1 00:00:18,320 --> 00:00:21,000 Speaker 1: Hello, and welcome to the Credit Edge, a weekly markets podcast. 2 00:00:21,079 --> 00:00:23,720 Speaker 1: My name is James Crombie. I'm a senior editor at Bloomberg. 3 00:00:24,120 --> 00:00:26,759 Speaker 1: This week, we're very pleased to welcome Colleen Kiff, head 4 00:00:26,760 --> 00:00:29,800 Speaker 1: of Global taxable credit research at Vanguard. How are you, Colleen, 5 00:00:30,320 --> 00:00:31,040 Speaker 1: I'm very well. 6 00:00:31,040 --> 00:00:32,760 Speaker 2: Thank you, Thank you for having me. 7 00:00:33,159 --> 00:00:34,600 Speaker 1: Thank you so much for joining us today. Were very 8 00:00:34,600 --> 00:00:37,080 Speaker 1: excited to get your credit market views. And we're also 9 00:00:37,159 --> 00:00:40,680 Speaker 1: delighted to have on the show Himanshu Bakshi from Bloomberg Intelligence. Hello, 10 00:00:40,760 --> 00:00:44,240 Speaker 1: him Manshu, Hey, Jim's good w how are you great? 11 00:00:44,280 --> 00:00:45,879 Speaker 1: Thank you so just to set the scene of it here, 12 00:00:45,920 --> 00:00:48,680 Speaker 1: credit markets have been very calm and collected going into 13 00:00:48,720 --> 00:00:51,520 Speaker 1: a US election that some analysts fear could be ruin 14 00:00:51,640 --> 00:00:53,840 Speaker 1: US for the US economy. We won't know for a 15 00:00:53,880 --> 00:00:56,040 Speaker 1: while how it all shakes out. And a note to 16 00:00:56,080 --> 00:00:58,840 Speaker 1: our listeners first, many thanks for tuning in, and we 17 00:00:58,880 --> 00:01:02,560 Speaker 1: are recording this episode on November fifth, the election day 18 00:01:02,560 --> 00:01:04,640 Speaker 1: in the US, and right now it's very hard to 19 00:01:04,680 --> 00:01:07,759 Speaker 1: tell which way it will go. Nonetheless, it does seem 20 00:01:07,800 --> 00:01:10,760 Speaker 1: that there's a little bit of complacency out there. Credit 21 00:01:10,800 --> 00:01:13,080 Speaker 1: spreads are very tight, particularly on the debt that is 22 00:01:13,120 --> 00:01:16,320 Speaker 1: most likely to blow up if the economy stumbles. Investors 23 00:01:16,360 --> 00:01:19,760 Speaker 1: have generally been happy leaning into risk, yields are high 24 00:01:19,920 --> 00:01:22,279 Speaker 1: and there's not enough new supply of bonds and loans 25 00:01:22,280 --> 00:01:25,479 Speaker 1: to go around. Also uncertain is the next move from 26 00:01:25,520 --> 00:01:28,959 Speaker 1: the Federal Reserve. The easing campaign started in September with 27 00:01:29,040 --> 00:01:32,400 Speaker 1: a surprising fifty basis points cut that got people very 28 00:01:32,440 --> 00:01:35,319 Speaker 1: excited about a very dubvish course for rates, which would 29 00:01:35,319 --> 00:01:37,400 Speaker 1: have been a boost to credit. But data on the 30 00:01:37,480 --> 00:01:40,160 Speaker 1: US economy keeps coming in hot and markets have dialed 31 00:01:40,200 --> 00:01:43,800 Speaker 1: down their forecasts on the speed and extent of further easing. 32 00:01:44,640 --> 00:01:46,640 Speaker 1: Lurking in the background, there are still some signs of 33 00:01:46,720 --> 00:01:51,080 Speaker 1: stress in public and private debt markets, including amendments, extensions, 34 00:01:51,360 --> 00:01:54,960 Speaker 1: loans being repaid with more debt plus arise in defaults. 35 00:01:55,360 --> 00:01:58,960 Speaker 1: We're also having a lot of storm clouds on the 36 00:01:59,000 --> 00:02:02,360 Speaker 1: horizon in terms of geopolitical risk, not just the US election, 37 00:02:02,840 --> 00:02:05,960 Speaker 1: and the double threats of inflation and recession haven't gone away. 38 00:02:06,280 --> 00:02:09,960 Speaker 1: A major downturn would cause more distress in credit markets. 39 00:02:09,960 --> 00:02:12,480 Speaker 1: But what's your take, Colleen? Am I worrying too much? 40 00:02:13,080 --> 00:02:15,520 Speaker 1: Those who boldly took credit risks this year? Have done 41 00:02:15,600 --> 00:02:18,200 Speaker 1: really well. Should we all be a bit more optimistic? 42 00:02:19,160 --> 00:02:21,079 Speaker 2: Yeah, well we're to start with all of that. Right, 43 00:02:21,120 --> 00:02:25,440 Speaker 2: that's great, that's a great backdrop, Thank you. Look so 44 00:02:25,480 --> 00:02:29,640 Speaker 2: to the question of complacency, I don't think that's the 45 00:02:29,680 --> 00:02:33,280 Speaker 2: word I would use. I think the markets are pricing 46 00:02:33,320 --> 00:02:40,120 Speaker 2: in a relatively soft landing. That's an expectation, not necessarily complacent, right, 47 00:02:40,160 --> 00:02:41,840 Speaker 2: And part of that, like when you think that through, 48 00:02:41,840 --> 00:02:43,519 Speaker 2: and there's lots of things we can talk about in there, 49 00:02:43,919 --> 00:02:46,560 Speaker 2: but part of that, let's think about IG credit spreads. 50 00:02:46,800 --> 00:02:49,200 Speaker 2: And you talked a little bit about this yourself. Yes, 51 00:02:49,320 --> 00:02:53,040 Speaker 2: IG credit spreads are tight, but things can stay tight 52 00:02:53,200 --> 00:02:55,840 Speaker 2: for extended periods of time, right, And when you look 53 00:02:55,880 --> 00:02:57,880 Speaker 2: over history, we can point to a few periods of 54 00:02:57,880 --> 00:03:01,079 Speaker 2: time where things have stayed tight. And if you look 55 00:03:01,080 --> 00:03:03,320 Speaker 2: at where we are today, we're still pretty early in 56 00:03:03,320 --> 00:03:06,520 Speaker 2: that tight tight levels. Right. That's you know, that's number one. 57 00:03:06,560 --> 00:03:09,960 Speaker 2: Number two, as you mentioned, yields are attractive. You know, 58 00:03:09,960 --> 00:03:12,919 Speaker 2: again looking at the percentiles, I mean the spread levels 59 00:03:12,919 --> 00:03:15,720 Speaker 2: on a percentile basis, you know, low low, low, single 60 00:03:15,720 --> 00:03:18,680 Speaker 2: digits almost not there. But when you look at yields, 61 00:03:19,080 --> 00:03:21,880 Speaker 2: particularly on the IG side, and you pair it down 62 00:03:21,919 --> 00:03:24,400 Speaker 2: to the last ten years right there. It's something like 63 00:03:24,440 --> 00:03:27,120 Speaker 2: the last number I looked at was like eighty ninth percentile. 64 00:03:27,960 --> 00:03:31,359 Speaker 2: And buyer, look, this is fixed income, right, so we're 65 00:03:31,440 --> 00:03:35,560 Speaker 2: looking for income. So buyers are attracted by yield. So 66 00:03:35,560 --> 00:03:38,400 Speaker 2: so I think that's part of what's driving you know what, 67 00:03:38,400 --> 00:03:42,160 Speaker 2: what you described as complacency. But the second piece to that, 68 00:03:42,520 --> 00:03:45,880 Speaker 2: you know, aside from the attractiveness of the yields, at 69 00:03:46,000 --> 00:03:49,160 Speaker 2: least at the moment, right when we look at the landscape, 70 00:03:50,440 --> 00:03:56,520 Speaker 2: it feels relatively benign. You know. We have growth slightly 71 00:03:56,640 --> 00:04:00,800 Speaker 2: over two plus percent is, we've got unemployed moments lightly 72 00:04:00,920 --> 00:04:04,920 Speaker 2: over four percent ish, we have inflation moderating, you know, 73 00:04:04,960 --> 00:04:07,360 Speaker 2: so when you look at that backdrop and you think 74 00:04:07,360 --> 00:04:10,560 Speaker 2: about where yields are, it doesn't surprise me that markets 75 00:04:10,600 --> 00:04:12,680 Speaker 2: look the way they look going. 76 00:04:12,760 --> 00:04:16,560 Speaker 3: Thank you. So, based on your view, what sectors are 77 00:04:16,600 --> 00:04:20,480 Speaker 3: you focused on? What sectors you see most value today? 78 00:04:21,200 --> 00:04:26,760 Speaker 2: Yeah, so maybe start on the IG side. Utilities has 79 00:04:26,800 --> 00:04:30,400 Speaker 2: been one where we've been very constructive. We think valuations 80 00:04:30,440 --> 00:04:35,080 Speaker 2: are more attractive than broader industrials, and we think there 81 00:04:35,120 --> 00:04:39,240 Speaker 2: are some nuances to the utility story that give us 82 00:04:39,920 --> 00:04:43,960 Speaker 2: a lot of comfort as a start, you know, the 83 00:04:44,040 --> 00:04:49,320 Speaker 2: the we see while there will be CAPEX demands and 84 00:04:49,360 --> 00:04:51,080 Speaker 2: we can talk about why that is. In a second, 85 00:04:51,640 --> 00:04:55,080 Speaker 2: we think there'll be enough demand for that paper to 86 00:04:55,240 --> 00:04:58,560 Speaker 2: absorb it, and so the issuance is a positive in 87 00:04:58,560 --> 00:05:02,039 Speaker 2: that sense. And then and we think that you know, 88 00:05:02,040 --> 00:05:05,760 Speaker 2: that kepex is being driven by positive dynamics. Right, there's 89 00:05:05,800 --> 00:05:08,640 Speaker 2: a lot of discussion in the world today about you know, 90 00:05:08,720 --> 00:05:12,040 Speaker 2: AI in particular, but data centers in general and what 91 00:05:12,080 --> 00:05:15,000 Speaker 2: we're going to need to fund, you know, fund that 92 00:05:15,279 --> 00:05:19,000 Speaker 2: growth in AI is going to require data centers, which 93 00:05:19,000 --> 00:05:22,200 Speaker 2: requires energy. Right. So so number one, we see a 94 