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Speaker 1: This is Master's in Business with Barry rid Holds on

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Speaker 1: Bloomberg Radio. This week on the podcast, I have an

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Speaker 1: extra special guest. Elizabeth Burton is Goldman Sachs's Assets Management's

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Speaker 1: client investment strategist. Previously, she was chief investment officer at

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Speaker 1: various state pension funds, including Maryland and Hawaii. I found

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Speaker 1: this to be really an intriguing conversation with somebody whose

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Speaker 1: investment charge is unconstrained. She can go anywhere do anything.

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Speaker 1: She provides advice to institutions and high net worth investors

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Speaker 1: that isn't limited by the typical buckets or lines or

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Speaker 1: structure that you so often see. Her job is portfolio

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Speaker 1: and product solutions, and that means she could go anywhere

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Speaker 1: in the world than do anything. I thought this conversation

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Speaker 1: was absolutely fascinating, and I think you will also with

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Speaker 1: no further ado, Goman Sachs Asset Managements. Elizabeth Burton, Hi Arry,

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Speaker 1: thank you for having me. That is quite a resume.

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Speaker 1: Let's start a little bit before we get to what

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Speaker 1: you do with Goldman Sachs. Let's talk about your background,

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Speaker 1: which is really kind of fascinating. First, you have a

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Speaker 1: degree in French, how does that lead to a group

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Speaker 1: to a focus on investment management?

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Speaker 2: I do have a degree in French, A little bit

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Speaker 2: of a cheat there, unless you consider English majors cheating

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Speaker 2: as well who speak English. But my grandmother's from Normandy,

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Speaker 2: and so I've been speaking French since like as long

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Speaker 2: as I can remember, and I love French literature. I

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Speaker 2: actually have some relationship far far away to Jules Vernen.

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Speaker 2: So how does that relate to finance?

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Speaker 3: It doesn't. But my parents told me college is the

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Speaker 3: last time you can.

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Speaker 2: Study in our dime anything you would like, and so

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Speaker 2: they were both in finance, and I decided that must

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Speaker 2: be the absolute last thing I ever wanted to do.

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Speaker 1: So University of Chicago Booth School of Business. Was this

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Speaker 1: just an inevitable, unavoidable thing your parents come from that

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Speaker 1: it seems like you're getting a lot of your focus

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Speaker 1: from your genetics. What led to Booth?

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Speaker 2: Well, so I will this will be the first time

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Speaker 2: I'm telling honestly why I went to Booth Two reasons.

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Speaker 2: One one is true, and I've always said is that

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Speaker 2: I wanted people to stop asking if I could do math,

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Speaker 2: And no one asked me if I can do math anymore?

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Speaker 2: With a degree from both, particularly in econometrics and statistics.

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Speaker 2: But the other reason was Booth rejected me an undergrad.

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Speaker 1: Oh really, yes, I'll show that of Chicago, so right.

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Speaker 2: And then the third and final reason was my dad

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Speaker 2: got his PhD in econ from Northwestern, but he's so ancient.

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Speaker 2: Back then it was taught at the University of Chicago,

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Speaker 2: and so I.

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Speaker 1: Wait, so Northwestern grad students took classes at you see.

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Speaker 2: At you Chicago, and my dad lived in the International House.

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Speaker 2: He's from Houston, so I don't know how he pulled

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Speaker 2: that one.

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Speaker 1: Well, it's really like a different a different kind of

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Speaker 1: humidity makes it feel in Houston, makes it feel like

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Speaker 1: you're in the tropics. So it's close totally. That's very amusing.

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Speaker 1: So people really ask you, if you take French, you

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Speaker 1: do math? Is that like still the sort of thing

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Speaker 1: that we ask people.

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Speaker 2: I think it's because I went into risk management straight

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Speaker 2: out of school, on the risk side of fund of

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Speaker 2: funds and various other industries, and without a formal degree

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Speaker 2: in math and statistics. I think there was some hesitation

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Speaker 2: on whether or not it was capable of doing it,

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Speaker 2: which which may be fair, And I wanted to bolster

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Speaker 2: my resume a little bit away from politics and French

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Speaker 2: and so I thought, what better places to go?

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Speaker 3: And you know it might hurt a little bit.

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Speaker 2: Chicago's a pretty good place to learn some math.

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Speaker 1: And flance, I'll say for sure. So how do you

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Speaker 1: go from coming out of Booth School in University of

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Speaker 1: Chicago to getting named CIO magazines top forty under forty.

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Speaker 2: So that was kind of a meandering path a little bit.

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Speaker 2: What ended up happening was I met my husband right

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Speaker 2: before I went to business school.

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Speaker 3: He was living in Maryland.

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Speaker 2: My boyfriend during business school and he was living in Maryland,

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Speaker 2: and so after school, I decided I should probably move there,

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Speaker 2: not back to New York, not back to California. And

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Speaker 2: the hedge funds down there looked like Post made off

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Speaker 2: post GFC that they were really.

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Speaker 3: Going to struggle. So I had to switch industries.

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Speaker 2: So I actually went to work in M and A

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Speaker 2: in payments, and I enjoyed that.

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Speaker 3: After three years, I decided I don't.

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Speaker 2: Love payments enough to continue to do consulting in M

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Speaker 2: and A and payments, so I actually went and worked

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Speaker 2: in economics. I was an econometrician. And then when my

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Speaker 2: second child was born, I needed a little bit of

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Speaker 2: a different lifestyle. I had two kids, they were both young.

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Speaker 2: My father had worked with public pensions and he said,

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Speaker 2: this is a pretty good place to be in finance

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Speaker 2: if you want to raise kids. It's a little bit better,

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Speaker 2: better of a lifestyle. Well, so I applied to Maryland

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Speaker 2: State Retirement. I actually think I interviewed there a couple

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Speaker 2: of days after my child was born because they were

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Speaker 2: cutting off the application. And I luckily, thankfully got the job.

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Speaker 3: Got to work for one.

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Speaker 2: Of the most amazing CIOs in the businesses and a

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Speaker 2: close friend, Andy Palmer. But how I got the award,

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Speaker 2: I'm not sure. I think, you know, I was in

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Speaker 2: my main thirties at the time, and I think I

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Speaker 2: was a little bit outspoken. And I also believe that

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Speaker 2: I have never really believed in bucketing very much in investments,

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Speaker 2: and so I often look at investments in my portfolio

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Speaker 2: that may be different from what most other people put

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Speaker 2: in their portfolios.

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Speaker 1: So I have like a half a dozen questions that

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Speaker 1: has led me to But let's start with bucketing, or

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Speaker 1: what some people call silos, different types of investing. When

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Speaker 1: you say you haven't been much for bucketing. Tell us

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Speaker 1: what you mean by that.

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Speaker 3: Well, let me give you an example.

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Speaker 2: I don't know if you're in the market for a

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Speaker 2: house currently, but let's say you're real at her goes

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Speaker 2: and says, I talk to you, and you say I

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Speaker 2: love Cape CODs, And he's like, okay, okay, I've also

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Speaker 2: got this amazing condo that overlooks all of Central Park

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Speaker 2: and it's only a one million dollars, right, or it's

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Speaker 2: only two hundred thousand dollars. And you say, wow, two

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Speaker 2: hundred thousand dollars for a condo overlooking Central Park. That

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Speaker 2: sounds great. But I only have spots in my portfolio

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Speaker 2: for a Cape Cod. How ridiculous is that?

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Speaker 1: Right?

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Speaker 2: So it's a problem that institutions often suffer from that

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Speaker 2: Retail investors do not like you and me, we probably

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Speaker 2: don't have this bucketing issue. And so I always felt

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Speaker 2: an institutional management that we were hamstrung by these bucketing

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Speaker 2: issues because we weren't able to invest in things because

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Speaker 2: of these prescribed rules, which I'm not saying are bad,

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Speaker 2: but they can be limiting. Anytime you have a rule,

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Speaker 2: you limit your availability of option.

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Speaker 1: So let's stay with this. So when I think of bucketing.

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Speaker 1: I think of a large institution that says, well, we're

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Speaker 1: gonna we like this space, pick a space, private credit,

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Speaker 1: venture capital, real estate doesn't matter, and we want to

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Speaker 1: allocate ten percent of our portfolio to that particular space.

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Speaker 1: What you're suggesting is regardless of whether they're fantastic deals

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Speaker 1: elsewhere or this space is pricey. You think that that

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Speaker 1: sort of bucket very much hamstrings the CIO to make

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Speaker 1: the best decisions.

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Speaker 2: I believe it can. I believe it can save you

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Speaker 2: from making poor decisions outside of your mandate. But here's

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Speaker 2: a good example that's come up in recent years. Real

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Speaker 2: estate that has been something in recent years that is

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Speaker 2: something that we're seeing in institutional portfolios. So does that

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Speaker 2: go in real estate or does that go in debt?

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Speaker 3: It can be a tricky problem.

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Speaker 1: Well, it depends on how it's financed.

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Speaker 3: It could It.

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Speaker 2: Could also depend on the bogie or the target return

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Speaker 2: for either of the If the person managing those two

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Speaker 2: portfolios are different, they may have different objectives, so it

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Speaker 2: may slip the cracks even though it's a good investment.

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Speaker 2: There's also some sort of some hedge fund structures that

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Speaker 2: have private equity, like investments. If the private equity team

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Speaker 2: doesn't feel that the return.

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Speaker 3: Is high enough, they will pass.

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Speaker 2: But if the hedge fund team feels like it has

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Speaker 2: too high of inequity beta, right, they may pass on that.

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Speaker 3: So you may miss.

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Speaker 2: Out on a good investment. So I always try to

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Speaker 2: find a way to not miss out on those investments. Plus,

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Speaker 2: often those investments are some of the better investments because

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Speaker 2: a lot of people have these constraints, right, so there's

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Speaker 2: not as much capital flying flying in there, and when

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Speaker 2: you have limited capital chasing you know these really amazing deals,

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Speaker 2: you can often earn a higher return.

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Speaker 1: So before you said perhaps it was because you were

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Speaker 1: outspoken and I was going to say, how do people

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Speaker 1: work in public pensions? Not spoken, but I get the

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Speaker 1: sense of what you're saying. You're pushing back at established

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Speaker 1: assumptions of investing, that we can create these broad categories

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Speaker 1: regardless of whether it helps our performance or not. In fact,

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Speaker 1: it sounds like you think these rigid rules get in

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Speaker 1: the way of good investors making good decisions.

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Speaker 3: I think sometimes.

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Speaker 2: But you could also take that and apply it to

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Speaker 2: a company, right, So you could say that if you

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Speaker 2: have a company that has people working there for twenty

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Speaker 2: five years. They all have seen the same thing for

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Speaker 2: twenty five years. When you get one person that comes

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Speaker 2: in and has a year of experience in that industry,

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Speaker 2: they're going to bring a new vision to it. And

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Speaker 2: it may be wrong, but there might be parts of.

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Speaker 3: That that are really interesting.

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Speaker 2: And I feel that because I was only there for

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Speaker 2: a year when I won that award, there might have

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Speaker 2: been flaws in my argument. But because I hadn't grown

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Speaker 2: up in the public pension spase, I had a different

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Speaker 2: perspective of what might work, and that's what I applied.

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Speaker 1: Right, So not only diversity as we tend to think

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Speaker 1: of it broadly, but diversity of experience, diversity of ideas,

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Speaker 1: just different ways of looking at things. So let's talk

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Speaker 1: about your prior experience. You worked at a South African

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Speaker 1: based hedge funds or fund of funds.

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Speaker 2: But fund of funds, and they did have an F

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Speaker 2: three product as well, if you can believe it, a

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Speaker 2: fund of fun to funds.

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Speaker 1: Oh so that's fun to fun squared. Tell us about

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Speaker 1: that experience. Were you actually in South Africa? Are you

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Speaker 1: working in the States.

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Speaker 3: I was working.

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Speaker 2: So they had four offices, one in Switzerland, one in Johannesburg,

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Speaker 2: one in Cape Town, and one in New York. And

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Speaker 2: so the New York team was the Diligence team, and

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Speaker 2: we had a couple of products. I had originally started

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Speaker 2: out on the multi strategy product. I had gone to

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Speaker 2: work there because I'd previously worked in mortgages, in mortgage backs,

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Speaker 2: and as you know, that was around seven and eight

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Speaker 2: tricky time.

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Speaker 3: Wanted to diversify this.

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Speaker 1: Something happened, Something happened.

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Speaker 2: So I wanted to try other strategies, and multi strat

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Speaker 2: sounded like a good place to learn about a bunch

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Speaker 2: of different types of strategies. I was really interested in

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Speaker 2: hedge funds. Our clientele was mostly x US, almost exclusively

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Speaker 2: x US, and it was great.

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Speaker 3: It was the best part about that job.

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Speaker 2: Actually, it wasn't even the investing and the meeting funds.

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Speaker 2: It was actually that I worked on a team across

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Speaker 2: multiple continents and like just trying to stay in touch

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Speaker 2: and trying to work together on this portfolio and coordinate meetings.

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Speaker 2: And we all had different backgrounds and different investment ideas

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Speaker 2: and different clients. Like US clients are very different from

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Speaker 2: clients in other countries, so it was really a unique experience.

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Speaker 2: I still keep in touch with them. I eventually moved

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Speaker 2: over to the global macro CTA type side of the business,

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Speaker 2: a little bit of a diversifier, which is funny because

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Speaker 2: later at Maryland and then Hawaii, that was a big

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Speaker 2: part of our investment strategy was investing in macro or

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Speaker 2: CTA and trend type funds.

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Speaker 3: So it was a great learning ground for me.

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Speaker 1: Was there a lot of travel? You were back and

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Speaker 1: forth at Geneva or London or Johannesburg, Zurich.

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Speaker 2: Johannesburg and Cape Town the majority of the trips, and

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Speaker 2: we tried to go a couple times a year to

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Speaker 2: each of the different offices. They would come here as well,

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Speaker 2: but at that point I was still fairly young, and

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Speaker 2: it wasn't as much client faxing x US, not as

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Speaker 2: much explaining, and because I was on the diligence team,

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Speaker 2: so more research base.

