WEBVTT - Lazard’s Nahal on Capturing Long-Term Megatrends 0:00:16.120 --> 0:00:19.319 Welcome to Inside Active, a podcast about active managers that 0:00:19.360 --> 0:00:22.120 goes beyond sound bites and headlines and looks deeper into 0:00:22.160 --> 0:00:27.240 the processes, challenges, and philosophies and security selection. I'm David Cohne, 0:00:27.280 --> 0:00:30.240 I lead mutual fund and active Research at Bloomberg Intelligence. 0:00:30.520 --> 0:00:34.479 Today my coast is Brian Darty, head of Thematic Strategy 0:00:34.479 --> 0:00:37.480 at Bloomberg Intelligence. Brie, thank you for joining me today. 0:00:38.479 --> 0:00:41.000 Always a pleasure, David, one of my favorite places to. 0:00:41.000 --> 0:00:45.040 Be So in a recent note, you wrote that US 0:00:45.120 --> 0:00:48.600 exceptionalism still matters, but it's no longer the whole story. 0:00:49.000 --> 0:00:52.120 As we've seen concentration risk re emerge with the tech 0:00:52.159 --> 0:00:55.360 sell off in AI back at the center of debate, 0:00:55.520 --> 0:00:58.200 How should investors be thinking about where the next phase 0:00:58.240 --> 0:01:00.880 of AI leadership actually comes from. 0:01:01.280 --> 0:01:03.400 Yeah, I think that the last year has been a 0:01:03.440 --> 0:01:05.680 really telling one, and what we've been saying is we 0:01:05.720 --> 0:01:08.160 think twenty twenty five set the signals, and then in 0:01:08.200 --> 0:01:10.240 twenty twenty six we're going to see some broadening of 0:01:10.280 --> 0:01:13.600 that opportunity. So again we're not at all saying that 0:01:13.800 --> 0:01:17.360 US exceptionalism is dead. The US naturally has an extremely 0:01:17.560 --> 0:01:19.759 important role to be playing in what we see happening 0:01:19.800 --> 0:01:23.240 in AI the hyperscalers, you know, first and foremost specifically 0:01:23.280 --> 0:01:25.160 as we look at this you know, capex driven cycle 0:01:25.200 --> 0:01:27.640 that we're that we're entering into or just starting to 0:01:27.800 --> 0:01:30.480 enter into. But what we really want to highlight is 0:01:30.560 --> 0:01:33.880 that I would say the deep seek of January twenty 0:01:33.920 --> 0:01:36.120 twenty five, so think back a year ago, was a 0:01:36.120 --> 0:01:38.119 bit of an eye opener that this isn't a one 0:01:38.160 --> 0:01:40.360 horse race, right, and that this is very much a 0:01:40.400 --> 0:01:43.600 global AI continuum that we're all on and we think 0:01:43.640 --> 0:01:45.319 that we're going to see more and more investors. We've 0:01:45.360 --> 0:01:47.040 seen it in the back half of twenty twenty five, 0:01:47.080 --> 0:01:49.120 we continue to expect that this will continue to take 0:01:49.160 --> 0:01:52.880 hold in twenty twenty six. That investors are looking globally right. 0:01:52.960 --> 0:01:55.080 They understand the opportunity of the United States, but they 0:01:55.080 --> 0:01:57.640 also understand that you're going to see a lot of 0:01:58.320 --> 0:02:01.280 great innovation coming out of Asia, coming out of Europe, 0:02:01.720 --> 0:02:03.560 and that a really good way to look at the 0:02:03.560 --> 0:02:06.120 portfolios to make sure that you have a balanced exposure there. 0:02:06.360 --> 0:02:09.160 The other thing that we're highlighting is naturally we tend 0:02:09.160 --> 0:02:12.440 to be lovers of equal weight, and particularly a lover 0:02:12.520 --> 0:02:16.880 of eical weight. In twenty twenty six, and just highlighting 0:02:16.880 --> 0:02:19.040 again that especially as we look to themes such as AI, 0:02:19.120 --> 0:02:21.600 but also across all of our innovation themes. We think 0:02:21.639 --> 0:02:24.680 that sometimes investors can get really hung up on the 0:02:24.680 --> 0:02:27.560 most well known names, right, and that's typically those big megacaps, 0:02:27.560 --> 0:02:28.880 and there tends to be a lot of US tech 0:02:28.919 --> 0:02:32.160 tunnel vision when people think of innovation, and we actually 0:02:32.200 --> 0:02:34.880 see a lot of opportunity in lesser nor names. And 0:02:34.919 --> 0:02:36.560 that's one of the work that the matics, I think 0:02:36.600 --> 0:02:39.280 really brings to the forefront is just how much opportunity 0:02:39.320 --> 0:02:42.639 is sitting outside benchmarks. And we really expect the broad 0:02:42.680 --> 0:02:44.119 name to continue through twenty twenty six. 0:02:44.880 --> 0:02:47.920 Great and so we all know AI is definitely considered 0:02:48.000 --> 0:02:51.080 a mega theme, and it just so happens today we 0:02:51.120 --> 0:02:54.000 have a mega theme portfolio manager as our guests today, 0:02:54.120 --> 0:02:57.360 So I'd like to welcome Sarji Nahal to the podcast. 