to stay. The second thing we learned was that the direct to consumer format for distributing these assets was the wrong one. And the reason is very simple. If you're a platform that only provides access to private markets, private equity, credit, real estate, doesn't matter the asset class, you're consistently competing to acquire customers with the largest incumbent public market distribution platforms in the world, the fiddellities, the schwaabs, the raven hoods. And when you're only capturing even 5%, 10% of an investor's portfolio, even 20%, your payback on that customer acquisition cost is always going to be less. And that's always going to be a challenge as you start to scale relative to the fiddellities, the schwaabs, the raven hoods, dead capture, 80%, 90%, 100% of that investor's portfolio. And so we realized in that moment through those conversations that direct to consumer channel for distributing private market access was directionally correct in that people want access, but wrong in that the direct to consumer approach would be the most scale for one. And so that really cultivated the thesis that we developed at Monarch, which was, OK, people want access to private markets. But what if we can make that access available through your fiddellity or schwaab or raven hood account and consolidate that customer experience, whether it's for an investor or an advisor, and make it really easy for folks to access these markets through the platforms that they know and use today. In economics, there's a term called path dependency, which is best understood as a mountain having these valleys that rivers have established over centuries. And so I think what you're saying is that those rivers have been established as the source of markets to consumers to end buyers of financial products, and that it makes more sense for the rising world of private market distribution to join those distribution channels. But they need new sources to enter the river if you can permit the continuation of the analogy. That's exactly right. And I think that was something that we learned a bit later in the journey. So probably around 2023, Paul and I had the opportunity to acquire a platform called Lex Markets that had gone into bankruptcy. And had raised a lot of venture capital funding about $27 million to build a direct to consumer fractional real estate investing platform. I was super excited about fractional real estate as one of the asset classes within private markets and very excited about this opportunity to acquire the Lex Markets assets at a significant discount to the amount of capital that they raised in their last valuation. And so post that acquisition, which was spring of 2023, one of the things that that unlocked for us was we started to talk to a lot of the more traditional brokerage platforms and off management platforms. I think one of the things I've learned and I learned early on in that process in capital markets in general is that credibility, trust, relationships and network are a huge part of the ability to open doors to have these conversations, to even understand what's going on in the market. And so Lex Markets in many ways helped us open some of those doors that we previously were not able to. And what we learned through those conversations with the more traditional public market brokerage platforms and mobile platforms is that they too want to enable access to private markets. They see this wave coming. They want to participate in it. But they actually don't have the back end infrastructure to enable that access in a scalable way. And so that's where those two pieces came together for us. And we really aligned on our core thesis and then what we needed to build on our, which was, which is API infrastructure that plugs natively into brokerage firm or wealth management platform and enables access to private markets. So we'll come back to Lex in the story there. But before we go further, did you always want to be an entrepreneur? Tell us about your upbringing. Where did you grow up? So I grew up in Brookline, Rastjuzes, right outside Boston. Both my parents were entrepreneurs. They built preschools, early child care centers together. They had three schools in Brookline. And as you can imagine, having two parents as entrepreneurs work was a constant part of our lives, even as young kids, said, older sister and younger brother. So family conversations, dinner conversations were often centered around work in what was going on in our lives in that sense were converged. One of the things I learned early on from my parents, probably in my early teens, was that capital equals independence. And so whether that's independence from your parents, telling you what to do or independence from government or whatever it may be, that lesson stuck with me is a big driving force behind what motivates me today. And so I started working. I got my first job when I was 14. I was a summer job at an ice cream shop that had a seafood shack sort of attached to it together. I guess I was really a seafood shack with an ice cream window. And I was scooping ice cream for a summer and I was really drawn to what was going on in the kitchen behind me. And so my next job was working as a prep cook at a burger restaurant and slowly learning more and more of the job of becoming a chef. And I was very privileged to be able to work as a chef throughout my, for about six years, throughout high school and college. And sort of rising the ranks from prep cook to line cook to Asusha. And I got a couple months to actually run my own kitchen. I senior year of high school, which was super challenging, super fun. There are a lot of similarities in running a kitchen to running a business. There are for sure. I think one thing that's always true is caring about your customers, whether that's people coming into the restaurant to eat or businesses that you serve in our capacity today. Well, you have to be really passionate about what you're doing. You work.