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Speaker 1: That flight to South Africa is thy.

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Speaker 2: Two hours with a layover in Dakar, and I remember

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Speaker 2: before the airline rules, I got stuck on the tarmac

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Speaker 2: once for five hours.

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Speaker 1: Wow, no fun. So you end up going from the

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Speaker 1: fund of funds to pension funds and what was first

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Speaker 1: Maryland or why so Maryland's first.

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Speaker 2: I had two brief jobs between the Fund of Funds

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Speaker 2: in Maryland and business school in between there, Maryland was first,

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Speaker 2: and I never intended to leave Maryland. It was one

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Speaker 2: of my favorite jobs. Probably my current job is probably

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Speaker 2: my favorite job, but that is a very close, good safe.

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Speaker 3: For very similar reasons.

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Speaker 1: Actually, But well, tell us why why was Maryland and

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Speaker 1: Goldman your favorite jobs?

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Speaker 2: I think number one the team my team at Goldman

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Speaker 2: and the broader team even and the team at Maryland

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Speaker 2: are some of my favorite people. Just really wonderful, smart,

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Speaker 2: fun human beings to work with with a very clear mission.

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Speaker 2: I also really like the access talking to really smart

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Speaker 2: people at Golman. It's the internal access, talking to the

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Speaker 2: traders and the pms and the CIOs. And we have

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Speaker 2: so many offices across the world that are.

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Speaker 1: A unique vision of what's going on in the world, right,

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Speaker 1: I mean, I have to think the intelligence that comes

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Speaker 1: from that team in what they see everywhere has to

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Speaker 1: be incomparable. It's just about anything else.

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Speaker 3: It is amazing.

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Speaker 2: I sometimes wonder if I would have rather having started

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Speaker 2: with this experience and then got what I would have

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Speaker 2: been better at Maryland having known what I know now,

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Speaker 2: or am I better now having learned how things work

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Speaker 2: on the clients. So I go back and forth. But

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Speaker 2: I'm lucky to have had both. And at Maryland it

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Speaker 2: was a giant pool capital fifty five billion back then.

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Speaker 2: I'm not sure exactly what it is now. But you

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Speaker 2: could talk to pretty much whoever you wanted to talk

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Speaker 2: to if you had a question. If you had a

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Speaker 2: question on high yield, It's not conceivable one day you

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Speaker 2: might get to talk to Milkin about it, and that

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Speaker 2: is just so cool. And I learned a lot because

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Speaker 2: remember I majored in French and politics. I did go

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Speaker 2: to Chicago, but they teach more finance less about like

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Speaker 2: these esoteric strategies. And that's one of the things I

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Speaker 2: love about Goldman, and I also loved about Maryland is

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Speaker 2: like good people and you're constantly learning and it never

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Speaker 2: is boring.

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Speaker 1: That sounds fascinating. Let's talk a little bit about your

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Speaker 1: time as CIO at Hires. Is that how that's pronounced, Yes,

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Speaker 1: the acronym for the Hawaii Investment Employt Retirement System or

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Speaker 1: where it's to that effect. How did that come about?

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Speaker 1: That seems like such a fascinating position and so far

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Speaker 1: away from Maryland's.

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Speaker 3: It is interesting how it happened. I guess I got lucky.

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Speaker 2: In January or February of twenty eighteen, Hawaii HA parted

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Speaker 2: ways with their then chief investment officer and there was

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Speaker 2: an article in a magazine for institutional allocators about it

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Speaker 2: and how they were hiring. And I still have the

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Speaker 2: email I sent to my husband and I said, ha, ha,

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Speaker 2: want to move to Hawaii. And I forwarded it to

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Speaker 2: him and I was very happy at Maryland. Wasn't planning

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Speaker 2: on leaving, and I had a lot of ties to

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Speaker 2: Maryland that I didn't think I wanted to break. But

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Speaker 2: on a whim, I applied, and at the same time

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Speaker 2: had mentioned to a friend of mine that I had applied,

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Speaker 2: And it turns out the recruiter had called my friend

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Speaker 2: about the job and he said, I'm not interested, but

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Speaker 2: I know someone who applied and she's got a risk background,

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Speaker 2: and I know you at.

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Speaker 3: How I care about risk, and so he put me

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Speaker 3: in contact with a recruiter.

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Speaker 2: They reached out and they said, look, you're one of.

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Speaker 3: One hundred and forty. It's unlikely.

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Speaker 2: So I actually went on vacasion. I went to work

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Speaker 2: in Asia. It was gone for a couple of months

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Speaker 2: here and there. When I got back, they said, okay,

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Speaker 2: that's STI unlikely, but you're down to about forty.

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Speaker 3: I was like, oh, oh, well, I like those odds.

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Speaker 3: Thos are okay.

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Speaker 2: And then by June I was telling my husband I'm

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Speaker 2: in the final four. We got to fly out there,

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Speaker 2: and he said, I moving to Hawaii. He had he

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Speaker 2: had a great job. He's very senior in his career.

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Speaker 2: Both our families are on the Ease coast. She went

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Speaker 2: out there for about a week and at the end

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Speaker 2: of the week that I interviewed, got the job and

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Speaker 2: we accepted by the.

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Speaker 3: End of the week.

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Speaker 1: Really, so what changed to make your husband say, yeah,

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Speaker 1: I could live in tropical paradise if I have to.

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Speaker 3: I think, you know, he's a really good guy.

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Speaker 2: I basically said, I've been working in my whole life

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Speaker 2: for something like this. I was thirty four, I was

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Speaker 2: a female. It was, you know, a Hawaii pension. There's

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Speaker 2: only so many pensions take pensions in the US. I said,

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Speaker 2: who knows what the next one to crop up will be.

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Speaker 3: This is unique.

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Speaker 2: There's just there aren't that many young or females cee

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Speaker 2: Ia is I have got to try this, And I

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Speaker 2: think he could tell how badly I wanted it, and

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Speaker 2: he sweetly gave up his job of fifteen years and

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Speaker 2: wow followed me out there.

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Speaker 1: Wow. So, how long did you stay in Hawaii?

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Speaker 3: For four years?

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Speaker 1: You lived on the islands? We did, so part of

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Speaker 1: me thinks of Hawaii as his tropical paradise. But I've

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Speaker 1: spent time on other islands, and I know at a

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Speaker 1: certain point you get a little island fever. You're stuck

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Speaker 1: with your seeing the same things. How long did it

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Speaker 1: take before it was no longer tropical paradise? It's just

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Speaker 1: where we lived.

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Speaker 2: Well, I think COVID sped up the process a little bit.

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Speaker 2: I also, I don't know if you've ever experienced this.

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Speaker 2: There's like one day when your parents are really young,

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Speaker 2: and then within thirty minutes they all of a sudden

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Speaker 2: mamede and you miss them and you've got to take

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Speaker 2: care of them. And so my parents, if they listen

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Speaker 2: to this, are going to kill me for calling them old.

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Speaker 2: But you know, I had little kids had when I

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Speaker 2: moved there. My daughter was two, my son was four,

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Speaker 2: and I think they saw them two three times, right,

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Speaker 2: and I was realizing I was sacrificing my family to

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Speaker 2: live in this beautiful location. I also really missed being

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Speaker 2: in New York. It's an island too, and that's an island, right,

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Speaker 2: And I missed being around the buzz of finance. It's

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Speaker 2: very easy in Hawaii to get wrapped up in the

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Speaker 2: water and surfing in the mountains and the hiking and

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Speaker 2: all of that is lovely. But I run it about

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Speaker 2: one hundred and sixty miles an hour, and I'd like

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Speaker 2: to be at a place where people run at least

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Speaker 2: at that And I have to say Goldman Sachs definitely

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Speaker 2: runs at one hundred and sixty miles an hour, and

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Speaker 2: I just I wanted to go back to finance and

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Speaker 2: being more like in the middle of all the frenzy.

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Speaker 1: I totally get that. I know this is sort of

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Speaker 1: old school, but it's true. Once you leave New York,

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Speaker 1: you've left town. You really have And it's and I

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Speaker 1: don't just mean waiting twenty minutes for an egg McMuffin

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Speaker 1: in Richmond, Virginia. I mean I leave New York, I

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Speaker 1: make a concerted effort to like take it down a

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Speaker 1: gear because the rest of the world has a very

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Speaker 1: different pace than New York City, and I imagine places

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Speaker 1: like London and Hong Kong and other financial capitals where

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Speaker 1: it's pedal to the metal. Did it take you a

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Speaker 1: while to get back into the rhythm here or like

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Speaker 1: riding a bike, you were just right back into.

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Speaker 2: It's funny that Hong Kong's my second favorite city in

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Speaker 2: the world. New York is number one. No, it took

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Speaker 2: all of thirty seconds. In fact, I very much wanted

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Speaker 2: to live in Manhattan. I wanted to go back to

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Speaker 2: the West Village where I lived in my twenties.

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Speaker 3: But my husband was.

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Speaker 2: Like, well, with two kids and a dog and a cat,

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Speaker 2: maybe we should not do that. But no, I actually

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Speaker 2: pretty long commute. I love coming in the city every day.

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Speaker 2: I don't think for me personally, there's no better city

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Speaker 2: in the world.

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Speaker 1: I love. Well, your commute is not bad. There are

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Speaker 1: much worse commutes.

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Speaker 3: Than It's about an hour forty five.

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Speaker 1: Oh really, because you have to go down to Yes,

403
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Speaker 1: that's why. See, they need to move into the space

404
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Speaker 1: between right between Penn Station and Grand Central knock a

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Speaker 1: half hour off your commute each other. Oh. Absolutely, So

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Speaker 1: let's talk a little bit about risk management. How does

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Speaker 1: that come into play when you're looking at a big

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Speaker 1: pension fund that has all of these obligations for employees

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Speaker 1: in perpetuity.

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Speaker 2: Right First, management is tough a pension and Goldman Sachs

411
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Speaker 2: provides itself on being a good manager of risk. But

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Speaker 2: Goldman Sachs has fewer constraints. We actually have a budget

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Speaker 2: for risk management and technology and tools. That is not

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Speaker 2: something your typical pension is able to do. And it's

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Speaker 2: a critical need and they often have to find multiple

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Speaker 2: tools that they can use, some free, some not free

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Speaker 2: to try to make a good and robust risk management system.

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Speaker 2: But it's definitely a challenge and it's really important because

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Speaker 2: to your point, especially now, it's always been important, but

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Speaker 2: I think post COVID, the industry is starting to realize

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Speaker 2: that liquidity for pension funds is extremely important. It affects

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Speaker 2: almost everything they do and the lack of it could

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Speaker 2: have really dire outcomes for the pensioners and for the

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Speaker 2: system itself and have a host of other consequences.

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Speaker 1: Is it something that can be outsourced or does it

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Speaker 1: have to be managed in house?

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Speaker 2: I think it would be tough to outsource all of

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Speaker 2: it unless also the investment team was partially outsourced.

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Speaker 3: I think there needs to be.

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Speaker 2: Some marriage between the two. But I do think that

431
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Speaker 2: you can outsource certain functions of it, or you can

432
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Speaker 2: have a consultant assist with the risk management. But I

433
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Speaker 2: think the most important thing that you have to do

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Speaker 2: at a pension fund for that is get a hold

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Speaker 2: on your You have to have good lawyers and good contracts.

436
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Speaker 2: You have to have a clear view of your liquidity

437
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Speaker 2: and your cash flows.

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Speaker 3: It's critical.

439
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Speaker 1: So let's talk a little bit about that, because that's

440
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Speaker 1: kind of fascinating. When when I think of a pension fund,

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Speaker 1: I think of existing employees contributing into the funds a

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Speaker 1: source of liquidity, and retirees drawing down on the fund,

443
00:21:33,840 --> 00:21:39,480
Speaker 1: which is the liability or the future obligations. When when

444
00:21:39,480 --> 00:21:43,600
Speaker 1: the pandemic shuts everything down, does this mean the current

445
00:21:43,600 --> 00:21:47,720
Speaker 1: employees are not making contributions? What happened during that period.

446
00:21:47,800 --> 00:21:50,920
Speaker 2: So we actually never fully shut down. We were always

447
00:21:50,960 --> 00:21:53,280
Speaker 2: in operations, and we were I was in the office

448
00:21:53,280 --> 00:21:55,960
Speaker 2: pretty much full time. But one thing I want to

449
00:21:56,000 --> 00:21:58,800
Speaker 2: point out is that not all employees at all.

450
00:21:58,640 --> 00:22:00,800
Speaker 3: Pension funds contribute. Some don't.

451
00:22:00,920 --> 00:22:04,000
Speaker 2: There are certain types of employer sponsor plans where some

452
00:22:04,080 --> 00:22:06,600
Speaker 2: portion of the employees are potentially all are part of

453
00:22:06,640 --> 00:22:10,280
Speaker 2: non contributory plans. Now, their multipliers are different, their payouts

454
00:22:10,280 --> 00:22:12,919
Speaker 2: are different. But that's a tough situation when you're not

455
00:22:13,040 --> 00:22:16,480
Speaker 2: paying in and you're only receiving, right, but what you

456
00:22:16,560 --> 00:22:22,320
Speaker 2: did mention So in COVID, a bunch of pension funds

457
00:22:22,560 --> 00:22:25,200
Speaker 2: experienced or thought they were going to experience furloughs or

458
00:22:25,440 --> 00:22:27,959
Speaker 2: cuts in their work week, which are essentially cuts into wages. Right,

459
00:22:28,000 --> 00:22:31,200
Speaker 2: So fifty percent furloughed, you're also fifty percent wage cut.

