WEBVTT - Man Group's Stock Skepticism 0:00:13.840 --> 0:00:17.239 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.440 --> 0:00:19.960 My name is Mike Reagan. I'm a senior editor at Bloomberg, 0:00:20.160 --> 0:00:23.480 and I'm Vildonna hire across asset reporter with Bloomberg. And 0:00:23.640 --> 0:00:27.640 this week on the show, well, sticky inflation, a slowing economy, 0:00:27.920 --> 0:00:31.320 even bank runs. Stocks have had a lot of headwinds 0:00:31.400 --> 0:00:34.280 this year, and yet the market is still pricing in 0:00:34.320 --> 0:00:37.280 a soft landing, where a scenario under which inflation is 0:00:37.320 --> 0:00:41.319 subdued but the economy avoids a deep recession. At least 0:00:41.360 --> 0:00:43.479 that's according to this week's guest, who is the w 0:00:43.760 --> 0:00:47.199 CEO of a major hedge fund firm. But does the 0:00:47.240 --> 0:00:50.159 market of it right? We're gonna get into it with him, Vildanna, 0:00:50.240 --> 0:00:53.479 But first I gotta ask, are you going to ask 0:00:53.520 --> 0:00:56.920 me a basketball question? I could don't. I don't know anything. 0:00:57.320 --> 0:00:59.480 I just know that the game was on really late 0:00:59.480 --> 0:01:02.920 and everybody was mad. Yeah, right, started after nine or something. 0:01:03.000 --> 0:01:05.839 That's about right. No. I was gonna ask you, um, 0:01:05.880 --> 0:01:08.520 if you watched MTV as a child, of course, of course, 0:01:08.600 --> 0:01:13.199 Oh my gosh, cribs, cribs, let's see my day. MTV 0:01:13.280 --> 0:01:15.240 still was playing videos. I don't I don't think I 0:01:15.280 --> 0:01:18.640 saw many cribs. Okay, So my craziest thing, the reason 0:01:18.680 --> 0:01:20.880 I ask is my craziest thing. The week harkings back 0:01:20.959 --> 0:01:24.640 to the early MTV days, and I'm wondering if you'll 0:01:24.640 --> 0:01:27.200 even know what we're talking about. Nineteen eighties, when did 0:01:27.319 --> 0:01:30.320 MTV start? It was like mid eighties. Yeah, okay, late 0:01:30.319 --> 0:01:32.920 eighties maybe, No. They they played videos when I was 0:01:32.959 --> 0:01:35.120 young too, But they also had like really fun shows. 0:01:35.160 --> 0:01:37.400 It was cribs. Was your main cribs? What else did 0:01:37.440 --> 0:01:41.399 they have? Oh my gosh, they had room Oh was 0:01:41.400 --> 0:01:44.920 that an MTV show? Yeah? They had Room Raiders Room 0:01:45.000 --> 0:01:46.720 rad Yeah, which is just like a really gross show, 0:01:46.720 --> 0:01:48.600 like somebody will go into your room and like literally 0:01:48.640 --> 0:01:51.640 go through all your stuff and try to embarrass you. Yeah, 0:01:51.640 --> 0:01:55.080 they had some good shows. I guess Jersey Shore was 0:01:54.720 --> 0:01:59.160 that's that's that's a gem. That's a gem. In fact, 0:01:59.240 --> 0:02:02.560 my daughter ran in to Pauly d Wow on her 0:02:02.640 --> 0:02:07.840 spring break where in Panama City, Florida, which is I 0:02:07.840 --> 0:02:11.040 guess is like the Jersey Shore of Florida. Yes, but anyway, 0:02:11.080 --> 0:02:14.800 we digress. We digress because our guest actually is really 0:02:14.840 --> 0:02:17.960 far removed from the Jersey for he's not really the 0:02:18.040 --> 0:02:23.640 Jersey Island. Sure, he's in the UK baste. Yeah, not 0:02:23.720 --> 0:02:26.120 quite the same Jersey shore. Not the same maybe a 0:02:26.240 --> 0:02:30.200 nicer Jersey shore. But anyway, Mark jones Man Group Deputy CEO, 0:02:30.440 --> 0:02:32.400 is joining us this week. Mark, thank you so much 0:02:32.400 --> 0:02:35.160 for joining us and welcome to the show. Pleasure glad 0:02:35.200 --> 0:02:37.880 to join you. I'm glad to be far away from 0:02:37.880 --> 0:02:41.919 the new Jersey Shore, right, it's definitely a different one 0:02:41.919 --> 0:02:45.880 on all side. Um, Okay, So you sent us a 0:02:45.880 --> 0:02:48.000 couple of notes before we started and you said we're 0:02:48.000 --> 0:02:51.560 in a tough period four large asset owners, and I 0:02:51.600 --> 0:02:54.120 wanted to ask you about this and what the backdrop 0:02:54.280 --> 0:02:57.240 is right now, what maybe some of your biggest worries 0:02:57.280 --> 0:03:01.240 