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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. Well, the story this morning,

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Speaker 1: it's been the rate market. We have the tenure treatories.

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Speaker 1: Charlie is just reporting one point four eight percent. We

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Speaker 1: did test one point five one in the thirty year

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Speaker 1: we are at a two point zero four percent. We're

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Speaker 1: just about two percent right now. Um, what's that mean?

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Speaker 1: What's that telling us? Here? Let's bring in Tom Purcelly,

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Speaker 1: chief US economists for OURBC Capital Markets. Tom, thanks so

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Speaker 1: much for joining us here. We've seen rates move up

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Speaker 1: pretty significantly, just by relative standards over the last couple

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Speaker 1: of years, just in the last a couple of days here.

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Speaker 1: What do you take away from it? Yeah, I mean, look,

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Speaker 1: I think that, um, you know, the move higher makes sense.

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Speaker 1: Um that the tomming may not. You know, this all

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Speaker 1: happened to day's after the the FOMC meeting but UM no,

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Speaker 1: I think we're moving um sort of directionally. I think

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Speaker 1: that this is all pretty consistent with you know, the

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Speaker 1: idea that look, um, you know, we're moving away or

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Speaker 1: going to be moving away from, you know, emergency levels

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Speaker 1: of accommodation. And I mean I think that is um,

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Speaker 1: you know, where we are from an economic backdrop perspective,

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Speaker 1: UM growth is. You know. It's funny. So so let

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Speaker 1: me freeing the conversation this way, because I think this

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Speaker 1: is a really important UM idea for for people to

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Speaker 1: keep in mind. You know, when when you think about

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Speaker 1: the last hiking cycle, um, you know, the one that

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Speaker 1: the FED started back in Uh, you know, the FET

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Speaker 1: had the luxury of of going really slow, right, you know,

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Speaker 1: we had the jobless recovery. UM, you know output you

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Speaker 1: know I E G d P. You know, didn't get

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Speaker 1: back um to the sort of the pre GFC level

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Speaker 1: the Great Financial Crisis, the pre GFC level of growth.

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Speaker 1: For it, it took like a decade. I mean, you know,

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Speaker 1: the unemployment was elevated for years. Um, none of that's

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Speaker 1: happened now, you know. Now it's taken eighteen months for

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Speaker 1: us to basically get back to where we were pre

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Speaker 1: pandemic level of output for the unemployment rate to you know,

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Speaker 1: really show meaningful improvement. So I think that this is

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Speaker 1: all going to be much more accelerated relative particularly relative

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Speaker 1: to what we saw after the GFC. Well to that point, Tom,

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Speaker 1: with kind of the trajectory that the FED has outlined

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Speaker 1: here a taper announcement likely in November, and then rate

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Speaker 1: liftoff possibly in even with that timeline, do they risk

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Speaker 1: being too far behind the curve? I mean, look, you

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Speaker 1: know so uh you know this is the should verse

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Speaker 1: would part right, And I learned long ago, um that

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Speaker 1: I'm always supposed to forecast, but the FED will do

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Speaker 1: nobody I think they should do. Do I think the

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Speaker 1: FED should have started this process um months ago. Yeah,

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Speaker 1: I do. And I think the people that know our

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Speaker 1: research well know that you know, we've that that that's

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Speaker 1: the sort of the side of them, the the this

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Speaker 1: equation that we will come down on the FED was

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Speaker 1: supposed to start this much sooner, but again we were

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Speaker 1: also acutely aware, um that that's probably not what they

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Speaker 1: were going to do. So I think this is all

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Speaker 1: pretty much in keeping with what Powell has um laid

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Speaker 1: out in terms of the sort of the you know,

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Speaker 1: starting this process in a very slow, methodical fashion. UM.

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Speaker 1: I think it's all in keeping with with what Powell wanted. UM,

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Speaker 1: But I again I would hasten to add UM. Just

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Speaker 1: keep in mind, one day pal said they were not

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Speaker 1: going to taper, and you know, the next week they said,

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Speaker 1: we're going to tape it. Right, And it's the same

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Speaker 1: thing is going to happen from a rate hike perspective,

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Speaker 1: I mean, palatine the same thing right now, we're knock

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Speaker 1: going to hike rates, but it'll it'll evolve in the

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Speaker 1: same way. And so twenty two for us, UM. You know,

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Speaker 1: again I think that they should at least give us

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Speaker 1: one hike. I mean again, now the median has shifted

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Speaker 1: for a hike. But again, just keep in mind something.

