WEBVTT - American Beacon’s Cavazos on Durable Managers 0:00:14.920 --> 0:00:17.680 Welcome to Inside Active, a podcast about active managers that 0:00:17.760 --> 0:00:20.480 goes beyond sound bites and headlines and looks deeper into 0:00:20.520 --> 0:00:25.000 their processes, challenges, and philosophies and security selection. I'm David Cohne, 0:00:25.000 --> 0:00:27.720 I lead mutual fund and active Research at Bloomberg Intelligence. 0:00:28.320 --> 0:00:32.040 Manager selection has become significantly more complex over the past decade. 0:00:32.320 --> 0:00:35.239 Investors today have access to more strategies, more data, and 0:00:35.280 --> 0:00:38.320 more managers than ever before. But without abundance comes a 0:00:38.320 --> 0:00:42.440 different challenge. Distinguishing between performance driven by skill, process and 0:00:42.560 --> 0:00:46.720 durability versus outcome shape by market environments factor exposure are 0:00:46.760 --> 0:00:50.200 simply good timing today, I wanted to explore what separates 0:00:50.240 --> 0:00:53.239 truly durable investment managers from those that may only look 0:00:53.240 --> 0:00:56.440 compelling for a moment in time, and how experience allocators 0:00:56.480 --> 0:00:59.800 approach that challenge. Joining me to discuss that is paulk 0:01:00.640 --> 0:01:05.560 Senior Vice president and Chief Investment Officer of American Beacon Advisors. Paul, 0:01:05.600 --> 0:01:06.520 thank you for joining me. 0:01:06.920 --> 0:01:09.000 Hey, great to be here, David, thanks for having me. 0:01:09.720 --> 0:01:11.800 So let's start at the beginning. When you're you know, 0:01:11.840 --> 0:01:13.880 when you begin researching a new manager, what are the 0:01:14.120 --> 0:01:16.360 you know, first three things you look at before even 0:01:16.360 --> 0:01:17.559 considering performance. 0:01:19.120 --> 0:01:22.240 Yeah, well hey, maybe just just quickly before getting into 0:01:22.640 --> 0:01:25.080 kind of a response there might it may be helpful 0:01:25.120 --> 0:01:30.120 to frame how American Beacon approaches manager selection as a firm. Sure, 0:01:30.360 --> 0:01:32.759 you know, we were built around an open architecture model 0:01:33.319 --> 0:01:36.880 with really like a long term partnership mindset. So what 0:01:36.959 --> 0:01:40.000 our what our CEO Greg Greg Stumm would say was, 0:01:40.080 --> 0:01:42.360 you know, we don't we don't date, we get married. 0:01:43.440 --> 0:01:46.200 And so from the beginning we focus on, you know, 0:01:46.360 --> 0:01:51.000 finding differentiated external managers that are that are very active, 0:01:51.360 --> 0:01:53.840 you know, doing the work to understand whether their edge 0:01:53.880 --> 0:01:58.320 is is real and durable like a consistent performer, and 0:01:58.360 --> 0:02:02.080 then building you know, lasting relationships around you know, the 0:02:02.120 --> 0:02:06.720 strongest opportunities for investors. So that's kind of philosophy. You know, 0:02:06.880 --> 0:02:12.280 rigorous selection, you know, thoughtful product structuring and and really 0:02:12.320 --> 0:02:15.320 a long term view are the backdrop for how we 0:02:15.360 --> 0:02:20.359 think about, you know, evaluating managers today. But yeah, and 0:02:20.680 --> 0:02:24.880 you know, look, so as you said, like performance, performance 0:02:24.960 --> 0:02:27.119 is important, but the first things we really look at 0:02:27.200 --> 0:02:32.639 our philosophy process and people you know behind it, and 0:02:32.639 --> 0:02:34.480 and you know, we want to make sure you know, 0:02:34.520 --> 0:02:39.160 the team has the experienced resources you know, discipline necessary 0:02:39.200 --> 0:02:44.120 to execute on their on their process consistently. You know, 0:02:44.120 --> 0:02:48.120 we also look at things like capacity, portfolio construction, whether 0:02:48.160 --> 0:02:50.720 it's a good fit and role to play for the 0:02:51.200 --> 0:02:56.480 broader product structure. And in our platform, certainly performance matters, 0:02:56.520 --> 0:02:59.160 but we think it it really comes down to the 0:02:59.160 --> 0:03:03.919 first things. We look at our philosophy process and the team. 0:03:05.240 --> 0:03:09.400 How much of managed selection is quantitative versus qualitative today? 