1
00:00:00,800 --> 00:00:04,040
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

2
00:00:04,040 --> 00:00:06,920
Speaker 1: my co host Matt Miller. Every business day we bring

3
00:00:06,960 --> 00:00:11,520
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

4
00:00:11,560 --> 00:00:15,600
Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast

5
00:00:15,560 --> 00:00:18,439
Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and

6
00:00:18,480 --> 00:00:22,919
Speaker 1: at Bloomberg dot com slash podcast. Steve Crowley is Executive

7
00:00:23,079 --> 00:00:26,880
Speaker 1: VP of K two Security Screening Group, also a former

8
00:00:27,200 --> 00:00:30,400
Speaker 1: Assistant administrator at the Transportation Security Agency at the t

9
00:00:30,720 --> 00:00:34,720
Speaker 1: s A. And UM, we want to talk about the

10
00:00:34,800 --> 00:00:38,880
Speaker 1: changes that we've seen in aviation security since nine eleven,

11
00:00:38,960 --> 00:00:43,720
Speaker 1: the UH, the improvements really and in in safety and security,

12
00:00:43,760 --> 00:00:47,520
Speaker 1: and then the vulnerabilities that may still exist. So Steve,

13
00:00:47,520 --> 00:00:50,160
Speaker 1: thanks very much for joining us. I guess the changes

14
00:00:50,200 --> 00:00:53,040
Speaker 1: are pretty clear um to anyone over the age of

15
00:00:53,080 --> 00:00:56,800
Speaker 1: like thirty, right, because we we've all lived through it. Um,

16
00:00:56,840 --> 00:00:59,560
Speaker 1: and remember the days before you had to take off

17
00:00:59,600 --> 00:01:03,040
Speaker 1: your shoe is now it's a lot more invasive, but

18
00:01:03,280 --> 00:01:06,600
Speaker 1: it's not really that bad. Um. How how how much

19
00:01:06,680 --> 00:01:09,280
Speaker 1: have we seen in terms of improvements in in UH,

20
00:01:09,319 --> 00:01:13,000
Speaker 1: in safety and security. Well, first, Paul, Matt, thank you

21
00:01:13,080 --> 00:01:16,199
Speaker 1: for having me on your show. Um, the Aviation Security

22
00:01:16,640 --> 00:01:19,840
Speaker 1: Enterprise has come a long way since non eleven. Um.

23
00:01:19,880 --> 00:01:22,600
Speaker 1: Not only do we have better technology to look for

24
00:01:22,720 --> 00:01:25,720
Speaker 1: and identify the explosives and weapons, but we also have

25
00:01:25,760 --> 00:01:30,080
Speaker 1: better security tactics, techniques and procedures. I mean, both of

26
00:01:30,120 --> 00:01:32,760
Speaker 1: these things enhance our security posture. Let me give you

27
00:01:32,800 --> 00:01:36,560
Speaker 1: some specific examples. UM. You know, as you mentioned back then,

28
00:01:36,600 --> 00:01:40,160
Speaker 1: we walked through simple melo detector. UM. Now we have

29
00:01:40,560 --> 00:01:45,360
Speaker 1: UM checkpoint X rays. UH, we have checkpoint on person

30
00:01:45,440 --> 00:01:49,120
Speaker 1: body scanners. We have increased well, we went from actually

31
00:01:49,200 --> 00:01:52,600
Speaker 1: a contracted security team twenty years ago to a professional

32
00:01:52,600 --> 00:01:57,960
Speaker 1: t S A officer cadre of fifty thou strong people. UM.

33
00:01:58,040 --> 00:02:00,600
Speaker 1: And now we have more law enforcement presence in UH.

34
00:02:00,720 --> 00:02:03,200
Speaker 1: In the airports were hard in flight that doors, we

35
00:02:03,240 --> 00:02:05,320
Speaker 1: have air marshals. Kind of what I'm getting at bottom

36
00:02:05,360 --> 00:02:09,079
Speaker 1: line is the Avia Security Enterprise has implemented a multi tiered,

37
00:02:09,160 --> 00:02:12,240
Speaker 1: multi layered approach to security. We didn't have this twenty

38
00:02:12,280 --> 00:02:17,440
Speaker 1: years ago. Steve, with twenty years of hindsight, you guys

39
00:02:17,440 --> 00:02:23,040
Speaker 1: in a security screening business, was it almost I mean,

40
00:02:23,280 --> 00:02:25,000
Speaker 1: how did it happen? I guess? I mean, is it

41
00:02:25,080 --> 00:02:26,919
Speaker 1: just that it was a different time and place, and

42
00:02:27,720 --> 00:02:29,880
Speaker 1: we didn't think about strengthening the doors and all that

43
00:02:29,960 --> 00:02:32,960
Speaker 1: kind of stuff. Well back then, if you remember, you know,

44
00:02:33,280 --> 00:02:36,080
Speaker 1: anything that happened pretty much, anything that happened with an

45
00:02:36,120 --> 00:02:40,520
Speaker 1: airline UM had to do with taking over the airline

46
00:02:40,600 --> 00:02:42,400
Speaker 1: to get to you know, hijacking one like to get

47
00:02:42,400 --> 00:02:45,280
Speaker 1: to another place. It was never really used never not really,

48
00:02:45,320 --> 00:02:47,480
Speaker 1: it was never used as a weapon. So it's twenty

49
00:02:47,560 --> 00:02:49,720
Speaker 1: years ago it's used that it was used as a weapon.

50
00:02:50,200 --> 00:02:52,240
Speaker 1: And so if you think about it, just hardening the

51
00:02:52,280 --> 00:02:54,960
Speaker 1: cockpit door, you know, they were able to get into

52
00:02:55,000 --> 00:02:58,440
Speaker 1: the cockpit because they thought it was just a typical hijacking. Hey,

53
00:02:58,480 --> 00:03:00,160
Speaker 1: I have a knife, I'm not gonna hurt anybody. Just

54
00:03:00,240 --> 00:03:03,320
Speaker 1: let me, you know, talk to the pilot and and

55
00:03:03,320 --> 00:03:06,440
Speaker 1: and that. You know, that changed obviously now we don't

56
00:03:06,480 --> 00:03:10,360
Speaker 1: view it as hijacking anymore. It's terrorism, and it's uh,

57
00:03:10,400 --> 00:03:13,160
Speaker 1: you know, we will always think of it as airplane

58
00:03:13,200 --> 00:03:16,080
Speaker 1: as a weapon and never allow this to happen. You

59
00:03:16,080 --> 00:03:23,160
Speaker 1: know again, well, we haven't seen anything even remotely like

60
00:03:23,280 --> 00:03:26,519
Speaker 1: that since um September eleven, have we? I mean, I

61
00:03:26,760 --> 00:03:30,000
Speaker 1: I don't recall any reports of plane being hijacked and

62
00:03:30,000 --> 00:03:32,800
Speaker 1: then used as a weapon in the last twenty years.