00:05:22,279 --> 00:05:26,120 Speaker 2: demand profile that is attractive, and we also see a 95 00:05:26,200 --> 00:05:30,040 Speaker 2: regulatory environment you know, broadly. First of all that is 96 00:05:30,120 --> 00:05:33,760 Speaker 2: paying some attention and we've seen recent articles about this, right, 97 00:05:33,800 --> 00:05:36,239 Speaker 2: paying some attention to the market and how the demand 98 00:05:36,320 --> 00:05:40,400 Speaker 2: for this AI driven energy is happening. But number two, 99 00:05:40,440 --> 00:05:43,599 Speaker 2: from our perspective, as you guys know we are, we 100 00:05:43,680 --> 00:05:46,159 Speaker 2: are an active credit shop. We do deep research on 101 00:05:46,240 --> 00:05:49,360 Speaker 2: my team, and so utilities is an example of where 102 00:05:49,360 --> 00:05:52,640 Speaker 2: that research really provides the value because the regulatory environment 103 00:05:52,720 --> 00:05:56,200 Speaker 2: state to state can be very different. So for instance, 104 00:05:56,480 --> 00:06:00,840 Speaker 2: particular utilities liability for something like a horse fire can 105 00:06:00,880 --> 00:06:02,680 Speaker 2: be different from one stay to the other, so you 106 00:06:02,800 --> 00:06:05,120 Speaker 2: need to do that deep research to understand where you're 107 00:06:05,160 --> 00:06:07,359 Speaker 2: investing in a sector like utilities. So it's it's an 108 00:06:07,440 --> 00:06:11,359 Speaker 2: area we think we can bring value to. You know. 109 00:06:11,400 --> 00:06:14,359 Speaker 2: The other sector that we've been talking about and probably 110 00:06:14,360 --> 00:06:16,440 Speaker 2: for the last year has been on the financial side, 111 00:06:16,480 --> 00:06:19,960 Speaker 2: which you know, which you cover and you know, the 112 00:06:20,279 --> 00:06:24,200 Speaker 2: the view there has been that we've been very constructive 113 00:06:24,880 --> 00:06:28,880 Speaker 2: for the last year on the regionals and super regionals 114 00:06:28,960 --> 00:06:32,520 Speaker 2: and we continue to be so that that trade has 115 00:06:32,680 --> 00:06:35,839 Speaker 2: sort of run a bit, so maybe slightly less attractive 116 00:06:35,920 --> 00:06:37,440 Speaker 2: or less attractive than it was a year ago, but 117 00:06:37,480 --> 00:06:41,080 Speaker 2: we still think there's some value value in that trade. 118 00:06:41,839 --> 00:06:45,840 Speaker 3: So, Colin, you've mentioned your preference for utilities and financials. 119 00:06:45,880 --> 00:06:49,480 Speaker 3: So prior to the rate hiking cycle in twenty twenty two, 120 00:06:50,279 --> 00:06:53,760 Speaker 3: financial spreads were about ten BIPs tited than the Bloomberg 121 00:06:53,839 --> 00:06:57,080 Speaker 3: US Corporate Index, and as RAID rows and the two 122 00:06:57,120 --> 00:07:00,640 Speaker 3: ten U s trategy cover it voted, financials spreads actually 123 00:07:00,760 --> 00:07:06,239 Speaker 3: underperformed relative to their corporate counterparts. Even now, financials trade 124 00:07:06,279 --> 00:07:10,160 Speaker 3: about say one bits wider than the overall gauge. Now 125 00:07:10,160 --> 00:07:13,280 Speaker 3: from a fundamental standpoint. We know that US banks have 126 00:07:13,440 --> 00:07:17,360 Speaker 3: healthy balance sheets if you look at capital levels, asset 127 00:07:17,440 --> 00:07:20,560 Speaker 3: quality trends, and stress stress results. So what do you 128 00:07:20,680 --> 00:07:24,840 Speaker 3: think is keeping financials wide to the overall gauge? And 129 00:07:24,880 --> 00:07:27,120 Speaker 3: if you see more rate cuts, do you expect the 130 00:07:27,160 --> 00:07:28,040 Speaker 3: STrenD to reverse? 131 00:07:29,040 --> 00:07:31,840 Speaker 2: Yeah? Well, I mean you answered some of the questions yourself, right, 132 00:07:31,840 --> 00:07:34,400 Speaker 2: I mean in terms of our view on overall financials, 133 00:07:34,400 --> 00:07:36,280 Speaker 2: all the things you pointed to are things that we 134 00:07:36,480 --> 00:07:40,920 Speaker 2: find attractive and don't think is necessarily reflected right now 135 00:07:41,000 --> 00:07:42,960 Speaker 2: and where things are trading, which is why, you know 136 00:07:42,960 --> 00:07:45,920 Speaker 2: why we continue to like that trade. I think you 137 00:07:45,960 --> 00:07:49,440 Speaker 2: know are you know we have an incredibly strong bank 138 00:07:49,480 --> 00:07:52,600 Speaker 2: analyst in our team, you know who views the what 139 00:07:52,640 --> 00:07:55,920 Speaker 2: you said, the fundamentals surrounding the bank and a you know, 140 00:07:56,040 --> 00:08:01,320 Speaker 2: the the potential you know, rate easing cycle as being positive. 141 00:08:01,320 --> 00:08:05,400 Speaker 2: So we would expect to continue to see that perform understood. 142 00:08:05,440 --> 00:08:08,320 Speaker 3: And where do you see the most values in financial 143 00:08:08,440 --> 00:08:11,320 Speaker 3: single a's, triple b's where do you see the most value? 144 00:08:11,960 --> 00:08:13,760 Speaker 2: Well, I would say, you know, I can answer that 145 00:08:14,040 --> 00:08:19,280 Speaker 2: question more broadly. You know, we we think we are 146 00:08:19,320 --> 00:08:21,520 Speaker 2: more interested, let's say in the triple B space more 147 00:08:21,520 --> 00:08:25,520 Speaker 2: broadly in I G and why. Why is that? Because 148 00:08:25,600 --> 00:08:29,800 Speaker 2: we think the triple B issuers show both commitment and 149 00:08:29,920 --> 00:08:35,520 Speaker 2: levers around their ratings, commitment to their triple B ratings, 150 00:08:36,000 --> 00:08:39,439 Speaker 2: and we have more concern in the higher quality space 151 00:08:40,120 --> 00:08:44,040 Speaker 2: that M and A transactions, leveraging M and A transactions. Again, 152 00:08:44,080 --> 00:08:46,480 Speaker 2: given where things are trading, you don't have a lot 153 00:08:46,520 --> 00:08:48,920 Speaker 2: of cushion in an M and A transaction A leveraging 154 00:08:49,040 --> 00:08:51,000 Speaker 2: M and A transactions, So we're a little bit more 155 00:08:51,040 --> 00:08:52,880 Speaker 2: cautious around the higher quality space. 156 00:08:54,040 --> 00:08:56,840 Speaker 1: What you said about the economy, Colleen, I'm interested. You know, 157 00:08:56,880 --> 00:08:59,400 Speaker 1: we had chrissel Wine, your colleague, on earlier this year 158 00:08:59,720 --> 00:09:02,199 Speaker 1: to about potential for a recession in the second half 159 00:09:02,360 --> 00:09:07,000 Speaker 1: of twenty twenty four, which obviously didn't happen. But nonetheless, 160 00:09:07,040 --> 00:09:09,959 Speaker 1: you still sound a little bit more causes on the 161 00:09:10,040 --> 00:09:13,000 Speaker 1: overall economic outlook than maybe some of our other guests 162 00:09:13,080 --> 00:09:16,800 Speaker 1: on this show. Do you expect slower growth? Do you 163 00:09:16,840 --> 00:09:19,920 Speaker 1: expect it to get much much slower than where we 164 00:09:19,960 --> 00:09:21,360 Speaker 1: are and how does that impact credit? 165 00:09:21,960 --> 00:09:23,920 Speaker 2: Yeah, I mean, Chris all Wane's my boss, actually, so 166 00:09:23,960 --> 00:09:27,920 Speaker 2: I'll be careful about what I say, But yeah, no, 167 00:09:28,040 --> 00:09:31,400 Speaker 2: look outlooks have been evolving, right for not just for us, 168 00:09:31,440 --> 00:09:34,719 Speaker 2: but for the market, and we'll continue to evolve. I 169 00:09:34,800 --> 00:09:37,200 Speaker 2: would say, you know, I think you use the phrase 170 00:09:37,280 --> 00:09:39,600 Speaker 2: much much slower growth. I don't. That's not the camp 171 00:09:39,640 --> 00:09:44,080 Speaker 2: that we fall in. I think that we're still, you know, 172 00:09:44,280 --> 00:09:48,120 Speaker 2: more along the lines of turbulent landing, but can see 173 00:09:48,160 --> 00:09:50,560 Speaker 2: and understand why people might be again the things I 174 00:09:50,640 --> 00:09:53,800 Speaker 2: laid out earlier in terms of at least the current environment, 175 00:09:53,840 --> 00:09:57,480 Speaker 2: why people might be pricing in something of a softer landing. 176 00:09:57,520 --> 00:10:00,400 Speaker 2: I would say, you know, the our ISG group, you know, 177 00:10:01,200 --> 00:10:03,719 Speaker 2: is their you know, their work is showing kind of 178 00:10:03,720 --> 00:10:07,120 Speaker 2: a bumpy ride rights as we move through the next 179 00:10:07,440 --> 00:10:08,400 Speaker 2: six to twelve months. 180 00:10:09,040 --> 00:10:12,679 Speaker 1: So do you avoid completely the very risky let's say, 181 00:10:12,679 --> 00:10:14,480 Speaker 1: triple C, single B that kind of thing. 