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Speaker 1: Welcome to our Bloomberg television and radio audiences. I'm sitting

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Speaker 1: here with an exclusive interview in Washington, DC at Carlisle's

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Speaker 1: headquarters with the CEO of Carlisle, Harvey Schwartz, in his

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Speaker 1: first interview since joining a year ago as CEO, Harvey, Today,

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Speaker 1: you announced a number of strategic updates to investors. Your

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Speaker 1: stock is up the most it's been since twenty twenty two.

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Speaker 1: What is the biggest change that investors need to know

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Speaker 1: about the future of Carlisle today?

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Speaker 2: So great to see, is Shanali.

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Speaker 3: I think the movement in the stock, which you point out,

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Speaker 3: is much more about seeing the momentum in the franchise.

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Speaker 3: So coming into the fourth quarter, the team really came

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Speaker 3: together and whether it was record fre fundraising, the momentum

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Speaker 3: coming into twenty twenty four, and then of course on

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Speaker 3: the call, we outlined some strategic initiatives and for the

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Speaker 3: first time financial targets for twenty twenty four, which you

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Speaker 3: know have very significant trajectory.

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Speaker 1: We'll talk about those initiatives, but you can also say

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Speaker 1: you passed your first year on the job.

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Speaker 4: The grace period is over.

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Speaker 2: What's the biggest anniversary Yesterday?

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Speaker 4: Yeah, and what it's now.

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Speaker 1: You're looking into year two and a lot of people

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Speaker 1: think of this as a make or break year.

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Speaker 4: What is the biggest challenge for you as you entered

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Speaker 4: this year?

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Speaker 3: So twenty twenty three as a new CEO coming in,

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Speaker 3: it really was about investing time with my teams and

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Speaker 3: spending time with our investing clients around the world. I

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Speaker 3: think I'm met with over three hundred LPs in the

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Speaker 3: first year that I was here, and with respect my teams,

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Speaker 3: it was really about me getting to know them, but

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Speaker 3: more importantly them getting to know me. Twenty twenty four

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Speaker 3: is really about focus on our priorities, excellence of execution,

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Speaker 3: and more teamwork. If we do those three things, we'll

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Speaker 3: exceed our targets.

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Speaker 2: For this year.

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Speaker 1: Part of the changes that you made, these financial initiatives,

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Speaker 1: as well as some strategic updates you've made me are

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Speaker 1: going to change the way you pay your deal makers.

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Speaker 1: You've also announced at one point four billion dollar buy

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Speaker 1: back plan. How does this change incentives for the people

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Speaker 1: who work at Carlisle and the people who invest in Carlisle.

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Speaker 3: So when I showed up here, one of the first

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Speaker 3: things the senior investors said is we would like even

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Speaker 3: more alignment with our investors. So this is about with

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Speaker 3: our investing clients. This is really about alignment across our stakeholders.

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Speaker 3: So it's our senior investors, our investing clients, and our shareholders.

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Speaker 2: And as I said.

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Speaker 3: Earlier, it really is a win win win because our

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Speaker 3: investing clients get more alignment with our investors, our investors

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Speaker 3: get even more paid for performance, and our shareholders get

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Speaker 3: an increased, steady stream of fee related earnings.

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Speaker 1: Most investors would recognize it's a tough job. Carlisle's founders,

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Speaker 1: including David Rubinstein, who is a contributor to Bloomberg TV

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Speaker 1: as well, has been famously involved in the succession plan

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Speaker 1: at Carlisle, and they remain large shareholders of the firm.

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Speaker 1: How involved are they in the day to day operations.

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Speaker 2: I met with the founders before I took this role.

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Speaker 2: I was very.

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Speaker 3: Clear with them that I wanted them very involved in

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Speaker 3: the business. Carlisle's an iconic brand. They created an amazing

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Speaker 3: culture here. Getting to know this company over the pastor

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Speaker 3: has been an extraordinary privilege for me.

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Speaker 2: But having really their.

