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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.

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Speaker 1: Along with my co host Lisa Bramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Banks

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Speaker 1: just cannot catch a break. Even today when there's a rebound,

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Speaker 1: you see the banking sector in the spire lagging behind

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Speaker 1: the broader gains in the index. And in fact, bank

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Speaker 1: stocks are down more than seventeen by several measures so

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Speaker 1: far this year. Joining us now Charles Peabody, President of

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Speaker 1: Brtala's Partners in New York. Charles, do you get the

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Speaker 1: sense that this is going to continue this pain in

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Speaker 1: bank stocks? Well, as you know from my earlier appearances,

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Speaker 1: I do think we're in a bear market for bank stocks,

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Speaker 1: and and the end won't come until they're down at

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Speaker 1: least thirty from their first quarter eighteen highs um that said,

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Speaker 1: I think the first leg of the bear market is

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Speaker 1: actually starting to conclude. Why is that give us more detail? Well,

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Speaker 1: A lot's going to depend upon the FED, and and

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Speaker 1: you know, whatever relief rally we have, It's hard to

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Speaker 1: tell until we know what the FED is going to do.

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Speaker 1: But I think we could go sideways in a trading

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Speaker 1: range before the next leg of the bear market begins,

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Speaker 1: or we could have quite a robust rally and maybe

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Speaker 1: even retest the September highs of eighteen UM if the

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Speaker 1: FED were too um change its language about quot which

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Speaker 1: I think is more important than what they do with

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Speaker 1: FED funds. But why are the bank stocks so dependent

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Speaker 1: on the Federal reserves language at a time when the

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Speaker 1: banks seem to have paired down their risk taking operations

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Speaker 1: and have also shed hundreds of thousands of workers. Well,

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Speaker 1: I think there's a big difference between what you're seeing

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Speaker 1: today in the markets and what you saw back in

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Speaker 1: January February when we had a sell off scare, if

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Speaker 1: you will, if you would call correctly, q T didn't

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Speaker 1: start until October seventeen, so we were only about three

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Speaker 1: or four months into it when we had to sell

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Speaker 1: offen equities in January February of eighteen UM. But back then,

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Speaker 1: we weren't seeing the plumbing of the fixed income markets

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Speaker 1: grinding to a halt. Today we're seeing the plumbing of

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Speaker 1: the fixed income markets grinding into a halt. And we're

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Speaker 1: about a year plus into QT, and we're we don't

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Speaker 1: know what QT is. It's quantitative tightening. And you're talking

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Speaker 1: about the FED basically shrinking it's balance sheet. It's four

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Speaker 1: trillion dollar balance sheet correct, right, And we're at the

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Speaker 1: MACS now of what fifty billion a month um And

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Speaker 1: that affects banks liquidity and ability to lubricate the system.

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Speaker 1: And so what you're starting to see is a lot

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Speaker 1: of hung loans, loans that can't be you know, turned

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Speaker 1: over and distributed because the capital markets are breaking down.

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Speaker 1: The fixed income buyers is slowing its purchase and so

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Speaker 1: the capital structure of the banking system is starting to

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Speaker 1: get used I won't say impaired, but used up if

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Speaker 1: you will. This is actually a really this is a

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Speaker 1: really interesting point. I just wanted to really sort of

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Speaker 1: highlight this what you're talking about, the basically leveraged loans,

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Speaker 1: that there were a lot of deals that were announced

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Speaker 1: private equity buyouts, which were at the fastest pace since

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Speaker 1: two thousand seven. There were a lot of these deals announced.

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Speaker 1: They were trying to get them done. Banks committed capital

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Speaker 1: to these companies at certain levels, and now these banks,

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Speaker 1: in order to sell these loans, have to sell them

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Speaker 1: at huge discounts. Is that basically what you're seeing exactly,

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Speaker 1: Lisa very well put and if they can't sell them,

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Speaker 1: they're retaining them. Um. And So between the QT, the

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Speaker 1: quantitative tightening, which is you know, reducing excess reserves and

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Speaker 1: the draw down of credit lines, um, you're seeing the

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Speaker 1: liquidity picture on banks bounce. She's changed quite dramatically. UM.

