1 00:00:00,000 --> 00:00:02,080 Speaker 1: We'll begin with our top story, wrapping up a quarter 2 00:00:02,160 --> 00:00:04,560 Speaker 1: that found like a year stops posting another all time 3 00:00:04,640 --> 00:00:08,119 Speaker 1: highest focus FED comments mondied the path to rate cuts, 4 00:00:08,200 --> 00:00:10,680 Speaker 1: Jenny Johnson, the CEO of Franklin Templeton, saying this we 5 00:00:10,720 --> 00:00:14,160 Speaker 1: see a dubvish but pragmatic federal reserve rate cuts may 6 00:00:14,200 --> 00:00:16,480 Speaker 1: not occur as soon or go as deep as markets 7 00:00:16,520 --> 00:00:19,119 Speaker 1: are currently projecting for this year. To talk about the 8 00:00:19,160 --> 00:00:21,320 Speaker 1: whole universe, Jenny on places say, it's with us around 9 00:00:21,320 --> 00:00:23,720 Speaker 1: the table. Jenny, good morning to you, Good morning, thank 10 00:00:23,760 --> 00:00:25,079 Speaker 1: you for being with us. I want to start with 11 00:00:25,120 --> 00:00:27,600 Speaker 1: this sort of really big picture stuff. How do you 12 00:00:27,640 --> 00:00:30,200 Speaker 1: and the team think about investing over the next ten 13 00:00:30,280 --> 00:00:33,199 Speaker 1: years compared to investing over the previous decade or so. 14 00:00:33,320 --> 00:00:34,800 Speaker 1: How different is it going to be? 15 00:00:34,960 --> 00:00:35,960 Speaker 2: I think it's very different. 16 00:00:35,960 --> 00:00:38,440 Speaker 3: I mean this is why I think it feels really 17 00:00:38,520 --> 00:00:40,720 Speaker 3: good to be an active manager, right because you've just 18 00:00:40,760 --> 00:00:44,040 Speaker 3: come off a decade where money was free. You know, 19 00:00:43,920 --> 00:00:46,960 Speaker 3: you didn't earn anything the fixed income markets, so the 20 00:00:46,960 --> 00:00:50,040 Speaker 3: obvious place to go was the equity markets. And when 21 00:00:50,040 --> 00:00:51,960 Speaker 3: you do that, you have a momentum market, and passive 22 00:00:52,280 --> 00:00:56,880 Speaker 3: outperforms in momentum markets and if you were lucky enough 23 00:00:56,920 --> 00:00:59,160 Speaker 3: you could qualify for the private markets and then you did, 24 00:00:59,320 --> 00:01:02,800 Speaker 3: you know, got exit returns there. Now it's much tougher, right, 25 00:01:03,280 --> 00:01:05,880 Speaker 3: And you know, I still think that actually that I 26 00:01:05,920 --> 00:01:07,759 Speaker 3: was listening to the two of you back and forth 27 00:01:07,800 --> 00:01:10,280 Speaker 3: on the politics of where the FED is going to go, 28 00:01:11,000 --> 00:01:12,920 Speaker 3: which is all the reason why I would say the 29 00:01:12,959 --> 00:01:14,920 Speaker 3: best thing for the FED to do is to ignore 30 00:01:15,000 --> 00:01:17,920 Speaker 3: the politics of the election and really look at the data. 31 00:01:17,959 --> 00:01:19,440 Speaker 3: And I do think if they look at the data, 32 00:01:19,800 --> 00:01:24,000 Speaker 3: I'm a believe that it's probably September that our first 33 00:01:24,040 --> 00:01:27,080 Speaker 3: rate cuts are probably in September, and frankly, maybe fifty 34 00:01:27,280 --> 00:01:29,720 Speaker 3: basis points, maybe not the seventy five that people think. 35 00:01:29,760 --> 00:01:31,360 Speaker 2: And it's you know, there are still. 36 00:01:31,120 --> 00:01:34,399 Speaker 3: One point four jobs for every one person looking for 37 00:01:34,400 --> 00:01:34,840 Speaker 3: a job. 38 00:01:35,040 --> 00:01:36,319 Speaker 2: Wages are still increasing. 