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Speaker 3: History, their connectivity with clients, their investing experience as much

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Speaker 3: will take as much as we can get at Carlile

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Speaker 3: so record.

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Speaker 1: For related earnings, as you have said, but even in

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Speaker 1: the last year there was a thirty six percent rise

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Speaker 1: in Carlisle stock last year. Rivals Blackstone areas we're seventy

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Speaker 1: percent or more.

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Speaker 4: How do you keep up?

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Speaker 1: How do you get Carlisle stock price to start to

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Speaker 1: match your rivals?

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Speaker 3: So I think about the stock price really as an output.

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Speaker 3: It is about, again what I said, focus on priorities,

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Speaker 3: deliver performance.

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Speaker 2: If we do all those things, the stock price is

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Speaker 2: going to follow.

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Speaker 1: How do you think about some of these areas that

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Speaker 1: have been very hot button issues across Wall Street?

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Speaker 4: Take private credit, for example.

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Speaker 1: On one hand, it is a big place for Carlisle

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Speaker 1: to be bringing in new money.

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Speaker 4: You've shown that in the fourth quarter.

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Speaker 1: On the other hand, there are a lot of questions

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Speaker 1: about the industry at large that a lot of money

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Speaker 1: is flowing in and whether there's enough opportunities to put

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Speaker 1: that money toward.

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Speaker 4: How do you address those concerns.

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Speaker 3: So I think there's really two questions that have come

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Speaker 3: up around credit. One of them I think really relates

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Speaker 3: to systemic risk, and I think a lot of those

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Speaker 3: discussions are sort of misunderstood. If you think about what

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Speaker 3: we do as capital providers and how we provide that capital,

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Speaker 3: and then you have a discussion around systemic risk, it

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Speaker 3: really doesn't have the three core characteristics. We don't have leverage,

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Speaker 3: we don't use significant leverage, there's not concentration risk, and

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Speaker 3: there's not interconnectivity and what we do. So I think

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Speaker 3: the systemic risk discussion that's a bit overblown and things.

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Speaker 3: In terms of deploying credit, it's our responsibility first and

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Speaker 3: foremost to our investment clients to deploy that credit in

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Speaker 3: the most thoughtful way possible, and that's what having twenty

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Speaker 3: plus years experience in the credit.

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Speaker 4: Business, there is a risk of a bubble.

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Speaker 3: I think whenever you see a lot of capital moving

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Speaker 3: into a space, you have to worry about at the margin,

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Speaker 3: how that distorts the opportunity set. But that's where the

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Speaker 3: investing teams really have to do their best work. They

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Speaker 3: have to pick their credits, they have to deploy that capital,

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Speaker 3: and they have to perform.

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Speaker 1: You know, we're sitting here on a week two where

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Speaker 1: you're seeing fears about regional banking come up once again

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Speaker 1: in the market. You're seeing the issues over it near

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Speaker 1: your community Bank and the.

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Speaker 4: Downgrades that it's been facing.

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Speaker 1: When you think about the role of private capital, where

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Speaker 1: Carlisle fits into the story, how much can private capital

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Speaker 1: really start to jump into the problems of the regional

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Speaker 1: banking system.

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Speaker 3: So I think, as capital providers, whether it's in our

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Speaker 3: private equity platform, credit, our solutions business, I think this

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Speaker 3: capital can be incredibly valuable, has proven to be valuable

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Speaker 3: in terms of solving economic problems, and so I think

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Speaker 3: when you think about banking crisis or a banking disruption,

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Speaker 3: the best way to address that is with the most

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Speaker 3: efficient cost of capital. And if Carlisle can be a

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Speaker 3: provider of that capital, I think we should put that

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Speaker 3: capital to work on behalf of our clients.

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Speaker 1: Well, some of the areas too, are kind of choppier.

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Speaker 1: Let's say commercial real estate, for example. There are a

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Speaker 1: lot of fears that the commercial real estate sector could

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Speaker 1: really be facing a significant crisis, particularly in the New

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Speaker 1: York area.

