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Speaker 1: PIMCO Publishing gets secular outlook the aftershock economy, writing quote,

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Speaker 1: we see a window to step in as a senior

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Speaker 1: lender in areas once occupied by regional banks, such as

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Speaker 1: consumer lending, mortgage credit, and various forms of asset based finance.

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Speaker 1: I'm very plased to say that we can have that

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Speaker 1: conversation now with the manage yourself the boss, PIMCO CEO

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Speaker 1: Manny Royman Money, good morning to thanks for having us.

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Speaker 2: Morning, Laton. Nice to see you.

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Speaker 1: That quote feels like your kind of language.

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Speaker 2: We're going to step in.

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Speaker 1: My first thought when I read that was why don't

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Speaker 1: you just buy a bank? There's many banks on sale

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Speaker 1: right now, Why don't you just buy a bank.

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Speaker 3: What I think there are going to be mini assets

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Speaker 3: to buy, and maybe the best way I have to

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Speaker 3: describe it is banks are going to be tight for capital.

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Speaker 3: And when they're type for capital, they have two ways

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Speaker 3: of solving the problem. They can either raise more capital

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Speaker 3: or they can sell assets. And the most likely scenario

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Speaker 3: is there will be assets to sell in area where

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Speaker 3: we have a big footprint mortgagers commercial with the state bonds,

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Speaker 3: municipal bonds. Dan said that earlier today that he was

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Speaker 3: very keen on mortgagers. They'll be mortgagers to sell and

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Speaker 3: will be there to step in and.

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Speaker 2: Try to buy them.

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Speaker 1: Are you looking at buying a franchise to do that

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Speaker 1: or is that just something that happens.

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Speaker 3: Is a cycling that we've built over the past twenty years.

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Speaker 3: And you know, there's good news and bad news when

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Speaker 3: you have a tougher economic cycle. I think the better

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Speaker 3: news is that the expected rhym goes up and they

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Speaker 3: are significant block of oursets to sell.

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Speaker 2: You know, it could be, for example, equipment loans.

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Speaker 3: You know, one of the bank who was very big

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Speaker 3: in equipment loans is out of business all of a sudden.

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Speaker 2: There's going to be a lot for us to do.

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Speaker 1: I hear this from other people too. I hear Apollo side.

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Speaker 1: Banks are going to step back. We're going to step

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Speaker 1: back in. How competitive is thiss going to be? Can

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Speaker 1: you give me some size and it is good? How

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Speaker 1: make the pie it's going to be?

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Speaker 3: It is going to be competitive because the seller has

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Speaker 3: a fiduciary duty and there will be enough for some

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Speaker 3: of us to do a lot and put money to

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Speaker 3: work and be patient and wait for the right opportunity

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Speaker 3: to do so, and I think the cycle is usually long,

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Speaker 3: and so there's no rush to put money to work.

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Speaker 3: There is a very discipline and systematic way to look

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Speaker 3: at your opportunity, and some will look better than the other.

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Speaker 3: It may very well be that the single best asset

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Speaker 3: turns out to be real estate where we have a

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Speaker 3: bit for print, or it may very well be that

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Speaker 3: it turns out to be commercial real estate. And you

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Speaker 3: know mortgagers in this whole segment.

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Speaker 1: Commercial red of state is something you've brought up, and

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Speaker 1: I've heard it from Dan. I spoke to Mark about

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Speaker 1: it just moments ago. Should I be worried about commercial

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Speaker 1: real estate? Can you talk me just taking into the

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Speaker 1: halls of this place, this building. Have you all sat

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Speaker 1: around a table, gone through every single portfolio and thought

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Speaker 1: about what you don't want exposure to right now related

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Speaker 1: to this one particular sector.

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Speaker 3: Well, I think we have, and I think I think

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Speaker 3: we've seen the playbook before and it is everything else

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Speaker 3: being equaled a slow cycle. So the banks we'll look

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Speaker 3: at the portfolio and slowly but surely marked the books.