63
00:03:32,639 --> 00:03:35,120
Speaker 1: That is correct, and that is it is because of

64
00:03:35,120 --> 00:03:38,640
Speaker 1: the aviation security enhancements that we have made. I said

65
00:03:38,640 --> 00:03:42,360
Speaker 1: that the multi layered and multi tiered approach UM because

66
00:03:42,560 --> 00:03:45,160
Speaker 1: there were there there's not even attempts. There's there's there

67
00:03:45,200 --> 00:03:49,200
Speaker 1: were several attempts, uh probably any less than five UM

68
00:03:49,480 --> 00:03:53,119
Speaker 1: to bring on an explosive UM, but that was all

69
00:03:53,160 --> 00:03:56,560
Speaker 1: failed and since then we have not had not even

70
00:03:56,600 --> 00:03:59,760
Speaker 1: an attempt And again that's because of whipped in place today.

71
00:04:00,920 --> 00:04:06,360
Speaker 1: How can technology steve make you know, this even safer? Again,

72
00:04:06,440 --> 00:04:09,480
Speaker 1: it seems a little low tech to have to send

73
00:04:09,600 --> 00:04:11,880
Speaker 1: you know, get in line, take shoes off if you're

74
00:04:11,920 --> 00:04:14,560
Speaker 1: not t s a pre approved It seems like there

75
00:04:14,600 --> 00:04:18,799
Speaker 1: should just be some technology solution that would maybe speed

76
00:04:18,839 --> 00:04:22,520
Speaker 1: up the process, make it less invasive. Yes, so there

77
00:04:22,520 --> 00:04:25,320
Speaker 1: are some changes that are happening again behind the scenes.

78
00:04:25,320 --> 00:04:28,479
Speaker 1: You don't you don't necessarily some of them. But UM,

79
00:04:28,520 --> 00:04:31,440
Speaker 1: for one, even you know about what ten years ago

80
00:04:31,480 --> 00:04:34,360
Speaker 1: when they came out with pre check UM being able

81
00:04:34,400 --> 00:04:37,159
Speaker 1: to look at at folks and put put folks that

82
00:04:37,200 --> 00:04:39,719
Speaker 1: you're comfortable with a side so that you can actually

83
00:04:39,720 --> 00:04:42,520
Speaker 1: focus on those folks that you don't know about the unknowns.

84
00:04:43,279 --> 00:04:45,200
Speaker 1: That actually helps the process and go a little the

85
00:04:46,080 --> 00:04:48,400
Speaker 1: process to go a little faster efficient. But there are

86
00:04:48,440 --> 00:04:51,239
Speaker 1: technologies that are that they're putting in place today, actually

87
00:04:51,279 --> 00:04:56,000
Speaker 1: computed tomography system called CT at the checkpoint. It's kind

88
00:04:56,000 --> 00:05:00,200
Speaker 1: of similar to the medical technology UM. It's a red

89
00:05:00,279 --> 00:05:02,960
Speaker 1: image technology that will allow you to kind of manipulate

90
00:05:03,000 --> 00:05:05,279
Speaker 1: the bag as your bag, your carry on bagg is

91
00:05:05,279 --> 00:05:08,360
Speaker 1: going through victory or CT system that you don't actually

92
00:05:08,360 --> 00:05:11,120
Speaker 1: have to have someone to take out things and move

93
00:05:11,160 --> 00:05:13,520
Speaker 1: things around. You can actually digitally do that, so that

94
00:05:13,600 --> 00:05:17,039
Speaker 1: becomes a more efficient process as well as these uh

95
00:05:17,200 --> 00:05:21,320
Speaker 1: what they're deploying is automated automated screening lanes which are

96
00:05:22,080 --> 00:05:26,520
Speaker 1: uh uh state of the art UM conveyance systems will

97
00:05:26,520 --> 00:05:30,000
Speaker 1: call it, and that allows basically the bags to automatically

98
00:05:30,000 --> 00:05:32,960
Speaker 1: be put into the X ray system or the CT system,

99
00:05:33,200 --> 00:05:36,680
Speaker 1: the bins automatically come back. You can more than one

100
00:05:36,720 --> 00:05:39,160
Speaker 1: person can divest their stuff at at the same time,

101
00:05:39,200 --> 00:05:41,040
Speaker 1: so thus you don't have to wait for that person

102
00:05:41,080 --> 00:05:43,080
Speaker 1: in front of you to finish. So it's things like

103
00:05:43,160 --> 00:05:46,200
Speaker 1: that that do help the process along and they aren't

104
00:05:46,200 --> 00:05:48,960
Speaker 1: looking at other things to even become more and more efficient.

105
00:05:49,240 --> 00:05:51,600
Speaker 1: You know the old Total Recall of someone going through

106
00:05:52,320 --> 00:05:54,800
Speaker 1: a Total Recall movie where you sup fall sports that

107
00:05:54,880 --> 00:05:57,320
Speaker 1: you're going through. Well, we're not gonna get down to

108
00:05:57,320 --> 00:05:59,039
Speaker 1: the point of looking at you know, bones and stuff

109
00:05:59,040 --> 00:06:02,360
Speaker 1: like that. The ideas that have the passenger continuously walk

110
00:06:02,440 --> 00:06:06,040
Speaker 1: down this this UH pathway where sensors are they are

111
00:06:06,120 --> 00:06:08,640
Speaker 1: looking at the individual, so we are moving in that

112
00:06:08,680 --> 00:06:11,000
Speaker 1: direction and that will happen in the in the future.

113
00:06:11,400 --> 00:06:13,719
Speaker 1: So at first, I want to say, there's a remake

114
00:06:13,760 --> 00:06:17,000
Speaker 1: of Total Recall with Colin Ferrell that got really bad reviews,

115
00:06:17,040 --> 00:06:20,120
Speaker 1: but I thought it was amazing, So I highly recommend

116
00:06:20,400 --> 00:06:22,520
Speaker 1: checking out the remake. And then I want to ask,

117
00:06:22,839 --> 00:06:27,040
Speaker 1: are these technologies going to lead to um an easier

118
00:06:27,440 --> 00:06:30,760
Speaker 1: airport security? I mean, are we gonna eventually leave our

119
00:06:30,760 --> 00:06:35,080
Speaker 1: shoes on and maybe even carry liquids through? Yes, So

120
00:06:35,200 --> 00:06:37,320
Speaker 1: the carrying liquid through, let me get that one first.