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Speaker 4: Do you share those concerns.

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Speaker 3: So one of the very fortunate things that I heard

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Speaker 3: when I showed about Carlisle is one of the best

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Speaker 3: real estate investing teams in the world. Their performance over

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Speaker 3: twenty years is truly extraordinary. When I talk to them

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Speaker 3: about commercial real estate, they really started bagging away from

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Speaker 3: office many many years ago. We don't see it as

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Speaker 3: a sector where yet we see it real opportunity. So

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Speaker 3: I think there's going to be challenges, But I think

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Speaker 3: this plays out over many, many years, because in some

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Speaker 3: respects we can see this problem, but it's a problem

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Speaker 3: that we'll have to be digested by the markets over

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Speaker 3: a number of years.

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Speaker 1: Yeah, let's get a little macro here, because part of

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Speaker 1: this problem is being caused on the heels of higher

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Speaker 1: interest rates. And you have a market now that still

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Speaker 1: expects more than five rate cuts before the January FOMC

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Speaker 1: meeting of next year.

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Speaker 4: Do you believe that those five rate cuts will come

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Speaker 4: to fruition.

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Speaker 3: So we have a pretty unique perspective on this because

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Speaker 3: across our portfolio companies, we have an excess of a

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Speaker 3: million employees and we see the data and the performance.

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Speaker 3: I would say that if you step back and you

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Speaker 3: think about historic FED behavior, the FED typically either is

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Speaker 3: fine tuning or cutting dramatically or raising dramatically. And when

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Speaker 3: we look at the data from our portfolio companies, and

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Speaker 3: then you look at strong GDP unemployment numbers that are

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Speaker 3: quite attractive when you see inflation has really stopped materially

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Speaker 3: and paused at this stage. I don't think we should

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Speaker 3: be rooting for five or eight rate cuts. I think

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Speaker 3: that would suggest an environment that actually requires a lot

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Speaker 3: of attention from the Fed. I think we should be

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Speaker 3: hoping for fine tuning because I think the economy is

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Speaker 3: in better shape than people are giving credit for, and

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Speaker 3: I think the Fed's done a fantastic job navigating us.

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Speaker 4: So what is a more realistic view of where rates go?

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Speaker 3: In our model, we would expect the base case to

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Speaker 3: be two or three cuts. The FED we expect to

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Speaker 3: be very data sensitive. We're watching this closely also, but

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Speaker 3: again my crystal ball may be as good as yours,

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Speaker 3: so we'll see what happens.

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Speaker 2: Well, that's are hard to predict.

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Speaker 1: What's the risk then that we tip over from a

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Speaker 1: soft landing or even no landing into a recession. What

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Speaker 1: would cause the tithes to turn?

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Speaker 3: I think you could see if you had an unexpected

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Speaker 3: market disruption, geopolitical event. But remember, the FED has communicated

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Speaker 3: to us that they're watching this data very carefully, and

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Speaker 3: so hoping for multiple rate cuts. I think it's a

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Speaker 3: little bit of a recency bias. I think it's the

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Speaker 3: people really saying, oh, I really enjoyed that QUI that

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Speaker 3: we're experiencing. I think, as market participants, we should want

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Speaker 3: a normal life cost of capital, and if we can

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Speaker 3: get there through this process, I think it'd be an

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Speaker 3: extraordinary outcome, and I think it actually be. I think

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Speaker 3: be great for business opportunities. I think it'd be really

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Speaker 3: good for Carlisle, and I think it'd be great for

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Speaker 3: investing clients.

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Speaker 2: I think we create a lot of alpha.

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Speaker 1: I'm curious about your view of the world. We're sitting

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Speaker 1: here in Washington, d C.

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Speaker 4: Today. I have a few DC questions for you before

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Speaker 4: we get there.

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Speaker 1: You do have a large presence internationally as well, particularly

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Speaker 1: when it comes to China at a time where there

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Speaker 1: are a lot of questions about the world's second largest economy,

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Speaker 1: the strength of the economy there and its relationship with Washington,

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Speaker 1: d C.