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Speaker 1: If you look at their their twenty two unemployment rate forecast, UM,

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Speaker 1: it's about three point eight percent. That's not very different

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Speaker 1: than where we were pre pandemic. And in mind where

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Speaker 1: we were pre pandemic from a funds perspective, we're to fifty, right,

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Speaker 1: So two fifty then equated um to uh, you know,

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Speaker 1: or it was roughly equivalent to an unemployment rate that

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Speaker 1: was you know, where they expect it to be in

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Speaker 1: twenty two, but now in twenty two it only equates

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Speaker 1: to one hike. I mean that seems inconsistent to us

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Speaker 1: again the process, and we're not going to beat up

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Speaker 1: on them. I think that they do. I want to

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Speaker 1: go in a very slow fashion. But I think that

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Speaker 1: there's a very uh, it's very inconsistent. And Tom, we

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Speaker 1: saw in the Fed's release taking down their economic growth

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Speaker 1: forecast yet taking up uh their inflation outlook. Does that

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Speaker 1: suggest stag inflation for this US economy? No, I think

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Speaker 1: you know, I have to be honest. I hate that.

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Speaker 1: I hate this conversation in that um, you know, the

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Speaker 1: stagflation part of the conversation, because I can make I

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Speaker 1: can get on board with deflation part, I can't get

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Speaker 1: in part board with the stag part. I mean, you know,

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Speaker 1: we're looking at what four or five growth UM next year? Uh?

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Speaker 1: You know that. And by the way, that's our own forecast,

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Speaker 1: which interestingly enough, is an inconsistent with the FED. I mean,

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Speaker 1: I think the FED is around four percent for twenty two,

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Speaker 1: six percent for twenty one UM numbers that are in

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Speaker 1: line with us. What what what stag about that? You're

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Speaker 1: still multiples above potential growth. I mean that I'm a

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Speaker 1: fader of that. In higher conversation to stag part of it,

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Speaker 1: the flation part of it, I can buy into more.

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Speaker 1: But yeah, and obviously the Fed is looking at the

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Speaker 1: flation part, and then they also have to look at

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Speaker 1: the other part of their dual. Mean that it was

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Speaker 1: just trying to maximize employment. As we look ahead to

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Speaker 1: the job's report we're getting on October eight than that

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Speaker 1: print for September, I'm wondering what you're expecting to see,

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Speaker 1: given even though additional benefits have started to roll off,

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Speaker 1: you haven't actually seen the corresponding return of people to

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Speaker 1: the labor market. Yeah, so we don't have a Um,

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Speaker 1: we'll have a forecast for next Friday's Piero report this Thursday. UM,

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Speaker 1: but what I can tell you is, you know, and

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Speaker 1: I have people already asking about it, as you would expect.

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Speaker 1: You know, you know now that the um the kicker

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Speaker 1: has expired. You know, well the generous kicker has expired. Well, Olson,

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Speaker 1: we'll see this, you know, um burst of hiring. No,

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Speaker 1: we we we don't think that that's how it's going

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Speaker 1: to happen. Um, you know, I don't think there's another

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Speaker 1: you know, sort of million plus job print waiting out

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Speaker 1: there for us. I think it'll be a bit slower

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Speaker 1: than that. Again, you know, is it another two thousand

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Speaker 1: like we saw last month. No, I think I probably

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Speaker 1: will wind up looking a little bit better than that. Again,

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Speaker 1: I got to go through the numbers still, But I

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Speaker 1: think more importantly, who doesn't matter? Palt basically pulled us

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Speaker 1: already that it's um uh, you know, as long as

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Speaker 1: we see you know, a sort of another decent pay

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Speaker 1: will report, and he already had the two thirty five

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Speaker 1: in hand, so I'm guessing that that sort of would

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Speaker 1: meet some of the criteria quote unquote decent. Then I

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Speaker 1: think that you know, tapers on and again if their

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Speaker 1: forecast for the end of next year comes into play,

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Speaker 1: that we're back to where we were pre pandemic um

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Speaker 1: and that should be enough for the to to start

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Speaker 1: the process of lifting rights. Is there as we're talking

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Speaker 1: about labor, is there a point where we really need

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Speaker 1: to think about realistically wage inflation? I mean, it's happening,