0:02:57.760 --> 0:03:00.920 Saraje is a portfolio manager in list with the Global 0:03:00.960 --> 0:03:04.520 Thematic Equity team at Lizard Asset Management SAGE. Thank you 0:03:04.520 --> 0:03:05.400 for joining us today. 0:03:06.320 --> 0:03:07.720 Thank you for having me. It's a pleasure to be 0:03:07.760 --> 0:03:08.360 here this morning. 0:03:08.919 --> 0:03:11.640 So we're going to be discussing the Lizard Equity Mega 0:03:11.639 --> 0:03:16.160 Trends ETF tickerh MZ. Can you walk us through the 0:03:16.200 --> 0:03:19.840 core investment philosophy behind the fund in what mega trend 0:03:19.919 --> 0:03:22.000 investing means in practice? 0:03:22.400 --> 0:03:24.800 Happy to say a few words, and you know, the 0:03:24.800 --> 0:03:28.040 core philosophy behind themes is rooted in the belief that 0:03:28.120 --> 0:03:33.160 we're living in an era of unprecedented transformation and disruption, 0:03:34.120 --> 0:03:36.800 whether it be structural chips, in terms of demographics with 0:03:36.880 --> 0:03:41.640 Asian populations, geopolitics with the emergence of a multipolar world, 0:03:42.040 --> 0:03:45.360 or in terms of technology and AI diffusion. And if 0:03:45.400 --> 0:03:47.520 I were to quote eighteen time All Star and thirteen 0:03:47.600 --> 0:03:50.880 time World Series champion Yogi Berra, the future aint what 0:03:50.920 --> 0:03:53.960 it used to be and investors need to prepare their 0:03:53.960 --> 0:03:57.400 clients for a future that is no longer predictable, no 0:03:57.480 --> 0:04:01.520 longer stable, or no longer a simple extent of the past. 0:04:02.120 --> 0:04:06.080 And these transformative and disruptive forces are no longer peripheral trends, 0:04:06.120 --> 0:04:10.960 but they've become central drivers of everything from dispersion to 0:04:11.040 --> 0:04:16.000 volatility to disruption and ultimately long term value creation. And 0:04:16.040 --> 0:04:17.880 we can see this with the lifespan of companies in 0:04:17.920 --> 0:04:20.159 the s and P five hundred. I was just falling 0:04:20.200 --> 0:04:23.200 from sixty years in the nineteen fifties to thirty years 0:04:23.200 --> 0:04:26.400 in the nineteen eighties to an estimated twelve to fifteen 0:04:26.480 --> 0:04:29.520 years by twenty thirty at the end of this decade, 0:04:29.839 --> 0:04:33.120 and the growth and so called Kodak moments of companies, 0:04:33.720 --> 0:04:36.599 we're simply failing to foresee and adapt to the pace 0:04:36.800 --> 0:04:41.000 of disruptive transformation, and we really see mega trends investing 0:04:41.040 --> 0:04:44.680 as offered an invaluable north star for investors looking to 0:04:45.360 --> 0:04:49.120 adapt for the future and navigate these structural shifts. And 0:04:49.160 --> 0:04:53.160 in practice this means leveraging a bottoms up fundamental, fundamental 0:04:53.200 --> 0:04:58.280 research and valuation discipline focused approach when it comes to investment, 0:04:58.800 --> 0:05:01.440 and we believe the software is it's two things. Firstly, 0:05:01.560 --> 0:05:05.600 it's an opportunity to invest in high quality, growing companies 0:05:06.080 --> 0:05:09.000 benefiting from structural change at a reasonable price what will 0:05:09.040 --> 0:05:11.640 refer to as themes or mega trends as a reasonable 0:05:11.680 --> 0:05:16.120 price along the lines of gart But secondly, longer term 0:05:16.240 --> 0:05:20.440 optionality from ten to twenty year themes that are currently 0:05:20.480 --> 0:05:24.240 on the investment frontier but rapidly becoming reality, so things 0:05:24.279 --> 0:05:30.719 like autonomous vehicles, humanoid robots, quantum computing, SMRs as well 0:05:30.800 --> 0:05:31.560 as space. 0:05:32.920 --> 0:05:34.479 So if we take a step back, how do you 0:05:34.560 --> 0:05:37.599 define and identify these mega trends? Is there a certain 0:05:37.640 --> 0:05:41.600 criteria that your team uses decide if a trend is 0:05:41.800 --> 0:05:44.680 structural enough to be included in the funds investment universe? 