WEBVTT - UK’s Child-Care Costs Under Examination 0:00:01.320 --> 0:00:05.680 This is Bloomberg business Week Inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.440 --> 0:00:13.640 global business finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:20.160 Podcast with Carol Masser and Tim stinebec from Bloomberg Radio. Well, 0:00:20.160 --> 0:00:22.520 we often talked about the high childcare costs that we 0:00:22.560 --> 0:00:24.720 have here in the US. This week, though, in the 0:00:24.800 --> 0:00:27.520 upcoming new issue of Bloomberg Business Week at on newsstands 0:00:27.560 --> 0:00:30.520 on Thursday, already on the Bloomberg In online at Bloomberg 0:00:30.600 --> 0:00:34.560 dot com Slash business Week, a story on the exorbitant 0:00:34.600 --> 0:00:37.479 childcare costs in the UK, which happened to be the 0:00:37.520 --> 0:00:40.040 most expensive among the O E c D countries, and 0:00:40.400 --> 0:00:43.280 how the calls will reform in that country are growing louder. 0:00:43.320 --> 0:00:45.360 So let's get to it, and let's get to her story. 0:00:45.680 --> 0:00:49.680 From Bloomberg News Equality reporter Olivia knot a Hulu with 0:00:49.760 --> 0:00:52.520 us on the phone from London, along with Bloomberg Business 0:00:52.520 --> 0:00:54.640 Week editor Jil Whever. He is here in our Bloomberg 0:00:54.680 --> 0:00:58.200 Interactive Broker studio. All right, Joel, I thought it was 0:00:58.240 --> 0:01:02.160 bad here, really bad, it is actually, But it turns 0:01:02.160 --> 0:01:05.880 out that we are not alone and that the UK 0:01:06.080 --> 0:01:09.039 actually has things even worse, m Olivia, what did What 0:01:09.120 --> 0:01:13.280 are the numbers reveal as you dug into the story? So, 0:01:13.319 --> 0:01:15.320 I think the most striking one is what you mentioned 0:01:15.360 --> 0:01:18.600 in terms of just the fact that proportion proportionate to 0:01:18.640 --> 0:01:21.840 what people earn, the UK has the highest childcare costs 0:01:21.920 --> 0:01:23.800 in UM in the O E c D, which is 0:01:23.800 --> 0:01:27.119 obviously very striking, and just the sense that some people 0:01:27.160 --> 0:01:31.399 are paying more on childcare costs and their mortgages UM. 0:01:31.520 --> 0:01:34.680 Some people are, some women are finding it's actually well, 0:01:34.920 --> 0:01:36.920 some parents and women to sticks are finding that it's 0:01:37.040 --> 0:01:40.360 more cost effective not to work because they earn less 0:01:40.360 --> 0:01:43.160 than they would pay on childcare UM. So that's coming 0:01:43.240 --> 0:01:46.560 some of the figures that we're seeing at the moment. Okay, 0:01:46.640 --> 0:01:50.440 so if it's so expensive that people are giving up 0:01:50.920 --> 0:01:53.200 their jobs just to take care of their kids, that 0:01:53.240 --> 0:01:56.720 cannot bode well for the economy. And this is an 0:01:56.760 --> 0:01:59.680 economy that has already I know, I know the word 0:01:59.680 --> 0:02:03.160 brex it maybe give you a little PTSD sail Olivia, 0:02:03.240 --> 0:02:07.080 but but what does this mean for the economy. So 0:02:07.160 --> 0:02:10.360 one of the general effects, one of the things that 0:02:10.360 --> 0:02:13.240 people generally find is that when childcare is very expensive 0:02:13.320 --> 0:02:16.240 and when women are generally the people who will kind 0:02:16.280 --> 0:02:20.160 of um take the hit and either cut back their 0:02:20.200 --> 0:02:22.880 hours or stay at home. And what we're seeing that 0:02:22.880 --> 0:02:25.200 that potentially could be the case in the UK. So 0:02:25.320 --> 0:02:29.359 what we've seen in the latest data available that um 0:02:29.560 --> 0:02:32.400 quite a few women left the workforce to stay at 0:02:32.440 --> 0:02:36.160 home and that's kind of been roughly happening over two 0:02:36.520 --> 0:02:38.320 which is one of the first time that's happened in 0:02:38.360 --> 0:02:42.440 about twenty years, so that's quite concerning. And overall, what 0:02:43.160 --> 0:02:46.720 one report found that you know, that cost if the 0:02:46.800 --> 0:02:50.040 UK had a similar employment rate female employment rates to Sweden, 0:02:50.080 --> 0:02:52.519 then you