182 00:10:14,920 --> 00:10:17,960 Speaker 2: Okay, So you know, so the triple C market's really interesting, right, 183 00:10:17,960 --> 00:10:19,480 Speaker 2: It's driven some of the perform a lot of the 184 00:10:19,480 --> 00:10:21,679 Speaker 2: performance this year on the high yield side. But when 185 00:10:21,720 --> 00:10:24,439 Speaker 2: you get down into the triple C market, and again 186 00:10:24,480 --> 00:10:27,920 Speaker 2: this is not to always pitch my research team, but 187 00:10:28,000 --> 00:10:29,920 Speaker 2: I love them and I think they're really really strong, 188 00:10:30,000 --> 00:10:32,280 Speaker 2: and this is one of the places we really excel 189 00:10:32,360 --> 00:10:35,920 Speaker 2: right looking at these idiosyncratic opportunities within triple C. So 190 00:10:36,000 --> 00:10:39,200 Speaker 2: in triple C, you know, your composition can be very 191 00:10:39,200 --> 00:10:41,920 Speaker 2: different depending on where we are. So, for instance, you 192 00:10:41,920 --> 00:10:44,920 Speaker 2: have triple c's that are financially engineered right like, that 193 00:10:44,960 --> 00:10:49,360 Speaker 2: are intentionally levered that way for for for for for 194 00:10:49,400 --> 00:10:52,520 Speaker 2: financial engineering purposes. And then you have triple c's that 195 00:10:52,600 --> 00:10:56,720 Speaker 2: are there because they're you know, facing stress, whether that 196 00:10:56,920 --> 00:10:59,600 Speaker 2: is secular stress or economic stress. Right now, a big 197 00:10:59,679 --> 00:11:01,920 Speaker 2: chunk the triple C buckets that we have that we 198 00:11:01,960 --> 00:11:04,480 Speaker 2: look at companies that we look at you know, let's 199 00:11:04,480 --> 00:11:07,640 Speaker 2: call it on the T M T side of side 200 00:11:07,640 --> 00:11:11,920 Speaker 2: of the sectors. You know, that's a secular evolution that's 201 00:11:12,640 --> 00:11:16,000 Speaker 2: challenging those companies, and so we're spending a lot of 202 00:11:16,040 --> 00:11:19,760 Speaker 2: time in that space. It's created a lot of opportunities 203 00:11:19,800 --> 00:11:24,439 Speaker 2: if you really know your sector and so you know, so, no, 204 00:11:24,600 --> 00:11:29,160 Speaker 2: we are not globally staying away from triple C. We're 205 00:11:29,200 --> 00:11:32,920 Speaker 2: trying to find those opportunities that are being created by 206 00:11:32,960 --> 00:11:37,760 Speaker 2: things we can understand and analyze and project and and 207 00:11:37,840 --> 00:11:41,600 Speaker 2: so so we have taken advantage of a few opportunities there. 208 00:11:41,880 --> 00:11:45,040 Speaker 1: There also seems to be another bucket in TRIPLECS where 209 00:11:45,280 --> 00:11:48,040 Speaker 1: we are having a lot of what they're calling liability 210 00:11:48,080 --> 00:11:53,079 Speaker 1: management transactions which parlays quickly into so called credits or 211 00:11:53,160 --> 00:11:56,080 Speaker 1: on creditor violence, which you know, people on this show 212 00:11:56,080 --> 00:11:57,560 Speaker 1: have said, well, this is just part of you know, 213 00:11:57,600 --> 00:12:00,680 Speaker 1: how capitalism works. You know, it's just natural selection in 214 00:12:00,760 --> 00:12:04,360 Speaker 1: the in the markets, but it obviously affects all investors 215 00:12:04,400 --> 00:12:06,920 Speaker 1: and it's quite unpredictable and it gets litigious that how 216 00:12:06,960 --> 00:12:07,640 Speaker 1: do you deal with that? 217 00:12:08,200 --> 00:12:10,640 Speaker 2: Yeah, yeah, so that's interesting. I like that, like that 218 00:12:10,720 --> 00:12:14,240 Speaker 2: natural selection and credit. Yeah, you have to try not 219 00:12:14,320 --> 00:12:16,920 Speaker 2: to take it personally, right, it is, it is investing, 220 00:12:17,800 --> 00:12:20,319 Speaker 2: but it's a fascinating sort of evolution. I mean, I've 221 00:12:20,320 --> 00:12:22,360 Speaker 2: been in the high yield market a very long time 222 00:12:22,720 --> 00:12:24,960 Speaker 2: and so to see the evolution that's happened in that 223 00:12:25,080 --> 00:12:30,079 Speaker 2: space has had a couple of implications, right, so how 224 00:12:30,080 --> 00:12:32,640 Speaker 2: do how do we deal with it? One is the 225 00:12:32,720 --> 00:12:36,680 Speaker 2: first realization that you have to understand is that the 226 00:12:36,760 --> 00:12:40,280 Speaker 2: analysis that you do today is not the same analysis 227 00:12:40,320 --> 00:12:43,920 Speaker 2: that you did fifteen years ago, where your waterfalls, you know, 228 00:12:44,080 --> 00:12:49,000 Speaker 2: dictated your recovery. Your position in the credit stack controlled 229 00:12:49,040 --> 00:12:52,199 Speaker 2: your recovery, and you could, for instance, just ride along, 230 00:12:52,440 --> 00:12:54,640 Speaker 2: you know, in a bankruptcy and you would get your 231 00:12:54,679 --> 00:12:57,360 Speaker 2: fail value. So what you have to realize today is 232 00:12:57,360 --> 00:13:00,600 Speaker 2: that your analysis has to include a lot more legal analysis, 233 00:13:00,600 --> 00:13:04,440 Speaker 2: a lot more understanding of your documents and what options 234 00:13:04,480 --> 00:13:07,040 Speaker 2: are available, and you have to understand who's in the 235 00:13:07,080 --> 00:13:10,240 Speaker 2: transaction with you and what their agenda might be that 236 00:13:10,320 --> 00:13:12,720 Speaker 2: might be different, right, and so you have to be 237 00:13:12,760 --> 00:13:17,360 Speaker 2: a much more active participant in the process than you 238 00:13:17,400 --> 00:13:21,720 Speaker 2: could be fifteen years ago. So that's that's a significant change. 239 00:13:22,280 --> 00:13:24,000 Speaker 1: Does it get worse though? From here? In terms of 240 00:13:24,040 --> 00:13:27,360 Speaker 1: the intensity, in terms of the you know, all of 241 00:13:27,360 --> 00:13:30,480 Speaker 1: this stuff just seems to be escalating. Do do you 242 00:13:30,480 --> 00:13:31,200 Speaker 1: think it gets worse? 243 00:13:31,760 --> 00:13:35,120 Speaker 2: I think, Look, I kind of believe that markets are 244 00:13:35,160 --> 00:13:38,559 Speaker 2: self correcting over the longer term, and so I think 245 00:13:38,640 --> 00:13:40,880 Speaker 2: that you could, could it get worse? Yeah, But what 246 00:13:41,400 --> 00:13:43,640 Speaker 2: will happen as it gets worse. We already seeing that 247 00:13:43,840 --> 00:13:49,000 Speaker 2: is documents are being uh those some of those loopholes 248 00:13:49,000 --> 00:13:54,319 Speaker 2: are being addressed to create some more strength for creditors 249 00:13:54,360 --> 00:13:57,040 Speaker 2: to try to prevent sort of the creditor and creditor 250 00:13:57,120 --> 00:14:00,120 Speaker 2: violence at least, And so I think, you know, it 251 00:14:00,120 --> 00:14:02,080 Speaker 2: will cycle. You know, I think is more of these 252 00:14:02,120 --> 00:14:05,000 Speaker 2: happen and investors wake up to what the documents or 253 00:14:05,080 --> 00:14:08,040 Speaker 2: opportunities and documents are creating for loss of our impairment 254 00:14:08,080 --> 00:14:11,520 Speaker 2: of capital. I think you'll see that addressed, and then 255 00:14:11,559 --> 00:14:14,880 Speaker 2: as markets swing back again, those things will become looser again, 256 00:14:14,920 --> 00:14:17,880 Speaker 2: and so it will cycle, just like we've seen right 257 00:14:18,480 --> 00:14:22,120 Speaker 2: the look covenant light has gone over over twenty years, right, 258 00:14:22,160 --> 00:14:24,280 Speaker 2: So I think that's kind of a similar sort of 259 00:14:24,400 --> 00:14:26,080 Speaker 2: dynamic that we'll see in this space. 260 00:14:26,920 --> 00:14:30,760 Speaker 3: Colin, going back to financials, you said you see particular 261 00:14:30,800 --> 00:14:35,160 Speaker 3: opportunity in triple B rated bonds, especially short dated once 262 00:14:35,240 --> 00:14:38,800 Speaker 3: for the attractive valuations. When it comes to triple B 263 00:14:38,880 --> 00:14:42,800 Speaker 3: rated regional banks, the key concern for these lenders were 264 00:14:43,440 --> 00:14:47,520 Speaker 3: they're just at capital levels which have improved through reduced 265 00:14:47,520 --> 00:14:51,680 Speaker 3: share buybacksen or unrealized losses. What would you say is 266 00:14:51,800 --> 00:14:55,480 Speaker 3: the greatest risk facing these mid sized regional US banks. 267 00:14:55,520 --> 00:14:58,520 Speaker 3: Do you think it's more likely to stem from asset 268 00:14:58,600 --> 00:15:02,280 Speaker 3: quality risks related to this cery exposure or from potential 269 00:15:02,360 --> 00:15:05,080 Speaker 3: for increased regulatory scrutiny. 270 00:15:06,280 --> 00:15:09,120 Speaker 2: I think I'll leave the regulatory scrutiny to my bank analyst. 