1 00:00:00,080 --> 00:00:02,560 Speaker 1: All right, let's go now to Soros fun CEO and 2 00:00:02,640 --> 00:00:07,600 Speaker 1: CEO Don Fitzpatrick, speaking with Bloomberg's Eric Shatsker down. 3 00:00:09,400 --> 00:00:13,200 Speaker 2: Did you ever imagine that we'd be here six weeks 4 00:00:14,000 --> 00:00:18,439 Speaker 2: into the Trump two point zero era and the Dow 5 00:00:18,600 --> 00:00:21,120 Speaker 2: is flirting with negative, The S and P five hundred 6 00:00:21,280 --> 00:00:24,200 Speaker 2: is down two and a half percent, the Nasdaq is 7 00:00:24,239 --> 00:00:25,160 Speaker 2: down six plus? 8 00:00:26,600 --> 00:00:27,000 Speaker 3: Did you. 9 00:00:28,880 --> 00:00:29,000 Speaker 4: So? 10 00:00:30,000 --> 00:00:32,640 Speaker 1: I would have thought that the markets would have held 11 00:00:32,720 --> 00:00:36,159 Speaker 1: up better, but I would I would also not have 12 00:00:36,200 --> 00:00:41,000 Speaker 1: thought that we would have had the level of frenetic activity. 13 00:00:41,000 --> 00:00:42,000 Speaker 4: Out of Washington. 14 00:00:42,960 --> 00:00:46,920 Speaker 1: And when we look at the headlines over the past 15 00:00:46,960 --> 00:00:51,920 Speaker 1: twenty four hours, they've they've been kind of breathtaking in 16 00:00:52,680 --> 00:00:53,720 Speaker 1: speed and scale. 17 00:00:55,000 --> 00:00:58,200 Speaker 2: I'd like to point out, because some of you here 18 00:00:58,960 --> 00:01:02,720 Speaker 2: may not know, or perhaps you've forgotten, that the Treasury 19 00:01:02,760 --> 00:01:07,319 Speaker 2: Secretary Scott Bessant once had Don's job as chief Investment Officer. 20 00:01:07,360 --> 00:01:10,400 Speaker 2: He worked at Soros in the nineteen nineties under Georgia 21 00:01:10,480 --> 00:01:13,360 Speaker 2: course and also understand Druckenmeller, and he returned as the 22 00:01:13,400 --> 00:01:17,600 Speaker 2: CIO in twenty eleven. You arrived in twenty seventeen, a 23 00:01:17,640 --> 00:01:19,040 Speaker 2: couple of years after he left, right. 24 00:01:19,640 --> 00:01:21,600 Speaker 4: I arrived about a year after he left. 25 00:01:22,160 --> 00:01:26,920 Speaker 2: I bring this up not just to establish a distinguished lineage, 26 00:01:26,920 --> 00:01:30,160 Speaker 2: but because it serves as a useful reminder that Scott 27 00:01:30,240 --> 00:01:34,240 Speaker 2: Besant has to be right the most market literate and 28 00:01:34,360 --> 00:01:38,520 Speaker 2: market savvy treasury secretary since at least Bob Rubin and 29 00:01:38,640 --> 00:01:43,800 Speaker 2: perhaps in American history. Now we have a president whom 30 00:01:43,840 --> 00:01:45,959 Speaker 2: we know thinks of the stock market as a daily 31 00:01:46,000 --> 00:01:50,400 Speaker 2: report card, and a treasury secretary who's laser focused on 32 00:01:50,560 --> 00:01:51,560 Speaker 2: macro indicators. 33 00:01:51,800 --> 00:01:52,840 Speaker 3: Why is that important? 34 00:01:53,840 --> 00:01:54,760 Speaker 4: So a couple of things. 35 00:01:54,920 --> 00:01:59,400 Speaker 1: Scott is incredibly smart, He's capable, and I think he 36 00:01:59,520 --> 00:02:03,760 Speaker 1: is the more most market savvy treasury Treasury secretary we've 37 00:02:03,760 --> 00:02:07,560 Speaker 1: ever had. I think it matters, matters because when he 38 00:02:07,600 --> 00:02:10,400 Speaker 1: says something, you should you should take him literally. So 39 00:02:10,560 --> 00:02:14,080 Speaker 1: he has said he and Trump care about the level 40 00:02:14,080 --> 00:02:18,679 Speaker 1: of ten year