Latest / Masters in Business / Jenny Johnson on Managing a Trillion-Dollar Firm

Transcript

Jenny Johnson on Managing a Trillion-Dollar Firm · Masters in Business

• 0:02
  Speaker 1: This is Master's in Business with Barry rid Holds on
• 0:06
  Speaker 1: Bloomberg Radio. This week on the podcast, once again, I
• 0:11
  Speaker 1: have an extra extra special guest. Jenny Johnson is CEO
• 0:17
  Speaker 1: of investment giant Franklin Templeton. They run about a trillion
• 0:21
  Speaker 1: and a half dollars. She's been CEO since February twenty twenty.
• 0:26
  Speaker 1: She's been with the firm for decades. Just an incredible
• 0:30
  Speaker 1: insightful conversation about how to build a company, how to
• 0:34
  Speaker 1: grow through acquisitions, how to make sure everybody on your
• 0:38
  Speaker 1: team understands their role is appreciated and is acting and
• 0:42
  Speaker 1: performing at the highest levels. I found this conversation to
• 0:47
  Speaker 1: be absolutely not only insightful and informative, but also delightful,
• 0:52
  Speaker 1: and I think you will also with no further ado,
• 0:55
  Speaker 1: my conversation with Franklin Templeton's CEO, Jenny Johnsen. Jenny Johnson,
• 1:02
  Speaker 1: Welcome to Bloomberg.
• 1:04
  Speaker 2: Thank you, Berry. It's great to be here.
• 1:06
  Speaker 1: It's great to have you. I've been looking forward to
• 1:08
  Speaker 1: this for a long time. I've been back and forth
• 1:10
  Speaker 1: for a while, and then we had the pandemic hit.
• 1:13
  Speaker 1: Let's talk a little bit about your background. You joined
• 1:17
  Speaker 1: Franklin Templeton in nineteen eighty eight. Family members helped found
• 1:21
  Speaker 1: the farm have run it for a long time. And
• 1:24
  Speaker 1: back then it was frank was a Franklin temple it was.
• 1:27
  Speaker 2: And it just acquired Tubleed at nineteen ninety two. Right,
• 1:31
  Speaker 2: So I spent a year. My father said to me, look,
• 1:34
  Speaker 2: if you're going to be in the financial services business,
• 1:36
  Speaker 2: you should probably work in New York. And so I
• 1:40
  Speaker 2: spent a year working for Drexel Burnham.
• 1:43
  Speaker 1: And and by the way, that's tough when you're a
• 1:44
  Speaker 1: West co Coast gal. Used to sunshine and feather. Right,
• 1:48
  Speaker 1: Although I was.
• 1:48
  Speaker 2: Born in New Jersey, Okay, you know Jersey. I was
• 1:51
  Speaker 2: born in Montclair, Okay. So, and I lived in New
• 1:54
  Speaker 2: Jersey till I was about nine. So I came back
• 1:57
  Speaker 2: and lived in Jersey City.
• 1:59
  Speaker 1: And now I remember why we moved to California.
• 2:02
  Speaker 2: Hey, there's some beautiful parts in Jersey.
• 2:04
  Speaker 1: There are. It's the weather. It's really the big yes effort.
• 2:08
  Speaker 1: It's hard to beat that, you know, sunshine three hundred
• 2:11
  Speaker 1: days a year, to say the least. So, since we're
• 2:16
  Speaker 1: talking about weather. Aside from the weather, what are the
• 2:20
  Speaker 1: cultural differences like, especially in finance, because California finance very
• 2:25
  Speaker 1: different than New York finance culturally.
• 2:27
  Speaker 2: Sure, I mean I think so Franklin's headquartered in Silicon Valley.
• 2:31
  Speaker 2: I actually think that what influences it more than anything
• 2:35
  Speaker 2: now is the tech culture that's going on on the
• 2:38
  Speaker 2: West Coast. And you know, it's kind of funny if
• 2:40
  Speaker 2: you and now you see it in New York City.
• 2:43
  Speaker 2: But you know, if you showed up in a meeting
• 2:46
  Speaker 2: in a coat and tie, you know, post the dot
• 2:49
  Speaker 2: com era and kind of you know, coming into the
• 2:51
  Speaker 2: more recent stuff, you're viewed as sort of the old economy, right,
• 2:56
  Speaker 2: And you know, now we see everybody walk around New
• 2:58
  Speaker 2: York City, hardly anybody where's a tie. Uh, you know,
• 3:01
  Speaker 2: the vest is the.
• 3:02
  Speaker 3: New already the maybe post right, it's kind of moved
• 3:07
  Speaker 3: to Lululemon, Pansen and you know, button down shorts is
• 3:12
  Speaker 3: about as dressed up.
• 3:12
  Speaker 2: So I don't think anybody expected the West Coast to
• 3:15
  Speaker 2: lead the East Coast on uh, you know, culture and attire.
• 3:18
  Speaker 2: But I think that's happened a little bit on the
• 3:20
  Speaker 2: tech otherwise, you know it the West Coast. You know,
• 3:24
  Speaker 2: if you were in the financial services business, was rough
• 3:27
  Speaker 2: life you were you were in the office by a
• 3:29
  Speaker 2: lot of people get up at.
• 3:31
  Speaker 1: Nine am lunch. Yeah, right, I used to let But
• 3:34
  Speaker 1: the good news is you finish it one you could
• 3:35
  Speaker 1: go out surfing. Yeah, there you go, always saying, so
• 3:39
  Speaker 1: you're at Drexel for a year in New York, you
• 3:41
  Speaker 1: come back to Franklin Templeton. What was your first role
• 3:44
  Speaker 1: at ft O god or Franklin.
• 3:48
  Speaker 2: I was an executive administrative coordinator, right, So I was
• 3:52
  Speaker 2: working for the COO kind of on special projects, right.
• 3:55
  Speaker 2: And then I moved into we had a bank at
• 3:58
  Speaker 2: the time, and I moved into running part of the bank.
• 4:02
  Speaker 2: And I got to tell you we then spun out
• 4:05
  Speaker 2: an auto financing business, and as a CEO today, I
• 4:08
  Speaker 2: have to say that period of my career running the
• 4:10
  Speaker 2: auto finance business was probably the most significant. I also
• 4:14
  Speaker 2: ran our credit card business at the time.
• 4:16
  Speaker 1: Both both difficult businesses.
• 4:17
  Speaker 2: And learning how to do things as a CEO. One is,
• 4:22
  Speaker 2: we were securitizing the assets and the auto loan and
• 4:26
  Speaker 2: selling them off to other asset managers. We weren't able
• 4:28
  Speaker 2: to buy them ourselves. And I remember being on the
• 4:30
  Speaker 2: phone thinking, you know, as the as the pms were
• 4:33
  Speaker 2: asking questions about cash flows and things. So I was thinking,
• 4:35
  Speaker 2: you're asking all the wrong questions about whether this portfolio
• 4:38
  Speaker 2: will perform because it's things like down payment, you know,
• 4:40
  Speaker 2: there's there's you know, the credit score, average credit card,
• 4:43
  Speaker 2: what they risk exactly, And so it was really good
• 4:47
  Speaker 2: to kind of learn that side of the business. And then,
• 4:49
  Speaker 2: of course as a CEO, it doesn't matter the size
• 4:52
  Speaker 2: of the company. You're always talking about word allocate capital.
• 4:54
  Speaker 2: You know, should you add more to marketing or in
• 4:57
  Speaker 2: you know, collections, right, And those are the same problems
• 5:01
  Speaker 2: for big companies as little companies, And so I always
• 5:03
  Speaker 2: felt like it was great learning experience. And then the
• 5:06
  Speaker 2: biggest thing in the credit card business in the late
• 5:08
  Speaker 2: nineties or early nineties, those who were great at data
• 5:12
  Speaker 2: and data analytics, uh huh dominated the industry and essentially
• 5:16
  Speaker 2: put others out of it. And so I became a
• 5:17
  Speaker 2: big fan of data and how predictive it can be.
• 5:21
  Speaker 1: For all the obvious reasons. Right, if you have an
• 5:23
  Speaker 1: edge in data, you have an edge across the whole
• 5:25
  Speaker 1: business line for sure. So Franklin obviously divests out of
• 5:30
  Speaker 1: the banking business, the credit card business, the auto financing business.
• 5:34
  Speaker 1: What led to that decision did you guys just say
• 5:37
  Speaker 1: we really want to be pure investment management?
• 5:40
  Speaker 2: Well, wet. Part of it was, I think regulatory the
• 5:43
  Speaker 2: requirements for asset managers to have a bank were such
• 5:47
  Speaker 2: that it was would it would inhibit us a.
• 5:50
  Speaker 1: Bit post SNL crisis, Yeah, came up exactly.
• 5:53
  Speaker 2: Yeah, And honestly, I think we divested post financial crisis.
• 5:59
  Speaker 2: So once rules, yeah, So we kept it for a
• 6:01
  Speaker 2: long time. But once the rules search, it became difficult
• 6:05
  Speaker 2: around things like seeding new funds. You had to within
• 6:08
  Speaker 2: a year. You couldn't be more than ten percent of
• 6:10
  Speaker 2: the fund. Well, that's hard to do in our business
• 6:12
  Speaker 2: because people look for a track record, So your seed
• 6:14
  Speaker 2: and get a track record. And we just looked at
• 6:16
  Speaker 2: it and said, you know, it's not material enough to
• 6:19
  Speaker 2: have it cause the complications that it caused on our
• 6:23
  Speaker 2: asset management.
• 6:24
  Speaker 1: It sounds like it was an easy decision to cut
• 6:26
  Speaker 1: it loose.
• 6:27
  Speaker 2: Yeah, except that we do have fiduciary trust, which is
• 6:30
  Speaker 2: a high net worth business.
• 6:31
  Speaker 1: Huh.
• 6:31
  Speaker 2: And it's always nice to have a lending arm when
• 6:34
  Speaker 2: you have a high net worth business.
• 6:36
  Speaker 1: All right, So we're going to get into the acquisitions
• 6:40
  Speaker 1: a little later. But from when you first started as
• 6:44
  Speaker 1: an administrative organizational assistant. Whatever, right, right, fetch me some
• 6:51
  Speaker 1: coffee please, that sort of And although I would imagine
• 6:54
  Speaker 1: that you still you know, you warn't the bottom bottom
• 6:58
  Speaker 1: of the tone poll because people knew, obviously knew who
• 7:00
  Speaker 1: you were and who the family was. But from when
• 7:04
  Speaker 1: you first started at was a let me get my
• 7:07
  Speaker 1: feet wet sort of roll. How has Franklin changed over
• 7:12
  Speaker 1: the ensuing decades.
• 7:13
  Speaker 2: Well, I have to say, when you say you know,
• 7:16
  Speaker 2: you're right, you know, in a business where founders are
• 7:19
  Speaker 2: still involved in your family member, you're gonna be treated
• 7:22
  Speaker 2: a little differently. But my father always was adamant you
• 7:24
  Speaker 2: have to work harder than everybody else because people would
• 7:26
  Speaker 2: look at how hard you work and work just a
• 7:28
  Speaker 2: little less, like they won't feel like they have to
• 7:30
  Speaker 2: do more. And I remember my first job was a
• 7:34
  Speaker 2: summer job and I took over from my older sister
• 7:37
  Speaker 2: who was twenty one at the time, and I was,
• 7:39
  Speaker 2: I don't know, fifteen or sixteen, and he was paying
• 7:41
  Speaker 2: her five dollars an hour and he was paying me
• 7:44
  Speaker 2: two dollars and fifty cents an hour. And I said
• 7:45
  Speaker 2: to him, look, I think I'm I think I'm a
• 7:47
  Speaker 2: harder worker, and I think I should get five dollars
• 7:50
  Speaker 2: an hour, and he said, well, you can always get
• 7:51
  Speaker 2: a job somewhere else. So that's what I learned. Okay,
• 7:55
  Speaker 2: there's certain Dad.