460
00:22:31,520 --> 00:22:35,600
Speaker 2: Those would slow contributions into the system, but it depends

461
00:22:35,600 --> 00:22:38,680
Speaker 2: on how you calculate the multiplier going out. So if

462
00:22:38,680 --> 00:22:41,919
Speaker 2: it's based on their highest wage, ever, it could be

463
00:22:42,040 --> 00:22:44,840
Speaker 2: your contribution to actually stay constant while the incoming cash

464
00:22:44,840 --> 00:22:49,080
Speaker 2: flows are not. Also, in many pension funds, while there

465
00:22:49,119 --> 00:22:53,120
Speaker 2: are technically penalties for employers not contributing to the system,

466
00:22:53,440 --> 00:22:56,159
Speaker 2: it's very politically unpopular for a pension fund to go

467
00:22:56,240 --> 00:23:00,119
Speaker 2: after it's counties or teachers or police for payments, So

468
00:23:00,160 --> 00:23:01,760
Speaker 2: it's very unlikely that would happen.

469
00:23:01,600 --> 00:23:05,040
Speaker 1: Especially in the middle of a crazy pandemic with everything

470
00:23:05,080 --> 00:23:06,439
Speaker 1: associated there too.

471
00:23:06,400 --> 00:23:10,840
Speaker 2: So it's a very precarious position. Luckily it actually, as

472
00:23:10,840 --> 00:23:13,720
Speaker 2: you probably know, the market turned around rather sharply. There

473
00:23:13,760 --> 00:23:16,240
Speaker 2: was a good equity rebound. A lot of this didn't

474
00:23:16,320 --> 00:23:18,679
Speaker 2: end up happening. In fact, state revenues were often at

475
00:23:18,760 --> 00:23:22,920
Speaker 2: all time highs from taxes when this happened, so that

476
00:23:23,040 --> 00:23:26,000
Speaker 2: the worst was somewhat avoided in the US, I will say,

477
00:23:27,000 --> 00:23:29,280
Speaker 2: but it did shed a light on the fact that,

478
00:23:30,200 --> 00:23:32,399
Speaker 2: you know, you still can have equities and bonds right

479
00:23:32,480 --> 00:23:34,640
Speaker 2: down at the same time, you can have a challenging

480
00:23:34,680 --> 00:23:37,240
Speaker 2: liquidity environment, just like we had No eight, which I

481
00:23:37,240 --> 00:23:39,800
Speaker 2: don't think you know, they're not the same thing, but

482
00:23:40,000 --> 00:23:42,040
Speaker 2: similar challenges in some respects.

483
00:23:42,280 --> 00:23:45,879
Speaker 1: So how do you think about I'm still looking at

484
00:23:45,960 --> 00:23:49,919
Speaker 1: the liquidity issue. How do you think about under normal

485
00:23:49,960 --> 00:23:57,200
Speaker 1: circumstances matching future liabilities with liquidity or cash flows. I'm

486
00:23:57,200 --> 00:23:59,760
Speaker 1: sure there are all sorts of actuarial tables that you

487
00:23:59,800 --> 00:24:03,159
Speaker 1: were working with, but you have to think, what are

488
00:24:03,280 --> 00:24:06,600
Speaker 1: obligations going to be five years, ten years, twenty years out.

489
00:24:07,080 --> 00:24:10,760
Speaker 1: Most investors don't think in those times, No.

490
00:24:11,160 --> 00:24:14,040
Speaker 2: They probably don't unless they're investing in private markets or

491
00:24:14,040 --> 00:24:17,080
Speaker 2: in your house. You're probably thinking about how to afford

492
00:24:17,080 --> 00:24:20,440
Speaker 2: those payments, So in the US and Europe or abroad,

493
00:24:20,480 --> 00:24:24,000
Speaker 2: they're actually two separate things. So in the US, corporate

494
00:24:24,000 --> 00:24:28,320
Speaker 2: pensions other than public pensions, right, corporate pensions tend to

495
00:24:28,359 --> 00:24:31,240
Speaker 2: focus more on the liability driven side, meaning they're matching

496
00:24:31,280 --> 00:24:34,200
Speaker 2: their cash flows very carefully. On the public side, usually

497
00:24:34,560 --> 00:24:38,320
Speaker 2: it's not an LDI type format, they are monitoring their liquidity.

498
00:24:38,359 --> 00:24:40,000
Speaker 2: So they might have a coverage ratio, so they might

499
00:24:40,040 --> 00:24:44,240
Speaker 2: say how many times can we meet our pension payments

500
00:24:44,240 --> 00:24:48,600
Speaker 2: and private market private equity capital commitment pacing over a

501
00:24:48,640 --> 00:24:51,640
Speaker 2: certain ratio with no contributions over a certain umbur of years.

502
00:24:51,680 --> 00:24:53,920
Speaker 2: So maybe they say, okay, we want it to be quarters,

503
00:24:53,920 --> 00:24:56,000
Speaker 2: we want it to be twenty times, and then they

504
00:24:56,000 --> 00:24:58,320
Speaker 2: can manage to that or something like that. And they

505
00:24:58,359 --> 00:25:02,399
Speaker 2: often have models for modeling the on corporate pensions or

506
00:25:02,440 --> 00:25:07,520
Speaker 2: European pensions. They most likely are involved in either liability

507
00:25:07,720 --> 00:25:10,200
Speaker 2: driven investing or this cash flow matching. But I will

508
00:25:10,200 --> 00:25:13,560
Speaker 2: say of the top ten questions I get from allocators

509
00:25:13,600 --> 00:25:16,920
Speaker 2: this year, one of them is can we implement cash

510
00:25:16,920 --> 00:25:20,560
Speaker 2: flow matching to try to help our liquidity issues? Because

511
00:25:20,600 --> 00:25:22,919
Speaker 2: of the denominator effect right now, a lot of pension

512
00:25:22,920 --> 00:25:25,760
Speaker 2: funds in the US are still suffering from some liquidity

513
00:25:26,280 --> 00:25:29,199
Speaker 2: issues since they're super overweight private equity and the equity

514
00:25:29,240 --> 00:25:31,040
Speaker 2: markets had stumbled right.

515
00:25:30,840 --> 00:25:33,800
Speaker 1: So that means while the value of the fund is

516
00:25:33,840 --> 00:25:36,320
Speaker 1: where they wanted to be, the liquidity in the ability

517
00:25:36,359 --> 00:25:39,280
Speaker 1: to send out cash is somewhat compromise.

518
00:25:39,359 --> 00:25:43,280
Speaker 2: It's challenging, especially because private equity funds are not distributing

519
00:25:43,320 --> 00:25:46,040
Speaker 2: as much as they used to because there haven't been

520
00:25:46,080 --> 00:25:49,120
Speaker 2: as many sales in the market or exits, so they're

521
00:25:49,119 --> 00:25:51,000
Speaker 2: getting hit on sort of both ends.

522
00:25:51,119 --> 00:25:55,120
Speaker 1: So in twenty twenty two, when equities were down and

523
00:25:55,240 --> 00:25:58,360
Speaker 1: fixed income were down, they were both down double digits.

524
00:25:58,720 --> 00:26:01,119
Speaker 1: Were you saying to yourself, I'm glad I'm not running

525
00:26:01,119 --> 00:26:04,359
Speaker 1: a state pension fund this year, or like, what was

526
00:26:04,359 --> 00:26:07,600
Speaker 1: that experience like from your perspective where you are now?

527
00:26:09,160 --> 00:26:14,200
Speaker 2: No, so, I you know Hawaii, It should have done

528
00:26:14,280 --> 00:26:16,239
Speaker 2: probably quite well during that time. It depends on your

529
00:26:16,240 --> 00:26:19,640
Speaker 2: asset allocation. I also don't think you should ever really

530
00:26:19,640 --> 00:26:22,560
Speaker 2: beat yourself up for sticking to your acid allocation.

531
00:26:22,240 --> 00:26:23,240
Speaker 3: And your beliefs.

532
00:26:24,040 --> 00:26:26,880
Speaker 2: I also think that was a great learning experience. But

533
00:26:26,920 --> 00:26:32,280
Speaker 2: more importantly, I have always struggled with why there seems

534
00:26:32,280 --> 00:26:34,040
Speaker 2: to be some belief that equities and bonds will be

535
00:26:34,119 --> 00:26:35,720
Speaker 2: negatively correlated throughout time.

536
00:26:35,840 --> 00:26:37,760
Speaker 3: Oh, it's simply not the case.

537
00:26:37,880 --> 00:26:40,640
Speaker 1: Go back to nineteen eighty one, you've had both stocks

538
00:26:40,640 --> 00:26:43,840
Speaker 1: and bonds down. I believe double digits that year, and

539
00:26:44,720 --> 00:26:46,680
Speaker 1: the year before was pretty close as well.

540
00:26:46,840 --> 00:26:50,280
Speaker 2: Right, And if you look at inflationary environments, a positive

541
00:26:50,280 --> 00:26:51,400
Speaker 2: correlation between the two.

542
00:26:51,440 --> 00:26:52,680
Speaker 3: It's also not uncommon.

543
00:26:52,800 --> 00:26:55,960
Speaker 2: And I think, sitting back in twenty twenty, twenty twenty one,

544
00:26:56,200 --> 00:26:59,119
Speaker 2: I was adamant that inflation was not transitory, adamant and

545
00:26:59,160 --> 00:27:03,520
Speaker 2: super public about it. I had many people, super famous

546
00:27:03,520 --> 00:27:05,840
Speaker 2: people telling me I was completely wrong. It's the one

547
00:27:05,840 --> 00:27:08,919
Speaker 2: good call I made ever my entire life. But so

548
00:27:09,000 --> 00:27:11,919
Speaker 2: I felt confident that I had prepared myself for this

549
00:27:12,000 --> 00:27:14,959
Speaker 2: type of environment. It's tricky, though, because one of the

550
00:27:14,960 --> 00:27:16,920
Speaker 2: things that can help you in this sort of environment

551
00:27:17,080 --> 00:27:19,800
Speaker 2: is a diversifier. It could be head friends, it can

552
00:27:19,840 --> 00:27:23,400
Speaker 2: be commodities, it could be cash, right, but commodities were

553
00:27:23,400 --> 00:27:26,400
Speaker 2: often taken out of institutional portfolios a decade or so ago,

554
00:27:26,520 --> 00:27:30,000
Speaker 2: because really they so there was at one point right

555
00:27:30,119 --> 00:27:33,240
Speaker 2: after I think actually the Gonzex Commodities Index came into

556
00:27:33,280 --> 00:27:37,240
Speaker 2: existence commodities actually struggled right after that index came out

557
00:27:37,280 --> 00:27:39,320
Speaker 2: for a while, right, And also the makeup of that

558
00:27:39,359 --> 00:27:43,399
Speaker 2: index has changed over time. It used to be I believe,

559
00:27:43,440 --> 00:27:48,480
Speaker 2: mostly like cattle features, but in commodities and disease. So

560
00:27:48,600 --> 00:27:50,840
Speaker 2: a lot of institution investors got tired of like the

561
00:27:51,040 --> 00:27:54,080
Speaker 2: challenging returns and the volatility and commodities. Also, it can

562
00:27:54,160 --> 00:27:56,960
Speaker 2: be challenging to invest in something without like an you

563
00:27:57,000 --> 00:27:58,840
Speaker 2: know that's based on supply and demand and.

564
00:27:58,800 --> 00:28:00,359
Speaker 3: Not some sort of like intrinsic value.

565
00:28:00,640 --> 00:28:02,439
Speaker 2: And they took it out of their asset allocation in

566
00:28:02,480 --> 00:28:05,800
Speaker 2: favor of other strategies. So when the pandemic came, they

567
00:28:05,800 --> 00:28:08,240
Speaker 2: didn't have that as a diversifier outright. They might have

568
00:28:08,320 --> 00:28:10,240
Speaker 2: had it through it's also hard to invest in start.

569
00:28:10,480 --> 00:28:13,119
Speaker 1: It would have been a good inflation diversified but it

570
00:28:13,160 --> 00:28:13,640
Speaker 1: wasn't there.

571
00:28:13,960 --> 00:28:16,200
Speaker 2: And once you start looking for something when the ship's

572
00:28:16,200 --> 00:28:17,960
Speaker 2: already sinking, right, it's.

573
00:28:17,800 --> 00:28:21,159
Speaker 3: A little late. So I was what I was most curious.

574
00:28:20,880 --> 00:28:23,080
Speaker 2: About actually in twenty twenty two, if when we saw

575
00:28:23,119 --> 00:28:25,679
Speaker 2: asset liability studies come out in twenty twenty three for

576
00:28:25,760 --> 00:28:28,040
Speaker 2: pension funds, where we going to see people putting commodities

577
00:28:28,119 --> 00:28:31,760
Speaker 2: back into their portfolio. And no, but out of the

578
00:28:31,800 --> 00:28:36,920
Speaker 2: cash allocations at some endowments and foundations, at some pensions

579
00:28:36,920 --> 00:28:40,560
Speaker 2: there's gold allocations like the outright gold allocations, but they're

580
00:28:40,560 --> 00:28:45,080
Speaker 2: not they're not in the investment policy statement. The interesting yes,

581
00:28:45,280 --> 00:28:47,360
Speaker 2: in for the most part, this is not you know, ubigodius.

582
00:28:47,480 --> 00:28:50,600
Speaker 2: But so that was an interesting play. And then but

583
00:28:51,000 --> 00:28:53,000
Speaker 2: another question I got in twenty twenty three that I

584
00:28:53,000 --> 00:28:55,840
Speaker 2: haven't heard in a long time is people asking for

585
00:28:56,000 --> 00:29:01,040
Speaker 2: information on CTA's trend following importable alpha to have diversified

586
00:29:01,280 --> 00:29:03,560
Speaker 2: buyers and try to ease cash in this environment.

