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Embracing Global Opportunities with Jeffrey Becker of Jennison Associates · Masters in Business

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Masters in
0:12
Speaker 1: Business with Barry Ricolts on Bloomberg Radio.
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Speaker 2: This week on the podcast. Jeff Becker chairman and CEO
0:20
Speaker 2: of Jennison Associates. They're part of the Pigeum family of
0:25
Speaker 2: asset managements. Jennison manages over two hundred billion dollars in assets.
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Speaker 2: Jeff has really a fascinating background, from Arthur Anderson to
0:37
Speaker 2: Altus to ion G. Eventually he becomes CEO of Voya
0:42
Speaker 2: when the parent company spun out the US holdings into
0:46
Speaker 2: a separate entity. Really a fairly unique career path and
0:53
Speaker 2: is sort of uniquely situated to look at the world
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Speaker 2: of investing. Jennison launched way back in nineteen sixty nine
1:03
Speaker 2: as a growth equity shop. Their focus is on generating
1:07
Speaker 2: alpha with high conviction concentrated portfolios. They've put off a
1:13
Speaker 2: damn good track record over the years. I thought this
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Speaker 2: conversation was really interesting. There aren't many people who have
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Speaker 2: this sort of perspective and perch to see the world
1:25
Speaker 2: of investing from both an institutional and insurance based perspective
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Speaker 2: and a long term retail investment perspective. I thought this
1:37
Speaker 2: conversation was really interesting, and I think you will also
1:40
Speaker 2: with no further ado my conversation with Jennison associates Jeff Becker.
1:47
Speaker 2: So let's start with your background. You get a bachelor's
1:51
Speaker 2: in economics from Colgate and then an MBA in finance
1:55
Speaker 2: from n YU. Stern. Sounds like you had been thinking
1:59
Speaker 2: about finance as a career right from the start.
2:02
Speaker 3: Quite the contrary, Berry, I had no idea what I
2:05
Speaker 3: wanted to do in college or coming out of college.
2:08
Speaker 3: I was a liberal arts major. My parents felt strongly
2:11
Speaker 3: about getting you know, me a liberal arts degree and
2:14
Speaker 3: having me learn how to read and write effectively, and
2:17
Speaker 3: so that was the goal. I was in economics, an
2:20
Speaker 3: English major. Econ was the closest thing you could get
2:23
Speaker 3: to business in some of those schools, and so, you know,
2:27
Speaker 3: that's what I majored in. You know, I had no
2:30
Speaker 3: real guidance in terms of finance. Neither of my parents
2:33
Speaker 3: were in the financial industry, and so I did what
2:36
Speaker 3: most students did in those days. As you saw on
2:39
Speaker 3: the board who was coming up to interview and potentially
2:42
Speaker 3: hire undergrads, and I saw that what were in those
2:47
Speaker 3: days the big eight accounting firms were coming up to hire,
2:50
Speaker 3: and they had this program where they would hire Liberal
2:53
Speaker 3: Arts graduates, have them work, and as part of the arrangement,
2:57
Speaker 3: would pay for you to go to grad school. So
2:59
Speaker 3: it was a combin find program through Arthur Anderson to
3:02
Speaker 3: go to NYU. And they were originally paying for a
3:07
Speaker 3: master's in accounting, but ultimately everyone parlayed that into an
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Speaker 3: MBA in finance.
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Speaker 2: Huh. Really interesting And did you end up at Arthur
3:14
Speaker 2: Anderson for any length of time?
3:16
Speaker 1: I did? I did.
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Speaker 3: I ended up there for for seven years. It was
3:20
Speaker 3: It was a terrific experience. It was a great company.
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Speaker 3: You know, in those days, these companies hired you know,
3:25
Speaker 3: crops of undergrads, they trained them together. We learned everything
3:30
Speaker 3: you know across from accounting, to auditing, to to UH
3:35
Speaker 3: tax and valuation. I ended up in what was called
3:38
Speaker 3: the Valuation Services Group, where we valued real estate and
3:42
Speaker 3: businesses either for transactions or for m and A activity.
3:46
Speaker 3: And it was a terrific company, a great learning experience.
3:49
Speaker 3: They sent you out to clients very early on in
3:52
Speaker 3: your career, and you also got people management skills pretty
3:55
Speaker 3: early on.
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Speaker 2: So learning to value real estate, learning to value companies
4:02
Speaker 2: sounds like you're going into private equity and private credit
4:05
Speaker 2: down the road, like that seems to be the path
4:08
Speaker 2: these days. What was that experience like and how did
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Speaker 2: it affect how you look at investments today?
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Speaker 3: You would have thought that I didn't know what private
4:17
Speaker 3: equity or private credit really was. At the time I
4:20
Speaker 3: had started to shift more and more into real estate.
4:24
Speaker 3: The background of tearing apart financial statements and balance sheets
4:28
Speaker 3: and discounted cash flow analysis was a great foundation really
4:31
Speaker 3: for anything in you doing finance ultimately, So it was
4:35
Speaker 3: a great experience in that regard. But I was starting
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Speaker 3: more and more to specialize in real estate, and as
4:42
Speaker 3: a result, I got hired away by one of Anderson's clients,
4:46
Speaker 3: which was ETNA, and ETNA had a very large commercial
4:50
Speaker 3: real estate business. As you may recall, the insurance companies
4:54
Speaker 3: had huge commercial loan portfolios in those days that they
4:58
Speaker 3: were using to backstop long dated life insurance liabilities. It
5:03
Speaker 3: seemed like the perfect match of asset and liabilities until
5:06
Speaker 3: real estate valuations bottomed out and the life companies ended
5:10
Speaker 3: up with a whole bunch of mortgage loans that were underwater.
5:14
Speaker 3: That led to a terrific experience for me being part
5:17
Speaker 3: of the workout of all of those loans in the
5:20
Speaker 3: early nineties. So we did foreclosures, we did restructurings, we
5:25
Speaker 3: did equity kickers, and we pulled up some of these
5:28
Speaker 3: loans into CMBs deals and sold them through Wall Street.
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Speaker 3: It was really a terrific experience and really bred out
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Speaker 3: of a crisis.
5:36
Speaker 2: And I just want to emphasize we're not talking the
5:40
Speaker 2: beginning of the pandemic in twenty twenty. We're not talking
5:43
Speaker 2: about the financial crisis in eight oh nine. You're talking
5:46
Speaker 2: about really the post SNL crisis late eighties, early nineties,
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Speaker 2: where a ton of commercial real estate suddenly took a
5:54
Speaker 2: big hit. Eventually you become chief credit officer covering real estate.
6:01
Speaker 2: Tell us a little bit about that.
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Speaker 3: Yeah, I was. I was part of, you know, the
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Speaker 3: management that ultimately had to determine, you know, the valuation
6:10
Speaker 3: and the credit approval of the different transactions that we
6:14
Speaker 3: were working on. Whether that was originally putting out new
6:16
Speaker 3: mortgage loans and determining whether it was a you know,
6:19
Speaker 3: a good credit for the insurance company capital, or when
6:23
Speaker 3: we got into the restructuring period, it was about was
6:26
Speaker 3: this the right deal, Were these the right terms? You
6:29
Speaker 3: know for us as we as we tried to salvage
6:31
Speaker 3: the portfolio.
6:32
Speaker 2: And then following ANA, you end up at Altus Investment Manager,
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Speaker 2: your CFO there. What was that like, going from analyzing
6:42
Speaker 2: credit to being chief financial officer for an investment firm.
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Speaker 3: Well, one of the things we were doing by working
6:48
Speaker 3: out the troubled mortgage loan book at ETNA is we
6:51
Speaker 3: were also working ourselves out of a job. So the
6:54
Speaker 3: job was to wind down the portfolio, and we were
6:57
Speaker 3: actually given retention agreements that were two years in duration,
7:02
Speaker 3: and at the end we essentially were out of jobs.