39 00:01:36,360 --> 00:01:39,040 Speaker 3: You saw a story with europe stocks, you know, the 40 00:01:39,160 --> 00:01:42,040 Speaker 3: projecting on earnings of European companies, and it's because the 41 00:01:42,120 --> 00:01:45,240 Speaker 3: US consumer is still strong. So you know, I think 42 00:01:46,480 --> 00:01:50,400 Speaker 3: this next decade is going to be all about risk 43 00:01:50,440 --> 00:01:56,080 Speaker 3: at risk adjusted asset management and active management. 44 00:01:56,240 --> 00:02:00,320 Speaker 1: You introduced the political conversation, so let's go there. They 45 00:02:00,320 --> 00:02:03,680 Speaker 1: should ignore the politics. Can you personally ignore the politics. 46 00:02:04,800 --> 00:02:07,480 Speaker 3: I think if you're the FED, the best thing you know, 47 00:02:07,800 --> 00:02:10,239 Speaker 3: in the end, you can never defend yourself if you've 48 00:02:10,240 --> 00:02:13,480 Speaker 3: allowed the politics to infiltrate your thinking, and so the 49 00:02:13,520 --> 00:02:15,400 Speaker 3: best thing is to just be able to truly look 50 00:02:15,440 --> 00:02:18,080 Speaker 3: at the data and stand by that, because no matter 51 00:02:18,080 --> 00:02:19,959 Speaker 3: what they do, are going to get criticized on the timing. 52 00:02:20,720 --> 00:02:23,360 Speaker 3: So you know, take out the politics and your decision 53 00:02:23,360 --> 00:02:25,520 Speaker 3: making process and then you can stand by it. 54 00:02:25,840 --> 00:02:28,440 Speaker 4: That said, that's for the FED as an investor, though 55 00:02:28,840 --> 00:02:33,400 Speaker 4: politics actually has a very legitimate influence on markets, especially 56 00:02:33,480 --> 00:02:35,560 Speaker 4: right now with industrial policy and people saying that that's 57 00:02:35,600 --> 00:02:36,680 Speaker 4: just the beginning. 58 00:02:36,480 --> 00:02:37,600 Speaker 2: Of a whole host of money. 59 00:02:37,840 --> 00:02:39,919 Speaker 4: We actually have to realize that our economy is held 60 00:02:39,960 --> 00:02:41,520 Speaker 4: up by nuts and bolts as much as it is 61 00:02:41,560 --> 00:02:44,320 Speaker 4: by the pixels on your phone. How much is that 62 00:02:44,440 --> 00:02:47,640 Speaker 4: changing your thesis in terms of how you invest the 63 00:02:47,720 --> 00:02:49,680 Speaker 4: asset classes and where you're directing money. 64 00:02:49,720 --> 00:02:53,320 Speaker 3: Sure, I mean, I actually think that we've done acquisitions 65 00:02:53,320 --> 00:02:57,480 Speaker 3: in the private markets. The change from public markets to 66 00:02:57,560 --> 00:03:00,840 Speaker 3: private markets I think is directly related to to what 67 00:03:00,919 --> 00:03:07,079 Speaker 3: has been political policies. So just take private credit banks 68 00:03:07,080 --> 00:03:09,120 Speaker 3: are not lending in the way that they used to 69 00:03:09,160 --> 00:03:11,000 Speaker 3: lend people get nervous because they say, look at this 70 00:03:11,040 --> 00:03:13,519 Speaker 3: growth of private credit, but really it just shifted from 71 00:03:13,520 --> 00:03:15,720 Speaker 3: the banks balance sheets to the private markets. 72 00:03:15,919 --> 00:03:19,040 Speaker 2: And that is a direct reaction. 73 00:03:18,840 --> 00:03:21,800 Speaker 3: To the capital requirements that have been imposed on banks. 74 00:03:22,560 --> 00:03:25,239 Speaker 2: And so you know, we managed about seventy eight billion 75 00:03:25,440 --> 00:03:26,320 Speaker 2: in private credit. 76 00:03:26,960 --> 00:03:28,880 Speaker 3: You look in twenty twenty four, I think only ten 77 00:03:28,919 --> 00:03:31,760 Speaker 3: percent of direct loans have been come through the banks 78 00:03:31,760 --> 00:03:34,280 Speaker 3: that are syndicated. The resc go from the private markets. 