271 00:15:09,200 --> 00:15:13,359 Speaker 2: That's his area of expertise, and but I will address 272 00:15:13,480 --> 00:15:15,840 Speaker 2: the the cre risk. You know, that's you know, it's 273 00:15:15,840 --> 00:15:19,080 Speaker 2: obviously something we pay a lot of attention to. We 274 00:15:19,200 --> 00:15:22,920 Speaker 2: think there's more of that risk in the much smaller, 275 00:15:23,960 --> 00:15:27,160 Speaker 2: much smaller local banks than then say, at the regional 276 00:15:27,240 --> 00:15:30,440 Speaker 2: or super regional level. And then also of course you 277 00:15:30,440 --> 00:15:33,000 Speaker 2: would find it in the money sector banks. But we 278 00:15:33,000 --> 00:15:39,280 Speaker 2: we we we think it's relatively diversified at the at 279 00:15:39,280 --> 00:15:42,280 Speaker 2: the regional super regional bank level. So we feel pretty 280 00:15:42,320 --> 00:15:43,240 Speaker 2: comfortable with that. 281 00:15:44,000 --> 00:15:48,880 Speaker 3: Okay, So let's shift to economy. So overall, the US 282 00:15:48,880 --> 00:15:52,160 Speaker 3: consumers are in pretty good shape, but there are some 283 00:15:52,240 --> 00:15:55,960 Speaker 3: pocket of stress. We know that pandemic savings have been 284 00:15:55,960 --> 00:15:59,239 Speaker 3: fully depleted as of March based on Feeds report, and 285 00:15:59,480 --> 00:16:02,520 Speaker 3: the unemployes has risen from three point four percent at 286 00:16:02,520 --> 00:16:06,080 Speaker 3: the beginning of last year to four point one. Now 287 00:16:06,280 --> 00:16:10,480 Speaker 3: we've heard some lenders talk about this unmeasurable risk of 288 00:16:10,640 --> 00:16:14,520 Speaker 3: delayed charge of effect where borrowers who might have defaulted 289 00:16:14,560 --> 00:16:17,680 Speaker 3: in the last few years actually managed to avoid it 290 00:16:18,480 --> 00:16:21,840 Speaker 3: or delayed thanks to forbear and s and stimulus checks. 291 00:16:22,360 --> 00:16:25,240 Speaker 3: And this delayed charge of effect is the reason why 292 00:16:25,280 --> 00:16:29,560 Speaker 3: we are seeing charge of settling up of pre pandemic 293 00:16:29,680 --> 00:16:33,960 Speaker 3: levels despite a strong label market how concerned are you 294 00:16:34,040 --> 00:16:37,040 Speaker 3: about this delayed charge of effect? Do you see this 295 00:16:37,120 --> 00:16:41,120 Speaker 3: as a threat to the asset quality of the sector 296 00:16:41,360 --> 00:16:41,920 Speaker 3: in general? 297 00:16:43,040 --> 00:16:45,640 Speaker 2: I don't see that as a large threat, right And 298 00:16:45,680 --> 00:16:49,440 Speaker 2: I think, you know, we have to talk about very respectfully. 299 00:16:49,480 --> 00:16:52,880 Speaker 2: We have to talk about the cohorts of consumers and 300 00:16:52,920 --> 00:16:57,360 Speaker 2: where that weakness is most prevalent right now, and so 301 00:16:57,680 --> 00:17:01,480 Speaker 2: we continue to see the first and second, if you will, 302 00:17:01,680 --> 00:17:04,879 Speaker 2: tiered cohort doing you know, doing quite well. 303 00:17:05,280 --> 00:17:08,280 Speaker 1: I can I ask you, Coleen about leverage loans. You know, 304 00:17:08,320 --> 00:17:12,040 Speaker 1: that's been another big outperformer this year. I think people 305 00:17:12,080 --> 00:17:16,200 Speaker 1: started the year quite cautious on loans because the default 306 00:17:16,240 --> 00:17:18,800 Speaker 1: rate was going to be higher than in high yeld bonds. 307 00:17:19,119 --> 00:17:22,040 Speaker 1: Also rates were going to come down and it's floating obviously, 308 00:17:22,040 --> 00:17:24,760 Speaker 1: so that so that returns would suffer. But leverage loans 309 00:17:24,760 --> 00:17:27,560 Speaker 1: have done extremely well, and you know, despite record issues. 310 00:17:27,600 --> 00:17:29,919 Speaker 1: I mean that's mostly been for repricing, refinancing, so that 311 00:17:29,960 --> 00:17:32,280 Speaker 1: the net supply is still very very low. But how 312 00:17:32,280 --> 00:17:36,119 Speaker 1: does the value proposition of leverage loans compared to bonds 313 00:17:36,119 --> 00:17:36,560 Speaker 1: at the moment. 314 00:17:37,400 --> 00:17:41,680 Speaker 2: Yeah, you know, generally we think there I'm going to 315 00:17:42,080 --> 00:17:44,119 Speaker 2: probably don't like this answer. We actually see them as 316 00:17:44,160 --> 00:17:48,000 Speaker 2: relatively neutral because of offsets. Okay, so you're right, on 317 00:17:48,080 --> 00:17:51,240 Speaker 2: a on a pure valuation basis, the loan market is 318 00:17:51,280 --> 00:17:54,280 Speaker 2: looking more attractive than high yeld bonds. But we're also 319 00:17:54,320 --> 00:17:55,880 Speaker 2: going to point to the fact that the high yell 320 00:17:56,280 --> 00:18:00,040 Speaker 2: bond market is a higher quality market. And so so 321 00:18:00,280 --> 00:18:03,120 Speaker 2: we feel those two things, you know, sort of are offsetting, 322 00:18:03,119 --> 00:18:08,399 Speaker 2: making us relatively relatively neutral relative, you know, between the 323 00:18:08,440 --> 00:18:10,160 Speaker 2: two between the two sectors. 324 00:18:10,720 --> 00:18:14,120 Speaker 1: So not even the seniority or anything else would would 325 00:18:14,119 --> 00:18:15,919 Speaker 1: attract you to loans versus the bonds. 326 00:18:16,960 --> 00:18:19,320 Speaker 2: Well, and that's you know, that's what the detailed devil 327 00:18:19,359 --> 00:18:21,080 Speaker 2: is in the details, right, because you really need to 328 00:18:21,200 --> 00:18:22,880 Speaker 2: you know, first of all, the loan market is more 329 00:18:22,960 --> 00:18:27,760 Speaker 2: so these days, a loan only structure market, and so 330 00:18:27,880 --> 00:18:29,280 Speaker 2: then you have to pay a lot of attention to 331 00:18:29,359 --> 00:18:31,840 Speaker 2: what your security really is in those structures and what 332 00:18:31,880 --> 00:18:34,000 Speaker 2: it's going to look like on a recovery basis. So 333 00:18:34,119 --> 00:18:36,560 Speaker 2: know that in and of itself wouldn't drive us to 334 00:18:37,240 --> 00:18:39,960 Speaker 2: a stronger view. And then even you know, more broadly, 335 00:18:40,280 --> 00:18:42,280 Speaker 2: I'm you know, I was looking at the numbers earlier 336 00:18:42,280 --> 00:18:44,800 Speaker 2: and it's it's it's sort of a little bit all 337 00:18:44,840 --> 00:18:47,480 Speaker 2: over the place, but there is a broader consensus that 338 00:18:47,600 --> 00:18:51,399 Speaker 2: recoveries on the loan side are coming down. In any case, again, 339 00:18:51,440 --> 00:18:53,320 Speaker 2: you have to be careful about whether you're looking at 340 00:18:53,359 --> 00:18:56,240 Speaker 2: complex capital structures or loan only capital structures, you know, 341 00:18:56,280 --> 00:18:57,400 Speaker 2: to kind of make that judgment. 342 00:18:58,160 --> 00:19:00,280 Speaker 1: And then of course the excitement this year really for 343 00:19:00,280 --> 00:19:04,240 Speaker 1: for investors has been around private credit. You know, everyone 344 00:19:04,480 --> 00:19:07,439 Speaker 1: is just you know, very excited. I mean it's it 345 00:19:07,560 --> 00:19:09,960 Speaker 1: sounds a little bit like leverage loans used to be 346 00:19:10,000 --> 00:19:13,880 Speaker 1: a long time ago. You know, But are they exciting 347 00:19:13,880 --> 00:19:15,720 Speaker 1: for you? I mean you are you joining that uh 348 00:19:16,480 --> 00:19:17,400 Speaker 1: that rush? 349 00:19:17,760 --> 00:19:19,440 Speaker 2: I don't know, no, we would say we were joining 350 00:19:19,480 --> 00:19:21,919 Speaker 2: that rush. But to me personally, yes, private credit is 351 00:19:21,960 --> 00:19:25,120 Speaker 2: really interesting because it's just another great example of how 352 00:19:25,160 --> 00:19:27,960 Speaker 2: the capital markets work to find, you know, to meet 353 00:19:27,960 --> 00:19:32,240 Speaker 2: the needs of companies through financing options. Right. And you know, again, 354 00:19:32,280 --> 00:19:35,360 Speaker 2: I started my career in middle market lending very very 355 00:19:35,400 --> 00:19:37,359 Speaker 2: long time ago. So to me, you know, I you know, 356 00:19:37,440 --> 00:19:39,800 Speaker 2: this whole idea that private credit is new is doesn't 357 00:19:39,840 --> 00:19:43,000 Speaker 2: feel that new, right, It just looks like it's been renamed. 358 00:19:44,119 --> 00:19:46,040 Speaker 2: So and I think it's you know, it's a it's 359 00:19:46,080 --> 00:19:49,080 Speaker 2: a really interesting area to do work. It requires the 360 00:19:49,119 --> 00:19:52,840 Speaker 2: stuff I love, which is deep credit analysis, you know, 361 00:19:52,920 --> 00:19:54,640 Speaker 2: and so you know, so I think it's I think 362 00:19:54,640 --> 00:19:57,640 Speaker 2: it's an really interesting area that will continue to grow. 363 00:19:58,440 --> 00:20:02,360 Speaker 2: We will, you know, I have to see how the 364 00:20:02,480 --> 00:20:06,480 Speaker 2: growth impacts sort of the regulatory environment around private credit. 365 00:20:07,240 --> 00:20:11,200 Speaker 2: But there's it's just it's a fascinating, evolving market which 366 00:20:11,320 --> 00:20:14,320 Speaker 2: which look as providing capital to companies, and so that's 367 00:20:14,320 --> 00:20:15,639 Speaker 2: a good thing from my perspective. 368 00:20:16,359 --> 00:20:19,119 Speaker 1: Is it an investment though, I mean the Pimco speaker 369 00:20:19,160 --> 00:20:21,840 Speaker 1: we had on recently said that it's just not compensating 370 00:20:22,000 --> 00:20:24,520 Speaker 1: enough for the illiquidity and the lack of transparency and 371 00:20:24,600 --> 00:20:28,080 Speaker 1: all of the other risks. They're obviously a big investor, 372 00:20:28,520 --> 00:20:31,480 Speaker 1: so you you look at these things, you know, on 373 00:20:31,520 --> 00:20:36,280 Speaker 1: a relative basis, and must be considering, you know, private 374 00:20:36,359 --> 00:20:39,000 Speaker 1: versus public. Is there enough of a pickup on for 375 00:20:39,080 --> 00:20:41,160 Speaker 1: sacrificing that liquidity to go private. 