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Speaker 3: I think you have a microstructure of the commercial real

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Speaker 3: estate market, which is quite different depending on the city

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Speaker 3: depending on the places. Some places are clearly tested, some

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Speaker 3: of them are doing just fine. I mean you can

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Speaker 3: look at Austin, for example. You're hard pressed to find

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Speaker 3: an empty office in Austin. And the overall trend is

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Speaker 3: going to be that people somehow come back to work

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Speaker 3: one way or the other. But there's a transition period

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Speaker 3: where for sure there will be distressed seller and people

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Speaker 3: who have the wrong financing. And I think the financing

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Speaker 3: part is really really important because it's one of the

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Speaker 3: segments where we're very involved, and people have borrowed short

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Speaker 3: term in.

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Speaker 2: The past with very low rates.

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Speaker 3: All of a sudden, the financing is expiring, spreads are higher,

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Speaker 3: and of course rates are much higher, and so they

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Speaker 3: will need to address the situation either by selling or

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Speaker 3: by refunding at more attractive terms.

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Speaker 1: For us, clearly, this business is going to change compared

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Speaker 1: to what it was several decades ago. We've had a

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Speaker 1: multi decade bond bull market. Most people assume that's now

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Speaker 1: over based on the last twelve months. Can you tell

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Speaker 1: me how this business will be different with that in mind,

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Speaker 1: what you need to position for now versus what this

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Speaker 1: firm was positioned for in the previous several decades.

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Speaker 3: What a very big change and done mentioned this before

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Speaker 3: is generative AI and how technology.

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Speaker 2: Can change our business.

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Speaker 3: And think, for example, about the real estate market. We

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Speaker 3: can hire one hundred people to go from city to

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Speaker 3: city and kind of look at every single lease or

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Speaker 3: every single property. Or we can use technology to give

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Speaker 3: us a better grasp of where the alpha is and

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Speaker 3: where we think the opportunity is. When we think about

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Speaker 3: communication with client, we can invest significantly in generative AI

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Speaker 3: and actually give a better risk report, better customized report

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Speaker 3: to clients and so on and so forth. And I

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Speaker 3: think it's incredibly exciting. I see the work that we

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Speaker 3: do with a on AI and Microsoft as important as

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Speaker 3: the birth of the Internet.

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Speaker 2: I mean, it is it is that it is.

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Speaker 3: You think it's that powerful, It is that powerful, and

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Speaker 3: it will change your job also changing job too potentially.

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Speaker 2: Yeah, No, no, of course, of course. I mean I

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Speaker 2: mean in a good way.

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Speaker 3: I think it will make us rop more productive and

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Speaker 3: I think that's a really really good thing.

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Speaker 1: Is that a challenge to your second outlook?

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Speaker 3: I think secular on a super secular basis, everything else

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Speaker 3: is being equal.

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Speaker 2: I think it means rates are.

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Speaker 3: Lower, but it also, I think you should say that

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Speaker 3: with a new moncous amount of humble pie in a

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Speaker 3: sense that the that the dispersion of event is going

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Speaker 3: to be very big, and we don't know what we

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Speaker 3: don't know, and it's easy for me to make prediction

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Speaker 3: about what will happen ten years that I'd be very wrong.

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Speaker 3: But it is quite exciting, and and and and we

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Speaker 3: tried to get everyone in PINCO to play with chage

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Speaker 3: GPT and familiarize themselves. We need to embrace technology and

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Speaker 3: the reality is it's a very competitive market. Every single day,

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Speaker 3: I think, Dan and I ask yourself, why do we

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Speaker 3: think we can generate higher return than passive? Why do

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Speaker 3: we think we can generate better returns that are competitor

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Speaker 3: every bit helps Technology is one of them, and I

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Speaker 3: think we need to embrace it and have the course

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Speaker 3: to stay and keep on investing significantly over the business cycle.

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Speaker 3: And that's a competitive edge and barriers to entry, just

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Speaker 3: like everything else.

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Speaker 1: Let's measure success AUM over the last ten years, and

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Speaker 1: let's go back a decade. PIMCO was at about two

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Speaker 1: trillion dollars AM, not too far away from the likes

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Speaker 1: of Black Rock Black Rocks, AUM since then has more

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Speaker 1: than doubled. The am here is steady, steady, with some volatility,

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Speaker 1: tons of volatility along the way, but it's basically unchanged

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Speaker 1: in the last decade.

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Speaker 2: What do you think that reflects?

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Speaker 3: It reflects the decision we made is that we try

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Speaker 3: to be very focused and do one thing and do

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Speaker 3: it very well. And I think we went through a

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Speaker 3: period of time where maybe fixed income wasn't as attractive

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Speaker 3: as it is right now. And we have the view

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Speaker 3: that if we perform, if we significantly beat the passive benchmark,

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Speaker 3: if we do better than appears, they will come.