is hard no matter what you're doing and so you may as well care deeply about it and be energized about it, draw energy from it. Restaurants, cooking definitely satisfies that urge for me, seeing people enjoy the fruits of your labor is an exciting feeling. And the best kitchens I worked in were incredibly stressful but also very well organized and that was probably the biggest lesson that I drew from my experience working at restaurants was if you can organize every step of the way from the orders that you place to buy food to the prep process that you go through to prepare food before dinner service to the way that you set up the line when you're running a dinner service to far cooking certain components of the dish may be searing steaks or pre-cooking some chicken doing so in a very methodical way and over time sort of creating this data asset within a restaurant or within a kitchen where you know roughly how many chickens people are going to buy in a night, how many steaks, how many pieces of salmon and so you can then work backwards to understand how much food you need to order you know once or twice a week how much you need to prep for dinner service and if you can get those dials right you can run a really efficient operation. I think one of the biggest costs in a kitchen is besides labor in a restaurant is you know your food cost and so you don't want to waste food right you don't want to be throwing out steaks because they're four days old and so getting that timing right to make sure that you're running that process efficiently is has a lot of overlap in the way that business more broadly works. So you're now studying at NYU. What did you study? Political science. Study political science at NYU working kitchens. I assume in the summer potentially through the years while fascinated by fractional real estate and you're looking to establish a company and fractional real estate and tell us about this and potentially was it established as monarch from the very beginning was that the name? So your first name was Rex the real estate exchange and so when I stumbled across Lex tell us about how that likes acquisition comes together. It's not normal for someone who you know two founders two young founders who've just established a business to go and purchase another business and it became a foundation to what monarch markets is today. How did that come about? So this goes back to those conversations that we were having with a lot of the D to C platforms in the market. You know we were meeting founders were meeting operators and building our thesis and building our understanding of how private markets worked and how these platforms work and sort of the the infrastructure the regulatory approvals that were required to operate these platforms were always the more interesting part of that experience for me. I cared less about sort of what the consumer interface looked like especially as we built our thesis that actually that approach wasn't going to be the most scalable in the market. And so one of the things that fascinated me about Lex markets which you know we found like every other platform that we talked to you know through our network through LinkedIn and through meeting people someone I'm sure along the way said how you should go check out the select markets popcorn and so you know we looked at their website and realized that they were regulators broker dealer they had an ATS and alternative trading system that allows allow them to establish a secondary market for trading these fraction real estate securities and so that was super interesting to us we reached out to the company and we were interested in potentially partnering with them or potentially working with them you know after after graduation and we happened to meet someone at the company that was post disease executive team and was sort of in the loop on the fact that the company and had run out of capital and was looking to wind down and so we were one of the few people that knew about that opportunity ahead of time we were able to raise some capital sort of a friends and family round to actually loan money to Lex markets to help them wind down the the business and run what is called an assignment from benefit of creditors process which is effectively I think if it is sort of the state run California state run version of a bankruptcy so it's not a chapter 11 but it's it's similar in nature and so we were actually the senior lender in this assignment from benefit of creditors process to the entity that the assets from Lex were transferred into to then potentially be sold to the highest bidder to try to return as much capital to the creditors and investors in the company as possible and I think that position is senior lender gave us you know a unique view and a closeness to the process that was then run we were able to credit bid that loan into the blind auction process that was run for the sale of the company's assets we did have to increase the size of our bid in order to win that auction but we were able to do so and walked away with the with the Lex market assets that was probably a three or four month process start to finish and this transaction is all happening while you're still an undergrad in studying or where your study is complete at that point we closed the auction I believe the day of graduation from NYU so I did not go to NYU's graduation I had dinner with my parents and friends mainly to celebrate that we were closing the the Lex markets acquisition and maybe more for my parents to celebrate that I had received the diploma from NYU. Those are two parallel educations. They were for sure and you know I think I had a great time at NYU I ran track and field in cross country met a ton of incredible people we've hired some great people from NYU but I was never much of a was never a good student I was never someone that was able to sit through class and get good grades and and do well in the traditional sense so it was less important to me that I attended graduation and so now you own these