WEBVTT - China, Asset Management and Investing Strategies 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.680 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. We 0:00:33.760 --> 0:00:37.440 are broadcasting live from the New York Bloomberg invest Summit, 0:00:37.520 --> 0:00:40.320 and I'm very pleased to say joining us next is 0:00:40.360 --> 0:00:44.320 a renowned short seller, well known for his correct calls. 0:00:44.600 --> 0:00:48.800 Carson Block, chief investment officer of Muddy Waters Capital here 0:00:48.800 --> 0:00:52.680 in our eleven three oh studios and in New York City. So, Carson, Um, 0:00:52.720 --> 0:00:56.120 you've been uh, sort of looking at possible store opportunities 0:00:56.160 --> 0:00:59.319 in China for a while, but your thesis is sort 0:00:59.360 --> 0:01:02.640 of sifting as time goes on, and as m s 0:01:02.680 --> 0:01:05.920 c I includes Chinese shares in one of its major 0:01:05.920 --> 0:01:08.759 emerging markets indexes tell us that can you explain how 0:01:08.760 --> 0:01:11.959 it's changing? Sure? Well, I mean we pay attention to 0:01:12.480 --> 0:01:15.480 stocks from China because we like to short frauds where 0:01:15.520 --> 0:01:18.120 active as short sellers. So I'm fond of saying that 0:01:18.240 --> 0:01:21.600 China is to stock fraud as Silicon Valley is to technology. 0:01:21.920 --> 0:01:26.119 So we will always be looking at especially you know, 0:01:26.280 --> 0:01:30.039 especially US companies are Chinese China companies listed in the US. 0:01:30.160 --> 0:01:33.080 But um, I think there's a bigger point, and part 0:01:33.160 --> 0:01:35.000 of it has to do with the fraud, and part 0:01:35.000 --> 0:01:39.360 of it has to do with other geopolitical or strategic reasons. 0:01:39.360 --> 0:01:44.960 But I'm arguing that US investors should start to look 0:01:45.080 --> 0:01:49.280 at China companies like sin stocks, you know, where there's 0:01:49.360 --> 0:01:52.360 a moral dimension. Um, you know, you're making a moral 0:01:52.480 --> 0:01:55.360 choice that you know it's not necessarily in accordance with 0:01:55.400 --> 0:01:59.240 the best interests of us and your kids and grandkids 0:01:59.720 --> 0:02:03.480 if you're going along the stocks and you know, on 0:02:03.480 --> 0:02:06.520 one hand, you've got the fraud problem. So you know, 0:02:06.760 --> 0:02:09.000 there's a movie that came out, a documentary came out 0:02:09.040 --> 0:02:11.560 a few months ago called The China Hustle, and that 0:02:11.680 --> 0:02:15.639 profiled how they were literally last decade, about four hundred 0:02:16.280 --> 0:02:19.959 companies from China listed on the US exchanges that were frauds, 0:02:20.240 --> 0:02:22.680 and so investors lost you know, who knows how many 0:02:22.720 --> 0:02:27.640 billions when those things blew up. But no, hardly anybody 0:02:27.760 --> 0:02:30.320 has been punished for that basically, you know, I think 0:02:30.360 --> 0:02:33.519 only one Chinese company chairman ever did prison time in 0:02:33.520 --> 0:02:37.040 the US. The auditors, the Big Four affiliates from China, 0:02:37.120 --> 0:02:40.679 we're going to have their practice licenses suspended for six months. 0:02:40.720 --> 0:02:45.160 But the administration capitulated and find each auditor, each Big 0:02:45.160 --> 0:02:48.480 Four affiliate only five hundred thousand dollars, which is basically 0:02:48.600 --> 0:02:51.320 you know, when you're audit fee of a medium sized client. 0:02:51.760 --> 0:02:54.840 And so you know, it's like Charlie Munger says, show 0:02:54.880 --> 0:02:57.760 me the incentive and I'll show you the outcome. Well, 0:02:58.240 --> 0:03:01.799 defrauding US investors from China is a you know, heads, 0:03:01.800 --> 0:03:04.799 I win, tails, you lose proposition um. And you know, 0:03:04.840 --> 0:03:06.680 it's like we saw the financial crisis. I mean, in 0:03:06.720 --> 0:03:09.440 that situation where somebody else bears all of the risk, 0:03:10.200 --> 0:03:12.239 you know you're going to get bad outcomes. So we 0:03:12.280 --> 0:03:15.800 have that situation, but we also have this issue that 0:03:15.880 --> 0:03:18.440 at the end of the day, in China, there's no 0:03:18.520 --> 0:03:22.040 such thing as a private company. They can all be 0:03:22.160 --> 0:03:25.440 made to do the bidding of the Chinese government. So 0:03:25.960 --> 0:03:29.560 you know, since the technological edge devolved from the government 0:03:29.639 --> 0:03:32.720 to the private sector, you know, probably ten fifteen years ago, 0:03:34.040 --> 0:03:37.040 we're struggling in the West to to adjust to that 0:03:37.120 --> 0:03:41.840 because we have these private companies that control our strategic technologies. 