0:03:09.440 --> 0:03:11.400 And you think it's kind of shifted it all over 0:03:11.400 --> 0:03:13.760 the last decade. 0:03:14.080 --> 0:03:17.040 So look, I think I think there's great managers, you know, 0:03:17.200 --> 0:03:20.200 in in in both camps. I do think with with 0:03:20.360 --> 0:03:24.799 AI lately, David, right, You're you're seeing more more data 0:03:24.960 --> 0:03:28.920 and more kind of quant information. Quantitative is taken into 0:03:29.080 --> 0:03:33.120 really like the front end of aspects of investing, and 0:03:33.720 --> 0:03:36.960 you know some some call it kind of I kind 0:03:36.960 --> 0:03:39.160 of don't like this term, but you know, quantumnal, so 0:03:39.480 --> 0:03:43.760 you have quantitative combined with with fundamental. I think how 0:03:43.800 --> 0:03:46.520 we look at it, maybe peeling that back a little bit, 0:03:46.640 --> 0:03:51.040 is we really see you know, quantitative and qualitative outputs 0:03:51.040 --> 0:03:55.440 as compliment mentory rather than competing. So we do think, 0:03:56.560 --> 0:04:00.320 you know, quantitative work when we're looking at assessing kind 0:04:00.320 --> 0:04:03.600 of a manager and underwriting them. We certainly look at 0:04:03.680 --> 0:04:08.640 quantitative factors like performance, risk, you know, attribution, consistency, whether 0:04:08.840 --> 0:04:11.480 you know results line up with the manager's stated approach. 0:04:11.800 --> 0:04:14.400 And from a qualitative side, it's just as important because 0:04:15.040 --> 0:04:18.320 you know, numbers, you know, can't tell you how decisions 0:04:18.360 --> 0:04:20.400 are actually being made. So how does the team function? 0:04:21.000 --> 0:04:24.400 Does the process hold up into certain environments you know, 0:04:24.480 --> 0:04:27.839 why or why not? So we we do think, you know, 0:04:27.880 --> 0:04:31.320 there's a there's a combination of both quantitative and qualitative 0:04:31.400 --> 0:04:35.520 too to really factor in when when looking at a 0:04:35.520 --> 0:04:36.640 manager holistically. 0:04:37.800 --> 0:04:39.520 So you know, you had touched upon a little bit, 0:04:39.560 --> 0:04:42.039 you know, focusing on the process over the outcome first, 0:04:42.040 --> 0:04:44.760 that's what you're looking at, you know, in practice, how 0:04:44.760 --> 0:04:48.000 do you distinguish between you know, a repeatable process and 0:04:48.160 --> 0:04:50.080 someone who just might have had a great cycle. 0:04:51.360 --> 0:04:54.000 Sure, I think I think it really does come down 0:04:54.000 --> 0:04:57.520 to whether you know there's that consistency there in the 0:04:57.560 --> 0:05:00.400 outcome that you can trace back to kind of clear 0:05:01.320 --> 0:05:06.479 discipline process, discipline process, does it follow their philosophy or 0:05:07.000 --> 0:05:10.239 was it really helped by just some you know, macro 0:05:10.880 --> 0:05:15.400 environment backdrop, right that happened to be favorable so we 0:05:15.520 --> 0:05:17.680 do really try to look for evidence that the manager 0:05:17.720 --> 0:05:21.760 can explain what drove results, you know, how those decisions 0:05:21.839 --> 0:05:26.640 connect to their stated philosophy and process. And you know, 0:05:26.720 --> 0:05:30.360 I would say though that we are also looking at 0:05:30.440 --> 0:05:33.279 kind of factor analysis, right, so we use fact set 0:05:33.760 --> 0:05:35.640 to kind of look at it. So before we even 0:05:35.640 --> 0:05:38.040 go in and talk to them, we're kind of seeing, hey, 0:05:38.400 --> 0:05:43.240 what were those factors, like, how is their portfolio construction constructed, 0:05:43.760 --> 0:05:46.839 and what kind of benefit that that had. So we 0:05:46.920 --> 0:05:49.839 go in there with kind of you know, that lens 0:05:49.839 --> 0:05:51.799 to begin with, so then we can have more pointed 0:05:52.279 --> 0:05:55.720 questions and kind of really see how they how they 0:05:55.760 --> 0:05:56.480 respond to that. 0:05:57.320 --> 0:05:59.000 So is that how you can kind of tell, you know, 0:05:59.080 --> 0:06:02.960 whether the performance came from skill or just being positioned correctly. 