• 7:56
  Speaker 1: Was no nonsense, noice serious here hit the bricks. That's
• 8:02
  Speaker 1: really interesting. But by the way, that's really astute observation.
• 8:06
  Speaker 1: People are gonna look at how hard you're gonna you're working,
• 8:09
  Speaker 1: and they think I could work a little less hard. See,
• 8:12
  Speaker 1: I would think they would want to work a little
• 8:13
  Speaker 1: harder than you, just so no one accuses them of slacking.
• 8:18
  Speaker 1: But maybe it's a generational thing. Who who knows, And
• 8:22
  Speaker 1: we're not that far. I think we're about the same age.
• 8:26
  Speaker 1: I was always taught, hey, find the hardest, fastest guy
• 8:30
  Speaker 1: out there and just do a little more than him.
• 8:33
  Speaker 1: So you don't want to be on the underside. You
• 8:35
  Speaker 1: are to be passing that. So h so, so well
• 8:39
  Speaker 1: you In the early days, it was mutual funds. It
• 8:42
  Speaker 1: was SMAs.
• 8:42
  Speaker 2: What what were you guys? Really just mutual funds? I
• 8:44
  Speaker 2: mean that's that was the That was the vehicle of choice.
• 8:48
  Speaker 2: And you know it evolved over time, uh, to things
• 8:52
  Speaker 2: like SMAs and ETFs and collective investment trust. Now now
• 8:55
  Speaker 2: you have to be able to provide all of those
• 8:58
  Speaker 2: vehicles as outlets for your investment capabilities. And I think
• 9:04
  Speaker 2: a lot of that change happened. It was starting to happen,
• 9:06
  Speaker 2: but accelerated after the Global Financial crisis, where regulators pushed
• 9:12
  Speaker 2: for more transparency in distribution fees, and so you saw
• 9:17
  Speaker 2: this shift from kind of fees embedded in say the
• 9:20
  Speaker 2: mutual fund vehicle, to being external on the client statement.
• 9:24
  Speaker 2: And so then advisors wanted things like ETFs and SMAs
• 9:29
  Speaker 2: and other things because a client was seeing that they
• 9:31
  Speaker 2: were paying their advisor every month, and so that's changed.
• 9:33
  Speaker 2: I think that's been a dramatic change in the industry
• 9:36
  Speaker 2: on the type of vehicle we use.
• 9:37
  Speaker 1: I always thought that the marketplace would fix that on
• 9:41
  Speaker 1: its own, and I've been wrong about this for decades.
• 9:44
  Speaker 1: I always assumed people would see, oh, five percent front
• 9:47
  Speaker 1: load on a C share or a two and a
• 9:51
  Speaker 1: half percent annual. I assume people would see that and
• 9:54
  Speaker 1: steer away. But it doesn't appear that that really happened
• 10:00
  Speaker 1: until the Financial crisis. That seems to be where indexing
• 10:05
  Speaker 1: really took off and where people became a lot more
• 10:07
  Speaker 1: price sensing well, I think.
• 10:08
  Speaker 2: You were seeing a big shift to C shares where
• 10:11
  Speaker 2: you know, you had a bigger back end trail and
• 10:14
  Speaker 2: a smaller upfront, So that was happening a bit. And
• 10:17
  Speaker 2: you know, look, I'm a big believer that some of
• 10:21
  Speaker 2: those type commission products are still important. We look in
• 10:24
  Speaker 2: the UK where they have something called RDR, so they
• 10:27
  Speaker 2: don't permit any kind of commission based selling, and so
• 10:30
  Speaker 2: it's all gone to fee based and you have a
• 10:32
  Speaker 2: huge percentage of population or orphan from advice because essentially
• 10:38
  Speaker 2: an advisor says, ah, that's too small, but an account it's
• 10:40
  Speaker 2: not worth my time, whereas if they got that upfront commission,
• 10:43
  Speaker 2: they'd spend the time doing it. And the key is
• 10:46
  Speaker 2: the difference for people investing early. So if you invest
• 10:50
  Speaker 2: for ten years from age twenty five to thirty five,
• 10:53
  Speaker 2: say five thousand dollars a year, or you wait till
• 10:57
  Speaker 2: thirty five and invest for thirty years at five thousand
• 11:01
  Speaker 2: dollars a year, you will have more money if you
• 11:03
  Speaker 2: start for those investments over those ten year period because
• 11:05
  Speaker 2: of the compounding. And so getting people to invest early
• 11:09
  Speaker 2: is really really important, and you don't want to have
• 11:12
  Speaker 2: mechanisms regulatory environments that kind of prohibit them getting advice early.
• 11:17
  Speaker 1: Huh. That's interesting. Although in today's digital world, as you
• 11:21
  Speaker 1: guys know, there's so many ways to invest with no
• 11:25
  Speaker 1: minimum fees, and a lot of people, especially of the
• 11:29
  Speaker 1: younger generation, are very comfortable as di wires not do
• 11:34
  Speaker 1: it yourselfers. Not that robinhood is how they should be
• 11:38
  Speaker 1: necessarily investing, but hey, it gets some interest in finance.
• 11:41
  Speaker 1: It gets them thinking about money. That's not a terrible thing.
• 11:44
  Speaker 2: No, it's not terrible. It's actually great, and especially because
• 11:48
  Speaker 2: you can do some basic kind of asset allocation models
• 11:51
  Speaker 2: or the robo advisor can be terrific for somebody who
• 11:54
  Speaker 2: doesn't have a complicated financial situation. What you tend to
• 11:59
  Speaker 2: see is people earn more and have more and more savings.
• 12:03
  Speaker 2: Somebody said to me anecdotally, if you have you know,
• 12:05
  Speaker 2: sort of three years worth of savings if your income,
• 12:08
  Speaker 2: that's when you start to look for advice because you realize,
• 12:11
  Speaker 2: you know what, this is more complicated. I'd rather have
• 12:14
  Speaker 2: somebody who's full time focused on this than me as
• 12:17
  Speaker 2: a part time person managing my money.
• 12:19
  Speaker 1: I just have to share a funny story. We just
• 12:21
  Speaker 1: got back from vacation, not like terribly long, but eight
• 12:25
  Speaker 1: or nine days, and you come back to all this
• 12:27
  Speaker 1: mail and it's, oh, here's the irs state the pass through.
• 12:33
  Speaker 1: I got to forward that to the accountant. Oh, and
• 12:35
  Speaker 1: here's a disclosure about this fun we have. And then
• 12:38
  Speaker 1: here's the quarterly thing coming up. And all of a sudden,
• 12:41
  Speaker 1: like in a rush, I figured out, Oh, this is
• 12:44
  Speaker 1: why people pay a fee for someone to give them advice.
• 12:48
  Speaker 1: I don't want to deal with. I'm like relaxed, I'm
• 12:50
  Speaker 1: back from vacation. The last thing I want to do
• 12:52
  Speaker 1: is start thinking about New York State, pe Tech passed through.
• 12:56
  Speaker 1: Just take this off. What is it going to cost? Great?
• 13:00
  Speaker 1: Get this off my plate. I don't want to deal
• 13:01
  Speaker 1: with that.
• 13:01
  Speaker 2: Well, and I think a lot of people when like
• 13:03
  Speaker 2: TurboTax came out, they said, oh, it's gonna be the
• 13:06
  Speaker 2: end of the CPA. Who are the number one users
• 13:08
  Speaker 2: of turbotaxes? Because in the end, people sit there and say,
• 13:12
  Speaker 2: wait a second, Actually, the more money people have, the
• 13:15
  Speaker 2: more they have options to do other things, and they
• 13:17
  Speaker 2: think the opportunity cost of spending their time trying to
• 13:20
  Speaker 2: manage those things is not worth it.
• 13:22
  Speaker 1: It's the time it's it's the time is crucial. Plus
• 13:26
  Speaker 1: the rules change every year. He wants to have to
• 13:28
  Speaker 1: stay current with that. I find it's just like, you
• 13:31
  Speaker 1: know what, and it's funny. This is like a later
• 13:34
  Speaker 1: in life realization when you're young and have all the
• 13:37
  Speaker 1: time in the world and not a lot of money,
• 13:39
  Speaker 1: I could figure this out. I do my own taxes.
• 13:41
  Speaker 1: And then when you're old, it's like, whatever it costs,
• 13:44
  Speaker 1: just do it. Get this, get this junk away from me.
• 13:47
  Speaker 1: So so let's talk a little bit about the history
• 13:50
  Speaker 1: of acquisitions at Franklin Templeton. Just about thirty years ago
• 13:56
  Speaker 1: Franklin acquired Templeton, Galbrith and Hansburger. That new name of
• 14:01
  Speaker 1: the company became Franklin Templeton. So it was Franklin along
• 14:05
  Speaker 1: with mutual fund pioneer Sir John Templeton. You were kind
• 14:09
  Speaker 1: of young in the farm in ninety two when this
• 14:11
  Speaker 1: took place. What do you recall from that fairly substantial
• 14:15
  Speaker 1: back then, a billion dollar acquisition was not nothing.
• 14:17
  Speaker 2: Yeah, No, it was huge, and uh it was interesting
• 14:20
  Speaker 2: because a lot of people, uh we we sort of
• 14:23
  Speaker 2: came into that late as far as one of the
• 14:26
  Speaker 2: potential acquirers. So you know, we basically viewed it as
• 14:33
  Speaker 2: Franklin had was very strong and fixed income, domestic equity,
• 14:38
  Speaker 2: and what Templeton did was open up this international investing,
• 14:41
  Speaker 2: which was really pretty new for most. So yeah, they
• 14:44
  Speaker 2: were they were you know, you you there were pioneers
• 14:46
  Speaker 2: in emerging markets and and uh and really kind of
• 14:49
  Speaker 2: global equity. And when we acquired it, a lot of
• 14:53
  Speaker 2: people were skeptical because asset management acquisitions don't always work,
• 14:57
  Speaker 2: and expected a big cultural difference, and and it was expensive.
• 15:01
  Speaker 2: And I have to say that my dad understood and
• 15:04
  Speaker 2: we It's been our philosophy, you know, throughout all our
• 15:06
  Speaker 2: acquisitions in the asset management business. What are you buying.
• 15:09
  Speaker 2: You're buying people their investment capability and their investment process.
• 15:14
  Speaker 2: So don't destroy value by going in and messing with it.
• 15:17
  Speaker 2: So we really left it stand alone on the investment
• 15:21
  Speaker 2: side and then integrated the rest of the firm, and
• 15:24
  Speaker 2: that worked out really well.