know the economy would gain a hundred and 0:02:52.560 --> 0:02:56.320 seventy seven billion pounds dollars a year, so you know, 0:02:56.440 --> 0:03:00.320 that could potentially be quite a big economic win. Olivia, 0:03:00.360 --> 0:03:03.320 I think it's worth talking about why why are costs 0:03:03.360 --> 0:03:05.880 so high? Is this a function of supply because clearly 0:03:05.880 --> 0:03:08.800 you're seeing you know, demand is strong but maybe decelerating 0:03:08.800 --> 0:03:11.080 with all these women leaving the workforce. Because the cost 0:03:11.200 --> 0:03:14.360 is so high, there must be a supply constraint hidden 0:03:14.360 --> 0:03:17.240 in here that's creating high cost of childcare? What is it? 0:03:18.800 --> 0:03:20.640 And one that's part of it? So you do speak 0:03:20.720 --> 0:03:24.040 to women who well to parents where it's pretty normal 0:03:24.080 --> 0:03:27.160 for them, for example, to triumph a childcare placed before 0:03:27.200 --> 0:03:30.120 they're born, and that kind of can be exacerbated depending 0:03:30.160 --> 0:03:32.280 on where you live. But what if you talk to 0:03:32.280 --> 0:03:34.920 anyone in the industry, what pretty much everyone says, without 0:03:35.520 --> 0:03:38.720 um exception, is that the way that childcare subsidies are 0:03:38.760 --> 0:03:43.240 structured basically means that although childcare costs are partly subsidized, 0:03:43.240 --> 0:03:47.960 when your child turns three or four, um, the cost 0:03:48.000 --> 0:03:50.160 of that the cost of those substitutes aren't fully met 0:03:50.160 --> 0:03:52.560 by the government, so providers have to hike their costs 0:03:52.560 --> 0:03:55.320 in order to meet those costs, which makes having which 0:03:55.320 --> 0:03:58.440 makes there anyone who's not doing no subsidies basically very 0:03:58.520 --> 0:04:01.880 very very expensive UM. And so what people in the 0:04:01.920 --> 0:04:04.960 industry are generally saying is that for the immediate term, 0:04:05.040 --> 0:04:08.119 what's just needed. It's just more cash. Hey, Olivia talked 0:04:08.080 --> 0:04:10.920 to us about the political will to actually do something substantial, 0:04:10.920 --> 0:04:12.400 because when I think about it here in the US, 0:04:12.440 --> 0:04:15.080 I feel like it's very low when it comes to 0:04:15.120 --> 0:04:18.520 the list of priorities of you can throw billions of 0:04:18.560 --> 0:04:21.360 dollars around and it's still not really touched. Childcare in 0:04:21.400 --> 0:04:26.440 the US, right, it's like in the UK. Well, I 0:04:26.480 --> 0:04:28.840 think it is a growing it is a growing theme. 0:04:28.960 --> 0:04:31.320 So last year there was this big protest called March 0:04:31.400 --> 0:04:33.920 the Mummy isn't really kind of really court people's attentions 0:04:33.920 --> 0:04:35.960 because they were just all these mums saying that they 0:04:36.000 --> 0:04:40.240 were fed up basically. And also last year they started 0:04:40.240 --> 0:04:43.000 the inquiry and the issue and the Labor Party, the 0:04:43.040 --> 0:04:46.880 opposition party, is really kind of doubling down. So recently, um, 0:04:46.920 --> 0:04:49.039 one of their officials went to Estonia because they have 0:04:49.080 --> 0:04:51.800 a really kind of exemptary model of childcare and there's 0:04:51.839 --> 0:04:54.159 this growing kind of recognition that something needs to be 0:04:54.160 --> 0:04:56.120 done because a lot of people are really really angry 0:04:56.160 --> 0:04:58.000 and it is going to be is potentially going to 0:04:58.080 --> 0:05:01.279 be a key electoral issue going forward. What did you 0:05:01.320 --> 0:05:05.760 say Estonia? What can we learn from Estonia here? Well, 0:05:05.760 --> 0:05:10.880 it's interesting apparently they have relatively low childcare costs, but 0:05:11.240 --> 0:05:13.640 there's a lot of kind of childhood of courts are 0:05:13.720 --> 0:05:15.840 very low basically, and that really kind of has helped 0:05:15.839 --> 0:05:20.080 the female employment rates. UM. So yeah, Labor's education spokesperson 0:05:20.240 --> 0:05:24.240 went went to Estonia and and they have really good 0:05:24.400 --> 0:05:27.680 educational