0:05:45.400 --> 0:05:48.000 Yeah, of course, you know. As our starting point, we 0:05:48.080 --> 0:05:51.880 really see mega trends as long term, large scale global 0:05:51.920 --> 0:05:56.560 structural shifts with the potential to reshape global industry, economics 0:05:56.600 --> 0:05:59.960 and profit pools. And we also believe that the evaluate 0:06:00.160 --> 0:06:05.120 a selection of mega trends requires robust fundamental grounding needs 0:06:05.120 --> 0:06:08.400 to be validated by both company level insights as well 0:06:08.400 --> 0:06:12.000 as the Lazarts Global research platform. A forward looking approach 0:06:12.080 --> 0:06:16.000 is critical to timing theme selection, as you generally don't 0:06:16.000 --> 0:06:18.200 want to be buying when the theme has reached page 0:06:18.200 --> 0:06:22.360 one of the newspapers or is all across your social media, 0:06:22.800 --> 0:06:25.480 or for that matter, your parents or your grandparents. 0:06:24.960 --> 0:06:25.960 Are asking you about it. 0:06:26.360 --> 0:06:28.120 You want to be focused on the ideas that are 0:06:28.160 --> 0:06:31.000 on section see page thirty two of the newspapers but 0:06:31.200 --> 0:06:35.720 slowly moving their way towards page one, and our investment 0:06:36.040 --> 0:06:38.000 edge in this regard lies in the four and a 0:06:38.000 --> 0:06:42.000 half thousand company meetings that we, together with our fundamental 0:06:42.000 --> 0:06:47.200 analyst colleagues, have with companies every single years. These meetings 0:06:47.240 --> 0:06:50.040 account for about fifty percent of our times as PMS 0:06:50.480 --> 0:06:54.239 and allow us to build a picture of our transforming world. 0:06:54.400 --> 0:06:57.000 And during this meetings we ask the CEOs and senior 0:06:57.080 --> 0:07:01.440 management strategic questions about things like structural changes over the 0:07:01.440 --> 0:07:04.760 next three to ten years, the evolution of both demand 0:07:05.040 --> 0:07:10.000 and supply, capex investments which are being underestimated or ignored 0:07:10.000 --> 0:07:14.720 by the market, and future sources of revenues and profit pools. 0:07:15.200 --> 0:07:17.920 And in essence, these collected data points allow us to 0:07:17.920 --> 0:07:22.320 both identify emerging mega trends and to focus on idiosyncratic 0:07:22.400 --> 0:07:25.760 stock factors, while also tying our mega trends to three 0:07:25.800 --> 0:07:30.480 to five year valuations for companies. And practically speaking, each 0:07:30.560 --> 0:07:34.880 mega trend must also be able to offer durability, scale 0:07:35.240 --> 0:07:39.480 and investability across a diversified set of companies, and at 0:07:39.520 --> 0:07:43.320 present we run a concentrated portfolio of sixty names across 0:07:43.360 --> 0:07:46.360 six themes or mega trends, so that includes smart campex, 0:07:46.400 --> 0:07:49.960 smarter industry, and a new era for capital investment, bits 0:07:50.000 --> 0:07:56.400 of chips, key selective components capturing value from digitalization powered 0:07:56.440 --> 0:07:59.560 consumer the winners in a whole new world of consumerism. 0:08:00.160 --> 0:08:04.520 Software agents, the next major evolution of software, data and 0:08:04.600 --> 0:08:07.760 AI competitive advantage from the plied AI. And then finally 0:08:07.800 --> 0:08:11.280 future health, which is focused on solutions to the societal 0:08:11.400 --> 0:08:13.960 challenges in and around healthcare. 0:08:14.640 --> 0:08:18.840 Can you describe how your proprietary multi theme process works 0:08:19.080 --> 0:08:22.360 in terms of how themes evolve over time in the portfolio? 