0:06:04.440 --> 0:06:06.680 We think that's we think that is really helpful. Yeah, 0:06:06.720 --> 0:06:08.479 so we we do try to separate it. You know, 0:06:08.560 --> 0:06:11.840 sometimes it's hard depending on the depending on the environment. 0:06:13.360 --> 0:06:16.880 But you know, a strong market, a style tailwind, broad 0:06:16.880 --> 0:06:19.080 factor exposure can can make a lot of managers look 0:06:19.120 --> 0:06:21.200 good for a period of time. So so we do 0:06:21.320 --> 0:06:25.520 spend you know a lot of time on that attribution again, construction, 0:06:26.000 --> 0:06:29.280 consistency of the decision making you know, of course we 0:06:29.320 --> 0:06:32.039 want to see that those excess returns are in fact 0:06:32.080 --> 0:06:35.039 coming from kind of bottom up stock selection. If that's 0:06:35.040 --> 0:06:37.720 what they claim to be their edge, right, if that's 0:06:37.720 --> 0:06:41.360 supposed to be three quarters of their performance over rolling 0:06:41.400 --> 0:06:44.440 market cycles, then we certainly want to make sure we're 0:06:44.760 --> 0:06:47.920 we're seeing that because, as you know, then if if 0:06:48.000 --> 0:06:52.040 stock selection is bad, you know, that's gonna that's gonna 0:06:52.080 --> 0:06:55.240 hurt them then and in those cases where they're not 0:06:55.320 --> 0:06:58.720 making good picks or or the market moves against them. 0:06:58.720 --> 0:07:04.680 But yes, that repeatable, That repeatability and that consistency you know, 0:07:04.800 --> 0:07:06.880 is really something that that we key in with with 0:07:07.200 --> 0:07:10.000 every one of our our partner sub advisors. 0:07:10.440 --> 0:07:12.360 So how I guess how long of a timeframe? Because 0:07:12.440 --> 0:07:14.240 one of the things I think of is, you know, 0:07:14.320 --> 0:07:17.160 some managers might have an edge, but you know, could 0:07:17.160 --> 0:07:20.200 it be arbitraged away you know, when other folks are 0:07:20.280 --> 0:07:22.360 kind of following that. You know, how do you kind 0:07:22.360 --> 0:07:23.160 of evaluate that? 0:07:24.440 --> 0:07:27.280 Yeah, so we do tend to look at you know, 0:07:27.400 --> 0:07:30.240 kind of rolling three in in five year periods. But 0:07:30.720 --> 0:07:32.880 we think, you know, the durability of a manager is 0:07:32.880 --> 0:07:36.800 really rooted in something structural or hard hard to replicate. 0:07:36.840 --> 0:07:39.000 You know, so what are they doing differently than others 0:07:39.680 --> 0:07:43.520 that can help them be you know, consistent over time. 0:07:43.920 --> 0:07:45.920 It could be, you know, it could be a differentiated 0:07:45.960 --> 0:07:49.080 research process. It could be you know, hey, they're just 0:07:49.200 --> 0:07:51.640 really deep in expertise in the in the areas that 0:07:51.680 --> 0:07:53.880 they play in. They might have a strong network that 0:07:53.880 --> 0:07:57.760 that helps them get some insight. You know. The team 0:07:57.840 --> 0:08:01.560 culture is also something we we look at, you know, 0:08:01.600 --> 0:08:05.160 and do they have scale and flexibility? So if if 0:08:05.240 --> 0:08:07.640 the edge does depend on something that can be easily 0:08:08.200 --> 0:08:11.720 you know, copied or screened for, you know, we we 0:08:11.760 --> 0:08:14.280 want to understand that and take that, take that seriously. 0:08:14.320 --> 0:08:15.880 But you know, if it comes down to like their 0:08:15.920 --> 0:08:20.040 overall judgment experience and a process that that's been refined 0:08:20.040 --> 0:08:23.080 over time, you know that that tends to be more durable. 