WEBVTT - BNY Mellon's Studley on Finding Yield in Global Markets (Audio) 0:00:03.320 --> 0:00:06.680 Global business news twenty four hours a day. It's Bloomberg 0:00:06.760 --> 0:00:09.800 dot Com, the radio plus mobile lact and on your radio. 0:00:10.080 --> 0:00:14.200 This is a Bloomberg Business Flash from Bloomberg World Handquarters. 0:00:14.240 --> 0:00:17.599 I'm Charlie Pellett. Nez DAC now negative on the day, 0:00:17.640 --> 0:00:20.040 down four points to drop. There of point one percent. 0:00:20.079 --> 0:00:23.439 The SMP five hundred index has gotten within one percent 0:00:23.480 --> 0:00:26.280 of a record. Right now. The SMP is at twenty 0:00:26.320 --> 0:00:29.480 one twelve. The record on the SMP twenty one thirty. 0:00:29.520 --> 0:00:31.960 It is up by two tenths of one percent. Tow 0:00:32.040 --> 0:00:34.519 Industrial is up thirty again there of two tenths of 0:00:34.600 --> 0:00:37.520 one percent. The tenure up seven thirty seconds, the old 0:00:37.520 --> 0:00:41.040 one point seven one percent, Gold lower little change, down 0:00:41.080 --> 0:00:44.920 just thirty cents, twelve forty seven. Announced crude oil fifty 0:00:45.479 --> 0:00:48.519 seven for a barrel of West Texas Intermedia crude. It 0:00:48.680 --> 0:00:51.000 is up one and a half percent today, building on 0:00:51.120 --> 0:00:54.720 yesterday's gains. Brent fifty one fifty one for a barrel 0:00:54.760 --> 0:00:58.440 of Brent. I'm Charlie Palett, and that's a Bloomberg business flash. 0:00:59.280 --> 0:01:01.280 Thank you very much, Charlie Pett. It's time now for 0:01:01.280 --> 0:01:03.040 the e t F Report. It is brought to by 0:01:03.120 --> 0:01:06.320 Vanach vectors et f s. Expect more from your muni's 0:01:06.520 --> 0:01:10.160 target tax exempt income by maturity and credit quality, all 0:01:10.200 --> 0:01:14.000 with low cost ETFs. 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It's 0:01:40.360 --> 0:01:43.240 attracted five point four billion dollars so far this here, 0:01:43.520 --> 0:01:46.039 putting it in the top five in terms of inflows. 0:01:46.440 --> 0:01:49.560 The reason Valtuna says, there's fear in the market and 0:01:49.600 --> 0:01:52.400 this product basically is a minimum volatility products So basically 0:01:52.480 --> 0:01:56.720 gives you SMP exposure, right, so you get large cap stocks. 0:01:56.800 --> 0:01:59.120 But it is designed in a way to give you 0:01:59.440 --> 0:02:02.559 less faulty, so it's about less the ups and downs. 0:02:03.320 --> 0:02:06.200 It's basically like taking the edge off of the marketer. 0:02:06.360 --> 0:02:08.880 It's like a diet coke version of the market um 0:02:09.080 --> 0:02:11.480 in that you get to participate into some of the upside, 0:02:11.560 --> 0:02:13.639 not all of it, but you get less downside about you, 0:02:13.720 --> 0:02:17.280 and says low volatility ets are now big business, with 0:02:17.400 --> 0:02:20.639 about twenty five billion dollars invested in about thirty five 0:02:20.760 --> 0:02:25.680 low volatility products. That's your Bloomberg ETF report. I'm Katherine Caldary. 0:02:27.880 --> 0:02:30.880 You're listening to Taking Stock with Kathleen Hayes and Kim 0:02:30.960 --> 0:02:36.520 Fox on Bloomberg Radio. We're broadcasting live from Pershing's Insite 0:02:36.600 --> 0:02:41.120 Tien conference at the Highatt Regency in Orlando. Kind of 0:02:41.200 --> 0:02:45.120 ready to take a look at the markets today broadly 0:02:45.200 --> 0:02:47.520 as we do every day around this time, going into 0:02:47.560 --> 0:02:50.120 the market close. Ralph Studley is joining us now. He's 0:02:50.160 --> 0:02:53.440 head of investment strategy for b n Y Melon. He's 0:02:53.600 --> 0:02:57.440 based in Boston, and of course he's here in Orlando today. Raul, 0:02:57.520 --> 0:02:59.519 thank you for joining us, Thank you for having so 0:03:00.040 --> 0:03:03.200 thig part. But what b and my mel and does Pershing? 