WEBVTT - Another Great Convergence: 7bps, APO, HOOD 0:00:02.720 --> 0:00:07.200 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.400 --> 0:00:11.800 I'm at forty percent right now. It was really not 0:00:11.960 --> 0:00:13.280 great doing television today. 0:00:13.440 --> 0:00:16.880 This is great. We have gotten I've gotten for months now, 0:00:16.960 --> 0:00:21.079 emails from listeners being like, Bloomberg's engineers need to do 0:00:21.160 --> 0:00:24.960 something because your voice isn't audible next to Katie's voice. 0:00:25.239 --> 0:00:27.680 And what we have done is the Bloomberg engineers have 0:00:27.800 --> 0:00:30.800 like tuned down Katie's voice by ten percent, so now 0:00:30.840 --> 0:00:31.960 we are more compatible. 0:00:32.000 --> 0:00:34.720 They've performed surgery on me. Actually, and now this is 0:00:34.760 --> 0:00:38.200 how I sound. It feels like I ate an ash tray. 0:00:39.320 --> 0:00:41.720 I just feel disgusting. I need more milk. 0:00:41.920 --> 0:00:42.760 It's gonna be great. 0:00:42.880 --> 0:00:43.640 It'll be fine. 0:00:43.760 --> 0:00:46.160 Big week, Katie tenth anniversary of Money Stuff. 0:00:46.320 --> 0:00:47.600 Happy birthday. 0:00:47.600 --> 0:00:50.080 Birthday to the newsletter, not the podcast. The podcast is 0:00:50.760 --> 0:00:52.200 still an infant getting mental. 0:00:52.560 --> 0:00:56.520 When did we get born in like April? Well, well, 0:00:56.720 --> 0:00:57.960 you seem like you're in a good mood. 0:00:58.400 --> 0:01:01.240 It was touch and go to get here today, as 0:01:01.280 --> 0:01:04.120 you know, because you're a bad late. Yeah, and we're 0:01:04.160 --> 0:01:05.119 getting through the week. 0:01:05.560 --> 0:01:07.880 This is my last thing that I have to do 0:01:08.200 --> 0:01:10.120 today because I'm going to call out sick tomorrow. 0:01:10.240 --> 0:01:14.240 Yeah, that's hello and Welcome to the Money Stuff Podcast, 0:01:14.560 --> 0:01:19.200 your weekly podcast where we talk about stuff related to money. 0:01:19.920 --> 0:01:22.000 I'm Matt Levine and I write the Money Stuff column 0:01:22.000 --> 0:01:22.880 for Bloomberg Opinion. 0:01:23.520 --> 0:01:25.959 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:01:26.000 --> 0:01:27.480 an anchor for Bloomberg Television. 0:01:28.360 --> 0:01:30.080 Wonder who are you talking about the bay, Kat? 0:01:30.440 --> 0:01:34.280 We're going to talk about Vanguard and seven basis points. Yeah, 0:01:34.360 --> 0:01:36.959 We're going to talk about Apollo, and then we're going 0:01:37.040 --> 0:01:38.479 to talk about the big game. 0:01:38.800 --> 0:01:48.960 The big game, so Vanguard. I texted you this week 0:01:49.360 --> 0:01:51.920 to say while I was on what should I say 0:01:51.920 --> 0:01:55.280 about Vanguard? Because you wrote an article about Vanguard cutting 0:01:55.320 --> 0:01:57.520 its fees and you never texted me back because you 0:01:57.520 --> 0:02:00.720 were on television. Sure I never wrote about it, but 0:02:00.880 --> 0:02:02.520 you did. 0:02:01.480 --> 0:02:05.280 So the story begin on Monday when Vanguard announced that 0:02:05.320 --> 0:02:09.240 they were putting through their biggest ever fee cut across 0:02:09.600 --> 0:02:12.880 eighty seven mutual funds and ETFs. It brings their average 0:02:12.919 --> 0:02:15.440 fee on their like ten trillion dollars of assets down 0:02:15.480 --> 0:02:18.440 to just seven basis points, which is wild. These are 0:02:19.040 --> 0:02:23.640 wild numbers. The industry averaged roughly is forty four bases points, 0:02:23.880 --> 0:02:26.640 So that tells you just how low Vanguard is, and 0:02:26.680 --> 0:02:29.520 then we wrote a follow up story myself and Vildna 0:02:29.560 --> 0:02:33.160 Hirich a couple days later, talking about how this really 0:02:33.200 --> 0:02:37.120 tightens the screws on everyone else Blackrock, State Street, Invesco, 0:02:37.200 --> 0:02:42.760 et cetera, because Vanguard has this ownership structure where basically 0:02:42.840 --> 0:02:46.000 the fund investors own the firm, and thus everything they 0:02:46.040 --> 0:02:50.160 do is just geared towards lowering fees. Other companies don't 0:02:50.160 --> 0:02:52.880 operate that way. Blackrock doesn't operate that way. And Blackrock 0:02:53.000 --> 0:02:56.000 actually fell, i believe, by the most since twenty twenty 0:02:56.000 --> 0:02:58.519 two on Monday alone, both because it was a down 0:02:58.560 --> 0:03:00.600 market with you know, the will he won't on tariffs, 0:03:00.600 --> 0:03:02.639 but also because of this news, which was interesting. 