Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Well, the story this morning,
Speaker 1: it's been the rate market. We have the tenure treatories.
Speaker 1: Charlie is just reporting one point four eight percent. We
Speaker 1: did test one point five one in the thirty year
Speaker 1: we are at a two point zero four percent. We're
Speaker 1: just about two percent right now. Um, what's that mean?
Speaker 1: What's that telling us? Here? Let's bring in Tom Purcelly,
Speaker 1: chief US economists for OURBC Capital Markets. Tom, thanks so
Speaker 1: much for joining us here. We've seen rates move up
Speaker 1: pretty significantly, just by relative standards over the last couple
Speaker 1: of years, just in the last a couple of days here.
Speaker 1: What do you take away from it? Yeah, I mean, look,
Speaker 1: I think that, um, you know, the move higher makes sense.
Speaker 1: Um that the tomming may not. You know, this all
Speaker 1: happened to day's after the the FOMC meeting but UM no,
Speaker 1: I think we're moving um sort of directionally. I think
Speaker 1: that this is all pretty consistent with you know, the
Speaker 1: idea that look, um, you know, we're moving away or
Speaker 1: going to be moving away from, you know, emergency levels
Speaker 1: of accommodation. And I mean I think that is um,
Speaker 1: you know, where we are from an economic backdrop perspective,
Speaker 1: UM growth is. You know. It's funny. So so let
Speaker 1: me freeing the conversation this way, because I think this
Speaker 1: is a really important UM idea for for people to
Speaker 1: keep in mind. You know, when when you think about
Speaker 1: the last hiking cycle, um, you know, the one that
Speaker 1: the FED started back in Uh, you know, the FET
Speaker 1: had the luxury of of going really slow, right, you know,
Speaker 1: we had the jobless recovery. UM, you know output you
Speaker 1: know I E G d P. You know, didn't get
Speaker 1: back um to the sort of the pre GFC level
Speaker 1: the Great Financial Crisis, the pre GFC level of growth.
Speaker 1: For it, it took like a decade. I mean, you know,
Speaker 1: the unemployment was elevated for years. Um, none of that's
Speaker 1: happened now, you know. Now it's taken eighteen months for
Speaker 1: us to basically get back to where we were pre
Speaker 1: pandemic level of output for the unemployment rate to you know,
Speaker 1: really show meaningful improvement. So I think that this is
Speaker 1: all going to be much more accelerated relative particularly relative
Speaker 1: to what we saw after the GFC. Well to that point, Tom,
Speaker 1: with kind of the trajectory that the FED has outlined
Speaker 1: here a taper announcement likely in November, and then rate
Speaker 1: liftoff possibly in even with that timeline, do they risk
Speaker 1: being too far behind the curve? I mean, look, you
Speaker 1: know so uh you know this is the should verse
Speaker 1: would part right, And I learned long ago, um that
Speaker 1: I'm always supposed to forecast, but the FED will do
Speaker 1: nobody I think they should do. Do I think the
Speaker 1: FED should have started this process um months ago. Yeah,
Speaker 1: I do. And I think the people that know our
Speaker 1: research well know that you know, we've that that that's
Speaker 1: the sort of the side of them, the the this
Speaker 1: equation that we will come down on the FED was
Speaker 1: supposed to start this much sooner, but again we were
Speaker 1: also acutely aware, um that that's probably not what they
Speaker 1: were going to do. So I think this is all
Speaker 1: pretty much in keeping with what Powell has um laid
Speaker 1: out in terms of the sort of the you know,
Speaker 1: starting this process in a very slow, methodical fashion. UM.
Speaker 1: I think it's all in keeping with with what Powell wanted. UM,
Speaker 1: But I again I would hasten to add UM. Just
Speaker 1: keep in mind, one day pal said they were not
Speaker 1: going to taper, and you know, the next week they said,
Speaker 1: we're going to tape it. Right, And it's the same
Speaker 1: thing is going to happen from a rate hike perspective,
Speaker 1: I mean, palatine the same thing right now, we're knock
Speaker 1: going to hike rates, but it'll it'll evolve in the
Speaker 1: same way. And so twenty two for us, UM. You know,
Speaker 1: again I think that they should at least give us
Speaker 1: one hike. I mean again, now the median has shifted
Speaker 1: for a hike. But again, just keep in mind something.
