Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Bloomberg Business Week inside from the reporters and
Speaker 2: editors who bring you America's most trusted business magazine, plus
Speaker 2: global business, finance and tech news as it happens. Bloomberg
Speaker 2: Business Week with Carol Messer and Tim Stenebek on Bloomberg Radio.
Speaker 1: Hi, everyone, this is Bloomberg Business Week of Carol Masser
Speaker 1: along with Barry Ridholts, who just said, did you smell that?
Speaker 1: What was that?
Speaker 3: That's hamburger, some sort of Meatia is grilling. It's delicious.
Speaker 1: Somebody has not had right.
Speaker 3: I'm late for my noon feeding.
Speaker 1: Barry Ridholts. He's chairman and chief investment officer Ridthelt's Wealth Management.
Speaker 1: I'm Carol Masser, of course of Bloomberg Business Week. Barry
Speaker 1: of course hosts of Masters in Business and at the Money.
Speaker 1: We're here at future Proof at Huntington Beach, California, and
Speaker 1: we've got an incredible sixty minutes coming up. Sarah Malik
Speaker 1: join us a little bit later on. Right now, we
Speaker 1: want to get to our first guest, and that is
Speaker 1: Pria Misra who's with us. She's a portfolio manager of
Speaker 1: global fixed income currency and Commodities at JP Morgan Asset
Speaker 1: Management joining us here at future Proof. How are you.
Speaker 4: I'm great, this is beautiful. Thanks for having me.
Speaker 1: Well, thanks for being here. I know, I just we
Speaker 1: always talk about taking the show outside, you know, when
Speaker 1: you're in college, You're like, let's take on this is
Speaker 1: what we are.
Speaker 3: Doing today from your outside.
Speaker 1: So I want to ask you about the elections because
Speaker 1: we have some reporting and it noted that a Kamala
Speaker 1: Harris victory in the elections is seen as better for
Speaker 1: treasuries worse for stocks than a win for Donald Trump.
Speaker 1: This was a Bloomberg Terminal subscriber survey. Are you thinking
Speaker 1: about the elections and what it means for the investment
Speaker 1: universe and what does it mean in your view?
Speaker 4: So we are all we're all definitely thinking about the elections.
Speaker 4: It's a big election. It's a very close election. But
Speaker 4: I'll make a couple of points. You know, the presidency
Speaker 4: is clearly extremely important, but Congress is very important to
Speaker 4: get a lot of things done, you know, or not done,
Speaker 4: because the twenty seventeen cuts are likely to expire if
Speaker 4: Congress doesn't do anything. So beyond the presidency, we're looking
Speaker 4: at the Senate races, the House races, so the entirety
Speaker 4: of the election is going to be important. Secondly, there's
Speaker 4: a lot of policies that are up in the air,
Speaker 4: right from tariff, immigration, you know, regulation, I talked about taxes, spending.
Speaker 4: I think it may be a little simplistic to say
Speaker 4: that one outcome is necessarily good for the economy or
Speaker 4: good for markets. I think we also have this deficit
Speaker 4: issue which is out there the other of them. For
Speaker 4: either of them exactly, whether it's spending or it's taxes
Speaker 4: or tariffs, they all have fiscal implications. I mean, what
Speaker 4: I'll say is, as I manage our portfolio, is one
Speaker 4: our position for one way or the other. It really
Speaker 4: from a risk awards standpoint, Given that the election is
Speaker 4: won by not a lot of forty thousand votes or
Speaker 4: one hundred thousand votes, we're talking not about, you know,
Speaker 4: a very clear dividea. So I would say it's best
Speaker 4: not to position before the election, to see the election
Speaker 4: outcome and then to see what, you know, what policies
Speaker 4: are prioritized. Is it going to be taxes first? Is
Speaker 4: it tariffs first, which is going to have a very
Speaker 4: different implication. There's also so I would say when we
Speaker 4: look at the election and the outcome on markets, I
Speaker 4: look at the impact on growth and inflation. I look
Speaker 4: at the impact on the deficit. And then what I
Speaker 4: really hope is FED independence, you know, remains, But that
Speaker 4: is I don't think we should take that for granted.
Speaker 4: Is there any impact there, because that's going to have
Speaker 4: an impact on treasuries as a safe haven, the dollar
Speaker 4: is a safe have and these are all things which
Speaker 4: require an independent center bank. So there's a lot. But
Speaker 4: I would say it's.
Speaker 1: Sad for independence. You really are concerned.
Speaker 4: I am a little concerned. I mean, we've seen this
Speaker 4: little bit before. And I think now with the fact
Speaker 4: that you know the FED was late in hiking rates,
Speaker 4: are they going to be late in cutting rates? They're
Speaker 4: about to embark on a cutting cycle. And if we
Speaker 4: have the President or Congress talk too much about what
Speaker 4: about FED policy, it's not great to inspire confidence in
Speaker 4: the US capital markets, and we need we need foreign investments.
Speaker 4: And as the FED cut rates, I actually think for
Speaker 4: will look at US fixed income, they'll look at the
Speaker 4: US equity market. So I do hope that that FED
Speaker 4: independence remains. I think it's something we should keep at
Speaker 4: the back of our mind as we think about market
Speaker 4: implications of the election.
Speaker 3: So the Fed has taken rates high enough that money
Speaker 3: market funds are yielding over five percent. They now stand
Speaker 3: over six trillion dollars. That's a lot of money. What
Speaker 3: happens as the FED begins to cut rates, where does
Speaker 3: that capital go looking for yield?
Speaker 4: Sure And that's the question I would say every asset
Speaker 4: management person, every wealth manager salivating at the thought of
Speaker 4: that six trillion. Historically, that money does move once the
Speaker 4: FED starts to cut rates, starts to move first into
Speaker 4: fixed income and then into risky assets. But here's the catch.
Speaker 4: We're in a soft landing, and soft landing rate cuts
Speaker 4: are rare. So can we apply the Historically the Fed
Speaker 4: is cutting in a recession, so the money moves into
Speaker 4: fixed income because well, equities might look a little scary
Speaker 4: this time round. If the soft linding is maintain, and
Speaker 4: that's a that's an if. I think there's a case
Speaker 4: we're in a good spot. If the Fed was to
Speaker 4: cut rates quickly enough, we might stay in that soft landing.
Speaker 4: We have a chance. It's a narrow path, but I
Speaker 4: think there's a chance we stay there. I think that
Speaker 4: money moves into different asset classes, not all of it.
Speaker 4: There is a reason people own cash, liquidity, cash management,
Speaker 4: but a certain portion of it, especially as you realize
Speaker 4: that there's reinvestment risk. That money is not going to
Speaker 4: stay at five percent. As the Fed cut rates and
Speaker 4: forwards are arguing for a little below three percent, that
Speaker 4: cash is going to give you three percent. As people
Speaker 4: start to internalize that, and I think the FED cutting
Speaker 4: starts that, that money then in a soft landing, moves
Speaker 4: into equities, credit and government bonds. If the economy slows down,
Speaker 4: I think you're going to see more into fixed incomes.