121
00:06:37,320 --> 00:06:40,240
Speaker 1: So the compute demography system that's being deployed today and

122
00:06:40,240 --> 00:06:42,920
Speaker 1: that UH started we'll say a year and a half

123
00:06:42,920 --> 00:06:45,600
Speaker 1: ago for deployments, you can actually leave the liquids in

124
00:06:45,640 --> 00:06:49,200
Speaker 1: because those those systems can see that. So yes, that

125
00:06:49,240 --> 00:06:52,240
Speaker 1: will help with that leading laptops in the bag. The

126
00:06:52,279 --> 00:06:55,720
Speaker 1: CT system will help with that leaving shoes on. They

127
00:06:55,760 --> 00:06:59,640
Speaker 1: are integrating uh, some sensors within those walk walk through

128
00:06:59,680 --> 00:07:02,560
Speaker 1: metal detectors as well as the omboy scanners to actually

129
00:07:02,560 --> 00:07:05,760
Speaker 1: be able to leave shoes on. UM. Will they always

130
00:07:05,800 --> 00:07:08,640
Speaker 1: be that way? Where? Yeah? Yeah, like for the entire

131
00:07:08,880 --> 00:07:11,600
Speaker 1: um you know, traveling public. No, my guess is you

132
00:07:11,600 --> 00:07:13,600
Speaker 1: will still have to do some of those for those

133
00:07:13,720 --> 00:07:18,840
Speaker 1: unknown high UM, the folks that need to be looked

134
00:07:18,840 --> 00:07:22,080
Speaker 1: at more more carefully than others. UM, you always have

135
00:07:22,160 --> 00:07:25,160
Speaker 1: that kind of capability of those technologies. UM, we'll be

136
00:07:25,200 --> 00:07:27,760
Speaker 1: able to support that. UM one way that they can

137
00:07:27,960 --> 00:07:29,320
Speaker 1: will be able to do it with shoes on wor

138
00:07:29,400 --> 00:07:31,920
Speaker 1: shoes off as an example. Uh, but it won't have

139
00:07:31,960 --> 00:07:34,440
Speaker 1: to be two separate technologies. Steve, where do you think

140
00:07:34,440 --> 00:07:40,200
Speaker 1: they're still risk in the system vulnerabilities in the system? Well, UM,

141
00:07:40,320 --> 00:07:45,560
Speaker 1: Airports continuously conduct res assessments and security vulnerability assessments to

142
00:07:45,600 --> 00:07:49,800
Speaker 1: identify prioritizes and actually mitigate what they find. We know

143
00:07:49,920 --> 00:07:53,920
Speaker 1: that the US aviation system is a high value, high

144
00:07:53,920 --> 00:07:57,320
Speaker 1: priority target for bad actors. UM, and I like to

145
00:07:57,320 --> 00:08:00,679
Speaker 1: say the bad actor only has to get it right once,

146
00:08:01,200 --> 00:08:03,560
Speaker 1: while t s A and the Aviation Security Enterprise that

147
00:08:03,680 --> 00:08:05,320
Speaker 1: you know has to be able to get it right

148
00:08:05,360 --> 00:08:10,000
Speaker 1: every time. So everybody still needs to remain vigilant. But today,

149
00:08:10,520 --> 00:08:12,280
Speaker 1: not only do we have uh we have to be

150
00:08:12,320 --> 00:08:15,400
Speaker 1: bilion against that that conventional bad actor you know who

151
00:08:15,440 --> 00:08:18,520
Speaker 1: carries the explosive or a weapon on board, but we

152
00:08:18,560 --> 00:08:21,080
Speaker 1: have to also look at those asymmetric bad actors that

153
00:08:21,080 --> 00:08:24,600
Speaker 1: are going after um the threat factors such as cyber

154
00:08:24,600 --> 00:08:27,440
Speaker 1: threats or even the use of drones as weapons. So

155
00:08:27,840 --> 00:08:30,720
Speaker 1: those things exist, and so the bottom line is we

156
00:08:30,760 --> 00:08:33,000
Speaker 1: need to be five steps ahead of those bad actors

157
00:08:33,240 --> 00:08:37,680
Speaker 1: if we want to security that aviation enterprise. All right, Steve,

158
00:08:37,720 --> 00:08:39,800
Speaker 1: thanks very much for joining us. Steve Curly there is

159
00:08:40,240 --> 00:08:44,280
Speaker 1: executive VP the k TO Security Screening Group. Of course,

160
00:08:44,600 --> 00:08:47,400
Speaker 1: as we mentioned, he's a former assistant administrator at the

161
00:08:47,480 --> 00:08:51,600
Speaker 1: t s A as well, and m really has done

162
00:08:51,679 --> 00:08:55,840
Speaker 1: so much in security and in leadership, so really appreciate

163
00:08:56,240 --> 00:08:58,600
Speaker 1: the time with you. Steve, Thanks very much for your

164
00:08:58,640 --> 00:09:02,200
Speaker 1: insights on this UM. Well tomorrow, I guess the twenty

165
00:09:02,280 --> 00:09:06,559
Speaker 1: year anniversary of nine eleven. Travel as we knew it

166
00:09:06,960 --> 00:09:12,120
Speaker 1: changed almost overnight and has become safer and more secure,

167
00:09:12,160 --> 00:09:18,599
Speaker 1: so we appreciate it. This is Bloomberg. Let's talk a

168
00:09:18,640 --> 00:09:23,720
Speaker 1: little bit about the crypto space, Michael Cameron, CEO of Skilling,

169
00:09:24,040 --> 00:09:28,400
Speaker 1: and let's let's start with El Salvador and and what

170
00:09:28,559 --> 00:09:31,600
Speaker 1: happened the other day. You know, we saw UM the

171
00:09:31,640 --> 00:09:35,720
Speaker 1: country adopt bitcoin as I guess legal tender. And on

172
00:09:35,760 --> 00:09:38,000
Speaker 1: the same day we had a big drop in the price.

173
00:09:38,000 --> 00:09:42,000
Speaker 1: So the two things related. Michael, Hi, Matt, thanks for

174
00:09:42,040 --> 00:09:44,559
Speaker 1: having me. I do think they are related. I think

175
00:09:44,600 --> 00:09:47,880
Speaker 1: it's a good old fashioned by the rumor, sell the news.

176
00:09:48,080 --> 00:09:52,000
Speaker 1: I think some of the people looking for UM, there's

177
00:09:52,000 --> 00:09:53,360
Speaker 1: a lot of people that like the link. You know,

178
00:09:53,559 --> 00:09:55,960
Speaker 1: this drop must equate to something that happened. I think

179
00:09:56,040 --> 00:09:58,360
Speaker 1: if you're looking for that, it's by the room, sell

180
00:09:58,400 --> 00:09:59,960
Speaker 1: the news. But also it was a bit of a

181
00:10:00,000 --> 00:10:02,439
Speaker 1: stumbled rollout, and so I think some people thought it

182
00:10:02,559 --> 00:10:06,120
Speaker 1: made cloud the it make cloud the future for other

183
00:10:06,160 --> 00:10:09,640
Speaker 1: countries to follow suit. What does it mean, Michael, for

184
00:10:09,679 --> 00:10:13,160
Speaker 1: a company to adopt it and for a country, I'm sorry,

185
00:10:13,160 --> 00:10:15,720
Speaker 1: to adopt bitcoin as legal tenor, what does that really

186
00:10:15,760 --> 00:10:21,000
Speaker 1: mean to you? I think it means that, I mean

187
00:10:21,000 --> 00:10:23,000
Speaker 1: the obvious cases that it means that they have to