0:03:02.960 --> 0:03:05.320 Yeah, this is sort of the most intuitive way for 0:03:05.360 --> 0:03:07.680 an index fund to work, right. Like, It's like you 0:03:07.720 --> 0:03:11.239 get a bunch of investors, they pull their money, they 0:03:11.560 --> 0:03:15.040 hand their money to someone to perform the sort of 0:03:15.040 --> 0:03:17.840 administrative tasks of putting it into all of the thoughts, 0:03:18.560 --> 0:03:21.280 and they pay that someone a reasonable fee. But there's 0:03:21.280 --> 0:03:24.560 no like outside shareholders. You don't need like pay the 0:03:24.600 --> 0:03:26.919 cost of capital of some giant firm to like just 0:03:27.000 --> 0:03:28.919 pull your money and put it into an index, right, 0:03:29.040 --> 0:03:32.359 so it should be you know, a world of technology 0:03:33.400 --> 0:03:35.320 and you know, a world of giant scale for these 0:03:35.320 --> 0:03:38.120 funds that should be kind of free to invest in 0:03:38.120 --> 0:03:40.360 in the next fund, and it kind of is. Well. 0:03:40.520 --> 0:03:43.680 Vanguard would be quick to tell you, including CEO Salem Ramji, 0:03:43.760 --> 0:03:48.440 who I also interviewed on BTV on Thursday, would say that, Okay, 0:03:48.480 --> 0:03:51.440 you think of us as just this passive index fund company, 0:03:51.760 --> 0:03:55.000 but we're more than that, Malavine. We also have active funds, 0:03:55.040 --> 0:03:57.400 and they care very deeply about their active funds, but 0:03:57.440 --> 0:04:00.680 their active funds are also really cheap. Their bond funds, 0:04:00.720 --> 0:04:03.920 in particular, their active bond funds charged ten basis points 0:04:03.920 --> 0:04:07.360 on average, and they have this interesting theory that because 0:04:07.520 --> 0:04:11.360 their fee is so low, their managers don't have to 0:04:11.400 --> 0:04:16.120 take outsized risks in the active portfolios to like outperform 0:04:16.240 --> 0:04:18.880 or make up the fee, and that that leads to 0:04:18.920 --> 0:04:21.080 their outperformance over longer term horizon. 0:04:21.360 --> 0:04:23.520 That makes sense. Yeah, it's like an old tybee, like 0:04:23.800 --> 0:04:25.680 how much work is it to like take my money 0:04:25.680 --> 0:04:27.599 and invest it in bonds? Like it's active in the 0:04:27.600 --> 0:04:30.040 sense that like you're choosing particular bonds, but. 0:04:30.040 --> 0:04:33.200 They they choose that bond over that but it's like 0:04:33.600 --> 0:04:35.520 the cost of that should come down over time, and 0:04:35.560 --> 0:04:38.600 that shouldn't be you know, like Vanguard is a mutual right, 0:04:38.600 --> 0:04:40.839 It's like the people in the mutual fund like pay 0:04:40.880 --> 0:04:44.520 the managers and there's no outside ownership to collect another fee. 0:04:45.160 --> 0:04:45.840 Makes sense what. 0:04:45.839 --> 0:04:49.120 I find interesting about van Garden, especially right now, so 0:04:49.680 --> 0:04:54.039 CEO Selim Ramsey, he came from Blackrock. He used to 0:04:54.080 --> 0:04:57.440 run the I shares line at Blackrock, which is their 0:04:57.440 --> 0:05:00.320 ETF business. So he went from Blackrock to van Guard, 0:05:00.320 --> 0:05:02.159 which is like, we don't get a lot of like 0:05:02.240 --> 0:05:04.479 exciting moves like that in the ETF industry all the time. 0:05:04.560 --> 0:05:08.800 So that was a big deal. And again, like Blackrock 0:05:08.839 --> 0:05:11.440 and everyone else has to operate in this