1 00:00:02,240 --> 00:00:06,800 Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio. 2 00:00:09,440 --> 00:00:13,160 Speaker 1: This week on the podcast, I have Ranji Naka Swamy. 3 00:00:13,400 --> 00:00:18,080 Speaker 1: She has quite the storied background as both a chief 4 00:00:18,120 --> 00:00:22,599 Speaker 1: investment officer and a chief executive officer at finance firms. 5 00:00:23,160 --> 00:00:26,320 Speaker 1: Uh she started out at U U b S Asset Management. 6 00:00:26,360 --> 00:00:31,120 Speaker 1: She ended up joining Sanford Bernstein. Ultimately she finds herself 7 00:00:31,320 --> 00:00:35,000 Speaker 1: at the City of New York's pension and retirement systems 8 00:00:35,600 --> 00:00:38,640 Speaker 1: as chief investment officers. She's had the role of chief 9 00:00:38,680 --> 00:00:44,360 Speaker 1: investment officer across numerous firms, and really this is a 10 00:00:44,600 --> 00:00:48,479 Speaker 1: if you're at all interested in asset allocation and thinking 11 00:00:48,600 --> 00:00:54,200 Speaker 1: about different types of asset classes, be the sources of beta, 12 00:00:54,280 --> 00:00:59,080 Speaker 1: sources of alpha, sources of non correlated alternative returns. This 13 00:00:59,160 --> 00:01:01,560 Speaker 1: is going to be the convert station for you. Uh 14 00:01:01,600 --> 00:01:05,040 Speaker 1: we Really she does a really nice job of covering 15 00:01:05,080 --> 00:01:09,600 Speaker 1: wonky subjects but making it really understandable for the lay person. 16 00:01:09,680 --> 00:01:12,520 Speaker 1: We really don't go too deep into the weeds on 17 00:01:12,600 --> 00:01:15,440 Speaker 1: a lot of the things we discuss with no further ado. 18 00:01:15,720 --> 00:01:23,560 Speaker 1: Here is my conversation with Rangji Naga Swamy. My special 19 00:01:23,600 --> 00:01:28,560 Speaker 1: guest today is Ranji Naga Swamy She has a stellar 20 00:01:28,840 --> 00:01:32,199 Speaker 1: resume filled with all of the best firms on Wall 21 00:01:32,280 --> 00:01:36,600 Speaker 1: Street and in finance. She began at UBS in the 22 00:01:36,600 --> 00:01:42,720 Speaker 1: asset management division before she joined Sanford Bernstein, eventually rising 23 00:01:42,760 --> 00:01:48,120 Speaker 1: to become Chief Investment Officer of Alliance Bernstein Investments. From 24 00:01:48,200 --> 00:01:51,160 Speaker 1: two thousand and ten to two thousand and twelve, she 25 00:01:51,360 --> 00:01:54,440 Speaker 1: served as the chief investment Advisor for the City of 26 00:01:54,480 --> 00:01:58,880 Speaker 1: New York's pension and retirement systems. She has held senior 27 00:01:58,920 --> 00:02:03,600 Speaker 1: positions at Bridgewater Associates, Court their Capital, and she is 28 00:02:03,800 --> 00:02:10,120 Speaker 1: currently chief executive officer of Hurdle Callahan. Ranji Nagaswami, Welcome 29 00:02:10,120 --> 00:02:12,639 Speaker 1: to Boomberg. Thanks for having me very so. I've been 30 00:02:12,639 --> 00:02:14,560 Speaker 1: looking forward to having you here for a while because 31 00:02:14,600 --> 00:02:19,600 Speaker 1: you have a really fascinating background and quite a financial 32 00:02:19,600 --> 00:02:24,200 Speaker 1: services resume. Let's start with UBS. What what brought you 33 00:02:24,240 --> 00:02:27,160 Speaker 1: to UBS and what did you learn there? So? I 34 00:02:27,240 --> 00:02:29,720 Speaker 1: got to UBS right after a business school. I was 35 00:02:29,760 --> 00:02:32,920 Speaker 1: in the fixed income division. Having been a quant a 36 00:02:32,960 --> 00:02:35,960 Speaker 1: bit of a self professed geek all my life, with 37 00:02:36,000 --> 00:02:39,840 Speaker 1: an accounting and mathematical background, it was not not a 38 00:02:39,880 --> 00:02:42,560 Speaker 1: surprise that I started out at the bottom of the 39 00:02:42,600 --> 00:02:47,200 Speaker 1: investment department in fixed income as a quantitative analyst, and 40 00:02:47,320 --> 00:02:49,960 Speaker 1: over the ten years from the time I started to 41 00:02:50,000 --> 00:02:54,040 Speaker 1: the time I ran the entire department globally running fixed 42 00:02:54,080 --> 00:02:57,600 Speaker 1: income for UBSS Management, I wore many hats. In the 43 00:02:57,680 --> 00:03:01,679 Speaker 1: late nineteen eighties and nine nine, during the SNL crisis, 44 00:03:02,000 --> 00:03:05,520 Speaker 1: I was asked to help with the HIL portfolios, so 45 00:03:05,919 --> 00:03:10,760 Speaker 1: being an accounting undergrad and understanding financial statements, I jumped 46 00:03:10,880 --> 00:03:13,079 Speaker 1: right into high yield in the middle of that chaos. 47 00:03:13,760 --> 00:03:18,040 Speaker 1: In four when the FED started to tighten, I was 48 00:03:18,080 --> 00:03:22,080 Speaker 1: asked to help with the mortgage backed securities portfolios, so 49 00:03:22,120 --> 00:03:25,400 Speaker 1: all of that negative convexity and a tightening cycle. Mortgages 50 00:03:25,400 --> 00:03:28,760 Speaker 1: were the worst performer in those in the period thereafter. 51 00:03:29,520 --> 00:03:33,920 Speaker 1: So essentially a career of jumping into things that were 52 00:03:34,360 --> 00:03:37,080 Speaker 1: about on their backs as cheap as they could get, 53 00:03:37,400 --> 00:03:40,920 Speaker 1: being a problem solver, and eventually being asked to run 54 00:03:40,960 --> 00:03:43,960 Speaker 1: the team. In the mid to late nineties, let's move 55 00:03:44,040 --> 00:03:48,160 Speaker 1: to San Francie Bernstein, which eventually became Alliance Burns. Thing. 56 00:03:48,240 --> 00:03:50,440 Speaker 1: You were there pretty much in the beginning of the 57 00:03:50,480 --> 00:03:54,240 Speaker 1: financial crisis, weren't you. I was there when value was in. 58 00:03:54,360 --> 00:03:59,440 Speaker 1: It's not dear nine, No one was a value investor. 59 00:03:59,520 --> 00:04:02,360 Speaker 1: Remember people were actually saying, oh, this Warren Buffett guy, 60 00:04:02,400 --> 00:04:06,000 Speaker 1: he's lost it. Absolutely, value investing is dead. That was 61 00:04:06,040 --> 00:04:08,840 Speaker 1: the headline. And having been a value investor in fixed 62 00:04:08,880 --> 00:04:11,400 Speaker 1: income all my life and by the way, nine while 63 00:04:11,440 --> 00:04:14,440 Speaker 1: I was at UBS, the firm was bought by Swiss 64 00:04:14,440 --> 00:04:17,240 Speaker 1: Bank and Gary Brinson came into my life a legendary 65 00:04:17,320 --> 00:04:22,280 Speaker 1: value investor and a thinker about global asset allocation, and 66 00:04:22,360 --> 00:04:25,400 Speaker 1: that has served me extremely well. That training with Gary 67 00:04:25,400 --> 00:04:30,160 Speaker 1: Brinson and Brinson partners went to Bernstein because like me, 68 00:04:30,320 --> 00:04:34,719 Speaker 1: they were still believers that value investing would work. Someday 69 00:04:35,040 --> 00:04:37,240 Speaker 1: was the fifth person in the history of Bernstein to 70 00:04:37,279 --> 00:04:41,440 Speaker 1: be brought in as a partner, and shortly after I joined, 71 00:04:41,480 --> 00:04:44,640 Speaker 1: six months later, the firm was sold to Alliance Capital. 72 00:04:46,080 --> 00:04:48,960 Speaker 1: In that six month period, I had worked very closely 73 00:04:49,000 --> 00:04:52,240 Speaker 1: with Lucanders and Maryland Feedback, who are of course some 74 00:04:52,320 --> 00:04:55,800 Speaker 1: of the greatest value equity investors of all time. And 75 00:04:55,880 --> 00:04:59,440 Speaker 1: upon that when that transaction happened, I said, I did 76 00:04:59,440 --> 00:05:01,880 Speaker 1: not come here to join Alliance. I really wanted to 77 00:05:01,920 --> 00:05:05,240 Speaker 1: stay with Bernstein, and I was persuaded to join the 78 00:05:05,279 --> 00:05:09,280 Speaker 1: equity team. And so it's a very unorthodox move from 79 00:05:09,440 --> 00:05:13,240 Speaker 1: fixed income to equities less unorthodox than you would imagine. 80 00:05:13,360 --> 00:05:16,200 Speaker 1: On the research side, A lot of the best equity 81 00:05:16,200 --> 00:05:20,920 Speaker 1: researchers I know all started out as fixed income researchers. 82 00:05:21,000 --> 00:05:23,159 Speaker 1: You know. I like to think that once, if you 83 00:05:23,279 --> 00:05:28,000 Speaker 1: had your fundamental training and fixed income, you understand capital structure, 84 00:05:28,080 --> 00:05:31,719 Speaker 1: you understand term structure, and you understand risk at a 85 00:05:31,920 --> 00:05:35,880 Speaker 1: far more granular level than most equity and absolutely absolutely, 86 00:05:36,080 --> 00:05:38,919 Speaker 1: and so that the next five years of my life 87 00:05:38,960 --> 00:05:42,760 Speaker 1: were terrific. I loved equity investing. If you can remember 88 00:05:42,839 --> 00:05:46,000 Speaker 1: that time two thousand to two thousand and four, all 89 00:05:46,040 --> 00:05:50,120 Speaker 1: of the darlings of the high yield market became value opportunities, 90 00:05:50,680 --> 00:05:55,120 Speaker 1: and so I tremendously enjoyed and think back fondly to 91 00:05:55,200 --> 00:05:59,040 Speaker 1: my time in the value equities team at Bernstein. Huh, 92 00:05:59,240 --> 00:06:03,720 Speaker 1: so you have actually rise to chief investment officer of 93 00:06:04,360 --> 00:06:07,839 Speaker 1: um Alliance Bernstein. What was that like? So? This was 94 00:06:08,000 --> 00:06:11,040 Speaker 1: the Hunter and eighty billion dollar retailed mutual fund division 95 00:06:11,600 --> 00:06:15,920 Speaker 1: that Bernstein actually inherited. It was an Alliance capital business, 96 00:06:16,760 --> 00:06:19,200 Speaker 1: and we I joined it at a very troubled time 97 00:06:19,240 --> 00:06:23,120 Speaker 1: in its history. Loosanders, the CEO of Bernstein, had just 98 00:06:24,040 --> 00:06:27,159 Speaker 1: asked the top ten people to leave the firm in 99 00:06:27,200 --> 00:06:31,640 Speaker 1: the wake of an sec settlement and a crisis, and 100 00:06:32,120 --> 00:06:37,560 Speaker 1: this was a transformation. What was needed was to completely 101 00:06:37,720 --> 00:06:43,280 Speaker 1: fundamentally rethink the firm's approach to the retail investor. And 102 00:06:43,320 --> 00:06:47,560 Speaker 1: what I really started with was how do retail investors behaved? 103 00:06:47,680 --> 00:06:52,200 Speaker 1: We embraced the work of behavioral economists like Daniel Kahneman, 104 00:06:52,200 --> 00:06:56,400 Speaker 1: who had always been a very big influence on the 105 00:06:56,440 --> 00:07:00,920 Speaker 1: Bernstein value investing philosophy. So the idea of investors being 106 00:07:00,960 --> 00:07:05,320 Speaker 1: myopically loss a verse, the idea that investors were much 107 00:07:05,360 --> 00:07:08,320 Speaker 1: more likely to believe something that they heard repeatedly and 108 00:07:08,400 --> 00:07:12,400 Speaker 1: most recently recency bias, confirmation bias. All of that went 109 00:07:12,440 --> 00:07:17,800 Speaker 1: into the design of how we restructured the mutual fund division. Essentially, 110 00:07:17,800 --> 00:07:21,400 Speaker 1: over the next four years, we went from fifty five 111 00:07:21,520 --> 00:07:26,480 Speaker 1: mutual funds, multiple tech funds, biotech funds, to really thinking 112 00:07:26,480 --> 00:07:30,400 Speaker 1: about what are the sources of return and risk that 113 00:07:30,600 --> 00:07:34,600 Speaker 1: every investor should own. And I remember making a presentation 114 00:07:34,640 --> 00:07:37,080 Speaker 1: to morning Star where I said, we have fifty five funds, 115 00:07:37,080 --> 00:07:42,000 Speaker 1: today investors need about a dozen. And that's exactly what 116 00:07:42,120 --> 00:07:44,520 Speaker 1: we did. We took the mutual fund lineup down from 117 00:07:44,560 --> 00:07:48,720 Speaker 1: fifty five to thirteen. Now, what we also did was 118 00:07:48,800 --> 00:07:54,000 Speaker 1: recognized that because investors were far worse off when you 119 00:07:54,040 --> 00:07:56,400 Speaker 1: looked at returns from a dollar weighted basis than a 120 00:07:56,440 --> 00:08:01,720 Speaker 1: time weighted basis, asset allocations strategies were probably the single 121 00:08:01,840 --> 00:08:06,320 Speaker 1: best response to human behavior. Berry, I've often said that 122 00:08:06,360 --> 00:08:11,440 Speaker 1: bilo selhai are the foremost abused words in the investment business, 123 00:08:11,480 --> 00:08:15,560 Speaker 1: and the answer to that is asset allocation portfolios. Coming up, 124 00:08:15,600 --> 00:08:20,520 Speaker 1: we continue our conversation with Ranji Nagaswamy discussing running of 125 00:08:20,600 --> 00:08:25,600 Speaker 1: values based firm in a rules based industry. I'm Barry Hults. 126 00:08:25,760 --> 00:08:29,160 Speaker 1: You're listening to Masters in Business on Bloomberg Radio. My 127 00:08:29,240 --> 00:08:33,800 Speaker 1: special guest today is Ranji Nagaswamy. She was at UBS 128 00:08:33,800 --> 00:08:37,520 Speaker 1: and Sanford Bernstein before she went on to serve as 129 00:08:37,600 --> 00:08:42,000 Speaker 1: chief's Chief Investment Advisor to the New York City Pension System. 