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Speaker 1: So they're seeing a loss of wholesale non operating deposits

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Speaker 1: and they're seeing a draw down of their lines. And

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Speaker 1: some of the drawdown is a positive, but some is

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Speaker 1: you know, like p G and E, the troubled California

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Speaker 1: utility which drew down their lines. You know, I think

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Speaker 1: what it was like forty one billion in less than

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Speaker 1: a month. You know, that's not the kind of loan demand.

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Speaker 1: You want to see? How big could the losses be

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Speaker 1: from some of these committed loans that the banks have

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Speaker 1: already have hanging out there? You know, the rule of

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Speaker 1: thumb is when you get into a recession, um. And

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Speaker 1: that's where I think we're headed. By the end of

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Speaker 1: the year UM, which is part of my you know,

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Speaker 1: logic behind the bear market has not yet ended UM,

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Speaker 1: and that these stocks will be down by the end

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Speaker 1: of the bear market. UM. The rule of thumb is

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Speaker 1: you're gonna lose maybe thirty percent UM on on a loan.

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Speaker 1: What's different this time is is that you've had such

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Speaker 1: a weakening of the covenants that you actually may lose

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Speaker 1: much more this time around UM than you have in

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Speaker 1: the past. You may not have as many loans going bad,

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Speaker 1: but you're gonna lose more per loan because of the

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Speaker 1: weakening of covenants. Charles havn't the banks had almost a

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Speaker 1: decade to prepare for this, Oh, they have, him, and

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Speaker 1: I think banks are much much better shape this time

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Speaker 1: around to deal UM with a recession and some credit fallout.

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Speaker 1: And in fact, I would argue that this will be

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Speaker 1: the first recession that I've followed, and I've seen four

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Speaker 1: of them. UM, that the banks will actually come out

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Speaker 1: with their balance sheets intact. There won't be the huge

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Speaker 1: capital impairments that car A tries prior recessions, and banks

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Speaker 1: spent most of the first two or three years of

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Speaker 1: the recovery repairing their balance sheets and replenishing their capital.

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Speaker 1: What I do think you're going to see is what

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Speaker 1: I call an earnings recession, and that's what we're adjusting

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Speaker 1: to right now in the way the stocks are traded

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Speaker 1: this year is if you if we call my last

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Speaker 1: appearance with you guys, I talked about a three legged

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Speaker 1: bear market, and the first leg would be characterized by

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Speaker 1: slowing growth or disappointing revenues, and that would be reflected

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Speaker 1: in multiple, multiple compression, and that's what you've seen this year.

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Speaker 1: The second leg is going to be more related to

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Speaker 1: credit deterioration, and we're not there yet. And that's why

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Speaker 1: I think you could have some kind of relief rally,

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Speaker 1: you know, probably sometimes starting in January. Yeah, which bank

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Speaker 1: do you think is most exposed to these hung loans? Well,

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Speaker 1: Wells Fargo has UM been involved in a couple of them.

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Speaker 1: You know, if I were going to buy the banks,

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Speaker 1: I wouldn't buy the regionals, and it's interesting that that

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Speaker 1: the regionals are weak today. I would actually buy the

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Speaker 1: money centers and and those are the ones that are

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Speaker 1: actually holding up a little bit better today. Um. And

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Speaker 1: the reason is if there is going to be a rally,

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Speaker 1: it's going to be related to FED action, which will

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Speaker 1: grease the skids for the capital markets, and that would

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Speaker 1: be very positive for the money centers. But but Wells,

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Speaker 1: you know, is one of those banks that UM is

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Speaker 1: capped by regulatory restrictions on unit volume growth, and so

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Speaker 1: they can't grow their net interest income unless they, you know,

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Speaker 1: take actions to um enhance their margin. UM. So if

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Speaker 1: you think about net interest income is a function of

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Speaker 1: volume times margin, the unit volume component is capped by

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Speaker 1: regulatory restrictions, so they have to pull levers and enhance

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Speaker 1: the margin. And that can be done either by taking

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Speaker 1: interest rate risk, which they're doing, or by changing the

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Speaker 1: mix of your assets and going after higher margin type assets.