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Speaker 1: right you know, wage inflation. Wage inflation is upon us

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Speaker 1: right right now. I think you know, again, most people

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Speaker 1: are aware that you know, eleven million job openings, people

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Speaker 1: having a hard time finding workers. As results, wage pressures

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Speaker 1: are building. But again I would hasten to add, I

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Speaker 1: don't think that that means that that these games that

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Speaker 1: we've seen are going to be sustained. I don't think

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Speaker 1: that they are. Um. I think leisure in hospitality is

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Speaker 1: sort of a great example of that. Leisure in hospitality

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Speaker 1: is the biggest shortfall in jobs right now, excuse me,

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Speaker 1: And once um, you start to get some of those

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Speaker 1: jobs back, you know, when there's you know, three and

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Speaker 1: four and five people, um applying for a job for

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Speaker 1: a single job, I think that those wage pressures can abate.

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Speaker 1: But again, the benefit has already has already materialized, right.

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Speaker 1: I mean we're now well above where we were a

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Speaker 1: pre pandemic from a wage pressure perspective. So I think

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Speaker 1: the level of wages is going to matter very much

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Speaker 1: so in the months to come, more so than than

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Speaker 1: the rate, because again I just don't think that that

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Speaker 1: these rates can be maintained. All right, Tom, Hey, we

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Speaker 1: really appreciate getting your thoughts here, Tom. Lots of data,

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Speaker 1: lots of moving parts out there, so it's good to

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Speaker 1: get your perspective. Tom, Percelly, chief US economists for OURBC

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Speaker 1: Capital Markets, joining us here, and and uh Kaylee, you

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Speaker 1: just reminded as Amazon target cut it Morgan Stanley on

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Speaker 1: impact from rising wages. So yeah, exactly, the cost of

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Speaker 1: labor is going up for a lot of companies. And

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Speaker 1: that's not just a conversation for the FED and wage inflation.

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Speaker 1: That's earnings and what that's going to mean for margins. Yeah,

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Speaker 1: that's a great point. And so the question is how

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Speaker 1: transitory are some of these factors versus you know, how

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Speaker 1: longer term we'll have more certainly coming up on all

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Speaker 1: of those issues. This is Bloomberg, Good morning. All right,

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Speaker 1: let's bring in Frank Holmes. Frank is the CEO and

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Speaker 1: chief investment officer of US Global Investors. He's also executive

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Speaker 1: chairman of Hive Blockchain Technologies. Joining us on the phone

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Speaker 1: from San Antonio, Texas. Franks, thanks so much for joining

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Speaker 1: us again here. I want to start with crypto. I

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Speaker 1: just want to get your thoughts because since the last

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Speaker 1: time we chatted, China has taken a decidedly different approach

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Speaker 1: to kind of all things crypto. What's your take, Well,

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Speaker 1: it's it's the leadership actually believes that they allowed under

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Speaker 1: Danks helping capitalism was a transitory phase to the road

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Speaker 1: to social and socialism is all about centralized and control.

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Speaker 1: And when we're witnessing an attack on all technology, limits

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Speaker 1: on capital returns and capital for risk taking um and

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Speaker 1: so you're seeing that this is now going into crypto

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Speaker 1: because they're coming up with their own digital money and

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Speaker 1: they and they just do not want to have anything

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Speaker 1: to compete with it um and next will be They've

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Speaker 1: been trying to push to compete against the US dollar,

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Speaker 1: but oil nations like Saudi Arabia, so they won't take

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Speaker 1: their currency want dollars. So now they're trying to buy

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Speaker 1: a lot of gold. You're seeing huge gold movements going

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Speaker 1: to China to try to create legitimacy behind their currency.

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Speaker 1: But they're further along in the path of having their

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Speaker 1: own digital money. But they become a non event. You know,

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Speaker 1: the markets bounced right back. It's been a big boom

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Speaker 1: for America UH in taxes in particular. I know that

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Speaker 1: building one point to gigabytes of UH energy that's stranded

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Speaker 1: from natural gas, which they can turn around to do

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Speaker 1: bitcoin mining. And you're seeing that more and more people

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Speaker 1: nodes are growing in America, so it's very very positive

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Speaker 1: this shift is happening here. Is that why we've seen

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Speaker 1: the crypto market basically take around trips since that China

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Speaker 1: news came out on Friday. I mean Bitcoin is back

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Speaker 1: around forty dollars like it never even happened, and Ethereum

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Speaker 1: jump twelve from those lows. Yes, you know that's a good,

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Speaker 1: you know, good observation. The same thing out of Europe.