130 00:08:42,040 --> 00:08:45,120 Speaker 1: So you're now doing something a little different than what 131 00:08:45,160 --> 00:08:48,880 Speaker 1: you've done previously. Tell us a little bit about Hurdle 132 00:08:48,960 --> 00:08:51,719 Speaker 1: Callahan and how you found your way to this company. 133 00:08:51,960 --> 00:08:55,240 Speaker 1: You know this role as CEO of one of the 134 00:08:55,280 --> 00:08:59,120 Speaker 1: greatest firms I think in the investment business. Hurdle Callaghan 135 00:08:59,320 --> 00:09:03,640 Speaker 1: a pioneer in the outsource chief investment officer industry. To 136 00:09:03,720 --> 00:09:05,880 Speaker 1: find what that is for the lay person who may 137 00:09:05,880 --> 00:09:08,800 Speaker 1: not be familiar with it. Think about if you are 138 00:09:09,000 --> 00:09:13,920 Speaker 1: an endowment, a foundation, or a family, wouldn't you like 139 00:09:14,120 --> 00:09:17,480 Speaker 1: to have someone by your side as as if they 140 00:09:17,520 --> 00:09:22,560 Speaker 1: were your internal chief investment officer. Only they bring the 141 00:09:22,720 --> 00:09:26,679 Speaker 1: scale and the expertise and the depth of a much 142 00:09:26,800 --> 00:09:30,200 Speaker 1: larger firm. If you were a fifty million dollar family 143 00:09:30,400 --> 00:09:34,800 Speaker 1: or a two million dollar endowment of a middle Midwestern 144 00:09:35,040 --> 00:09:40,560 Speaker 1: educational institution, it is impossible for you to create the returns, 145 00:09:41,080 --> 00:09:46,480 Speaker 1: the access to managers, the access to thinking about markets 146 00:09:47,000 --> 00:09:50,640 Speaker 1: that a multibillion dollar endowment is able to do. In 147 00:09:51,000 --> 00:09:55,640 Speaker 1: other words, the infrastructure, the hiring, the staffing, the resources 148 00:09:55,679 --> 00:10:01,439 Speaker 1: of a giant institution is made available to smaller shops, 149 00:10:01,600 --> 00:10:06,840 Speaker 1: family offices, pension funds, etcetera. Exactly not just the operational 150 00:10:06,880 --> 00:10:12,880 Speaker 1: and administrative infrastructure, but the investment capability, the investment access, 151 00:10:12,920 --> 00:10:17,400 Speaker 1: and the ability to to access world class managers, but 152 00:10:17,480 --> 00:10:20,359 Speaker 1: at much lower fees. If a two million dollar institution 153 00:10:20,440 --> 00:10:23,200 Speaker 1: went to get a manager, they would pay their highest 154 00:10:23,280 --> 00:10:27,480 Speaker 1: fee level. But if we are investing hundreds of billions 155 00:10:27,520 --> 00:10:30,600 Speaker 1: in with this investor, we will get a much lower fee. 156 00:10:31,000 --> 00:10:36,040 Speaker 1: So it is a far more scalable, cost efficient model 157 00:10:36,559 --> 00:10:40,679 Speaker 1: to get best thinking about markets into these smaller portfolios. 158 00:10:40,720 --> 00:10:42,559 Speaker 1: How did you find your way to this firm? And 159 00:10:42,679 --> 00:10:46,240 Speaker 1: this is really different than what you've done as a 160 00:10:46,360 --> 00:10:49,640 Speaker 1: c i O for a specific company. Now you're a 161 00:10:49,720 --> 00:10:54,000 Speaker 1: c i O for many firms. We see the entire 162 00:10:54,080 --> 00:10:58,560 Speaker 1: investment industry as being a very essential role for clients, 163 00:10:58,600 --> 00:11:01,680 Speaker 1: but most firm are. If you if you take the 164 00:11:01,720 --> 00:11:05,440 Speaker 1: analogy from the healthcare industry, most firms are like the 165 00:11:05,520 --> 00:11:09,360 Speaker 1: large pharmaceutical companies or the drug manufacturers, playing a vital 166 00:11:09,480 --> 00:11:13,120 Speaker 1: role spending a lot of time on a particular disease 167 00:11:13,240 --> 00:11:17,520 Speaker 1: or a particular product to help with the particular disease. 168 00:11:18,000 --> 00:11:21,400 Speaker 1: We see ourselves far more at Hurdle Callahan as the 169 00:11:21,440 --> 00:11:25,679 Speaker 1: mayo clinic. We want to serve the client. We want 170 00:11:25,800 --> 00:11:28,800 Speaker 1: someone to come in with an issue and a problem 171 00:11:28,920 --> 00:11:32,480 Speaker 1: or something to solve, something they need help with in investing, 172 00:11:32,960 --> 00:11:37,560 Speaker 1: and we access the product providers, but we are the 173 00:11:37,600 --> 00:11:41,559 Speaker 1: ones that's doing the diagnosis. We are understanding the client's 174 00:11:41,600 --> 00:11:44,839 Speaker 1: fact pattern. We are meeting the client where they are. 175 00:11:44,960 --> 00:11:47,880 Speaker 1: What do I mean by that? What is your risk tolerance. 176 00:11:47,920 --> 00:11:50,640 Speaker 1: Berry doesn't matter what the rest of the world does. 177 00:11:50,960 --> 00:11:54,480 Speaker 1: How much liquidity do you need? What does your institution 178 00:11:55,120 --> 00:11:59,120 Speaker 1: want from this portfolio? And we bring all of the 179 00:11:59,160 --> 00:12:03,360 Speaker 1: products together in a way that makes sense for this 180 00:12:03,520 --> 00:12:07,400 Speaker 1: particular client. Now there are a number of c i 181 00:12:07,520 --> 00:12:11,520 Speaker 1: O outsourcing firms in the world. How do you fit 182 00:12:11,600 --> 00:12:15,040 Speaker 1: into that firmament? How large have you guys become and 183 00:12:15,480 --> 00:12:19,640 Speaker 1: how long has Hurdle Callahan been around thirty years ago? 184 00:12:19,920 --> 00:12:22,560 Speaker 1: At this point, when John Hurdle and his and his 185 00:12:22,640 --> 00:12:27,480 Speaker 1: partner went on to form Hurdle Callahan, no one had 186 00:12:27,520 --> 00:12:32,320 Speaker 1: thought about the words outsourced c i O. David Swenson 187 00:12:32,559 --> 00:12:36,000 Speaker 1: was not a household name. The endowment model was not known. 188 00:12:36,520 --> 00:12:41,880 Speaker 1: A total solution with uncorrelated sources of return were not known, 189 00:12:42,840 --> 00:12:46,320 Speaker 1: having a single solution taking a dred percent of a 190 00:12:46,400 --> 00:12:50,559 Speaker 1: client's money. None of those things were even in the 191 00:12:50,640 --> 00:12:54,400 Speaker 1: industry lexicon. So thirty years later, it is not a 192 00:12:54,480 --> 00:12:59,240 Speaker 1: surprise that we are one of the largest still privately held, 193 00:12:59,559 --> 00:13:04,840 Speaker 1: stand alone, pure play outsourced chief investment officers. Our business 194 00:13:04,880 --> 00:13:08,439 Speaker 1: model is one of the most intriguing things about that 195 00:13:08,520 --> 00:13:11,920 Speaker 1: that attracted me to the firm. We are conflict free. 196 00:13:12,440 --> 00:13:16,000 Speaker 1: This idea we use our scale. We are over twenty 197 00:13:16,080 --> 00:13:20,120 Speaker 1: billion and client assets today. Very few c i O 198 00:13:20,280 --> 00:13:22,520 Speaker 1: s have managed when they have gone to the outsource 199 00:13:22,600 --> 00:13:26,160 Speaker 1: model to scale up to that size. That allows us 200 00:13:26,200 --> 00:13:30,280 Speaker 1: to negotiate fees for our clients and manage our clients 201 00:13:30,360 --> 00:13:35,280 Speaker 1: costs down. So what's the difference between managing money as 202 00:13:35,520 --> 00:13:39,840 Speaker 1: a outsourced c i O and what you did? Um 203 00:13:40,080 --> 00:13:43,679 Speaker 1: let's use Alliance Bernstein on the retail level. How do 204 00:13:43,760 --> 00:13:47,000 Speaker 1: those two compare? So the first, of course is in 205 00:13:47,200 --> 00:13:51,520 Speaker 1: retail or in any product shop which which populates a 206 00:13:51,600 --> 00:13:57,000 Speaker 1: client client's portfolio with only their products, there's an inherent 207 00:13:57,160 --> 00:14:00,760 Speaker 1: conflict of interest. We don't have that. We manage none 208 00:14:00,800 --> 00:14:04,480 Speaker 1: of the money ourselves. We pull the asset allocation together 209 00:14:04,520 --> 00:14:07,200 Speaker 1: to meet a client's needs and then go out. We 210 00:14:07,240 --> 00:14:11,200 Speaker 1: are completely agnostic whether we would buy passive or active. 211 00:14:11,559 --> 00:14:14,200 Speaker 1: When we invest in active, how much is in liquid 212 00:14:14,320 --> 00:14:17,640 Speaker 1: versus a liquid We we have this for the hurdle. 213 00:14:17,679 --> 00:14:22,320 Speaker 1: Callahan innovated very early in the factor investing space. What 214 00:14:22,520 --> 00:14:26,200 Speaker 1: is now popular and very well known ten years ago 215 00:14:26,360 --> 00:14:29,360 Speaker 1: was not at all known. And yet we recognized that 216 00:14:29,480 --> 00:14:34,440 Speaker 1: active managers in many, many active manager portfolios. All we 217 00:14:34,440 --> 00:14:38,560 Speaker 1: were getting was factor beta exposure to a particular risk 218 00:14:38,880 --> 00:14:41,320 Speaker 1: and paying active fees for it. So we designed our 219 00:14:41,360 --> 00:14:45,440 Speaker 1: own portfolios which are managed by a third party, but 220 00:14:45,520 --> 00:14:50,040 Speaker 1: with our our design and our our innovation to design 221 00:14:50,080 --> 00:14:53,080 Speaker 1: these portfolios to play a pretty central part of our 222 00:14:53,080 --> 00:14:57,320 Speaker 1: clients equity exposures. So the way I would describe it 223 00:14:57,440 --> 00:15:00,120 Speaker 1: is we have been a firm that has to it 224 00:15:00,240 --> 00:15:05,760 Speaker 1: for innovation in investing. We are deeply valuation focused our 225 00:15:06,080 --> 00:15:08,920 Speaker 1: entire philosophy, which was a big part of the attraction. 226 00:15:09,280 --> 00:15:12,040 Speaker 1: So other than the business model which is conflict free 227 00:15:12,400 --> 00:15:16,320 Speaker 1: and uses scale to manage costs and do provide our 228 00:15:16,320 --> 00:15:21,720 Speaker 1: service at reasonable fees, the valuation philosophy was a tremendous 229 00:15:21,760 --> 00:15:25,000 Speaker 1: alignment of the way I think about investing in the 230 00:15:25,000 --> 00:15:28,520 Speaker 1: way Hurdle Callahan has always thought about investing. To put it, 231 00:15:28,640 --> 00:15:34,280 Speaker 1: simply buying assets, whether in equities or fixed income, large 232 00:15:34,360 --> 00:15:38,880 Speaker 1: or small, international or US at at the cheapest prices 233 00:15:39,560 --> 00:15:43,640 Speaker 1: at the at the most reasonable valuation level and avoiding 234 00:15:43,680 --> 00:15:47,520 Speaker 1: them or selling them when they become expensive over long 235 00:15:47,600 --> 00:15:51,040 Speaker 1: time horizons five to sevent year horizons is by far 236 00:15:51,560 --> 00:15:55,280 Speaker 1: the soundest way to invest, and this firm has stuck 237 00:15:55,360 --> 00:15:58,640 Speaker 1: to its discipline over thirty year periods. So this is 238 00:15:58,640 --> 00:16:03,160 Speaker 1: a very prov infirm in terms of using that valuation 239 00:16:03,200 --> 00:16:06,240 Speaker 1: framework for clients. Let's talk a little bit about the 240 00:16:06,360 --> 00:16:10,920 Speaker 1: role of women in finance. I have made an effort 241 00:16:10,960 --> 00:16:12,960 Speaker 1: to bring more women on the show, and it's not 242 00:16:13,120 --> 00:16:18,280 Speaker 1: easy to find people, um to do that, because it 243 00:16:18,480 --> 00:16:24,120 Speaker 1: really is so disproportionately, uh, finances, so disproportionately a male 244 00:16:25,000 --> 00:16:29,000 Speaker 1: dominated field that there seems to be signs though that 245 00:16:29,000 --> 00:16:32,600 Speaker 1: that's changing. How do you perceive what's going on in 246 00:16:32,640 --> 00:16:36,760 Speaker 1: the industry in terms of a little better gender ratio 247 00:16:36,880 --> 00:16:40,560 Speaker 1: than than finances has had for a long time. I 248 00:16:40,640 --> 00:16:43,640 Speaker 1: hope you are right. I hope things are changing, but 249 00:16:43,760 --> 00:16:46,720 Speaker 1: the data would not suggest that that is really true 250 00:16:47,320 --> 00:16:50,480 Speaker 1: in a very in any kind of systematic way. UM. 251 00:16:50,520 --> 00:16:52,640 Speaker 1: I will tell you that I see it as one 252 00:16:52,640 --> 00:16:56,560 Speaker 1: of my personal missions in life to make sure that 253 00:16:56,800 --> 00:17:01,239 Speaker 1: Hurdle Callahan has not just a gener they're balanced workforce, 254 00:17:01,320 --> 00:17:06,320 Speaker 1: but a balanced workforce period. And so that really means 255 00:17:06,520 --> 00:17:09,960 Speaker 1: having people from all sorts of backgrounds at the table, 256 00:17:10,080 --> 00:17:13,840 Speaker 1: reflecting our clients, reflecting the world we live in, and 257 00:17:13,960 --> 00:17:17,919 Speaker 1: honestly reflecting the best possible pool of talent. And the 258 00:17:18,040 --> 00:17:22,439 Speaker 1: data suggests the more diverse the head of a company is, 259 00:17:22,520 --> 00:17:25,400 Speaker 1: the better the returns are, the better the performances. That's 260 00:17:25,440 --> 00:17:28,720 Speaker 1: exactly That's exactly the data, right, and so why why 261 00:17:28,800 --> 00:17:31,119 Speaker 1: would you not design? But for me this comes to 262 00:17:31,160 --> 00:17:36,440 Speaker 1: process design in our own recruitment. We hired an extraordinary 263 00:17:36,520 --> 00:17:41,200 Speaker 1: talent from Expedia as our chief human resources Officer, and 264 00:17:41,280 --> 00:17:44,199 Speaker 1: Sarah our Our c h r O has brought a 265 00:17:44,240 --> 00:17:48,600 Speaker 1: whole way of thinking about the inputs that dry recruiting 266 00:17:48,640 --> 00:17:52,399 Speaker 1: that lead to outputs, which is a balanced workforce. And 267 00:17:52,440 --> 00:17:54,760 Speaker 1: the inputs are how do we write the job description, 268 00:17:55,200 --> 00:18:00,560 Speaker 1: how do we insist a recruiter called the pool of talent? 