0:03:42.200 --> 0:03:45.400 They're running around taking investment from you know, companies from 0:03:45.480 --> 0:03:48.920 China um that I think in you know, some cases, 0:03:49.040 --> 0:03:51.960 if not many cases, are making those investments not because 0:03:51.960 --> 0:03:54.920 they think it's just commercially a great move, but because 0:03:54.960 --> 0:03:58.600 they're being directed to do so by you know, say 0:03:58.600 --> 0:04:02.080 the Ministry of State Security or the PRC government. And 0:04:02.200 --> 0:04:04.440 you know, if you think like that's kind of crazy, 0:04:04.480 --> 0:04:06.800 well how could they do that? You know, private companies 0:04:07.040 --> 0:04:10.800 don't forget the banking system in China is state run. 0:04:10.880 --> 0:04:16.120 It's state owned, you know, in financing. I mean, look there. 0:04:16.440 --> 0:04:18.640 I used to live in China and do business there. 0:04:18.680 --> 0:04:22.200 And so they took in foreign you know, strategic investors, 0:04:22.520 --> 0:04:25.040 and that's actually kind of an old thing that happened 0:04:25.040 --> 0:04:27.120 in the early two thousands, and the idea, you know 0:04:27.160 --> 0:04:29.280 a lot of these foreign banks bought in. It's like, oh, 0:04:29.360 --> 0:04:30.600 you know, we're gonna help them, you know, with their 0:04:30.680 --> 0:04:32.920 risk management. And I talked to a few people who 0:04:32.920 --> 0:04:35.400 were the you know, foreign representatives brought in to try 0:04:35.440 --> 0:04:38.640 to make sure these banks were operating properly, and it 0:04:38.680 --> 0:04:40.560 sounded like it was one of the most frustrating jobs 0:04:40.600 --> 0:04:43.799 on the planet, Like they don't know what's going on. Um. 0:04:43.880 --> 0:04:47.040 So look, I you know, at the end of the day, 0:04:47.520 --> 0:04:49.160 I think when you look at a Bai Do and 0:04:49.240 --> 0:04:51.400 Ali Baba, you know, I think a lot of their 0:04:51.440 --> 0:04:55.120 interest in making investments in the US, it's not driven 0:04:55.160 --> 0:04:57.440 by you know, ge this is gonna you know, make 0:04:57.480 --> 0:05:00.880 our platform, make our search engine. You know that much better. Um, 0:05:00.920 --> 0:05:04.040 it's just real, you know, case and point um. Every 0:05:04.120 --> 0:05:08.640 year there's a Joint Congressional Committee report on the US 0:05:08.720 --> 0:05:11.960 China Economic relationship, and the last report that was published 0:05:12.040 --> 0:05:14.440 this past November. I mean it was I mean, I 0:05:14.480 --> 0:05:17.120 think it was very realistic about you know, number of 0:05:17.120 --> 0:05:19.520 the challenges and you know, the cheat, the IP, theft 0:05:19.560 --> 0:05:22.560 that's rampant, and the dumping. But they also talked about 0:05:22.600 --> 0:05:25.120 AI and this was a surprise to me, but they 0:05:25.160 --> 0:05:27.680 said that China's AI is on par with out of 0:05:27.720 --> 0:05:31.400 the US. And interestingly then they said that the entity 0:05:31.400 --> 0:05:34.159 in China that has the single most advanced AI. So 0:05:34.480 --> 0:05:37.160 in other words, our main strategic competitor is by Do, 0:05:37.680 --> 0:05:40.600 and we give that company liquid markets for for security. 