• 15:25
  Speaker 1: That's so different of an approach than we typically hear,
• 15:30
  Speaker 1: which is, we want to buy a company for the assets,
• 15:33
  Speaker 1: the revenue stream, maybe some technology or intellectual property, and
• 15:37
  Speaker 1: we're going to just mash you into our culture, whether
• 15:39
  Speaker 1: you like it or not. That seems like a little
• 15:42
  Speaker 1: more nuanced approach that your dad took. I don't see
• 15:46
  Speaker 1: a lot of other mergers in the finance space that
• 15:50
  Speaker 1: are that hands off. Maybe the big acquisition of Pimco
• 15:56
  Speaker 1: twenty years ago was maybe a little too much hands off,
• 16:00
  Speaker 1: But for the most part, it seems like everybody just
• 16:03
  Speaker 1: mashes everybody together.
• 16:04
  Speaker 2: Yeah, I mean, I you know, in our case, I
• 16:07
  Speaker 2: wouldn't say it's totally hands off. It's hands off on
• 16:09
  Speaker 2: the investment process, uh huh, right, and really trying to
• 16:14
  Speaker 2: integate and integrate the rest of it, and then trying
• 16:17
  Speaker 2: to figure out ways that you can add value because
• 16:20
  Speaker 2: you have scale so that these firms you know, don't have.
• 16:22
  Speaker 2: That was less of an issue in the Templeton deal,
• 16:25
  Speaker 2: but with our more recent acquisitions that's been really important.
• 16:28
  Speaker 2: What can we do because we're bigger, that can enhance
• 16:31
  Speaker 2: the various investment teams.
• 16:32
  Speaker 1: So let's talk about some of those more recent acquisitions.
• 16:35
  Speaker 1: Twenty twenty, you buy leg Mason. I think it was
• 16:39
  Speaker 1: an old cash deal four and a half billion dollars
• 16:42
  Speaker 1: is that abount? Right?
• 16:43
  Speaker 2: And then we took on some debt.
• 16:44
  Speaker 1: Yeah, what was the thinking that what did Leg Mason
• 16:48
  Speaker 1: bring that you guys needed or didn't have.
• 16:50
  Speaker 2: Yeah. So in the case of LEG, they had Western
• 16:54
  Speaker 2: Asset Management, which is you know, core corplus fixed income,
• 16:57
  Speaker 2: which is the largest category. We just didn't have scale there,
• 17:01
  Speaker 2: and you have to have scale to be in the
• 17:02
  Speaker 2: institutional space. And the other big one that was exciting
• 17:06
  Speaker 2: for us was Clarion Partners, which now is an eighty
• 17:08
  Speaker 2: two billion dollar I think they were probably forty five
• 17:10
  Speaker 2: at the time, forty five billion real estate manager. And
• 17:14
  Speaker 2: we knew that we wanted to get into alternative space
• 17:17
  Speaker 2: and so getting that as part of the LEG deal
• 17:21
  Speaker 2: was really exciting. And then you know unbelievable managers and
• 17:24
  Speaker 2: Clearbridge and Martin Curry and brandy Wine, and so we
• 17:29
  Speaker 2: just got great expertise there. They were seventy five percent institutional,
• 17:33
  Speaker 2: we were seventy five percent retail. So bringing the two
• 17:37
  Speaker 2: firms together, you really made us fifty to fifty retail
• 17:40
  Speaker 2: and institutional, and that's been very important.
• 17:42
  Speaker 1: Huh. And then this year you acquire Putinham for almost
• 17:46
  Speaker 1: a billion dollars. Puttenham almost the purchaser of Templeton, which
• 17:51
  Speaker 1: is kind of kind of amusing that everybody ended up
• 17:54
  Speaker 1: in the same place. That seems to be a very
• 17:57
  Speaker 1: strategic purchase. Tell us the thing thinking behind acquiring Putnam.
• 18:01
  Speaker 2: So let me step back and just say, serve of
• 18:04
  Speaker 2: what our strategy is in acquisition. So we've done I
• 18:06
  Speaker 2: think ten in the last Putnam will be R tenth
• 18:08
  Speaker 2: in the last three years, and they've all been focused on.
• 18:11
  Speaker 2: If you think about the big macro trends going on
• 18:14
  Speaker 2: in the industry, one is private markets are here to stay,
• 18:18
  Speaker 2: and they're here to stay. One take private credit. Right
• 18:22
  Speaker 2: the banking crisis of the Global financial crisis, had regulators
• 18:26
  Speaker 2: changed capital requirements for banks. Banks preserve their capital for
• 18:30
  Speaker 2: their best clients, and it created this opportunity for you know,
• 18:35
  Speaker 2: basically private credit outside the banking system. And honestly, with
• 18:38
  Speaker 2: the discussion around which I have strong opinions on discussion
• 18:42
  Speaker 2: around more capital requirements post the regional banking crisis, I
• 18:46
  Speaker 2: think that's only gonna get worse and then you'll.
• 18:48
  Speaker 1: Well, that's going to create opportunities for firms that are
• 18:51
  Speaker 1: filling that void exactly. And by the way, this really
• 18:54
  Speaker 1: began in the late nineties early two thousands as the
• 18:57
  Speaker 1: big banks moved upscale. They like to void underneath and
• 19:01
  Speaker 1: private markets stepped right in.
• 19:02
  Speaker 2: That's exactly right. And then the other piece of that,
• 19:05
  Speaker 2: and you know this was definitely fueled by low interest rates,
• 19:08
  Speaker 2: but private equity. The fact is companies can stay private longer.
• 19:12
  Speaker 2: And you see that in the numbers. Right, two thousand,
• 19:15
  Speaker 2: average company went public after three years. That was probably
• 19:17
  Speaker 2: an anomaly in the dot com right. By twenty nineteen
• 19:20
  Speaker 2: it was I think nine to ten years, and by
• 19:23
  Speaker 2: twenty twenty two was fourteen to fifteen years before they
• 19:26
  Speaker 2: were going public. Right, you have half the number of
• 19:28
  Speaker 2: public companies that you had in two thousand and so
• 19:31
  Speaker 2: you look at it, well, why go public? Right? A
• 19:35
  Speaker 2: public company has quarterly earning pressure. You know, there's a
• 19:40
  Speaker 2: lot of scrutiny around compensation of the staff, there's a
• 19:45
  Speaker 2: lot of uh, there's an expectation on political you know,
• 19:48
  Speaker 2: you're going to opine on certain political issues. If you're
• 19:50
  Speaker 2: private company, you don't have any of those pressures. Right,
• 19:53
  Speaker 2: And in a time of great technological advances, you need
• 19:57
  Speaker 2: to invest for things. I mean, some of the stuff
• 19:59
  Speaker 2: we're doing in the block change space won't be material
• 20:01
  Speaker 2: to the firm for seven to ten years. But we
• 20:04
  Speaker 2: think it's really important that we're doing it now.
• 20:06
  Speaker 1: But if you're a private comp if your public company
• 20:08
  Speaker 1: shareholders are going to give you grief about that sort
• 20:10
  Speaker 1: of adi.
• 20:10
  Speaker 2: If it's impacting your quarterly earnings. We're fortunate in that
• 20:15
  Speaker 2: we still have founders and employees and management that have
• 20:18
  Speaker 2: a significant amount of the stocks, so we can sort
• 20:21
  Speaker 2: of withstand some of that pressure. But if your stock's
• 20:24
  Speaker 2: under performing, you can always get an activist in who's
• 20:26
  Speaker 2: looking short term to capture the benefit and say we'll
• 20:29
  Speaker 2: be worth more if we break all this up. That
• 20:31
  Speaker 2: doesn't build a long term sustainable company. But that's the
• 20:35
  Speaker 2: type of pressure that public companies have, and so we
• 20:38
  Speaker 2: believe that trend is here to stay, and we knew
• 20:40
  Speaker 2: that we needed to add those capabilities. Soe I say,
• 20:45
  Speaker 2: there's three areas that we look for an acquisition. So
• 20:47
  Speaker 2: one is filling product gaps, particularly in the case of
• 20:51
  Speaker 2: private markets. The second is the second big trend was
• 20:54
  Speaker 2: when the financial crisis happened and you had we mentioned,
• 20:58
  Speaker 2: you know, the regulators made put pressure onto have transparency
• 21:02
  Speaker 2: around distribution fees and advisors became fee based that honestly
• 21:06
  Speaker 2: pushed much of the power to the distributor and honestly
• 21:11
  Speaker 2: actually to the person who deals directly with a client,
• 21:14
  Speaker 2: to the financial advisor themselves and so, and the manufacturer
• 21:18
  Speaker 2: had less power, and so we look for ways that
• 21:21
  Speaker 2: we can build greater strength in distribution as being a
• 21:24
  Speaker 2: better strategic partner. Some of that's fintech. In the case
• 21:27
  Speaker 2: of the Putnam, it's building a closer relationship with POWERCREP,
• 21:31
  Speaker 2: who has you know, who owns both Great West Life
• 21:34
  Speaker 2: Insurance or significant control of it, as well as Empower
• 21:39
  Speaker 2: the second fast the second largest retirement platform, fastest growing one.
• 21:45
  Speaker 2: And that's really important because the retirement channel is where
• 21:48
  Speaker 2: mutual funds still have growth, right.
• 21:50
  Speaker 1: Because there's no reason to put an ETF there Exactly
• 21:53
  Speaker 1: the negative on a mutual funders phantom taxes. Hey, if
• 21:56
  Speaker 1: it's a qualified account, it doesn't matter, it's irrelevant. And
• 22:00
  Speaker 1: there are advantages to mutual funds in terms of trading
• 22:04
  Speaker 1: and management that give it a leg up over over ETFs,
• 22:08
  Speaker 1: especially in that sort of environment. Absolutely, so I want
• 22:11
  Speaker 1: to talk about the forty percent and a little bit
• 22:14
  Speaker 1: of insulation from public markets, but I'm going to circle
• 22:17
  Speaker 1: back to that. I got to ask you about one
• 22:19
  Speaker 1: last acquisition last year. You purchased O'Shaughnessey Investments, including their
• 22:25
  Speaker 1: direct indexing product called Canvas Full Disclosure, where one of
• 22:31
  Speaker 1: the early users of Canvas. I think my firm Results
• 22:34
  Speaker 1: Wealth Management is the largest or at least was when
• 22:36
  Speaker 1: you acquired it, the largest client of Canvas. We love
• 22:40
  Speaker 1: the product and our clients have found it to be
• 22:43
  Speaker 1: tremendously useful in terms of managing and offsetting capital gain taxes.
• 22:50
  Speaker 1: What was the thinking behind the O'Shaughnessy acquisition and what
• 22:53
  Speaker 1: are the plans for Canvas?
• 22:55
  Speaker 2: Oh fantastic. I mean you probably could having being a
• 22:58
  Speaker 2: user of it, you probably could even speak to this
• 23:00
  Speaker 2: more than I can, But I can tell you we
• 23:02
  Speaker 2: think again, a big trend is this direct indexing. But
• 23:05
  Speaker 2: the reason we love Canvas, and I know you know
• 23:08
  Speaker 2: this is Canvas grew out of a quant shop that
• 23:13
  Speaker 2: built the technology to manage their quant portfolio. And so
• 23:18
  Speaker 2: when initially you just have direct indexing with tax optimization,
• 23:22
  Speaker 2: but we look at it as a tool where we
• 23:24
  Speaker 2: think you can take just like the trend towards SMA
• 23:27
  Speaker 2: separately managed accounts, you can use the technology of Canvas
• 23:31
  Speaker 2: express our active management strategies in there. So take a
• 23:35
  Speaker 2: mutual fund strategy, deliver it through the Canvas platform overlay
• 23:40
  Speaker 2: with tax optimization, and even include some ESG overlay. So
• 23:44
  Speaker 2: if you have a client who says, you know, I
• 23:46
  Speaker 2: really want to you know, my daughter will say, I
• 23:49
  Speaker 2: really want things that are pushing towards net neutral, on
• 23:53
  Speaker 2: net zero and carbon, so she wants her portfolio manager.