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Speaker 1: And they've been doing that. They've been a very aggressive

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Speaker 1: in the leverage loan market and they've been caught. I think,

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Speaker 1: thank you very much for being with us. Charles Peabody

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Speaker 1: is the president of Portalis Partners, speaking about the US

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Speaker 1: banking system and the potential for more sell offs in

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Speaker 1: bank stocks. Well, in the United Kingdom, the Cabinet of

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Speaker 1: Prime Minister Theresa May has put into place emergency no

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Speaker 1: deal Brexit contingency plans. They say they must be implemented

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Speaker 1: across government. It includes reserving ferry space for supplies and

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Speaker 1: putting thirty five hundred armed forces personnel on standby. The

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Speaker 1: Prime Minister's office said that ministers would ramp up no

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Speaker 1: deal planning and that all the departments would be expected

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Speaker 1: to make it their main priority. Here to help us

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Speaker 1: understand the consequences for investors is Alberto Gallo. He is

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Speaker 1: a partner and portfolio manager for Algebras Macro Credit Fund

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Speaker 1: that is under the umbrella of Algebras Investments, that's managing

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Speaker 1: more than twelve and a half billion dollars and he

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Speaker 1: joins us from London. Alberto, what can you tell us

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Speaker 1: about the reaction to the contingency plans that the cabinet

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Speaker 1: is now set to put in place. Good morning, UM.

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Speaker 1: We have definitely seen a very strong bolstering from the government, UM,

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Speaker 1: at least showing they're ready to face the really worst

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Speaker 1: case scenario. Have been at that UM. We know that

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Speaker 1: very very few people are, you know, realistically planning to

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Speaker 1: go that far, because we know the consequences for the

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Speaker 1: country would be really severe. UM. So our view here

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Speaker 1: remains that UM, there is a vote in January and

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Speaker 1: that there will be an extension of the transition Agreement,

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Speaker 1: so the limbo period under which the UK will have

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Speaker 1: to define the long term partnership with the EU. So

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Speaker 1: this extension would be two three two to three years UM.

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Speaker 1: And you know during this time things could change. There

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Speaker 1: is a there is definitely a shift in public opinion UM.

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Speaker 1: So I would not exclude that in two years time

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Speaker 1: or three years time, you know the Brexit vote would

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Speaker 1: be will be five years old and will be less relevant.

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Speaker 1: So you could even have a second referendum at some

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Speaker 1: point in the future. So in the meantime that there

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Speaker 1: is actually a tangible influence in credit. Squee for example,

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Speaker 1: just advised some of its high out worth clients to

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Speaker 1: consider moving assets out of the United Kingdom. We've seen

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Speaker 1: banks move some of their personnel to Paris, to Frankfurt.

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Speaker 1: There have been material moves by a number of companies.

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Speaker 1: So do you think that this is going to have

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Speaker 1: a permanent effect frankly on the UK, regardless of whether

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Speaker 1: there's an additional REFERINUM and do you agree do you

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Speaker 1: want to put people to move money out of the

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Speaker 1: the region. It does have a permanent effect. And we

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Speaker 1: we estimated just around and before the Brexit involve happened.

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Speaker 1: We estimated a loss of around eight of GDP or

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Speaker 1: nearly two billion dollars over a period of ten years,

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Speaker 1: So there is a drag on the economy. Uh, and

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Speaker 1: you know, various think tank and universities universities have estimated

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Speaker 1: a similar amount. So the growth trend um is lowered

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Speaker 1: and the major issues the UK doesn't have a growth

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Speaker 1: model to build on its own future. It was based

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Speaker 1: on services. It was you know, the economy is still

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Speaker 1: based on importing human capital um money and financial capital,

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Speaker 1: physical goods and exporting services and so it depends a

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Speaker 1: lot on trade. And the nearest region to trade with

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Speaker 1: is Europe. So we don't have a an alternative business

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Speaker 1: model for the United Kingdom. Yet there's been very little

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Speaker 1: investment in research in infrastructure over the last two decades

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Speaker 1: because the services economy and the trade we're going so well.

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Speaker 1: So this is the missing piece of the puzzle. The

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Speaker 1: government has been focusing on a a lot of negotiations, but

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Speaker 1: very little on, uh, you know, how the UK is

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Speaker 1: going to grow in the future. Alberta. Just to pick

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Speaker 1: up on your point having to do with the transition

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Speaker 1: period and an a potential extension of that transition period.

