Latest / Masters in Business / Christine Hurtsellers on the Business of Trust (Podcast)

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Christine Hurtsellers on the Business of Trust (Podcast) · Masters in Business

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Speaker 1: M This is Mesters in Business with Very Renaults on
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Speaker 1: Bluebird Radio. This week on the podcast, I have an
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Speaker 1: extra special guest. Christine hurt Sellers is the CEO of
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Speaker 1: Investment Management. You may not know the name Voya that well.
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Speaker 1: They've been around for forty years, a lot of which
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Speaker 1: was spent as I n g um. They run about
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Speaker 1: two billion dollars. They do over seven billion dollars in revenue.
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Speaker 1: Christine Hurtsels has really a fascinating background. In addition to
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Speaker 1: being on all the most important, most influential lists, She's
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Speaker 1: worked in everything from structured product to fixed income to
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Speaker 1: the c i O of foy you before becoming the
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Speaker 1: CEO of Void Investment Management. Really very knowledgeable person about
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Speaker 1: all aspects of investing and one of the things that
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Speaker 1: Voya is best known for are there um defined contribution business.
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Speaker 1: Uh really, I just found this to be a fascinating,
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Speaker 1: fascinating conversation and I think you will also, so, with
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Speaker 1: no further ado, my conversation with Voya Investment Management CEO
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Speaker 1: Christine hurt Sellers. This is mesters in Business with Very
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Speaker 1: Renaults on Bluebird Radio. My special guest this week is
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Speaker 1: Christine hurt Sellers. She is the CEO of Voya Investment Management.
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Speaker 1: The firm manages over two hundred and forty five billion
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Speaker 1: dollars in assets and generates more than seven billion dollars
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Speaker 1: in revenue annually. Previously, she was the Chief Investment Officer
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Speaker 1: of the fixed Income group at Voya and has had
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Speaker 1: a number of interesting positions throughout her career. Hurt Sellers
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Speaker 1: has been named to numerous most Influential and finance lists.
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Speaker 1: Most recently, she was named Baron's Top ten most Influential
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Speaker 1: Women in Wealth Management. Christine Hert Sellers, Welcome to Bloomberg.
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Speaker 1: Thank you so much, Barry. So let's start out with
2:09
Speaker 1: your current gig and then work our way back a
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Speaker 1: little bit. Your chief executive officer avoida investment management but
2:17
Speaker 1: previously you were chief investment officer. How do you make
2:21
Speaker 1: the leap from c i O to CEO. It seems
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Speaker 1: like it's a very different set of skills, very you know,
2:28
Speaker 1: in some respects as different skills, but in a lot
2:30
Speaker 1: of boys, very similar skills. And so what in the
2:33
Speaker 1: world do I mean by that? You know, a lot
2:35
Speaker 1: of what you need in the role of CEO is
2:39
Speaker 1: good strategic thinking. So really being able to think about
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Speaker 1: where the markets, where's the business going out, you know, three,
2:45
Speaker 1: three to five years from now. And so I've been
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Speaker 1: an investor most of my career, so when you think
2:49
Speaker 1: about strategic thinking and reading the markets and opportunities, there's
2:54
Speaker 1: a lot of similarity there as well, as you have
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Speaker 1: to have a team approach, really have good intuition and
3:04
Speaker 1: figure out how are we going to set a strategy,
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Speaker 1: how are we going to get people excited and really
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Speaker 1: moving in this direction? And so what they call e
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Speaker 1: Q that emotional intelligence. Uh. You know, the more senior
3:16
Speaker 1: you become over time, the more important that actually is,
3:19
Speaker 1: and less so pure technical skills that you develop early
3:23
Speaker 1: in your career. So really it was a pretty natural move.
3:27
Speaker 1: But I will tell you Bury, the one thing that
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Speaker 1: I really miss, uh is my I miss being in
3:33
Speaker 1: the markets for sure. I mean just the joy of
3:36
Speaker 1: being with an investment team. That isn't my day job anymore.
3:40
Speaker 1: But again, I love strategy, love working with people, and
3:43
Speaker 1: so I think it's just a wonderful role for anybody
3:46
Speaker 1: to have. So despite some pretty big challenges, Voya had
3:51
Speaker 1: a pretty good tell us a little bit about last year.
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Speaker 1: How did you guys do so well. Wow, well, there's
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Speaker 1: no very I mean last year Judd started out in
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Speaker 1: such a crazy fashion, and I would say the way
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Speaker 1: that Voya did so well. I mean, number one, you know,
4:09
Speaker 1: we have great customer relationships, um, and you know, really
4:13
Speaker 1: differentiated products so much today you know, people are talking
4:17
Speaker 1: about alternatives and private markets and seventy billion of the
4:22
Speaker 1: assets that we manage are in that category. So number one,
4:25
Speaker 1: you know, we we certainly have great products that our
4:28
Speaker 1: clients want. But but more importantly, you know, it was
4:32
Speaker 1: really leveraging our culture into a period of real uncertainty.
4:35
Speaker 1: I mean, as you recall, the markets just completely froze
4:40
Speaker 1: uh in the in the spring and uh and so
4:43
Speaker 1: you know, what did we do as as things just
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Speaker 1: got so disconnected? It was leveraging the culture of of
4:49
Speaker 1: just being transparent and and talking to our clients and
4:54
Speaker 1: really walking them through. We did tons of webinars, uh,
4:58
Speaker 1: talked about what was working, what was not, what was
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Speaker 1: in the portfolio, what were we doing, and what we're
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Speaker 1: our views and we got the feedback from clients. Hey,
5:06
Speaker 1: not all asset managers are doing that, right, But at
5:09
Speaker 1: the end of the day, we're in the trust business.
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Speaker 1: It's their money we're managing, and we want to be
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Speaker 1: that trusted partner. So how you behave and how your
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Speaker 1: people rallied together in times of stress, those are moments
5:22
Speaker 1: in life and in careers that truly define you. So
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Speaker 1: couldn't be prouder of the team. As we work through
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Speaker 1: two thousand and twenty two push ahead through a lot
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Speaker 1: of uncertainty. So given how successful two thousand and twenty was,
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Speaker 1: did that momentum carry over to is things began to
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Speaker 1: open up and sort of return to normal? You know,
5:45
Speaker 1: it has and a lot of the a lot of
5:48
Speaker 1: the momentum that we continued to see just based on
5:51
Speaker 1: where yields are in the world and what's going on
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Speaker 1: really are and some of those more private asset classes
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Speaker 1: that we managed, so I think commercial real estate or
6:00
Speaker 1: you know, actually what we call private credit, meaning issuers
6:03
Speaker 1: that don't come to a public credit market, and we
6:06
Speaker 1: have a very strong business there. So as a result,
6:09
Speaker 1: is people continue to struggle with where am I going
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Speaker 1: to put my money? I'm uncertain? You know, the yields
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Speaker 1: are really low. We tend to see quite a bit
6:16
Speaker 1: of demand in those assets that we manage. Really kind
6:20
Speaker 1: of interesting. So you guys are one of the larger
6:23
Speaker 1: investment managers in the defined contribution space. But for your size,
6:29
Speaker 1: you kind of fly a little bit onto the radar.
6:31
Speaker 1: Tell us a little bit about that practice and how
6:34
Speaker 1: you became as large as you have in that space. Yeah,
6:39
Speaker 1: you know, voy overall, you're absolutely right, Verry. We are
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Speaker 1: one of the largest companies that work with define contribution
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Speaker 1: plans and managing them for employers and and really having
6:50
Speaker 1: you know, good good tools really to engage employees and
6:54
Speaker 1: to help them save. And so I would say, though,
6:58
Speaker 1: as you say, you know, we ourselves small but mighty
7:01
Speaker 1: as a company. We've got a great brand, great brand recognition,
7:06
Speaker 1: and our brand is really only as Voia only about
7:09
Speaker 1: I'm gonna say, seven years old, uh at this point.
7:12
Speaker 1: And yet you know we're we're our brand recognition is
7:16
Speaker 1: very attached to retirement. So going back over all, like
7:20
Speaker 1: like how do we do this? And and again we're
7:24
Speaker 1: kind of small and mighty, we like to think, and
7:26
Speaker 1: it's actually true that we're more agile. We can pivot
7:29
Speaker 1: more carefully or quickly actually than than other people. And
7:34
Speaker 1: one of the things that we tell our clients are
7:37
Speaker 1: when we engage on asset management specifically is we call
7:40
Speaker 1: ourselves big enough to deliver, but small enough to care.
7:44
Speaker 1: And when you think about that, uh, you know, what
7:47
Speaker 1: do those two things mean? Because you know when you
7:51
Speaker 1: wake up and you look at the newspaper today and
7:53
Speaker 1: you say, oh my gosh, you know these asset managers
7:55
Speaker 1: that call them between two hundred billion to a trillion
8:00
Speaker 1: are just going to go away. Right. The industry is consolidating.