treasuries, and and I think he will 41 00:02:18,680 --> 00:02:21,079 Speaker 1: pay very close attention in. 42 00:02:21,040 --> 00:02:22,120 Speaker 4: A kind of perverse way. 43 00:02:22,880 --> 00:02:24,960 Speaker 1: Right after the election, we had the Trump bump, and 44 00:02:25,000 --> 00:02:29,040 Speaker 1: as Eric pointed out, we've we've had something different in 45 00:02:29,680 --> 00:02:32,400 Speaker 1: the past week or so. And you've seen that ten 46 00:02:32,480 --> 00:02:35,760 Speaker 1: year treasury go from four eighty in the middle of 47 00:02:35,840 --> 00:02:38,560 Speaker 1: January where they were getting nervous and if you remember 48 00:02:38,880 --> 00:02:41,720 Speaker 1: they kind of backed off some of some of the 49 00:02:42,080 --> 00:02:45,080 Speaker 1: tariff timing at that moment in time. Now you have 50 00:02:45,160 --> 00:02:49,320 Speaker 1: a ten year treasury that's going, that's down at before 51 00:02:49,440 --> 00:02:53,359 Speaker 1: twelve level, and I think they should be getting a 52 00:02:53,360 --> 00:02:57,960 Speaker 1: little nervous. I think the one thing that market participants 53 00:02:58,560 --> 00:03:02,000 Speaker 1: maybe have underestimated in the first term, we all said 54 00:03:02,360 --> 00:03:07,800 Speaker 1: Trump is very SPX sensitive, and that was invariably the truth. 55 00:03:08,919 --> 00:03:13,760 Speaker 1: I think with Scott, I think their pain tolerance is different, 56 00:03:14,400 --> 00:03:17,400 Speaker 1: and I think they're more sensitive to a broader set 57 00:03:17,480 --> 00:03:21,960 Speaker 1: of asset classes, and I think they might believe that 58 00:03:22,120 --> 00:03:26,280 Speaker 1: ultimately they have they have more levers to pull when 59 00:03:26,320 --> 00:03:29,800 Speaker 1: and where they need it. That said, when you think 60 00:03:29,840 --> 00:03:33,760 Speaker 1: about tariff's we can all look at a textbook and 61 00:03:33,800 --> 00:03:35,600 Speaker 1: we can and we can say, and I think the 62 00:03:35,640 --> 00:03:40,880 Speaker 1: Treasury Secretary said today manufacturers will absorb the price pressure, 63 00:03:41,280 --> 00:03:43,120 Speaker 1: and then you can also argue that it's a one 64 00:03:43,200 --> 00:03:47,080 Speaker 1: time price shift. But I think what you can't control 65 00:03:47,640 --> 00:03:52,440 Speaker 1: is consumer confidence and corporate confidence, and I think that 66 00:03:53,080 --> 00:03:55,480 Speaker 1: is what is falling off a cliff right now. 67 00:03:56,000 --> 00:03:59,840 Speaker 2: Do you think don that the market is correct to 68 00:04:00,240 --> 00:04:02,960 Speaker 2: as of now pricing in three rate cuts in twenty twenty. 69 00:04:02,720 --> 00:04:07,640 Speaker 1: Five, So I would take the other side of that bet, 70 00:04:07,720 --> 00:04:11,760 Speaker 1: because again I think ultimately they will. 71 00:04:13,080 --> 00:04:14,280 Speaker 4: Bear more pain. 72 00:04:14,240 --> 00:04:16,839 Speaker 1: Than I think market participants originally thought, but there will 73 00:04:16,839 --> 00:04:21,279 Speaker 1: be a limit, and I think they will make deals. 74 00:04:21,800 --> 00:04:26,520 Speaker 2: There's a view in the market that Scott's preoccupation with 75 00:04:26,640 --> 00:04:31,000 Speaker 2: keeping the tenure yield low foreshadows a coming. 76 00:04:30,760 --> 00:04:32,640 Speaker 3: Change and bank regulation. 