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Speaker 1: The UK government would still owe at least part of

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Speaker 1: the nearly forty five billion dollars that they've agreed to

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Speaker 1: pay the europe Union in order to purchase that status

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Speaker 1: quote transition period. Do they have the money? Yeah, that's correct,

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Speaker 1: So there will be a continuation of the payment, most

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Speaker 1: likely maybe a smaller amounts, but a continuation of the

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Speaker 1: payment to the European Union. Let's remember, however, that the

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Speaker 1: UK was also a net was also a recipient recipient

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Speaker 1: of aid. A lot of regions of the UK, the

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Speaker 1: poorer ones, you know, are um destinations where the EU are.

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Speaker 1: The U has been funding projects and creative jobs. So

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Speaker 1: the net number is a lot smaller, is a much

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Speaker 1: closer to ten billion uh per year UM. Clearly, you

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Speaker 1: know the picture that we see here is lower growth

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Speaker 1: but still positive in the market. Sometimes you see extreme

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Speaker 1: pricing which suggests, you know, a very tail type scenario.

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Speaker 1: For example, in in credit market, some of the corporate

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Speaker 1: bank bonds in the UK are pricing a heavy recession

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Speaker 1: within that's excessive UM. But you know what we see

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Speaker 1: is really a kick the kind of model through environment.

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Speaker 1: So Albert, let's just if I were Tom Keat, I

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Speaker 1: would say, let's rip up the script for a second.

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Speaker 1: I want to go through a couple of just quick

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Speaker 1: quick questions. Number one, where in Europe do you think

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Speaker 1: is the best place to invest? Well, I think that

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Speaker 1: you know, Germany is definitely benefiting the most from the Eurozone,

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Speaker 1: will continue to to benefit. Um. But there's a couple

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Speaker 1: of other places where the risk of a recession has

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Speaker 1: been really really priced in by the market. One of

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Speaker 1: them is the UK and the other one is Spain. Uh.

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Speaker 1: And you know, the these two countries still have good

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Speaker 1: trend growth. They're still growing positively. Spain has obviously less

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Speaker 1: of a populist movement um than the UK or or

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Speaker 1: Italy um. And um, you know that what we're looking

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Speaker 1: at is a slowdown, not a recession. So what about US?

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Speaker 1: What about US versus ERA, which do you prefer? Well,

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Speaker 1: you know, in bond markets, um, the US high yield

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Speaker 1: market is still priced relatively well, you know, the level

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Speaker 1: of spreads as wide and compared to last year, but

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Speaker 1: it's still far from the highs of two thousand sixteen. Uh.

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Speaker 1: And oil is going down, and so the US markets

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Speaker 1: still looks a little bit expensive. Europe has been in

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Speaker 1: some cases left for dead between you know, slower growth,

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Speaker 1: the Brexit negotiations, the Italian negotiations on the budget. There's

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Speaker 1: a lot of tail events, a lot of binary events,

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Speaker 1: and investors have just fled European bond markets. So that's

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Speaker 1: why to us it looks attractive. Then you have emerging

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Speaker 1: markets which are a little bit cheaper than the US

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Speaker 1: but historically still expensive, with a few exceptions of countries

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Speaker 1: that have serious issues like Argentina or Turkey. So overall

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Speaker 1: we like Europe the most in bond markets. In credit markets,

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Speaker 1: there you go. Alberto Gallo always wonderful to hear perspective.

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Speaker 1: Alberto Gallo is partner and portfolio manager for the Algebras

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Speaker 1: Macro Credit Fund for Algebras Investments coming to US from London.

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Speaker 1: He is also a Bloomberg Opinion calumnist. There's been a

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Speaker 1: market slowdown over the past I don't know year, year

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Speaker 1: and a half in the US housing market that has

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Speaker 1: been felt, particularly at the upper ends of the spectrum.

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Speaker 1: Joining us now in our Bloomberg Interactive Broker Studios as

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Speaker 1: Best Friedman, Chief executive Officer of Brown Harris Stevens, the

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Speaker 1: first ever CEO of the luxury residential home seller that

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Speaker 1: one is one of the top Manhattan residential firms. Best.