8:03
Speaker 1: But at the end of the day, I just don't
8:05
Speaker 1: think clients want to wake up and and just have
8:08
Speaker 1: a few select partners where they're gigantic and that customization
8:13
Speaker 1: in that high touch isn't really available. And over half
8:17
Speaker 1: of our assets that we manage barrier what we call customized,
8:21
Speaker 1: meaning the client has specific needs that they need. It's
8:24
Speaker 1: not just to what we call a generic benchmark in
8:27
Speaker 1: the marketplace. So again that that's our brand, that's our value,
8:31
Speaker 1: and it's really resonating with clients. And so we're growing
8:35
Speaker 1: as a company, you know, despite the rhetoric around the
8:38
Speaker 1: difficulty to compete in the in the trillion dollar club.
8:42
Speaker 1: So let's talk a little bit about that customization. What
8:45
Speaker 1: does a typical client look like and what do they
8:48
Speaker 1: want beyond just a standard six or these days stock
8:54
Speaker 1: and bond portfolio. Well, you know, we have a variety
8:58
Speaker 1: of clients. But but on the institutional side, specifically, when
9:03
Speaker 1: you think about insurance companies or some of the pension funds, Uh,
9:08
Speaker 1: they have unique liabilities that they're managing assets against, so
9:13
Speaker 1: so they need somebody that's going to engage them. And
9:15
Speaker 1: then plus, when you look at the context of the
9:17
Speaker 1: market and where the equity markets are and all the
9:20
Speaker 1: liquidity in the world, more and more clients are nervous about,
9:24
Speaker 1: you know, yields being so low, and where can I
9:27
Speaker 1: really put things in terms of what asset classes offer
9:30
Speaker 1: great returns? And so what does customization look like? Um,
9:34
Speaker 1: let's just take a somewhat simple example in the fixed
9:39
Speaker 1: income market. And so there's a there's a product or
9:42
Speaker 1: a trend called l d I or liability you know,
9:46
Speaker 1: sort of immunizing liabilities for pension funds, right, And so
9:50
Speaker 1: as the equity markets have done well, so many of
9:54
Speaker 1: the pension funds are saying, wow, I want to do
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Speaker 1: what I call immunize and actually move my overall pension
10:01
Speaker 1: funds that I have as a corporation into more of
10:05
Speaker 1: a fixed income laddered bond portfolio, so that that's essentially
10:11
Speaker 1: what's happening. And yet that fixed income laddered bond portfolio,
10:16
Speaker 1: there aren't a lot of corporate issuers out there, so
10:19
Speaker 1: you end up taking trading equity volatility for concentrated credit risk.
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Speaker 1: So what do we do We actually blend in private
10:28
Speaker 1: credit with public bonds for those clients to offer them
10:32
Speaker 1: a unique solution where they can diversify some of the
10:36
Speaker 1: exposure to the companies that they're invested in. So that
10:38
Speaker 1: would just be one small example of how do we
10:42
Speaker 1: customize something to help our clients come up with a
10:44
Speaker 1: better solution. So that sounds not so much like you're
10:49
Speaker 1: reaching for yield with different credit risk or higher credit risk,
10:54
Speaker 1: but you're diversifying into yield that might be a little
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Speaker 1: more attractive because it's not yet part of the public market.
11:02
Speaker 1: Absolutely right, Perry. Really intriguing. And you mentioned some of
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Speaker 1: your clients are big insurance companies and um pension plans.
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Speaker 1: They have very specific liabilities at specific future dates. How
11:17
Speaker 1: do you manage towards that future you know date certain liability, Hey,
11:24
Speaker 1: we're gonna have to have X in two You really
11:27
Speaker 1: it's it's as you say, it's just that that dialogue
11:30
Speaker 1: with the clients in terms of do they have specific
11:33
Speaker 1: liquidity needs and impointant time that that they're looking to
11:37
Speaker 1: us to help them deliver do a lot of the specifically,
11:42
Speaker 1: some of these clients more and more asking how can
11:46
Speaker 1: I get yield and maybe uh not need as much liquidity.
11:50
Speaker 1: So when you think about when you think about the
11:53
Speaker 1: markets today and really the growth of private markets, I
11:55
Speaker 1: think that a lot of institutions are waking up and
11:58
Speaker 1: saying is liquidity necessarily as necessary meaning that they can
12:03
Speaker 1: quickly liquidate their bond portfolios right within a few days?
12:07
Speaker 1: Or do I actually have opportunities in my business model
12:10
Speaker 1: where I can have you know, long term investments and
12:13
Speaker 1: tuck it away. So when you think about that, uh
12:17
Speaker 1: and what we can do across floy a private credit
12:21
Speaker 1: could be a great example. We also have what a
12:24
Speaker 1: private equity business that focuses on what we call secondaries.
12:29
Speaker 1: So think about buying secondary private equity investments in you know,
12:34
Speaker 1: the marketplace at a at a very attractive kind of
12:38
Speaker 1: going in investment level. So when you think about those things,
12:41
Speaker 1: very those those really are opportunities where yes, you you
12:45
Speaker 1: don't necessarily call void tomorrow tomorrow and say please liquidate
12:48
Speaker 1: my real estate or my private equity portfolio. But if
12:52
Speaker 1: your patients and you have a long run business strategy,
12:55
Speaker 1: these can be some great opportunities to enhance your yield
12:58
Speaker 1: in your return. So tradeoff is a little better yield
13:02
Speaker 1: in exchange for less liquidity. But if you have that
13:05
Speaker 1: future liability and you don't need it for a decade,
13:08
Speaker 1: seems like a pretty reasonable trade off. Absolutely. And so again,
13:14
Speaker 1: is we hear a lot of the rhetoric in the
13:16
Speaker 1: market of oh, you know, our private assets, do people
13:18
Speaker 1: really understand them? Or you know, is it a bubble
13:22
Speaker 1: you know, with the growth of private assets? And again
13:24
Speaker 1: I would say no. I mean, certainly there are risks
13:28
Speaker 1: and opportunities within any broadbrush sector of the market. But
13:31
Speaker 1: again it's highly logical just given the state of the
13:35
Speaker 1: world and investment opportunities, that these types of asset classes
13:39
Speaker 1: continue to grow. Let's talk a little bit about what
13:44
Speaker 1: sort of challenges did you face managing Voya's investment management
13:49
Speaker 1: group during the lockdown and the pandemic and work from home.
13:54
Speaker 1: How did you work your way through that? Well, Barry,
13:58
Speaker 1: we do all of us I think the industry right,
14:00
Speaker 1: we didn't have a lot of answers. It was really surprising,
14:03
Speaker 1: and in fact, I think at the beginning, you know,
14:06
Speaker 1: if you would have asked me, hate Christine, how long
14:07
Speaker 1: do you think the people are going to be working
14:10
Speaker 1: from home as a result of this pandemic, I would
14:12
Speaker 1: have told you six weeks. Uh, you know, the summer's coming,
14:16
Speaker 1: things that are going to get better, and and and actually, uh,
14:19
Speaker 1: you know, we've been at work from home for over
14:22
Speaker 1: a year at this point, and we're still working from
14:24
Speaker 1: home and won't be back until the fall. So so
14:27
Speaker 1: what do we do? Um didn't have a playbook, but
14:30
Speaker 1: a lot of listening. We were able from a technology
14:33
Speaker 1: standpoint to move pretty seamlessly, you know, from in the
14:36
Speaker 1: office to out of the office. But but then it
14:39
Speaker 1: was a matter of how in the world, how in
14:41
Speaker 1: the world do we keep our employees engaged. So we
14:47
Speaker 1: tried a lot of different things. We did you know,
14:51
Speaker 1: web tests where you know, I would I would talk about,
14:55
Speaker 1: you know, how the business was doing, how the clients
14:58
Speaker 1: were feeling. U We tried a lot of things with
15:01
Speaker 1: our team. We do no meeting fridays in the summer
15:05
Speaker 1: to try to give them some bandwidths because you know,
15:07
Speaker 1: people are just plugged in all the time, and so
15:12
Speaker 1: some of the issues really when I think about the business,
15:15
Speaker 1: you know, the markets after the FED came in sort
15:19
Speaker 1: of calmed down, right, So the real challenges once we
15:22
Speaker 1: got through the spring really is keeping our employees healthy
15:26
Speaker 1: as they were dealing with working from home, kids, kids
15:29
Speaker 1: not in school, a feeling admit detached. So we spend
15:32
Speaker 1: a lot of time and energy and we still do
15:35
Speaker 1: on thinking about how can we be a good place
15:38
Speaker 1: to work for employees in the world like we have today,
15:41
Speaker 1: which is virtual. So let's jump right to that question.
15:45
Speaker 1: Pensions and Investments named Void Investment Management one of the
15:49
Speaker 1: best places to work in money management. I think it's
15:52
Speaker 1: like your sixth year in a row on that list.
