WEBVTT - US Services Expand, ADP Data, Trump Speech 0:00:02.720 --> 0:00:10.560 Bloomberg Audio Studios, Podcasts, radio news. You're listening to the 0:00:10.560 --> 0:00:14.480 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.560 --> 0:00:17.800 Eastern on Apple Corplay and Android Auto with the Bloomberg 0:00:17.880 --> 0:00:21.000 Business App. Listen on demand wherever you get your podcasts, 0:00:21.320 --> 0:00:23.040 or watch us live on YouTube. 0:00:23.880 --> 0:00:25.480 Alex feel here alongside Paul sw We need this a 0:00:25.480 --> 0:00:28.600 Bloomberg Intelligence Radio. We are broadcasting to live from a 0:00:28.600 --> 0:00:31.800 Bloomberg Invest twenty twenty five conference in downtown Manhattan. A 0:00:31.920 --> 0:00:35.080 lot of the action, though, is still in the economic data, 0:00:35.120 --> 0:00:38.280 in particular ADP. We also got ism services and also 0:00:38.520 --> 0:00:41.000 what's going to happen with trade policy. Earlier today, US 0:00:41.040 --> 0:00:44.199 Commerce Secretary Howard Lutnick spoke with Bloomberg, saying maybe a 0:00:44.240 --> 0:00:47.000 potential a potential shift in TEARFF policy. 0:00:47.920 --> 0:00:51.879 The President is listening uh to the offers from Mexico 0:00:51.960 --> 0:00:55.040 and Canada. He's thinking about trying to do something in 0:00:55.080 --> 0:00:57.920 the middle. He's thinking about it. We're talking about it. 0:00:57.960 --> 0:00:59.760 We're going to what I leave here, I'm going to 0:00:59.800 --> 0:01:01.400 go to talk about it with him, and I think 0:01:01.680 --> 0:01:04.400 early this afternoon or this afternoon, we expect to make 0:01:04.440 --> 0:01:07.640 an announcement. And my thinking is it's going to be 0:01:07.680 --> 0:01:08.200 somewhere in. 0:01:08.120 --> 0:01:12.000 The middle, all right. That was Howard Ludnik. 0:01:12.000 --> 0:01:15.480 We also are hearing from Peter Navarro on CNN talking 0:01:15.480 --> 0:01:17.880 about trade as well, saying Trump is right, there's going 0:01:17.920 --> 0:01:19.720 to be some kind of tear uf disturbance, and all 0:01:19.720 --> 0:01:21.640 of this just means a little bit more uncertainty within 0:01:21.680 --> 0:01:26.120 the market. Michael mcckeb Bloomberg Economic and Policy correspondent joins us. Now, Mike, 0:01:26.240 --> 0:01:27.840 is that uncertainty showing up in some. 0:01:27.840 --> 0:01:29.520 Of the data not yet? 0:01:30.200 --> 0:01:34.000 Interestingly enough, we've had divergent data today. The ADP report 0:01:34.040 --> 0:01:37.000 comes in a little light in terms of private sector jobs, 0:01:37.080 --> 0:01:40.400 and the composition of jobs is a little strange in 0:01:40.520 --> 0:01:45.000 that report. But the ISM services PMI comes in much 0:01:45.040 --> 0:01:48.600 better than anticipated, and new orders were up, which is 0:01:48.680 --> 0:01:52.000 the converse of what we saw in the ISM manufacturing number. 0:01:52.200 --> 0:01:55.440 So a little reassurance for the markets, which sort of 0:01:55.560 --> 0:01:59.559 have been bouncing around today, but in general have taken 0:01:59.600 --> 0:02:03.960 a little encouragement from the idea that perhaps the economy 0:02:04.040 --> 0:02:05.400 is not falling off a cliff. 0:02:07.880 --> 0:02:11.399 Hey, Mike, I see the ISM services prices paid came 0:02:11.440 --> 0:02:13.880 in higher than expected and higher than the last period. 0:02:13.919 --> 0:02:17.160 Does that suggest maybe some inflation seeping in to the 0:02:17.200 --> 0:02:18.200 economy there. 0:02:18.320 --> 0:02:22.679 Well, maybe more inflation still in the economy as opposed 0:02:22.680 --> 0:02:23.840 to seeping in now. 0:02:24.240 --> 0:02:26.240 It's a little hard to separate out because we don't know. 0:02:26.760 --> 0:02:29.000 This is a sentiment survey, and we don't know how 0:02:29.080 --> 0:02:32.240 much that sentiment might have been influenced by all the 0:02:32.320 --> 0:02:36.960 tariff talk. But tariffs generally don't hit services in the 0:02:37.000 --> 0:02:40.320 same way they hit goods, and so this may be 0:02:40.480 --> 0:02:44.520 just more reflection of the cost of raw materials, maybe 0:02:44.520 --> 0:02:48.800 commodities that are out there now. We don't know, but 0:02:48.880 --> 0:02:53.120 we have seen the ism services prices paid index up 0:02:53.160 --> 0:02:55.320 for four months in a row, so it does seem 0:02:55.400 --> 0:02:57.560 that we still have some inflation out there. 0:02:57.560 --> 0:02:59.480 The Fen's going to have to address. 0:03:02.080 --> 0:03:03.960 Yes, yes, inflation address. 0:03:03.960 --> 0:03:06.880 And that brings us to your news making interview yesterday 0:03:07.240 --> 0:03:09.640 of a New York Fed President John Williams talking about 0:03:09.760 --> 0:03:12.880 how to address the inflationary impact from tariffs. 0:03:13.160 --> 0:03:15.359 Can walk us through some of the highlights. 0:03:14.960 --> 0:03:17.320 Here, because that was definitely one of the standouts yesterday 0:03:17.320 --> 0:03:17.600 at Boom. 0:03:17.600 --> 0:03:18.160 We're going to best. 0:03:18.560 --> 0:03:20.720 The Fed's been waiting for quite some time to have 0:03:20.760 --> 0:03:23.480 any kind of comment on what Trump's policies would be 0:03:23.480 --> 0:03:26.080 because he didn't know what they were. But now that 0:03:26.120 --> 0:03:28.880 we know, he's got these twenty five percent tariffs on 0:03:29.680 --> 0:03:32.800 maybe some carve outs coming this afternoon and more coming. 0:03:32.960 --> 0:03:36.960 As Secretary Lutnik emphasized over and over again this morning, 0:03:37.440 --> 0:03:42.080 the FED feels a little more unconstrained. John Williams talking 0:03:42.080 --> 0:03:45.640 about the fact that tariffs are inflationary. Now they don't 0:03:45.680 --> 0:03:49.960 know how inflationary because they don't know how many tariffs 0:03:50.000 --> 0:03:52.280 are going to end up being imposed, at what level 0:03:52.320 --> 0:03:55.760 and over what period of time. But he did suggest 0:03:55.800 --> 0:03:59.560 that that's reason for caution and that the Fed basically 0:03:59.600 --> 0:04:01.640 needs to stay on hold for right now. 0:04:04.560 --> 0:04:06.760 We're going to get some labor data MIC over the 0:04:06.760 --> 0:04:09.040 next couple of days, with initial jobles claims tomorrow and 0:04:09.040 --> 0:04:13.640 then nonfarm payrolls on Friday. Still too early to see 0:04:13.680 --> 0:04:16.800 any effects of dose impacting the numbers. 0:04:17.120 --> 0:04:20.560 Well, we might actually get some numbers this week because 0:04:20.680 --> 0:04:26.880 the federal government employees have their own category within jobless claims. 0:04:26.920 --> 0:04:28.600 It's funded separately, and so. 0:04:30.240 --> 0:04:32.960 It's two weeks delayed in terms of its release and 0:04:33.400 --> 0:04:37.479 should suggest that we are now at least getting some 0:04:37.680 --> 0:04:41.040 jobless claims from federal workers who've been laid off, so 0:04:41.320 --> 0:04:44.520 we would anticipate that. I wouldn't anticipate much of anything 0:04:44.880 --> 0:04:48.599 showing up in the payrolls report on Friday, because that 0:04:48.800 --> 0:04:52.360 encompasses the pay period that includes the twelfth of the month, 0:04:52.640 --> 0:04:56.159 And it really was Valentine's Day, February fourteenth when the 0:04:56.240 --> 0:05:00.640 layoffs really started. If you remember the late night time 0:05:00.720 --> 0:05:03.159 from Elon Musk to so many federal. 0:05:02.880 --> 0:05:09.320 Workers, Mike, before we let you go, my favorite question, 0:05:09.720 --> 0:05:11.760 as most of you know, he always gets to send 0:05:11.800 --> 0:05:13.720 me charts in the afternoon, like the one nerdy thing 0:05:13.720 --> 0:05:16.240 that Mike's paying attention to. What's that one nerdy thing 0:05:16.240 --> 0:05:17.360 you're going to be paying attention to. 0:05:17.960 --> 0:05:20.600 Well, I'm looking at the ADP numbers, and it's unusual 0:05:20.640 --> 0:05:25.200 that we see service industry jobs much lower than the 0:05:25.240 --> 0:05:28.120 goods producing jobs. In this case, it's the goods producing. 0:05:28.160 --> 0:05:32.080 That's very odd because we've been talking about how manufacturing 0:05:32.240 --> 0:05:35.680 is suffering, and yet they had a big increase in 0:05:35.839 --> 0:05:39.719 jobs during the month according to ADP, of eighteen thousand jobs, 0:05:39.720 --> 0:05:41.520 and construction was up. 0:05:41.440 --> 0:05:42.679 By twenty six thousand. 0:05:42.960 --> 0:05:45.720 But what have we been hearing for weeks now about 0:05:45.760 --> 0:05:48.320 how bad the weather was and how do you have 0:05:48.400 --> 0:05:51.280 a lot of construction going on when the weather is 0:05:51.320 --> 0:05:55.360 that bad, so some unusual numbers. Also, of educational health 0:05:55.400 --> 0:05:58.440 services is usually the biggest job creator, and ADP found 0:05:58.640 --> 0:06:02.360 a twenty eight thousand job loss there. So I'm not 0:06:02.440 --> 0:06:05.320 sure about the makeup of the ADP numbers, but we'll 0:06:05.360 --> 0:06:09.120 get a better clue on Friday. 