269 00:18:00,640 --> 00:18:03,280 Speaker 1: If you put your job posting on LinkedIn, you're gonna 270 00:18:03,280 --> 00:18:06,520 Speaker 1: get hundreds of hits. How who are the ten people 271 00:18:06,600 --> 00:18:09,600 Speaker 1: that you will narrow that down to? What's their gender balance? 272 00:18:09,640 --> 00:18:12,560 Speaker 1: If nine out of ten are a certain group, whatever 273 00:18:12,600 --> 00:18:15,439 Speaker 1: group that is, you're likely to hire someone out of 274 00:18:15,480 --> 00:18:19,000 Speaker 1: that group. So we have examined our entire recruitment process, 275 00:18:19,080 --> 00:18:22,639 Speaker 1: from the job description to the slate of candidates, to 276 00:18:22,760 --> 00:18:27,639 Speaker 1: who does the interview If a candidate of diversity, background, opinion, 277 00:18:28,119 --> 00:18:34,160 Speaker 1: angle of approach, or a gender ethnicity meets people like them, 278 00:18:34,200 --> 00:18:37,280 Speaker 1: they're far more likely to be attracted to that firm. Now, 279 00:18:37,320 --> 00:18:40,679 Speaker 1: we are very privileged that almost half of the senior 280 00:18:40,720 --> 00:18:44,080 Speaker 1: team at the firm at Hurdle Callaghan are women. In fact, 281 00:18:44,240 --> 00:18:47,600 Speaker 1: on your executive team you have five women, which is 282 00:18:47,920 --> 00:18:52,639 Speaker 1: in finance relatively unusual. That leads to the question, what 283 00:18:52,840 --> 00:18:55,879 Speaker 1: is taking the rest of Wall Street so long to 284 00:18:56,160 --> 00:18:59,360 Speaker 1: catch up with some of the smaller, more nimble firms 285 00:18:59,720 --> 00:19:04,320 Speaker 1: who been more aggressive in this space. Look, I generally 286 00:19:04,400 --> 00:19:08,320 Speaker 1: believe that unconscious bias is one of the most relevant 287 00:19:08,359 --> 00:19:12,359 Speaker 1: biases when it comes to answering your question, and I 288 00:19:12,480 --> 00:19:16,000 Speaker 1: also believe that leadership has not made it enough of 289 00:19:16,000 --> 00:19:19,560 Speaker 1: a priority. I am really struck in all of my 290 00:19:19,760 --> 00:19:22,879 Speaker 1: thinking about my own career and the trajectory of the 291 00:19:22,960 --> 00:19:26,679 Speaker 1: ark of my life how much the choices I have 292 00:19:26,840 --> 00:19:29,439 Speaker 1: made have been deliberate and have taken a lot of 293 00:19:29,480 --> 00:19:33,760 Speaker 1: work to kind of create a culture and an environment 294 00:19:34,160 --> 00:19:37,640 Speaker 1: that leads to certain behavior and leads to certain outcomes. 295 00:19:38,080 --> 00:19:41,159 Speaker 1: And my fear is it's really about the culture of 296 00:19:41,160 --> 00:19:43,119 Speaker 1: the firm and the leaders at the top who have 297 00:19:43,880 --> 00:19:46,919 Speaker 1: whether they they they pay lip service to this, but 298 00:19:47,040 --> 00:19:49,919 Speaker 1: have not created the processes and the commitment that this 299 00:19:49,960 --> 00:19:55,600 Speaker 1: would hit the academic data shows that women are less emotional, 300 00:19:55,680 --> 00:19:59,359 Speaker 1: they make better decisions, and they have better performance as 301 00:19:59,440 --> 00:20:03,399 Speaker 1: PORTFOLI the managers. So that raises the question why aren't 302 00:20:03,400 --> 00:20:06,960 Speaker 1: more organizations embracing that. Is it simply a question of 303 00:20:07,000 --> 00:20:11,480 Speaker 1: a bad hiring process. I think it's it goes back 304 00:20:11,520 --> 00:20:15,200 Speaker 1: to culture, and I really believe that it's not just 305 00:20:16,280 --> 00:20:20,359 Speaker 1: a hiring process issue, because this talent comes in the door. 306 00:20:20,440 --> 00:20:23,240 Speaker 1: There are many many women today. You look at the 307 00:20:23,280 --> 00:20:26,560 Speaker 1: college graduate numbers and ratios, and there are many women 308 00:20:26,680 --> 00:20:29,640 Speaker 1: entering the workforce, but we lose them along the way, 309 00:20:30,400 --> 00:20:33,640 Speaker 1: and I wonder, and my belief has often has has 310 00:20:33,720 --> 00:20:36,600 Speaker 1: really been that it is about the culture of a 311 00:20:36,720 --> 00:20:42,320 Speaker 1: firm and how the workforce is managed and treated as 312 00:20:42,359 --> 00:20:45,600 Speaker 1: it matures within a company. Let's talk a little bit 313 00:20:45,920 --> 00:20:50,680 Speaker 1: about the way you approach asset management. You mentioned asset 314 00:20:50,720 --> 00:20:55,280 Speaker 1: allocation earlier. Tell us about how you begin the process 315 00:20:55,480 --> 00:20:59,480 Speaker 1: of putting together a diversified portfolio. You know, before I 316 00:20:59,560 --> 00:21:02,800 Speaker 1: jump in to the portfolio construction piece. One of the 317 00:21:02,920 --> 00:21:06,000 Speaker 1: real reasons I think asset management is a gem of 318 00:21:06,040 --> 00:21:10,680 Speaker 1: an industry in society is because of what it means 319 00:21:10,880 --> 00:21:14,720 Speaker 1: for the average investor. Asset management is the part of 320 00:21:14,800 --> 00:21:18,760 Speaker 1: finance that really allows investors to take their hard earned 321 00:21:18,800 --> 00:21:24,199 Speaker 1: serving savings and turn them into very productive capital and 322 00:21:24,320 --> 00:21:28,200 Speaker 1: pulling of assets. The first mutual fund, the way we 323 00:21:28,280 --> 00:21:30,880 Speaker 1: now invest and take it for granted, but was so 324 00:21:31,040 --> 00:21:35,320 Speaker 1: novel in the last forty years, has really been a 325 00:21:35,400 --> 00:21:40,080 Speaker 1: tremendous innovation in finance that has not only brought capital 326 00:21:40,160 --> 00:21:45,280 Speaker 1: to industry and create businesses, but has propelled investors by 327 00:21:45,359 --> 00:21:48,720 Speaker 1: making their savings far more productive than it would have 328 00:21:48,720 --> 00:21:51,600 Speaker 1: been had it been sitting in golda cash. So I 329 00:21:51,680 --> 00:21:54,679 Speaker 1: come back to this because the themes of what the 330 00:21:54,720 --> 00:21:58,640 Speaker 1: approach we take to asset management is really to remember 331 00:21:58,680 --> 00:22:03,600 Speaker 1: that as an outsourced chief investment officer, we are representing 332 00:22:03,680 --> 00:22:08,639 Speaker 1: the owners of capital. We Our job is to take 333 00:22:08,720 --> 00:22:14,600 Speaker 1: our investment acumen, our our people, our investment philosophy, our process, 334 00:22:15,440 --> 00:22:20,080 Speaker 1: and without ever losing sight that we are here to 335 00:22:20,200 --> 00:22:24,640 Speaker 1: help these savers use their capital to meet their life needs. 336 00:22:24,720 --> 00:22:28,680 Speaker 1: Whether it's an organization endowment that has a mission, a 337 00:22:28,840 --> 00:22:31,600 Speaker 1: college that wants to be more tuition free and offer 338 00:22:31,640 --> 00:22:36,080 Speaker 1: more discounts, or a family philanthropy that seeks to change 339 00:22:36,080 --> 00:22:40,200 Speaker 1: its role in society, we really are here to bring 340 00:22:40,280 --> 00:22:44,280 Speaker 1: our investment acumen to a more productive use in society. 341 00:22:44,800 --> 00:22:47,080 Speaker 1: So so let me ask you a question. Every day 342 00:22:47,280 --> 00:22:49,400 Speaker 1: I pick up the Wall Street Journal, I open it up, 343 00:22:49,920 --> 00:22:54,520 Speaker 1: and today there's an article about stocks being overvalued, And 344 00:22:54,600 --> 00:22:58,560 Speaker 1: yesterday was an article that bonds are overvalued, and last 345 00:22:58,600 --> 00:23:03,200 Speaker 1: week was a was an article that venture capital is overvalued. 346 00:23:04,000 --> 00:23:06,440 Speaker 1: It seems that wherever you look, there are lots of 347 00:23:06,640 --> 00:23:10,119 Speaker 1: claims that all assets are overvalued. What how do you 348 00:23:10,160 --> 00:23:12,560 Speaker 1: respond to that and how do you operate in that 349 00:23:12,640 --> 00:23:15,719 Speaker 1: sort of environment. Well, we have come a long way 350 00:23:15,800 --> 00:23:19,240 Speaker 1: from March two thousand and nine, when the exact opposite 351 00:23:19,359 --> 00:23:23,320 Speaker 1: was true, when all assets were cheap, were priced very, 352 00:23:23,400 --> 00:23:28,199 Speaker 1: very cheaply. We've had a long bull run in the 353 00:23:28,280 --> 00:23:33,840 Speaker 1: global risk asset classes, fueled by a FED by a 354 00:23:33,960 --> 00:23:37,280 Speaker 1: US FED and global central banks that have kept interest 355 00:23:37,359 --> 00:23:40,159 Speaker 1: rates low for a very long period to be sure 356 00:23:40,720 --> 00:23:45,680 Speaker 1: we were out of what was a potentially generationally unnerving 357 00:23:45,720 --> 00:23:49,320 Speaker 1: crisis going back that has gone on for a really 358 00:23:49,359 --> 00:23:53,680 Speaker 1: long time, and at this point, all risky assets appeared 359 00:23:53,720 --> 00:23:58,439 Speaker 1: to be fully valued, and some indeed are overvalued. The 360 00:23:58,560 --> 00:24:01,480 Speaker 1: most overvalued part parts of the markets are, indeed the 361 00:24:01,480 --> 00:24:05,080 Speaker 1: bond market and in particular the risk free parts of 362 00:24:05,119 --> 00:24:09,639 Speaker 1: the bond market, even though meaning treasuries, although credit is 363 00:24:09,680 --> 00:24:13,480 Speaker 1: now appearing quite fully valued to us as well. The 364 00:24:13,520 --> 00:24:17,920 Speaker 1: way we think about valuation is first relative to history, 365 00:24:17,960 --> 00:24:22,240 Speaker 1: but also relative to other asset classes that are available 366 00:24:22,240 --> 00:24:26,600 Speaker 1: in the marketplace, and finally relative to level of growth 367 00:24:26,800 --> 00:24:31,719 Speaker 1: and prospects for earnings and returns going forward. So so 368 00:24:31,760 --> 00:24:36,280 Speaker 1: it's historical, it's relative to other opportunities, and it's relative 369 00:24:36,320 --> 00:24:40,840 Speaker 1: to the economic environment. And when we look at the 370 00:24:40,920 --> 00:24:44,800 Speaker 1: first two assets are quite overvalued. But when you look 371 00:24:44,840 --> 00:24:50,720 Speaker 1: at the macro environment, corporate earnings are still strong. Growth 372 00:24:51,040 --> 00:24:53,680 Speaker 1: is not as strong as it has been in some 373 00:24:53,720 --> 00:24:56,280 Speaker 1: periods in the past, but we seem to be doing 374 00:24:56,359 --> 00:25:00,679 Speaker 1: just fine. Inflation is subdued, so we appeared to be 375 00:25:00,800 --> 00:25:07,800 Speaker 1: prolonging this Goldilock scenario of stable growth, low inflation, and 376 00:25:07,920 --> 00:25:12,920 Speaker 1: corporate earnings have been robust. Earnings revisions in the US 377 00:25:12,960 --> 00:25:15,440 Speaker 1: going forward, looking forward for the next five months, next 378 00:25:15,440 --> 00:25:19,440 Speaker 1: twelve months, US earnings revisions are still positive, up about 379 00:25:19,440 --> 00:25:23,560 Speaker 1: five pc. But outside the US or earnings revisions are 380 00:25:23,560 --> 00:25:27,400 Speaker 1: in the double digits. So the real story is meaning Europe, 381 00:25:27,400 --> 00:25:31,399 Speaker 1: emerging markets Asia exactly right, And so The real story 382 00:25:31,560 --> 00:25:36,400 Speaker 1: is today equities look attractive to bonds and with their equities, 383 00:25:36,800 --> 00:25:40,080 Speaker 1: the most interesting parts of the world are non US 384 00:25:40,280 --> 00:25:45,320 Speaker 1: developed markets, particularly Europe and the emerging markets. Now, all 385 00:25:45,359 --> 00:25:48,040 Speaker 1: of these markets have done really well in the last 386 00:25:48,640 --> 00:25:51,399 Speaker 1: in the year to date in two thousand and seventeen, 387 00:25:52,000 --> 00:25:55,440 Speaker 1: but we think that there is still room for for 388 00:25:55,600 --> 00:25:59,560 Speaker 1: the growth for their improvement and earnings prospects. So we 389 00:25:59,640 --> 00:26:02,720 Speaker 1: are not yet pulling the reins in, but we are 390 00:26:02,760 --> 00:26:07,879 Speaker 1: remaining very cautious, in particular in bond markets. We are 391 00:26:08,040 --> 00:26:12,080 Speaker 1: very cautious in our client When I look back at 392 00:26:12,119 --> 00:26:15,320 Speaker 1: the past ten years of performance. You said, we've had 393 00:26:15,359 --> 00:26:19,280 Speaker 1: a robust year in Europe and emerging markets, but on 394 00:26:19,320 --> 00:26:23,800 Speaker 1: a tenure basis, they've really done practically nothing, haven't they 395 00:26:23,840 --> 00:26:27,720 Speaker 1: Absolutely right? So, look, the US was easily the most 396 00:26:27,880 --> 00:26:32,040 Speaker 1: decisive in terms of coming out of the crisis. Big response, 397 00:26:32,280 --> 00:26:37,600 Speaker 1: very strong um uh, somewhat of a modest fiscal response, 398 00:26:37,840 --> 00:26:41,399 Speaker 1: but a very strong monetary response, certainly before Europe or 399 00:26:41,480 --> 00:26:44,640 Speaker 1: Japan started to engage in it when they were in denial. 