15:54
Speaker 1: So what do you guys do that's different than the
15:59
Speaker 1: average money manager as a as an employer that makes
16:02
Speaker 1: it so attractive. Well, Barry, thank you for mentioning that,
16:07
Speaker 1: and that's something you're absolutely right. We've we've been named
16:10
Speaker 1: that buyer employees for six consecutive years and it's not
16:14
Speaker 1: something that we take lightly. It's an honor and it's
16:17
Speaker 1: something our employees vote on and and you know, in
16:19
Speaker 1: the context overall as far as why are we um
16:22
Speaker 1: winning this year after year? And then I'll pivot to
16:25
Speaker 1: COVID specifically really as goes to two things that come
16:29
Speaker 1: out from our employees consistently. They love the teamwork, you know,
16:32
Speaker 1: the the approach, the open mindedness, and we spent a
16:35
Speaker 1: lot of time investing in that and psychological safety and
16:39
Speaker 1: different things as a company. So they love the teamwork,
16:42
Speaker 1: and they also love the fact that that voys mission
16:44
Speaker 1: driven and we give back to our communities and so
16:48
Speaker 1: we have we give as an example, we give all
16:51
Speaker 1: employees forty forty hours there a full week of paid
16:54
Speaker 1: leave to go and go out and volunteer in the
16:58
Speaker 1: community whatever cause that they want. And so that would
17:02
Speaker 1: just be one small example of the things that we
17:04
Speaker 1: do that make our employees really feel proud of what
17:06
Speaker 1: Voya does and that we make the world better for
17:09
Speaker 1: our communities and our our clients. But I would say
17:12
Speaker 1: pivoting to two thousand and twenties specifically, uh, because you know, certainly,
17:17
Speaker 1: I mean as a leader, I was like, I don't
17:19
Speaker 1: know if we're gonna win this again, how are people doing?
17:22
Speaker 1: And we're certainly surveying them and trying to stay connected
17:25
Speaker 1: in a virtual world. But I think I think what
17:27
Speaker 1: really resonated with the team in two thousand and twenty was, uh,
17:31
Speaker 1: you know, just a transparency, the transparency of leadership um
17:36
Speaker 1: of seeing them and you know, trying to say, well,
17:40
Speaker 1: this is what I know, and this is what I
17:42
Speaker 1: don't know, and and here's kind of what we're gonna
17:44
Speaker 1: do about it, because again, when you think about it, times,
17:47
Speaker 1: we're pretty uncertain last year, and so just being authentic
17:50
Speaker 1: present Voya pivoted very quickly in terms of benefits and
17:55
Speaker 1: trying to help people adjust through this more flexibility things
17:59
Speaker 1: like that. And so when when employees really feel like
18:02
Speaker 1: they they understand where you're coming from, that you're authentic,
18:05
Speaker 1: that they believe you, and then also you see them
18:08
Speaker 1: and you're becoming more flexible, expanding your mental health benefits.
18:12
Speaker 1: As an example, as people were dealing with COVID, and
18:15
Speaker 1: certainly as the summer continued and we had George Floyd,
18:20
Speaker 1: the murder of George Floyd and the emotions associated with that,
18:24
Speaker 1: and having conversations and really working towards how our employees
18:28
Speaker 1: feeling about all of these different things are dealing with
18:31
Speaker 1: I think those are the key things that that really
18:34
Speaker 1: helped get us through two thousand and twenty and uh
18:38
Speaker 1: and and so as a result, thankfully, our employees continued
18:41
Speaker 1: to really be engaged and want to work with Folly
18:44
Speaker 1: Investment Management. So we've been hearing from from some CEOs
18:50
Speaker 1: of very large wealth managers like JP Morgan Chase and
18:55
Speaker 1: Morgan Stanley, both talking about we want everybody back in
18:59
Speaker 1: the office. It's time to go back to work. What
19:01
Speaker 1: do you think is going to happen with work from
19:04
Speaker 1: home in the future. Are we just going to go
19:06
Speaker 1: straight back to pre pandemic offices or is it going
19:09
Speaker 1: to be some different hybrid model in the future. And
19:13
Speaker 1: what are you guys doing? Well, you know, it's so
19:17
Speaker 1: interesting watching all of this unfolds as we learn very
19:20
Speaker 1: so starting with with what we're doing and thinking about
19:24
Speaker 1: it broadly, is you know, we're we're going to be
19:27
Speaker 1: what's called hybrid. I mean, we don't think a hundred
19:30
Speaker 1: percent in the office is right, nor do we think
19:32
Speaker 1: a hundred percent virtual is right. And so we've gone
19:35
Speaker 1: through very robust surveying of our people and thinking what's
19:39
Speaker 1: the right thing to do? So why are JP Morgan
19:42
Speaker 1: and Morgan Stanley going back, Um, you know, I would say,
19:45
Speaker 1: you know, very real, you want to maintain your culture,
19:48
Speaker 1: you want to maintain teamwork. And then the investment side,
19:51
Speaker 1: particularly when you think about alpha an idea generating, you know,
19:56
Speaker 1: being a part like this for so long can intact
19:58
Speaker 1: your investment results because sort of those sidebar conversations where
20:02
Speaker 1: you get good ideas as an investor from your people,
20:04
Speaker 1: you know, you really can't replicate that on zoom or
20:07
Speaker 1: with the telephone calls. So so, yes, you know people
20:11
Speaker 1: need to come back. Do they need to be here
20:13
Speaker 1: five days a week? Absolutely not. Do I think that
20:16
Speaker 1: people should be mandating you have to be in you know, Tuesday, Wednesday, Thursday. No,
20:22
Speaker 1: that's also not flexibility. So we're taking an in office
20:27
Speaker 1: flexible approach and and bury it. I could go on
20:30
Speaker 1: and on. I have so many views around this, but
20:32
Speaker 1: you know what our employees telling us? And where am
20:34
Speaker 1: I really concerned and where do I think people and
20:37
Speaker 1: leaders may be missing it? It's it's our it's our
20:41
Speaker 1: female employees particularly, and when you think about you know
20:46
Speaker 1: what a female person is dealing with uniquely and all employees,
20:50
Speaker 1: all employees. But when you think about you know, children
20:53
Speaker 1: and balancing, and you look at the overall US statistics
20:57
Speaker 1: about who's dropping out of the workforce, it's it's working mothers.
21:01
Speaker 1: And so if you as an employer saying okay, you
21:04
Speaker 1: have to come in, just as the industry is really
21:08
Speaker 1: really an industry that has has not done well in
21:12
Speaker 1: terms of diversity and inclusion with our employee population, and
21:15
Speaker 1: now you're coming in and saying okay, well, you guys
21:18
Speaker 1: all have to come into the office. I just think
21:20
Speaker 1: that that could create some real challenges as that as
21:24
Speaker 1: people are trying to work through more inclusion, more diversity.
21:27
Speaker 1: So again, our choices, let's listen to our people, let's
21:31
Speaker 1: figure out what's what works. We're going to learn as
21:33
Speaker 1: we go. But we want to we want to be
21:35
Speaker 1: an employer of choice for all of our employees. So
21:39
Speaker 1: maybe this is an obvious observation slash question, but let
21:43
Speaker 1: me ask in anyway, if you're flexible and you're offering
21:47
Speaker 1: a hybrid model, is this going to help you in
21:50
Speaker 1: terms of recruitment and retention? It seems like from a
21:55
Speaker 1: employment strategic perspective, it's a big advantage. I agree with you,
22:01
Speaker 1: I Verry, I think it is a big advantage. And
22:04
Speaker 1: and listen, we don't have all the answers yet, but
22:07
Speaker 1: some of the things that we're doing as far as
22:09
Speaker 1: this hybrid world is is we're going through a whole
22:13
Speaker 1: process as far as well, what different technology do we
22:17
Speaker 1: need to be putting into people's homes, and how do
22:21
Speaker 1: we change what our workplace looks like if it's a
22:23
Speaker 1: little bit more of a hoteling space. So we're literally
22:26
Speaker 1: renovating as we speak too, of our offices to accommodate that.
22:30
Speaker 1: Our New York office, in our Atlanta office. So we
22:33
Speaker 1: don't have all of the answers, but we're giving it
22:35
Speaker 1: a lot of thought. And we do think that this
22:38
Speaker 1: is going to make void Investment Management, you know, continue
22:41
Speaker 1: to be the best places to work in a in
22:43
Speaker 1: a place of choice. And again just going to flexibility,
22:46
Speaker 1: going to workforce diversity, we've got to pivot, so you know,
22:51
Speaker 1: and I'm very mindful of this. And this is a
22:53
Speaker 1: little bit different to barry from from some of our competitors.
