WEBVTT - Carlyle CEO Harvey Schwartz Talks Tariffs

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Let's get over to

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<v Speaker 1>our panel. Shanalie Basket is standing by with the CEO

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<v Speaker 1>or speaking with the CEO of Carlisle, Harvey Schwartz Schnelli.

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<v Speaker 2>Not only are you running one of the most storied

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<v Speaker 2>private capital firms on the planet, you were also at

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<v Speaker 2>Goldman You navigated very tough moments from the c suite,

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<v Speaker 2>including in the wake of the two thousand and eight

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<v Speaker 2>financial crisis. So you've seen a lot in markets, a

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<v Speaker 2>lot of ups and downs. Yeah, how do you look

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<v Speaker 2>at the environment that we're in today.

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<v Speaker 1>Well, again, it's great to be here. Congratulations on what's

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<v Speaker 1>going to be an extraordinary event. I think it's my

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<v Speaker 1>birthday next week, I'll turn sixty one. I think in

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<v Speaker 1>my lifetime the trends geopolitically have been extraordinarily favorable. And

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<v Speaker 1>I think that certainly some horrific things have happened. But

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<v Speaker 1>if you think about the Berlin Wall, globalization, and I

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<v Speaker 1>would say that this is the first time we're really

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<v Speaker 1>entering a period of what i'll call geopolitical economic tension.

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<v Speaker 1>And so let's just pause on that for a second.

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<v Speaker 1>Coming into the election, there was a lot of uncertainty.

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<v Speaker 1>I mean, it seems like a long time ago now,

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<v Speaker 1>but if you think back to the fall, there was

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<v Speaker 1>uncertainty about whether or not we would have an outcome,

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<v Speaker 1>certainty around who the new administration would be. The administration

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<v Speaker 1>ran on a policy very pro business, pro growth, all

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<v Speaker 1>the factors that support that, and so markets reflected that,

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<v Speaker 1>and I think there was this huge relief factor in

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<v Speaker 1>knowing that there was certainty in the administration. It was

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<v Speaker 1>a sweeping victory, consolidated government and the ability to execute Now,

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<v Speaker 1>tariffs were always in the discussion. What's happened now is

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<v Speaker 1>and the markets are obviously reacting to it in a

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<v Speaker 1>fairly material way, is we're starting to see what is

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<v Speaker 1>the full poll let's see mandate going to look like.

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<v Speaker 1>And the reason I started with geopolitical economic uncertainty. And

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<v Speaker 1>obviously if we've had geopolitical uncertainty with the tragic war

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<v Speaker 1>in the Middle East and the tragic war in Europe,

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<v Speaker 1>but the geopolitical economic concertainty, it's a bit of new.

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<v Speaker 1>It's a new information set and the opinions on tariffs

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<v Speaker 1>vary from there. Incredibly inflationary too. They are potentially contributing

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<v Speaker 1>to a recession, and so it's a bit of now uncertainty.

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<v Speaker 1>And what the election originally people grasped to was certainty,

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<v Speaker 1>Marcus like certainty, and so now we're in a period

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<v Speaker 1>of uncertainty, and I think you're seeing it in the

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<v Speaker 1>risk reduction that we've seen over the past several days

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<v Speaker 1>and obviously this morning.

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<v Speaker 2>Also when you look at what's happening with the tariff's strategy,

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<v Speaker 2>I'm guessing this kind of comes into part of that

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<v Speaker 2>geopolitical uncertainty. At what point are you worried about it

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<v Speaker 2>crossing over into a tariff war? Is this all kind

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<v Speaker 2>of par for the forest what we're seeing right now,

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<v Speaker 2>or is there a risk of serious escalation?

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<v Speaker 1>Okay, so tarif's a complicated subject that doesn't really get

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<v Speaker 1>unpacked very often. So let's just try and do it

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<v Speaker 1>super fast given the time constraints. But if you think

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<v Speaker 1>of tariff's, let's just split the conversation to two things

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<v Speaker 1>really simply one will let's just say economic policy and

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<v Speaker 1>sended tariffs, which can make a lot of sense. We

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<v Speaker 1>have the lowest tariffs in the world relative to other countries,

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<v Speaker 1>and then you have tariffs that are motivated by let's say,

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<v Speaker 1>political objectives social objectives. So first of all, you have

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<v Speaker 1>to unpack the two. This bucket I think can be

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<v Speaker 1>reversed much more quickly. We've seen that in discussions and negotiations.