188
00:10:23,240 --> 00:10:28,040
Speaker 1: that vendors and providers have to accept bitcoin as a

189
00:10:28,040 --> 00:10:31,920
Speaker 1: as a an asset that they'll accept. And so that's

190
00:10:32,200 --> 00:10:34,800
Speaker 1: that comes with a lot of operational hurdles that they

191
00:10:34,840 --> 00:10:37,200
Speaker 1: have to get over, and uh that that you know,

192
00:10:37,240 --> 00:10:39,439
Speaker 1: it's citizens have to adopt this and understand how to

193
00:10:39,559 --> 00:10:42,000
Speaker 1: how to use it now to convert from dollars over

194
00:10:42,040 --> 00:10:44,240
Speaker 1: to BTC and and so on and so forth. So

195
00:10:44,400 --> 00:10:46,600
Speaker 1: at a very basic level, it just means that every

196
00:10:46,679 --> 00:10:50,840
Speaker 1: vendor from a little kiosk selling phone top ups to uh,

197
00:10:50,880 --> 00:10:53,199
Speaker 1: you know, a large purchase of a furniture or a

198
00:10:53,280 --> 00:10:58,000
Speaker 1: car has to accept bitcoin. What about um skilling, You're

199
00:10:59,280 --> 00:11:04,280
Speaker 1: a trading form um that tries to make trading I

200
00:11:04,280 --> 00:11:08,040
Speaker 1: guess transparent and secure and you deal in over eight

201
00:11:08,320 --> 00:11:12,760
Speaker 1: d f x um Uh well pair currency pairs? Does

202
00:11:12,800 --> 00:11:18,200
Speaker 1: that include crypto? Yeah? So Skilling is a is a

203
00:11:18,480 --> 00:11:21,360
Speaker 1: ex and CFD broker. We deal, We do deal in crypto.

204
00:11:21,440 --> 00:11:23,520
Speaker 1: In fact, we're a leading provider of crypto. We have

205
00:11:24,240 --> 00:11:27,840
Speaker 1: twenties seven crypto assets right now, which includes the big

206
00:11:27,880 --> 00:11:30,760
Speaker 1: boys like Bitcoin and ether, but also the more nascent

207
00:11:30,760 --> 00:11:34,800
Speaker 1: cryptos like dog coin, shiba Inu and more. Well, how's

208
00:11:34,840 --> 00:11:37,160
Speaker 1: it going? How's that going right now? I mean, is

209
00:11:37,160 --> 00:11:42,280
Speaker 1: it still um an incredibly hot sector? Bitcoin is trading

210
00:11:42,280 --> 00:11:46,680
Speaker 1: for over forty dollars right now. It's still incredibly hot.

211
00:11:46,800 --> 00:11:49,240
Speaker 1: It is. It is the product that that that customers

212
00:11:49,280 --> 00:11:52,120
Speaker 1: want to trade, you know, where we we find that

213
00:11:52,559 --> 00:11:56,719
Speaker 1: UM more and more customers are just exclusively trading cryptocurrencies

214
00:11:56,760 --> 00:12:00,000
Speaker 1: now Skilling it does attract. Skilling is a really relatively

215
00:12:00,080 --> 00:12:02,439
Speaker 1: new fintech on the scene. Were only a few years old,

216
00:12:03,040 --> 00:12:06,360
Speaker 1: and uh, we primarily attract a younger audience, but they

217
00:12:06,400 --> 00:12:09,640
Speaker 1: and they almost exclusively dip their toe into crypto. Some

218
00:12:09,720 --> 00:12:11,959
Speaker 1: of the older brokers still rely on a lot of

219
00:12:12,040 --> 00:12:15,040
Speaker 1: customers that trade the kind of the traditional assets, you know,

220
00:12:15,120 --> 00:12:19,640
Speaker 1: the TAO and the SMP and gold and the Fiat currencies. UM.

221
00:12:19,679 --> 00:12:21,560
Speaker 1: But we are trying to push the envelope and just

222
00:12:21,679 --> 00:12:24,920
Speaker 1: offer all the cryptocurrencies that that are making the news,

223
00:12:25,040 --> 00:12:28,640
Speaker 1: making the headlines, and and it's still on fire. It's

224
00:12:28,679 --> 00:12:32,080
Speaker 1: still all that people want to trade right now, you know, Uh, Michael,

225
00:12:32,120 --> 00:12:35,760
Speaker 1: there's still a lot of skepticism out there about bitcoin

226
00:12:35,800 --> 00:12:38,120
Speaker 1: and crypto in general. In fact, the Sweetish central banker

227
00:12:38,240 --> 00:12:42,400
Speaker 1: warned that bitcoin could eventually collapse. How do you kind

228
00:12:42,400 --> 00:12:46,040
Speaker 1: of frame that type of thinking as this market continues

229
00:12:46,080 --> 00:12:51,920
Speaker 1: to develop. I think that that skepticism is is a

230
00:12:51,920 --> 00:12:56,280
Speaker 1: little unfair. I think a better I think that these

231
00:12:56,360 --> 00:12:58,560
Speaker 1: the way comments like that I think are are are

232
00:12:58,600 --> 00:13:00,320
Speaker 1: going to be judged to be on the wrong side

233
00:13:00,320 --> 00:13:05,320
Speaker 1: of history. So this cryptocurrencies have with every passing year,

234
00:13:05,360 --> 00:13:08,840
Speaker 1: there's more and more use cases for both blockchain but

235
00:13:08,840 --> 00:13:13,520
Speaker 1: also cryptocurrencies, and so I feel like when there's comments

236
00:13:13,559 --> 00:13:17,720
Speaker 1: like that denigratee cryptocurrencies and the use of blockchain, it's

237
00:13:17,800 --> 00:13:22,160
Speaker 1: very shortsighted. Fiat currencies like the Prono, like the Swiss

238
00:13:22,160 --> 00:13:26,520
Speaker 1: frank are not um. They're not without volatility. I mean,

239
00:13:26,559 --> 00:13:30,000
Speaker 1: just a few, just a few januaries back, m a

240
00:13:30,120 --> 00:13:35,000
Speaker 1: currency here in Europe, dropped well appreciated. UM. So for

241
00:13:35,040 --> 00:13:38,400
Speaker 1: all the naysayers that say crypto is a scam or

242
00:13:38,559 --> 00:13:41,960
Speaker 1: it's too volatile, UM, fiat currencies are not above that.