out there are, and just sort of conceptualize this. Yeah. Sure, 0:03:01.919 --> 0:03:04.000 So I think if you're a large asset owner, you've 0:03:04.000 --> 0:03:07.160 obviously you've got some structural risk asset positions in equities 0:03:07.160 --> 0:03:11.160 and bonds, and you've had this very benign period where 0:03:11.200 --> 0:03:15.080 inflation just hasn't been a problem or certainly in developed markets, 0:03:15.480 --> 0:03:17.600 and obviously it's been back with a vengeance over the 0:03:17.600 --> 0:03:20.240 past eighteen months or so. And getting out of the 0:03:20.360 --> 0:03:23.720 way of that when you have those structural long asset 0:03:24.240 --> 0:03:27.800 positions is very, very tough for people, and actually, frankly, 0:03:27.880 --> 0:03:31.040 HARKing back to how do I risk manage my positions 0:03:31.040 --> 0:03:34.560 in an inflationary environment? Last year is one of the 0:03:34.560 --> 0:03:37.160 most difficult that most of our clients will have had 0:03:37.200 --> 0:03:42.200 for at least a decade and possibly significantly more. And 0:03:42.520 --> 0:03:46.800 they're definitely still concerned about what do we do now 0:03:46.840 --> 0:03:51.480 that this insidious sort of force on real assets that 0:03:51.600 --> 0:03:53.760 hasn't been around for a long period of time is back. 0:03:54.320 --> 0:03:56.240 What do they do with their allocations? Where do they 0:03:56.280 --> 0:03:59.600 need to move things around? Who can help them? Where's 0:03:59.640 --> 0:04:01.920 the ALP Do they still need to increase the private 0:04:01.920 --> 0:04:05.160 market allocations they've had in the past. Just sort of 0:04:05.280 --> 0:04:08.160 a long long list of debates that they're having in 0:04:08.200 --> 0:04:10.280 a way frankly that we haven't heard from them for 0:04:10.320 --> 0:04:13.880 a long, long period of time. You know, Mark, in 0:04:14.240 --> 0:04:17.120 the intro, I mentioned that, as you mentioned in your notes, 0:04:17.160 --> 0:04:19.800 it sure does look like equity markets at least are 0:04:19.880 --> 0:04:23.520 pracing in a soft landing. Here reading the restaur notes, 0:04:23.560 --> 0:04:26.400 I'm not convinced you believe they're right. Could this rally 0:04:26.520 --> 0:04:29.599 be a big head fake? Do you think? Yeah? I 0:04:29.600 --> 0:04:33.280 think the risk reward inequities is very, very tough at 0:04:33.279 --> 0:04:36.920 the moment because, as you say, they're effectively implying that 0:04:37.000 --> 0:04:40.200 the FED does manage to navigate this and land things perfectly. 0:04:40.640 --> 0:04:43.760 They've got an incredibly difficult job on their hands. I 0:04:43.800 --> 0:04:45.839 definitely wouldn't want to be in their shoes right now, 0:04:46.640 --> 0:04:51.719 because you've got very material risks both sides, and indeed 0:04:51.760 --> 0:04:53.880 you've now got financial stability coming up as a third 0:04:54.000 --> 0:04:56.640 dress that frankly I wasn't thinking about six months previously. 0:04:57.360 --> 0:04:59.360 But the standard ones, which clearly have been the ones 0:04:59.360 --> 0:05:02.280 on their mind for most of this period, are Okay, 0:05:02.400 --> 0:05:04.200 we do think we're going to cause a drop in 0:05:04.279 --> 0:05:08.440 economic growth, but can we time that perfectly? Can we 0:05:08.480 --> 0:05:12.159 have a mild recession without you know, major major job losses? 0:05:12.360 --> 0:05:14.360 At every time, you know, you hear him stand up, 0:05:14.400 --> 0:05:16.920 he does make the point of it's better to take 0:05:16.960 --> 0:05:20.520 pain now, otherwise it's worse long term. They understand what 0:05:20.560 --> 0:05:24.000 they're doing, they understand the potential consequences. Can they get 0:05:24.000 --> 0:05:27.400 the dial right there? And you know, economies are not 0:05:27.680 --> 0:05:31.440 things where the dials work desperately well. And the sort 0:05:31.440 --> 0:05:33.400 of feedback from what you do to how they behave 0:05:33.400 --> 0:05:36.800 as that perfect and then clearly the brisk the other side, 0:05:36.839 --> 0:05:39.560 which again you know they've been talking about previously. If 