WEBVTT - Miletti Says Money Still on Sidelines

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Jason

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<v Speaker 1>Kelly on Bloomberg Radio. She does very much so and

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<v Speaker 1>also have some great ideas when it comes to looking

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<v Speaker 1>at the markets. Emiletti is back without still atted to

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<v Speaker 1>have our senior portfolio manager at Wells Fargo Asset Management

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<v Speaker 1>five nine billion in assets under management based in Nominee Falls,

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<v Speaker 1>Wisconsin in our Bloomberg Interactor Broker studio here and y'k.

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<v Speaker 1>Nice to have you here, Happy New year, Thank you,

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<v Speaker 1>same to you. What do you win back? When you

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<v Speaker 1>make your rounds and you're talking to clients and stuff,

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<v Speaker 1>what do they want to know? What do they ask you?

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<v Speaker 1>Most often? Most people want to know when is the

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<v Speaker 1>bull market going to end? I mean that's kind of

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<v Speaker 1>the most widely feared um probably topic, right because as

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<v Speaker 1>good as things have been, people worry about when is

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<v Speaker 1>it going to end? Does that mean everybody? Because for

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<v Speaker 1>so long we talked about money on the sidelines? I mean,

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<v Speaker 1>did people finally ultimately well just think I never Mr

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<v Speaker 1>Peanut com it was good. No, I promised you it

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<v Speaker 1>wasn't you it was, But I mean I do wonder

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<v Speaker 1>about did people finally come into the market or is

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<v Speaker 1>there still a lot of hesitation by investors. There still

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<v Speaker 1>is a lot of hesitation and a lot of money

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<v Speaker 1>on the sidelines. When you look at money flows, a

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<v Speaker 1>lot of money came into money markets, a lot of

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<v Speaker 1>money still flowed into bond funds, fixed income, but not

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<v Speaker 1>a lot of money flowed still into the equity markets

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<v Speaker 1>even last year. And so the you know, kind of

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<v Speaker 1>supply demand really as you looked into the equity space

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<v Speaker 1>still maybe hasn't been met, which is maybe you know,

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<v Speaker 1>part of the reason that's driving this market even higher.

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<v Speaker 1>Is it going elsewhere? That to private markets? Jason, I

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<v Speaker 1>think about how much we talk about the you know,

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<v Speaker 1>we're just talking about private equity planning to raise even

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<v Speaker 1>more money U this year. Is that where it's going.

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<v Speaker 1>Certainly clients have institutional clients have allocated more money to investments,

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<v Speaker 1>and so I think that is, you know, clearly an allocation.

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<v Speaker 1>And what about this whole active management question. I mean,

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<v Speaker 1>we love talking to you about this because you're obviously

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<v Speaker 1>a big believer in it, You do it, uh, And

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<v Speaker 1>yet we live in a world that is increasingly passive,

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<v Speaker 1>I feel like across all of our lives. But that's

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<v Speaker 1>a separate we'll deal with that separately. They sex exactly, Um,

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<v Speaker 1>but I do wonder how people are responding to the

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<v Speaker 1>message around active, especially as you said at the top,

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<v Speaker 1>when they're like, well, when is this bull market gonna end?

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<v Speaker 1>I'm making money pretty easily. Yeah, So you know, it's

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<v Speaker 1>a really great question. And I look, active manager part

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<v Speaker 1>of the reason why the money flow has been so

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<v Speaker 1>great too passive, is because active managers have struggled to

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<v Speaker 1>keep up. And when you look at UM internally Wells

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<v Speaker 1>Fargo Asset Management, eight percent of our strategies are of

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<v Speaker 1>our active strategies have outperformed their benchmarks within the last

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<v Speaker 1>three years. So over the last three years, so I

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<v Speaker 1>feel like that's a that's a significant portion of our

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<v Speaker 1>active strategies outperforming. I think we've kind of answered the

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<v Speaker 1>question that active managers can find areas of the market,

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<v Speaker 1>and some of them by substantial amounts. Right. The magnitude

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<v Speaker 1>in general has been just under two percent, but we

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<v Speaker 1>have managers in en that outperformed their benchmarks by ten percent,

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<v Speaker 1>by some by four percent, right, significant amounts and are

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<v Speaker 1>the outperforming of the broader market. Which is why I

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<v Speaker 1>think at this point everyone's like, okay, let me just

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<v Speaker 1>go for that so called diversified basket and just throw

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<v Speaker 1>it in that way. You're saying yes, yes, yes, you know.

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<v Speaker 1>And again they're across all different strategies and across different benchmarks,

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<v Speaker 1>and so it's a depending on where you're allocating your

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<v Speaker 1>dollars in a lot of different passive spaces. Are active

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<v Speaker 1>managers in those spaces, the majority of them have done

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<v Speaker 1>well over that longer time period. But I think you know, look,

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<v Speaker 1>we just put out our investment insight piece yesterday, and

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<v Speaker 1>the one thing that we also recognize is clients care

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<v Speaker 1>about what's going on today. They care about what's going

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<v Speaker 1>to happen over the next quarter, the next year. But

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<v Speaker 1>as investors, we're looking at which companies are innovating for

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<v Speaker 1>the next three to five years. And you know, now

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<v Speaker 1>in my current position too, as heading up all of

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<v Speaker 1>the active teams, what we want to make sure we're

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<v Speaker 1>doing is investing in the innovation for our teams. And

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<v Speaker 1>so when you look at active management, we know that

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<v Speaker 1>there's a lot of tools that you can place in

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<v Speaker 1>the hands of active managements, in the hact of hands

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<v Speaker 1>of active managers and make them even better, such as

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<v Speaker 1>so we've developed an internal tool we call Casper, and

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<v Speaker 1>what it does is, over the last three to five years,

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<v Speaker 1>it's looked at the way that I've managed money, that

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<v Speaker 1>other portfolio teams have managed money, and it starts to

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<v Speaker 1>suggest ideas for you know, your portfolio, and it learns

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<v Speaker 1>basically from some of the activities that you've done over

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<v Speaker 1>the past years and from your investment strategies. And from that,

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<v Speaker 1>what we've done and what I've seen is some of

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<v Speaker 1>the ideas that end up on our watch list as

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<v Speaker 1>a bottom up stock selector are sometimes ending up on

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<v Speaker 1>the list of that that this tool is helping us provide.

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<v Speaker 1>And those are names you might not have otherwise thought

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<v Speaker 1>of because you just wouldn't have seen it in from

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<v Speaker 1>that sort of twist of the prison. Possibly not. But

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<v Speaker 1>then we're also looking at external tools that will help

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<v Speaker 1>our managers build inefficiencies right, that can help with natural

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<v Speaker 1>language processing, that can help table stitch, go back, you know,

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<v Speaker 1>multiple quarters, and pull together in income statement things that

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<v Speaker 1>we don't need our analyst wasting time doing so. I

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<v Speaker 1>think you know, when you look at the returns of

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<v Speaker 1>you know, quant managers, they've been somewhat disappointing because there's

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<v Speaker 1>a lot of people doing them. If you combine the two,

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<v Speaker 1>you can even get better outcomes. And I think that's

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<v Speaker 1>what you know. We're to take away layers, to takeaways

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<v Speaker 1>maybe waste of time and trying to figure out things.

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<v Speaker 1>It's amazing where it's all going. And thank you, so

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<v Speaker 1>nice to see you again. An Lettie. She's head of

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<v Speaker 1>active Equity at Wells Fargo Asset Management based in the

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<v Speaker 1>Nominee Falls, Wisconsin. In our New York studio,