• 23:56
  Speaker 2: That way, you can put those tags in there but
• 23:59
  Speaker 2: still take a professionally managed strategy and express it through
• 24:03
  Speaker 2: that technology. So we looked at that and said, this
• 24:05
  Speaker 2: is going to be really significant in the future. We
• 24:08
  Speaker 2: have to be in the direct index space, but more importantly,
• 24:11
  Speaker 2: we have to have great technology because we think this
• 24:13
  Speaker 2: is just the beginning of a trend.
• 24:15
  Speaker 3: Right.
• 24:16
  Speaker 1: Not only is the software really good, but the O'Shaughnessy
• 24:19
  Speaker 1: database so that they've been polishing up for decades. Very
• 24:24
  Speaker 1: few things, I mean, Crisper is probably the only other
• 24:26
  Speaker 1: one that is that focus, that dedicated, that clean. Most
• 24:30
  Speaker 1: databases are just problematic to do the solo work. And
• 24:34
  Speaker 1: Jim is now retired, but and a son, Patrick took over.
• 24:38
  Speaker 1: But it's a great product. They're a great team. I'm
• 24:40
  Speaker 1: sure you guys are gonna have a lot of success
• 24:43
  Speaker 1: with them. Let me go over a couple of more
• 24:48
  Speaker 1: acquisitions that really kind of surprise me. Managed options capabilities
• 24:53
  Speaker 1: tell us, tell us about that.
• 24:54
  Speaker 2: Well, we think that's going to be important to add
• 24:57
  Speaker 2: to the Canvas platform. Oh really so yeah, so managed
• 25:01
  Speaker 2: options are important part as part of the tax optimization strategy. Uh.
• 25:06
  Speaker 2: And so the feeling is that you needed that to
• 25:10
  Speaker 2: be included to where this where the technology will ultimately
• 25:13
  Speaker 2: go for this where the uh the strategies ultimately.
• 25:17
  Speaker 1: So when I hear managed options and capital gains, I
• 25:21
  Speaker 1: think zero cost collars and things like that, is that
• 25:24
  Speaker 1: what's along the lines?
• 25:25
  Speaker 2: Yeah, so they can include that now in in like
• 25:28
  Speaker 2: a separately managed account.
• 25:29
  Speaker 1: Oh that's really really interesting. And then Alcentra you acquired
• 25:34
  Speaker 1: from bny Mellon Lexington Partners, who was another private equity
• 25:39
  Speaker 1: and secondary entity. And then I didn't realize you guys
• 25:43
  Speaker 1: bought Advisor Engine that was like a big sort of
• 25:48
  Speaker 1: semi robo advisor, uh for for advisors. I mean this
• 25:53
  Speaker 1: is a long line. And then Alternative Credit Manager, Benefit
• 25:56
  Speaker 1: Street Partners, and then Athenia Capital. I mean, you guys
• 26:00
  Speaker 1: have been on a tear. All of these things are
• 26:03
  Speaker 1: different products filling in holes. Different services, and you want
• 26:07
  Speaker 1: to be able to offer a full rounded set of
• 26:09
  Speaker 1: products to institutional and retail clients.
• 26:12
  Speaker 2: We want to be the first phone call. We want
• 26:15
  Speaker 2: to be the strategic partner where you know, somebody's thinking,
• 26:18
  Speaker 2: I've got this problem, let me think about how to
• 26:20
  Speaker 2: solve it. I want to talk to Franklin Templeton and
• 26:23
  Speaker 2: talk to them about how to approach it. And so
• 26:25
  Speaker 2: you take Advisor Engine. It has a CRM system that
• 26:29
  Speaker 2: was built by a financial advisor. So you know, a
• 26:33
  Speaker 2: lot of you know, a lot of smaller rias don't
• 26:39
  Speaker 2: have a tech team to sit there and say how
• 26:40
  Speaker 2: do I use Salesforce? How do I use Microsoft Dynamic?
• 26:44
  Speaker 2: And so they want something simple. So this is a
• 26:46
  Speaker 2: simple CRM system that's just for the business of being
• 26:49
  Speaker 2: a financial advisor. And if we can build that relationship
• 26:52
  Speaker 2: with that advisor, then we feel like we can be
• 26:56
  Speaker 2: a stickier partner.
• 26:58
  Speaker 1: How important is the registered investment advisor the ri A
• 27:02
  Speaker 1: space to Franklin Templeton, I always thought of you guys
• 27:05
  Speaker 1: back in the day as mutual fund managers, perhaps selling
• 27:11
  Speaker 1: into that vertical I sound like a marketing guy, But
• 27:16
  Speaker 1: how important is the ri A space to Franklin Templeton.
• 27:19
  Speaker 2: Today, well, the ra as have been growing again as
• 27:22
  Speaker 2: the fee based environment and the fact that people honestly
• 27:25
  Speaker 2: can take their book and walk in and set up
• 27:28
  Speaker 2: their own shingle and be on a platform provider, and
• 27:31
  Speaker 2: so it's a really important channel for us. It's it's
• 27:34
  Speaker 2: a we are much bigger in the wirehouse and the
• 27:39
  Speaker 2: UH in the independent channels because that's kind of been
• 27:41
  Speaker 2: our DNA historically. UH and and those who who were
• 27:45
  Speaker 2: big in the ETF tended ra as have tended to
• 27:48
  Speaker 2: lean more towards ETFs, although that's a little bit of
• 27:51
  Speaker 2: a stereotype, and so it's been an important area of
• 27:55
  Speaker 2: focus for us to grow that channel.
• 27:58
  Speaker 1: And to be fair, the wirehouses have kind of been
• 28:01
  Speaker 1: slowly morphing into advisors. They're all hybrids these days. It's
• 28:06
  Speaker 1: less transactional, more fee based to the benefit of the clients.
• 28:10
  Speaker 2: Absolutely couldn't agree more.
• 28:11
  Speaker 1: UH really really quite fascinating. Let's talk a little bit
• 28:15
  Speaker 1: about your experience as a woman running a corporation. You've
• 28:20
  Speaker 1: held leadership roles across just about every line of business
• 28:24
  Speaker 1: in the company. What was that experience like, what did
• 28:27
  Speaker 1: you learn from running things as diverse as investment management
• 28:32
  Speaker 1: and technology. It seems like totally opposite business.
• 28:35
  Speaker 2: It's funny. So you know, on the first question people
• 28:38
  Speaker 2: ask me, what's it like to be a woman in finance. Well,
• 28:40
  Speaker 2: the problem is I don't know what it's like not
• 28:41
  Speaker 2: to be one, So I don't know that I have
• 28:44
  Speaker 2: a good answer to that, but I can say I
• 28:46
  Speaker 2: am so thankful today as a CEO to have having
• 28:50
  Speaker 2: run technology because so much I think of decisions that
• 28:56
  Speaker 2: we have to make in innovation that's happening requires a
• 28:59
  Speaker 2: basic understand technology. And so I look at, you know,
• 29:04
  Speaker 2: parts of your career you've sort of moved your way around,
• 29:07
  Speaker 2: and you wonder whether it's going to be relevant at
• 29:09
  Speaker 2: some point or not. And some of the things that
• 29:12
  Speaker 2: I think we would naturally people think wouldn't be relevant
• 29:17
  Speaker 2: to being CEO have been the most relevant. I mentioned
• 29:19
  Speaker 2: running the auto finance business and honestly, running the technology department.
• 29:23
  Speaker 1: You don't have a background in tech. How hard was
• 29:25
  Speaker 1: it to ramp up running a tech division when you're
• 29:29
  Speaker 1: not a natural geek And it's almost a different language sometimes.
• 29:34
  Speaker 2: So it's funny. I am divorced now, but I was
• 29:37
  Speaker 2: married to a guy who was a tech person, and
• 29:42
  Speaker 2: I'd always ask them all these questions. I was really
• 29:43
  Speaker 2: curious around it, and so I always felt like he
• 29:47
  Speaker 2: gave me a really good background in understanding technology. And
• 29:50
  Speaker 2: then I learned to be fearless in asking the question right.
• 29:54
  Speaker 2: Tech people are used to everybody's being so afraid of
• 29:57
  Speaker 2: tech that they give you They can sometimes give you
• 29:59
  Speaker 2: a little bit of a blurred answer steam yeah, and
• 30:04
  Speaker 2: you're afraid to look stupid, so you don't ask. Well,
• 30:06
  Speaker 2: I learned, you know what, if you think about what
• 30:10
  Speaker 2: technology is, it's moving this piece of data from here
• 30:12
  Speaker 2: to here and maybe adding some new data. Dumb down
• 30:15
  Speaker 2: what you're talking about and let me just try to
• 30:17
  Speaker 2: understand it right, and and things like cloud servicing right.
• 30:21
  Speaker 2: These are concepts that have existed in tech for a
• 30:23
  Speaker 2: long time. The technology gets better, and we usually change
• 30:26
  Speaker 2: the name about every decade. But once you understand what
• 30:29
  Speaker 2: it's trying to achieve, you don't have to be a programmer.
• 30:33
  Speaker 2: You just you know. And I honestly, I think one
• 30:35
  Speaker 2: of the biggest things that people don't appreciate is the
• 30:37
  Speaker 2: quality of data. Truly, garbage in, garbage out, and so
• 30:41
  Speaker 2: having discipline around your data management is really really important
• 30:46
  Speaker 2: in a tech department.
• 30:46
  Speaker 1: It's really hard. Also, we were talking earlier about the
• 30:49
  Speaker 1: O'Shaughnessy database. I know that they painstakingly triple check and
• 30:53
  Speaker 1: quadruple check stuff because you don't want an errant thing
• 30:57
  Speaker 1: in there that will change the outcome of a back
• 31:00
  Speaker 1: test or a model.
• 31:01
  Speaker 2: For sure. And I think actually we all talk about
• 31:04
  Speaker 2: AI and AI understanding and the models that you use,
• 31:08
  Speaker 2: and the combination of models is going to be really important.
• 31:10
  Speaker 2: But honestly, I think the real competitive advantage is going
• 31:12
  Speaker 2: to be and this is why I think scale in
• 31:14
  Speaker 2: asset management is so important, is the breadth and depth
• 31:18
  Speaker 2: of the database. So we have an investment data like
• 31:22
  Speaker 2: that is shared by our eighteen individual investment teams and
• 31:27
  Speaker 2: so you know as they contribute. So maybe a team
• 31:29
  Speaker 2: like our Global Macro team has fourteen different feeds for
• 31:32
  Speaker 2: its ESG framework. They come in it's scrubs centrally. Now
• 31:37
  Speaker 2: that data is available to the other teams, right, and
• 31:40
  Speaker 2: we think over time it's going to be more about
• 31:42
  Speaker 2: what unique data do you have that you can apply
• 31:45
  Speaker 2: your models. It's going to be more and more important.
• 31:47
  Speaker 1: So let's talk a little bit about your leadership experience.