Speaker 4: So there's a bit of a bifurcated outlook for that
Speaker 4: money depending on how the economy evolves from here.
Speaker 3: So it's interesting when the FED was raising so a
Speaker 3: longer duration bonds get a little with punished. Twenty twenty
Speaker 3: two is a tough year if the Fed is starting
Speaker 3: on a longer cycle of rate cuts, and some people
Speaker 3: have talked about high three low four percent is where
Speaker 3: they end up. What do you do with your duration?
Speaker 3: Where do you want to have your bonds? What sort
Speaker 3: of longevity you're looking for in the whole things.
Speaker 4: Sure, I think bonds finally give you income. So I
Speaker 4: joke that fixed income finally has income in it, which
Speaker 4: is good real income. You know, not only are you
Speaker 4: getting that nominal income, but net of inflation, you're actually
Speaker 4: earning real returns. The other thing bonds are giving us diversification,
Speaker 4: which you talked about twenty two, is the opposite of
Speaker 4: diversification because risk assets struggled and bond struggled. That's changed.
Speaker 4: And actually you don't have to take my word for it.
Speaker 4: Look at the last couple of months, just the last
Speaker 4: two payroll reports that come in a little weaker than before,
Speaker 4: and this fear of a hard landing or a recession
Speaker 4: starts to come up. Risk assets struggle and bonds do
Speaker 4: really well. So you talk about longer term perspective, I
Speaker 4: think there's a lot of TALC that has happened. That
Speaker 4: sixty forty is dead. No, sixty forty is back, because
Speaker 4: that fixed income component is giving you that diversification. So
Speaker 4: we've actually been adding to it. Because we're in a
Speaker 4: soft landing. We have risk assets in the form of spread,
Speaker 4: high quality, investment grade, high yield spread, securitized spread. Owning
Speaker 4: some duration is a good hedge if the economy starts
Speaker 4: to slow down, our spread products will underperform. But then
Speaker 4: that treasury long and we're long intermediate. I think the
Speaker 4: two year doesn't give you that much. You start to
Speaker 4: go long fives and tens. We should not worry that
Speaker 4: much about whether they go twenty five or fifty. Let's
Speaker 4: look at the totality of cuts. Exactly where they end
Speaker 4: up is right around three percent. We're not pricing in
Speaker 4: a recession. So if we do get into a recession
Speaker 4: at that point the Fed's cutting to two percent one percent,
Speaker 4: there's a lot of room from in terms of price
Speaker 4: appreciation for that duration. So I like adding duration. We're
Speaker 4: buying any backups any election related You talked about elections,
Speaker 4: I bring up any election related volatility, supply and auction
Speaker 4: that doesn't go well. Anytime interstrates rise, I think it
Speaker 4: should be viewed as a buying opportunity to add that duration,
Speaker 4: especially if you've got risk assets on the other side
Speaker 4: of your portfolio.
Speaker 1: All right, we're going to leave it on that note. Pria,
Speaker 1: thank you so much. Really enjoyed having you. Pria Mizra
Speaker 1: joining us. Of course, Global fixed income, Currency and Commodities
Speaker 1: portfolio manager at JP Morgan Asset Management. Thank you so much.
Speaker 1: Prank you. Hey, folks, I just want to bring you
Speaker 1: some headlines from Intel. We do have just crossing the
Speaker 1: Bloomberg terminal. It looks like Intel, specifically the company CEO
Speaker 1: has landed Amazon as an AWS customer for the company's
Speaker 1: manufacturing business, potentially bringing work to new plants under construction
Speaker 1: in the United States, boosting his efforts to turn around
Speaker 1: the embattled chip maker. So we're seeing some headlines there.
Speaker 1: I thought I saw one other headline also to pause
Speaker 1: Poland Germany factory projects by about two years. So we
Speaker 1: know the woes. We've talked about it a lot. I
Speaker 1: highly recommend that you check out some of the reporting
Speaker 1: that's being done by Ian King that really talks about
Speaker 1: how this has been long and coming. Intel shares though
Speaker 1: on these headlines, folks, in the aftermarket, we're seeing the
Speaker 1: stock pop around eleven percent here, so we'll continue to
Speaker 1: watch that, all right. Want to get back to future
Speaker 1: Proof Carol Masser along with Barry Ridtholtz here and want
Speaker 1: to get to an interesting guest, Christian Phase.
Speaker 5: Hi, Kristin, Hi, thanks for having me.
Speaker 1: Well, thanks for being here. He's founder and CEO Faz
Speaker 1: and Company. I can describe the company, but I'm going
Speaker 1: to let you describe it. Tell us what you guys
Speaker 1: are up to.
Speaker 5: Absolutely, thank you very much.
Speaker 6: It's great to be here, great sort of venue to
Speaker 6: have a conference.
Speaker 5: So we were a private credit fund.
Speaker 6: We run a private credit fund that gives accredited investors
Speaker 6: the opportunity to get exposure to what we think is
Speaker 6: a really interesting asset class, and that's real estate bridging
Speaker 6: finance against residential.
Speaker 1: Property, something you know a little bit about.
Speaker 5: I do know a little bit about.
Speaker 6: Yeah, So I've been involved in the sector for almost
Speaker 6: twenty years. Originally was a lawyer. Grew up in Australia,
Speaker 6: which you might be able to tell from my accent.
Speaker 1: Spend time over in London.
Speaker 6: Spend time in London. Yeah, so recovering lawyer as well,
Speaker 6: Barry so happy to be a lawyer.
Speaker 3: That's half of the lawyers aren't practicing seven years after graduation.
Speaker 1: Why is it that? Because another podcast that's.
Speaker 3: A whole nother conversation. So what sort of real estate
Speaker 3: you guys focus on? Is it just residential or is
Speaker 3: it a variety of sectors?
Speaker 6: No, it's residential. So we're very careful to explain that
Speaker 6: to to investors. Obviously, there's parts of the real estate
Speaker 6: market that are quite troubled and instead of making headlines
Speaker 6: like commercial and different parts. But we're small, balanced, single
Speaker 6: family residential. Our average loan size is four hundred and
Speaker 6: fifty thousand dollars, So it is kind of really targeting
Speaker 6: what we describe as property entrepreneurs buying the worst house
Speaker 6: on a nice street, replacing the bathrooms, kitchen, and then
Speaker 6: selling for the flip. Right, Yeah, it's fix and flip.
Speaker 6: It is fix and flip finance, and you know, it's
Speaker 6: a big market in the US. It's a big opportunity.