Speaker 1: If you look at their their twenty two unemployment rate forecast, UM,
Speaker 1: it's about three point eight percent. That's not very different
Speaker 1: than where we were pre pandemic. And in mind where
Speaker 1: we were pre pandemic from a funds perspective, we're to fifty, right,
Speaker 1: So two fifty then equated um to uh, you know,
Speaker 1: or it was roughly equivalent to an unemployment rate that
Speaker 1: was you know, where they expect it to be in
Speaker 1: twenty two, but now in twenty two it only equates
Speaker 1: to one hike. I mean that seems inconsistent to us
Speaker 1: again the process, and we're not going to beat up
Speaker 1: on them. I think that they do. I want to
Speaker 1: go in a very slow fashion. But I think that
Speaker 1: there's a very uh, it's very inconsistent. And Tom, we
Speaker 1: saw in the Fed's release taking down their economic growth
Speaker 1: forecast yet taking up uh their inflation outlook. Does that
Speaker 1: suggest stag inflation for this US economy? No, I think
Speaker 1: you know, I have to be honest. I hate that.
Speaker 1: I hate this conversation in that um, you know, the
Speaker 1: stagflation part of the conversation, because I can make I
Speaker 1: can get on board with deflation part, I can't get
Speaker 1: in part board with the stag part. I mean, you know,
Speaker 1: we're looking at what four or five growth UM next year? Uh?
Speaker 1: You know that. And by the way, that's our own forecast,
Speaker 1: which interestingly enough, is an inconsistent with the FED. I mean,
Speaker 1: I think the FED is around four percent for twenty two,
Speaker 1: six percent for twenty one UM numbers that are in
Speaker 1: line with us. What what what stag about that? You're
Speaker 1: still multiples above potential growth. I mean that I'm a
Speaker 1: fader of that. In higher conversation to stag part of it,
Speaker 1: the flation part of it, I can buy into more.
Speaker 1: But yeah, and obviously the Fed is looking at the
Speaker 1: flation part, and then they also have to look at
Speaker 1: the other part of their dual. Mean that it was
Speaker 1: just trying to maximize employment. As we look ahead to
Speaker 1: the job's report we're getting on October eight than that
Speaker 1: print for September, I'm wondering what you're expecting to see,
Speaker 1: given even though additional benefits have started to roll off,
Speaker 1: you haven't actually seen the corresponding return of people to
Speaker 1: the labor market. Yeah, so we don't have a Um,
Speaker 1: we'll have a forecast for next Friday's Piero report this Thursday. UM,
Speaker 1: but what I can tell you is, you know, and
Speaker 1: I have people already asking about it, as you would expect.
Speaker 1: You know, you know now that the um the kicker
Speaker 1: has expired. You know, well the generous kicker has expired. Well, Olson,
Speaker 1: we'll see this, you know, um burst of hiring. No,
Speaker 1: we we we don't think that that's how it's going
Speaker 1: to happen. Um, you know, I don't think there's another
Speaker 1: you know, sort of million plus job print waiting out
Speaker 1: there for us. I think it'll be a bit slower
Speaker 1: than that. Again, you know, is it another two thousand
Speaker 1: like we saw last month. No, I think I probably
Speaker 1: will wind up looking a little bit better than that. Again,
Speaker 1: I got to go through the numbers still, But I
Speaker 1: think more importantly, who doesn't matter? Palt basically pulled us
Speaker 1: already that it's um uh, you know, as long as
Speaker 1: we see you know, a sort of another decent pay
Speaker 1: will report, and he already had the two thirty five
Speaker 1: in hand, so I'm guessing that that sort of would
Speaker 1: meet some of the criteria quote unquote decent. Then I
Speaker 1: think that you know, tapers on and again if their
Speaker 1: forecast for the end of next year comes into play,
Speaker 1: that we're back to where we were pre pandemic um
Speaker 1: and that should be enough for the to to start
Speaker 1: the process of lifting rights. Is there as we're talking
Speaker 1: about labor, is there a point where we really need
Speaker 1: to think about realistically wage inflation? I mean, it's happening,
Speaker 1: right you know, wage inflation. Wage inflation is upon us
Speaker 1: right right now. I think you know, again, most people
Speaker 1: are aware that you know, eleven million job openings, people
Speaker 1: having a hard time finding workers. As results, wage pressures
Speaker 1: are building. But again I would hasten to add, I
Speaker 1: don't think that that means that that these games that
Speaker 1: we've seen are going to be sustained. I don't think
Speaker 1: that they are. Um. I think leisure in hospitality is
Speaker 1: sort of a great example of that. Leisure in hospitality
Speaker 1: is the biggest shortfall in jobs right now, excuse me,
Speaker 1: And once um, you start to get some of those
Speaker 1: jobs back, you know, when there's you know, three and
Speaker 1: four and five people, um applying for a job for
Speaker 1: a single job, I think that those wage pressures can abate.
