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How Smart Is Your Home? Outlook For Smart Home Tech · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day, we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. All right, let's take
0:22
Speaker 1: a look at the smart home. And she met. You know,
0:24
Speaker 1: I recently sold my house and I'm only built it
0:27
Speaker 1: seventeen years ago. But apparently it's not smart enough because
0:30
Speaker 1: the new buyer had his tech guy come by to
0:33
Speaker 1: do an assessment. I think they're gonna be a big upgrade.
0:35
Speaker 1: I don't have a tech guy, but apparently a lot
0:37
Speaker 1: of people have a tech guy. You need a tech
0:39
Speaker 1: guy for your house. Aaron Amy, tech guy, co founder
0:42
Speaker 1: and CEO of Brilliant Home Technology. Aaron, thanks so much
0:45
Speaker 1: for joining us here. I guess the smart home, I
0:49
Speaker 1: know it's a big thing. Give us a sense of
0:51
Speaker 1: how big it is, how fast it's growing. What are
0:54
Speaker 1: people doing to their homes these days? Yeah, I mean
0:57
Speaker 1: it's it's the next great platform. Because technology advance is
1:00
Speaker 1: in a series of platform wars, and we've seen that
1:02
Speaker 1: happen with personal computers, Internet and then mobile. Uh. Smart
1:06
Speaker 1: home has is the next great platform and it has
1:09
Speaker 1: rapidly grown to more than seventy five billion dollars and
1:13
Speaker 1: is taking over every home. But so what is it?
1:16
Speaker 1: I mean? Is this where like the lights turn on
1:19
Speaker 1: and off when you walk in and out of rooms,
1:21
Speaker 1: does your stereo, like your playlist follow you around? Um?
1:27
Speaker 1: You know, does it adjust the thermos stat I don't
1:30
Speaker 1: get it. It does all of those things, and it
1:33
Speaker 1: basically personalizes your home, so it does what you wanted
1:37
Speaker 1: to do with a minimum of us and bother and
1:38
Speaker 1: it opens up new kinds of possibilities. So when someone's
1:41
Speaker 1: at the door, you see who it is and you
1:43
Speaker 1: can talk to them. You can give people permission to
1:46
Speaker 1: come into your home without having to make a key
1:48
Speaker 1: for them and the security risks that that entails. And
1:51
Speaker 1: then you can automate functions. So when you're gonna watch
1:54
Speaker 1: a movie or you're gonna go to bed, all of
1:56
Speaker 1: the different things that need to happen, whether it's temperature,
1:59
Speaker 1: whether it's light, whether it's locks and so on, can
2:02
Speaker 1: all happen automatically. So what are some of the most
2:05
Speaker 1: popular functionality that I guess people are asking for these days. Yeah,
2:11
Speaker 1: I mean smart locks has been a really important category
2:15
Speaker 1: of access control because there are a lot of security
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Speaker 1: benefits uh to to being able to control access remotely. UH.
2:23
Speaker 1: Security has been a big area where where you have
2:27
Speaker 1: you have peace of mind that your home is secure. Uh.
2:30
Speaker 1: Lighting is a very important area. Smart music is another.
2:35
Speaker 1: Is another big one. Smart climate control both saves a
2:38
Speaker 1: lot of energy and makes homes more comfortable. So all
2:41
Speaker 1: of these categories have already proven themselves to be very significantly.
2:45
Speaker 1: So where do consumers get hold of all this? I mean,
2:49
Speaker 1: Paul's HomeBuyer had a tech guy. I don't even know
2:52
Speaker 1: where I would go to get one. Yeah, so there
2:55
Speaker 1: certainly are some, you know, some tech guys that you
2:59
Speaker 1: can get in so on. Increasingly, what we're seeing a
3:01
Speaker 1: brilliant is new homes being built with technology in them
3:05
Speaker 1: as well. So you can buy it yourself and you
3:07
Speaker 1: can install it yourself. You can have it a tech
3:10
Speaker 1: guy do it if you're not that is that chech
3:11
Speaker 1: forward yourself, or it simply comes when you get a
3:15
Speaker 1: new house or or you move into a new apartment.
