WEBVTT - Opportunity For Value In Private Equity 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.479 at Bloomberg dot com slash podcast. You know, one of 0:00:22.520 --> 0:00:27.639 the areas of investments in these markets that continues to 0:00:27.760 --> 0:00:31.880 attract tremendous amounts of capital is private equity. And in 0:00:31.880 --> 0:00:33.720 a world where you've got a ten year yielding one 0:00:33.760 --> 0:00:37.880 point five percent um, people are looking for returns, looking 0:00:37.920 --> 0:00:40.640 for yield, and the asset class of private equities one 0:00:40.680 --> 0:00:44.720 of those areas that continues to generate superior returns. Glenn Mincy. 0:00:44.920 --> 0:00:48.120 He's a national sector leader for private equity at KPMG. 0:00:48.320 --> 0:00:50.560 He joins us here. Glenn, thanks so much for joining 0:00:50.640 --> 0:00:52.960 us here. I'd love to get your maybe thirty thousand 0:00:53.000 --> 0:00:56.440 foot view of the private equity space, and I'd love 0:00:56.480 --> 0:00:59.440 to get it into context of pre pandemic and maybe 0:00:59.520 --> 0:01:05.520 kind of where we are now. Give us your thoughts. Thanks, Paul. Yeah, 0:01:05.600 --> 0:01:09.200 and you know, in the area of impact investing specifically 0:01:09.280 --> 0:01:12.280 in E s G. I'd say that before the pandemic, 0:01:13.240 --> 0:01:17.479 private equity had been active and responsible investing. But looking back, 0:01:17.880 --> 0:01:21.000 I think there was maybe the naive sentiment that COVID 0:01:21.120 --> 0:01:23.360 was going to stall or halt progress in the space. 0:01:23.920 --> 0:01:27.560 But the social impact of the pandemic really accelerated the 0:01:27.600 --> 0:01:31.360 industry's awareness of environmental and social issues, and it really 0:01:31.400 --> 0:01:34.760 pushed that intersection of E s G related issues with 0:01:35.040 --> 0:01:39.320 financial return. And if you look at the driver's oh sorry, Paul, Um, 0:01:40.520 --> 0:01:43.880 go ahead, Glenn, this is Kayleie. Nice to speak with you. 0:01:44.120 --> 0:01:46.040 So if we're they're pushing more towards E s G, 0:01:46.240 --> 0:01:51.520 where specifically, where are investments being made, Well, it's you know, 0:01:53.000 --> 0:01:56.040 if we're talking about the new economy, you know, we're 0:01:56.080 --> 0:01:58.240 all looking at angels on the head of a pen 0:01:58.400 --> 0:02:00.480 to determine what that new account m is going to 0:02:00.560 --> 0:02:03.120 look like. And we often we often say that, you know, 0:02:03.240 --> 0:02:07.320 COVID um that after COVID tech was a horizontal across 0:02:07.360 --> 0:02:11.560 all asset classes. And there's no question that impact investing 0:02:11.560 --> 0:02:13.400 in the s G are going to be integrated across 0:02:13.440 --> 0:02:16.960 the other asset classes as a horizontal future and the 0:02:17.120 --> 0:02:20.480 you know, the area is that, UM, if you think 0:02:20.520 --> 0:02:24.320 about it, they're changing, you know, there the p funds 0:02:24.360 --> 0:02:27.360 are they're actively looking at E s G and and 0:02:27.400 --> 0:02:30.800 it's it's you know, a question for your energy funds, 0:02:30.840 --> 0:02:33.480 for example, do you shift your focus from traditional oil 0:02:33.520 --> 0:02:36.320 and gas oil its services to you know, the so 0:02:36.440 --> 0:02:40.960 called transition companies companies that support transition to cleaner, more 0:02:41.000 --> 0:02:46.280 affordable energy like storage and renewables. UM. You know, you 0:02:46.320 --> 0:02:49.960 guys have looked at totally for example, UM and other 0:02:50.440 --> 0:02:54.000 plant based products. You know that that continue to attract 0:02:54.040 --> 0:02:58.000 mainstream investor attention. UM and Totally is actually, you know, 0:02:58.160 --> 0:03:01.160 it's doing well, and it's it's a good ample of 0:03:01.800 --> 0:03:04.440 uh work, consumers willing to pay more for your product 0:03:04.720 --> 0:03:07.799 for the beneficial impact that it has on society. Glenn, 0:03:07.840 --> 0:03:11.080 give us a sense of kind of private