Speaker 1: But again, the benefit has already has already materialized, right.
Speaker 1: I mean we're now well above where we were a
Speaker 1: pre pandemic from a wage pressure perspective. So I think
Speaker 1: the level of wages is going to matter very much
Speaker 1: so in the months to come, more so than than
Speaker 1: the rate, because again I just don't think that that
Speaker 1: these rates can be maintained. All right, Tom, Hey, we
Speaker 1: really appreciate getting your thoughts here, Tom. Lots of data,
Speaker 1: lots of moving parts out there, so it's good to
Speaker 1: get your perspective. Tom, Percelly, chief US economists for OURBC
Speaker 1: Capital Markets, joining us here, and and uh Kaylee, you
Speaker 1: just reminded as Amazon target cut it Morgan Stanley on
Speaker 1: impact from rising wages. So yeah, exactly, the cost of
Speaker 1: labor is going up for a lot of companies. And
Speaker 1: that's not just a conversation for the FED and wage inflation.
Speaker 1: That's earnings and what that's going to mean for margins. Yeah,
Speaker 1: that's a great point. And so the question is how
Speaker 1: transitory are some of these factors versus you know, how
Speaker 1: longer term we'll have more certainly coming up on all
Speaker 1: of those issues. This is Bloomberg, Good morning. All right,
Speaker 1: let's bring in Frank Holmes. Frank is the CEO and
Speaker 1: chief investment officer of US Global Investors. He's also executive
Speaker 1: chairman of Hive Blockchain Technologies. Joining us on the phone
Speaker 1: from San Antonio, Texas. Franks, thanks so much for joining
Speaker 1: us again here. I want to start with crypto. I
Speaker 1: just want to get your thoughts because since the last
Speaker 1: time we chatted, China has taken a decidedly different approach
Speaker 1: to kind of all things crypto. What's your take, Well,
Speaker 1: it's it's the leadership actually believes that they allowed under
Speaker 1: Danks helping capitalism was a transitory phase to the road
Speaker 1: to social and socialism is all about centralized and control.
Speaker 1: And when we're witnessing an attack on all technology, limits
Speaker 1: on capital returns and capital for risk taking um and
Speaker 1: so you're seeing that this is now going into crypto
Speaker 1: because they're coming up with their own digital money and
Speaker 1: they and they just do not want to have anything
Speaker 1: to compete with it um and next will be They've
Speaker 1: been trying to push to compete against the US dollar,
Speaker 1: but oil nations like Saudi Arabia, so they won't take
Speaker 1: their currency want dollars. So now they're trying to buy
Speaker 1: a lot of gold. You're seeing huge gold movements going
Speaker 1: to China to try to create legitimacy behind their currency.
Speaker 1: But they're further along in the path of having their
Speaker 1: own digital money. But they become a non event. You know,
Speaker 1: the markets bounced right back. It's been a big boom
Speaker 1: for America UH in taxes in particular. I know that
Speaker 1: building one point to gigabytes of UH energy that's stranded
Speaker 1: from natural gas, which they can turn around to do
Speaker 1: bitcoin mining. And you're seeing that more and more people
Speaker 1: nodes are growing in America, so it's very very positive
Speaker 1: this shift is happening here. Is that why we've seen
Speaker 1: the crypto market basically take around trips since that China
Speaker 1: news came out on Friday. I mean Bitcoin is back
Speaker 1: around forty dollars like it never even happened, and Ethereum
Speaker 1: jump twelve from those lows. Yes, you know that's a good,
Speaker 1: you know, good observation. The same thing out of Europe.