0:06:09.760 --> 0:06:11.440 All right, My thanks a lot, really appreciate it. 0:06:11.440 --> 0:06:14.320 Michael mcke Boomberg Economic and Policy Corresponding, joining us now. 0:06:14.360 --> 0:06:17.160 Looking for his nerde chart later on as well. 0:06:18.880 --> 0:06:22.599 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:22.680 --> 0:06:25.760 weekdays at ten am Eastern on Apple, Cocklay and Android 0:06:25.760 --> 0:06:29.080 Auto with the Bloomberg Business app. Listen on demand wherever 0:06:29.120 --> 0:06:32.240 you get your podcasts, or watch us live on YouTube. 0:06:32.880 --> 0:06:35.800 Joining us now at the conference on site is Katie Fogerty, 0:06:35.839 --> 0:06:38.680 chief financial officer of Shakeshack. Katie, thanks so much for 0:06:39.000 --> 0:06:42.640 joining us here. Love to get a sense everybody's talking 0:06:42.680 --> 0:06:44.840 about Harris and what it might do to economic growth, 0:06:44.839 --> 0:06:47.039 what it might do to the consumer. Who is the 0:06:47.040 --> 0:06:49.680 consumer shake check and what is that consumer telling you 0:06:49.720 --> 0:06:50.360 these days? 0:06:50.720 --> 0:06:54.200 Great? So you know who we think of as our consumer? 0:06:55.080 --> 0:06:57.400 We have you know, went out there and we have 0:06:57.440 --> 0:07:00.720 this amazing real estate strategy, real estates strategy, and what 0:07:00.720 --> 0:07:05.200 we've done is we've put these great community gathering places 0:07:05.240 --> 0:07:07.919 in a lot of these you know, great communities, and 0:07:08.279 --> 0:07:10.600 where we have attracted is just really kind of more 0:07:10.600 --> 0:07:13.400 of a I would say, you know, a more a 0:07:13.440 --> 0:07:16.280 middle income to higher income guests, and we've seen that 0:07:16.360 --> 0:07:18.280 guest be able to weather a lot more of the 0:07:18.320 --> 0:07:21.760 economic headwinds than other, you know, than the low income 0:07:21.800 --> 0:07:25.440 consumer has been facing. And you know, what we continue 0:07:25.440 --> 0:07:28.040 to see is by leaning into our strength, which is 0:07:28.080 --> 0:07:31.280 delivering a fine casual experience. So we think about kind 0:07:31.280 --> 0:07:34.880 of bringing all those great guts of fine dining, elevated food, 0:07:35.240 --> 0:07:38.720 premium ingredients, doing the things that you know, other you know, 0:07:39.040 --> 0:07:41.560 fast casual and QSR just are not willing to do. 0:07:41.920 --> 0:07:46.440 Putting that an amazing hospital or hospitable environment and getting 0:07:46.440 --> 0:07:49.560 great guest service. That together has been a winning formula 0:07:49.600 --> 0:07:52.840 to help us outpunch what has been you know, some 0:07:53.120 --> 0:07:55.760 consumer headwinds that has been facing the industry. 0:07:56.040 --> 0:07:57.960 And we are going to continue to lean into that. 0:07:58.440 --> 0:08:01.360 It's it's helping us to different and kind of pull 0:08:01.400 --> 0:08:05.240 apart from the pack, and it's it's been our strength. 0:08:05.520 --> 0:08:08.680 Where are our samples? I know, I mean what is 0:08:08.720 --> 0:08:09.440 this about? 0:08:09.760 --> 0:08:11.320 Uh, you know, who doesn't want to burger at ten 0:08:11.360 --> 0:08:13.240 am on a Wednesday so close to open? 0:08:13.320 --> 0:08:14.480 So so who. 0:08:14.400 --> 0:08:16.560 Are your competitors then? So if you're a middle and 0:08:16.640 --> 0:08:18.120 high end consumer, who would. 0:08:17.960 --> 0:08:22.120 You say as a competitor, Yeah, I mean we sell burgers, shakes, fries, 0:08:22.280 --> 0:08:24.440 I think the best chicken sandwich out there in the business. 0:08:25.080 --> 0:08:28.160 We view our competitors as being, you know, anybody who 0:08:28.600 --> 0:08:31.200 you know you might consider having lunch at or dinner at. 0:08:31.720 --> 0:08:34.760 So that is a pretty wide array and it also 0:08:34.840 --> 0:08:36.840 can be you know, food at home. I mean that 0:08:36.880 --> 0:08:39.560 can also be in you know, in an area where 0:08:39.559 --> 0:08:42.160 you would have some share of stomach. So, you know, 0:08:42.440 --> 0:08:46.000 for the vast amount of you know, of our restaurants 0:08:46.000 --> 0:08:48.520 out there, we are competing with a lot of people. 0:08:48.600 --> 0:08:51.000 Now we are differentiated and we are kind of in 0:08:51.000 --> 0:08:54.960 that category of one in the fine casual sector. But 0:08:55.040 --> 0:08:57.040 at the same time we know that, you know, people 0:08:57.080 --> 0:08:58.920 have lots of different options where they can go out 0:08:58.960 --> 0:08:59.199 to eat. 0:08:59.320 --> 0:09:02.840 Okay, there's concern out there about inflation. If inflation were 0:09:02.960 --> 0:09:04.800 to come into your business, where would you see it 0:09:04.920 --> 0:09:05.880 and how do you plan for that? 0:09:06.160 --> 0:09:08.880 So we actually have been navigating through inflationary pressures for 0:09:08.880 --> 0:09:12.160 a number of years here and doing so quite successfully. 0:09:12.200 --> 0:09:15.640 I'll say, you know, we've had wage inflationary pressures in COVID. 0:09:15.720 --> 0:09:17.599 It was actually very hard to get. 0:09:17.679 --> 0:09:21.520 Restaurant talent in our restaurants to staff and to deliver 0:09:21.679 --> 0:09:24.320 our food. It was not a desirable job at the time, 0:09:24.440 --> 0:09:26.760 and we had we raised wages and had a very 0:09:26.760 --> 0:09:30.800 competitive and compelling opportunity for our team members. We also 0:09:30.840 --> 0:09:34.520 introduced tips as a way to compensate our team members 0:09:34.520 --> 0:09:38.040 as well and give them added benefit. And then last 0:09:38.120 --> 0:09:40.560 year with you know, with California Fast Food Wage Act, 0:09:40.559 --> 0:09:43.280 you know, we paced through that as well. We've also 0:09:43.400 --> 0:09:46.320 had on the food side, you know, inflationary pressures that 0:09:46.320 --> 0:09:49.040 have been we've been navigating for a number of years 0:09:49.080 --> 0:09:52.560 as well. But through all of this through leaning in 0:09:52.640 --> 0:09:55.080 on our strength, which is you know, again delivering that 0:09:55.320 --> 0:09:58.400 elevated you know experience to guests, giving them that you know, 0:09:58.480 --> 0:10:02.320 twenty five dollars you know, black truffle Burger that we 0:10:02.320 --> 0:10:04.440 were actually selling for ten dollars and giving them that 0:10:04.520 --> 0:10:08.120 great value. On that side, we've been able to both 0:10:08.160 --> 0:10:11.200 grow sales and grow margins at a faster pace. Just 0:10:11.320 --> 0:10:14.200 even last year, we expanded our margins in the fourth 0:10:14.280 --> 0:10:15.880 quarter by three hundred basis points. 0:10:16.120 --> 0:10:18.280 So I've never had Shakeshack but it looks I know, 0:10:18.320 --> 0:10:19.959 I know, but it looks like I may be able 0:10:19.960 --> 0:10:20.760 to now in Delta. 0:10:21.000 --> 0:10:21.200 Yeah. 0:10:21.400 --> 0:10:24.240 So, and this really also goes to your expansion plans. 0:10:24.440 --> 0:10:27.560 Delta is going to offer Shakeshack Burgers on additional domestic 0:10:27.640 --> 0:10:31.079 roots this year, and that could expand international flights next year. 0:10:31.120 --> 0:10:32.640 Talk about these expansion kind of plans. 0:10:32.720 --> 0:10:34.839 Yeah, I mean, if you look at Delta at its 0:10:34.840 --> 0:10:37.520 core and what this does, you know, this is an 0:10:37.559 --> 0:10:41.400 opportunity where we're able to surprise and delight our guests, 0:10:41.440 --> 0:10:43.840 give them that thing that they weren't really expecting. You know, 0:10:43.920 --> 0:10:46.560 you have your expectation for what airline food is like, 0:10:47.200 --> 0:10:50.520 and you know this this opportunity to get a Shakeshack 0:10:50.559 --> 0:10:53.840 burger and our great we have a special brownie that 0:10:53.880 --> 0:10:56.160 we've made for Delta as well. 0:10:56.600 --> 0:10:57.440 Through this program. 0:10:58.000 --> 0:11:00.880 People are just absolutely elated at the opportunity to have 0:11:00.960 --> 0:11:03.400 that on their flights, and so much so that it's 0:11:03.440 --> 0:11:05.240 exceeded our internal expectations. 0:11:05.480 --> 0:11:07.000 We're rolling it out to more airports. 0:11:07.000 --> 0:11:08.160 You're going to be able to get it, you know, 0:11:08.240 --> 0:11:11.880 New York, Atlanta, a number of airports, and that will 0:11:12.000 --> 0:11:15.080 just you know, probably continue to grow. And you know, 0:11:15.080 --> 0:11:17.719 if you look at that opportunity, and I can make 0:11:17.800 --> 0:11:21.920 so many different parallels to how we've gone into an 0:11:22.040 --> 0:11:26.040 area where the consumer had a certain expectation and we 0:11:26.200 --> 0:11:28.800 just really raised the bar on it and out punched 0:11:28.840 --> 0:11:32.920 above our weight and transformed what people were expecting from 0:11:33.040 --> 0:11:37.280 you know, it's airline food, if it's roadside food, and 0:11:37.480 --> 0:11:38.559 across the board. 