equity, what 0:03:11.200 --> 0:03:16.600 percentage of their invested funds are are targeting E s 0:03:16.639 --> 0:03:19.359 G types of investments. It just doesn't seem like I'm 0:03:19.360 --> 0:03:21.760 not even sure a how you define it be how 0:03:21.800 --> 0:03:24.360 you measure it. UM, give us a sense of how 0:03:24.360 --> 0:03:28.119 private equity is approaching that. Well, yeah, yeah, your point 0:03:28.160 --> 0:03:31.440 about measurement is actually a good one. The you know, 0:03:31.480 --> 0:03:33.960 the perception, mostly in the US. I guess is that 0:03:34.480 --> 0:03:36.520 private markets have been slow to pick up on the 0:03:36.680 --> 0:03:39.480 s G monitoring and reporting because I figured, you know, 0:03:39.920 --> 0:03:43.920 getting that meaningful data from portfolio companies was a little 0:03:43.960 --> 0:03:47.200 too difficult, and there were skeptical their skepticism about whether 0:03:47.240 --> 0:03:50.040 the market was ready to accept the costs associated with 0:03:50.040 --> 0:03:53.200 measurement reporting. But that information is really so vital to 0:03:53.280 --> 0:03:55.880 being able to determine not only where you stand, but 0:03:56.000 --> 0:03:57.839 what you need to do in the future. And let's 0:03:57.960 --> 0:04:02.080 let's face it, right, doing the right things, it's it's imprecise. 0:04:02.280 --> 0:04:06.320 You need verifiable metrics and data and the uniform standard, 0:04:06.320 --> 0:04:09.000 and there's been right now, there isn't a uniform standard. 0:04:09.000 --> 0:04:12.120 There's no one standard to rule them all. But you know, 0:04:12.120 --> 0:04:14.960 there's an opportunity to change that, and that you know, 0:04:15.000 --> 0:04:19.760 as a percentage, each of the you know, the largest UM, 0:04:19.880 --> 0:04:22.000 some of the some of the largest funds you know, 0:04:22.279 --> 0:04:29.080 whether it's UM, whether it's TPG, Bang, KKR, black Stone, Carlisle, Apollo, 0:04:29.480 --> 0:04:33.920 they all over whether before COVID or over that period 0:04:33.960 --> 0:04:38.000 of time, they all really invested significantly. They know they 0:04:38.200 --> 0:04:41.360 their funds are in excess of the billion dollars each 0:04:41.760 --> 0:04:45.560 and they're putting that money to work right there. They 0:04:45.600 --> 0:04:47.800 have a lot of cash to deploy, right. Are there 0:04:47.880 --> 0:04:53.320 enough targets out there? You know? I think and as 0:04:53.360 --> 0:04:56.000 I said, you know, before the pandemic, they've been active 0:04:56.040 --> 0:04:59.320 in responsible investing. And yeah, I'd say that, I'd say 0:04:59.320 --> 0:05:02.440 almost every day it you look and there is you know, 0:05:02.520 --> 0:05:04.960 there's a two hundred million dollar investment here, there's a 0:05:04.960 --> 0:05:09.120 billion dollar investment there. Um, you know totally was was 0:05:09.520 --> 0:05:11.920 a terrific example just in the past what two weeks 0:05:11.920 --> 0:05:17.640 of the IDA um and yes, so yeah, Cley, I'd 0:05:17.640 --> 0:05:20.400 say there are there, there's a plethora of targets. Talk 0:05:20.400 --> 0:05:22.960 to us about returns, Glenn E. S G. I keep 0:05:22.960 --> 0:05:26.560 hearing how E s G provides superior returns. I'm just 0:05:26.680 --> 0:05:31.680 I'm very skeptical. What are you finding in the PE space? Um, 0:05:31.839 --> 0:05:40.320 the you're you're touching on greenwashing, right, Paul, and here 0:05:40.400 --> 0:05:43.760 let's let's let's talk about the elephant round far and not. 0:05:43.960 --> 0:05:46.719 It's probably accurate to say that p suffered in the 0:05:46.760 --> 0:05:50.040 past from reputational issues, and not just in p but 0:05:50.040 --> 0:05:54.400 but across all industries. There's a concern that companies are 0:05:54.440 --> 0:05:56.360 just going to do impact in e s G by 0:05:56.360 --> 0:05:59.719 press release, right, the company has will announced they're going 0:05:59.760 --> 0:06:02.520 to the carbonized and you buy any credits to fulfill 0:06:02.600 --> 0:06:06.320 that commitment, and you haven't really changed anything. Um. But 0:06:06.400 --> 0:06:08.679 I think I'd say the P he really sees value 0:06:08.720 --> 0:06:13.080 here and and the desire to contribute to a better 0:06:13.120 --> 0:06:16.400 world is is certainly a motivator. That's truly a motivator 0:06:16.440 --> 0:06:18.720 on a personal level. I know many of these heads 0:06:18.720 --> 0:06:21.320 of funds and it's really clear to me that each 0:06:21.360 --> 0:06:23.799 of them fervently and passionately believes it was the moment 0:06:23.800 --> 0:06:26.840 in time to really make the world a better place. 