77 00:04:33,360 --> 00:04:36,760 Speaker 2: You know, if the administration wants to juice demand for treasuries, 78 00:04:36,839 --> 00:04:40,920 Speaker 2: it could exempt treasuries from the supplementary leverage ratio, one 79 00:04:40,960 --> 00:04:43,400 Speaker 2: of the capital penalties that the big US banks have 80 00:04:43,480 --> 00:04:44,600 Speaker 2: to pay. 81 00:04:44,680 --> 00:04:47,039 Speaker 3: Do you think they'll go there? So? 82 00:04:47,240 --> 00:04:50,600 Speaker 1: I definitively think that is going to happen. So when 83 00:04:50,640 --> 00:04:53,560 Speaker 1: you look at kind of the net issuance of treasuries 84 00:04:54,000 --> 00:04:58,400 Speaker 1: post COVID, it's almost all been bought by the levered 85 00:04:58,440 --> 00:05:02,040 Speaker 1: hedge fund community, and I don't think, first of all, 86 00:05:02,080 --> 00:05:05,960 Speaker 1: that's not a sustainable kind of marginal buyer, and it 87 00:05:06,080 --> 00:05:10,800 Speaker 1: also probably isn't isn't good for market structure and market stability. 88 00:05:11,520 --> 00:05:13,880 Speaker 1: And when you look at what came out of Congress 89 00:05:15,000 --> 00:05:19,920 Speaker 1: last week, you know, the deficit is not going lower 90 00:05:20,200 --> 00:05:22,960 Speaker 1: in any any material way. So what I think they're 91 00:05:23,000 --> 00:05:25,719 Speaker 1: going to do is they they will change bank regulation 92 00:05:26,560 --> 00:05:31,960 Speaker 1: and the supplemental leverage ratio allowing banks to buy treasuries 93 00:05:33,080 --> 00:05:38,000 Speaker 1: in ways that that won't be regulatorially punitive. And the 94 00:05:38,040 --> 00:05:40,960 Speaker 1: next step is they will try to take some leverage 95 00:05:41,040 --> 00:05:43,880 Speaker 1: out of out of kind of that that basis trade 96 00:05:43,880 --> 00:05:47,960 Speaker 1: and the leverage leverage levered market. And again I think 97 00:05:48,040 --> 00:05:52,480 Speaker 1: this is where Scott understands and moving parts in ways 98 00:05:52,520 --> 00:05:54,520 Speaker 1: that I think will ultimately. 99 00:05:54,080 --> 00:05:54,880 Speaker 4: Be really helpful. 100 00:05:55,360 --> 00:05:57,960 Speaker 2: You've given us a couple of clues about how you 101 00:05:58,080 --> 00:06:01,320 Speaker 2: might be trading the bond market. You take the other 102 00:06:01,440 --> 00:06:04,080 Speaker 2: side of three rate cuts this year, but at the 103 00:06:04,080 --> 00:06:06,680 Speaker 2: same time you think that the administration will be inclined 104 00:06:06,720 --> 00:06:10,480 Speaker 2: to help lift demand for treasuries. How are you trading treasuries? 105 00:06:10,600 --> 00:06:14,320 Speaker 2: Like what would you buy and where? And are you 106 00:06:14,320 --> 00:06:16,839 Speaker 2: a holder or your seller at any point? 107 00:06:17,120 --> 00:06:21,400 Speaker 1: So, we are a reasonably large holder of US government bonds, 108 00:06:21,440 --> 00:06:25,039 Speaker 1: but we're below our benchmark weight by a little bit. 109 00:06:25,520 --> 00:06:29,440 Speaker 1: And what we've been doing is we've been using volatility 110 00:06:29,440 --> 00:06:34,720 Speaker 1: as our friend. So in January when the tenure rates spiked, 111 00:06:35,520 --> 00:06:40,240 Speaker 1: we were buyers of bonds at that time. And then 112 00:06:40,400 --> 00:06:45,240 Speaker 1: now as you've seen kind of rates go lower, bonds 113 00:06:45,320 --> 00:06:47,960 Speaker 1: rally a lot we're not taking profits, and you'll see 114 00:06:48,040 --> 00:06:51,520 Speaker 1: us continue to build a position into that volatility, and 115 00:06:51,600 --> 00:06:55,880 Speaker 1: I think you're going to see continued volatility again this 116 00:06:55,960 --> 00:06:58,839 Speaker 1: moment in time. Rates are going lower, but I don't 117 00:06:58,839 --> 00:07:00,239 Speaker 1: think that's going to be true for the. 118 00:07:00,080 --> 00:07:00,800 Speaker 4: Next four years. 