7:06
Speaker 3: That was a little bit scary for an early career endeavor,
7:10
Speaker 3: but by the same token, it was the first time
7:12
Speaker 3: in my life I ever saw a six figure payment
7:15
Speaker 3: come at one time, and it was quite rewarding at
7:19
Speaker 3: an early stage in my career. So I knew I
7:21
Speaker 3: was going to be out of a job. ATNA was
7:23
Speaker 3: up in Hartford, Connecticut, so I was up there alone
7:27
Speaker 3: as a young man, and I went to the head
7:30
Speaker 3: of HR at ETNA, and I said, this has been
7:33
Speaker 3: a terrific experience, but my gig is up and I'm
7:37
Speaker 3: probably going to head back to New York City. Is
7:40
Speaker 3: there anything that I should look at within ETNA. She
7:43
Speaker 3: happened to be a Colgate grad. Took an interest in
7:46
Speaker 3: me as a Colgate grad and said, yeah, we've got
7:48
Speaker 3: this great little third party institutional investment manager named Altis
7:52
Speaker 3: Investment Management. It runs pretty independently, has about one hundred
7:56
Speaker 3: billion in assets. I'm going to send you over there
7:58
Speaker 3: to meet the young Dynamic make CEO. There a guy
8:01
Speaker 3: named John Kim. So I went over and met John.
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Speaker 3: We had a terrific three hour conversation and at the
8:08
Speaker 3: end of the conversation, he said, you're hired. And I said,
8:12
Speaker 3: I'm hired. What am I going to do? And he said,
8:14
Speaker 3: I don't know, we'll figure it out, but I think
8:15
Speaker 3: you're going to be CFO. And I said, well, I
8:18
Speaker 3: know Arthur Anderson is on my resume, but I actually
8:21
Speaker 3: have never practiced accounting and so I'm not sure that's
8:25
Speaker 3: the right role for me. And he said, wow, we've
8:26
Speaker 3: got a really strong finance team and a good strong controller.
8:30
Speaker 3: I want you to be a more strategic CFO. I
8:32
Speaker 3: want you to work on structured deals m and a
8:36
Speaker 3: levers of profitability. And so that turned into a CFO role,
8:39
Speaker 3: which again is a terrific experience for anything you do.
8:42
Speaker 3: Really understanding how businesses make money and the levers of
8:46
Speaker 3: profitability is a great experience.
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Speaker 2: Huh. So how do you go from Altis to ING
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Speaker 2: Investing Management? What was that transition like?
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Speaker 3: Well, in two thousand and three, I fired etna's financial
9:01
Speaker 3: businesses and that was the life insurance, retirement and asset
9:04
Speaker 3: management businesses, and so Altis went along with that. With
9:08
Speaker 3: that acquisition, Ing had been on a buying spree around
9:13
Speaker 3: the world and in the US, buying up insurers and
9:17
Speaker 3: other businesses, and had ultimately ended up with about six
9:20
Speaker 3: asset managers brands that are now all gone. Altis the
9:24
Speaker 3: one I came to the party with Pilgrim Firm and Cells,
9:28
Speaker 3: Lexington Partners, Relia Star Research, the original Ing Investment Management.
9:35
Speaker 3: But Ing did not want to see these runs as boutiques. Ultimately,
9:39
Speaker 3: in the long run, Ing had a very integrated model,
9:43
Speaker 3: a mono brand approach to the world, and wanted to
9:47
Speaker 3: bring all these asset managers together. So I was selected
9:51
Speaker 3: to help lead the integration of these asset managers, which
9:56
Speaker 3: was which was an interesting project. Each of these asset
9:59
Speaker 3: manag had a CEO. These boutiques were pretty fiercely independent
10:04
Speaker 3: and it was a bit of a bumpy ride as
10:06
Speaker 3: we as we brought them together, but ultimately we did.
10:09
Speaker 3: We you know, we started out in some cases with
10:12
Speaker 3: four small cap equity teams, and in some instances we
10:16
Speaker 3: selected one and not the others, and others instances we
10:20
Speaker 3: might have combined teams, and in other instances we started
10:23
Speaker 3: all over. So it was, you know, a multi year
10:25
Speaker 3: project to really bring all of what were the acquired
10:30
Speaker 3: asset managers into one integrated IG Investment Management, and ultimately
10:34
Speaker 3: I was the CFO of that initially and then later
10:39
Speaker 3: the COO, the CEO at the time, came to me
10:43
Speaker 3: and said, you did a terrific job on the integration project.
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Speaker 3: You can be ce CFO or COO. Which one do
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Speaker 3: you choose? And I said, well, can I be both
10:54
Speaker 3: and and he said no, I can't do that right now,
10:57
Speaker 3: so you have to pick one, and I chose CFO.
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Speaker 3: And my rationale was the CFO is always at the
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Speaker 3: head table because there's always a financial implication to everything
11:07
Speaker 3: you do. So that's where I started, but ultimately did
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Speaker 3: become COO as well.
11:12
Speaker 2: Eventually ING changes its name to Voya and everything is
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Speaker 2: now branded Voya that were either of these other pieces
11:21
Speaker 2: or ING and you rise to the role of CEO.
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Speaker 2: How did that come about and what was it like
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Speaker 2: going from COO and CFO to CEO.
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Speaker 3: Yeah, it happened because of another crisis in two thousand
11:35
Speaker 3: and eight, the Great Financial Crisis. ING had gotten overexposed
11:42
Speaker 3: in mortgages and had to take a loan from the
11:45
Speaker 3: Dutch state to shore up their Tier one capital ratios.
11:48
Speaker 3: And as part of that deal with the Dutch government,
11:51
Speaker 3: ING agreed to sell off the US properties. If you
11:55
Speaker 3: can remember back to the start of the financial crisis,
11:58
Speaker 3: it was viewed as largely a US and so I
12:01
Speaker 3: think there was a desire to shed the businesses that
12:04
Speaker 3: you know where the where the subprime mortgage bubble had
12:07
Speaker 3: burst ultimately, and so I was I was working for
12:12
Speaker 3: the head of ING Investment Management. But when I decided
12:16
Speaker 3: to take this loan, there was a change in leadership
12:20
Speaker 3: and my boss became head of I in g America's
12:24
Speaker 3: all of the insurance, retirement and life businesses, and I
12:27
Speaker 3: became a CEO of ING Investment Management, which later became Voya.
12:33
Speaker 3: The way I found out that I was becoming CEO
12:37
Speaker 3: of I G I Am. Was a bit of an
12:38
Speaker 3: interesting story. I was coaching my son at a U
12:43
Speaker 3: twelve hockey tournament up in the Northeast and my cell
12:46
Speaker 3: phone kept ringing while I was on the bench yelling
12:49
Speaker 3: at kids to skate harder and get into the get
12:51
Speaker 3: into the corners. And it kept ringing, and it was
12:54
Speaker 3: my boss. And it was a Sunday, And eventually, in
12:57
Speaker 3: between periods, I picked it up and and it was
13:00
Speaker 3: my boss. At the time was a gentleman named Rob Leary,
13:03
Speaker 3: a terrific mentor of mine, who said, I need you
13:06
Speaker 3: to get down to my house tonight. I said, Rob,
13:09
Speaker 3: I'm up in the Boston area. He lived in Greenwich, Connecticut.
13:13
Speaker 3: He said, no, you have to be here, and I said,
13:15
Speaker 3: am I fired? And because if so, I'm not coming down.
13:19
Speaker 3: Just tell me now. I'm going to finish the game.
13:21
Speaker 3: And he said, no, you're not fired, but you have
13:24
Speaker 3: to get down here. So I made my way down
13:26
Speaker 3: to Greenwich, Connecticut, and I proceeded to learn that I
13:30
Speaker 3: and G had taken the loan from the Dutch state
13:32
Speaker 3: and that in the morning before we woke up, because
13:35
Speaker 3: Europe's ahead, it was going to go public and my
13:39
Speaker 3: boss would become the CEO of the Americas and I
13:43
Speaker 3: would become the CEO of the investment management firm, and
13:47
Speaker 3: we planned what was going to happen. The next morning.