22:57
Speaker 1: So let me just tell you this is them. I've
23:01
Speaker 1: heard some competitors say, well, you know, the senior people,
23:04
Speaker 1: you know, we're going into the office. Um, we want
23:07
Speaker 1: people to see us because you kind of lead by example, right. Well,
23:12
Speaker 1: you know, Verry, I've I've had five children. I have
23:16
Speaker 1: one of the things about me, I have five sons, right,
23:19
Speaker 1: and one of my sons, um is on the autism spectrum,
23:23
Speaker 1: which has its own unique challenges and opportunities. And I
23:27
Speaker 1: think long and hard, how do I want to lead
23:30
Speaker 1: by examples for really investment management in our people? And
23:33
Speaker 1: it's with understanding flexibility and enabling them to succeed in
23:40
Speaker 1: their careers. And so that's the approach we're taking. So
23:43
Speaker 1: are you seeing Christine hurt Sellers every day in the
23:46
Speaker 1: office even though we're still closed, hoping that people will
23:49
Speaker 1: follow my example? Absolutely not. M that's really interesting and
23:55
Speaker 1: we do a lot of research and preparation for these conversations.
24:00
Speaker 1: I did not know any of that about you, and
24:02
Speaker 1: that's really intriguing. It's more than just let me show
24:06
Speaker 1: up and and pretend to be productive in the office.
24:10
Speaker 1: You're living the actual life work balance that so many
24:15
Speaker 1: employees aspired to. Yep, that's right, yeah, yeah, And I
24:20
Speaker 1: and I know Barry. You know a lot of times
24:22
Speaker 1: people will will say, oh, well, you know, who are you?
24:26
Speaker 1: What's your role? And wouldn't expect that. I have raised
24:28
Speaker 1: five children, including one with special needs. So yeah, so
24:32
Speaker 1: you see, you're absolutely right. So that drives a lot
24:34
Speaker 1: of my passion right when I think about the industry
24:37
Speaker 1: and where we need to go and what can we
24:39
Speaker 1: do differently and how can the legacy or the world.
24:42
Speaker 1: You know that I leap behind you my story how
24:46
Speaker 1: to make it a better place. So I do think
24:48
Speaker 1: I bring a certain level of understanding and empathy as
24:52
Speaker 1: far as how complex, uh, you know, the working world
24:55
Speaker 1: can be to navigate. Well, thank you for sharing that.
24:57
Speaker 1: That's really very very entry thing and I think a
25:00
Speaker 1: lot of listeners are going to appreciate that. Let's talk
25:04
Speaker 1: about Alliance Capital. What did you do for them in
25:07
Speaker 1: terms of their securitized assets? Verry At Alliance I was
25:12
Speaker 1: I was part of a team that really just focused
25:15
Speaker 1: on mortgage mortgage product, mortgage derivatives way back in the
25:20
Speaker 1: day it's such a bad word now post the g FC.
25:23
Speaker 1: We actually managed sort of c d O s that's
25:26
Speaker 1: they recalled. So think about you know, structured mortgage product.
25:30
Speaker 1: It was a growing business at Alliance Capital. That again,
25:33
Speaker 1: most of my career, you know, from the very beginning
25:36
Speaker 1: has been was focused on really the housing market aspect
25:40
Speaker 1: securities and and so that sort of was my original
25:44
Speaker 1: task in in my love. So let's let's stay with that.
25:47
Speaker 1: You were Freddie Mac for a while, right, I recall
25:50
Speaker 1: reading your portfolio team had about six hundred and fifty
25:53
Speaker 1: billion dollars in assets. Tell us a little bit about
25:56
Speaker 1: your Freddy Mac experience. Yes, yes, Verry, I were Freddie
26:00
Speaker 1: Mack and left there, uh right at the end of
26:05
Speaker 1: two thousand and four, but but worked there and managed
26:08
Speaker 1: a variety of assets there. So back in the day,
26:11
Speaker 1: you know, pre g SC or Global Financial Crisis, you know,
26:14
Speaker 1: they had these very large what they called retained portfolios,
26:18
Speaker 1: and so kind of going into Freddy, I worked quite
26:21
Speaker 1: a bit on what are called collateralized mortgage obligations or
26:25
Speaker 1: cmos than what we call mortgage derivatives, so think really
26:29
Speaker 1: esoteric product, uh you know, sort of what we call
26:32
Speaker 1: interests only your principle only securities. So a lot of structuring,
26:36
Speaker 1: just a lot of deep knowledge around the housing market.
26:39
Speaker 1: Really interesting time in my career because at that point
26:42
Speaker 1: in time, the g s s of Freddie and Fanny
26:45
Speaker 1: were huge in terms of their participation in the mortgage market,
26:49
Speaker 1: and they had these very large portfolios at the time.
26:52
Speaker 1: So in the early days anyway, in the early two
26:56
Speaker 1: thousands and throughout most of the nineties, the g s
26:59
Speaker 1: s we're doing all um conforming mortgages. There were none
27:03
Speaker 1: of the subprime or at least very very little subprime
27:07
Speaker 1: all day no money down, no income check sort of stuff.
27:12
Speaker 1: They were pretty safe mortgages. It was only later in
27:16
Speaker 1: the cycle that and they were losing so much market
27:19
Speaker 1: share to private banks that they dove into it. I
27:23
Speaker 1: think you might have missed most of the crazy stuff
27:26
Speaker 1: if you left Fanny in Freddie in two thousand and four,
27:30
Speaker 1: tell us what your experience was like pre financial crisis
27:34
Speaker 1: at Freddie Mack. It's sure berry and and this is
27:37
Speaker 1: something you know when when you think about it. So
27:40
Speaker 1: certainly Freddie and Fanny were prominent in the GFC right
27:44
Speaker 1: as we went through the financial crisis in the US
27:46
Speaker 1: housing market. So the seeds of the global financial crisis,
27:51
Speaker 1: you know, began in the nineties. And uh, you know,
27:54
Speaker 1: as the market screw and Freddie and Fanny got more
27:57
Speaker 1: aggressive on what they were underwriting and compete against one another,
28:01
Speaker 1: uh things, you know that that explains part of that journey.
28:06
Speaker 1: But but again, you know, lessons learned though, you know,
28:09
Speaker 1: they were highly levered institutions and they had no guaranteed
28:13
Speaker 1: debt that then enabled them to lever. So so again,
28:16
Speaker 1: lots of lots of crazy, you know, interesting things going
28:20
Speaker 1: on at the time. You know, I did resigner, I
28:23
Speaker 1: moved on to the company I'm now with, you know,
28:26
Speaker 1: before the global financial crisis happened. But again a lot
28:30
Speaker 1: of these things within broader housing and the financial markets
28:34
Speaker 1: were many years in the making before it's sort of
28:36
Speaker 1: all kind of imploded on us, if you will, in
28:39
Speaker 1: two thousand and seven. So let's talk housing a little bit.
28:42
Speaker 1: Housing prices have blown up over the past year, in
28:47
Speaker 1: large part because there's almost no supply around. Whatever comes
28:50
Speaker 1: out seems to get a just an overwhelming amount of bids.
28:54
Speaker 1: What do you think of the state of the housing
28:56
Speaker 1: market here and what's the likely out come going forward? Well, Bury,
29:02
Speaker 1: just from a kind of an investor or a tactical view,
29:05
Speaker 1: you know, when you think about asset classes and what
29:08
Speaker 1: you recommend to your clients, um, housing related securities would
29:13
Speaker 1: be really towards the bottom of the list. Um because
29:16
Speaker 1: as you say, you know, house prices have gone very quickly.
29:21
Speaker 1: That what the governments, the Federal Reserve has them buying securities,
29:26
Speaker 1: you know, agency securities associated with housing. So you have
29:29
Speaker 1: a combination of a sort of a federal push liquidity
29:33
Speaker 1: event there as well as you've suddenly got all of
29:35
Speaker 1: these people all over the place. You know, we're bidding
29:38
Speaker 1: up the housing market. And in fact, you know, just
29:40
Speaker 1: recently housing prices came up again and they continue to
29:44
Speaker 1: skyrockets so so so thinking about but as a housing
29:47
Speaker 1: market today within itself, uh, you know, enough to really
29:51
Speaker 1: be the seeds of yet another financial crisis, I would
29:55
Speaker 1: say no, I would say it's a little bit more
29:58
Speaker 1: isolated now. Granted, houses are you know, the largest asset
30:03
Speaker 1: for most Americans. It's a very important part of their
30:06
Speaker 1: net worth, and so the housing market getting volatile on
30:09
Speaker 1: us is not a good thing. I mean, however, as
30:12
Speaker 1: you just referenced Verry, I think a lot of this
30:14
Speaker 1: is a combination of low interest rates, uh, and it's
30:18
Speaker 1: it's demands right now, we see even building houses is
30:21
Speaker 1: getting more challenging based on commodity prices going up. So
30:25
Speaker 1: so this is a period of time we're going through.