Speaker 1: What we noticed is that the number of miners in fact,
Speaker 1: Etherorium is more decentralized than Bitcoin, because when China came
Speaker 1: down with the hammer, uh, the mining, the number of
Speaker 1: miners in the world dropped dramatically. So the difficulty there's
Speaker 1: no competition felt greatly. So even though bitcoin felt the
Speaker 1: thirty thousand, the profit margins we had were growing because
Speaker 1: there's no competition because it basically it's limited to nine
Speaker 1: hundred coins a day that you've run and it's a
Speaker 1: jump ball to see if you can touch that ball,
Speaker 1: and you got to touch that ball, then you can
Speaker 1: mind coin. So we're minding close to eight coins a
Speaker 1: day a bitcoin uh and and that difficulty only helped it.
Speaker 1: Now it's been growing slightly because they would shift the Kazakhstan.
Speaker 1: But the big move has come to the US, and
Speaker 1: I think that's very positive. Ethereum hardly came off that difficulty.
Speaker 1: All the gamers in the world when etherium rises, they
Speaker 1: basically try to turn the machines on. They run up
Speaker 1: their parents electrical bill and they take that GPU chip
Speaker 1: they need and they minded an ethereum coin and then
Speaker 1: they go off in a holiday. So Frank's I'm wondering,
Speaker 1: you know that strategy for China here, because you know,
Speaker 1: if you listen to the bowls of crypto and bitcoin,
Speaker 1: it's the future, It's the future of decentralized finance. If
Speaker 1: that is in fact the case, does China not run
Speaker 1: the risk of just falling behind the global you know,
Speaker 1: competitive landscape in terms of crypto, absolutely and in other technologies.
Speaker 1: To mean it's return to socialism, is a return to
Speaker 1: trying to drive your car looking out the review mirror
Speaker 1: um and and there's nothing but guilt and shame and attack,
Speaker 1: and everyone's looking out the review meer. You can't drive forward. Uh,
Speaker 1: And so I think it's it's quite dangerous. Well, but
Speaker 1: for in China also is in the process of rolling
Speaker 1: out a digital you want, right, So in some way
Speaker 1: you could argue maybe they're making space for that. How
Speaker 1: do you think about kind of government controlled centralized digital
Speaker 1: currencies versus the crypto world and the likes of bitcoin.
Speaker 1: It's a complete opposite. And if you notice that the
Speaker 1: more socialist the country is, the more they are anti
Speaker 1: gold and they're anti bitcoin. Um, they wish to control
Speaker 1: everything that has to do with money. Money is basically
Speaker 1: evil unless the government is in control of it in
Speaker 1: every part of it. When you just look around the
Speaker 1: world for that idealist and that takes place, and that's
Speaker 1: what happens, and and bitcoin is the opposite. About something
Speaker 1: else is really important for all your listeners, is bitcoin
Speaker 1: validated the blockchain. The blockchain was created by telecom companies
Speaker 1: to move money in and it wasn't really validated to
Speaker 1: the Bitcoin came along and showed this triple entry accounting
Speaker 1: is a major breakthrough, an accounting that hasn't taken place
Speaker 1: since the Medici's uh they created banking and the Venetians
Speaker 1: in the four hundreds. So the bottom line is a
Speaker 1: blockchain is going to grow and the adoption of bitcoin
Speaker 1: is so decentralized as thirteen thousand nodes around the world.