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Speaker 1: Thank you so much for being here. Good morning, Thank

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Speaker 1: you for having me this morning. So since you focus

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Speaker 1: on the high end aspect of the market, can you

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Speaker 1: give us a sense of just how pronounced the slowdown

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Speaker 1: has been so far? You know it has, as you

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Speaker 1: said accurately, it's been about a year of a slowdown

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Speaker 1: and a correction, and you know we're feeling it. You know,

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Speaker 1: our volume is off from last year, but we were

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Speaker 1: in need of a price correction. You know, the market

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Speaker 1: had been going up, up, up for seven years, and

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Speaker 1: this is really good for the market. It's healthy. We're

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Speaker 1: still fluid, but at the same time, this is an

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Speaker 1: opportunity for buyers to come in and really negotiate and

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Speaker 1: get deals. Let's just look at some of the numbers.

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Speaker 1: The median price cut remained unchanged at around a half

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Speaker 1: a million dollars. These are for ultra luxury listings, and

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Speaker 1: through the first three quarters of the year, nearly eighty

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Speaker 1: five per cent of ultra luxury listings. These are the

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Speaker 1: pricest ten percent right in Manhattan sold below the original

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Speaker 1: asking price. Is it going to get worse? You know,

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Speaker 1: it's hard to say. I mean, we are. You have

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Speaker 1: to remember, whenever there's uncertainty in the market, uh, you know,

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Speaker 1: we have these sort of global political headwinds going on

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Speaker 1: that we all know about. I think that impacts consumer

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Speaker 1: confidence and so we see that, you know, with discretionary purchases,

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Speaker 1: like at the high end, people are taking their time.

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Speaker 1: International buyers are taking their time, but people who need

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Speaker 1: to sell and buy, like people are getting divorced or

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Speaker 1: having babies, or there's estate sales, those those that product

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Speaker 1: is moving. The high end uber luxury has slowed down

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Speaker 1: a bit, but we're still seeing good numbers and good

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Speaker 1: sales happening. Have China buyers completely pulled back? We have,

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Speaker 1: that's been I mean, I have to say overall that's

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Speaker 1: been very quiet. It really has been. I mean, we

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Speaker 1: did see an influx of that a few years ago

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Speaker 1: and it's really quieted down. We don't see that anymore.

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Speaker 1: What about other international buyers, you know, we're seeing people

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Speaker 1: from you know, South America. We still have a nice

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Speaker 1: influx of buyers who are looking to purchase and doing

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Speaker 1: deals in at least New York City and Miami and

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Speaker 1: Miami as well, although Miami, remember Miami's a heavy investor market,

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Speaker 1: it's not like New York City. Um. And then a

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Speaker 1: market like the Hampton's, which is a seasonal market, has

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Speaker 1: also been impacted. But Palm Beach is doing incredibly well.

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Speaker 1: So these are markets it's hard to tell, but we're

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Speaker 1: doing overall considerably well considering everything that's going on in

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Speaker 1: our environment. Rates are low. Uh, people are still buying.

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Speaker 1: New developments are moving, but people can negotiate now, so

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Speaker 1: it's a great time for people to come in and buy. Recently,

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Speaker 1: we had Gerald Government, the senior principal partner at Government Partners,

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Speaker 1: one of the largest owners of rental, residential and commercial

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Speaker 1: property in the United States, and he said, a lot

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Speaker 1: of the issues are related to over building and too

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Speaker 1: unrealistic expectations on the part of developers. That is not

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Speaker 1: a stock market issue, it's not an interest rate issue.

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Speaker 1: It's a certain supply and demand issue. I second, I

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Speaker 1: second that emotion completely. I mean, remember, when the market

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Speaker 1: is very fluid, you have an intersection between supply and demand.

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Speaker 1: Right now, we have an oversupply and the demand is

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Speaker 1: not caught up to it. UM. So I agree with that.

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Speaker 1: There's a lot of new developments in Manhattan, for example,

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Speaker 1: that they have to come down in price. There's an oversupply.

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Speaker 1: But the things that there's a demand for that there

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Speaker 1: priced right people are purchasing them. What price range is

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Speaker 1: the stickiest right now? In other words, what price range

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Speaker 1: is seeing no declines? Uh? Seeing no declines at all.