0:05:39.560 --> 0:05:41.520 they're sustained inflation, they have to get it back to 0:05:41.520 --> 0:05:43.880 two percent. That is their mandate. They will have to 0:05:43.920 --> 0:05:46.200 be high for longer if it doesn't move down. And 0:05:46.279 --> 0:05:50.200 the path between those two things is pretty hard. And 0:05:50.279 --> 0:05:54.200 then to throw the third problem in which we've obviously 0:05:54.240 --> 0:05:57.120 seen in the last month or so, is okay, do 0:05:57.279 --> 0:05:59.680 we put enough stress in the financial system here that 0:05:59.720 --> 0:06:02.560 they suddenly have to start worrying about financial stability? Is 0:06:02.600 --> 0:06:04.880 the you know, the other piece of their mandate that 0:06:04.920 --> 0:06:06.800 has been in the background for most of the lost 0:06:06.839 --> 0:06:11.120 eighteen months or so and then suddenly came very very aggressively. 0:06:11.120 --> 0:06:14.760 Interview with SVB, I do not envy him his job 0:06:14.800 --> 0:06:18.039 at the moment. I certainly don't. I don't think any 0:06:19.160 --> 0:06:23.839 I really don't. You say you're expecting more volatility ahead, Like, 0:06:23.880 --> 0:06:26.880 what are you expecting? What are you expecting from the Fed? 0:06:27.000 --> 0:06:29.400 I've read some interesting notes from some of the big 0:06:29.400 --> 0:06:31.640 banks this week. One of them said, when they're talking 0:06:31.640 --> 0:06:35.040 to clients, well, clients says they're sort of frustrated with 0:06:35.480 --> 0:06:37.960 the rally that we've seen in stocks. I guess if 0:06:37.960 --> 0:06:40.320 you were not positioned for it, you'd be frustrated with 0:06:40.560 --> 0:06:43.800 So what are you expecting going forward? Yeah, I think, 0:06:43.839 --> 0:06:46.480 I mean, I think equities difficult because we haven't really 0:06:46.520 --> 0:06:49.919 seen the cut in earnings und some drift down in 0:06:49.920 --> 0:06:54.520 earnings expectations, but nothing too material. So that's definitely one leg, 0:06:54.560 --> 0:06:57.039 which is just the fundamental piece, and then the other 0:06:57.160 --> 0:06:59.680 is just a flow piece. You know, we are starting 0:06:59.720 --> 0:07:03.640 to see people move back obviously money markets out of banks, 0:07:03.680 --> 0:07:07.320 but also into credit and government bond positions in a 0:07:07.320 --> 0:07:09.440 way that they just haven't had for years because there 0:07:09.480 --> 0:07:12.400 hasn't been enough return there to attract people. So whether 0:07:12.440 --> 0:07:16.120 that's the consumer or whether that's big institutional clients starting 0:07:16.120 --> 0:07:18.560 to come back to an asset class that frankly had 0:07:18.600 --> 0:07:21.680 fallen relatively out of favor. And some of that flow 0:07:21.680 --> 0:07:23.920 of funds is also an issue for equities. There's just 0:07:24.000 --> 0:07:27.200 people move money around. So I think it's, as I said, 0:07:27.280 --> 0:07:29.120 it's a tough tight rope to walk if you look 0:07:29.120 --> 0:07:31.280 at equities right now. I think there's plenty of other 0:07:31.320 --> 0:07:35.280 places where you can get comfortable returns without the same 0:07:35.400 --> 0:07:37.880 risk profile. And I think you're seeing plenty of people 0:07:37.920 --> 0:07:41.040 make some of those allocation moves. The US is obviously 0:07:41.040 --> 0:07:43.280 a bit of an outline, and that the balance is 0:07:43.320 --> 0:07:46.520 a bit better in some other markets. The SMP is 0:07:46.920 --> 0:07:51.360 remarkably calm in the face of everything we've seen recently. Mark, 0:07:51.800 --> 0:07:54.880 there's some comments from your colleague Lucallis, the CEO of 0:07:54.880 --> 0:07:57.800 Man Group, a few weeks ago that really sort of 0:07:57.840 --> 0:08:00.400 clop my eye. One thing he said was, such banks 0:08:00.400 --> 0:08:02.600 will have to break stuff to tame inflation. I think 0:08:02.640 --> 0:08:06.080 the mission accomplished there to some degree. I don't think 0:08:06.160 --> 0:08:09.000 that's what they thought they were going to break exactly. 