0:06:27.000 --> 0:06:29.960 But they're in the business of making money. And what's 0:06:30.080 --> 0:06:32.960 made the P industry successful in the past is the 0:06:33.000 --> 0:06:37.200 ability to future trends. But you know, they need to 0:06:37.200 --> 0:06:39.120 say they need to stay ahead of the game. And 0:06:39.200 --> 0:06:40.960 all right, Glenn, I just have to leave it there 0:06:41.000 --> 0:06:42.720 just in case, just because of the time we really 0:06:42.720 --> 0:06:49.839 appreciated Glenn Mincy, National Sector leader for Private Equity at KPMG. Well, 0:06:49.880 --> 0:06:53.680 the metrics for vaccinations are have been very, very impressive 0:06:53.720 --> 0:06:56.760 here uh in the United States, and now we're starting 0:06:56.800 --> 0:07:00.240 to see supply outstrip demand and so we'll starting to 0:07:00.279 --> 0:07:04.240 see Um, you know, the US sending extra vaccines globally, 0:07:04.640 --> 0:07:07.000 I think beginning in August, and that's a good thing. 0:07:07.040 --> 0:07:10.200 Let's bring in Lauren Sour she's Associate Professor of Emergency 0:07:10.240 --> 0:07:12.840 Medicine the Johns Hopkins School of Medicine. And I should 0:07:12.880 --> 0:07:15.560 know that the Bloomberg School of Public Health is supported 0:07:15.600 --> 0:07:19.720 by Michael Bloomberg, founder Bloomberg LP, Bloomberg Philanthropies and this 0:07:19.880 --> 0:07:22.920 radio and TV operation. Lauren, thanks so much again for 0:07:23.000 --> 0:07:25.960 joining us year. We always appreciate getting your thoughts and 0:07:25.960 --> 0:07:28.200 input as we try to navigate through this pandemic and 0:07:28.240 --> 0:07:31.360 now through the vaccines and the reopening. Talk to us 0:07:31.360 --> 0:07:35.240 about how important it is for the US to be uh, 0:07:35.280 --> 0:07:37.200 you know, kind of a leader here and exporting some 0:07:37.280 --> 0:07:41.880 of its vaccines globally. Yeah. Absolutely. Um. The w h 0:07:41.960 --> 0:07:45.000 O has a campaign, Um. I believe it's called Nobody's 0:07:45.040 --> 0:07:47.000 Takes Till Everybody is Safe, and I think that really 0:07:47.040 --> 0:07:50.120 speaks to the fundamentals of live vaccine sharing is important. 0:07:50.680 --> 0:07:53.280 We have to make sure that we have global reach 0:07:53.280 --> 0:07:56.440 of these vaccinations, especially because you know, we're such a 0:07:56.720 --> 0:08:00.600 easy to travel globe right now. Right travel has never 0:08:00.640 --> 0:08:03.280 been easier, There's never been more people traveling, I mean 0:08:03.280 --> 0:08:07.200 prior to the pandemic. Of course, UM. Globalization continues to 0:08:07.280 --> 0:08:09.880 grow and we can continues to get easier and easier 0:08:09.920 --> 0:08:12.800 for more and more people to travel UM and so 0:08:13.040 --> 0:08:15.760 borders sort of become a thing of the past, especially 0:08:15.800 --> 0:08:18.600 when you when you're talking about infectious diseases like COVID 0:08:19.120 --> 0:08:23.960 and so sharing vaccines create schobal equity, it creates a 0:08:23.960 --> 0:08:28.720 healthier planet, and it also allows us to reopen globally quicker. 0:08:29.560 --> 0:08:32.280 I've been sitting here talking to Paul about my travel 0:08:32.360 --> 0:08:34.840 plants for the summer, and I'm going to Europe. But 0:08:34.960 --> 0:08:37.079 what a place that will let us in if we're vaccinated. 