WEBVTT - Franklin Templeton CEO Jenny Johnson Talks Trump's Policies

0:00:02.360 --> 0:00:07.520
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news will. Joining us now

0:00:07.560 --> 0:00:10.680
<v Speaker 1>is Jenny Johnson, Chief executive Franklin Templeton, which oversees around

0:00:10.720 --> 0:00:13.760
<v Speaker 1>one point seven trillion dollars in assets, and I have

0:00:13.760 --> 0:00:16.319
<v Speaker 1>to say it's called colder this morning than yesterday, but

0:00:16.320 --> 0:00:18.360
<v Speaker 1>at least it wakes us up to try and understand

0:00:18.360 --> 0:00:20.840
<v Speaker 1>and figure out the world economy and everything that goes

0:00:20.840 --> 0:00:23.160
<v Speaker 1>with it. Jenny, thank you so much for joining us.

0:00:23.200 --> 0:00:25.639
<v Speaker 1>A lot of the participants here, we're looking at the inauguration,

0:00:26.120 --> 0:00:27.840
<v Speaker 1>a lot of the bankers here and fight the world

0:00:27.880 --> 0:00:31.840
<v Speaker 1>of finance is expecting deregulation and Donald Trump to not

0:00:31.960 --> 0:00:34.960
<v Speaker 1>kickstart because the economy is doing okay but actually better

0:00:35.040 --> 0:00:36.040
<v Speaker 1>the economy in the US.

0:00:36.680 --> 0:00:38.960
<v Speaker 2>Well, I think that's right. I think, you know, the

0:00:39.680 --> 0:00:41.840
<v Speaker 2>view on Trump is it and he's been very clear

0:00:41.920 --> 0:00:44.479
<v Speaker 2>he wants less regulation. I think he said he's going to,

0:00:44.720 --> 0:00:47.600
<v Speaker 2>you know, for every new one enacted, take away to regulations.

0:00:47.680 --> 0:00:50.760
<v Speaker 2>So I think that's positive for business. You know, I

0:00:50.800 --> 0:00:56.520
<v Speaker 2>think that he'll continue spending, which you know is positive

0:00:56.520 --> 0:00:58.520
<v Speaker 2>in the short run for economy. I do think we

0:00:58.600 --> 0:01:01.920
<v Speaker 2>have a concern with debt, and you know, I think

0:01:01.960 --> 0:01:04.160
<v Speaker 2>he'll extend the tax cuts. I think people view that

0:01:04.240 --> 0:01:06.480
<v Speaker 2>as all positive. You know, obviously there's a lot of

0:01:06.560 --> 0:01:09.959
<v Speaker 2>rhetoric around the tariffs, and you know, the reality is

0:01:10.000 --> 0:01:14.280
<v Speaker 2>actually I think two things. One is he's a deal maker, right,

0:01:14.319 --> 0:01:15.840
<v Speaker 2>and if you're a deal maker, the first thing you

0:01:15.880 --> 0:01:19.400
<v Speaker 2>do is you show your you know, your powerful stance.

0:01:19.520 --> 0:01:21.840
<v Speaker 2>So you make a broad statement, I'm going to tax

0:01:21.880 --> 0:01:25.160
<v Speaker 2>Canada and Mexico by twenty five percent. Well, and then

0:01:25.200 --> 0:01:26.840
<v Speaker 2>you sit down at the table, you get them to

0:01:26.880 --> 0:01:29.240
<v Speaker 2>the table, and you say, this is what I need.

0:01:29.280 --> 0:01:31.240
<v Speaker 2>I need some help on immigration, I need I want

0:01:31.240 --> 0:01:34.000
<v Speaker 2>you to import more of our goods. And so, you know,

0:01:34.080 --> 0:01:36.959
<v Speaker 2>I think we've seen that that's his kind of approach.

0:01:37.000 --> 0:01:39.600
<v Speaker 2>He makes big, broad statements I'm going to buy Greenland

0:01:40.440 --> 0:01:43.160
<v Speaker 2>and then and then from there goes in with a

0:01:43.240 --> 0:01:45.160
<v Speaker 2>more kind of practical deal approach.