Speaker 6: Like you're saying, I've done it, built a business in
Speaker 6: the UK, there was very active in the fixed and
Speaker 6: flip market. That's now the largest non bank mortgage lender
Speaker 6: in the UK and now being active in the US
Speaker 6: for the last two years.
Speaker 5: And it's a huge market here.
Speaker 1: I did the investors who are like constantly sending me
Speaker 1: texts and saying I want to buy your house? Are
Speaker 1: these the people that you like are dealing no.
Speaker 7: All the time?
Speaker 3: Right, I get those on houses I don't even know them.
Speaker 3: I'm like, yes, send me, you definitely want to sell
Speaker 3: that one, right, here's.
Speaker 1: My price, and it's like you know some crazy number,
Speaker 1: you want it, it's yours, but no, tell me, like
Speaker 1: like we're dealing with.
Speaker 6: We describe them as property entrepreneurs. I mean, I think
Speaker 6: that it's a bit of a misnomer because a lot
Speaker 6: of people turn on the TV and see the glamorous couple,
Speaker 6: you know, flipping houses making lots of money, and it
Speaker 6: all looks quite easy. It's not that. In reality, it
Speaker 6: is kind of they're real hustlers. They have to work hard,
Speaker 6: and we target property professionals. They're they're doing this full time,
Speaker 6: and they do it multiple times a year, so five,
Speaker 6: ten times a year, and so they're good customers for us.
Speaker 6: Once we acquire them, we can be their funding partner
Speaker 6: of choice. They keep coming back to us and so yeah,
Speaker 6: so it's a very entrepreneurial boro but product.
Speaker 3: So my brother has been doing this for years, right,
Speaker 3: sort of a side hustle, but he does four or
Speaker 3: five houses a year, and the conversation has always been, hey,
Speaker 3: I'm funding this primarily with my own money. I asked him,
Speaker 3: have you thought about getting venture funding or any sort
Speaker 3: of credit for this? Because you could turn this into
Speaker 3: eight or ten houses a year if you really want to.
Speaker 3: And it's some of these houses are fairly it's not
Speaker 3: always the worst house in a nice block. Sometimes it's
Speaker 3: a very nice house on a really nice block.
Speaker 6: Yeah. Yeah, well, I'll have to give you my number.
Speaker 6: You can give to your brother for afterwards.
Speaker 5: We see the ideal happening.
Speaker 6: I proved people that are not trying to sort of
Speaker 6: maximize leverage. So the average LTV across our books less
Speaker 6: than sixty percent, so they're pretty conservative. But with a
Speaker 6: bit of leverage, they can do a couple of projects
Speaker 6: as opposed to being exposed to just a few, you know,
Speaker 6: the lesser number, and there's a lot of tailwinds for
Speaker 6: the asset class. You know, there's just fundamentally not enough
Speaker 6: houses being built here in the US, the same as
Speaker 6: in many arts of the world.
Speaker 1: Yeah, but that's a whole other story because it's in
Speaker 1: terms of, you know, acquisition of land and you've got
Speaker 1: to get neighborhoods to sign on. It's not just a
Speaker 1: case of here's the money, and it's not.
Speaker 5: Just a funding issue.
Speaker 6: But then the other sort of addition to that is
Speaker 6: that over sixty percent of housing stock in the US
Speaker 6: is over forty years old, so you do have a
Speaker 6: lot of aging stock that does need to be referbed.
Speaker 6: And so with not enough housing stock and a lot
Speaker 6: of older stock in the market, you know, refirbing is
Speaker 6: kind of is something that's very much needed.
Speaker 1: Something I've got to ask you though, and I'm curious
Speaker 1: about what your brother says, is that you know, there
Speaker 1: are people who want to do projects. There aren't plumbers,
Speaker 1: there aren't electricians, there aren't contractors. There isn't a younger generation.
Speaker 1: I have two contractors in the family too, and but
Speaker 1: there is not a younger generation who wants to do
Speaker 1: this kind of stuff.
Speaker 6: Yeah, definitely, and I think through COVID that's been a
Speaker 6: difficult time as well. You know, costs even crease, yeah
Speaker 6: even still, Yeah, it's tough. And also you don't have
Speaker 6: a lot of end borrowers that want to take a
Speaker 6: seven percent mortgage to buy the end product. So it's
Speaker 6: kind of a time of disruption. I kind of see
Speaker 6: that as a time of opportunity in many respects. You know,
Speaker 6: banks aren't active in this market. They're just not really
Speaker 6: equipped to provide the quick sort of streamline finance that
Speaker 6: we provide, and so you know, so I think it's
Speaker 6: a great opportunity for investors to get a superior risk
Speaker 6: adjusted return against what is a relatively liquid underlying asset class.
Speaker 3: So you're talking about the age of the housing stuff.
Speaker 3: Did I get this right? Sixty percent of the homes
Speaker 3: for forty years old or older. Yeah, So we're talking
Speaker 3: about referbs. I see a lot of knockdowns in some
Speaker 3: of the neighborhoods, either by my house or out by
Speaker 3: the beach or anywhere else. It seems like a lot
Speaker 3: of contractors are just, hey, let's not fix this, let's
Speaker 3: just build a bigger one.
Speaker 5: Yeah.
Speaker 3: Is that a space you work in?
Speaker 1: Also?
Speaker 5: So we don't.
Speaker 6: So we think that a ground up construction is quite
Speaker 6: a significantly higher risk proposition to be investing in. So
Speaker 6: we try and focus just on fix and flip where
Speaker 6: it's not sort of it's not sort of changing the
Speaker 6: construction of the bill. It's really just a tartup and
Speaker 6: then an opportunity to sell because we want it to
Speaker 6: be quick. You know, it's twelve months or less in
Speaker 6: duration our funding.
Speaker 1: Well, that's quick.
Speaker 5: It is quick. Yeah, but you know the typical borrow
Speaker 5: a little bit.
Speaker 6: Yeah, but it's it's quick, and that's that helps the
Speaker 6: underlying investors because it's it's there's a lot of volume
Speaker 6: of loans underlying.
Speaker 3: So what's the relationship between you and the fixer flipper?
Speaker 3: Is it just a credit relationship? Do you do anything
Speaker 3: with them? How do how does a participation work?
Speaker 6: So it's a direct relationship. So I think that's one
Speaker 6: of the advantages of our fund as well. We're not
Speaker 6: sort of buying loans originated by other originators. We have
Speaker 6: a direct borol relationship. That means we're very close to
Speaker 6: the underlying credit. You know, we can sort of understand
Speaker 6: what that borrow's true circumstances.
Speaker 1: Are, Like, you want to make sure this works.