0:08:23.360 --> 0:08:26.440 Yeah, of course, of course. Well as thematic investors, we 0:08:26.680 --> 0:08:31.320 anchor our portfolio to multiple themes or mega trends rather 0:08:31.360 --> 0:08:34.719 than benchmarks, which we believe don't tell you very much 0:08:34.720 --> 0:08:38.160 about the future and lead to a framing bias. And 0:08:38.400 --> 0:08:40.560 as a Canadian, I'll make an ice hockey analogy. We 0:08:40.640 --> 0:08:42.840 need to be skating to where the puck is going, 0:08:43.080 --> 0:08:44.880 not where it currently is. 0:08:45.520 --> 0:08:45.640 Now. 0:08:45.720 --> 0:08:48.080 As mentioned, we have six themes in our strategy, with 0:08:48.120 --> 0:08:52.280 our belief being that firstly, each theme captures a different 0:08:52.360 --> 0:08:56.640 subset of structural factors, Secondly, that different themes pay off 0:08:56.679 --> 0:08:59.880 at different times and in different ways, and that thirdly 0:09:00.120 --> 0:09:03.480 themes evolve over time. We also believe that a multi 0:09:03.480 --> 0:09:08.200 thematic approach reduces risk and smooth's return patterns over time. 0:09:08.679 --> 0:09:12.800 In escence, it affects competition for capital between themes as 0:09:12.800 --> 0:09:15.760 opposed to a single theme approach where no one tells 0:09:15.800 --> 0:09:19.160 you when to evolve or sell. And obviously we run 0:09:19.200 --> 0:09:22.720 an active ETF and our themes are dynamic and evolve 0:09:22.720 --> 0:09:25.160 off the back of our bottoms up research and the 0:09:25.240 --> 0:09:28.439 data points we're collecting from our meetings with companies and 0:09:28.840 --> 0:09:34.200 as evidence, as economics, as competitive dynamics, As policy directions change, 0:09:34.720 --> 0:09:38.760 new themes emerge, and existing themes can shrink, expand, or 0:09:38.920 --> 0:09:42.680 be retired based on our conviction. But to put things 0:09:42.679 --> 0:09:46.400 in perspective, we are true long term investors. Of the 0:09:46.440 --> 0:09:49.400 average lifespan of our themes average is about five years, 0:09:49.800 --> 0:09:54.280 and portfolio turnover is about twenty percent per year. 0:09:55.080 --> 0:09:57.080 So I'm gvite you mentioned bottom up research because that 0:09:57.120 --> 0:09:59.079 was kind of the next part I wanted to talk about. 0:09:59.520 --> 0:10:02.200 Is there specific approach to selecting you know, once you 0:10:02.240 --> 0:10:05.280 have your themes, to selecting the specific companies you know, 0:10:05.920 --> 0:10:08.680 you know certain fundamental metrics you like to use, or 0:10:08.720 --> 0:10:12.960 even you know, any biases towards geographic regions or even 0:10:12.960 --> 0:10:13.640 market caps. 0:10:14.360 --> 0:10:18.440 Yeah, perfect, well. In terms of investment process, we've got 0:10:18.480 --> 0:10:22.760 a robust and long standing four step process you know. Firstly, 0:10:23.280 --> 0:10:26.600 we're looking for thematic fits, with companies needing to clearly 0:10:26.720 --> 0:10:30.720 benefit from the structural drivers behind a theme and supportant stress. 0:10:30.760 --> 0:10:34.760 We're not looking at simplistic quant or revenue exposure screens 0:10:34.800 --> 0:10:38.400 and stock lists, but rather at the evolution of business models, 0:10:38.440 --> 0:10:42.640 exposure to exogeness factors, and how stocks will benefit from 0:10:42.679 --> 0:10:47.319 the return opportunity over time. Secondly, we're looking at stock 0:10:47.400 --> 0:10:51.400 specific factors. The reality is that no stock will ever 0:10:51.480 --> 0:10:54.199 be a perfect fit for a theme, and there are 0:10:54.400 --> 0:10:58.160 many idiosyncratic factors at play, from the quality of management 0:10:58.320 --> 0:11:03.320 to worry some legacy businesses is to sustainability concerns, and 0:11:03.520 --> 0:11:07.280 these are often swept under the carpet by top down investors, 0:11:07.640 --> 0:11:11.080 but we choose to choose to go deeper, working closely 0:11:11.120 --> 0:11:16.240 with Lazard's fundamental research team and their insights. Thirdly is valuation, 0:11:16.440 --> 0:11:19.880 where we place an overarching focus on year three so 0:11:20.000 --> 0:11:23.600 twenty twenty nine and year five twenty thirty one, and 0:11:23.640 --> 0:11:26.880 on whether the valuation is reasonable, whether there's a possibility 0:11:26.920 --> 0:11:29.679 of upside if the theme plays out, and ultimately on 0:11:29.840 --> 0:11:36.040 capturing asymmetries. And then fourth and finally is diversification. We 0:11:36.080 --> 0:11:40.360 have multiple themes and multiple stocks per theme, and layers 0:11:40.360 --> 0:11:46.280 of diversification across market segments geographies, products, services, as well 0:11:46.320 --> 0:11:49.840 as sectors. It's very much our belief that diversification allows 0:11:49.880 --> 0:11:53.880 us to access different return profiles. And generally speaking, we 0:11:54.080 --> 0:11:58.360 equally wake themes and stocks and we regularly take profits 0:11:58.400 --> 0:12:03.760 and recycle them into strong suctual stories experiencing moments of weakness. 