13:49
Speaker 3: I was going to have to assure our investment teams,
13:52
Speaker 3: our clients, our pension consulting partners that everything was going
13:58
Speaker 3: to be okay and that we were you know, we
14:00
Speaker 3: were still in business. But as you can imagine, it's
14:03
Speaker 3: incredibly hard to run an asset manager with a for
14:05
Speaker 3: sale sign on your back. Because Ing had announced that
14:08
Speaker 3: it would dispose of the US businesses. So another crisis
14:12
Speaker 3: bred opportunity for me. I had to actually tell my
14:17
Speaker 3: team of peers that I was now their boss. Because
14:19
Speaker 3: it was so chaotic that no one came in to
14:21
Speaker 3: actually deliver that message. I had to deliver it myself.
14:24
Speaker 3: But it was a great team and we rallied together
14:27
Speaker 3: and we built the business, grew it coming out of
14:31
Speaker 3: the financial crisis, and then that ultimately became the business
14:35
Speaker 3: that we spun out as Voya.
14:37
Speaker 2: So two questions that first, I have to get the
14:40
Speaker 2: date of this, Like, was this right in the middle
14:44
Speaker 2: of the crisis? Was it towards the tail ends when
14:47
Speaker 2: did you get this Sunday hockey phone call?
14:50
Speaker 3: Yeah, I was about the middle of two thousand and nine.
14:53
Speaker 3: So two thousand and eight, you know, as you remember Barry,
14:55
Speaker 3: fourth quarter was chaotic. We were having global calls, trying
14:59
Speaker 3: to preserve capital. Who knew what was failing next. And
15:03
Speaker 3: then as we got into two thousand and nine, companies
15:06
Speaker 3: were starting to sort out, you know, where they were,
15:08
Speaker 3: and that's and it was about mid two thousand and
15:10
Speaker 3: nine where Ing decided to take the state aid.
15:13
Speaker 2: But the second question is he couldn't have told you
15:16
Speaker 2: that over the phone, Like, I know, they want everybody
15:19
Speaker 2: in the room when you're planning, but now, no, this
15:22
Speaker 2: is good news. You're getting a promotion. Get down here.
15:25
Speaker 2: It's important. That's a stressful drive from Boston to granted
15:30
Speaker 2: it was I.
15:30
Speaker 3: Think he was being extra cautious given it that it
15:32
Speaker 3: was material, non public information and pretty significant information at
15:37
Speaker 3: that and also we needed to be up and running
15:41
Speaker 3: in New York Monday morning, and so he needed to
15:44
Speaker 3: make sure I was down Sunday night.
15:46
Speaker 2: Gotcha. That's really that's really quite fascinating. How did you
15:51
Speaker 2: end up going from Voya to Jennison Associates? What drew
15:54
Speaker 2: you there.
15:55
Speaker 3: Yeah, I wasn't necessarily looking for a new role. I
15:58
Speaker 3: was enjoying joining the role at Voya, being CEO of
16:02
Speaker 3: the asset manager. I was on the executive committee. I
16:05
Speaker 3: was learning new skills being part of quarterly earnings calls
16:08
Speaker 3: and and and you know, helping grow that business as
16:12
Speaker 3: part of a new company and new brand. But at
16:15
Speaker 3: the same time, I was probably deep down ready for
16:18
Speaker 3: a change. I had been with the company for twenty years,
16:21
Speaker 3: but really it had changed around me, from Altus to
16:24
Speaker 3: ETNA to two I n G and and then DA Voia,
16:28
Speaker 3: and so I was ready for a change. I said
16:33
Speaker 3: that to myself that if I left, it would not
16:35
Speaker 3: be for another insurance or bank owned asset manager. And
16:39
Speaker 3: no disrespect to those those businesses. I had terrific experiences
16:43
Speaker 3: and opportunities presented to me there, but I just felt that,
16:47
Speaker 3: you know, a new experience, maybe going back to something
16:51
Speaker 3: more independent or private would would be the uh would
16:55
Speaker 3: be the move for me. But I got the call
16:58
Speaker 3: and from a recruiter, and Jennison was an intriguing company
17:03
Speaker 3: to me. It's you know, just well known quality firm,
17:08
Speaker 3: strong results, impressive client roster and I'd heard it had
17:12
Speaker 3: a great culture, so I was intrigued and agreed to
17:16
Speaker 3: have have some meetings and really really got quite interested
17:20
Speaker 3: in the business. I thought the people were outstanding that
17:24
Speaker 3: I met, They validated the culture, the client list and
17:30
Speaker 3: roster truly was impressive. What you know, what I had
17:35
Speaker 3: to get my head around is that it was owned
17:37
Speaker 3: by an insurance company. However, part of pgm's multi boutique model,
17:42
Speaker 3: and that was that was very appealing to me. I
17:44
Speaker 3: think for this stage of the asset management industry, a
17:48
Speaker 3: multi boutique model is a good model. You get the
17:51
Speaker 3: asset class specialization, you get the entrepreneurialism in the boutique,
17:56
Speaker 3: but you get the benefit of being part of a
17:59
Speaker 3: large your manager that has access to wealth management platforms, capital,
18:04
Speaker 3: global distribution. So it seemed like a very good business
18:09
Speaker 3: model that allowed for sort of the best of both worlds,
18:13
Speaker 3: and you know, I was therefore attracted to it and
18:16
Speaker 3: really have not regretted the move one bit.
18:19
Speaker 2: Really interesting talk a little bit about Jennison. You mentioned
18:24
Speaker 2: they had been around a while nineteen sixty nine. They've
18:27
Speaker 2: been around for let's call it fifty plus, almost sixty years.
18:33
Speaker 2: What sort of traditions and cultures made that longevity so
18:37
Speaker 2: attractive to you.
18:39
Speaker 3: Yeah, it was all around reputation. And the history is
18:42
Speaker 3: that Jennison, founded in nineteen sixty nine, was really one
18:45
Speaker 3: of the first independent institutional asset managers. In those days,
18:49
Speaker 3: all the institutional asset management was done out of the banks,
18:53
Speaker 3: and there were seven founders who decided that maybe they
18:56
Speaker 3: could do it better, and they left their banks and
18:59
Speaker 3: they set up the business in the in the Drake
19:01
Speaker 3: Hotel in New York City and they started to u
19:04
Speaker 3: they started to invest. They they ultimately were growth investors,
19:09
Speaker 3: but growth investing was not even known at the time. Uh,
19:13
Speaker 3: you know, the Russell one thousand growth didn't even exist.
19:16
Speaker 3: But the team started investing in what they believed to
19:19
Speaker 3: be the fastest growing companies, the disruptors of the time,
19:24
Speaker 3: and really became there for one of the earliest true
19:27
Speaker 3: growth investors. And the founder that that that survived the
19:31
Speaker 3: the you know, almost the entirety of the business and
19:35
Speaker 3: and was there when I arrived was sig Sigalis, who
19:38
Speaker 3: was an iconic investor again really one of the first
19:41
Speaker 3: dedicated growth investors. He was an incredible investor but also
19:46
Speaker 3: an incredible man.
19:47
Speaker 2: Uh.
19:47
Speaker 3: He worked right up until he passed two years ago
19:50
Speaker 3: at eighty nine, literally until the week before. He was
19:54
Speaker 3: never going to retire. He you know, he he was
19:58
Speaker 3: someone who taught me a lot, He taught the firm
20:01
Speaker 3: a lot. But at the end of the day, he
20:03
Speaker 3: was an intense competitor who wanted to win. But he
20:06
Speaker 3: was very values based. Everything was about the client and
20:10
Speaker 3: about values. And he had a great saying, which was
20:13
Speaker 3: do what's right for clients, and that'll always be right
20:16
Speaker 3: for the business. And I think those are pretty pretty
20:18
Speaker 3: sage words. And if you're serving your clients well, you're
20:22
Speaker 3: going to both retain and get new clients. And in fact,
20:27
Speaker 3: if you look at our you know our client roster,
20:29
Speaker 3: two thirds of our clients have been with us for
20:31
Speaker 3: more than ten years and forty percent more than twenty years.
20:35
Speaker 2: Wow, that's pretty substantial. I'm kind of intrigued by the concept.