0:01:45.280 --> 0:01:47.360
<v Speaker 1>But is there a danger that actually you're a CEO,

0:01:47.800 --> 0:01:50.640
<v Speaker 1>you don't invest because you're never quite sure what's policy

0:01:50.680 --> 0:01:52.320
<v Speaker 1>and what's negotiation tactics.

0:01:52.880 --> 0:01:55.720
<v Speaker 2>Oh, I think that that most people have a clear

0:01:56.520 --> 0:01:58.200
<v Speaker 2>well I don't know most people have a clear understantion.

0:01:58.400 --> 0:02:01.320
<v Speaker 2>I think you know, you under stand under the covers

0:02:01.480 --> 0:02:05.040
<v Speaker 2>because he's he makes his statements in Europe right he

0:02:05.080 --> 0:02:08.520
<v Speaker 2>wants Europe to import more from the US. He wants

0:02:08.639 --> 0:02:12.480
<v Speaker 2>is particularly energy. He wants help on you know, funding

0:02:12.600 --> 0:02:15.040
<v Speaker 2>from a you know, NATO. As far as military funding,

0:02:15.760 --> 0:02:17.680
<v Speaker 2>he probably wants him to lay off a little bit

0:02:17.720 --> 0:02:20.440
<v Speaker 2>on the tech companies. I mean, so there's an understanding

0:02:20.480 --> 0:02:23.440
<v Speaker 2>of what his desire is, and so you know, then

0:02:23.760 --> 0:02:25.400
<v Speaker 2>then you get to the table and you start to

0:02:25.400 --> 0:02:26.360
<v Speaker 2>negotiate those things.

0:02:26.400 --> 0:02:28.480
<v Speaker 1>I mean, is it impossible to know whether he's better

0:02:28.480 --> 0:02:30.240
<v Speaker 1>for private markets than public markets?

0:02:31.080 --> 0:02:33.720
<v Speaker 2>Well, I don't necessarily I think he's I think the

0:02:33.840 --> 0:02:35.560
<v Speaker 2>view is that he's going to be good for the

0:02:35.600 --> 0:02:38.440
<v Speaker 2>economy and that therefore is good for both public and

0:02:38.480 --> 0:02:39.280
<v Speaker 2>private markets.

0:02:39.600 --> 0:02:41.240
<v Speaker 1>What are you seeing in private markets right now?

0:02:41.600 --> 0:02:43.560
<v Speaker 2>Look, you know, I think you're starting to see more

0:02:43.560 --> 0:02:46.360
<v Speaker 2>movement on IPOs, which is good for the private equity business.

0:02:47.200 --> 0:02:49.040
<v Speaker 2>You know. I think that the areas that I'm most

0:02:49.080 --> 0:02:52.600
<v Speaker 2>focused on is, or that I think I have tremendous opportunity,

0:02:52.680 --> 0:02:55.360
<v Speaker 2>is secondary private equity. There's just been so much deployed

0:02:55.360 --> 0:02:58.640
<v Speaker 2>in private equity. There hasn't been that kind of liquidity ability.

0:02:58.840 --> 0:03:01.000
<v Speaker 2>There's been about one hundred and fifty billion deployed in

0:03:01.120 --> 0:03:04.919
<v Speaker 2>secondary pe and we're still seeing you know, Lexington Partners

0:03:05.840 --> 0:03:07.720
<v Speaker 2>raised a fund, they closed a twenty two point seven

0:03:07.720 --> 0:03:09.640
<v Speaker 2>billion dollar fund last year. I think they've deployed about

0:03:09.639 --> 0:03:13.600
<v Speaker 2>seventy percent of it with very large discounts, almost you know,

0:03:13.720 --> 0:03:18.280
<v Speaker 2>sixty percent more than the average discount historically. So secondary PE.