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Speaker 4: And the United States. How do you view those.

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Speaker 1: Challenges and how do you navigate them as an investor.

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Speaker 3: So we represent investors all over the world. They have

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Speaker 3: different requirements. Some of those will look at China and

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Speaker 3: they'll say, you know, the risk profile doesn't look like

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Speaker 3: it fits our characters.

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Speaker 2: Many of my clients around the world in.

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Speaker 3: Touring the world last year, they really like the risk

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Speaker 3: reward in China, and you know, you bring up China.

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Speaker 3: It got a lot of attention because we sold our

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Speaker 3: position in McDonald's. I'm sure you saw it. This was

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Speaker 3: a tremendous return over a number of years. And the

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Speaker 3: one thing I'll say about that because it really highlights

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Speaker 3: the power of our private equity franchise.

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Speaker 2: You know, people ask me this question all the time

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Speaker 2: on higher rates, what does that mean for business?

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Speaker 3: When you actually look at that transaction, it was a

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Speaker 3: mere seven times return for our investors in China just

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Speaker 3: exited writing this environment and roughly eighty percent of the

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Speaker 3: value creation came just from operational enhancements. So it's really

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Speaker 3: what we do. It's about picking the right partner. Being

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Speaker 3: in China made sense and actually executing the business. So

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Speaker 3: I think there's opportunities.

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Speaker 1: What about the opportunities here at home? There have been

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Speaker 1: a large large US investors, a lot of big names

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Speaker 1: sounding alarms about what's happening here, not about the economy,

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Speaker 1: but about the sustainability of what we're spending as a country.

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Speaker 4: The debt load and the deficit.

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Speaker 1: How do you view that from where you're sitting and

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Speaker 1: do you think it could spiral into a bigger problem.

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Speaker 2: So I think these are all legitimate concerns.

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Speaker 3: Tend to lament a lot of things in the United States,

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Speaker 3: and I think I'll tell you, when I traveled around

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Speaker 3: the world last year in a number of geographies, I

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Speaker 3: was told by our investing clients they felt a bit

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Speaker 3: over allocated to the United States, and they actually said

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Speaker 3: they're going.

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Speaker 2: To keep allocating more to the United States. I wouldn't

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Speaker 2: bet against the United States.

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Speaker 1: Well, what about that concern embedded with the dysfunction you're

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Speaker 1: seeing in Congress alone, how do you see kind of

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Speaker 1: this gridlock impacting investors throughout the year?

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Speaker 3: So, you know, we're in an election year and I

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Speaker 3: was just talking to one of our chief economists, Jason Thomas.

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Speaker 3: We're having a discussion about this just last week. And

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Speaker 3: I think the S and P five hundred has gone

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Speaker 3: through twenty three election cycles. In twenty three election cycles,

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Speaker 3: roughly eighty plus percent of the time Democrat Republican, the

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Speaker 3: S and P five hundreds gone up. I'd like to

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Speaker 3: see us get through an election cycle, and I'd like

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Speaker 3: to see everyone in Washington really start to come together,

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Speaker 3: because we do have complex problems and coming together is

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Speaker 3: the way we're.

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Speaker 2: Going to solve them.

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Speaker 1: Well with a content threat here of government shutdowns, for example,

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Speaker 1: do you think that the road ahead this year could

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Speaker 1: be bumpy, particularly as we had due to election to

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Speaker 1: the election, If.

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Speaker 3: It's been like the ones I just mentioned for the

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Speaker 3: twenty three elections since the S.

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Speaker 2: And P five hundred, I think it's going to be

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Speaker 2: good for markets.

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Speaker 3: I don't think it's great when our politicians play ping

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Speaker 3: pong with things like the debt selling and everything else.

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Speaker 3: I think we should just focus on the business of

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Speaker 3: the government. But I'm not a politician.

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Speaker 1: The election itself, obviously, this is a very unique election

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Speaker 1: with two leading contenders having served in office recently.