0:05:40.680 --> 0:05:43.960 So are we financing our own demise here. Well, come on, secondly, 0:05:43.960 --> 0:05:45.440 you just have like a minute left, But I want 0:05:45.440 --> 0:05:47.279 to get your sense of do you think that they're 0:05:47.320 --> 0:05:50.400 going to be imminent collapses of Chinese companies coming up 0:05:50.680 --> 0:05:52.080 or do you think that this is going to be 0:05:52.240 --> 0:05:54.440 played out over over a number of years. I think 0:05:54.440 --> 0:05:56.840 there's still a lot of frauds listed from China and 0:05:56.880 --> 0:06:00.000 the US. Now these are not companies where the red 0:06:00.040 --> 0:06:02.080 news fake. They're real businesses. But I think a lot 0:06:02.160 --> 0:06:04.520 of the profits are fake. You know, whether those collapse 0:06:04.600 --> 0:06:07.359 or not, I don't know, But I am trying to 0:06:07.360 --> 0:06:09.680 start a conversation and I think there's some other people 0:06:09.680 --> 0:06:12.400 who would like to do that as well, where allocators 0:06:12.440 --> 0:06:15.839 really should be thinking twice about whether they should be 0:06:15.880 --> 0:06:19.120 putting this money into into China stocks. So to the 0:06:19.160 --> 0:06:22.920 extent that we get some traction that has implications for valuations, 0:06:23.320 --> 0:06:26.240 you know, we'll see. All right, Well, we got to 0:06:26.320 --> 0:06:28.200 leave it there. Unfortunately, we'd love to have you back 0:06:28.200 --> 0:06:31.280 and spend more time, because you know, the world of 0:06:31.800 --> 0:06:35.560 misinformation is not just confined to the to China, right, 0:06:35.600 --> 0:06:38.640 I mean there are companies all over the world that 0:06:38.760 --> 0:06:41.599 you think are straight players, And I mean I'm thinking of, 0:06:41.640 --> 0:06:44.520 for example, one company particular in France that you've had 0:06:44.560 --> 0:06:47.839 something to do with, uh, And that's a story that 0:06:47.880 --> 0:06:50.400 I think could probably be made into a Netflix series. 0:06:50.920 --> 0:06:53.400 How Arada. But so thanks very much for being with us, 0:06:53.400 --> 0:06:55.159 and we look forward to having you more in the future. 0:06:55.240 --> 0:06:59.520 Carson Block is the chief investment officer for money Waters Capital, 0:06:59.560 --> 0:07:03.960 speaking about investments in the Chinese companies. They might not 0:07:04.000 --> 0:07:22.960 be exactly what they've seen. We are broadcasting live from 0:07:23.000 --> 0:07:26.520 the Bloomberg invest Summit from our world headquarters in New York, 0:07:26.560 --> 0:07:28.520 and it's my pleasure to bring in our next guest, 0:07:29.120 --> 0:07:32.720 you Send Hung, the chief executive of New York Life 0:07:32.800 --> 0:07:37.600 Investment Management, joining us here in our beautiful world headquarters. 0:07:37.600 --> 0:07:39.680 Thank you very much for being I'm so delighted to 0:07:39.680 --> 0:07:42.280 be here. Thank you. What are the things We'll get 0:07:42.280 --> 0:07:44.600 to a couple of things, like you know, alternative assets 0:07:44.640 --> 0:07:46.720 and and so on, But I want to first understand 0:07:46.760 --> 0:07:50.760 a little bit, UH, the specific challenges that you face 0:07:50.960 --> 0:07:56.480 because you work for people who don't even know that 0:07:56.560 --> 0:07:59.480 you work for them, because they're gonna be people who 0:07:59.560 --> 0:08:02.880 in the future, the big future, like ten twenty thirty 0:08:02.960 --> 0:08:06.320 years down the line, they are depending on decisions that 0:08:06.400 --> 0:08:09.400 you make now in order for them to be able 0:08:09.400 --> 0:08:12.160 to plan for their retirement and a variety of their 0:08:12.200 --> 0:08:15.040 financial goals. I'm wondering if you could explain a little 0:08:15.040 --> 0:08:18.640 bit about how you take on that responsibility. So the 0:08:18.720 --> 0:08:20.800 right way and the way that I think about New 0:08:20.880 --> 0:08:23.280 York Life Investments is that we are the best of 0:08:23.320 --> 0:08:27.480 both worlds. So we have independent investment boutiques together with 0:08:27.640 --> 0:08:30.520 a heritage and long term perspective of New York Life, 0:08:31.040 --> 0:08:34.480 and we come at this business really from an investment perspective. 