assets you have the technology base you have an ETS you've graduated and you've established that the business model is really not to be disruptive to the major distributors in this space like APACs or fidelity but to provide them with tools they need to stay competitive and to be the infrastructure delivery model for these other distribution agents through an API model how do you go about using those assets you've now acquired to build that infrastructure there was a couple parallel tracks first we actually didn't acquire the Lexmarket's broker dealer that was found down and so we had to go out and find and acquire a broker dealer we found a what's called sort of a shell broker dealer private placement broker dealer that had not had any prior business activities and started the process of acquiring firm they're sort of a cool trick with broker dealers in that if you acquire less than 25% of the firm you can start to operate with the current supervisory principles and place and so that's what we did we acquired 24.9% of the firm initially started a CMA process to change the ownership and control of the firm to be entirely owned by by Monarch and also add the approval for the TSP business sign and mutual fund retail business sign as well as the private placement approval that the firm already had and so that allowed us to start operating with the broker dealer but also go start a process of wholly owning the broker dealer and so in parallel to that we started building out the team we started raising capital the car first venture investment was towards the end of 2023 then we raised our seed rounds a year later in 24 and you know you learned a lot in that process I think raising capital especially at those early stages really helps refine the vision that helps establish focus for the company something that we definitely lacked early on even after the Lex market sacrosition and you also meet a lot of people along the way as you raise capital and so building out our network finding our early employees building out of the early team was a big part of that process as well and then you know over sort of the year year and a half after the Lex acquisition really refining our focus our team our strategy building the API product landing our first customers all of that process sort of happened time on pain you see the alternative asset space is quite vast as you touched on when you first started exploring this and earlier in the the discussion but it can be at least in private markets it can be most simply broken down to private shares private funds and private loans which often get distributed into funds you've written how there's really one area of the private markets that is bought not sold which is that pre IPO shares space but that's not all you're building for having said that let's talk about that private share space because pre IPO shares are a big part of what modern markets offers and there's tremendous demand out there in the market today for early access to the brands that we all hear about before they go public tell us about that segment and what is chief challenges are as it's developing part of that thesis refinement strategy refinement focus for us was really unequal.
understanding where there was demand in the market and what asset classes there was demand for. And so we knew that we wanted to start in the area with the most demand because we have always been a very demand-focused, informed, right? Distribution is really our core value proposition and we think that over time if you can aggregate distribution, you hold a lot of power in the market and it can help really standardize the way that the market evolves over time. And so distribution being our focus, of course, the question we asked every brokerage firm or wealth firm that we were talking to was what asset class or what product structure do you think your investors would be interested in? And pretty much across the board, the response was the pre-IPO space. And it makes sense. Everybody hears about companies like SpaceX and OpenAI and Anthropic. They're in the news every other day. Some of the they are some of the largest companies in the world at this point. And there's many more private companies beyond those three that people have interest and are excited about investing in. There's the broader trends of the IPO window being more difficult to get through for private companies, companies staying longer in general. I think we all see and hear these trends. And the result of that is that there is a developing and more liquid secondary market for these private company shares that people want to be able to participate in. And so given that that was where the demand was, we decided to start there and really focus on the pre-IPO market as our first asset class that we would make available through the Monarch APIs. And so that picked off this journey of understanding some of the structural challenges in the pre-IPO market or private company market. So one is that private companies can only have 2000 registered shareholders on their cap table before they have to start publicly reporting and effectively become a public company or there's no reason not to become a public company at that point. And so as a result of that, instead of having 2000 individual shareholders on their cap table, many of these companies will set up or allow investors to set out a special purpose vehicle, SPDs, which are entities that sit on the company's cap table but allow more investors to invest in the SPD, pulling capital and helping a private company not breach that 2000 shareholder limit but allow more investors and more capital to participate in the company. And so as a result, you've seen the development of the SPD ecosystem and a couple years ago when we started thinking about how to approach the pre-IPO market, we realized that leveraging that SPD structure was the right way to get involved, especially for retail investors that would be writing smaller ticket size, smaller tickets into these companies. And so we developed