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Speaker 4: How do you see this really playing out?

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Speaker 1: Both candidates, both leading candidates in the Democratic and Republican

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Speaker 1: Party of.

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Speaker 4: Low approval ratings.

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Speaker 1: How do you think about this dynamic in the c

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Speaker 1: suite and the risks that it poses into twenty twenty five.

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Speaker 2: So, Carlo, we've been doing this for a very very

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Speaker 2: long time.

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Speaker 3: We've been through complicated elections, we've been through surprise elections.

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Speaker 3: I think we will get through this election, and as

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Speaker 3: I said, we'll focus on the business and the priorities of.

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Speaker 4: The day, priorities of today.

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Speaker 1: We've kind of started this conversation talking about Carlisle, the

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Speaker 1: future of Carlisle. By the time you're done leading Carlisle,

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Speaker 1: what ways will you have transformed the firm?

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Speaker 3: Well, I'm not thinking about being done. I think we're

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Speaker 3: just getting started. I couldn't be prouder of my team

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Speaker 3: this year, the way they really came together. You saw

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Speaker 3: it and all the growth and you see in the

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Speaker 3: menum coming into this year. Again, this is really as

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Speaker 3: I said, if we focus on our investing clients, we

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Speaker 3: focus on performance, Carlisle continue to grow and we will

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Speaker 3: be an incredibly important capital provider to people benefiting from

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Speaker 3: that capital.

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Speaker 1: With all of these changes, it begs the question too,

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Speaker 1: you know, private credit wealth channels. What's the future of

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Speaker 1: traditional private equity, especially under a higher interest rate regime?

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Speaker 4: As you said, so you.

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Speaker 2: Know you and I have chat about this before.

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Speaker 3: I don't generally make any sort of long data predictions.

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Speaker 3: I think the role of private equity in private capital

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Speaker 3: will only grow over the next several years. The number

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Speaker 3: of companies that will want to stay private, the wealth

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Speaker 3: accumulation in the world, the actual wealth that will move

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Speaker 3: move into this sector, often referred to as the democrazation

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Speaker 3: of the asset class, the tail winds in the industry,

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Speaker 3: And one of the great appeals for me actually coming

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Speaker 3: in and thinking about can I really have the impact

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Speaker 3: I want to have at Carlisle, is about the trajectory

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Speaker 3: of this industry.

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Speaker 2: I think it's early days for private capital managers, and

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Speaker 2: I think we're all on a pretty.

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Speaker 4: Steady growth path, you know.

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Speaker 1: Last word here, it's interesting you're talking about these share buybacks.

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Speaker 1: You're talking about also the changes you're making at the firm.

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Speaker 1: Analysts on the call earlier was almost asking are you

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Speaker 1: giving back too much money? How are you going to

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Speaker 1: keep investing back into the firm? How are you going

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Speaker 1: to keep investing back into the firm.

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Speaker 3: So, in terms of how we think about capital allocation,

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Speaker 3: today was all about defining the flexibility, acknowledging first and

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Speaker 3: foremost that we think the enterprise value isn't represented, and

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Speaker 3: so if we think that is the best marginal deployment

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Speaker 3: of capital, we'll put it back to the shareholder. We're

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Speaker 3: not going to sacrifice growth opportunities, and I don't want

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Speaker 3: to make it to technical, but it really just is

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Speaker 3: about the efficient frontier and efficiently allocating that capital. If

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Speaker 3: we think the best opportunities in growth where we see

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Speaker 3: enormous opportunity, we'll do it. If we think the capital

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Speaker 3: flexibility provides us the opportunity to return to the shows,

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Speaker 3: we'll do it.

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Speaker 2: But the balance sheet is strong and we can do

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Speaker 2: both things.

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Speaker 4: Harvey, thank you so much for your time.

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Speaker 1: That is Harvey Schwartz, the CEO of Carlisle, just off

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Speaker 1: of his first year on the job for Bloomberg Television

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Speaker 1: and Radio audiences