376 00:20:42,320 --> 00:20:45,479 Speaker 2: We're not involved in the private markets right now. So 377 00:20:46,640 --> 00:20:48,760 Speaker 2: but what I would say to that is, look, I 378 00:20:48,800 --> 00:20:53,240 Speaker 2: think these markets evolve over time, and so you know, 379 00:20:53,320 --> 00:20:56,880 Speaker 2: I think I think you are getting spread pick up. Again. 380 00:20:56,920 --> 00:20:59,639 Speaker 2: I don't have insight into the deals specifically themselves, but 381 00:20:59,720 --> 00:21:02,720 Speaker 2: I think I think you are getting paid some for 382 00:21:02,800 --> 00:21:07,280 Speaker 2: the additional illiquidity, and I think that liquidity will change 383 00:21:07,320 --> 00:21:10,480 Speaker 2: over time. I think, you know, from a Vanguard perspective, 384 00:21:11,000 --> 00:21:14,280 Speaker 2: you know, we're always trying to provide access, you know, 385 00:21:14,600 --> 00:21:19,440 Speaker 2: to broaden investment strategies for the entire investing population, right, 386 00:21:19,560 --> 00:21:22,439 Speaker 2: and so you know, we'll pay attention to this and 387 00:21:22,520 --> 00:21:25,040 Speaker 2: try to understand it and you know, try to help 388 00:21:25,960 --> 00:21:28,800 Speaker 2: sort of evolve it ourselves in terms of our own 389 00:21:28,800 --> 00:21:33,159 Speaker 2: thinking around it, because you know, like I said, it's 390 00:21:33,200 --> 00:21:37,400 Speaker 2: in line with our view of trying to democratize access 391 00:21:37,400 --> 00:21:38,159 Speaker 2: to investments. 392 00:21:38,800 --> 00:21:40,680 Speaker 1: But just to be clear, when you say we're not involved, 393 00:21:40,760 --> 00:21:42,320 Speaker 1: you mean just on the research side. I mean you're 394 00:21:42,359 --> 00:21:44,960 Speaker 1: not saying that Vanguard as a whole is not participating 395 00:21:44,960 --> 00:21:54,200 Speaker 1: at all in any private credit markets. Yeah, right, Okay, 396 00:21:54,200 --> 00:21:55,920 Speaker 1: I just wanted to make that clear for our listeners. 397 00:21:56,320 --> 00:21:57,440 Speaker 1: The other thing I wanted to ask you about is 398 00:21:57,440 --> 00:22:01,320 Speaker 1: structure products, because that's that's a big area everyone is 399 00:22:01,359 --> 00:22:05,400 Speaker 1: excited about. Abs issuance has been massive. People are talking 400 00:22:05,480 --> 00:22:08,879 Speaker 1: about it also in the asset back well, there's an 401 00:22:08,880 --> 00:22:11,160 Speaker 1: extension of private credit. It just gets you know, into 402 00:22:11,200 --> 00:22:13,679 Speaker 1: the tens of trillions of dollars. So again, it's just 403 00:22:13,720 --> 00:22:17,399 Speaker 1: one of those huge opportunities for people. They see it 404 00:22:17,440 --> 00:22:20,040 Speaker 1: as you know, secured, they see it as as you know, 405 00:22:20,400 --> 00:22:24,560 Speaker 1: higher yielding and in all manner of ways better relative 406 00:22:24,600 --> 00:22:28,080 Speaker 1: value than than you know, conventional bonds. But wonder how 407 00:22:28,119 --> 00:22:32,200 Speaker 1: much how much you're seeing activity and opportunity there on. 408 00:22:32,119 --> 00:22:34,479 Speaker 2: The structured product side. Yeah, I mean we're very active 409 00:22:34,520 --> 00:22:36,679 Speaker 2: on the on on both A B S and C mbs. 410 00:22:36,760 --> 00:22:38,960 Speaker 2: On the A B S side, you know, we particularly 411 00:22:39,119 --> 00:22:43,119 Speaker 2: like it in the short end, and so you know, 412 00:22:43,200 --> 00:22:45,639 Speaker 2: we think, uh, you know, it's as you said, it 413 00:22:45,800 --> 00:22:50,760 Speaker 2: offers access, you know to diversified you know, collateral and 414 00:22:50,840 --> 00:22:54,080 Speaker 2: a structure that gives you a lot of security, and 415 00:22:54,119 --> 00:22:57,280 Speaker 2: we think it trades attractively relative you know, to other 416 00:22:57,320 --> 00:22:59,479 Speaker 2: asset classes that we're looking at. So it is it 417 00:22:59,560 --> 00:23:01,520 Speaker 2: is a place we find very attractive. 418 00:23:02,160 --> 00:23:04,720 Speaker 1: Is it on any particular sector? Is it consumer? Is 419 00:23:04,760 --> 00:23:07,520 Speaker 1: it autos? Is there anywhere else are you're looking at? 420 00:23:07,880 --> 00:23:11,040 Speaker 2: Yeah, I mean the majority of our exposure would be 421 00:23:11,880 --> 00:23:14,040 Speaker 2: on the auto side, not that we aren't looking at others. 422 00:23:14,240 --> 00:23:16,840 Speaker 2: Other there's less issuance in some of the other smaller 423 00:23:16,840 --> 00:23:19,720 Speaker 2: sectors around ABS than than there is an autos. So 424 00:23:19,760 --> 00:23:22,520 Speaker 2: that's just that's a driver of you know, what you 425 00:23:22,560 --> 00:23:23,240 Speaker 2: have access to. 426 00:23:23,840 --> 00:23:25,840 Speaker 1: And you'd say that there is good relative value there 427 00:23:25,880 --> 00:23:28,960 Speaker 1: in structured against nonstructured products. 428 00:23:29,400 --> 00:23:31,679 Speaker 2: Yeah, against you know, corporate ig which is you know, 429 00:23:31,680 --> 00:23:34,200 Speaker 2: how we look at it. We think there's good relative 430 00:23:34,280 --> 00:23:34,800 Speaker 2: value there. 431 00:23:35,160 --> 00:23:37,880 Speaker 1: Okay, is there anything else out there that you're looking 432 00:23:37,880 --> 00:23:41,320 Speaker 1: at that we're not we're not asking about right now. 433 00:23:43,000 --> 00:23:45,159 Speaker 2: I would say, you know, you know, we'll look at 434 00:23:45,160 --> 00:23:46,639 Speaker 2: what one of the things is topical is on the 435 00:23:46,680 --> 00:23:49,600 Speaker 2: CNBS side, So in the structured product space, right, Like, 436 00:23:49,640 --> 00:23:52,400 Speaker 2: that's another area where I think our research team brings 437 00:23:52,400 --> 00:23:54,919 Speaker 2: our you know, our deep research approach to bear because 438 00:23:55,280 --> 00:23:57,560 Speaker 2: you know, there is a tendency to throw the baby 439 00:23:57,560 --> 00:23:59,760 Speaker 2: out with the bathwater or whatever that phrase is, right, 440 00:23:59,800 --> 00:24:03,880 Speaker 2: and so we think there's opportunities to use good research 441 00:24:03,960 --> 00:24:08,399 Speaker 2: to look through the CMBs market and find opportunities. And 442 00:24:08,440 --> 00:24:12,399 Speaker 2: so you know, there's you know, we think there's like 443 00:24:12,600 --> 00:24:15,840 Speaker 2: you know, obviously office has been stressed, but again, you know, 444 00:24:15,880 --> 00:24:18,800 Speaker 2: there's shifting momentum there. There's a long period of time, 445 00:24:18,880 --> 00:24:20,680 Speaker 2: There's been a period of time as changes in the 446 00:24:20,720 --> 00:24:24,560 Speaker 2: work environment have led you know, more Gateway City buildings 447 00:24:24,600 --> 00:24:27,520 Speaker 2: to be less attractive and things moved to the suburbs. 448 00:24:27,560 --> 00:24:29,480 Speaker 2: That's so different. That's like a flip flop from what 449 00:24:29,520 --> 00:24:31,240 Speaker 2: it used to be, right, and that that could move 450 00:24:31,280 --> 00:24:34,359 Speaker 2: again as we evolve through sort of our working environments. 451 00:24:34,880 --> 00:24:37,879 Speaker 2: And then you know, with those again the structured nature 452 00:24:37,920 --> 00:24:40,600 Speaker 2: of those products and the diversification you also have, you know, 453 00:24:40,640 --> 00:24:43,320 Speaker 2: other deals that have other good quality assets in them 454 00:24:43,320 --> 00:24:46,040 Speaker 2: that might be reflective of other sectors. And so digging 455 00:24:46,080 --> 00:24:49,480 Speaker 2: in really understanding the CMBs structure, you know, we found 456 00:24:49,480 --> 00:24:52,280 Speaker 2: opportunities there and that's something we'll we'll continue to look 457 00:24:52,320 --> 00:24:55,720 Speaker 2: through as this long tail of office kind of evolves 458 00:24:55,760 --> 00:24:57,920 Speaker 2: through through its its challenges. 459 00:24:58,800 --> 00:25:02,280 Speaker 3: Colin, you mentioned you reference for utilities and financial and 460 00:25:02,320 --> 00:25:05,920 Speaker 3: triple B rated bones specifically. So my question is what 461 00:25:06,000 --> 00:25:10,280 Speaker 3: will make you position more defensively by preferring singly or 462 00:25:10,280 --> 00:25:10,960 Speaker 3: what triple B. 463 00:25:12,240 --> 00:25:15,200 Speaker 2: I think, if you know, as I think for us, 464 00:25:15,359 --> 00:25:19,920 Speaker 2: defensively would be kind of even within the triple B space. 465 00:25:20,040 --> 00:25:23,800 Speaker 2: How we position on a sector basis, right, We're always 466 00:25:23,800 --> 00:25:28,800 Speaker 2: looking for companies that can withstand cycles and have strong 467 00:25:28,840 --> 00:25:34,040 Speaker 2: balance sheets and so and and trend away for lean 468 00:25:34,080 --> 00:25:37,320 Speaker 2: away from more idio adiosyncratic stories, because that's something people 469 00:25:37,440 --> 00:25:39,560 Speaker 2: kind of forget when they think about the IG universe. 