79 00:03:34,320 --> 00:03:36,640 Speaker 3: You look at the private equity market. Look, it's tough 80 00:03:36,680 --> 00:03:39,920 Speaker 3: to be a public company. Here you see CEOs who 81 00:03:40,000 --> 00:03:43,320 Speaker 3: have the choice to wait longer, waiting longer to go public, 82 00:03:43,600 --> 00:03:45,640 Speaker 3: and so all of those excess returns in the early 83 00:03:45,720 --> 00:03:47,840 Speaker 3: years are being captured in the private equity market. 84 00:03:48,440 --> 00:03:50,120 Speaker 2: And I think again that's a bit. 85 00:03:49,960 --> 00:03:55,360 Speaker 3: Of the politics that has become imposed on public companies. 86 00:03:55,560 --> 00:03:58,000 Speaker 3: And yet the average investor needs to be able to 87 00:03:58,000 --> 00:04:00,200 Speaker 3: you know, they invest in mutual funds and ETFs. Those 88 00:04:00,240 --> 00:04:03,240 Speaker 3: are only investable in the public markets. And so we 89 00:04:03,280 --> 00:04:06,800 Speaker 3: actually should encourage and create opportunities for companies to go 90 00:04:06,880 --> 00:04:11,480 Speaker 3: public versus creating an environment where we're constantly attacking public companies. 91 00:04:11,720 --> 00:04:14,160 Speaker 5: The ke Key executive was just on the last hour, 92 00:04:14,240 --> 00:04:16,839 Speaker 5: saying how basically it's hard to plan thirty forty years 93 00:04:16,880 --> 00:04:19,400 Speaker 5: out when regulation is constantly on and off like a 94 00:04:19,480 --> 00:04:22,440 Speaker 5: light switch. In Washington, John's asking about ten years out, 95 00:04:22,480 --> 00:04:24,520 Speaker 5: how do you look four years out, especially if a 96 00:04:24,600 --> 00:04:27,840 Speaker 5: change of a president in next year from November. 97 00:04:28,120 --> 00:04:30,919 Speaker 3: Well, I think you probably, I think we probably do 98 00:04:31,040 --> 00:04:33,680 Speaker 3: look four years out as you're making investments. I mean, 99 00:04:33,880 --> 00:04:35,919 Speaker 3: the thing not to do is be a day trader 100 00:04:35,960 --> 00:04:38,080 Speaker 3: where you're trying to just up and down jump. Where 101 00:04:38,080 --> 00:04:41,000 Speaker 3: we're longer term investors, and so the investment thesis are 102 00:04:41,040 --> 00:04:43,600 Speaker 3: going to be anywhere from three to ten years, depending 103 00:04:43,680 --> 00:04:45,080 Speaker 3: on what companies they're investing in. 104 00:04:45,279 --> 00:04:46,880 Speaker 2: But it's difficult. You have to look at markets. 105 00:04:46,880 --> 00:04:48,720 Speaker 3: I mean, he was talking about the EV market, and 106 00:04:49,160 --> 00:04:52,000 Speaker 3: you know, as all of the politics that go behind that, 107 00:04:52,480 --> 00:04:54,880 Speaker 3: you're going to be focused on all the policy that 108 00:04:54,920 --> 00:04:57,480 Speaker 3: comes in. Similar to banks, honestly, you know, it was 109 00:04:57,520 --> 00:04:59,880 Speaker 3: pretty quiet for banks for a long time until you 110 00:04:59,880 --> 00:05:02,560 Speaker 3: have Silicon Valley bank blowing up, and then boom, you're 111 00:05:02,560 --> 00:05:05,560 Speaker 3: in with a bunch more regulations. So you try to 112 00:05:05,600 --> 00:05:08,680 Speaker 3: pick your sectors and understand how quickly the politics are 113 00:05:08,680 --> 00:05:10,880 Speaker 3: going to impact the investment in the shorter and longer term. 114 00:05:11,000 --> 00:05:12,680 Speaker 1: Jenny, you were talking about some of the money shifting 115 00:05:12,720 --> 00:05:15,320 Speaker 1: towards private markets. I believe you've ever seen about ten 116 00:05:15,680 --> 00:05:18,719 Speaker 1: strategic investments and acquisitions in your tenure as the CEO. 117 00:05:19,000 --> 00:05:21,440 Speaker 1: How do they complement maybe the shifts of Campital in 118 00:05:21,680 --> 00:05:22,680 Speaker 1: US capital markets. 