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<v Speaker 1>This might be stickier depending on what's happening. But in

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<v Speaker 1>terms of and you asked, your language was perfect, Shanali,

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<v Speaker 1>because the real question is are they inflationary? And a

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<v Speaker 1>one time tariff let's just say twenty five percent on

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<v Speaker 1>a country. A one time tariff is a one time

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<v Speaker 1>step up in price acceleration, but it's not sustainably inflationary.

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<v Speaker 1>Trade wars are sustainably inflationary because then, of course you

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<v Speaker 1>could perceive a twenty five percent step ten ten ten,

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<v Speaker 1>And I think that's what the market is now responding to.

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<v Speaker 1>But what the market's really responding to is increase uncertainty

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<v Speaker 1>because we just don't know where the tariff discussions are

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<v Speaker 1>going to go.

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<v Speaker 2>It's too early to the point you're making on uncertainty

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<v Speaker 2>and the earliness of the conversation. How do you think

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<v Speaker 2>about this as it pertains to your business?

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<v Speaker 1>Do you have to make changes?

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<v Speaker 2>Are their portfolio companies that are structuring differently? Are there

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<v Speaker 2>deals that you can't do right now because you don't

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<v Speaker 2>know what the tariff impact is going to be.

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<v Speaker 1>So the vast majority, so for those of you are

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<v Speaker 1>not as explicitly familiar with Carlisle, we're four hundred and

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<v Speaker 1>forty billion of assets. We're one of the largest private

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<v Speaker 1>capital managers in the world. That's split across real estate,

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<v Speaker 1>private equity, credit insurance, which is our largest segment, and

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<v Speaker 1>our solutions secondaries and co invest business. We're micro investors.

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<v Speaker 1>So as micro investors looking to invest capit, whether it's

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<v Speaker 1>in private equity or in direct lending, what we're looking

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<v Speaker 1>for are opportunities to deploy capital at attractive risk return.

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<v Speaker 1>So we don't as a when we wake up in

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<v Speaker 1>the morning, we don't seek to avoid risk. We seek

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<v Speaker 1>to price it correctly. And so in an environment like this,

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<v Speaker 1>for sure, if you're looking at a portfolio company opportunity,

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<v Speaker 1>when you think of the value creation plan, you're factoring

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<v Speaker 1>in now the uncertainty, which undoubtedly will impact the extent

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<v Speaker 1>to which you're willing to pay for that asset. And

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<v Speaker 1>so yes, now, in our existing companies and our existing portfolio,

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<v Speaker 1>the vast majority of our services company and services companies

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<v Speaker 1>don't have basically the input issues. But I will say

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<v Speaker 1>that when we look and we roll up all this

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<v Speaker 1>data for all of our portfolio companies, and it's quite rich.

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<v Speaker 1>We have. It's just down now below a million employees

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<v Speaker 1>globally around the world, three hundred Carlisle itself. But in

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<v Speaker 1>our portfolio companies, we roll up this data every month.

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<v Speaker 1>For example, when the PMI yesterday, the inventory component of

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<v Speaker 1>PMI was up about four points. I know that's not

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<v Speaker 1>really news that anybody probably would have focused on, but

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<v Speaker 1>we could see that happening months ago. So immediately when

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<v Speaker 1>it looked like the new administration was going to come

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<v Speaker 1>in and there was the possibility of tariffs, you could

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<v Speaker 1>see purchasing managers immediately mobilizing to start bringing goods in

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<v Speaker 1>faster because of the uncertainty factor.

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<v Speaker 2>So what are the things that you see now that

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<v Speaker 2>investors are going to.