outcomes as a result. Also Worth mentioning that if 0:05:27.760 --> 0:05:29.560 if you're going to start a march, March of the 0:05:29.640 --> 0:05:32.600 Mummies is definitely going to get in some people's attention, 0:05:32.800 --> 0:05:35.359 want the T shirt along with that. So what's the 0:05:35.400 --> 0:05:38.920 likelihoods and everything? All right? So, Olivia, what's the likelihood 0:05:38.960 --> 0:05:41.640 though that anything changes or is there a time frame 0:05:41.720 --> 0:05:45.400 that that's being thought about? Well, the thing is that 0:05:45.480 --> 0:05:48.080 the election the next general elections in the next two years. 0:05:48.120 --> 0:05:51.760 So if if major reform is going to be done, 0:05:51.839 --> 0:05:55.960 then the clock is ticking. And what one study said 0:05:56.040 --> 0:05:59.360 is that most kind of liberal economies which are similar 0:05:59.400 --> 0:06:01.560 to us, have had some kind of major reform of 0:06:01.640 --> 0:06:03.800 childcare in the past five years or so, but the 0:06:03.880 --> 0:06:06.880 UK it's biggest change within two thousand and seventeen, and 0:06:06.920 --> 0:06:08.680 a lot of people said that in many things worse. 0:06:08.760 --> 0:06:12.240 So what some people would say that changes over to 0:06:12.240 --> 0:06:16.240 you basically, and considering the laundry list of issues that 0:06:16.360 --> 0:06:18.400 the Labor Party is going to try to contend with, 0:06:18.760 --> 0:06:20.880 this is obviously one of them. But how would you 0:06:20.960 --> 0:06:23.880 rank this relative to the other issues that the party 0:06:23.960 --> 0:06:27.960 is really focused on right now? Well, I think the 0:06:28.040 --> 0:06:31.600 cost of living in the UK does eclipse almost anything. 0:06:31.600 --> 0:06:34.920 It feels like at the moment, and although inflation isn't 0:06:34.960 --> 0:06:38.080 as pronounced as it was saying at some point last year, 0:06:38.160 --> 0:06:41.599 it's still I think, just just people getting by and 0:06:41.640 --> 0:06:44.080 the health of the economy is the number one concern. 0:06:44.160 --> 0:06:47.240 But obviously part of that is childcare cost for families 0:06:47.240 --> 0:06:51.039 are just a really, really substantial expense, So I'd say 0:06:51.080 --> 0:06:54.479 for that particular group of the voters it is pretty high. 0:06:54.600 --> 0:06:57.200 So just on that political front, like what what could 0:06:57.240 --> 0:07:00.760 become of this, is anybody willing to really step into 0:07:00.800 --> 0:07:03.440 the ring and say this is a political issue that 0:07:03.480 --> 0:07:05.240 we can really get behind, or is it's still just 0:07:05.360 --> 0:07:08.520 so divisive like it is here in the US that 0:07:08.560 --> 0:07:10.200 no one's really willing to go to back for it. 0:07:11.960 --> 0:07:15.640 I think it's difficult because fundamentally what's being asked for 0:07:16.280 --> 0:07:19.000 in the short term, at least, there's a lot of money. 0:07:19.280 --> 0:07:20.800 In the UK does feel like there's a lot of 0:07:20.840 --> 0:07:23.160 things which needs another a lot of money for for example, 0:07:23.200 --> 0:07:27.280 the NHS, the health services, the other it's another massive issue. 0:07:27.400 --> 0:07:31.280 A lot of public place servants want more, want higher 0:07:31.280 --> 0:07:33.760 pay for much inflation, There's so many things kind of 0:07:33.800 --> 0:07:36.840 competing for the government's attention. It's hard to know if 0:07:36.880 --> 0:07:39.640 they would. It's hard to to know if they will 0:07:39.720 --> 0:07:41.760 choose this as the issue where they're going to pour 0:07:41.840 --> 0:07:45.840 money into UM, but so I think that's my way 0:07:45.840 --> 0:07:47.640 of thinking. It's hard to know at this point. Yeah. 0:07:47.640 --> 0:07:49.840 An interesting aspect of the story too that they're mostly 0:07:49.960 --> 0:07:52.720 are largely privately held companies, a lot of them are leveraged, 0:07:53.240 --> 0:07:55.840 and the insolvencies of Search often leads to you know, 0:07:55.920 --> 0:07:59.840 ultimately higher class as well. Olivia really interesting story a 0:08:00.120 --> 0:08:02.880 via Ka ta