0:08:37.080 --> 0:08:38.880 But at the same time, I look over at the 0:08:38.960 --> 0:08:43.200 UK where the delta variant cases have tripled. Should that 0:08:43.240 --> 0:08:46.760 make me worried even if I'm fully vaccinated. I think 0:08:46.760 --> 0:08:48.600 you're going to want to pay attention to what happens 0:08:48.600 --> 0:08:51.000 with the sciences that you, you know, you get closer 0:08:51.040 --> 0:08:54.320 to your travel. We're hearing that the vaccines are still 0:08:54.440 --> 0:08:57.199 very protective UM, and I think we'll see more about 0:08:57.200 --> 0:09:00.120 some of these new variants, like the delta variant UM 0:09:00.160 --> 0:09:03.400 and how how the vaccines work against them. Vaccine is 0:09:03.400 --> 0:09:06.040 going to give you protection. So perhaps you'll get if 0:09:06.040 --> 0:09:07.719 you were to get infected, you might get a more 0:09:07.720 --> 0:09:10.520 mild illness or have a symptomatic infection. But the vaccines 0:09:10.559 --> 0:09:13.080 are protective, and that is a really important point that 0:09:13.440 --> 0:09:15.840 you know, when you're considering travel, you need to continue 0:09:15.880 --> 0:09:18.880 to remember. And again, the more people that get vaccinated 0:09:18.880 --> 0:09:21.840 in those countries, even if they see the variants in 0:09:21.880 --> 0:09:26.280 that space, that the protection grows exponentially, you know. So 0:09:26.360 --> 0:09:28.520 we see more and more people get vaccinated, we are 0:09:28.559 --> 0:09:31.920 more and more protected, Lauren. One of the other big 0:09:32.000 --> 0:09:35.120 issues is getting folks back to work. I mean, Kaylee 0:09:35.120 --> 0:09:37.040 has been coming she's been here the whole time. This 0:09:37.080 --> 0:09:39.840 is my fifth week of coming back. And uh, you know, 0:09:39.880 --> 0:09:42.360 we're starting to hear more and more companies, even a 0:09:42.400 --> 0:09:47.640 Goldman Saxes requiring employees to report their vaccination status. How 0:09:47.679 --> 0:09:49.280 do you think, what do you think it is the 0:09:49.280 --> 0:09:52.839 most responsible way for companies or what have you heard 0:09:52.920 --> 0:09:56.920 or seeing about bringing people back into the office. Yeah, 0:09:56.960 --> 0:09:59.000 I think it's been really mixed. I would love to 0:09:59.040 --> 0:10:02.559 see some more BBC guidance and stronger CDC guidance around 0:10:03.080 --> 0:10:06.800 office workplaces um and bringing people back I think they've 0:10:06.800 --> 0:10:08.600 done a lot of work in the last few months 0:10:08.640 --> 0:10:11.559 on various areas that we needed guidance, and I think 0:10:11.600 --> 0:10:14.239 the workplaces a place where we could use some more information, 0:10:14.320 --> 0:10:17.480 some more you know, guidance as support. I do think 0:10:17.480 --> 0:10:19.480 we're going to see more and more places move towards 0:10:19.520 --> 0:10:22.200 what Goldman is doing. We're seeing a lot of higher 0:10:22.280 --> 0:10:25.840 education institutions doing this, a lot of academic medical centers 0:10:25.880 --> 0:10:29.600 doing this. UM. We're seeing more and more places move 0:10:29.720 --> 0:10:34.040 towards requiring vaccination to come back UM. And you know, 0:10:34.200 --> 0:10:36.959 I think there is arguments to be made on both 0:10:37.000 --> 0:10:40.400 sides of of the coin for this. So we're not 0:10:40.559 --> 0:10:43.480 we don't have an approved vaccine. We have some really 0:10:43.480 --> 0:10:47.439 great emergency use authorization vaccines with tons of clinical data 0:10:47.480 --> 0:10:50.640 now that show that they're safe and effective. UM. And 0:10:50.679 --> 0:10:54.080 I think we have vaccines moving towards approval. It'll be 0:10:54.080 --> 0:10:57.680 easier to require them when once approval happens. But we 0:10:57.720 --> 0:11:01.160 have to give sort of space for people to make choices. 0:11:01.200 --> 0:11:03.280 I mean, that's that is what you know this country 0:11:03.320 --> 0:11:06.000 is built on, is that choice piece and that autonomy, 0:11:06.040 --> 0:11:09.840 and so weighing those risks and benefits very carefully along 0:11:09.880 --> 0:11:12.400 with the autonomy of individuals and their ability to decide. 