0:03:18.320 --> 0:03:21.440
<v Speaker 2>We also think real estate debts really interesting. Banks aren't

0:03:21.480 --> 0:03:24.480
<v Speaker 2>able to lend, they're clogged up with office Regional banks

0:03:24.520 --> 0:03:26.720
<v Speaker 2>were the big real estate lenders and so as they

0:03:26.720 --> 0:03:29.440
<v Speaker 2>haven't been able to lean in. Those private credit managers

0:03:29.639 --> 0:03:33.680
<v Speaker 2>who have real estate expertise can fill in that void

0:03:33.760 --> 0:03:36.520
<v Speaker 2>and benefits Street Partners. We have as about nine billion

0:03:36.520 --> 0:03:39.200
<v Speaker 2>in real estate, and they think it's a really interesting opportunity.

0:03:39.560 --> 0:03:41.680
<v Speaker 1>Mainly in the US or there are there are also

0:03:41.760 --> 0:03:43.840
<v Speaker 1>other parts of the world where you could actually see distress.

0:03:43.920 --> 0:03:46.440
<v Speaker 2>Yeah, I think in the secondary PE space, you're seeing

0:03:46.480 --> 0:03:48.400
<v Speaker 2>it all over because there's a need for you know,

0:03:48.520 --> 0:03:51.080
<v Speaker 2>for LPs to get their liquidity. I think in the

0:03:51.080 --> 0:03:53.920
<v Speaker 2>real estate that is more of a US issue. Look

0:03:53.920 --> 0:03:56.560
<v Speaker 2>at I think office all over the world, you know,

0:03:56.600 --> 0:04:00.440
<v Speaker 2>has issues, but it be office space, its not a

0:04:00.560 --> 0:04:03.400
<v Speaker 2>office space. But in the US it was the regional

0:04:03.440 --> 0:04:05.440
<v Speaker 2>banks who were the primary lenders and they're just not

0:04:05.600 --> 0:04:07.960
<v Speaker 2>able to capital requirements have changed in the US, is

0:04:08.040 --> 0:04:09.680
<v Speaker 2>they're just not able to lend like they used to.

0:04:10.280 --> 0:04:12.280
<v Speaker 1>There's also so much talk about, you know, crypto being

0:04:12.320 --> 0:04:15.880
<v Speaker 1>at the center of the Trump administration's kind of second mandate.

0:04:16.279 --> 0:04:19.919
<v Speaker 2>Did you participate in the Trump and Millennia mean coin

0:04:20.040 --> 0:04:20.400
<v Speaker 2>or whatever?

0:04:20.760 --> 0:04:23.280
<v Speaker 1>I haven't, but this has everyone excited. They were even

0:04:23.320 --> 0:04:27.440
<v Speaker 1>talking about in Davos. Does it change an appetite for ETFs,

0:04:27.480 --> 0:04:30.359
<v Speaker 1>does it change you know, is it market liquidity in

0:04:30.400 --> 0:04:33.440
<v Speaker 1>some places? And does it impact basically your company?

0:04:33.880 --> 0:04:35.680
<v Speaker 2>First of all, I think it's really important to think

0:04:35.680 --> 0:04:38.800
<v Speaker 2>of blockchain as a technology. It's a programming language, right

0:04:38.800 --> 0:04:41.479
<v Speaker 2>that does certain things really well. I do think that

0:04:41.600 --> 0:04:45.160
<v Speaker 2>it will It's likely that ETFs and mutual funds will

0:04:45.200 --> 0:04:48.600
<v Speaker 2>ultimately be built on block changes because it's an incredibly efficient,

0:04:48.640 --> 0:04:53.440
<v Speaker 2>efficient technology. And then there's the crypto world, some of

0:04:53.480 --> 0:04:56.440
<v Speaker 2>which I think has tremendous opportunity and some of which

0:04:56.480 --> 0:04:58.040
<v Speaker 2>I think it'll be noise. It'll be a little bit

0:04:58.120 --> 0:05:00.640
<v Speaker 2>like the dot com era, when you know, eventually you

0:05:00.720 --> 0:05:03.160
<v Speaker 2>had some of the biggest companies of the next decade

0:05:03.160 --> 0:05:04.479
<v Speaker 2>that came out of it, and then you had a

0:05:04.480 --> 0:05:06.719
<v Speaker 2>lot that kind of blew away to the side, and

0:05:06.760 --> 0:05:10.400
<v Speaker 2>so I think the crypto world is similar. I think

0:05:10.800 --> 0:05:13.279
<v Speaker 2>the thing with the Trump administration is we're going to

0:05:13.279 --> 0:05:16.400
<v Speaker 2>start to see them converge more, the trad fi and

0:05:16.440 --> 0:05:18.840
<v Speaker 2>the crypto, which is something that we need. We need

0:05:18.880 --> 0:05:21.479
<v Speaker 2>to have some sort of regulatory clarity so that you

0:05:21.480 --> 0:05:24.960
<v Speaker 2>could bring these together because the fundamentally it will drive

0:05:24.960 --> 0:05:29.039
<v Speaker 2>out costs and there is great innovation that the technology enables.