0:12:04.559 --> 0:12:05.960 So I do have a follow up to that, you 0:12:05.960 --> 0:12:09.880 know you touched upon valuations. Are there specific valuation metrics 0:12:10.000 --> 0:12:12.480 you consider or does it kind of differ from stock 0:12:12.520 --> 0:12:12.960 to stock. 0:12:14.320 --> 0:12:15.400 Yeah, happy to say. 0:12:15.240 --> 0:12:15.800 A word there. 0:12:16.080 --> 0:12:18.920 And firstly I would just stress that, you know, so 0:12:19.120 --> 0:12:21.920 much of the focus in terms of thematic and mega 0:12:21.960 --> 0:12:26.880 trends is on narrative heavy areas and support of stress. 0:12:26.920 --> 0:12:31.079 There's certainly some great narratives or stories associated around mega trends, 0:12:31.480 --> 0:12:35.000 but we really pride ourselves on our valuation discipline. You know, 0:12:35.080 --> 0:12:37.960 Our emphasis again is on that bottoms up long term 0:12:38.040 --> 0:12:42.280 valuation years three and years five in particular, but also 0:12:42.320 --> 0:12:46.480 the thematic optionality playing out over longer period so five 0:12:46.559 --> 0:12:49.280 to ten years. And it's our belief that these are 0:12:49.280 --> 0:12:53.199 timeframes where markets tend to be less efficient and structural 0:12:53.280 --> 0:12:58.480 change is generally underappreciated, but in terms of valuation, rather 0:12:58.559 --> 0:13:03.280 than fixing target our team we work extremely closely with 0:13:03.320 --> 0:13:07.520 Thozard seventy fundamental analysts to compare with the market is 0:13:07.600 --> 0:13:12.800 discounting the consensus and price with what our differentiated long 0:13:12.920 --> 0:13:18.880 term judgments say. Valuation approaches can be flexible by company type. 0:13:19.480 --> 0:13:23.320 We're recognizing everything from annuity like elements through to optionality. 0:13:23.920 --> 0:13:27.640 We're leveraging scenario based analysis, which helps us to calibrate 0:13:27.679 --> 0:13:32.280 materiality and avoid overpaying for popular or narrative German themes, 0:13:32.720 --> 0:13:36.520 and our valuation discipline also means that we can help 0:13:36.600 --> 0:13:39.960 our clients access the best themes and the best companies 0:13:40.120 --> 0:13:44.120 tomorrow early and at a reasonable price. Because themes at 0:13:44.160 --> 0:13:47.280 a reasonable price, Mega trends at a reasonable price is 0:13:47.320 --> 0:13:49.920 have the heart of everything that we are trying to do. 0:13:51.320 --> 0:13:55.319 Is there any type of top down research as part 0:13:55.360 --> 0:13:57.240 of the process. Do you kind of incorporate any type 0:13:57.240 --> 0:14:03.079 of macroeconomic or geopolitical insights into your framework? Yeah? Of course, 0:14:03.240 --> 0:14:08.400 you know, as you can imagine, macro geopolitical insights are 0:14:08.640 --> 0:14:11.880 critical for us as a Mega trens team, especially in 0:14:11.920 --> 0:14:16.040 light of the new realities of the fragmented, the transactional, 0:14:16.240 --> 0:14:19.840 the intensely competitive, multi polar world that we're living in, 0:14:20.360 --> 0:14:23.280 and we really see these inputs as key to shaping 0:14:23.360 --> 0:14:28.080 long term foundations and construction of our themes, as opposed 0:14:28.120 --> 0:14:32.680 to those who would use them for tactical positioning or 0:14:33.040 --> 0:14:35.760 short term timing. So just to give you an example, 0:14:35.840 --> 0:14:39.360 you know, we see strategic investment in US manufacturing and 0:14:39.400 --> 0:14:44.520 industry as accelerating due to macro on geopolitical challenges. We 0:14:44.560 --> 0:14:47.960 see the scales tilting away from chasing low cost labor 0:14:48.280 --> 0:14:53.239 back towards domestic production, and we believe capital and proximity 0:14:53.280 --> 0:14:56.040 to the end user is going to dictate the national 0:14:56.080 --> 0:14:59.800 and regional allocation of capex parameters to which the US 0:14:59.840 --> 0:15:02.560 have no equal. We also see the US as in 0:15:02.600 --> 0:15:07.400 the very early innings of a massive reindustrialization wave which 0:15:07.440 --> 0:15:11.160 could become a multi decade opportunity which we size at 0:15:11.160 --> 0:15:14.080 a minimum of ten trillion dollars in the coming years. 