• 31:51
  Speaker 1: Your timing was impeccable. You step into the CEO role
• 31:56
  Speaker 1: February twenty twenty, Thank goodness, nothing was about to happen
• 32:00
  Speaker 1: over the next three years. What was it like, a
• 32:03
  Speaker 1: month into the new gig and suddenly the world shuts down.
• 32:07
  Speaker 2: Yeah, well, so I stepped in I think February eleventh,
• 32:11
  Speaker 2: I think February twentieth, we announced the acquisition of leg Mason,
• 32:14
  Speaker 2: which of course had been in the works right for
• 32:16
  Speaker 2: quite a while, so we had good plans in place.
• 32:18
  Speaker 2: And then about three weeks later, remember we were going
• 32:21
  Speaker 2: to flatten the curve with two weeks off.
• 32:22
  Speaker 1: Yeah, that's it turned into two years this Yeah, that
• 32:25
  Speaker 1: was transitory.
• 32:26
  Speaker 2: Yeah, that was transitory. You know, you just deal with
• 32:30
  Speaker 2: the cards that are in front of you. And the
• 32:34
  Speaker 2: good news was when I was running technology, I became
• 32:37
  Speaker 2: very passionate because we had you know, developers in India,
• 32:41
  Speaker 2: uh and kind of around the world, Poland, in various places,
• 32:44
  Speaker 2: and I felt like it was really important that you
• 32:47
  Speaker 2: could see people when English was a second language, and
• 32:51
  Speaker 2: so we push, I pushed the tech team to get
• 32:54
  Speaker 2: a desktop video and so we had these devices. They
• 32:58
  Speaker 2: were called a Tanberg device, and it's sat separately on
• 33:01
  Speaker 2: your desktop, and we would do video calls and so
• 33:05
  Speaker 2: the company had you been doing this for twenty.
• 33:08
  Speaker 1: Years zoom before Zoom, Yeah, exactly, and.
• 33:11
  Speaker 2: So we were comfortable. It was already part of our
• 33:13
  Speaker 2: DNA to have meetings where inevitably somebody was on video.
• 33:17
  Speaker 2: So it was already kind of how we operated. Now
• 33:19
  Speaker 2: you had everybody on video, and I think the thing
• 33:22
  Speaker 2: that I appreciated was actually people's finally believed you can
• 33:26
  Speaker 2: run businesses that way. And so, you know, in many ways,
• 33:29
  Speaker 2: we closed the leg Mason deal two months early, and
• 33:33
  Speaker 2: I think it was because we were in some ways
• 33:34
  Speaker 2: more efficient by doing it via video, not everybody getting
• 33:38
  Speaker 2: on an airplane and going and trying to work your
• 33:40
  Speaker 2: calendars to go meet you know.
• 33:42
  Speaker 1: The crazy unexpected benefit of the new post nine to
• 33:47
  Speaker 1: eleven rules was that everybody had to have backup systems.
• 33:52
  Speaker 1: You couldn't just have everything in one location. I think
• 33:55
  Speaker 1: the SEC promulgated those, and when people were suddenly forced
• 34:00
  Speaker 1: to work from home, it was very easy to get
• 34:03
  Speaker 1: or relatively easy to get up and running. Just an
• 34:05
  Speaker 1: unexpected side effect of the new regulations that came in
• 34:09
  Speaker 1: after you know, we lost the twin towers. It's who
• 34:13
  Speaker 1: knew that the SEC can actually be so forward looking
• 34:17
  Speaker 1: and hey, you know, it all worked out. We were
• 34:20
  Speaker 1: all able to know for sure to get up and
• 34:21
  Speaker 1: run it. So were there any complications from all this
• 34:26
  Speaker 1: remote work in your CEO transition or you were in
• 34:30
  Speaker 1: place when everything hit the fan and you know, it
• 34:33
  Speaker 1: was just a matter of tacking into the wind when
• 34:36
  Speaker 1: the world changed.
• 34:37
  Speaker 2: I mean, I wouldn't attribute anything in particular to that.
• 34:41
  Speaker 2: I mean, you're you know, when you do an acquisition,
• 34:43
  Speaker 2: one of the most important things you do is assess talent,
• 34:45
  Speaker 2: and there's a bias towards your own talent, and it's
• 34:49
  Speaker 2: a missed opportunity if you don't infuse your organization with
• 34:52
  Speaker 2: talent from the company you acquired. And so we were
• 34:55
  Speaker 2: very focused on that. And sure, you'd love to meet
• 34:57
  Speaker 2: people in person versus doing zoom in or views, but
• 35:01
  Speaker 2: you know, we had to do it that way. We
• 35:02
  Speaker 2: ended up with I think two thirds of leg Mason's
• 35:06
  Speaker 2: kind of corporate services groups came into Franklin Templeton and
• 35:09
  Speaker 2: a big part of the distribution team became part of
• 35:12
  Speaker 2: Franklin Templeton. So you know, you're trying to kind of
• 35:16
  Speaker 2: build a best athlete, and it's not just the best athlete,
• 35:19
  Speaker 2: it's the best team. So sometimes you're just trying to
• 35:23
  Speaker 2: make sure the team will you know, coalesce. And I
• 35:27
  Speaker 2: think we did a pretty good job of that.
• 35:30
  Speaker 1: Really interesting you mentioned your dad. Let's talk about some
• 35:34
  Speaker 1: leadership lessons. What did your father teach you about managing people,
• 35:41
  Speaker 1: running a company and getting all of the horses pulling
• 35:45
  Speaker 1: the cart in the same direction.
• 35:48
  Speaker 2: I mean, one of the things my father has always said,
• 35:51
  Speaker 2: take care of the client and the business takes care
• 35:53
  Speaker 2: of itself. And so anytime there'd be and I still
• 35:57
  Speaker 2: talk to them about things. You know, how old now
• 36:00
  Speaker 2: he just turned ninety in January.
• 36:02
  Speaker 1: And sharp as attack. Absolutely, that's really you got some
• 36:05
  Speaker 1: good genes.
• 36:06
  Speaker 2: Yeah, amazing, And so you know, if you think about
• 36:12
  Speaker 2: that and you overlay that in any decision, is this
• 36:15
  Speaker 2: good for the client? Then I think that gives you
• 36:18
  Speaker 2: a lot of clarity. It's kind of a north star there.
• 36:20
  Speaker 2: And then I'd say, my dad is you know, he's
• 36:22
  Speaker 2: always incredibly fair to people, and you recognize that every
• 36:26
  Speaker 2: person contributes to who we are as a company. When
• 36:29
  Speaker 2: your call center employee picks up the phone and is
• 36:33
  Speaker 2: talking to a client, They're shouldering the entire reputation of
• 36:37
  Speaker 2: the firm on them with that client. And my dad
• 36:40
  Speaker 2: always understood that, and so there's just a genuine respect
• 36:44
  Speaker 2: for everybody's contribution to the company, and I think that's
• 36:48
  Speaker 2: part of our culture.
• 36:49
  Speaker 1: That's really interesting. You mentioned you took a slot from
• 36:54
  Speaker 1: your sister when you first started at an entry level.
• 36:57
  Speaker 1: I know one of your brothers was very involved with
• 37:00
  Speaker 1: with the firm. What's it like dealing with people that
• 37:04
  Speaker 1: you have this familial personal relationship. How do you manage
• 37:08
  Speaker 1: around that? I would think that's I'm just thinking about
• 37:10
  Speaker 1: my own siblings, and we would have killed each other
• 37:13
  Speaker 1: and gone bankrupt long ago.
• 37:15
  Speaker 2: Everybody asked me, is this succession our family?
• 37:18
  Speaker 1: I wasn't even thinking about that. I'm just thinking about
• 37:20
  Speaker 1: my own family, and I know there would have been bloodshed,
• 37:23
  Speaker 1: But how do you navigate that?
• 37:25
  Speaker 2: A challenging They were definitely tires of where I'd say
• 37:28
  Speaker 2: to my brother, listen, stop, you can't treat me like
• 37:31
  Speaker 2: your little sister in a meeting. But no, right, But
• 37:36
  Speaker 2: you know what, as a family, we get along great.
• 37:38
  Speaker 2: And my brother and I get along great, and you know,
• 37:40
  Speaker 2: he's still executive chairman today, and you know, we talk
• 37:44
  Speaker 2: about parts of the business, things that I'm struggling with.
• 37:46
  Speaker 2: I'll talk to him, I'll talk to my dad.
• 37:48
  Speaker 3: Uh.
• 37:48
  Speaker 2: And I got to tell you what a great privilege
• 37:53
  Speaker 2: it is to be a CEO and have people who
• 37:57
  Speaker 2: care so much like you do, to be able to
• 38:00
  Speaker 2: talk to about things that you're thinking about.
• 38:02
  Speaker 1: You go to them for advice all the time.
• 38:04
  Speaker 2: We'll talk about you know, before any acquisition is done.
• 38:07
  Speaker 2: That's clearly you know, part of the conversation. As well
• 38:10
  Speaker 2: as my uncle. My uncle is still active in the firm,
• 38:12
  Speaker 2: and so you know, we'll have conversations about what we think,
• 38:16
  Speaker 2: does it make sense? And you know, it's just my father,
• 38:21
  Speaker 2: my uncle, my brother will never say you have to
• 38:24
  Speaker 2: do this. They'll say, here the thinking on it. And
• 38:28
  Speaker 2: my brother would say the same thing when he was
• 38:30
  Speaker 2: CEO for fifteen years. My father was a great resource,
• 38:33
  Speaker 2: but never would tell you what to do. And so
• 38:36
  Speaker 2: it's nice to have those voices in the room. But
• 38:39
  Speaker 2: in the end, the decisions mine as a CEO with
• 38:41
  Speaker 2: my board and my management team, and they're just great advisors.
• 38:47
  Speaker 1: That's great. I love the stock symbol ben right, I
• 38:52
  Speaker 1: mean so great, you talked earlier about long termism versus
• 38:58
  Speaker 1: short termism. The family still owns like forty percent of
• 39:03
  Speaker 1: the outstanding shares. Yes, does that insulate you from the
• 39:06
  Speaker 1: sort of short term activist? What about this quarter's returns
• 39:11
  Speaker 1: when you're making those long term investments in technology? How
• 39:15
  Speaker 1: does that affect how you navigate? Yeah?
• 39:17
  Speaker 2: No, I mean for sure, you're you. The risk in
• 39:20
  Speaker 2: asset management is that an activist comes in and says,
• 39:22
  Speaker 2: you know what, why don't we spin off all these
• 39:24
  Speaker 2: groups because we can get a bigger multiple for the
• 39:26
  Speaker 2: alts business and you know various things, and and that
• 39:29
  Speaker 2: that is a short term gain, right, and doesn't build
• 39:33
  Speaker 2: a long sustainable business. So it's better to have that,
• 39:36
  Speaker 2: you know, for and I genuinely believe scale is going
• 39:39
  Speaker 2: to be more and more important as I mentioned, for
• 39:41
  Speaker 2: things like data for asset managers, and so building a
• 39:44
  Speaker 2: long term business really important. An activist doesn't take on
• 39:47
  Speaker 2: a company that's got a forty percent you know, control,
• 39:50
  Speaker 2: because you can't get enough stock to be able to
• 39:53
  Speaker 2: ultimately you know, right, again, it's.