20:40
Speaker 2: And I mean I was a kid in nineteen sixty nine.
20:43
Speaker 2: I think I was seven or eight years old, but
20:46
Speaker 2: the idea that growth investing was like a novel concept.
20:51
Speaker 2: I get the idea that, hey, this was kind of
20:55
Speaker 2: the early days of a bear market that went on
20:58
Speaker 2: for another decade. But tell us what does it mean
21:03
Speaker 2: to be growth oriented investors when there's no such thing
21:09
Speaker 2: as a typical growth index or a value index.
21:13
Speaker 3: And what growth investing has meant for Jennison and it
21:15
Speaker 3: is it is the original legacy and uh an original
21:20
Speaker 3: book of business for the firm. We've extended from there.
21:22
Speaker 3: But growth investing for us has really been about high conviction,
21:26
Speaker 3: deep fundamental research driven active management management. And you know,
21:31
Speaker 3: we're we're concentrated manager. We take we take large positions
21:35
Speaker 3: in in concentrated portfolios, and we're really striving to be
21:40
Speaker 3: that high alpha equity manager for for pension plans and
21:45
Speaker 3: for wealth allocators, and often we're part of an asset
21:48
Speaker 3: allocation and you know, we're you know, we're the alpha
21:51
Speaker 3: in the corners, if you will. And you know, I
21:54
Speaker 3: think that's the right place to play as a fundamental
21:58
Speaker 3: active equity manager because the hollow has been middled, because
22:02
Speaker 3: the middle has been hollowed out. And you know, at
22:05
Speaker 3: the end of the day, no one's going to pay
22:07
Speaker 3: active management fees for two to three tracking error equity.
22:11
Speaker 2: Huh. That makes a lot of sense. So I got
22:13
Speaker 2: to ask two questions about concentration and deep conviction. First,
22:18
Speaker 2: what is a concentrated portfolio. I've seen a lot of
22:22
Speaker 2: people describe themselves as concentrated portfolios and they're fifty sixty,
22:27
Speaker 2: one hundred holdings. It doesn't really seem concentrated. What is
22:30
Speaker 2: concentrated mean to you?
22:32
Speaker 3: Yeah? For us, fifty sixty would be the largest portfolios
22:36
Speaker 3: that we manage in our in our growth book of business.
22:39
Speaker 3: We do have down in our small cap and smid
22:43
Speaker 3: cap of book of business, we do have larger holdings
22:47
Speaker 3: down there, just to get some more liquidity and diversification.
22:50
Speaker 3: But for our core franchise of growth portfolios, you know,
22:54
Speaker 3: we have ten stock portfolios. We have twenty stock portfolios.
22:58
Speaker 3: When we say something focused, it tends to be about
23:01
Speaker 3: thirty and for us, you know, Flagship might be up
23:04
Speaker 3: to fifty, but not typically more than that.
23:07
Speaker 2: And so when you say deep conviction, what does deep
23:11
Speaker 2: conviction mean? Is that what leads to these ten stock
23:15
Speaker 2: or twenty stock concentrated portfolios. Tell us a little bit
23:18
Speaker 2: of what does deep conviction mean?
23:20
Speaker 3: Well, I think it starts with our investment research. You know,
23:23
Speaker 3: we're a firm of four hundred people, seventy investment professionals,
23:27
Speaker 3: about half pms and half analysts. They have very long
23:31
Speaker 3: tenures with the firm, about thirty years of experience in
23:36
Speaker 3: the industry, more than fifteen on average with the firm,
23:40
Speaker 3: and they are doing very deep research by team. So
23:44
Speaker 3: every team, our large cap growth team, our global growth team,
23:49
Speaker 3: our small smid mid team, our value team, and our
23:53
Speaker 3: fixed income team all have dedicated research analysts. So there's
23:57
Speaker 3: no central research model, there's no house view, there's no
24:01
Speaker 3: you know, mandated approach to seeking alpha. Every team has
24:05
Speaker 3: the UH has the ability to seek alpha in its
24:08
Speaker 3: own way. And what we have are very long tenured,
24:12
Speaker 3: experienced career analysts. So our analysts and our firm ours
24:16
Speaker 3: important as our portfolio managers. It's not necessarily a track
24:20
Speaker 3: to portfolio management. In fact, we believe, you know, the
24:23
Speaker 3: real UH secret, Sauce to to Jennison is the research
24:28
Speaker 3: that that we do and what the teams do and
24:30
Speaker 3: on the growth side, at the end of the day,
24:32
Speaker 3: what we're looking for is innovative and disruptive businesses driving
24:36
Speaker 3: structural shifts and industries. You know, business models with with
24:40
Speaker 3: significant barriers to entry, secular demand trends driven by superior
24:46
Speaker 3: product offerings, and these days you know, as you know,
24:49
Speaker 3: that might be evs, autonomous UH driving, machine learning, obesity, drugs,
24:55
Speaker 3: or luxury that's owned through the value chain, and all
24:58
Speaker 3: of those tend to be superior your growers. They tend
25:01
Speaker 3: to have moats around them and are the leaders and
25:05
Speaker 3: the disruptors. And you know, as you know, Barry, history
25:08
Speaker 3: has shown that market returns over time have been driven
25:11
Speaker 3: by a narrow set of disruptors and consistent winners. And
25:14
Speaker 3: Jennison has developed a reputation for identifying those companies.
25:18
Speaker 2: So the past fifteen years, those innovators, disruptors, companies with
25:24
Speaker 2: moats have primarily been US based, right, And we see
25:29
Speaker 2: the rest of the world, Asia, Japan, Europe primarily lagging
25:33
Speaker 2: the US, although there seems to be a lot of
25:36
Speaker 2: signs these days that that's starting to change. Certainly Q
25:41
Speaker 2: one tw twenty five, Europe is dramatically outperforming the US.
25:47
Speaker 2: How do you think about the relationship between US investing
25:52
Speaker 2: and international investing. I know only about ten or fifteen
25:56
Speaker 2: percent of your assets are invested overseas. What would it
26:00
Speaker 2: take to make that change?
26:03
Speaker 3: Yeah, in terms of our our portfolios that are invested overseas.
26:06
Speaker 3: And then I'll and then I'll answer your question about
26:08
Speaker 3: how do I think about international versus US markets. We
26:12
Speaker 3: have about twenty five billion of dedicated international and global portfolios,
26:18
Speaker 3: but within our other equity portfolios across the firm, we
26:22
Speaker 3: do hold a percentage of international assets, so that that
26:26
Speaker 3: number ultimately is about forty billion of our one hundred
26:29
Speaker 3: and fifty billion of equity, So it is a little
26:32
Speaker 3: larger than it may may appear. And you know, at
26:36
Speaker 3: the end of the day, unless we have investment guidelines
26:40
Speaker 3: or restrictions from clients, you know, we seek alpha with
26:44
Speaker 3: a bit of agnosticism to both the benchmark and the region.
26:47
Speaker 3: So we are building portfolios bottoms up, company by company
26:51
Speaker 3: and looking for what we you know, view are the
26:53
Speaker 3: best companies for our strategy, whether that be you know,
26:56
Speaker 3: intrinsic value, and you know what we think are our
27:00
Speaker 3: undervalued companies or the disruptors and the growers. In terms
27:05
Speaker 3: of international holdings per se as you mentioned the first quarter,
27:11
Speaker 3: after a long drought of underperformance compared to the US,
27:15
Speaker 3: international equities have had a nice run. You know, it's
27:18
Speaker 3: primarily driven by policy shifts locally in some of those regions,
27:25
Speaker 3: as well as reactions to current US policy shifts and
27:28
Speaker 3: the uncertainty around that. So in Asia, you know, the
27:32
Speaker 3: government is clearly priming the pump. In Europe, increased defense
27:37
Speaker 3: spending has really ignited, ignited the markets over there, and
27:42
Speaker 3: so I think the international markets might have some legs.
27:45
Speaker 3: We do still favor the US, you know, in the
27:48
Speaker 3: medium term and longer term right now, but certainly international markets,
27:53
Speaker 3: after being beaten down for years have come back strongly.