Hulu. She's a quality reporter at Bloomberg 0:08:02.960 --> 0:08:04.920 News on the phone from London along with the editor 0:08:04.920 --> 0:08:07.320 of Bloomberg Business Week, told Webber the story in the 0:08:07.400 --> 0:08:10.240 upcoming new double issue up Bloomberg Business Week, out later 0:08:10.240 --> 0:08:14.480 this week, but already on the Bloomberg and Bloomberg dot com. 0:08:14.480 --> 0:08:18.800 This is Bloomberg business Week Inside, from the reporters and 0:08:19.000 --> 0:08:22.560 editors who bring you America's most trusted business magazine, plus 0:08:22.600 --> 0:08:26.800 global business, finance and tech news. The Bloomberg Business Week 0:08:26.840 --> 0:08:31.760 Podcast with Carol Messer and Tim stinebec from Bloomberg Radio 0:08:35.720 --> 0:08:39.240 on our radar. This week thirteen filings which institutional investment 0:08:39.240 --> 0:08:42.240 managers are required to file quarterly, and it really does 0:08:42.280 --> 0:08:44.360 give investors some clues on how some of the most 0:08:44.360 --> 0:08:47.520 watched investors have been investing their money. We are usually 0:08:47.559 --> 0:08:50.480 obsessed with them and watched them because they can move 0:08:50.640 --> 0:08:54.439 share prices. Our next guest uses machine learnings to create 0:08:54.600 --> 0:08:57.720 index replication et s to track all the investments such 0:08:57.760 --> 0:09:01.160 as hedge funds, VC venture cow but and also private equity. 0:09:01.280 --> 0:09:04.840 Bob Elliott is the CIO at Unlimited and is former 0:09:05.240 --> 0:09:09.400 senior investment executive at Bridgewater Associates. His bio reminds us 0:09:09.440 --> 0:09:12.439 that he built and led Ray Dalios personal investment research 0:09:12.600 --> 0:09:14.960 team for Newly a decade and he's here in our 0:09:15.000 --> 0:09:18.000 Bloomberg Interactive Broker studio. Hey, welcome, Nice to have you 0:09:18.040 --> 0:09:19.679 here with Gena and myself. How are you? Thanks so 0:09:19.720 --> 0:09:21.240 much for having me. Great to be here. What was 0:09:21.280 --> 0:09:24.160 it like to be with Ray years? It was great. 0:09:24.320 --> 0:09:27.600 It was, you know, really a formative time in my career, 0:09:27.880 --> 0:09:33.160 particularly starting around the financial crisis and navigating that challenging time, 0:09:33.240 --> 0:09:35.520 and then of course you know, the decade and a 0:09:35.600 --> 0:09:38.120 half cents and so it was really about about the 0:09:38.200 --> 0:09:41.120 best place and about the best time to to learn 0:09:41.160 --> 0:09:44.800 how the macro economy works and how how financial markets work. 0:09:44.880 --> 0:09:47.360 So it's really it was a great time. So talk 0:09:47.440 --> 0:09:50.040 to us about what you've taken from your lessons at 0:09:50.160 --> 0:09:53.760 Bridgewater and brought to your new organization. I mean, it 0:09:53.880 --> 0:09:56.440 sounds fantastic because it sounds like the confluence of hedge 0:09:56.480 --> 0:09:58.600 funds and AI and machine learning, and these are all 0:09:58.679 --> 0:10:02.480 things that people are very, very captivated by. So how 0:10:02.640 --> 0:10:06.040 are you utilizing a machine or learning in your process? Now? Well, 0:10:06.080 --> 0:10:09.640 if you think about it, most investors, whether they're explicit 0:10:09.679 --> 0:10:12.120 about it or not, use a set of decision rules 0:10:12.240 --> 0:10:15.880 to make to inform their investment decisions, right, And of 0:10:16.000 --> 0:10:18.679 course some people are more explicit about it, using an 0:10:18.800 --> 0:10:22.959 explicit systematic approach. Some people call themselves discretionary, but they're 0:10:23.040 --> 0:10:25.600 using heuristics. And what we can do is we can 0:10:25.800 --> 0:10:29.559 draw on our understanding of the types of decisions that 0:10:29.960 --> 0:10:32.560 those investors are making, the types of assets that they're 0:10:32.600 --> 0:10:35.920 making across different hedge fund strategies. So like equity long 0:10:35.960 --> 0:10:38.559 short managers are a little different than global macro folks 0:10:38.679 --> 0:10:42.000 than fixed income are. And with that understanding, we can 