Speaker 6: We want to make sure it works. Yeah, And it's
Speaker 6: a relationship lend. You know, we ideally want to be
Speaker 6: the preferred funding provider. They come to us, once they
Speaker 6: have a good experience, we get to know them. Once
Speaker 6: a borrow repays us, the risks around fraud and the
Speaker 6: things that sort of keep you up at night are
Speaker 6: significantly diminished. So we want to sort of be you know,
Speaker 6: finding good customers, lend to them again and again.
Speaker 1: I don't know if I missed this, did you say,
Speaker 1: what a typical loan, like, what the rate is? And
Speaker 1: I'm just curious about the returns on these investments for
Speaker 1: you guys.
Speaker 6: Yeah, sure, So I'm not sure if I'm alowed to
Speaker 6: talk about our investment returns and our fund but we
Speaker 6: offer investors a fixed return of ten percent and we're
Speaker 6: lending out at about twelve percent per random so there's
Speaker 6: a bit of a margin there for us, but it's
Speaker 6: a good sort of risk adjusted return for our investors.
Speaker 6: We say to our investors it's one percent a month.
Speaker 6: So the typical borrow does come to say I only
Speaker 6: need it for three months. Maybe it ends up being
Speaker 6: six months, but it's six percent. Is the cost of
Speaker 6: the funding for them. And what we say to the
Speaker 6: borrow is if they're too tight on the margin, then
Speaker 6: they shouldn't be doing the project. You know, that's kind
Speaker 6: of just a cost of doing business for them.
Speaker 3: Traditionally in on the property the usual mortgage stuff.
Speaker 6: Firstly, in yeah, so we I mean, our head of
Speaker 6: underwriting comes from a bank.
Speaker 5: We sort of experienced team.
Speaker 6: We say, we do everything that a bank does, you know,
Speaker 6: we fi COO score the borrowers.
Speaker 5: We look to make sure that we're only.
Speaker 6: Lending to corporates, but we look through to the individuals
Speaker 6: and make sure that they're credit worthy individuals. It's full
Speaker 6: recourse against those individuals and it's firstly security against the property.
Speaker 1: Just fifteen seconds. Is there any area in the United
Speaker 1: States that's particularly hot that you're working in or is
Speaker 1: it all over?
Speaker 6: It's we're quite selective in the States. Florida is a
Speaker 6: very strong smack of frost. But it's been on the
Speaker 6: op so I guess you watch closely.
Speaker 5: You know.
Speaker 1: It's a great interview, and you still have like a
Speaker 1: million press rights, right, Christian, such great stay.
Speaker 5: I love you to match you. Thank you, Thank you.
Speaker 1: Christian Phase. He is founder in CEO Phase and Company.
Speaker 1: We're headed for a break, folks, for from future Proof
Speaker 1: with Barry and myself. This is Bloomberg.
Speaker 2: This is Bloomberg Business Week with Carol Messer and Tim
Speaker 2: Stenebeck on Bloomberg Radio.
Speaker 1: Carol Masser along with Barry Redholts, were live at future
Speaker 1: Proof having some fun Huntington Beach, California. How could you not?
Speaker 1: I want to set this up a little bit, Okay.
Speaker 1: Bloomberg news story that was recently out just last month
Speaker 1: talked about the one point seven trillion dollar private credit industry.
Speaker 1: You talk about it a lot. We talk about it
Speaker 1: a lot, how it's grown so much as higher rates
Speaker 1: are basically forced byout firms to look further afield for
Speaker 1: funding while traditional lenders pull back. We know the story.
Speaker 1: What's interesting is banks have now become more competitive in
Speaker 1: recent months trying to regain the leverage loan markets, so
Speaker 1: they're starting to get a little upset in response. We've
Speaker 1: talked about credit funds starting to push their pricing down,
Speaker 1: raising concerns about a potential race to the bottom. So
Speaker 1: that's my setup because I want to ask our next
Speaker 1: guest whether that's what's going on. Alona Gornick is managing
Speaker 1: director senior investment strategist at Churchill Asset Management, which, as
Speaker 1: we'd like to remind everybody, is the fifty billion dollars
Speaker 1: private capital affiliate of NEU ven.
Speaker 8: Welcome, Welcome, Thank you so much for having me, Carol Berry.
Speaker 1: I feel like we know so much about Churchill. You
Speaker 1: do in particular, but I've also talked with Ken consel
Speaker 1: So a lot about what's going on. He often talks
Speaker 1: about just being the golden era of private credit, but
Speaker 1: are we seeing a little bit of a race to
Speaker 1: the bottom as banks are getting more involved. Tell me
Speaker 1: what's happening in terms of the deals that are going
Speaker 1: on right now.
Speaker 8: Sure, it's been a really interesting competitive landscape. As we
Speaker 8: think about the different segments of the middle market, I
Speaker 8: feel like they are individually each facing this sort of
Speaker 8: bank pressure in a very different way. I think a
Speaker 8: lot of the activity you're talking about is largely hitting
Speaker 8: that upper middle market segment, which makes a lot of
Speaker 8: sense for corporate barers of the size that banks really
Speaker 8: want to attract. In the core middle market, where Churchill's focus,
Speaker 8: we generally see a little bit less of that bank
Speaker 8: interaction or bank threat if you will, in that same
Speaker 8: traditional sense. But generally what we are seeing is a
Speaker 8: little bit more competition for the most part, with some
Speaker 8: upper middle market direct lenders somewhat coming down market. Given
Speaker 8: there isn't as much activity that they can pursue in
Speaker 8: that upper middle market or a little bit more of
Speaker 8: a competitive threat, they might want to expand their wings,
Speaker 8: if you will. But there are ways in the core
Speaker 8: middle market where we can really expand and stay disciplined
Speaker 8: and avoid some of that race to the bottom, which
Speaker 8: can come in the form of maybe tighter spreads, looser
Speaker 8: covenants to no covenants, coming down in market in terms
Speaker 8: of the size of the business, which is really where
Speaker 8: we want to stay away from.
Speaker 3: So private credit private credit really seems to navigate the
Speaker 3: rising rate environment pretty well. Most of the most of
Speaker 3: the various fun and deals form of sofur A plus
Speaker 3: some upgrade. So as rates go up, SOFA rises replacement
Speaker 3: of libor, and you guys seem to maintain a fairly
Speaker 3: robust spread and pretty good returns over time. Who are
Speaker 3: you targeting with your products? These tend to be locked
Speaker 3: up a little longer than I think. A lot of
Speaker 3: rias are used to tell us a little bit about
Speaker 3: who you're marketing to and why you're at this event.
Speaker 8: Sure, so private credit has generally been very focused on
Speaker 8: the institutional market. It really makes a lot of sense
Speaker 8: to have committed capital locked up where you can draw
Speaker 8: it down over time as a manager. But what be
Speaker 8: seeen has been incredible opportunity set in the wealth market
Speaker 8: that is just tapping the surface right of starting to
Speaker 8: explore private markets, private equity, private credit. But in size
Speaker 8: the wealth market is equal in terms of the institutional market,
Speaker 8: so think about going from zero percent effectively up to
Speaker 8: five percent. When you think about institutions and their exposure
Speaker 8: private credit, they're generally anywhere between five to fifteen percent.