0:08:09.480 --> 0:08:11.800 You'd never quite know what's going to break. But he 0:08:11.840 --> 0:08:15.160 also said a significant number of banks won't exist in 0:08:15.320 --> 0:08:18.080 twelve to twenty four months. And we have not seen 0:08:18.160 --> 0:08:22.040 the lows in equities this cycle. Now, these comments were 0:08:22.040 --> 0:08:24.720 a couple of weeks old. A lot has changed. It 0:08:24.840 --> 0:08:28.240 seems like the fire in the US regional banking system 0:08:28.320 --> 0:08:31.960 knock on wood, if it's not completely put out, it's 0:08:32.000 --> 0:08:34.920 not raging like it once was. The reaction from the 0:08:34.960 --> 0:08:38.439 Federal Reserve, the FDIC was very aggressive, you know, was 0:08:38.480 --> 0:08:40.920 that sort of the house view there about you know, 0:08:41.000 --> 0:08:44.720 the banking system being bracing for more failures. Has anything 0:08:44.800 --> 0:08:47.200 changed about that? How are you thinking about the state 0:08:47.200 --> 0:08:49.360 of the banking system. I think he was talking at 0:08:49.360 --> 0:08:52.880 a point when the market was pretty fee bro. Yeah, 0:08:52.600 --> 0:08:55.600 in full. What he's actually talking about is, Look, there's 0:08:55.720 --> 0:08:58.080 the US regional banks, in particular, the US as an 0:08:58.120 --> 0:09:01.720 incredible number of banks compared to virtually every other major market. 0:09:02.120 --> 0:09:06.120 There's obviously stress amongst them. There's likely to be consolidation 0:09:06.160 --> 0:09:08.240 as some of the stronger players take on some of 0:09:08.280 --> 0:09:11.520 the weaker players. We've obviously seen the extreme version of that, 0:09:11.559 --> 0:09:15.560 where it's been via fdoc rescues and then reseales, But 0:09:15.760 --> 0:09:19.400 just more generally you would expect to see consolidation. Then 0:09:19.440 --> 0:09:23.120 maybe some failures. Banks do fail, that's part of the 0:09:23.200 --> 0:09:26.040 nature of the business model, but it was a much 0:09:26.080 --> 0:09:30.720 It was much more around the banking system generally either 0:09:30.760 --> 0:09:35.040 consolidating or maybe some going out of business. We did 0:09:35.280 --> 0:09:37.400 we did manage to trigger a comment from the Bank 0:09:37.440 --> 0:09:40.360 of England saying that they were comfortable with the banking 0:09:40.360 --> 0:09:42.640 system off the back of that. So that was definitely 0:09:42.640 --> 0:09:45.560 not an intended effect and maybe slightly taken out of 0:09:45.600 --> 0:09:48.000 context in a market where everyone was feeling a little 0:09:48.000 --> 0:09:50.959 bit more scared than they are today. Yeah, but no, 0:09:51.120 --> 0:09:54.000 we I mean, look, there's definitely still some stress in 0:09:54.040 --> 0:09:57.000 the banking system. And I saw some of the big 0:09:57.040 --> 0:10:01.079 investment bank defaults back sort of post in the financial crisis, 0:10:01.080 --> 0:10:04.520 and I remember telling people post that, look, the key 0:10:04.559 --> 0:10:06.280 thing is not to be there if there's a default 0:10:06.320 --> 0:10:08.800 of a bank, And that was the lesson that I 0:10:08.840 --> 0:10:11.160 thought everyone had learned in OA, and I spent years 0:10:11.160 --> 0:10:13.440 telling everyone when we get bank runs in future, they're 0:10:13.440 --> 0:10:15.920 going to be faster because everyone's going to remember O eight. 0:10:16.640 --> 0:10:19.680 And it turned a bit into the sort of horror 0:10:19.679 --> 0:10:21.840 story by the fire, because we didn't have very many 0:10:22.960 --> 0:10:24.920 defaults in banks for a long period of time, and 0:10:24.960 --> 0:10:28.840 then we just saw obviously the speed recently, which frankly, 0:10:29.559 --> 0:10:31.600 even though I was expecting bank runs to be faster, 0:10:31.800 --> 0:10:35.760 I was amazed at how fast really quite big institutions 0:10:35.880 --> 0:10:41.440 went from functioning to into FDIC hands. So SVB obviously 0:10:41.480 --> 0:10:43.080 is the one that people focused on. I actually think 0:10:43.120 --> 0:10:45.920 signature is the more interesting one in some ways, where 0:10:46.480 --> 0:10:50.920 there was almost no noise because everyone was focused on SVB, 0:10:51.080 --> 0:10:53.520 and then it