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<v Speaker 1>See four months later? So today, nothing about today looks

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<v Speaker 1>dramatically different than three months ago. By that, what do

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<v Speaker 1>I mean? EBA DOUG growth is quite solid, earnings are

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<v Speaker 1>quite solid. The factors around input pricing there's still marginal

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<v Speaker 1>pricing capacity and demand seems quite high. The consumer seems

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<v Speaker 1>quite resilient. I think the administration inherited quite a stable economy.

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<v Speaker 1>You know, inflation obviously not exactly where the Federal Reserve

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<v Speaker 1>would like it, but has come down dramatically, and so

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<v Speaker 1>the environment feels quite good now in terms of what

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<v Speaker 1>we're seeing in that data. There's nothing suggesting today that

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<v Speaker 1>the economic underpinnings of that have shifted dramatically at all. Well,

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<v Speaker 1>you're starting to see those are the things I just described,

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<v Speaker 1>which is preemptive actions around how best the position again

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<v Speaker 1>around the uncertainty. The way I would describe it is,

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<v Speaker 1>for a long period of time, you know, geopolitical economic

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<v Speaker 1>risktails were very tight. They're just fatter today. And we'll

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<v Speaker 1>have to see over the next three, six, nine months

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<v Speaker 1>how the tariff discussions play out and what does it mean.

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<v Speaker 1>But this uncertainty factor obviously is affecting markets.

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<v Speaker 2>You started to hit on this a few minutes ago

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<v Speaker 2>about inflation and worries about the impacts that tariffs would

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<v Speaker 2>have on inflation. One time, more more persistent. Where do

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<v Speaker 2>you see the direction of travel? More recent economic data

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<v Speaker 2>has created some cause for concern among investors.

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<v Speaker 1>Yeah, so, first of all, we just came through an

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<v Speaker 1>impressary period and I got to give. And I know

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<v Speaker 1>that the data around the Federal Reserve happens a lot.

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<v Speaker 1>It always surprises me because I think the Federal Reserve

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<v Speaker 1>and Jpal's done an extraordinary job navigating a massive spike

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<v Speaker 1>in inflation. You know, we went through an impressive period

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<v Speaker 1>of rate hikes. There was a big audience calling for

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<v Speaker 1>rates back to zero. I have no idea why anybody

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<v Speaker 1>would want rags back to zero. Rates back to zero

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<v Speaker 1>is not a normal way to run an economy, and

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<v Speaker 1>we certainly shouldn't be wishing for that. In terms of

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<v Speaker 1>getting inflation down, that's a very, very difficult thing to do,

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<v Speaker 1>and I think the Fed has done an extraordinary job.

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<v Speaker 1>I think at this point, given we don't exactly know

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<v Speaker 1>how the tariffs will ultimately settle, I think the inflationary

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<v Speaker 1>question is a bit uncertain. So what I mean by

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<v Speaker 1>that is there is a path where you could see

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<v Speaker 1>a one time bump in prices, assuming there's no trade

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<v Speaker 1>waror no future escalation, that will translate through the system

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<v Speaker 1>as higher prices. They also cause some demand destruction, which

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<v Speaker 1>longer term would be deflationary, and you actually could see

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<v Speaker 1>the economy experiencing stress as it goes through that. So

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<v Speaker 1>I would say that all the parameters around forecasting inflation,

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<v Speaker 1>forecasting interest rates again, I just think we should be

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<v Speaker 1>we should all buckle up a bit because markets will

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<v Speaker 1>be more volatile, super data centric, probably two data centric,

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<v Speaker 1>because you can't extrapolate one data point to the future.

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<v Speaker 1>But it's going to be a sort of a wait

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<v Speaker 1>and see. I do think the administration will be very

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<v Speaker 1>sensitive to pro growth policies, and so I think they'll

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<v Speaker 1>be watching also.

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<v Speaker 2>So with that push pull going on, what you're looking

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<v Speaker 2>at as a market that has changed so drastically in

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<v Speaker 2>terms of rate cut expectations. You had a number of

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<v Speaker 2>investors feeling like maybe you might get a rate hike

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<v Speaker 2>this year coming into this year, but market consensus now

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<v Speaker 2>you have shifted from maybe one rate cut to three.

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<v Speaker 2>Market pricing overnight went to three rate cuts this year.