30:28
Speaker 1: Plus finally, you know, millennials are forming housing finally or
30:31
Speaker 1: households quicker than ever as a result of COVID. So
30:35
Speaker 1: I would call this more of a tactical risk, if
30:38
Speaker 1: you will, not a systemic risk like the global financial
30:41
Speaker 1: crisis was. There's just not enough leverage in the system. Yeah.
30:45
Speaker 1: That that household formation data is fascinating because it fell
30:49
Speaker 1: off a cliff after the financial crisis. The first i
30:53
Speaker 1: don't know, five or seven years was way below average,
30:56
Speaker 1: and then over the past two years it really seems
30:59
Speaker 1: to tick up. How closely do you pay attention to
31:05
Speaker 1: data points like household formation? Yeah, we we watch it
31:08
Speaker 1: pretty closely. And I think you know, we've we've always
31:12
Speaker 1: had a big you know, a big level of assets
31:15
Speaker 1: and securitized product. We're very good at it avoid investment management,
31:19
Speaker 1: and we do watch it. It's a little bit of
31:21
Speaker 1: a slower moving train. Berry. But I think what what
31:25
Speaker 1: people had often forgotten about the millennials is this is
31:30
Speaker 1: that they would say, well, you know, they're different. They
31:32
Speaker 1: want to travel, they want to do X, Y and Z,
31:35
Speaker 1: and they don't want houses. And we've had the theme
31:37
Speaker 1: that no, no, you just forget these these people are
31:40
Speaker 1: going to live until they're one hundreds, right, So you
31:43
Speaker 1: just they're growing up slower, they're doing things slowly. But
31:46
Speaker 1: ultimately our millennials, is house holformation going to happen? Absolutely
31:51
Speaker 1: it is, and these are important demographic trends to watch.
31:55
Speaker 1: So I think COVID just accelerated it as uh as
31:58
Speaker 1: people were, you know, work in apartments as well as
32:01
Speaker 1: it's certainly the work flexibility of being able to work
32:04
Speaker 1: in the suburbs and not commune as accelerated. But this
32:07
Speaker 1: is just an acceleration of a very natural trend that
32:10
Speaker 1: we see. M quite interesting. So I've always found that
32:15
Speaker 1: fixed income people approach stocks generally, but investing and risk
32:22
Speaker 1: management different than the folks who kinda grew up on
32:26
Speaker 1: the equity side of the street. Tell us a little bit,
32:29
Speaker 1: how did your background prepare you for your current job? Well, Barry,
32:35
Speaker 1: you know, first of all, as you say, with with
32:37
Speaker 1: fixed income versus equity investors, now you know I get
32:40
Speaker 1: to work with with both. Is your absolutely right? Just
32:43
Speaker 1: to start out? You know, fixed income investors tend to
32:46
Speaker 1: be cynical or more cynical because you know, for them,
32:49
Speaker 1: successes par right, like get every dollar that you invested,
32:53
Speaker 1: and you have you know, all kinds of downside risk.
32:55
Speaker 1: So I got a dollar back from coupon. Yeah, I
32:58
Speaker 1: got a dollar back in a little bit of coupon
33:00
Speaker 1: or I love you know, uh what we call or
33:04
Speaker 1: fifty or points, you know, like high yield. So so
33:07
Speaker 1: that sort of explains to everybody. Whereas equity they're optimistic, right,
33:12
Speaker 1: Oh this company is going, isn't Loos wonderful? And so
33:14
Speaker 1: even in our employees, you do see a mindset difference,
33:17
Speaker 1: and so kind of going back to your your question
33:20
Speaker 1: though of of how did fixed income prepare me for
33:25
Speaker 1: this role, I would say, uh, you know, certainly a
33:29
Speaker 1: certain level of of um really focused on the facts, right,
33:34
Speaker 1: But but also I would say, uh, you know, for
33:37
Speaker 1: my career specifically, you know, I spent most of it
33:40
Speaker 1: in what we call structured products, as we were talking about,
33:44
Speaker 1: And I think that that is a great market because
33:47
Speaker 1: you can kind of combine the discipline of the fixed
33:49
Speaker 1: income investor also with the enthusiasm of of the housing
33:54
Speaker 1: market and interesting things going on in the world. But overall,
33:58
Speaker 1: I think coming out of it, you know, just balance
34:00
Speaker 1: of as a leader. As a leader, I like to
34:04
Speaker 1: use this this phrase with people when you lead people,
34:07
Speaker 1: you need to have what I call authentic optimism. And
34:11
Speaker 1: why is that It's like you have to believe that
34:14
Speaker 1: the world is a better place than that. Your strategy
34:16
Speaker 1: is going to deliver and you're adding value, but you
34:20
Speaker 1: have to, you know, face things authentically because also employees
34:23
Speaker 1: don't want you to just be telling the stuff that
34:25
Speaker 1: isn't true. Right, So so it's kind of that balance
34:28
Speaker 1: as investors or as leaders is what I call authentic optimism.
34:33
Speaker 1: That's really intriguing. So you mentioned, um when we were
34:37
Speaker 1: talking about housing and mortgage backed securities, the Federal Reserve
34:42
Speaker 1: was a big buyer. They're keeping rates low. What other
34:45
Speaker 1: reasons are there for rates being so low? We really
34:48
Speaker 1: we know the central banks can affect short term bond yields,
34:53
Speaker 1: but even the long term yields are are way down.
34:57
Speaker 1: What's the driver of today's UH lower eights? Is it
35:01
Speaker 1: inflation price and sensitive buyers, just demand for yield or
35:05
Speaker 1: something else? Entirely, very certainly one contribution, as you say,
35:10
Speaker 1: is really the Federal reserves buying program, right, so they
35:14
Speaker 1: continue to buy lots of treasury securities UH and certainly
35:18
Speaker 1: mortgage backed securities as well. So that's an effect. But
35:21
Speaker 1: when you when you peel it back, why is the
35:23
Speaker 1: long run bond market or those ten uere yields still
35:27
Speaker 1: anchored is so low? It's it's we think about it.
35:30
Speaker 1: It's it's telling you what does the world believe what
35:33
Speaker 1: we call terminal FED funds really is. And so when
35:37
Speaker 1: you think about that, what does that mean? That's like
35:40
Speaker 1: the real rate where FED funds can be in order
35:44
Speaker 1: to sort of have economic growth, and it's it's pretty low.
35:48
Speaker 1: So the market is still telling you, yeah, they're going
35:51
Speaker 1: to be some inflation risks potentially, but long run, you know,
35:55
Speaker 1: lots of people around the world are aging. Uh, so
35:58
Speaker 1: you think about China, you think about you know, the
36:01
Speaker 1: United States and productivity, what's it going to be? But
36:05
Speaker 1: at the end of the day, you know, people are
36:07
Speaker 1: telling you we don't think that real growth is really
36:09
Speaker 1: going to be that that that's strong or that robust.
36:12
Speaker 1: And so really that is the reasoning behind why are
36:15
Speaker 1: long term rates still so low? Tides of growth rates.
36:19
Speaker 1: So so when I look around, um, the spectrum of
36:23
Speaker 1: credit quality, seven year junk bonds were just trading at
36:27
Speaker 1: two point five percent, actually a touch under that. That
36:31
Speaker 1: seems to be unthinkable that something relatively risky is paying
36:36
Speaker 1: so little yield. Tell us a little bit about the
36:39
Speaker 1: dynamics behind that. Why would I want to buy a
36:44
Speaker 1: high risk piece of supposedly safe investment with so little yield? Well, Barry,
36:51
Speaker 1: we call high yield, you know. One of the things
36:54
Speaker 1: we say is we call it the asset class and
36:56
Speaker 1: you know, formally known as as high yield. And you're
37:01
Speaker 1: absolutely right right that that is what we call it.
37:04
Speaker 1: And as you say, you know, it's it's been challenged
37:07
Speaker 1: for quite some time, and so what what really is
37:10
Speaker 1: going on inside of there? And it goes back to,
37:14
Speaker 1: you know, the issue you were raising is that treasury
37:17
Speaker 1: rates or interest rates are so low. So when we
37:20
Speaker 1: think about high yields specifically, we kind of divided up
37:25
Speaker 1: into two things, and we think about the risk premium
37:28
Speaker 1: versus treasuries are sort of the spread and when you
37:30
Speaker 1: look at you know, say, the higher quality high yield
37:34
Speaker 1: um they're all, you know, called a hundred and sixty
37:38
Speaker 1: basis points over treasuries. Is that's not the tightest they've
37:42
Speaker 1: ever been. Um, you know, they have been narrower, right,
37:45
Speaker 1: believe it or not. If you look at spread relative
37:47
Speaker 1: to the risk free rate, and plus you know, you
37:49
Speaker 1: have good economic momentum and you have you know, the market.
37:53
Speaker 1: When you think about how yield there these credit rating
37:56
Speaker 1: agencies right that rate the debt and we're seeing more
37:59
Speaker 1: upgrade then downgrades, meaning the credit you know, the balance
38:02
Speaker 1: sheets to repairing, and so the economy is helping the sector.
