1 00:00:02,200 --> 00:00:06,399 Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg 2 00:00:06,480 --> 00:00:10,160 Speaker 1: Radio this weekend on the podcast What Can I Say? 3 00:00:10,320 --> 00:00:13,440 Speaker 1: Luke ellis CEO of the Man Group, managing well over 4 00:00:13,480 --> 00:00:18,000 Speaker 1: a hundred billion dollars. They are the world's largest publicly 5 00:00:18,000 --> 00:00:22,479 Speaker 1: traded hedge fund and Luke is a specialist in a 6 00:00:22,600 --> 00:00:29,720 Speaker 1: number of things, risk management, systematic trading, derivatives, big data. 7 00:00:30,120 --> 00:00:35,040 Speaker 1: He is about as knowledgeable of the world of math 8 00:00:35,240 --> 00:00:40,280 Speaker 1: and technology driven trading as anybody in the world. And 9 00:00:40,320 --> 00:00:42,960 Speaker 1: what a tour to force this conversation was. I wish 10 00:00:43,240 --> 00:00:45,840 Speaker 1: I had him for another three hours. I just had 11 00:00:45,840 --> 00:00:48,200 Speaker 1: so many questions to get to. If you were all 12 00:00:48,360 --> 00:00:53,880 Speaker 1: interested in algorithmic trading, hedge funds, big data, understanding what 13 00:00:53,960 --> 00:00:56,840 Speaker 1: it's like to run a large firm and to risk 14 00:00:57,000 --> 00:00:59,880 Speaker 1: hundreds of billions of dollars, well, then what can I say? 15 00:01:00,000 --> 00:01:04,160 Speaker 1: You're going to find this conversation absolutely fascinating. With no 16 00:01:04,240 --> 00:01:10,960 Speaker 1: further ado, my conversation with Luke Ellis. This is Masters 17 00:01:11,000 --> 00:01:15,600 Speaker 1: in Business with Barry Ridholts on Bloomberg Radio. My special 18 00:01:15,640 --> 00:01:19,200 Speaker 1: guest today is Luke Ellis. He is the CEO of 19 00:01:19,280 --> 00:01:23,360 Speaker 1: Man Group, which manages about a hundred and four billion dollars. 20 00:01:23,840 --> 00:01:28,160 Speaker 1: They are the world's largest listed hedge fund. The firm 21 00:01:28,720 --> 00:01:32,800 Speaker 1: is known as a pioneer in the application of systematic trading. 22 00:01:33,240 --> 00:01:39,040 Speaker 1: Since all the way back in Luke ellis welcome to Bloomberg. 23 00:01:40,880 --> 00:01:44,440 Speaker 1: Very it's a pleasure to be here. So let's go 24 00:01:44,480 --> 00:01:47,319 Speaker 1: back to the early days of your career. You began 25 00:01:47,440 --> 00:01:52,040 Speaker 1: at Japanese Bank Numeral Holdings in the eighties. Tell us 26 00:01:52,080 --> 00:01:55,919 Speaker 1: about that experience. The eighties and Japan was a pretty 27 00:01:56,000 --> 00:02:01,640 Speaker 1: wild financial world, wasn't it. Yeah, yes, well, look, I 28 00:02:01,680 --> 00:02:05,640 Speaker 1: have to admit that. Um so, I knew from an 29 00:02:05,640 --> 00:02:09,280 Speaker 1: early age that I wanted to work in finance. I 30 00:02:09,400 --> 00:02:12,080 Speaker 1: sort of I grew up playing cards when I was 31 00:02:12,160 --> 00:02:16,399 Speaker 1: very young, sort of three or four. And then then 32 00:02:16,880 --> 00:02:19,040 Speaker 1: my grandfather taught me to bet on the horses when 33 00:02:19,040 --> 00:02:22,959 Speaker 1: I was about six, and but to do it seriously, 34 00:02:23,040 --> 00:02:26,120 Speaker 1: you know, readformed guides, so on and so forth. And 35 00:02:26,240 --> 00:02:29,920 Speaker 1: one day we're watching the racing and I there was 36 00:02:29,960 --> 00:02:32,120 Speaker 1: there was a three horse race, and all of them 37 00:02:32,160 --> 00:02:36,400 Speaker 1: had odds which were reasonably tight. And I looked at 38 00:02:36,400 --> 00:02:39,240 Speaker 1: my grandfather and said, hang on, this isn't fair. None 39 00:02:39,240 --> 00:02:40,959 Speaker 1: of those are good enough. The book he's going to 40 00:02:41,000 --> 00:02:42,600 Speaker 1: win and he looked at me that the books were 41 00:02:42,600 --> 00:02:45,079 Speaker 1: in on every race and I said, well, I think 42 00:02:45,120 --> 00:02:47,680 Speaker 1: I want to be a bookie. One day he said, well, 43 00:02:48,120 --> 00:02:50,000 Speaker 1: in our family we call that going to work in 44 00:02:50,000 --> 00:02:52,120 Speaker 1: the city. So I knew I wanted to work in 45 00:02:52,160 --> 00:02:57,280 Speaker 1: the city. And it's hard for young people listening to 46 00:02:57,600 --> 00:03:01,000 Speaker 1: think about it properly. But when I graduate did there 47 00:03:01,040 --> 00:03:04,840 Speaker 1: wasn't the Internet, and so when you were trying to 48 00:03:04,840 --> 00:03:07,560 Speaker 1: work out where to go and get a job, there 49 00:03:07,639 --> 00:03:11,920 Speaker 1: was a career's office which had various books about jobs, 50 00:03:12,200 --> 00:03:15,519 Speaker 1: and it only had three jobs listed in the city 51 00:03:15,840 --> 00:03:17,600 Speaker 1: that weren't accounting, and I knew I didn't want to 52 00:03:17,600 --> 00:03:21,280 Speaker 1: do accounting. So I applied to all three and the 53 00:03:21,440 --> 00:03:23,919 Speaker 1: first one that I got through to the final interview, 54 00:03:25,120 --> 00:03:28,240 Speaker 1: m I nicely. They offered me the job. One of 55 00:03:28,280 --> 00:03:30,080 Speaker 1: the interview questions was why do you want to go 56 00:03:30,120 --> 00:03:32,560 Speaker 1: and live in Japan? But I just thought it was 57 00:03:32,600 --> 00:03:36,400 Speaker 1: one of those trick interview questions that was all the 58 00:03:36,520 --> 00:03:39,040 Speaker 1: rage in the eighties, like you sell on me this 59 00:03:39,160 --> 00:03:41,520 Speaker 1: broken pen or stopped me jumping out of the window 60 00:03:41,600 --> 00:03:43,920 Speaker 1: or something. So I just made up a story of 61 00:03:43,960 --> 00:03:46,440 Speaker 1: why I wanted to go and live in Japan. Anyway, 62 00:03:46,440 --> 00:03:48,360 Speaker 1: they offered me the job, and then I discovered it 63 00:03:48,400 --> 00:03:51,080 Speaker 1: was a Japanese firm and I'd signed up to four 64 00:03:51,080 --> 00:03:55,400 Speaker 1: months training program in Japan. It researched was harder in 65 00:03:55,440 --> 00:03:57,440 Speaker 1: the pre internet days. That's what I'm going to defend 66 00:03:57,480 --> 00:04:00,839 Speaker 1: myself off. But it was a brilliant time him. Yeah, 67 00:04:00,880 --> 00:04:04,560 Speaker 1: that was the height of the Japanese company's power in 68 00:04:04,680 --> 00:04:08,920 Speaker 1: financial market. So and when I was there in those 69 00:04:09,000 --> 00:04:13,400 Speaker 1: days that they with one quarters earnings, they could have 70 00:04:13,440 --> 00:04:16,080 Speaker 1: bought Meal Lynch, which at the time was the biggest 71 00:04:16,160 --> 00:04:20,320 Speaker 1: US broker, Goldman, Sacks, you name it, just with one 72 00:04:20,400 --> 00:04:23,640 Speaker 1: quarters earnings. So it was a pretty good time to 73 00:04:23,720 --> 00:04:27,520 Speaker 1: get started in the industry, to say the very least. 74 00:04:27,720 --> 00:04:32,000 Speaker 1: You know, if I find that Americans don't fully understand 75 00:04:32,760 --> 00:04:36,960 Speaker 1: the extent of the Japanese bubble. As bad as the 76 00:04:37,080 --> 00:04:40,880 Speaker 1: dot coms were in the United States, I think the 77 00:04:41,040 --> 00:04:45,799 Speaker 1: measure of the peak in Japan was something like five 78 00:04:45,920 --> 00:04:49,120 Speaker 1: times the US or seven times the US valuation is 79 00:04:49,160 --> 00:04:53,760 Speaker 1: that ballpark? Yeah, that sounds about right. I mean, amazingly 80 00:04:53,839 --> 00:04:58,479 Speaker 1: it's still double where it's ever got two since the 81 00:04:58,480 --> 00:05:01,880 Speaker 1: other way. So the that which was always the stat 82 00:05:01,920 --> 00:05:05,000 Speaker 1: which was in the end the best was the Imperial 83 00:05:05,040 --> 00:05:08,279 Speaker 1: Palace with its garden, which is a sort of bit 84 00:05:08,360 --> 00:05:11,200 Speaker 1: in the middle of Tokyo. It's right in the central 85 00:05:11,200 --> 00:05:14,680 Speaker 1: of Tokyo. It's you know, it's a two or three 86 00:05:15,120 --> 00:05:18,480 Speaker 1: type of plot. And at the time, the value of 87 00:05:18,520 --> 00:05:21,640 Speaker 1: that land was more than the value of the land 88 00:05:21,640 --> 00:05:24,600 Speaker 1: in California, and I mean all the land in California. 89 00:05:25,240 --> 00:05:26,880 Speaker 1: That's the point where you know that this is a 90 00:05:26,920 --> 00:05:29,159 Speaker 1: bubble that when it births, is going to have a 91 00:05:29,240 --> 00:05:35,560 Speaker 1: really dire consequences. So you worked with Lane Tomlinson, who 92 00:05:35,640 --> 00:05:40,920 Speaker 1: was founder of funder Funds Finance Risk Management. You ended 93 00:05:41,000 --> 00:05:47,719 Speaker 1: up at FMR. What was that like working there? FMR 94 00:05:47,960 --> 00:05:54,800 Speaker 1: is fidelity I think I m so. I was lucky 95 00:05:54,920 --> 00:05:57,919 Speaker 1: enough to start my career right at the beginning of 96 00:05:58,240 --> 00:06:01,960 Speaker 1: the drivative business. So this was the very early days 97 00:06:01,960 --> 00:06:06,640 Speaker 1: of swats, and in fact, in Japan, the word swaps 98 00:06:06,760 --> 00:06:11,240 Speaker 1: wasn't legal for very Japanese reason. So they had a 99 00:06:11,240 --> 00:06:15,360 Speaker 1: group called the New Product Department, and basically Blame used 100 00:06:15,400 --> 00:06:18,800 Speaker 1: to run that, and he got the pick of all 101 00:06:18,839 --> 00:06:22,719 Speaker 1: of the new graduates that started that had a either 102 00:06:23,680 --> 00:06:28,080 Speaker 1: some sort of mathematical numerical background, and luckily I got 103 00:06:28,080 --> 00:06:33,040 Speaker 1: picked and so sort of died into the swap business 104 00:06:33,720 --> 00:06:36,479 Speaker 1: when you know, nobody could teach you how to do it. 105 00:06:36,520 --> 00:06:39,040 Speaker 1: You had to teach yourself because the rules haven't been written. 106 00:06:39,640 --> 00:06:42,800 Speaker 1: So we had the first IBM come order. It was 107 00:06:42,839 --> 00:06:45,200 Speaker 1: called an a T or an XT, but the first 108 00:06:45,200 --> 00:06:48,520 Speaker 1: personal computer on the floor in the mirror, and people 109 00:06:48,600 --> 00:06:51,240 Speaker 1: used to come around to look at it. Yeah, this 110 00:06:51,320 --> 00:06:53,600 Speaker 1: is sort of if I did my first trade by telex. 