119 00:05:22,760 --> 00:05:25,680 Speaker 3: I mean, so our acquisitions have all been what we 120 00:05:25,680 --> 00:05:28,200 Speaker 3: think are secular shifts in that. So one is again 121 00:05:28,240 --> 00:05:32,279 Speaker 3: I talked about this private market so and actually I 122 00:05:32,320 --> 00:05:34,400 Speaker 3: think right now private equity is going to be sort 123 00:05:34,440 --> 00:05:36,440 Speaker 3: of a challenge. Right with interest rates up. You've seen 124 00:05:36,480 --> 00:05:39,320 Speaker 3: the private equity firms that have excelled well. When cash 125 00:05:39,400 --> 00:05:41,640 Speaker 3: was free, it was hard not to do well. It's 126 00:05:41,640 --> 00:05:44,440 Speaker 3: going to be a different story now. We bought secondary 127 00:05:44,440 --> 00:05:47,760 Speaker 3: private equity, and for a variety of reasons supply and demand, 128 00:05:47,839 --> 00:05:49,320 Speaker 3: I think it's a great place to be if you 129 00:05:49,360 --> 00:05:52,480 Speaker 3: want exposure in that part of the market. So in 130 00:05:52,839 --> 00:05:55,320 Speaker 3: the private markets, again, I think there's a shift towards capital. 131 00:05:55,320 --> 00:05:59,400 Speaker 3: But the other thing that's happening is the massive advances 132 00:05:59,440 --> 00:06:02,520 Speaker 3: in technologlogy are creating it so you can have truly 133 00:06:02,560 --> 00:06:05,200 Speaker 3: customized client portfolios in just a way that we've never 134 00:06:05,240 --> 00:06:08,520 Speaker 3: been able to do. And so we have an AI 135 00:06:08,600 --> 00:06:12,080 Speaker 3: application called go It's a Goes optimization engine where you 136 00:06:12,120 --> 00:06:16,880 Speaker 3: literally at financial advisor can customize client's portfolios based on 137 00:06:16,960 --> 00:06:20,279 Speaker 3: their individual goals as opposed to one portfolio, and it 138 00:06:20,400 --> 00:06:23,640 Speaker 3: dynamically shifts based on the timeframe and the risk of 139 00:06:23,640 --> 00:06:28,520 Speaker 3: that particular goal. That kind of customization is real and 140 00:06:28,600 --> 00:06:29,720 Speaker 3: tax optimizing it too. 141 00:06:29,720 --> 00:06:30,960 Speaker 2: For the individual. That kind of. 142 00:06:30,960 --> 00:06:33,000 Speaker 3: Customization is going to be a real win, I think 143 00:06:33,040 --> 00:06:35,520 Speaker 3: to investors, and it's enabled by technology. 144 00:06:35,120 --> 00:06:37,599 Speaker 4: When you talk about the AI technology but also the 145 00:06:37,720 --> 00:06:40,400 Speaker 4: ten strategic partnerships or acquisitions. 146 00:06:40,839 --> 00:06:41,839 Speaker 2: Are there more to come? 147 00:06:42,120 --> 00:06:45,600 Speaker 4: Is this the best way to really access new markets 148 00:06:45,640 --> 00:06:46,520 Speaker 4: and new expertise. 