0:15:14.520 --> 0:15:17.200 And as the US aims to regain the twenty to 0:15:17.240 --> 0:15:20.280 twenty five percent of global manufacturing share that it commanded 0:15:20.280 --> 0:15:24.200 in the nineties, we see an increasing focus on reshoring 0:15:24.720 --> 0:15:29.960 high value strategic supply chains and critical infrastructure, and in 0:15:30.040 --> 0:15:34.600 terms of example semis or chips, that industry is clearly 0:15:34.720 --> 0:15:37.800 becoming one of the biggest focus areas. And if you 0:15:37.800 --> 0:15:39.960 take a look at twenty twenty five, as of July, 0:15:40.120 --> 0:15:43.360 Semi companies had announced over five hundred billion of private 0:15:43.360 --> 0:15:47.640 sector investments across twenty eight states to revitalize the US 0:15:47.760 --> 0:15:51.160 leading edge cheap chip ecosystem and move towards this whole 0:15:51.200 --> 0:15:55.280 idea of solvereign AI and US pharma manufacturing is another 0:15:55.400 --> 0:15:59.240 reshoring beneficiary with three hundred and seventy billion of investments 0:15:59.360 --> 0:16:02.520 in two thousan twenty five. So we're looking at the macro, 0:16:02.640 --> 0:16:05.280 we're looking at the geopolitical, but we're trying to see 0:16:05.320 --> 0:16:08.600 what sort of bottom up impacts that is having in 0:16:08.720 --> 0:16:10.720 terms of our in terms of our portfolio. 0:16:11.680 --> 0:16:14.360 So I know BRI has some really great questions digging 0:16:14.400 --> 0:16:16.560 deeper into the themes themselves, but I just have one 0:16:16.560 --> 0:16:19.600 more question on investment process before we move on. You 0:16:19.680 --> 0:16:23.520 work alongside a few different co managers on this strategy. 0:16:23.760 --> 0:16:27.520 How does collaboration work in terms of theme selection, sizing 0:16:27.920 --> 0:16:29.480 and portfolio reviews? 0:16:30.000 --> 0:16:32.240 Of course, well, just in terms of the team itself, 0:16:32.640 --> 0:16:37.560 Mozon's Thematic and Mega Trends team comprises six members, four pms, 0:16:37.600 --> 0:16:42.080 a portfolio analyst, and a client portfolio manager. We're based 0:16:42.120 --> 0:16:45.240 in both New York and London, and we are one 0:16:45.240 --> 0:16:48.600 of the world's most experienced thematic teams, with an average 0:16:48.680 --> 0:16:53.160 of twenty four years of industry experience, including an average 0:16:53.160 --> 0:16:56.680 of eleven years at Lazard. We have complementary backgrounds that 0:16:56.760 --> 0:17:01.360 spanned the buy and sell side, geographies, areas of study 0:17:01.360 --> 0:17:05.600 and interest, and one member was actually a former member 0:17:05.640 --> 0:17:08.760 of a national chess team. But it's important to stress 0:17:08.840 --> 0:17:12.840 that beyond the core team is that we're collaborating throughout 0:17:12.960 --> 0:17:16.560 the day with an emphasis on cognitive diversity and collective 0:17:16.680 --> 0:17:22.280 decision making, with everything from theme and stock selections, sizing decisions, 0:17:22.280 --> 0:17:26.439 and portfolio reviews made jointly by the pms, supported by 0:17:26.480 --> 0:17:31.199 ongoing debate and shared research ownership. But it's critical to 0:17:31.200 --> 0:17:34.520 stress the importance of the inter connected insights that we 0:17:34.600 --> 0:17:38.639 derive from the investment investment network. At Lazard, we have 0:17:38.760 --> 0:17:43.359 access to and regularly leverage a world class network of 0:17:43.480 --> 0:17:47.639 seventy sector specialists across continents who help us to construct 0:17:47.720 --> 0:17:50.199 our bottoms up vision of the world and we're an 0:17:50.240 --> 0:17:54.280 incredibly interconnected platform. We're in constant touch with the fundamental analysts, 0:17:54.320 --> 0:17:57.160 with dedicated chat groups with each of them, as well 0:17:57.160 --> 0:18:00.960 as a firm wide big Big Picture weekly Leal Thematic meeting, 0:18:01.000 --> 0:18:03.760 