0:05:29.480 --> 0:05:31.160
<v Speaker 1>Is that going to be overlaid by inflation?

0:05:32.040 --> 0:05:35.520
<v Speaker 2>Well so inflation, you know, I actually I do think

0:05:35.560 --> 0:05:39.120
<v Speaker 2>that if I were to predict, I think that you

0:05:39.160 --> 0:05:42.000
<v Speaker 2>could have at the end of twenty five the ten

0:05:42.040 --> 0:05:45.080
<v Speaker 2>year at five percent, you know, I just and by

0:05:45.120 --> 0:05:49.240
<v Speaker 2>the way, from nineteen fifty to the to the GFC

0:05:49.720 --> 0:05:51.880
<v Speaker 2>kind of the neutral rate on FED funds was about

0:05:51.880 --> 0:05:53.640
<v Speaker 2>four percent, and the ten year of five percent, that's

0:05:53.680 --> 0:05:56.200
<v Speaker 2>actually much more normalized. I think that's what we're going

0:05:56.240 --> 0:05:58.080
<v Speaker 2>to see. And I think that the Fed is going

0:05:58.120 --> 0:05:59.920
<v Speaker 2>to pause right now. They're going to try to you know,

0:06:00.680 --> 0:06:04.200
<v Speaker 2>this gives them time to see how Trump's policies impact

0:06:04.240 --> 0:06:07.039
<v Speaker 2>the economy. Some of them can be inflation area, and

0:06:07.080 --> 0:06:09.359
<v Speaker 2>let's face it, the US consumer is still very strong.

0:06:10.120 --> 0:06:14.440
<v Speaker 2>You know, the inflation numbers, Unemployment still still pretty low,

0:06:14.800 --> 0:06:17.839
<v Speaker 2>so the inflation numbers are pretty sticky. And I just

0:06:17.880 --> 0:06:20.359
<v Speaker 2>don't know that we go back to that period of

0:06:20.600 --> 0:06:22.279
<v Speaker 2>much lower interest rates.

0:06:22.400 --> 0:06:24.960
<v Speaker 1>But that again changes everything, which is maybe why you're

0:06:24.960 --> 0:06:28.400
<v Speaker 1>seeing opportunities probably if you're higher for longer.

0:06:28.400 --> 0:06:31.760
<v Speaker 2>So but kind of more normal for longer. Right, it's

0:06:31.839 --> 0:06:34.080
<v Speaker 2>much more of a normal rate. And I do think

0:06:34.120 --> 0:06:36.920
<v Speaker 2>that for example, on the private equity side and private

0:06:36.960 --> 0:06:39.880
<v Speaker 2>market side, look at it was easier to make money

0:06:39.920 --> 0:06:43.400
<v Speaker 2>when cash costs nothing. Now you have to be very

0:06:43.480 --> 0:06:47.120
<v Speaker 2>skilled because your carry costs of say five to eight percent,

0:06:47.960 --> 0:06:50.120
<v Speaker 2>means that your investments are going to have a drag

0:06:50.160 --> 0:06:51.760
<v Speaker 2>on them, and so you have to be very good.

0:06:52.520 --> 0:06:54.400
<v Speaker 2>And so I think you'll see those who are skilled

0:06:54.440 --> 0:06:55.760
<v Speaker 2>and others will fall away.

0:06:56.400 --> 0:06:58.760
<v Speaker 1>Jenny. For the integration of Western, how's it going. I

0:06:58.760 --> 0:07:01.320
<v Speaker 1>know you've started with you know, some big chunks of it.