0:08:34.920 --> 0:08:36.800 You know, New York Life is a hundred and seventy 0:08:36.800 --> 0:08:39.560 three years old. We've been through the Civil War, two 0:08:39.600 --> 0:08:43.520 World Wars, the Great Recession, and today it's as strong 0:08:43.559 --> 0:08:46.199 as we've ever been as only one of a handful 0:08:46.360 --> 0:08:50.080 of tripoy rated financial institutions around the world. And so 0:08:50.280 --> 0:08:53.320 we really think about this business and our clients the 0:08:53.360 --> 0:08:55.720 same way as we work in terms of what we're 0:08:55.720 --> 0:08:58.640 trying to accomplish. You take the time to understand the 0:08:58.640 --> 0:09:02.080 problems are trying to solve the challenges they face, and 0:09:02.120 --> 0:09:05.240 that's really helped me as CEO of this business to 0:09:05.320 --> 0:09:09.959 really think about expansion. So we've moved significantly outside the 0:09:10.120 --> 0:09:14.360 US into Europe and Asia through editions of boutiques. We 0:09:14.520 --> 0:09:17.920 really lean very heavily into alternatives, an area that I 0:09:18.000 --> 0:09:20.959 know quite well. Well, let's talk about alternatives, actually, I 0:09:21.000 --> 0:09:22.880 want to go there because when you talk about the 0:09:22.880 --> 0:09:25.280 needs of your clients, what need is for yield, especially 0:09:25.360 --> 0:09:28.920 in this financial oppression era, what alternatives are you going into? 0:09:28.960 --> 0:09:31.920 And how concerned are you about the glut of cash 0:09:31.960 --> 0:09:34.560 sitting on the sidelines and pouring into things that people 0:09:34.600 --> 0:09:38.000 aren't as familiar with. You know, as a general rule, 0:09:38.240 --> 0:09:42.480 I believe alternatives have a role in every portfolio. What 0:09:42.480 --> 0:09:45.960 we've been seeing is equity markets are fairly elevated, interest 0:09:46.080 --> 0:09:50.679 razor climbing, greater volatility, and so in this market environment, 0:09:50.840 --> 0:09:53.960 our advice to clients is really to think about what 0:09:54.120 --> 0:09:58.719 exposures they can introduce to dampen volatility, maybe introduced a 0:09:58.760 --> 0:10:03.720 little bit of inflation since activity, but in general diversify 0:10:03.760 --> 0:10:06.160 and so what we like. We have a platform called 0:10:06.200 --> 0:10:09.959 index i Q that has really developed some interesting e 0:10:10.080 --> 0:10:12.959 t s. There are the Pioneer and Alternative et s 0:10:13.040 --> 0:10:15.959 and so things like ROOF which is for real estate 0:10:16.440 --> 0:10:19.880 or m and A for merger arbitrage strategies, or even QAI, 0:10:20.080 --> 0:10:23.040 which is a diversified multi strat And so our view 0:10:23.160 --> 0:10:26.400 is there are many ways for investors to add these 0:10:26.400 --> 0:10:29.960 elements to their portfolios. Structure at e T F that 0:10:30.040 --> 0:10:33.240 has alternative assets that aren't as liquid, you know, those 0:10:33.280 --> 0:10:36.440 are actually liquid. They're just like the e T s 0:10:36.480 --> 0:10:40.200 that we all know right daily, liquid, transparent, low cost. 0:10:40.640 --> 0:10:43.960 And that's why they offer such an interesting value proposition 0:10:44.400 --> 0:10:47.800 because today, if you're an individual investor, you can buy 0:10:47.920 --> 0:10:50.520 one of hundreds of e T s, one of thousands 0:10:50.520 --> 0:10:53.480 of mutual funds. But if you want alternative exposure, you 0:10:53.520 --> 0:10:56.800 don't have a lot of choice like institutions do today. 0:10:57.240 --> 0:11:00.480 They want to go into real estate or private equity. Now, 0:11:00.520 --> 0:11:04.240 just to give people little detail, some of the subsidiaries 0:11:04.280 --> 0:11:08.400 that come under your umbrella, I believe mackay Shields, the 0:11:08.880 --> 0:11:14.720 mutual fund company, also Cornerstone, right os Bille, the investment 0:11:14.720 --> 0:11:19.120 management firm. How do you decide who fits with the 0:11:19.160 --> 0:11:23.680 New York Life investment management sort of zeitgeist. You know, 0:11:23.760 --> 0:11:27.960 we really are carefully slagged the boutiques that we bring 0:11:28.120 --> 0:11:31.520 under our umbrella. Clearly, what's important to us is really 0:11:31.640 --> 0:11:36.600 investment excellence and UH