111 00:06:54,400 --> 00:06:56,159 Speaker 1: The thing. Most people weren't even remember what it is, 112 00:06:56,200 --> 00:06:59,160 Speaker 1: so it was a very different world. But you basically 113 00:06:59,200 --> 00:07:02,240 Speaker 1: had to have a fields for numbers in order to 114 00:07:02,279 --> 00:07:05,600 Speaker 1: be able to do trade. And for me that was 115 00:07:05,800 --> 00:07:09,280 Speaker 1: great because you know, I'm never was the best academic, 116 00:07:09,360 --> 00:07:14,480 Speaker 1: but I've always had a natural affinity with patterns, and 117 00:07:14,600 --> 00:07:16,720 Speaker 1: you know that was why I like playing cards. Originally 118 00:07:17,200 --> 00:07:21,400 Speaker 1: it got me through degrees in maths in economics understanding patterns. 119 00:07:21,440 --> 00:07:23,840 Speaker 1: But it really really worked when you were having to 120 00:07:25,160 --> 00:07:27,520 Speaker 1: present value a set of cash flows in your head, 121 00:07:28,200 --> 00:07:30,520 Speaker 1: because that was much quicker than the computer, and you 122 00:07:30,520 --> 00:07:33,560 Speaker 1: could get the deal done before the other person's computer 123 00:07:33,640 --> 00:07:37,440 Speaker 1: have worked out exactly what the answer was. So you 124 00:07:37,480 --> 00:07:40,800 Speaker 1: were very very different world than you'd imagine. Now, I 125 00:07:41,200 --> 00:07:44,920 Speaker 1: certainly could you end up at JP Morgan where eventually 126 00:07:45,480 --> 00:07:49,920 Speaker 1: you become global head of equity derivatives trading. What was 127 00:07:50,040 --> 00:07:55,440 Speaker 1: that experience like, well, that was my first build a 128 00:07:55,440 --> 00:07:59,880 Speaker 1: business experience, and so I went there to do swell 129 00:08:01,040 --> 00:08:05,840 Speaker 1: and fairly quickly, maybe it's a couple of years I've 130 00:08:05,840 --> 00:08:09,440 Speaker 1: been there. They had a problem in their sort of 131 00:08:09,560 --> 00:08:12,120 Speaker 1: Nathan Equity group to business. And this was back in 132 00:08:12,200 --> 00:08:16,160 Speaker 1: the Glass Eagle days, so you know told of JP 133 00:08:16,200 --> 00:08:19,480 Speaker 1: Morgan wasn't particularly supposed to be doing anything in equities, 134 00:08:19,560 --> 00:08:24,119 Speaker 1: but you know, we were already a very important swaps house, 135 00:08:24,840 --> 00:08:27,520 Speaker 1: maybe the leading swaps house, and they wanted to do 136 00:08:27,560 --> 00:08:31,160 Speaker 1: other derivatives. They started in the equity rivative business and 137 00:08:31,200 --> 00:08:35,600 Speaker 1: it sort of hadn't really worked, and in a very 138 00:08:35,679 --> 00:08:38,440 Speaker 1: JP Morgan way, I got a phone call while I 139 00:08:38,480 --> 00:08:41,400 Speaker 1: was on holiday saying when you get back from holiday, 140 00:08:41,440 --> 00:08:44,200 Speaker 1: your new job is this. And then a couple of 141 00:08:44,200 --> 00:08:46,520 Speaker 1: hours later somebody called me back and said, sorry, we 142 00:08:46,520 --> 00:08:48,880 Speaker 1: were supposed to ask if you wanted that, but you know, 143 00:08:49,440 --> 00:08:52,160 Speaker 1: it was like, of course I'll take the job. Yeah, 144 00:08:52,360 --> 00:08:54,960 Speaker 1: I didn't think I got a choice. And so when 145 00:08:54,960 --> 00:08:58,600 Speaker 1: I got to that business, it was I mean it 146 00:08:58,720 --> 00:09:00,960 Speaker 1: was sort of twenty people and it was losing a 147 00:09:00,960 --> 00:09:03,840 Speaker 1: bit of money, and it had revenues of sort of 148 00:09:03,960 --> 00:09:06,959 Speaker 1: I think revenues of ten million or something. And when 149 00:09:07,000 --> 00:09:10,920 Speaker 1: I left it, what was seven eight years later, we 150 00:09:10,920 --> 00:09:14,240 Speaker 1: were up to making a billion dollars of profits. So 151 00:09:14,280 --> 00:09:17,400 Speaker 1: it was it was a huge growth of a business, 152 00:09:18,080 --> 00:09:21,920 Speaker 1: and it was a mixture of doing whatever we could 153 00:09:21,920 --> 00:09:25,000 Speaker 1: do from a kind or of the point of view 154 00:09:26,040 --> 00:09:28,959 Speaker 1: at the same time as effectively running a big hedge 155 00:09:29,000 --> 00:09:33,400 Speaker 1: fund embedded in the bank. And it was a sort 156 00:09:33,440 --> 00:09:37,880 Speaker 1: of hugely successful business that we built up there, and 157 00:09:38,000 --> 00:09:40,560 Speaker 1: it was a lot of it was driven by the 158 00:09:40,600 --> 00:09:43,600 Speaker 1: fact that JP Morgan was trying to grow a cash 159 00:09:43,640 --> 00:09:47,800 Speaker 1: equities business, and growing a cash equities business from nothing 160 00:09:48,200 --> 00:09:52,520 Speaker 1: is very expensive, and the chief executive at the time 161 00:09:52,559 --> 00:09:54,800 Speaker 1: had said that we would be able to build a 162 00:09:54,800 --> 00:09:58,960 Speaker 1: cash equities business without losing any money. And so basically 163 00:09:59,480 --> 00:10:02,720 Speaker 1: sort of job of my team was to make enough 164 00:10:02,760 --> 00:10:06,040 Speaker 1: money to offset whatever money needed to be invested in 165 00:10:06,080 --> 00:10:09,920 Speaker 1: the next year of the equities cash equities business. Honestly, 166 00:10:09,960 --> 00:10:13,000 Speaker 1: I had a real blast. I had a fantastic boss 167 00:10:13,160 --> 00:10:17,319 Speaker 1: who kept all of the sort of complicated politics of 168 00:10:17,520 --> 00:10:20,839 Speaker 1: being in a you know, in a money center bank, 169 00:10:22,640 --> 00:10:25,160 Speaker 1: away from my shoulders. I didn't have to worry about 170 00:10:25,160 --> 00:10:27,680 Speaker 1: any of that. I could just get on with running 171 00:10:27,679 --> 00:10:31,439 Speaker 1: money and we had a very good time. We built 172 00:10:31,440 --> 00:10:35,400 Speaker 1: a lot of interesting strategies, made some very good returns, 173 00:10:35,720 --> 00:10:38,480 Speaker 1: and grew it. And for me, it was a really 174 00:10:38,520 --> 00:10:41,560 Speaker 1: exciting growing a business. I got a kick of that. 175 00:10:41,640 --> 00:10:45,040 Speaker 1: I've got a kick of leading the troops, learned a 176 00:10:45,280 --> 00:10:49,840 Speaker 1: number of lessons along the way, quite fascinating. One of 177 00:10:49,840 --> 00:10:54,400 Speaker 1: the interesting things about the JP Morgan Derivative book is 178 00:10:54,440 --> 00:10:57,640 Speaker 1: it actually held up pretty well in the oh eight 179 00:10:57,720 --> 00:11:02,480 Speaker 1: or nine crisis. Beca before that, a good five or 180 00:11:02,520 --> 00:11:05,600 Speaker 1: seven years earlier, there was a little flare up that 181 00:11:05,720 --> 00:11:08,520 Speaker 1: was managed. I don't know if you were there during that, 182 00:11:09,120 --> 00:11:12,960 Speaker 1: but whatever policies were put into place, whatever risk management 183 00:11:12,960 --> 00:11:18,160 Speaker 1: policies came in, really helped JP Morrigan navigate the Great 184 00:11:18,160 --> 00:11:22,920 Speaker 1: Financial Crisis with very very little damage. Did that overlap 185 00:11:22,960 --> 00:11:26,480 Speaker 1: with your time when you were there, well, I mean, 186 00:11:26,880 --> 00:11:30,080 Speaker 1: clearly I had left well before the financial crisis, but 187 00:11:31,040 --> 00:11:33,840 Speaker 1: you know, I think that there'd been a number of 188 00:11:34,320 --> 00:11:36,480 Speaker 1: you know, as I mean, as you grow a drip 189 00:11:36,559 --> 00:11:40,000 Speaker 1: to business in your learning things, there'd been a number 190 00:11:40,040 --> 00:11:43,640 Speaker 1: of should we call them small minor hiccups, some of 191 00:11:43,679 --> 00:11:47,800 Speaker 1: which were at the time seemed extremely important, but when 192 00:11:47,840 --> 00:11:50,160 Speaker 1: you look back, they were quite small numbers compared to 193 00:11:50,720 --> 00:11:54,000 Speaker 1: financial crisis. But you know, I was part of the 194 00:11:54,080 --> 00:11:58,520 Speaker 1: sort of the old pre chase merger JP Morgan, where 195 00:11:58,640 --> 00:12:01,640 Speaker 1: risk management was really the number one thing they taught you. 196 00:12:02,520 --> 00:12:06,840 Speaker 1: And you know, Jamie Diamond obviously has a fantastic eye 197 00:12:06,920 --> 00:12:10,840 Speaker 1: through his management, and so those two things together clearly 198 00:12:10,880 --> 00:12:15,960 Speaker 1: has helped them operate through the next twenty years. And 199 00:12:16,440 --> 00:12:19,280 Speaker 1: you go from being you know, at the heart when 200 00:12:19,679 --> 00:12:23,200 Speaker 1: you know, back when I was there, people looked at 201 00:12:23,280 --> 00:12:28,080 Speaker 1: it as as a very uppercross type of business, but 202 00:12:28,320 --> 00:12:30,800 Speaker 1: you know, it wasn't really thought of as a powerhouse 203 00:12:31,320 --> 00:12:35,760 Speaker 1: away from derivatives. And obviously today it's you know, well 204 00:12:35,800 --> 00:12:40,199 Speaker 1: it's the most successful investment bank. Earlier we were discussing 205 00:12:40,240 --> 00:12:44,080 Speaker 1: your time running the equity derivative's desk at JP Morgan. 206 00:12:44,600 --> 00:12:47,520 Speaker 1: How did you get to the Man group? What what 207 00:12:47,640 --> 00:12:52,480 Speaker 1: brought you over there? Well, so after JP Morgan, I 208 00:12:52,600 --> 00:12:56,360 Speaker 1: had ten years building a fund of funds business with 209 00:12:56,600 --> 00:12:59,920 Speaker 1: my original boss, Playe. Thomlinson. So he and I were 210 00:13:00,000 --> 00:13:03,240 Speaker 1: partners in building up a fund of hedge funds business 211 00:13:03,280 --> 00:13:06,680 Speaker 1: called FRM, which was really again that was my sort 212 00:13:06,720 --> 00:13:11,560 Speaker 1: a second experience of building something, this time a private business. 213 00:13:11,800 --> 00:13:16,640 Speaker 1: It was really interesting and entertaining, and I thought it 214 00:13:16,720 --> 00:13:18,600 Speaker 1: got as big as it could get on its own. 215 00:13:19,480 --> 00:13:22,520 Speaker 1: I tried to convince playing that we should sell the business. 