0:11:12.440 --> 0:11:14.240 It's going to be a really challenging space in the 0:11:14.240 --> 0:11:16.600 next few years, and we are gonna look, we're going 0:11:16.640 --> 0:11:18.760 to need to look to the CDC and the federal 0:11:18.800 --> 0:11:21.520 government to provide guidance in this space, Lauren. A lot 0:11:21.520 --> 0:11:25.040 of companies are targeting September for their return to office, 0:11:25.080 --> 0:11:27.400 and there isn't so much worry about how the summer 0:11:27.480 --> 0:11:29.680 is going to go. People seem pretty optimistic, but then 0:11:29.720 --> 0:11:32.280 people talk about what could come in the fall and 0:11:32.400 --> 0:11:34.800 the winter. Are we going to have to send people 0:11:34.840 --> 0:11:38.360 home again? Yeah, I think it's really the hope that 0:11:38.400 --> 0:11:41.880 we don't. Um, It is definitely a possibility. I would say, 0:11:42.120 --> 0:11:44.640 we don't know what's going to happen as um. You know, 0:11:44.679 --> 0:11:46.959 as we move back into fall, we're still trying to 0:11:47.040 --> 0:11:51.040 understand the potential seasonality of this disease, um of this pathogen, 0:11:51.120 --> 0:11:53.640 and so looking towards the fall, this will be sort 0:11:53.640 --> 0:11:56.680 of our first real experience of what a season might 0:11:56.720 --> 0:12:00.160 look like with with a highly vaccinated population. So it's 0:12:00.200 --> 0:12:01.720 kind of a wait and see, which I know is 0:12:01.760 --> 0:12:05.480 not a particularly satisfying answer. Um, But I think the 0:12:05.600 --> 0:12:08.480 hope is that we get enough people vaccinated. Perhaps we've 0:12:08.520 --> 0:12:11.839 developed boosters if necessary, um, but we build the foundation 0:12:11.960 --> 0:12:14.960 so that we can keep things safely open and and 0:12:15.040 --> 0:12:16.720 that is one of the goals of getting more and 0:12:16.720 --> 0:12:20.480 more people vaccinated. Lauren, thank you so much for joining 0:12:20.520 --> 0:12:23.959 us once again. We always appreciate your weekly uh discussions 0:12:24.000 --> 0:12:26.760 with us as we try to get more educated on 0:12:26.800 --> 0:12:29.320 this pandemic and on the vaccines and on the reopening. 0:12:29.360 --> 0:12:32.680 Lauren sour Associate Professor of Emergency Medicine that JOHNS Hopkins 0:12:32.720 --> 0:12:35.000 School of Medicine, and of course the Bloomer School of 0:12:35.000 --> 0:12:37.520 Public Health is supported by Michael Bloomberg, founder of Bloomberg 0:12:37.640 --> 0:12:43.160 LP and Bloomberg Philanthropies. Alright, folks, on the trading desk 0:12:43.200 --> 0:12:45.240 of Wall Street, this is how it works. You get 0:12:45.240 --> 0:12:47.840 a trader out there who's making money. He's got a 0:12:47.880 --> 0:12:52.480 hot hand, maybe a unique positioning and unique strategy. You 0:12:52.600 --> 0:12:55.120 give that trader more capital to make more money for 0:12:55.320 --> 0:12:58.280 you less you risk losing that said trader to a 0:12:58.360 --> 0:13:01.599 hedge fund where they can gen even more returns. And 0:13:01.640 --> 0:13:04.640 that's what Credit Swiss was doing until decided to pull back. 0:13:04.679 --> 0:13:07.480 And so again Credit Swiss back in the news, maybe 0:13:07.480 --> 0:13:10.360 not for the reasons it likes. Laura Benitez, Leverage finance 0:13:10.400 --> 0:13:13.920 markets reporter for Bloomberg, joins us lard give us the 0:13:14.000 --> 0:13:16.840 story at what happened at Credit Swiss with one of 0:13:16.840 --> 0:13:20.840 its star traders. Well, we tracked the story of HANSA. 