3:18
Speaker 1: Because the developers are increasingly building homes as smart homes.
3:23
Speaker 1: So one of the things I'm concerned about. All right,
3:25
Speaker 1: what I've noticed, I guess, is that the technology changes
3:27
Speaker 1: so quickly. So whatever tech you put into your house,
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Speaker 1: it's out of date, you know, five years later. It
3:33
Speaker 1: seems like it's got to be super super flexible to
3:36
Speaker 1: be adaptable going forward. It is, um, it is, and
3:41
Speaker 1: that's one of the changes. Uh. And one of the
3:42
Speaker 1: things that companies like Brilliant are doing is making sure
3:45
Speaker 1: that what we're doing is extensible. So for example, we're
3:49
Speaker 1: updating our software every two weeks, and the software is
3:51
Speaker 1: really the heart of the system. UM. So your home
3:55
Speaker 1: actually gets better as you as you live in it.
3:58
Speaker 1: And we've already seen this in other rbunus, like if
4:00
Speaker 1: you have a Tesla car, for example, you know they're
4:03
Speaker 1: always software updates, and and you know, one day your
4:06
Speaker 1: car can parallel park itself. One day it can send
4:08
Speaker 1: the autonomously drive. Uh. And that happens without having to
4:12
Speaker 1: update the underlying hardware platform. Are you worried about these
4:16
Speaker 1: devices getting hacked? I mean, I wouldn't want, for example,
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Speaker 1: somebody to be watching me through my refrigerator or whatever
4:24
Speaker 1: you know, watching through the refrigerator. Note this is this
4:27
Speaker 1: is a really important topic. And uh and yes, you know,
4:30
Speaker 1: the the responsible companies in this field are very very
4:34
Speaker 1: careful about about security and actually bring additional security to
4:39
Speaker 1: uh to bear. I myself have a background in cybersecurity. UM.
4:43
Speaker 1: And you know, I think that we have the ability
4:47
Speaker 1: to offer much better security. For example, you don't have
4:49
Speaker 1: to leave your key under the welcome matter at a
4:52
Speaker 1: fake rock in the garden that everyone knows what it
4:53
Speaker 1: looks like. Uh. If it's to give people access to
4:56
Speaker 1: your house, all right, I guess that's that's where we're own, Matt.
5:00
Speaker 1: So when you, you know, buy your I'm happy to
5:02
Speaker 1: go there. I just want someone to do it for me. Yeah,
5:05
Speaker 1: you got a guy. We'll find you a guy. All right,
5:07
Speaker 1: maybe Aaron, Maybe we'll do that for Aaron. Amy, co
5:09
Speaker 1: founder CEO Brilliant Home Technology, is talking about upgrading the
5:13
Speaker 1: homes to technology. UM and again you know again, what
5:16
Speaker 1: I've noticed is the technology changes so quickly. So you
5:20
Speaker 1: look at some of those houses where they have like panels,
5:22
Speaker 1: you know, kind of in the wall, and they don't
5:25
Speaker 1: use them anymore. The intercom all that kind of stuff.
5:27
Speaker 1: I gotta say, I I first heard about all this
5:29
Speaker 1: stuff when Bill Gates Um built Zanna Do two point
5:33
Speaker 1: oh like twenty years ago. So now regular people are
5:36
Speaker 1: getting what exactly Let's get to the vaccine mandate for
5:44
Speaker 1: federal employees. It looks like President Biden is set to
5:46
Speaker 1: announce a vaccine mandate, and we have Josh wynd Grove
5:50
Speaker 1: who's broken the story. Josh, what are we looking for?