587
00:29:03,800 --> 00:29:07,560
Speaker 1: That's intriguing. Let me stick with either gold or commodities

588
00:29:07,640 --> 00:29:12,520
Speaker 1: or both. How much of the large allocators a voidance

589
00:29:12,560 --> 00:29:16,120
Speaker 1: of that has to do with the fact that academia

590
00:29:16,280 --> 00:29:20,760
Speaker 1: is not a big fan of commodities. They are not

591
00:29:20,880 --> 00:29:23,600
Speaker 1: just gold. But when you look at Kamali's general as

592
00:29:23,600 --> 00:29:29,480
Speaker 1: opposed to trend following and specific trading systems, the academics

593
00:29:29,480 --> 00:29:31,040
Speaker 1: I always look at it and say, we don't see

594
00:29:31,040 --> 00:29:34,920
Speaker 1: a real return here over longer periods of time. There

595
00:29:34,960 --> 00:29:37,800
Speaker 1: are specific short periods of time where they do spectacular,

596
00:29:38,200 --> 00:29:41,560
Speaker 1: but over long time and eventually mean reverts. Is the

597
00:29:41,800 --> 00:29:45,280
Speaker 1: allocator issue with commodities a function of, Hey, we just

598
00:29:45,360 --> 00:29:47,360
Speaker 1: don't have the white papers to show this is a

599
00:29:47,400 --> 00:29:50,479
Speaker 1: good long term investment or is it something else? And

600
00:29:50,720 --> 00:29:52,920
Speaker 1: I know I'm calling on you to speculate because it's

601
00:29:53,560 --> 00:29:54,440
Speaker 1: a goofy question.

602
00:29:54,800 --> 00:29:55,320
Speaker 3: Well I'm not.

603
00:29:56,080 --> 00:29:57,480
Speaker 2: I would love to agree with you that it is

604
00:29:57,520 --> 00:30:01,080
Speaker 2: the academia, But academia a and always predict the best

605
00:30:01,240 --> 00:30:03,880
Speaker 2: outcomes in I can say this because my dad's an

606
00:30:03,880 --> 00:30:07,000
Speaker 2: academic don't always have the best outcomes in terms of investing.

607
00:30:07,080 --> 00:30:09,320
Speaker 2: I do think there's some merit in staying that. But

608
00:30:09,360 --> 00:30:11,680
Speaker 2: I would also point out that risk parity doesn't have

609
00:30:11,720 --> 00:30:14,920
Speaker 2: a deep history in academia and doesn't have a ton

610
00:30:14,960 --> 00:30:18,720
Speaker 2: of support. And yet risk parity was historically very popular.

611
00:30:18,560 --> 00:30:20,720
Speaker 1: And it's done fairly well recently.

612
00:30:20,480 --> 00:30:23,440
Speaker 2: Great So I don't know if it's purely academic based.

613
00:30:23,480 --> 00:30:25,400
Speaker 2: I think part of it is a volatility, and part

614
00:30:25,400 --> 00:30:27,560
Speaker 2: of it is that it is genuinely unless you're doing

615
00:30:27,600 --> 00:30:29,760
Speaker 2: it through a hedged vehicle or a hedge fund or

616
00:30:29,800 --> 00:30:33,840
Speaker 2: an alternative investment, it is hard to get access to commodities. Typically,

617
00:30:34,360 --> 00:30:36,520
Speaker 2: it's just not the easiest thing to invest in. And

618
00:30:36,560 --> 00:30:40,440
Speaker 2: a lot of funds historically were prohibited from investing in alternatives.

619
00:30:39,920 --> 00:30:42,320
Speaker 1: Meaning they can't invest in futures or anything with the

620
00:30:42,360 --> 00:30:45,200
Speaker 1: liability components of it. So let's talk a little bit

621
00:30:45,200 --> 00:30:48,640
Speaker 1: about what you do at Goldman Sachs's asset management, starting

622
00:30:48,680 --> 00:30:51,400
Speaker 1: with how did you end up at Goldman? It sounds

623
00:30:51,440 --> 00:30:55,320
Speaker 1: like things were delightful on the island of Oahu where

624
00:30:55,320 --> 00:30:57,680
Speaker 1: you were working in Hawaii. Is that where you were

625
00:30:57,720 --> 00:31:02,320
Speaker 1: living or yes? Uh huh not a terrible place to

626
00:31:02,360 --> 00:31:04,080
Speaker 1: set up shop, right, No, it was.

627
00:31:04,080 --> 00:31:06,880
Speaker 3: A wonderful place to live. Yes.

628
00:31:07,000 --> 00:31:09,200
Speaker 2: I would have bet you money I wouldn't have ended

629
00:31:09,240 --> 00:31:10,720
Speaker 2: up at Goldman Sachs two years ago.

630
00:31:11,440 --> 00:31:14,000
Speaker 1: So you weren't going to leave Maryland. You were never

631
00:31:14,000 --> 00:31:15,560
Speaker 1: going to end up in a while. You weren't going

632
00:31:15,640 --> 00:31:17,880
Speaker 1: to go in Goldman. I'm taking the other side of

633
00:31:17,920 --> 00:31:21,360
Speaker 1: your trade, your career. So how did this come about?

634
00:31:21,760 --> 00:31:22,000
Speaker 4: Well?

635
00:31:22,880 --> 00:31:27,640
Speaker 2: I decided to leave Hawaii, believe in about maybe March

636
00:31:27,640 --> 00:31:31,760
Speaker 2: April May of twenty twenty two, and I gave a

637
00:31:31,760 --> 00:31:33,760
Speaker 2: couple months notice and I did not have another job

638
00:31:33,800 --> 00:31:34,239
Speaker 2: lined up.

639
00:31:34,320 --> 00:31:36,440
Speaker 1: I did not know what I wanted to do. Wow.

640
00:31:36,560 --> 00:31:38,000
Speaker 3: So that is a common trend with me.

641
00:31:38,920 --> 00:31:40,800
Speaker 1: I usually yes, something will come up.

642
00:31:41,560 --> 00:31:44,880
Speaker 2: I just can't quiet quit, so I need to just say, hey,

643
00:31:44,880 --> 00:31:45,600
Speaker 2: this isn't the right fit.

644
00:31:45,680 --> 00:31:46,360
Speaker 3: Something will happen.

645
00:31:47,520 --> 00:31:50,720
Speaker 2: And I evaluated what I wanted to do next, and

646
00:31:50,760 --> 00:31:52,440
Speaker 2: I sort of just assumed, Okay, I'll go be a

647
00:31:52,480 --> 00:31:56,400
Speaker 2: CIO somewhere else. We'll see what happens. And I was

648
00:31:56,440 --> 00:31:59,600
Speaker 2: close to taking another role. And when I started thinking

649
00:31:59,600 --> 00:32:03,160
Speaker 2: about we're at Goldman Sachs, I thought, this is again

650
00:32:03,360 --> 00:32:05,880
Speaker 2: just like Chicago. This may hurt, this may be really hard.

651
00:32:06,040 --> 00:32:07,960
Speaker 2: It's going to be a lot of very smart people.

652
00:32:08,320 --> 00:32:10,720
Speaker 2: But I really, like I said earlier, I missed running

653
00:32:10,720 --> 00:32:12,280
Speaker 2: at like one hundred and sixty miles an hour.

654
00:32:12,400 --> 00:32:13,800
Speaker 3: I wanted a challenge.

655
00:32:13,920 --> 00:32:18,040
Speaker 2: I was, you know, forty, and I figured I have

656
00:32:18,120 --> 00:32:22,200
Speaker 2: a couple more moves in me and I wanted something different,

657
00:32:22,240 --> 00:32:23,840
Speaker 2: and I thought, let's see if I can do this.

658
00:32:24,000 --> 00:32:26,760
Speaker 2: And most importantly, like I said before, I loved the team.

659
00:32:26,880 --> 00:32:30,600
Speaker 2: Some of my favorite investors right now are people that

660
00:32:30,680 --> 00:32:33,239
Speaker 2: came out of Goldman Sachs, mostly hedge funds, because I

661
00:32:33,320 --> 00:32:36,240
Speaker 2: love hedge funds. But to me, it was like joining

662
00:32:36,560 --> 00:32:39,720
Speaker 2: the Yankees, like I had followed their versions of Derek

663
00:32:39,800 --> 00:32:41,520
Speaker 2: Jeter and I was like, Wow, I could I could

664
00:32:41,520 --> 00:32:43,000
Speaker 2: go work for these people that I idolized.

665
00:32:43,000 --> 00:32:43,760
Speaker 3: This would be amazing.

666
00:32:43,880 --> 00:32:45,840
Speaker 1: And I'm assuming you know a lot of these people

667
00:32:45,880 --> 00:32:49,840
Speaker 1: through both Maryland and Hawaii, CIO, you're interacting with them

668
00:32:49,880 --> 00:32:53,920
Speaker 1: on a regular basis. What made you think, Hey, I

669
00:32:53,960 --> 00:32:56,720
Speaker 1: can I can keep up with these guys. I want

670
00:32:56,720 --> 00:32:58,680
Speaker 1: to play on this team.

671
00:32:59,320 --> 00:33:01,320
Speaker 2: I think was the one that said you can keep

672
00:33:01,400 --> 00:33:02,920
Speaker 2: up with us, you can play on this team. And

673
00:33:02,960 --> 00:33:05,000
Speaker 2: the amount that they letting me come here and do

674
00:33:05,040 --> 00:33:08,040
Speaker 2: this interview, the amount that Goldman believes in me every day.

675
00:33:08,560 --> 00:33:10,320
Speaker 2: I had to tell you, it's it's like the best

676
00:33:10,320 --> 00:33:11,720
Speaker 2: feeling in the world to wake up and put on

677
00:33:11,720 --> 00:33:13,520
Speaker 2: the Goldman jersey, like they believe in me.

678
00:33:13,600 --> 00:33:16,480
Speaker 3: And it's crazy. I think they believe more than my family.

679
00:33:17,480 --> 00:33:19,000
Speaker 1: I'm going to tell you right now, I don't think

680
00:33:19,000 --> 00:33:22,280
Speaker 1: it's crazy at all, given your history and your your

681
00:33:22,320 --> 00:33:26,760
Speaker 1: track record. But at what point in the process was

682
00:33:26,800 --> 00:33:30,320
Speaker 1: it who was interviewing, who were they recruiting you, or

683
00:33:30,400 --> 00:33:33,680
Speaker 1: had you kind of quietly reached out How did this

684
00:33:34,160 --> 00:33:36,200
Speaker 1: specific position come about?

685
00:33:36,880 --> 00:33:39,400
Speaker 2: You know, I don't even know if the position it self,

686
00:33:39,440 --> 00:33:42,440
Speaker 2: Huven came about till very late in the summer until

687
00:33:42,680 --> 00:33:44,640
Speaker 2: you know, I started in September, and I don't even

688
00:33:44,680 --> 00:33:47,960
Speaker 2: know that it was fully ironed out like much before then.

689
00:33:48,400 --> 00:33:53,120
Speaker 2: I think for me though, the opportunity to join the group.

690
00:33:52,880 --> 00:33:53,920
Speaker 3: That I was joining.

691
00:33:54,040 --> 00:33:57,520
Speaker 2: I have so much respect for this group and to

692
00:33:57,560 --> 00:33:59,680
Speaker 2: be part of what they wanted to do, which was,

693
00:33:59,800 --> 00:34:03,520
Speaker 2: you know, reignite their asset management business. I really like,

694
00:34:04,440 --> 00:34:06,280
Speaker 2: I really like to join places that have something they

695
00:34:06,360 --> 00:34:06,880
Speaker 2: need to get.

696
00:34:06,720 --> 00:34:11,000
Speaker 1: Done and that you can help contribute to making that happen.

697
00:34:11,360 --> 00:34:13,359
Speaker 2: Yes, And I thought, you know, why don't I try

698
00:34:13,360 --> 00:34:14,960
Speaker 2: something different? And if you look at my career and

699
00:34:14,960 --> 00:34:16,640
Speaker 2: all the next steps, they're all a little different and

700
00:34:16,680 --> 00:34:20,040
Speaker 2: in some cases very different. And I think actually all

701
00:34:20,080 --> 00:34:22,840
Speaker 2: those different careers I had led me to be a

702
00:34:22,840 --> 00:34:24,880
Speaker 2: really good CIO. So I thought, if I add this in,

703
00:34:25,000 --> 00:34:26,040
Speaker 2: what does that make me next?

704
00:34:26,080 --> 00:34:26,520
Speaker 3: I don't know.

705
00:34:27,760 --> 00:34:29,719
Speaker 1: So let's talk a little bit about what you do

706
00:34:29,760 --> 00:34:34,200
Speaker 1: with the team you work with at Goldman Sachs. Are

707
00:34:34,239 --> 00:34:38,000
Speaker 1: the clients primarily retail? Are they institutional? Is it a mix?

708
00:34:38,719 --> 00:34:40,799
Speaker 1: What does that group focus on it is?

709
00:34:41,560 --> 00:34:44,279
Speaker 2: Well, the whole group of the client Solutions group is

710
00:34:44,320 --> 00:34:46,600
Speaker 2: a mix of all different kinds of clients, right, But

711
00:34:46,640 --> 00:34:49,520
Speaker 2: I mostly step in with the institutional clients. I don't

712
00:34:49,520 --> 00:34:52,600
Speaker 2: own the client relationships, but I do help advise from

713
00:34:52,640 --> 00:34:56,560
Speaker 2: the perspective as a former institutional allocator and occasionally have

714
00:34:56,560 --> 00:34:59,480
Speaker 2: comments on the retail side that may be tangential. But

715
00:34:59,520 --> 00:35:00,759
Speaker 2: it's mostly institutions.

716
00:35:01,000 --> 00:35:04,120
Speaker 1: So this sounds like this is a very unconstrained position.

717
00:35:04,560 --> 00:35:08,240
Speaker 1: You can help clients work on setting goals, put together

718
00:35:08,280 --> 00:35:11,760
Speaker 1: an investment policy statement, like you've done all the stuff

719
00:35:11,800 --> 00:35:14,960
Speaker 1: from the from the client side, and now you're saying

720
00:35:15,320 --> 00:35:16,799
Speaker 1: what can we what can we do for you?