0:08:23.120 --> 0:08:25.640 Doesn't mean that it's you know, week in or week 0:08:25.680 --> 0:08:27.720 out or month in or month out that they're going 0:08:27.760 --> 0:08:32.320 to outperform. But that's what we try to review and 0:08:32.320 --> 0:08:36.640 and look we're we're reviewing these things on a on 0:08:36.520 --> 0:08:39.920 a quarterly basis with all of our underlying managers. So yes, 0:08:39.960 --> 0:08:42.600 we do a lot of due diligence on the front 0:08:42.679 --> 0:08:49.240 end to onboard you know, a subadvisor partner. But it 0:08:49.240 --> 0:08:52.600 it really comes down to that ongoing relationship and that 0:08:52.679 --> 0:08:56.280 ongoing re underwriting of the managers that we think differentiates 0:08:56.720 --> 0:09:00.319 what we do and helps us have a better understanding 0:09:00.400 --> 0:09:03.200 and our view of how that manager should react in 0:09:03.240 --> 0:09:04.880 certain market environments or not. 0:09:05.880 --> 0:09:07.960 So when you're meeting with managers, you know, what are 0:09:08.000 --> 0:09:10.079 the types of questions you ask them or you think 0:09:10.120 --> 0:09:12.319 that you know, they tend to reveal most about how 0:09:12.360 --> 0:09:13.080 they really think. 0:09:15.120 --> 0:09:18.400 Yeah, look, you know, the best questions are usually the 0:09:18.440 --> 0:09:21.160 ones that force the manager to move beyond you know, 0:09:21.200 --> 0:09:25.320 their their polished narrative and explain what actually how they 0:09:25.320 --> 0:09:28.600 actually make decisions. And we've all been part of those 0:09:28.640 --> 0:09:31.959 meetings where you get some kind of slick, very smart 0:09:32.080 --> 0:09:36.480 and also very talented at presenting and you're kind of like, wow, 0:09:36.559 --> 0:09:40.400 that's that's fantastic, But you really have to look, you know, 0:09:40.520 --> 0:09:44.320 beneath that that veneer. I think one of the best 0:09:44.360 --> 0:09:47.240 things is like, hey, talk to us about your highest 0:09:47.240 --> 0:09:51.480 conviction ideas, what mistakes have you made, what are they 0:09:51.559 --> 0:09:54.960 debating like internally right now, and what would cause them 0:09:54.960 --> 0:09:57.440 to change their mind in a position. So you learn 0:09:57.480 --> 0:10:00.840 a lot when you're when you walk through a decision 0:10:00.880 --> 0:10:03.760 from beginning to end and what they saw, what they waited, 0:10:04.080 --> 0:10:08.120 what risk were considered. You know, did they ever think 0:10:08.120 --> 0:10:11.200 about doing something and they didn't, why not? And I 0:10:11.240 --> 0:10:14.000 think that's where you get a lot of good information 0:10:14.080 --> 0:10:17.240 from that. I also think being able to talk to 0:10:17.360 --> 0:10:21.120 different team members, not just kind of the polished you 0:10:21.160 --> 0:10:24.520 know client PM or or you know, the real good 0:10:24.600 --> 0:10:28.520 marketer and sometimes even the lead pms are are very 0:10:28.559 --> 0:10:31.720 good at sometimes they're just they're really smart, but not 0:10:31.800 --> 0:10:35.160 the best at giving the message. But some are very good. 0:10:35.400 --> 0:10:38.280 And then you have the polished marketing person. We like 0:10:38.400 --> 0:10:43.040 to talk to the lieutenant, the junior PM, the analyst, 0:10:43.800 --> 0:10:48.160 And what we really like to do, David, is if 0:10:48.200 --> 0:10:51.280 we can let's get some of those you know, more 0:10:51.400 --> 0:10:55.439 junior folks like an analyst or senior analyst alone and 0:10:55.760 --> 0:10:59.200 talk to them. So to us, that can be extremely 0:10:59.240 --> 0:11:03.320 beneficial because as you might be surprised what they share 0:11:03.520 --> 0:11:06.719 or sometimes when you're like the executive on the thing 0:11:06.760 --> 0:11:08.319 and you say, well, here's how we do it, and 0:11:08.320 --> 0:11:10.200 then you talk to the people that are kind of 0:11:10.679 --> 0:11:13.839 really doing the analysis and a lot of the quantitative 0:11:13.840 --> 0:11:16.400 stuff on the front end and everything you can learn, 0:11:16.480 --> 0:11:18.360 you can learn some interesting things. 