• 39:56
  Speaker 1: Ninety percent of the remaining sixty it's it's so that
• 40:00
  Speaker 1: it does create a little bit of a buffer. So
• 40:02
  Speaker 1: you guys can think very long term, make acquisitions and
• 40:05
  Speaker 1: make investments which other publicly traded companies.
• 40:09
  Speaker 2: Might not have that luxury, right, And we're totally aligned
• 40:13
  Speaker 2: with the shareholders because we're looking for the best outcome
• 40:16
  Speaker 2: for the stock. And again sometimes that's making some investments
• 40:20
  Speaker 2: today that you know will pay off in a few years.
• 40:22
  Speaker 1: So this is a ridiculous question, but tell us about
• 40:25
  Speaker 1: your next acquisition, meaning I don't expect you to say
• 40:29
  Speaker 1: we're gonna pay X for this. Like what areas do
• 40:32
  Speaker 1: you think are interesting? Where are you looking to say, hey,
• 40:35
  Speaker 1: we can acquire some talent and some technology in this space.
• 40:40
  Speaker 2: So with respect to kind of product gaps, the only
• 40:45
  Speaker 2: one that we really feel is out there as a
• 40:47
  Speaker 2: gap is infrastructure. So if interesting because we think there's
• 40:50
  Speaker 2: gonna be a lot of growth.
• 40:51
  Speaker 1: On the bond side or on the equity side.
• 40:53
  Speaker 2: Probably equity, but because we can do on the private
• 40:58
  Speaker 2: credit teams, they can do it on them on the
• 41:00
  Speaker 2: bond side, but it would be that would be an
• 41:03
  Speaker 2: area that would be interesting to us. We like local
• 41:08
  Speaker 2: asset management, so you know we have clients one hundred
• 41:11
  Speaker 2: and fifty five countries. People tend to like home, they
• 41:15
  Speaker 2: have a home country bias, so you know eighty percent
• 41:18
  Speaker 2: flows in India tend to go to domestic products. We
• 41:21
  Speaker 2: were the first foreign manager in India and so we
• 41:24
  Speaker 2: have local equity, local fixed income, but we look for
• 41:27
  Speaker 2: markets that made sense to us. We'd be a buyer
• 41:30
  Speaker 2: of a local asset management. We have them spattered throughout
• 41:34
  Speaker 2: the world. And then, as I mentioned on the distribution side,
• 41:37
  Speaker 2: anything that builds that deeper relationship that can help us
• 41:40
  Speaker 2: with distribution.
• 41:41
  Speaker 1: So I don't want to talk about politics. I want
• 41:43
  Speaker 1: to talk about culture and environment. We're recording this. We
• 41:47
  Speaker 1: have President Modi here in the US. India seems to
• 41:50
  Speaker 1: be like a perennial next economic powerhouse after China, and
• 41:56
  Speaker 1: it just always seems to be not catching that next
• 42:00
  Speaker 1: bid when you look at a region like that, and
• 42:03
  Speaker 1: I don't want to just talk about India, but if
• 42:05
  Speaker 1: you're looking at India, or you're looking at China, or
• 42:07
  Speaker 1: you're looking at Taiwan or Singapore or Korea or Vietnam,
• 42:13
  Speaker 1: how do you think about building a presence in a
• 42:17
  Speaker 1: place like that and developing a relationship, either building or
• 42:22
  Speaker 1: acquiring a local entity, Because how do you pick. Let's
• 42:27
  Speaker 1: focus on this region over that region. It seems like
• 42:30
  Speaker 1: it changes from week to week, month to month.
• 42:33
  Speaker 2: It's going to matter the demographics of a country, the growth,
• 42:39
  Speaker 2: the policies, the regulation, all those going to the factors.
• 42:42
  Speaker 2: I mean, we were in India in nineteen ninety five,
• 42:46
  Speaker 2: We're in Taiwan in nineteen eighty five, China first investments
• 42:50
  Speaker 2: in nineteen eighty eight. So you know, we look at
• 42:54
  Speaker 2: those Asia is going to be. They say there's going
• 42:56
  Speaker 2: to be a billion people who enter the middle class
• 42:59
  Speaker 2: in the next decade, and eighty seven percent of them
• 43:01
  Speaker 2: we're going to be in Asia. I lived in India
• 43:04
  Speaker 2: for a little while when I was running the Technology
• 43:06
  Speaker 2: and Operations Group, and I can tell you fifty six
• 43:09
  Speaker 2: percent of the population is under the age of twenty five.
• 43:12
  Speaker 2: It's got a British legal system, a British education system.
• 43:17
  Speaker 2: You know, while there's twenty three different languages that are spoken,
• 43:20
  Speaker 2: and more dialogical English. You know that certainly you aspire
• 43:24
  Speaker 2: to speak English, and so the people that you hire
• 43:27
  Speaker 2: from colleges are all English speaking. So that's those are
• 43:29
  Speaker 2: all great tailwinds for the economy. Many people say, you know,
• 43:34
  Speaker 2: India grows at night when the government sleeps. I think
• 43:36
  Speaker 2: Moty's been doing a really terrific job at you know,
• 43:39
  Speaker 2: trying to to you know, reduce the amount of kind
• 43:43
  Speaker 2: of bureaucracy that's there. I have to say that my
• 43:47
  Speaker 2: observation when I would be excited by all those statistics
• 43:51
  Speaker 2: was Indians were the most skeptical about India. On my
• 43:54
  Speaker 2: last trip, it was a clear difference in view that
• 43:58
  Speaker 2: that in India, India and Indian Americans are really excited
• 44:03
  Speaker 2: about what's going on. And for the first time I
• 44:06
  Speaker 2: found an optimism there that I hadn't really sensed before.
• 44:10
  Speaker 1: That's so interesting because that's what I meant by they're
• 44:13
  Speaker 1: perennially about to happen, Like they can very easily be
• 44:21
  Speaker 1: on par with China in terms of their economic prowess.
• 44:27
  Speaker 1: More along the lines on technology and software and other
• 44:30
  Speaker 1: areas where clearly there's a huge, huge infrastructure there and
• 44:34
  Speaker 1: it just seems to like always be about to happen.
• 44:37
  Speaker 1: It never happens.
• 44:38
  Speaker 2: Well, you know, they say there's six times the number
• 44:41
  Speaker 2: of engineers that graduate in India every year than the US.
• 44:44
  Speaker 2: And I can tell you, you know, an India would
• 44:47
  Speaker 2: prefer to go to an I than Harvard. They look
• 44:50
  Speaker 2: at Harvard as a safety school. I mean really and
• 44:53
  Speaker 2: so I.
• 44:54
  Speaker 1: T though, is really still very difficult, right I go.
• 44:58
  Speaker 2: But the its are pretty phenomenal and.
• 45:00
  Speaker 1: We end up, you know, importing a decent number of
• 45:04
  Speaker 1: engineers from the best Indian schools. Is that still going
• 45:08
  Speaker 1: on the way it used to?
• 45:09
  Speaker 2: Well, I think a lot of them are deciding that
• 45:10
  Speaker 2: there's more opportunity even at home. It used to be
• 45:13
  Speaker 2: they had to come to the US or Europe because
• 45:15
  Speaker 2: that was going to be where the opportunity is. But
• 45:17
  Speaker 2: now the domestic economy is growing so well that there's
• 45:20
  Speaker 2: a lot of excitement, so there's less choosing to leave.
• 45:25
  Speaker 2: And then I think, you know, China, A lot a
• 45:27
  Speaker 2: lot of discussion around China. You know, China's what's the
• 45:30
  Speaker 2: US twenty three percent of world's GDP in China is
• 45:33
  Speaker 2: eighteen percent, the next the third is like Japan at
• 45:35
  Speaker 2: four point nine. I mean, it's a big, big market
• 45:38
  Speaker 2: and it's going to be important, and so you know,
• 45:43
  Speaker 2: we have a joint venture there and we continue to
• 45:48
  Speaker 2: you know, invest in China. But then there's other markets
• 45:52
  Speaker 2: you know that you look at There're three hundred million
• 45:55
  Speaker 2: people in Indonesia. They get their policies, right, it's going
• 45:58
  Speaker 2: to be amazing growth. Vietnam, you know another one. Capital
• 46:02
  Speaker 2: markets are really tough there, but you know it should
• 46:05
  Speaker 2: be a great opportunity and growth. And you see some
• 46:07
  Speaker 2: of the supply chains. People are diversifying. India as one
• 46:09
  Speaker 2: of the beneficiaries of that. Vietnam is another beneficiary of that.
• 46:14
  Speaker 2: Japan even in the case of semiconductors. So I think
• 46:16
  Speaker 2: there's just a lot going on there that is pretty interesting.
• 46:20
  Speaker 2: And then the Middle East is another amazing Yeah.
• 46:23
  Speaker 1: They seem to be purposefully trying to morph their reliance
• 46:26
  Speaker 1: away from crude oil and energy towards more modern technologies.
• 46:31
  Speaker 1: How can you even think about making an investment in
• 46:34
  Speaker 1: the Middle East on anything other than oil. That's no
• 46:37
  Speaker 1: longer the case.
• 46:38
  Speaker 2: Right, I mean, I think what's interesting is they think
• 46:41
  Speaker 2: like a generational family thinks, right, and so in their
• 46:45
  Speaker 2: mind oil runs out. I don't get three generations for
• 46:48
  Speaker 2: whatever it is. They want to reinvest in their economies
• 46:52
  Speaker 2: to diversify it, to ensure that they're not out of
• 46:54
  Speaker 2: money when that happens, right, And I actually genuinely believe
• 46:58
  Speaker 2: some of the greatest innovation on renewable energy is going
• 47:01
  Speaker 2: to come out of places like Abu Dhabi and Saudi
• 47:05
  Speaker 2: Arabia because they are investing in it and they have
• 47:08
  Speaker 2: the balance sheet to be able to make those investments.
• 47:11
  Speaker 1: And keep in mind, oil isn't going to go away.
• 47:15
  Speaker 1: It's just gonna go away as an energy source. As
• 47:18
  Speaker 1: a material science source, it's enormous. The old joke used
• 47:22
  Speaker 1: to be the Arab cheek says to the American businessman,
• 47:25
  Speaker 1: we're selling you all this oil. We can't believe you guys.
• 47:28
  Speaker 1: Burn this. You know what it's really good for. You
• 47:30
  Speaker 1: can make it into a million different things, and that's
• 47:33
  Speaker 1: the future of oil, not energy, but materials. So you
• 47:37
  Speaker 1: have confidence in what's going to take place in the
• 47:40
  Speaker 1: Middle East. How does one invest into that region? If
• 47:44
  Speaker 1: you're a retail investor, Hey, I like the idea of India,
• 47:47
  Speaker 1: I could go buy an ETF. I like the idea
• 47:50
  Speaker 1: of Middle East. How do I invest in that?
• 47:52
  Speaker 3: Well?
• 47:52
  Speaker 2: I think you got to spend a lot of time
• 47:54
  Speaker 2: there and go see because I took my executive committee
• 47:58
  Speaker 2: to the Middle East. We have visited several countries there
• 48:03
  Speaker 2: and honestly, I think that many of them felt that
• 48:06
  Speaker 2: we were going there to, you know, think about raising
• 48:10
  Speaker 2: money from that region and came away thinking they're going
• 48:12
  Speaker 2: to be investment opportunities there. We actually acquired in two
• 48:15
  Speaker 2: thousand and seven a local asset management I mentioned local
• 48:18
  Speaker 2: asset management being important, So a local asset management team
• 48:22
  Speaker 2: that's based We've been in Dubai about twenty years and
• 48:25
  Speaker 2: we're the largest I think, you know, multinational Sharia manager
• 48:32
  Speaker 2: for Islamic finance.