our pre-IPO product. We partnered with Sci-Cars, one of the only API native fund administrators in the SPD market to embed their SPD infrastructure into our product and allow us to programmatically create SPDs, distribute them through the APIs. And then we started building out our network of sourcing. So brokers, venture funds, family offices, folks that hold private shares today that want liquidity in those shares and are willing to sell them to us to distribute through SPDs to investors. And so that became the foundation of our pre-IPO product. And again, it was very much a demand-driven decision to start there in the pre-IPO market and we're really excited about the traction and growth that we've seen in that business so far. And for clarity sake of the business, you're distributing that through the major wealth distribution firms or direct consumers as well. So we don't have a direct-to-consumer offering. So the only way for investors or advisors to get access to SPDs that we're offering is through their platform integrating with our APIs. And we felt that that decision was really important. There are a number of direct-to-consumer pre-IPO investing platforms in the market today. But sort of inherently they are competitive with these larger distribution platforms in that they want to acquire customers. They want those customers to make an account on their platform. They want customers to hold assets on their platform. And so that does create a competitive dynamic with the distribution partners that we serve in our network. And we felt that doing both would be a distraction and would be counterintuitive to the nature of our business as a e to v infrastructure layer. And we are seeing consolidation in this space as we all know who follow this. And there's no question in my mind that every investor will ultimately want some portion of their portfolio dedicated to these pre-IPO shares. And it makes sense because to your point, the fastest growing companies in the world are in that space. And yet Ben, we're here to talk about something else today because the real growth in private markets won't necessarily come from these pre-IPO shares and the tension that exists between private companies going public or SPVs, which there is some tension involved in, but around evergreens. Even despite some of the news headlines we're recording this in April, 2026. There's a lot of Stern and Drang about private credit and some of the BDCs in that space. How do we know that evergreens are the mechanism by which private markets will scale? So I'll tell you about how we got drawn into the evergreen fun space and then I'll answer your question more directly. Well, we started Mark and you can see on our pre-C seed round pitch decks, our latest funding round pitch deck, we consistently use this term of the DTCC for private markets. That that's really our or a vision at Monarch is this back end infrastructure, API-native platform, but really serving that DTCC functionality that they serve in public markets but for private markets. And so as we look at the market as a whole, one of the things we often think about at Monarch is what are the product structures that enable access for investors at lower minimums that have the opportunity to be traded in a more liquid nature and that people are interested in investing. And again, back to that point around demand. And so probably about a year and a half ago, we started seeing a lot of the larger GPs in the private markets face, think firms like a Blackstone or an Apollo or a KKR really leaning into this evergreen fun product structure. And these are 40 Ac registered funds. They can generally accept an unlimited number of investors. They often are offered at lower minimums than a traditional drawdown fund structure. And their securities are often registered. And so the ability to trade those securities in the secondary market is more feasible and more possible from a product structure perspective. And then importantly, as well, these funds often issue 1099 tax documents instead of KWANIS. And so we started seeing a lot of these vehicles coming to market. I think there's maybe little less than 300 today in the space and probably about 550 billion or so of totally you am across the evergreen fun market. So it's still relatively small part of private markets as a whole, but it's a very quickly growing space. And again, an area of the market that the largest GPs are really leaning into. And so we saw that signal when we realized we should be in this market as well. If these evergreen fun product structures really can accept more investors, lower minimums, create the opportunities for liquidity issue a more standardized form of tax document that we should be playing in the evergreen fun space. And so we started pitching this concept to some of our existing clients, to some of the wealth platforms that we wanted to work with. And we got really excited about the feedback that we were getting. And so we decided to lean into the evergreen fun market to build our evergreen fun platform. And we started learning a lot more about the evergreen fun space as well. One of the topics that Mark Row and the CEO of Apollo has referenced is that very similar to what public security experienced 20 years ago, where individuals used to buy individual securities. And today we buy exposure to broad swathes of the economy through a portfolio approach. That's a key factor that evergreens are going to allow for within these portfolios, isn't it? Absolutely. I think thinking about an evergreen fund as sort of like an ETF for private markets is the right way to frame it. So an ETF for private equity or an ETF for private credits. Now to be clear, evergreen funds are not ETFs and they operate differently than an ETF. But if you think about the core principles of an ETF diversified exposure, brand name managers, giving you access to themes as opposed to individual securities, I think a lot of those same characteristics exist within the evergreen fun market today. Okay, so we've established that evergreens will scale almost undoubtedly. What are the key challenges and let's get into the plumbing here in particular around transfer agency, which is a term even most people who are active in finance won't be familiar with, but it has to do with the custody and the transfer of these underlying securities. How does it work in evergreens and what are the problems to scale? So thank you, I have to take a step back and