216 00:13:23,240 --> 00:13:26,240 Speaker 1: We had a couple of goals of getting extremely close 217 00:13:26,280 --> 00:13:29,480 Speaker 1: to selling the business, and he really couldn't bring himself 218 00:13:29,520 --> 00:13:34,080 Speaker 1: to let go, and so I basically said, Okay, well, 219 00:13:34,120 --> 00:13:36,440 Speaker 1: if you're not going to sell the business, then you 220 00:13:36,480 --> 00:13:40,040 Speaker 1: have to buy me out. And I actually retired at 221 00:13:40,040 --> 00:13:42,960 Speaker 1: the end of two thousand and seven. So I had 222 00:13:43,000 --> 00:13:47,960 Speaker 1: the good fortune to be retired during the financial crisis 223 00:13:48,840 --> 00:13:52,640 Speaker 1: and to be not emotionally involved in what was going on, 224 00:13:53,679 --> 00:13:58,960 Speaker 1: which has definitely given me longevity. And various friends running 225 00:13:59,120 --> 00:14:02,520 Speaker 1: various hedge fund businesses asked for help during the course 226 00:14:02,559 --> 00:14:06,200 Speaker 1: of the crisis, and you know, so I was you 227 00:14:06,240 --> 00:14:09,240 Speaker 1: could call it consulting, but it was essentially helping friends 228 00:14:09,240 --> 00:14:13,280 Speaker 1: with their businesses to think about what how they survived, 229 00:14:13,320 --> 00:14:15,520 Speaker 1: what they could do, what they couldn't do. You know. 230 00:14:15,600 --> 00:14:20,840 Speaker 1: It was an amazingly fast moving period and one of 231 00:14:20,880 --> 00:14:24,960 Speaker 1: those was a business called g l G that at 232 00:14:24,960 --> 00:14:27,160 Speaker 1: the time was run by a guy called Manny Roman, 233 00:14:27,960 --> 00:14:31,560 Speaker 1: who's sort of an old equity friend of mine. And 234 00:14:31,640 --> 00:14:35,040 Speaker 1: when things calmed down in the middle of two thousand 235 00:14:35,120 --> 00:14:39,240 Speaker 1: and nine, I carried on doing sort of one day 236 00:14:39,240 --> 00:14:43,480 Speaker 1: a week helping Manny at g LG, which was nice 237 00:14:43,480 --> 00:14:45,840 Speaker 1: and interesting, but I didn't have any urge to go 238 00:14:45,920 --> 00:14:48,680 Speaker 1: back to all time. So I was sort of doing 239 00:14:48,760 --> 00:14:53,080 Speaker 1: one day a week, and then what ten years ago now, 240 00:14:54,160 --> 00:14:58,440 Speaker 1: So spring of two thousand and ten, Man Group made 241 00:14:58,440 --> 00:15:03,680 Speaker 1: a bid for g LG and succeeded in buying Geology 242 00:15:04,640 --> 00:15:09,280 Speaker 1: and in looking at you know, I understood the GELG 243 00:15:09,440 --> 00:15:13,440 Speaker 1: business very well. I also understood the Man business reasonably well, 244 00:15:13,480 --> 00:15:15,800 Speaker 1: given it was sort of made up of a C 245 00:15:16,000 --> 00:15:18,680 Speaker 1: T A and a fund of DGE funds. And I 246 00:15:18,720 --> 00:15:22,400 Speaker 1: could see that the job of sorting out this merger 247 00:15:22,520 --> 00:15:27,120 Speaker 1: was going to be extremely hard work but rather intellectually interesting. 248 00:15:28,080 --> 00:15:33,240 Speaker 1: And so in effect I put my hand up and said, hey, 249 00:15:33,960 --> 00:15:36,440 Speaker 1: many you've talked to me about coming full time to 250 00:15:36,440 --> 00:15:38,240 Speaker 1: work at g LG. Well, now it's going to be 251 00:15:39,160 --> 00:15:43,160 Speaker 1: the combination of mana GELG that looks really quite fun. 252 00:15:43,960 --> 00:15:48,320 Speaker 1: And so I signed up to join Man as part 253 00:15:48,400 --> 00:15:52,600 Speaker 1: of the team that was there to turn around the business. 254 00:15:52,640 --> 00:15:57,280 Speaker 1: As you put those two things together, that's quite fascinating 255 00:15:57,280 --> 00:15:59,840 Speaker 1: in knowing it was. I came in knowing it was 256 00:15:59,880 --> 00:16:03,600 Speaker 1: a turnaround and thinking that that, you know, I built 257 00:16:03,600 --> 00:16:07,120 Speaker 1: two businesses. I'd enjoyed building two businesses, but I wasn't 258 00:16:07,120 --> 00:16:11,200 Speaker 1: back excited about starting to build another new one. But 259 00:16:11,360 --> 00:16:16,160 Speaker 1: the chance to turn around some big, quite complicated things 260 00:16:16,160 --> 00:16:20,800 Speaker 1: seemed rather exciting, and sure enough it was. So so 261 00:16:20,880 --> 00:16:24,760 Speaker 1: let's stay with that. Turning around a giant hedge fund 262 00:16:24,840 --> 00:16:27,520 Speaker 1: that had run into I don't even want to say trouble, 263 00:16:28,160 --> 00:16:33,080 Speaker 1: but had become very complex, very complicated, and perhaps some 264 00:16:33,320 --> 00:16:37,480 Speaker 1: of that was not showing up in UM the performance numbers, 265 00:16:37,640 --> 00:16:40,680 Speaker 1: or at least it wasn't consistent. If I recall that 266 00:16:40,760 --> 00:16:46,239 Speaker 1: era Man Group was a little inconsistent across different strategies, 267 00:16:46,280 --> 00:16:50,400 Speaker 1: across different managers. Tell us what you saw when you arrived, 268 00:16:50,440 --> 00:16:55,800 Speaker 1: and how did you turn a giant, multidiscipline multi manager 269 00:16:56,440 --> 00:17:02,960 Speaker 1: funds around? So UM, I mean, there was a lot 270 00:17:03,120 --> 00:17:07,960 Speaker 1: going on. The big thing was that during the pre 271 00:17:08,080 --> 00:17:13,640 Speaker 1: crisis period, Man had specialized in selling the structured products, 272 00:17:13,760 --> 00:17:17,920 Speaker 1: sort of ten year structured products, which actually the clients 273 00:17:17,920 --> 00:17:21,400 Speaker 1: did very well out of over time, but they basically 274 00:17:21,440 --> 00:17:24,159 Speaker 1: took a c t A, a fund of HETGE funds, 275 00:17:24,200 --> 00:17:28,879 Speaker 1: and a capital guarantee rolled it all up together. But importantly, 276 00:17:28,880 --> 00:17:32,400 Speaker 1: Man Group earned enormous fees out of those by any comparison, 277 00:17:33,119 --> 00:17:37,440 Speaker 1: so Man had the highest sea margins by a multiple 278 00:17:37,520 --> 00:17:41,200 Speaker 1: of five or six in the industry. But they also 279 00:17:41,240 --> 00:17:44,040 Speaker 1: had a cost base that was a multiple of anybody 280 00:17:44,040 --> 00:17:48,720 Speaker 1: else's cost base. And what was clear was in a 281 00:17:48,840 --> 00:17:52,800 Speaker 1: post crisis, well, these structured products with those sorts of 282 00:17:52,800 --> 00:17:57,119 Speaker 1: fees were unsellable, and so you could see in the 283 00:17:57,200 --> 00:18:01,399 Speaker 1: future that we had to build a new stream of 284 00:18:01,440 --> 00:18:05,080 Speaker 1: revenues for the business and a new form of distributing 285 00:18:05,119 --> 00:18:08,600 Speaker 1: the product, and we also really had to sort out 286 00:18:08,600 --> 00:18:11,800 Speaker 1: the cost base. So I think roughly the numbers went 287 00:18:12,160 --> 00:18:15,919 Speaker 1: at the point of the merger that were about two thousand, 288 00:18:16,040 --> 00:18:21,200 Speaker 1: four hundred people in Man Group, and at the low 289 00:18:21,480 --> 00:18:26,159 Speaker 1: when we finished all of the cost initiatives that we 290 00:18:26,200 --> 00:18:30,000 Speaker 1: needed to do, there were about seven fifty. So it 291 00:18:30,160 --> 00:18:37,719 Speaker 1: was very significant cost removal exercise. Combined with that, we 292 00:18:37,760 --> 00:18:41,919 Speaker 1: had to make sure that the investment processes were really 293 00:18:41,960 --> 00:18:47,560 Speaker 1: focused on alpha generation and that required some a mixture 294 00:18:47,560 --> 00:18:50,080 Speaker 1: of change of people and change of emphasis of what 295 00:18:50,119 --> 00:18:53,320 Speaker 1: they focused on. And then thirdly, we had to build 296 00:18:53,320 --> 00:18:58,000 Speaker 1: an entirely new distribution process. In the pre crisis world, 297 00:18:58,680 --> 00:19:02,919 Speaker 1: these structured products were basically Man paid other people to 298 00:19:02,960 --> 00:19:07,080 Speaker 1: sell them for them, and they were sold to retail 299 00:19:07,160 --> 00:19:10,520 Speaker 1: around the world with an average ticket size and ten dollars. 300 00:19:11,760 --> 00:19:16,199 Speaker 1: You know, what we did was to build a basically 301 00:19:16,280 --> 00:19:21,080 Speaker 1: from scratch institutional sales process. So today we're an eight 302 00:19:21,280 --> 00:19:26,520 Speaker 1: percent institutional business and even the other is you know, 303 00:19:26,560 --> 00:19:30,480 Speaker 1: what we think of as retail business is JP Morgan 304 00:19:30,560 --> 00:19:34,200 Speaker 1: Private banking is Morgan Stanley's wirehouse. You know, we don't 305 00:19:34,240 --> 00:19:38,320 Speaker 1: do any direct to individual type of selling at all 306 00:19:38,400 --> 00:19:43,399 Speaker 1: these days. Quite interesting, So most hedge funds we know 307 00:19:43,520 --> 00:19:48,480 Speaker 1: about are not publicly traded entities. Why did Man Group 308 00:19:48,520 --> 00:19:53,800 Speaker 1: decide to go public? Um, well, clearly pre my time, 309 00:19:54,440 --> 00:19:57,960 Speaker 1: and I would say that at the time Man Group 310 00:19:58,119 --> 00:20:02,320 Speaker 1: was more of a holding company and the bit that's 311 00:20:02,400 --> 00:20:06,120 Speaker 1: the hedge fund was one of a number of pieces 312 00:20:06,160 --> 00:20:10,680 Speaker 1: within the puzzle. And so a Man has a rather 313 00:20:10,800 --> 00:20:13,600 Speaker 1: wonderful story in history. The business has been the firm 314 00:20:13,600 --> 00:20:16,920 Speaker 1: has been around almost two d and forty years. Used 315 00:20:16,960 --> 00:20:19,520 Speaker 1: to have a monopoly and supplying run to the Royal 316 00:20:19,600 --> 00:20:23,840 Speaker 1: Navy doesn't sound like much of a business, but everybody 317 00:20:23,880 --> 00:20:28,119 Speaker 1: in the Royal Navy used to get what's not quite 318 00:20:28,160 --> 00:20:31,000 Speaker 1: half a point of rum every day, and you have 319 00:20:31,000 --> 00:20:33,080 Speaker 1: a monopoly providing that. It was a very good business 320 00:20:33,080 --> 00:20:35,280 Speaker 1: for a long time. So they were sort of quite 321 00:20:35,359 --> 00:20:38,560 Speaker 1: late to the asset management thing. It wasn't their nature. 