was gone over the weekend, which is 0:10:53.800 --> 0:10:57.120 a remarkable sign of the speed of liquidity withdrawal in 0:10:57.160 --> 0:11:00.760 the current world. I wanted to ask you about that. Actually, 0:11:01.400 --> 0:11:03.560 I wanted to ask you about the speed with which 0:11:03.600 --> 0:11:07.160 we saw some of these bank rounds actually happen. And 0:11:07.320 --> 0:11:09.960 obviously we have had some weeks go by, and we've 0:11:09.960 --> 0:11:13.320 had some retrospective and lots of news reports about what 0:11:13.360 --> 0:11:17.280 actually happened and how, you know, different tech figures, we're 0:11:17.320 --> 0:11:19.760 talking to each other in different chat groups and whatever else. 0:11:19.800 --> 0:11:23.800 Can you characterize what happened and sort of the astoundingness 0:11:24.040 --> 0:11:26.840 at which and the speed at which had happened. I mean, 0:11:26.880 --> 0:11:30.200 it is just classic bank runs, So it's it's just 0:11:30.360 --> 0:11:34.240 liquidity withdrawal and banks a levied institutions, and you know 0:11:34.280 --> 0:11:36.520 they can't cope with some level of liquidity withdrawal. The 0:11:36.559 --> 0:11:40.560 thing that's different, it's clearly the sheer speed of which 0:11:40.559 --> 0:11:44.359 it happened. And as I say, all of the stories, 0:11:44.440 --> 0:11:47.040 you know, the press commentary is around SVB and the 0:11:47.240 --> 0:11:51.360 concentration of the client base there, and you know, effectively 0:11:51.480 --> 0:11:55.320 did they create their own bank run? But then go 0:11:55.400 --> 0:11:58.520 look at signature where it's not obvious that any of 0:11:58.559 --> 0:12:00.720 that was happening, but exactly the same thing happened at 0:12:00.840 --> 0:12:04.400 very very high speed. You know, look at the money 0:12:04.400 --> 0:12:06.800 coming out of credits we set great speed. Again, that's 0:12:06.840 --> 0:12:10.360 not coordinated action, that's just people reading press reports, and 0:12:11.280 --> 0:12:14.360 the world is much more attuned to some of this information. Clearly, 0:12:14.440 --> 0:12:18.920 generally financial information percolates far far faster than it used to. 0:12:20.120 --> 0:12:21.959 But I don't think if you look at the set 0:12:21.960 --> 0:12:23.920 of them, I don't think you can say it's sort 0:12:23.960 --> 0:12:26.960 of specifically a social media thing, or a concentrated set 0:12:26.960 --> 0:12:30.040 of clients thing, or a tech thing, because that's not 0:12:30.080 --> 0:12:34.320 the case with the other institutions that ran into liquidity issues. 0:12:34.760 --> 0:12:38.679 I think it's much more around general speed of information 0:12:38.800 --> 0:12:42.520 flow combined with frankly, just a classic tail risk with 0:12:42.640 --> 0:12:46.720 banking as a business model, which is bank runs happen, 0:12:47.120 --> 0:12:51.560 They will happen again. They've happened for decades. I'm not 0:12:51.600 --> 0:12:53.280 sure when the first one wards, but it won't have 0:12:53.280 --> 0:12:57.440 been that long after the first bank was started. That's 0:12:57.440 --> 0:13:06.040 probably true. Mark. I wanted to talk about sort of 0:13:06.040 --> 0:13:08.679 the climate of the hedge fund industry itself, you know, 0:13:08.880 --> 0:13:11.680 sort of a mixed year in twenty twenty two for 0:13:12.040 --> 0:13:16.439 a lot of funds. CTA's trend following funds did did 0:13:16.559 --> 0:13:19.640 very well. There were a lot of outflows from some funds. 0:13:20.120 --> 0:13:23.840 Madgroup actually managed to book about more than three billion 0:13:23.880 --> 0:13:26.400 dollars worth of inflows. And I was looking at some 0:13:26.440 --> 0:13:31.680 of the better performing funds. The HL Diversified Fund was 0:13:31.800 --> 0:13:36.560 up more than thirteen percent, HL Alpha up eleven percent. Now, 0:13:36.760 --> 0:13:38.480 of course, some of the long and only strategies, it 0:13:38.559 --> 0:13:41.320 was tough to post a positive return last year given 0:13:41.360 --> 0:13:45.000 the markets, but pretty impressive returns for some of these 0:13:45.040 --> 0:13:47.760 AHL funds. What if you could break down for us 