strategies that we think really makes 0:11:36.640 --> 0:11:40.280 sense for UH investors portfolios. But just as important to 0:11:40.360 --> 0:11:43.600 us is cultural fit. We're an institution at New York 0:11:43.640 --> 0:11:47.679 Life that really believes and putting our clients first, solving 0:11:47.720 --> 0:11:50.800 their problems. And so what's important to us is that 0:11:50.880 --> 0:11:55.040 we have a set of capabilities specialists by boutique and 0:11:55.080 --> 0:11:57.600 then out forwards us the opportunity to have the building 0:11:57.600 --> 0:12:00.000 blocks so that if we're having that conversation with clients, 0:12:00.240 --> 0:12:02.960 you know, how to put together good portfolios. So we 0:12:03.040 --> 0:12:05.280 just have about a minute left, and I'm wondering. You know, 0:12:05.320 --> 0:12:07.760 a lot of people are worried that perhaps we are 0:12:07.920 --> 0:12:11.680 a seeing two elevated evaluations we could crash. Other people 0:12:11.720 --> 0:12:14.000 worrying that they're gonna pull out too soon, which is 0:12:14.040 --> 0:12:17.520 the biggest worry for you. You know, all of these 0:12:17.600 --> 0:12:21.720 are legitimate worries. It's very interesting that last year we 0:12:21.760 --> 0:12:24.320 had a lot of worries, but the market seemed pretty confident. 0:12:24.720 --> 0:12:26.400 This year we have a lot of worries and there's 0:12:26.440 --> 0:12:29.400 a lot of anxiety. My view is one of a 0:12:29.440 --> 0:12:33.839 long term view. Look, clients really have not only return expectations, 0:12:33.880 --> 0:12:37.040 but they have obligations and needs to meet, and that's 0:12:37.080 --> 0:12:39.840 really our focus because we have all the pieces to 0:12:39.880 --> 0:12:42.280 help them achieve their goals. Thank you so much for 0:12:42.320 --> 0:12:45.160 being with us, and thank you for participating in it 0:12:45.240 --> 0:12:47.959 this day where a lot of really interesting ideas are 0:12:48.040 --> 0:12:52.240 being thrown out there and discussed. Uh Eahan Hung is 0:12:52.320 --> 0:12:56.040 chief executive officer of New York Life Investment Management. She 0:12:56.120 --> 0:12:59.160 has helped to expand the company and UH and and 0:12:59.320 --> 0:13:01.840 plow further into alternatives, which has been one of the 0:13:01.840 --> 0:13:04.360 hottest areas over the past few years as people try 0:13:04.400 --> 0:13:06.640 to diversify and frankly, as they see a lot of 0:13:06.679 --> 0:13:09.959 the equity markets as being somewhat overvalued, as well as 0:13:10.000 --> 0:13:14.080 bond markets, which have been UH certainly affected dramatically by 0:13:14.200 --> 0:13:34.000 central banks around the world. We are broadcasting live from 0:13:34.040 --> 0:13:37.559 the Bloomberg Invests Summit in New York. Our next guest, 0:13:37.840 --> 0:13:41.520 manages more than a trillion dollars, is chief executive of 0:13:41.720 --> 0:13:45.480 p G. I am David Hunt, President, chief executive joining 0:13:45.520 --> 0:13:48.480 us now. Thank you so much for being with us. Um. 0:13:48.520 --> 0:13:50.920 You said on the panel that you're just on that 0:13:51.000 --> 0:13:54.280 you are worried about the US equity market, that it 0:13:54.360 --> 0:13:56.800 is not in good shape because fewer companies are opting 0:13:56.840 --> 0:14:00.000 to go public and stay public, and this reduces opportunity 0:14:00.120 --> 0:14:03.400 das for retail investors. Can you talk about what the 0:14:03.480 --> 0:14:07.000 consequences are of this in your view? Sure, here's the 0:14:07.400 --> 0:14:09.960 parlor trick question for you. How many stocks are in 0:14:10.000 --> 0:14:14.520 the will share five thousand? Well, answer three thousand, six hundred. 