322 00:20:38,600 --> 00:20:43,159 Speaker 1: They were a commodity dealer, but more a principle and 323 00:20:44,000 --> 00:20:50,480 Speaker 1: through essentially the acquisition of HL which is the ct 324 00:20:50,680 --> 00:20:53,399 Speaker 1: A within the firm, or the platform that came from 325 00:20:53,440 --> 00:20:56,240 Speaker 1: the ct A, the you know, they started in the 326 00:20:56,240 --> 00:20:59,919 Speaker 1: asset management business, and so you know when they went public, 327 00:21:00,040 --> 00:21:03,640 Speaker 1: they were thinking of themselves as a financial conglomerate. As 328 00:21:03,640 --> 00:21:06,720 Speaker 1: a hedge fund business. You know, there are things we 329 00:21:06,840 --> 00:21:09,160 Speaker 1: gain from being public and there are things we lose 330 00:21:09,200 --> 00:21:12,239 Speaker 1: from being public. You know that the truth of it is, 331 00:21:13,160 --> 00:21:17,000 Speaker 1: if you're a private hedge fund business, I wouldn't recommend 332 00:21:17,040 --> 00:21:21,240 Speaker 1: going public. As a public hedge fund business, I wouldn't 333 00:21:21,280 --> 00:21:24,720 Speaker 1: recommend going private. It's you know, there are swings and roundabouts, 334 00:21:24,800 --> 00:21:30,720 Speaker 1: gains and losses. It's absolutely fine, but you know sort 335 00:21:30,760 --> 00:21:35,080 Speaker 1: of that there's pluses and minuses in the columns. Look, 336 00:21:35,160 --> 00:21:37,880 Speaker 1: let's talk a little bit about the state of the 337 00:21:37,960 --> 00:21:43,760 Speaker 1: industry today. Things are pretty challenging for a lot of 338 00:21:43,760 --> 00:21:47,520 Speaker 1: hedge funds really since the Great Financial Crisis the past 339 00:21:47,520 --> 00:21:51,359 Speaker 1: decade plus. Why is it that so many hedge funds 340 00:21:51,560 --> 00:21:55,320 Speaker 1: have been struggling? And the obvious follow up question and 341 00:21:55,359 --> 00:22:02,840 Speaker 1: how come you guys have not I think that one 342 00:22:02,840 --> 00:22:07,960 Speaker 1: of the things that we're seeing in many industries with 343 00:22:08,119 --> 00:22:11,919 Speaker 1: the rise of technology, and I think it's primarily driven 344 00:22:11,920 --> 00:22:15,240 Speaker 1: by technology. But it's an interesting question because you see 345 00:22:15,240 --> 00:22:19,600 Speaker 1: it in many different industries. Is the stronger getting stronger 346 00:22:20,640 --> 00:22:25,520 Speaker 1: and the week are struggling to survive. And the hedge 347 00:22:25,520 --> 00:22:29,760 Speaker 1: fund business is a very Darwinian industry. And what you're 348 00:22:29,800 --> 00:22:35,200 Speaker 1: seeing is that the larger hedge fund platforms have actually 349 00:22:35,240 --> 00:22:38,520 Speaker 1: done very well over the last five and ten years 350 00:22:39,240 --> 00:22:43,280 Speaker 1: and have grown and have got you know, with signs, 351 00:22:43,320 --> 00:22:46,440 Speaker 1: have actually been able to invest more and thereby create 352 00:22:47,040 --> 00:22:51,160 Speaker 1: bigger barriers to entry, which creates competitive advantage, which makes 353 00:22:51,240 --> 00:22:54,520 Speaker 1: it even harder for the small hedge fund And so, 354 00:22:54,920 --> 00:22:58,439 Speaker 1: you know, twenty whatever years ago, when I started in 355 00:22:58,480 --> 00:23:01,679 Speaker 1: the hedge fund business, it was all about looking for 356 00:23:01,800 --> 00:23:06,920 Speaker 1: the next two hundred million dollar hedge fund. The reality 357 00:23:07,000 --> 00:23:11,280 Speaker 1: is that's not really an economically viable business anymore. And 358 00:23:11,440 --> 00:23:15,959 Speaker 1: so you know that what's been happening is a concentration 359 00:23:16,359 --> 00:23:19,960 Speaker 1: of the alpha with the people who can afford to 360 00:23:20,080 --> 00:23:23,119 Speaker 1: invest in the technology, who can afford to invest in 361 00:23:23,160 --> 00:23:28,720 Speaker 1: the best people, and that is squeezing out the smaller players. 362 00:23:28,800 --> 00:23:31,840 Speaker 1: So you hear a lot of stories of people struggling 363 00:23:31,880 --> 00:23:36,000 Speaker 1: in the hedge fund industry because by number of hedge funds, 364 00:23:36,800 --> 00:23:39,520 Speaker 1: that's right, But when you look at it in terms 365 00:23:39,520 --> 00:23:43,600 Speaker 1: of the overall industry, actually it's in rather good health. 366 00:23:43,680 --> 00:23:47,800 Speaker 1: It's just the good health is getting concentrated in first 367 00:23:48,160 --> 00:23:51,960 Speaker 1: the top and the top hundred, now maybe the top 368 00:23:52,000 --> 00:23:56,280 Speaker 1: twenty players when you take all we see that across 369 00:23:56,280 --> 00:23:59,880 Speaker 1: a lot of industries. So you mentioned and I think 370 00:24:00,040 --> 00:24:03,480 Speaker 1: it's I think it's particularly something around this technology question 371 00:24:03,600 --> 00:24:08,520 Speaker 1: because one of the big differences between human process and 372 00:24:08,600 --> 00:24:14,719 Speaker 1: technology processes. When you develop a human process, uh, you know, 373 00:24:14,960 --> 00:24:18,000 Speaker 1: the next day you have to repeat roughly the same 374 00:24:18,000 --> 00:24:21,239 Speaker 1: process again in order to check that everything is all right, 375 00:24:21,880 --> 00:24:25,520 Speaker 1: and so the amount of new research you do is 376 00:24:25,560 --> 00:24:30,720 Speaker 1: relatively constrained when you have a technology process. Once you've 377 00:24:30,720 --> 00:24:33,960 Speaker 1: got the technology running, you don't really need to spend 378 00:24:34,040 --> 00:24:36,639 Speaker 1: very much time at all making sure it's doing what 379 00:24:36,640 --> 00:24:39,240 Speaker 1: it's supposed to be doing, and so you can put 380 00:24:39,359 --> 00:24:44,520 Speaker 1: nine of your time into new research and that means 381 00:24:44,560 --> 00:24:49,560 Speaker 1: that you get a compounding effect that over time really 382 00:24:49,640 --> 00:24:54,159 Speaker 1: is is a significant benefit to the technology empowered business 383 00:24:54,320 --> 00:24:57,480 Speaker 1: over the one that is sort of dragging its feed 384 00:24:59,040 --> 00:25:04,400 Speaker 1: quite quite fast innings. So during the first quarter, when 385 00:25:04,440 --> 00:25:08,479 Speaker 1: the market dropped pretty substantially, you saw a drop of 386 00:25:08,600 --> 00:25:12,800 Speaker 1: only eleven, a lot of hedge funds did much much 387 00:25:12,840 --> 00:25:16,120 Speaker 1: worse than that. What did you guys see to get 388 00:25:16,160 --> 00:25:22,560 Speaker 1: this right? Or asked more systematically, what was the technological 389 00:25:22,800 --> 00:25:27,199 Speaker 1: edge that helped you avoid the full thirty plus percent 390 00:25:27,320 --> 00:25:32,760 Speaker 1: down draft? So many other funds suffered. So I think 391 00:25:32,800 --> 00:25:38,119 Speaker 1: one of the things just to highlight is so sort 392 00:25:38,119 --> 00:25:42,720 Speaker 1: of six what we do is hedge funds and is 393 00:25:42,880 --> 00:25:46,040 Speaker 1: long only, and so we run a number of long 394 00:25:46,080 --> 00:25:49,879 Speaker 1: only strategies as well within the platform. And you know, 395 00:25:49,920 --> 00:25:52,560 Speaker 1: when you look at the returns in the first quarter, 396 00:25:53,680 --> 00:25:57,680 Speaker 1: the long only strategies were down when we had some 397 00:25:57,920 --> 00:26:03,080 Speaker 1: decent outfit performance, but they were down proportionately with the market. Actually, 398 00:26:03,080 --> 00:26:07,159 Speaker 1: our hedge fund strategies on average made money small but 399 00:26:07,240 --> 00:26:10,920 Speaker 1: on average made small money in the first quarter. And 400 00:26:11,359 --> 00:26:14,520 Speaker 1: you know what was that about. Well, the if I 401 00:26:14,560 --> 00:26:18,280 Speaker 1: go back to that thing I mentioned about JP Morgan 402 00:26:18,359 --> 00:26:22,359 Speaker 1: in the beginning, you know, I think that risk management 403 00:26:22,800 --> 00:26:27,239 Speaker 1: is an incredibly important skill. And if you looked at 404 00:26:27,240 --> 00:26:33,440 Speaker 1: our positioning on the February just before the market turned, yeah, 405 00:26:33,480 --> 00:26:36,560 Speaker 1: we had good positioning for the way the market was 406 00:26:36,600 --> 00:26:41,480 Speaker 1: then and therefore horrific positioning for where the market was 407 00:26:42,080 --> 00:26:47,479 Speaker 1: two weeks later. Um. But we've spent a lot of 408 00:26:47,480 --> 00:26:51,600 Speaker 1: our time and energy on investing in our risk management 409 00:26:51,640 --> 00:26:56,159 Speaker 1: processes and particularly a sort of strong belief that the 410 00:26:56,359 --> 00:27:00,520 Speaker 1: simple answer to risk management is if you don't like position, 411 00:27:01,280 --> 00:27:05,239 Speaker 1: don't try and find some complicated heading strategy, get rid 412 00:27:05,280 --> 00:27:08,639 Speaker 1: of it. And so in order to do that you 413 00:27:08,680 --> 00:27:10,439 Speaker 1: have to spend a lot of time and effort on 414 00:27:10,520 --> 00:27:14,399 Speaker 1: your execution process. But basically what we were able to 415 00:27:14,440 --> 00:27:19,320 Speaker 1: do is the systems recognized very quickly that they had 416 00:27:19,359 --> 00:27:22,560 Speaker 1: the wrong positioning as the market started to sell off, 417 00:27:23,080 --> 00:27:26,680 Speaker 1: and we got out of that positioning very quickly by 418 00:27:26,760 --> 00:27:29,720 Speaker 1: the end of February so that we could make money 419 00:27:30,000 --> 00:27:34,080 Speaker 1: as the market continued itsel off down into the end 420 00:27:34,080 --> 00:27:39,200 Speaker 1: of March, and you know it comes from very good 421 00:27:39,359 --> 00:27:43,640 Speaker 1: risk management systems and the risk management built into everything 422 00:27:43,640 --> 00:27:48,439 Speaker 1: we do. But really important the execution platform because the 423 00:27:48,520 --> 00:27:52,880 Speaker 1: market's got pretty crazy, as we all remember during that period, 424 00:27:53,680 --> 00:27:59,320 Speaker 1: and doing your execution in a smart way was really 425 00:27:59,359 --> 00:28:03,359 Speaker 1: important because if you were a bit sloppy about it, 426 00:28:03,400 --> 00:28:06,840 Speaker 1: you could get terrible slippage, so you could be leaving 427 00:28:06,880 --> 00:28:10,199 Speaker 1: loads of money on the table. Yeah. We because of 428 00:28:10,240 --> 00:28:12,960 Speaker 1: the investment we made in that execution, we're able to 429 00:28:13,000 --> 00:28:17,119 Speaker 1: get out of our positions without leaving lots a bit 430 00:28:17,200 --> 00:28:21,080 Speaker 1: offer on the table. M hm, very interesting. What do 431 00:28:21,119 --> 00:28:24,359 Speaker 1: you make of this recovery? Here we are in the 432 00:28:24,440 --> 00:28:28,440 Speaker 1: second week of June. Nasdaq is up to all time highs, 433 00:28:28,960 --> 00:28:32,560 Speaker 1: SMP not quite back to all time highs, but just 434 00:28:32,680 --> 00:28:36,440 Speaker 1: about positive for the year. Have we come too far 435 00:28:36,480 --> 00:28:40,800 Speaker 1: too fast? Or do you just let the technology guide 436 00:28:40,840 --> 00:28:47,280 Speaker 1: you on those decisions and not sort of spitball market commentary? Well, 437 00:28:47,440 --> 00:28:51,760 Speaker 1: I'm always happy to spitball market commentary. But the machines 438 00:28:51,800 --> 00:28:53,600 Speaker 1: will do what the machines do. They don't do what 439 00:28:53,640 --> 00:28:57,200 Speaker 1: I tell them to do, that's for sure, But quite interestingly, 440 00:28:57,320 --> 00:29:02,200 Speaker 1: they they don't really believe in this rally. Either, which 441 00:29:02,240 --> 00:29:06,440 Speaker 1: there's something about history, but it's very easy to see 442 00:29:06,480 --> 00:29:10,800 Speaker 1: how the first half of the rally happened, given how 443 00:29:10,880 --> 00:29:15,560 Speaker 1: quickly we sold off, perfectly normal in market behavior for 444 00:29:16,240 --> 00:29:20,800 Speaker 1: a rebound, normally for for the port of shorts to 445 00:29:20,880 --> 00:29:24,200 Speaker 1: reset if you like, um, you know, and then we 446 00:29:24,280 --> 00:29:28,400 Speaker 1: saw this amazing wave of retail buying that came in 447 00:29:28,560 --> 00:29:32,520 Speaker 1: and sort from the middle of April onwards that has 448 00:29:32,600 --> 00:29:37,760 Speaker 1: really driven the rally up here. And I think it's 449 00:29:38,040 --> 00:29:41,800 Speaker 1: easy to look at valuations where they are now and 450 00:29:42,000 --> 00:29:48,080 Speaker 1: think that the valuations are going down from here. Now. 451 00:29:48,520 --> 00:29:52,280 Speaker 1: Whether that happens in the next month will depend on 452 00:29:52,480 --> 00:29:54,640 Speaker 1: more buyers or sellers. I mean, you know, this is 453 00:29:54,960 --> 00:29:58,480 Speaker 1: the market is being driven by technicals. But I think 454 00:29:58,600 --> 00:30:02,960 Speaker 1: somewhere over the summer it's almost inevitable that the sort 455 00:30:02,960 --> 00:30:06,280 Speaker 1: of buying frenzy from retail is running out of steam. 456 00:30:07,080 --> 00:30:11,520 Speaker 1: The issuing from companies is not running out of steam, 457 00:30:12,160 --> 00:30:14,360 Speaker 1: and there's a point where that's going to create more 458 00:30:14,400 --> 00:30:19,840 Speaker 1: sellers than buyers, and we'll start another leg down. How 459 00:30:19,880 --> 00:30:24,640 Speaker 1: far that goes will be an interesting question. I think evaluation, 460 00:30:24,760 --> 00:30:30,680 Speaker 1: which basically says that the current valuation says earnings have 461 00:30:30,880 --> 00:30:35,560 Speaker 1: to be at least as high as earnings, and you're 462 00:30:35,600 --> 00:30:38,000 Speaker 1: happy to put on a multiple that's higher than we 463 00:30:38,040 --> 00:30:44,160 Speaker 1: had in myself. You know, you can debate multiples, but 464 00:30:45,240 --> 00:30:48,280 Speaker 1: you know that that even if the economy, I think 465 00:30:48,320 --> 00:30:52,600 Speaker 1: that the most most optimistic view of the economy would 466 00:30:52,600 --> 00:30:59,040 Speaker 1: be the returns to something like grow sort of absolute 467 00:30:59,120 --> 00:31:02,240 Speaker 1: GDP into one, I think it's likely to be lower. 468 00:31:03,560 --> 00:31:07,720 Speaker 1: In that process, I think that you're likely to see 469 00:31:08,040 --> 00:31:13,560 Speaker 1: higher costs for companies and higher cost of capital because 470 00:31:13,600 --> 00:31:16,680 Speaker 1: they're likely to run more conservative balance sheets. You know, 471 00:31:16,720 --> 00:31:19,840 Speaker 1: they're going to have to pay the sort of gig 472 00:31:19,880 --> 00:31:24,600 Speaker 1: type of workers more, and so I think the you know, 473 00:31:24,640 --> 00:31:27,920 Speaker 1: the margins that companies had in are not going to 474 00:31:27,960 --> 00:31:32,760 Speaker 1: be seen. But at the moment, you know, this market 475 00:31:32,800 --> 00:31:36,000 Speaker 1: is being driven purely by technicals. On every day, there 476 00:31:36,000 --> 00:31:39,880 Speaker 1: are more buyers and sellers. You go up. Before we 477 00:31:39,920 --> 00:31:43,560 Speaker 1: get into some more details about different strategies and what's 478 00:31:43,600 --> 00:31:46,920 Speaker 1: working and what's not, tell us a little bit about 479 00:31:47,000 --> 00:31:52,000 Speaker 1: your role as CEO. Are you overseeing investments? Are you 480 00:31:52,040 --> 00:31:56,720 Speaker 1: overseeing investor relations? Running the day to day business? Man 481 00:31:56,760 --> 00:32:02,720 Speaker 1: Group is a pretty substantial, complicated business to run. What 482 00:32:02,880 --> 00:32:08,960 Speaker 1: demands your attention the most? The interesting thing is considered 483 00:32:09,080 --> 00:32:14,960 Speaker 1: not what people expect, So I probably maybe I spend 484 00:32:15,000 --> 00:32:19,360 Speaker 1: ten per cent of my time on corporate stuff. We are, 485 00:32:19,400 --> 00:32:22,840 Speaker 1: as you say, a public company that requires a certain 486 00:32:22,840 --> 00:32:25,640 Speaker 1: amount of things, But I spend very little time with 487 00:32:25,680 --> 00:32:29,160 Speaker 1: our shareholders. I provide them with the information and then 488 00:32:29,240 --> 00:32:32,479 Speaker 1: leave them to make their own decision. I spend about 489 00:32:33,120 --> 00:32:38,400 Speaker 1: ten percent of my time on clients, um sort of 490 00:32:38,440 --> 00:32:42,800 Speaker 1: temper cent of my time on the sort of other 491 00:32:42,880 --> 00:32:47,360 Speaker 1: aspects of business management. And you know what I spend 492 00:32:47,400 --> 00:32:51,600 Speaker 1: most of my time on is really the people. You know, 493 00:32:51,640 --> 00:32:54,480 Speaker 1: I have strong views about markets. I talk markets all 494 00:32:54,520 --> 00:32:57,000 Speaker 1: the time with the different people at work, but you know, 495 00:32:57,080 --> 00:33:01,720 Speaker 1: I don't influence anybody's investment pro fesse. But I spend 496 00:33:01,720 --> 00:33:05,680 Speaker 1: a lot of time on getting people to work together well, 497 00:33:05,840 --> 00:33:10,040 Speaker 1: making sure that they're happy in their job, making sure 498 00:33:10,080 --> 00:33:12,239 Speaker 1: that people that are having a tough time have an 499 00:33:12,320 --> 00:33:15,160 Speaker 1: arm around the shoulder, making sure that people that are 500 00:33:15,320 --> 00:33:19,000 Speaker 1: doing really well don't get cocky, and you know, you 501 00:33:19,080 --> 00:33:23,440 Speaker 1: poke them hard so that they don't get arrogant about it. 502 00:33:23,520 --> 00:33:27,360 Speaker 1: Because we all know, whatever your investment style is, at 503 00:33:27,440 --> 00:33:30,720 Speaker 1: various points, the market will love your investment style and 504 00:33:30,840 --> 00:33:33,120 Speaker 1: you'll look really clever, and there are times when the 505 00:33:33,200 --> 00:33:36,320 Speaker 1: market will hate your investment style. And you know, what 506 00:33:36,360 --> 00:33:41,760 Speaker 1: we want is people and whether it's discretionary or quand 507 00:33:42,240 --> 00:33:46,080 Speaker 1: to stick to a process. And so my job to 508 00:33:47,280 --> 00:33:51,080 Speaker 1: keep them motivated, keep them working together, make sure you 509 00:33:51,440 --> 00:33:55,040 Speaker 1: provide leadership to the people, because you know, in the end, 510 00:33:55,120 --> 00:33:59,280 Speaker 1: these businesses are all about the people you have within them. 511 00:33:59,320 --> 00:34:02,760 Speaker 1: Quite interesting in let's talk a little bit about what 512 00:34:03,320 --> 00:34:08,520 Speaker 1: the various worldwide government's responses have been to the pandemic. 513 00:34:09,120 --> 00:34:13,360 Speaker 1: Central banks of slash rates. They've injected a ton of liquidity, 514 00:34:13,560 --> 00:34:17,719 Speaker 1: lots of governments have done large fiscal stimulus. How much 515 00:34:17,760 --> 00:34:21,480 Speaker 1: of this rally is being driven by all this government 516 00:34:21,560 --> 00:34:25,120 Speaker 1: largess and how much of it is bounce back from 517 00:34:25,320 --> 00:34:32,439 Speaker 1: the fastest down I think we've ever seen in market history. Yeah, 518 00:34:32,480 --> 00:34:35,640 Speaker 1: I think we've hit the fastest, quickest, largest everything in 519 00:34:35,680 --> 00:34:40,840 Speaker 1: the last oh actually in everything compare the last time 520 00:34:41,480 --> 00:34:43,640 Speaker 1: that this all happened was in the circus, which is 521 00:34:43,680 --> 00:34:47,120 Speaker 1: a slightly scary thought of the hold. I think what 522 00:34:47,239 --> 00:34:53,200 Speaker 1: you've got going on is, you know, you have a 523 00:34:53,280 --> 00:34:59,040 Speaker 1: serious tsunami of pain in the real economy out there. Um, 524 00:34:59,080 --> 00:35:02,759 Speaker 1: you know, even with a slightly strange unemployment numbers that 525 00:35:02,800 --> 00:35:05,680 Speaker 1: we had on Friday. You know, we've had a ten 526 00:35:05,719 --> 00:35:09,360 Speaker 1: percent increase in unemployment in the space for two months, 527 00:35:10,200 --> 00:35:12,879 Speaker 1: and you know, in many countries it's a lot worse 528 00:35:12,960 --> 00:35:17,040 Speaker 1: than that. Um. You know, when you talk to anybody 529 00:35:17,160 --> 00:35:22,080 Speaker 1: running a small business in the sort of you know 530 00:35:22,160 --> 00:35:25,000 Speaker 1: that's not in the financial markets, in the real economy, 531 00:35:25,200 --> 00:35:29,840 Speaker 1: that they're having a miserable time. Um. And on the 532 00:35:29,880 --> 00:35:34,200 Speaker 1: other side, you've got this incredible ways of money that's 533 00:35:34,239 --> 00:35:37,800 Speaker 1: come from governments and central banks getting harder and harder 534 00:35:37,840 --> 00:35:40,320 Speaker 1: to tell governments and central banks apart to be honest. 535 00:35:41,160 --> 00:35:44,920 Speaker 1: You know, that has to something I alluded to earlier 536 00:35:45,560 --> 00:35:50,320 Speaker 1: that has definitely benefited a lot of the larger companies. 