which has been running at the firm for well over 0:18:04.320 --> 0:18:06.160 for well over two decades now. 0:18:06.800 --> 0:18:08.879 A lot of what you were saying that echoes with also, 0:18:08.920 --> 0:18:11.480 you know the low approach we take, and it's you've 0:18:11.640 --> 0:18:16.400 said some of my favorite words asymmetric right here, right, idiosyncratic, 0:18:17.400 --> 0:18:19.600 all those really good ones. When you start talking about thematic, 0:18:20.040 --> 0:18:22.800 I was I was looking at the current membership and 0:18:23.560 --> 0:18:25.399 interested to hear your perspective, you know, thinking back to 0:18:25.480 --> 0:18:27.359 the question I answered David at the very beginning here, 0:18:27.400 --> 0:18:32.040 when we think about going global versus focusing on opportunity 0:18:32.040 --> 0:18:34.000 potentially being unlocked in the US, you've got a decently 0:18:34.040 --> 0:18:37.439 high waiting to us, interested to hear on if there 0:18:37.440 --> 0:18:39.719 are certain of the mega trends that you're focused on 0:18:39.800 --> 0:18:42.359 where you are looking more global versus other ones that 0:18:42.400 --> 0:18:45.480 you're more focused on being US driven. 0:18:46.520 --> 0:18:49.679 Yep, yep, perfect, Happy to say a word there, and 0:18:49.680 --> 0:18:52.000 I think I would take things one step back, and 0:18:52.160 --> 0:18:53.960 what I would really stress is it's r you that 0:18:54.000 --> 0:18:57.640 investors need to look beyond the horizon the capture tomorrow's 0:18:57.680 --> 0:19:01.480 ELpH and future wealth. And basically this reals a fourfold 0:19:01.480 --> 0:19:04.919 shift in investing wavelength. And the first is just clearly 0:19:04.960 --> 0:19:08.119 moving from short term to long term. All of the 0:19:08.160 --> 0:19:11.200 market volatility that we're seeing on a daily basis presents 0:19:11.240 --> 0:19:15.640 opportunities for long term investors. Its Secondly, exactly in line 0:19:15.680 --> 0:19:18.119 with what you're saying, we believe that we need to 0:19:18.160 --> 0:19:22.200 move away from the US to becoming more global allocation 0:19:22.359 --> 0:19:27.480 can help us navigate a shifting market performance in what 0:19:27.640 --> 0:19:30.520 really is a new regime. And Thirdly, we need to 0:19:30.560 --> 0:19:34.159 diversify from that sometimes obsessive focus on data centers and 0:19:34.200 --> 0:19:39.280 ais to more diversity across sectors, market segments as well 0:19:39.320 --> 0:19:41.880 as companies. And then finally, as we discussed, we need 0:19:41.920 --> 0:19:44.600 to shift away from those backward looking benchmarks to being 0:19:44.680 --> 0:19:47.040 forward looking. Now, if to take a look at the 0:19:47.080 --> 0:19:49.320 portfolio itself, you know what you end up with is 0:19:49.359 --> 0:19:52.840 a portfolio which truly is global, right about sixty three 0:19:52.880 --> 0:19:57.400 percent North America and thirty seven percent rest of world, 0:19:57.680 --> 0:20:00.960 and this reflects global profit pool distribution and where many 0:20:01.080 --> 0:20:04.600 leaders in structural change reside. So I was talking about 0:20:04.640 --> 0:20:07.360 the changes that we're seeing, for instance, in the manufacturing 0:20:07.560 --> 0:20:12.320 and renaissance space in the United States. Massive opportunity. But 0:20:13.040 --> 0:20:14.879 this is a space where we need to look towards 0:20:14.920 --> 0:20:18.160 some of the European as well as the Japanese actors 0:20:18.200 --> 0:20:23.280 as we look to instill everything from automation, digitalization software 0:20:23.320 --> 0:20:27.399 and AI based operating systems for factories through to industrial 0:20:27.520 --> 0:20:30.840 robots as well as the emergence of humanoid robots. But 0:20:30.880 --> 0:20:32.760 if you look at the portfolio, the way that we 0:20:32.840 --> 0:20:35.119 think and the way that we act, it also results 0:20:35.119 --> 0:20:38.520 in a portfolio which is very well diversified. We've got 0:20:38.560 --> 0:20:43.480 about forty percent technology, but we have material exposure to healthcare, 0:20:43.920 --> 0:20:48.720 to industrials, to financials as well as consumer companies. And 0:20:49.119 --> 0:20:52.840 our global approach as well as our equal weighting based 0:20:52.840 --> 0:20:57.440 philosophy basically means under exposure to megacaps even when based 0:20:57.480 --> 0:21:02.480 in the US, providing broad participations across global trends. 