0:14:14.880 --> 0:14:18.240 In fact, we used to have over seven thousand, five 0:14:18.320 --> 0:14:21.720 hundred stocks in the US. If you go back fifteen years, um, 0:14:21.760 --> 0:14:24.200 we've had a huge drop in the number of publicly 0:14:24.240 --> 0:14:28.080 traded companies. At the same time, the level of I 0:14:28.240 --> 0:14:31.160 p o s are literally at half of the level 0:14:31.200 --> 0:14:34.480 that they were a decade ago. So what's happening. What's 0:14:34.480 --> 0:14:37.480 happening is that a lot of the higher growth companies, 0:14:37.480 --> 0:14:40.800 some of them are technology, but health sciences and others 0:14:41.120 --> 0:14:44.440 are choosing to stay private. And so whereas ten years 0:14:44.440 --> 0:14:47.600 ago everyone's dream was to ring the bell and and 0:14:47.640 --> 0:14:50.720 really come out in the public way, now they're very 0:14:50.720 --> 0:14:53.560 happy to take another slug or a second round of 0:14:53.600 --> 0:14:57.560 private financing from the private equity realm um and stay private. 0:14:58.240 --> 0:15:01.840 And uh that it really does us have important implications. 0:15:01.880 --> 0:15:05.040 So we've got fewer stocks, we've got fewer growth stocks 0:15:05.080 --> 0:15:08.000 coming in, and we've got a private equity industry that 0:15:08.120 --> 0:15:12.240 has a trillion dollars of dry powder. Now leverage that 0:15:12.320 --> 0:15:14.520 a few times and you're talking about real money. So 0:15:14.600 --> 0:15:17.800 you've got a lot. Even more of these companies are 0:15:18.160 --> 0:15:20.960 likely to choose to stay private. And here's a prediction. 0:15:21.240 --> 0:15:24.680 I think that some public companies UM will choose to 0:15:24.680 --> 0:15:28.320 go private. We saw that, we saw that in in 0:15:28.320 --> 0:15:31.520 in spades last year for the first time dramatically, and 0:15:31.520 --> 0:15:34.400 I think we'll see it some more. So what does 0:15:34.440 --> 0:15:37.320 that mean then for for the markets? It obviously means 0:15:37.320 --> 0:15:41.520 there's less choice, uh for for investors, but it more 0:15:41.600 --> 0:15:45.000 fundamentally means that these growth stocks that were available to 0:15:45.240 --> 0:15:49.040 retail investors through the public markets now are actually having 0:15:49.040 --> 0:15:51.560 their returns come up through private equity and into the 0:15:51.560 --> 0:15:55.760 institutional market. And UM. I think that that goes against 0:15:55.800 --> 0:15:59.160 a little bit of the democratization of the capital markets 0:15:59.200 --> 0:16:01.800 that we've enjoyed in the United States for a long time, 0:16:02.160 --> 0:16:04.840 and I don't think people have really taken on the 0:16:04.920 --> 0:16:08.480 overall kind of implications and consequences of that. Uh And 0:16:08.480 --> 0:16:11.560 and the weakness in our public equity markets is that 0:16:11.640 --> 0:16:14.960 because the amount of money that is available in private 0:16:14.960 --> 0:16:19.840 equity investments is so great and growing that in a sense, 0:16:19.880 --> 0:16:22.680 it doesn't matter whether you take money from the public 0:16:23.080 --> 0:16:26.520 or the private sector in terms of the actual amount 0:16:26.640 --> 0:16:29.400 of money. And yet the public sector comes with a 0:16:29.440 --> 0:16:33.840 lot of rules, regulations and quarterly reports. Yeah. I think 0:16:33.880 --> 0:16:37.160 that there's a multitude of reasons, um and you've you've 0:16:37.200 --> 0:16:38.840 hit on many of them. I think there's been the 0:16:38.840 --> 0:16:41.360 burdens of being a public company. Uh. And I think 0:16:41.400 --> 0:16:44.600 that the Sarbanes Oxley was a bit of a flashpoint 0:16:45.000 --> 0:16:48.160 for that. I think also to to to give private 0:16:48.160 --> 0:16:51.760 equity is due. They have become a lot better owners 0:16:51.880 --> 0:16:54.880 over the course of the last fifteen years. In the 0:16:54.880 --> 0:16:58.040 early days, this was a bit of a financial engineering move, 0:16:58.600 --> 0:17:00.960 and now they actually have turned out to be good 0:17:01.000 --> 0:17:04.199 long term investors investing in businesses. I have to I 0:17:04.240 --> 0:17:06.679 have to inter interject there, because there's been a lot 0:17:06.720 --> 0:17:09.560 of publicity around the retail apocalypse and a lot of 0:17:09.600 --> 0:17:12.359 fingers pointing at private equity companies that added quite a 0:17:12.400 --> 0:17:15.080 bit of leverage to some of these retailers that seems 0:17:15.119 --> 0:17:19.320 unsustainable in