537 00:35:51,520 --> 00:35:55,080 Speaker 1: That's where most of the money has gone to. And 538 00:35:55,600 --> 00:36:01,240 Speaker 1: so there is something understandable that says, you know, large 539 00:36:01,280 --> 00:36:06,799 Speaker 1: tax stocks are doing relatively well in a world where 540 00:36:06,800 --> 00:36:11,359 Speaker 1: the overall economy is still doing poorly, because there will 541 00:36:11,400 --> 00:36:14,000 Speaker 1: be market share gains for big companies out of all 542 00:36:14,000 --> 00:36:18,200 Speaker 1: of this, I believe. But one of the troubles of 543 00:36:18,280 --> 00:36:22,040 Speaker 1: trying to put valuations on the market or valuations on 544 00:36:22,160 --> 00:36:27,720 Speaker 1: individual stocks is you know, these enormous waves of money 545 00:36:27,719 --> 00:36:32,719 Speaker 1: in the different directions. People are trying to guess the 546 00:36:32,840 --> 00:36:37,000 Speaker 1: inputs for their share model that you know, the stock 547 00:36:37,120 --> 00:36:39,719 Speaker 1: valuation model that they had a year ago. What are 548 00:36:39,719 --> 00:36:42,400 Speaker 1: the inputs I should put in for next year? I 549 00:36:42,440 --> 00:36:45,000 Speaker 1: have to say my own senses, you need a different 550 00:36:45,040 --> 00:36:48,239 Speaker 1: model looking forward, because I do think out of all 551 00:36:48,280 --> 00:36:51,920 Speaker 1: of this, there are going to be some material changes 552 00:36:52,000 --> 00:36:55,440 Speaker 1: over time. Sort of time scales in the US are 553 00:36:55,440 --> 00:36:58,960 Speaker 1: hard to guess given the political situation, but yeah, there 554 00:36:59,000 --> 00:37:02,520 Speaker 1: are going to be changed us for the corporate landscape 555 00:37:02,560 --> 00:37:04,520 Speaker 1: in the same way that there were coming out of 556 00:37:04,560 --> 00:37:09,120 Speaker 1: two thousand and eight nine to the financial institution landscape 557 00:37:10,000 --> 00:37:16,520 Speaker 1: two nine. You know what happened. You can say what 558 00:37:16,520 --> 00:37:18,680 Speaker 1: we realized. I don't know, but it's certainly what happened 559 00:37:19,480 --> 00:37:23,600 Speaker 1: was that, you know, there's a conclusion banks were two 560 00:37:23,680 --> 00:37:27,680 Speaker 1: levered and that they didn't take enough responsibility for their 561 00:37:27,719 --> 00:37:31,640 Speaker 1: own actions, and they were not resilient enough in their business. 562 00:37:32,000 --> 00:37:34,759 Speaker 1: And so we came out of two thousand eight nine 563 00:37:35,360 --> 00:37:39,760 Speaker 1: with a series of regulation which put leverage limits on banks, 564 00:37:40,760 --> 00:37:43,719 Speaker 1: to impose stress tests on them so the businesses were 565 00:37:43,760 --> 00:37:47,800 Speaker 1: more resilient and put personal liability into the management of 566 00:37:47,880 --> 00:37:52,960 Speaker 1: the of the banks. I think personally that we're likely 567 00:37:53,000 --> 00:37:56,960 Speaker 1: to see similar types of things come out of this, 568 00:37:57,200 --> 00:38:01,040 Speaker 1: but applied to the corporate world, because what happened after 569 00:38:01,120 --> 00:38:04,439 Speaker 1: two thousand and eight nine was bank leverage went down 570 00:38:04,520 --> 00:38:07,440 Speaker 1: and corporate leverage went up a lot, and so we 571 00:38:07,520 --> 00:38:10,880 Speaker 1: came into the crisis with all of these companies with 572 00:38:11,200 --> 00:38:15,280 Speaker 1: absolutely no resilience. Not again, not all of the companies. 573 00:38:15,360 --> 00:38:18,440 Speaker 1: You could see why an Amazon or an Apple has 574 00:38:18,520 --> 00:38:21,680 Speaker 1: done incredibly well through all of this because they have 575 00:38:21,840 --> 00:38:26,520 Speaker 1: incredibly robust balant sheets. But if you look at a 576 00:38:26,560 --> 00:38:31,440 Speaker 1: whole bunch of the names which um I've struggled, you 577 00:38:31,560 --> 00:38:35,840 Speaker 1: see that they had huge leverage and no ability to 578 00:38:35,920 --> 00:38:40,440 Speaker 1: withstand two three months of you know, I mean it's 579 00:38:40,440 --> 00:38:44,680 Speaker 1: an extreme shock, but still to withstand two or three 580 00:38:44,719 --> 00:38:48,960 Speaker 1: months of no income is not you know, I don't 581 00:38:48,960 --> 00:38:52,520 Speaker 1: think that's an unreasonable thing to expect the company to 582 00:38:52,600 --> 00:38:55,839 Speaker 1: run with that amount of resilience. And I think you're 583 00:38:55,920 --> 00:38:58,399 Speaker 1: life you to see regulation coming out of the other 584 00:38:58,520 --> 00:39:03,280 Speaker 1: end of this which start to drive that behavior into company. 585 00:39:03,800 --> 00:39:07,239 Speaker 1: We've certainly seen that in the just in time delivery 586 00:39:07,400 --> 00:39:12,400 Speaker 1: for essential medical and food supplies. I wouldn't be surprised 587 00:39:12,840 --> 00:39:18,280 Speaker 1: to see some regulations change with that. When the supermarkets 588 00:39:18,320 --> 00:39:22,000 Speaker 1: don't have toilet paper for a month, that doesn't say 589 00:39:22,800 --> 00:39:27,000 Speaker 1: your society is especially stable, does it. There you go 590 00:39:27,440 --> 00:39:31,640 Speaker 1: and you know you you mean, you know, toilet paper 591 00:39:31,760 --> 00:39:34,160 Speaker 1: was I mean, it's a perfect post to chart on it. 592 00:39:34,880 --> 00:39:37,160 Speaker 1: And one of the things is, you know, when you 593 00:39:37,200 --> 00:39:40,080 Speaker 1: think you might run out of toilet paper, you're willing 594 00:39:40,120 --> 00:39:42,640 Speaker 1: to pay any price for it. But that's not good 595 00:39:42,680 --> 00:39:46,239 Speaker 1: for an economy. So I think that just in time 596 00:39:46,280 --> 00:39:52,000 Speaker 1: inventories is another form of running businesses with extremely low resiliency. 597 00:39:52,400 --> 00:39:56,239 Speaker 1: And so I think that either through company management or 598 00:39:56,239 --> 00:39:58,960 Speaker 1: through regulation, there is going to be a push for 599 00:39:59,120 --> 00:40:03,280 Speaker 1: companies to run with more inventory, to run with shorter 600 00:40:03,400 --> 00:40:06,920 Speaker 1: supply lines. And if you've got the longest supply line, 601 00:40:06,920 --> 00:40:10,480 Speaker 1: then it's got to have more, even more inventory built 602 00:40:10,480 --> 00:40:15,239 Speaker 1: into it. All of these things are likely to come 603 00:40:15,239 --> 00:40:19,400 Speaker 1: out of the other side of this crisis. And you know, 604 00:40:19,480 --> 00:40:23,960 Speaker 1: when we when we moved from companies having you know, 605 00:40:24,120 --> 00:40:27,600 Speaker 1: sort of a year of spare part inventory to just 606 00:40:27,800 --> 00:40:32,279 Speaker 1: in time manufacturing, the route of direction was a good one. 607 00:40:33,000 --> 00:40:35,560 Speaker 1: But I think you know, in the way that happens 608 00:40:35,600 --> 00:40:39,520 Speaker 1: if there's no regulation, it went too far. I'm a 609 00:40:39,600 --> 00:40:42,200 Speaker 1: huge believer in capitalism. It's the best system there is, 610 00:40:42,840 --> 00:40:46,440 Speaker 1: but it shouldn't be untrammeled. It should have some constraints 611 00:40:46,480 --> 00:40:49,600 Speaker 1: on it. And you know, if you actually go back 612 00:40:49,640 --> 00:40:52,960 Speaker 1: and read Adam Smith, you know who is everybody's posted 613 00:40:53,080 --> 00:40:56,880 Speaker 1: child for the father of capitalism. Actually, when he talks 614 00:40:56,920 --> 00:40:59,680 Speaker 1: about the invisible hand, in the rest of the chat, 615 00:40:59,840 --> 00:41:03,320 Speaker 1: he talks about the fact that the invisible hand needs 616 00:41:03,360 --> 00:41:09,080 Speaker 1: some constraints to stop it going too far. Absolutely, So 617 00:41:09,160 --> 00:41:12,280 Speaker 1: let me shift gears a little bit and ask you 618 00:41:12,480 --> 00:41:15,880 Speaker 1: about a different sort of practice within the Man group. 619 00:41:16,840 --> 00:41:21,920 Speaker 1: You have a private practice focusing on real estate, single 620 00:41:21,960 --> 00:41:25,680 Speaker 1: family homes financing. Tell us a little bit about that 621 00:41:25,760 --> 00:41:30,359 Speaker 1: practice and what you are looking at going forward. Some 622 00:41:30,440 --> 00:41:35,960 Speaker 1: people have posited that following the pandemic, there's gonna be 623 00:41:36,239 --> 00:41:38,600 Speaker 1: a little bit of an egress out of the city 624 00:41:39,160 --> 00:41:42,960 Speaker 1: and into the surrounding bedroom communities where you have a 625 00:41:42,960 --> 00:41:45,640 Speaker 1: little more space and a little more room to deal 626 00:41:46,360 --> 00:41:49,880 Speaker 1: with either a pandemic or a shelter in place situation. 627 00:41:52,600 --> 00:41:56,400 Speaker 1: I think that's right. I would love to say that, 628 00:41:57,160 --> 00:42:00,200 Speaker 1: you know, we have predicted that part in getting into 629 00:42:00,280 --> 00:42:03,239 Speaker 1: this business, But you know, I think what we saw 630 00:42:03,760 --> 00:42:08,200 Speaker 1: was in the States. Two big things happening. One has 631 00:42:08,239 --> 00:42:13,000 Speaker 1: been a gradual drift of people from I guess you'd 632 00:42:13,040 --> 00:42:17,520 Speaker 1: call it something like the Northeast down in the direction 633 00:42:17,600 --> 00:42:23,280 Speaker 1: of the southeast and south, in terms of moving from 634 00:42:23,320 --> 00:42:25,640 Speaker 1: parts of the country where the cost of living is 635 00:42:25,680 --> 00:42:28,879 Speaker 1: incredibly high to parts of the country where the cost 636 00:42:28,880 --> 00:42:33,239 Speaker 1: of living is more manageable, and that suits both the 637 00:42:33,280 --> 00:42:39,080 Speaker 1: individuals and the companies. Um. So, you know, the cost 638 00:42:39,160 --> 00:42:44,400 Speaker 1: of having a three bedroom house in commuting distance to 639 00:42:44,480 --> 00:42:50,319 Speaker 1: a bank in Manhattan is crucifying the expensive. The cost 640 00:42:50,400 --> 00:42:54,000 Speaker 1: of having a three bedroom house in commuting distance to 641 00:42:54,920 --> 00:42:59,799 Speaker 1: Bank of America in Charlotte is you know, it's sort 642 00:42:59,800 --> 00:43:03,200 Speaker 1: of a couple of hundred thousand dollars and therefore well 643 00:43:03,239 --> 00:43:07,160 Speaker 1: within the sort of capability of people. But the second 644 00:43:07,200 --> 00:43:12,480 Speaker 1: thing we've seen is that after the financial crisis, there 645 00:43:12,600 --> 00:43:16,880 Speaker 1: is a whole generation of people who don't see houses 646 00:43:17,040 --> 00:43:20,919 Speaker 1: as a store of value. In the UK, still there 647 00:43:21,000 --> 00:43:23,960 Speaker 1: is the sense that the house is the one shore 648 00:43:24,040 --> 00:43:26,840 Speaker 1: fare store of value. Obviously, a lot of people in 649 00:43:26,920 --> 00:43:31,840 Speaker 1: the US had real difficulties in financial crisis with housing finance, 650 00:43:32,680 --> 00:43:37,640 Speaker 1: and so there is a whole generation that is very 651 00:43:37,680 --> 00:43:41,319 Speaker 1: nervous of owning their own home, doesn't see it as 652 00:43:41,360 --> 00:43:45,880 Speaker 1: a store of value and therefore is really quite happy 653 00:43:46,000 --> 00:43:51,640 Speaker 1: with rental as opposed to mortgage finance. And so one 654 00:43:51,680 --> 00:43:57,680 Speaker 