universe that 0:05:11.960 --> 0:05:15.720 Vanguard has creative where Vanguard is just lowering fees, lowering fees, 0:05:15.760 --> 0:05:19.240 lowering fees, and everyone else has to respond, even though 0:05:19.320 --> 0:05:21.080 you know they actually do have to worry about their 0:05:21.080 --> 0:05:24.880 margins and their external shareholders. But in tweeting about this story, 0:05:25.400 --> 0:05:27.560 I got a few tweets back to the effect of, 0:05:27.839 --> 0:05:30.400 you know, maybe they should actually stop focusing on lower 0:05:30.440 --> 0:05:33.400 fees and like focus more on putting this money back 0:05:33.440 --> 0:05:37.360 into the business and making the customer experience better. 0:05:37.839 --> 0:05:39.560 That's fair because I'm like, ah, you just put your 0:05:39.600 --> 0:05:41.839 money and your own but like, in fact, it is 0:05:41.880 --> 0:05:43.760 a corporation that has to do things like. 0:05:44.000 --> 0:05:46.680 Yeah, maintain a website, yeah, exactly. 0:05:46.440 --> 0:05:48.480 Have customer service and like yeah. 0:05:48.520 --> 0:05:51.159 One of the responses I got was from a woman 0:05:51.640 --> 0:05:54.680 theoretically who says that she's a financial planner who I 0:05:54.680 --> 0:05:57.200 didn't verify her profile or anything, but she said I 0:05:57.240 --> 0:05:59.159 wish they would have cut their fees a little less 0:05:59.200 --> 0:06:03.000 and instead invest in their customer facing it and user experience, 0:06:03.080 --> 0:06:07.159 which is often disjointed and confusing to consumer's relative to 0:06:07.200 --> 0:06:10.719 the competition, which I find kind of funny. Okay, your 0:06:10.760 --> 0:06:13.000 fees are seven basis points, you're playing next to nothing, 0:06:13.040 --> 0:06:15.880 and you have this like small subset of people saying no, 0:06:16.040 --> 0:06:19.279 please stop lowering fees, like put this into improving my 0:06:19.440 --> 0:06:21.120 experience as your client. 0:06:21.800 --> 0:06:24.560 Yeah, this is pretty reasonable man. Yeah, I would frequently 0:06:24.600 --> 0:06:27.520 pay more for better experiences. And there are a lot 0:06:27.520 --> 0:06:30.120 of people in the financial industry who get very sad 0:06:30.120 --> 0:06:34.040 at the idea that the only criterion is like lowest 0:06:34.040 --> 0:06:39.520 fees and you worry one about customer experience being sacrificed. 0:06:39.560 --> 0:06:42.280 But then people don't those worried about performance being sacrificed too, 0:06:42.360 --> 0:06:46.160 although the evidence for the higher fee managers having better 0:06:46.200 --> 0:06:48.520 performance isn't great. The other thing I'll say is, like 0:06:48.640 --> 0:06:51.120 you're talking about like black Rock, it seems to me 0:06:51.200 --> 0:06:53.320 that like the move and asset management is like there's 0:06:53.360 --> 0:06:56.279 this kind of Barbell strategy of like you know, there's 0:06:56.360 --> 0:07:02.320 like indexy public stuff that tends to zero fees, and 0:07:02.400 --> 0:07:06.000 there's hot new private credit where you can charge all 0:07:06.040 --> 0:07:07.800 sorts of fees. Right, And so you look at black 0:07:07.839 --> 0:07:11.000 Dot getting into private credit a big way because like 0:07:11.120 --> 0:07:13.840 the fees on that are just a lot higher. Blueberg 0:07:13.960 --> 0:07:17.120 lawa Benita has had an article this week about Pimco, Yeah, 0:07:17.240 --> 0:07:19.240 not really getting into private credit. And like one thing 0:07:20.160 --> 0:07:22.920 there is like you have a lot of competition and 0:07:23.200 --> 0:07:27.240 margin compression on liquid fixed income, which is you know, 0:07:27.320 --> 0:07:29.080 like the Vanguard, Like I have to fix I remember, 0:07:29.120 --> 0:07:32.400 like you know, Pimco's bread and butter is like running 0:07:32.440 --> 0:07:36.119 bond mutual funds, and that's a tough business because people 0:07:36.160 --> 0:07:38.520 want low fees, and you get low fees and index funds, 0:07:38.640 --> 0:07:41.560 and people want the hot new thing which is private credit, 0:07:41.600 --> 0:07:42.840 and you can get high fees there. But like just 0:07:42.920 --> 0:07:44.880 running an active bond fund is tough. 