400 00:26:44,840 --> 00:26:47,160 Speaker 1: Remember a guy flying over to Europe saying, you guys 401 00:26:47,200 --> 00:26:49,760 Speaker 1: need to do this, and so late to the game, 402 00:26:49,880 --> 00:26:54,720 Speaker 1: quantitative easing. Now, obviously the mantra around the world, so 403 00:26:54,840 --> 00:26:58,600 Speaker 1: we were we under it seemed like our policy makers 404 00:26:58,720 --> 00:27:02,639 Speaker 1: understood the depths what we were dealing with and really 405 00:27:02,680 --> 00:27:07,280 Speaker 1: opened up both the Fed's balance sheet. The tried to 406 00:27:07,320 --> 00:27:11,480 Speaker 1: get risk back into the markets, and today ten years later, 407 00:27:12,080 --> 00:27:16,240 Speaker 1: we really have potentially the excess of that. So let's 408 00:27:16,280 --> 00:27:18,720 Speaker 1: let's talk about bond markets. Since you brought that up. 409 00:27:19,280 --> 00:27:23,960 Speaker 1: Wherever you look, you mentioned risk free treasuries, corporates, pretty 410 00:27:24,040 --> 00:27:28,840 Speaker 1: much across the whole credit and duration curves. Everything looks 411 00:27:28,880 --> 00:27:32,720 Speaker 1: somewhat expensive in bond world. What's a fixed income investor 412 00:27:32,800 --> 00:27:35,919 Speaker 1: to do? We have had a high yield and cash 413 00:27:36,000 --> 00:27:39,240 Speaker 1: barbell on in our portfolios. Now, admittedly the cash piece 414 00:27:39,280 --> 00:27:43,239 Speaker 1: of this has been an expensive, uh safety measure for 415 00:27:43,280 --> 00:27:46,800 Speaker 1: our portfolios, and we've also held on to hedge funds. 416 00:27:46,840 --> 00:27:51,880 Speaker 1: So we have been invested in a barbell in fixed income, 417 00:27:52,520 --> 00:27:56,560 Speaker 1: thinking that as the FED tightened, the higher quality, particularly 418 00:27:56,600 --> 00:28:00,600 Speaker 1: the treasuries would be would underperform, and and that while 419 00:28:00,640 --> 00:28:03,920 Speaker 1: that has begun to happen in the last year, over 420 00:28:03,960 --> 00:28:06,720 Speaker 1: the course of the last three or four years, we 421 00:28:06,800 --> 00:28:10,360 Speaker 1: have been our cautiousness has allowed us by the way 422 00:28:10,400 --> 00:28:13,679 Speaker 1: to also be overweighted inequities, which has worked in an 423 00:28:13,760 --> 00:28:17,080 Speaker 1: overall sense for client portfolios. But we have been very 424 00:28:17,119 --> 00:28:21,199 Speaker 1: reluctant investors and treasuries. So some people some people have 425 00:28:21,359 --> 00:28:26,520 Speaker 1: suggested UM having reeds or m LPs or something else 426 00:28:26,600 --> 00:28:32,200 Speaker 1: that is high yielding to supplement their their high yield bonds. 427 00:28:32,200 --> 00:28:34,919 Speaker 1: How do you look at those asset classes relative to 428 00:28:35,840 --> 00:28:38,760 Speaker 1: cash and and high yield. So we did have a 429 00:28:38,760 --> 00:28:43,080 Speaker 1: pretty significant view on commodities that we tempered in the 430 00:28:43,120 --> 00:28:45,600 Speaker 1: middle of last year, in the fall of last year, 431 00:28:46,200 --> 00:28:49,720 Speaker 1: so we have held commodity stocks. We shifted from the 432 00:28:49,760 --> 00:28:53,880 Speaker 1: commodities themselves to the stocks, and in our taxable client 433 00:28:53,920 --> 00:28:57,400 Speaker 1: portfolios held m LPs. But we now have had a 434 00:28:57,440 --> 00:29:01,320 Speaker 1: pretty negative view on energy overall the last year, so 435 00:29:01,440 --> 00:29:04,719 Speaker 1: we have gone back to neutral, although we still have 436 00:29:04,880 --> 00:29:08,400 Speaker 1: about a four to six percent weight in those areas. 437 00:29:09,120 --> 00:29:12,280 Speaker 1: In reeds, we were believers that that market was pretty 438 00:29:12,320 --> 00:29:15,560 Speaker 1: fully valued, and so we have not been overweight reads 439 00:29:15,600 --> 00:29:18,600 Speaker 1: for quite some time. So you've been gone from Bernstein 440 00:29:18,680 --> 00:29:22,160 Speaker 1: for a good couple of years. Uh. There's obviously been 441 00:29:22,160 --> 00:29:27,120 Speaker 1: this huge debate about active versus passive UM Van God 442 00:29:27,160 --> 00:29:30,400 Speaker 1: likes to describe it as high high cost versus low cost. 443 00:29:31,200 --> 00:29:33,480 Speaker 1: What what goes through your mind when you see a 444 00:29:33,560 --> 00:29:39,720 Speaker 1: research paper from Bernstein that says indexing is the new markets. Yes, yes, 445 00:29:40,800 --> 00:29:43,800 Speaker 1: a little bit of sympathy for the view, but not 446 00:29:43,880 --> 00:29:49,400 Speaker 1: much sympathy for the journalism journalistic access that that implies. Um, 447 00:29:49,480 --> 00:29:51,840 Speaker 1: So let me let me step back and say the following. 448 00:29:52,040 --> 00:29:56,040 Speaker 1: We are agnostic as to passive and active. We believe 449 00:29:56,120 --> 00:29:59,360 Speaker 1: that there is a time and place for passive and 450 00:29:59,400 --> 00:30:02,840 Speaker 1: there's a time a place for active. Today we are 451 00:30:03,000 --> 00:30:05,280 Speaker 1: very interested in active. So if you look at our 452 00:30:05,400 --> 00:30:10,280 Speaker 1: US equity portfolios, six of our portfolios are some combination 453 00:30:10,320 --> 00:30:13,840 Speaker 1: of passive and factor based, which is near low cost 454 00:30:13,960 --> 00:30:17,320 Speaker 1: if you would right. But today we really believe you're 455 00:30:17,320 --> 00:30:22,600 Speaker 1: getting quite interested in the active managers who have been 456 00:30:22,640 --> 00:30:26,800 Speaker 1: on their backs. All active managers are massively underperformed in 457 00:30:26,840 --> 00:30:30,040 Speaker 1: the wake of the charging bull market. Now we are 458 00:30:30,040 --> 00:30:32,720 Speaker 1: beginning to get interested. We think that in a market 459 00:30:32,760 --> 00:30:36,120 Speaker 1: where there is no where all stocks are highly correlated, 460 00:30:36,240 --> 00:30:38,160 Speaker 1: you do not get paid for picking stock A or 461 00:30:38,240 --> 00:30:41,000 Speaker 1: stock bay. So now we are beginning as a firm 462 00:30:41,080 --> 00:30:43,240 Speaker 1: to get more interested in active. But just bear in 463 00:30:43,280 --> 00:30:45,720 Speaker 1: mind we are agnostic. We do not come out with 464 00:30:45,920 --> 00:30:48,600 Speaker 1: a point of view that you should only be passive 465 00:30:48,680 --> 00:30:52,320 Speaker 1: or only be active. We have been speaking with Ranji Nagaswamy. 466 00:30:52,480 --> 00:30:56,800 Speaker 1: She is currently the chief executive officer of Hurdle Callahan. 467 00:30:57,320 --> 00:30:59,960 Speaker 1: Be sure and check out all of our podcast extras 468 00:31:00,000 --> 00:31:02,920 Speaker 1: where we keep the tape running and continue chatting about 469 00:31:02,960 --> 00:31:06,239 Speaker 1: all things investing. You can find the rest of the 470 00:31:06,360 --> 00:31:10,200 Speaker 1: hundred and fifty or so podcasts in this series wherever 471 00:31:10,320 --> 00:31:14,360 Speaker 1: fine podcasts are sold. We love your feedback and suggestions. 472 00:31:14,440 --> 00:31:17,240 Speaker 1: Be sure to write to us at m IB podcast 473 00:31:17,280 --> 00:31:20,320 Speaker 1: at Bloomberg dot net. You could follow me on Twitter 474 00:31:20,440 --> 00:31:23,280 Speaker 1: at rit Holts and check out my daily column on 475 00:31:23,320 --> 00:31:27,280 Speaker 1: Bloomberg View dot com. I'm Barry rit Holts. You're listening 476 00:31:27,320 --> 00:31:50,000 Speaker 1: to Masters in Business on Bloomberg Radio. Welcome to the podcast, Ronchie. 477 00:31:50,040 --> 00:31:51,760 Speaker 1: Thank you so much for doing this. I've been looking 478 00:31:51,760 --> 00:31:56,160 Speaker 1: forward to having this conversation for quite some time. Um, 479 00:31:56,280 --> 00:32:00,440 Speaker 1: let's let's jump back to a couple of questions that 480 00:32:00,640 --> 00:32:03,960 Speaker 1: I didn't get to during the broadcast portion. Uh, tell 481 00:32:03,960 --> 00:32:06,440 Speaker 1: me about what you've done in the past with the 482 00:32:06,480 --> 00:32:09,840 Speaker 1: Aspen Institute and and the new project that you've had 483 00:32:09,920 --> 00:32:13,160 Speaker 1: underway with them for for a while now. So Barry. 484 00:32:13,240 --> 00:32:18,160 Speaker 1: I was honored to be selected and nominated as a 485 00:32:18,160 --> 00:32:22,160 Speaker 1: Aspen Fellow in the Henry Crown Fellowship program at the Institute. 486 00:32:22,720 --> 00:32:27,080 Speaker 1: Aspen really is an institute that was created in the 487 00:32:27,120 --> 00:32:31,000 Speaker 1: aftermath of two World Wars and the Great Depression to 488 00:32:31,320 --> 00:32:36,000 Speaker 1: ask leaders in business what is your responsibility for building 489 00:32:36,000 --> 00:32:39,440 Speaker 1: the good society? And in the aftermath of all of 490 00:32:39,480 --> 00:32:42,440 Speaker 1: that destruction, the question cause quite simply, where were the 491 00:32:42,480 --> 00:32:46,640 Speaker 1: business leaders and what is the role of the private 492 00:32:46,680 --> 00:32:52,000 Speaker 1: sector in really building and shaping the good society? So, 493 00:32:52,200 --> 00:32:58,280 Speaker 1: using readings that are time tested Socrates, Plato, Aristotle, Lock Hume, 494 00:32:58,960 --> 00:33:04,600 Speaker 1: we really get to fundamental notions of as leaders in society. 495 00:33:04,640 --> 00:33:08,959 Speaker 1: How do we trade off liberty and equality, efficiency and community? 496 00:33:09,240 --> 00:33:12,720 Speaker 1: What are the choices we make? How do you, as 497 00:33:12,760 --> 00:33:17,360 Speaker 1: a successful business person walk in the world. And I 498 00:33:17,400 --> 00:33:20,000 Speaker 1: was nominated to this fellowship by the Dean of the 499 00:33:20,080 --> 00:33:24,160 Speaker 1: Yale School of Management, a good friend in two thousand 500 00:33:24,160 --> 00:33:26,880 Speaker 1: and five at a time when I was leading Alliance 501 00:33:26,880 --> 00:33:32,600 Speaker 1: Bernstein's mutual fund division through a transformation post a pretty 502 00:33:32,640 --> 00:33:37,160 Speaker 1: significant self inflicted crisis at the firm or in that 503 00:33:37,240 --> 00:33:39,360 Speaker 1: division of the firm, and I was brought in as 504 00:33:39,360 --> 00:33:42,520 Speaker 1: part of a management team to help turn that division around. 505 00:33:43,120 --> 00:33:48,080 Speaker 1: And as we confronted business practices, as we confronted our 506 00:33:48,360 --> 00:33:52,720 Speaker 1: role with retail investors who know so little about the investments, 507 00:33:52,760 --> 00:33:56,120 Speaker 1: we were buying all of the principles of what am 508 00:33:56,160 --> 00:33:59,280 Speaker 1: I here to do as a leader. I'm here to 509 00:33:59,520 --> 00:34:03,000 Speaker 1: actually be a fight usuary in its fullest sense of 510 00:34:03,040 --> 00:34:07,320 Speaker 1: the word, to actually take decisions and be a steward 511 00:34:07,360 --> 00:34:10,960 Speaker 1: of my of my clients capital. So this began a 512 00:34:11,040 --> 00:34:14,319 Speaker 1: journey for me, now obviously over a dozen years ago, 513 00:34:14,880 --> 00:34:19,280 Speaker 1: into my leadership values, my leadership style. In two thousand 514 00:34:19,320 --> 00:34:21,800 Speaker 1: and ten, I remember so clearly when I was sitting 515 00:34:22,000 --> 00:34:25,760 Speaker 1: in Mayor Bloomberg's administration, as you've noted, as his chief 516 00:34:25,800 --> 00:34:30,200 Speaker 1: investment advisor in the third term of the Bloomberg mayoralty. 