Speaker 1: Bloomberg Audio Studios, podcasts, radio news will. Joining us now
Speaker 1: is Jenny Johnson, Chief executive Franklin Templeton, which oversees around
Speaker 1: one point seven trillion dollars in assets, and I have
Speaker 1: to say it's called colder this morning than yesterday, but
Speaker 1: at least it wakes us up to try and understand
Speaker 1: and figure out the world economy and everything that goes
Speaker 1: with it. Jenny, thank you so much for joining us.
Speaker 1: A lot of the participants here, we're looking at the inauguration,
Speaker 1: a lot of the bankers here and fight the world
Speaker 1: of finance is expecting deregulation and Donald Trump to not
Speaker 1: kickstart because the economy is doing okay but actually better
Speaker 1: the economy in the US.
Speaker 2: Well, I think that's right. I think, you know, the
Speaker 2: view on Trump is it and he's been very clear
Speaker 2: he wants less regulation. I think he said he's going to,
Speaker 2: you know, for every new one enacted, take away to regulations.
Speaker 2: So I think that's positive for business. You know, I
Speaker 2: think that he'll continue spending, which you know is positive
Speaker 2: in the short run for economy. I do think we
Speaker 2: have a concern with debt, and you know, I think
Speaker 2: he'll extend the tax cuts. I think people view that
Speaker 2: as all positive. You know, obviously there's a lot of
Speaker 2: rhetoric around the tariffs, and you know, the reality is
Speaker 2: actually I think two things. One is he's a deal maker, right,
Speaker 2: and if you're a deal maker, the first thing you
Speaker 2: do is you show your you know, your powerful stance.
Speaker 2: So you make a broad statement, I'm going to tax
Speaker 2: Canada and Mexico by twenty five percent. Well, and then
Speaker 2: you sit down at the table, you get them to
Speaker 2: the table, and you say, this is what I need.
Speaker 2: I need some help on immigration, I need I want
Speaker 2: you to import more of our goods. And so, you know,
Speaker 2: I think we've seen that that's his kind of approach.
Speaker 2: He makes big, broad statements I'm going to buy Greenland
Speaker 2: and then and then from there goes in with a
Speaker 2: more kind of practical deal approach.
Speaker 1: But is there a danger that actually you're a CEO,
Speaker 1: you don't invest because you're never quite sure what's policy
Speaker 1: and what's negotiation tactics.
Speaker 2: Oh, I think that that most people have a clear
Speaker 2: well I don't know most people have a clear understantion.
Speaker 2: I think you know, you under stand under the covers
Speaker 2: because he's he makes his statements in Europe right he
Speaker 2: wants Europe to import more from the US. He wants
Speaker 2: is particularly energy. He wants help on you know, funding
Speaker 2: from a you know, NATO. As far as military funding,
Speaker 2: he probably wants him to lay off a little bit
Speaker 2: on the tech companies. I mean, so there's an understanding
Speaker 2: of what his desire is, and so you know, then
Speaker 2: then you get to the table and you start to
Speaker 2: negotiate those things.
Speaker 1: I mean, is it impossible to know whether he's better
Speaker 1: for private markets than public markets?
Speaker 2: Well, I don't necessarily I think he's I think the
Speaker 2: view is that he's going to be good for the
Speaker 2: economy and that therefore is good for both public and
Speaker 2: private markets.
Speaker 1: What are you seeing in private markets right now?
Speaker 2: Look, you know, I think you're starting to see more
Speaker 2: movement on IPOs, which is good for the private equity business.
Speaker 2: You know. I think that the areas that I'm most
Speaker 2: focused on is, or that I think I have tremendous opportunity,
Speaker 2: is secondary private equity. There's just been so much deployed
Speaker 2: in private equity. There hasn't been that kind of liquidity ability.
Speaker 2: There's been about one hundred and fifty billion deployed in
Speaker 2: secondary pe and we're still seeing you know, Lexington Partners
Speaker 2: raised a fund, they closed a twenty two point seven
Speaker 2: billion dollar fund last year. I think they've deployed about
Speaker 2: seventy percent of it with very large discounts, almost you know,
Speaker 2: sixty percent more than the average discount historically. So secondary PE.
Speaker 2: We also think real estate debts really interesting. Banks aren't
Speaker 2: able to lend, they're clogged up with office Regional banks
Speaker 2: were the big real estate lenders and so as they
Speaker 2: haven't been able to lean in. Those private credit managers
Speaker 2: who have real estate expertise can fill in that void
Speaker 2: and benefits Street Partners. We have as about nine billion
Speaker 2: in real estate, and they think it's a really interesting opportunity.
Speaker 1: Mainly in the US or there are there are also
Speaker 1: other parts of the world where you could actually see distress.
Speaker 2: Yeah, I think in the secondary PE space, you're seeing
Speaker 2: it all over because there's a need for you know,
Speaker 2: for LPs to get their liquidity. I think in the
Speaker 2: real estate that is more of a US issue. Look
Speaker 2: at I think office all over the world, you know,
Speaker 2: has issues, but it be office space, its not a
Speaker 2: office space. But in the US it was the regional
Speaker 2: banks who were the primary lenders and they're just not
Speaker 2: able to capital requirements have changed in the US, is
Speaker 2: they're just not able to lend like they used to.
Speaker 1: There's also so much talk about, you know, crypto being
Speaker 1: at the center of the Trump administration's kind of second mandate.