And recognize that private markets historically were built for institutional allocators. Investors that were able to write $50 million plus checks into these funds. And in that environment, when someone's writing $100 million check, a $10,000 processing cost, whether that's, you know, director indirect, is not a huge deal. When someone's writing a $10,000 check, a $10,000 processing cost is prohibitive. And so now that private markets are being opened up to the wealth channel to individual investors, there is a real problem, which is that the plumbing and the infrastructure that was built around these large institutional allocations is not able to scale to meet the moment of the wealth channel demand and especially individual investor demand, which even for ever being funds still, I think, is a couple years away. I do think one day you'll be able to log into your broker job, look a button that says private equity and immediately get exposure and allocation to potentially multiple private equity funds, very likely evergreen funds that allows you to have private equity as a core part of your portfolio allocation. Today, net experience is generally true for advisors, not generally true for self-directed investors and even the advisory space is seeing these challenges. So kind of going into end, we can start with funds, evergreen funds are managed by a general partnership from like a Black Stone or KKR. They generally leverage a fund administrator and outside council to create the legal documents that govern the structure of the fund and to manage the bank account for the fund and the sort of core books and records. Evergreen funds generally also leverage a transfer agent, which really provides that core system of record for the fund. Problem that the industry is facing right now is that again, transfer agents were built around being able to accept $50 million checks and $100 million checks and managing a relatively small cap table of maybe a couple hundred or maybe a couple thousand investors. Evergreen funds today are already at the scale where they're reaching 100,000 or a million investors across the industry. And so these same systems and providers that were built for a couple thousand investors where there are manual processes where trades and orders are being entered by a human into a system are not able to scale to meet the demand from hundreds of thousands or millions of investors investing in these funds that increasingly lower minimums. And so I think the industry broadly recognizes this challenge and going forward from the transfer agent, you then generally have the custodian and the wealth platform or brokerage platform that is actually offering that fund out to its investors or advisors. And that connectivity between the custodian and the transfer agent is also very fragmented today. And so as a result, Evergreen funds have a roughly 8% nigo error rate today, which means not in good order errors. Those could be KYC errors. Those could be trades that were manually booked incorrectly. Those could be subscription documents that got lost somewhere. And so whether you're a custodian and advisor or a GP, you pretty much universally recognize that the existing infrastructure supporting the Evergreen fund space is crumbling underneath the weight of this new way of demand from retail and advisors. And so that's not a sustainable path that we're on as an industry and is a problem that at Monarch, we set out to help fix. So Ben, what you said here is that there's an 8% not in good order rate to the trades that are happening, which means 8% of the trades are failing. And as this industry scales, that rate obviously has to drop. There's no way the industry can scale to $9 trillion in new retail wealth coming into private markets within 8% nigo. And on almost every prior episode of this podcast, I've mentioned how that there is a precedent for this that paperwork crisis broke Wall Street 60 years ago. And so what is Monarch markets building to help the industry private market scale while not having so much paperwork failure? So I think the obvious answer is actually just to remove the paper. Today you have subscription documents which govern the investor's investment in an Evergreen fund product. And those subscription documents get passed back and forth between the advisor and their custodian and the fund in their transportation. And to your point, the error rate that occurs today is not scalable and will not allow for tens of millions of individual investor orders or trades to actually clear through the system. And so really what's needed and what we're building here at Monarch is what you think of as basically an Alts custodian, a digital Alts custodian that can sit between the existing advisors, clearing firms and the distribution stack and the transfer agents and GPs on the supply side of the stack and actually clear and sell these trades in an efficient way. And to be more specific, we think of Monarch that the on the bus infrastructure is what allows for a much more efficient settlement process. On the bus in a nutshell is a single account held with the transfer agent for each Evergreen fund and that accounts is held in the name of the custodian or clearing firm that's cussing that product. And of course, advisors then sit on top of or clear through that clearing firm and access products accordingly. And within that on the bus account because it's a single position with the transfer agent, you remove a lot of the friction that we have today in this market where the transfer agents are manually reconciling all of