721
00:35:17,080 --> 00:35:19,520
Speaker 2: They can ask confidential questions. They can say, do you

722
00:35:19,560 --> 00:35:22,239
Speaker 2: think we should sell part of this portfolio? Do you

723
00:35:22,360 --> 00:35:24,799
Speaker 2: like this private equity fund, do you like that? Do

724
00:35:24,800 --> 00:35:28,040
Speaker 2: you like this equity in this country? Do you like

725
00:35:28,040 --> 00:35:30,600
Speaker 2: emerging markets right now? Do you like local bonds? They

726
00:35:30,640 --> 00:35:34,880
Speaker 2: can ask me anything, And because I'm not running my portfolio,

727
00:35:34,880 --> 00:35:37,200
Speaker 2: I can have a more honest position on what I

728
00:35:37,239 --> 00:35:39,040
Speaker 2: would do if I were them in that environment.

729
00:35:39,680 --> 00:35:43,640
Speaker 1: Huh. So this is much broader than the typical relationship

730
00:35:43,680 --> 00:35:47,480
Speaker 1: with a client, So that sounds quite fascinating. You mentioned

731
00:35:47,480 --> 00:35:50,000
Speaker 1: you really like hedge funds. Let's talk a little bit

732
00:35:50,000 --> 00:35:54,520
Speaker 1: about alternative investments within a portfolio. What do you think

733
00:35:54,560 --> 00:35:58,840
Speaker 1: of those various I'm gonna use a dirty word, buckets

734
00:35:58,880 --> 00:36:00,560
Speaker 1: of different types of investments.

735
00:36:02,000 --> 00:36:04,520
Speaker 2: So I want to qualify that I don't know that

736
00:36:04,560 --> 00:36:07,439
Speaker 2: everyone should be invested in alternative investments, and I don't

737
00:36:07,480 --> 00:36:09,880
Speaker 2: mean you and me, I mean institutions as well. But

738
00:36:10,040 --> 00:36:12,160
Speaker 2: I have to say I think their alternatives are the

739
00:36:12,160 --> 00:36:14,759
Speaker 2: most fascinating part of the investment landscape to me, and

740
00:36:14,760 --> 00:36:15,560
Speaker 2: it's why I love them.

741
00:36:15,800 --> 00:36:18,080
Speaker 1: So tell us a little bit. Why why are alternatives

742
00:36:18,120 --> 00:36:22,000
Speaker 1: so fascinating? Here's the pushback? Let's start with this. The

743
00:36:22,040 --> 00:36:25,719
Speaker 1: pushback is, alternatives are great. If you're in the top

744
00:36:25,760 --> 00:36:29,160
Speaker 1: death style of hetche funds, venture capital funds, private equity,

745
00:36:29,280 --> 00:36:32,680
Speaker 1: that stuff is awesome. But there's so much competition, so

746
00:36:32,840 --> 00:36:36,840
Speaker 1: much delution of talent, so many people chasing so few deals,

747
00:36:37,280 --> 00:36:40,920
Speaker 1: that unless you're really in the best funds, it's a

748
00:36:41,040 --> 00:36:44,440
Speaker 1: challenge to generate alpha. How do you respond to that

749
00:36:44,560 --> 00:36:45,440
Speaker 1: sort of criticism?

750
00:36:45,560 --> 00:36:47,640
Speaker 2: Well, I think that's true in the public equity markets

751
00:36:47,640 --> 00:36:49,080
Speaker 2: as well, in the mid large.

752
00:36:48,800 --> 00:36:53,160
Speaker 1: Gap, right, it's certainly true in individual stocks. Rites what

753
00:36:53,360 --> 00:36:56,439
Speaker 1: was it a best in Binders research? Two point three

754
00:36:56,520 --> 00:37:00,279
Speaker 1: percent of equities or responsible for all the returns. It's

755
00:37:00,280 --> 00:37:03,160
Speaker 1: not even top death style. That's a teeny tiny percentage.

756
00:37:03,640 --> 00:37:06,480
Speaker 1: So you're saying that, hey, if you can be in

757
00:37:06,520 --> 00:37:09,040
Speaker 1: a better fund, you want to be in a better fund.

758
00:37:09,120 --> 00:37:11,880
Speaker 2: I think that's true across everything. You always want to

759
00:37:11,880 --> 00:37:14,760
Speaker 2: be in the best possible fund. Picking funds is very challenging.

760
00:37:14,840 --> 00:37:18,160
Speaker 2: I think it is most challenging in the private market space.

761
00:37:18,200 --> 00:37:22,440
Speaker 2: There's an information gap which makes it pretty challenging. But

762
00:37:22,560 --> 00:37:25,640
Speaker 2: I think what I love most about it is so

763
00:37:25,680 --> 00:37:28,239
Speaker 2: I think I've always loved credit, and part of that

764
00:37:28,320 --> 00:37:29,280
Speaker 2: is that I love contracts.

765
00:37:29,320 --> 00:37:29,880
Speaker 3: I should have been a.

766
00:37:29,920 --> 00:37:33,439
Speaker 2: Lawyer, and for me, private equity, private credit, and some

767
00:37:33,920 --> 00:37:38,680
Speaker 2: other liquid strategies real estate included, they have a complexity

768
00:37:38,680 --> 00:37:40,400
Speaker 2: component to it and a lot of that is contract

769
00:37:40,480 --> 00:37:43,160
Speaker 2: related and you have to get very Like my favorite

770
00:37:43,160 --> 00:37:43,480
Speaker 2: class in.

771
00:37:43,440 --> 00:37:45,759
Speaker 3: Business school is taxes. I should tell you I like

772
00:37:45,840 --> 00:37:49,360
Speaker 3: loopholes and I like figuring out unique.

773
00:37:49,120 --> 00:37:51,279
Speaker 1: Ways to structure its supposals right.

774
00:37:51,800 --> 00:37:54,360
Speaker 2: But for private equity, private credit, private real estate, for me,

775
00:37:54,520 --> 00:37:57,640
Speaker 2: those make sense. Those are complex deals and there's ways

776
00:37:57,680 --> 00:37:59,480
Speaker 2: to derive value out of them, and if you can

777
00:37:59,520 --> 00:38:01,960
Speaker 2: get access to those, I think it's brilliant. If you

778
00:38:02,000 --> 00:38:04,120
Speaker 2: can't get access to those. The other way I think

779
00:38:04,160 --> 00:38:07,520
Speaker 2: it's interesting to play in those markets is to play

780
00:38:07,560 --> 00:38:10,640
Speaker 2: the discrepancy and value between public equity and private equity,

781
00:38:10,920 --> 00:38:14,879
Speaker 2: public real estate and private real estate, public infrastructure private infrastructure.

782
00:38:15,600 --> 00:38:17,680
Speaker 2: So for those reasons, I just think they're the most

783
00:38:17,680 --> 00:38:20,080
Speaker 2: interesting place to look. And in terms of hedge funds,

784
00:38:20,080 --> 00:38:23,319
Speaker 2: specifically where I started my career, they invest in every

785
00:38:23,320 --> 00:38:25,640
Speaker 2: asset class, So if you want to learn about commodities,

786
00:38:25,640 --> 00:38:29,719
Speaker 2: fixed income, rates, equities, bonds, they're all there, right, And

787
00:38:29,760 --> 00:38:31,640
Speaker 2: so I think it's a really great proving ground, and

788
00:38:31,680 --> 00:38:35,680
Speaker 2: it also teaches you to understand relative value in which

789
00:38:35,760 --> 00:38:39,399
Speaker 2: trades are better relatively speaking, not absolutely speaking. In an

790
00:38:39,480 --> 00:38:43,440
Speaker 2: environment like today and probably the next ten years, relative value.

791
00:38:43,239 --> 00:38:43,960
Speaker 3: Is going to be critical.

792
00:38:44,160 --> 00:38:48,320
Speaker 1: Huh. That's really interesting. Let's stay focused on the complications

793
00:38:48,360 --> 00:38:51,520
Speaker 1: of the private side, because you're touching on something that's

794
00:38:51,560 --> 00:38:56,319
Speaker 1: really fascinating and a little bit contrarian to the consensus view,

795
00:38:56,800 --> 00:39:01,640
Speaker 1: which is complications tend to be expanded and very often

796
00:39:01,719 --> 00:39:05,320
Speaker 1: simple is better. What you're saying on the private side

797
00:39:05,960 --> 00:39:08,520
Speaker 1: is if you have an ability and correct me if

798
00:39:08,560 --> 00:39:12,640
Speaker 1: I'm getting this wrong, if you have an ability to

799
00:39:12,719 --> 00:39:17,240
Speaker 1: manage through that complexity in a way that doesn't disadvantage

800
00:39:17,280 --> 00:39:22,560
Speaker 1: you as an investor. There's potential upside from complexity because

801
00:39:23,440 --> 00:39:29,640
Speaker 1: most investors aren't finding that thread that really leads you

802
00:39:29,719 --> 00:39:35,479
Speaker 1: to Hitchcock used to call it the McGuinty, but that's

803
00:39:35,480 --> 00:39:39,000
Speaker 1: whatever everybody is chasing, that's driving the action. You're looking

804
00:39:39,000 --> 00:39:42,600
Speaker 1: through complexity to define where is the piece of alpha

805
00:39:42,680 --> 00:39:43,720
Speaker 1: that everybody is missing.

806
00:39:44,239 --> 00:39:45,120
Speaker 3: If that is.

807
00:39:45,040 --> 00:39:47,000
Speaker 2: Your edge, and that is the one thing I want

808
00:39:47,040 --> 00:39:49,120
Speaker 2: to be very clear on. You should not be investing

809
00:39:49,120 --> 00:39:51,520
Speaker 2: in complex issues that you do not understand. So if

810
00:39:51,560 --> 00:39:54,400
Speaker 2: you do not understand technology, do not go do a

811
00:39:54,440 --> 00:39:55,560
Speaker 2: technology co investment.

812
00:39:55,640 --> 00:39:58,759
Speaker 1: Right, we shouldn't all be piling my money into AI startups.

813
00:39:58,760 --> 00:40:01,520
Speaker 1: You don't think that's that's a savvy thing to do today.

814
00:40:01,600 --> 00:40:04,440
Speaker 2: I have Plowing money into anything is usually a good idea.

815
00:40:04,520 --> 00:40:07,080
Speaker 2: But I mean to use an example. So I did

816
00:40:07,200 --> 00:40:09,880
Speaker 2: Killimanjaro a year ago, and I didn't get altitude sickness.

817
00:40:09,960 --> 00:40:13,600
Speaker 2: And so to do hiking at high elevations when something

818
00:40:13,640 --> 00:40:15,600
Speaker 2: isn't a challenge for you, it is a challenge for

819
00:40:15,640 --> 00:40:18,120
Speaker 2: other people. That's not a terrible idea and experience that

820
00:40:18,160 --> 00:40:20,480
Speaker 2: you get that's unique, right, And so I think that

821
00:40:20,520 --> 00:40:22,879
Speaker 2: if there are managers you can find, or if you

822
00:40:22,880 --> 00:40:25,120
Speaker 2: yourself are good at certain parts of these markets, then

823
00:40:25,120 --> 00:40:27,239
Speaker 2: I do think you in any investment, if you have

824
00:40:27,280 --> 00:40:30,520
Speaker 2: an edge, you should lean into that edge, right, And

825
00:40:30,600 --> 00:40:34,080
Speaker 2: I think that is why, or I believe that's why alternatives.

826
00:40:34,120 --> 00:40:35,919
Speaker 2: There are people who have edges, there are people who don't,

827
00:40:36,000 --> 00:40:38,399
Speaker 2: and they raise money, and that's the world, right, right.

828
00:40:39,000 --> 00:40:41,480
Speaker 2: But if you can find when you find a good

829
00:40:41,520 --> 00:40:44,600
Speaker 2: manager or you find a good investment, I mean, I

830
00:40:44,640 --> 00:40:46,120
Speaker 2: think that's one of the best feelings in life. And

831
00:40:46,120 --> 00:40:49,239
Speaker 2: when it comes to fruition is incredible and unique and

832
00:40:49,280 --> 00:40:51,080
Speaker 2: you learn so much, and you learn so much about

833
00:40:51,080 --> 00:40:52,239
Speaker 2: the industry you're investing in.

834
00:40:52,640 --> 00:40:55,520
Speaker 1: Huh, know your skill set, know your blind spot, know

835
00:40:55,600 --> 00:40:56,080
Speaker 1: your edge.

836
00:40:56,239 --> 00:40:56,359
Speaker 3: Right.

837
00:40:56,680 --> 00:41:00,279
Speaker 1: That sounds like very savvy advice. Let's talk little bit

838
00:41:00,320 --> 00:41:04,480
Speaker 1: about institutional investing. What's happening these years. We had rates

839
00:41:04,719 --> 00:41:08,919
Speaker 1: and yields on fixed income shoot up in twenty twenty

840
00:41:08,960 --> 00:41:13,360
Speaker 1: two and twenty twenty three, and pension funds, especially in Europe,

841
00:41:13,840 --> 00:41:17,279
Speaker 1: seemed to stumble around. That tell us a little bit

842
00:41:17,280 --> 00:41:20,799
Speaker 1: what's been going on with institutions as you see it

843
00:41:20,840 --> 00:41:25,120
Speaker 1: from the thirty thousand foot view. Why was last year

844
00:41:25,280 --> 00:41:29,520
Speaker 1: into this year so challenging for many large institutions.

845
00:41:30,040 --> 00:41:32,040
Speaker 2: Well, I think in Europe it was some of what

846
00:41:32,080 --> 00:41:36,000
Speaker 2: we mentioned earlier with the liability driven investing. They had,

847
00:41:36,320 --> 00:41:40,680
Speaker 2: you know, rates go up precipitously as well for various

848
00:41:40,760 --> 00:41:44,520
Speaker 2: reasons twice in a very short amount of time. And

849
00:41:45,360 --> 00:41:49,120
Speaker 2: you know, because they had leveraged in some casions, bomb

850
00:41:49,120 --> 00:41:50,880
Speaker 2: portfolio has been rates to go up as you know,

851
00:41:50,920 --> 00:41:53,640
Speaker 2: prices go down. They had margin calls because they were

852
00:41:53,680 --> 00:41:55,320
Speaker 2: trading on margin in a world.

