Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Christopher Ayleman. He's a
Speaker 1: CIO over at Colsters, overseeing more than three hundred billion
Speaker 1: dollars in assets under the portfolio. And Chris, let's start
Speaker 1: off with those rate cut expectations, because, as you know,
Speaker 1: a lot has changed over the past three or four months.
Speaker 1: When everybody thought we were getting four or five, maybe
Speaker 1: six cuts this year, the market right now only pricing
Speaker 1: in one, though the Fed still has three on its
Speaker 1: dot PT.
Speaker 2: Well, and what man, you've got to look You hear
Speaker 2: him head back in December that we were looking for six,
Speaker 2: then three, now two and one. Market has to readjust
Speaker 2: so this has been a huge change in the shift.
Speaker 2: It's actually taken it in stride. I'm not surprised April's
Speaker 2: been so tough because strong January, February and March we're
Speaker 2: in the market. It almost got ahead of itself. So
Speaker 2: you know, the Fed's going to be data dependent. I
Speaker 2: think we've adjusted to five percent interest rates up here
Speaker 2: and the economy is doing okay, so I bet they're
Speaker 2: going to continue to hold for a while. That's news
Speaker 2: to the market. It's got to adjust to that.
Speaker 1: Well, what is the psychology in the market. I mean,
Speaker 1: there's been a lot of discussion here about that. Some
Speaker 1: of the sell off that we saw in April was
Speaker 1: really a lot of folks just kind of protecting their
Speaker 1: profits from the first quarter. And then of course there's
Speaker 1: a seasonal factors. If you believe in the whole, you know,
Speaker 1: selling may and go away idea that we could see
Speaker 1: maybe the price action get even worse over the next
Speaker 1: couple of months.
Speaker 2: Well, I think you hit it on the head. Old
Speaker 2: adages still hold true. Romaine and selling may go away
Speaker 2: because the market is kind of choppy, it's gotten ahead
Speaker 2: of itself. We have to see earnings. I mean, like
Speaker 2: you said, we're waiting for Amazon in a few minutes,
Speaker 2: and the earnings have been okay but not spectacular. AI
Speaker 2: is expensive as they build it up, and so far
Speaker 2: none of us are paying a lot for it. So
Speaker 2: the revenues will come. But it's the market reassessing its expectations.
Speaker 2: I think we're in a good place, but I think
Speaker 2: the market's going to go sideways. You can easily have
Speaker 2: a ten to thirteen percent sell off in a bowl
Speaker 2: market year, so people after be ready. This market could
Speaker 2: be choppy during the summer, we've got the election. The
Speaker 2: Fed's going to be data dependent.
Speaker 3: Chris I asked this question on radio. Cameron Christ writes
Speaker 3: great stuff for m Live. You write to call him
Speaker 3: every day, and his first line today was one of
Speaker 3: the basic principles of successfully navigating financial markets is that
Speaker 3: you should only date, not marry, your positions. And the
Speaker 3: question I was asking is what positions should you date
Speaker 3: right now and which one should you marry?
Speaker 2: You know, Alex, I actually heard you this morning driving
Speaker 2: and listening to the radio, and that was a very
Speaker 2: interesting discussion because I'm going to make a shout out
Speaker 2: to my wife Robin forty years this month of May.
Speaker 2: So commitment, I think you stay married, and I think
Speaker 2: I'm a long term investor, Alex. So I'm going to
Speaker 2: buy the beta of the market and hold it, and
Speaker 2: I'm okay being married to positions. I don't necessarily believe
Speaker 2: in trading and trying to time the market, and I've
Speaker 2: learned that the hard way my set and for our
Speaker 2: fund here, we've done very well by being invested through
Speaker 2: thick and thin. Maybe you up you flow a little bit,
Speaker 2: but you diversify the portfolio. Seventy thirty you hold for
Speaker 2: the long term and you stay married to your acid allocation. Oh,
Speaker 2: don't worry about individual stocks.
Speaker 3: Seventy thirty Okay, what happened is sixty forty or what
Speaker 3: happened to like sixty thirty ten?
Speaker 2: Hey, sixty forty went out as interest rates went down
Speaker 2: below seven percent, down to five, down to two, down
Speaker 2: to zero. Now we're back up to five. So I
Speaker 2: think you can be a seventy thirty. And I think
Speaker 2: more people need to look at that. The baby boom
Speaker 2: has to start diverse flying their portfolio. Finally, they're all
Speaker 2: in their sixties and yet they love equities. So I
Speaker 2: think you've got to really see that fixed income has
Speaker 2: a return. But sixty forty is in the past. It's
Speaker 2: seventy thirty. Eighty twenty is what the typical pension plan is,
Speaker 2: and then a typical endowment is ninety ten.
Speaker 1: I'm sure, Well, let's fold in also a private capital
Speaker 1: into that. Chris, I mean, Calis, there's a US was
Speaker 1: one of the at least one of the bigger penches
Speaker 1: funds out there to kind of gravitate into the private
Speaker 1: equity space as an allocation. As a proper allocation here,
Speaker 1: and we've seen those allocations go up pretty significantly, not
Speaker 1: just at counsels, but as some of your peers as well.
Speaker 1: What is the role of that right now, particularly given
Speaker 1: the lockouts and particularly given some of the concerns that
Speaker 1: the last vintages that we saw at least for right
Speaker 1: now haven't delivered.
Speaker 2: Yeah, remain that market is absolutely frozen. I still think
Speaker 2: there's a place for private investments in a diversified mega
Speaker 2: and I'll call U a mega fund at three hundred
Speaker 2: billion portfolio. You know, when I got here twenty five
Speaker 2: years ago, we were in the single digits in private
Speaker 2: equity real estate. Now we're at about fifteen percent, so
Speaker 2: let's call it thirty five forty percent in private markets.
Speaker 2: And I think that's the right place for us. But
Speaker 2: you're right, they've been very slow. Real estate's got to
Speaker 2: adjust to whatever is going on in the office market
Speaker 2: and to this new level of interest rates, and I
Speaker 2: think it is. You're starting to see some transactions, but boy,
Speaker 2: our private equity is just frozen in here. We're not
Speaker 2: having a merger Monday. I need you guys to be
Speaker 2: hitting the airwaves on Monday with merger acquisitions. Companies selling
Speaker 2: their divisions, then that market will unthaw. It's not so
Speaker 2: much interest rates. I think it really is a hangover
Speaker 2: of the economic shutdown from the pandemic, and we just
Speaker 2: haven't seen a lot of transactions. But they'll come back,
Speaker 2: and those markets I think still offer a premium over
Speaker 2: public markets for long term institutional investors.
Speaker 1: All Right, Chris, always great to talk to.
Speaker 2: You have to leave it there.
Speaker 1: Christopher Allman, the CIO over at Colter's