517 00:34:30,719 --> 00:34:33,040 Speaker 1: This role, by the way, in the Bloomberg administration was 518 00:34:33,120 --> 00:34:36,640 Speaker 1: created to health the city with what had become a 519 00:34:37,120 --> 00:34:41,719 Speaker 1: cute financial and budgetary crisis. Pension expenditure had gone from 520 00:34:41,800 --> 00:34:44,000 Speaker 1: one percent of the budget to twelve percent of the budget, 521 00:34:44,040 --> 00:34:50,040 Speaker 1: really crowding out investment in schools, roads, uh and healthcare 522 00:34:50,040 --> 00:34:52,719 Speaker 1: and many other things. And I was asked to come 523 00:34:52,719 --> 00:34:55,280 Speaker 1: in and really help the administration think through this issue 524 00:34:55,360 --> 00:34:58,279 Speaker 1: and as Mike said, fixed set, which of course is 525 00:34:58,320 --> 00:35:01,279 Speaker 1: easier said than done. But as I was sitting in 526 00:35:01,360 --> 00:35:05,680 Speaker 1: an investment committee meeting and watching the administration at odds 527 00:35:05,680 --> 00:35:09,640 Speaker 1: with the unions, and the administration and the unions completely 528 00:35:09,640 --> 00:35:13,120 Speaker 1: at odds with wolf Street. Remember two years following the 529 00:35:13,160 --> 00:35:18,680 Speaker 1: Great Financial Crisis, our our cities pensions are at their 530 00:35:18,719 --> 00:35:22,320 Speaker 1: lowest point. All of the risk that had been taken 531 00:35:22,320 --> 00:35:25,960 Speaker 1: in this portfolio and equities had had devastating effects for 532 00:35:26,040 --> 00:35:30,800 Speaker 1: the funded status of the pension portfolios. What I recognized 533 00:35:30,960 --> 00:35:35,120 Speaker 1: is that we needed to bring the ecosystem of finance 534 00:35:35,360 --> 00:35:39,160 Speaker 1: into a conversation about the role of finance in society. 535 00:35:40,040 --> 00:35:42,839 Speaker 1: And this was not something that I thought we should 536 00:35:42,920 --> 00:35:45,719 Speaker 1: leave to our regulators. You know, it's very easy when 537 00:35:45,760 --> 00:35:49,000 Speaker 1: we look backed on the crisis to say, you know, yeah, yeah, yeah. 538 00:35:49,040 --> 00:35:51,840 Speaker 1: Guidner and Bernancy were great, but they should have known 539 00:35:51,960 --> 00:35:55,439 Speaker 1: they created the rules that they looked the other way 540 00:35:55,760 --> 00:36:00,760 Speaker 1: when when finance began to fail, where were the business leaders? 541 00:36:00,760 --> 00:36:03,239 Speaker 1: Where were the leaders in finance who were saying, you 542 00:36:03,280 --> 00:36:07,920 Speaker 1: know what, thirty to one leverage is pernicious to the system, 543 00:36:07,960 --> 00:36:11,160 Speaker 1: and how can we put the entire system at this 544 00:36:11,320 --> 00:36:14,320 Speaker 1: kind of risk. If you recall, there were a handful 545 00:36:14,360 --> 00:36:19,000 Speaker 1: of people that were raising those questions and everybody looked 546 00:36:19,040 --> 00:36:20,960 Speaker 1: at them like they were crazy. What you know, the 547 00:36:21,000 --> 00:36:24,560 Speaker 1: market's going up, Everything is good, this is working while 548 00:36:24,600 --> 00:36:29,080 Speaker 1: getting the way. In fact, green then FED Chairman Alan 549 00:36:29,120 --> 00:36:33,279 Speaker 1: Greenspan famously said when someone had it might have even 550 00:36:33,360 --> 00:36:36,840 Speaker 1: been Edward Gramleck was a FED governor, Hey you have 551 00:36:36,920 --> 00:36:42,880 Speaker 1: all these crazy mortgages sub prime mortgages were Greenspan's response was, 552 00:36:43,040 --> 00:36:46,520 Speaker 1: we don't want to mess around with the financial innovators. 553 00:36:46,880 --> 00:36:49,719 Speaker 1: What do you do when everybody is looking the other 554 00:36:49,840 --> 00:36:53,200 Speaker 1: way and the train is coming down the tracks and 555 00:36:53,200 --> 00:36:56,000 Speaker 1: and people are pretending it's not coming. But the key 556 00:36:56,120 --> 00:37:00,439 Speaker 1: to your statement is everybody we were all complexit. And 557 00:37:00,560 --> 00:37:03,399 Speaker 1: the question we ask in the Aspen Fine in the 558 00:37:03,440 --> 00:37:07,600 Speaker 1: Aspen Leadership program is what about you? What are you 559 00:37:07,840 --> 00:37:11,719 Speaker 1: going to do about this issue? And so follow on 560 00:37:11,800 --> 00:37:14,960 Speaker 1: and a few years later it occurs to me that 561 00:37:15,080 --> 00:37:18,839 Speaker 1: finance needs a group of leaders who will step up 562 00:37:18,880 --> 00:37:25,280 Speaker 1: and accept responsibility for their role in reconnecting finance and society. 563 00:37:25,520 --> 00:37:28,640 Speaker 1: And it is this set of values that leads me 564 00:37:28,800 --> 00:37:31,160 Speaker 1: and a group of people at the Aspen Institute to 565 00:37:31,239 --> 00:37:34,960 Speaker 1: founding something called the Aspen Finance Leaders Fellowship. We have 566 00:37:35,200 --> 00:37:38,680 Speaker 1: just announced our second class of leaders. Every year we 567 00:37:38,760 --> 00:37:42,040 Speaker 1: gather about twenty two people around the table. So this 568 00:37:42,120 --> 00:37:44,520 Speaker 1: is the long game. This is saying that in ten 569 00:37:44,600 --> 00:37:47,880 Speaker 1: years we will have over two leaders in finance around 570 00:37:47,880 --> 00:37:53,760 Speaker 1: the world, selected from across the financial ecosystem, savers of capital, 571 00:37:54,000 --> 00:37:58,960 Speaker 1: users of capital, intermediaries and stewards, and the regulators in 572 00:37:59,040 --> 00:38:03,239 Speaker 1: a conversation first about their personal leadership and their personal 573 00:38:03,320 --> 00:38:07,520 Speaker 1: responsibility in whatever belieful pit they have, and our whatever 574 00:38:07,640 --> 00:38:10,920 Speaker 1: role they play in. And these are highly successful people 575 00:38:11,320 --> 00:38:15,200 Speaker 1: in their firms and in the industry coming together then 576 00:38:15,360 --> 00:38:20,160 Speaker 1: in using a project to really define how they want 577 00:38:20,280 --> 00:38:24,640 Speaker 1: to connect finance and society. Now this is about Aspen, 578 00:38:24,680 --> 00:38:27,040 Speaker 1: and your question was about Aspen. And this, of course 579 00:38:27,160 --> 00:38:31,640 Speaker 1: is my life's legacy. I've considered this my Elie Mascenary commitment. 580 00:38:31,840 --> 00:38:34,000 Speaker 1: My husband and I are really committed to using this 581 00:38:34,239 --> 00:38:36,600 Speaker 1: and and and believing and investing in this for the 582 00:38:36,640 --> 00:38:40,520 Speaker 1: next twenty to thirty years whatever it takes. But to 583 00:38:40,600 --> 00:38:43,120 Speaker 1: come full circle with this to your earlier question about 584 00:38:43,200 --> 00:38:47,520 Speaker 1: Hurdle Callahan. In my very first conversation with John Hurtle. 585 00:38:48,080 --> 00:38:50,239 Speaker 1: One of the real reasons we hit it off was 586 00:38:50,320 --> 00:38:54,560 Speaker 1: because we both have spent our lives, in his case, 587 00:38:54,920 --> 00:38:59,680 Speaker 1: building a highly successful business model outsourced chief investment officer 588 00:38:59,760 --> 00:39:03,200 Speaker 1: really as an innovator and a pioneer in finance, creating 589 00:39:03,200 --> 00:39:06,359 Speaker 1: a model that never existed that puts the client at 590 00:39:06,400 --> 00:39:10,000 Speaker 1: its center and brings our capability to the client. And 591 00:39:10,040 --> 00:39:13,520 Speaker 1: in my case, I say giving speeches and creating this fellowship, 592 00:39:13,880 --> 00:39:17,280 Speaker 1: and hands down, John wins because building a great business 593 00:39:17,880 --> 00:39:20,960 Speaker 1: which you know stands the test of time and market 594 00:39:21,000 --> 00:39:24,800 Speaker 1: cycles is by far a stronger way to make a statement. 595 00:39:24,960 --> 00:39:29,200 Speaker 1: So this shared value about what finance can do in 596 00:39:29,280 --> 00:39:33,600 Speaker 1: society is why I joined Hurdle Callahan and why of 597 00:39:33,719 --> 00:39:38,640 Speaker 1: us in a suburb of Philadelphia today are really believing 598 00:39:38,760 --> 00:39:41,800 Speaker 1: that this is the business model for the future of 599 00:39:41,840 --> 00:39:45,640 Speaker 1: the asset management industry. But back to Aspen Institute, you 600 00:39:46,440 --> 00:39:50,000 Speaker 1: the parallel I'm thinking of is someone endows a chair 601 00:39:50,040 --> 00:39:53,520 Speaker 1: at a university. There was a project you've been working 602 00:39:53,520 --> 00:39:58,440 Speaker 1: on an Aspen more specifically, which is the Finance Leader's Fellowship. 603 00:39:58,560 --> 00:40:01,080 Speaker 1: That's what That's what the name of it. In extending, yes, 604 00:40:01,120 --> 00:40:04,400 Speaker 1: in extending the Henry Crown Fellowship of the fellowship model 605 00:40:04,440 --> 00:40:09,560 Speaker 1: at Aspen to to the finance industry. My project has 606 00:40:09,640 --> 00:40:12,800 Speaker 1: really been to start this conversation and how many years 607 00:40:12,800 --> 00:40:15,680 Speaker 1: into this are we now? So we just announced our 608 00:40:15,719 --> 00:40:18,200 Speaker 1: second class. We've been working on it for five years. 609 00:40:19,239 --> 00:40:22,600 Speaker 1: But this is one of the fifteen fellowship programs at 610 00:40:22,600 --> 00:40:26,680 Speaker 1: the Aspen Institute. That that's quite fascinating. Let's let's talk 611 00:40:26,719 --> 00:40:30,440 Speaker 1: about another fascinating place you worked. You held a fairly 612 00:40:30,520 --> 00:40:35,640 Speaker 1: senior position at Bridgewater Associates run by Ray Dalio and Company. 613 00:40:36,320 --> 00:40:40,239 Speaker 1: What was that experience like? First, that was a brief experience, 614 00:40:40,480 --> 00:40:43,160 Speaker 1: um and so not something not not a place where 615 00:40:43,160 --> 00:40:46,400 Speaker 1: I spent a lot of time. Bridgewater is a fascinating 616 00:40:46,400 --> 00:40:50,880 Speaker 1: institution because, first of how they think about markets and investing. 617 00:40:50,960 --> 00:40:55,640 Speaker 1: This is one of the purest intellectual exercises in investing 618 00:40:55,680 --> 00:40:58,600 Speaker 1: I think in the world. Really, that's quite quite a statement. 619 00:40:58,960 --> 00:41:01,000 Speaker 1: It really is quite a tagment. And what I took 620 00:41:01,000 --> 00:41:03,960 Speaker 1: away from my brief time there was really how to 621 00:41:04,080 --> 00:41:08,160 Speaker 1: think about markets, how to think about risk. I fundamentally 622 00:41:08,239 --> 00:41:12,560 Speaker 1: broadened and deepened my understanding of risk in our parts 623 00:41:12,560 --> 00:41:15,520 Speaker 1: that are embedded in our portfolios, and how people really 624 00:41:15,560 --> 00:41:20,440 Speaker 1: ignore diversification from an environmental risk perspective to their own peril. 625 00:41:21,000 --> 00:41:24,800 Speaker 1: But equally I brought what I've brought to Hurtle Callahan 626 00:41:24,840 --> 00:41:28,880 Speaker 1: and other endeavors is the culture piece, and the culture 627 00:41:28,920 --> 00:41:35,239 Speaker 1: piece in its most benign form, which is transparency, employee engagement, 628 00:41:35,880 --> 00:41:40,280 Speaker 1: and really focusing on excellence, how to keep getting better 629 00:41:40,400 --> 00:41:44,640 Speaker 1: at getting better? They that's really interesting. They describe themselves 630 00:41:44,719 --> 00:41:50,200 Speaker 1: as having radical transparency. Is that is that a fair assessment? Look, 631 00:41:50,719 --> 00:41:53,520 Speaker 1: as I just said, Bridgewater is a singular culture and 632 00:41:53,600 --> 00:41:57,680 Speaker 1: transfer singular and that is unlike in other words, unlike 633 00:41:57,680 --> 00:42:01,480 Speaker 1: anything else, and it is for the person. It is 634 00:42:01,520 --> 00:42:04,279 Speaker 1: a glorious firm. But I would say that for me, 635 00:42:04,920 --> 00:42:10,000 Speaker 1: the principles that have endured, including transparency and excellence, are 636 00:42:10,040 --> 00:42:15,200 Speaker 1: really the hallmarks of my time. There. Interesting you mentioned 637 00:42:15,200 --> 00:42:20,200 Speaker 1: at Hurdle you guys, um you guys. I've always used 638 00:42:20,200 --> 00:42:22,920 Speaker 1: that phrase. Can I tell you? I've always used that 639 00:42:23,000 --> 00:42:27,200 Speaker 1: phrase as a gender neutral phrase. It's like you collective guys, 640 00:42:27,239 --> 00:42:31,000 Speaker 1: meaning people in the room. But given our earlier conversation, 641 00:42:31,840 --> 00:42:36,200 Speaker 1: it stands out like a sore thumb. You folks at 642 00:42:36,280 --> 00:42:41,880 Speaker 1: Hurdle Callahan, you put money into venture capitals, private equity 643 00:42:42,080 --> 00:42:49,360 Speaker 1: and hedge funds. As well as UH indexing and factor models, etcetera. 644 00:42:50,000 --> 00:42:54,840 Speaker 1: What's the process like to select any of the alternative 645 00:42:54,840 --> 00:42:58,359 Speaker 1: investments hedge funds, venture capital, private equity. I think the 646 00:42:58,400 --> 00:43:03,400 Speaker 1: average investor is both fascinated by the group and somewhat 647 00:43:03,440 --> 00:43:08,560 Speaker 1: overwhelmed by the personalities, the process, the dollar figures, because 648 00:43:08,600 --> 00:43:12,560 Speaker 1: they're always uh so outsized the compensation and so outside. 