853
00:41:55,239 --> 00:41:58,880
Speaker 1: Were their duration issues? Also because I know some areas

854
00:41:59,160 --> 00:42:01,359
Speaker 1: seem to be in did very long and they're much

855
00:42:01,400 --> 00:42:05,520
Speaker 1: more sensitive to rate moves than others. Is that part

856
00:42:05,560 --> 00:42:08,840
Speaker 1: of the issue where they mandated to have longer dated bonds.

857
00:42:08,880 --> 00:42:10,120
Speaker 1: What's to happen in Europe?

858
00:42:10,200 --> 00:42:12,440
Speaker 2: It's part of the liability matching, right, So if you

859
00:42:12,560 --> 00:42:15,800
Speaker 2: have an infinitely lived asset or a very long lived asset,

860
00:42:15,840 --> 00:42:18,680
Speaker 2: you're going to want to match your investments to that.

861
00:42:18,840 --> 00:42:21,920
Speaker 2: So that's why they had some of these longer term bonds.

862
00:42:22,320 --> 00:42:24,960
Speaker 2: US pension funds also had a fair degree of long

863
00:42:25,000 --> 00:42:29,239
Speaker 2: bond exposure and they hurt you know, I think in

864
00:42:29,920 --> 00:42:32,680
Speaker 2: the two thousand and eight crisis, a lot of pension

865
00:42:32,719 --> 00:42:36,759
Speaker 2: fund boards struggled with the fact that their equity portfolio

866
00:42:36,800 --> 00:42:39,560
Speaker 2: and their bond portfolio and credit portfolio all stumbled around

867
00:42:39,600 --> 00:42:42,560
Speaker 2: the same time. And it's why you saw in ten,

868
00:42:42,640 --> 00:42:46,000
Speaker 2: twenty eleven, twenty twelve a lot of the investment policy

869
00:42:46,040 --> 00:42:48,839
Speaker 2: statements of pension funds changed from saying equity and fixed

870
00:42:48,880 --> 00:42:53,000
Speaker 2: income to saying growth risk and diversifying risk. And I

871
00:42:53,040 --> 00:42:54,920
Speaker 2: don't know that anyone really noticed that and this they

872
00:42:54,920 --> 00:42:57,040
Speaker 2: were working in it, but that is what changed in

873
00:42:57,080 --> 00:43:00,000
Speaker 2: a large part, because if you have your growth bucket

874
00:43:00,200 --> 00:43:03,120
Speaker 2: drawn out, so credit and equity, it feels less bad

875
00:43:04,000 --> 00:43:05,880
Speaker 2: than if you thought something that was diversifying all of

876
00:43:05,880 --> 00:43:09,439
Speaker 2: a sudden wasn't diversifying, right. So I think last year

877
00:43:10,560 --> 00:43:13,040
Speaker 2: potentially we still hadn't quite learned the lesson as we

878
00:43:13,040 --> 00:43:15,800
Speaker 2: were discussing earlier, that these things can all kind of

879
00:43:15,800 --> 00:43:18,680
Speaker 2: suffer at the same time. And that's true diversifying strategies too.

880
00:43:18,719 --> 00:43:21,400
Speaker 2: That's two of alternatives. It's true of CTAs. Unless you

881
00:43:21,400 --> 00:43:23,960
Speaker 2: have a short term trend follower, usually in the instant

882
00:43:24,000 --> 00:43:25,680
Speaker 2: the market drops, you're going to get all those things

883
00:43:25,680 --> 00:43:28,640
Speaker 2: to kind of drop too. Beauty about alternatives they're not

884
00:43:28,680 --> 00:43:31,040
Speaker 2: going to mark, so you might just not notice it

885
00:43:31,080 --> 00:43:33,719
Speaker 2: for quite a bit of time, so you have some

886
00:43:33,760 --> 00:43:35,440
Speaker 2: cushion there, and by that time they may have rebounded.

887
00:43:35,520 --> 00:43:35,680
Speaker 1: Right.

888
00:43:36,680 --> 00:43:39,879
Speaker 2: But the biggest issue that happened with both Europe and

889
00:43:39,960 --> 00:43:42,759
Speaker 2: the US, and you can look up a broad elsewhere,

890
00:43:43,280 --> 00:43:47,400
Speaker 2: was that when these things drop, when your equity portfolio

891
00:43:47,520 --> 00:43:51,279
Speaker 2: which is supposed to be some return generating mainly, and

892
00:43:51,320 --> 00:43:53,200
Speaker 2: you're fixing come portfolio which is supposed to be your

893
00:43:53,200 --> 00:43:56,520
Speaker 2: liquidity provider, but then you don't have a job necessarily

894
00:43:56,520 --> 00:43:59,320
Speaker 2: in your private markets bucket, you're in a really tricky

895
00:43:59,440 --> 00:44:04,800
Speaker 2: position for funding new investments, for funding you know, retirement benefits,

896
00:44:04,840 --> 00:44:07,640
Speaker 2: healthcare benefits, the like. And so they were all kind

897
00:44:07,680 --> 00:44:11,680
Speaker 2: of in this illiquidity spiral for a little bit of time,

898
00:44:11,880 --> 00:44:14,200
Speaker 2: and so they actually had to alter a lot of funds,

899
00:44:14,239 --> 00:44:17,399
Speaker 2: altered their investment policy statements, which are never.

900
00:44:17,280 --> 00:44:17,719
Speaker 3: Supposed to do.

901
00:44:17,880 --> 00:44:19,719
Speaker 2: These are supposed to be setting stone reviewed every couple

902
00:44:19,719 --> 00:44:22,040
Speaker 2: of years in order to allow them to have wider

903
00:44:22,160 --> 00:44:25,520
Speaker 2: bands in the private markets until things sort of reset.

904
00:44:25,560 --> 00:44:28,160
Speaker 1: Now, to be fair, you're not really getting marked in

905
00:44:28,200 --> 00:44:31,160
Speaker 1: private markets what you are in stocks and bonds every tick,

906
00:44:31,760 --> 00:44:34,719
Speaker 1: so you could kind of ignore that for a while.

907
00:44:35,320 --> 00:44:37,080
Speaker 2: And they actually might have liked to have been marked

908
00:44:37,080 --> 00:44:38,080
Speaker 2: down right because it.

909
00:44:38,040 --> 00:44:41,960
Speaker 4: Would have reseent it would hurt yours as long as reset,

910
00:44:42,160 --> 00:44:45,600
Speaker 4: but was a loser anyway, you might as well clear

911
00:44:45,640 --> 00:44:48,239
Speaker 4: the decks, get everything off, and start fresh the following year.

912
00:44:48,520 --> 00:44:50,360
Speaker 1: You can't really do that with private equity.

913
00:44:50,440 --> 00:44:52,480
Speaker 3: But it also makes it challenging if you're an investor

914
00:44:52,520 --> 00:44:52,759
Speaker 3: and you.

915
00:44:52,719 --> 00:44:55,319
Speaker 2: Decide, well, what do I do about the iniquity I'd

916
00:44:55,360 --> 00:44:57,560
Speaker 2: like to sell part of my private market book? Well,

917
00:44:57,560 --> 00:44:59,759
Speaker 2: then where are you pricing it? Because if you go

918
00:44:59,840 --> 00:45:02,560
Speaker 2: with these inflated asset values and you try to sell them,

919
00:45:02,600 --> 00:45:04,440
Speaker 2: and they know you're a force seller and they know

920
00:45:04,480 --> 00:45:06,840
Speaker 2: that the value is likely lower, it actually made it

921
00:45:06,840 --> 00:45:09,239
Speaker 2: a really tricky environment to kind of close those transactions

922
00:45:09,280 --> 00:45:09,600
Speaker 2: as well.

923
00:45:09,640 --> 00:45:12,160
Speaker 1: No one wants to be a distressed seller now, boy.

924
00:45:12,920 --> 00:45:14,600
Speaker 1: So let's stick with Europe a little bit, and I'm

925
00:45:14,600 --> 00:45:17,719
Speaker 1: going to ask you to put your econometricians hat on

926
00:45:17,880 --> 00:45:22,680
Speaker 1: for a second. Us are CPI peaked around nine percent

927
00:45:22,760 --> 00:45:25,520
Speaker 1: a year and a half ago or so, and the

928
00:45:25,600 --> 00:45:28,640
Speaker 1: last CPI print was what three point two percent three

929
00:45:28,680 --> 00:45:31,839
Speaker 1: point three percent year of a year, it seems, and

930
00:45:31,880 --> 00:45:35,520
Speaker 1: that's with this massive fiscal stimulus, the pig is still

931
00:45:35,520 --> 00:45:38,359
Speaker 1: working his way through the python. Europe seems to be

932
00:45:38,560 --> 00:45:44,600
Speaker 1: having a harder time wrestling inflation into submission. Why do

933
00:45:44,680 --> 00:45:45,400
Speaker 1: we think that is?

934
00:45:46,440 --> 00:45:47,239
Speaker 3: I think that well.

935
00:45:47,280 --> 00:45:50,839
Speaker 2: I believe that they our US economics team would say

936
00:45:50,840 --> 00:45:53,040
Speaker 2: that the wage pressures in Europe are part of the

937
00:45:53,080 --> 00:45:55,440
Speaker 2: reason they still remain as much.

938
00:45:55,360 --> 00:45:57,360
Speaker 1: Greater than here in the US, where there seems to

939
00:45:57,360 --> 00:46:01,320
Speaker 1: be such a shortage in almost every sector of people

940
00:46:01,320 --> 00:46:03,160
Speaker 1: want to come in and work for a living.

941
00:46:03,280 --> 00:46:05,480
Speaker 2: We're seeing improvement and I think we're about four or

942
00:46:05,480 --> 00:46:07,320
Speaker 2: five percent, It could be off on the wage increase

943
00:46:07,400 --> 00:46:12,520
Speaker 2: number somewhere around there. So we've got stickier inflation still

944
00:46:12,560 --> 00:46:16,080
Speaker 2: happening in Europe, and in the US we were starting

945
00:46:16,080 --> 00:46:17,919
Speaker 2: to see signs of improvement. Who knows what could happen

946
00:46:17,960 --> 00:46:18,480
Speaker 2: between now on the.

947
00:46:18,480 --> 00:46:18,920
Speaker 3: End of the year.

948
00:46:18,920 --> 00:46:22,400
Speaker 2: You can't Some of it you can't predict. But we're

949
00:46:22,400 --> 00:46:26,200
Speaker 2: seeing improvement here and you've got emerging markets. We're seeing

950
00:46:26,239 --> 00:46:28,400
Speaker 2: more improvement on the inflation front than you're seeing in

951
00:46:28,760 --> 00:46:29,600
Speaker 2: the US.

952
00:46:29,880 --> 00:46:33,160
Speaker 1: Huh. Just kind of interesting that that's what's taking place there.

953
00:46:33,239 --> 00:46:36,640
Speaker 1: So let's stay with the concept of we had inflation.

954
00:46:36,920 --> 00:46:40,200
Speaker 1: We now have higher FED funds rates, and we have

955
00:46:40,880 --> 00:46:45,240
Speaker 1: what a number of people have been calling very attractive yields,

956
00:46:45,280 --> 00:46:49,480
Speaker 1: certainly much higher than they've been in decades. One of

957
00:46:49,520 --> 00:46:52,000
Speaker 1: the ag funds of I want to say about seven

958
00:46:52,080 --> 00:46:56,439
Speaker 1: years duration is five percent for investment grade. We haven't

959
00:46:56,440 --> 00:47:00,960
Speaker 1: seen that in you know, ten fifteen years. What how

960
00:47:00,960 --> 00:47:04,000
Speaker 1: do you work around those sort of numbers? What does

961
00:47:04,000 --> 00:47:07,600
Speaker 1: that do to the sort of advice you give to clients.

962
00:47:07,840 --> 00:47:10,440
Speaker 2: So if we just take the US public pension market

963
00:47:10,480 --> 00:47:12,759
Speaker 2: and kind of separate it from the corporates and other

964
00:47:12,880 --> 00:47:15,880
Speaker 2: institutional investors for a moment, five percent is still below

965
00:47:16,000 --> 00:47:19,120
Speaker 2: most target returns. Most target returns are still around on average,

966
00:47:19,160 --> 00:47:21,839
Speaker 2: like let's call it seven percent. It might be six

967
00:47:21,920 --> 00:47:25,000
Speaker 2: and three quarters, but it's not five. So in order

968
00:47:25,160 --> 00:47:28,240
Speaker 2: to take advantage of some of those, so like agency

969
00:47:28,239 --> 00:47:31,279
Speaker 2: mortgages may be a good trade right now, right, but

970
00:47:31,440 --> 00:47:33,759
Speaker 2: you probably want to even that's what the thirties at

971
00:47:33,800 --> 00:47:36,319
Speaker 2: seven plus rate, So you even want to think about

972
00:47:36,320 --> 00:47:38,560
Speaker 2: that more in like a credit long short context in

973
00:47:38,560 --> 00:47:42,560
Speaker 2: and outright by But in terms of a higher rate environment,

974
00:47:42,600 --> 00:47:45,880
Speaker 2: I still think look, Goman would probably say they're aggressively

975
00:47:45,960 --> 00:47:50,839
Speaker 2: neutral on on ponds. I love that aggssively right the

976
00:47:50,840 --> 00:47:53,520
Speaker 2: next three to three to twelve months, because there is

977
00:47:53,560 --> 00:47:56,000
Speaker 2: still some duration risk. Now the numbers that have been

978
00:47:56,040 --> 00:47:59,000
Speaker 2: recently coming out that are showing more likely to you know,

979
00:47:59,520 --> 00:48:02,120
Speaker 2: the economy slowing, we should have avoid a recession. And

980
00:48:02,160 --> 00:48:04,799
Speaker 2: I will say Goldman's opinion on this is that there's

981
00:48:04,800 --> 00:48:06,600
Speaker 2: a twenty percent out of a recession in the next

982
00:48:06,640 --> 00:48:09,040
Speaker 2: twelve months. That is still meaningfully higher than the twelve

983
00:48:09,040 --> 00:48:12,080
Speaker 2: percent in any given year, right, but it's it's not

984
00:48:12,080 --> 00:48:15,640
Speaker 2: one hundred percent. It's also not zero. But there's still

985
00:48:16,000 --> 00:48:19,000
Speaker 2: risk that rates could rise, right. There still could be

986
00:48:19,000 --> 00:48:21,439
Speaker 2: something that happens we get another rate increase. Our view

987
00:48:21,480 --> 00:48:23,560
Speaker 2: is that there's not going to be another hike this year,

988
00:48:23,600 --> 00:48:25,200
Speaker 2: and that in the back half of next year we'll

989
00:48:25,200 --> 00:48:27,280
Speaker 2: start seeing FED funds comes.