0:11:19.320 --> 0:11:22.599 So if we talk about what you're looking for it, 0:11:22.679 --> 0:11:25.679 do you think is any part of the process that's overrated? 0:11:25.760 --> 0:11:28.160 You know, is it just kind of people focusing on 0:11:28.200 --> 0:11:29.520 performance alone or. 0:11:29.880 --> 0:11:32.800 Yeah, Look, I would say I'll go back to one 0:11:32.800 --> 0:11:35.600 of the things I just mentioned, Like, I think some people, 0:11:35.640 --> 0:11:38.480 you know, it's overrated if you're just doing due diligence 0:11:38.480 --> 0:11:40.880 and you're just talking to those polished people and the 0:11:40.920 --> 0:11:43.920 polish presentation. So and I also think the other aspect 0:11:43.960 --> 0:11:46.680 of that is short term performance. I think, Look, we're 0:11:46.679 --> 0:11:50.760 all human, and I do think like retail folks in general, 0:11:50.800 --> 0:11:53.960 I know you know this, David, but like they'll tend 0:11:54.000 --> 0:11:57.880 to chase performance, right, and that's probably not what you 0:11:57.920 --> 0:11:59.640 want to do. I think. I think both of those 0:11:59.640 --> 0:12:03.000 things can be useful, but neither tells us enough on 0:12:03.040 --> 0:12:06.080 their own. And so, you know, kind of a great 0:12:06.120 --> 0:12:09.560 presentation to make a process sound more differentiated than it 0:12:09.600 --> 0:12:13.120 really is, or a recent short term track record might 0:12:13.160 --> 0:12:15.360 not reflect, you know, kind of the true skill. So 0:12:15.400 --> 0:12:17.880 in our experience, it's it's it's better to look kind 0:12:17.880 --> 0:12:20.760 of under that surface. Again, rolling three and five year periods, 0:12:21.400 --> 0:12:24.760 you know, in and through and out of market cycles 0:12:24.880 --> 0:12:27.760 is what we want to see. And we also want 0:12:27.760 --> 0:12:31.880 to see obviously risk adjusted performance, not just top line performance, 0:12:31.960 --> 0:12:34.640 like how much risk are they taking to get that? 0:12:36.400 --> 0:12:39.240 And yeah, I think I think that's really you know, 0:12:39.280 --> 0:12:42.079 and tell us those three to five year periods are 0:12:42.160 --> 0:12:45.360 really what folks should be looking at. And you could 0:12:45.480 --> 0:12:48.680 you could say, hey, a market cycle, now, Paul has 0:12:48.720 --> 0:12:52.920 been a lot longer, you know, with kind of financial 0:12:52.960 --> 0:12:56.720 and monetary policies and everything like that. But in general, 0:12:57.240 --> 0:12:59.080 if you get beyond three and five, people are going 0:12:59.160 --> 0:13:01.440 to say, well, why would I look at ten? So 0:13:01.440 --> 0:13:03.120 that's why we tend to focus in on three and 0:13:03.160 --> 0:13:05.400 five and we do think that can give you Again, 0:13:05.520 --> 0:13:08.600 rolling cycles of three and five can be we think 0:13:08.640 --> 0:13:09.640 can be very meaningful. 0:13:10.520 --> 0:13:13.480 What about red flags? I mean, you know, you mentioned risk. 0:13:13.600 --> 0:13:15.679 Are there other kind of red flags that would kind 0:13:15.679 --> 0:13:18.520 of immediately move a manager that's you know, probably not 0:13:18.760 --> 0:13:19.600 the best fit for you. 0:13:21.280 --> 0:13:24.120 Yeah, I think there's a number of them. I think it. 0:13:24.280 --> 0:13:27.720 You know, for us, the biggest ones come back to inconsistency, 0:13:28.559 --> 0:13:33.040 you know, lack of transparency or communication or a process 0:13:33.080 --> 0:13:36.480 that just doesn't match up with the outcomes. That we 0:13:36.520 --> 0:13:39.319 would think you would get from that market. So we 0:13:39.400 --> 0:13:42.800 had as an example, a value manager. Now we do 0:13:42.960 --> 0:13:45.440 kind of like different flavors of value within our multi 0:13:45.520 --> 0:13:48.720 managed value products, and so we have kind of a deep, 0:13:48.880 --> 0:13:52.280 a core, and a relative and that relative value manager, 0:13:52.800 --> 0:13:56.000 David was becoming a lot more growth leaning, and this 0:13:56.120 --> 