retrospect. I'm thinking toys, r us Vonton, you know, 0:17:19.359 --> 0:17:22.200 pick your company. I'm just wondering, do you think that 0:17:22.200 --> 0:17:25.240 that is an inadequate sort of representation or sort of 0:17:25.280 --> 0:17:28.960 an unjust representation of what private equity has done broadly, 0:17:29.000 --> 0:17:31.120 I would say it is. I think that the the 0:17:31.280 --> 0:17:35.320 overall returns of the private equity business have been quite attractive, 0:17:35.760 --> 0:17:38.240 and if you're certainly in one of the better funds, 0:17:38.320 --> 0:17:40.520 you've done extremely well. And you've done it in a 0:17:40.560 --> 0:17:43.479 way that is, to some extent non corelate because they 0:17:43.520 --> 0:17:45.320 can time when they want to get out of their 0:17:45.359 --> 0:17:50.400 investments to the underlying investment equity businesses. So I actually 0:17:50.440 --> 0:17:54.000 think that they've done broadly quite a good job. Would 0:17:54.000 --> 0:17:57.359 the public markets have made those decisions sooner or better? 0:17:57.520 --> 0:18:00.880 I'm not really sure. Does this then beg the question 0:18:01.000 --> 0:18:07.160 about passive investing versus active investing, particularly with the explosion 0:18:07.400 --> 0:18:11.280 in exchange traded funds, where you don't actually buy a 0:18:11.359 --> 0:18:15.680 specific company, and therefore you have no allegiance to their 0:18:15.840 --> 0:18:19.280 long term plan or strategy or even to their management. 0:18:20.440 --> 0:18:23.600 That's partly true, um. On the other hand, the irony 0:18:23.720 --> 0:18:26.320 is that if you're a passive manager, you actually are 0:18:26.359 --> 0:18:28.720 a long term investor, because as long as that company 0:18:28.800 --> 0:18:31.359 is in the index, UH, the e t F is 0:18:31.359 --> 0:18:34.320 going to also remain an investor in that, but what 0:18:34.520 --> 0:18:37.440 you do lose is having analysts who are following that 0:18:37.520 --> 0:18:42.000 particular stock, and so we have many fewer people who 0:18:42.040 --> 0:18:45.919 are actually understanding the fundamentals of a business um and 0:18:46.000 --> 0:18:48.080 I do think that that is a back to another 0:18:48.160 --> 0:18:51.040 reason why you have many fewer companies going public, because 0:18:51.080 --> 0:18:54.240 you have many fewer analysts who are covering midsize companies. 0:18:54.280 --> 0:18:57.640 From the cell side, there's been a dramatic fall in, uh, 0:18:57.680 --> 0:19:00.320 the amount of money and people on the cell side 0:19:00.320 --> 0:19:03.280 who were doing the kind of high quality research that's 0:19:03.280 --> 0:19:05.879 required for these One thing that strikes me though, is 0:19:05.880 --> 0:19:08.720 that as people worry about overvaluation and the equity markets 0:19:08.760 --> 0:19:11.920 and a lack of diversification, they're going increasingly to alternatives 0:19:11.960 --> 0:19:14.560 and investing more money in private equity companies which do 0:19:14.680 --> 0:19:18.280 have that a trillion dollars of dry powder sitting on 0:19:18.320 --> 0:19:21.920 their books. How worried are you that valuations in private 0:19:21.960 --> 0:19:25.199 markets have gotten way far ahead of themselves and are 0:19:25.240 --> 0:19:27.720 poised for some sort of correction, you know. It's it's 0:19:27.800 --> 0:19:31.840 interesting how different the allocations are by investor group. And 0:19:31.880 --> 0:19:33.960 I think you really have to make these comments about 0:19:34.080 --> 0:19:39.160 individual client types. For most of my professional life. If 0:19:39.200 --> 0:19:42.000 you were to just guess the asset allocation of a 0:19:42.040 --> 0:19:45.119 pension fund whether the public were private, and said sixty, 0:19:45.920 --> 0:19:49.280 you would be within five percentage points of being right. Um. 0:19:49.320 --> 0:19:53.360 And they really went down a very balanced investment approach 0:19:53.880 --> 0:19:57.200 that is absolutely not true today. If you go into 0:19:57.320 --> 0:20:01.199 a corporate plan today, for the most part, they have 0:20:01.280 --> 0:20:05.159 a de risking plan in place. They have moved significantly 0:20:05.200 --> 0:20:07.280 to take risk off the table. They are much more 0:20:07.320 --> 0:20:11.520 into fixed income, and their holdings actually of alternatives and 0:20:11.760 --> 0:20:15.399 even equities overall is at some of its lowest levels. 