Speaker 1: So we're and and Hive is the first public company
Speaker 1: to mind mot bitcoin etherory. And we only use green energy,
Speaker 1: so we're not consumed with these other difficulties some of
Speaker 1: the other miners have had. All right, Frank, thank you
Speaker 1: so much for joining us. As always, we appreciate a
Speaker 1: Franklin CEO and Chief Investment Officer of US Global Investors
Speaker 1: Mo Hagmen, chief operating officer for Investo Investment Solutions. He
Speaker 1: joins us to day. They've got their sixth annual Global
Speaker 1: Global Factor Investing Study that's released today. We're gonna talk
Speaker 1: to them all about that. Factor investing has become a big,
Speaker 1: big way for folks to look at investing in these markets. Well,
Speaker 1: thanks so much for joining us here. I love to
Speaker 1: get your thoughts the highlights the takeaways from your Global
Speaker 1: Factor Investing Study. Thank you for having me. Good morning. Yes,
Speaker 1: as you mentioned, we released our sixth annual Factor Investing
Speaker 1: Study today and the study basically interviews two forty or
Speaker 1: so institutional and retail investors around the world. Roughly about
Speaker 1: one trillion in assets by those ascid owners held by
Speaker 1: those asset owners, and what's interesting is we continue to
Speaker 1: see no surprise that factor investing continues to gain adoption,
Speaker 1: both institutionally and more recently in the retail market. And specifically.
Speaker 1: What was interesting this year as we saw a lot
Speaker 1: of rotation within kind of the factor strategy landscape, given
Speaker 1: kind of the markets and what we saw post the
Speaker 1: presidential election last year, we've seen a very large shift
Speaker 1: towards value and more procyclical factors at the expense of
Speaker 1: defensive and low volatility factors which had been gaining a
Speaker 1: lot of traction over the years. Well, and then when
Speaker 1: we talk about the momentum factor as well, there was
Speaker 1: a lot of conversation, particularly in kind of the first
Speaker 1: quarter of the year when we saw that huge rush
Speaker 1: into value, that value was then the new momentum when
Speaker 1: it had been growth before. How do you think about
Speaker 1: the momentum factor now given some of those dynamics. Yeah,
Speaker 1: it's a very interesting observation. So momentum is a technical factor,
Speaker 1: so it kind of shape shifts, it actually takes the
Speaker 1: characteristics of other factors. And what we have seen over
Speaker 1: the last twelve months is momentum looks very much like
Speaker 1: value in size, whereas historically it had been very much
Speaker 1: growth and kind of low volatility oriented, as the mega
Speaker 1: cap tech companies were the best price performers. You're absolutely right.
Speaker 1: We've seen actually some more concentration within the value and
Speaker 1: momentum factor, and those two historically have been negatively correlated,
Speaker 1: but more recently there's a positive correlation between those two factors.
Speaker 1: So MO would just I'd love to take a step
Speaker 1: back here. When I was an equity analyst and I'd
Speaker 1: be walking into a meeting with a fun manager in Boston,
Speaker 1: my salesperson returned to me and say, Oh, this person
Speaker 1: is a growth investor. Or, This fund managers a value investor,
Speaker 1: isn't So how is that different from this factor investing
Speaker 1: we talk about. It's really not that different. I think
Speaker 1: it's very much a different lens of looking at the
Speaker 1: same thing. I think for a very long period of time,
Speaker 1: we thought about the world in like the Morning Star
Speaker 1: style box, where managers really had a discipline whether you're
Speaker 1: a value fundamental manager or a growth manager. Factors are
Speaker 1: actually a very precise way of capturing some of those
Speaker 1: same outperformance characteristics. We know factors over the very long
Speaker 1: term have a premier attached to them, very much like
Speaker 1: asset classes have premiers attached to them, and you're actually
Speaker 1: able to capture that by focusing in systematic ways on
Speaker 1: parts of the equity market. So when you want value,
Speaker 1: for example, in your portfolio, you look at fundamental metrics
Speaker 1: such as earnings and revenues and cash flows, and you're
Speaker 1: looking for cheapness in the market. When you look at momentum,
Speaker 1: it's a technical factor which really looks at price appreciation
Speaker 1: over the recent, recent past. So you know, it's not
Speaker 1: really that much different. I think it's a new lens
Speaker 1: of thinking about it. And what we've seen is that
Speaker 1: adoption is actually moved, as you mentioned, from the equity
Speaker 1: markets into fixed income. So this this year's factor study
Speaker 1: was really interesting and that we saw investors looking at
Speaker 1: fixed income factor strategies as a way to reduce cost
Speaker 1: and a low yield environment. Well we're talking about fixed income.