0:03:03.440 --> 0:03:09.240 This this very powerful uh organization, many services, all kinds 0:03:09.240 --> 0:03:11.400 of things invited to provided to investment advisors, but of 0:03:11.440 --> 0:03:13.959 course one of them is just market intelligence, a sense 0:03:14.040 --> 0:03:17.680 of trends where things are going. You started out as 0:03:17.919 --> 0:03:20.040 a muti bond trader. I did you know about dealing 0:03:20.080 --> 0:03:22.959 with volatility, which is investors have been dealing with that 0:03:23.160 --> 0:03:27.520 in spades this year. What what what would use? How 0:03:27.520 --> 0:03:29.880 whe would you start with the volatility? Where we are? 0:03:29.960 --> 0:03:32.840 Where we're going? Yeah, I think you know it's it's 0:03:32.880 --> 0:03:36.000 certainly an interesting topic and one that's on everybody's minds. 0:03:36.120 --> 0:03:38.280 Myself and my team. We have a unique position within 0:03:38.400 --> 0:03:41.280 this you know massive organization that you talk about. We 0:03:41.520 --> 0:03:45.000 we have a unique little investment management business that has 0:03:45.000 --> 0:03:47.560 about one point six trillion in assets under managements. Were 0:03:47.560 --> 0:03:51.000 actually the seventh largest, and that's comprised of thirteen investment 0:03:51.040 --> 0:03:53.040 management boutiques. So we have the ability, my team and 0:03:53.080 --> 0:03:54.600 I to sit in the middle of all that and 0:03:54.720 --> 0:03:57.680 listen to you know, a lot of really smart portfolio managers, 0:03:57.680 --> 0:04:00.120 a lot of really smart market strategist and economists talk 0:04:00.160 --> 0:04:02.440 about how they think about volatility, and then it allows 0:04:02.480 --> 0:04:04.680 us to go out and position that overall holistically to 0:04:04.720 --> 0:04:08.160 our clients. So when I think about volatility, when we 0:04:08.240 --> 0:04:10.600 think about volatility, our biggest concerns, how do we take 0:04:10.640 --> 0:04:13.000 that out of portfolio today? How do we prepare prepare 0:04:13.120 --> 0:04:15.720 clients for things that they may not necessarily be prepared for. 0:04:16.200 --> 0:04:18.719 A lot of clients tend to have a significant US bias. 0:04:18.720 --> 0:04:20.760 A lot of clients tend to have forgotten maybe what 0:04:21.279 --> 0:04:23.280 two thousand and eight did to their portfolios and what 0:04:23.360 --> 0:04:26.480 a significant market turn can do to your overall glide paths. 0:04:26.600 --> 0:04:30.120 So we're we're very concerned about talking about those types 0:04:30.160 --> 0:04:32.760 of events and how they can head your position themselves 0:04:33.320 --> 0:04:36.039 to whether those events are whether those storms. Is there 0:04:36.080 --> 0:04:39.840 a behavioral finance components all this in the conversation, I 0:04:39.960 --> 0:04:42.640 think there certainly is. There certainly is there's there's certainly 0:04:42.680 --> 0:04:45.880 a component of people, uh, you know, feeling comfortable with 0:04:45.960 --> 0:04:48.320 certain things. You know, you you mentioned uni bonds, you know, 0:04:48.480 --> 0:04:51.640 for there's plenty muni bond investors out there that, uh 0:04:51.880 --> 0:04:53.920 that are afraid to get away from municipal bonds because 0:04:53.960 --> 0:04:55.400 it's what they know and what they love. And