149 00:06:46,920 --> 00:06:51,520 Speaker 2: I think it's important for it's difficult to say. 150 00:06:51,360 --> 00:06:56,440 Speaker 3: To grow organically in new areas. So our big alternative 151 00:06:56,480 --> 00:06:59,480 Speaker 3: investments were in real estate, private credit, and secondary pe. 152 00:06:59,640 --> 00:07:01,599 Speaker 3: The other area that we've said we think there's growth 153 00:07:01,600 --> 00:07:04,720 Speaker 3: opportunity that we would be a potential buyer would be 154 00:07:04,720 --> 00:07:08,200 Speaker 3: an infrastructure and so you know that would be kind 155 00:07:08,200 --> 00:07:10,920 Speaker 3: of the last to fill out that product gap. Our 156 00:07:10,960 --> 00:07:15,240 Speaker 3: acquisition recently of Putnam Investments brought actually traditional capabilities in 157 00:07:15,280 --> 00:07:18,600 Speaker 3: the retirement and the insurance, which is an important channel 158 00:07:18,640 --> 00:07:22,080 Speaker 3: for us that we'd probably been underrepresented in. So we're 159 00:07:22,080 --> 00:07:24,440 Speaker 3: looking for those things that helped to fill gaps that 160 00:07:24,480 --> 00:07:26,440 Speaker 3: we have. And I think the good news is we 161 00:07:26,600 --> 00:07:30,200 Speaker 3: probably have the broadest investment capabilities of any asset manager, 162 00:07:30,960 --> 00:07:34,080 Speaker 3: and so we don't need to do any acquisitions, and 163 00:07:34,160 --> 00:07:37,880 Speaker 3: now it's about finding ways. And just had recently had 164 00:07:38,120 --> 00:07:40,520 Speaker 3: one of our private credit manager, the CEO said, you know, 165 00:07:40,880 --> 00:07:43,560 Speaker 3: it was great Franklin brought us in twenty eighteen Benefits 166 00:07:43,560 --> 00:07:44,800 Speaker 3: Street Partners. 167 00:07:44,640 --> 00:07:46,640 Speaker 2: And you know you helped us with distribution. 168 00:07:47,240 --> 00:07:50,520 Speaker 3: But now because of AI and the cost of data 169 00:07:50,840 --> 00:07:54,000 Speaker 3: and the expertise it's required there, we realized we would 170 00:07:54,080 --> 00:07:55,680 Speaker 3: not be able to do that on our own. So 171 00:07:55,760 --> 00:07:58,640 Speaker 3: being part of a one point six trillion dollar platform 172 00:07:58,800 --> 00:08:01,160 Speaker 3: that can invest in these and then have the boutique 173 00:08:01,160 --> 00:08:02,360 Speaker 3: managers as a real advantage. 174 00:08:02,440 --> 00:08:04,480 Speaker 4: This really raises the point that I was getting to, 175 00:08:04,560 --> 00:08:07,920 Speaker 4: which is some people are wondering whether the biggest players 176 00:08:07,920 --> 00:08:12,240 Speaker 4: in the space have a disproportionate advantage because they do 177 00:08:12,280 --> 00:08:14,720 Speaker 4: have economies of scale, because they do have that scope 178 00:08:14,720 --> 00:08:17,880 Speaker 4: of data to use for the machine learning programs. Do 179 00:08:17,920 --> 00:08:19,480 Speaker 4: you think that this is going to be how it 180 00:08:19,520 --> 00:08:22,000 Speaker 4: sort of is? Is that sort of smaller boutique fund 181 00:08:22,040 --> 00:08:26,000 Speaker 4: managers have to partner with big funds, big firms in 182 00:08:26,120 --> 00:08:27,640 Speaker 4: order to survive this new era. 183 00:08:28,040 --> 00:08:31,360 Speaker 3: I mean, you definitely see distribution partners wanting to narrow 184 00:08:31,480 --> 00:08:34,240 Speaker 3: the number of asset managers that they work with just 185 00:08:34,240 --> 00:08:36,000 Speaker 3: because it's complicated for a variety of reasons. 186 00:08:36,040 --> 00:08:36,480 Speaker 2: You have to do the. 187 00:08:36,480 --> 00:08:39,040 Speaker 3: Same amount of due diligence on a small manager as 188 00:08:39,080 --> 00:08:42,959 Speaker 3: a large manager. And as I mentioned with AI, not 189 00:08:43,040 --> 00:08:46,120 Speaker 3: only is the cost of external data very expensive, but 190 00:08:46,280 --> 00:08:49,480 Speaker 3: your ability to train your own AI models by having 191 00:08:49,520 --> 00:08:51,599 Speaker 3: more data in house is a real advantage. 