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<v Speaker 1>Yeah, does that make sense to you? So we we

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<v Speaker 1>were never in a camp United's discussion two years ago.

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<v Speaker 1>We've never been in a camp that the Federal Reserve

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<v Speaker 1>was going to cut rates aggressively. Our strategic economist has

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<v Speaker 1>really nailed this, Jason Thomas. If you don't read his work,

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<v Speaker 1>he really should. I've worked with some extraordinary people in

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<v Speaker 1>my career, real privilege, and he's extraordinary, but he has

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<v Speaker 1>the benefit of rolling up all our data, so he's

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<v Speaker 1>been saying for a long time rates were stickier. I

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<v Speaker 1>just spoke to him before I got on the show,

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<v Speaker 1>and he said, listen, it's more complicated now to have

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<v Speaker 1>a very firm opinion again period of uncertainty. But it's

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<v Speaker 1>not surprising to me that the market is shifted to

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<v Speaker 1>this because of the unknown around tariffs. And I think

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<v Speaker 1>what the Federal Reserve has proven to us is they're

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<v Speaker 1>very data centric because they know they're in a situation

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<v Speaker 1>that is somewhat novel, so they're going to be very

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<v Speaker 1>data centric. They're going to do what they need to do.

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<v Speaker 1>So if you see inflationary pressure, they're going to moderate up.

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<v Speaker 1>If you see deflationary pressure or a slowing of the economy,

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<v Speaker 1>I think the Federal Reserve one thing that proved us

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<v Speaker 1>now for a very long time. They know how to

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<v Speaker 1>cut rates, and they're going to cut rates if they

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<v Speaker 1>need to. But it's not surprising me that the market

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<v Speaker 1>is forecasting more of that. But also we were sort

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<v Speaker 1>of shocked when they were forecasting five six cuts and

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<v Speaker 1>we were calling for one or two.

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<v Speaker 2>So want to back out for a moment, because coming

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<v Speaker 2>into this year, there was a lot of investors saying

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<v Speaker 2>America first, and you saw the broader market really reflect

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<v Speaker 2>that trade that has changed. You have seen a lot

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<v Speaker 2>of money flow into international markets. Carlisle's a global investor.

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<v Speaker 2>Is American exceptionalism at risk?

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<v Speaker 1>I wouldn't bet against America. You know, if you go

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<v Speaker 1>back to the nineties, when in the mid nineties European

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<v Speaker 1>Union in the United States had the same GDP. Here

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<v Speaker 1>we are twenty five thirty years later, we have ten

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<v Speaker 1>trillion dollars more for GDP. There's a lot of fundamental

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<v Speaker 1>reasons for why that occurred. We don't need to go

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<v Speaker 1>through them. I think that as a global firm, we

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<v Speaker 1>see opportunity and lots of places. So we have taken

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<v Speaker 1>in the past several months three companies public standard are

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<v Speaker 1>in the United States. We just two weeks ago took

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<v Speaker 1>Hexaware public in India. It's the largest private equit owned

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<v Speaker 1>company to ever go public in India. We took a

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<v Speaker 1>company called where Good Coats an X ray technician, an

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<v Speaker 1>X ray technical company in Japan public. It's the largest

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<v Speaker 1>ever private owned equity company in Japan. All of this

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<v Speaker 1>in the past six months, and our portfolios have gone

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<v Speaker 1>up five billion in value. We've returned a lot of

0:12:30.640 --> 0:12:37.400
<v Speaker 1>value to clients. I would say that is it surprising

0:12:37.760 --> 0:12:40.240
<v Speaker 1>that after the SMP was up fifty percent plus in

0:12:40.320 --> 0:12:43.720
<v Speaker 1>two years and the rest of the world had lagged,

0:12:43.920 --> 0:12:46.800
<v Speaker 1>that there's been more capital moving overseas. No. I do

0:12:46.880 --> 0:12:49.319
<v Speaker 1>think that if you're going to have a European Union

0:12:49.360 --> 0:12:51.840
<v Speaker 1>that's going to be very focused on, for example, of defense,

0:12:52.480 --> 0:12:54.400
<v Speaker 1>which is not a surprise US. We've had an aerospace

0:12:54.440 --> 0:12:57.480
<v Speaker 1>depends practice for a very long time on the heels

0:12:57.480 --> 0:13:00.000
<v Speaker 1>of all the global conflict. Defense is going to be

0:13:00.640 --> 0:13:03.400
<v Speaker 1>a sector that's going to grow securely again for a

0:13:03.520 --> 0:13:07.000
<v Speaker 1>very long period of time, regardless of tariffs, it doesn't matter.