243
00:13:42,080 --> 00:13:44,800
Speaker 1: European fiot currencies are not above that. And so I

244
00:13:44,840 --> 00:13:47,280
Speaker 1: think I think it's here to stay. I think UM,

245
00:13:47,360 --> 00:13:49,160
Speaker 1: and I think comments like that aren't aren't gonna help

246
00:13:49,200 --> 00:13:51,040
Speaker 1: and are going to be judged to be on the

247
00:13:51,040 --> 00:13:54,000
Speaker 1: wrong side of history. But We're gonna clearly need more regulation,

248
00:13:54,280 --> 00:13:56,080
Speaker 1: aren't we. I mean, you look at all the rip

249
00:13:56,080 --> 00:14:00,079
Speaker 1: offs going on and defy and um, the fact that

250
00:14:00,240 --> 00:14:03,640
Speaker 1: it's almost expected by investors. Not that you trade those

251
00:14:03,720 --> 00:14:08,840
Speaker 1: defy tokens also, but you see them. Yeah. Yeah, there's

252
00:14:08,880 --> 00:14:11,000
Speaker 1: more regulation coming, and I think that's that's a good

253
00:14:11,000 --> 00:14:12,839
Speaker 1: thing for companies like Skilling. It's a very good thing.

254
00:14:12,840 --> 00:14:15,520
Speaker 1: We don't we're highly regulated as it is. You know,

255
00:14:15,559 --> 00:14:17,959
Speaker 1: we have a significant amount of you know, a m

256
00:14:18,080 --> 00:14:20,000
Speaker 1: L and k y C checks we put customers through.

257
00:14:20,480 --> 00:14:24,160
Speaker 1: We don't accept cryptocurrencies right now as uh for deposits,

258
00:14:24,200 --> 00:14:27,720
Speaker 1: But um, it's something we're we're obviously we're eyeing, and

259
00:14:27,760 --> 00:14:30,400
Speaker 1: we know that all of our competitors and most brokerages

260
00:14:30,440 --> 00:14:33,320
Speaker 1: are looking into this. And there are leading companies out

261
00:14:33,360 --> 00:14:36,960
Speaker 1: there that do what they call KYT tracking, so that

262
00:14:37,160 --> 00:14:41,720
Speaker 1: you can track the genesis of a cryptocurrency transaction. You

263
00:14:41,720 --> 00:14:43,800
Speaker 1: can track it very far back and you can see

264
00:14:44,240 --> 00:14:46,840
Speaker 1: you know where where it's been used. So, um, I

265
00:14:46,840 --> 00:14:49,600
Speaker 1: think the regulation is building and I and companies like

266
00:14:49,640 --> 00:14:52,360
Speaker 1: ours welcoming. Hey, Michael, thanks so much for joining us.

267
00:14:52,360 --> 00:14:56,560
Speaker 1: Really appreciate it. Fascinating store here developing so just we

268
00:14:56,600 --> 00:14:59,600
Speaker 1: will obviously keep you on the loopas as we need

269
00:14:59,680 --> 00:15:06,280
Speaker 1: more discussion going forward. Michael Camerman, CEO of Skilling. I'm

270
00:15:06,320 --> 00:15:10,000
Speaker 1: a credit investor. Where do I go for yield? A

271
00:15:10,000 --> 00:15:13,160
Speaker 1: lot of folks are looking at the private credit market

272
00:15:13,200 --> 00:15:15,680
Speaker 1: and we've got an expert in that market. John Klient,

273
00:15:16,000 --> 00:15:19,880
Speaker 1: President and Chief operating Officer of New Mountain Finance Corporation. John,

274
00:15:19,920 --> 00:15:22,320
Speaker 1: thanks so much for joining us here. Just give us,

275
00:15:22,680 --> 00:15:26,440
Speaker 1: you know, for those folks that that aren't that you know, um,

276
00:15:26,480 --> 00:15:29,760
Speaker 1: you know, knowledgeable about the private credit market, just framed

277
00:15:29,760 --> 00:15:32,240
Speaker 1: for us. What is the private credit market that you

278
00:15:32,240 --> 00:15:35,760
Speaker 1: guys playing well? Thanks for having me on the show.

279
00:15:35,800 --> 00:15:39,160
Speaker 1: I really appreciate it. The private credit market, at least

280
00:15:39,160 --> 00:15:41,600
Speaker 1: the way we think about it, is a market that

281
00:15:41,640 --> 00:15:46,920
Speaker 1: finances leverage buyouts for um uh for for financial sponsors

282
00:15:47,520 --> 00:15:51,480
Speaker 1: across a big continuum of size. So we're providing capital

283
00:15:51,720 --> 00:15:56,920
Speaker 1: to effectuate leverage buyouts, and historically we've done so in

284
00:15:56,960 --> 00:15:59,520
Speaker 1: the middle market, but more and more private credit is

285
00:15:59,560 --> 00:16:03,720
Speaker 1: moving up market and and executing billion dollar tranches to

286
00:16:03,800 --> 00:16:07,200
Speaker 1: effectuate these larger buyouts. So what kind of return are

287
00:16:07,240 --> 00:16:11,680
Speaker 1: we talking about? So private credit the pitch across the

288
00:16:11,720 --> 00:16:15,200
Speaker 1: industry to investors is essentially in private credit you can

289
00:16:15,240 --> 00:16:21,720
Speaker 1: get consistent seven to ten percent returns essentially with floating

290
00:16:21,800 --> 00:16:25,800
Speaker 1: rate tranches so you can protect against inflation and changes

291
00:16:25,840 --> 00:16:30,440
Speaker 1: in the general macro environment. And across the industry, we've

292
00:16:30,480 --> 00:16:33,680
Speaker 1: we've done a good job achieving returns that are better

293
00:16:33,720 --> 00:16:36,800
Speaker 1: than the high yield market and the syndicated market, and

294
00:16:37,120 --> 00:16:40,560
Speaker 1: that continues today. So it's interesting, John, I mean, you know,

295
00:16:40,600 --> 00:16:42,200
Speaker 1: Matt and I we we talked a lot of folks

296
00:16:42,200 --> 00:16:45,160
Speaker 1: who in the private equity space and we're just amazed

297
00:16:45,200 --> 00:16:48,760
Speaker 1: by how much capital and is in the private equity

298
00:16:48,840 --> 00:16:51,960
Speaker 1: space looking for deals. Give us a sense of kind

299
00:16:51,960 --> 00:16:55,360
Speaker 1: of the deal flow that you guys are seeing right now.

300
00:16:56,800 --> 00:16:59,280
Speaker 1: Right now, We've never seen deal flow as high as

301
00:16:59,280 --> 00:17:02,360
Speaker 1: we see it see it today. Uh. Here at New Mountain,

302
00:17:02,400 --> 00:17:04,280
Speaker 1: we have a private equity business and we also have

303
00:17:04,400 --> 00:17:07,000
Speaker 1: the credit business which I'm in charge of. We manage

304
00:17:07,000 --> 00:17:10,760
Speaker 1: about over twenty billion in private equity, seven billion in credit.