990
00:48:27,120 --> 00:48:31,600
Speaker 1: Down back half of twenty twenty four. Yeah, So, hypothetically,

991
00:48:32,160 --> 00:48:37,120
Speaker 1: an investor has listened to you three years ago when

992
00:48:37,160 --> 00:48:41,240
Speaker 1: you were screaming about inflation is not transitory. It actually

993
00:48:41,280 --> 00:48:43,919
Speaker 1: turned out to be transitory. Transfory just took a whole

994
00:48:43,920 --> 00:48:47,640
Speaker 1: lot longer than everybody expected. Everything in life is transitory,

995
00:48:48,560 --> 00:48:53,439
Speaker 1: all right. So a couple of years ago you had said, Hey,

996
00:48:53,480 --> 00:48:55,759
Speaker 1: this inflation thing is for real. The Fed's going to

997
00:48:55,880 --> 00:49:01,440
Speaker 1: raise rates substantially, and given how sensitive dated bonds are

998
00:49:01,600 --> 00:49:06,120
Speaker 1: too moves up in FED funds, rate investors should be

999
00:49:06,120 --> 00:49:09,880
Speaker 1: thinking about shortening their duration. Clients who listened to that

1000
00:49:10,000 --> 00:49:13,879
Speaker 1: advice avoided at least some of the bloodshed last year.

1001
00:49:15,600 --> 00:49:18,520
Speaker 1: Now though that rates have gone up five hundred and

1002
00:49:18,600 --> 00:49:22,000
Speaker 1: something basis points and you can actually get five five

1003
00:49:22,000 --> 00:49:26,600
Speaker 1: and a half percent yield. At what point are clients

1004
00:49:26,680 --> 00:49:30,359
Speaker 1: going to want to think about taking advantage and extending

1005
00:49:30,480 --> 00:49:34,080
Speaker 1: duration you mentioned? Goldman says there's a twenty percent chance

1006
00:49:34,239 --> 00:49:39,080
Speaker 1: of recession in the coming twenty twenty four and we

1007
00:49:39,160 --> 00:49:42,040
Speaker 1: may see rate cuts in the back half of twenty

1008
00:49:42,080 --> 00:49:45,080
Speaker 1: twenty four. How do you respond to I have to

1009
00:49:45,080 --> 00:49:47,960
Speaker 1: think clients are asking about duration at this point. What's

1010
00:49:48,000 --> 00:49:50,600
Speaker 1: your response to people who shortened duration a few years ago?

1011
00:49:51,040 --> 00:49:53,480
Speaker 1: And we're very successful because.

1012
00:49:53,200 --> 00:49:56,080
Speaker 2: Of it, right, So I do get asked quite a bit,

1013
00:49:56,120 --> 00:49:58,560
Speaker 2: when can we start adding duration back to the portfolio.

1014
00:49:58,600 --> 00:50:00,640
Speaker 3: It's probably the third biggest.

1015
00:50:00,400 --> 00:50:03,200
Speaker 2: Question that I have been getting In twenty twenty three.

1016
00:50:03,920 --> 00:50:06,080
Speaker 2: A lot of clients weren't able to shorten their duration,

1017
00:50:06,200 --> 00:50:09,600
Speaker 2: some were, some can take advantage of two years, right,

1018
00:50:09,680 --> 00:50:11,640
Speaker 2: and you could get a pretty good return there. But

1019
00:50:11,680 --> 00:50:13,680
Speaker 2: some couldn't, not in their investment policy or they didn't

1020
00:50:13,680 --> 00:50:16,560
Speaker 2: want the reinvestment risk, right, So some are still holding

1021
00:50:16,560 --> 00:50:18,719
Speaker 2: onto those long bonds portfolio. But what I would say

1022
00:50:18,920 --> 00:50:22,000
Speaker 2: is I would look to see where you could add duration,

1023
00:50:22,080 --> 00:50:24,040
Speaker 2: but I would be cautious. There's still risks to the

1024
00:50:24,080 --> 00:50:26,239
Speaker 2: upside on rates and the other part of that. I

1025
00:50:26,239 --> 00:50:28,560
Speaker 2: would say that let's say inflation is coming down and

1026
00:50:28,600 --> 00:50:31,759
Speaker 2: it's moderating, it's coming down from a very high level,

1027
00:50:31,800 --> 00:50:34,000
Speaker 2: but it's not coming down to zero, right, so we

1028
00:50:34,000 --> 00:50:35,880
Speaker 2: could see a three percent level for a while.

1029
00:50:36,000 --> 00:50:38,640
Speaker 3: We could see and that you know, in the grand.

1030
00:50:38,400 --> 00:50:41,319
Speaker 2: Scheme of life, grand scheme of history, maybe that's not exorbitant,

1031
00:50:41,320 --> 00:50:43,360
Speaker 2: but it is a higher cost of capital. Right, So

1032
00:50:43,760 --> 00:50:47,040
Speaker 2: if you think about where term premiums might end up

1033
00:50:47,080 --> 00:50:49,480
Speaker 2: off of that number one hundred and fifty two hundred

1034
00:50:49,520 --> 00:50:51,960
Speaker 2: basis points, you're still looking at a pretty high cost

1035
00:50:52,040 --> 00:50:54,799
Speaker 2: of capital compared to the last ten years, right, So

1036
00:50:54,880 --> 00:50:58,640
Speaker 2: for firms and for refinancing risks. So if you can

1037
00:50:58,680 --> 00:51:01,800
Speaker 2: add a duration, then where you can and take your pockets.

1038
00:51:01,840 --> 00:51:03,360
Speaker 2: And yes, but I still think there's still risk to

1039
00:51:03,400 --> 00:51:06,080
Speaker 2: the upside there, and so again I would reiterate that

1040
00:51:06,400 --> 00:51:09,160
Speaker 2: Goldman's views right now are pretty neutral on equities and

1041
00:51:09,440 --> 00:51:10,680
Speaker 2: bonds the next three to twelve.

1042
00:51:10,480 --> 00:51:15,520
Speaker 1: Months, aggressively neutral. I like that. And you know you're

1043
00:51:15,560 --> 00:51:19,359
Speaker 1: pointing out that it's a very different regime today. In

1044
00:51:19,400 --> 00:51:23,160
Speaker 1: the twenty tens, not only did you have cheap capital,

1045
00:51:23,320 --> 00:51:28,239
Speaker 1: but real returns were so low given how low inflation was.

1046
00:51:28,320 --> 00:51:32,080
Speaker 1: So now capital costs more, inflation is higher. So how

1047
00:51:32,120 --> 00:51:36,160
Speaker 1: do we think about real returns when discussing fixed income?

1048
00:51:37,200 --> 00:51:37,359
Speaker 3: Right?

1049
00:51:37,480 --> 00:51:40,800
Speaker 2: Interestingly enough, there's only you know, a handful of valcators

1050
00:51:40,880 --> 00:51:44,399
Speaker 2: actually benchmark themselves to real returns, and I think, really, yeah,

1051
00:51:44,560 --> 00:51:48,000
Speaker 2: it's not as popular as one would think, particularly when

1052
00:51:48,040 --> 00:51:50,319
Speaker 2: they're having to worry about that on the back end

1053
00:51:50,360 --> 00:51:53,879
Speaker 2: and their payouts and their liability side. But I think

1054
00:51:53,880 --> 00:51:56,919
Speaker 2: it's going to becoming increasingly more important, and it might

1055
00:51:57,400 --> 00:51:58,799
Speaker 2: very well to your point, I believe this is where

1056
00:51:58,800 --> 00:52:00,319
Speaker 2: you get It might change what you're looking looking at

1057
00:52:00,320 --> 00:52:03,360
Speaker 2: and what you evaluate in terms of your outcomes. You

1058
00:52:03,440 --> 00:52:05,759
Speaker 2: also probably will see a change in benchmarking if you

1059
00:52:05,760 --> 00:52:08,799
Speaker 2: think about some of the real asset and infrastructure and

1060
00:52:08,840 --> 00:52:11,400
Speaker 2: real estate investments that were benchmarked a CPI plus a

1061
00:52:11,400 --> 00:52:15,239
Speaker 2: spread for example, or even absolute return that likely was

1062
00:52:15,360 --> 00:52:17,799
Speaker 2: challenged in the last couple of years, So you may

1063
00:52:17,840 --> 00:52:21,160
Speaker 2: see portfolios change as a result of a benchmarking. I

1064
00:52:21,200 --> 00:52:23,279
Speaker 2: do believe the next couple of years will probably start

1065
00:52:23,320 --> 00:52:26,959
Speaker 2: to get more questions on deflation what that means for portfolios,

1066
00:52:27,280 --> 00:52:29,480
Speaker 2: and that can be very tricky if you haven't figured

1067
00:52:29,520 --> 00:52:32,279
Speaker 2: out your liabilities, because that can hurt the liability side

1068
00:52:32,280 --> 00:52:37,040
Speaker 2: of your balance sheet. And if your liabilities are really struggling,

1069
00:52:37,120 --> 00:52:39,560
Speaker 2: then the ability of what you can invest in will

1070
00:52:39,560 --> 00:52:40,239
Speaker 2: be truncated.

1071
00:52:40,480 --> 00:52:44,000
Speaker 1: All right, So you said the duration question is the

1072
00:52:44,040 --> 00:52:50,160
Speaker 1: third most asked question you get from institutional investors. I'm

1073
00:52:50,239 --> 00:52:52,759
Speaker 1: curious what are questions one and two?

1074
00:52:53,280 --> 00:52:55,839
Speaker 2: So number one would be give me ideas on how

1075
00:52:55,840 --> 00:52:57,600
Speaker 2: to raise liquidity in my portfolio.

1076
00:52:58,120 --> 00:53:01,520
Speaker 1: And this is mostly from institutions.

1077
00:53:00,920 --> 00:53:02,200
Speaker 3: Mostly from institutional investment.

1078
00:53:02,280 --> 00:53:05,680
Speaker 1: So when someone says I want more liquiditly is this

1079
00:53:05,840 --> 00:53:08,600
Speaker 1: because they're kind of tied up with long dated bonds

1080
00:53:08,680 --> 00:53:11,480
Speaker 1: or is it more because they're tied up with ill

1081
00:53:11,480 --> 00:53:15,320
Speaker 1: liquid investments looking for the illiquidity premium.

1082
00:53:16,080 --> 00:53:18,640
Speaker 2: Typically it's because they're tied up in inliquid investments and

1083
00:53:18,680 --> 00:53:20,720
Speaker 2: they don't want to miss out on a vintage cycle,

1084
00:53:21,040 --> 00:53:22,520
Speaker 2: or they want to out they see good deals that

1085
00:53:22,560 --> 00:53:25,719
Speaker 2: they want to get done. Another option is that their

1086
00:53:26,520 --> 00:53:31,600
Speaker 2: pension is finite, and so they are not able in

1087
00:53:31,640 --> 00:53:33,640
Speaker 2: certain cases to make the same investments that they used

1088
00:53:33,680 --> 00:53:35,440
Speaker 2: to make. But they see interesting deals and they want

1089
00:53:35,440 --> 00:53:37,080
Speaker 2: to find a way to do them without hurting the

1090
00:53:37,800 --> 00:53:41,880
Speaker 2: liquidity of their structure. And those would be the two

1091
00:53:41,920 --> 00:53:45,560
Speaker 2: biggest cases, but usually it's funding other investments or trying

1092
00:53:45,600 --> 00:53:48,359
Speaker 2: to stay within their policy balance. The second most asked

1093
00:53:48,440 --> 00:53:52,359
Speaker 2: question I get is around either crisis position, crisis risk

1094
00:53:52,440 --> 00:53:57,080
Speaker 2: offt set positions or tail risk hedging or diversifying strategies.

1095
00:53:57,080 --> 00:53:59,359
Speaker 2: People are looking for ways investors, I should say, are

1096
00:53:59,360 --> 00:54:03,080
Speaker 2: looking for way to be protected should this happen again.

1097
00:54:04,680 --> 00:54:07,640
Speaker 2: But you know, one interesting statistics I like to mention

1098
00:54:07,840 --> 00:54:10,120
Speaker 2: is if you think of twenty two diversifiers that are

1099
00:54:10,160 --> 00:54:13,160
Speaker 2: typically involved in a sort of crisis portfolio or when

1100
00:54:13,160 --> 00:54:14,560
Speaker 2: you're in a tail hedge, twenty.

1101
00:54:14,400 --> 00:54:15,960
Speaker 3: Two take twenty two of the most common ones.

1102
00:54:16,360 --> 00:54:19,120
Speaker 2: There's a paper that Goldman has done on this, No

1103
00:54:19,280 --> 00:54:22,200
Speaker 2: two in these three periods, So there are no one

1104
00:54:22,280 --> 00:54:25,200
Speaker 2: in these three periods pre twenty twenty from twenty twenty

1105
00:54:25,239 --> 00:54:27,040
Speaker 2: through twenty to twenty twenty one, and then post twenty

1106
00:54:27,120 --> 00:54:31,080
Speaker 2: twenty two were positive. Huh, so you need more options

1107
00:54:31,080 --> 00:54:33,640
Speaker 2: than you think to kind of hedge the risk there,

1108
00:54:33,960 --> 00:54:36,400
Speaker 2: But more than I've heard probably in the last decade,

1109
00:54:36,880 --> 00:54:38,919
Speaker 2: investors are asking I would like to put a tail

1110
00:54:38,960 --> 00:54:39,279
Speaker 2: hedge on.