these investments and trades, viewing all these individual subscription documents, trying to resolve nigh goes awful manually. And instead you abstract away all of that complexity and the actual trades that buys and sells submitted by investors live within the on the bus account. On the bus is not a new concept. This exists across financial markets today. What Schwab is built in the mutual fund space with the once worst platform is probably the clearest example of what on the bus can do at scale. And what on the bus really unlocks is the ability for investors to trade in and out of this on the bus account or to be more specific model portfolios that are looking to allocate to Evergreen funds to trade in and out of the on the bus account, rebalance more frequently because the actual trades are all held within the on the bus infrastructure and are not processed directly by the transfer agent and their books and records. And so we think that on the bus and this idea of not replacing the transfer agents, not replacing the clearing firms and advisory platforms, but really supplementing the existing infrastructure with this on the bus build will help simplify and standardize a lot of the way that Evergreen funds get invested in today. And it's a big part of what we're focused on here at BAH. So let's provide context to this. In the public markets, your broker buys Apple shares and that would be through an on the bus account, right? The DTCC would net inflows and you just don't see the plumbing. But in private markets, every subscription is going individually to a funds transfer agent, which means every sub-doc, now reconciliation and all these redemptions are flowing bilaterally and individually. And so what you're proposing through this omnibus account is the simplification of that so that orders net and there's one sub-doc per fund, not per investor, and the transfer agents can process one transaction instead of thousands. Have I described that correctly? You have. So one omnibus account per fund per custodian in the network and likely a different omnibus account for cash investors that elect to receive cash dividends versus drip and rolling into dividend reinvestment plan. But effectively one or two omnibus accounts per fund per custodian, which is dramatically less than the hundreds of thousands or millions of individual accounts that the transfer agent would need to record without omnibus. The ability to eliminate paper-based subscription documents and the passing of those paper-based subscription documents from a wealth platformer or custodian to the transfer agent. And a real ability to actually scale the evergreen fund market in a way that is simply not possible today. So the obvious question then Ben, if omnibus is very clearly the answer and it's a borrow from public markets, why hasn't it been built yet? Well, I think there's a couple reasons. Number one, it is a deeply complex technical challenge to solve. And so the technology behind omnibus and ensuring that it works is not trivial. I think number two,
And this is really important is that incentive alignment on both sides of the market is also very key for any sort of financial market infrastructure to work, but especially something like on the bus where you do really need buy in from both sort of the gps side of the market as well as the custodians and distribution platforms that are offering these evergreen funds to their customers. And so as a startup, I actually think we're very uniquely positioned to tell the story very clearly of what we think needs to exist in market and spend a lot of time and energy convincing both sides to align on that central vision. It is very difficult for entities on either side of the market to take a stab at that challenge on their own because they have their own incentives and they're often competing with each other. Despite the unique challenges that come with being a startup selling financial market infrastructure into the space, I actually do think there are advantages in that we're able to focus we're able to solve these really deeply technical challenges. And we're able to work really hard to get a cent of alignment on both sides of the market to ultimately get the adoption that we we're looking for with this product. And let me jump in there because you're not just a startup solving the problem from scratch to your earlier point, you're a startup solving a specific integration issue with the existing incumbents, which is a fascinating approach. I think it's I think it's a necessary approach. I think without getting buy in from incumbents in the market, it is almost impossible to create real change, especially in financial market infrastructure. And so being a startup helps being very focused on solving the specific problem also helps. And in the conversations that we have with whether it's GPs, custodians, wealth platforms, there is a broad recognition and an excitement about omnibus and about omnibus existing. And there are the conversations that have been happening about omnibus in the old market for years. But it takes, in my opinion, someone that's willing to face that challenge head off, be willing to solve it, dedicate resources and focus to solving it, and have the right relationships, the right doors that are opened, the right regulatory structure and approval to actually go in and solve that problem. Let's get very specific for a minute. What is exactly the technical challenge you're describing? So it's a couple of things. An order comes into the omnibus account. You have to be able to route that order to the ATS or Q that order up for settlement with the fund. The ATS alternative trading system is able to net buys and sells, match those orders, create settlement instructions for custodians. Orders that are not matched on the ATS have to queue up for either subscriptions or redemptions with the funds transfer agent. And then all of that sub accounting infrastructure to track every individual investor position within the omnibus account to track and