0:07:45.040 --> 0:07:47.840 Yeah, what an interesting way to think about barbelling by 0:07:48.000 --> 0:07:50.760 fees rather than like risk, which I guess correspond to 0:07:50.800 --> 0:07:51.200 each other. 0:07:51.400 --> 0:07:53.720 But I mean, like there are a lot of context 0:07:53.760 --> 0:07:57.119 where you can make a BARRELLI decision, right, and like yeah, 0:07:57.160 --> 0:08:00.920 here it's like your product offerings, Like there's a lot 0:08:00.960 --> 0:08:02.840 of demand for index, there's a lot of demand for 0:08:03.440 --> 0:08:06.560 alts in private, and like the middle is getting kind 0:08:06.560 --> 0:08:08.480 of hollowed out. It's been a tough time for like 0:08:08.600 --> 0:08:10.400 active mutual fund managers for a long time. 0:08:10.480 --> 0:08:12.600 Yeah, I mean you're seeing that in the UTF world too, 0:08:12.840 --> 0:08:15.280 which you can't offer private yet. 0:08:15.560 --> 0:08:16.760 I know. But I was going to say, like the 0:08:16.760 --> 0:08:18.760 other thing is like your article with the Vildanna, like 0:08:18.760 --> 0:08:20.880 you talk about like in the ETF world, like there 0:08:20.880 --> 0:08:24.000 are people who don't want to compete with yeah the 0:08:24.080 --> 0:08:27.640 giants by cutting piece to zero, and so they're like, ooh, 0:08:27.800 --> 0:08:30.119 here's a weird product where you can judge with higher fees, 0:08:30.280 --> 0:08:32.240 and like we're certainly seeing and talking about a lot 0:08:32.280 --> 0:08:34.000 of that, like the weird productized ETFs. 0:08:34.080 --> 0:08:36.200 Yeah exactly. I mean you think about all the silly 0:08:36.400 --> 0:08:39.800 single stock super leveraged ETFs that are out there, all 0:08:39.800 --> 0:08:43.880 the derivatives based ETFs. Really interesting phenomenon occurred actually in 0:08:43.880 --> 0:08:48.720 twenty twenty four where the average fee on new ETFs 0:08:48.720 --> 0:08:52.080 coming to the market was ticking higher. So the new 0:08:52.640 --> 0:08:55.920 the new launches were expensive because the feeling among issuers 0:08:55.960 --> 0:08:57.560 is like, I'm not going to compete in the core, 0:08:58.120 --> 0:08:59.680 so I got to launch the silly stuff and I 0:08:59.679 --> 0:08:59.959 can try. 0:09:00.360 --> 0:09:02.360 Yeah, the course is already there. You can get index 0:09:02.400 --> 0:09:16.000 bonds like now you need like the silly stuff. 0:09:18.720 --> 0:09:19.760 Shall we sail long? 0:09:21.920 --> 0:09:28.280 So Apollo is crouching thinking about starting a private credit 0:09:28.320 --> 0:09:28.960 trading desk. 0:09:29.080 --> 0:09:32.400 They are having conversations that have been highly constructive at 0:09:32.480 --> 0:09:34.120 the highest levels about this. 0:09:34.760 --> 0:09:36.920 So I wrote this. I wrote, I don't really know 0:09:36.960 --> 0:09:41.000 what private credit is, you know, And I get answers 0:09:41.160 --> 0:09:44.080 like a bunch of people emailed to say basically something like, 0:09:44.480 --> 0:09:47.679 if it's a registered public bond, it's public credit, and 0:09:47.720 --> 0:09:49.880 if it's not that, then it's private credit, which is 0:09:49.920 --> 0:09:51.760 not right. It's not how people use the term, right, 0:09:51.760 --> 0:09:54.920 like people talk about syndicated bank loans and like loans 0:09:54.960 --> 0:09:58.959 that are bought by clos like as not private credit, right, 0:09:59.000 --> 0:10:02.199 Like that's something else People won't really say public credit, 0:10:02.200 --> 0:10:05.120 but it's something else. Private credit is distinct from deals 0:10:05.640 --> 0:10:08.440 done by banks, right private credit is asset managers during 0:10:08.440 --> 0:10:11.640 direct lending. And in the past I would have followed 0:10:11.640 --> 0:10:14.079 that by saying that