Speaker 1: I would love to just get your take on the
Speaker 1: bond market and the action we've seen over the last
Speaker 1: couple of days post FED decision, this dramatic move upward
Speaker 1: and yields to test one fifty again. Just do you
Speaker 1: think the bond market in the equity market are now
Speaker 1: in sync? What's interesting is you know, we talk a
Speaker 1: lot about rates, but rates are still historically very low,
Speaker 1: and I think at this point in the economic cycle,
Speaker 1: you should actually expect some steeping of the yield curve.
Speaker 1: We actually think that's actually quite healthy for the bond market.
Speaker 1: Although when we look at certain sectors within the equity market,
Speaker 1: obviously there's going to be more sensitivity to rising rate environment.
Speaker 1: You know, tech has always been very sensitive to rates,
Speaker 1: and if you think about what really drives tech valuations,
Speaker 1: it's the discount rate and future cash flows. We know,
Speaker 1: future cash flows are kind of priced for perfection, so
Speaker 1: any move in rates has a very very big impact
Speaker 1: on kind of the pricing of those of those particular
Speaker 1: securities within the market. Alright, So Moe, it looks like
Speaker 1: a lot of folks are kind of thinking about a
Speaker 1: re reopening trade here. Uh um, You know, the vaccination
Speaker 1: numbers continue to trend in the right direction. You know,
Speaker 1: how are you thinking about that here as you take
Speaker 1: a look at the some of the factors that you're
Speaker 1: hearing from your clients. Sure, so the economic backdrop is
Speaker 1: still very supportive of risk as sets. Although what I
Speaker 1: will tell you is that our economic indicators are leading
Speaker 1: indicators are showing into showing a little bit of softening
Speaker 1: and growth, and that deceleration is actually noticeable across every
Speaker 1: region around the world. That said, investor sentiment and risk
Speaker 1: appetite in the market has been improving, which we kind
Speaker 1: of look at as possibly pointing to a rebound in
Speaker 1: growth as we go into year end. And there's really
Speaker 1: a couple of reasons that I think that is a
Speaker 1: very plausible outcome. One, we still have a very accommodative
Speaker 1: policy backdrop. I know that FED tapering has been a topic,
Speaker 1: but it has been very well socialized, and I don't
Speaker 1: actually think the market was surprised by a lot of
Speaker 1: that commentary. What we do think is more important, though,
Speaker 1: is lift off right and if there's any change in
Speaker 1: that accommodation around rates rising, you know, if it's end
Speaker 1: of two, that could be very impactful. All Right, we'll
Speaker 1: keep an eye on that. Mo hag been chief operating
Speaker 1: officer for invest Go Investment Solutions giving us his thoughts
Speaker 1: on these markets. End factor investing more coming up this
Speaker 1: is Bloomberg. We'll talk about our performance. We're starting to
Speaker 1: get some of the big universities endowments they're reporting their
Speaker 1: fiscal their returns for their fiscal year ended June. Boys
Speaker 1: some big, big numbers and again kind of the pandemic
Speaker 1: impacting the returns given the timing there, but still some
Speaker 1: pretty solid fort returns. And I see my boys down
Speaker 1: at Duke University, Neil Triplet from the Duke University Management
Speaker 1: Company six percent return. So I will buy Neil a
Speaker 1: beverage of his choice when I see him soon. Down
Speaker 1: in Derham. Janet Lawn, higher education finance reporter for Bloomberg News,
Speaker 1: joins us on the phone. Janet universities endowments are putting
Speaker 1: up just some stellar numbers in this most recent fiscal year. Yes,
Speaker 1: it's really once in a generation that you're seeing some
Speaker 1: of these members. We reported wash you last week and
Speaker 1: they added, are you sitting down six billion dollars value
Speaker 1: what the go into unless they made that money in
Speaker 1: twelve months? And only about two dozen universities even have
Speaker 1: at least six billion dollars. So it's it's really been,
Speaker 1: as I said, once in a generation, are you going
Speaker 1: to see these kinds of returns? And it's really coming
Speaker 1: from two ends. One is, you know, you look at
Speaker 1: how global equities performed during the year. You know, the
Speaker 1: U S stock market alone was up forty one percent
Speaker 1: during that time period. So if you had a nice
Speaker 1: allocation to certain global equities, UM, that certainly helped you.