5:53
Speaker 1: You know, we're gonna hear from five PM, probably probably
5:56
Speaker 1: gonna get some more details beforehand. But to rewind to
5:59
Speaker 1: Jill Live, they said a rule he had to be
6:01
Speaker 1: vaccinated or you had an option to sort of do
6:04
Speaker 1: testing and masking and that sort of thing. Now he's
6:07
Speaker 1: expanding it, sort of taking away that option B so
6:09
Speaker 1: you have to be vaccinated, and he's expanding the number
6:13
Speaker 1: or the scope of the federal contract workforce that it
6:17
Speaker 1: applies to. Also previously was aimed at on site, so
6:20
Speaker 1: essentially more people being covered by this without an option
6:25
Speaker 1: to instead of get a vaccine, get regular testing and masking.
6:29
Speaker 1: So you know, obviously many details still TPD. You would
6:32
Speaker 1: expect pushback or legal challenges potentially to this. We don't
6:35
Speaker 1: know when this would take effect. We don't know what
6:38
Speaker 1: it would mean for let's say, a federal worker who
6:40
Speaker 1: showed up on that day without being able to demonstrate vaccination.
6:44
Speaker 1: So definitely moving target on this one, but a substantial
6:46
Speaker 1: expansion of the vaccine requirement and for federal workers. You know,
6:50
Speaker 1: it's interesting, Josh, you know roughly how many people were
6:52
Speaker 1: talking about here, Like it's not all federal employees, just
6:55
Speaker 1: executive branch employees plus federal contractors. That still sounds like
6:59
Speaker 1: a lot of people to make. Yeah, I mean, I
7:01
Speaker 1: think we're talking millions of people, but the exact member,
7:04
Speaker 1: you know, we don't know. And I think the question
7:06
Speaker 1: that I have right now is is, you know, why
7:09
Speaker 1: are we going to see push back from labor groups.
7:11
Speaker 1: Are they're going to be legal challenges or arbitration, you know, grievances,
7:14
Speaker 1: these kinds of things filed, you know, potentially, but the
7:17
Speaker 1: White House broadly abews these sort of you know, Alkhart mandates.
7:21
Speaker 1: Pretty big one for them is the ctereral government. But
7:23
Speaker 1: you know, for smaller companies are doing the same thing
7:26
Speaker 1: as a good way to sort of spur vaccination rates
7:29
Speaker 1: people sort of you know, I don't want to be
7:31
Speaker 1: ordered by the government to do it overall. But if
7:34
Speaker 1: your employer requires that, there's there's evidence of that leads
7:37
Speaker 1: to enough tick in vaccinations. But you know, of course,
7:40
Speaker 1: the concern on the flip side is that it might
7:42
Speaker 1: generate blowback or you know, get people's backed up, you know,
7:45
Speaker 1: that kind of thing. So, you know, broad a lot
7:48
Speaker 1: of moving parts in this especially it's almost like they're
7:50
Speaker 1: trying to antagonize, um, the Trumpian anti vaxers. We know
7:56
Speaker 1: that percent maybe more are valy opposed, right, Uh yeah.
8:02
Speaker 1: I mean there's different camps where you've got hardcore anti
8:05
Speaker 1: vax people. You've got people that can be bothered, you
8:06
Speaker 1: have people that have barriers, like they don't have paid
8:09
Speaker 1: time off to go get it, that sort of thing.
8:10
Speaker 1: You know. I think it's worth noting that vaccine has
8:12
Speaker 1: a nancy has been declining in the US, not maybe
8:16
Speaker 1: as fast as other countries, but it's been going down.
8:18
Speaker 1: And we now have you know, seventy of US adults
8:22
Speaker 1: with at least one shot. That's a fairly big number.