0:13:08.360 --> 0:13:11.560
<v Speaker 1>And so in a period where you go from geopolitical

0:13:11.840 --> 0:13:15.080
<v Speaker 1>and globalization to less globalization, you're going to have increase

0:13:15.080 --> 0:13:17.200
<v Speaker 1>spending on defense. So you're going to see defense bocks

0:13:17.240 --> 0:13:18.600
<v Speaker 1>go up in the US. I think it's all seems

0:13:18.640 --> 0:13:21.800
<v Speaker 1>quite rational tonight. But no, I wouldn't bet against America.

0:13:21.920 --> 0:13:24.960
<v Speaker 2>So I want to shift gears a bit now because

0:13:25.000 --> 0:13:27.800
<v Speaker 2>there's this dynamic going on in the markets where you have,

0:13:27.880 --> 0:13:29.600
<v Speaker 2>of course, the public markets, and then you have the

0:13:29.600 --> 0:13:31.920
<v Speaker 2>private markets, which of course you operate well, and you've

0:13:32.000 --> 0:13:35.920
<v Speaker 2>kind of operated many times through both and throughout your career.

0:13:36.200 --> 0:13:37.880
<v Speaker 2>So in the mid nineteen nineties there are more than

0:13:37.920 --> 0:13:40.480
<v Speaker 2>seven thousand companies. Now there are less than half of that.

0:13:41.679 --> 0:13:44.960
<v Speaker 2>Many people talk about that being the dynamic of the

0:13:45.000 --> 0:13:48.800
<v Speaker 2>situation we're in. Nobody talks about what the implications are

0:13:49.280 --> 0:13:52.880
<v Speaker 2>if you have such a vast private market, what do

0:13:52.920 --> 0:13:54.880
<v Speaker 2>you do with that? How do you get more investors'

0:13:54.880 --> 0:13:55.560
<v Speaker 2>access to that?

0:13:56.200 --> 0:13:59.679
<v Speaker 1>So you nailed it. I mean, if you went back

0:14:00.120 --> 0:14:02.960
<v Speaker 1>plus years there or twice as many public companies, I

0:14:03.000 --> 0:14:06.800
<v Speaker 1>think there were eight times as many public companies. If

0:14:06.840 --> 0:14:08.559
<v Speaker 1>you went back even farther now there's two and a

0:14:08.559 --> 0:14:11.160
<v Speaker 1>half times as many private companies. And the private capital

0:14:11.200 --> 0:14:15.440
<v Speaker 1>formation has been a trend that has been incredibly persistent

0:14:15.679 --> 0:14:19.480
<v Speaker 1>for lots of very meaningful reasons, and it's secular. It's

0:14:19.480 --> 0:14:23.840
<v Speaker 1>not going to change any Any prediction in terms of

0:14:24.280 --> 0:14:28.560
<v Speaker 1>the sustainability and durability of private capital suggests it's going

0:14:28.600 --> 0:14:32.200
<v Speaker 1>to keep compounding at ten percent, So it'll be a

0:14:32.240 --> 0:14:35.120
<v Speaker 1>you know, twenty five twenty six trillion dollar market before

0:14:35.120 --> 0:14:37.800
<v Speaker 1>we blink in terms of private capital. Now, what's happening

0:14:37.880 --> 0:14:41.760
<v Speaker 1>is there are a lot of forces in the system

0:14:42.360 --> 0:14:46.680
<v Speaker 1>that are driving more capital to private markets. Demand from

0:14:47.040 --> 0:14:50.920
<v Speaker 1>insurance clients as they look for private investment grade, and

0:14:50.960 --> 0:14:53.640
<v Speaker 1>of course the biggest factor is, and a lot of

0:14:53.640 --> 0:14:56.040
<v Speaker 1>you involved in this business, is what's happening in wealth.

