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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Christopher Ayleman. He's a

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Speaker 1: CIO over at Colsters, overseeing more than three hundred billion

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Speaker 1: dollars in assets under the portfolio. And Chris, let's start

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Speaker 1: off with those rate cut expectations, because, as you know,

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Speaker 1: a lot has changed over the past three or four months.

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Speaker 1: When everybody thought we were getting four or five, maybe

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Speaker 1: six cuts this year, the market right now only pricing

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Speaker 1: in one, though the Fed still has three on its

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Speaker 1: dot PT.

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Speaker 2: Well, and what man, you've got to look You hear

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Speaker 2: him head back in December that we were looking for six,

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Speaker 2: then three, now two and one. Market has to readjust

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Speaker 2: so this has been a huge change in the shift.

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Speaker 2: It's actually taken it in stride. I'm not surprised April's

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Speaker 2: been so tough because strong January, February and March we're

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Speaker 2: in the market. It almost got ahead of itself. So

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Speaker 2: you know, the Fed's going to be data dependent. I

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Speaker 2: think we've adjusted to five percent interest rates up here

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Speaker 2: and the economy is doing okay, so I bet they're

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Speaker 2: going to continue to hold for a while. That's news

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Speaker 2: to the market. It's got to adjust to that.

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Speaker 1: Well, what is the psychology in the market. I mean,

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Speaker 1: there's been a lot of discussion here about that. Some

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Speaker 1: of the sell off that we saw in April was

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Speaker 1: really a lot of folks just kind of protecting their

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Speaker 1: profits from the first quarter. And then of course there's

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Speaker 1: a seasonal factors. If you believe in the whole, you know,

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Speaker 1: selling may and go away idea that we could see

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Speaker 1: maybe the price action get even worse over the next

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Speaker 1: couple of months.

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Speaker 2: Well, I think you hit it on the head. Old

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Speaker 2: adages still hold true. Romaine and selling may go away

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Speaker 2: because the market is kind of choppy, it's gotten ahead

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Speaker 2: of itself. We have to see earnings. I mean, like

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Speaker 2: you said, we're waiting for Amazon in a few minutes,

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Speaker 2: and the earnings have been okay but not spectacular. AI

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Speaker 2: is expensive as they build it up, and so far

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Speaker 2: none of us are paying a lot for it. So

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Speaker 2: the revenues will come. But it's the market reassessing its expectations.

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Speaker 2: I think we're in a good place, but I think

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Speaker 2: the market's going to go sideways. You can easily have

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Speaker 2: a ten to thirteen percent sell off in a bowl

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Speaker 2: market year, so people after be ready. This market could

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Speaker 2: be choppy during the summer, we've got the election. The

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Speaker 2: Fed's going to be data dependent.

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Speaker 3: Chris I asked this question on radio. Cameron Christ writes

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Speaker 3: great stuff for m Live. You write to call him

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Speaker 3: every day, and his first line today was one of

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Speaker 3: the basic principles of successfully navigating financial markets is that

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Speaker 3: you should only date, not marry, your positions. And the

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Speaker 3: question I was asking is what positions should you date

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Speaker 3: right now and which one should you marry?

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Speaker 2: You know, Alex, I actually heard you this morning driving

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Speaker 2: and listening to the radio, and that was a very

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Speaker 2: interesting discussion because I'm going to make a shout out

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Speaker 2: to my wife Robin forty years this month of May.

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Speaker 2: So commitment, I think you stay married, and I think

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Speaker 2: I'm a long term investor, Alex. So I'm going to

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Speaker 2: buy the beta of the market and hold it, and

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Speaker 2: I'm okay being married to positions. I don't necessarily believe

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Speaker 2: in trading and trying to time the market, and I've

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Speaker 2: learned that the hard way my set and for our

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Speaker 2: fund here, we've done very well by being invested through

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Speaker 2: thick and thin. Maybe you up you flow a little bit,

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Speaker 2: but you diversify the portfolio. Seventy thirty you hold for

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Speaker 2: the long term and you stay married to your acid allocation. Oh,

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Speaker 2: don't worry about individual stocks.

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Speaker 3: Seventy thirty Okay, what happened is sixty forty or what

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Speaker 3: happened to like sixty thirty ten?

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Speaker 2: Hey, sixty forty went out as interest rates went down

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Speaker 2: below seven percent, down to five, down to two, down

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Speaker 2: to zero. Now we're back up to five. So I

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Speaker 2: think you can be a seventy thirty. And I think

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Speaker 2: more people need to look at that. The baby boom

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Speaker 2: has to start diverse flying their portfolio. Finally, they're all

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Speaker 2: in their sixties and yet they love equities. So I

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Speaker 2: think you've got to really see that fixed income has

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Speaker 2: a return. But sixty forty is in the past. It's

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Speaker 2: seventy thirty. Eighty twenty is what the typical pension plan is,

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Speaker 2: and then a typical endowment is ninety ten.

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Speaker 1: I'm sure, Well, let's fold in also a private capital

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Speaker 1: into that. Chris, I mean, Calis, there's a US was

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Speaker 1: one of the at least one of the bigger penches

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Speaker 1: funds out there to kind of gravitate into the private

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Speaker 1: equity space as an allocation. As a proper allocation here,

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Speaker 1: and we've seen those allocations go up pretty significantly, not

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Speaker 1: just at counsels, but as some of your peers as well.

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Speaker 1: What is the role of that right now, particularly given

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Speaker 1: the lockouts and particularly given some of the concerns that

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Speaker 1: the last vintages that we saw at least for right

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Speaker 1: now haven't delivered.

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Speaker 2: Yeah, remain that market is absolutely frozen. I still think

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Speaker 2: there's a place for private investments in a diversified mega

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Speaker 2: and I'll call U a mega fund at three hundred

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Speaker 2: billion portfolio. You know, when I got here twenty five

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Speaker 2: years ago, we were in the single digits in private

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Speaker 2: equity real estate. Now we're at about fifteen percent, so

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Speaker 2: let's call it thirty five forty percent in private markets.

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Speaker 2: And I think that's the right place for us. But

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Speaker 2: you're right, they've been very slow. Real estate's got to

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Speaker 2: adjust to whatever is going on in the office market

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Speaker 2: and to this new level of interest rates, and I

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Speaker 2: think it is. You're starting to see some transactions, but boy,

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Speaker 2: our private equity is just frozen in here. We're not

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Speaker 2: having a merger Monday. I need you guys to be

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Speaker 2: hitting the airwaves on Monday with merger acquisitions. Companies selling

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Speaker 2: their divisions, then that market will unthaw. It's not so

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Speaker 2: much interest rates. I think it really is a hangover

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Speaker 2: of the economic shutdown from the pandemic, and we just

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Speaker 2: haven't seen a lot of transactions. But they'll come back,

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Speaker 2: and those markets I think still offer a premium over

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Speaker 2: public markets for long term institutional investors.

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Speaker 1: All Right, Chris, always great to talk to.

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Speaker 2: You have to leave it there.

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Speaker 1: Christopher Allman, the CIO over at Colter's