0:10:42.040 --> 0:10:47.240 actually look at the returns of those managers and infer 0:10:47.520 --> 0:10:50.240 what they're doing and close to real time, and that's 0:10:50.240 --> 0:10:52.320 what we're really doing. That's what our technology is all about, 0:10:52.400 --> 0:10:55.719 is understand seeing what they're doing, seeing the outcomes of 0:10:55.760 --> 0:10:59.160 their strategies, knowing what they could plausibly be betting on 0:10:59.320 --> 0:11:01.559 long and short, and then we can take that understanding 0:11:01.640 --> 0:11:04.200 and package it into an et F structure and make 0:11:04.240 --> 0:11:06.440 it accessible to everyone in a in a very tax 0:11:06.480 --> 0:11:08.760 efficient form. What kind of back testing did you do 0:11:08.880 --> 0:11:10.959 to really figure out that this works? Because because once 0:11:11.000 --> 0:11:13.760 you get the filings right, all of these investment folks 0:11:13.840 --> 0:11:16.400 could have been out of the positions in different positions. 0:11:16.400 --> 0:11:19.000 So I'm trying to understand how this strategy can be 0:11:19.160 --> 0:11:21.360 used going forward. We don't actually look at the filings. 0:11:21.400 --> 0:11:24.160 We look at the returns, which is really important because 0:11:24.320 --> 0:11:26.360 it's still after the fact, isn't it. It is after 0:11:26.400 --> 0:11:28.920 the fact that we actually have pretty timely returned some 0:11:29.280 --> 0:11:32.280 some returns information that's daily, some of it is a 0:11:32.360 --> 0:11:34.000 few days after the end of the month, and so 0:11:34.080 --> 0:11:36.719 we have a pretty good real time sense of what 0:11:36.840 --> 0:11:39.640 types of positions these folks have on. And the interesting 0:11:39.720 --> 0:11:41.760 thing is at sort of the industry wide level or 0:11:41.880 --> 0:11:44.920 hedge fund style level, they don't move that fast. Uh, 0:11:45.000 --> 0:11:48.360 you know, the shifts, say from being very into growth 0:11:48.440 --> 0:11:52.240 stocks and tech stocks to being more positioned in value stocks. 0:11:52.520 --> 0:11:56.880 Really transitioned from say the summer of until early two. 0:11:56.960 --> 0:12:00.679 That's a pretty normal, normal shift in thinking and positioning 0:12:01.240 --> 0:12:04.000 amongst hedge fund managers. That's sort of twelve to eighteen 0:12:04.040 --> 0:12:06.760 month time frame. And so when we're when we're doing 0:12:06.840 --> 0:12:10.319 what we're doing, we're a few weeks behind the actual positions. 0:12:10.400 --> 0:12:14.880 But you know, relative to uh, relative to capturing understanding 0:12:14.920 --> 0:12:18.000 of what these most sophisticated asset managers are doing, it's 0:12:18.280 --> 0:12:21.160 it's it's a pretty good job of capturing what they're doing. 0:12:21.600 --> 0:12:24.280 And then when you're actually capturing what they're you're doing, 0:12:24.320 --> 0:12:27.640 are you investing alongside them effectively or are you ever 0:12:27.760 --> 0:12:30.400 going against them? For instance, if they're going more long 0:12:30.480 --> 0:12:32.959 small caps, are you always going more along small caps 0:12:33.400 --> 0:12:35.920 or are you taking that as a contrary signal and 0:12:36.040 --> 0:12:38.120 going short small caps in your strategy. What we're doing 0:12:38.160 --> 0:12:41.679 with our first product is we're replicating the returns of 0:12:41.720 --> 0:12:43.880 the aggregate hedge fund industry. So we're going along with 0:12:44.000 --> 0:12:47.440 what we see those managers doing and trying to match 0:12:47.520 --> 0:12:49.520 it as closely as we can. And that's because you know, 0:12:49.600 --> 0:12:52.600 the truth is hedge fund managers are pretty darn good 0:12:53.160 --> 0:12:58.959 at investing them, surely inaggregate, particularly when you when you 0:12:59.080 --> 0:13:01.959 consider the the strategy. So if you add back the fees, 0:13:02.040 --> 0:13:03.360 which is really one of the things that we can 0:13:03.440 --> 0:13:05.480 do because we don't have to charge two and twine, 0:13:05.640 --> 0:13:08.360 we use technology to replicate what they're doing rather than 0:13:08.440 --> 0:13:11.240 charge two and twenty and so grossive fees. You know, 0:13:11.600 --> 0:13:14.000 if you add back the fees, hedgemen managers are great, 0:13:14.320 --> 0:13:16.840 it's just the challenges. You can't invest in them typically 0:13:16.960 --> 0:13:19.760 without that high fee structure. And so what we're trying 0:13:19.800 --> 0:13:22.400 to do is infer what they're doing and offer it 0:13:22.480 --> 0:13:25.679 a much lower fee structure than a typical LP position. 