649 00:43:12,800 --> 00:43:15,240 Speaker 1: What is your process like when you're trying to figure 650 00:43:15,239 --> 00:43:20,600 Speaker 1: out if a half a billion dollar endowment says, look, 651 00:43:20,640 --> 00:43:23,200 Speaker 1: we're just looking for something simple, maybe we want x 652 00:43:23,239 --> 00:43:27,759 Speaker 1: percent of our portfolio in alter alternatives, how do you 653 00:43:27,800 --> 00:43:30,680 Speaker 1: approach that? So once we have the conversation with the 654 00:43:30,719 --> 00:43:33,960 Speaker 1: client about their risk tolerance and their liquidity needs, it's 655 00:43:34,080 --> 00:43:37,040 Speaker 1: very important to do the scenario analysis to say, if 656 00:43:37,080 --> 00:43:39,920 Speaker 1: we had a great financial crisis again, your a liquid 657 00:43:39,960 --> 00:43:43,720 Speaker 1: portfolio will double because you will because of the market 658 00:43:43,760 --> 00:43:46,080 Speaker 1: Reactually that was a lesson learned. Everything else will gets 659 00:43:46,080 --> 00:43:49,480 Speaker 1: smaller and suddenly this is the market exactly, and and 660 00:43:49,480 --> 00:43:52,319 Speaker 1: this and you can't get out, so we have to 661 00:43:52,480 --> 00:43:55,080 Speaker 1: be we have. But once we've done all that, and 662 00:43:55,120 --> 00:43:57,959 Speaker 1: that planning piece, by the way, is a huge part 663 00:43:58,000 --> 00:44:01,200 Speaker 1: of what an outsourced ce IO us much as that's 664 00:44:01,200 --> 00:44:04,840 Speaker 1: exactly what an internal chief investment officer would do. But 665 00:44:04,920 --> 00:44:06,840 Speaker 1: once we get to that and we have decided on 666 00:44:06,880 --> 00:44:09,800 Speaker 1: an allocation, first a couple of things about our business model. 667 00:44:10,160 --> 00:44:12,120 Speaker 1: We are not a fund of funds. We have no 668 00:44:12,440 --> 00:44:18,120 Speaker 1: layers of fees, so we are building our sleeves venture capital, 669 00:44:18,200 --> 00:44:21,759 Speaker 1: private equity, hedge funds not to make it available in 670 00:44:21,760 --> 00:44:24,680 Speaker 1: the marketplace. No one can buy those services from us 671 00:44:24,760 --> 00:44:28,120 Speaker 1: if they are not in our overall, right, so we 672 00:44:28,160 --> 00:44:31,879 Speaker 1: are completely aligned, just as David Spensen would not get 673 00:44:31,880 --> 00:44:35,000 Speaker 1: paid more or less if he was investing or not 674 00:44:35,160 --> 00:44:38,200 Speaker 1: investing in hedge funds as an example. So that's the model, 675 00:44:38,360 --> 00:44:41,400 Speaker 1: and we are very pure in that way. But within 676 00:44:42,200 --> 00:44:47,440 Speaker 1: within these asset classes, we only invest in them to 677 00:44:47,560 --> 00:44:50,960 Speaker 1: the extent that they're additive to what we can get 678 00:44:51,080 --> 00:44:56,640 Speaker 1: cheaply in public markets data. So by definition the costs 679 00:44:56,680 --> 00:44:59,400 Speaker 1: matter greatly because it's all net of fees that we 680 00:44:59,480 --> 00:45:03,520 Speaker 1: care about. But the correlation to the rest of the 681 00:45:03,600 --> 00:45:08,560 Speaker 1: portfolio becomes a very significant part of the exercise. So 682 00:45:08,600 --> 00:45:12,360 Speaker 1: that suggests more venture capital and private equity than hedge funds, 683 00:45:12,520 --> 00:45:15,120 Speaker 1: or is that just my bias revealing it? So it 684 00:45:15,239 --> 00:45:18,440 Speaker 1: looks at the answer will depend on the five to 685 00:45:18,520 --> 00:45:21,080 Speaker 1: ten year horizon that we see for each of these 686 00:45:21,120 --> 00:45:23,960 Speaker 1: asset classes and what's going on. The reason I asked 687 00:45:23,960 --> 00:45:29,520 Speaker 1: that is, except for very very specialized types of hedge 688 00:45:29,520 --> 00:45:34,080 Speaker 1: funds like risk ARB or something that's really very non correlated, 689 00:45:34,880 --> 00:45:37,279 Speaker 1: most of the hedge funds. There are eleven thousand hedge 690 00:45:37,320 --> 00:45:40,280 Speaker 1: funds out there, most of them seem to be fairly 691 00:45:40,400 --> 00:45:44,680 Speaker 1: correlated to the equity markets. Fair fair statement, very fair statement, 692 00:45:44,760 --> 00:45:48,120 Speaker 1: And so we do analytical work up front so that 693 00:45:48,200 --> 00:45:51,920 Speaker 1: we don't pay for passive beta or what we call 694 00:45:52,080 --> 00:45:56,799 Speaker 1: structural beta. Structural beta is, for example, merger arbitrage, where 695 00:45:56,840 --> 00:45:59,799 Speaker 1: in fact, you could have an entire basket where you 696 00:45:59,840 --> 00:46:04,120 Speaker 1: go long the acquired company and short the acquiring company. 697 00:46:04,239 --> 00:46:08,520 Speaker 1: That structural beta, it's it's related to a certain part 698 00:46:08,520 --> 00:46:11,360 Speaker 1: of the market structure or or or a way of 699 00:46:11,400 --> 00:46:14,160 Speaker 1: looking at the world. We don't want to pay over 700 00:46:14,239 --> 00:46:16,480 Speaker 1: pay for that. What we really want to be able 701 00:46:16,480 --> 00:46:20,160 Speaker 1: to isolate is that idiosyncratic skill. And then what we 702 00:46:20,239 --> 00:46:24,319 Speaker 1: want to pay for is something that moves very differently 703 00:46:24,760 --> 00:46:28,640 Speaker 1: than the rest of our portfolio. So the portfolio construction 704 00:46:28,840 --> 00:46:34,720 Speaker 1: for us is deeply focused on what are the strategies 705 00:46:34,760 --> 00:46:39,160 Speaker 1: that the underlying managers are employing to create value, and 706 00:46:39,440 --> 00:46:46,120 Speaker 1: is that reliable, sustainable, consistent, then we are willing to invest. 707 00:46:46,120 --> 00:46:49,759 Speaker 1: So it's a very high bar. It's a deep research 708 00:46:50,000 --> 00:46:53,440 Speaker 1: process and it truly is to end up with the 709 00:46:53,520 --> 00:46:58,360 Speaker 1: portfolio where those I liquid buckets, other than capturing the 710 00:46:58,600 --> 00:47:02,720 Speaker 1: liquidity risk premier, also give us something that's very different 711 00:47:03,120 --> 00:47:05,399 Speaker 1: than what we can do in public markets. So it's 712 00:47:05,480 --> 00:47:08,360 Speaker 1: it's really a very different set of analytics and a 713 00:47:08,440 --> 00:47:12,640 Speaker 1: very different research process with the alternatives and lives with 714 00:47:13,200 --> 00:47:16,760 Speaker 1: the rest of your asset allocation. I put it this way, 715 00:47:16,840 --> 00:47:19,239 Speaker 1: there is a beta decision that needs to be made 716 00:47:19,239 --> 00:47:22,640 Speaker 1: and that's our valuation framework. But when we get into 717 00:47:22,680 --> 00:47:26,440 Speaker 1: active management, whether in the public long only space, hedge 718 00:47:26,440 --> 00:47:29,919 Speaker 1: fund space, of private equity, our research process is the same. 719 00:47:30,000 --> 00:47:33,640 Speaker 1: It's really who are the people, what are their investment beliefs, 720 00:47:34,040 --> 00:47:38,239 Speaker 1: what are their time tested ways of investing, and can 721 00:47:38,360 --> 00:47:43,160 Speaker 1: we gain the confidence from our due diligence, our research 722 00:47:43,640 --> 00:47:46,600 Speaker 1: writing shotgun as these people drive around and make their 723 00:47:46,640 --> 00:47:50,879 Speaker 1: investment decisions and look at their investments, understand how their 724 00:47:50,920 --> 00:47:55,040 Speaker 1: investment committee works. So we get very granular into people 725 00:47:55,120 --> 00:47:59,880 Speaker 1: in process. At our managers, whether they're long only active, 726 00:48:00,680 --> 00:48:05,080 Speaker 1: or or in the in the private markets. The beta 727 00:48:05,239 --> 00:48:08,759 Speaker 1: process is what's different because that is really driven by 728 00:48:08,880 --> 00:48:14,320 Speaker 1: our valuation framework, which is based on normalized earnings going 729 00:48:14,400 --> 00:48:17,800 Speaker 1: into the future. That's quite fascinating. So I know, only 730 00:48:17,880 --> 00:48:20,960 Speaker 1: have you here for a finite amount of time. Let's 731 00:48:21,040 --> 00:48:23,880 Speaker 1: jump into some of our favorite questions that we ask 732 00:48:24,040 --> 00:48:28,200 Speaker 1: all of our guests. Let's let's start, Um, what's the 733 00:48:28,200 --> 00:48:33,719 Speaker 1: most interesting thing people don't know about your background? Well, look, 734 00:48:34,080 --> 00:48:36,960 Speaker 1: I guess the way I'd answer that is the arc 735 00:48:37,080 --> 00:48:41,560 Speaker 1: of my life. Um. Really, from my roots, very humble 736 00:48:41,640 --> 00:48:46,640 Speaker 1: beginnings on the dusty suburbs of a very industrialized town 737 00:48:46,760 --> 00:48:52,000 Speaker 1: in India. Um too, the audacity of starting a world 738 00:48:52,000 --> 00:48:54,759 Speaker 1: class starting at a world class business school at the 739 00:48:54,760 --> 00:48:57,960 Speaker 1: age of twenty and I think to this date being 740 00:48:57,960 --> 00:49:00,920 Speaker 1: the youngest person ever admitted to the Yale Cool of Management. 741 00:49:01,719 --> 00:49:05,720 Speaker 1: UM to really moving into my roles in the asset 742 00:49:05,800 --> 00:49:10,200 Speaker 1: management industry, always marrying. By the way, something else people 743 00:49:10,239 --> 00:49:12,480 Speaker 1: don't know about me is I spent fourteen years as 744 00:49:12,480 --> 00:49:16,319 Speaker 1: a classically trained dancer growing up in India, and from 745 00:49:16,360 --> 00:49:20,560 Speaker 1: my perspective, the creative side of me, the conceptual, creative 746 00:49:20,600 --> 00:49:24,719 Speaker 1: side married to a very hyper rational, pragmatic side has 747 00:49:24,760 --> 00:49:28,120 Speaker 1: really been the way I walk in the world that 748 00:49:28,200 --> 00:49:32,600 Speaker 1: has made me different as a leader, as a thinker 749 00:49:32,600 --> 00:49:36,080 Speaker 1: and as a doer. And so it's all of that 750 00:49:36,600 --> 00:49:39,719 Speaker 1: which the art. What that art traces, I think for 751 00:49:39,840 --> 00:49:43,640 Speaker 1: me to bury is a value system, and the value 752 00:49:43,680 --> 00:49:49,040 Speaker 1: system is really centered on confident humility, to have the 753 00:49:49,160 --> 00:49:53,920 Speaker 1: confidence in oneself to achieve difficult things, to take on 754 00:49:54,239 --> 00:50:01,640 Speaker 1: difficult things. But a fundamental humility with my background that 755 00:50:01,680 --> 00:50:05,279 Speaker 1: would have made my success against all odds that you know, 756 00:50:05,360 --> 00:50:07,359 Speaker 1: to think that I could come from where I did 757 00:50:07,520 --> 00:50:12,440 Speaker 1: too to the success and to the to the engagement 758 00:50:12,520 --> 00:50:15,560 Speaker 1: that I have today in the world. UM. For me, 759 00:50:16,200 --> 00:50:20,080 Speaker 1: it's that entire piece of the ark that is perhaps 760 00:50:20,120 --> 00:50:23,880 Speaker 1: not as known. Kind of fascinating that to even imagine 761 00:50:24,600 --> 00:50:29,640 Speaker 1: that you can merge creative arts like dancing with fundamental 762 00:50:30,160 --> 00:50:33,960 Speaker 1: work like accounting and statistics. UM, let's talk a little 763 00:50:33,960 --> 00:50:36,279 Speaker 1: bit about some of your early mentors. Tell me some 764 00:50:36,400 --> 00:50:40,719 Speaker 1: of the people who helped guide your career along its way. 765 00:50:40,760 --> 00:50:43,160 Speaker 1: So I would always start with my dad, who every 766 00:50:43,200 --> 00:50:45,400 Speaker 1: morning when he left for work, looked at something in 767 00:50:45,400 --> 00:50:48,320 Speaker 1: the newspaper and reminded me that we would be debating 768 00:50:48,320 --> 00:50:51,400 Speaker 1: it tonight, and so I grew up debating my dad 769 00:50:51,520 --> 00:50:54,560 Speaker 1: for you know, through high school and college about politics 770 00:50:54,640 --> 00:50:58,640 Speaker 1: and current affairs, but really coming to the business side 771 00:50:58,680 --> 00:51:04,680 Speaker 1: of it UM. I have been extraordinarily privileged in finding, 772 00:51:04,840 --> 00:51:09,680 Speaker 1: seeking out and working with some very special mentors. Bert 773 00:51:09,719 --> 00:51:13,040 Speaker 1: Malkiel was my faculty advisor at Yale and took an 774 00:51:13,040 --> 00:51:16,440 Speaker 1: interest in me and guided me throughout the recruiting process, 775 00:51:16,440 --> 00:51:21,080 Speaker 1: guided me to asset management, and really encouraged me in 776 00:51:21,160 --> 00:51:24,960 Speaker 1: ways that were very special for someone who was twenty 777 00:51:25,000 --> 00:51:27,359 Speaker 1: and twenty one and trying to figure out the rest 778 00:51:27,400 --> 00:51:30,680 Speaker 1: of the world. Gary Brinson, who came into my life 779 00:51:30,680 --> 00:51:33,400 Speaker 1: in the mid nineties when Swiss Bank pot Qubs and 780 00:51:33,560 --> 00:51:37,280 Speaker 1: I started working with Brinson Partner. What was Brinton partners 781 00:51:37,480 --> 00:51:42,520 Speaker 1: um really driving from the equity side my valuation discipline, 782 00:51:42,560 --> 00:51:46,360 Speaker 1: but bringing global asset allocation into my thinking and and 783 00:51:46,440 --> 00:51:49,880 Speaker 1: something that I began to participate in. But perhaps the 784 00:51:49,920 --> 00:51:55,320 Speaker 1: most formative mentor for me, Lusanders at Bernstein. Lou has 785 00:51:55,480 --> 00:52:00,880 Speaker 1: been a role model, a guide, a league of friend 786 00:52:01,200 --> 00:52:08,200 Speaker 1: UM and his commitment to valuation and a value investment philosophy. 