• 48:33
  Speaker 1: Huh.
• 48:33
  Speaker 2: They came out of that local team and so they
• 48:36
  Speaker 2: do local GCC bonds and equity investments. So there's a
• 48:40
  Speaker 2: lot opportunity I think to invest there.
• 48:42
  Speaker 1: Huh. Really quite fascinating. So let's talk a little bit
• 48:45
  Speaker 1: about what's going on in the world today. We've seen
• 48:49
  Speaker 1: this massive change in rate regimes. How does that affect
• 48:53
  Speaker 1: your ability to run the firm and how does the
• 48:56
  Speaker 1: affect fund managers dealing with this sun in five hundred
• 49:00
  Speaker 1: bases point increase in rates.
• 49:02
  Speaker 2: Well, I think the good news is that fixed income
• 49:05
  Speaker 2: is now actually an asset class you want to be in.
• 49:08
  Speaker 2: And you exciting yelled exactly, and so you know, I
• 49:13
  Speaker 2: think that's that's terrific, right, And then you know the
• 49:16
  Speaker 2: other thing is volatility is good for active managers, right,
• 49:20
  Speaker 2: It shows whether you have skill, and we've we've come
• 49:23
  Speaker 2: off a decade where basically government's been pumping money into
• 49:27
  Speaker 2: the system. If you didn't have access to private markets,
• 49:30
  Speaker 2: you couldn't make any money in fixed income. So where'd
• 49:32
  Speaker 2: you go? You went into equities. It just exploded equities up.
• 49:36
  Speaker 1: And was that twenty twenty fourteen fifteen percent years exactly?
• 49:40
  Speaker 1: That's that's double normal.
• 49:42
  Speaker 2: But it was hard if you're if you are an
• 49:44
  Speaker 2: active manager, your job is to have a diversified portfolio
• 49:49
  Speaker 2: and think about risk adjusted returns. And when you have
• 49:52
  Speaker 2: a momentum market like that and you have five companies
• 49:56
  Speaker 2: that take you know, twenty five percent of the index
• 49:58
  Speaker 2: or whatever it ended up, being a professional manager gets
• 50:02
  Speaker 2: nervous by that type of concentration, and say the S
• 50:04
  Speaker 2: and P five hundred, and there's not enough discussion about
• 50:07
  Speaker 2: how the indexes. The market risk of the index changes
• 50:12
  Speaker 2: depending on one you know, the day Tesla was added
• 50:14
  Speaker 2: to the S and P five hundred, it became a
• 50:16
  Speaker 2: much riskier investment by investing the S and P five
• 50:20
  Speaker 2: hundred based on volatility and concentration. And so in those
• 50:23
  Speaker 2: types of market it's hard for an active manager to
• 50:26
  Speaker 2: actually beat that but when you have volatility, that's when
• 50:29
  Speaker 2: you start to see outperformance.
• 50:31
  Speaker 1: Huh. So let's talk about money market funds. Not only
• 50:34
  Speaker 1: are you seeing some yield on fixed income products, money
• 50:40
  Speaker 1: market funds used to yield nothing. Now you're actually seeing
• 50:43
  Speaker 1: some returns. Even though there's been some concerns about some
• 50:49
  Speaker 1: of the regulation around money market funds and the problem
• 50:53
  Speaker 1: we had in the financial crisis. What is Franklin Templeton
• 50:57
  Speaker 1: doing in this space?
• 50:58
  Speaker 2: Well, first of all, I don't think money market funds
• 50:59
  Speaker 2: look anything like they did when you had problems and
• 51:02
  Speaker 2: you just had a couple of huge difference and so
• 51:06
  Speaker 2: you know, there's if you have a certain amount of
• 51:09
  Speaker 2: risk and you're a prime floating fund. Otherwise you're you're
• 51:12
  Speaker 2: you know, tied to the dollar and it's it's short duration,
• 51:16
  Speaker 2: and uh, you know, I think very secure. And you
• 51:20
  Speaker 2: know today you can get five and a half percent
• 51:22
  Speaker 2: in the money market fund. I mean that's pretty aggressive, right, really,
• 51:25
  Speaker 2: And I think that we've seen a lot of money
• 51:29
  Speaker 2: flow into money market funds because people saw that they
• 51:32
  Speaker 2: could get that and they weren't ready to get back
• 51:35
  Speaker 2: into the market. Now, having said that, we're close to
• 51:37
  Speaker 2: the end of the cycle. Uh, you know the rate
• 51:41
  Speaker 2: hike se right, Okay, you know, I think the FED
• 51:43
  Speaker 2: is saying they're going to still raise more, and I
• 51:46
  Speaker 2: think you could see one to two more times that
• 51:48
  Speaker 2: they raise this year. I think I think people are
• 51:50
  Speaker 2: finally over the they're going to cut this year. I
• 51:52
  Speaker 2: definitely don't think they're going to cut this year.
• 51:55
  Speaker 1: Those are the same people, by the way, who have
• 51:57
  Speaker 1: been forecasting recession for the past eighteen months. Yeah, so
• 52:00
  Speaker 1: of course they think the FED is going to cut.
• 52:03
  Speaker 1: What I find fascinating about the whole FED investor community
• 52:07
  Speaker 1: thing is that Jay Pal keeps saying this is what
• 52:11
  Speaker 1: I'm going to do, and nobody really right. I mean,
• 52:14
  Speaker 1: go back twenty years, you had no idea what the
• 52:16
  Speaker 1: FED was doing. He's telling you. Nobody wants to believe.
• 52:19
  Speaker 2: You know why. A huge percentage of fixed income managers
• 52:22
  Speaker 2: have only lived through the time that the FED bailed
• 52:26
  Speaker 2: us out every time, right, right, And so they've been
• 52:28
  Speaker 2: in that and so they believe that that's going to
• 52:30
  Speaker 2: be the response. Whereas people that have a little more
• 52:33
  Speaker 2: experience like me, you right, we know that you can't always,
• 52:37
  Speaker 2: you know, count on the FED to bail you out
• 52:40
  Speaker 2: as a matter of fact, Jaypal's trying to be very
• 52:42
  Speaker 2: clear with it, and the market keeps fighting the FED
• 52:45
  Speaker 2: and thinking, you know, they're going to call his bluff
• 52:47
  Speaker 2: or something. I think that the FED is being very
• 52:50
  Speaker 2: data driven at this point and uh, and he's trying
• 52:53
  Speaker 2: to make it clear that if they're the economy still
• 52:57
  Speaker 2: remains pretty hot, he's going to raise rates.
• 53:00
  Speaker 1: Here's a crazy stat that someone shared with me. If
• 53:03
  Speaker 1: you were born after nineteen eighty and you work in finance,
• 53:08
  Speaker 1: you don't know what it was like when we had
• 53:11
  Speaker 1: no idea what the FED. I remember we used to
• 53:13
  Speaker 1: look at the Flow of Funds report to try and
• 53:17
  Speaker 1: tease out what might happen. Now the FED says we're
• 53:20
  Speaker 1: going to do this, and then they go out and
• 53:22
  Speaker 1: do it. I'm born before nineteen eighty, so this is
• 53:25
  Speaker 1: all new to me. But imagine spending your whole career where,
• 53:30
  Speaker 1: of course we're gonna get bailed out by the FED.
• 53:33
  Speaker 1: If that happens, how do you recover from that as
• 53:36
  Speaker 1: a professional. If you've never experienced wild market I guess
• 53:41
  Speaker 1: that isn't true, because you have experienced wild market volatility.
• 53:45
  Speaker 1: Just the cavalry has always come to the rescue.
• 53:47
  Speaker 2: That's right. I think that's right. And I don't think that,
• 53:49
  Speaker 2: you know, I don't think that the FED is going
• 53:53
  Speaker 2: to oh I as I said, I think the FED
• 53:56
  Speaker 2: is going to be very data driven. And right now,
• 54:00
  Speaker 2: you know, unemployment is still what is it three point.
• 54:03
  Speaker 1: Seven very low, right, historically low level.
• 54:05
  Speaker 2: You're starting to see some labor participation coming back in
• 54:08
  Speaker 2: a little bit. You know, look at a lot of
• 54:10
  Speaker 2: people say is there gonna be a recession or not?
• 54:13
  Speaker 2: There probably is. I mean they have to write, I
• 54:16
  Speaker 2: mean that they have to cool it down. The question
• 54:18
  Speaker 2: is is it a deep recession that causes a lot.
• 54:21
  Speaker 2: We don't think, or at least I don't think. And
• 54:23
  Speaker 2: by the way, we have five different fixed income teams
• 54:25
  Speaker 2: at Franklin Templetons, so there are some different views on this.
• 54:28
  Speaker 2: But that we'll have a deep recession. Uh and uh.
• 54:32
  Speaker 2: You know, but the FED is definitely jammed on the
• 54:35
  Speaker 2: brakes and it's still been hard.
• 54:37
  Speaker 1: You know.
• 54:38
  Speaker 2: The easy part was getting inflation from nine to five
• 54:41
  Speaker 2: four and a half. Now is the real challenge.
• 54:43
  Speaker 1: So less PPI that came out had a three handle
• 54:47
  Speaker 1: on it. CPI usually follows PPI. J PAL can put
• 54:52
  Speaker 1: a flag in the ground to clare victory. Take a
• 54:55
  Speaker 1: long vacation. He's already won, right, Is am I oversimplifying
• 54:59
  Speaker 1: that too much? Or can can he just say all right,
• 55:02
  Speaker 1: I'm taking the summer off.
• 55:04
  Speaker 2: Well. I think the challenge for him is that they've
• 55:07
  Speaker 2: been very vocal about the two percent target, and which is.
• 55:11
  Speaker 1: A little weird because two percent target was post nine
• 55:14
  Speaker 1: to eleven, post financial crisis, post pandemic, where rates were
• 55:18
  Speaker 1: at zero and two percent was the upside target. Maybe
• 55:22
  Speaker 1: that target should be rethought. Maybe three percent makes sense.
• 55:26
  Speaker 2: So until we start to hear the FED start talking
• 55:29
  Speaker 2: about maybe they're going to change that target or lighting
• 55:32
  Speaker 2: up on that target, I think it's tough for him
• 55:35
  Speaker 2: to just take too long of a break. Sure you
• 55:38
  Speaker 2: can take the break through the summer, Yeah, take this.
• 55:40
  Speaker 1: Off, go fishing. They had a Jackson hole his great
• 55:43
  Speaker 1: fly fishing there you go, right, I mean he could
• 55:46
  Speaker 1: just chill out for a while, all right. So I
• 55:47
  Speaker 1: want to throw one curve ball at you. And as
• 55:51
  Speaker 1: a West Coast girl, I got to ask you. You're
• 55:53
  Speaker 1: on the board for the San Francisco Giants. What was
• 55:56
  Speaker 1: that experience like?