calculate the throwout of dividend distributions, the difference between the aggregate subscription amount and the individual investor subscription amounts. The reconciliation process that goes on daily between the transfer agent sub accounting infrastructure and the custodian and ensuring that that system works and is scalable all the time. Right. These are people's investments and dollars and unlike other areas of technology where you can sort of build something, try it, maybe it breaks, maybe it doesn't, you know, you try again, you build version two. This is an airplane in flight and you are adding new seats as it's flying. Exactly. And those seats have to work and they can't break and they can't fall apart. And so a core part of building in financial markets in general is that the systems that you build have to work from day while they have to be scalable if scale is your goal. And you don't get second chances. Okay. So let's discuss what the omnibus then unlocks, which is model portfolios, SMS and UMAs public and private markets in a single account. Is it fair to say that that vision of a portfolio exposure to private markets isn't possible without omnibus that effectively you can't run a five fund evergreen model portfolio when every rebalance. Requires 5,000 individual subscription documents that every turn. So if you think about the model portfolio industry, which is roughly $16 trillion of assets today, the way a model portfolio works is that the model strategist sets a set of parameters for the securities that that model will own whether it's equities fixed income. One day private securities and those positions have what are called bands and if the position drifts outside of that band, then the model triggers a rebalance and not rebalance and the rebound serve aggregates all of the orders within that the various accounts that are following that model. And submits a trade to the markets and rebalance is those positions within the model. And so effectively what I'm describing is programmatic machine driven trading for positions inside of potentially thousands of individual positions inside of these model portfolios. So the idea of including any sort of security in that portfolio where you have drift rebalancing this that that security sort of by necessity needs to be able to trade on a secondary kick if that security is a liquid when the model goes to rebalance and it can't sell that a liquid position. It won't be able to rebalance and so we were drawn into the evergreen fund market very much with this idea of how do we fit evergreen funds into model portfolios and hearing and seeing a lot of demand from a lot of the model portfolio platforms to include alternatives specifically in the form of evergreen funds in their existing models. So long way of answering your question. Yes, I don't think it is possible to have evergreen funds included in model portfolios in a scaled way without the omnibus infrastructure behind it that allows for equity that simplifies the order entry netting and settlement process and that allows evergreen funds to behave more like a more traditional equity. So if I'm to frame this another way, Ben, your building an essential technological product for the biggest brands in finance to meet the missions they've already set out to accomplish Vanguard Apollo BlackRock UBS Morgan Stanley have all committed to having private markets within most of their accounts. And that requires an evergreen omnibus approach and that requires and building an evergreen omnibus approach requires new technology given us technical challenges and that's what monarch markets is building. That's exactly what we're building in the evergreen fund space and I think if you think about the market as a whole we're in the very early innings and I think a lot of other folks would say this as well a couple converging trends. Private markets being a broader part of private wealth portfolios and eventually retail portfolios the evergreen fund market as a type of product that's being developed by GPs demand from advisors to get portfolio exposure to private markets both of those need to be true the GPs need to have the incentive to distribute through the wealth channel and the wealth of buyers needs to have the incentive to allocate to private markets and those incentives exist today. And so we're in the very early days of those trends and as those conversations get louder and louder people start to realize well if this is going to be true the infrastructure underneath all of this also needs to exist and so that's where we've been able to step in and really engage with platforms and GPs on both sides of the market and understand and identify that this pain point is real. The timing to build the solution is now and the opportunity is all ahead of us. Ben you're building financial infrastructure at a time when most of your peers are still figuring out their first bonus if they're lucky enough to be working. What's the moment when you've most felt the weight of that? Do you ever feel that you have embossed your syndrome all the time but the weight I think I will say we we closed strategic financing round. The end of February we had I've probably lead the round commerce ventures participate treasury and as is always true in the fundraising process you know you spend months sometimes years chasing investors trying to get them excited about what you're building and get them to you know invest in your business. And the last round was easier than before but but still very challenging and I think you know you did I don't know there's no one moments all the time the weights always there. I can just got used to it this part. I think that's typical of anybody building something important and as I've gotten to know you Ben it's very clear that building financial infrastructure at a narrow level is not your core motivator you're clearly driven by a broader purpose. What is your core motivating factor and and building this what brings you to work every day what gives you passion.