470 00:25:39,880 --> 00:25:41,800 Speaker 2: You know, even in the triple B space, you have 471 00:25:41,920 --> 00:25:44,760 Speaker 2: opportunities to you know, to really dig in and find 472 00:25:44,840 --> 00:25:48,200 Speaker 2: some idiosyncratic story. So if if if we were leaning 473 00:25:48,280 --> 00:25:51,200 Speaker 2: higher in quality, we'd be you know, trend leaning away 474 00:25:51,200 --> 00:25:53,760 Speaker 2: from those types of stories and leaning into sectors that 475 00:25:53,760 --> 00:25:57,080 Speaker 2: we felt were more defensive rather than a wholesale move to, 476 00:25:57,560 --> 00:25:59,919 Speaker 2: you know, to the higher quality end of the market. 477 00:26:01,040 --> 00:26:04,159 Speaker 1: What about the rest of the world, Colleen, Everyone is 478 00:26:04,359 --> 00:26:09,880 Speaker 1: very US centric. We're all loaded up on dollar assets. 479 00:26:10,400 --> 00:26:13,760 Speaker 1: But there are big credit markets out there, and I'm wondering, 480 00:26:14,080 --> 00:26:16,119 Speaker 1: you know, a lot of people talk about value in 481 00:26:16,200 --> 00:26:19,719 Speaker 1: Europe at the moment. Europe is a big, big market. 482 00:26:20,359 --> 00:26:22,639 Speaker 1: There are opportunities in Asia as well. I was wondering, 483 00:26:22,720 --> 00:26:26,679 Speaker 1: how how you see the rest of the global credit markets. 484 00:26:27,440 --> 00:26:30,200 Speaker 2: Yeah, you know, Europe has been interesting, even though as 485 00:26:30,200 --> 00:26:33,520 Speaker 2: you know, it's got a slower growth backdrop than than 486 00:26:33,560 --> 00:26:39,600 Speaker 2: the US, its valuations have been relatively speaking, more attractive 487 00:26:39,960 --> 00:26:42,359 Speaker 2: and even still you know, when you look at on 488 00:26:42,400 --> 00:26:45,480 Speaker 2: a spread basis, you know, more attractive than US i G. 489 00:26:45,840 --> 00:26:48,359 Speaker 2: So that is that is an area that we have 490 00:26:48,440 --> 00:26:51,640 Speaker 2: been focused on, and we think there's still a little 491 00:26:51,680 --> 00:26:54,439 Speaker 2: bit more room for that to run, so so we 492 00:26:54,480 --> 00:26:58,800 Speaker 2: continue to focus there. You know, the the we have 493 00:26:58,880 --> 00:27:02,760 Speaker 2: a team in a small team in Australia that covers 494 00:27:03,480 --> 00:27:07,959 Speaker 2: covers that market and there's some interesting sort of if 495 00:27:08,000 --> 00:27:11,119 Speaker 2: you want to call them countercyclical or counter rate cycle, 496 00:27:11,520 --> 00:27:14,920 Speaker 2: you know, aspects to that market that make it an 497 00:27:14,920 --> 00:27:18,520 Speaker 2: interesting uh spot for us. Given that we have a 498 00:27:18,560 --> 00:27:21,480 Speaker 2: dedicated team on the ground to invest in Australian corporates, 499 00:27:21,480 --> 00:27:24,639 Speaker 2: that again provide some good diversification, you know, from a 500 00:27:24,840 --> 00:27:27,679 Speaker 2: from not just a geography, you know, but a cycle 501 00:27:27,720 --> 00:27:28,960 Speaker 2: basis perspective. 502 00:27:29,080 --> 00:27:31,240 Speaker 1: And in Europe, are there any particular countries you focus 503 00:27:31,320 --> 00:27:34,760 Speaker 1: on all types of bonds, you know, sectors. 504 00:27:35,800 --> 00:27:38,480 Speaker 2: Yeah, so I wouldn't say that we are focused on 505 00:27:38,520 --> 00:27:43,160 Speaker 2: any particular geography in Europe. We're a fundamental, bottoms up 506 00:27:43,280 --> 00:27:47,560 Speaker 2: kind of group and so it's it's sector oriented and 507 00:27:47,800 --> 00:27:51,040 Speaker 2: kind of not unlike you know, not unlike the US. 508 00:27:51,480 --> 00:27:54,760 Speaker 2: We've been focused on things like technology again, looking for 509 00:27:54,840 --> 00:27:57,239 Speaker 2: opportunities there, driven by some of the stuff we were 510 00:27:57,280 --> 00:28:01,960 Speaker 2: talking about earlier in the in the in the conversation, 511 00:28:02,320 --> 00:28:04,520 Speaker 2: we've seen weak spots in Europe that that you know, 512 00:28:04,520 --> 00:28:08,400 Speaker 2: we've been sort of avoiding, and in terms of luxury 513 00:28:08,440 --> 00:28:11,240 Speaker 2: retail and on the auto side, right that's been you know, 514 00:28:11,280 --> 00:28:13,240 Speaker 2: kind of well publicized in some of the papers that 515 00:28:13,240 --> 00:28:15,399 Speaker 2: that's an area of weakness that we're that we're staying 516 00:28:15,400 --> 00:28:15,880 Speaker 2: away from. 517 00:28:16,440 --> 00:28:20,080 Speaker 1: Chinese credit markets have also been very interesting, you know, 518 00:28:20,240 --> 00:28:22,720 Speaker 1: not that long ago, people are calling them uninvestable, but 519 00:28:22,760 --> 00:28:25,000 Speaker 1: then when all the all the stimulus came in, people 520 00:28:25,000 --> 00:28:26,760 Speaker 1: were piling back in at least on the actually side. 521 00:28:26,920 --> 00:28:29,560 Speaker 1: Is there any interest there? I mean, I know it's 522 00:28:29,600 --> 00:28:31,800 Speaker 1: just it's very sort of real estate centric, but is 523 00:28:31,840 --> 00:28:33,159 Speaker 1: there any interest in that market? 524 00:28:33,359 --> 00:28:36,760 Speaker 2: Real estate centric? And I think mostly on shore from 525 00:28:36,800 --> 00:28:39,400 Speaker 2: what I understand. So we're not we're not investing in 526 00:28:39,520 --> 00:28:42,320 Speaker 2: China right now for exactly what we're talking about. Not 527 00:28:42,360 --> 00:28:46,400 Speaker 2: a lot of transparency, not a lot of very sector 528 00:28:46,520 --> 00:28:51,080 Speaker 2: oriented from from a property perspective. So it's sorry, it's 529 00:28:51,120 --> 00:28:52,800 Speaker 2: just not a market that we're involved in right now. 530 00:28:53,040 --> 00:28:55,520 Speaker 1: Okay, it is. It is a huge market though, so 531 00:28:55,640 --> 00:28:58,360 Speaker 1: essentially down the road at some point, you. 532 00:28:58,400 --> 00:29:00,680 Speaker 2: Know, we're we never you know, we're always looking and 533 00:29:00,720 --> 00:29:04,040 Speaker 2: researching and trying to understand, you know, where there's opportunities, 534 00:29:04,280 --> 00:29:06,960 Speaker 2: so I would put that in that bucket. 535 00:29:06,760 --> 00:29:08,760 Speaker 1: And elsewhere in emerging markets, I mean, those are the 536 00:29:08,760 --> 00:29:11,840 Speaker 1: bonds that are getting hammered and probably most exposed to 537 00:29:12,520 --> 00:29:15,720 Speaker 1: election risk if there's a certainly a strong leaning towards 538 00:29:15,840 --> 00:29:20,400 Speaker 1: Republicans given the last election, Mexican pacer and all that stuff. 539 00:29:20,960 --> 00:29:23,880 Speaker 1: But are there opportunities in emerging markets which which again 540 00:29:23,960 --> 00:29:25,960 Speaker 1: just seem cheap compared to the US. 541 00:29:26,480 --> 00:29:28,240 Speaker 2: Yeah. I mean there's a couple of countries that I 542 00:29:28,240 --> 00:29:31,840 Speaker 2: know talking to my EM research lead that they're pretty 543 00:29:31,840 --> 00:29:33,680 Speaker 2: focused on, Turkey being one of them. They have a 544 00:29:33,720 --> 00:29:36,720 Speaker 2: couple of corporate exposures there. And then you know, the 545 00:29:36,720 --> 00:29:38,960 Speaker 2: other one we were talking about was Columbia with elections 546 00:29:38,960 --> 00:29:41,120 Speaker 2: coming up in twenty twenty six. You know, they think 547 00:29:41,160 --> 00:29:43,800 Speaker 2: that the market will start to focus on that in 548 00:29:43,840 --> 00:29:46,880 Speaker 2: twenty twenty five and could be in a positive way. 549 00:29:46,960 --> 00:29:49,640 Speaker 2: So those are just two examples again, you know, with 550 00:29:49,680 --> 00:29:51,840 Speaker 2: these markets, and this must make them so interesting right 551 00:29:52,520 --> 00:29:55,360 Speaker 2: in particular, there's you know, the EM market is fascinating 552 00:29:55,400 --> 00:29:56,760 Speaker 2: to me. I think if I hadn't been a high 553 00:29:56,800 --> 00:29:58,560 Speaker 2: Yeald analyst, that's one of the areas I would have 554 00:29:58,680 --> 00:30:02,680 Speaker 2: liked to have explored more because there's no broad generalization 555 00:30:02,760 --> 00:30:05,239 Speaker 2: you can make, like every country, every sovereign is just 556 00:30:05,280 --> 00:30:08,280 Speaker 2: so so different in how things are going to affect it. 557 00:30:08,360 --> 00:30:09,920 Speaker 2: So it's a fascinating area. 558 00:30:10,680 --> 00:30:14,240 Speaker 3: Colin talking about election today is election in the US, 559 00:30:14,400 --> 00:30:19,520 Speaker 3: and who wins could significantly impact the financial sector. If 560 00:30:19,560 --> 00:30:21,720 Speaker 3: Donald Trump returns to the White House, it may mean 561 00:30:21,760 --> 00:30:26,440 Speaker 3: a lighter regulatory environment, more riskticking by banks, and potentially 562 00:30:26,480 --> 00:30:29,280 Speaker 3: a steper Yiel code. On the other hand, if you 563 00:30:29,320 --> 00:30:33,360 Speaker 3: have Kamala has we may see the basil three endgame 564 00:30:33,360 --> 00:30:37,880 Speaker 3: requirements in a potentially less stringent form. How would each 565 00:30:37,920 --> 00:30:41,880 Speaker 3: of these outcomes shape your view on the financial sector? 