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Speaker 1: You know what's very fluid for us is the one

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Speaker 1: to two million dollar market. That market is moving very

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Speaker 1: well and even under a million dollars, those one bedrooms

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Speaker 1: and studios very fluid. And what's the market that's seeing

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Speaker 1: the biggest price declines? I would say at the higher

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Speaker 1: and over ten million million dollars. I think that's the

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Speaker 1: most impacted right now in Manhattan. What about the number

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Speaker 1: of days that the properties are staying on the market

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Speaker 1: much longer absorbing that's five months now, I mean that's

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Speaker 1: extended five months, six months, And again if something is overpriced,

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Speaker 1: it could be on for a year or two years

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Speaker 1: because sellers are not being realistic, and they need to

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Speaker 1: be realistic if they really want to sell the property.

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Speaker 1: What's your sense how long do you think this is

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Speaker 1: gonna last? How deeple it go? Let me look into

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Speaker 1: my crystal blades. Um. I think that moving into next year,

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Speaker 1: it's going to depend on our environment. I think, I

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Speaker 1: think we're still going to be selling properties, but we're

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Speaker 1: gonna have to still get into more of a correction.

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Speaker 1: And I think next year is going to be a

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Speaker 1: little choppy, and then hopefully by I think will be

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Speaker 1: fluid again. I hope all right, Well, maybe they just

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Speaker 1: need more yoga classes or pools or or yoga is

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Speaker 1: very important. Yes, yoga and kickbox, and you need both

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Speaker 1: because you have to alleviate the stress. Him. I'm gonna

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Speaker 1: go take some going kickbox and join me. People do

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Speaker 1: it together. There's a lot of space. Thanks very much

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Speaker 1: for being here. Best Friedman is the chief executive of

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Speaker 1: Brown Harris Stevens, speaking to us about the real estate

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Speaker 1: market and the woes that it feels at least right now. Now,

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Speaker 1: let's turn our attention to one of the themes of investing.

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Speaker 1: Many people and many companies invest in stocks and in

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Speaker 1: funds that they believe further their environmental, social, or governance perspectives.

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Speaker 1: And here to tell us more about the industry is

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Speaker 1: Rachel Evans, cross asset reporter for Bloomberg and You can

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Speaker 1: follow Rachel as we all do on Twitter at Rachel

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Speaker 1: Evans Underscore and why Rachel great story tell us about

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Speaker 1: e s G funds and how sometimes the label does

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Speaker 1: not accurately present the detail. Right. So e s G

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Speaker 1: short for Environmental, Social and Governance, promises a lot. It

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Speaker 1: sounds pretty good, right, the idea being that you can

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Speaker 1: invest in line with your values. So if you have

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Speaker 1: an issue with, say, pollutants or the oil industry, maybe

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Speaker 1: you can avoid those by buying one of these funds. However,

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Speaker 1: the truth is a little bit more complicated than that.

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Speaker 1: If you actually look behind the wrapper of some of

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Speaker 1: the exchange traded funds offer E s G solutions, you

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Speaker 1: may be a little bit surprised about what you find.

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Speaker 1: We came across a number of funds actually include XO Mobile,

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Speaker 1: one of the largest oil companies in the world, UH,

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Speaker 1: and other funds that include you know, sort of pollutants,

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Speaker 1: UM and some of the socially perhaps less responsible companies

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Speaker 1: out there. Rachel, I guess that this sort of goes

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Speaker 1: to the heart of the confusion of what it means

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Speaker 1: to be responsible, And I guess that there's a question

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Speaker 1: of how tailored some of these E S G funds

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Speaker 1: are too specifically environmental or specifically corporate governance. That's a

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Speaker 1: huge challenge. And I mean that's the thing. If you

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Speaker 1: take a hundred people, you can't find even two that

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Speaker 1: will have exactly the same values. So that's the issue

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Speaker 1: when you try and put these types of things into

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Speaker 1: a fund. Inevitably you have to make some kind of generalization,

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Speaker 1: some kind of categorization to actually pull together companies and

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Speaker 1: create a fund. And inevitably, if you look at a

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Speaker 1: hundred people, you know they'll be one or two, or

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Speaker 1: three or even more people that would disagree with at

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Speaker 1: least one of the companies in that fund. However, I

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Speaker 1: think this goes a little bit more deeper than that.

