lisa: i am lisa abramowicz. welcome to "bloomberg money undercover." a show that provides valuable insights into alternative investments. we take you inside the world of private debt, equity and real estate. let's get straight into those burning issues in private markets. private markets are gaining steam into year-end. jp morgan charting out expansion plans with more companies seeking to shed the mantle of being public. comcast ventures its funds on startups. babe ruth hit another home run. this time, at the auction block.

let's get straight into the burning issues. with me is kelsey butler, adam tim gunn, and chenal bass lake. a number of big asset managers have been getting into an expanding in private markets. what is it doing? kelsey: the firm is definitely growing its footprint into private credit. for one, they have appointed their cfo, meg mcclellan into a newly formed role of how to private bets. they are also doing hiring and potentially more acquisitions o grow their assets. lisa: what is the goal here? why is this happening now? kelsey: it is part of a push from investors. investors want someone who is specialized in these unique asset classes. especially when you are talking about alternatives and there are some intricacies along the way. lisa: although, how much is this coming from investor demand, how much from the fact that fees are higher in the alternative space? kelsey: that is definitely a driver as well as these have kind of compressed along the board.

banks are making the smart decisions and boosting fees where they think they will come. lisa: is it largely in private debt or also private equities, is it also in perhaps beaten up existing public debt? where is the focus? kelsey: the focus for jp morgan s going to be in credit that has collateral backing it. they really see a lot of opportunity in that. when there is a downturn, they can go in and seize assets if need be. they are also seeing opportunity in special situations. lisa: collateral backing it which brings us perfectly to adam and the underlying supply and demand fundamentals when it comes to commercial mortgage-backed debt. you recently wrote a piece talking about the year ahead. what are bankers expecting? adam: the nbs was up 20% this year. may go up another 20%. lisa: in terms of issuance. adam: in terms of issuance. could be close to 140 billion next year. borrowers are locking in fixed rates, search for yield, and a mature way where borrowers may

refinance next year because of the low rates. lisa: it is not necessarily a lot of net new supply as much as recycling existing securities? adam: that's right, it is a lot of refinancing. not only that, but a search for yield. great relative value there. lisa: there is a concern that people have with the commercial mortgage debt because there has been a weakening in the underlying market. what are you hearing from bankers and investors on their concerns about that? adam: retail is a small portion. it is lower leverage in the post crisis. a great relative value. cmbs, like a lot of structured markets did not tighten in, the spreads didn't tighten in as much as investment corporate bonds. all the banks are saying get in it now before there is a rally. lisa: when you say retail, it is because there has been a whole world of pain in the mall space and the retail focused space but not so much

elsewhere? adam: correct. the collateral is getting a lot cleaner now. lisa: it has been washed out which brings us to chenalia. when it comes to demand, it brings us to the fact that more public companies are trying to go private for a variety of reasons. in no small part because of money flooding into this area. hudson's bay, one shopping based company has been trying to go private. sonali: what is happening today, there is an issue here because there is an investor that really wants higher valuation here in terms of this private deal. like you say, they are not only companies looking to go private that are already in public markets that don't like this pressure from shareholders that are not that patient in terms of a turnaround plan. at the same time, more companies may be looking for different exits while they are entering public markets as to not face that investor pressure in the first place. lisa: that is something we saw in the energy space with a takeover by blackstone.

it was done at a high valuation. sonali: it was 15% higher. this is blackstone infrastructure. it was done 50% higher than their offer was. it is interesting to see these public shareholders pushback at these private equity firms and say listen, you need to pay up a little more to make this worth our time to take it out of the public market. lisa: more broadly, can you give us a sense of what the advantage is for companies to be private over public? sonali: a lot of people are having a lot of issues with corporate governance. a lot of the things that flew in the past that allowed management teams to do what they wanted to do are not flying with investors anymore that want more control. especially big index funds that have taken a more active role in the market. meanwhile, you have private equity willing to say ok, let's be patient, while we also have co-investors, pension funds, that are willing to put more toward our deals. with that said, valuations are as high on average as they have been since 2000.

the earning and return on these assets will be a more difficult thing moving forward. lisa: thank you so much and to all of our reporters, appreciate it. which brings us to our next guest, karen davies. huntington national bank managing director of private equity. i want to focus on valuations and how high they have been. what have you seen this year in terms of pushback or reluctance to do deals in the part of private equity firms because of high valuations? karen: 2019 has really been a repeat of 2018 in terms of valuations, the peaking of the 10, 11, 12. i don't see there being a lot of pushback on these transactions. i see a lot of larger equity checks being written to chase the best assets out there now. they have tons of dry powder to do it. if they want an asset and it makes sense for their portfolio, they will write a larger equity check. lisa: you say they have dry

powder and that is the key. how much are these deals being driven by the amount of cash they have versus the idea that perhaps there is values in these deals being done? karen: it is a tricky thing to figure that out. we have i think anywhere from $2 trillion globally of dry powder. we have sovereign wealth funds coming in, family office joining the party as well. you have all of this capitol on the side from the investment standpoint. gp is wanting return, the exits have slowed down. then you have access to the credit markets that is huge. you have low borrowing rates at the regular traditional banks. you have access to the capital markets.