0:21:03.840 --> 0:21:06.440 I think that's really interesting, and you mentioned in there 0:21:07.119 --> 0:21:09.960 specifically as it comes to AI. Let's be honest, can't 0:21:10.000 --> 0:21:12.159 help almost every conversation I have clients, even when we 0:21:12.240 --> 0:21:14.280 go in with a different topic of conversation. I feel 0:21:14.280 --> 0:21:19.000 like we always come back to AI. I think it's 0:21:19.000 --> 0:21:21.000 interesting what you said, they're looking beyond AI, looking beyond 0:21:21.040 --> 0:21:23.480 the data centers, and I know you mentioned also this 0:21:23.640 --> 0:21:26.080 really keen focus that your team has on the three 0:21:26.119 --> 0:21:28.879 to five year right and where the opportunity is going 0:21:28.920 --> 0:21:31.399 to sit there. Naturally, though, we've got this volatility and 0:21:31.440 --> 0:21:33.840 this tension, great opportunities to lean in when you get 0:21:33.880 --> 0:21:37.280 when you get some of this volatility, where in the 0:21:37.400 --> 0:21:41.679 AI ecosystem or which aspects of AI are you watching 0:21:41.720 --> 0:21:46.680 most closely right now, understanding that you're prioritizing where things 0:21:46.680 --> 0:21:48.359 are going to be in a three to five year window. 0:21:49.320 --> 0:21:52.680 Yeah, happy to share some insights there. And I think firstly, 0:21:53.520 --> 0:21:56.080 it's there's no getting away from the fact that AI 0:21:56.280 --> 0:22:00.280 has and will continue to dominate the investment landscape. You know, 0:22:00.280 --> 0:22:03.879 we're anticipating about three to four trillion dollars in AI 0:22:04.000 --> 0:22:07.000 infrastructure spend by the end of this decade, and what 0:22:07.119 --> 0:22:10.040 companies are telling us is that they likely need to 0:22:10.119 --> 0:22:13.400 double compute every six months, which obviously means a three 0:22:13.520 --> 0:22:16.560 hundred to one thousand time increase over the next four 0:22:16.560 --> 0:22:22.360 to five years as they strive towards AGI or artificial 0:22:22.480 --> 0:22:25.480 general intelligence. And if we want to put things in perspective, 0:22:25.480 --> 0:22:30.320 it's really most comparable to the nineteenth century railway boom 0:22:30.640 --> 0:22:35.000 with both of these both of these representing massive transformative 0:22:35.359 --> 0:22:39.679 and potentially speculative investment cycles. And to put things in perspective, 0:22:40.320 --> 0:22:43.520 Gilded Age railroad investment peaked at about six percent of GDP, 0:22:43.920 --> 0:22:46.879 But if we look at AI hyperscaler Capex alone in 0:22:46.920 --> 0:22:49.359 twenty twenty five, it was about two percent of GDP, 0:22:49.480 --> 0:22:53.879 And obviously it's been increasing by the day, and a 0:22:53.880 --> 0:22:55.680 lot of people will always ask us, you know, why 0:22:55.720 --> 0:22:57.800 are we engaging in one of the costs theiest buildings 0:22:57.840 --> 0:23:00.679 freeze in human history. You take a over the last 0:23:00.680 --> 0:23:03.240 three years of AI spend and it's greater than when 0:23:03.240 --> 0:23:06.120 it costs to build the US Interstate highway network over 0:23:06.200 --> 0:23:09.560 forty years. You know why are we seeing multi billion 0:23:09.680 --> 0:23:14.280 dollar AI factories bigger than ten home depots being built 0:23:14.359 --> 0:23:19.080 in windswept towns like Ellendale, North Dakota, which has eleven 0:23:19.160 --> 0:23:22.680 hundred people, two motels, one dollar general, and a Pentecostal 0:23:22.920 --> 0:23:28.320 Bible college. The reality is that AI compute demand continues 0:23:28.400 --> 0:23:33.240 to exceed supply it's the fastest growing technology in history, 0:23:33.320 --> 0:23:38.840 faster than the TVs, the Internet, smartphones, or previous computing revolutions. 0:23:39.320 --> 0:23:41.719 You look at the consumer space, Chat GBT cheap one 0:23:41.760 --> 0:23:44.440 hundred million users in two months and is now close 0:23:44.480 --> 0:23:47.280 to nine hundred million. You know, that's a record for 0:23:47.359 --> 0:23:50.200