0:13:20.920 --> 0:13:23.600 Lusinger who wrote to prominence very very quickly from a 0:13:23.679 --> 0:13:26.240 very young age. Um. So he started off at the 0:13:26.600 --> 0:13:28.640 on the trading desk and the high trading desk out 0:13:28.640 --> 0:13:31.720 Credit Swie in London and very quickly was promoted to 0:13:31.960 --> 0:13:34.760 head up that desk. Um and actually said I had 0:13:34.760 --> 0:13:37.000 a very unique strategy, made a lot of money for 0:13:37.040 --> 0:13:39.240 the bank and it was just a very very big 0:13:39.320 --> 0:13:42.160 name in the market. Um. It was a very attractive 0:13:42.160 --> 0:13:44.400 proposition for others as well, hence why he was sick 0:13:44.480 --> 0:13:48.720 to Citadel. But obviously you know, Credits we supported him back. Um. 0:13:48.840 --> 0:13:50.160 So there's a bit of a tug of war there 0:13:50.160 --> 0:13:52.160 which was quite interesting at the end of last year 0:13:52.200 --> 0:13:54.920 and the beginning of this year. However, the tables turned 0:13:55.000 --> 0:13:57.559 slightly in the last few months because of the situation 0:13:57.600 --> 0:13:59.679 that Credits weee at the moment and all the crisis 0:14:00.080 --> 0:14:03.520 they're facing. Um, the patter dial backs and risk and Therefore, 0:14:03.840 --> 0:14:07.520 you know, hands a petty basically go alone. Now, would 0:14:07.559 --> 0:14:09.920 this have happened had the r K goes blow up 0:14:10.040 --> 0:14:14.360 not happened. Um, It's difficult to say, because overall the 0:14:14.360 --> 0:14:16.240 strategy at the bank seems to be that they're just 0:14:16.320 --> 0:14:19.800 diving back risk across the businesses, especially on the asset 0:14:19.880 --> 0:14:22.920 management side. So obviously, you know, the hands of fund 0:14:23.000 --> 0:14:25.480 and what he was trading in was in that time 0:14:25.640 --> 0:14:28.760 very liquid, very very high risk, and therefore that would 0:14:28.760 --> 0:14:30.600 be a fund that would just be deemed too high 0:14:30.680 --> 0:14:33.480 risk for the bank to even consider at the momentum. 0:14:33.600 --> 0:14:36.440 Would that the other crises developing. It's very hard to 0:14:36.440 --> 0:14:38.120 say how that fund would have played out. I mean, 0:14:38.320 --> 0:14:41.360 as we nursed my reporting, he was fundraising throughout January 0:14:41.440 --> 0:14:43.960 and February UM, and he was poised to launched that 0:14:44.000 --> 0:14:47.640 funding March. So UM, it's yeah, it remains to be 0:14:47.640 --> 0:14:50.160 seen how that would have gone otherwise. You know, it's 0:14:50.360 --> 0:14:53.440 really interesting, Um, Laura. You know again, I used to 0:14:53.440 --> 0:14:55.960 work at Credit Swiss and then still know some folks there, 0:14:56.040 --> 0:14:58.760 and it just seems like they stumble from from one 0:14:59.600 --> 0:15:03.440 issue to the next. Here and now you know we're 0:15:03.440 --> 0:15:06.560 seeing some reporting earlier this week about offering retention bonuses 0:15:07.000 --> 0:15:10.320 to managing directors as well as some rank and file people. 0:15:10.840 --> 0:15:13.000 How difficult, you know, when you look at a story 0:15:13.040 --> 0:15:15.560 like you're reporting on here with your team, it must 0:15:15.600 --> 0:15:18.520 be very difficult for them to attract talent if they can't, 0:15:19.120 --> 0:15:22.040 you know, really reward them and allow their their traitors 0:15:22.080 --> 0:15:23.880 to take a certain amount of risk to generate a 0:15:23.880 --> 0:15:26.320 certain amount of return. What's going on at credits with 0:15:27.640 --> 0:15:30.200 absolutely they're dealing with huge reputational risk right now. And 0:15:30.240 --> 0:15:32.960 on one hand, they have to preserve preserved that and 0:15:33.000 --> 0:15:34.920 they have to dial back at their risk and make 0:15:34.960 --> 0:15:37.120 sure that everything is you know, white and they're white 0:15:37.120 --> 0:15:39.680 in terms of their compliance strateges. On the other hand, 0:15:39.720 --> 0:15:41.600 like you said, they do have to retain talent. They've 0:15:41.640 --> 0:15:43.920 been leaking talent for the last three or four months 0:15:44.040 --> 0:15:47.280 and they've been bringing in these retention bonuses to keep 0:15:47.280 --> 0:15:50.080 the very top and see new talent in place. UM. 0:15:50.120 --> 0:15:51.840 But like you said, it's very very tricky for them 0:15:51.840 --> 0:15:53.720 to balance that. I think it is the balancing that 0:15:53.880 --> 0:15:56.600 going forward. UM. As we know from the story, Hanson 0:15:56.760 --> 0:15:58.640 was able to take on a huge amount of risk. 0:15:58.760 --> 0:16:02.800 He was given it up