you have access to direct lenders who are at the table doing much larger deals and doing it alone. i almost feel like these valuations are a new norm. even if you start to slightly slow down. lisa: what could potentially trigger a shift here? there is a concern that as valuations get higher and higher and profits don't match pace, you have 70% of all the companies that ipoed this year were a cash flow negative, at what point does this become a real fundamental problem? karen: i think if you are investing in certain sectors that could be cyclical, that could be a problem. like you are in an automotive space, maybe you are heavy into retail, old-school brick-and-mortar retail, that stuff will suffer, it is already suffering. transportation is showing a sign of weakness. if we see housing slow down and you are in building products, i think it will force the investors to pick a little bit more of a heavier focus on the non-cyclicals. spend a little bit of time in the food and beverage space, automotive, it will force the decision-making to a place that could be more stable. lisa: what are you looking for in terms of 2020? mna, activity in general?

particularly in the middle market space. karen: at huntington, i sit inside of cleveland, ohio but our bank is headquartered in columbus. our footprint is the entire midwest. we see these big companies come in every day and oftentimes, we bank them. i think we will see a pace in 2020 is really the same of 2019. we are hearing from our companies, pe buyers, that they are very optimistic, that revenues are up. that they have a capex spend budget in mind to keep up with the growth. i do think you are going to see another 2020 year that matches 2019 in m&a while the economic indicators are favorable. lisa: you think valuations will increase to a similar degree as they did this year? karen: i think they will stay relatively the same but certain sectors will always push the edge. i.t., fintech, health care. lisa: thank you so much for being with us. that was national banks karen davies. coming up, this week's power player, comcast ventures' amy banse says there is a silver lining of high valuations. amy: there's no question that valuations are high across the spectrum. again, we see that as an

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lisa: i'm lisa abramowicz. this is "bloomberg money undercover." time for power player, a look at the notable names in private markets. we talk about the mega deals being done with mega funds like softbank attracting a lot of attention. perhaps because of this, some funds are increasingly looking at the smallest startups for better value. i spoke about this with head of funds at comcast ventures. amy: our investment analysis looks very much like the investment in analysis i imagine of the standalone fund. the first thing we ask ourselves is how good is the team, that is critically important. then we look at the product, is it a compelling product? and ultimately, you ask is their product to market fit

that will result in profitable growth? we do go one step further in that we ask ourselves, is there something that we can bring to the table in addition to money? and that goes back to leveraging who we are, our platform, and our assets. lisa: how does that translate in actuality? in other words, does that mean for example advertising on the comcast platform, or the marketing lines that you guys have, what kinds of ways could you leverage? amy: exactly. we have a division in the fund called forecast labs. forecast labs offers a number of products, including television advertising products, where we help our very early stage companies realize that tv advertising can often have a better rli than other forms of advertising. in addition, we have a white

glove broadband service which you can imagine is critically important to a company just launching. we have a direct marketing service, any number of other products that we are able to create out of the fact that we are comcast, and we invest in large platforms. lisa: you talked a little bit about the mega funds leading to mega valuations and how you don't really want to play in that space. i'm wondering given how much money has been raised, i imagine there is a lot of bidding going on at this stage. i'm wondering how valuations appear to you at that point in a company's evolution? amy: yeah, there is no question that valuations are high across the spectrum. again, we see that as an opportunity. we at comcast ventures see that as an opportunity. in that we are increasingly able to bring more than money to the table.

and win investments at an early stage. lisa: going forward, you said the main motivation is financial, that you are not there as a philanthropy arm, that you want these companies to be successful and make money. what kind of returns are you looking for? amy: we are looking for venture returns. we want to see 3x, 4x, 20x if possible. you are absolutely right. at the end of the day, we measure our success based on financial returns. lisa: there has been a lot of focus on tech startup valuations and how high that particular area, how lofty the valuations have gotten there. do you think that is an area of particular concern? amy: i actually think we are going to see the pendulum swing there in 2020. there is already considerable amount of talk in the market about good growth. profitable growth.

sustainable growth. instead of growth at any cost. so i do think you will see those valuations moderate to some extent in the next year. lisa: does that mean a washout of some sort with companies folding up or consolidating into others? amy: no, not necessarily. i think it probably suggests you are going to have companies ocused more on keeping their heads down and realizing margins that result in profitable growth. lisa: i'm wondering, are there particular industries where you are completely avoiding the startups? amy: nothing that we are avoiding but we are certainly seeing a lot we are excited about. the categories that we comcast ventures will be focused on in 2020 are categories like ensure

tech, real estate tech, enterprise automation, cybersecurity, and then of course, one that i am particularly excited about is the rapid growth in the audio ecosystem. lisa: that was my conversation with amy banse, head of funds at comcast ventures. it is important to get context and understand why firms may want to look beyond the mega startups. let's look at 2018, a new annual record for u.s. venture capital investment at nearly $137 billion. it is on pace to surpass $100 billion this year. this is according to pitch book data. starting to look more like public companies which fundamentally changes the risk and return expectations. as a result, a lot of firms are taking a look at the earlier phases of development for perhaps more opportunities. coming up, unloading uber. co-founder travis kalanick selling $350 million more of his shares this month. the details next. this is "money undercover" on bloomberg.