119 00:07:01,920 --> 00:07:06,400 Speaker 2: Volatility can be your friend. Is that is that? 120 00:07:06,839 --> 00:07:08,760 Speaker 3: I guess I better put it this way. 121 00:07:08,800 --> 00:07:11,720 Speaker 2: What is the what's the best thing and what's the 122 00:07:11,760 --> 00:07:14,160 Speaker 2: worst thing about trying to put money to work in 123 00:07:14,200 --> 00:07:14,680 Speaker 2: this market? 124 00:07:16,320 --> 00:07:21,880 Speaker 1: Yeah, So so we're we're technically we're an endowment, but 125 00:07:21,960 --> 00:07:24,840 Speaker 1: we use the best of the endowment model and the 126 00:07:24,880 --> 00:07:27,560 Speaker 1: hedge fund model, so we can react. 127 00:07:27,320 --> 00:07:30,040 Speaker 4: Very quickly, and I think we're very good. 128 00:07:30,840 --> 00:07:32,320 Speaker 1: I would argue probably one of the best in the 129 00:07:32,360 --> 00:07:37,920 Speaker 1: world at connecting the dots across asset classes. And from 130 00:07:37,920 --> 00:07:40,920 Speaker 1: our perspective right now, the volatility is great. 131 00:07:41,360 --> 00:07:42,520 Speaker 4: I think market. 132 00:07:42,240 --> 00:07:47,080 Speaker 1: Structure is still challenged in that liquidity at moments in 133 00:07:47,160 --> 00:07:50,960 Speaker 1: time when there's a lot of volatility is challenging. So 134 00:07:51,080 --> 00:07:54,520 Speaker 1: you can see a great trade, but sometimes buying as 135 00:07:54,600 --> 00:07:57,480 Speaker 1: much of it as you want is easier said than done. 136 00:07:57,840 --> 00:07:59,280 Speaker 3: Do you have a favorite trade right now? 137 00:08:02,600 --> 00:08:03,320 Speaker 4: That's a good question. 138 00:08:03,400 --> 00:08:07,080 Speaker 1: So we are tactically at the end of last year, 139 00:08:07,800 --> 00:08:13,360 Speaker 1: we bought call spreads on Hong Kong equity indexes and 140 00:08:13,720 --> 00:08:17,440 Speaker 1: I continue to like that trade. So we're holding that position. 141 00:08:17,960 --> 00:08:21,680 Speaker 1: And again, when you see kind of the micro and 142 00:08:21,720 --> 00:08:25,200 Speaker 1: macro economic data coming out of the US. 143 00:08:24,920 --> 00:08:28,960 Speaker 4: And you see the data in China, I think. 144 00:08:28,840 --> 00:08:33,120 Speaker 1: You will see a tactical deal out of economic necessity 145 00:08:33,720 --> 00:08:38,520 Speaker 1: between China and the US. And I think when you 146 00:08:38,559 --> 00:08:42,800 Speaker 1: look at investors, generally they've left China for dead, So 147 00:08:42,840 --> 00:08:45,920 Speaker 1: I think there's going to be money forced into that market. 148 00:08:46,440 --> 00:08:48,480 Speaker 4: Again for US, that's. 149 00:08:48,240 --> 00:08:51,720 Speaker 1: More a short term tactical trade than a longer term position. 150 00:08:52,160 --> 00:08:54,160 Speaker 2: I feel like I have to ask you the requisite 151 00:08:54,160 --> 00:08:57,920 Speaker 2: MAG seven question. Those talks are down about thirteen percent 152 00:08:58,080 --> 00:08:59,920 Speaker 2: or so from the peak in December. That was as 153 00:09:00,040 --> 00:09:02,560 Speaker 2: of yesterday I didn't check this morning, Probably down by more. 154 00:09:02,640 --> 00:09:06,400 Speaker 2: Tesla's off what forty Nvidia has lost twenty four percent 155 00:09:06,400 --> 00:09:07,640 Speaker 2: of those buying opportunities. 