to a hundred million to 0:16:02.920 --> 0:16:05.400 trade on and that would that was just way wed. 0:16:05.520 --> 0:16:08.520 But what other traders and his peers were doing, um 0:16:08.960 --> 0:16:11.480 And therefore, you know, that's one of the reasons why 0:16:11.520 --> 0:16:13.880 he was so successful. He had an edge on everyone 0:16:13.920 --> 0:16:15.920 else because he was able to take you know, twice 0:16:15.960 --> 0:16:19.200 the risk um. So to be able to continue that 0:16:19.280 --> 0:16:23.280 performance while also riding back in the riskier parts of 0:16:23.320 --> 0:16:26.280 why that happened I think will be very interesting go forward. 0:16:26.840 --> 0:16:29.000 So even if he's no longer there to take on 0:16:29.040 --> 0:16:31.040 that kind of risk as credits, he's going to allow 0:16:31.120 --> 0:16:33.720 allow other traders to do that going forward? Are we 0:16:33.800 --> 0:16:37.040 looking at a huge dial back here of the risks 0:16:37.080 --> 0:16:40.880 that they're willing to take. It's difficult to say because 0:16:40.920 --> 0:16:44.360 they haven't actually communicated anything specifically about this, but it 0:16:44.400 --> 0:16:48.520 would be hard to understand I think, you know, if 0:16:48.560 --> 0:16:51.800 if that kind of risk appetite was to continue from here, 0:16:51.840 --> 0:16:53.880 because like I said, he was the only trader on 0:16:54.000 --> 0:16:56.240 you know, especially in Europe and London who was able 0:16:56.240 --> 0:16:59.240 to take on that amount of risk. And the last 0:16:59.280 --> 0:17:02.160 few months is really I think demonstrated, um, you know, 0:17:02.240 --> 0:17:05.199 some of the pitfalls of I mean, even any middlet 0:17:05.200 --> 0:17:06.800 of money for the bank, there was also a huge 0:17:06.880 --> 0:17:09.959 risk attached and obviously you know there was a lot 0:17:09.960 --> 0:17:14.280 of controversy behind some of his techniques too, So um, yes, 0:17:14.560 --> 0:17:18.440 I think it's um it's definitely an interesting one going forward. Laura, 0:17:18.480 --> 0:17:21.040 thank you so much for joining us. Really appreciate this story. 0:17:21.040 --> 0:17:23.919 It's fascinating, a story about kind of the rise and 0:17:24.600 --> 0:17:27.520 somewhat of a fall of a star trader at Credit Swiss, 0:17:27.520 --> 0:17:30.440 and it's also a tale of, you know, pulling back 0:17:30.680 --> 0:17:34.160 on risk that we're seeing at certain firms, particularly Credit 0:17:34.200 --> 0:17:38.080 Swiss again trying to navigate some reputational issues there. La Benita, 0:17:38.160 --> 0:17:41.960 she's a leverage finance markets reporter for Bloomberg Editorial based 0:17:42.000 --> 0:17:44.120 in London, and you know, it just kind of goes 0:17:44.119 --> 0:17:46.080 to that issue. We see it on Wall Street a lot. 0:17:45.920 --> 0:17:49.280 You know, a firm takes a hit, whether it's financial reputational, 0:17:49.280 --> 0:17:52.879 and they pulled back in on the risk profile on 0:17:52.920 --> 0:17:55.600 their trading desks, on some of their investment banking operations 0:17:56.160 --> 0:17:59.119 as they try to reassess their risk and their credit. 0:18:02.720 --> 0:18:05.000 Looking at the markets again, a little bit of green 0:18:05.040 --> 0:18:07.760 on the skate and not much going on, but certainly 0:18:07.920 --> 0:18:11.320 we have markets at or near all time highs. And 0:18:11.359 --> 0:18:16.280 that's despite some concerns about inflation coming into this market 0:18:16.359 --> 0:18:18.920 that may prove a challenge for this economy in this market. 0:18:19.000 --> 0:18:22.480 Christopher Wolf, he's a chief investment officer First Republic Private 0:18:22.480 --> 0:18:26.040 Wealth Management. They have about two nineteen billion dollars in 0:18:26.119 --> 0:18:29.000 assets under management. Christopher joins us. Chris, thanks so much 0:18:29.040 --> 0:18:31.760 for joining us here. Love to get your thoughts on 0:18:31.800 --> 0:18:35.840 this inflation question, which is certainly an area area of 0:18:35.960 --> 0:18:40.320 debate for investors. Is its transitory as FED chairman Power 0:18:40.359 --> 0:18:42.840 would suggest, or is it something more that we need 0:18:42.880 --> 0:18:45.399 to be concerned about. What do you think? Well, I 0:18:45.400 --> 0:18:47.560 think there's a couple of things. Uh. You know, first, 0:18:47.680 --> 0:18:49.600 it's really hard to disagree with the FED and all 0:18:49.640 --> 0:18:52.399 their pH d economists and how they think about transitory. 