27:57
Speaker 2: So let's talk a little bit about risk management. I
28:00
Speaker 2: know you guys employ the traditional sected diversification, geographic diversification,
28:07
Speaker 2: different strategies, but talk a little bit about your risk
28:10
Speaker 2: management and the downside protection you deploy to make sure
28:14
Speaker 2: that volatility like we've been seeing doesn't hit the bottom
28:18
Speaker 2: line too hard.
28:20
Speaker 3: Yeah, And you know, as we discuss Barry, we are
28:23
Speaker 3: concentrated managers, high conviction managers, so you know, we're paid
28:27
Speaker 3: to take risk and as a result, our portfolios do
28:31
Speaker 3: tend to be more volatile than the benchmark, certainly and
28:34
Speaker 3: many other managers who are more diversified. So you know,
28:38
Speaker 3: we will have periods where we wildly outperform the benchmark,
28:41
Speaker 3: in periods where we underperform the benchmark. We're looking typically
28:46
Speaker 3: at a holding period in our names of you know,
28:48
Speaker 3: three to five years and much longer, and so you
28:51
Speaker 3: know we are long term investors. We want to align
28:55
Speaker 3: interest with our clients who are long term investors and
28:59
Speaker 3: try to filter out the quarter to quarter noise and
29:02
Speaker 3: the volatility that comes in between those periods. So again,
29:06
Speaker 3: if we can identify those companies early that are going
29:08
Speaker 3: to be the longer term winners, that's that's where we go.
29:12
Speaker 3: From a risk perspective, what we want to protect against
29:15
Speaker 3: is unintended risk. So we're taking very deliberate and concentrated risk.
29:21
Speaker 3: But we have every kind of risk management report that
29:24
Speaker 3: you would expect in an asset manager to make sure
29:26
Speaker 3: we don't have unintended risks, to check our dispersion, and
29:31
Speaker 3: to make sure that at the end of the day,
29:32
Speaker 3: the risks we're taking our stock selection risk and not
29:36
Speaker 3: unintended risk around you know, sized geography sector.
29:41
Speaker 2: So I don't usually hear the phrase unintended risk. So
29:45
Speaker 2: I certainly understand the risk of performance relative to a benchmark.
29:50
Speaker 2: You over underperform, you're gonna outperform. What are some other
29:55
Speaker 2: unintended risks? Is it strictly just sector concentration jigra a
30:00
Speaker 2: concentration or is there a little more nuance to it.
30:03
Speaker 3: We want to make sure at the at the end
30:05
Speaker 3: of the day that the risk we're taking is is
30:07
Speaker 3: stock specific. That's that's who we are on the equity side.
30:10
Speaker 3: We are we are stock pickers, and so we want
30:13
Speaker 3: to make sure that you know what's what's coming through
30:16
Speaker 3: our portfolio from a risk perspective is all based on
30:20
Speaker 3: stock selection and not some of the more factor based
30:24
Speaker 3: UH influences that can that can take shape in portfolios.
30:28
Speaker 3: And as you mentioned, you know, sector and geography and
30:32
Speaker 3: and UH and other.
30:33
Speaker 2: Exposures really interesting. So so given that PGEUM is the
30:39
Speaker 2: parent company and they run a sort of multi boutique,
30:44
Speaker 2: multi strategy approach, how does your concentrated alpha approach to
30:50
Speaker 2: investing fit in. Do you have to think about, well,
30:54
Speaker 2: maybe this group or that group is doing something similar,
30:59
Speaker 2: or do you do your thing and it's up to
31:01
Speaker 2: the pairing company to select the allocation they want.
31:05
Speaker 3: Yeah. The great thing about the multi manager model at
31:08
Speaker 3: PGEUM is each of the affiliates as we call them
31:11
Speaker 3: versus boutiques are free to pursue their asset class and
31:16
Speaker 3: their specialty UH in their own way. Now to the
31:19
Speaker 3: extent that there are multi asset portfolios put together, you
31:24
Speaker 3: know within PGEUM that might select components of the different
31:27
Speaker 3: affiliates or boutiques. You know, that'll be determined by the
31:30
Speaker 3: multi asset team doing the acid allocation. You know, for
31:34
Speaker 3: for Genison, given you know the high highly concentrated UH,
31:39
Speaker 3: you know nature of our of our equity portfolios, we
31:42
Speaker 3: fit into some of those multi asset products, but in
31:45
Speaker 3: other cases we don't. We're too high octane UH for that.
31:49
Speaker 3: But we are in a number of annuity and and
31:54
Speaker 3: other acid allocation products throughout Prudential that that avail themselves
31:57
Speaker 3: of our various capabilities. And the other thing that that
32:01
Speaker 3: that Jennison can do is we have a small quantitative
32:05
Speaker 3: equity team, not to be confused with PGIM Quantitative Services,
32:10
Speaker 3: which is a sister company. Our team is there to
32:15
Speaker 3: customize our fundamental alpha from our equity portfolios. So if
32:19
Speaker 3: a client is looking for a targeted tracking error, a
32:22
Speaker 3: targeted volatility, you know, likes what we do but maybe
32:25
Speaker 3: can't quite take take the tracking error volatility, we can
32:29
Speaker 3: manipulate the portfolio to fit within their requirements. They might
32:33
Speaker 3: be someone who wants a sustainable portfolio and you know,
32:37
Speaker 3: has some exclusions or types of industries they don't want
32:40
Speaker 3: to include. So having this little quad group within Jennison
32:44
Speaker 3: to customize our our outcomes for our clients as has
32:48
Speaker 3: been a terrific addition of value that has allowed us
32:51
Speaker 3: to get into some of these multi asset products. The
32:55
Speaker 3: other great thing about the PGM multi manager model that
32:59
Speaker 3: I'll come and on is that we have virtually no
33:03
Speaker 3: overlap among the different affiliates or boutique. So Jennison is
33:07
Speaker 3: the is the fundamental active equity manager. Uh, you know,
33:11
Speaker 3: PGEUM Quantitative Services is the quant manager. Pageum fixed income
33:15
Speaker 3: has you know, broad based fixed income capabilities. We have
33:18
Speaker 3: private real estate, private credit, et cetera. And we're not
33:22
Speaker 3: fighting with each other over shelf space in different products
33:26
Speaker 3: because we're all experts in what we do.
33:29
Speaker 2: Now, it's taken me about ten years to stop saying
33:32
Speaker 2: Prudential and start saying pgeum. You did mention Prudential. When
33:38
Speaker 2: you think about the parent company, it traces back to
33:42
Speaker 2: Prudential Insurance, which is still a giant brand. How does
33:47
Speaker 2: the relationship between Genesis, How does the relationship between Jennison
33:52
Speaker 2: and PGEUM and PGEUM Prudential just affect the nomenclature. It's
33:56
Speaker 2: a lot of stuff to keep straight.
33:58
Speaker 3: It is you have you have the master brand of
34:00
Speaker 3: Prudential one hundred and fifty years, you have the pGEM
34:03
Speaker 3: brand a little over a decade old, and then you
34:06
Speaker 3: have the brands underneath Jennison at fifty five years being
34:11
Speaker 3: the oldest of the investment management brands. It's also why
34:15
Speaker 3: Jennison tends to be the most independent of the of
34:20
Speaker 3: the affiliates or boutiques. It was an acquired business. About
34:23
Speaker 3: seventy five percent of the assets were sourced by Jennison
34:27
Speaker 3: versus assets that have come through some of the Prudential
34:33
Speaker 3: or PGYM channels. But you know, we do, you know,
34:36
Speaker 3: we do have to be careful about the branding, and
34:39
Speaker 3: sometimes it's at the product level. For example, PGUM runs
34:46
Speaker 3: a lot of the you know, the consolidated platforms like
34:50
Speaker 3: the mutual fund platform and in Europe the use it
34:55
Speaker 3: platform that are you know, used to structure the funds
34:59
Speaker 3: that are sold into the wealth management channels and there
35:03
Speaker 3: for example, if you want to buy Jennison in a
35:06
Speaker 3: growth fund through the through the PGAM mutual fund company.