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lisa: i am lisa abramowicz. this is "bloomberg money

undercover." we like to highlight the money behind public companies that often go to a lot of private investments of all types. recently, there was a reorganization of a power of corporation of canada that included two brothers stepping down as co-chief executive officers casting a spotlight on the desmarais family. joining us now from montrã©al is sandrine rastello. can you talk about who are andre and paul desmarais? sandrine: these are two brothers who are part of a family that is basically sitting on top or near the top of the canadian business establishment. their father had taken over that company in 1968. their father had built an empire. and at some point, a media empire, starting basically from scratch from a company he inherited in a small town. he was a very astute businessman. he was not afraid to make deals. he grew this big company out of this postwar era. the family became very powerful.

they have an estate, 300 kilometers north of montrã©al where a lot of heads of state came to relax and play golf. and the sons took over in 1996. after 23 years, they are stepping down. lisa: i'm wondering, this is one of the wealthiest companies in canada. i believe they have an estimated $6.4 billion. do we have a sense of where they put that money? what they do with it? sandrine: you should know that this is -- media shy is a polite way to say it. in montrã©al, in articular. the family has a huge investment in the shares of the company. they control the company, they control the votes. through these investments, they have a hand in a lot of indirect investment in holding company. in terms of personal investment, there are a few interesting things from one of the brothers. there was a media report of an

investment from formula one, but also more local things. andre started some organic farms not too far from montrã©al where young farmers et trained in a particular organic growing method and hopefully, the idea he says, is to give the tools for these people to start these farms and make a decent amount of money growing organic vegetables. lisa: thank you so much. we will stick with billionaires because travis kalanick is having the sale of the century. the uber co-founder sold $350 million more of his shares bringing his sale to $2.1 billion. joining us in london is tom metcalf. can we have a sense of what he is doing with all this money as he sells and liquidates his holdings? tom: that is the big topic of conversation in silicon valley. this is one of the great liquidity events of the year.

as you said, he has sold about $2 billion. one thing we know is he is using some of that for his next start up, something called loud kitchens. that is supplying to restaurants where if you want to do delivery services, but they don't actually want to have it in their own restaurants. it is a pretty capital-intensive business. he has put $300 million into that. and is doing pretty well. the latest valuation from a january investment by the saudi's valued that at $5 billion. not a bad return for travis kalanick. that leaves a huge amount of money left on the table. that is sort of the guessing game right now. not really sure what he is doing with it and it is all in cash. he is very liquid. whether there is a big opportunity out there that may emerge or he is just playing it conservative and wants to get out of uber and sit on his fortune.

lisa: when you say he has a knack, he certainly has a knack getting it up. i am also wondering how typical it is to see a co-founder liquidates so much of their holdings right after the ipo. tom: at least -- i've been covering this space for six years, and i have never seen something at this pace. it is pretty extraordinary. to give you a bit of context, his co-founder sold off about $35 million of his shares out of a $2 billion portfolio. that is much more the pace you typically see. obviously, travis kalanick was ousted as the ceo. he may feel his time is done at uber. certainly, there has been filings that suggest he is planning on selling his entire stake. as recently as november, the stake was something like $2.5 billion and now down to $500 million. extraordinary pace of sale. lisa: really quick, do uber investors care about this? care about his sales? tom: don't really seem to be affecting the share prices. share prices are down but that seems to be unrelated at the pace of sales. it seems people have baked in the idea that travis kalanick may not have much of a role left at uber. lisa: tom metcalf, thank you so much for that. speaking of big money, it's time for this week's big umber. babe ruth hit his 500th homerun

90 years ago against the cleveland indians. the yankees lost that game but his bat that day recently sold for a little over $1 million. after the sultan of swat whacked the ball out of league park, that according to newspaper accounts, ruth was the first player to reach the homerun milestone. that does it for us. reminder, you can watch us each tuesday at 1:00 p.m. new york time, 6:00 p.m. in london and 2:00 a.m. in hong kong. from new york, this is bloomberg. ask

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kailey: coming up on "bloomberg best," the stories that shaped the week in business around the world. the u.s. and china show off a shiny trade deal. let's see what is under the hood. >> a lot of tariffs will remain in place. >> the trade issues with china will go on for years. not months, but years. >> after a landslide electoral win, boris johnson puts the risk of a no deal brexit back on the table. >> his big election win, we will not see amy imagined -- a new reimagined boris. >> a new heavyweight in the auto industry. >> the consolidation is there, especially now.