566 00:30:42,040 --> 00:30:43,960 Speaker 2: Yeah, you know, I'm honestly not going to sit here 567 00:30:43,960 --> 00:30:47,160 Speaker 2: today and try to figure out which outcome is going 568 00:30:47,200 --> 00:30:49,760 Speaker 2: to drive what kind of policies are changes. You know, 569 00:30:49,960 --> 00:30:53,520 Speaker 2: we're going to as a research team, we treat every 570 00:30:53,600 --> 00:30:56,120 Speaker 2: risk the same in the sense that we look at 571 00:30:56,120 --> 00:30:59,160 Speaker 2: the risk, we try to understand the potential scenarios and 572 00:30:59,200 --> 00:31:01,400 Speaker 2: outcomes which had a book and what we think could 573 00:31:01,440 --> 00:31:04,000 Speaker 2: happen in the markets, and then and then you know, 574 00:31:04,120 --> 00:31:06,960 Speaker 2: and then we evolved. But I'm, you know, candidly just 575 00:31:07,000 --> 00:31:09,080 Speaker 2: not going to sit here today, and and and try 576 00:31:09,120 --> 00:31:11,920 Speaker 2: to make a like make a make a prediction there. 577 00:31:12,280 --> 00:31:16,080 Speaker 2: You know, there'll be volatility around any election, and we 578 00:31:16,120 --> 00:31:18,600 Speaker 2: would say the same thing to our investors that we 579 00:31:18,640 --> 00:31:21,320 Speaker 2: say around other volatility. Just stay the course, focus on 580 00:31:21,360 --> 00:31:24,479 Speaker 2: your long term goals and let the noise, you know, 581 00:31:24,760 --> 00:31:26,360 Speaker 2: let the noise settle out around you. 582 00:31:27,280 --> 00:31:30,480 Speaker 1: Given you a huge track record in in high yield, Colleen, 583 00:31:30,520 --> 00:31:33,600 Speaker 1: I mean, I'd love to have veterans like yourself on 584 00:31:33,640 --> 00:31:36,520 Speaker 1: the show because you you've got that really great perspective. 585 00:31:37,040 --> 00:31:39,480 Speaker 1: We have a lot of people telling us that things 586 00:31:39,480 --> 00:31:42,760 Speaker 1: are different this time, which immediately sets off alarm bells 587 00:31:42,760 --> 00:31:46,080 Speaker 1: in my head. You know, the high yield is higher quality, 588 00:31:46,640 --> 00:31:49,000 Speaker 1: that you know, there are there are a lot lot 589 00:31:49,000 --> 00:31:52,160 Speaker 1: better protections in place for investors, That liquidity is great, 590 00:31:52,640 --> 00:31:54,920 Speaker 1: that it doesn't really matter about the spread because you've 591 00:31:54,920 --> 00:31:57,600 Speaker 1: got enough yield to to to you know, overcome any 592 00:31:57,600 --> 00:32:00,680 Speaker 1: fears you might have. All those things, you know, kind 593 00:32:00,680 --> 00:32:02,080 Speaker 1: of worrying me a bit, And that's why I use 594 00:32:02,080 --> 00:32:04,880 Speaker 1: the work complacency. But is it really different this time? 595 00:32:05,080 --> 00:32:07,960 Speaker 1: What gives you the sense that you know we should 596 00:32:08,040 --> 00:32:08,520 Speaker 1: not worry? 597 00:32:09,200 --> 00:32:10,920 Speaker 2: Yeah, well I don't. Yeah, I agree with you. That 598 00:32:10,960 --> 00:32:13,760 Speaker 2: phrase it's different this time would would raise alarm bills 599 00:32:13,800 --> 00:32:14,400 Speaker 2: for me as well. 600 00:32:14,440 --> 00:32:14,760 Speaker 3: Sort of. 601 00:32:15,080 --> 00:32:17,000 Speaker 2: I don't think I'm going to stay away from the phrase, 602 00:32:17,040 --> 00:32:20,040 Speaker 2: but do acknowledge that what you just described is accurate. 603 00:32:20,160 --> 00:32:23,680 Speaker 2: Right compared to thirty years ago, you know, there the 604 00:32:23,720 --> 00:32:26,920 Speaker 2: market is very different. It is a higher quality market 605 00:32:28,240 --> 00:32:31,640 Speaker 2: and and a much more liquid market than it was 606 00:32:31,720 --> 00:32:34,840 Speaker 2: back then. So you know, I acknowledge those two things 607 00:32:34,880 --> 00:32:37,200 Speaker 2: to be true. But at the same time, we're still, 608 00:32:37,520 --> 00:32:41,720 Speaker 2: you know, investing in leveraged transactions, and so we need 609 00:32:41,760 --> 00:32:44,160 Speaker 2: to do the deep work to understand the deals that 610 00:32:44,200 --> 00:32:47,320 Speaker 2: we're invested in. And you know, so it's a it 611 00:32:47,360 --> 00:32:49,680 Speaker 2: is not I would not make a comment that broadly. 612 00:32:49,960 --> 00:32:51,920 Speaker 2: You know, you can just invest in high yield and 613 00:32:52,000 --> 00:32:54,080 Speaker 2: you'll be fine. Right, You need to do your work. 614 00:32:54,120 --> 00:32:56,120 Speaker 2: You need to pick your spots, you need to understand 615 00:32:56,120 --> 00:32:58,520 Speaker 2: what companies you're investing in, and then you know, the 616 00:32:58,600 --> 00:33:01,200 Speaker 2: other components that we just talked about of the market 617 00:33:01,320 --> 00:33:03,280 Speaker 2: can help, but they're not going to protect you if 618 00:33:03,320 --> 00:33:04,240 Speaker 2: you pick bad deals. 619 00:33:05,080 --> 00:33:07,560 Speaker 1: But it is all relative in credit, and I look 620 00:33:07,600 --> 00:33:09,560 Speaker 1: at I mean, I'm a total credit geek, but I 621 00:33:09,600 --> 00:33:11,440 Speaker 1: look at the spreads between the spreads. So you know, 622 00:33:11,480 --> 00:33:13,280 Speaker 1: I look at single beat A triple C and how 623 00:33:13,400 --> 00:33:15,960 Speaker 1: tight that's becoming. You know, single aid to double A. 624 00:33:16,040 --> 00:33:20,040 Speaker 1: It's very very tight on a historical basis. And then, 625 00:33:20,200 --> 00:33:21,880 Speaker 1: you know, so I ask people that have been doing 626 00:33:21,880 --> 00:33:23,160 Speaker 1: this a long time and they say, oh, don't worry 627 00:33:23,160 --> 00:33:24,720 Speaker 1: about that because of the yield. And then you sort 628 00:33:24,720 --> 00:33:26,080 Speaker 1: of push them a bit and they say, well, actually, 629 00:33:26,320 --> 00:33:28,800 Speaker 1: you know, it doesn't matter until it matters, by which 630 00:33:28,800 --> 00:33:31,400 Speaker 1: they mean, you know, when things get choppy, when things 631 00:33:31,400 --> 00:33:34,640 Speaker 1: get very volatile, then we start worrying about credit spreads. Again, 632 00:33:35,520 --> 00:33:37,200 Speaker 1: there are a lot of different things on the horizon 633 00:33:37,240 --> 00:33:40,720 Speaker 1: that could cause that volatility. Am I being alarmist? 634 00:33:41,640 --> 00:33:44,400 Speaker 2: Now? I don't think you're being alarmist. You're being an analyst, right, 635 00:33:44,480 --> 00:33:47,280 Speaker 2: you know, like trying to understand the risks that are 636 00:33:47,280 --> 00:33:50,120 Speaker 2: out there, just like we do. And so we're never complacent, 637 00:33:50,240 --> 00:33:52,640 Speaker 2: particularly when we're investing in high yield. You know, we 638 00:33:53,440 --> 00:33:56,600 Speaker 2: want to think through those risks and use portfolio positioning 639 00:33:56,640 --> 00:34:00,800 Speaker 2: as well sizing of positions to help us us. You know, 640 00:34:00,880 --> 00:34:03,520 Speaker 2: if we have concerns or we think there are risks 641 00:34:03,560 --> 00:34:07,480 Speaker 2: out there that we can't quantify, or you know, or 642 00:34:07,920 --> 00:34:10,640 Speaker 2: you know, then we then we adjust with with position 643 00:34:10,719 --> 00:34:13,799 Speaker 2: sizing and portfolio construction. So I think, I think we 644 00:34:13,800 --> 00:34:16,120 Speaker 2: have tools at our disposal to still you know, do 645 00:34:16,160 --> 00:34:19,080 Speaker 2: a really good job within high yield, even in an 646 00:34:19,160 --> 00:34:23,439 Speaker 2: environment where there may be volatility or potential risks. 647 00:34:23,840 --> 00:34:26,560 Speaker 1: And those risks are being accurately priced right now by 648 00:34:26,560 --> 00:34:27,000 Speaker 1: the market. 649 00:34:28,239 --> 00:34:30,360 Speaker 2: I think, like we started the conversation at like I 650 00:34:30,400 --> 00:34:34,560 Speaker 2: think there the market is pricing in their expectations. We 651 00:34:34,560 --> 00:34:37,920 Speaker 2: we are, we are cautious on high yield at the moment. 