35:09
Speaker 3: It's the Pgmjennison Growth Fund, So sometimes we have multiple
35:13
Speaker 3: brands at play.
35:14
Speaker 2: Huh, really interesting. So let's talk a little bit about
35:18
Speaker 2: the current environment. It certainly has been a chaotic first
35:23
Speaker 2: quarter with tariffs on and off. Again, you guys are
35:28
Speaker 2: deep fundamental investors. How do you think about newsflow and
35:32
Speaker 2: all this noisy stuff when you're looking at the fundamentals
35:37
Speaker 2: of companies.
35:39
Speaker 3: It's it's hard to do, but it really comes down
35:42
Speaker 3: to focus. At the end of the day, we have
35:44
Speaker 3: to try to filter out the noise. Now we can't
35:47
Speaker 3: we're not macro investors, but we have to be macro aware.
35:51
Speaker 3: We have to understand if policy shifts or you know,
35:55
Speaker 3: anything in the macro environment will ultimately affect the environ
36:00
Speaker 3: in which our companies operate. So we always bring it
36:03
Speaker 3: back to the fundamentals. You know, we can't put blinders
36:06
Speaker 3: on and say this is a great company, but if
36:08
Speaker 3: if the landscape in which they operate changes, it can
36:12
Speaker 3: affect the fundamentals of the company. So, you know, we
36:14
Speaker 3: work very hard to try to separate the you know,
36:17
Speaker 3: the noise from the fundamentals. But at the end of
36:19
Speaker 3: the day. Sometimes that macro environment can affect the fundamentals.
36:24
Speaker 2: So when it starts affecting the fundamentals, how do you
36:27
Speaker 2: manage it? I'm assuming since you're the alpha managers, you
36:31
Speaker 2: don't have an option of saying we're going to go
36:34
Speaker 2: to cash or we're going to go to bonds. Is
36:36
Speaker 2: in a matter of saying, hey, Europe seems to be
36:39
Speaker 2: doing better, we're going to rotate shift some of our
36:41
Speaker 2: exposure from the US two overseas. How do you deal
36:45
Speaker 2: with the macro once it starts affecting the fundamentals.
36:50
Speaker 3: Yeah, it's exactly as you described. We're paid to invest
36:54
Speaker 3: in a certain strategy for a client, so we hold
36:57
Speaker 3: very little cash just forquidity and trading. We're paid to
37:02
Speaker 3: be fully invested, and so you know, as we see
37:05
Speaker 3: either a sector or a supply chain or a company's
37:08
Speaker 3: fundamentals coming under pressure, will will either underweight or get
37:12
Speaker 3: out of the company completely and look for the next
37:15
Speaker 3: best opportunity.
37:16
Speaker 2: Really kind of interesting. You had a piece recently at
37:20
Speaker 2: Jennison titled is value investing debt? Tell us a little
37:25
Speaker 2: bit about that.
37:27
Speaker 3: Well, Well, growth indexes have certainly outperformed value for for
37:30
Speaker 3: well over a decade. I think we're all aware of that.
37:33
Speaker 3: That's that's been good for Gennison two thirds of our
37:35
Speaker 3: equity assets or our growth oriented assets, and and we've
37:39
Speaker 3: we've benefited during this period and also outperformed and raised
37:44
Speaker 3: money and new clients. So, you know, a lot of
37:47
Speaker 3: that has been has been a great tailwind for our business.
37:50
Speaker 3: But we also have a high performing value team that's
37:54
Speaker 3: that's put up some very good numbers. The way we've
37:57
Speaker 3: uh the way we manage in value is called an
38:01
Speaker 3: intrinsic value approach, which is very opportunistic. It's not deep
38:06
Speaker 3: value or a Fallen Angel type strategy. We look for
38:09
Speaker 3: companies with temporarily depressed earnings versus a permanent situation. We
38:15
Speaker 3: try to identify those, and periods of short term volatility
38:18
Speaker 3: can actually favor our approach if we can, if we
38:22
Speaker 3: can decipher, you know, which companies have hidden inflection point
38:26
Speaker 3: and get into those early and hold them long term.
38:29
Speaker 3: Now the market has broadened out recently from the mag
38:33
Speaker 3: seven and some of the you know, the most concentrated
38:36
Speaker 3: positions that have that have led the market, and and
38:40
Speaker 3: we're being rewarded, you know, for executing in the value space.
38:44
Speaker 3: There's still good companies and good growth in value. I
38:47
Speaker 3: don't think investors really think about growth versus value investing
38:52
Speaker 3: like they used to. I think they think about it
38:54
Speaker 3: as portions of the portfolio, stable growers maybe with dividends,
38:59
Speaker 3: versus as innovators and disruptors that that might lead the
39:02
Speaker 3: way in the future.
39:04
Speaker 2: That's really that's really kind of interesting. It's funny because
39:09
Speaker 2: you're talking about your approach to intrinsic value, and I
39:15
Speaker 2: would imagine that as the mag seven and traditional growth
39:19
Speaker 2: equity falters, the volatility of this market would be great
39:24
Speaker 2: for an opportunistic intrinsic value investor. Tell us how the
39:30
Speaker 2: value guys are salivating these days over what the state
39:35
Speaker 2: of markets are with volatility spiking up close to thirty.
39:40
Speaker 3: Yeah, I think volatility actually can be good on the
39:43
Speaker 3: growth side as well. So I think I think when
39:45
Speaker 3: you're a fundamental stock picker, you you want number one
39:50
Speaker 3: is as little correlation as possible. If everything goes up,
39:53
Speaker 3: it's hard to differentiate yourself when market's broaden out, you know,
39:57
Speaker 3: when when volatility is UH is elevated, you know it,
40:04
Speaker 3: really you really have to have skill to to differentiate
40:07
Speaker 3: and to separate the noise, uh, you know, from the
40:10
Speaker 3: fundamentals of the company, and so we think we can
40:12
Speaker 3: benefit in these periods both on the value and the
40:16
Speaker 3: growth side. Certainly, you know, on the growth side has
40:19
Speaker 3: pulled back most recently in the first quarter. You're you're
40:24
Speaker 3: starting to see that, uh shift back already. It appears
40:28
Speaker 3: that mid March was perhaps the you know, the the
40:32
Speaker 3: you know, the bottom, and we seem to be, you know,
40:35
Speaker 3: starting to bounce off of that. I for one, UH
40:40
Speaker 3: don't don't see a recession on the horizon, at least
40:43
Speaker 3: not a not a severe one. So I think we
40:46
Speaker 3: will continue to see as as you know, we filter
40:50
Speaker 3: through the noise. We learned the tariffs may be a
40:52
Speaker 3: little more targeted and forgiven in some instances that uh,
40:56
Speaker 3: the supply chains don't get as disrupted as as we thought,
40:59
Speaker 3: and we could see a good period for growth equity.
41:04
Speaker 2: Again, So you have large cap growth equity as a focus,
41:09
Speaker 2: you have global equity opportunity. What are some of the
41:13
Speaker 2: other areas where you guys focus in terms of looking
41:18
Speaker 2: for alpha.
41:19
Speaker 3: Yeah, growth growth equity, as we've talked about, was the
41:22
Speaker 3: foundation of the firm and the largest book of assets
41:25
Speaker 3: about half the assets of the firm. We have a
41:28
Speaker 3: global growth team that was built and extended off of that,
41:32
Speaker 3: getting into global, international and emerging market equity, also following
41:37
Speaker 3: a growth style and philosophy. That team leverages a lot
41:42
Speaker 3: of the same research of our growth analysts. Then we
41:46
Speaker 3: have a small smid mid cap team. They are a
41:51
Speaker 3: little more growth managers, but a little more valuation sensitive there,
41:55
Speaker 3: and we offer that in sort of growth and core portfolio.