8:25
Speaker 1: And you know they had shot for seventy in July,
8:27
Speaker 1: they hit it in August and now seventy five. The
8:30
Speaker 1: problem of courses with delta you might need to get
8:32
Speaker 1: quite a bit higher than that when you And of
8:34
Speaker 1: course there's the whole segment of the population those under
8:36
Speaker 1: twelve that aren't eligible for a vaccine and are probably
8:38
Speaker 1: weeks or months away from being eligible. So you know
8:41
Speaker 1: the yeah, absolutely, you know, if you're die hard anti
8:44
Speaker 1: vax or, this is probably not going to change your mind.
8:47
Speaker 1: But there's there's folks in the middle essentially that aren't
8:50
Speaker 1: vaccinated to have questions. Maybe I haven't gotten around to
8:52
Speaker 1: it that that I think they're sort of hoping the
8:56
Speaker 1: mandates at the employer level in other with your job
8:58
Speaker 1: making you do it. Well, we'll have it if you
9:00
Speaker 1: have a difference. Yeah, Josh, it's you know, the big
9:02
Speaker 1: take story of the day that Matt and I had
9:05
Speaker 1: we were talking about this morning, focused on, you know,
9:08
Speaker 1: corporate mandates. Um, does a White House hope or anticipate
9:12
Speaker 1: that by taking this aggressive federal policy that they will
9:16
Speaker 1: you know, maybe coax or urge or prod some big
9:19
Speaker 1: corporations to kind of follow suit with vaccine and dates. Yeah. Absolutely,
9:23
Speaker 1: you know they're sort of hoping that people joined the
9:25
Speaker 1: parade behind them in this big wave started. You recall
9:29
Speaker 1: with the approval of Fiser's vaccine, remember from montsore reason,
9:32
Speaker 1: and only on an emergency authorization. When the FDA gave
9:36
Speaker 1: full approval, Biden's administration took that as a real sort
9:39
Speaker 1: of turning point to start saying, Okay, you know, corporate America, look,
9:43
Speaker 1: you know, you know it's not an emergency authorized vaccine,
9:45
Speaker 1: is now an approved vaccine. So you're on stronger footing
9:49
Speaker 1: morally legally what have you to be able to require vaccination?
9:52
Speaker 1: So I think we're going to expect to hear him
9:54
Speaker 1: call for that this evening, beat that drum. We also
9:56
Speaker 1: expect him to give an update on boosters. Remember they
9:59
Speaker 1: planned to start sister shots in a week from Monday.
10:02
Speaker 1: Maybe more on testing, a couple other elements on schools.
10:05
Speaker 1: There could be some you know, news if you will,
10:07
Speaker 1: in this speech, But broadly, I think he just wants
10:10
Speaker 1: to kind of sweep together what they've been doing over
10:11
Speaker 1: the summer to try to curb this thing as those
10:13
Speaker 1: cases rose. But so far, as far as we know,
10:16
Speaker 1: this is only a requirement for the two two vaccine shots,
10:20
Speaker 1: or is it? Will they require three? Now that's a
10:24
Speaker 1: good question right now that they consider too to be
10:26
Speaker 1: fully vaccinated, so that but that's that's as of now,
10:29
Speaker 1: so presumably that may change. But that is a huge
10:32
Speaker 1: open question right now among researchers about what will happen.
10:34
Speaker 1: And of course those folks have got that Johnson and
10:36
Speaker 1: Johnson shot something fourteen million of people in the US.
10:39
Speaker 1: They don't know what they're going to do for booster shots,
10:41
Speaker 1: and you know they're considered fully vaccinated after one shot,
10:44
Speaker 1: so you know, this, uh, a lot of questions still
10:46
Speaker 1: to be answered. We expect to have some clarity in
10:49
Speaker 1: you know, the afternoon, either around the speech, perhaps before
10:53
Speaker 1: the speech, on on what exactly they're proposing. And as
10:56
Speaker 1: I say, I'm expecting a bit of a wave of
10:58
Speaker 1: statements from labor groups and what have you saying you know,
11:01
Speaker 1: responding to this, you know, about their members potentially being
11:04
Speaker 1: forced to do this, and we just simply don't know
11:06
Speaker 1: the what you know, what if kind of factor? If
11:09
Speaker 1: someone shows up? Are they fired? Are they furloughed? Are
11:12
Speaker 1: they sent home? Are they you know, work from home? Like,
11:14
Speaker 1: what is the deal? We don't know. It's gonna be fascinatorry.