0:20:16.160 --> 0:20:20.080 And yet almost in complete contrast, if you walk down 0:20:20.160 --> 0:20:23.160 the street and you visit the public plan, UH, you 0:20:23.200 --> 0:20:25.600 find that they've gone in the other direction. Uh. They 0:20:25.600 --> 0:20:29.639 have actually decided to re risk. They've moved significant money 0:20:29.680 --> 0:20:33.919 into real estate, into privates UH, private equity UH, and 0:20:34.000 --> 0:20:38.439 into hedge funds. And they are trying very hard to 0:20:38.600 --> 0:20:43.000 work their way out of their underfunded situation through investment returns. 0:20:43.400 --> 0:20:46.040 And so you have these two groups that have diametricly 0:20:46.119 --> 0:20:50.119 different approaches to what's essentially the same problem, which is 0:20:50.160 --> 0:20:52.840 how do you meet the very important promises that they've 0:20:52.880 --> 0:20:55.600 made to their workers. Thank you very much for being 0:20:55.600 --> 0:20:58.000 with us. David Hunt is the president and the chief 0:20:58.080 --> 0:21:02.040 executive of p gimp G I m a R, the 0:21:02.240 --> 0:21:06.520 investment management business of Prudential Financial, helping to manage more 0:21:06.520 --> 0:21:10.760 than one point to trillion dollars of assets. Much appreciated 0:21:10.800 --> 0:21:12.439 and thank you, thank you for having me here at 0:21:12.440 --> 0:21:16.480 our Bloomberg constating the idea of public and private pensions 0:21:16.560 --> 0:21:19.439 having the exact opposite aims. You have to wonder who's 0:21:19.440 --> 0:21:37.120 got it right well, Pam. The one trillion dollar Apple 0:21:37.280 --> 0:21:41.600 valuations stories have started to be plastered all over media 0:21:41.760 --> 0:21:46.000 across the board. Everyone's getting ready as Apple's market capitalization 0:21:46.080 --> 0:21:49.760 reaches nifty billion dollars. So has it gone too far 0:21:49.800 --> 0:21:53.680 too fast? Are the FAMOD stocks uh is a little 0:21:53.680 --> 0:21:55.679 bit over valued at this point or is this just 0:21:55.720 --> 0:21:59.000 the beginning of a massive bull run? Here to sort 0:21:59.000 --> 0:22:01.359 of lay out the arguments on either side. A Shara Ovida. 0:22:01.400 --> 0:22:06.600 She's technology columnist for Bloomberg Opinion and contribute to contributor 0:22:06.760 --> 0:22:09.760 to Bloomberg Markets. Am Um, Sara, thank you so much 0:22:09.760 --> 0:22:12.320 for being with us. So um, let's just start with 0:22:12.520 --> 0:22:14.880 the people who say that this is something that can 0:22:15.000 --> 0:22:18.600 keep going, that even though the biggest six US tech 0:22:18.640 --> 0:22:23.600 companies account for more than four trillion dollars of market capitalization. 0:22:24.160 --> 0:22:26.840 This is just the beginning. I mean, if you look 0:22:27.040 --> 0:22:30.720 at the story of those tech giants, and you could 0:22:30.760 --> 0:22:35.359 include Ali Baba Intencent in that mix too, from China eats, 0:22:35.359 --> 0:22:42.760 a story of revenue growth, earnings, power pricing, power global businesses, 0:22:43.320 --> 0:22:47.000 and the ability to kind of invest money. All of 0:22:47.000 --> 0:22:50.399 those companies are investing near record amounts in research and 0:22:50.440 --> 0:22:54.520 development and capital spending. So they're looking to the future 0:22:54.680 --> 0:22:58.280 and it's hard to imagine at this point that anything 0:22:58.359 --> 0:23:00.320 is going to slow them down, right, So that's the 0:23:00.400 --> 0:23:03.359 kind of bull market for the tech giants of the 0:23:03.400 --> 0:23:06.440 future and the and the current well that it does. 0:23:06.480 --> 0:23:08.480 Let's look at some of the kind of valuations, because 0:23:08.520 --> 0:23:11.919 that's why I always like to kind of understand this. Um. 0:23:12.080 --> 0:23:15.879