they hold to maturity on their 0:10:14.120 --> 0:10:16.880 balance sheet, but everyone kind of knew that would not 0:10:17.000 --> 0:10:21.160 last forever, right, Like, eventually, if you have potentially trillions 0:10:21.200 --> 0:10:23.440 of dollars in an asset class, like people are kind 0:10:23.440 --> 0:10:27.199 of trade it and uh, pollow is the launching at 0:10:27.200 --> 0:10:29.400 trading desk or talking about launching it trading desk. 0:10:29.480 --> 0:10:32.640 I feel like we've been talking about Apollo's trading dusk 0:10:32.679 --> 0:10:35.280 for a while because we first started having this conversation, 0:10:35.960 --> 0:10:39.079 especially around when they filed for an ETF with State Streets. 0:10:39.160 --> 0:10:41.360 Yeah, right, let me take that back. It's not that 0:10:41.400 --> 0:10:43.679 they're launching a trading desk. It's that they're having conversations 0:10:43.679 --> 0:10:44.880 that are consarned about. 0:10:44.720 --> 0:10:47.240 Highly constructive at the highest levels. 0:10:47.440 --> 0:10:50.719 About like a venue, about like a marketplace, where it's 0:10:50.720 --> 0:10:53.559 not just they'll have a trading desk, but there will 0:10:53.600 --> 0:10:55.120 be a bunch of trading desks and they'll trade with 0:10:55.160 --> 0:10:57.959 each other, and they'll be a pricing service and some 0:10:58.000 --> 0:11:00.280 sort of electronic platform for people to meet and trade 0:11:00.320 --> 0:11:02.880 private credit because the trading desk that they were doing, 0:11:03.240 --> 0:11:05.840 that they're planning and connection with the ETF was like 0:11:05.960 --> 0:11:08.880 to do a private credit ETF, you need your assets 0:11:08.920 --> 0:11:11.240 to be liquid Certainly the way you get liquidity is 0:11:11.240 --> 0:11:13.960 by Apollo saying we'll buy the assets, right, and so 0:11:14.080 --> 0:11:16.439 like that trading desk was a sort of like facing 0:11:16.480 --> 0:11:19.320 a single customer, which is the ETF. But then obviously 0:11:19.400 --> 0:11:21.320 you know if you have that, you're going to look 0:11:21.360 --> 0:11:23.880 for other places to trade with. But here it's like 0:11:24.200 --> 0:11:27.080 we want to all to all open venue for people 0:11:27.120 --> 0:11:30.640 who want to trade private credit because like obviously that's 0:11:30.679 --> 0:11:33.920 coming right, Like obviously you know you have enough private 0:11:33.920 --> 0:11:36.560 credit funds, they're gonna want to start trading, and so 0:11:36.840 --> 0:11:37.840 that's what they're putting on. 0:11:37.920 --> 0:11:40.240 I'm trying to think about how to think about this, 0:11:40.760 --> 0:11:44.480 and you say marketplace for bond trading, and I think 0:11:44.480 --> 0:11:47.520 of like a market access or a trade web. Sure 0:11:47.559 --> 0:11:49.960 are they just trying to build that put for private credit. 0:11:49.920 --> 0:11:53.480 Something like that? You're so young you think of market access. 0:11:53.800 --> 0:11:55.440 I mean like it used to be like you know, 0:11:56.040 --> 0:11:58.120 a dozen dealers with telephones, right. 0:11:58.160 --> 0:12:00.640 Well, that is that just sounds bake, yeah. 0:12:00.640 --> 0:12:02.520 Or like a dozen dealers with Bloombergs, right, And I 0:12:02.559 --> 0:12:04.760 think right when Pollow talks about you know, they're like 0:12:04.840 --> 0:12:07.760 to part with banks, exchanges and fintech firms. Like exchanges 0:12:07.760 --> 0:12:10.440 in fintech firms suggest there is like electronic marketplace, but yeah, 0:12:10.480 --> 0:12:13.480 like there's not that for private credit because if don't 0:12:13.480 --> 0:12:16.800 really trade and it doesn't have the electronic identifiers, right, 0:12:16.880 --> 0:12:18.520 it's like you sign a contract, right, so you have 0:12:18.600 --> 0:12:21.600 to like do some like technological processes to make it 0:12:22.280 --> 0:12:25.600 tradable easily. But yeah, it's not that hard and they're 0:12:25.600 --> 0:12:29.240 going to do those