11:16
Speaker 1: We're gonna get more details coming throughout the day. You'll
11:18
Speaker 1: have and your team, lots of reporting there, I am sure.
11:21
Speaker 1: Josh wind Grove, White House, correspondent for Bloomberg News, joinings
11:24
Speaker 1: on the phone from Washington, d C. Again green on
11:30
Speaker 1: the screen, yet again at or near all time highs.
11:33
Speaker 1: As we continue to hear that from Greg jard and
11:35
Speaker 1: his reporting seemingly on a daily basis. It's just for
11:38
Speaker 1: a lot of folks, this feels like a market and
11:40
Speaker 1: looks like a market that is priced to perfection and
11:43
Speaker 1: might have some vulnerability into it, but that's not stopping
11:47
Speaker 1: this market. Let's check in with an expert who knows
11:49
Speaker 1: this stuff. Lisa Chalotte, chief investment officer for wealth management
11:53
Speaker 1: at Morgan Stanley. They have one point five trillion with
11:56
Speaker 1: a t UH and assets under management. Lisa, thanks so
11:59
Speaker 1: much for joining us here today. I guess I'll start
12:03
Speaker 1: with kind of the wall of worry, uh kind of
12:06
Speaker 1: question or topic here. How concerned are you about this
12:10
Speaker 1: market given some of the headwinds that you know, folks
12:14
Speaker 1: rightfully point out, whether it's rising interest rates tapering and
12:17
Speaker 1: you know, just the delta variant. How do you view
12:19
Speaker 1: this market right here? Uh? So, look, you know we've
12:23
Speaker 1: been on the record, um, you know, to say that
12:27
Speaker 1: this is a market that for the most part, while
12:30
Speaker 1: I can claim that it's climbing the wall of worry
12:33
Speaker 1: and and certainly positioning uh in you know, the megacap
12:37
Speaker 1: tex sox, it's suggests an element of defensiveness. UM. You know,
12:43
Speaker 1: our sense has been that that this is a market
12:46
Speaker 1: uh you know that is shrugging off most of the concerns,
12:50
Speaker 1: whether it is um you know, disruptions coming from delta variant,
12:55
Speaker 1: whether it's you know, supply chain concerns, whether it's been
12:58
Speaker 1: the China regulator or uh crackdown, or you know, shifts
13:03
Speaker 1: in policy um from the Fed. UM. Nothing really has
13:08
Speaker 1: gotten in the way of this market. You know. It's
13:11
Speaker 1: it's notable. I think uh that uh for for much
13:16
Speaker 1: of the period, uh you know, after the first quarter,
13:20
Speaker 1: many folks were saying that the market was rallying because
13:23
Speaker 1: interest rates were falling. Uh. You know, really, over the
13:26
Speaker 1: last month or so, we've seen the ten year back
13:30
Speaker 1: up from its ultimate lows on the ten year of
13:33
Speaker 1: one seventeen. We're back up here, uh into the mid
13:36
Speaker 1: one thirties on the ten yere Uh And and even
13:40
Speaker 1: that has not uh you know, interrupted this this grind
13:45
Speaker 1: higher UM in markets. So you but you expect a
13:49
Speaker 1: pullback right least, so you expect to ten to correction
13:52
Speaker 1: before the end of the year. Yeah, we do, and
13:55
Speaker 1: and and um. The reason for that is essentially two fold.
13:59
Speaker 1: So with that move in rates, we ultimately think that
14:02
Speaker 1: price earnings ratios, especially on those most expensive stocks, should compress.