156 00:09:08,840 --> 00:09:12,240 Speaker 1: Yeah, so I think the MAG seven are I mean, 157 00:09:12,240 --> 00:09:16,000 Speaker 1: those are extraordinary companies with real earnings power, and the 158 00:09:16,120 --> 00:09:20,560 Speaker 1: onwind here has been pretty pretty violent, So I would 159 00:09:20,559 --> 00:09:21,120 Speaker 1: take the other. 160 00:09:21,000 --> 00:09:21,880 Speaker 4: Side of that trade. 161 00:09:22,240 --> 00:09:26,240 Speaker 2: And of course, we are witnessing some historic shifts in 162 00:09:26,559 --> 00:09:32,360 Speaker 2: US foreign policy, it would appear that the United States 163 00:09:32,440 --> 00:09:35,839 Speaker 2: is to a degree abandoning Europe perhaps embracing Russia. And 164 00:09:35,880 --> 00:09:44,400 Speaker 2: Vladimir Putin has that translated? Will it translate into great 165 00:09:44,400 --> 00:09:45,080 Speaker 2: macro trades? 166 00:09:46,840 --> 00:09:47,080 Speaker 4: Yeah? 167 00:09:47,120 --> 00:09:51,520 Speaker 1: So, you know, Russia is not that relevant from a 168 00:09:51,640 --> 00:09:56,800 Speaker 1: trading perspective when when they invaded Ukraine it didn't really 169 00:09:56,840 --> 00:10:01,360 Speaker 1: reverberate through markets. And I think the context of what's 170 00:10:01,400 --> 00:10:05,400 Speaker 1: going on now, the only thing that's worth watching, in 171 00:10:05,400 --> 00:10:09,640 Speaker 1: my opinion, the context of trading markets is oil and 172 00:10:09,840 --> 00:10:14,680 Speaker 1: whether ultimately, and this is a big if, if Trump 173 00:10:14,720 --> 00:10:19,959 Speaker 1: can negotiate a piece between Russia and Ukraine, whether part 174 00:10:20,000 --> 00:10:24,520 Speaker 1: of that deal is Trump needs more oil, right, part 175 00:10:24,520 --> 00:10:28,319 Speaker 1: of what he's been promising the US consumer is lower prices, 176 00:10:28,840 --> 00:10:33,440 Speaker 1: and particularly lower prices when it comes to the gas pump. 177 00:10:34,640 --> 00:10:39,280 Speaker 1: The US really can't drill more. It's not in Saudi 178 00:10:39,280 --> 00:10:42,760 Speaker 1: Arabia's best interests to produce a lot more. They need 179 00:10:42,800 --> 00:10:46,120 Speaker 1: about ninety dollars a barrel to balance their budget. So 180 00:10:46,200 --> 00:10:50,440 Speaker 1: the lever he can really pull there is Russia. And 181 00:10:50,640 --> 00:10:55,439 Speaker 1: one kind of wild card would be Russia dropping out 182 00:10:55,440 --> 00:10:57,840 Speaker 1: of OPEC, and that would have a real impact on 183 00:10:57,880 --> 00:11:01,080 Speaker 1: oil price in the cots of moving it lower. 184 00:11:01,320 --> 00:11:04,400 Speaker 2: What about America ripping the security blanket away from Europe? 185 00:11:04,600 --> 00:11:06,439 Speaker 3: You know, I could imagine that. 186 00:11:06,040 --> 00:11:09,720 Speaker 2: We've already seen, right, the Germans move toward spending. In fact, 187 00:11:10,000 --> 00:11:11,960 Speaker 2: I think they found some flexibility this morning, right, two 188 00:11:12,040 --> 00:11:16,160 Speaker 2: hundred billion euros on additional two hundred billion on defense, 189 00:11:16,640 --> 00:11:18,480 Speaker 2: and we hear the same noises out of France that 190 00:11:18,720 --> 00:11:21,720 Speaker 2: surely that has to result in at least some some 191 00:11:21,880 --> 00:11:22,640 Speaker 2: bond issuance. 