1: could get people who can very easily afford the house 655 00:43:59,080 --> 00:44:02,239 Speaker 1: that choose to sit rather than buy it. We use 656 00:44:02,360 --> 00:44:08,719 Speaker 1: some technology to basically identify best neighborhood's best type of 657 00:44:08,760 --> 00:44:14,000 Speaker 1: houses for the type of of renters we're looking for, 658 00:44:14,080 --> 00:44:16,719 Speaker 1: you know, and part of the thing is it's as 659 00:44:16,719 --> 00:44:20,399 Speaker 1: opposed to the multi family, you know, lots of apartments 660 00:44:20,480 --> 00:44:23,719 Speaker 1: packed in together. This is much more about, you know, 661 00:44:23,760 --> 00:44:27,840 Speaker 1: the three four bedroom family house around the sort of 662 00:44:27,880 --> 00:44:32,600 Speaker 1: ring road in one of the growing cities, where you 663 00:44:32,640 --> 00:44:34,960 Speaker 1: know that they care a lot about it's a three 664 00:44:35,040 --> 00:44:39,239 Speaker 1: four bedroom house. You're worried about kids because otherwise why 665 00:44:39,360 --> 00:44:42,160 Speaker 1: you've got three or four bedrooms, and so you worry 666 00:44:42,160 --> 00:44:45,480 Speaker 1: about the quality of the local school and so access 667 00:44:45,520 --> 00:44:48,800 Speaker 1: to the right schools is really important. And then once 668 00:44:48,840 --> 00:44:52,520 Speaker 1: somebody is renting and their kids are at a good school, 669 00:44:53,040 --> 00:44:56,520 Speaker 1: you know they're a pretty stable tenant because the last 670 00:44:56,560 --> 00:44:57,879 Speaker 1: thing you want to do is take your kids out 671 00:44:57,920 --> 00:45:00,360 Speaker 1: of a good school. So, you know, we think that's 672 00:45:00,400 --> 00:45:08,200 Speaker 1: a very interesting thing where you're delivering value to the tenants, 673 00:45:08,360 --> 00:45:13,080 Speaker 1: and you can deliver a very decent return to the 674 00:45:13,200 --> 00:45:18,279 Speaker 1: capital providers, to our investors, and actually, really interestingly through 675 00:45:18,320 --> 00:45:24,080 Speaker 1: the crisis, you know, so we've been collecting something like 676 00:45:25,640 --> 00:45:29,400 Speaker 1: class of the rent that we collected by number of 677 00:45:30,800 --> 00:45:34,640 Speaker 1: tenants as this time last year, and actually more dollars 678 00:45:34,920 --> 00:45:37,839 Speaker 1: of rent than we collected this time of last year. 679 00:45:38,360 --> 00:45:41,520 Speaker 1: So as an asset class, it's really held up even 680 00:45:41,600 --> 00:45:44,760 Speaker 1: before me it's held up in cash flow, even before 681 00:45:44,800 --> 00:45:48,880 Speaker 1: you start to see the possibility of of increasing prices 682 00:45:48,960 --> 00:45:51,320 Speaker 1: as people start to move out of the big cities. 683 00:45:52,560 --> 00:45:58,040 Speaker 1: Quite interesting. Any other new strategies that are being revealed 684 00:45:59,200 --> 00:46:02,640 Speaker 1: by the pens I'm making lockdown or or asked differently, 685 00:46:03,760 --> 00:46:09,160 Speaker 1: what has changed going forward? As a allocator of capital? 686 00:46:09,719 --> 00:46:13,480 Speaker 1: What areas are you thinking about? As hey, this is 687 00:46:13,600 --> 00:46:19,200 Speaker 1: very different post than it was previously. I think the 688 00:46:19,560 --> 00:46:24,640 Speaker 1: challenge for allocators is that everybody's got used to the 689 00:46:24,760 --> 00:46:27,280 Speaker 1: idea that the sort of starting point is a sixty 690 00:46:27,719 --> 00:46:32,480 Speaker 1: type of portfolio, and that was based around the idea 691 00:46:32,600 --> 00:46:37,759 Speaker 1: that government bonds were a store of value and had 692 00:46:37,800 --> 00:46:42,520 Speaker 1: a decent yield and were uncorrelated. And I think we 693 00:46:42,600 --> 00:46:48,520 Speaker 1: are seeing something through the course of this process of 694 00:46:49,960 --> 00:46:58,800 Speaker 1: basically central banks funding government deficits and thereby repressing natural 695 00:46:58,840 --> 00:47:01,680 Speaker 1: movements and yields, and so we've we've ended up at 696 00:47:01,719 --> 00:47:07,000 Speaker 1: this place where the amount of upside in owning treasuries 697 00:47:07,160 --> 00:47:13,200 Speaker 1: is extremely limited or government bonds anywhere over time, and 698 00:47:13,320 --> 00:47:15,879 Speaker 1: you obviously have a downside if the central bank ever 699 00:47:15,920 --> 00:47:21,680 Speaker 1: loses control. And so I think government bonds globally have 700 00:47:22,640 --> 00:47:27,600 Speaker 1: gone from being a long term investment as one of 701 00:47:27,640 --> 00:47:31,960 Speaker 1: the core pillars of your natural savings process could basically 702 00:47:32,040 --> 00:47:35,080 Speaker 1: being a trading instrument. So there are moments you want 703 00:47:35,080 --> 00:47:36,960 Speaker 1: to be long treasuries, there are moments you want to 704 00:47:37,000 --> 00:47:41,400 Speaker 1: be short treasuries, but just owning them as a store 705 00:47:41,400 --> 00:47:44,560 Speaker 1: of value over time with a nice yield that just 706 00:47:44,600 --> 00:47:48,640 Speaker 1: doesn't apply anymore, and thinking that they're going to provide 707 00:47:48,680 --> 00:47:53,600 Speaker 1: you with significant ballant in a time of difficulty also 708 00:47:53,719 --> 00:47:57,000 Speaker 1: really not clear that that happens when you start getting 709 00:47:57,000 --> 00:47:59,960 Speaker 1: down to these very low levels of yields, which are 710 00:48:00,000 --> 00:48:02,880 Speaker 1: only there because of central bank buying, because of QUI. 711 00:48:03,760 --> 00:48:07,600 Speaker 1: So I think you know that there's a challenge in 712 00:48:08,440 --> 00:48:14,040 Speaker 1: building successful portfolios for clients over time that really you 713 00:48:14,160 --> 00:48:17,960 Speaker 1: have equities and the equity like things like credit, like 714 00:48:18,080 --> 00:48:21,920 Speaker 1: private equities. They're all basically growth instruments driven by the 715 00:48:22,000 --> 00:48:25,360 Speaker 1: same thing. On the one hand, and you have cash 716 00:48:25,400 --> 00:48:31,319 Speaker 1: as the alternative, and that's a that's a riskier portfolio 717 00:48:32,000 --> 00:48:34,640 Speaker 1: than the one that clients have had for the last 718 00:48:34,800 --> 00:48:37,840 Speaker 1: twenty years. And so we're doing a lot of work 719 00:48:38,600 --> 00:48:43,400 Speaker 1: helping clients think about how you manage manage their overall 720 00:48:43,960 --> 00:48:47,880 Speaker 1: pension fund, whatever it might be. In that type of environment. 721 00:48:49,160 --> 00:48:52,080 Speaker 1: Quite intriguing. I know I only have you for a 722 00:48:52,120 --> 00:48:55,880 Speaker 1: couple of minutes. More so, let's jump to our speed round. 723 00:48:55,960 --> 00:48:59,640 Speaker 1: These are our favorite questions we ask all of our guests, 724 00:49:00,040 --> 00:49:02,720 Speaker 1: and let's start out with what are you streaming these days? 725 00:49:02,800 --> 00:49:07,120 Speaker 1: What are you watching on Netflix or whatever video preferences 726 00:49:07,200 --> 00:49:11,080 Speaker 1: you have. I have to say I thought about that 727 00:49:11,120 --> 00:49:13,600 Speaker 1: one because I've heard it in your other questions, and 728 00:49:13,719 --> 00:49:17,400 Speaker 1: I realized we haven't had a rather unexciting time with streaming. 729 00:49:18,200 --> 00:49:20,400 Speaker 1: It's partly by the time you get to the evening, 730 00:49:20,760 --> 00:49:24,160 Speaker 1: we're not I'm not after anything very intellectual, but you know, 731 00:49:24,239 --> 00:49:27,800 Speaker 1: we've we've watched some New Amsterdam. On one thing we watched, 732 00:49:27,840 --> 00:49:32,560 Speaker 1: there's a British police drama called in the line of duty, 733 00:49:32,680 --> 00:49:35,560 Speaker 1: which we somehow missed over the last ten years, so 734 00:49:35,640 --> 00:49:37,720 Speaker 1: we went back and started that one from the beginning. 735 00:49:38,640 --> 00:49:42,680 Speaker 1: But fundamentally, television has been really dull for me without 736 00:49:42,719 --> 00:49:47,479 Speaker 1: sport in barely worth putting the TV on for quite 737 00:49:47,480 --> 00:49:51,600 Speaker 1: interesting tell us about some of your mentors who helped 738 00:49:51,640 --> 00:49:58,879 Speaker 1: guide your career when you were a young buck um Well, 739 00:49:58,920 --> 00:50:01,879 Speaker 1: I have to say that the uh, I've tried over 740 00:50:01,960 --> 00:50:05,719 Speaker 1: my life to get, you know, sort of whoever I 741 00:50:05,800 --> 00:50:08,719 Speaker 1: deal with to try and learn something from them. I'm 742 00:50:08,840 --> 00:50:14,080 Speaker 1: quite a sponge for ideas and processes from people in 743 00:50:13,880 --> 00:50:18,160 Speaker 1: a traditional sense. So the you know, so I mentioned earlier, 744 00:50:18,440 --> 00:50:21,279 Speaker 1: you know the best manager I've ever had was my 745 00:50:21,400 --> 00:50:25,160 Speaker 1: boss at JP Morgan, who was called Rumond olivera who 746 00:50:25,280 --> 00:50:27,520 Speaker 1: really taught me how to build a team, how to 747 00:50:27,600 --> 00:50:31,399 Speaker 1: motivate people, and I've always been super grateful to him 748 00:50:31,440 --> 00:50:34,800 Speaker 1: for everything I learned from that. Let's talk about books. 749 00:50:35,040 --> 00:50:38,000 Speaker 1: What are some of your all time favorite books and 750 00:50:38,040 --> 00:50:41,040 Speaker 1: what are you reading right now? So I have to 751 00:50:41,080 --> 00:50:44,400 Speaker 1: say I've been reading a lot in the in the lockdown. 752 00:50:45,040 --> 00:50:47,520 Speaker 1: One of the things I realized was getting up in 753 00:50:47,520 --> 00:50:51,520 Speaker 1: the morning and going straight to my desk was slightly sad, 754 00:50:52,040 --> 00:50:57,480 Speaker 1: so that morning commute type of period. I've taken that 755 00:50:57,600 --> 00:50:59,520 Speaker 1: first hour of the morning and I sit and read, 756 00:51:00,040 --> 00:51:02,239 Speaker 1: which means you get through quite a lot. I try 757 00:51:02,280 --> 00:51:06,280 Speaker 1: to read a mixture old things which are good for work, 758 00:51:06,480 --> 00:51:10,359 Speaker 1: things which are sort of mind expanding in some form, 759 00:51:10,400 --> 00:51:12,480 Speaker 1: of things which are just just a bit of fun. 760 00:51:13,320 --> 00:51:18,239 Speaker 1: My favorite book is a book called John McNabb, which 761 00:51:18,280 --> 00:51:23,359 Speaker 1: is a John Bucking book written in thirties, I think, 762 00:51:24,120 --> 00:51:29,200 Speaker 1: and it's actually applies incredibly today, and it's basically about 763 00:51:29,360 --> 00:51:34,760 Speaker 1: three successful people who are suffering from on weed. They're 764 00:51:35,040 --> 00:51:38,320 Speaker 1: somewhat bored with their successful life and they've lost the spark. 