14:08
Speaker 1: We've seen PE multiple compression uh in many many other
14:13
Speaker 1: parts of the market, whether you're talking about international stocks,
14:16
Speaker 1: you're talking about value stocks, more cyclical stocks, you're talking
14:20
Speaker 1: about the small caps. Uh. This is the one area
14:23
Speaker 1: of the market that has remained immune so far. Uh.
14:27
Speaker 1: And there's just no precedent for that. Uh. You know,
14:30
Speaker 1: historically when rates go up, ultimately PE ratios um do
14:34
Speaker 1: come down. So we we see that as a risk.
14:36
Speaker 1: In secondarily, Uh, you know, we're seeing folks talk about
14:40
Speaker 1: the growth scare. We're seeing people downgrade their estimates for
14:43
Speaker 1: third quarter GDP growth. Even at Morgan Stanley ellen Ventner
14:48
Speaker 1: has cut her third quarter number from six point five
14:51
Speaker 1: percent annualized growth rates to a two point nine percent.
14:55
Speaker 1: That's a pretty big cut. Uh. And yet folks, uh,
14:59
Speaker 1: you know, don't think that's going to harm earnings in
15:03
Speaker 1: the third quarter. And we think that that could be
15:05
Speaker 1: another negative catalysts. So, you know, lower PE ratios and
15:09
Speaker 1: potentially earnings disappointments or or fewer positive earnings or visions
15:15
Speaker 1: are the two catalysts that that might unleash that ten
15:17
Speaker 1: fiercent correction. So with that type of correction between now
15:21
Speaker 1: and the end of the end of the year possible,
15:24
Speaker 1: are you suggesting people raise cash? Are you suggesting they
15:26
Speaker 1: rotate into uh, just maybe more cyclical names. How do
15:30
Speaker 1: you think people should position themselves for that? Yeah, so
15:35
Speaker 1: we're we're in the camp that says this is about
15:38
Speaker 1: UH rotating and actively managing UM. So we are buyers
15:43
Speaker 1: of consumer services, of financials, of some of the uh
15:47
Speaker 1: industrial cyclicals, from some you know, safer healthcare names and
15:53
Speaker 1: some staples. UM. It's just really some of these long
15:57
Speaker 1: duration oriented UM secular growth stocks that that we just
16:02
Speaker 1: think are long in the tooth and need to kind
16:04
Speaker 1: of take their hit. So we're rotating here. Uh no
16:09
Speaker 1: need to panic and go to cash and get paid nothing,
16:13
Speaker 1: uh and even negative returns after inflation. But we do
16:17
Speaker 1: think that we're in a bull market. It's just a
16:19
Speaker 1: bull market in things other than the SMP depth. How
16:24
Speaker 1: important is the infrastructure bill or how important is um
16:28
Speaker 1: fiscal Uh you know, trillions of dollars in continued fiscal support. UM.
16:35
Speaker 1: You know. Our perspective is that it's not so much
16:38
Speaker 1: the dollars, because what people forget is that a lot
16:42
Speaker 1: of this is going to be spent over you know,
16:44
Speaker 1: multiple years, if not, if not a decade, uh, and
16:49
Speaker 1: so on any annual basis, it's it's it's fractions of
16:53
Speaker 1: percentage points of growth. UM. But it's really the the
16:59
Speaker 1: shift in mind that uh, that we are in a
17:03
Speaker 1: m in a more fiscally active environment and and um,
17:08
Speaker 1: you know that is growth oriented. Uh. And so you
17:12
Speaker 1: know we are constructive broadly. I don't know, um you
17:16
Speaker 1: know exactly what the form of final legislation is going
17:21
Speaker 1: to take, given all the puts and takes of this,
17:23
Speaker 1: but we do think we're going to get something, uh.
17:26
Speaker 1: And that's something on the margin. Is helpful. Lisa, great
17:32
Speaker 1: to get your take. Thank you so much for joining us.