Speaker 8: I mean Kelper's was out I think last week talking
Speaker 8: about targeting five going to eight percent massive institution. Think
Speaker 8: about the wealth channel getting from zero to even five.
Speaker 8: That's a huge untapped opportunity that we would like to meet.
Speaker 8: But to do that, we need more accessible products. It
Speaker 8: has been very difficult to think about wealth coming into
Speaker 8: a product that has a five million dollar minimum that
Speaker 8: is nowhere near what a wealth manager or an advisor
Speaker 8: can touch. So we're really focused on this market. This
Speaker 8: is a great conference to do it. There's about two
Speaker 8: thousand advisors here, but when I think about the wealth channel,
Speaker 8: I think there's about three hundred thousand advisors. It's so fragmented.
Speaker 8: How is Churchill going to access this market? So we
Speaker 8: absolutely need education, We need resources, We need distribution folks
Speaker 8: on the ground all over the country. We need specialists
Speaker 8: to help with that education. And we need partners, you know,
Speaker 8: like technology platforms like Case and I Capital help us
Speaker 8: create funds and ultimately product development that have lower minimums.
Speaker 8: These non traded perpetually non traded BDCs that allow you
Speaker 8: to come in for twenty five hundred dollars instead of
Speaker 8: five million and ten ninety nine's much more easy to access,
Speaker 8: really simple, really interesting.
Speaker 1: Do you think investors are ready for the possibility of
Speaker 1: it having higher risk as an investment or also having
Speaker 1: their money maybe locked up and not as liquid in
Speaker 1: these kinds of deals.
Speaker 8: I'd say the top three concerns or at least hesitation
Speaker 8: points that advisors have when I'm on the road are
Speaker 8: number one, the liquidity risk, Number two default risk in
Speaker 8: the asset class that they're not very familiar with, and
Speaker 8: number three it would generally be accessibility, like how am
Speaker 8: I going to get access to this product and comfortably
Speaker 8: get it if in fact we are in a rate
Speaker 8: declining environment? How will that impact my return picture. With liquidity,
Speaker 8: you have to really educate folks that these are ultimately
Speaker 8: not traded assets.
Speaker 1: Right.
Speaker 8: We're putting it in a wrapper that affords you potentially
Speaker 8: some liquidity and a quarterly redemption, but underneath it, the
Speaker 8: assets aren't really meant to trade. So you really have
Speaker 8: to educate the client and thinking if this is something
Speaker 8: your portfolio that you will not touch for a very
Speaker 8: long time, enjoy current income along the way. That's what
Speaker 8: you want to really think about, and diversify the portfolio
Speaker 8: with an enhanced return. I think that's what's really resonating.
Speaker 3: What's the typical lock up period.
Speaker 8: So we don't have one in these funds and a
Speaker 8: non traded BBC, you're actually first twelve months you'll have
Speaker 8: a soft lock at ninety eight. But then after that
Speaker 8: you can really redeem your entire amount up to a
Speaker 8: cap where we as a manager would cap it at
Speaker 8: five percent of the enemy of the fund.
Speaker 3: So really that window and we saw this craziness with
Speaker 3: a B credit and be read earlier this last year.
Speaker 3: I've always thought of that as I call it the
Speaker 3: widows and orphans redemption if yours And my favorite story
Speaker 3: is surgeon forty seven years old, wife, two young kids,
Speaker 3: suddenly passes away. They don't want to be in an
Speaker 3: I liquid thing, and so that's what that five percent
Speaker 3: is really for. So for the typical line who's not
Speaker 3: they expect to hold this for three years, five years,
Speaker 3: seven years, what sort of expectation do you have.
Speaker 8: I think what's great with advisors is really trying to
Speaker 8: help them educate their clients about a very long term
Speaker 8: hold here. I think what's really resonating in terms of
Speaker 8: benefits about private credit are one that income generation. It's
Speaker 8: incredible to think about income generation in terms of a
Speaker 8: predictable path to retirement. So if it's on your way
Speaker 8: or when you're in retirement, that is a multi year
Speaker 8: potential investment addition to your portfolio. But if you think
Speaker 8: about the income component of that, it's very similar to
Speaker 8: fixed income and public credit, but with a really nice
Speaker 8: yield premium to it. And you were talking about this earlier. Historically,
Speaker 8: the yield premium for private credit, particularly direct lending versus
Speaker 8: the upper kind of large corporate credit, has been anywhere
Speaker 8: between one hundred and fifty to two hundred and fifty
Speaker 8: basis points. That's pretty historically kind of where the average
Speaker 8: has been around two hundred. Right now, we're actually seeing
Speaker 8: it widen out to about two fifty two sixty five,
Speaker 8: which has been because of that really that comeback in
Speaker 8: the bank market. When things come back, activity picks up,
Speaker 8: spreads tighten out, but not as much in that middle market.
Speaker 8: So our premium is actually increasing, So current income is
Speaker 8: really going to be really attractive for advisors when they
Speaker 8: think about multi year in terms of at three, is
Speaker 8: it five, is it seven?
Speaker 1: Is it for the long haul? Is there any stress
Speaker 1: that you guys are seeing? I mean, I do think
Speaker 1: that there was, you know, milk in the last couple
Speaker 1: of years and milk in this year. Like the concerns
Speaker 1: about stresses in the private credit area because we feel
Speaker 1: like that there isn't enough transparency. You know, you know
Speaker 1: the arguments, but I'm just curious, you know, re renegotiating
Speaker 1: the terms of deals to make sure that you know
Speaker 1: there's no defaults and that you can kind of see
Speaker 1: the deal through. What are you seeing on that front?
Speaker 8: I think that there are pockets of stress or distress
Speaker 8: happening in the market, and I think it's going to
Speaker 8: be vintage specific still, yes, and actually showing it. It's
Speaker 8: ugly head a little bit more so when you think
Speaker 8: about the most aggressive deals were generally done in and
Speaker 8: around the time where we saw massive recovery post COVID.
Speaker 8: At twenty twenty one, valuations were really high, really fantastic
Speaker 8: software healthcare services businesses were getting bought from double digit multiples,
Speaker 8: and along with that came a pretty heavy dose of leverage,
Speaker 8: pretty easy kind of money, very low to no covenants.
Speaker 8: It's that which we're seeing. If you had any issue
Speaker 8: before COVID and now in an interest rate environment that's
Speaker 8: been twice as high as it was two years ago,
Speaker 8: you're going to feel a little bit of pain right now.