processes. The other thing that I 0:12:29.280 --> 0:12:30.880 was thinking about in terms of how to think about 0:12:30.880 --> 0:12:33.280 this is like I haven't used the word banks to 0:12:33.360 --> 0:12:36.920 describe the golden Saxes of the world that like originate 0:12:37.200 --> 0:12:40.880 bond deals and then have bond trading desks. But it 0:12:41.040 --> 0:12:45.320 used to be that that business was done mostly by 0:12:45.679 --> 0:12:48.160 non banks like Goldman Sachs right, which became a bank 0:12:48.160 --> 0:12:50.480 holding company in two thousand and eight. And it used 0:12:50.480 --> 0:12:52.680 to be that there was this world of investment banks 0:12:53.000 --> 0:12:56.040 that use their own capital to trade securities and that 0:12:56.120 --> 0:13:00.440 also originated and like underwrote bond deals. Committed the capital 0:13:00.520 --> 0:13:02.240 that basically sold it on to other people. And like 0:13:02.520 --> 0:13:06.120 those were non banks, they were investment banks, and they 0:13:06.320 --> 0:13:08.160 you know, were big and had a big market niche. 0:13:08.200 --> 0:13:10.440 And then over time, like you know, the rules were 0:13:10.480 --> 0:13:12.800 relaxed in the US to allow banks to own them. 0:13:13.240 --> 0:13:16.000 And then in two thousand and eight, the big independent 0:13:16.040 --> 0:13:19.680 investment banks kind of got acquired or became bank holding companies. 0:13:20.120 --> 0:13:21.880 But like this used to be a non bank business, 0:13:22.240 --> 0:13:24.800 and you look at these big alternative managers and like 0:13:24.840 --> 0:13:27.720 to some extent, they are like recreating what the big 0:13:27.800 --> 0:13:29.719 investment banks used to be. Right, Like if you look 0:13:29.720 --> 0:13:33.960 at like Apollo, like Apollo, KKR, Blackstone, like their DNA 0:13:34.080 --> 0:13:36.760 is like their LBO shops, right yeah, but like the 0:13:36.840 --> 0:13:40.400 thing that they're doing now is we're going to originate 0:13:40.440 --> 0:13:44.559 loans or you originate you know, debt deals, and we're 0:13:44.559 --> 0:13:46.480 going to run a trading desk for people to trade 0:13:46.720 --> 0:13:48.880 debt deals. Right. They're kind of like moving into the 0:13:48.880 --> 0:13:51.360 business that like Goldman Sachs was doing thirty years ago 0:13:51.480 --> 0:13:54.200 before it became a bank. And they have some advantages 0:13:54.200 --> 0:13:56.040 in doing that business now, like largely in terms of 0:13:56.120 --> 0:13:59.520 just like being less regulated and also in terms of 0:13:59.600 --> 0:14:03.200 like being the cool place to go work if you 0:14:03.440 --> 0:14:05.440 want to work in finance, and so you can kind 0:14:05.440 --> 0:14:09.440 of get a lot of talent that banks have a 0:14:09.480 --> 0:14:12.200 harder time competing for now. Yeah, but a lot of 0:14:12.240 --> 0:14:14.840 this is like the sort of traditional business of the 0:14:14.880 --> 0:14:17.440 investment bank has become hard to do because the investment 0:14:17.440 --> 0:14:20.200 banks are all banks now and they're all pretty highly regulated, 0:14:20.520 --> 0:14:22.440 and so like the big alternative managers are kind of 0:14:22.480 --> 0:14:25.640 stepping into do kinds of business that banks used to do. 0:14:26.880 --> 0:14:30.200 So does that give you any blueprint about where this 0:14:30.280 --> 0:14:33.240 expands to? I mean, you have all these lofty projections 0:14:33.320 --> 0:14:36.000 right now of like private credit being thirty forty trillion 0:14:36.040 --> 0:14:40.000 dollars if they're sort of like following the blueprint of 0:14:40.200 --> 0:14:42.480 you know what these big investment banks used to be, 0:14:42.640 --> 0:14:43.600 Like how does this end? 0:14:44.680 --> 0:14:47.320 I mean how much credit is there in the world? Right? Like, 0:14:47.520 --> 0:14:50.200 you know, like there is this long term push against 0:14:50.200 --> 0:14:52.320 banks doing a lot of credit on their balancee Right, 