38:06
Speaker 1: So near term it's logical that the yields are this low,
38:10
Speaker 1: but you know it's certainly longer run. This isn't our
38:14
Speaker 1: call for today. The longer run when the economy gives
38:17
Speaker 1: a hiccup and things get choppy. We've seen this before.
38:19
Speaker 1: These these assets yields, if you will, can go from
38:22
Speaker 1: two fifty to north of six percent in a heartbeat.
38:26
Speaker 1: So a little treacherous, but yes, I mean you saw
38:31
Speaker 1: this kind of activity actually really in in the spring
38:34
Speaker 1: of two thousand and twenty. I mean just prices gapped
38:37
Speaker 1: out so wide. So people do need to be mindful
38:40
Speaker 1: that emotion and fragility can you know, certainly affect this sector,
38:44
Speaker 1: and that's why it was called high yield, not your
38:47
Speaker 1: best quality. But again for now, logical words price just
38:50
Speaker 1: given how low interest rates are and how many clients
38:53
Speaker 1: and business models really need higher yields in order to
38:57
Speaker 1: you know, to have the savings or hit their targets.
39:00
Speaker 1: That's really fascinating and it raises again an obvious question,
39:04
Speaker 1: how do you run a big fixed income portfolio as
39:08
Speaker 1: a manager when yields are this low, when the spread
39:11
Speaker 1: is this tight, and when investors are not necessarily getting
39:16
Speaker 1: paid for taking risk there? Yeah, you have to you know,
39:21
Speaker 1: you can't. The cost of sitting in cash berry or
39:24
Speaker 1: is also quite high, right, so call return on cash
39:27
Speaker 1: and zero U. So you've got to come up with
39:30
Speaker 1: with some things you know to do for your clients.
39:33
Speaker 1: And so as you say, you know, what do you do? Uh,
39:36
Speaker 1: you flail, You fly a little closer to you know,
39:41
Speaker 1: sort of your lower risk budget. So you don't want
39:44
Speaker 1: to be over your skis in terms of the overall
39:46
Speaker 1: risk that you would take, because the opportunity to stretch
39:50
Speaker 1: just isn't there in many of the sectors that you
39:52
Speaker 1: and I've been talking about. So you gotta be careful.
39:55
Speaker 1: You've got to be super super diligent as far as
39:58
Speaker 1: what areas makes sense, what securities do you really believe?
40:03
Speaker 1: And try to keep some dry powder to react. But
40:07
Speaker 1: you know, when when is this going to happen. You know,
40:09
Speaker 1: you wake up every day and early in my career,
40:12
Speaker 1: very for for people that might be listening that are earliest,
40:15
Speaker 1: is this axiom is that it always feels terrible at
40:19
Speaker 1: the lows, and it always feels great at the top
40:22
Speaker 1: of the market. Right you're at the top of the market.
40:25
Speaker 1: It's like, of course, the economy is great, you know,
40:27
Speaker 1: life is good, and that's when it all falls apart.
40:29
Speaker 1: So you've got to be mindful. Are we there yet? No?
40:33
Speaker 1: But as the FED starts to over the next year
40:36
Speaker 1: or two drain liquidity, they have been doing massive support
40:40
Speaker 1: of risk assets. Uh, you know, things are going to
40:42
Speaker 1: get choppy, so we're trying to be very diligent. Look
40:46
Speaker 1: at what we're doing. But keep some dry powder. That's
40:49
Speaker 1: pretty Uh, that's pretty interesting. Another silly question, are we
40:54
Speaker 1: ever going to see rates on the tenure over four
40:57
Speaker 1: in our lifetime or is this U And I know
41:02
Speaker 1: that this is a classic magazine cover indicator. We'll never
41:06
Speaker 1: see rates back to normal in our lifetime, but it
41:10
Speaker 1: feels like rates are stuck down here for at least
41:14
Speaker 1: the foreseeable future. What are your what are your views
41:17
Speaker 1: on I know this is a ridiculous question. Hey, where's
41:20
Speaker 1: the tenure likely to be in one? Yeah, and so
41:29
Speaker 1: ten year tenure? Um? Well, you know what, that's right?
41:34
Speaker 1: That is a That is a that is a great
41:36
Speaker 1: question because you've got to balance very the ingenuity and
41:41
Speaker 1: the productivity of the human spirit, which is pro growth
41:45
Speaker 1: and very exciting, which is some of these these natural
41:48
Speaker 1: headwinds of you know, and and an aging world people
41:53
Speaker 1: needing yield. I remember sort of conventional wisdom is like, oh,
41:57
Speaker 1: you know, you know when people age are actually going
41:59
Speaker 1: to start draining assets and that's going to be inflationary.
42:02
Speaker 1: I don't really believe that. So so it's a good question.
42:06
Speaker 1: Can we get back to you know, four percent ten
42:09
Speaker 1: year and real growth being stronger than where we are
42:11
Speaker 1: to day ten years from now if we have you know,
42:14
Speaker 1: Tesla has automatic cars and all kinds of wonderful things
42:17
Speaker 1: are happening, Yes we can. Is it going to happen
42:20
Speaker 1: near term? If it is, it's an investment opportunity for folks. Um,
42:24
Speaker 1: and so you should jump on board if yields really rise,
42:28
Speaker 1: because people may over index right now on inflationary pressures.
42:33
Speaker 1: But you know, can the economy the way that I'm
42:37
Speaker 1: looking at it sustain you know, a real growth rate
42:41
Speaker 1: this year's different, a real growth rate that high, particularly
42:45
Speaker 1: given challenges with immigration and labor force. No, so if
42:50
Speaker 1: yields sort to go high due to inflation, it would
42:52
Speaker 1: be very damaging, more of the stagflation event and again
42:56
Speaker 1: not good for real growth. So very is is an
43:00
Speaker 1: much as I think, Oh gosh, this is consensus. Am
43:02
Speaker 1: I still saying that treasuries are going to stay low? Yeah?
43:06
Speaker 1: I do. I just think it's really challenging to get
43:08
Speaker 1: what we call escape velocity out of this low growth
43:12
Speaker 1: world structurally that we're living in right now. And you know,
43:16
Speaker 1: the massive amount of debt that the US I mean,
43:19
Speaker 1: just a lot of things you know, could could point
43:21
Speaker 1: you to say not. It's going to be really hard
43:22
Speaker 1: to believe the FED can completely walk away from the
43:26
Speaker 1: markets in terms of everything they've done. Uh, and that this,
43:30
Speaker 1: you know, the world economy, to US economy is strong
43:32
Speaker 1: enough on its own without intervention to support those types
43:36
Speaker 1: of YELD levels. I don't see it. So speaking of
43:39
Speaker 1: the FED, let me give you a promotion and put
43:42
Speaker 1: you in the role of Jerome Powell. Is FED share,
43:46
Speaker 1: what do you think you would do? What should the
43:48
Speaker 1: FED be doing given the current circumstances. Yeah, I think actually,
43:55
Speaker 1: I think Jerome pal is exceptional, as was Janet Yellen,
43:59
Speaker 1: and I would do what he's doing, and it's communicate, communicate,
44:04
Speaker 1: because there's a lot of risk in the market, given
44:06
Speaker 1: that the FED does have so much that they're doing
44:11
Speaker 1: in terms of unconventional support of the markets, and they're
44:14
Speaker 1: they're being very slow, they're communicating, being very careful, and
44:18
Speaker 1: so all this. You know, sometimes market participants will say, oh,
44:21
Speaker 1: my gosh, you know that FED us behind the curve
44:23
Speaker 1: and inflate. They're gonna lose control of the market. Well
44:26
Speaker 1: as if you're the Federal Reserve. It's like fool me once,
44:28
Speaker 1: foolmy twice. You know, we sort of believe that, you know,
44:30
Speaker 1: growth was strong and inflation was strong, and kind of
44:33
Speaker 1: got worried, you know, in taper tantrum or you know,
44:35
Speaker 1: fill in the blank of different things that have happened
44:37
Speaker 1: in the market. Uh, And they're like, well, you know what,
44:40
Speaker 1: we're gonna be judicious, we're gonna be careful, we're going
44:42
Speaker 1: to be slow, and and I believe absolutely it's the
44:45
Speaker 1: right thing to do. And I think what market participants
44:48
Speaker 1: are missing right now. Some that that talk a lot
44:52
Speaker 1: about this, I think they're still underestimating how important all
44:57
Speaker 1: of the stimulation has been to the calm, to the
45:00
Speaker 1: markets and the growth that we have in addition to
45:03
Speaker 1: in addition to fiscal So again, I think the room
45:06
Speaker 1: pulse and in the governors are spot on in in
45:10
Speaker 1: what they're doing, and I fully support, you know, everything
45:13
Speaker 1: that they've done. So let's stay with that, and and
45:17
Speaker 1: stay with the concept of the taper tantrum and the
45:22
Speaker 1: ability to get off of emergency footing forget four. I'm
45:27
Speaker 1: with you that that isn't happening anytime soon barring some catastrophe.