0:13:47.800 --> 0:13:51.839 what worked? Is it to oversimplify it, to just call 0:13:51.880 --> 0:13:54.160 it trend following with some of these strategies. Is there 0:13:54.160 --> 0:13:56.760 more going on or was that really a big part 0:13:56.760 --> 0:14:01.160 of it? Trend fulling was definitely a big driver. So 0:14:01.200 --> 0:14:05.360 I think systematic funds did very well last year. In 0:14:05.480 --> 0:14:09.720 macro markets, there were some big trends to invest in, 0:14:09.760 --> 0:14:12.240 so some of the commodities moves at the start. Obviously 0:14:12.280 --> 0:14:15.600 the bond moves throughout the dollar move was a big 0:14:15.600 --> 0:14:20.920 positive contributor. So there were plenty of places for positive 0:14:20.920 --> 0:14:24.400 returns to be had, and CTAs are very good at 0:14:24.400 --> 0:14:27.920 capturing those sorts of macro moves. And I think when 0:14:28.080 --> 0:14:32.080 you so when you step back, we've had this very 0:14:32.120 --> 0:14:36.280 prolonged period where all developed markets have basically been doing 0:14:36.320 --> 0:14:38.760 the same things with interest rate policy. There's been this 0:14:38.880 --> 0:14:42.040 very very high correlation, and then that's clearly pushed into 0:14:42.040 --> 0:14:45.760 a bunch of other asset classes. It's generally dampened volatility down, 0:14:45.800 --> 0:14:49.920 it's increased correlation. It's been quite a tough environment for alpha, 0:14:50.000 --> 0:14:52.440 or at least there's less opportunities than you would sort 0:14:52.440 --> 0:14:55.600 of normally have seen pre that period of very very 0:14:55.640 --> 0:14:58.920 low interest rates. What we're moving back into now is 0:14:58.920 --> 0:15:02.280 something that's much more into O eight. So you've seen 0:15:03.200 --> 0:15:05.440 I mean, actually equity vole hasn't increased in the same way, 0:15:05.480 --> 0:15:07.440 but in a lot of other ethic classes you've seen 0:15:07.480 --> 0:15:10.760 quite material step ups, whether it's that in fixed income 0:15:10.880 --> 0:15:13.280 or in commodities or in currencies. You know, there's a 0:15:13.280 --> 0:15:16.000 lot more going on. There's a lot more differentiation in 0:15:16.040 --> 0:15:19.320 how countries are managing their interest rates because of some 0:15:19.400 --> 0:15:23.320 of the core macroeconomic differences between them, where inflation is, 0:15:23.360 --> 0:15:26.800 where energy policy is, in each of those places, strength 0:15:26.800 --> 0:15:30.160 at the job market. That's exactly the sort of environment 0:15:30.240 --> 0:15:34.360 that suits some of these macro strategies. Over time, because 0:15:34.520 --> 0:15:37.160 there's just a lot more opportunity. There's the risk management 0:15:37.160 --> 0:15:39.000 skills are a lot more relevant when things are moving 0:15:39.040 --> 0:15:41.320 around in that sort of a way. So, yeah, trends 0:15:41.320 --> 0:15:45.040 were absolutely critical to a lot of the strong outline 0:15:45.080 --> 0:15:48.520 returns last year. But we think that environment is going 0:15:48.560 --> 0:15:52.240 to persist, and frankly, it feels like that's the future 0:15:52.240 --> 0:15:54.000 decades going to be a lot more like that rather 0:15:54.040 --> 0:15:57.760 than just the next year or so. Really, so twenty 0:15:57.880 --> 0:16:00.480 twenty three will another good year for trend follow me 0:16:00.560 --> 0:16:04.280 think I mean individual, I mean that the last month 0:16:04.320 --> 0:16:07.200 or so it's been tougher for trend followers specifically because 0:16:07.240 --> 0:16:11.080 of the interest rate moves post SVB. That's in the 0:16:11.160 --> 0:16:13.400 nature of the strategy. You will have some difficult periods. 