0:14:52.920 --> 0:14:54.880 this long term push through like a little bit narrower 0:14:54.920 --> 0:14:58.520 banking where like the risk of lending is taken by 0:14:58.800 --> 0:15:03.800 you know, equity finance investment funds, and you know, the 0:15:03.840 --> 0:15:06.400 big private credit managers are kind of well set up 0:15:06.400 --> 0:15:09.600 for that, and there's a lot of like, you know, 0:15:09.640 --> 0:15:13.240 that's the sort of like stereotypical private credit deal is 0:15:13.280 --> 0:15:15.960 like direct lending to finance at LBO. But like all 0:15:16.000 --> 0:15:20.280 of these big managers are getting into structured investment CREAD stuff. 0:15:20.840 --> 0:15:22.160 You know, a lot of them are getting into like 0:15:23.080 --> 0:15:26.200 consumer loans, and like eventually, like why wouldn't these like 0:15:26.320 --> 0:15:28.720 quote unquote private credit firms be like you know, holding 0:15:28.720 --> 0:15:30.680 most of the mortgages or whatever. Like, I is a 0:15:30.680 --> 0:15:33.240 real possibility that like this is like talking about like 0:15:33.560 --> 0:15:38.680 Blackrock kind of trying to have higher fees by you know, 0:15:39.480 --> 0:15:42.200 diversifying its dex funds with like private credit. Right, Like, 0:15:42.680 --> 0:15:44.600 you could see the kind of the reverse happening in 0:15:44.640 --> 0:15:47.920 private credit, where like you start with like very risky, 0:15:48.680 --> 0:15:52.240 expensive direct LBO loans and you end up doing like 0:15:52.440 --> 0:15:56.240 consumer credit for tighter spreads because you want to become 0:15:56.320 --> 0:15:59.280 like a financial supermarket, right, Like that's a possible outcome. 0:15:59.520 --> 0:16:02.840 Yeah, look forward to that future. And something I was 0:16:02.840 --> 0:16:05.080 thinking about. I mean, there was been several articles this 0:16:05.160 --> 0:16:08.440 week that have talked about this grand convergence between private 0:16:08.840 --> 0:16:11.440 and public, which has been going on for a while now, 0:16:11.600 --> 0:16:14.600 as a narrative but I mean, when you think about 0:16:14.600 --> 0:16:17.720 that convergence, is it just the private debt markets becoming 0:16:17.920 --> 0:16:20.800 more public? Are the public debt markets going to take 0:16:20.840 --> 0:16:24.160 on any characteristics of what happens in the shadows, or 0:16:24.200 --> 0:16:26.440 is this just private becoming more public. 0:16:26.520 --> 0:16:28.440 I think it's mostly private becoming more public. But like 0:16:28.520 --> 0:16:31.000 one way of private becoming more public is ets, right, Like, 0:16:31.000 --> 0:16:35.120 if there's like liquid trading, then there will be private 0:16:35.120 --> 0:16:37.800 credit ets, just as there are, like you know, loan ets, which, 0:16:37.880 --> 0:16:40.280 like you know, bank loans used to not trade. Yeah, 0:16:40.400 --> 0:16:42.000 bank loans used to be not a product that you 0:16:42.040 --> 0:16:44.600 could buy in your retail account, and now like there's 0:16:44.680 --> 0:16:47.560 loan ETFs, there'll be private credit ets if like this 0:16:47.760 --> 0:16:49.560 gets off the ground and there's a lot of trading, 0:16:49.560 --> 0:16:50.280 which I'm sure there. 0:16:50.200 --> 0:16:53.040 Eventually will be, this being apollos. 0:16:52.880 --> 0:16:57.640 Being someone's private credit trading venue, right, yeah, being like 0:16:57.720 --> 0:17:01.800 just private credit trading. Right. I spent three years maybe 0:17:01.800 --> 0:17:06.760 more writing most days the phrase people are worried about 0:17:06.760 --> 0:17:09.400 bond market liquidity, because like people were worried about bond 0:17:09.440 --> 0:17:11.600 market liquidity and the story was something like there are 0:17:11.600 --> 0:17:14.560 all these like bond mutual funds, but like really bond 0:17:14.600 --> 0:17:18.280 ETFs people are worried about these ETFs are so liquid 0:17:18.480 --> 0:17:20.000 and you can just trade them on the Stock exchange 0:17:20.040 --> 0:17:22.320 anytime you want, and if like, people will want their 0:17:22.320 --> 0:17:24.560 money back. At the same time, these ETFs will have 0:17:24.720 --> 0:17:28.400 effectually redemptions and they'll have to sell or someone will 0:17:28.440 --> 0:17:31.040 have to sell all these bonds, and the bonds are 0:17:31.040 --> 0:17:32.880 not as liquid as the ets now, and so it's 0:17:32.880 --> 0:17:35.359 a disaster waiting to happen, and then disaster never really happened. 