Speaker 2: Did you participate in the Trump and Millennia mean coin
Speaker 2: or whatever?
Speaker 1: I haven't, but this has everyone excited. They were even
Speaker 1: talking about in Davos. Does it change an appetite for ETFs,
Speaker 1: does it change you know, is it market liquidity in
Speaker 1: some places? And does it impact basically your company?
Speaker 2: First of all, I think it's really important to think
Speaker 2: of blockchain as a technology. It's a programming language, right
Speaker 2: that does certain things really well. I do think that
Speaker 2: it will It's likely that ETFs and mutual funds will
Speaker 2: ultimately be built on block changes because it's an incredibly efficient,
Speaker 2: efficient technology. And then there's the crypto world, some of
Speaker 2: which I think has tremendous opportunity and some of which
Speaker 2: I think it'll be noise. It'll be a little bit
Speaker 2: like the dot com era, when you know, eventually you
Speaker 2: had some of the biggest companies of the next decade
Speaker 2: that came out of it, and then you had a
Speaker 2: lot that kind of blew away to the side, and
Speaker 2: so I think the crypto world is similar. I think
Speaker 2: the thing with the Trump administration is we're going to
Speaker 2: start to see them converge more, the trad fi and
Speaker 2: the crypto, which is something that we need. We need
Speaker 2: to have some sort of regulatory clarity so that you
Speaker 2: could bring these together because the fundamentally it will drive
Speaker 2: out costs and there is great innovation that the technology enables.
Speaker 1: Is that going to be overlaid by inflation?
Speaker 2: Well so inflation, you know, I actually I do think
Speaker 2: that if I were to predict, I think that you
Speaker 2: could have at the end of twenty five the ten
Speaker 2: year at five percent, you know, I just and by
Speaker 2: the way, from nineteen fifty to the to the GFC
Speaker 2: kind of the neutral rate on FED funds was about
Speaker 2: four percent, and the ten year of five percent, that's
Speaker 2: actually much more normalized. I think that's what we're going
Speaker 2: to see. And I think that the Fed is going
Speaker 2: to pause right now. They're going to try to you know,
Speaker 2: this gives them time to see how Trump's policies impact
Speaker 2: the economy. Some of them can be inflation area, and
Speaker 2: let's face it, the US consumer is still very strong.
Speaker 2: You know, the inflation numbers, Unemployment still still pretty low,
Speaker 2: so the inflation numbers are pretty sticky. And I just
Speaker 2: don't know that we go back to that period of
Speaker 2: much lower interest rates.
Speaker 1: But that again changes everything, which is maybe why you're
Speaker 1: seeing opportunities probably if you're higher for longer.
Speaker 2: So but kind of more normal for longer. Right, it's
Speaker 2: much more of a normal rate. And I do think
Speaker 2: that for example, on the private equity side and private
Speaker 2: market side, look at it was easier to make money
Speaker 2: when cash costs nothing. Now you have to be very
Speaker 2: skilled because your carry costs of say five to eight percent,
Speaker 2: means that your investments are going to have a drag
Speaker 2: on them, and so you have to be very good.
Speaker 2: And so I think you'll see those who are skilled
Speaker 2: and others will fall away.
Speaker 1: Jenny. For the integration of Western, how's it going. I
Speaker 1: know you've started with you know, some big chunks of it.
Speaker 2: We are working through the integration of westerd yes, and
Speaker 2: that you know that we've done it. I think now
Speaker 2: when we bought Lake Mason, it was actually like buying
Speaker 2: seven managers. Plus we've been integrating Putnam investments and we've done.
Speaker 2: There's less integration that happens on a private market acquisition
Speaker 2: than a traditional acquisition, and so we've been methodically going
Speaker 2: along and so we're in that process.
Speaker 1: And so it's going to plan. Is it quicker than
Speaker 1: I expected?
Speaker 2: Slower? It's probably quicker than expected because we were not
Speaker 2: planning to do it until, you know, after July twenty five.
Speaker 2: And now we've started that process earlier.
Speaker 1: And that's Are you happy with the progress so far?
Speaker 1: I mean, you started earlier, Will it finish earlier? And
Speaker 1: is that's a positive.
Speaker 2: For I think it's definitely a positive.
Speaker 1: I mean, look, our.
Speaker 2: Whole model is to keep the investment teams independent and
Speaker 2: to build scale around them, and it's become even more important.
Speaker 2: Actually one of the acquisitions, it was actually a private
Speaker 2: credit manager said she's when Franklin bought us, we thought
Speaker 2: they'd help us on distribution. But now that I see
Speaker 2: what's happening on AI and the cost of data, I
Speaker 2: realize we could never participate at this level without the
Speaker 2: kind of scale and breadth of Franklin doubled in. So
Speaker 2: that's what we try to build at the center and
Speaker 2: then leave the independence of the investment team and I.
Speaker 1: Know there's been an issue of course with one of
Speaker 1: the managers.
Speaker 2: There any updates, We are still working through it, you know.
Speaker 1: Okay, Jennie Johnson, thank you so much for joining us
Speaker 1: the first of us. Actually, yes, we have to catch
Speaker 1: up at the end of the week to see how
Speaker 1: how's that been going so far?
Speaker 2: Fun, so far, it's great. Yeah, no, it's good to
Speaker 2: be here.
Speaker 1: There you go. Jenny Johnson, Chief executive Officer of course
Speaker 1: of Franklin Templeton