0:07:01.600 --> 0:07:05.240
<v Speaker 2>We are working through the integration of westerd yes, and

0:07:05.279 --> 0:07:07.720
<v Speaker 2>that you know that we've done it. I think now

0:07:07.839 --> 0:07:09.880
<v Speaker 2>when we bought Lake Mason, it was actually like buying

0:07:09.920 --> 0:07:14.280
<v Speaker 2>seven managers. Plus we've been integrating Putnam investments and we've done.

0:07:14.400 --> 0:07:17.040
<v Speaker 2>There's less integration that happens on a private market acquisition

0:07:17.080 --> 0:07:21.280
<v Speaker 2>than a traditional acquisition, and so we've been methodically going

0:07:21.280 --> 0:07:23.160
<v Speaker 2>along and so we're in that process.

0:07:22.840 --> 0:07:24.920
<v Speaker 1>And so it's going to plan. Is it quicker than

0:07:24.920 --> 0:07:25.360
<v Speaker 1>I expected?

0:07:25.480 --> 0:07:28.920
<v Speaker 2>Slower? It's probably quicker than expected because we were not

0:07:29.000 --> 0:07:32.120
<v Speaker 2>planning to do it until, you know, after July twenty five.

0:07:32.160 --> 0:07:33.880
<v Speaker 2>And now we've started that process earlier.

0:07:34.320 --> 0:07:36.760
<v Speaker 1>And that's Are you happy with the progress so far?

0:07:36.760 --> 0:07:38.920
<v Speaker 1>I mean, you started earlier, Will it finish earlier? And

0:07:39.000 --> 0:07:40.960
<v Speaker 1>is that's a positive.

0:07:40.520 --> 0:07:42.239
<v Speaker 2>For I think it's definitely a positive.

0:07:42.280 --> 0:07:43.440
<v Speaker 1>I mean, look, our.

0:07:43.760 --> 0:07:48.160
<v Speaker 2>Whole model is to keep the investment teams independent and

0:07:48.280 --> 0:07:51.960
<v Speaker 2>to build scale around them, and it's become even more important.

0:07:51.960 --> 0:07:54.600
<v Speaker 2>Actually one of the acquisitions, it was actually a private

0:07:54.640 --> 0:07:57.600
<v Speaker 2>credit manager said she's when Franklin bought us, we thought

0:07:57.600 --> 0:07:59.760
<v Speaker 2>they'd help us on distribution. But now that I see

0:07:59.800 --> 0:08:02.560
<v Speaker 2>what's happening on AI and the cost of data, I

0:08:02.720 --> 0:08:06.520
<v Speaker 2>realize we could never participate at this level without the

0:08:06.600 --> 0:08:08.800
<v Speaker 2>kind of scale and breadth of Franklin doubled in. So

0:08:08.800 --> 0:08:10.960
<v Speaker 2>that's what we try to build at the center and

0:08:11.000 --> 0:08:13.400
<v Speaker 2>then leave the independence of the investment team and I.

0:08:13.320 --> 0:08:15.280
<v Speaker 1>Know there's been an issue of course with one of

0:08:15.320 --> 0:08:15.960
<v Speaker 1>the managers.

0:08:15.960 --> 0:08:19.400
<v Speaker 2>There any updates, We are still working through it, you know.

0:08:19.640 --> 0:08:21.720
<v Speaker 1>Okay, Jennie Johnson, thank you so much for joining us

0:08:21.880 --> 0:08:24.240
<v Speaker 1>the first of us. Actually, yes, we have to catch

0:08:24.280 --> 0:08:25.320
<v Speaker 1>up at the end of the week to see how

0:08:25.560 --> 0:08:26.800
<v Speaker 1>how's that been going so far?

0:08:27.520 --> 0:08:29.520
<v Speaker 2>Fun, so far, it's great. Yeah, no, it's good to

0:08:29.520 --> 0:08:29.760
<v Speaker 2>be here.

0:08:29.840 --> 0:08:32.400
<v Speaker 1>There you go. Jenny Johnson, Chief executive Officer of course

0:08:32.400 --> 0:08:33.320
<v Speaker 1>of Franklin Templeton