Speaker 8: So we're starting to see a little bit of that
Speaker 8: unfold so that stress that those cracks. But I'd say
Speaker 8: it isn't broad based across all of private credit. I'd
Speaker 8: say it's sort of isolated to vintages and then even
Speaker 8: certain parts of the market where you took a little
Speaker 8: too much leverage, then the business should be able to handle.
Speaker 3: So let's talk a little bit about the industry itself.
Speaker 3: We've seen broad adoption of private credit when rates were
Speaker 3: really low and double digit growth every year. How much
Speaker 3: longer can this sector continue to grow at such a
Speaker 3: rapid rate?
Speaker 8: So we get this question a lot on the road
Speaker 8: in terms of is this growth a bubble? How much
Speaker 8: of this is sustainable? And it's important to think about this,
Speaker 8: and I know you've talked a few of my colleagues
Speaker 8: or we think look back at the growth so far,
Speaker 8: if you really unpack that, a lot of it has
Speaker 8: been really more secular driven rather than fad driven. Right,
Speaker 8: These are changes that are evolutionary nature that had to
Speaker 8: happen at some point or you had for the first
Speaker 8: time a commensurate demand in both investors' interest in the
Speaker 8: asset class with that search for a yield in the
Speaker 8: low rate environment and borrowers who are really looking for
Speaker 8: a more efficient, customized speed to certainty of execution type
Speaker 8: of solution. And both of those happened in lockstep. But
Speaker 8: now where are we. We're not in a low rate
Speaker 8: environment anymore. Right, Borrowers already know that this is a
Speaker 8: fantastic customized solution. They can avoid going to S and
Speaker 8: PN moodies. But what's going to push it to the
Speaker 8: next level? And I think what we've got is looking
Speaker 8: at dry powder that's on the side for equity, massive
Speaker 8: amounts of dry powder that still needs to be put
Speaker 8: to work. And if you think about every dollar private
Speaker 8: equity that's put to work, there's typically another private credit
Speaker 8: dollar put to work if you think about a fifty
Speaker 8: to fifty debt to equity structure. So I do think
Speaker 8: that they'll be sustainable demand going forward.
Speaker 1: A great overview, certainly of something that has become hot,
Speaker 1: and I feel like year after year after year we
Speaker 1: talked so much about what's going on in private credit. Alona,
Speaker 1: thank you so much.
Speaker 8: Yes, definitely, thank you for having me.
Speaker 1: Ellen and Gornick, senior investment strategist at Churchill Asset Management.
Speaker 1: You are listening and watching Bloomberg Business Week from future Proof.
Speaker 1: This is Carol mass Long Barry Redholts. We're live at
Speaker 1: Futureproof in Huntington Beach, California, and I was going to
Speaker 1: do an introduction, but I just want to get right
Speaker 1: to her because we have so much to talk about.
Speaker 1: Great to have back with a Sarah Mallock. She's Chief
Speaker 1: Investment Officer, head of Equities and fixed income over at
Speaker 1: new Van Asset Management. There are one of the world's
Speaker 1: largest investment managers one point two trillion dollars in assets
Speaker 1: under management, not just shack real mind, right, that is
Speaker 1: real money. How are you great?
Speaker 7: It's great to be here. It's a sunny day in
Speaker 7: Huntington Beach. How can I complain?
Speaker 1: I agree?
Speaker 7: I agree.
Speaker 3: That seems to be the consensus, like let's go out
Speaker 3: side and play.
Speaker 1: All right, so here we've just it's not it's not
Speaker 1: what the Fed's doing. It's just the consensus is it's beautiful, right,
Speaker 1: This is not going to be bad the investment environment.
Speaker 1: Let's talk about today. I feel like we've seen some
Speaker 1: of the megacaps continue to be pulling back. How are
Speaker 1: you thinking about, first of all, the equity side of
Speaker 1: things right now, Well, let's start with technology. I think
Speaker 1: July tenth was was an important day for tech stocks.
Speaker 1: That's where in second quarter earnings, people decided they weren't
Speaker 1: good enough. So even with Nvidia and there are one
Speaker 1: hundred and twenty two percent revenue growth in the second quarter,
Speaker 1: these socks had gotten crowded and it just wasn't good enough,
Speaker 1: and stock started sounding crazy in your view, Well, it's just,
Speaker 1: you know, it's tough to say what's really priced in
Speaker 1: in terms of artificial intelligence. And I think what people
Speaker 1: are really waiting for, though, is some signs of return
Speaker 1: on investment or monetization from all these huge AI investments
Speaker 1: that companies have made. And in any cycle where we're
Speaker 1: in this ultra growth cycle, you're not just going to
Speaker 1: see that immediately. So a bit of a pause here
Speaker 1: as we wait to see that these socks are even
Speaker 1: though they're growing gangbusters, still there's there's so much crowding
Speaker 1: in them and the valuations and everything just I think,
Speaker 1: you know, they roll over for a bit until we
Speaker 1: get the next catalyst, which, by the way, Jensen's on
Speaker 1: the road in early October that could be a catalyst.
Speaker 7: No more delays from Blackwell.
Speaker 9: And also, you know, the stock is not incredibly expensive,
Speaker 9: so I think that could also be another reason why
Speaker 9: Nvidia does eventually bounce off the bottom and go up.
Speaker 9: But in the meantime probably training range of one hundred
Speaker 9: and one hundred and forty okay.
Speaker 3: So but but you know, we're almost done with September.
Speaker 3: We're coming up on you know, Q three earnings. By
Speaker 3: every estimate, that looks like we're going to be at
Speaker 3: or near record earnings. Isn't that what's going to drive
Speaker 3: stock prices high?
Speaker 9: Well, before we get to those third quarter earnings, let's
Speaker 9: talk about being almost done with September, because it is
Speaker 9: the middle of September. For the past four years in
Speaker 9: a row, the second half of September has seasonally been
Speaker 9: the worst two weeks of the year for the stock market.
Speaker 9: So we have a little bit in front of us
Speaker 9: beyond retail sales, and that fed meeting in a couple
Speaker 9: of days. Earnings have been strong, and even if a
Speaker 9: recession is coming, and we are in that camp, but
Speaker 9: the recession east to camp, as Bob was talking about
Speaker 9: earlier today on my panel, you know, the earnings are
Speaker 9: not showing that yet. Employment markets are so reasonably strong,
Speaker 9: consumers showing some signs of cracking. So I think we're
Speaker 9: okay for now. But we do have the last two
Speaker 9: weeks of September to contend with.
Speaker 3: Didn't we kind of pull that September trouble back to
Speaker 3: the beginning of September. That's when the mess really was
Speaker 3: And it's almost like September's in the rear view mirror,
Speaker 3: even though we're only in the first day of the
Speaker 3: second half.