0:13:25.800 --> 0:13:28.160 How does this work for VC and p E because 0:13:28.200 --> 0:13:32.360 they're not all the same worlds. Absolutely absolutely, those those 0:13:32.440 --> 0:13:35.840 positions and those exposures are different. Although the same idea 0:13:35.960 --> 0:13:38.679 that there's a set of core decision rules that those 0:13:38.760 --> 0:13:42.440 investors are making to identify what type of investments they 0:13:42.480 --> 0:13:44.920 wanted they want to put in, they want to invest 0:13:45.040 --> 0:13:48.480 in is it's it's the same basic concept except they're 0:13:48.480 --> 0:13:50.760 what we're doing is we're looking at their private market 0:13:50.840 --> 0:13:55.160 investments and finding look alike type companies in the public 0:13:55.240 --> 0:13:58.160 markets that we can use that look a lot like 0:13:58.280 --> 0:14:01.280 the type of investments that they're doing, particularly later stage 0:14:01.280 --> 0:14:04.240 investments that they're doing. We can take that understanding, find 0:14:04.320 --> 0:14:07.440 lookalikes in the public markets and use that and package 0:14:07.520 --> 0:14:09.920 that as an e t F to make it widely accessible. 0:14:10.200 --> 0:14:12.760 And the tradeoff is it's imperfect, but you also don't 0:14:12.800 --> 0:14:14.679 have your money locked up for you know, ten or 0:14:14.720 --> 0:14:16.679 twelve years, and you don't have to pay two and 0:14:16.760 --> 0:14:20.040 twenty fees. So how do you speaking of fees, I 0:14:20.120 --> 0:14:23.200 think immediately of transactions costs, I would think that this 0:14:23.320 --> 0:14:26.440 is a pretty lumpy sort of transactions cost strategy where 0:14:26.480 --> 0:14:29.160 you have the thirteen F filings, all of your transactions occur. 0:14:29.600 --> 0:14:32.320 How do you manage those transactions costs and also manage 0:14:32.360 --> 0:14:34.040 the impact that you may have on the market by 0:14:34.080 --> 0:14:37.520 having such a lumpy trading period. Yeah, because we're looking 0:14:37.560 --> 0:14:40.840 at the returns, we actually get information, incremental information kind 0:14:40.880 --> 0:14:43.280 of all the time. Every week or two we're getting 0:14:43.320 --> 0:14:47.360 new incremental information, and so that allows us to evolve 0:14:47.480 --> 0:14:51.680 the portfolio through time in instead of in a concentrated way, 0:14:51.720 --> 0:14:54.360 in an incremental way, and that and that helps reduce 0:14:54.520 --> 0:14:58.080 the transactions costs that that we see. We also typically 0:14:58.120 --> 0:15:00.840 are trading and you know some of the biggest liquid markets, 0:15:00.880 --> 0:15:03.680 the sixty biggest liquid markets in the world, and so 0:15:03.840 --> 0:15:08.120 those markets fortunately have much lower transactions costs. Then if 0:15:08.240 --> 0:15:10.920 you know, we were trading very specific positions, so no 0:15:11.040 --> 0:15:14.920 fees or low fees. Low fees we we charge at 0:15:15.800 --> 0:15:18.400 basis point management fee, which you know, when you think 0:15:18.440 --> 0:15:22.320 about that in the context of say two and twenty 0:15:22.360 --> 0:15:25.480 type products, right, you know, a typical hedge fund strategy 0:15:25.920 --> 0:15:28.560 charge what four hundred basis points on average per year 0:15:30.160 --> 0:15:32.480 looks like a good deal, and you know, I probably 0:15:32.520 --> 0:15:34.520 don't have to sell you all on the et F structure. 