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Speaker 1: Really you're looking at these index funds are tracking indexes

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Speaker 1: created based on a very very limited amount of data,

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Speaker 1: and data that doesn't necessarily speak to all the different

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Speaker 1: types of E S and G. So whilst ex Mobile

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Speaker 1: might find that it has actually quite good governance, it

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Speaker 1: doesn't necessarily have the environmental or social chops that people

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Speaker 1: might be looking for. So it's very difficult for an

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Speaker 1: investor to get that full E and S and G

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Speaker 1: out of an E S g fund Well, I mean,

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Speaker 1: but but truly, how difficult would it be to find

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Speaker 1: out whether the fund that you own or thinking of owning,

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Speaker 1: owns Philip Morris International, which sells cigarettes. It's not that

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Speaker 1: challenging if you know where to look. And all of

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Speaker 1: these are funds publish their holdings on a daily basis,

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Speaker 1: and we certainly spoke to retail investors that have gone

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Speaker 1: through all of these funds and done an awful lot

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Speaker 1: of work to actually find out exactly what they do own.

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Speaker 1: The problem is when you do do that, you find

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Speaker 1: that there may be one or two companies in there,

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Speaker 1: and it's very difficult in the context of an e

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Speaker 1: t F to actually exclude those companies from what you own. Rachel,

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Speaker 1: can you give us a sense of how popular these

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Speaker 1: funds have become, because it's sort of not as relevant

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Speaker 1: if there isn't that much money going into them, right, So,

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Speaker 1: these funds, has to be said, are still a relatively

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Speaker 1: small part of the e t F universe. They are

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Speaker 1: getting bigger outside of the e t F if you

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Speaker 1: think about mutual funds or if you think about separately

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Speaker 1: managed accounts E t F side, though, we're looking about

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Speaker 1: seven billion However, we are seeing significantly higher rate of

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Speaker 1: growth in E s G E t F that we

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Speaker 1: are in the wider E t F industry. So we've

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Speaker 1: been seeing assets kind of I think have tripled in

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Speaker 1: the last three years, which pretty significant um and we

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Speaker 1: are asking funds that want to kind of service that

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Speaker 1: demand kind of coming out. But for investors it's very

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Speaker 1: much more of a mixed picture. Is there any pushback

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Speaker 1: from investors that would force the E t F managers

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Speaker 1: to push out the stocks of companies that perhaps go

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Speaker 1: against the general mandate. It's tricky. I mean, we saw

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Speaker 1: after kind of some of the shootings earlier this year

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Speaker 1: that some of the fund providers came out with new

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Speaker 1: e t fs that explicitly excluded gunmakers. So in that respect,

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Speaker 1: you know, public pressure has work to move E t

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Speaker 1: F providers more towards something that the investors are looking for.

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Speaker 1: The challenge, of course, is that you have a numerous

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Speaker 1: different types of investors. Not only do you have these

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Speaker 1: different retail investors that may have different values, you also

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00:26:54,480 --> 00:26:57,080
Speaker 1: have to think about the institutional investors, the pension frinds,

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Speaker 1: the insurers who may well actually prefer a fund that

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Speaker 1: is more leaning towards good governance and less towards good

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Speaker 1: environmental or social policies than a retail investor. Rachel Levin's

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Speaker 1: great story. Thank you so much for coming and joining

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Speaker 1: us here. Rachel Levin's cross asst reporter for Bloomberg, talking

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Speaker 1: about the E and the S and the G and

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Speaker 1: how sometimes sticking them all together can be really complicated. Pam. Yes,

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Speaker 1: I mean the concept of an environmentally and yet also

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Speaker 1: governmentally corporate, governmentally responsible company, having those be all in tandem,

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Speaker 1: isn't isn't intuitive? Yes? And the idea of being just

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Speaker 1: be transparent about what is actually in those exchange traded

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Speaker 1: funds and what it means to be responsible. I mean

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Speaker 1: a lot of big philosophical questions, all tried to be

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Speaker 1: quantified and then indexed. Thanks for listening to the Bloomberg

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Speaker 1: P and L podcast. You can subscribe and listen to

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Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.

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Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm

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Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.

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Speaker 1: You can always catch us worldwide on Bloomberg Radio.