305
00:17:11,200 --> 00:17:14,040
Speaker 1: And uh, I'll tell you, the zoom environment that we

306
00:17:14,080 --> 00:17:18,920
Speaker 1: have today has has really created tremendous deal velocity, tremendous

307
00:17:18,960 --> 00:17:22,359
Speaker 1: efficiencies and uh, there are tremendous amount of players with

308
00:17:22,400 --> 00:17:25,359
Speaker 1: a lot of capital to put to work, and essentially

309
00:17:25,680 --> 00:17:29,240
Speaker 1: there's a major competition to to buy all the best assets,

310
00:17:29,600 --> 00:17:32,280
Speaker 1: and so we've never seen anything like it, and I

311
00:17:32,320 --> 00:17:35,160
Speaker 1: think that is driven by the large amount of fundraising

312
00:17:35,160 --> 00:17:38,280
Speaker 1: that we've seen in private equity. And from my seat,

313
00:17:38,280 --> 00:17:40,359
Speaker 1: we're just trying to keep up with our clients to

314
00:17:40,480 --> 00:17:43,840
Speaker 1: raise money fast enough to to suit their needs and

315
00:17:43,880 --> 00:17:46,720
Speaker 1: to be a little finance the bigger and bigger buyouts

316
00:17:46,760 --> 00:17:50,400
Speaker 1: that that our clients are pursuing. So if I'm high

317
00:17:50,480 --> 00:17:53,760
Speaker 1: networth individual or family office, how long do I have

318
00:17:53,840 --> 00:17:56,280
Speaker 1: to commit funds and and what kind of risk am

319
00:17:56,320 --> 00:18:00,679
Speaker 1: I taking? Well? Across UH, I have a credit There

320
00:18:00,680 --> 00:18:02,520
Speaker 1: are a lot of different structures here at New Mountain.

321
00:18:02,560 --> 00:18:05,480
Speaker 1: We do manage a public BDC, so you can buy

322
00:18:05,480 --> 00:18:09,080
Speaker 1: our stock, buy and sell our stock on a daily

323
00:18:09,119 --> 00:18:12,520
Speaker 1: basis very easily. So you've got that daily liquidity and

324
00:18:12,520 --> 00:18:16,080
Speaker 1: you kind of access to a diversified group of of

325
00:18:15,920 --> 00:18:19,119
Speaker 1: of of private loans that we make to our sponsored clients.

326
00:18:19,160 --> 00:18:22,160
Speaker 1: There are some structures um that are out there where

327
00:18:22,200 --> 00:18:24,880
Speaker 1: as a high net worth individual or an institutional investor,

328
00:18:25,240 --> 00:18:27,240
Speaker 1: you have to commit to the fund of the asset

329
00:18:27,280 --> 00:18:31,960
Speaker 1: class over many years. So UH big picture, I'd say

330
00:18:32,440 --> 00:18:35,200
Speaker 1: there are different structures for different time horizons, and it's

331
00:18:35,240 --> 00:18:37,480
Speaker 1: possible to get access to private credit in a lot

332
00:18:37,480 --> 00:18:40,800
Speaker 1: of different ways with a lot of different time horizons. John,

333
00:18:40,840 --> 00:18:42,600
Speaker 1: earlier in my career, I was at the Chase Manhattan

334
00:18:42,600 --> 00:18:44,800
Speaker 1: Bank and the corporate finance team, and we were lending

335
00:18:44,800 --> 00:18:47,560
Speaker 1: money to the media sector, which is a great cash

336
00:18:47,600 --> 00:18:52,240
Speaker 1: flowing industry and supportive of, you know, a good level

337
00:18:52,359 --> 00:18:54,280
Speaker 1: of debt. What are some of the sectors that you

338
00:18:54,320 --> 00:18:59,000
Speaker 1: guys like from a private credit perspective. Here at New Mountain,

339
00:18:59,160 --> 00:19:01,600
Speaker 1: we're really focused on what we refer to as defensive

340
00:19:01,600 --> 00:19:04,240
Speaker 1: growth industries, So we're trying to lend to businesses that

341
00:19:04,280 --> 00:19:06,520
Speaker 1: we think are going going to do well no matter

342
00:19:06,560 --> 00:19:09,520
Speaker 1: what the economic environment looks like. Uh and I think

343
00:19:09,520 --> 00:19:12,600
Speaker 1: our sponsor clients are are geared the same way. So

344
00:19:12,640 --> 00:19:17,800
Speaker 1: we're looking at software, technology, enabled business services, subscription data companies,

345
00:19:18,400 --> 00:19:23,320
Speaker 1: life sciences, especially materials, healthcare. I could go on and on,

346
00:19:23,400 --> 00:19:26,440
Speaker 1: but it's a lot of niches that have really predictable,

347
00:19:26,960 --> 00:19:30,320
Speaker 1: recurring revenue models that that we can take comfort in

348
00:19:30,359 --> 00:19:33,679
Speaker 1: as a lender. What are some of the biggest deals

349
00:19:33,680 --> 00:19:35,919
Speaker 1: you've been involved in. Can you tell us any of

350
00:19:35,920 --> 00:19:39,320
Speaker 1: the deal details. Well, I can give you a bunch

351
00:19:39,359 --> 00:19:42,880
Speaker 1: of deals. It's pretty amazing. Before before COVID, I'd say

352
00:19:42,920 --> 00:19:45,520
Speaker 1: the biggest deals would barely touch a billion dollars in

353
00:19:45,560 --> 00:19:49,200
Speaker 1: the private credit market. And today we're we're we're financing

354
00:19:49,240 --> 00:19:51,440
Speaker 1: deals as small as a hundred million and as big

355
00:19:51,480 --> 00:19:53,800
Speaker 1: as three billion, where where we'd be a member of

356
00:19:53,840 --> 00:19:56,919
Speaker 1: a of a club of lenders that financed those bigger deals.

357
00:19:57,920 --> 00:20:02,240
Speaker 1: But really post COVID, there's been an explosion of larger deals. Uh.

358
00:20:02,280 --> 00:20:05,159
Speaker 1: You can think about stamps dot com, which is a

359
00:20:05,200 --> 00:20:09,840
Speaker 1: software business, Affordable Care which is a dentistry business, Galway

360
00:20:09,880 --> 00:20:13,359
Speaker 1: and insurance broker Um, a novel on Holdings which has

361
00:20:13,400 --> 00:20:16,240
Speaker 1: been announced that to take private lead by Norrik and Insight.