45:32
Speaker 1: But um, how far can can interest rates rise without
45:37
Speaker 1: disrupting the equity markets? Can we see a two and
45:41
Speaker 1: a half percent ten year without the equity markets freaking out?
45:46
Speaker 1: How do we get back to normal, whatever normal might
45:50
Speaker 1: be these days. Yeah, And I think it's we're in
45:55
Speaker 1: a tricky spot right as Barry is. You know, the
45:59
Speaker 1: FED starts to remove the support of the bond market
46:02
Speaker 1: through purchases, and you said, can we at what level
46:06
Speaker 1: on the tenure does it start to disrupt the growth?
46:09
Speaker 1: I think you hit on a really important theme early on,
46:12
Speaker 1: it really goes a lot down to the housing market.
46:15
Speaker 1: You know, again that is the most important asset that
46:17
Speaker 1: most Americans have. And so if you get you get
46:20
Speaker 1: ten years, uh, you know, up to say two and
46:23
Speaker 1: a quarter two and a half, I think that really
46:26
Speaker 1: starts to create some potential challenges for for the equity
46:30
Speaker 1: market because it does housing start to roll over. So
46:34
Speaker 1: that reduces the momentum at what level. If you going
46:38
Speaker 1: back to our conversation about high yield earlier on, so
46:41
Speaker 1: let's just say to ourselves, okay, uh, you know, ten
46:45
Speaker 1: year interest rates go up two and a half you know, say,
46:49
Speaker 1: excuse me, say that the you know how you'll spread
46:53
Speaker 1: you know, to a tenure treasury. Let's just call it um,
46:57
Speaker 1: you know, two percent or two and a half percent.
47:01
Speaker 1: So if you get some of these competing asset classes
47:04
Speaker 1: that attractive yields relative to equities where you're like, huh,
47:07
Speaker 1: I can clip the coupon and I can earn four
47:09
Speaker 1: and a half five again, I think that's where things
47:12
Speaker 1: get pretty challenging for the equity market. So a long
47:15
Speaker 1: way of saying, I think once you get to like
47:17
Speaker 1: two and a quarter or two and a half, it's
47:19
Speaker 1: going to take the air out of the bond balloon,
47:21
Speaker 1: so we've got to be very careful. And that is
47:24
Speaker 1: not that far away, although I guess in terms of
47:28
Speaker 1: of interest rate increases, I guess it's a a good
47:33
Speaker 1: couple of years away. Let's let's stick with the Fed
47:36
Speaker 1: for a bit. You know, the consensus seems to be
47:39
Speaker 1: we're not going to see any increases this year and
47:42
Speaker 1: probably no increases into late two. Do you think the
47:47
Speaker 1: consensus is spot on or or is this really going
47:51
Speaker 1: to be subject to new economic data and that will
47:54
Speaker 1: impact the FEDS thought process. It's certainly very you know,
47:59
Speaker 1: the Fed is going to watch data, so they're you know,
48:02
Speaker 1: they're mindful of all of that. But again I would
48:05
Speaker 1: say the set also loves to not loves that has
48:09
Speaker 1: learned right as post global financial crisis to try not
48:14
Speaker 1: to surprise the market and to move slowly. So so typically,
48:18
Speaker 1: you know, they announced that they're thinking about tapering, and
48:21
Speaker 1: then they start to give you more details and so realistically,
48:25
Speaker 1: what's the soonest that they're probably gonna really back office
48:29
Speaker 1: from some of their initial support. Uh call that early
48:33
Speaker 1: next year, so early twenty two. And then once they
48:36
Speaker 1: do that, we've learned from them. They're going to wait
48:38
Speaker 1: at least another year eighteen months most likely before they
48:41
Speaker 1: actually try to raise the rate. So the market is
48:43
Speaker 1: pricing in I believe called a hundred basis points in
48:47
Speaker 1: twenty three. You know, is the market wrong in this?
48:50
Speaker 1: I think no. I think that it's gonna be a while.
48:53
Speaker 1: I think they're gonna be, you know, very slow. I
48:55
Speaker 1: think what will happen is the market even a hundred
48:58
Speaker 1: is pretty aggressive in that time frame. You know, they
49:01
Speaker 1: think the FET is going to then start raising rates
49:03
Speaker 1: and move quickly. So again I think that the market
49:06
Speaker 1: is probably going to get ahead of itself and forcecasting
49:10
Speaker 1: too many FET increases and what actually is delivered. But
49:14
Speaker 1: for now, you know that that part of the market,
49:16
Speaker 1: that part of the curve, what the FET is doing,
49:18
Speaker 1: move slow seems pretty logical to me. So I hope
49:22
Speaker 1: this isn't too silly of a question. But but it
49:25
Speaker 1: comes up from time to time. So you're responsible for
49:28
Speaker 1: billions of dollars in bonds, and yet investors are looking
49:33
Speaker 1: for more yield. Do you want to see rates rise?
49:37
Speaker 1: It arguably hurts your existing positions, but when you're laddered,
49:43
Speaker 1: it generates more yield on the back end, What are
49:46
Speaker 1: your thoughts as a fixed income manager about the possibility
49:50
Speaker 1: of of yields going higher from here? Yeah, very you know,
49:56
Speaker 1: with our client's eyes in the world eyes on, you know,
50:01
Speaker 1: higher rates would be a good thing, right if you
50:04
Speaker 1: think that real growth justicies it. And also there are
50:09
Speaker 1: a lot of business models, a lot of our clients,
50:11
Speaker 1: whether it's pension funds or insurance companies, where their business
50:15
Speaker 1: models are really struggling to work, right given how low
50:19
Speaker 1: rates are. And what do I mean by that? You know,
50:22
Speaker 1: pensions that need a certain level of return in the
50:25
Speaker 1: market in order to deliver the pension benefits to their employees.
50:29
Speaker 1: An insurance company that may be sold an annuity UH
50:33
Speaker 1: to its clients that now needs higher yields in order
50:36
Speaker 1: to make the profit margins and build capital that they need.
50:39
Speaker 1: So again, there are a lot of parts of the
50:40
Speaker 1: world and no retirees who need rely on income and
50:44
Speaker 1: so as low as rates are, this creates you know,
50:47
Speaker 1: societal and business challenges. So again, higher rates from where
50:52
Speaker 1: we are today is a good thing now if it
50:55
Speaker 1: were some sort of disruptive stagflation quick thing, And certainly
51:00
Speaker 1: we've seen fragility in markets in the last ten years
51:03
Speaker 1: that I think are concerning. But as long as it's
51:06
Speaker 1: a natural outcome, gradual and as a result of real growth,
51:11
Speaker 1: then it's a good thing for clients and for the
51:13
Speaker 1: United States in the world. Really interesting. I know, I
51:18
Speaker 1: only have you for a finite amount of time, so
51:21
Speaker 1: let's jump to our favorite questions. We ask all our guests,
51:26
Speaker 1: starting with tell us about what you're streaming these days.
51:29
Speaker 1: Give us your favorite uh work from home, Netflix and
51:33
Speaker 1: Amazon Prime shows? Okay, you verry. One of my favorites
51:38
Speaker 1: that I met recommending is a show on HBO Max
51:42
Speaker 1: called ted Lasso, and so I highly recommended to viewers.
51:47
Speaker 1: Why do I like it, I'll just give you in
51:48
Speaker 1: a nutshell, it's a it's a funny, funny series, and
51:52
Speaker 1: it's about an American football coach from a college who's
51:56
Speaker 1: hired by a major soccer franchise in the UK to
52:00
Speaker 1: be their coach. And he's kind of this goofy Southern person,
52:04
Speaker 1: you know, he's, uh, he's and I live in the South,
52:07
Speaker 1: so I didn't mean anything by that, but he's just
52:10
Speaker 1: really you know, wonderful and in overs his head and
52:15
Speaker 1: people should just watch it because it's sort of one
52:17
Speaker 1: of these things where you're in over your head, you've
52:21
Speaker 1: got to pivot. But the qualities of the human being,
52:24
Speaker 1: you know, his his compassion, his ability to motivate and
52:28
Speaker 1: communicate as a leader are actually they shine through in
52:31
Speaker 1: the series. It's funny. And so when you think about leading,
52:34
Speaker 1: and you think about leading through COVID nineteen and everything, right,
52:38
Speaker 1: it goes back to just trying to have a sense
52:40
Speaker 1: of humor and to really care about your people. And
52:44
Speaker 1: so even though it's a comedy about soccer, I find
52:47
Speaker 1: that it has a lot of good messages as far
52:50
Speaker 1: as how to lead. Well, yeah, it's a it's a
52:52
Speaker 1: charming series. I believe it's Apple Plus or Apple TV.