0:13:58.280 was at a time when it was beneficial from a 0:13:58.280 --> 0:14:01.560 performance standpoint, and so I think when you when you 0:14:01.600 --> 0:14:04.080 see that, you know, there's there's a lot of questions 0:14:04.080 --> 0:14:05.840 we had, and we did move on from that manager 0:14:05.840 --> 0:14:08.719 even though they were they did lights out, but they 0:14:08.760 --> 0:14:12.280 weren't sticking to the discipline in the space that we 0:14:12.360 --> 0:14:15.160 needed them to be in. And so it was the 0:14:15.200 --> 0:14:18.920 right decision for us because when we offer something to 0:14:18.920 --> 0:14:22.240 to a client, to an investor, we wanted to stay true. Right. 0:14:22.760 --> 0:14:25.160 So I guess if they if they can't clearly explain 0:14:25.280 --> 0:14:28.680 how decisions are made, if the team appears unstable, if 0:14:28.760 --> 0:14:32.880 risk controls are our secondary, and if the story you know, 0:14:33.440 --> 0:14:36.360 continues to change on how they're doing things, that's you know, 0:14:36.360 --> 0:14:38.080 obviously that's a problem that's going those are going to 0:14:38.120 --> 0:14:39.040 be red flags. 0:14:39.680 --> 0:14:41.440 So I could have a follow up to that, you know, 0:14:41.520 --> 0:14:43.640 just talking about actually value kind of brought up a 0:14:43.640 --> 0:14:45.280 good point. And you know, there were a lot of 0:14:45.360 --> 0:14:47.760 I think value managers that were picking up I guess 0:14:47.800 --> 0:14:52.120 discounted tech stocks after you know, the bear market, and 0:14:52.160 --> 0:14:55.520 then you know, if they're holding it too long once 0:14:55.560 --> 0:14:57.880 they become growth stocks. Is that kind of something you'd 0:14:57.880 --> 0:14:58.880 be looking at? 0:14:59.560 --> 0:15:04.320 We would, we would, And you know, look, you know 0:15:04.360 --> 0:15:07.320 how these these indices are are created, and you guys 0:15:07.360 --> 0:15:10.520 have some good ones, but maybe some other firms don't have. 0:15:10.600 --> 0:15:13.640 You know, it's kind of like how it's divided up. 0:15:13.840 --> 0:15:19.840 You have really big, large megacap kind of growth names 0:15:19.840 --> 0:15:23.640 that are in the large cap value index. So it 0:15:23.680 --> 0:15:27.040 does become hard. So look if our if our deep 0:15:27.160 --> 0:15:29.560 value guys are looking at that in that same kind 0:15:29.600 --> 0:15:33.040 of multi managed portfolio structure that I alluded to earlier, 0:15:34.280 --> 0:15:35.880 that that could be a problem. It's that if it's 0:15:35.880 --> 0:15:38.280 the relative value manager and then they are trimming it 0:15:38.320 --> 0:15:40.760 when it once it does get you know that that 0:15:40.800 --> 0:15:44.760 maybe makes some sense. But certainly, like in the large 0:15:44.760 --> 0:15:47.600 cap space right, it's been it's been tough to be 0:15:48.360 --> 0:15:51.360 an active manager with with the whole AI, you know, 0:15:51.480 --> 0:15:54.400 and the mag seven and all that going on, and 0:15:54.440 --> 0:15:57.400 I suspect that's still going to be somewhat of a 0:15:57.880 --> 0:16:03.280 of a talking point right here here going for but yeah, 0:16:03.320 --> 0:16:04.520 you do, you do see that. 0:16:05.640 --> 0:16:07.320 So that kind of brings up to another question of 0:16:07.760 --> 0:16:09.400 you know, we kind of talk about when you're kind 0:16:09.400 --> 0:16:12.640 of your meeting managers and kind of doing your due diligence, 0:16:12.720 --> 0:16:15.720 what does the ongoing due diligence look like an American beacon, 0:16:15.840 --> 0:16:18.360 you know, while you're kind of continuing to monitor them. 0:16:19.200 --> 0:16:21.880 Yeah, so as I, as I mentioned a little bit 0:16:21.920 --> 0:16:24.400 earlier that you know, we do think this is a 0:16:24.400 --> 0:16:26.960 differentiator for us and for our firm, We don't. We 0:16:27.000 --> 0:16:30.000 don't believe a lot of other folks are kind of 0:16:30.520 --> 0:16:33.880 re underwriting you know, their subadvisor partners on a on 0:16:33.920 --> 0:16:37.880 a quarterly basis. So we do that quarter in and 0:16:37.960 --> 0:16:41.160 quarter out, and it does take a lot of time. Again, 0:16:41.200 --> 0:16:44.280 doesn't mean we're going to be perfect in finding you know, 0:16:44.360 --> 0:16:49.080 pivots or issues, but I think it provides definitely a 0:16:49.080 --> 0:16:51.720 better lens. So we're just not peripherally looking at, oh, 0:16:51.800 --> 0:16:55.560 this was their performance, you know, for the period, we're 0:16:55.560 --> 0:16:59.040 really looking at again that people process. You know, is 0:16:59.040 --> 0:17:02.200 there any changes to the FLAWPIA is the culture still 0:17:02.760 --> 0:17:04.880 you know, intact from what we can see, and again 0:17:04.920 --> 0:17:08.280 that that helps in talking to different levels of folks 0:17:08.320 --> 0:17:13.280 on the team. You know, are there organizational changes outside 0:17:13.280 --> 0:17:15.840 of the investment team that we should be concerned about? 0:17:15.880 --> 0:17:19.920 What about from an operational perspective, So we we try 0:17:19.960 --> 0:17:25.760 to be as fully encompassing as we can. And again 0:17:25.840 --> 0:17:28.640 we we think that, you know, it's very helpful then, 0:17:28.680 --> 0:17:31.720 like even capacity, So we look at capacity all the time, 0:17:31.760 --> 0:17:34.520 particularly in those areas that you would expect that are 0:17:34.520 --> 0:17:38.560 more capacity constrained. But we're constantly talking to them about 0:17:38.600 --> 0:17:41.280 even those aspects to say, hey, if we can sell 0:17:41.760 --> 0:17:44.000 a half a billion dollar more in a small are 0:17:44.000 --> 0:17:46.199 we okay, Like is that good? Is this amount that 0:17:46.240 --> 0:17:48.800 you gave us before still accurate? Or can we get 0:17:48.840 --> 0:17:51.800 more at that same price point? So all of those 0:17:51.840 --> 0:17:55.240 things are coming up, and you know, we do think 0:17:55.280 --> 0:17:58.679 it's it's been helpful for us to identify some some 0:17:58.840 --> 0:18:00.200 problems in. 0:18:00.160 --> 0:18:03.320 The past, so you know, what would actually cause you 0:18:03.359 --> 0:18:05.800 to lose conviction and a manager? 0:18:07.640 --> 0:18:12.240 Yeah, so yeah, we I think when something changes and 0:18:12.640 --> 0:18:15.920 we can no longer kind of explain that the strategy 0:18:15.920 --> 0:18:18.840 with the same clarity we we once could, so that 0:18:18.960 --> 0:18:22.760 might be a shift in in people, a drift in process, 0:18:23.000 --> 0:18:28.160 unexpected risk taking, inconsistency between you know, what is said 0:18:28.200 --> 0:18:32.120 and what is done, or results that no longer line 0:18:32.200 --> 0:18:33.880 up with the state of philosophy. Like you know, hey, 0:18:34.160 --> 0:18:36.800 you're a relative value manager and all of a sudden 0:18:36.800 --> 0:18:40.120 they're kind of like a heavy growth manager. So from 0:18:40.119 --> 0:18:45.520 a style perspective, under performance by itself, I guess i'd 0:18:45.520 --> 0:18:49.080 say is not usually enough, because good managers will go 0:18:49.119 --> 0:18:52.719 through difficult periods. But the bigger issue is when the 0:18:52.760 --> 0:18:55.800 reasons we believed in the manager to begin you know 0:18:56.000 --> 0:18:59.440 with to begin with, start to eroad and we no 0:18:59.480 --> 0:19:02.679 longer fell you know, the process is as coherent or 0:19:02.680 --> 0:19:05.880 repeatable or trustworthy as it needs to be. Is when 0:19:05.960 --> 0:19:06.879 when we lose conviction. 