362
00:20:16,480 --> 00:20:20,520
Speaker 1: And these are all multibillion dollar deals, uh that that

363
00:20:20,520 --> 00:20:22,639
Speaker 1: that are that are really popping up every day. So

364
00:20:22,720 --> 00:20:25,280
Speaker 1: I need all my hands and toes to talk about

365
00:20:25,280 --> 00:20:27,800
Speaker 1: the billion dollar deals and the private credit markets that

366
00:20:27,840 --> 00:20:30,240
Speaker 1: have occurred over the last over the last two months,

367
00:20:30,240 --> 00:20:33,280
Speaker 1: even John just about thirty seconds talked to us about

368
00:20:33,280 --> 00:20:37,359
Speaker 1: credit quality out there. So I think credit quality is

369
00:20:37,400 --> 00:20:39,840
Speaker 1: really good as long as you stick to to the

370
00:20:39,960 --> 00:20:43,560
Speaker 1: sectors that have done well through COVID, so um, and

371
00:20:43,640 --> 00:20:45,199
Speaker 1: essentially I think it's a lot of the sectors that

372
00:20:45,240 --> 00:20:48,000
Speaker 1: we focus on. Our book has been very strong through COVID,

373
00:20:48,480 --> 00:20:52,000
Speaker 1: and we were we worry about credit quality is really uh,

374
00:20:52,119 --> 00:20:56,119
Speaker 1: companies that are that are exposed to secular change, supply

375
00:20:56,280 --> 00:20:58,440
Speaker 1: Chaine disruption, which I'm sure you're talking a lot about

376
00:20:58,440 --> 00:21:01,320
Speaker 1: in your show, labor shore is. So we really we

377
00:21:01,400 --> 00:21:04,159
Speaker 1: really stay away from, uh, you know, industries that that

378
00:21:04,280 --> 00:21:07,600
Speaker 1: that could be exposed to those those negative trends. I

379
00:21:07,600 --> 00:21:12,520
Speaker 1: think about automotive, retail, travel and leisure, heavy heavy industrials, uh,

380
00:21:12,640 --> 00:21:16,480
Speaker 1: consumer discretionary of course, you know energy. So I really

381
00:21:16,480 --> 00:21:19,159
Speaker 1: think those are the industries that good, good lenders avoid.

382
00:21:19,600 --> 00:21:23,960
Speaker 1: John Klein, President, chief operating Officer at New Mountain Finance Corporation.

383
00:21:24,000 --> 00:21:32,200
Speaker 1: Appreciate your time today. This is Bloomberg. Now let's get

384
00:21:32,240 --> 00:21:37,400
Speaker 1: over to Don Steinbroger been Uh. We've been anxiously awaiting

385
00:21:37,400 --> 00:21:40,000
Speaker 1: the CEO of Agecroft Partners and he joins us now

386
00:21:40,040 --> 00:21:42,560
Speaker 1: at a Richmond, Virginia. Don great to have you on

387
00:21:42,600 --> 00:21:45,920
Speaker 1: the program. Thanks so much for joining us. You say, um,

388
00:21:45,960 --> 00:21:49,159
Speaker 1: this is the greatest asset raising environment in the history

389
00:21:49,160 --> 00:21:50,720
Speaker 1: of hedge funds. At least you have a paper out

390
00:21:51,160 --> 00:21:53,679
Speaker 1: UM with that title. What do you mean by that?

391
00:21:53,920 --> 00:21:55,720
Speaker 1: In the history of hedge fund industry? This is the

392
00:21:55,720 --> 00:22:00,600
Speaker 1: best well I've been in the institutional investment and business

393
00:22:00,640 --> 00:22:04,080
Speaker 1: for thirty six years. And uh. There are three things

394
00:22:04,080 --> 00:22:07,040
Speaker 1: that drive flows to hedge funds and all of those

395
00:22:07,280 --> 00:22:11,879
Speaker 1: are are pointing to me to be UM very strong

396
00:22:12,000 --> 00:22:15,919
Speaker 1: indicators that two thousand, uh twenty two will be the

397
00:22:15,960 --> 00:22:19,440
Speaker 1: best environment to raise money in the hedge fund industry.

398
00:22:19,680 --> 00:22:22,760
Speaker 1: The first is you're just starting with a large asset bates.

399
00:22:23,000 --> 00:22:24,800
Speaker 1: You know, the hedge fund industry at the end of

400
00:22:24,800 --> 00:22:27,760
Speaker 1: the second quarter was at four point three trillion, up

401
00:22:27,800 --> 00:22:30,440
Speaker 1: from six hundred billion at the end of the turn

402
00:22:30,480 --> 00:22:34,560
Speaker 1: of the century. It's grown every year but three this century.

403
00:22:36,320 --> 00:22:40,720
Speaker 1: Before this year, flows the hedge fund industry had been static.

404
00:22:40,880 --> 00:22:43,960
Speaker 1: Most of the growthy industry had come from performance, but

405
00:22:44,119 --> 00:22:46,480
Speaker 1: a lot of that has changed. You seem very strong

406
00:22:46,760 --> 00:22:51,200
Speaker 1: flows into the hedge fund industry this year, and three

407
00:22:51,240 --> 00:22:54,000
Speaker 1: things are resulting in this strong flows. One is just

408
00:22:54,119 --> 00:22:56,680
Speaker 1: the performance of the hedge fund industry has been very

409
00:22:56,680 --> 00:22:59,719
Speaker 1: good over the past two years. Most investors are investing

410
00:22:59,720 --> 00:23:02,679
Speaker 1: in head funds to protect on the down side and

411
00:23:02,800 --> 00:23:06,800
Speaker 1: add diversification, and they were very happy with performance first

412
00:23:06,840 --> 00:23:09,600
Speaker 1: quarter of last year when the markets sold off, they

413
00:23:09,600 --> 00:23:11,840
Speaker 1: were happy with the full year up ten percent. In

414
00:23:11,840 --> 00:23:14,280
Speaker 1: the first six months of this year, hedge funds are

415
00:23:14,320 --> 00:23:16,760
Speaker 1: up ten percent, which was the best start of a

416
00:23:16,880 --> 00:23:21,479
Speaker 1: year since. In addition to that, when you look at

417
00:23:21,480 --> 00:23:24,000
Speaker 1: flows from hedge fund industries, it tend to be dominated

418
00:23:24,040 --> 00:23:27,720
Speaker 1: by large institutional investors, and a lot of large institutional

419
00:23:27,760 --> 00:23:32,240
Speaker 1: investors have allocations to fixed income that are you know,

420
00:23:32,280 --> 00:23:34,919
Speaker 1: expected to return in the mid two percent range, and

421
00:23:34,960 --> 00:23:38,000
Speaker 1: a number of these large institutional investors are beginning to

422
00:23:38,040 --> 00:23:44,040
Speaker 1: shift money away from fixed income into uncorrelated hedge fund strategies,

423
00:23:44,080 --> 00:23:47,280
Speaker 1: and some of them are also including hedge fund strategies

424
00:23:47,320 --> 00:23:51,560
Speaker 1: and their fixed income portfolio like direct lending to stress debt,

425
00:23:51,880 --> 00:23:56,479
Speaker 1: specialty financing. And the third thing that's helping that flows

426
00:23:56,480 --> 00:23:59,720
Speaker 1: to the industry is the fact that the fees have

427
00:23:59,800 --> 00:24:02,280
Speaker 1: come down a lot. A lot of institutions used to

428
00:24:02,320 --> 00:24:03,919
Speaker 1: point at the industry and say, hey, we don't want

429
00:24:03,920 --> 00:24:06,919
Speaker 1: to pay two and twenty it's too much. But in

430
00:24:06,960 --> 00:24:11,320
Speaker 1: a recent survey by um UH of the industry, the

431
00:24:11,400 --> 00:24:14,879
Speaker 1: average management fee is now one point three eight percent

432
00:24:16,040 --> 00:24:20,600
Speaker 1: and performance fee is UH fifteen point nine percent, and

433
00:24:20,680 --> 00:24:24,280
Speaker 1: that's standard hedge fund fee. There is a two tiered

434
00:24:24,400 --> 00:24:30,280
Speaker 1: fee structure which is giving large institutional investors a significant

435
00:24:30,359 --> 00:24:33,199
Speaker 1: feed discount on the standard fee. So a lot of

436
00:24:33,240 --> 00:24:35,520
Speaker 1: these big institutional investors are able to get in it

437
00:24:35,640 --> 00:24:38,600
Speaker 1: like one in ten, which makes a lot more attractive.