Speaker 9: What's tough to say, because first of all, retail sales cut,
Speaker 9: you know important this month consensus is one point two
Speaker 9: percent growth, but remember if we go back to last month,
Speaker 9: consensus was point three percent. They retail sales printed at
Speaker 9: one percent in markets. That's what caused the markets to remount.
Speaker 9: I don't think that's going to happen tomorrow because of
Speaker 9: what's in front of us on Wednesday. I think if
Speaker 9: the FED cuts by twenty five basis points, which is
Speaker 9: our expectation markets might sell up on that news because
Speaker 9: they've already priced that in.
Speaker 7: Now the FED cuts by fifty.
Speaker 9: Or even more, we have to wonder are the markets
Speaker 9: going to get concerned that the FED knows too much
Speaker 9: and they're too worried?
Speaker 7: Basically, I don't know how they can can.
Speaker 3: I I got to ask a question because every time
Speaker 3: someone says the FED knows something, we don't know. The
Speaker 3: FED didn't know inflation was coming, they were late. The
Speaker 3: FED didn't know inflation was peaked, they were late. What
Speaker 3: do you say, I didn't know the inflation had bottom.
Speaker 3: I'm saying they're a large, cautious institution that tends to
Speaker 3: move very deliberately, and so the FED knowing what we
Speaker 3: don't know is less of a concern than hey, when
Speaker 3: are these guys going to figure out what we've already
Speaker 3: figured out. I look at it differently than you.
Speaker 9: Well, I agree with you on the FED being cautious,
Speaker 9: and that's why we think they only cut by twenty
Speaker 9: five is first of all, economy is slowing, but it's
Speaker 9: not on the precipice of a recession.
Speaker 8: Yeah.
Speaker 9: But on the second part of you know, I guess
Speaker 9: it has a little bit more to do with if
Speaker 9: the FED sneezes of the rest of us catch a cold.
Speaker 9: So if they come in at this higher rate cut,
Speaker 9: it's not necessarily do they know a recession is coming.
Speaker 9: It's that if they're so concerned about it, should the
Speaker 9: rest of the world be concerned about it. You have
Speaker 9: an SMP that's trading around fifty six hundred. Obviously the
Speaker 9: S and P five hundred is not concerned about a
Speaker 9: recession at this point, so that would be I think
Speaker 9: what would get people unnerved.
Speaker 3: So my favorite question anytime we're talking about the FED
Speaker 3: is not whether it's twenty five or fifty, what's the
Speaker 3: terminal rate? Where did they end up when everything is
Speaker 3: said and done.
Speaker 9: I think that's the challenge. So, first of all, this year,
Speaker 9: so in antelection, your FED tends to do more rather
Speaker 9: than less, So that's another reason I think they start slowly.
Speaker 9: You might get one or two more rate cuts by
Speaker 9: the end of this year.
Speaker 1: Then it just.
Speaker 9: Depends on are we going to get that recession that
Speaker 9: we've now talked about for two years straight or not.
Speaker 7: I think that we are.
Speaker 9: If we get to that, then I think we get
Speaker 9: multiple rate cuts next year.
Speaker 7: So our view is they start.
Speaker 9: Off a little bit slow, maybe more slowly than the
Speaker 9: market expects, but then they start to accelerate as employment
Speaker 9: markets really crack and the consumer continues to slow, and
Speaker 9: then you know, we get to a level where, you know,
Speaker 9: depending on the level of the recession, you know, then
Speaker 9: we'll sort of see where the FED finally ends up
Speaker 9: in terms of its terminal rate.
Speaker 1: Is there a trade that we should be talking about?
Speaker 9: I think we should first of all, Okay, so fixed
Speaker 9: income tends to outperform equities into twelve months after rate cuts,
Speaker 9: so we should be talking about fixed income. Secondarily, I
Speaker 9: think we should be talking about quality overall. If we
Speaker 9: are going into this recession, companies with strong balance sheet,
Speaker 9: companies with the ability to continue to grow their dividends.
Speaker 7: And provide income for investors.
Speaker 9: Also rate sensitive sectors like reats, which tend to have
Speaker 9: lagged for the two years. As a FED raise rates,
Speaker 9: we should outperform as a FED cuts rate. So looking
Speaker 9: for this is a little different than what we've been
Speaker 9: thinking about last years has been about who can survive
Speaker 9: rate hikes, who can survive ultra high inflation. Now we're
Speaker 9: thinking about who performs well during rate cuts, which companies
Speaker 9: might will be able to survive some form of a recession.
Speaker 3: So you mentioned some consumers are showing signs of cracking.
Speaker 3: A lot of the bottom half of the economy is
Speaker 3: reliant on credit cards. If we see rate cuts, does
Speaker 3: that start to alleviate some of that pain?
Speaker 7: I think it could.
Speaker 9: Already we're seeing we are seeing consumer delinquencies pick up.
Speaker 9: Second quarter earnings companies were not super optimistic on the consumer.
Speaker 9: Rate cuts I think will help, But the question will
Speaker 9: be will it be enough? Is it too little, too late?
Speaker 9: I think given what already, what we've experienced in terms
Speaker 9: of rate hikes for the last couple of years, and
Speaker 9: the fact that we think the FED starts slowly, I'm
Speaker 9: not sure that a couple of rate cuts is enough
Speaker 9: to get us into the soft landing camp that we
Speaker 9: all hope for.
Speaker 1: All Right, I was going to ask you what's the
Speaker 1: big risk that we have to worry about? Five seconds?
Speaker 1: What's the big risk?
Speaker 9: Probably geopolitics, one that we're not talking about as much anymore,
Speaker 9: and you know, will that bubble up in any of
Speaker 9: the you know, unfortunately where it's happening. I think you know,
Speaker 9: non US markets are something that people aren't talking that
Speaker 9: much about right now, All.
Speaker 1: Right, good stuff as always, Sarah Mallick, Chief investment Officer,
Speaker 1: head of Equities and fixed Income over at new Van
Speaker 1: Asset Management.
Speaker 2: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 2: Tim Stenebeck on Bloomberg Radio and television.
Speaker 1: All right, everybody, we are back at future Proof Carol
Speaker 1: Masser along with Barry Ridholtz and our next guest, participating
Speaker 1: in a panel here at future Proof about capturing the
Speaker 1: next generation of investors. It's something we've talked about a theme,
Speaker 1: right are you on?
Speaker 3: No there, I am. It's a theme because we've been
Speaker 3: talking to there's so many young young people here, tell
Speaker 3: so many young advisors. It's a place if you want
Speaker 3: to look into where this industry is going. We're better
Speaker 3: right exactly, and Betterment is one of the companies that
Speaker 3: has been looking into where this business is going.
Speaker 1: And we've got the CEO sour Levy. How are you.
Speaker 8: I'm doing well, Thank you for having me.