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Speaker 1: What we noticed is that the number of miners in fact,

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Speaker 1: Etherorium is more decentralized than Bitcoin, because when China came

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Speaker 1: down with the hammer, uh, the mining, the number of

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Speaker 1: miners in the world dropped dramatically. So the difficulty there's

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Speaker 1: no competition felt greatly. So even though bitcoin felt the

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Speaker 1: thirty thousand, the profit margins we had were growing because

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Speaker 1: there's no competition because it basically it's limited to nine

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Speaker 1: hundred coins a day that you've run and it's a

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Speaker 1: jump ball to see if you can touch that ball,

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Speaker 1: and you got to touch that ball, then you can

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Speaker 1: mind coin. So we're minding close to eight coins a

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Speaker 1: day a bitcoin uh and and that difficulty only helped it.

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Speaker 1: Now it's been growing slightly because they would shift the Kazakhstan.

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Speaker 1: But the big move has come to the US, and

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Speaker 1: I think that's very positive. Ethereum hardly came off that difficulty.

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Speaker 1: All the gamers in the world when etherium rises, they

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Speaker 1: basically try to turn the machines on. They run up

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Speaker 1: their parents electrical bill and they take that GPU chip

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Speaker 1: they need and they minded an ethereum coin and then

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Speaker 1: they go off in a holiday. So Frank's I'm wondering,

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Speaker 1: you know that strategy for China here, because you know,

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Speaker 1: if you listen to the bowls of crypto and bitcoin,

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Speaker 1: it's the future, It's the future of decentralized finance. If

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Speaker 1: that is in fact the case, does China not run

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Speaker 1: the risk of just falling behind the global you know,

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Speaker 1: competitive landscape in terms of crypto, absolutely and in other technologies.

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Speaker 1: To mean it's return to socialism, is a return to

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Speaker 1: trying to drive your car looking out the review mirror

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Speaker 1: um and and there's nothing but guilt and shame and attack,

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Speaker 1: and everyone's looking out the review meer. You can't drive forward. Uh,

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Speaker 1: And so I think it's it's quite dangerous. Well, but

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Speaker 1: for in China also is in the process of rolling

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Speaker 1: out a digital you want, right, So in some way

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Speaker 1: you could argue maybe they're making space for that. How

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Speaker 1: do you think about kind of government controlled centralized digital

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Speaker 1: currencies versus the crypto world and the likes of bitcoin.

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Speaker 1: It's a complete opposite. And if you notice that the

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Speaker 1: more socialist the country is, the more they are anti

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Speaker 1: gold and they're anti bitcoin. Um, they wish to control

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Speaker 1: everything that has to do with money. Money is basically

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Speaker 1: evil unless the government is in control of it in

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Speaker 1: every part of it. When you just look around the

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Speaker 1: world for that idealist and that takes place, and that's

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Speaker 1: what happens, and and bitcoin is the opposite. About something

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Speaker 1: else is really important for all your listeners, is bitcoin

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Speaker 1: validated the blockchain. The blockchain was created by telecom companies

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Speaker 1: to move money in and it wasn't really validated to

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Speaker 1: the Bitcoin came along and showed this triple entry accounting

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Speaker 1: is a major breakthrough, an accounting that hasn't taken place

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Speaker 1: since the Medici's uh they created banking and the Venetians

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Speaker 1: in the four hundreds. So the bottom line is a

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Speaker 1: blockchain is going to grow and the adoption of bitcoin

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Speaker 1: is so decentralized as thirteen thousand nodes around the world.