192 00:11:23,520 --> 00:11:23,760 Speaker 4: Yeah. 193 00:11:23,800 --> 00:11:26,200 Speaker 1: So if you you know, if you look at Europe 194 00:11:26,240 --> 00:11:29,040 Speaker 1: and if they they end up spending the two and 195 00:11:29,080 --> 00:11:32,200 Speaker 1: a half, you know, three percent of GDP on defense, 196 00:11:32,600 --> 00:11:35,880 Speaker 1: that's one hundred and seventy five billion dollars a year. 197 00:11:36,920 --> 00:11:40,839 Speaker 1: And when you think about the fiscal space they need, 198 00:11:41,080 --> 00:11:44,960 Speaker 1: just generally, the amount of bond issuance out of the 199 00:11:45,000 --> 00:11:50,679 Speaker 1: EU and European sovereigns is going very materially higher at 200 00:11:50,679 --> 00:11:55,319 Speaker 1: the same time when US net issuance is also going higher. 201 00:11:55,920 --> 00:12:00,360 Speaker 1: So I think one of the things that we might see, 202 00:12:00,480 --> 00:12:02,559 Speaker 1: and this isn't going to happen tomorrow, but I think 203 00:12:02,559 --> 00:12:04,800 Speaker 1: it could happen in the next twelve to twenty four months, 204 00:12:05,280 --> 00:12:06,600 Speaker 1: is a failed auction. 205 00:12:07,000 --> 00:12:07,760 Speaker 4: Out of Europe. 206 00:12:08,200 --> 00:12:11,720 Speaker 1: I just think at some point sourcing that marginal buyer 207 00:12:12,200 --> 00:12:14,559 Speaker 1: is going to become extremely difficult. 208 00:12:14,840 --> 00:12:19,000 Speaker 2: Do you feel confident enough to predict which country will 209 00:12:19,040 --> 00:12:20,280 Speaker 2: failed to sell enough bonds? 210 00:12:21,360 --> 00:12:25,480 Speaker 1: The two most vulnerable countries are the UK and France 211 00:12:25,520 --> 00:12:28,600 Speaker 1: in my opinion, don. 212 00:12:28,440 --> 00:12:31,920 Speaker 2: There's a lot of Western money, including some of yours, 213 00:12:32,760 --> 00:12:36,520 Speaker 2: trapped in bets on Chinese private companies. Bite Downs of 214 00:12:36,559 --> 00:12:38,480 Speaker 2: course tops the list, but there are lots of others. 215 00:12:40,440 --> 00:12:46,120 Speaker 2: Could that logjam maybe start to break if Presidents Trump 216 00:12:46,160 --> 00:12:49,920 Speaker 2: and She negotiate some kind of a deal, whether it 217 00:12:50,000 --> 00:12:52,240 Speaker 2: concerns trade or whether it goes even beyond trade. 218 00:12:53,600 --> 00:12:56,120 Speaker 4: So I think there's a lot of people hoping for that. 219 00:12:56,320 --> 00:13:00,720 Speaker 1: And as Eric said, US included, where we have private 220 00:13:00,720 --> 00:13:05,240 Speaker 1: capital in China and we've been you know, everyone thought 221 00:13:05,280 --> 00:13:08,440 Speaker 1: these companies would come private, I mean public years ago, 222 00:13:08,600 --> 00:13:11,160 Speaker 1: and the markets just didn't allow for that, and if 223 00:13:11,160 --> 00:13:15,240 Speaker 1: you remember, the Chinese government kind of closed that door 224 00:13:16,600 --> 00:13:20,120 Speaker 1: at the eighteenth hour. So if there is a tactical 225 00:13:20,720 --> 00:13:23,480 Speaker 1: deal between the US and China, I think there's a 226 00:13:23,520 --> 00:13:27,280 Speaker 1: lot of market participants US included, that will hope that 227 00:13:27,480 --> 00:13:32,840 Speaker 1: the private to public market's unfreeze and we can get 228 00:13:32,840 --> 00:13:35,600 Speaker 1: some money out I think if you get money out 229 00:13:35,640 --> 00:13:38,400 Speaker 1: of privates, it's only going to be in that very 230 00:13:38,559 --> 00:13:39,320 Speaker 1: very tight. 231 00:13:39,240 --> 00:13:41,640 Speaker 4: Top tier like a Bye Dance. 