17:34
Speaker 1: Hope we can get you back on soon. Lisa Shallatt
17:37
Speaker 1: is the chief investment Officer for wealth Management at Morgan Stanley.
17:42
Speaker 1: Obviously very important for you to get so always good
17:47
Speaker 1: to to hear from Lisa. You know, we are seeing
17:49
Speaker 1: continued gains in the markets right now, and as we
17:53
Speaker 1: heard earlier from UM from Dave Wilson, we see the
18:00
Speaker 1: SMP five lead by energy, financials and materials. This is Bloomberg.
18:09
Speaker 1: Now let's get over to Nathan Chetty. I told you
18:11
Speaker 1: we're going to be joined by the head of multi
18:13
Speaker 1: asset at now ven they've got one point two trillion
18:16
Speaker 1: dollars in assets under management. We're gonna talk about the
18:20
Speaker 1: opportunities and risks in private markets. Where do you start when? Um, uh, Nathan,
18:26
Speaker 1: when analyzing such a huge universe, Thanks uh, Matt Paul
18:32
Speaker 1: for having me on. It is indeed a massive universe,
18:35
Speaker 1: and I think, um, it's only growing. We've seen a
18:39
Speaker 1: ton of interest in in private markets, and I think
18:42
Speaker 1: this has been driven really by two phenomenon. The first
18:47
Speaker 1: is this lower expected return environment at least on a
18:50
Speaker 1: go for a basis, and I I'd argue the second
18:53
Speaker 1: one is partly driven by the volatility we're seeing in
18:57
Speaker 1: economic variables and brought broad indicator. So investors are moving
19:01
Speaker 1: to private markets in order to incorporate them in their
19:05
Speaker 1: portfolios for more diversification. They're trying to eat out every
19:09
Speaker 1: basis point of return that they can, and that liquidity
19:11
Speaker 1: premium UM is certainly one place to source it. So
19:16
Speaker 1: it's interesting, Nathan, we hear a little bit more I
19:19
Speaker 1: guess really over the last several weeks and months about
19:22
Speaker 1: private credit, and I guess that's simply, you know, investors
19:25
Speaker 1: looking anywhere they can for yield. Give us kind of
19:29
Speaker 1: the risk return profile as you know, you guys got
19:32
Speaker 1: to go out from you know, maybe you know, looking
19:34
Speaker 1: at treasuries, are looking at public corporates to to going
19:38
Speaker 1: out into the private credit market. Give us a sense
19:40
Speaker 1: of the risk return that you guys think about. Yeah,
19:43
Speaker 1: private credit has just absolutely exploded, and and part of
19:47
Speaker 1: that is due to UM, you know, some of the
19:51
Speaker 1: bank rag et cetera, and ultimately UM syndicated loans haven't
19:56
Speaker 1: had the same levels of plot that we was seen
19:58
Speaker 1: in the past. So the credits stepped in there UM
20:02
Speaker 1: and really have a risk return profile that's not dissimilar
20:08
Speaker 1: to their public cousins, meaning syndicated loans, but at least
20:12
Speaker 1: on the middle market lending or senior secured side, we're
20:15
Speaker 1: looking at high single digits and uh, you know, a
20:19
Speaker 1: lower risk profile than you'd see in public markets, and
20:22
Speaker 1: again part of that is due to that illiquidity risk
20:25
Speaker 1: premium that you're getting UM. I think another reason why
20:29
Speaker 1: private credit is of such interest is you're sitting higher
20:33
Speaker 1: in the cap structure. Private equity or VC has always
20:35
Speaker 1: been part of UH portfolios, but with private credit, you're
20:39
Speaker 1: sitting higher up in that cap structure, have to deploy
20:41
Speaker 1: less risk, but again a very attractive risk return profile,
20:45
Speaker 1: particularly UM for income oriented investors. So how much does
20:56
Speaker 1: how much do things like FED policy matter to private markets?