1111
00:54:39,520 --> 00:54:41,319
Speaker 3: How can I do that? What should I be looking at?

1112
00:54:41,520 --> 00:54:44,160
Speaker 1: Let's jump to our favorite questions that we ask all

1113
00:54:44,200 --> 00:54:47,480
Speaker 1: of our guests, starting with, Hey, what are you streaming

1114
00:54:47,520 --> 00:54:51,000
Speaker 1: these days? What kept you entertained during the pandemic.

1115
00:54:51,760 --> 00:54:52,759
Speaker 3: So I don't.

1116
00:54:52,760 --> 00:54:55,000
Speaker 2: Watch a ton of TV, I will say, I am

1117
00:54:55,040 --> 00:54:57,799
Speaker 2: a shark tank addict. I am a huge fan of

1118
00:54:57,880 --> 00:55:01,640
Speaker 2: Kevin O'Leary, I think the absolute greatest, But that is

1119
00:55:01,760 --> 00:55:04,080
Speaker 2: really the extent of my TV watching, other than, of

1120
00:55:04,120 --> 00:55:05,200
Speaker 2: course blow bird.

1121
00:55:06,480 --> 00:55:09,120
Speaker 1: So let me throw a Kevin O'Leary thing at you

1122
00:55:09,200 --> 00:55:12,759
Speaker 1: that you probably haven't seen, okay, or if you have,

1123
00:55:14,800 --> 00:55:18,560
Speaker 1: I would be surprised. So there's a young watch geek

1124
00:55:18,680 --> 00:55:21,640
Speaker 1: named Teddy I'm gonna get his last name wrong, Balderas

1125
00:55:21,719 --> 00:55:26,799
Speaker 1: or balder Ass say something like that, and he is

1126
00:55:26,800 --> 00:55:30,000
Speaker 1: pretty well known in the time piece of community, and

1127
00:55:30,520 --> 00:55:35,319
Speaker 1: somehow he him and Kevin O'Leary became friendly and the

1128
00:55:35,360 --> 00:55:41,440
Speaker 1: two of them go on these watch shopping for lack

1129
00:55:41,480 --> 00:55:46,200
Speaker 1: of a better word, expeditions and they're just shockingly hilarious.

1130
00:55:46,239 --> 00:55:48,759
Speaker 1: So if you're a Kevin O'Leary fan, it this is

1131
00:55:48,840 --> 00:55:52,560
Speaker 1: him up close and personal talking about why he likes

1132
00:55:52,600 --> 00:55:56,359
Speaker 1: certain things and doesn't. And you know, Teddy's a young guy.

1133
00:55:56,520 --> 00:56:01,440
Speaker 1: Kevin is a different generation and the interaction it's just charming.

1134
00:56:01,440 --> 00:56:04,960
Speaker 1: And if you're a fan of leary's you'll find this

1135
00:56:05,000 --> 00:56:08,239
Speaker 1: absolutely Thank you for the tips, So yeah, you will

1136
00:56:08,239 --> 00:56:12,240
Speaker 1: thank me for sure. Let's talk about mentors who helped

1137
00:56:12,480 --> 00:56:13,640
Speaker 1: shape your career.

1138
00:56:14,960 --> 00:56:16,880
Speaker 3: Number one would be my dad.

1139
00:56:17,280 --> 00:56:21,040
Speaker 2: We are very close, we have had very similar career careers.

1140
00:56:21,200 --> 00:56:21,960
Speaker 1: We look alike.

1141
00:56:22,480 --> 00:56:26,120
Speaker 2: He's my best friend by far. We talk two or

1142
00:56:26,120 --> 00:56:28,640
Speaker 2: three tight times a day. I'm admittedly super codependent.

1143
00:56:28,719 --> 00:56:32,919
Speaker 3: He's awesome. I was joking earlier.

1144
00:56:32,960 --> 00:56:34,680
Speaker 2: I think Goldman believes me more than he does that

1145
00:56:35,080 --> 00:56:37,840
Speaker 2: I am totally joking. He is wonderful and he's the

1146
00:56:37,880 --> 00:56:39,880
Speaker 2: one person I can trust to give me honest advice.

1147
00:56:41,080 --> 00:56:43,320
Speaker 3: Other than that, I think second.

1148
00:56:43,120 --> 00:56:47,240
Speaker 2: Grade soccer coach, a guy named Jeff Easter. He actually

1149
00:56:47,280 --> 00:56:48,759
Speaker 2: told me to read this book. Golf is not a

1150
00:56:48,800 --> 00:56:52,520
Speaker 2: game of perfect, but he he taught me to like

1151
00:56:52,800 --> 00:56:54,480
Speaker 2: it was a good lesson for being a trader. He

1152
00:56:54,560 --> 00:56:57,200
Speaker 2: taught me to like, move on from your last you know,

1153
00:56:57,280 --> 00:57:00,120
Speaker 2: mystical and just stop stressing over it.

1154
00:57:00,440 --> 00:57:01,560
Speaker 3: I finally.

1155
00:57:02,880 --> 00:57:05,400
Speaker 2: Somebody I used to work with Hawaii, my deputy Cio.

1156
00:57:06,800 --> 00:57:09,440
Speaker 2: He has thirty more years probably an investment experience in me,

1157
00:57:09,880 --> 00:57:13,600
Speaker 2: but always treated me as an equal even though it's

1158
00:57:13,640 --> 00:57:15,680
Speaker 2: his boss, and gave me wonderful advice and to this

1159
00:57:15,800 --> 00:57:17,920
Speaker 2: day is a close friend that can ask anything else.

1160
00:57:18,320 --> 00:57:20,800
Speaker 1: Let's talk about books. What are some of your favorites?

1161
00:57:20,800 --> 00:57:21,920
Speaker 1: What are you reading right now?

1162
00:57:22,080 --> 00:57:28,439
Speaker 2: I just finish The Wager and Endurance and wait.

1163
00:57:28,520 --> 00:57:31,880
Speaker 1: So the Wager I'm not familiar with. Endurance is the

1164
00:57:31,920 --> 00:57:35,200
Speaker 1: Shackleton the Stories, which is insane. I can't believe that's

1165
00:57:35,680 --> 00:57:39,840
Speaker 1: made hit into a movie that anyone knows of what's

1166
00:57:39,880 --> 00:57:40,360
Speaker 1: the Wager?

1167
00:57:40,680 --> 00:57:44,240
Speaker 2: The Wager is a shipwreck actually around the same area,

1168
00:57:44,320 --> 00:57:48,960
Speaker 2: but it is a true story of a shipwreck, and

1169
00:57:49,560 --> 00:57:51,760
Speaker 2: similar to the reasons I like the Shackleford story. It's

1170
00:57:51,800 --> 00:57:56,240
Speaker 2: an interesting examination of leadership in crisis. And also it

1171
00:57:56,400 --> 00:57:58,439
Speaker 2: helps me when I'm running in the morning and I'm tired.

1172
00:57:58,480 --> 00:58:02,320
Speaker 2: I'm like, well I have and I've had water and

1173
00:58:02,720 --> 00:58:03,680
Speaker 2: not covered in lice.

1174
00:58:04,760 --> 00:58:08,920
Speaker 1: Right or sub sub zero temperature with leopard seals.

1175
00:58:08,640 --> 00:58:10,920
Speaker 2: Trying to use I know, it's incredible story.

1176
00:58:11,200 --> 00:58:13,680
Speaker 1: I think I just read not too long ago that

1177
00:58:13,960 --> 00:58:21,600
Speaker 1: they found the Shackleford ship the uh No Way and

1178
00:58:21,640 --> 00:58:24,960
Speaker 1: it's the water is so cold, everything is preserved. Normally

1179
00:58:25,040 --> 00:58:27,479
Speaker 1: the wood would have wrought it away a long time ago,

1180
00:58:27,560 --> 00:58:32,200
Speaker 1: but nothing eats it away because it's barely of a

1181
00:58:32,320 --> 00:58:33,640
Speaker 1: phreezing most It's Unloubal.

1182
00:58:33,840 --> 00:58:36,040
Speaker 2: The Shackleling story really struck me because if you look

1183
00:58:36,040 --> 00:58:38,080
Speaker 2: at the wager, I won't this is not a spoiler.

1184
00:58:38,320 --> 00:58:40,600
Speaker 2: They're mostly negative in this story and he is just

1185
00:58:40,640 --> 00:58:44,280
Speaker 2: like continually positive and it's incredible. It's just it's a

1186
00:58:44,320 --> 00:58:45,480
Speaker 2: great story in leadership.

1187
00:58:45,720 --> 00:58:48,000
Speaker 1: Like if you would have told me, hey, you're gonna

1188
00:58:48,000 --> 00:58:51,120
Speaker 1: lose your ship and you're stuck somewhere in the Antarctic,

1189
00:58:51,200 --> 00:58:54,080
Speaker 1: my assumption is you're gone or you have no chance

1190
00:58:54,120 --> 00:58:57,960
Speaker 1: of survival. Yes, like the fact that if you if

1191
00:58:57,960 --> 00:59:01,240
Speaker 1: you've never read the book Endurance, it's just one of

1192
00:59:01,280 --> 00:59:04,840
Speaker 1: the most amazing. It couldn't be fiction because it just

1193
00:59:04,840 --> 00:59:07,160
Speaker 1: wouldn't be believable. The fact that it's a true story

1194
00:59:07,560 --> 00:59:11,040
Speaker 1: makes it really amazing, right right, Yeah, So two books,

1195
00:59:11,040 --> 00:59:13,160
Speaker 1: The Wager and Endurance. I'm going to have to check

1196
00:59:13,160 --> 00:59:17,080
Speaker 1: out The Wager. Our final two questions, what sort of

1197
00:59:17,120 --> 00:59:20,360
Speaker 1: advice would you give to a recent college grad interested

1198
00:59:20,400 --> 00:59:24,520
Speaker 1: in a career in either investment or risk management, or

1199
00:59:24,640 --> 00:59:27,320
Speaker 1: public pensions or anything else in finance.

1200
00:59:27,800 --> 00:59:30,120
Speaker 2: I think I would encourage them to know the full

1201
00:59:30,160 --> 00:59:32,400
Speaker 2: scope of what jobs you can have investments. You can

1202
00:59:32,440 --> 00:59:35,120
Speaker 2: be in marketing, you can be in communications. We need writers.

1203
00:59:35,280 --> 00:59:39,320
Speaker 2: Everybody needs good writers these days. We need good public speakers.

1204
00:59:39,360 --> 00:59:42,120
Speaker 2: We also need traders, we need pms, we need leaders,

1205
00:59:42,480 --> 00:59:46,440
Speaker 2: we need hr need legal So it always strikes me

1206
00:59:46,480 --> 00:59:49,480
Speaker 2: how the young people seem to think you're just a

1207
00:59:49,520 --> 00:59:50,480
Speaker 2: banker or a trader.

1208
00:59:50,560 --> 00:59:51,880
Speaker 3: Nope, there's a lot of other things.

1209
00:59:52,200 --> 00:59:54,840
Speaker 1: And our final question, what do you know about the

1210
00:59:54,840 --> 00:59:58,360
Speaker 1: world of investing today? You wish you knew let's say,

1211
00:59:58,400 --> 01:00:02,120
Speaker 1: twenty years ago when you first got it started.

1212
01:00:03,400 --> 01:00:05,840
Speaker 2: Then no one knows all the right answers all the time.

1213
01:00:06,120 --> 01:00:07,960
Speaker 2: They all act like they do, but they don't. And

1214
01:00:08,040 --> 01:00:10,320
Speaker 2: if you get it wrong, they've gotten it wrong too.

1215
01:00:10,880 --> 01:00:13,640
Speaker 1: Really interesting, Elizabeth, Thank you for being so generous. With

1216
01:00:13,720 --> 01:00:15,640
Speaker 1: your time. This was absolutely fascinating.

1217
01:00:15,840 --> 01:00:16,600
Speaker 3: Thank you for having me.

1218
01:00:16,840 --> 01:00:20,720
Speaker 1: We have been speaking with Elizabeth Taylor Slash Elizabeth Burton

1219
01:00:21,360 --> 01:00:25,360
Speaker 1: of Goldman Sachs's Asset Management. If you enjoy this conversation,

1220
01:00:25,520 --> 01:00:27,840
Speaker 1: be sure and check out any of the five hundred

1221
01:00:27,880 --> 01:00:31,760
Speaker 1: previous conversations we've had over the past eight years. You

1222
01:00:31,800 --> 01:00:35,520
Speaker 1: can find those at iTunes, Spotify, YouTube, wherever you get

1223
01:00:35,600 --> 01:00:39,440
Speaker 1: your favorite podcast. Sign up from my daily reading list

1224
01:00:39,480 --> 01:00:42,040
Speaker 1: at ridults dot com. Follow me on Twitter at rid

1225
01:00:42,040 --> 01:00:46,200
Speaker 1: Holts or at Barry Underscore Ridults. Follow all of the

1226
01:00:46,240 --> 01:00:51,040
Speaker 1: Bloomberg family of podcasts on Twitter at podcast I would

1227
01:00:51,080 --> 01:00:53,120
Speaker 1: be remiss if I did not thank the craft team

1228
01:00:53,480 --> 01:00:57,680
Speaker 1: that helps us put these conversations together each week. Ana

1229
01:00:57,800 --> 01:01:03,760
Speaker 1: Luke is my producer, Sean Russo is my researcher. Attica

1230
01:01:03,760 --> 01:01:07,520
Speaker 1: of albron is my project manager. Sam Danziger is my

1231
01:01:07,640 --> 01:01:12,040
Speaker 1: audio engineer. I'm Barry Hults. You've been listening to Masters

1232
01:01:12,040 --> 01:01:14,240
Speaker 1: in Business on Bloomberg Radio.