765 00:51:39,320 --> 00:51:42,880 Speaker 1: And it's about how they refined that spark, which I 766 00:51:42,920 --> 00:51:46,360 Speaker 1: go back to that really quite often. But in the lockdown, 767 00:51:46,480 --> 00:51:48,960 Speaker 1: I don't know if you've come across the guy called 768 00:51:49,000 --> 00:51:54,239 Speaker 1: Matthew Said, who writes some very interesting books. He's more 769 00:51:54,280 --> 00:51:57,200 Speaker 1: of a thinker than Malcolm Gladwell, but he's in the 770 00:51:57,280 --> 00:52:01,840 Speaker 1: same type of area. He has one called Black Box Thinking, 771 00:52:01,880 --> 00:52:04,600 Speaker 1: which is one of my favorite ones because it's it's 772 00:52:04,680 --> 00:52:09,120 Speaker 1: really into how the the aviation. I mean, it's I 773 00:52:09,200 --> 00:52:11,000 Speaker 1: can thinking of how do you create a no blame 774 00:52:11,080 --> 00:52:14,840 Speaker 1: culture within a business? But it's really about the difference 775 00:52:14,880 --> 00:52:19,360 Speaker 1: between the aviation industry, where every time there's a problem, 776 00:52:19,360 --> 00:52:22,960 Speaker 1: it's a learning experience, as opposed to the medical industry, 777 00:52:23,000 --> 00:52:26,120 Speaker 1: where nobody wants to admit they ever got anything wrong. 778 00:52:26,640 --> 00:52:28,839 Speaker 1: And he had a new one out just recently called 779 00:52:28,880 --> 00:52:33,440 Speaker 1: Rebel Ideas, which is about cognitive diversity and have some 780 00:52:33,600 --> 00:52:39,319 Speaker 1: very interesting ideas about practical diversity in a business, which 781 00:52:39,400 --> 00:52:43,839 Speaker 1: is pretty appropriate in the circumstances of the last couple 782 00:52:43,840 --> 00:52:46,960 Speaker 1: of weeks. I love wine. I spent a lot of 783 00:52:47,000 --> 00:52:50,640 Speaker 1: time thinking about wine. I like reading about wine. I 784 00:52:50,840 --> 00:52:53,640 Speaker 1: like drinking it more and going around and fiddling in 785 00:52:53,680 --> 00:52:56,160 Speaker 1: my wine cellar. But the somebody got me a book 786 00:52:56,200 --> 00:52:59,680 Speaker 1: called Corkdalk, which is about New York's Famelia, which I 787 00:52:59,760 --> 00:53:03,719 Speaker 1: found a really good read. What I read Black Box 788 00:53:03,760 --> 00:53:07,680 Speaker 1: Thinking some time ago, and what I found so surprising 789 00:53:07,680 --> 00:53:13,440 Speaker 1: and fascinating was that the famed black box is actually 790 00:53:13,600 --> 00:53:18,880 Speaker 1: orange because, as part of their process of always reviewing 791 00:53:19,000 --> 00:53:24,040 Speaker 1: each problem, if a plane crashes in water or in 792 00:53:24,160 --> 00:53:27,480 Speaker 1: deep forest, black is hard to see, an orange is 793 00:53:27,520 --> 00:53:32,040 Speaker 1: easy to see. So even the same black box itself 794 00:53:32,800 --> 00:53:35,640 Speaker 1: is actually a different color. That's how serious they are 795 00:53:35,680 --> 00:53:41,440 Speaker 1: about learning from the process exactly and don't don't have 796 00:53:41,520 --> 00:53:45,080 Speaker 1: sacred coals. Learned from a process and try and get better. 797 00:53:45,320 --> 00:53:47,960 Speaker 1: I definitely try to follow a lot of those ideas 798 00:53:47,960 --> 00:53:51,560 Speaker 1: in my day to day process. Quite interesting, what sort 799 00:53:51,600 --> 00:53:54,920 Speaker 1: of advice would you give to a recent college graduate, 800 00:53:55,280 --> 00:53:59,480 Speaker 1: recent university graduate who was interested in either the world 801 00:53:59,719 --> 00:54:05,040 Speaker 1: of investing or systematic trading or anything quantitative having to 802 00:54:05,080 --> 00:54:09,720 Speaker 1: do with finance. For the first one would be simple, 803 00:54:09,840 --> 00:54:13,719 Speaker 1: which is, if you haven't done it already, go and 804 00:54:13,800 --> 00:54:17,839 Speaker 1: spend time learning to code in Python. Python is one 805 00:54:17,840 --> 00:54:22,439 Speaker 1: of these languages that you know, it's it's a new 806 00:54:22,480 --> 00:54:27,239 Speaker 1: generation language where it's one of these places ways of 807 00:54:27,320 --> 00:54:30,400 Speaker 1: language where you could get real compounding of ideas because 808 00:54:30,960 --> 00:54:33,360 Speaker 1: you don't have to code everything from first principles. You 809 00:54:33,400 --> 00:54:36,600 Speaker 1: could take chunks of other people's work. I think that's 810 00:54:36,719 --> 00:54:40,400 Speaker 1: really important in terms of the one of the interesting 811 00:54:40,440 --> 00:54:43,920 Speaker 1: things that man is. You know, while while obviously English 812 00:54:43,960 --> 00:54:47,040 Speaker 1: is the first language of man and we have I 813 00:54:47,080 --> 00:54:51,640 Speaker 1: think we've worked out fifty two different first language is 814 00:54:51,960 --> 00:54:56,520 Speaker 1: in the employees in the firm. The second largest human 815 00:54:56,600 --> 00:55:02,640 Speaker 1: language is the Mandarin. So if we've got employees, because 816 00:55:02,680 --> 00:55:05,040 Speaker 1: a sort of called it a thousand of them their 817 00:55:05,160 --> 00:55:08,680 Speaker 1: first language might be English, hundred and fifty their first 818 00:55:08,760 --> 00:55:13,120 Speaker 1: language would be Mandarin. But we have about six people 819 00:55:13,160 --> 00:55:17,160 Speaker 1: who code for a living in Python, and so really 820 00:55:17,280 --> 00:55:20,480 Speaker 1: Python is becoming more and more the lingual pancra of 821 00:55:20,520 --> 00:55:25,439 Speaker 1: our business, and I think is for anybody who has 822 00:55:25,480 --> 00:55:29,320 Speaker 1: an interest in these sorts of areas, it's a real necessity. 823 00:55:29,480 --> 00:55:33,680 Speaker 1: The other is something I would always tell people is 824 00:55:34,360 --> 00:55:37,920 Speaker 1: don't choose a job because you think it's the one 825 00:55:37,920 --> 00:55:40,680 Speaker 1: where you can make the most money. Choose a job 826 00:55:40,760 --> 00:55:44,080 Speaker 1: because it's the one way you're interested where you get 827 00:55:44,120 --> 00:55:50,879 Speaker 1: intellectually challenged by it. Because actually predicting where which would 828 00:55:50,880 --> 00:55:54,360 Speaker 1: be the most profitable jobs in ten years time, I 829 00:55:54,400 --> 00:55:57,360 Speaker 1: don't think I've ever seen anybody succeed at that. But 830 00:55:57,760 --> 00:56:01,480 Speaker 1: you'll never succeed at something which you're doing just for 831 00:56:01,520 --> 00:56:04,919 Speaker 1: the money, Whereas if you're doing something with passion, that's 832 00:56:04,960 --> 00:56:08,960 Speaker 1: always the thing you'll do best at. Quite quite of triguing, 833 00:56:09,040 --> 00:56:12,080 Speaker 1: and our final question, what do you know about the 834 00:56:12,120 --> 00:56:16,520 Speaker 1: world of investing today that you wish you knew thirty 835 00:56:16,520 --> 00:56:23,080 Speaker 1: plus years ago when you were first getting started. I 836 00:56:23,120 --> 00:56:25,920 Speaker 1: don't know. That's an interesting one in terms of that 837 00:56:26,000 --> 00:56:28,239 Speaker 1: they're easy answers like I wish I knew that rates 838 00:56:28,239 --> 00:56:30,960 Speaker 1: were going to go down to nothing, but the but 839 00:56:31,080 --> 00:56:33,600 Speaker 1: the reality is, I mean, I've had a great run, 840 00:56:34,560 --> 00:56:38,719 Speaker 1: and I'm not sure I would change what happened in 841 00:56:38,800 --> 00:56:42,120 Speaker 1: my thirty years of my career by knowing something different 842 00:56:42,160 --> 00:56:45,880 Speaker 1: at the beginning. So what I would say is what 843 00:56:46,000 --> 00:56:48,360 Speaker 1: I hope I did, which is trying to make everything 844 00:56:48,400 --> 00:56:52,000 Speaker 1: a learning experience. When you talk to somebody, try and 845 00:56:52,080 --> 00:56:54,920 Speaker 1: figure out not what's wrong with them, but what do 846 00:56:55,000 --> 00:56:58,400 Speaker 1: they know that you don't know. When you see a problem, 847 00:56:58,400 --> 00:57:00,200 Speaker 1: try and figure out what you could learn from man 848 00:57:00,880 --> 00:57:03,680 Speaker 1: and then you know, over the long run, you'll do really, 849 00:57:04,080 --> 00:57:06,719 Speaker 1: really well out of that. Thanks Luke for being so 850 00:57:06,800 --> 00:57:10,240 Speaker 1: generous with your time. We have been speaking with Luke Ellis, 851 00:57:10,280 --> 00:57:14,120 Speaker 1: CEO of the Man Group, the world's largest publicly traded 852 00:57:14,120 --> 00:57:17,800 Speaker 1: hedge funds. If you enjoy this conversation well, be sure 853 00:57:17,800 --> 00:57:20,560 Speaker 1: to look up an intro Down an Inch on Apple iTunes, 854 00:57:20,600 --> 00:57:23,600 Speaker 1: where you can see all of our previous three D 855 00:57:23,840 --> 00:57:27,600 Speaker 1: conversations over the past is it six years, seven years? 856 00:57:27,760 --> 00:57:34,160 Speaker 1: I've lost count? You can find our previous broadcasts at iTunes, Spotify, 857 00:57:34,360 --> 00:57:40,280 Speaker 1: Google Podcasts, Overcast, Stitcher, wherever final podcasts are sold. We 858 00:57:40,400 --> 00:57:44,480 Speaker 1: love your comments, feedback and suggestions right to us at 859 00:57:44,880 --> 00:57:48,240 Speaker 1: m IB podcast at Bloomberg dot net. Check out my 860 00:57:48,360 --> 00:57:52,360 Speaker 1: weekly column on Bloomberg dot Com Opinion. You can sign 861 00:57:52,440 --> 00:57:55,960 Speaker 1: up for my daily reading list at rid Halts dot com. 862 00:57:56,080 --> 00:57:58,920 Speaker 1: Follow me on Twitter at rit Halts. I would be 863 00:57:58,960 --> 00:58:01,480 Speaker 1: remiss if I did not thank the crack staff that 864 00:58:01,600 --> 00:58:05,880 Speaker 1: helps put this conversation together each week. Michael Boyle is 865 00:58:05,960 --> 00:58:11,440 Speaker 1: my producer. Maroufo is my audio engineer. Michael Batnick is 866 00:58:11,480 --> 00:58:15,680 Speaker 1: my head of research. Batica val Bronn is our project manager. 867 00:58:16,320 --> 00:58:19,640 Speaker 1: I'm Barry Retolts. You've been listening to Masters in Business 868 00:58:20,040 --> 00:58:21,160 Speaker 1: on Bloomberg Radio.