0:11:39.240 --> 0:11:41.600 Katie, in terms of growth, how many locations do you 0:11:41.640 --> 0:11:44.079 have today and what's your outlook for the next year 0:11:44.160 --> 0:11:44.400 or two. 0:11:44.600 --> 0:11:47.400 Yeah, we have, you know, across both our company operated 0:11:47.840 --> 0:11:51.840 and our licensed business. We're you know, about five hundred 0:11:51.840 --> 0:11:54.720 and fifty five hundred and seventy locations, but we are 0:11:54.760 --> 0:11:58.440 growing very fast. We're going to add another forty five 0:11:58.679 --> 0:12:02.560 domestic company operator shacks this year, and we're going to 0:12:02.600 --> 0:12:06.000 open about thirty five to forty licensed shacks as well. 0:12:06.520 --> 0:12:09.840 Those licensed shacks are ones that we operate, that our 0:12:09.840 --> 0:12:14.280 partners operate. We have locations in the US, but most 0:12:14.320 --> 0:12:16.880 of that is kind of outside of the US and Asia, 0:12:17.040 --> 0:12:21.200 and and we have UK, the Middle East, Mexico and 0:12:21.360 --> 0:12:23.120 most recently we opened up in Canada. 0:12:23.760 --> 0:12:25.480 Well, great stuff. We really appreciate it. We know you 0:12:25.520 --> 0:12:26.240 got to run, Katie. 0:12:26.280 --> 0:12:29.199 Thank you very much, next time, snaxt Katie Muggerty, Chief 0:12:29.200 --> 0:12:31.160 financial officer at shake Shack. 0:12:32.840 --> 0:12:36.559 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:12:36.640 --> 0:12:39.720 weekdays at ten am Eastern on Apple Coarcklay and Android 0:12:39.720 --> 0:12:43.040 Auto with the Bloomberg Business Up. Listen on demand wherever 0:12:43.080 --> 0:12:46.640 you get your podcasts, or watch us live on YouTube. 0:12:47.080 --> 0:12:49.240 Alex Steel, Paul Swiney live here in our Bloomberg invest 0:12:49.720 --> 0:12:52.840 conference at Brookfield Place in Lower Manhattan. Lots of great 0:12:52.840 --> 0:12:54.280 guests we're just grabbing. As soon as they get off 0:12:54.280 --> 0:12:56.000 the stage, we grab and put them in the hot seat. 0:12:56.040 --> 0:12:58.280 One of them is Chris Heisie, chief investment officer at 0:12:58.320 --> 0:13:01.760 Bank of America Private Bank, and I love that branding 0:13:01.880 --> 0:13:04.040 right there. Somebody thought of that, got you paid that 0:13:04.080 --> 0:13:07.199 for that? Chris, talk to us about the market here. 0:13:07.280 --> 0:13:10.839 There's a lot of cross winds coming in aside from 0:13:10.880 --> 0:13:13.640 some of the economic data like we received today, aside 0:13:13.640 --> 0:13:15.240 from some of the corporate earnings that we have to 0:13:15.280 --> 0:13:17.880 deal with. A lot of cross winds coming out of Washington, 0:13:17.960 --> 0:13:20.080 d C. How do you guys at the portfolio level 0:13:20.120 --> 0:13:20.480 deal with. 0:13:20.400 --> 0:13:23.680 That novel statement here I'm about to say, which is, 0:13:24.040 --> 0:13:27.520 you know, market hates uncertainty. We've seen it. There's a 0:13:27.520 --> 0:13:30.360 lot of uncertainty. It's across the board. It's geopolitical risk, 0:13:30.400 --> 0:13:33.720 it's policy in general. It's now starting to seep into 0:13:33.880 --> 0:13:36.480 the level of growth. You saw a little bit of 0:13:36.520 --> 0:13:40.560 soft patch data. We believe it's a little exaggerated, frankly, 0:13:40.600 --> 0:13:42.280 because a lot of it was weather induced. I know 0:13:42.320 --> 0:13:45.600 it sounds like an excuse, but it's particularly true in 0:13:45.600 --> 0:13:48.480 the Northeast. But when you're putting all this together, one 0:13:48.480 --> 0:13:50.840 thing that hasn't changed is the fact that corporate earnings 0:13:50.880 --> 0:13:53.440 are still going to be very attractive and above average. Frankly, 0:13:53.880 --> 0:13:56.160 you could see double digits. Some of Wall Street has 0:13:56.200 --> 0:13:58.400 been bringing them down, but that's pretty natural. 0:13:59.160 --> 0:14:00.480 So overall, we're. 0:14:00.360 --> 0:14:05.120 In a volatility pothole which is forcing some repricing, and 0:14:05.160 --> 0:14:07.839 that's very healthy. And it's easy for me to say 0:14:07.880 --> 0:14:10.320 because it's only a five percent pullback and it could 0:14:10.320 --> 0:14:12.040 get to a ten percent correction, but that would be 0:14:12.080 --> 0:14:13.480 a buying opportunity in our opinion. 0:14:13.720 --> 0:14:17.040 So the narrative of maybe you want to be putting 0:14:17.080 --> 0:14:20.840 money into areas that will be stimulative Europe, for example, 0:14:21.120 --> 0:14:23.960 Germany most likely, China versus US. 0:14:24.600 --> 0:14:26.600 Hold for you, it does. It does. 0:14:26.680 --> 0:14:28.920 It's at the top of our watch list for one 0:14:29.080 --> 0:14:32.840 very important reason. They are now serious about a level 0:14:32.840 --> 0:14:33.920 of stimulus. 0:14:34.520 --> 0:14:35.760 It wasn't the case. 0:14:35.600 --> 0:14:36.680 Before both of them. 0:14:36.680 --> 0:14:38.520 You can make the argument right both, Yeah. 0:14:38.280 --> 0:14:38.720 That's right. 0:14:39.160 --> 0:14:42.160 And when the US was providing the fiscal stimulus, you 0:14:42.160 --> 0:14:45.640 saw what happened. Now, granted it created a deficit for sure, 0:14:45.920 --> 0:14:50.200 but now you're starting to see easing financial conditions across Europe. 0:14:50.640 --> 0:14:52.880 At the same time, you're seeing this willingness now to 0:14:53.000 --> 0:14:54.560 add fiscal spend. 0:14:54.480 --> 0:14:57.400 To get the growth. So it's a little bit of 0:14:57.400 --> 0:14:58.080 a normalization. 0:14:58.120 --> 0:15:02.000 I want to get two over enthusiastic about non dollar assets, 0:15:02.040 --> 0:15:02.720 but certainly it's the. 0:15:02.640 --> 0:15:04.280 Top of the watch list to upgrade. 0:15:04.520 --> 0:15:07.160 Just breaking across the Bloomberg terminal right now, red headline 0:15:07.280 --> 0:15:11.640 Canada won't end tariffs unless all US tariffs lifted. That 0:15:11.720 --> 0:15:14.080 is according to an official. So again the news keeps 0:15:14.120 --> 0:15:18.080 flowing here. So as we think about the US equity markets, 0:15:18.320 --> 0:15:21.080 one of the risks that gets called out quite frequently 0:15:21.160 --> 0:15:23.680 Chris is just this concentration risk. It's just too over 0:15:23.720 --> 0:15:26.000 concentrated some of these big cap names. As you talk 0:15:26.040 --> 0:15:28.600 to your portfolio managers, how did they deal with that? 0:15:29.800 --> 0:15:33.600 Most portfolio managers cannot own up to the level of 0:15:33.600 --> 0:15:36.880 what the index is in any one name. So when 0:15:36.880 --> 0:15:41.360 people say portfolio managers are underperforming or active managers are underperformed, well, 0:15:41.440 --> 0:15:45.000 they can't participate at the level that the index can't. 0:15:45.000 --> 0:15:49.400 Now we're now switching into a marketplace that's rotating rebalancing. 0:15:50.200 --> 0:15:52.760 I'd like to use the word rebalancing because the rotation 0:15:53.760 --> 0:15:56.480 would make you think that it's going to happen with with. 0:15:56.440 --> 0:15:58.960 A snap of a chalk line. It's from here to there. 0:15:59.120 --> 0:16:01.160 It actually applies that you'd be like selling tech and 0:16:01.200 --> 0:16:01.800 buying Europe. 0:16:01.960 --> 0:16:03.480 It's the one for one exactly. 0:16:03.640 --> 0:16:06.200 And I think it's just really portfolio construction. To your 0:16:06.200 --> 0:16:08.480 point about what do you do with it? I think 0:16:08.560 --> 0:16:11.360 you have to look for three things that have been 0:16:11.440 --> 0:16:15.240 driving markets and it's now switching to other parts. It's 0:16:15.560 --> 0:16:18.560 earnings momentum, price momentum, and news momentum. 0:16:18.720 --> 0:16:20.880 Those three things hit together. Where are they hitting? 0:16:21.120 --> 0:16:24.400 Some defensives and frankly, some cyclicals and away from the 0:16:24.400 --> 0:16:25.080 big leaders. 0:16:26.080 --> 0:16:27.680 I wouldn't be short the big leaders. 0:16:27.440 --> 0:16:31.840 Though, so it's not short the big leaders. How do 0:16:31.920 --> 0:16:34.240 you protect yourself from all the noise? 0:16:35.840 --> 0:16:38.200 Very hard to do. You have to take emotion out. 0:16:38.680 --> 0:16:41.200 You have to be disciplined. How do you be disciplined? 0:16:41.240 --> 0:16:42.800 You have to have a process, you have to have 0:16:42.880 --> 0:16:45.840 cash ready to reinvest and stick to your goals. I 0:16:45.880 --> 0:16:48.680 know that sounds very simple and elementary, but it's the 0:16:48.720 --> 0:16:52.880 only way to create a framework that takes the emotion out. Granted, 0:16:53.360 --> 0:16:56.040 we just wrote a report recently. It talks about focus 0:16:56.120 --> 0:16:58.120 on the trend lines, not the headlines. 0:16:58.360 --> 0:17:01.080 Hard to do so to a. 0:17:01.000 --> 0:17:05.400 Certain degree, trust your instincts about your goals and objectives 0:17:05.640 --> 0:17:09.159 and be diversified. And it just doesn't always mean sixty forty. 