So when Paul and I first started on our calls my co-founder we met at NYU and started working together. We got very close because we shared this passion for solving really complex problems and I think that's what led us to financial markets in the first place and then led us specifically to this convergence of private markets and public market distribution. This is a very hard problem to solve. There are a lot of stakeholders, stakeholders, alignment, is really important. The actual tech and infrastructure is not trivial and the architecture that's required are all uniquely very challenging things to solve for and so that's what I enjoy doing. The passion comes from the idea of getting to go to work every day and solve really hard and complex problems with people that care deeply about what the solutions look like and getting to work with incredible people across financial markets to bring those ideas to life and that's what's motivated us for the last few years and I think that's what will continue to motivate us as monarch growth. You are youthful Ben. One of the things that comes up when people mentioned you is your age and it's something that I think this industry needs a lot more of is the tech mentality of another generation and a new one but you and I have spoken before too about some of the thoughts you have around your peer set and how they feel about the sense of opportunity that exists in the modern American economy. Just riff on that a bit, tell us about it and how building better financial infrastructure with private markets might make people feel like they're a better part of the ownership economy. So I have a lot of conversations with folks my age, I'm 24, you know, other folks that maybe are still in college and there is sort of this general trend of depression almost about the state of the world, sadness, a feeling that they're young people in particular don't have the same set of opportunities that our parents did, jobs are harder to find, participating in the upside of all of the incredible things that are happening in the economy today like AI or robotics or space travel are so far out of reach for kind of young people to get involved in. And so I noticed this trend of fear and a feeling of lack of ownership that a lot of young people share and I think private markets is a great answer to that. I think participating in private markets in some way whether you're building a company yourself and raising venture capital, whether you're investing in private companies, I think is a great way for people to actually participate in economic upside and feel like they own a piece of big growth that's happening all around them and for young people in particular I think that's a really important way to keep people bought into the American dream and the vision that we have for this country. And so tying that to the role of private markets, providing more access, more optionality, more entry points to the world of, to a broader universe of investable assets, becomes a path to driving greater optionality for individuals across the economy. You could argue as a purpose. Well, taking me as an example, you know, 100 plus percent of my net worth is tied up in the stock of one private company, which is modern. And part of what that means for me is that, momark is my sole focus and the core driver of my existence today. Other people don't have to take it to that extreme of course, but the ability to access and invest in the companies that are changing the world and generating outsized value because of it, whether that's AI companies, whether that's private real estate investments, whether it's private credit investments, really allows people to or broadly participate in the growth of the economy in a way that public markets just can't offer today. So not only enabling access but simplifying it and making it a core part of investors, experience is, in my view, a way of allowing more people to participate in the economic growth of our country and, you know, companies around the world. It's worth repeating some of the numbers that get said often, but many still may be having heard or internalized that there used to be 8,000 public companies in the United States. And today there are less than 4,000, which is a remarkable number that only 4,000 public companies exist in the most sophisticated, deepest market in the world and that there are something like over 100,000 private companies with over 50 million in revenue. I think some material portion of 10 to 15% of those private equity owned, then there's a just starting universe of private loans that will rival the traditional fixed income markets, public fixed income markets and support them, all delivering the growth of massive new companies. And so yeah, to provide further access is a story of more inclusion, especially when you consider that most of the pre-IPO shares get distributed just among friends and family of these massive corporations. And so that's an inside game, typically for those who are early access and connections to the founders. And public markets investors are left with, you know, the late stages of value creation rather than the early stages. So there's a real social purpose or underlying political premise to some of this. And I mean political in the broadest sense of the public's benefit to broadening access to private markets, which is ironic because I think often the financial press and others will see this as just private equity is seeking a new last-stage investor to hold the bag. When in fact, this is at its best the story of increasing opportunity across markets in general, but it requires that market infrastructure that got built over decades in the public markets to be built now in private markets. I think that's absolutely right. And I think that the headlines and that median narrative of access to private markets being a negative to society is misguided. And I think that folks like yourself that are telling the stories of private market infrastructure and private market opportunities is an important and increasingly important part of the media landscape. Because without that counter narrative, people may just decide that private markets isn't for them. And I think that that would be wrong for society as a whole given how much of the value creation in today's economy happens in private markets. Yeah, we've talked with others about the terms. Even something like private credit potentially is not an accurate term. When you consider most of that credit is really owned by institutional LPs who are ultimately public capital doing more long-dated lending with less deposit taking pressure. Now, this is slightly different than the the retail argument. But it's not clear that, you know, or it is clear to me that private capital is effectively a form of public capital when you consider the initial sources of it. And certainly over time, I think that will become more true. Ben, this has been a terrific conversation. I want to thank you for joining it. There's a lot more to come as we continue these discussions. Where can people find you if they're interested in learning more? My largest presence personally is on LinkedIn. You can always follow me there, reach out. You can find
[email protected]. And if you're a broker-dealer or wealth management platform that is looking to access private markets and create that native experience for customers, that's where monarch can be most helpful. Thank you Ben, terrific conversation. Thank you Mark for having me. Thanks for listening to Modern Capital. The next generation of private markets is being built right now. And it's reshaping business, technology, and society. I'm Mark Andrew. Learn more about our work at the private markets forum in each of our upcoming events at private-markets.com. See you next time. [BLANK_AUDIO]
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