0:14:56.800 --> 0:14:59.840
<v Speaker 1>And really, if you look at whether it's one, two,

0:15:00.000 --> 0:15:07.600
<v Speaker 1>three percent of portfolios in wealth individuals portfolios today managed

0:15:07.640 --> 0:15:11.880
<v Speaker 1>by people in this room, then if that grows to five, six,

0:15:11.960 --> 0:15:15.960
<v Speaker 1>seven percent, we're talking about an enormous trend. And I

0:15:16.000 --> 0:15:19.760
<v Speaker 1>think the stats on US pensions, for example, forty percent

0:15:20.200 --> 0:15:25.280
<v Speaker 1>are in alternatives. Ultimately retirement accounts will be in private capital.

0:15:25.320 --> 0:15:29.520
<v Speaker 1>It's the perfect balance of liability and return and it

0:15:29.560 --> 0:15:34.520
<v Speaker 1>gives investors diversification. So ultimately, yes, for sure, a pace

0:15:34.560 --> 0:15:38.800
<v Speaker 1>of which hard to predict. But the wealth transition to

0:15:39.040 --> 0:15:44.920
<v Speaker 1>private capital, for sure, is a durable transition. Should be

0:15:45.200 --> 0:15:46.800
<v Speaker 1>the asset class makes a lot of sense for a

0:15:46.840 --> 0:15:49.160
<v Speaker 1>lot of people, advisors. I've spent a lot of time

0:15:49.200 --> 0:15:51.960
<v Speaker 1>with advisors in the past two years, so Carlisle has

0:15:52.000 --> 0:15:53.600
<v Speaker 1>been in that part of the business for a long time,

0:15:53.600 --> 0:15:56.840
<v Speaker 1>but it wasn't strategically important as initiative. When I showed up,

0:15:56.840 --> 0:15:58.840
<v Speaker 1>we switched to all that We've reorganized the team. It's

0:15:58.840 --> 0:16:01.680
<v Speaker 1>one of our fastest growing areas. But this is again

0:16:01.880 --> 0:16:07.320
<v Speaker 1>we scratch this surface globally on wealthy individuals participating in

0:16:07.320 --> 0:16:10.400
<v Speaker 1>these markets so that capital stream will continue to come in.

0:16:11.240 --> 0:16:13.080
<v Speaker 2>How do you think about what might need to change

0:16:13.080 --> 0:16:16.200
<v Speaker 2>about the industry in order to make this more available

0:16:16.320 --> 0:16:19.680
<v Speaker 2>to wealth clients as opposed to institutional clients who have

0:16:20.040 --> 0:16:23.080
<v Speaker 2>been able to get into a private fund hold it

0:16:23.080 --> 0:16:25.920
<v Speaker 2>for a very very long time. Now you have investors

0:16:26.160 --> 0:16:28.720
<v Speaker 2>barring therefore, oh one K that might want more liquidity,

0:16:29.280 --> 0:16:32.320
<v Speaker 2>and do you think that that presents another set of

0:16:32.440 --> 0:16:33.960
<v Speaker 2>risks to a mismatch.

0:16:34.080 --> 0:16:36.680
<v Speaker 1>Perhaps so, I think the only I think the only

0:16:36.680 --> 0:16:38.080
<v Speaker 1>thing that gets in the way of the industry and

0:16:38.120 --> 0:16:41.440
<v Speaker 1>the growth of this is the industry. So if we

0:16:41.520 --> 0:16:45.840
<v Speaker 1>execute at Carlisle, we don't want to rush. This is

0:16:45.880 --> 0:16:48.680
<v Speaker 1>all about performance. If we say we're going to do it,

0:16:48.760 --> 0:16:51.680
<v Speaker 1>we have to do it, and we have to understand

0:16:52.120 --> 0:16:55.040
<v Speaker 1>the ultimate wealth client is managed by an advisor or

0:16:55.040 --> 0:16:58.160
<v Speaker 1>an RIA or one of the big platform partners that

0:16:58.200 --> 0:17:01.440
<v Speaker 1>we work with. That is our oblique and as long

0:17:01.480 --> 0:17:04.880
<v Speaker 1>as we deliver the performance consistently over a period of time,

0:17:06.240 --> 0:17:09.320
<v Speaker 1>with all the risk factors understood, then we will be

0:17:09.359 --> 0:17:11.720
<v Speaker 1>successful in the industry, really successful. The only thing worries

0:17:11.760 --> 0:17:13.400
<v Speaker 1>me sometimes is there's a bit of an arms race.