0:19:08.000 --> 0:19:11.160 So, I mean, you know, my focus is active, and 0:19:11.320 --> 0:19:13.160 you know, well, I think you know the general thing 0:19:13.280 --> 0:19:15.480 is when people think of active is they tend to 0:19:15.520 --> 0:19:18.320 do or they tend to really show their merit during 0:19:18.480 --> 0:19:21.400 down periods. And so, yeah, what do you think separates 0:19:21.440 --> 0:19:25.760 managers who do do well or survive difficult periods? You know, 0:19:25.800 --> 0:19:27.920 what separates them from the ones that kind of unravel 0:19:27.920 --> 0:19:30.080 when the market turns against them? 0:19:30.440 --> 0:19:34.760 Yeah, So I do think the managers that navigate you know, 0:19:35.040 --> 0:19:38.880 tough periods best are usually the ones with the process 0:19:38.880 --> 0:19:41.239 they really understand and believe in. Right, they combine with 0:19:41.920 --> 0:19:47.160 the discipline importantly to stay thoughtful under pressure. So they 0:19:47.200 --> 0:19:50.359 tend to know, you know, kind of like what they know, 0:19:50.520 --> 0:19:52.720 why they know it, and what what kinds of environment 0:19:52.760 --> 0:19:56.600 should or should not favor them. You know, they're not improvising, 0:19:56.760 --> 0:19:59.520 you know, in difficult markets. They they really stay true 0:19:59.560 --> 0:20:02.960 to what is it we do and have to believe 0:20:03.800 --> 0:20:06.040 the fact that, hey, when quality as you know David 0:20:06.040 --> 0:20:08.200 as a factor. Last year was one of the worst 0:20:08.760 --> 0:20:14.520 periods to have quality as as a key discipline. Uh, 0:20:14.520 --> 0:20:16.639 in the last one decade and a half or so, 0:20:17.520 --> 0:20:22.240 we have some managers that absolutely are have outperformed like 0:20:22.359 --> 0:20:25.520 last year and are continuing to struggle a bit, but 0:20:25.560 --> 0:20:27.840 they're staying true to what they do and that's and 0:20:27.880 --> 0:20:30.520 that's actually very meaningful. If we saw them veer off 0:20:30.560 --> 0:20:33.240 that course, we would have concerns. And by the way, 0:20:33.320 --> 0:20:37.000 now if quality comes back and they're not participating, we're 0:20:37.000 --> 0:20:40.159 gonna have some other you know, challenging discussions. But somebody 0:20:40.160 --> 0:20:42.960 that really knows who they are and stays true to it. 0:20:43.480 --> 0:20:46.720 That that's you know, that's what we think separates uh, 0:20:46.840 --> 0:20:47.800 you know, the good managers. 0:20:48.119 --> 0:20:50.880 Okay, I also want to ask you about concentration because 0:20:50.880 --> 0:20:53.679 we all know, you know, what's happening with you know, 0:20:53.720 --> 0:20:56.480 the large and megacap companies, you know, making up such 0:20:56.480 --> 0:20:59.040 a huge part of some of the large indexes. If 0:20:59.000 --> 0:21:02.320 we're talking about concentrate risk, are you being more cautious 0:21:02.359 --> 0:21:05.000 about highly concentrated managers or you do or do you 0:21:05.080 --> 0:21:07.440 kind of view it more as evidence of conviction? 0:21:09.359 --> 0:21:12.639 Yeah, look, I think I think the latter. Yeah, So 0:21:12.680 --> 0:21:15.720 we really we do have you know, we have a 0:21:15.720 --> 0:21:19.639 lot of different you know products on our platform right 0:21:19.680 --> 0:21:24.160 that that very greatly but those that have high conviction, 0:21:25.359 --> 0:21:27.959 I mean, we like that. So we are an active shop, 0:21:28.080 --> 0:21:31.399 right and so the title of what you want to 0:21:31.440 --> 0:21:34.359 talk about is just write up our power alley. We 0:21:34.359 --> 0:21:36.760 we strongly believe in it, and so we do have 0:21:36.800 --> 0:21:41.359 a lot of managers that are very concentrated and have 0:21:41.440 --> 0:21:46.120 great conviction around that. And there's there's certainly risk aspects 0:21:46.200 --> 0:21:49.080 to that that you have to make sure you're you're 0:21:49.080 --> 0:21:54.040 discipline from the perspective as well, But we think that 0:21:54.040 --> 0:21:57.679 that can you know, that can be a great a 0:21:57.760 --> 0:22:02.600 great philosophy and strategy to have have certainly in definitely 0:22:02.640 --> 0:22:06.520 some some you know, specific asset classes, right, and so 0:22:07.240 --> 0:22:09.840 we we value that we you know, we try to 0:22:09.840 --> 0:22:13.600 find managers that have high conviction. And some would say, hey, 0:22:13.960 --> 0:22:16.800 conviction is if you have you know, in a large 0:22:16.800 --> 0:22:19.440