0:15:34.560 --> 0:15:37.440 But it also comes with the incredible tax efficiency of 0:15:37.520 --> 0:15:40.760 an et F, whereas most of these hedge fund structures 0:15:40.800 --> 0:15:43.960 are fund to fund structures are typically LP positions and 0:15:44.360 --> 0:15:47.400 their tax at ordinary income, which is much less efficient 0:15:47.440 --> 0:15:49.920 than an ETF. Bob, how do you think, though, you know, 0:15:50.080 --> 0:15:52.840 we're coming out of this environment where money was so 0:15:53.080 --> 0:15:55.480 cheap for such a long time, and we're also coming 0:15:55.520 --> 0:15:57.240 out of a pandemic where again we had just so 0:15:57.360 --> 0:16:00.680 much money flooding the market. How might that we're all 0:16:00.720 --> 0:16:03.080 trying to figure out what everything is on the other 0:16:03.200 --> 0:16:06.120 side and whether we are in somewhat of a new normal, right, so, 0:16:06.520 --> 0:16:11.000 how do you think about how that might potentially impact performance? 0:16:11.400 --> 0:16:15.680 For sure, the dynamic for fifteen years of unbridled monetary 0:16:15.720 --> 0:16:19.760 stimulation was if you bought pretty much pretty much everything 0:16:19.800 --> 0:16:22.480 went up, and the more risky the thing that you bought, 0:16:22.720 --> 0:16:25.560 the more it went up. Typically, And and that air 0:16:25.680 --> 0:16:28.120 is over and the fetes make it very clear that 0:16:28.200 --> 0:16:30.480 that era is over. And so now we're in an 0:16:30.520 --> 0:16:33.360 era of of tighter monetary policy and a lot more 0:16:33.440 --> 0:16:37.320 macroeconomic uncertainty. And that's a period of time where alpha 0:16:37.400 --> 0:16:41.240 typically shines, right because you have the most sophisticated asset 0:16:41.360 --> 0:16:45.240 managers who can who spend billions of dollars on you know, 0:16:45.440 --> 0:16:48.880 the smartest minds to figure out what's likely to transpire, 0:16:49.400 --> 0:16:52.320 and that's where they really shine is in those difficult moments, 0:16:52.360 --> 0:16:56.360 those uncertain moments, where they can position their portfolios agilely 0:16:56.800 --> 0:17:00.280 in a way that helps them navigate the difficult ronment. 0:17:00.280 --> 0:17:02.600 If you look back last year, you know, hedge funds, 0:17:02.760 --> 0:17:05.679 the hedge fund industry in general in aggregate was roughly 0:17:05.760 --> 0:17:09.080 flat at a time when you know sixty stock index 0:17:09.119 --> 0:17:13.000 investing was down fifteen or that's the that's the type 0:17:13.160 --> 0:17:16.359 of significant outperformance that you can see in these in 0:17:16.480 --> 0:17:20.080 these very challenging times from the sophisticated asset managers. So 0:17:20.200 --> 0:17:22.320 you gave us the opening to talk about positioning, So 0:17:22.440 --> 0:17:24.159 I'm just going to dive right in. What are you 0:17:24.240 --> 0:17:26.200 seeing with respect to position And you talked a little 0:17:26.240 --> 0:17:28.480 bit about the value growth transition or the growth value 0:17:28.520 --> 0:17:32.080 transition over the last year. What are the big themes 0:17:32.280 --> 0:17:35.000 in terms of positioning this year. I think the biggest 0:17:35.080 --> 0:17:38.639 thing which connects to that aggregate uncertainty is we're actually 0:17:38.640 --> 0:17:43.280 seeing managers playing about as conservatively as we have seen 0:17:43.359 --> 0:17:45.800 in the last twenty five years other than the acute 0:17:45.840 --> 0:17:49.040 crisis periods of oh eight and twenty. And I think 0:17:49.119 --> 0:17:51.040 that speaks to the fact that there is a lot 0:17:51.119 --> 0:17:55.000 of uncertainty, macro uncertainty about exactly where we're going. Is it, 0:17:55.200 --> 0:17:58.280 you know, higher for longer or has the FED tightened 0:17:58.400 --> 0:18:01.400 enough to tip us into recession? And in those moments, 0:18:01.840 --> 0:18:04.800 um you don't have to you don't have to hold 0:18:04.880 --> 0:18:09.080 your max positions in order to UH, in order to 0:18:09.160 --> 0:18:13.240 continue to earn, to continue to deliver those returns. And 0:18:13.320 --> 0:18:16.040 so that's what we're seeing as a conservativism. And then 0:18:16.200 --> 0:18:18.760 under the under the hood, what we're seeing is a 0:18:19.480 --> 0:18:23.680 bunch of positioning in line with that, tilted towards value stocks, 0:18:23.800 --> 0:18:27.280 tilted towards higher top part of the credit stack, positions 0:18:27.320 --> 0:18:30.120 like that that are defensive in nature in this environment. 