0:17:09.240 --> 0:17:11.520 It's whatever that appropriate mix is for you. 0:17:12.080 --> 0:17:13.960 What are we doing in the fixed income world here? 0:17:14.560 --> 0:17:15.280 Yield's coming down? 0:17:15.320 --> 0:17:18.280 Actually, yeah, for a few people that have been around 0:17:18.359 --> 0:17:20.480 the block a little bit, we're back to the nineteen 0:17:20.520 --> 0:17:23.840 nineties again, and you're talking about four to five percent yields, 0:17:23.840 --> 0:17:26.800 which are attractive for savers and fixed income investors. So 0:17:27.000 --> 0:17:30.280 there's a reason why fixed income is called fixed income 0:17:30.680 --> 0:17:32.439 and that's how we should think about it versus the 0:17:32.440 --> 0:17:35.080 total return that occurred for better part of three decades. 0:17:35.160 --> 0:17:37.919 So we're looking across the curve. We're right on duration 0:17:38.240 --> 0:17:41.000 right now. We think at some point up to five 0:17:41.040 --> 0:17:43.440 percent of the ten year yield, it's important to. 0:17:43.080 --> 0:17:44.199 Extend duration a little bit. 0:17:44.200 --> 0:17:45.480 A lot of people don't like to do that because 0:17:45.480 --> 0:17:48.080 they're getting four percent at the short end. That's fine 0:17:49.119 --> 0:17:50.840 at the end of the day. I would say in 0:17:50.880 --> 0:17:53.800 terms of segments within fixed income, real quickly, we want 0:17:53.800 --> 0:17:55.840 to be neutral across the board. There's not a unit 0:17:56.000 --> 0:17:58.399 of risk out there that's going to give you extra 0:17:58.480 --> 0:18:01.399 return that is more attractive than any of the space. 0:18:01.480 --> 0:18:04.199 What about corporate credit, for example, because we finally to 0:18:04.200 --> 0:18:05.760 see a little bit of a widening in the investment 0:18:05.760 --> 0:18:06.400 grade market. 0:18:06.840 --> 0:18:10.520 In addition to international equities being at the top of 0:18:10.520 --> 0:18:12.959 the watch list, it's also corporate credit. They're at spreads now, 0:18:12.960 --> 0:18:15.199 they're a little bit more attractive both high yield and 0:18:15.320 --> 0:18:18.200 investment grade, and I would consider. 0:18:17.880 --> 0:18:19.000 That an upgrade potential. 0:18:19.520 --> 0:18:21.600 So one of the topics we hear a lot about 0:18:21.640 --> 0:18:23.480 at this conference and a lot of conferences over the 0:18:23.560 --> 0:18:26.199 last couple of years is alternative investments, not just private credit, 0:18:26.320 --> 0:18:29.439 I mean private equity and hedge funds, but also private credit. 0:18:29.640 --> 0:18:32.480 How do you and your private clients at Bava Meryl, 0:18:32.520 --> 0:18:33.439 how do you guys think about that? 0:18:33.840 --> 0:18:36.119 Well, we think of it as an alternative piece of 0:18:36.160 --> 0:18:39.120 credit right and at the same time, right now where 0:18:39.160 --> 0:18:43.840 it is in the cycle, stay high quality. Don't reach 0:18:43.880 --> 0:18:46.200 for the lower quality end of private credit right now. 0:18:46.640 --> 0:18:48.200 Even though you're going to get a little bit of 0:18:48.720 --> 0:18:51.399 pickup in yield, you can do that in the normal 0:18:51.520 --> 0:18:52.440 high yield market. 0:18:52.600 --> 0:18:54.560 We don't see any big default cycle coming. 0:18:54.880 --> 0:18:57.920 We're kind of through the hornet's nest of that recycle 0:18:58.160 --> 0:19:01.520 of going from zero percent inturates restraights sharply up to 0:19:01.600 --> 0:19:04.440 five percent. So we look at private credit as an 0:19:04.480 --> 0:19:07.240 alternative source of credit as a part of a build 0:19:07.240 --> 0:19:09.480 out of a portfolio on the private side. 0:19:09.640 --> 0:19:11.560 Okay, So if we were looking at the sixty forty 0:19:11.640 --> 0:19:13.320 or like, just don't think of it like that is it? 0:19:13.680 --> 0:19:15.760 What percent is equity is what is fixed income? And 0:19:15.840 --> 0:19:19.200 in fixed income what would be your traditional stuff versus 0:19:19.200 --> 0:19:19.919 a private credit. 0:19:20.119 --> 0:19:21.680 So you start with the role it's going to play 0:19:21.840 --> 0:19:24.240 if you're looking for it to be in a yield 0:19:24.720 --> 0:19:28.320 or a yield enhancing strategy for you that comes from 0:19:28.320 --> 0:19:29.960 fixed income. If you're going to pick up a little 0:19:29.960 --> 0:19:32.080 bit of the equity, which some parts of private credit 0:19:32.119 --> 0:19:34.000 can do, then it's a little bit of a combination 0:19:34.080 --> 0:19:38.000 of both. We don't have any one particular allocation to 0:19:38.200 --> 0:19:40.960 private credit. It kind of depends on the individual. But 0:19:41.040 --> 0:19:42.320 at the end of the day, I think you're going 0:19:42.359 --> 0:19:44.960 to consistently see this. It's gone from an assa class 0:19:45.000 --> 0:19:48.080 so basically had nothing in it to two trillion. Ultimately, 0:19:48.080 --> 0:19:50.240 they're probably increasing that over the course of the next 0:19:50.320 --> 0:19:52.680 decade for sure, so we're going to constantly be adding 0:19:52.720 --> 0:19:52.959 to it. 0:19:53.320 --> 0:19:56.800 We talked a little bit about Europe earlier. There's actually 0:19:56.840 --> 0:19:59.439 been some pretty good performance out of Europe in this 0:19:59.480 --> 0:20:02.159 first quarter visa VI the US, and that has not 0:20:02.440 --> 0:20:05.200 been the case for a long time. Does that change 0:20:05.200 --> 0:20:08.479 your allocation? I mean, do you risk kind of chasing 0:20:08.520 --> 0:20:09.240 this performance? 0:20:10.680 --> 0:20:14.639 The US reached seventy percent of the world market cap extraordinary. 0:20:15.720 --> 0:20:18.040 I remember in the nineteen nineties it barely broke the 0:20:18.080 --> 0:20:21.200 fifty two percent level and everybody got excited. Now you're 0:20:21.200 --> 0:20:24.680 talking seventy percent, and it makes sense for everything that's 0:20:24.680 --> 0:20:26.760 going on in the last, you know, twenty plus years. 0:20:27.920 --> 0:20:29.240 We think it's a little excessive. 0:20:29.720 --> 0:20:33.720 We don't believe that America dominance from an equity market standpoint, 0:20:33.880 --> 0:20:37.360 is over, but we think people should reassess their allocation 0:20:37.480 --> 0:20:43.040 overseas and not overseas investing. Typically the window opens and 0:20:43.119 --> 0:20:47.040 it closes, and usually it closes because they can't compete 0:20:47.040 --> 0:20:49.919 on growth, they can't compete on yields, and ultimately the 0:20:50.000 --> 0:20:53.359 dollar doesn't stay weak, it ultimately strengthens again. 0:20:53.760 --> 0:20:55.760 You're starting to see winds of change there. 0:20:56.040 --> 0:20:58.680 So this is a great time to reassess and put 0:20:58.680 --> 0:21:00.840 that at the top of your watchlift for potential upgrade. 0:21:00.960 --> 0:21:03.359 And I'm assuming you're talking about the fiscal break kind 0:21:03.359 --> 0:21:05.480 of coming off the boil in Germany, so like this 0:21:05.600 --> 0:21:07.479 time it maybe actually is different. 0:21:08.280 --> 0:21:12.479 It seems it seems like that, And there's a lot 0:21:12.520 --> 0:21:15.800 of investors who think the international markets didn't participate in 0:21:15.800 --> 0:21:16.880 that narrow leadership. 0:21:17.000 --> 0:21:17.400 They did. 0:21:18.200 --> 0:21:20.879 A lot of the companies that lead the market even 0:21:20.960 --> 0:21:23.520 now in this year, particularly in Europe, thin get most 0:21:23.560 --> 0:21:26.159 of their revenues outside of Europe. They're just happened to 0:21:26.160 --> 0:21:30.000 be domiciled there. But you're going to pick up value 0:21:30.160 --> 0:21:32.920 and it doesn't mean you go from growth to value. 0:21:33.040 --> 0:21:34.320 You have a broad mix of both. 0:21:34.880 --> 0:21:37.240 How am I back here in the US valuation? What's 0:21:37.280 --> 0:21:40.639 the valuation call? Here? Earnings have been good, but are 0:21:40.680 --> 0:21:41.359 they good enough? 0:21:41.840 --> 0:21:43.919 This is where it gets interesting, right The whole second 0:21:43.920 --> 0:21:48.320 derivative argument is slowing down and the first mover when 0:21:48.320 --> 0:21:51.639 the second derivative is going up higher velocity, get higher 0:21:51.640 --> 0:21:52.359 earnings growth. 0:21:53.160 --> 0:21:55.040 You start early, you benefit from that. 0:21:55.119 --> 0:21:56.879 Now you start to see a little cresting of that 0:21:56.960 --> 0:21:59.440 second derivative. You're slowing down, but earning's growth should still 0:21:59.440 --> 0:22:04.359 be okay. A Our view is pretty simple valuation. If 0:22:04.560 --> 0:22:08.639 billions of investors feel comfortable paying twenty times forward earnings. 0:22:08.600 --> 0:22:12.679 Who are we to argue with that? Until something changes? 0:22:12.720 --> 0:22:13.520 What's that something? 0:22:13.560 --> 0:22:16.520 We have to see earnings growth fade and ultimately go 0:22:16.640 --> 0:22:21.200 down to almost zero three to two percent keeping with inflatial, 0:22:21.240 --> 0:22:24.520 We don't see that, So we are comfortable with valuation 0:22:24.600 --> 0:22:27.240 right now. We understand it's at premium. But our last 0:22:27.240 --> 0:22:30.800 point on this is pretty simple. If the leaders have 0:22:30.960 --> 0:22:34.080 been and the leaders of tomorrow are going to consistently 0:22:34.119 --> 0:22:37.240 be asset light, they have high cash rich, they have 0:22:37.280 --> 0:22:41.040 good balance sheets, they have low fixed labor. Why shouldn't 0:22:41.040 --> 0:22:43.840 they have premium valuations? And that's how we see the 0:22:43.880 --> 0:22:46.399 market moving in the next ten years. It's going to 0:22:46.400 --> 0:22:49.960 become increasingly asset light, which keeps valuations a little higher 0:22:50.040 --> 0:22:51.760 than what we've come to know in the last thirty 0:22:51.760 --> 0:22:52.320 forty years. 