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Speaker 1: So we're and and Hive is the first public company

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Speaker 1: to mind mot bitcoin etherory. And we only use green energy,

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Speaker 1: so we're not consumed with these other difficulties some of

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Speaker 1: the other miners have had. All right, Frank, thank you

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Speaker 1: so much for joining us. As always, we appreciate a

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Speaker 1: Franklin CEO and Chief Investment Officer of US Global Investors

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Speaker 1: Mo Hagmen, chief operating officer for Investo Investment Solutions. He

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Speaker 1: joins us to day. They've got their sixth annual Global

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Speaker 1: Global Factor Investing Study that's released today. We're gonna talk

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Speaker 1: to them all about that. Factor investing has become a big,

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Speaker 1: big way for folks to look at investing in these markets. Well,

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Speaker 1: thanks so much for joining us here. I love to

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Speaker 1: get your thoughts the highlights the takeaways from your Global

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Speaker 1: Factor Investing Study. Thank you for having me. Good morning. Yes,

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Speaker 1: as you mentioned, we released our sixth annual Factor Investing

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Speaker 1: Study today and the study basically interviews two forty or

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Speaker 1: so institutional and retail investors around the world. Roughly about

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Speaker 1: one trillion in assets by those ascid owners held by

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Speaker 1: those asset owners, and what's interesting is we continue to

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Speaker 1: see no surprise that factor investing continues to gain adoption,

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Speaker 1: both institutionally and more recently in the retail market. And specifically.

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Speaker 1: What was interesting this year as we saw a lot

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Speaker 1: of rotation within kind of the factor strategy landscape, given

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Speaker 1: kind of the markets and what we saw post the

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Speaker 1: presidential election last year, we've seen a very large shift

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Speaker 1: towards value and more procyclical factors at the expense of

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Speaker 1: defensive and low volatility factors which had been gaining a

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Speaker 1: lot of traction over the years. Well, and then when

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Speaker 1: we talk about the momentum factor as well, there was

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Speaker 1: a lot of conversation, particularly in kind of the first

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Speaker 1: quarter of the year when we saw that huge rush

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Speaker 1: into value, that value was then the new momentum when

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Speaker 1: it had been growth before. How do you think about

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Speaker 1: the momentum factor now given some of those dynamics. Yeah,

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Speaker 1: it's a very interesting observation. So momentum is a technical factor,

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Speaker 1: so it kind of shape shifts, it actually takes the

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Speaker 1: characteristics of other factors. And what we have seen over

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Speaker 1: the last twelve months is momentum looks very much like

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Speaker 1: value in size, whereas historically it had been very much

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Speaker 1: growth and kind of low volatility oriented, as the mega

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Speaker 1: cap tech companies were the best price performers. You're absolutely right.

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Speaker 1: We've seen actually some more concentration within the value and

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Speaker 1: momentum factor, and those two historically have been negatively correlated,

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Speaker 1: but more recently there's a positive correlation between those two factors.

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Speaker 1: So MO would just I'd love to take a step

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Speaker 1: back here. When I was an equity analyst and I'd

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Speaker 1: be walking into a meeting with a fun manager in Boston,

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Speaker 1: my salesperson returned to me and say, Oh, this person

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Speaker 1: is a growth investor. Or, This fund managers a value investor,

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Speaker 1: isn't So how is that different from this factor investing

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Speaker 1: we talk about. It's really not that different. I think

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Speaker 1: it's very much a different lens of looking at the

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Speaker 1: same thing. I think for a very long period of time,

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Speaker 1: we thought about the world in like the Morning Star

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Speaker 1: style box, where managers really had a discipline whether you're

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Speaker 1: a value fundamental manager or a growth manager. Factors are

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Speaker 1: actually a very precise way of capturing some of those

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Speaker 1: same outperformance characteristics. We know factors over the very long

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Speaker 1: term have a premier attached to them, very much like

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Speaker 1: asset classes have premiers attached to them, and you're actually

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Speaker 1: able to capture that by focusing in systematic ways on

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Speaker 1: parts of the equity market. So when you want value,

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Speaker 1: for example, in your portfolio, you look at fundamental metrics

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Speaker 1: such as earnings and revenues and cash flows, and you're

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Speaker 1: looking for cheapness in the market. When you look at momentum,

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Speaker 1: it's a technical factor which really looks at price appreciation

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Speaker 1: over the recent, recent past. So you know, it's not

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Speaker 1: really that much different. I think it's a new lens

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Speaker 1: of thinking about it. And what we've seen is that

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Speaker 1: adoption is actually moved, as you mentioned, from the equity

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Speaker 1: markets into fixed income. So this this year's factor study

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Speaker 1: was really interesting and that we saw investors looking at

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Speaker 1: fixed income factor strategies as a way to reduce cost

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Speaker 1: and a low yield environment. Well we're talking about fixed income.