0:17:35.359 --> 0:17:36.400 I made fun of this for a long time. 0:17:36.400 --> 0:17:38.040 There are those would argue that it's like real twenty 0:17:38.080 --> 0:17:40.040 twenty stuff, you know, I want. 0:17:39.880 --> 0:17:40.680 To say it was earlier. 0:17:40.800 --> 0:17:41.159 I don't know. 0:17:41.240 --> 0:17:43.680 Yeah, twenty twenty is when it came to a head 0:17:43.680 --> 0:17:45.840 because of like was when the theory was tested, but 0:17:45.840 --> 0:17:48.240 people are worrying about it for years before that. So 0:17:48.320 --> 0:17:51.560 I'm just really excited for like the first seventeen times 0:17:51.680 --> 0:17:54.000 I can write people are worried about private credit liquidity 0:17:54.040 --> 0:17:56.080 because it's just gonna happen again, right, Like, there will 0:17:56.119 --> 0:17:59.440 be some trading and then there will be ETFs and 0:17:59.560 --> 0:18:01.879 like trading and private credit markets will not be as 0:18:01.920 --> 0:18:03.800 liquid as the easy apps, and then people are like, oh, 0:18:03.840 --> 0:18:05.840 what happens if and it'll it'll. 0:18:05.600 --> 0:18:08.200 Talk about ill liquidity, doom loops. It'll be great, It'll 0:18:08.240 --> 0:18:08.600 be great. 0:18:08.600 --> 0:18:12.520 And like the best part of this is that, I 0:18:12.640 --> 0:18:14.520 want to say, Tracy Alley was who pointed to this 0:18:14.520 --> 0:18:16.359 out to me, but our Bloomberg collegue. But in like 0:18:16.400 --> 0:18:22.760 the sixties, people had this exact worry about equity mutual funds, right, 0:18:22.880 --> 0:18:25.399 it was like, howint Yeah, it was like, oh, these 0:18:25.480 --> 0:18:27.560 mutual funds, like if they all get redemptions at once, 0:18:27.640 --> 0:18:29.480 like they'll have to sell the stocks. There's not enough 0:18:29.520 --> 0:18:32.000 liquidity for that. And then like you know, they performed 0:18:32.000 --> 0:18:33.879 relatively well and like people just forgot about that. And 0:18:33.880 --> 0:18:36.160 it also stocks are very liquid, but it's gonna keep going, 0:18:36.359 --> 0:18:38.480 keep moving up the capital structure to private credit. 0:18:39.400 --> 0:19:01.080 God, history just repeats itself. Are you excited for the 0:19:01.200 --> 0:19:02.560 Pro Football Championship? 0:19:03.040 --> 0:19:08.800 I am looking forward to the professional football game to 0:19:08.800 --> 0:19:12.479 be played this weekend between the Philadelphia Squadron and the 0:19:12.720 --> 0:19:14.840 Kansas City eleven. 0:19:15.080 --> 0:19:18.680 Wouldn't it be really cool if you could perhaps bet 0:19:18.720 --> 0:19:23.440 on that on the place where you also trade stocks? Alas, 0:19:23.720 --> 0:19:24.359 doesn't that. 0:19:24.280 --> 0:19:26.320 Seem like a good day? It looked like it. 0:19:26.359 --> 0:19:28.560 Might happen one beautiful shining day in the sun. 0:19:29.280 --> 0:19:31.880 Yeah, Robin Hood. I love Robin Hood. 0:19:32.640 --> 0:19:34.720 They just like they shoot their shot. 0:19:36.080 --> 0:19:39.919 They do him play lawyers like good lawyers, but like 0:19:40.000 --> 0:19:43.000 they keep years ago, they launched a thing called Robinhood 0:19:43.080 --> 0:19:45.080 checking in savings. But they're like, it's a bank account. 0:19:45.400 --> 0:19:47.720 And then like bank examiners are like, it's not a 0:19:47.720 --> 0:19:50.000 bank account, You're not a bank and they pulled it 0:19:50.040 --> 0:19:52.639 within like twenty four hours. It's so embarrassing, it's so 0:19:52.680 --> 0:19:56.040