652 00:34:38,640 --> 00:34:40,799 Speaker 2: You know, I guess we started the conversation talking really 653 00:34:40,800 --> 00:34:43,399 Speaker 2: more focused on IG and didn't didn't necessarily address where 654 00:34:43,400 --> 00:34:46,160 Speaker 2: we are on high yield. So we're we're actually relatively 655 00:34:46,200 --> 00:34:49,160 Speaker 2: cautious on high yield at the moment from a broad 656 00:34:49,239 --> 00:34:52,400 Speaker 2: you know perspective, and you know, really using the research 657 00:34:52,440 --> 00:34:56,200 Speaker 2: analysts to pick our spots, and a lot of that's 658 00:34:56,280 --> 00:34:58,520 Speaker 2: driven by the things you're talking about valuation on a 659 00:34:58,560 --> 00:35:02,200 Speaker 2: spread basis, yields our are still support the argument I 660 00:35:02,239 --> 00:35:03,880 Speaker 2: mentioned at the beginning, but maybe less so than on 661 00:35:03,920 --> 00:35:08,200 Speaker 2: the IG side. And yeah, you know, depending on where 662 00:35:08,200 --> 00:35:12,560 Speaker 2: we go with the economy, you know, you know, could 663 00:35:12,640 --> 00:35:15,560 Speaker 2: particularly on the lower quality end and I'm not just 664 00:35:15,600 --> 00:35:18,560 Speaker 2: talking about idiosyncratic triple c's. I'm talking about you know, 665 00:35:18,640 --> 00:35:21,319 Speaker 2: low sing low single bs B threes, you know, could 666 00:35:21,360 --> 00:35:23,520 Speaker 2: have an outsized impact on some of those issues. 667 00:35:24,360 --> 00:35:26,360 Speaker 1: Are you seeing any signs of froth right now in 668 00:35:26,360 --> 00:35:27,200 Speaker 1: the market. 669 00:35:27,560 --> 00:35:30,040 Speaker 2: No, I don't think I would describe it as froth 670 00:35:30,200 --> 00:35:33,759 Speaker 2: at the moment, honestly, not not like not froth that 671 00:35:33,800 --> 00:35:36,239 Speaker 2: I not not frath that I may have seen in 672 00:35:36,239 --> 00:35:40,000 Speaker 2: the past, right. I think I think there's a demand 673 00:35:40,040 --> 00:35:42,840 Speaker 2: for paper. I think you see that. But I also 674 00:35:42,880 --> 00:35:45,600 Speaker 2: think there is still some you know, there's still some 675 00:35:46,400 --> 00:35:49,479 Speaker 2: you still need a reasonable deal in order to get 676 00:35:49,560 --> 00:35:53,000 Speaker 2: done in the market. There's probably still some sort of 677 00:35:53,080 --> 00:35:55,800 Speaker 2: line in the sand, you know, of deals that people 678 00:35:55,840 --> 00:35:58,720 Speaker 2: won't do. So I don't think I would call it froth. 679 00:35:58,800 --> 00:36:02,319 Speaker 2: I think I think there's a there's a you know, 680 00:36:02,360 --> 00:36:04,239 Speaker 2: we we haven't dressed this yet. But the market is 681 00:36:04,239 --> 00:36:07,080 Speaker 2: smaller than it was again historically, right so I think. 682 00:36:07,320 --> 00:36:09,640 Speaker 2: And yet people are very comfortable with the market and 683 00:36:09,640 --> 00:36:11,960 Speaker 2: they're looking for yield. So I do think there's demand. 684 00:36:12,080 --> 00:36:14,040 Speaker 2: I wouldn't put it. I wouldn't say that it's created 685 00:36:14,120 --> 00:36:15,000 Speaker 2: frauth yet. Though. 686 00:36:15,640 --> 00:36:17,200 Speaker 1: Is there anything that worries. 687 00:36:16,880 --> 00:36:21,760 Speaker 2: You, you know, more from a broader perspective, if if, 688 00:36:22,239 --> 00:36:24,640 Speaker 2: if we you know, the thing that would worry me 689 00:36:24,800 --> 00:36:28,480 Speaker 2: is a hard landing, right, I think turbulent landing, soft land. 690 00:36:28,480 --> 00:36:30,719 Speaker 2: I think if we're in that range, you know, I 691 00:36:30,760 --> 00:36:33,759 Speaker 2: think I think will be okay if we truly have 692 00:36:34,000 --> 00:36:38,520 Speaker 2: a hard landing, whether that's from you know, misgauging inflation 693 00:36:38,719 --> 00:36:41,640 Speaker 2: and the direction of inflation or any other kind of 694 00:36:42,040 --> 00:36:46,120 Speaker 2: that's the cause of a hard landing, that that would 695 00:36:46,120 --> 00:36:48,440 Speaker 2: concern me. I think that's when we run into. 696 00:36:48,280 --> 00:36:51,320 Speaker 1: Trouble or policy error potentially. 697 00:36:51,800 --> 00:36:52,360 Speaker 2: Potentially. 698 00:36:52,760 --> 00:36:56,399 Speaker 1: Yeah, Is there any way you're particularly contrarian right now, 699 00:36:56,480 --> 00:36:59,320 Speaker 1: clean that you think that you're doing differently to others? 700 00:37:00,080 --> 00:37:05,279 Speaker 2: That's a hard question. Are we contrarian in any way? 701 00:37:06,120 --> 00:37:10,080 Speaker 2: I think I can't point to specific sectors that we're 702 00:37:10,080 --> 00:37:14,719 Speaker 2: contrarian on. I think, you know, maybe our caution on 703 00:37:14,719 --> 00:37:17,200 Speaker 2: the high yield market is maybe different, as you said, 704 00:37:17,239 --> 00:37:19,200 Speaker 2: from some of the people you're talking to, or maybe 705 00:37:19,239 --> 00:37:22,080 Speaker 2: sound like they're you know, full speed ahead, you know, 706 00:37:22,239 --> 00:37:24,879 Speaker 2: might be a little bit on the more cautious side 707 00:37:24,920 --> 00:37:28,279 Speaker 2: of the market. That might be one area that could 708 00:37:28,280 --> 00:37:28,680 Speaker 2: point to. 709 00:37:29,320 --> 00:37:31,560 Speaker 1: And that doesn't wear you that you're missing out potentially 710 00:37:31,560 --> 00:37:34,640 Speaker 1: on some big returns if this triple C rally, for example, 711 00:37:34,680 --> 00:37:35,479 Speaker 1: just keeps on going. 712 00:37:36,640 --> 00:37:38,560 Speaker 2: No, Like I said, I mean, you know, we're cautious 713 00:37:38,600 --> 00:37:40,480 Speaker 2: the market over here all but we're finding some spots 714 00:37:40,520 --> 00:37:43,160 Speaker 2: in triple c's where we feel comfortable. So we're using 715 00:37:43,200 --> 00:37:45,400 Speaker 2: those spots where we have that comfort, you know, to 716 00:37:45,480 --> 00:37:47,960 Speaker 2: try to make sure that we have some exposure to 717 00:37:48,040 --> 00:37:48,600 Speaker 2: that area. 718 00:37:49,360 --> 00:37:51,840 Speaker 1: And my favorite question, what's your edge? 719 00:37:53,000 --> 00:37:55,480 Speaker 2: Look my edge? I said it before? You know our edge? 720 00:37:55,320 --> 00:37:59,920 Speaker 2: I We have this terrific research team at at Vanguard. 721 00:38:00,080 --> 00:38:02,640 Speaker 2: It's almost fifty people strong and around the globe, and 722 00:38:02,680 --> 00:38:05,480 Speaker 2: we cover a lot of sectors and they do really 723 00:38:05,560 --> 00:38:08,840 Speaker 2: really strong deep research. They you know, we are credit geeks. 724 00:38:08,840 --> 00:38:11,520 Speaker 2: Like you said, I love sitting around talking about issuers 725 00:38:11,520 --> 00:38:14,200 Speaker 2: and credit. They like it too. You know, we have 726 00:38:14,280 --> 00:38:18,040 Speaker 2: these great collaborations, you know, cross currency collaborations with our 727 00:38:18,080 --> 00:38:20,840 Speaker 2: team in the UK where conversations can go on for 728 00:38:20,880 --> 00:38:23,080 Speaker 2: an hour and a half two hours about a single sector. 729 00:38:23,120 --> 00:38:25,840 Speaker 2: So you know that's I think that to me, that's 730 00:38:25,960 --> 00:38:28,239 Speaker 2: the edge, and that's the edge that I want to continue, 731 00:38:28,440 --> 00:38:31,280 Speaker 2: you know, to build and promote for Vanguard because it really, 732 00:38:31,760 --> 00:38:34,040 Speaker 2: it really is a core strength and how we can 733 00:38:34,400 --> 00:38:36,960 Speaker 2: you know, serve our investors' best as we look for 734 00:38:37,000 --> 00:38:38,759 Speaker 2: opportunities for them. 735 00:38:39,440 --> 00:38:43,280 Speaker 1: Great stuff, Colleen Kniff, head of Global taxable Credit Research 736 00:38:43,320 --> 00:38:45,080 Speaker 1: at Vanguard, It's been a pleasure having you on the 737 00:38:45,080 --> 00:38:45,600 Speaker 1: Credit Edge. 738 00:38:45,640 --> 00:38:48,160 Speaker 2: Many thanks, many thank you, and of. 739 00:38:48,080 --> 00:38:51,400 Speaker 1: Course we're very grateful to Himanshu Bakshi from Bloomberg Intelligence. 740 00:38:51,440 --> 00:38:52,440 Speaker 1: Thanks for joining us today. 741 00:38:52,640 --> 00:38:54,359 Speaker 3: Thank you, James, thanks for having me for. 742 00:38:54,360 --> 00:38:57,000 Speaker 1: More credit market analysis and insight. Read all of HIMANSHUW. 743 00:38:57,040 --> 00:39:00,239 Speaker 1: Bakshi's great work on the Bloomberg Terminal Bloomberg and this 744 00:39:00,320 --> 00:39:02,800 Speaker 1: is part of our research department with five hundred analysts 745 00:39:02,840 --> 00:39:06,440 Speaker 1: and strategists working around the globe in all markets. Coverage 746 00:39:06,440 --> 00:39:09,440 Speaker 1: includes over two thousand equities and credits and outlooks on 747 00:39:09,520 --> 00:39:13,080 Speaker 1: more than ninety industries and one hundred market industries, currencies 748 00:39:13,120 --> 00:39:16,239 Speaker 1: and commodities. Please do subscribe to the Credit Edge wherever 749 00:39:16,280 --> 00:39:19,399 Speaker 1: you get your podcasts. We're on Apple, Spotify and all 750 00:39:19,400 --> 00:39:22,800 Speaker 1: other good podcast providers, including the Bloomberg Terminal at bpod Go. 751 00:39:23,360 --> 00:39:25,719 Speaker 1: Give us a review, tell your friends, or email me 752 00:39:25,760 --> 00:39:30,200 Speaker 1: directly at Jcrombieight at Bloomberg dot net. I'm James Crombie. 753 00:39:30,239 --> 00:39:32,600 Speaker 1: It's been a pleasure having you join us again next 754 00:39:32,600 --> 00:39:50,719 Speaker 1: week on the Credit Edge.