0:17:13.400 --> 0:17:19.600
<v Speaker 1>It seems to develop solutions. There's clearly competition on the

0:17:19.600 --> 0:17:24.480
<v Speaker 1>advisor side, you know, Carlisle, I'm super fortunate that I

0:17:24.480 --> 0:17:26.840
<v Speaker 1>had the opportunity two years ago. It's you know, it's

0:17:26.840 --> 0:17:29.920
<v Speaker 1>a really iconic name in finance. It's been around for

0:17:30.240 --> 0:17:33.119
<v Speaker 1>you know, well over thirty five years. You know. To

0:17:33.200 --> 0:17:37.040
<v Speaker 1>be successful in this industry, particularly this segment, you need

0:17:37.480 --> 0:17:41.639
<v Speaker 1>global brand recognition. Carlisle's well known. We have wealth partnerships

0:17:41.680 --> 0:17:45.240
<v Speaker 1>in the Middle East, in Korea, in Japan, and we

0:17:45.320 --> 0:17:47.679
<v Speaker 1>tend to think in a very US centric way that

0:17:47.720 --> 0:17:49.919
<v Speaker 1>the wealth phenomenon is a US centric phenomenon. It's a

0:17:49.920 --> 0:17:52.840
<v Speaker 1>global phenomenon. And that's why I feel confident in saying

0:17:52.880 --> 0:17:55.520
<v Speaker 1>over the next five ten years, you'll see this trajectory

0:17:55.560 --> 0:17:56.000
<v Speaker 1>of growth.

0:17:57.119 --> 0:18:00.119
<v Speaker 2>So we talk about private markets like it's a on

0:18:00.160 --> 0:18:03.480
<v Speaker 2>a list, but of course it's private equity and private debt,

0:18:03.560 --> 0:18:06.480
<v Speaker 2>and infrastructure in real estate and all of the above,

0:18:06.600 --> 0:18:09.160
<v Speaker 2>private credit in particular has gotten a lot of focus.

0:18:09.280 --> 0:18:11.840
<v Speaker 2>At one point six trillion dollar market of direct lending,

0:18:12.240 --> 0:18:16.120
<v Speaker 2>it seems that the industry is pushing away from just

0:18:16.200 --> 0:18:19.560
<v Speaker 2>that into new places. What's the biggest growth area in

0:18:19.600 --> 0:18:22.439
<v Speaker 2>your mind, and what is driving it? Are there mega

0:18:22.520 --> 0:18:25.480
<v Speaker 2>forces that will make this industry much bigger?

0:18:26.080 --> 0:18:33.320
<v Speaker 1>So I don't so there's a flywheel effect in capital formation.

0:18:33.520 --> 0:18:35.359
<v Speaker 1>This exists in public markets. I mean, if we went

0:18:35.440 --> 0:18:38.639
<v Speaker 1>back many many years ago, ETFs were new, then they

0:18:38.640 --> 0:18:40.560
<v Speaker 1>became very efficient tools. Then they became some of the

0:18:40.600 --> 0:18:43.480
<v Speaker 1>most popular tools that exist in the marketplace for investors.