232 00:13:42,040 --> 00:13:44,920 Speaker 1: And to be clear, Bye Dance is probably the most 233 00:13:45,040 --> 00:13:49,319 Speaker 1: largely held private company by real asset investors in the world, 234 00:13:49,360 --> 00:13:51,880 Speaker 1: So there's a lot of people with that hope trade on. 235 00:13:52,679 --> 00:13:56,640 Speaker 2: This feels like a good time for us to wade 236 00:13:57,120 --> 00:14:00,600 Speaker 2: into the public private debate for a moment because for 237 00:14:00,720 --> 00:14:03,640 Speaker 2: years right foundations like yours and endowments and pension funds 238 00:14:03,679 --> 00:14:06,199 Speaker 2: and sovereigns have been plowing money into private equity. 239 00:14:06,600 --> 00:14:08,120 Speaker 3: Of course, they've had some trouble. 240 00:14:07,800 --> 00:14:09,800 Speaker 2: Getting that money out of private equity over the past 241 00:14:09,800 --> 00:14:12,439 Speaker 2: couple of years, and now private credit is the rage, 242 00:14:12,880 --> 00:14:15,560 Speaker 2: and more and more capital as a result is flowing 243 00:14:15,559 --> 00:14:20,600 Speaker 2: into liquid vehicles. Why do you believe in liquidity when 244 00:14:20,800 --> 00:14:24,480 Speaker 2: everyone else, right from Apolla to Blackrock, is extolling the 245 00:14:24,600 --> 00:14:27,640 Speaker 2: virtues and the benefits of private markets. 246 00:14:28,840 --> 00:14:29,160 Speaker 4: Yeah. 247 00:14:29,160 --> 00:14:34,040 Speaker 1: So, over the last again, we typically are benchmark against 248 00:14:34,080 --> 00:14:37,920 Speaker 1: the typical largest US endowments, but over the last six 249 00:14:38,040 --> 00:14:43,200 Speaker 1: years we actually let our private equity positions roll off. 250 00:14:43,240 --> 00:14:45,680 Speaker 1: We still allocated to the best managers. 251 00:14:45,200 --> 00:14:46,600 Speaker 4: But with a really hot high. 252 00:14:46,480 --> 00:14:49,880 Speaker 1: Bar, so we lost about one thousand basis points of 253 00:14:49,920 --> 00:14:53,400 Speaker 1: exposure there, which, to be clear, has has served us 254 00:14:53,480 --> 00:14:57,280 Speaker 1: really well. And at the same time we pivoted to 255 00:14:57,400 --> 00:15:00,640 Speaker 1: public markets. And it's interesting, I think think a lot 256 00:15:00,680 --> 00:15:06,960 Speaker 1: of both high net worth and institutional investors pivoted to 257 00:15:07,000 --> 00:15:11,600 Speaker 1: private markets in part because you didn't get a scorecard 258 00:15:11,640 --> 00:15:16,720 Speaker 1: every day and your sharp ratio and the returns looked 259 00:15:17,840 --> 00:15:22,680 Speaker 1: artificially good. And by doing that, first of all, I 260 00:15:22,720 --> 00:15:26,480 Speaker 1: think those investors are in a world of hurt right now, 261 00:15:26,520 --> 00:15:29,760 Speaker 1: both in context of liquidity and in the context of 262 00:15:30,320 --> 00:15:36,120 Speaker 1: they've massively lagged a equity market that has until the 263 00:15:36,200 --> 00:15:40,040 Speaker 1: last couple of weeks been on fire. But the other 264 00:15:40,120 --> 00:15:43,760 Speaker 1: thing is if your Soros fund management and you have 265 00:15:43,800 --> 00:15:47,840 Speaker 1: a long term perspective in public markets, you have a 266 00:15:47,840 --> 00:15:50,800 Speaker 1: lot less competition because it's it's most of the active 267 00:15:50,840 --> 00:15:56,560 Speaker 1: money is large multi strat investors. So the for us, 268 00:15:56,600 --> 00:16:01,360 Speaker 1: the capital