42:00
Speaker 3: Our value team. We talked about our intrinsic value capabilities,
42:04
Speaker 3: but you know, on the value side, we also have
42:08
Speaker 3: certain sector funds infrastructure, utilities, energy and other things, and
42:16
Speaker 3: including some of some strategies that are in demand in Europe,
42:21
Speaker 3: like carbon solution strategy that's a sort of a brown
42:25
Speaker 3: green strategy, if you will. And then we have our
42:28
Speaker 3: fifty billion dollar fixed income shop based up in Boston.
42:33
Speaker 3: They are really the antithesis of what we do in
42:37
Speaker 3: high conviction focused concentrated equity. They are a high, high
42:44
Speaker 3: quality credit shop staying in you know, the higher end
42:49
Speaker 3: of the space there down the fairway core fixed income
42:53
Speaker 3: manager managing for the largest pension plans in the world,
42:58
Speaker 3: and also able value in LDI mandates. So it's also
43:02
Speaker 3: a nice diversifier for the business. We have this very stable,
43:06
Speaker 3: you know, core credit manager and this high conviction, high
43:09
Speaker 3: alpha equity manager.
43:11
Speaker 2: So given that there seems to be a consensus at
43:15
Speaker 2: your shop of higher for longer at least when it
43:18
Speaker 2: comes to rates. Since you brought up fixed income and
43:21
Speaker 2: you brought up credit, does this allow your clients to say, hey,
43:27
Speaker 2: we could take a little off the table with equity
43:29
Speaker 2: and focus a little more on on stable fixed income.
43:33
Speaker 2: How does that balance work?
43:35
Speaker 3: Yeah, we've seen that over the last several years as
43:38
Speaker 3: rates ticked up and there was something to earn in
43:40
Speaker 3: fixed income. Again, we watch pension plans, you know, adjust
43:45
Speaker 3: their their asset allocations. You know, one of the double
43:48
Speaker 3: edged swords of being a high performing equity manager is
43:53
Speaker 3: when the equity markets run up and you outperform the
43:56
Speaker 3: benchmark you get allocated against, you're the one they take
43:59
Speaker 3: the money away from from. So you know, we've we've
44:01
Speaker 3: had that happen and have been a victim of our success,
44:04
Speaker 3: if you will, in some of these areas. So we
44:06
Speaker 3: have seen that over the last couple of years as
44:08
Speaker 3: rates ticked up, where we did see some of our clients,
44:12
Speaker 3: you know, maintain us, but shift sort.
44:15
Speaker 2: Of rebalanced falls from alpha generating concentrated equity into more stable,
44:21
Speaker 2: lower yielding fixed income.
44:23
Speaker 3: Exactly exactly. I mean, we we do know. I'm not
44:26
Speaker 3: one to call rates per se, but you know, I
44:30
Speaker 3: agree with the base case out there that we'll probably
44:32
Speaker 3: see two cuts. Hopefully they're you know, they're for the
44:36
Speaker 3: right reasons and not bad news cuts, if you will.
44:39
Speaker 2: So that's interesting you say that because originally last year
44:45
Speaker 2: Wall Street was looking for a lot more cuts than
44:47
Speaker 2: we got, and the sort of pushback to the expectation was, Hey,
44:54
Speaker 2: the economy is really robust. Consumers are spending, companies are hiring,
44:58
Speaker 2: capex spending is up, revenue and profits are up. Why
45:02
Speaker 2: are you guys expecting cuts? How does that transition? Now?
45:06
Speaker 2: Where you know, I'm in your camp, I don't really
45:09
Speaker 2: see an imminent recession, but at the same time, it
45:13
Speaker 2: certainly appears that recession risks are ticking up. They're still
45:18
Speaker 2: relatively low, but they're appreciably higher than they were at
45:22
Speaker 2: the end of twenty twenty four. So if we're going
45:26
Speaker 2: to get two cuts, is that because the FED wants
45:29
Speaker 2: to normalize rates to where they've been over the past
45:32
Speaker 2: twenty twenty five years as inflation sort of settles down,
45:38
Speaker 2: or are we going to see cuts because the economy
45:41
Speaker 2: is beginning to slow.
45:42
Speaker 3: Yeah, I agree with you completely. I hope it's the
45:46
Speaker 3: former and not the latter. We are starting to see
45:49
Speaker 3: some signs of some potential slowing of growth. I do
45:53
Speaker 3: think we could see growth slow down from what it's been.
45:56
Speaker 2: And it's been red hot, and it's a couple of years.
45:59
Speaker 3: And it's been red hot. You know, there's still some
46:01
Speaker 3: good signs out there. Housing starts are up, services pmis up,
46:06
Speaker 3: you know, retail sales and manufacturing are down, consumer sentiments down.
46:10
Speaker 3: The income and labor markets importantly are still are still decent.
46:13
Speaker 3: I think that'll be a major determinant of where we go.
46:18
Speaker 3: Inflation is stubborn, but it's showing signs of coming down
46:22
Speaker 3: in key areas. Tariff's notwithstanding, and you know, I think
46:25
Speaker 3: the tariff path will determine a lot of where we
46:28
Speaker 3: go here.
46:29
Speaker 2: So it sounds like you guys stick to your knitting.
46:33
Speaker 2: You do fundamental research, You focus on intrinsic value, but
46:37
Speaker 2: you're certainly aware that, hey, what's going on in the
46:40
Speaker 2: rest of the world. It could have an impact then
46:42
Speaker 2: lead over if you're advising pension funds or foundations that
46:48
Speaker 2: have a perpetual lifespan or at least future liabilities that
46:55
Speaker 2: are decades off, is the best advice. Hey, it's gonna
46:59
Speaker 2: get bumped for a while, but you have to look
47:01
Speaker 2: past this, look to the other side of whatever happens
47:04
Speaker 2: over the next one two, four years or is it
47:07
Speaker 2: everybody manned their battle stations.
47:10
Speaker 3: Yeah, I think keeping a long term focus is good advice. Uh,
47:15
Speaker 3: you know, for for the pension plans who obviously have
47:17
Speaker 3: teams of experts, you know, focused on their asset allocation,
47:21
Speaker 3: but also for the retail investor who who obviously has
47:24
Speaker 3: the financial advisor as well. But you know, as you
47:28
Speaker 3: know Barry, staying invested is key when people try to
47:31
Speaker 3: time the markets and and exit, you know, they they've
47:35
Speaker 3: they've always regretted that, you know, being in the market
47:40
Speaker 3: during those key points of inflection when when markets take
47:45
Speaker 3: up or missing that that last uh, that last large spike,
47:50
Speaker 3: you know, it really can have a dramatically negative impact
47:54
Speaker 3: on your returns overall.
47:55
Speaker 2: Yeah, We've seen a lot of studies that show the
47:57
Speaker 2: worst days and the best days tend to come cluster together,
48:01
Speaker 2: and it's very hard to miss one and catch the other. Absolutely,
48:04
Speaker 2: so I know I only have you for a limited
48:07
Speaker 2: amount of time. Let's jump to our favorite questions that
48:11
Speaker 2: we ask all of our guests, starting with what's keeping
48:15
Speaker 2: you entertained these days? What are you either watching or
48:17
Speaker 2: listening to? What's your tell us about your favorite podcast? Netflix? Whatever?
48:25
Speaker 2: You know?
48:25
Speaker 3: I'm always well behind where everyone else is. I didn't
48:29
Speaker 3: watch the first episode of The Sopranos until until the
48:32
Speaker 3: series was over, and I'm just starting Yellowstone, So that
48:37
Speaker 3: tells you how up to date.
48:39
Speaker 2: You're ahead of me. And Yellowstone it's the next one
48:41
Speaker 2: up in Mike queue. Are you enjoying it?
48:45
Speaker 3: I just started it, so so far, so good. I've
48:48
Speaker 3: heard so many great things about it, so I'm looking
48:51
Speaker 3: forward to it. I'm a bit of a history buff,
48:53
Speaker 3: so I've been working my way through the ken Burns, uh,
48:57
Speaker 3: Doctor Malarisa. I've seen the Brooklyn Bridge, the Statue of Liberty,
49:01
Speaker 3: the Civil War, the Vietnam War, and the Great War.
49:04
Speaker 3: And the next one up for me is Benjamin Franklin.