787 00:52:08,280 --> 00:52:12,720 Speaker 1: I remember the stories told in nine and ninety nine, 788 00:52:13,360 --> 00:52:16,160 Speaker 1: when you know, some of our our clients began to 789 00:52:16,200 --> 00:52:20,920 Speaker 1: lose confidence. Remember value was dead, and Luce said, listen, 790 00:52:21,040 --> 00:52:24,359 Speaker 1: our clients believe we will simply need to understand how 791 00:52:24,400 --> 00:52:27,840 Speaker 1: to manage a smaller firm, never giving up on the 792 00:52:27,920 --> 00:52:33,080 Speaker 1: valuation philosophy, building Bernstein into the juggernaut that it became 793 00:52:33,239 --> 00:52:35,839 Speaker 1: in the two in the two thousands and to this 794 00:52:35,920 --> 00:52:37,880 Speaker 1: day one of the most I always want to know 795 00:52:37,920 --> 00:52:41,000 Speaker 1: what Luke thinks about the world and capital market. I 796 00:52:41,080 --> 00:52:45,120 Speaker 1: remember the Bernstein research notes that came out in the 797 00:52:45,280 --> 00:52:51,280 Speaker 1: late nineties, second to none. They were really absolutely top notch. Um, 798 00:52:51,400 --> 00:52:56,080 Speaker 1: let's talk about investors. What what investors influence the way 799 00:52:56,160 --> 00:52:59,279 Speaker 1: you think about the world without a doubt lou and 800 00:52:59,280 --> 00:53:03,480 Speaker 1: Gary Brin's and but I would also add um, David 801 00:53:03,520 --> 00:53:07,480 Speaker 1: Swenson has played an extraordinary role in my thinking about 802 00:53:07,640 --> 00:53:12,040 Speaker 1: time horizon, in my thinking about governance and the role 803 00:53:12,600 --> 00:53:14,760 Speaker 1: you know, one of the things, particularly as it relates 804 00:53:14,800 --> 00:53:17,720 Speaker 1: both to our institutional as well as our family clients, 805 00:53:18,280 --> 00:53:22,040 Speaker 1: it's yes, there is alpha from your investment policy, Yes 806 00:53:22,080 --> 00:53:27,040 Speaker 1: there is alpha from managers selection. But people underestimate the 807 00:53:27,200 --> 00:53:31,959 Speaker 1: role of governance and having the right agreement and the right, 808 00:53:32,239 --> 00:53:35,640 Speaker 1: I think shared thinking between an investment committee and your 809 00:53:35,680 --> 00:53:40,759 Speaker 1: investment staff, um the So it's not just horizon and governance, 810 00:53:40,800 --> 00:53:44,319 Speaker 1: it's also being willing to be different, being willing to 811 00:53:44,400 --> 00:53:50,440 Speaker 1: be early, to spend your life building relationships, following deeply 812 00:53:50,520 --> 00:53:54,480 Speaker 1: what people do. David is a student of human nature. 813 00:53:55,160 --> 00:53:59,120 Speaker 1: What's also not understood is David's extraordinary partnership with Dean 814 00:53:59,120 --> 00:54:03,000 Speaker 1: Takahashi and his senior stuff. All of those things, to 815 00:54:03,080 --> 00:54:07,840 Speaker 1: me are the things that I have taken away from 816 00:54:07,880 --> 00:54:12,840 Speaker 1: my privileged friendship and relationship with the entire Yale Stuff 817 00:54:13,200 --> 00:54:17,360 Speaker 1: and David Swanson. Let's talk about what is everybody seemingly 818 00:54:17,400 --> 00:54:21,320 Speaker 1: favorite question? Some of your favorite books? Fiction, nonfiction, investing, 819 00:54:21,400 --> 00:54:24,359 Speaker 1: not investing. What what have you been reading lately and 820 00:54:24,800 --> 00:54:28,000 Speaker 1: what would you recommend people read? So h you know, 821 00:54:28,040 --> 00:54:29,680 Speaker 1: I have often said that if I wrote a book 822 00:54:29,680 --> 00:54:33,080 Speaker 1: about my childhood, it would be titled my Mother's favorite refrain. 823 00:54:33,200 --> 00:54:35,600 Speaker 1: Take your nose out of that book. So I have 824 00:54:36,280 --> 00:54:39,600 Speaker 1: I have been a prolific reader all of my life. 825 00:54:39,840 --> 00:54:44,120 Speaker 1: Um work wise, the most important books I have ever 826 00:54:44,160 --> 00:54:47,880 Speaker 1: read on finance had to do with human behavior. So 827 00:54:47,960 --> 00:54:52,240 Speaker 1: anything written by Knaman diversity really all of the books 828 00:54:52,239 --> 00:54:55,080 Speaker 1: and behavioral economics, and there are new versions of them 829 00:54:55,120 --> 00:54:59,880 Speaker 1: all the time. But I would say that my readings 830 00:55:00,080 --> 00:55:02,759 Speaker 1: for my Finance Fellowship about the role of finance and 831 00:55:02,840 --> 00:55:07,200 Speaker 1: society once in Golconda a must read for any financial 832 00:55:07,239 --> 00:55:11,160 Speaker 1: historian to understand how human behavior and the character of 833 00:55:11,200 --> 00:55:15,399 Speaker 1: the people at the time shaped the finance industry. UM. 834 00:55:15,440 --> 00:55:18,920 Speaker 1: I would add to that, UM, you know, my great 835 00:55:19,000 --> 00:55:22,400 Speaker 1: My most favorite readings are in moral philosophy. UM. Iris 836 00:55:22,480 --> 00:55:26,560 Speaker 1: Murdoch is a is probably my most read I've probably 837 00:55:26,600 --> 00:55:28,800 Speaker 1: read more of her books than anybody else's. She's a 838 00:55:28,800 --> 00:55:34,560 Speaker 1: British philosopher who really talks about the moral dilemmas and 839 00:55:34,600 --> 00:55:38,799 Speaker 1: the need to live fully examined life. Uh and to 840 00:55:38,880 --> 00:55:41,160 Speaker 1: look in word, give us, give us a title? What, 841 00:55:41,200 --> 00:55:45,240 Speaker 1: what's your what's the Where would you send someone to start? UM? 842 00:55:45,239 --> 00:55:49,359 Speaker 1: Exploring Iris Murdock's work The Good Apprentice easily my my 843 00:55:49,480 --> 00:55:54,399 Speaker 1: favorite story. UM. But my on my bedside are two 844 00:55:54,480 --> 00:55:56,880 Speaker 1: things that will never leave my bedside, The poetry of 845 00:55:56,920 --> 00:56:03,280 Speaker 1: Mary Oliver and Rilka's Letters to a Young Poet Rika's 846 00:56:03,360 --> 00:56:07,399 Speaker 1: Letters and the most important part about what Roca Low 847 00:56:07,560 --> 00:56:12,160 Speaker 1: wrote the motto of my life is lived The questions. UM, 848 00:56:12,200 --> 00:56:15,319 Speaker 1: it's not about the answers. It's really the beginning of 849 00:56:15,360 --> 00:56:19,520 Speaker 1: wisdom is knowing what questions to ask. And that author 850 00:56:19,719 --> 00:56:26,000 Speaker 1: is R. I. L K. E. Letters to a Young Poet. 851 00:56:26,800 --> 00:56:30,520 Speaker 1: By the way, more questions come in about books from 852 00:56:30,560 --> 00:56:33,680 Speaker 1: people because people are looking for Hey, I'm looking for 853 00:56:33,719 --> 00:56:36,960 Speaker 1: someone to give me some guidance. The so many books, 854 00:56:36,960 --> 00:56:42,480 Speaker 1: which which way to go, young poet? UM, let's talk 855 00:56:42,560 --> 00:56:45,560 Speaker 1: about what's changed since you've joined the industry. What do 856 00:56:45,600 --> 00:56:48,239 Speaker 1: you see as the major shifts? And uh is this 857 00:56:48,280 --> 00:56:52,600 Speaker 1: for better or worse? So UM I joined the industry 858 00:56:52,600 --> 00:56:57,600 Speaker 1: in the mid eighties and venture capital, private equity, UM, 859 00:56:57,840 --> 00:57:02,000 Speaker 1: leverage loans, private markets, private credit, these were all things 860 00:57:02,040 --> 00:57:07,160 Speaker 1: that didn't exist. UM. The disintermediation of capital, the disappearance 861 00:57:07,200 --> 00:57:11,480 Speaker 1: of all the financial intermediaries has really turned asset owners 862 00:57:12,280 --> 00:57:17,760 Speaker 1: into capital allocators at a very profoundly different level of 863 00:57:17,840 --> 00:57:21,760 Speaker 1: the last thirty years. And so I think the fundamental 864 00:57:21,960 --> 00:57:26,120 Speaker 1: role of the asset owner has changed. And I love 865 00:57:26,480 --> 00:57:29,520 Speaker 1: to see the movement led by Keith Ambik Share in 866 00:57:29,600 --> 00:57:35,000 Speaker 1: Canada and others across the Canadian European Pension Plan on sustainability, 867 00:57:35,040 --> 00:57:40,080 Speaker 1: on finding ways of using the power of the purchasing 868 00:57:40,120 --> 00:57:44,760 Speaker 1: power that they have to really think about the importance 869 00:57:45,400 --> 00:57:50,000 Speaker 1: of investing in ways that ensure sustainability in society. So 870 00:57:50,080 --> 00:57:53,720 Speaker 1: I'd say the role of the asset owner, the continued 871 00:57:54,640 --> 00:57:59,840 Speaker 1: increase in capital formation and really um use of capital 872 00:58:00,040 --> 00:58:04,640 Speaker 1: to more and more productive purposes in society. Financial inclusion 873 00:58:04,680 --> 00:58:09,040 Speaker 1: a tremendous So this is the democratization of finance and 874 00:58:09,080 --> 00:58:14,040 Speaker 1: so fintech tremendous shift. So look, the last thirty years 875 00:58:14,080 --> 00:58:18,840 Speaker 1: have seen these seismic chefs and by far bringing more 876 00:58:19,000 --> 00:58:22,960 Speaker 1: savers to be able to invest your capital in productive ways. 877 00:58:23,280 --> 00:58:26,240 Speaker 1: Is the role that the asset management industry plays. I 878 00:58:26,360 --> 00:58:28,800 Speaker 1: have to tell you that there's a dark side to 879 00:58:28,880 --> 00:58:32,880 Speaker 1: the story too that worries me. And that's something that 880 00:58:32,960 --> 00:58:38,000 Speaker 1: Gerald Epstein at Columbia called financialization finance, which has been 881 00:58:38,040 --> 00:58:41,760 Speaker 1: going on now for decades, for decades and almost parallel 882 00:58:41,800 --> 00:58:45,600 Speaker 1: path with the developments I just described, where finance has 883 00:58:45,640 --> 00:58:50,720 Speaker 1: been used by the financiers for their own privilege, for 884 00:58:50,760 --> 00:58:54,920 Speaker 1: their own profits, and not for society. And look, I 885 00:58:54,960 --> 00:58:58,640 Speaker 1: am not I am a fundamental free market capitalist. I 886 00:58:58,800 --> 00:59:02,960 Speaker 1: really believe in the power of capitalism and free markets 887 00:59:03,000 --> 00:59:06,680 Speaker 1: to improve lives, but this has gone on for way 888 00:59:06,720 --> 00:59:10,600 Speaker 1: too long, and the lack of transparency into fees, the 889 00:59:10,680 --> 00:59:18,200 Speaker 1: lack of responsibility that many many in finance feel too share, 890 00:59:18,240 --> 00:59:21,960 Speaker 1: you know, simply charging reasonable fees for their for what 891 00:59:22,040 --> 00:59:25,160 Speaker 1: has been very average and mediocre performance by the industry 892 00:59:25,160 --> 00:59:28,520 Speaker 1: as a whole. That would be the darker elements, But 893 00:59:29,360 --> 00:59:32,000 Speaker 1: at at its core, I think the changes have been 894 00:59:32,040 --> 00:59:37,600 Speaker 1: positive and again come to the centrality of finance in society. 