0:18:30.119 --> 0:18:31.520 All right, we're gonna have to leave it there. I'm 0:18:31.560 --> 0:18:33.200 good to know. I know you're just getting these funds 0:18:33.200 --> 0:18:35.119 off the ground, or get you got one fund off 0:18:35.119 --> 0:18:37.000 the ground, right, one fund, the h F n D 0:18:37.080 --> 0:18:39.600 E t F. Looking looking forward to hear a little 0:18:39.600 --> 0:18:41.880 bit more as you guys build out. Bob Elliott, Chief 0:18:41.920 --> 0:18:46.159 Investment Officer Unlimited. Here in our studio, you're listening to 0:18:46.240 --> 0:18:49.920 the Bloomberg Business Week Podcast. Catch us live week days 0:18:49.960 --> 0:18:52.960 from two to five pm Eastern on Bloomberg Radio, the 0:18:53.000 --> 0:18:56.520 Bloomberg Business Bank You do. You can also listen live 0:18:56.640 --> 0:19:00.280 to our flagship New York station, Just say Alexa, play 0:19:00.359 --> 0:19:06.119 Bloomberg eleven, Dirty This Next story, Today's Big Take and 0:19:06.400 --> 0:19:08.639 Big Take podcast. You can find it at Bloomberg dot 0:19:08.680 --> 0:19:10.879 com or wherever you get your podcast. Don't miss also 0:19:11.200 --> 0:19:13.920 the Big Take on Bloomberg Radio. That's weeknights at eleven pm. 0:19:14.000 --> 0:19:17.080 Wall Street Times story at eleven pm Wall Street Time. 0:19:17.359 --> 0:19:18.960 So you want to know what the story is because 0:19:18.960 --> 0:19:20.720 it also happens to be one of our most read 0:19:20.840 --> 0:19:24.200 It's about how global cities and businesses are still struggling 0:19:24.240 --> 0:19:27.400 to get workers back into offices and the economic cost 0:19:27.480 --> 0:19:30.959 of not being able to And it's really pronounced when 0:19:31.040 --> 0:19:34.000 you think about Manhattan. So let's get to it, uh. 0:19:34.119 --> 0:19:37.119 In our interactive broker studios. Emma Court, she's reporter at 0:19:37.160 --> 0:19:40.040 Bloomberg knew she and some of our colleagues here wrote 0:19:40.119 --> 0:19:42.879 this story, and she joins Gina and myself, So all right, 0:19:42.920 --> 0:19:44.920 break it down to us because we keep talking. I 0:19:45.040 --> 0:19:48.080 keep talking with executives like people are coming back, but 0:19:48.440 --> 0:19:50.560 it's a lot of hybrid work still going on, especially 0:19:50.600 --> 0:19:52.920 here in New York City. Yeah, so I think that 0:19:53.080 --> 0:19:55.320 there are kind of two key takeaways from our story. 0:19:55.680 --> 0:19:59.600 The first is that workers are back in offices. They're 0:19:59.680 --> 0:20:02.920 just back full time. They're not back at the same 0:20:03.040 --> 0:20:05.400 levels they used to be, and they're definitely not back 0:20:05.440 --> 0:20:08.280 at the same levels on Mondays and Friday's. The second 0:20:08.359 --> 0:20:10.880 big takeaway is as a result of some of these 0:20:10.960 --> 0:20:14.280 big shifts and work schedules. We know that workers are 0:20:14.440 --> 0:20:17.439 spending less money in and around the office than they 0:20:17.520 --> 0:20:19.359 used to be. Thinking about it, your coffee in the morning, 0:20:19.440 --> 0:20:22.479 you're salad at lunch, you're happy hour after work. That's spending, 0:20:22.880 --> 0:20:25.080 you know, isn't happening near the office anymore. It maybe 0:20:25.119 --> 0:20:27.639 help it happening elsewhere, but it's not happening, you know, 0:20:27.760 --> 0:20:31.440 here in Manhattan sometimes. So we calculated that the cost 0:20:31.600 --> 0:20:35.119 of this shift in spending for Manhattan is a missed 0:20:35.400 --> 0:20:38.800 twelve point four billion dollars a year. So that's twelve 0:20:38.880 --> 0:20:41.840 point billion dollars of consumers spending near the office that 0:20:42.000 --> 0:20:44.840 isn't happening anymore as a result of workers being in 0:20:44.880 --> 0:20:49.120 the office about thirty percent less. Amazing. Can you break 0:20:49.160 --> 0:20:51.119 that down a little bit by industry, because we all 0:20:51.160 --> 0:20:55.439 think of obviously the restaurant, the retailer, maybe the transportation services. 0:20:56.040 --> 0:20:59.400