0:22:52.400 --> 0:22:55.040 Before we let you go, thoughts and comments on a 0:22:55.040 --> 0:22:57.639 potential recession in the US, what are you guys modeling 0:22:57.680 --> 0:22:58.080 right now? 0:22:58.600 --> 0:22:59.320 Very low level. 0:23:00.040 --> 0:23:02.879 Obviously, if tariffs stay and they stick, and they're across 0:23:02.880 --> 0:23:06.320 the board and ultimately becomes a tax on growth, we 0:23:06.359 --> 0:23:07.879 would have to reset. 0:23:07.480 --> 0:23:10.320 And stay in stick means like forever tariffs. 0:23:09.760 --> 0:23:12.439 Forever tariffs at least, or if they just stay and 0:23:12.480 --> 0:23:15.280 stick through the year and into next year, it could harm. 0:23:15.200 --> 0:23:17.560 Growth pretty aggressively. So we'll be watching that closely. 0:23:17.600 --> 0:23:19.880 But we have a very low probability on any recession 0:23:19.960 --> 0:23:21.720 risk in the in the foreseeable future. 0:23:22.320 --> 0:23:25.800 Villanova basketball tough loss at Georgetown last night, eighteen and 0:23:25.920 --> 0:23:28.240 thirteen on the year. What's going on down Philly? 0:23:28.320 --> 0:23:30.920 I don't even want to talk about last night's Let's 0:23:30.960 --> 0:23:33.560 talk about humble and hungry, which is who we are. 0:23:33.600 --> 0:23:35.000 And we're going to move on and we're going to 0:23:35.640 --> 0:23:36.280 do really well. 0:23:36.280 --> 0:23:38.639 Are they having a hard time adjusting to the nil 0:23:38.720 --> 0:23:40.840 and every trans for a portfolio kind of thing. 0:23:40.960 --> 0:23:43.639 Everybody is Yeah, it's a whole new state out there. 0:23:44.000 --> 0:23:46.679 But at the end of the day, it is what 0:23:46.720 --> 0:23:49.280 it is. We like friendly competition. We're going to look 0:23:49.320 --> 0:23:51.320 forward to the Big East. It's gonna be very very 0:23:51.320 --> 0:23:53.840 fun and Big East is back. 0:23:53.720 --> 0:23:56.040 Big East is backward. Bettina's back. See smug in a 0:23:56.040 --> 0:23:58.560 little bit. Did Villanova people. They're very passionate about their who. 0:23:58.640 --> 0:24:01.720 Hey, man, I support sports, so I support you supporting sports. 0:24:01.760 --> 0:24:04.560 My father was all set to go to Villanova and 0:24:04.560 --> 0:24:07.280 then the Japanese bomb Pearl Harbor change in plans for 0:24:07.359 --> 0:24:09.920 him and like a lot of people, so soft spot 0:24:09.960 --> 0:24:11.600 in the heart for you. Ye, fair enough, fair enough, 0:24:11.680 --> 0:24:13.520 Chris Heisei, thanks so much for joining us. Chris Hesei, 0:24:13.560 --> 0:24:16.119 Chief Investment Officer, Bank of America Private Bank, and Merril 0:24:16.600 --> 0:24:19.120 here at our Bloomberg inst conference. A lot of smart 0:24:19.119 --> 0:24:20.119 people running around here. 0:24:20.200 --> 0:24:20.960 Yeah, it's really great. 0:24:21.000 --> 0:24:23.200 Actually, I mean all these people that you see through 0:24:23.240 --> 0:24:25.000 the screens and now they're real and you're talking and 0:24:25.040 --> 0:24:26.160 you get lots of time to chat. 0:24:27.880 --> 0:24:31.600 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:24:31.680 --> 0:24:34.719 weekdays at ten am Eastern on Apple Coarclay, and Android 0:24:34.760 --> 0:24:38.080 Auto with the Bloomberg Business App. Listen on demand wherever 0:24:38.119 --> 0:24:41.240 you get your podcasts, or watch us live on YouTube. 0:24:42.480 --> 0:24:45.640 Alex Steel alongside Pops we Need. This is Bloomberg Intelligence Radio. 0:24:45.680 --> 0:24:48.760 We are broadcasting to live from Bloomberg invest conference in 0:24:48.800 --> 0:24:51.119 downtown at Manhattan. We talked to all the top names 0:24:51.400 --> 0:24:54.359 in business, really asset managers, private credit, private equity, even 0:24:54.359 --> 0:24:57.160 pension funds. And for that we are joined now by Yupkim, 0:24:57.400 --> 0:25:01.520 a chief investment officer at Texas Municipal Retirement System managing 0:25:01.720 --> 0:25:05.840 forty plus billion dollars in pension fund today. Do a 0:25:05.960 --> 0:25:10.159 long history in funds, right, you previously ran private equity 0:25:10.200 --> 0:25:13.159 over at CalPERS. You also were senior portfolio manager at 0:25:13.200 --> 0:25:15.959 the Alaska Permanent Fund Corporation, so you've been through this 0:25:16.000 --> 0:25:20.399 for a long time. What is the best allocation that 0:25:20.440 --> 0:25:22.560 you can think of right now in this very strange, 0:25:22.600 --> 0:25:23.600 difficult environment. 0:25:24.200 --> 0:25:28.120 Yeah, it's you know, I think on a very holistic basis, 0:25:28.520 --> 0:25:31.640 we are long term investors, and so our long term 0:25:31.680 --> 0:25:35.360 strategy remains unchanged. You know, it's really predicated upon three 0:25:35.400 --> 0:25:39.960 pillars number one, attract higher and retain the best talent possible, 0:25:40.480 --> 0:25:43.560 and also attract and partner with the world class investment 0:25:43.600 --> 0:25:49.080 managers around the globe. Secondly, it's really about taking a 0:25:49.119 --> 0:25:53.560 low cost, public markets benchmark aligned approach to investing. 0:25:53.600 --> 0:25:56.159 I do think we all recognize. 0:25:55.640 --> 0:25:59.240 Going forward there are more alph opportunities and beta might 0:25:59.280 --> 0:26:01.720 be you know, there might some headwinds to to beta 0:26:01.800 --> 0:26:04.600 going forward. So I do think increasing the share of 0:26:04.600 --> 0:26:07.639 active management and public markets will be a critical a 0:26:07.680 --> 0:26:11.440 critical approach. And lastly, really endeavoring to generate a lot 0:26:11.480 --> 0:26:15.040 of the upperformance going forward in private markets will be 0:26:15.560 --> 0:26:18.840 absolutely critical. And you know, and so I do think 0:26:18.920 --> 0:26:21.000 kind of with the you know, with the confluence of 0:26:21.040 --> 0:26:23.480 a lot of market volatility, it's it's easy to be 0:26:23.560 --> 0:26:26.119 swayed left and right. But I do think kind of 0:26:26.160 --> 0:26:30.119 sticking to your core long term strategy is you know, 0:26:30.280 --> 0:26:31.480 very important in this environment. 0:26:31.680 --> 0:26:34.200 How does an asset allocation work for you guys down 0:26:34.240 --> 0:26:37.800 in Austin stocks, bonds, alternatives, Let's you hold it with 0:26:37.880 --> 0:26:39.080 alternatives playing. 0:26:39.160 --> 0:26:44.520 Absolutely Look, I think when you think about alternatives, the 0:26:44.560 --> 0:26:48.000 delta between a media and manager and a top five 0:26:48.000 --> 0:26:52.159 percentile manager in alternatives and privates can be upwards of 0:26:52.200 --> 0:26:55.800 fifteen hundred to eighteen hundred basis points. That equivalent number 0:26:55.800 --> 0:26:58.040 in public markets is two hundred fifty to three hundred 0:26:58.040 --> 0:27:02.240 basis points. And so you are really compensated for good 0:27:02.240 --> 0:27:05.240 manager selection but also a good deal selection. And so 0:27:05.480 --> 0:27:07.919 I do think there's still you know, when you think 0:27:07.960 --> 0:27:09.760 about the next ten years, there's a lot of equity 0:27:09.840 --> 0:27:12.399 value creation that will occur in the private markets, and 0:27:12.480 --> 0:27:15.480 so it really you know, kind of provides that long 0:27:15.560 --> 0:27:18.160 term you know, kind of alp engine to the overall portfolio. 0:27:18.280 --> 0:27:20.600 I mean, so surprise that you did private equity in 0:27:20.760 --> 0:27:22.520 your last job, and then now we're taking over at 0:27:22.560 --> 0:27:25.879 the Texas Pension fund. Correct, How how well funded are 0:27:25.880 --> 0:27:26.680 pensions right now? 0:27:27.119 --> 0:27:31.680 Yes, and so pension funds are definitely better funded kind 0:27:31.680 --> 0:27:35.520 of really on the backs of two incredible years in 0:27:35.680 --> 0:27:37.879 you know, the equity public markets. And and I do 0:27:37.960 --> 0:27:42.600 think public pensions typically have higher allocations to public equities, 0:27:42.600 --> 0:27:46.399 since that's that's certainly helped. At Texas, we're you know, 0:27:46.440 --> 0:27:50.239 above ninety percent funded and so and just given that 0:27:50.280 --> 0:27:53.399 we serve cities that are growing, you know, you know, 0:27:53.480 --> 0:27:56.040 our net cash out flow for the past two years 0:27:56.080 --> 0:27:58.200 has been less than a percent, and so that really 0:27:58.600 --> 0:28:01.679 empowers us to harvest, you know, the ilquided premium of 0:28:01.720 --> 0:28:05.240 our private market book, but also really helps us risk 0:28:05.280 --> 0:28:06.600 manage on the liquidity side. 0:28:07.400 --> 0:28:10.760 How do you feel about just the opportunities today? Where 0:28:10.800 --> 0:28:13.120 do you guys see the best opportunities? 