192 00:08:52,000 --> 00:08:54,440 Speaker 2: And for us having it in all different. 193 00:08:54,080 --> 00:08:57,480 Speaker 3: Parts of the capital stack is a great opportunity to advantage. 194 00:08:57,559 --> 00:09:01,640 Speaker 3: So I think that's where it becomes an important advantage 195 00:09:01,679 --> 00:09:02,120 Speaker 3: to size. 196 00:09:02,160 --> 00:09:04,360 Speaker 2: And then honestly, things like blockchain. 197 00:09:04,360 --> 00:09:06,520 Speaker 3: I mean, I'm a big believer that there's going to 198 00:09:06,559 --> 00:09:09,480 Speaker 3: be new types of products are introduced because of this technology. 199 00:09:10,000 --> 00:09:12,079 Speaker 2: The work that we've been doing. We have a. 200 00:09:12,160 --> 00:09:14,640 Speaker 3: Tokenized money market fund that we launched, our Benji app 201 00:09:14,679 --> 00:09:18,080 Speaker 3: launched i think in twenty twenty, approved by the SEC. 202 00:09:18,400 --> 00:09:20,600 Speaker 3: But for us, it's going to be the interesting follow 203 00:09:20,679 --> 00:09:23,960 Speaker 3: on projects. Now We're probably not going to be material 204 00:09:24,280 --> 00:09:26,920 Speaker 3: in earning money from this for seven plus years. 205 00:09:27,160 --> 00:09:29,079 Speaker 2: But you have to do that. You have to get 206 00:09:29,120 --> 00:09:30,240 Speaker 2: that knowledge today. 207 00:09:30,480 --> 00:09:33,240 Speaker 3: That's harder for a small manager to spend their time 208 00:09:33,559 --> 00:09:35,040 Speaker 3: in kind of an R and D on that. 209 00:09:35,280 --> 00:09:37,720 Speaker 1: Can we finish on stock picking but of the sporting kind? 210 00:09:38,000 --> 00:09:40,319 Speaker 1: Can you tell us the secret sauce to brackets for 211 00:09:40,360 --> 00:09:42,560 Speaker 1: a cause to march madness? I've got the details in 212 00:09:42,559 --> 00:09:44,440 Speaker 1: front of Mey, you won the men's bracket in twenty 213 00:09:44,440 --> 00:09:47,440 Speaker 1: one time for first place in a women's bracket last year? 214 00:09:47,720 --> 00:09:50,920 Speaker 2: Why are you so good at this? Hey? Just like 215 00:09:51,080 --> 00:09:53,480 Speaker 2: active management comes down to a great team. 216 00:09:53,840 --> 00:09:56,360 Speaker 3: I have a great team at Franklin Doubletons, and you. 217 00:09:56,440 --> 00:10:00,160 Speaker 2: Give me great advice. How big is the team at 218 00:10:00,160 --> 00:10:02,200 Speaker 2: that point? And we'll want to bring it into it? 219 00:10:02,240 --> 00:10:02,960 Speaker 2: Are probably? 220 00:10:03,080 --> 00:10:04,960 Speaker 3: And then by the way, so many people like Levers 221 00:10:05,000 --> 00:10:07,880 Speaker 3: are quantine. Mine's like the communication and D and I team. 222 00:10:08,000 --> 00:10:10,800 Speaker 3: You know, so uh, you know it's about I'd say 223 00:10:10,800 --> 00:10:13,760 Speaker 3: that there are kind of five core people that helped 224 00:10:13,760 --> 00:10:16,000 Speaker 3: me fill it out, and I'm sure they get advice 225 00:10:16,040 --> 00:10:16,480 Speaker 3: for a few. 226 00:10:16,520 --> 00:10:18,079 Speaker 1: I'm coming to you for how next year because I'm 227 00:10:18,120 --> 00:10:20,679 Speaker 1: absolutely threadful at this. Jenny, this was great. It's good 228 00:10:20,679 --> 00:10:22,000 Speaker 1: to see you got to do it again. Thank you 229 00:10:22,040 --> 00:10:24,440 Speaker 1: for having Thank you. Jenny Johnson had a CEO of 230 00:10:24,440 --> 00:10:25,360 Speaker 1: Franklin Sandwoodsen