allocated to public markets above our bench. We've 269 00:16:01,440 --> 00:16:05,160 Speaker 1: annualized six hundred and fifty basis points of excess return 270 00:16:05,200 --> 00:16:07,720 Speaker 1: over the last five years, and I think it's because 271 00:16:07,720 --> 00:16:08,720 Speaker 1: we play our own game. 272 00:16:09,240 --> 00:16:13,040 Speaker 2: What does that mean in actual numbers, six hundred and 273 00:16:13,080 --> 00:16:15,880 Speaker 2: fifty over what last year? Six hundred and fifty over 274 00:16:15,920 --> 00:16:16,920 Speaker 2: what in twenty twenty, So. 275 00:16:17,480 --> 00:16:21,040 Speaker 1: It's always we our beta benchmark is MSCI AQUI and 276 00:16:21,040 --> 00:16:23,160 Speaker 1: then we have the risk free rates, so we don't 277 00:16:23,160 --> 00:16:26,280 Speaker 1: give ourselves any credit for what you can get, you know, 278 00:16:26,320 --> 00:16:28,400 Speaker 1: by by in money markets or what you can get 279 00:16:28,400 --> 00:16:31,440 Speaker 1: by buying buying beta, and we assume we're at our 280 00:16:31,480 --> 00:16:34,880 Speaker 1: benchmark weight in those so add those together and then 281 00:16:34,920 --> 00:16:37,280 Speaker 1: add six hundred and fifty basis points by the way 282 00:16:37,320 --> 00:16:41,520 Speaker 1: the other. But the thing that's pretty interesting is when 283 00:16:41,600 --> 00:16:45,560 Speaker 1: you look at the last two years, your private equity 284 00:16:46,200 --> 00:16:50,680 Speaker 1: has lagged by more than that, so you needed that 285 00:16:51,520 --> 00:16:54,480 Speaker 1: active return in public markets to make up for the. 286 00:16:54,440 --> 00:16:58,440 Speaker 4: Sins in private equity. But we think our. 287 00:16:58,360 --> 00:17:02,240 Speaker 1: Peer endownment and foundations haven't had that offset. 288 00:17:02,720 --> 00:17:05,439 Speaker 2: So you're thinking more along the lines of a hedge fund. 289 00:17:06,760 --> 00:17:09,959 Speaker 2: Is tell us what you returned in twenty four what 290 00:17:10,000 --> 00:17:13,240 Speaker 2: are you here to date? And and when you look 291 00:17:13,280 --> 00:17:15,679 Speaker 2: at those numbers, do you think of your competition as 292 00:17:15,960 --> 00:17:17,080 Speaker 2: a citadel or do you think. 293 00:17:17,000 --> 00:17:18,600 Speaker 3: Of your competition as the Ford Foundation. 294 00:17:20,080 --> 00:17:23,560 Speaker 5: So so we think of both like we want it 295 00:17:23,600 --> 00:17:27,000 Speaker 5: to be clear, we want to take the best from 296 00:17:27,080 --> 00:17:30,080 Speaker 5: from both of those those operators. 297 00:17:30,080 --> 00:17:31,800 Speaker 4: And but We don't play Sitadel's games. 298 00:17:31,840 --> 00:17:36,000 Speaker 1: There is no one Citadel plays there like the multi 299 00:17:36,040 --> 00:17:39,119 Speaker 1: strack game, and nobody plays it better than them, And 300 00:17:39,160 --> 00:17:43,959 Speaker 1: I think the distance between Citadel and their competition has 301 00:17:44,000 --> 00:17:49,240 Speaker 1: has only grown and again, relative to other foundations and endowments. 302 00:17:49,359 --> 00:17:51,399 Speaker 1: There's some things they do really well, and we like 303 00:17:51,440 --> 00:17:57,080 Speaker 1: to take those pieces. But but uh, you know again, 304 00:17:57,440 --> 00:17:58,960 Speaker 1: play our own game and play a game that we 305 00:17:59,000 --> 00:18:00,800 Speaker 1: think no one else in the world old can can 306 00:18:00,840 --> 00:18:02,600 Speaker 1: do quite the way we do it.