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Speaker 2: And we don't measure our success by the amount of

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Speaker 2: a SATs where we have.

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Speaker 3: We measure our success better returns we give to our

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Speaker 3: investors in what is a very competitive market, and so

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Speaker 3: and so and so. The real scene of asset manager

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Speaker 3: is to try to be bigger for the sake of

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Speaker 3: being bigger because of economy of scale.

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Speaker 2: That's not a goal. Just to be clear, it's not

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Speaker 2: a goal. It's not a goal.

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Speaker 3: We're here to perform with the money we've been entrusted

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Speaker 3: and if we do a good job, we'll be fine.

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Speaker 1: Well, let's talk about that good job. There have been

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Speaker 1: a couple of difficulties. I want to talk about one

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Speaker 1: specific name, which is Columbia Property Trust. What do I

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Speaker 1: need to know about that?

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Speaker 2: What happened?

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Speaker 1: Can you just give me a better idea of what

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Speaker 1: happened there?

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Speaker 2: Well?

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Speaker 3: I think I think for obvious reasons, we don't specifically

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Speaker 3: come in on names. But of course we have a

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Speaker 3: big portfolio of our sets across the globe, and when

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Speaker 3: you have a recession, some of them going to be

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Speaker 3: doing less well, and we're going to work on trying

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Speaker 3: to bet to get the best possible dot com. And

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Speaker 3: the reality of fund management is you have at any

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Speaker 3: point in time things doing great and things doing less great,

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Speaker 3: and we focus on the one doing let's great, and

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Speaker 3: making sure we have the best possible dot com.

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Speaker 1: So is that just a reflection of being so big

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Speaker 1: there across everything or was that a canary in the

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Speaker 1: coal mine on a certain issue at a certain time.

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Speaker 3: No, I think it's a reflection of us having a

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Speaker 3: diverse portfolio. And I think you heard one of my

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Speaker 3: competitor at Milkin saying that very yeah, well, saying that

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Speaker 3: when you have a big real estate portfolio at any

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Speaker 3: point in time, not everything is going to do great

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Speaker 3: and I think we're willing to do that as long

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Speaker 3: as the net result for our investors is going to

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Speaker 3: be the right one, and I think that's what matters.

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Speaker 1: One last issue that we need to discuss as well.

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Speaker 1: And understand that perhaps you can't offer a great degree

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Speaker 1: of clarity and detail because of issues. But you know

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Speaker 1: what name is going to come up in conversation now,

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Speaker 1: credits Wace. Now, I just wonder from your perspective the

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Speaker 1: future of the eight one market continued convertibles after the

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Speaker 1: events of the last couple of months. As a firm,

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Speaker 1: and if you don't want to talk directly about that institution,

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Speaker 1: we don't have to. But as a firm, have you

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Speaker 1: rethought about that particular class of securities.

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Speaker 3: Well, the banks, especially in Europe have a big need

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Speaker 3: to issue eighty one as a way to raise.

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Speaker 2: Enough equity to pass the stress test.

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Speaker 3: And so there needs to be clear rule of engagement

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Speaker 3: from both the banks and the regulator. And you've seen

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Speaker 3: in the recent months the Bank of England and the

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Speaker 3: ECB being incredibly vocal about what they think the words

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Speaker 3: of the game are in what a well functioning market

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Speaker 3: has to offer to make it attractive for inversus to participate.

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Speaker 3: And if the rules of the game are attractive and

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Speaker 3: the price is right, you'll see plenty of people coming

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Speaker 3: into this market, and Pincole will be one of them.

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Speaker 2: And if the rules of the.

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Speaker 3: Games are biased or unclear, or at the expense of investors,

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Speaker 3: then maybe we'll decide to step out of it. Do

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Speaker 3: you think that pass unclear? Now depends on the jurisdiction.

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Speaker 3: We have welcomed the comments made by the ECB and

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Speaker 3: the Bank of England.

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Speaker 2: Money.

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Speaker 1: It's good to see it. It's good to see you,

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Speaker 1: so I appreciate it. Thank you very much. We've got

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Speaker 1: to do this again next year as well. Money Rhyme

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Speaker 1: and fair, the pin Cut CEO