we've 0:04:55.440 --> 0:04:57.360 been telling people for years that, you know, interest rates 0:04:57.360 --> 0:04:59.200 are gonna rise and bonds are gonna work against you, 0:04:59.320 --> 0:05:02.120 but that hasn't happened yet. So there's certainly a behavioral 0:05:02.200 --> 0:05:05.080 finance component of how people invest in and getting them 0:05:05.120 --> 0:05:07.640 to think more broadly, about how to manage volatility. There's 0:05:07.680 --> 0:05:09.880 no doubt about it. Okay, So since you are at 0:05:09.960 --> 0:05:12.040 heart a bond guy, let's take a look just at 0:05:12.120 --> 0:05:16.160 at the at the broadly, where bond yields haven't haven't 0:05:16.200 --> 0:05:17.840 gone four or five years in a row that Fed 0:05:17.920 --> 0:05:20.360 was supposed to start moving and then we'd have bond 0:05:20.440 --> 0:05:24.000 we have that tenure benchmark Treasury note up around three 0:05:24.120 --> 0:05:28.400 percent easily, we'll guess what here we are once again, 0:05:28.520 --> 0:05:31.960 it hasn't happened. What is your sense of where the 0:05:32.120 --> 0:05:35.040 where the risk and reward lies in the bond market 0:05:35.160 --> 0:05:37.880 right now? Yeah? I think you know, there's certainly there's 0:05:37.880 --> 0:05:40.080 certainly the reality that we're going to be facing a 0:05:40.200 --> 0:05:42.400 rising interest rate environment at some point. It's just a 0:05:42.480 --> 0:05:45.080 matter of when. Right. The market doesn't seem to think 0:05:45.120 --> 0:05:47.520 that the Fed's gonna do anything and Jill in June, 0:05:47.560 --> 0:05:50.679 excuse me, and less likely in July. That's mostly because 0:05:50.720 --> 0:05:54.200 of there's no scheduled press conference. Um. But Yellen's comments 0:05:54.320 --> 0:05:57.200 yesterday give us some belief that will most likely see 0:05:57.320 --> 0:05:59.280 something this year. And there's a lot of you know, 0:05:59.400 --> 0:06:01.560 people out there that believe we'll see one or two rises. 0:06:01.839 --> 0:06:03.840 I don't think it's gonna be dramatic and we're gonna 0:06:03.839 --> 0:06:05.760 see that, you know, the ten year ago from self 0:06:05.800 --> 0:06:08.240 to two to over three. But I do think it's 0:06:08.240 --> 0:06:10.000 something that investors need to be aware of. I think 0:06:10.040 --> 0:06:11.920 the beautiful part about the bond market though, is this 0:06:12.000 --> 0:06:14.400 it's not correlated globally anymore like it used to be. 0:06:14.520 --> 0:06:17.920 So there's plenty of opportunity outside the US and good 0:06:18.040 --> 0:06:21.480 quality credits to get you know, diversification away from the 0:06:21.560 --> 0:06:24.119 potential monetary policy US that we have here in the US. 0:06:24.200 --> 0:06:26.160 So you know, while I think, you know, our our 0:06:26.240 --> 0:06:28.320 rise will be slow and steady, I do think that 0:06:28.440 --> 0:06:32.840 there is opportunity out them. What about opportunity in alternative assets, 0:06:32.960 --> 0:06:36.480 assets that are not correlated either to the bond market 0:06:36.680 --> 0:06:39.520 or to the equity market. And I'm keep thinking, for example, 0:06:39.600 --> 0:06:42.880 of things such as annuities and insurance and other elements 0:06:42.920 --> 0:06:46.080 of a portfolio to plan for retirement. Yeah, I mean 0:06:46.200 --> 0:06:48.640 retirements a big components something that we we spend a 0:06:48.680 --> 0:06:50.880 lot of you know, spend a lot of time worrying about. 