20:59
Speaker 1: How quickly you see follow through? I mean, look, FED
21:04
Speaker 1: policy matters for all markets, public or private, and it
21:08
Speaker 1: depends on the private market we're talking about. Some are
21:10
Speaker 1: going to UM transmit or or reverberate in in those
21:14
Speaker 1: private markets quicker than others, particularly those that are sensitive
21:19
Speaker 1: to fixed income. We're just talking about private credit. Most
21:22
Speaker 1: of private credit is in UM live or plus type
21:27
Speaker 1: landing or floating rate structures. So UM you have some
21:32
Speaker 1: UH some ability to manage that rates duration risk, which
21:36
Speaker 1: is really going to reflect FED policy much more so
21:39
Speaker 1: than you would with public market rate sensitive assets, and
21:42
Speaker 1: those are obviously going to be reflected UM immediately in
21:46
Speaker 1: the private real assets space. UM, not dis similar funding rates,
21:51
Speaker 1: credit spreads. They all are going to have an impact
21:53
Speaker 1: on UH demand and and ultimately debility to to purchase
21:58
Speaker 1: and supply in the real asset space. But but but
22:02
Speaker 1: the the implications and that transmission from shifts in FED
22:07
Speaker 1: policy are going to take some time. They're going to
22:09
Speaker 1: take UM multiple quarters, and ultimately I guess that goes
22:14
Speaker 1: back to why we've seen such a huge uptake in
22:17
Speaker 1: demand and interest is to mitigate some of that volatility
22:21
Speaker 1: around UM, you know, economic variables, and that volatility around
22:28
Speaker 1: policy uncertainty gives it time to digest UM and ultimately
22:34
Speaker 1: reflect more fundamentals going forward. Nathan, we're presumably heading into UH.
22:41
Speaker 1: You know, there is inflation in this economy, Nathan, the discussion,
22:44
Speaker 1: I guess the debate is whether it's transitory and there's
22:46
Speaker 1: something more longer term. How does your portfolio, a portfolio
22:52
Speaker 1: that has a lot of you know, alternative assets, private
22:54
Speaker 1: market investments, private credit investments, how does that typically fair
22:58
Speaker 1: in you know, a inflationary perhaps rising rate environment. UM.
23:05
Speaker 1: Thanks for the question, And obviously inflation is is top
23:10
Speaker 1: of mind for all investors right now, it's re entered
23:13
Speaker 1: the conversation. It does exist. There's supply chain issues, and
23:17
Speaker 1: we can argue UM round and round about its transitory nature.
23:22
Speaker 1: We do believe that it's going to settle UM at
23:25
Speaker 1: a at a level that's higher than we've seen in
23:28
Speaker 1: the past decade, this disinflationary decades. So UM in a
23:35
Speaker 1: portfolio the size of ours and a portfolio that is
23:39
Speaker 1: highly diversified traversing public and private markets. The big area
23:45
Speaker 1: where UM, say an uptakeing inflation is going to influence
23:51
Speaker 1: the portfolios in the bond equity correlation. I mean people
23:57
Speaker 1: hold bonds in their portfolio as a diversified against equities.
24:01
Speaker 1: When we enter higher inflation regimes, we see that correlation
24:06
Speaker 1: tends to flip. I mean this this dynamic of correlation
24:10
Speaker 1: that's thirty years ago it was positively correlated. So UM
24:14
Speaker 1: for us very much about finding diversification. You need to
24:19
Speaker 1: find divertification real assets, UM and private assets to provide
24:23
Speaker 1: that diversification that we're seeking in those environments. All right, Nathan,
24:26
Speaker 1: thank you so much for joining us. For really appreciation
24:28
Speaker 1: appreciate it. Nathan Chetty, head of Multi Asset at Nuvine,
24:32
Speaker 1: talking to us about the private market alternatives in a portfolio.
24:36
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