438
00:24:38,680 --> 00:24:40,719
Speaker 1: So you're to day you've had a hundred and fifty

439
00:24:40,760 --> 00:24:44,040
Speaker 1: billion dollars pour into the hedge fund industry. The main

440
00:24:44,240 --> 00:24:48,480
Speaker 1: driver of assets next year is going to be manager turnover.

441
00:24:49,440 --> 00:24:52,320
Speaker 1: You know, I just mentioned hundred and fifty net flows

442
00:24:52,320 --> 00:24:55,399
Speaker 1: in the industry, but there is a natural turnover of

443
00:24:55,480 --> 00:24:59,679
Speaker 1: managers and at if you assume the average investor Holton

444
00:24:59,720 --> 00:25:03,639
Speaker 1: manage for seven years, that means of the industry turns

445
00:25:03,680 --> 00:25:09,480
Speaker 1: over every year on four point three trillion dollars is

446
00:25:09,760 --> 00:25:13,560
Speaker 1: six hundred and forty five billion. And that's that's in

447
00:25:13,600 --> 00:25:16,800
Speaker 1: an average year. And we're predicting that the turnover will

448
00:25:16,800 --> 00:25:20,239
Speaker 1: be record high next year and done. I guess my

449
00:25:21,200 --> 00:25:23,560
Speaker 1: thought process over the last four or five, six, seven

450
00:25:23,600 --> 00:25:26,399
Speaker 1: years has been most of the hedge fund money is

451
00:25:26,440 --> 00:25:30,560
Speaker 1: going to the big players, the citadels of the World's

452
00:25:30,600 --> 00:25:33,480
Speaker 1: the point seventy two is I don't see as many

453
00:25:34,040 --> 00:25:36,000
Speaker 1: folks coming off of Wall Street the trading desk and

454
00:25:36,080 --> 00:25:39,760
Speaker 1: Morgan Stanley and raising or billion on a long short fund.

455
00:25:40,040 --> 00:25:45,840
Speaker 1: Are those days over? Where's the money going? Well? So

456
00:25:45,960 --> 00:25:51,720
Speaker 1: I think of assets are going to five of funds,

457
00:25:51,880 --> 00:25:55,359
Speaker 1: and I do think disproportionate amount is going to the

458
00:25:55,440 --> 00:25:58,680
Speaker 1: largest managers, and I think that's bad. I mean, when

459
00:25:58,680 --> 00:26:02,639
Speaker 1: you look at the performance of larger managers versus smaller

460
00:26:02,680 --> 00:26:07,560
Speaker 1: managers over long periods of time, larger managers underperform. You know,

461
00:26:07,640 --> 00:26:12,000
Speaker 1: there's a hedge fund index called the h f R

462
00:26:12,040 --> 00:26:17,560
Speaker 1: I index, and that index shows performance for hedge funds

463
00:26:17,600 --> 00:26:21,119
Speaker 1: that are equally weighted, so every hedge fund is weighted

464
00:26:21,160 --> 00:26:24,760
Speaker 1: the same size, and they also have an asset weighted composit.

465
00:26:25,320 --> 00:26:28,080
Speaker 1: And if you look at performance over the past or

466
00:26:28,240 --> 00:26:32,040
Speaker 1: you to date, uh, the equally weighted one is up

467
00:26:32,080 --> 00:26:36,080
Speaker 1: ten and the asset weighted which is dominated by the largest,

468
00:26:36,400 --> 00:26:41,360
Speaker 1: is up only six. So large hedge funds has significantly underperformed.

469
00:26:41,880 --> 00:26:45,399
Speaker 1: Over twelve months, large hedge funds have underperformed by eight percent.

470
00:26:46,000 --> 00:26:51,679
Speaker 1: They've underperformed by four percent over three years. So what

471
00:26:51,800 --> 00:26:54,479
Speaker 1: happens is a lot of people like to invest in

472
00:26:54,560 --> 00:26:58,800
Speaker 1: the glamorous hedge funds to the largest and they get

473
00:26:58,800 --> 00:27:02,439
Speaker 1: way too much as that's a ner great security ideas,

474
00:27:02,480 --> 00:27:05,760
Speaker 1: get to looking over larger asset base, so the best

475
00:27:05,840 --> 00:27:10,000
Speaker 1: diamonds in the rough are not the largest hedge funds. Typically. Hey, Don,

476
00:27:10,040 --> 00:27:12,160
Speaker 1: thanks so much for joining us. We always appreciate getting

477
00:27:12,200 --> 00:27:15,479
Speaker 1: a kind of the latest on the world of hedge funds,

478
00:27:15,520 --> 00:27:18,879
Speaker 1: capital raising, where the money's going strategies, and we always

479
00:27:18,880 --> 00:27:22,520
Speaker 1: get that with Don Steinberg, CEO and President of Agecroft

480
00:27:22,640 --> 00:27:26,760
Speaker 1: Partners based in the former capital the Confederacy, Richmond, Virginia,

481
00:27:26,840 --> 00:27:31,600
Speaker 1: home of the University of Richmond Spiders, my alma mater there. So, uh,

482
00:27:31,640 --> 00:27:33,879
Speaker 1: Don giving us the latest of hedge funds. You know,

483
00:27:33,920 --> 00:27:35,439
Speaker 1: I kind of looked at the hedge fund business when

484
00:27:35,480 --> 00:27:37,040
Speaker 1: I left Wall Street and I said, boy, that's a

485
00:27:37,080 --> 00:27:39,879
Speaker 1: young man's game, and it is a difficult game, and

486
00:27:39,880 --> 00:27:43,320
Speaker 1: the folks that make their living there, I think generally

487
00:27:43,359 --> 00:27:45,160
Speaker 1: earn it. It is a tough game, but a lot

488
00:27:45,160 --> 00:27:47,920
Speaker 1: of successful folks there. Thanks for listening to the Bloomberg

489
00:27:47,960 --> 00:27:51,359
Speaker 1: Markets podcast. You can subscribe and listen to interviews with

490
00:27:51,440 --> 00:27:56,200
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.

491
00:27:56,520 --> 00:28:00,760
Speaker 1: I'm on Twitter at Matt Miller three. An onfall Sweeney,

492
00:28:00,760 --> 00:28:03,399
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you

493
00:28:03,400 --> 00:28:05,800
Speaker 1: can always catch us worldwide at Bloomberg Radio