0:28:13.200 --> 0:28:13.480 Sure? 0:28:13.600 --> 0:28:16.480 Sure, you know, like I think, maybe three things I'll 0:28:16.480 --> 0:28:20.040 share there is, you know, number one, the core building 0:28:20.080 --> 0:28:25.239 blocks on why people were excited about this US exceptionalism. 0:28:25.400 --> 0:28:28.520 The core building blocks have not changed. Right when I 0:28:28.560 --> 0:28:31.320 talk to my peers in Asia and Europe and the 0:28:31.320 --> 0:28:35.400 Middle East, the US continues to be the top destination, 0:28:35.680 --> 0:28:38.560 you know, for their investment capital. You have the top 0:28:38.600 --> 0:28:44.000 academic institutions in the United States, presumably with the greatest founders, 0:28:44.160 --> 0:28:45.719 the most tenured management teams. 0:28:45.800 --> 0:28:47.360 You have access to cheap energy. 0:28:47.840 --> 0:28:53.200 You have really a risk taking culture that's celebrated that's 0:28:53.200 --> 0:28:55.560 really not found in many parts of the world. And 0:28:55.640 --> 0:28:58.880 so I do think when we think, the question we 0:28:58.920 --> 0:29:01.680 ask is not how do we performs in twenty twenty five, 0:29:02.240 --> 0:29:04.880 but how do we generate outperforms in the next decade. 0:29:05.280 --> 0:29:08.520 And we do view the US to continue to take 0:29:08.560 --> 0:29:11.680 an asymantic share of that equity, you know, value creation 0:29:11.840 --> 0:29:13.080 in our total portfolio. 0:29:13.400 --> 0:29:16.280 How do you deal with liquidity when it comes to 0:29:16.320 --> 0:29:18.040 different parts of the market. Being in the public market, 0:29:18.040 --> 0:29:19.800 obviously it is easier, but then the more you go 0:29:19.840 --> 0:29:21.240 to alternatives as harder it as. 0:29:21.080 --> 0:29:25.680 A get Yeah, absolutely, liquidity is absolutely critical. I do think, 0:29:25.800 --> 0:29:29.440 you know, as I shared before, given that our net 0:29:29.440 --> 0:29:32.400 cash off flow annually is less than a percent, we're 0:29:32.520 --> 0:29:35.320 very well covered by our public equities book and our 0:29:35.320 --> 0:29:38.880 public credit book to meet those annual you know, liability streams. 0:29:39.120 --> 0:29:42.720 The situation you really want to avoid is having to 0:29:42.800 --> 0:29:46.040 sell your private market assets at a grave discount right 0:29:46.080 --> 0:29:48.960 to satisfy that that liability stream. And so we feel 0:29:49.080 --> 0:29:52.560 very very fortunate, you know, from a liquidity standpoint. 0:29:53.200 --> 0:29:56.160 Texans would say that they are unique. Their Texans first, 0:29:57.280 --> 0:30:00.560 really strong strong belief in that not often comes into 0:30:00.600 --> 0:30:03.560 the investment themes as well, kind of leading the way 0:30:03.720 --> 0:30:06.680 with maybe an alternative view of ESG investing several years ago, 0:30:06.760 --> 0:30:10.840 allocating towards energy versus people who don't have heat towards energy. 0:30:10.840 --> 0:30:13.720 How does that impact running the state pension fund? Yeah? 0:30:13.760 --> 0:30:16.880 Look, I think I think Austin is a wonderful place 0:30:16.960 --> 0:30:19.480 to be an allocator. Right, there are a number of 0:30:20.000 --> 0:30:23.440 very large LPs you know, in town, and all the 0:30:23.480 --> 0:30:26.560 CIOs we convene together and you know, we share share, 0:30:27.120 --> 0:30:28.440 you know, kind of our views of the world, and 0:30:28.440 --> 0:30:30.600 so I think that's that's super helpful, you know, Like 0:30:30.760 --> 0:30:34.440 I think thematically, we're really excited about you know, five 0:30:34.520 --> 0:30:38.520 big mega trends, right. Number one obviously around you know, 0:30:38.600 --> 0:30:44.120 digital transformation. So we're talking about just industry transforming AI applications, 0:30:44.560 --> 0:30:47.440 vertical software, cybersecurity, and data centers. 0:30:48.000 --> 0:30:50.240 In healthcare innovation, we're really focused on. 0:30:50.960 --> 0:30:54.719 Next generation pre clinical biotech platforms and also just opportunities 0:30:54.720 --> 0:30:59.560 across the biotech and pharma value chain. On industrial resilience, 0:30:59.640 --> 0:31:05.239 really around robotics AI, and also aerospace and defense. And 0:31:05.280 --> 0:31:08.200 then kind of the last two areas, it's really around energy, 0:31:08.200 --> 0:31:11.640 monetization and financial empowerment, so opportunities in fintech and also 0:31:12.000 --> 0:31:15.240 asset light insurance, brokerage and so look, I do think 0:31:15.960 --> 0:31:18.040 the next fifteen years will look very different from the 0:31:18.120 --> 0:31:21.720 last fifteen and so really digging deep on these mega 0:31:21.760 --> 0:31:25.160 trends and understanding how the world is moving, how these 0:31:25.160 --> 0:31:28.200 industries are transforming, will be critical to long term OWT performance. 0:31:28.320 --> 0:31:30.280 Here's an entirely unfair question you have to answer now 0:31:30.280 --> 0:31:32.560 in thirty seconds. Okay, do you think the US should 0:31:32.560 --> 0:31:33.600 have a sovereign well fund? 0:31:35.720 --> 0:31:37.200 I do think that. 0:31:39.360 --> 0:31:41.560 I do think we have the best investment talent in 0:31:41.600 --> 0:31:43.960 the world residing here in the United States. I do think, 0:31:44.400 --> 0:31:46.360 you know, a lot of our federal sources of capital 0:31:46.640 --> 0:31:50.320 has not been compounding at endowment or pension like returns, 0:31:50.360 --> 0:31:53.840 and so I think there is great opportunity to bring 0:31:53.880 --> 0:31:58.120 the best of America's investment management and apply it to 0:31:58.520 --> 0:32:00.360 you know, different forms of federal funds. 0:32:00.920 --> 0:32:04.080 Great stuff. I really appreciate it. They're getting some thoughts 0:32:04.160 --> 0:32:07.360 on these markets. Yep Kim, Chief Investment Officer, Texas Municipal 0:32:07.400 --> 0:32:10.440 Retirement System based in Austin, Texas. 0:32:10.440 --> 0:32:15.479 Credit you're listening to the Bloomberg Intelligence Podcast. Catch us 0:32:15.520 --> 0:32:18.960 live weekdays at ten am Eastern on Applecarclay, and Android 0:32:18.960 --> 0:32:22.280 Auto with the Bloomberg Business App. Listen on demand wherever 0:32:22.360 --> 0:32:26.320 you get your podcasts, or watch us live on YouTube Alex. 0:32:26.360 --> 0:32:29.600 You here alongside Paul Sweeney the Bloomberg invest Conference twenty 0:32:29.600 --> 0:32:32.040 twenty five downtown in Lower Manhattan. 0:32:32.080 --> 0:32:33.440 Now, obviously, when you. 0:32:33.360 --> 0:32:36.920 Get together wealth managers private equity bankers, private credit guys. 0:32:36.920 --> 0:32:39.360 They're all talking about alternative assets, but what have you 0:32:39.480 --> 0:32:41.520 already been in that space for decades? 0:32:41.560 --> 0:32:42.320 What do you do there? 0:32:42.560 --> 0:32:45.479 While joining us now is a Pernima PII. She's governing 0:32:45.520 --> 0:32:50.040 partner and portfolio manager for public credit at HPS Investment Partners, 0:32:50.080 --> 0:32:52.200 which was founded back in twenty to two thousand and 0:32:52.240 --> 0:32:55.360 seven to focus on credit and guess what longer dated, 0:32:55.720 --> 0:32:59.840 less liquid investment opportunities, which it feels like that's the world. 0:32:59.520 --> 0:33:01.080 That everyone is chasing right now. 0:33:01.760 --> 0:33:03.760 You guys ended twenty twenty four with one hundred and 0:33:03.760 --> 0:33:06.000 forty nine billion dollars in assets under management. 0:33:06.360 --> 0:33:07.760 Where are your biggest opportunities? 0:33:08.840 --> 0:33:13.640 Yeah, So when we started the business, the regulatory environment 0:33:13.720 --> 0:33:15.760 changed pretty quickly thereafter, and it really gave us the 0:33:15.760 --> 0:33:20.080 opportunity to get involved in the private credit business. And 0:33:20.120 --> 0:33:24.280 at the time, private credit was more levered companies in 0:33:24.320 --> 0:33:27.680 the high market or a substitute for broadly syndicated loans. 0:33:28.160 --> 0:33:30.000 Like I can't get funding for my regular banks, I 0:33:30.000 --> 0:33:30.400 got to go to. 0:33:30.440 --> 0:33:31.000 You and pay up. 0:33:31.080 --> 0:33:33.360 And there were moments of dislocation in the marketplace, and 0:33:33.400 --> 0:33:34.840 so the banks might not have been there at that 0:33:34.880 --> 0:33:37.880 moment in time regulatory environment changed and that opened up 0:33:37.880 --> 0:33:40.600 the sort of I would say, that opened up the 0:33:40.640 --> 0:33:44.560 marketplace for people to be an alternative provider of capital 0:33:44.600 --> 0:33:46.960 to companies that needed at different moments in time. And 0:33:47.040 --> 0:33:49.000 so what we used to be, you know, oh, was 0:33:49.040 --> 0:33:52.040 when the capital markets were shifting. It actually transitioned a lot. 0:33:52.120 --> 0:33:54.959 Like our business for example, we invest not just in 0:33:55.000 --> 0:33:58.760 sponsor deals. We invest in we provide capital to owners 0:33:58.800 --> 0:34:01.400 as well on a regular base. So over time the 0:34:01.440 --> 0:34:03.240 market's evolved a lot. I would say, the market is 0:34:03.280 --> 0:34:06.120 really bifurcated. There's a whole host of folks in private credit. 