0:18:52.680 --> 0:18:56.480 I think the market's interpretation of transitory is what's gonna matter. 0:18:56.840 --> 0:18:59.160 And I think the narrative is shifting a little bit, 0:18:59.200 --> 0:19:01.480 even though the a data to digest in the last 0:19:01.480 --> 0:19:03.399 couple of days, and in particular what we saw for 0:19:03.480 --> 0:19:06.640 the you know, the five prints on CPI yesterday. UM, 0:19:06.640 --> 0:19:08.919 I think the market is going to shift towards defining 0:19:08.960 --> 0:19:12.280 how long is transitory? The market started with the narrative 0:19:12.320 --> 0:19:15.720 that was transitory means it'll be over in one and 0:19:15.760 --> 0:19:18.760 I sent that's going to shift into two. And that's 0:19:18.800 --> 0:19:22.360 the problem. If the market thinks that inflation around longer, 0:19:22.840 --> 0:19:25.520 you get pressure, um at least from the markets on 0:19:25.640 --> 0:19:27.879 should the Fed be acting? And why would I believe that? 0:19:28.240 --> 0:19:32.040 Mostly because break evens and inflation expectations for market participants 0:19:32.160 --> 0:19:34.040 are a lot higher than where the Fed says. So 0:19:34.119 --> 0:19:37.040 that's setting up this dynamic. Yeah, we're looking at something 0:19:37.080 --> 0:19:39.280 like two percent on the two year break even. Of 0:19:39.320 --> 0:19:42.720 course the shortest term expectation. They're all that said, Should 0:19:42.760 --> 0:19:44.560 I be looking at a ten year yield higher than 0:19:44.560 --> 0:19:48.320 one point four six percent right now? Uh? You know 0:19:48.400 --> 0:19:51.160 in a normal world, yes, you know. You haven't seen 0:19:51.240 --> 0:19:55.439 this kind of extreme penalty phase for savers until you 0:19:55.480 --> 0:19:57.480 go back to like the seventies and early part of 0:19:57.520 --> 0:20:00.600 the eighties, and even then way beyond that in the hundreds. 0:20:00.960 --> 0:20:03.359 So why is this important? It's because there's some things 0:20:03.359 --> 0:20:05.480 going on that are likely to stay in place. The 0:20:05.520 --> 0:20:08.760 first we've talked about with inflation, they should sticky tends 0:20:08.800 --> 0:20:10.480 to be around a little bit longer than you want, 0:20:10.520 --> 0:20:11.800 and in order to get rid of it, you've got 0:20:11.800 --> 0:20:13.920 to do harder things than you thought in the first 0:20:13.920 --> 0:20:16.160 place to get rid of it. The second piece, though, 0:20:16.200 --> 0:20:18.119 is that there's just a lot of cash around. The 0:20:18.240 --> 0:20:20.880 reboil markets are full of it, bank balance sheets are 0:20:20.880 --> 0:20:22.880 full of it, and you know what, they buy lots 0:20:22.920 --> 0:20:25.800 of treasury. So the idea here is that the excess 0:20:25.840 --> 0:20:27.960 cashets and system is going to get put back into 0:20:27.960 --> 0:20:31.680 treasury markets. And that's a little disconnected from fundamentals. Normally, 0:20:31.720 --> 0:20:34.920 I would say that if you have inflation and economic 0:20:34.960 --> 0:20:37.040 growth in the four or five or six range, the 0:20:37.119 --> 0:20:39.400 tenor bond should be about that as well. But we're 0:20:39.440 --> 0:20:41.480 not going there anytime soon, as long as all this 0:20:41.640 --> 0:20:44.240 cash sitting on the sidelines needs to be put back 0:20:44.280 --> 0:20:47.880 into the treasury market. So, Chris, you know, a bunch 0:20:47.880 --> 0:20:49.639 of my business school buddies and I we were chatting 0:20:49.680 --> 0:20:52.440 just recently about our kids. How are they going to 0:20:52.560 --> 0:20:56.200 generate the returns on their savings and on their investments 0:20:56.200 --> 0:21:00.280