52:56
Speaker 1: And I know season two starts, uh last week in July,
53:01
Speaker 1: so I'm looking forward to seeing that. Also, tell us
53:05
Speaker 1: about some of your early mentors who helped to shape
53:08
Speaker 1: your career. Well, one of my early mentors was Rob Compito,
53:13
Speaker 1: who's president Black Rock and uh, kind of funny story.
53:17
Speaker 1: I met him years and years ago giving a kind
53:20
Speaker 1: of a talk at a at a conference, and uh,
53:24
Speaker 1: why was he an important mentor to me? Uh? He
53:27
Speaker 1: said to me, I was working in Ohio at the time,
53:30
Speaker 1: and he said, Christine, you got to get out of
53:33
Speaker 1: Ohio and moved to the East coast for your career.
53:35
Speaker 1: And uh, I had three kids at the time. Uh so,
53:39
Speaker 1: so not the most obvious thing, but you know, I
53:41
Speaker 1: listened to him and he gave me great advice over
53:45
Speaker 1: that period of time in my career, and I moved
53:47
Speaker 1: east and I never looked back. Let's talk about reading
53:51
Speaker 1: in books. What are some of your favorites and what
53:53
Speaker 1: are you reading right now? Well, you know, right now
53:56
Speaker 1: I'm reading of The Handmaid's Tale is going to uh,
54:01
Speaker 1: you know, shows and series and things that you stream.
54:03
Speaker 1: I thought, wow, you know, I've I've actually never read
54:06
Speaker 1: anything by Margaret Atwood and books are always better than
54:09
Speaker 1: than TV, and so I'm reading that one thing. It's
54:12
Speaker 1: it's funny. You know, people in my lives, whether it's
54:16
Speaker 1: team members or whatever, will give me gift me, you know,
54:19
Speaker 1: the latest nonfiction book about you know, leadership or markets
54:23
Speaker 1: and things. And you know what, Barry, I almost never
54:26
Speaker 1: read that kind of stuff now, so if you were
54:29
Speaker 1: to look at my reading list, it's all fiction. It
54:32
Speaker 1: has nothing to do with finance. But again, I think,
54:35
Speaker 1: you know, when you look back over the years. I
54:37
Speaker 1: think to be a good investor, and and advice for
54:40
Speaker 1: young people that are thinking about it is to really
54:44
Speaker 1: push the way that your brain works through creativity, through
54:48
Speaker 1: reading fiction, through music. Those are the things qualities in
54:52
Speaker 1: a highly technical world that I think are underrated. As
54:55
Speaker 1: far as what to do to be a good investor,
54:57
Speaker 1: you want to give us a couple of titles. Oh
55:00
Speaker 1: as far as um my favorite books that I've read?
55:04
Speaker 1: Oh yeah, I would say, you know, one of my
55:06
Speaker 1: very favorite books I love. I love Steinbeck, going back
55:09
Speaker 1: to being sort of a dark fixed income investor. If
55:13
Speaker 1: you read something like Grapes of Wrath, you absolutely want
55:16
Speaker 1: to jump out a window. But one of my favorite
55:18
Speaker 1: books is East of Eden and I and by Steinbeck,
55:21
Speaker 1: And again I just love you know, nonfiction that has
55:24
Speaker 1: you study human nature and human interaction. Those are the
55:28
Speaker 1: types of things that that I absolutely love. What sort
55:32
Speaker 1: of advice would you give to a recent college grad
55:35
Speaker 1: who was interested in a career in investment management or finance. Well,
55:41
Speaker 1: you know, certainly expand your mind in creative ways, as
55:45
Speaker 1: we just talked about. But also I would say, you know,
55:49
Speaker 1: for for our young talent, I always remind them, don't
55:53
Speaker 1: don't specialize too quickly. Take some risks with your career
55:58
Speaker 1: as you go into finance. There's so many great people
56:01
Speaker 1: that you can learn from, so make sure that you
56:04
Speaker 1: start building relationships early on. And the thing that I find,
56:08
Speaker 1: you know, sometimes on the investment side, senior investors can
56:12
Speaker 1: be kind of scary. You know, sometimes you get these
56:14
Speaker 1: like big personalities or whatever. But you find, you know,
56:17
Speaker 1: human nature with people if you catch them at the
56:20
Speaker 1: right time. People love to share, they love to give back,
56:23
Speaker 1: They love to explain to you why did I do
56:25
Speaker 1: this trade? Why am I thinking about this way? So
56:27
Speaker 1: just for our young talent to not be shy to
56:30
Speaker 1: find those manners to create those relationships, and and to
56:33
Speaker 1: make sure that you try a lot of different things
56:35
Speaker 1: early in your career. And then after that point in
56:38
Speaker 1: time and you find your true genius or passion, that's
56:41
Speaker 1: when you actually start to specialize and go a little deeper.
56:45
Speaker 1: Really interesting, and our final question, what do you know
56:48
Speaker 1: about the world of investing today? You wish you knew
56:52
Speaker 1: thirty plus years ago when you were first getting started.
56:56
Speaker 1: I would say, oh, that's such a great question, Terry.
57:00
Speaker 1: One of the things is um uh, get comfortable being wrong,
57:05
Speaker 1: and so you know, and and what I tell you,
57:09
Speaker 1: why why do I say that is UM Back when
57:13
Speaker 1: I was running fixed income, I put UM a picture
57:19
Speaker 1: out on the training floor and it was a picture
57:21
Speaker 1: of a deer in the headlights. And why I had
57:24
Speaker 1: that is I would everybody every day look at that
57:28
Speaker 1: and say, am I being that deer in the headlights?
57:31
Speaker 1: Because as much as you know you can say in
57:33
Speaker 1: the investment game, oh, it's like six of the time
57:36
Speaker 1: you're right, in the rest of you the wrong. People
57:37
Speaker 1: don't like to be wrong, and sometimes we're naturally risk averse.
57:41
Speaker 1: And so what I would do I kept that deer
57:43
Speaker 1: in the headlight photo right on my desk. And one
57:46
Speaker 1: thing that I would say to the team, and I
57:48
Speaker 1: continue to say to myself, and advice that I would
57:50
Speaker 1: give you as far as investments in career, I always
57:54
Speaker 1: tell people to and this would go to UM markets
57:57
Speaker 1: from oil, don't doubt in the darkness things you decided
58:03
Speaker 1: in the light. And what do I mean by that
58:07
Speaker 1: is that there are dark times where the markets go crazy.
58:11
Speaker 1: You know, certainly Spring of two thousand and twenty was
58:14
Speaker 1: one of those examples. But the decisions that you make
58:17
Speaker 1: in the light are when you're thinking about the facts,
58:20
Speaker 1: when you're kind of meditating and you have a calm mind,
58:24
Speaker 1: because that's where people make mistakes. They get over overly emotional,
58:28
Speaker 1: they react, they panic, things happen. So again, are you
58:32
Speaker 1: being a deer in the headlights and don't doubt decisions
58:36
Speaker 1: she's made when you were calm and in the light
58:39
Speaker 1: when things give ros h Google tells me a version
58:43
Speaker 1: of that is Raymond's Edmund But I've never heard that
58:46
Speaker 1: quote before. Very very intriguing. Christine, Thank you so much
58:51
Speaker 1: for being so generous with your time. We have been
58:54
Speaker 1: speaking with Christine Hurt Sellers. She is the CEO of
58:58
Speaker 1: OIA Investment Managed Man, which runs about two hundred and
59:02
Speaker 1: forty five billion dollars in assets. If you don't know
59:06
Speaker 1: the void in name, there have been around forty years.
59:10
Speaker 1: But their previous name was I N G U S.
59:14
Speaker 1: And and that might be uh, how you might be
59:17
Speaker 1: more familiar with them. If you enjoyed this conversation, well
59:21
Speaker 1: check out all of our previous interviews. You can find
59:25
Speaker 1: them at iTunes, Spotify, wherever finer podcasts are sold. We
59:30
Speaker 1: love your comments, feedback and suggestions. Right to us at
59:34
Speaker 1: m IB podcast at Bloomberg dot net. Give us a
59:37
Speaker 1: review at Apple iTunes UH. You can sign up from
59:41
Speaker 1: my daily reading list at rit Halts dot com. Check
59:45
Speaker 1: out my weekly column on Bloomberg dot com slash Opinion.
59:49
Speaker 1: Follow me on Twitter at rit Halts. I would be
59:52
Speaker 1: remiss if I did not thank the crack staff that
59:55
Speaker 1: helps put these conversations together each week. Paris Wald is
1:00:00
Speaker 1: my producer, Atika val Bronn is my project manager. Tim
1:00:04
Speaker 1: Harrow is my audio engineer. Michael Batnick is my head
1:00:08
Speaker 1: of research. I'm Barry Ridults. You've been listening to Masters
1:00:12
Speaker 1: in Business on Bloomberg Radio