0:18:43.520 --> 0:18:47.639
<v Speaker 1>For a lot of obvious and very rational reasons, it's

0:18:47.760 --> 0:18:54.720
<v Speaker 1>very hard for finance professionals to create demand for a

0:18:54.760 --> 0:18:57.679
<v Speaker 1>particular form of capital. I don't think we're actually particularly

0:18:57.680 --> 0:19:00.000
<v Speaker 1>good at that as an industry. When we really are

0:19:00.040 --> 0:19:04.639
<v Speaker 1>operate well in finance, and having seen it at you

0:19:05.040 --> 0:19:08.240
<v Speaker 1>over thirty plus years, when we really operate well is

0:19:08.280 --> 0:19:11.800
<v Speaker 1>when we truly understand the client demand for capital and

0:19:11.840 --> 0:19:14.639
<v Speaker 1>what is the client demand for capital. The businesses that

0:19:14.680 --> 0:19:17.280
<v Speaker 1>get supported by this capital are just looking for the

0:19:17.320 --> 0:19:21.720
<v Speaker 1>most efficient form of capital, so they're not being sold

0:19:21.960 --> 0:19:25.560
<v Speaker 1>direct lending. They're choosing direct lending over other sources. So,

0:19:25.720 --> 0:19:28.560
<v Speaker 1>but what has happened direct lending in many regards, which

0:19:28.600 --> 0:19:30.960
<v Speaker 1>has been around for a long time and really grew

0:19:31.000 --> 0:19:34.040
<v Speaker 1>quite quickly over the past cause five years. What's really

0:19:34.040 --> 0:19:38.480
<v Speaker 1>happening though, is the understanding of the capital choices continues

0:19:38.520 --> 0:19:41.879
<v Speaker 1>to expand, so direct lending will continue to grow, although

0:19:41.880 --> 0:19:45.120
<v Speaker 1>more mature today, but now asset based finance and there

0:19:45.119 --> 0:19:48.600
<v Speaker 1>are forces and asset based finance, private investment in grade

0:19:48.880 --> 0:19:50.879
<v Speaker 1>returns and really at the end of the day, what

0:19:51.000 --> 0:19:53.399
<v Speaker 1>allows us to be most effective at nationality is we

0:19:53.440 --> 0:19:56.560
<v Speaker 1>have the right liability structure. So because we have longer

0:19:56.600 --> 0:20:00.000
<v Speaker 1>liabilities which our clients provide us, whether they're wealth clients,

0:20:00.080 --> 0:20:03.280
<v Speaker 1>institutions all around the world, we're able to structure and

0:20:03.320 --> 0:20:05.560
<v Speaker 1>to play that capital. But again it has to be

0:20:05.600 --> 0:20:08.800
<v Speaker 1>the most efficient marginal capital for the end user. There's

0:20:08.840 --> 0:20:12.879
<v Speaker 1>no creating something and people come. These are really thoughtful

0:20:12.920 --> 0:20:16.480
<v Speaker 1>business owners that are choosing to use that capital because

0:20:16.480 --> 0:20:19.080
<v Speaker 1>it's the most efficient capital, and that's what we have

0:20:19.160 --> 0:20:19.800
<v Speaker 1>to provide.

0:20:20.080 --> 0:20:23.040
<v Speaker 2>Harvey, we are out of time. You spared yourself from

0:20:23.040 --> 0:20:26.760
<v Speaker 2>my lightning round. Although what are you doing for dinner

0:20:26.760 --> 0:20:27.320
<v Speaker 2>for your birthday?

0:20:27.400 --> 0:20:31.200
<v Speaker 1>You can have that. I'm hosting the first partner offsite

0:20:31.240 --> 0:20:33.159
<v Speaker 1>Carlisles had in a long time. They asked me if

0:20:33.160 --> 0:20:34.679
<v Speaker 1>I would do it on my birthday, so I said, so,

0:20:34.720 --> 0:20:36.240
<v Speaker 1>all of our partners are going to an off site

0:20:36.240 --> 0:20:38.040
<v Speaker 1>for two days. I'm super excited about my birthday.

0:20:38.080 --> 0:20:42.399
<v Speaker 2>That sounds like flash thanky, everybody welcome, not that helpful.

0:20:42.400 --> 0:20:43.680
<v Speaker 1>Thanks so much. I have a great conference.

0:20:49.680 --> 0:20:52.960
<v Speaker 2>And that was Carlisle CEO Harvey Schwartz speaking with Shanali

0:20:53.000 --> 0:20:53.320
<v Speaker 2>Basic