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Speaker 1: I would love to just get your take on the

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Speaker 1: bond market and the action we've seen over the last

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Speaker 1: couple of days post FED decision, this dramatic move upward

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Speaker 1: and yields to test one fifty again. Just do you

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Speaker 1: think the bond market in the equity market are now

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Speaker 1: in sync? What's interesting is you know, we talk a

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Speaker 1: lot about rates, but rates are still historically very low,

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Speaker 1: and I think at this point in the economic cycle,

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Speaker 1: you should actually expect some steeping of the yield curve.

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Speaker 1: We actually think that's actually quite healthy for the bond market.

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Speaker 1: Although when we look at certain sectors within the equity market,

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Speaker 1: obviously there's going to be more sensitivity to rising rate environment.

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Speaker 1: You know, tech has always been very sensitive to rates,

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Speaker 1: and if you think about what really drives tech valuations,

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Speaker 1: it's the discount rate and future cash flows. We know,

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Speaker 1: future cash flows are kind of priced for perfection, so

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Speaker 1: any move in rates has a very very big impact

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Speaker 1: on kind of the pricing of those of those particular

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Speaker 1: securities within the market. Alright, So Moe, it looks like

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Speaker 1: a lot of folks are kind of thinking about a

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Speaker 1: re reopening trade here. Uh um, You know, the vaccination

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Speaker 1: numbers continue to trend in the right direction. You know,

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Speaker 1: how are you thinking about that here as you take

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Speaker 1: a look at the some of the factors that you're

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Speaker 1: hearing from your clients. Sure, so the economic backdrop is

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Speaker 1: still very supportive of risk as sets. Although what I

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Speaker 1: will tell you is that our economic indicators are leading

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Speaker 1: indicators are showing into showing a little bit of softening

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Speaker 1: and growth, and that deceleration is actually noticeable across every

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Speaker 1: region around the world. That said, investor sentiment and risk

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Speaker 1: appetite in the market has been improving, which we kind

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Speaker 1: of look at as possibly pointing to a rebound in

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Speaker 1: growth as we go into year end. And there's really

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Speaker 1: a couple of reasons that I think that is a

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Speaker 1: very plausible outcome. One, we still have a very accommodative

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Speaker 1: policy backdrop. I know that FED tapering has been a topic,

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Speaker 1: but it has been very well socialized, and I don't

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Speaker 1: actually think the market was surprised by a lot of

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Speaker 1: that commentary. What we do think is more important, though,

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Speaker 1: is lift off right and if there's any change in

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Speaker 1: that accommodation around rates rising, you know, if it's end

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Speaker 1: of two, that could be very impactful. All Right, we'll

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Speaker 1: keep an eye on that. Mo hag been chief operating

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Speaker 1: officer for invest Go Investment Solutions giving us his thoughts

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Speaker 1: on these markets. End factor investing more coming up this

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Speaker 1: is Bloomberg. We'll talk about our performance. We're starting to

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Speaker 1: get some of the big universities endowments they're reporting their

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Speaker 1: fiscal their returns for their fiscal year ended June. Boys

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Speaker 1: some big, big numbers and again kind of the pandemic

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Speaker 1: impacting the returns given the timing there, but still some

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Speaker 1: pretty solid fort returns. And I see my boys down

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Speaker 1: at Duke University, Neil Triplet from the Duke University Management

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Speaker 1: Company six percent return. So I will buy Neil a

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Speaker 1: beverage of his choice when I see him soon. Down

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Speaker 1: in Derham. Janet Lawn, higher education finance reporter for Bloomberg News,

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Speaker 1: joins us on the phone. Janet universities endowments are putting

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Speaker 1: up just some stellar numbers in this most recent fiscal year. Yes,

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Speaker 1: it's really once in a generation that you're seeing some

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Speaker 1: of these members. We reported wash you last week and

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Speaker 1: they added, are you sitting down six billion dollars value

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Speaker 1: what the go into unless they made that money in

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Speaker 1: twelve months? And only about two dozen universities even have

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Speaker 1: at least six billion dollars. So it's it's really been,

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Speaker 1: as I said, once in a generation, are you going

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Speaker 1: to see these kinds of returns? And it's really coming

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Speaker 1: from two ends. One is, you know, you look at

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Speaker 1: how global equities performed during the year. You know, the

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Speaker 1: U S stock market alone was up forty one percent

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Speaker 1: during that time period. So if you had a nice

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Speaker 1: allocation to certain global equities, UM, that certainly helped you.