• 55:58
  Speaker 2: So I was Now, my brother Greg is the control
• 56:02
  Speaker 2: person at the Giants. Look, it was a blast. I
• 56:05
  Speaker 2: have to say, Uh, the thing that I learned, I
• 56:09
  Speaker 2: think I know a little bit about baseball. I don't
• 56:10
  Speaker 2: know anything about baseball. People talk about statisticians, they know everything. Yes,
• 56:17
  Speaker 2: this guy's gonna move three feet with this picture? Who
• 56:19
  Speaker 2: goes up? And so Pretty quickly I realized I don't
• 56:21
  Speaker 2: actually know that much about baseball. But I loved it.
• 56:24
  Speaker 2: It was a lot of fun. And of course I
• 56:27
  Speaker 2: was there as I tease my brother about. You know,
• 56:30
  Speaker 2: when I was on the board we won three World Series?
• 56:32
  Speaker 2: Have you done?
• 56:33
  Speaker 1: What have you done? Right? Exactly?
• 56:34
  Speaker 2: He actually knows a lot about baseball and I don't.
• 56:37
  Speaker 1: That's very funny. Just goes to show you that breath
• 56:40
  Speaker 1: of and depth knowledge doesn't necessarily help you win.
• 56:43
  Speaker 2: Whin I think the key was Jenny wasn't really involved
• 56:47
  Speaker 2: in making too.
• 56:47
  Speaker 1: Many decisions when to bring in the left, we need
• 56:52
  Speaker 1: to switch pictures. That wasn't part of your responsibilities, all right,
• 56:56
  Speaker 1: So I know I only have you for a little while.
• 56:58
  Speaker 1: Let me jump to my favorite question that we ask
• 57:01
  Speaker 1: all our guests, starting with tell us what you've been
• 57:04
  Speaker 1: keeping yourself entertained with? What are you watching or listening
• 57:07
  Speaker 1: to these days.
• 57:10
  Speaker 2: I just finished. I'm always way behind on these things,
• 57:14
  Speaker 2: So I just finished. I think it's called Dead to Me,
• 57:17
  Speaker 2: which is a huff flick seriously, which I thought was
• 57:20
  Speaker 2: it's a it's like a dark comedy book.
• 57:22
  Speaker 1: Very funny.
• 57:22
  Speaker 2: Yeah, very good, but very good. It was funny. Uh.
• 57:26
  Speaker 2: And I've been watching a little bit of Manifest, so
• 57:32
  Speaker 2: that was one that.
• 57:32
  Speaker 1: I've heard about Manifest. I haven't seen it yet.
• 57:34
  Speaker 2: Yeah. So anyway, and then you know, I uh, I
• 57:40
  Speaker 2: love to watch there's a there's a streaming service called
• 57:43
  Speaker 2: Curiosity Stream. Uh huh oh sure, and you know it's
• 57:45
  Speaker 2: got great documentaries on science and history and stuff like that.
• 57:49
  Speaker 2: So I tend to watch some things. I was trying
• 57:52
  Speaker 2: to understand quantum computing and what it does and quantum
• 57:57
  Speaker 2: entanglement and because from.
• 57:59
  Speaker 1: A entanglement spooky action out of exactly, and so you know,
• 58:03
  Speaker 1: Curiosity Stream is one of my favorite has one of
• 58:06
  Speaker 1: my favorite astronomy. It's really they do like deep crazy
• 58:11
  Speaker 1: stuff and it's you just get lost the Yeah.
• 58:13
  Speaker 2: No, exactly. So I love watching that kind of thing.
• 58:16
  Speaker 1: Huh really really interesting. Uh I know the answer, but
• 58:20
  Speaker 1: I got to ask anyway, tell us about your early
• 58:23
  Speaker 1: mentors who helped shape your career.
• 58:25
  Speaker 2: Well, my father is, uh, my early mentor and continues
• 58:30
  Speaker 2: to be my greatest mentor. Uh. I feel incredibly blessed
• 58:35
  Speaker 2: to have them and and I am grateful. Uh. And
• 58:39
  Speaker 2: like I said, he's uh he never tells you what
• 58:41
  Speaker 2: to do, but he's always a great if you ask,
• 58:43
  Speaker 2: he's he's always great at giving you, you know, his opinion.
• 58:46
  Speaker 2: Uh and really incredibly thoughtful.
• 58:50
  Speaker 1: Huh. Really interesting. Let's talk about books.
• 58:52
  Speaker 2: I have to say something about my mom for a second. Okay,
• 58:54
  Speaker 2: so you got to understand my mom had seven kids
• 58:57
  Speaker 2: and then went back to Stanford medical school. So really
• 59:00
  Speaker 2: my dad was building Franklin. She was she was doing
• 59:02
  Speaker 2: that and they you know, she's eighty seven. They're amazing.
• 59:07
  Speaker 2: And you know, how long was the leadership?
• 59:09
  Speaker 1: How long did she practice for? Oh?
• 59:11
  Speaker 2: I think she practiced probably you know, twenty five years.
• 59:15
  Speaker 1: Wow, after seven kids went to medical school, that's a hell.
• 59:18
  Speaker 2: I think she probably decided she needed a reason to
• 59:20
  Speaker 2: be out of the house.
• 59:22
  Speaker 1: That's very funny. Let's talk about books. What are some
• 59:25
  Speaker 1: of your favorites and what are you reading right now?
• 59:28
  Speaker 2: I am reading a book on Kissinger right now, but
• 59:34
  Speaker 2: I think you know.
• 59:35
  Speaker 1: His book or the someone else's biography.
• 59:38
  Speaker 2: I'm reading Walter Isaacson's book on Kissinger. I loved his
• 59:45
  Speaker 2: book on Steve Jobs, and he's done so. I like
• 59:50
  Speaker 2: historical fiction, and I like history books. Probably can follow it.
• 59:56
  Speaker 2: I really enjoy his historical fiction books. You once in
• 59:59
  Speaker 2: World War One, World War Two. He's a great one
• 1:00:01
  Speaker 2: called It's about the building of cathedrals, Pillars of the Earth.
• 1:00:05
  Speaker 2: I think it is.
• 1:00:06
  Speaker 1: Every one of his books could absolutely be a movie, right,
• 1:00:10
  Speaker 1: I mean they all are like a James Bond online.
• 1:00:13
  Speaker 1: But by the way, if you liked Isaacson's biography on Jobs,
• 1:00:20
  Speaker 1: I'm drawing a blank on his name is on the
• 1:00:22
  Speaker 1: tip of my tongue. Did you see the book on
• 1:00:24
  Speaker 1: the Right Brothers? Oh, David McCullough, Oh yeah, yeah, so fascinating. Good.
• 1:00:30
  Speaker 2: Yeah, he's another one. I'm a big fan.
• 1:00:32
  Speaker 1: Right, Everything he writes it's just amazing, right, It's like
• 1:00:36
  Speaker 1: he was there reporting on it, and one hundred years
• 1:00:38
  Speaker 1: forward exactly, just so much details. Down to our final
• 1:00:42
  Speaker 1: two questions, what sort of advice would you give to
• 1:00:45
  Speaker 1: a recent college graduate who is interested in a career
• 1:00:49
  Speaker 1: in either investment management, or finance.
• 1:00:52
  Speaker 2: You know, I feel like as an industry, we don't
• 1:00:55
  Speaker 2: do a good enough job at selling people and what
• 1:00:57
  Speaker 2: we do. And I tell the story about I have
• 1:01:00
  Speaker 2: five kids and with my daughter I I was talking
• 1:01:04
  Speaker 2: to my daughters and I said, so are you going
• 1:01:05
  Speaker 2: to join me in this industry? And one of my
• 1:01:08
  Speaker 2: daughters said, no, Mom, I want to do something that
• 1:01:09
  Speaker 2: helps people. I'm like, are you kidding me? This industry
• 1:01:13
  Speaker 2: is a great industry to help people. You know, you
• 1:01:17
  Speaker 2: wouldn't have the vaccines that we had without you know,
• 1:01:21
  Speaker 2: the businesses that were out there that were investing and
• 1:01:24
  Speaker 2: trying to, you know, find opportunities. We help people, I
• 1:01:29
  Speaker 2: say it Franklin Templeton, to achieve the most important financial
• 1:01:32
  Speaker 2: goals of their life. And by the way, every goal,
• 1:01:34
  Speaker 2: not every goal. Most goals require some financially.
• 1:01:37
  Speaker 1: Buy a house, retirements, kids, education, down the line.
• 1:01:41
  Speaker 2: Sadly, So, I my first thing is to say, this
• 1:01:44
  Speaker 2: is just a great industry to be in. If you
• 1:01:46
  Speaker 2: want to make a difference and you want to help people.
• 1:01:49
  Speaker 2: You think about some of the stuff on esg. You know,
• 1:01:51
  Speaker 2: the kind of impact investing, those types of things. All
• 1:01:54
  Speaker 2: of those things require money. And so one is it's
• 1:01:57
  Speaker 2: a great industry too, is go in and be just curious,
• 1:02:02
  Speaker 2: ask questions. Read I always, you know, say to people,
• 1:02:06
  Speaker 2: read the CEO's letter in an annual report if you
• 1:02:08
  Speaker 2: want to know what's on your boss's mind, right, because
• 1:02:10
  Speaker 2: they're gonna lay it out there and try to connect
• 1:02:13
  Speaker 2: what you do to the bigger picture of whatever a company.
• 1:02:16
  Speaker 1: Is really interesting. And our final question, what do you
• 1:02:20
  Speaker 1: know about the world of investing today you wish you
• 1:02:23
  Speaker 1: knew thirty five years or so ago when you were
• 1:02:26
  Speaker 1: first starting out.
• 1:02:28
  Speaker 2: Well, I think the tenants that have always been important,
• 1:02:32
  Speaker 2: which we talked about earlier, like diversification, get invested early,
• 1:02:36
  Speaker 2: the value of compounding dollar cost averaging where you just
• 1:02:40
  Speaker 2: keep committing, you know, and investing month after month after month.
• 1:02:45
  Speaker 2: Those things get lost sometimes in the stories, and yet
• 1:02:48
  Speaker 2: they're probably the most important things about investing.
• 1:02:52
  Speaker 1: Really really, really good stuff. Jenny Johnson, thank you so
• 1:02:55
  Speaker 1: much for being so generous with your time. This has
• 1:02:58
  Speaker 1: just been delightful. We have been speaking with Jenny Johnson.
• 1:03:03
  Speaker 1: She is the CEO of Franklin Templeton. If you enjoy
• 1:03:07
  Speaker 1: this conversation, well, be sure and check out any of
• 1:03:11
  Speaker 1: the five hundred other such conversations we've had over the
• 1:03:15
  Speaker 1: past nine years. You can find those at iTunes, Spotify, YouTube,
• 1:03:21
  Speaker 1: wherever you find your favorite podcast. You can sign up
• 1:03:25
  Speaker 1: from my daily reading list at ridults dot com. Follow
• 1:03:29
  Speaker 1: me on Twitter at Ridolts, follow all of the Bloomberg
• 1:03:32
  Speaker 1: Family of podcasts on Twitter at podcast I would be
• 1:03:37
  Speaker 1: remiss if I did not thank the crack team that
• 1:03:39
  Speaker 1: helps put these conversations together each week. Attika of Albron
• 1:03:43
  Speaker 1: is my project manager. Justin Milner is my audio engineer.
• 1:03:47
  Speaker 1: Paris Wald is my producer. Sean Russo is my researcher.
• 1:03:51
  Speaker 1: I'm Barry Ridolts. You've been listening to Masters in Business
• 1:03:55
  Speaker 1: on Bloomberg Radio. Ye