0:06:51.040 --> 0:06:53.080 You know, when we look at you know the majority 0:06:53.120 --> 0:06:56.160 of US investors have actually have not saved the proper 0:06:56.240 --> 0:06:58.599 amount for retirement when we look at you know, pensions 0:06:58.640 --> 0:07:01.840 and endowments, most of them are unfunded. So there's certainly 0:07:02.080 --> 0:07:05.760 a huge focus now on looking at alternative sources of 0:07:05.920 --> 0:07:09.040 return um for you know, for for two reasons. One 0:07:09.120 --> 0:07:10.920 is to insulate those portfolios so you can stay on 0:07:10.920 --> 0:07:13.800 the correct clypath and look for alternative sources and return. 0:07:14.240 --> 0:07:16.360 I think the key to that, though, PIM is is 0:07:16.400 --> 0:07:19.680 manager due diligence. Right, it's not just the asset class itself, 0:07:19.720 --> 0:07:22.680 but who's investing that money for you? How have they done? Uh? 0:07:22.840 --> 0:07:25.240 Through somewhat baldom markets. Have they stayed the course in 0:07:25.400 --> 0:07:26.880 terms of what their direction is. If you have a 0:07:26.920 --> 0:07:29.520 real return strategy that you know is looking to get you, 0:07:30.040 --> 0:07:32.400 you know, cash plus three or four percent, have they 0:07:32.440 --> 0:07:35.560 returned twelve percent in certain years? If so, maybe that's 0:07:35.560 --> 0:07:37.880 not exactly what you're looking for. So there's a lot 0:07:37.960 --> 0:07:40.360 of manager do a big manager due diligence component that 0:07:40.720 --> 0:07:41.960 I want to come back to this point you just 0:07:42.040 --> 0:07:45.680 made about opportunities outside the US. High quality credits offer 0:07:45.800 --> 0:07:48.440 more yield because if you just look at the sovereign 0:07:48.520 --> 0:07:51.280 think at the government bond yields around the world, they're 0:07:51.960 --> 0:07:56.880 low and uh, just about negative in some cases. Right, Uh, Brazil, 0:07:57.000 --> 0:08:00.640 of course that the bench their benchmark tenure government's at 0:08:00.680 --> 0:08:03.440 five point three percent. Where where are you and your 0:08:03.480 --> 0:08:06.360 team looking for value? And again are you looking not 0:08:06.560 --> 0:08:10.560 just at a country, but at a sector like investment 0:08:10.600 --> 0:08:13.360 grade corporates for example. Yeah, So just to be clear, 0:08:13.400 --> 0:08:15.400 I mean, we're not investing my team and I write 0:08:15.400 --> 0:08:17.560 so you know, I would look to our our our 0:08:17.880 --> 0:08:20.160 our our portfolio managers on our teams, and some of 0:08:20.200 --> 0:08:22.480 our boutiques for more specific comment. Ever, what I will 0:08:22.560 --> 0:08:25.880 tell you is that less about the yield and more 0:08:26.000 --> 0:08:29.160 specifically about the monetary policy and the environment. Right. So, 0:08:29.640 --> 0:08:31.640 you know, Australia is a perfect example. They seem to 0:08:31.680 --> 0:08:33.480 be going in a little bit of a different direction 0:08:33.520 --> 0:08:35.240 than us. They tend to be you know, to be 0:08:35.360 --> 0:08:37.319 easy and as a result, you know that will be 0:08:38.000 --> 0:08:40.559 somewhat more beneficial to the fixed income markets, similar to 0:08:40.640 --> 0:08:42.160 what we've seen here in the US for the past 0:08:42.200 --> 0:08:44.959 several years. So when I talk about opportunity, that's more 0:08:45.040 --> 0:08:48.319 what I'm thinking through Japan, Australia peripherally, you based on 0:08:48.400 --> 0:08:50.520 the e c B. You know, those are places where 0:08:50.559 --> 0:08:54.080 we send tendency our fixed income managers with global lens, 0:08:54.400 --> 0:08:58.400 with a global lens looking more proactively. We are here, 0:08:58.440 --> 0:09:02.240 obviously at at