0:34:06.160 --> 0:34:07.720 You say to yourself, there's been a ton of funds 0:34:07.720 --> 0:34:10.800 that have been raised. We tend to traffic in I 0:34:10.800 --> 0:34:14.279 would say, Number one, bigger businesses. Number Two, we tend 0:34:14.360 --> 0:34:17.480 to we tend to provide larger sources of capital. Three, 0:34:17.520 --> 0:34:19.840 we have flexible capital in terms of the top and bottom 0:34:19.880 --> 0:34:22.120 of the structure, so we do we are able to 0:34:22.160 --> 0:34:24.239 sort of think about where our solution might make sense 0:34:24.280 --> 0:34:27.600 for a company. So that competitive landscape I think is 0:34:27.640 --> 0:34:29.880 a little bit smaller in terms of the folks that 0:34:29.920 --> 0:34:32.000 are trafficking there. The other thing I would say is 0:34:32.040 --> 0:34:34.920 private credits expanding dramatically now because you're seeing it with 0:34:35.640 --> 0:34:37.960 I think Joe Bay was just speaking, you know, private 0:34:38.000 --> 0:34:41.359 ig that's a whole other sector that there's a whole 0:34:41.400 --> 0:34:43.520 need of financing for all these mega trends that are 0:34:43.520 --> 0:34:46.279 happening in the US. So that could be infrastructure, that 0:34:46.280 --> 0:34:49.520 can be AI, that can be energy transition and that, 0:34:49.680 --> 0:34:53.800 and that opportunity set is sort of ripe for folks 0:34:54.000 --> 0:34:56.080 like ourselves and others to take advantage of. 0:34:56.320 --> 0:34:58.640 What's a typical deal size for you guys? And how 0:34:58.640 --> 0:34:59.960 has that changed over the year. 0:35:00.560 --> 0:35:02.920 Well, it's changed a lot because the market's changed a lot. 0:35:03.040 --> 0:35:05.839 So several years ago you did not have a lot 0:35:05.880 --> 0:35:09.640 of private credit tranches that were you know, call it 0:35:09.719 --> 0:35:11.040 much greater than three hundred. 0:35:10.840 --> 0:35:12.000 Million dollars of size. 0:35:12.120 --> 0:35:14.560 There are many now, I'll give you an example in 0:35:14.560 --> 0:35:17.200 the marketplace today. There are three deals I can think 0:35:17.239 --> 0:35:20.640 of that are refinancing in the broadly syndicated loan private credit. 0:35:21.000 --> 0:35:24.080 One of them is a four to five billion dollar 0:35:24.200 --> 0:35:25.160 deal size. 0:35:25.600 --> 0:35:26.520 That's one trunch. 0:35:26.880 --> 0:35:29.759 Another is, you know, three billion on the first lane, 0:35:29.840 --> 0:35:32.800 nine hundred million second lane. That's a trunch, And another's 0:35:32.800 --> 0:35:34.680 two and a half billion so like now you're starting 0:35:34.680 --> 0:35:38.400 to see billion dollar deals. Wow, you don't have tons 0:35:38.440 --> 0:35:39.920 of people that can traffic in two and a half 0:35:39.960 --> 0:35:42.680 billion dollar deal sizes there, But there's guys out there 0:35:42.719 --> 0:35:44.200 that can. You know, we think there's five or six 0:35:44.239 --> 0:35:46.520 people who do that on a regular basis every single day. 0:35:47.760 --> 0:35:49.920 But that's a smaller, smaller pool of competition. 0:35:49.960 --> 0:35:54.040 I think, are you seeing the distress market grow pick up? 0:35:54.280 --> 0:35:56.120 Is that the catastrophe we all thought it was going 0:35:56.160 --> 0:35:57.239 to be five years ago or no? 0:35:58.120 --> 0:36:00.920 I mean I would say, no, Oh, I don't think there. 0:36:01.239 --> 0:36:03.279 I mean this was like the default cycle that never was. 0:36:03.640 --> 0:36:06.200 So it was a variant on the distress cycle, which 0:36:06.280 --> 0:36:08.520 is that you guys have talked about this, I'm sure, 0:36:08.560 --> 0:36:11.080 but all the liability management stuff and sort of structured 0:36:11.080 --> 0:36:13.720 transactions to kick the can a little bit and figure 0:36:13.760 --> 0:36:15.960 out if you had time, especially in the in the 0:36:16.000 --> 0:36:18.760 world of rising interest rates where balance sheets got stressed. 0:36:20.200 --> 0:36:23.600 But we haven't really seen a distress cycle. And in fact, 0:36:25.040 --> 0:36:28.520 if you talk to my partners who run our private 0:36:28.560 --> 0:36:32.719 credit business, they would say they were surprised by how 0:36:32.760 --> 0:36:35.239 well a lot of companies did over this period of time. 0:36:35.680 --> 0:36:37.560 I started my career at the Chasement, Heaton Bank, and 0:36:37.560 --> 0:36:41.480 the Leverage Lending Group lending five six times that the EBITTA. 0:36:41.840 --> 0:36:44.160 We took a big fee up front, We syndicate, syndicated 0:36:44.200 --> 0:36:45.640 all the risk off our balance sheet. It was a 0:36:45.680 --> 0:36:47.880 great business. I would never allow you to come in 0:36:47.920 --> 0:36:49.840 and take one of my clients. What are the banks 0:36:49.880 --> 0:36:51.680 doing here? Why are they letting this business go to 0:36:51.719 --> 0:36:53.200 people like you and others? 0:36:54.960 --> 0:36:55.200 Wow? 0:36:55.239 --> 0:36:58.239 So so one is that there's a regulatory environment shift right, 0:36:58.400 --> 0:37:00.400 that changed a lot from when you started and frankly 0:37:00.400 --> 0:37:01.840 when I started, and all that kind of stuff. 0:37:01.880 --> 0:37:02.680 So that's number one. 0:37:02.800 --> 0:37:06.480 Number two, there's different reasons companies go to private credit lenders, 0:37:06.560 --> 0:37:09.560 right because banks, by and large, I think, just take 0:37:09.560 --> 0:37:12.120 the body syndicated loan market, right, That bodily syndicated loan 0:37:12.160 --> 0:37:14.000 market is sixty plus percent colos. 0:37:14.239 --> 0:37:16.080 Colo is like a box. There's a box. 0:37:16.120 --> 0:37:18.480 You want a reading, you want a certain amount of leverage, 0:37:18.520 --> 0:37:20.640 you need a certain amount of diversity. It's great business, 0:37:20.719 --> 0:37:23.319 by the way, but the things that are straight down 0:37:23.360 --> 0:37:25.320 the fairway nicely fit into a colo. 0:37:25.680 --> 0:37:27.959 So all of a sudden, if your reading's. 0:37:27.680 --> 0:37:31.200 Constrained and maybe something's the minus, that market may or 0:37:31.280 --> 0:37:33.359 may not be available to at a given moment in time. 0:37:33.400 --> 0:37:35.719 So why do people go why do issuers go to 0:37:35.719 --> 0:37:38.440 private credit folks? Well, they'll go because maybe they need 0:37:38.480 --> 0:37:41.560 flexibility in picking for a period of time. 0:37:42.040 --> 0:37:43.040 Okay, that could be one. 0:37:43.239 --> 0:37:47.040 Maybe it's because the americket feels pretty saturated in particular industries. 0:37:47.280 --> 0:37:47.919 That could be two. 0:37:48.160 --> 0:37:51.840 Maybe it's because people need a delay draw facility because 0:37:51.880 --> 0:37:53.960 businesses aren't static and they grow over time, and you 0:37:53.960 --> 0:37:56.000 want to have that funding sort of lined up and 0:37:56.080 --> 0:37:58.640 ready to roll if it's a roll up or something 0:37:58.680 --> 0:38:00.640 like that, or you have a capback plan or something 0:38:00.680 --> 0:38:03.960 like that. So that could be the third reason. And 0:38:04.000 --> 0:38:06.239 then four, I think that you know, what we've seen, 0:38:06.280 --> 0:38:08.799 certainly in some of our buckets of capital is that 0:38:08.840 --> 0:38:12.759 as businesses grow, sometimes they'd like to have one or 0:38:12.760 --> 0:38:14.160 two relationship providers. 0:38:15.320 --> 0:38:17.160 Interesting, it's great business. 0:38:16.760 --> 0:38:19.160 What what do you not want to touch right now 0:38:19.200 --> 0:38:20.360 at the tem football. 0:38:21.480 --> 0:38:23.319 Well, I think you mean, I'm sure you've heard this 0:38:23.360 --> 0:38:24.000 from everybody. 0:38:24.040 --> 0:38:25.920 You know, we don't know what's going on with tariffs, 0:38:26.280 --> 0:38:30.000 and tariffs have both short term implications and longer term applicatdications. 0:38:30.080 --> 0:38:31.680 The longer term implications. 0:38:31.239 --> 0:38:34.480 Are trickier to underwrite because trade wars are very difficult 0:38:34.480 --> 0:38:37.480 to underwrite, and that can really that coupled with the 0:38:37.520 --> 0:38:39.440 other sort of things as part of the puzzle. 0:38:40.400 --> 0:38:41.800 Immigration, slower growth. 0:38:41.600 --> 0:38:44.840 Et cetera, affect a whole, but will affect everyone's portfolio. 0:38:44.880 --> 0:38:49.439 Everybody's portfolio, every company. Shorter term. Maybe there's a band 0:38:49.480 --> 0:38:52.120 you can underwrite on tariffs. So there's sort of the obvious, 0:38:52.200 --> 0:38:56.279 which are you know, industrial manufacturing, retail or certain things 0:38:56.280 --> 0:38:59.759 in the consumer space which get trickier to trickier to underwrite. 0:39:00.080 --> 0:39:02.160 But just real quickly, thirty seconds. Your market is open, 0:39:02.160 --> 0:39:03.759 today's miss. There's three deals in the market. 