0:16:13.400 --> 0:16:17.200 They work over time, but it's a higher volatility and 0:16:17.240 --> 0:16:20.440 lower correlation between things, so at some level, just much 0:16:20.480 --> 0:16:23.200 more macro uncertainty in the sort of simplified way of 0:16:23.240 --> 0:16:26.840 putting that, that's the environment when you want strategies which 0:16:26.840 --> 0:16:31.440 can help you navigate that uncertainty, And that at heart 0:16:31.560 --> 0:16:33.880 is what trend followers are very good at doing over time, 0:16:34.240 --> 0:16:38.240 and I think we who knows in twenty years, thirty years, time, 0:16:38.280 --> 0:16:40.680 I suspect we'll look back now and go the previous 0:16:40.720 --> 0:16:44.400 ten years with the outlier rather than the other way around. Okay, 0:16:44.440 --> 0:16:47.040 and you said there's a bigger opportunity set for alpha 0:16:47.240 --> 0:16:50.560 than over the last decade one interest rates where near zero. 0:16:50.600 --> 0:16:54.040 Can you talk about what you mean by that? Yeah, 0:16:54.040 --> 0:16:56.360 I mean it's it's because of that higher volatility, So 0:16:56.440 --> 0:16:59.760 there's more there's more risk in markets, which if you've 0:16:59.760 --> 0:17:03.680 got skill, is the opportunity set obvious. You've got to 0:17:03.720 --> 0:17:07.320 have the skill in the first place. Similarly, within equities, 0:17:07.400 --> 0:17:10.280 you know, there's more dispersion within equities than they have 0:17:10.359 --> 0:17:12.399 been for a prolonged period of time. Again, if you 0:17:12.440 --> 0:17:15.920 are good making those investment choices, that's a great environment 0:17:15.960 --> 0:17:18.119 for you because there's just a bigger opportunity to make 0:17:18.160 --> 0:17:21.119 money for your clients. You've got to have the skill. 0:17:21.280 --> 0:17:25.439 Otherwise it's just risk with out the positive return. So 0:17:25.480 --> 0:17:27.760 I think it's it's sort of a more difficult environment 0:17:27.800 --> 0:17:30.600 because the risk is higher. But where you've got expertise, 0:17:30.640 --> 0:17:32.600 that's what you want. You know, our job is to 0:17:32.640 --> 0:17:36.400 take risk on behalf of clients when there's more opportunities 0:17:36.440 --> 0:17:39.120 in the world. Because it's a riskier period, you can 0:17:39.119 --> 0:17:42.639 add more benefit to them, and that's that's definitely what 0:17:42.640 --> 0:17:44.600 we're looking to do from here. I think what he's 0:17:44.600 --> 0:17:49.280 trying to say is he has the skill the firm. 0:17:49.440 --> 0:17:52.200 There's a there's a one and a half thousand double 0:17:52.240 --> 0:17:54.720 PhDs and the like sitting around me who definitely have 0:17:54.800 --> 0:17:59.119 the skills. You got to call him doctor, doctor. Doctor. 0:17:59.160 --> 0:18:01.280 We do have some gen you in rocket scientists, so 0:18:01.880 --> 0:18:04.720 on any day that you're feeling small at yourself, you 0:18:04.720 --> 0:18:07.000 can just go talk to someone and if you immediately 0:18:07.119 --> 0:18:10.199 feel a lot smaller. So I always joke about this. 0:18:10.240 --> 0:18:13.080 It's amazing how many actual rocket scientists find their way 0:18:13.080 --> 0:18:18.680 into investing, and yeah, quant we've interviewed some of them. Mark. 0:18:18.760 --> 0:18:23.040 I think one really sort of interesting sea change that 0:18:23.119 --> 0:18:26.400 we saw this year with Silicon Valley Bank is a 0:18:26.400 --> 0:18:32.879 greater focus on private markets venture capital, especially in Silicon Valley, 0:18:33.440 --> 0:18:36.960 and sort of this notion that boy, they had a 0:18:37.000 --> 0:18:39.879 great run. There was so much sort of interest in 0:18:39.960 --> 0:18:44.560 private markets that almost seems to me like the end 0:18:44.560 --> 0:18:47.720 of an era once Silicon Valley Bank broke. I mean, 0:18:47.840 --> 0:18:51.240 is is that an exaggeration? Do you think? I mean, 0:18:51.640 --> 0:18:57.760 was that whole private market craze a low interest rate phenomenon. 0:18:58.040 --> 0:19:01.199 I mean, is has this has every changed now for 0:19:02.119 --> 0:19:06.919 say private versus public the appeal of each type of investment. Yeah. So, 0:19:06.960 --> 0:19:10.119 I mean we've obviously had this huge trend in asset 0:19:10.160 --> 0:19:13.360 management for I mean, it's more than a decade old now, 0:19:13.840 --> 0:19:18.160 arguably too of increased allocation into private markets over time 0:19:18.640 --> 0:19:21.680 from the big asset owners, and the period of low 0:19:21.680 --> 0:19:27.280 interest rates definitely helped that trend because you just had 0:19:27.320 --> 0:19:30.240 to go somewhere you for returns them rather than the 0:19:30.280 --> 0:19:33.560 traditional asset classes. I don't think we're going to see 0:19:33.680 --> 0:19:37.520 some huge pivot away from that, because there's a lot 0:19:37.560 --> 0:19:39.800 of money allocated and you can't pull it out quickly. 