895 00:59:38,040 --> 00:59:41,200 Speaker 1: So I have you you hinted at something in the 896 00:59:41,280 --> 00:59:45,000 Speaker 1: last answer, I have to ask you about Keith and 897 00:59:45,400 --> 00:59:50,800 Speaker 1: lecture ambicure. I can't read my own handwriting. At Canada, 898 00:59:50,960 --> 00:59:54,160 Speaker 1: we really haven't talked about impact investing or E s 899 00:59:54,200 --> 00:59:58,840 Speaker 1: G investing. How do you see that developing? How significant 900 00:59:58,960 --> 01:00:02,920 Speaker 1: of a shift is that looking forward in the next 901 01:00:03,280 --> 01:00:07,000 Speaker 1: decade or two? Full disclosure, My husband teaches the impact 902 01:00:07,080 --> 01:00:11,000 Speaker 1: investing classes at Yale And by the way describing my mentors, 903 01:00:11,120 --> 01:00:14,360 Speaker 1: my I am married to my greatest mentor in the 904 01:00:14,440 --> 01:00:18,160 Speaker 1: in the world. So I am talking about Fortunately, what's 905 01:00:18,160 --> 01:00:22,280 Speaker 1: your husband's name? His name is bo Hopkins Hopkins and 906 01:00:22,360 --> 01:00:26,600 Speaker 1: he is an adjunct professor at Yale UM and has 907 01:00:26,680 --> 01:00:31,760 Speaker 1: really helped develop and encourage kids to think about social 908 01:00:31,840 --> 01:00:34,919 Speaker 1: enterprise and which really is one of the many guys 909 01:00:35,040 --> 01:00:39,720 Speaker 1: of impact investing UM. I am a I have followed 910 01:00:39,760 --> 01:00:42,200 Speaker 1: that part of the industry for a very long time. 911 01:00:43,040 --> 01:00:49,760 Speaker 1: We have a growing and thriving thought leadership ways of 912 01:00:49,800 --> 01:00:57,400 Speaker 1: portfolio construction around sustainability, environment, social and governance issues. We 913 01:00:57,520 --> 01:01:01,400 Speaker 1: have an increasing group of clients and prospective clients who 914 01:01:01,400 --> 01:01:04,600 Speaker 1: are asking us about that. From our family clients who 915 01:01:04,600 --> 01:01:08,560 Speaker 1: are very interested in impact investing and really increasing the 916 01:01:08,640 --> 01:01:13,960 Speaker 1: direct investment component of their socially conscious, socially sensitive or 917 01:01:13,960 --> 01:01:20,160 Speaker 1: sustainable investing, to our faith based institutions and our endowments 918 01:01:20,320 --> 01:01:25,240 Speaker 1: and UM foundations, and so we have a very thoughtful 919 01:01:25,280 --> 01:01:29,880 Speaker 1: way we think of building these portfolios. I will say 920 01:01:29,920 --> 01:01:33,600 Speaker 1: that so far UM we have had more interest than 921 01:01:33,680 --> 01:01:38,840 Speaker 1: actual commitment of capital, and our belief is not to 922 01:01:38,920 --> 01:01:42,720 Speaker 1: be dogmatic, but to really meet our clients where they 923 01:01:42,800 --> 01:01:45,800 Speaker 1: are on these issues. That's not a cop out. That's 924 01:01:45,800 --> 01:01:48,560 Speaker 1: simply saying that there are investors who would like to 925 01:01:48,800 --> 01:01:53,120 Speaker 1: invest to maximize return and then use that maximize return 926 01:01:53,240 --> 01:01:56,320 Speaker 1: for social good and there are investors who want to 927 01:01:57,440 --> 01:02:01,320 Speaker 1: express their desire for social good who they're investing. Both 928 01:02:01,360 --> 01:02:03,720 Speaker 1: of those things are legitimate in our point of view, 929 01:02:04,240 --> 01:02:07,560 Speaker 1: but we hope to stand out as an institution that 930 01:02:07,640 --> 01:02:12,160 Speaker 1: has found a way to in to identify productive uses 931 01:02:12,240 --> 01:02:17,800 Speaker 1: of capital in credit in equities which are not secondary 932 01:02:18,120 --> 01:02:22,200 Speaker 1: to the return generation need that our clients have. So 933 01:02:22,240 --> 01:02:24,840 Speaker 1: what do you do outside of the office to relax 934 01:02:25,080 --> 01:02:28,760 Speaker 1: or or just online? Look? I am a I spent 935 01:02:28,840 --> 01:02:32,320 Speaker 1: a lot of time with the Finance Leadership Fellow, so 936 01:02:32,360 --> 01:02:35,600 Speaker 1: I am co chair of the of the Overseers Board. 937 01:02:36,160 --> 01:02:39,400 Speaker 1: I'm a moderator at the Aspen Institute, so I really 938 01:02:40,080 --> 01:02:43,440 Speaker 1: spend a lot of time with leaders in all you know, 939 01:02:43,800 --> 01:02:47,360 Speaker 1: walks of life at Aspen, helping them engage and think 940 01:02:47,400 --> 01:02:52,600 Speaker 1: about their contribution, their role in society. I am a meditator. 941 01:02:52,680 --> 01:02:56,040 Speaker 1: For the last ten years, I have deepened and built 942 01:02:56,080 --> 01:03:01,439 Speaker 1: a meditation practice that really creates this self awareness and 943 01:03:01,560 --> 01:03:05,840 Speaker 1: the sense of how I engage and this notion that 944 01:03:06,400 --> 01:03:10,840 Speaker 1: things are impermanent and things are interrelated. Really for me 945 01:03:10,960 --> 01:03:15,560 Speaker 1: from a leadership perspective, in building a higher partner, high 946 01:03:15,560 --> 01:03:20,120 Speaker 1: performing partnership culture at Hurdle Callahan, I bring all of 947 01:03:20,160 --> 01:03:23,560 Speaker 1: those values. I talk about my meditation practice with the 948 01:03:23,720 --> 01:03:27,640 Speaker 1: entire firm to talk about the way I see human 949 01:03:27,680 --> 01:03:33,160 Speaker 1: interaction and collaboration and why you know you asked me 950 01:03:33,240 --> 01:03:35,840 Speaker 1: what I was reading. Now I'm reading two books. I 951 01:03:35,840 --> 01:03:38,880 Speaker 1: always read more than one book at a time. Hillbillyology 952 01:03:39,000 --> 01:03:42,400 Speaker 1: is one, but the other is Sapiens, which I highly 953 01:03:42,480 --> 01:03:47,080 Speaker 1: recommend to anybody. And this notion that uh that Harari 954 01:03:47,240 --> 01:03:52,000 Speaker 1: has in this book about no, it's not our enterprising 955 01:03:52,080 --> 01:03:54,800 Speaker 1: nature as humans that set us apart. It is our 956 01:03:54,840 --> 01:04:01,200 Speaker 1: ability to collaborate. What an extraordinary way thinking about why 957 01:04:01,240 --> 01:04:06,160 Speaker 1: we have succeeded as a species. The the subsequent book, Homodis, 958 01:04:06,360 --> 01:04:09,400 Speaker 1: is a little darker than Sapiens. If if wh if 959 01:04:09,440 --> 01:04:12,520 Speaker 1: you when I didn't even know it came out a 960 01:04:12,600 --> 01:04:17,280 Speaker 1: year ago. Um, it's really picks up where Sapiens left off, 961 01:04:17,640 --> 01:04:21,960 Speaker 1: only it's looking forward instead of back. It's um, I 962 01:04:22,000 --> 01:04:26,200 Speaker 1: mean look, even Sapiens he looks at agriculture as hey, 963 01:04:26,240 --> 01:04:29,120 Speaker 1: you know, we were just happy, go lucky hunter gatherers. 964 01:04:29,160 --> 01:04:32,720 Speaker 1: But then agriculture that's what we exchange diseases, and that's 965 01:04:32,760 --> 01:04:36,120 Speaker 1: where we had backbreaking work. I'm not sure I fully buy. 966 01:04:36,480 --> 01:04:40,480 Speaker 1: It's a fascinating book, but it has those elements of 967 01:04:40,560 --> 01:04:44,720 Speaker 1: darkness really bleed into the next The follow up if 968 01:04:44,760 --> 01:04:49,360 Speaker 1: you like Sapiens, try Homoda. It's really because Sapiens is 969 01:04:49,400 --> 01:04:51,600 Speaker 1: a fascinating book. You don't have to agree with his 970 01:04:51,640 --> 01:04:56,439 Speaker 1: whole positions, but it's certainly stimulating. And I just love 971 01:04:56,480 --> 01:04:59,640 Speaker 1: the way he puts physics, chemistry, and biology in the 972 01:04:59,640 --> 01:05:04,080 Speaker 1: beginning into these big arcs of frameworks about how to 973 01:05:04,120 --> 01:05:08,800 Speaker 1: think about different things. Really really quite quite fascinating. Um 974 01:05:08,880 --> 01:05:13,320 Speaker 1: let's get to my two favorite questions that of course 975 01:05:13,320 --> 01:05:16,320 Speaker 1: we ask all of our guests. If a millennial or 976 01:05:16,360 --> 01:05:18,640 Speaker 1: someone who's just getting out of college where to come 977 01:05:18,680 --> 01:05:21,160 Speaker 1: to you and say, Hey, I'm interested in a career 978 01:05:21,160 --> 01:05:23,840 Speaker 1: in finance. What sort of advice would you give them? 979 01:05:24,320 --> 01:05:27,680 Speaker 1: So I have a millennial who just got into finance, 980 01:05:27,920 --> 01:05:32,600 Speaker 1: and of course she does not need my advice but 981 01:05:33,160 --> 01:05:37,280 Speaker 1: the classic parent. But I would say three things. And 982 01:05:37,360 --> 01:05:39,920 Speaker 1: by the way, I love to talk to these groups, 983 01:05:40,080 --> 01:05:46,200 Speaker 1: particularly young women. UM, I say three things. First, be curious, Second, 984 01:05:46,280 --> 01:05:51,840 Speaker 1: be prepared, and third bill lasting relationships. Be curious for 985 01:05:51,880 --> 01:05:55,560 Speaker 1: me is living the questions. I think people who are 986 01:05:55,560 --> 01:05:59,240 Speaker 1: intellectually curious about finance can find that there are so 987 01:05:59,280 --> 01:06:03,960 Speaker 1: many ways to use finance in society. And I love 988 01:06:04,120 --> 01:06:08,040 Speaker 1: the way millennials appear to have this pretty keen social 989 01:06:08,080 --> 01:06:11,960 Speaker 1: purpose linked to whatever they seem to want to do 990 01:06:12,080 --> 01:06:15,120 Speaker 1: many many doing at any rate. I shouldn't characterize the 991 01:06:15,240 --> 01:06:19,880 Speaker 1: entire generation that way, and so be curious, be prepared. 992 01:06:20,040 --> 01:06:24,040 Speaker 1: There is just no substitute for walking into a meeting, 993 01:06:24,200 --> 01:06:27,720 Speaker 1: to a conversation with a client, to an analyst program 994 01:06:27,760 --> 01:06:32,000 Speaker 1: without being prepared. And I really believe that people who 995 01:06:32,040 --> 01:06:34,919 Speaker 1: think they can show up and someone will teach them 996 01:06:34,960 --> 01:06:39,640 Speaker 1: stuff is just not the right attitude. And finally, this 997 01:06:39,720 --> 01:06:43,160 Speaker 1: notion of bill lasting relationships, I have found when I 998 01:06:43,240 --> 01:06:47,200 Speaker 1: look back that yes, perhaps my technical skills, knowing this, 999 01:06:47,480 --> 01:06:51,120 Speaker 1: knowing Matt, knowing you know, being able to synthesize information 1000 01:06:51,280 --> 01:06:55,600 Speaker 1: all served me well. But what has endured, the thread 1001 01:06:55,720 --> 01:06:59,640 Speaker 1: that I can pull through is the lasting relationships is 1002 01:06:59,680 --> 01:07:03,400 Speaker 1: taking the time to understand the people I am working 1003 01:07:03,440 --> 01:07:08,040 Speaker 1: with and to build those relationships, not networks. This is 1004 01:07:08,080 --> 01:07:12,080 Speaker 1: not a cynical view to to using people to get ahead. 1005 01:07:12,600 --> 01:07:17,440 Speaker 1: It's really building relationships of trust where you can be yourself, 1006 01:07:17,480 --> 01:07:19,680 Speaker 1: where you can say that you were wrong, where you 1007 01:07:19,720 --> 01:07:23,640 Speaker 1: can ask people when you are stuck for help. Interesting, 1008 01:07:23,720 --> 01:07:26,560 Speaker 1: and my final question, what is it that you know 1009 01:07:26,640 --> 01:07:29,920 Speaker 1: about the world of investing? Today that you wish you 1010 01:07:30,000 --> 01:07:34,160 Speaker 1: knew when you began in the nineties that the only 1011 01:07:34,240 --> 01:07:37,560 Speaker 1: way to succeed in investing is playing the long game. 1012 01:07:39,120 --> 01:07:42,280 Speaker 1: That attempts to try and outwit the market in the 1013 01:07:42,400 --> 01:07:45,520 Speaker 1: short term or to time the market in the short 1014 01:07:45,640 --> 01:07:52,280 Speaker 1: term are very tempting because but but so flawed, because 1015 01:07:52,320 --> 01:07:56,320 Speaker 1: you think you know something when all you know is 1016 01:07:56,360 --> 01:08:00,240 Speaker 1: how much you don't know. That's that's quite fast, and 1017 01:08:00,520 --> 01:08:03,240 Speaker 1: thank you Ronji for being so generous with your time. 1018 01:08:03,640 --> 01:08:07,160 Speaker 1: We have been speaking with Ranji Naga Swami. She is 1019 01:08:07,200 --> 01:08:12,320 Speaker 1: currently CEO of Hurdle Callahan. If you enjoy this conversation, 1020 01:08:12,360 --> 01:08:15,440 Speaker 1: be sure and look up or down on Apple iTunes 1021 01:08:15,920 --> 01:08:21,559 Speaker 1: to see or Bloomberg or overcast or everywhere else all 1022 01:08:21,600 --> 01:08:24,679 Speaker 1: of our this podcast can be found to see any 1023 01:08:24,720 --> 01:08:28,040 Speaker 1: of the other hundred and fifty or so such conversations 1024 01:08:28,080 --> 01:08:30,200 Speaker 1: that we've had. I've been saying a hundred and fifty 1025 01:08:30,320 --> 01:08:35,960 Speaker 1: for weeks because I'm only looking at what's already out there. Um, 1026 01:08:36,040 --> 01:08:37,920 Speaker 1: so we may go through a run of a hundred 1027 01:08:37,920 --> 01:08:41,519 Speaker 1: and fifty over time. But as you folks who listened 1028 01:08:41,560 --> 01:08:45,240 Speaker 1: to the CEE, there's a different one posted every week. Uh, 1029 01:08:45,400 --> 01:08:49,560 Speaker 1: be sure and check out my daily column on Bloomberg 1030 01:08:49,760 --> 01:08:52,120 Speaker 1: View dot com. You can follow me on Twitter at 1031 01:08:52,360 --> 01:08:56,320 Speaker 1: rid Halts. We love your comments, feedback and suggestions right 1032 01:08:56,400 --> 01:08:59,960 Speaker 1: to us at m IB podcast at Bloomberg dot net. 1033 01:09:00,720 --> 01:09:02,760 Speaker 1: I would be remiss if I did not thank the 1034 01:09:02,760 --> 01:09:05,920 Speaker 1: team of folks who help us put together uh this 1035 01:09:06,200 --> 01:09:11,320 Speaker 1: broadcast every week. Um Medina Parwana is my audio engineer. 1036 01:09:11,880 --> 01:09:16,280 Speaker 1: Slash recording engineer Taylor Riggs helps us out with production 1037 01:09:16,439 --> 01:09:20,919 Speaker 1: and booking. Michael Batnick his head of research. I'm Barry Ritults. 1038 01:09:21,080 --> 01:09:24,439 Speaker 1: You've been listening to Masters in Business on Bloomberg Radio