0:39:04.200 --> 0:39:07.920 The broadly syndicated liquid loan market is open. Yes, you know, 0:39:07.960 --> 0:39:10.840 there's been one hundred and sixty billion dollars of COLO 0:39:10.920 --> 0:39:13.400 growth demand and the markets in twenty twenty one, the 0:39:13.480 --> 0:39:15.080 lever lone market has changed by fifty billion. 0:39:15.280 --> 0:39:16.800 There's a lot of people who want paper. 0:39:16.880 --> 0:39:19.560 Yep, there you go, all right, Really great to get 0:39:19.600 --> 0:39:23.280 your perspective up from Prairie joining us from HPS Investment Partners. 0:39:23.320 --> 0:39:25.759 Also Feller in Northwestern grad and now you're going up 0:39:25.800 --> 0:39:28.120 on me. They are good to know, they are good Western. 0:39:28.280 --> 0:39:29.120 It was really cold. 0:39:29.760 --> 0:39:31.760 It was very cool, Chicago. 0:39:32.640 --> 0:39:35.000 Yeah, but you know it's because you're not like you don't. 0:39:34.760 --> 0:39:37.520 Have big towers, because you're kind of allot to win. 0:39:37.600 --> 0:39:38.719 All you have got that win. 0:39:39.160 --> 0:39:40.200 Yes, and it's cold. 0:39:40.560 --> 0:39:43.200 Yeah, I went to Virginia in North Carolina. 0:39:43.239 --> 0:39:46.200 I'm not so many layers. All right, I thank very much. 0:39:46.200 --> 0:39:49.239 We really appreciate it's great to talk to you. 0:39:49.239 --> 0:39:52.919 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:39:53.000 --> 0:39:56.120 weekdays at ten am Eastern on Apple, Cocklay and Android 0:39:56.120 --> 0:39:59.400 Auto with the Bloomberg Business App. Listen on demand wherever 0:39:59.440 --> 0:40:02.600 you get your or watch us live on YouTube. 0:40:03.200 --> 0:40:05.319 Let's get to our next guest, Stephen Meyer, New York 0:40:05.360 --> 0:40:08.880 City Retirement Systems Asset Management CIO and he's deputy controller 0:40:09.520 --> 0:40:12.480 for the city. Steve, thanks so much for joining us here. 0:40:12.560 --> 0:40:14.719 Now you just jumped off a panel. We appreciate it. 0:40:15.320 --> 0:40:19.239 How are you guys navigating the last six, seven, eight 0:40:19.280 --> 0:40:21.719 weeks with all the cross current of news coming out. 0:40:21.760 --> 0:40:23.560 How does that impact the way you manage your pension? 0:40:23.719 --> 0:40:27.879 Well, it's certainly been interesting, and we try to do 0:40:27.920 --> 0:40:30.960 those adhere to a long term strategic plan. So a 0:40:31.000 --> 0:40:33.480 lot for us, a lot of this is noise in 0:40:33.600 --> 0:40:35.480 terms of what's going on in the change of policy 0:40:35.719 --> 0:40:38.239 in Washington. So we're really trying to stick to our 0:40:38.280 --> 0:40:41.360 north star, which is our strategic ass allocation. Again, we 0:40:41.400 --> 0:40:46.080 have multi generational liabilities that we're trying to satisfy. So again, 0:40:46.120 --> 0:40:49.160 a long term investment horizon and a long term discipline. Now, 0:40:49.160 --> 0:40:52.480 having said that, our trustees and our beneficiaries and our 0:40:52.520 --> 0:40:55.360 participants do call. We have the privilege of servicing eight 0:40:55.480 --> 0:40:58.960 hundred thousand public workers here in the City of New 0:40:59.040 --> 0:41:01.799 York their concerns. So we need to stay on top 0:41:01.840 --> 0:41:05.520 of it in terms of increasing the information flow of 0:41:05.560 --> 0:41:08.400 how our assets are diversified and they continue to perform 0:41:08.440 --> 0:41:09.120 as expected. 0:41:09.200 --> 0:41:12.200 So how are they like forty sixty or sixty forty 0:41:12.320 --> 0:41:14.200 maybe a thing of the past. There's different mix in there, 0:41:14.320 --> 0:41:16.080 especially when it comes to alternative assets. 0:41:16.120 --> 0:41:16.839 What's the best mix. 0:41:17.040 --> 0:41:19.759 We're about thirty five percent and alternative assets at this point. 0:41:19.960 --> 0:41:24.360 That's a lot, yeah, yeah, yeah, And that includes private equity, infrastructure, 0:41:24.680 --> 0:41:28.480 private credit, some small exposure to hedge funds in real estate. 0:41:29.400 --> 0:41:33.080 Of this other sixty five percent were about almost forty 0:41:33.120 --> 0:41:36.960 percent of that is in equity, dominated by US equity, 0:41:36.960 --> 0:41:40.799 about eighty five percent US large cap in particular, and 0:41:40.800 --> 0:41:43.520 then an allocation to develop market xually US and emerging market. 0:41:43.600 --> 0:41:46.480 So we're balanced. We're balanced from a private perspective, we're 0:41:46.480 --> 0:41:50.200 balanced from a public perspective, and again I think that's 0:41:50.200 --> 0:41:51.479 going to benefit us over time. 0:41:51.680 --> 0:41:54.560 With the increase in volatility, have you changed your views 0:41:54.640 --> 0:41:57.680 on the economy out of the US economy or global 0:41:57.719 --> 0:41:59.839 economy given some of these trade tensions that are coming 0:41:59.840 --> 0:42:00.680 into the marketplace. 0:42:00.840 --> 0:42:03.640 Well, we're concerned about inflation, and we do think we 0:42:03.680 --> 0:42:06.960 have some natural hedges against inflation and our portfolio in 0:42:07.000 --> 0:42:10.520 terms of a real asset allocation, real estate, infrastructure. I 0:42:10.520 --> 0:42:13.120 think our public equities will actually perform well over time 0:42:13.200 --> 0:42:18.160 in a higher inflationary environment. So we're not necessarily overly concerned. 0:42:18.719 --> 0:42:22.720 We did expect to see some uplift in inflation expectations 0:42:22.840 --> 0:42:29.120 given concerns about the imposition of tariffs, the mass deportations 0:42:29.120 --> 0:42:32.320 that were talked about anyway in terms of potentially impact 0:42:32.320 --> 0:42:33.320 in the price of labor. 0:42:33.719 --> 0:42:35.400 So again, haven't really changed. 0:42:35.200 --> 0:42:36.920 What we're doing or how we're doing it, but we're 0:42:36.960 --> 0:42:39.719 certainly mindful and we continue to monitor the situations. 0:42:40.520 --> 0:42:44.000 We do have a headline carousing right now the US 0:42:44.080 --> 0:42:45.960 is now weighing a one month delay of Canada and 0:42:45.960 --> 0:42:49.799 Mexico tariffs on autos, so looking for those exemptions, those 0:42:49.800 --> 0:42:52.520 little carve outs. But potentially we could hear more about 0:42:52.520 --> 0:42:55.640 that from the White House later on this afternoon. Before 0:42:55.640 --> 0:42:58.839 we let you go, you mentioned thirty five percent in alternatives. 0:42:58.840 --> 0:43:01.160 Seems like a lot. Is there a liquidity issue there? 0:43:01.440 --> 0:43:04.440 Not really compared to some of our peers, And I know, 0:43:04.320 --> 0:43:07.760 you know other institutional investors were just under three hundred 0:43:07.760 --> 0:43:10.279 billion dollars in assets, So I understand that there are 0:43:10.280 --> 0:43:13.480 other managers out there that have forty forty five fifty 0:43:13.480 --> 0:43:16.400 percent allocation to alternatives. We have ample liquidity through the 0:43:16.440 --> 0:43:19.920 sixty five percent in public markets. Again, we're disciplined in 0:43:20.040 --> 0:43:22.320 terms of putting them work money to work over time, 0:43:22.640 --> 0:43:27.040 we're benefiting from vintage your diversification. We've actually been putting 0:43:27.040 --> 0:43:29.520 more money to work in private assets over the last 0:43:29.520 --> 0:43:32.160 two years with a change of our strategic as allocation, 0:43:32.560 --> 0:43:34.839 which has been beneficial as others have pulled away from 0:43:34.880 --> 0:43:37.400 the markets. We've been actually putting money to work, getting 0:43:37.400 --> 0:43:41.280 better economics, better access to the top manager's co investment 0:43:41.320 --> 0:43:43.240 as well to average down the fees and expense. 0:43:43.719 --> 0:43:45.239 All right, Steve, thank you so much for joining us. 0:43:45.239 --> 0:43:48.120 Really appreciate you. Stee my New York City Retirement System 0:43:48.120 --> 0:43:52.640 Asset Management CIO and Deputy Comptroller for the great City 0:43:52.719 --> 0:43:55.000 of New York that does it for us here at 0:43:55.200 --> 0:43:58.560 Umberg Invest twenty twenty five here at the Convene Conference 0:43:58.560 --> 0:44:00.160 Center down here in the world financial centers. In a 0:44:00.200 --> 0:44:01.960 great couple of days, some great guests. 0:44:01.960 --> 0:44:03.200 Yeah, amazing guests, yep. 0:44:03.440 --> 0:44:05.960 And it's great to get all different perspectives, right, Like 0:44:06.800 --> 0:44:08.400 that's how you make a market at the end of 0:44:08.440 --> 0:44:08.759 the day. 0:44:09.719 --> 0:44:14.400 This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 0:44:14.600 --> 0:44:18.040 and anywhere else you get your podcasts. Listen live each 0:44:18.080 --> 0:44:21.840 weekday ten am to noon Eastern on Bloomberg dot com, 0:44:21.960 --> 0:44:25.520 the iHeartRadio app, tune In, and the Bloomberg Business app. 0:44:25.920 --> 0:44:28.800 You can also watch us live every weekday on YouTube 0:44:29.239 --> 0:44:31.480 and always on the Bloomberg terminal.