Speaker 1: So what are you doing with the younger folks and
Speaker 1: how do you get them and how do you get
Speaker 1: them to come onto the platform.
Speaker 10: So Betterment Advisor Solutions is really our ria platform that
Speaker 10: helps this next generation of advisors reach the next generation
Speaker 10: of investors, right, and so so one step removed, if
Speaker 10: you will, and what we offer is really a seamless
Speaker 10: platform to move between investing and cash and retirement. And
Speaker 10: I think the key to this generation. There's a lot
Speaker 10: that is the same with this generation as the prior generation, right,
Speaker 10: a long term outlook. I want to be better off
Speaker 10: down the road than I am today. I want to
Speaker 10: pay low taxes. But what's different is their expectation of technology.
Speaker 1: Right.
Speaker 10: Fundamentally, they have grown up in a world where everything
Speaker 10: from e commerce to streaming is delightful and easy, and
Speaker 10: they expect the same of the platform they use for
Speaker 10: financial advice. And I can access on my phone, I
Speaker 10: can access on my phone whenever I want.
Speaker 3: Right, So late iss use of technology friction free. What
Speaker 3: else are they looking for? Are they different than their
Speaker 3: parents in terms of what they want in terms of
Speaker 3: their portfolios?
Speaker 10: I don't think they're different. We don't see them being
Speaker 10: different in terms of their portfolios. I mean, I think
Speaker 10: there's a lot of theory around how the sixty forty
Speaker 10: portfolio has evolved because.
Speaker 1: We've done stories about gen Z kind of shunning the
Speaker 1: sixty forty and more interested in, you know, investing things
Speaker 1: like sneakers and you know, rather than stock. So help
Speaker 1: us understand, Well, can't you say that they kind of
Speaker 1: have the same goals.
Speaker 10: Well, I think ultimately their goals are to retire comfortably.
Speaker 10: And when you think about social security and the challenges that,
Speaker 10: you know, they're unlike their predecessors, you know, in the
Speaker 10: prior generations, they're not as comfortable with the role government
Speaker 10: is going to play, and they're fearful about what's going
Speaker 10: to happen in social security. They don't have the luxury
Speaker 10: of a pension right which their predecessors had. And so
Speaker 10: I think the idea that personal investing and a defined
Speaker 10: contribution plan is their future means they have to take
Speaker 10: more control. And I think what's challenging about taking more
Speaker 10: control is that there's tons of information out there, and
Speaker 10: there's disinformation, there's misinformation, right, So how do you make
Speaker 10: sense of it all? I think is the biggest struggle
Speaker 10: for them. And so they're seeking advice, and the ones
Speaker 10: who get great advice from advisors are the ones who
Speaker 10: are more confident that they will be able to retire comfortably.
Speaker 3: Huh. Really interesting. So technology, we've been talking about AI
Speaker 3: constantly this whole week. You guys have been embracing AI.
Speaker 3: Explain how you use AI to deliver a better product
Speaker 3: and better performance for your clients and their clients.
Speaker 10: So I think of AI really as a continuum from automation.
Speaker 10: We've been delivering fantastic automation for advisors and for retail
Speaker 10: customers for a decade and a half, and AI really
Speaker 10: supercharges what we've been doing right. You know, there's a
Speaker 10: lot of fear around which I think is unnecessary around
Speaker 10: you know, is AI going to take over the jobs?
Speaker 10: And I think the better way to think about it
Speaker 10: is AI. People who don't understand AI, those are the
Speaker 10: ones who are whose jobs are going to be threatened
Speaker 10: because you need to harness the power of AI to
Speaker 10: basically accelerate and supercharge everything the humans are doing right.
Speaker 10: And so whether that's paraplanning, whether that's marketing, collateral customer service,
Speaker 10: there are all sorts of ways where generative AI can
Speaker 10: basically strengthen the advisor's relationship with their customer by freeing
Speaker 10: up time and money, which is ultimately what they're after.
Speaker 1: I mean, it's all about making things easier, right and.
Speaker 8: Seamless, easier, faster, cheaper.
Speaker 1: I am curious too in terms of the younger generation.
Speaker 1: I mean, are they feeling like it is going to
Speaker 1: be largely you talked about four one ks and that
Speaker 1: it's going to be the financial markets, because I think
Speaker 1: I have you know, I had a dat who had
Speaker 1: a pension and VA benefits and k and like just
Speaker 1: multiple things. And there's a generation that isn't going to
Speaker 1: have it. Is it going to be all about the markets?
Speaker 1: And they've got to figure this out?
Speaker 10: Well, you're exactly right, and I think that is the
Speaker 10: fear that they have, right, is that I'm not going
Speaker 10: to have the same kind of social safety net that
Speaker 10: my parents had, and so I'm going to need defend
Speaker 10: for myself. And then to the sort of asset class
Speaker 10: question they're wondering also, some of them have a different
Speaker 10: set of beliefs or you know, a social frame that
Speaker 10: they want to put around their investing, and so they
Speaker 10: want to make choices, whether that's at the margin or
Speaker 10: completely about where is that money going ultimately in service
Speaker 10: of a comfortable retirement.
Speaker 3: So you'd mentioned there's not that different goal, but a
Speaker 3: different method to get there. If you're a twenty something
Speaker 3: or a thirty something, does a sixty forty really make sense?
Speaker 3: You have decades before you retire. How do you feel
Speaker 3: about the people who advocate just straight equity, no bonds.
Speaker 10: So we think about diversification. We believe from a long
Speaker 10: term perspective, you want to be diversified domestic, international, equity, bonds,
Speaker 10: some alternatives as a part of that portfolio. And I
Speaker 10: think where you are in your life stage that that
Speaker 10: affects the mix.
Speaker 3: So not necessarily sixty forty, seventy thirty eighty twenty. Correct.
Speaker 10: The mix is about your risk tolerance and your timeline.
Speaker 1: Last question, and just got about ten to fifteen seconds.
Speaker 1: Does a younger generation want investment advice or do they
Speaker 1: want to do more on their own or is it
Speaker 1: a combination. The smart ones want investment advice, they do
Speaker 1: so they just go.
Speaker 10: Back absolutely, particularly as their lives get more complicated.
Speaker 1: That makes sense, do you see that? Ring? Sarah, Thank
Speaker 1: you so much, Thanks for having what a great way
Speaker 1: for us to wrap up day one of our coverage. Share.
Speaker 1: Thank you so much. Sarah Levy. She's the CEO of
Speaker 1: Betterment All right, that's it for day one.
Speaker 3: You're ready for take it absolutely. Hopefully the weather stays
Speaker 3: like this. Another Burger Nashville Chicken slider.
Speaker 1: It's been eating it all right, everybody gonna do it
Speaker 1: for Barry Retolts and myself. This is Bloomberg BusinessWeek.