0:19:39.840 --> 0:19:42.960 It takes time. Plus frankly, they are useful sources of 0:19:43.040 --> 0:19:46.119 returning people's portfolio. But I do think the speed of 0:19:46.119 --> 0:19:49.360 that trend is definitely, at a minimum going to slow down, 0:19:49.400 --> 0:19:50.880 and I think for a lot of people they're going 0:19:50.880 --> 0:19:53.640 to tilt back towards public markets for the first time 0:19:53.680 --> 0:19:56.240 in really quite a long time, because it's been relatively 0:19:56.280 --> 0:19:59.560 inexorable of adding to their private allocations year by year 0:19:59.560 --> 0:20:02.280 by year. And that's for a couple of reasons. One 0:20:02.480 --> 0:20:04.240 some of the stuff that we touched on earlier, where 0:20:04.240 --> 0:20:08.280 there's actually there's more return from some traditional asset classes, 0:20:08.280 --> 0:20:11.119 in particular on the fixed income side, So people go, actually, 0:20:11.160 --> 0:20:13.600 I don't need to reach out on the risk spectrum. 0:20:13.680 --> 0:20:17.040 I can meet my investment goals with some much more 0:20:17.080 --> 0:20:21.360 traditional returns, investment grade, credit, whatever it may be. And 0:20:21.400 --> 0:20:23.159 they're much happier if they can do that in a 0:20:23.200 --> 0:20:26.920 lower risk way and meet whatever their their retirees obligations 0:20:27.160 --> 0:20:30.840 or whatever their responsibilities are. And so that piece definitely 0:20:30.840 --> 0:20:32.480 is a big driver. And then I think the other 0:20:32.520 --> 0:20:37.280 thing is we saw the benefit of liquidity. The UK 0:20:37.520 --> 0:20:40.639 obviously had a relatively spectacular blow up in the guilt 0:20:40.680 --> 0:20:47.159 market last year. You had clients who suddenly had a 0:20:47.359 --> 0:20:50.560 very very strong liquidity need to meet that big, big 0:20:50.640 --> 0:20:54.280 market move, and they were having to sell assets to 0:20:54.840 --> 0:20:58.560 meet cash calls. And suddenly that reminder of things that 0:20:58.600 --> 0:21:00.800 I can liquidated if I need it in a crisis, 0:21:01.240 --> 0:21:02.960 and the value of that so I'm not a force 0:21:03.000 --> 0:21:06.800 seller of something else. We'd sort of forgotten that as 0:21:06.880 --> 0:21:10.280 a key benefit of liquidity, but I think we've had 0:21:10.280 --> 0:21:12.320 a few reminders in some of the sort of panic 0:21:12.400 --> 0:21:15.600 periods of that benefit of more liquid assets. So both 0:21:15.640 --> 0:21:17.760 for a risk management piece of balanced piece and a 0:21:17.800 --> 0:21:19.760 course sort of return piece, I think you're going to 0:21:19.800 --> 0:21:23.800 see tilts bag. Private markets are well established as parts 0:21:23.880 --> 0:21:26.199 of investor's portfolios. It's not that they're just going to 0:21:26.240 --> 0:21:28.840 drop them, but I think the speed of growth is 0:21:28.880 --> 0:21:33.040 going to change. Okay, So if we are seeing a 0:21:33.119 --> 0:21:36.960 tilt back towards more liquid assets, where do you already 0:21:37.040 --> 0:21:39.960 or maybe where are you foreseeing that money actually going 0:21:40.359 --> 0:21:43.040 from our business? Clearly the head fund business is a 0:21:43.040 --> 0:21:46.399 big part of what we do, and some of the 0:21:46.520 --> 0:21:50.000 systematic strategies, in particular macrosystematic strategy. I think people are 0:21:50.000 --> 0:21:52.200 looking at again this clearly saw them had a good 0:21:52.240 --> 0:21:54.439 year last year, and I think they agree with what 0:21:54.480 --> 0:21:57.720 I've just discussed around the environment suiting those sorts of 0:21:57.720 --> 0:22:00.600 strategies and needing something nimble to help them move around. 0:22:01.000 --> 0:22:05.120 So strategies that are able to take macro risk successfully 0:22:05.160 --> 0:22:07.879