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Speaker 1: And even if you're going to see the smallest endowments

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Speaker 1: that invested in US equities UM will have some nice

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Speaker 1: returns where typically they're not able to capture what the

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Speaker 1: big ease have done. But you're also going to see

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Speaker 1: it from the venture capital side. So you know, two

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Speaker 1: ways to get these crazy returns this year. Plus you know,

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Speaker 1: if you are lucky to have a really robust and

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Speaker 1: the right venture in your portfolio, you know you're seeing

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Speaker 1: these super duper outside return Yeah. I saw a data

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Speaker 1: point that broadly high our education institutions are on track

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Speaker 1: for their best return since nineteen eight six. I mean

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Speaker 1: we're talking decades here, And to Paul's point, how do

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Speaker 1: they put it to work? What do they do with

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Speaker 1: all this money? Well that's a really good question and

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Speaker 1: that UM colleges are going to be having to answer that.

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Speaker 1: You know, as they're posting the returns. This is all

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Speaker 1: very new. In the last week. We've just been getting

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Speaker 1: these numbers UM. But you know we've already heard um.

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Speaker 1: You know, the endowment test which many of these schools

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Speaker 1: are are paying UM likely is going to be UM uh,

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Speaker 1: not necessarily rescinded, but that that what's on the table

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Speaker 1: is if schools are going to give money towards financial aid.

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Speaker 1: So I think you're going to see that pressure, you know,

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Speaker 1: having to increase scholarships. You know, do they what else

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Speaker 1: do they do with this money? You know? Of course

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Speaker 1: their position is we can't spend it all because we

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Speaker 1: have to be fair to the current students as well

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Speaker 1: as the future students. So it's it's a really good

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Speaker 1: question what are they going to do with it? So Jen,

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Speaker 1: give us a sense of the strategies here, because we

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Speaker 1: know a lot of these endowments, and I'm thinking about

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Speaker 1: Yale in particular, a couple of decades ago really embraced

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Speaker 1: alternative investments UM and successfully so so it's kind of

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Speaker 1: become the Yale method, if you will, of managing endowments.

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Speaker 1: How big has alternative investment has been to to some

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Speaker 1: of these returns well quite quite a bit UM. And

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Speaker 1: if you look at Yale, which we haven't seen when

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Speaker 1: they announced their new UM chief investment officers since David

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Speaker 1: Swinton passed away earlier this year. Um he there was

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Speaker 1: a note in there that he manages the venture capital portfolio,

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Speaker 1: and the venture capital portfolio at Yale alone is over.

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Speaker 1: So you know, you get a sense of how big

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Speaker 1: alternatives are. Um in a place like Yale. You know,

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Speaker 1: they haven't directly invested in U S equities in decades,

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Speaker 1: um So among the biggest colleges, they're you know, they're

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Speaker 1: not holding US equities, but you know they maybe had

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Speaker 1: that exposure through a hedge phone or through global that's

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Speaker 1: putty fun um so. But but largely um you know,

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Speaker 1: in alternatives have been where they've seen a lot of

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Speaker 1: their outside returns. Yeah. Very interesting and uh that's a

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Speaker 1: certain level of risk into these endowments that they historically

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Speaker 1: did not have. And so that's one of the challenges

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Speaker 1: for these endowments is to manage that risk. But it's

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Speaker 1: certainly paid off this year. Janet Lauren, thank you so

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Speaker 1: much for joining us. Really fascinating story unfolding as we

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Speaker 1: get more and more of these universities reporting their endowment

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Speaker 1: returns for the fiscal year ended in in June. Janet Lauren,

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Speaker 1: higher education reporter for Bloomberg News, joining us on the

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Speaker 1: phone here and again, I will just point out, for

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Speaker 1: those that weren't listening earlier, duke fifty six percent return,

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Speaker 1: and I know it easily beats our friends down in

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Speaker 1: Philadelphia at University of Pennsylvania who also had some pretty

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Speaker 1: good numbers up forty one percent. Thanks for listening to

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Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to

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Speaker 1: interviews with Apple Podcasts or whatever podcast platform you prefer.

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Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller nine

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Speaker 1: seventy three. Pet On Ball Sweeney, I'm on Twitter at

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Speaker 1: pt Sweeney. Before the podcast, you can always catch us

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Speaker 1: worldwide at Bloomberg Radient m