your conference inside sixteen, you've got over 0:09:02.320 --> 0:09:06.959 two thousand investment of professionals. Here is the conversation more 0:09:07.000 --> 0:09:09.959 about volatility or do you believe it really is? The 0:09:10.080 --> 0:09:12.719 subtext is I can't live on two percent, so you've 0:09:12.720 --> 0:09:15.679 got to give me more. And as a client, you're 0:09:15.720 --> 0:09:19.240 probably not going to tell the complete truth, which is, oh, yes, 0:09:19.320 --> 0:09:21.480 I can stomach lots of volatility if you get me 0:09:21.520 --> 0:09:24.320 the return I want. Except when that doesn't happen. Yeah, 0:09:24.520 --> 0:09:27.000 you are you gonna make me pick one or the other? Well, 0:09:27.040 --> 0:09:28.920 I mean you can pick, you can, you can do both. 0:09:28.960 --> 0:09:31.320 But I but from a professional perspective, because it's as 0:09:31.400 --> 0:09:34.160 much about educating the client as it is about having 0:09:34.200 --> 0:09:36.640 the information as a as an advisor, what I would 0:09:36.640 --> 0:09:38.960 say is, I think those two things go hand in hand. Him. 0:09:39.080 --> 0:09:41.760 I think, you know, there's certainly a concern from clients 0:09:41.800 --> 0:09:44.599 that I can't live on this, but you know, so 0:09:44.760 --> 0:09:47.160 let's find something else for me that I can live on. 0:09:47.640 --> 0:09:49.640 But you have to be willing to have that really 0:09:49.720 --> 0:09:52.880 difficult conversation with a client in terms of what taking 0:09:52.960 --> 0:09:55.160 more risk means to you what it can do to 0:09:55.240 --> 0:09:57.760 your overall portfolio, what it can do to your ride, 0:09:57.880 --> 0:10:01.040 or at least the perception of your you know, your investment, uh, 0:10:01.679 --> 0:10:04.079 your your investment return. So I think those two things 0:10:04.160 --> 0:10:06.000 go hand in hand. I would say, you know, I 0:10:06.040 --> 0:10:08.280 spend the majority of my year traveling around and talking 0:10:08.320 --> 0:10:12.000 to financial advisors at times talking to their clients. I think, um, 0:10:12.200 --> 0:10:15.559 while the short search for yield is important, volatility is 0:10:15.600 --> 0:10:17.679 a big concern for people. People do not want to, 0:10:18.400 --> 0:10:20.199 you know, two thousand and eight, while it's you know, 0:10:20.760 --> 0:10:23.480 we we've had a relatively well, it hasn't necessarily felt great, 0:10:23.520 --> 0:10:26.520 a relatively reasonable rights. Since then, it's still very much 0:10:26.559 --> 0:10:28.320 on the forefront of people's minds, and I don't think 0:10:28.360 --> 0:10:31.320 anybody wants to experience that again. So you do see 0:10:31.360 --> 0:10:33.640 people willing to give up some yield because of all. 0:10:34.160 --> 0:10:37.000 Thanks very much for spending time with us. Ralph Studley 0:10:37.120 --> 0:10:40.319 is the head of investment strategy at b N Y Melon. 0:10:40.760 --> 0:10:42.679 Thank you for being here and thank you for having us. 0:10:42.720 --> 0:10:46.559 We're broadcasting live from Pershing Insights sixteen conference at the 0:10:46.640 --> 0:10:51.200 Highatt Regency in Orlando, Florida, and this year marks eighteen 0:10:51.320 --> 0:10:55.160 years of insight, eighteen years committed to the success of advisors. 0:10:55.640 --> 0:10:59.160 We're here with over two thousand financial professionals from Paul 0:10:59.400 --> 0:11:02.280 over Glow. We're gonna take you through to the clothes 0:11:02.360 --> 0:11:05.760 on Wall Street down on pim Fox my co host 0:11:05.880 --> 0:11:08.560 Kathleen Hayes. You're listening to Bloomberg Radio.