Speaker 1: And even if you're going to see the smallest endowments
Speaker 1: that invested in US equities UM will have some nice
Speaker 1: returns where typically they're not able to capture what the
Speaker 1: big ease have done. But you're also going to see
Speaker 1: it from the venture capital side. So you know, two
Speaker 1: ways to get these crazy returns this year. Plus you know,
Speaker 1: if you are lucky to have a really robust and
Speaker 1: the right venture in your portfolio, you know you're seeing
Speaker 1: these super duper outside return Yeah. I saw a data
Speaker 1: point that broadly high our education institutions are on track
Speaker 1: for their best return since nineteen eight six. I mean
Speaker 1: we're talking decades here, And to Paul's point, how do
Speaker 1: they put it to work? What do they do with
Speaker 1: all this money? Well that's a really good question and
Speaker 1: that UM colleges are going to be having to answer that.
Speaker 1: You know, as they're posting the returns. This is all
Speaker 1: very new. In the last week. We've just been getting
Speaker 1: these numbers UM. But you know we've already heard um.
Speaker 1: You know, the endowment test which many of these schools
Speaker 1: are are paying UM likely is going to be UM uh,
Speaker 1: not necessarily rescinded, but that that what's on the table
Speaker 1: is if schools are going to give money towards financial aid.
Speaker 1: So I think you're going to see that pressure, you know,
Speaker 1: having to increase scholarships. You know, do they what else
Speaker 1: do they do with this money? You know? Of course
Speaker 1: their position is we can't spend it all because we
Speaker 1: have to be fair to the current students as well
Speaker 1: as the future students. So it's it's a really good
Speaker 1: question what are they going to do with it? So Jen,
Speaker 1: give us a sense of the strategies here, because we
Speaker 1: know a lot of these endowments, and I'm thinking about
Speaker 1: Yale in particular, a couple of decades ago really embraced
Speaker 1: alternative investments UM and successfully so so it's kind of
Speaker 1: become the Yale method, if you will, of managing endowments.
Speaker 1: How big has alternative investment has been to to some
Speaker 1: of these returns well quite quite a bit UM. And
Speaker 1: if you look at Yale, which we haven't seen when
Speaker 1: they announced their new UM chief investment officers since David
Speaker 1: Swinton passed away earlier this year. Um he there was
Speaker 1: a note in there that he manages the venture capital portfolio,
Speaker 1: and the venture capital portfolio at Yale alone is over.
Speaker 1: So you know, you get a sense of how big
Speaker 1: alternatives are. Um in a place like Yale. You know,
Speaker 1: they haven't directly invested in U S equities in decades,
Speaker 1: um So among the biggest colleges, they're you know, they're
Speaker 1: not holding US equities, but you know they maybe had
Speaker 1: that exposure through a hedge phone or through global that's
Speaker 1: putty fun um so. But but largely um you know,
Speaker 1: in alternatives have been where they've seen a lot of
Speaker 1: their outside returns. Yeah. Very interesting and uh that's a
Speaker 1: certain level of risk into these endowments that they historically
Speaker 1: did not have. And so that's one of the challenges
Speaker 1: for these endowments is to manage that risk. But it's
Speaker 1: certainly paid off this year. Janet Lauren, thank you so
Speaker 1: much for joining us. Really fascinating story unfolding as we
Speaker 1: get more and more of these universities reporting their endowment
Speaker 1: returns for the fiscal year ended in in June. Janet Lauren,
Speaker 1: higher education reporter for Bloomberg News, joining us on the
Speaker 1: phone here and again, I will just point out, for
Speaker 1: those that weren't listening earlier, duke fifty six percent return,
Speaker 1: and I know it easily beats our friends down in
Speaker 1: Philadelphia at University of Pennsylvania who also had some pretty
Speaker 1: good numbers up forty one percent. Thanks for listening to
Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to
Speaker 1: interviews with Apple Podcasts or whatever podcast platform you prefer.
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller nine
Speaker 1: seventy three. Pet On Ball Sweeney, I'm on Twitter at
Speaker 1: pt Sweeney. Before the podcast, you can always catch us
Speaker 1: worldwide at Bloomberg Radient m