49:07
Speaker 3: So I really enjoy ken Burns and how he approaches
49:11
Speaker 3: you know, the documentary.
49:13
Speaker 2: Huh, really interesting. You You mentioned one of your mentors previously.
49:18
Speaker 2: Tell us about the folks who helped shape your career.
49:22
Speaker 2: Who were your mentors?
49:24
Speaker 3: Yeah, I would say, first, you know, it was my
49:27
Speaker 3: mother from a values and from a work ethic perspective,
49:31
Speaker 3: first generation college grad, went to got a master's at Georgetown,
49:36
Speaker 3: worked in politics, ransom nonprofits, and then ultimately worked in education.
49:43
Speaker 3: She's she's ninety years old and still alive and doing well.
49:47
Speaker 3: And you know, she's been a great inspiration to me.
49:50
Speaker 3: Again from a values and work ethic perspective. I've also
49:55
Speaker 3: had the great opportunity to work for some great leaders
49:58
Speaker 3: and manager I tried to learn from each one of
50:02
Speaker 3: them along the way, take the styles or the characteristics
50:05
Speaker 3: that I most admired of each of them and try
50:08
Speaker 3: to incorporate that into my leadership style. And at Altis
50:12
Speaker 3: it was John Kim and Scott Fox at at you know,
50:15
Speaker 3: Bob Crispin, Rob Leary at I n g Uh and
50:18
Speaker 3: then alone Cara Oagland at Voya to name a few.
50:22
Speaker 3: Sig Sigalis who who I mentioned past about two years ago.
50:26
Speaker 3: I worked with him for only about six years and
50:29
Speaker 3: while you know he wasn't necessarily a mentor in the
50:32
Speaker 3: sense of helping me do my job, which was terrific
50:35
Speaker 3: when when when I came on board, Sig said, I,
50:38
Speaker 3: I managed the money, you managed the firm. And he
50:41
Speaker 3: he kept his word there and allowed me to do
50:43
Speaker 3: what you know, we felt we needed to do to
50:45
Speaker 3: help grow the business and set the strategy. And it
50:48
Speaker 3: was a it was a terrific partnership. And UH, and
50:51
Speaker 3: I have great admiration for him. So he was more
50:53
Speaker 3: an inspiration to me, just the you know, his will
50:56
Speaker 3: to win and and the way he impacted everyone around
51:00
Speaker 3: him and the quality, UH and the values of the
51:03
Speaker 3: firm that he built really inspirational.
51:06
Speaker 2: Really really interesting.
51:08
Speaker 1: Uh.
51:08
Speaker 2: Let's talk about books. What are you reading currently? What
51:11
Speaker 2: are some of your favorites?
51:13
Speaker 3: Yeah, right, right now, I just started, UH, Leadership in
51:17
Speaker 3: Turbulent Times, UH, from from Doris Kurrn's Goodwin. It seems a.
51:21
Speaker 2: Little apropos sure right now.
51:23
Speaker 3: And and UH, you know, it's a it's a book
51:26
Speaker 3: about Lincoln, Teddy Roosevelt, FDR and UH and LBJ and
51:31
Speaker 3: it kind of you know, takes you through their you know,
51:34
Speaker 3: their administrations and UH and some of the challenges that
51:37
Speaker 3: they faced. You know, it's a big book. It sat
51:40
Speaker 3: on my coffee table for a few years and I
51:42
Speaker 3: looked at it and I, you know, I've wanted to
51:44
Speaker 3: kind of tap in, but it was four inches high,
51:46
Speaker 3: and and finally I h I did tap in, and
51:49
Speaker 3: I'm glad I did.
51:51
Speaker 2: Our final two questions, what sort of advice would you
51:55
Speaker 2: give to a recent college grad interested in a career
52:00
Speaker 2: in either investment, credit, finance, anything along the lines of
52:05
Speaker 2: your career experiences.
52:07
Speaker 3: Yeah, I would say, first thing, you know, you know,
52:11
Speaker 3: getting into finance. The path to finance starts so much
52:14
Speaker 3: earlier than it ever did. And in our day, you know,
52:17
Speaker 3: it was senior year, it was time to look for
52:19
Speaker 3: a job, maybe had an internship, you know, the year before.
52:23
Speaker 1: But now.
52:25
Speaker 3: Undergrads going into finance, they need to be lining up
52:27
Speaker 3: their internships sophomore summer, junior summer, senior summer. So so
52:33
Speaker 3: it really starts a lot sooner. But once they're on
52:36
Speaker 3: the job, my my advice to them is always builder
52:39
Speaker 3: a resume of skills, not a resume of jobs. Try to,
52:44
Speaker 3: you know, try to develop as many skills as you
52:46
Speaker 3: can along the way, and ask questions early and often
52:50
Speaker 3: you're not expected to know anything when when you're young
52:53
Speaker 3: and in the job, but as you move on in
52:55
Speaker 3: your career, you're expected to know more and it becomes
52:58
Speaker 3: a little harder to ask questions and then ask for
53:02
Speaker 3: experiences outside of your current duties. So if you see
53:05
Speaker 3: something going on in the next department over, ask if
53:09
Speaker 3: you can be exposed to that you know while doing
53:12
Speaker 3: the job you were hired for, and try to get
53:16
Speaker 3: more exposure, but don't expect anything to be given to you.
53:20
Speaker 3: You own your career. Seek out mentors and try to learn,
53:25
Speaker 3: But at the end of the day, you have to
53:26
Speaker 3: take ownership of your career and your advancement will really
53:30
Speaker 3: depend on the success of your current role, and if
53:33
Speaker 3: you focus on that and do it well, you'll be recognized.
53:36
Speaker 2: Really good good advice, And our final question, what do
53:40
Speaker 2: you know about the world of investing today? You wish
53:43
Speaker 2: you knew thirty forty years ago when you were first
53:46
Speaker 2: getting started.
53:47
Speaker 3: Well, as I mentioned, I didn't know anything about it
53:49
Speaker 3: forty years ago when I was getting started coming out
53:52
Speaker 3: of college. But in reflecting back, what I think would
53:57
Speaker 3: be helpful would have been how many different types of
54:00
Speaker 3: finance careers there actually are? Everyone thinks sort of Wall
54:05
Speaker 3: Street investment banking, M and A. But but there's investment management,
54:09
Speaker 3: there's wealth management, there's insurance, there's commercial banking, there's you know,
54:13
Speaker 3: there's institutional banking. So many many careers in finance and
54:17
Speaker 3: past that that that you can go down. I had
54:21
Speaker 3: a very narrow view of the investment world. And you know,
54:24
Speaker 3: my journey really, you know, happened because of the next
54:28
Speaker 3: role that I got. In the next role that I got,
54:30
Speaker 3: I didn't have a plan per se, and I think,
54:33
Speaker 3: you know, I wish I knew more earlier on and
54:36
Speaker 3: I might have set a plan. The plan turned out okay,
54:39
Speaker 3: and and I've been happy with it, but you know,
54:42
Speaker 3: who knows what the path would have taken had I
54:43
Speaker 3: known a little more about it.
54:45
Speaker 2: Huh, really interesting stuff, Jeff, Thank you for being so
54:48
Speaker 2: generous with your time. We have been speaking with Jeff Becker.
54:52
Speaker 2: He's chairman and CEO of Jennison Associates, helping to run
54:56
Speaker 2: the firm that manages well over two hundred billion dollars
55:00
Speaker 2: in assets. If you enjoy this conversation, be sure to
55:04
Speaker 2: check out any of the five hundred and fifty or
55:07
Speaker 2: so we've done over the past eleven years. You can
55:11
Speaker 2: find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find
55:16
Speaker 2: your favorite podcasts. Be sure to check out my new book,
55:20
Speaker 2: How Not to Invest The Ideas, numbers, and behaviors that
55:24
Speaker 2: destroy wealth and How to Avoid Them, out now at
55:28
Speaker 2: your favorite bookseller. I would be remiss if I did
55:32
Speaker 2: not thank the Cracked team that helps with these conversations
55:34
Speaker 2: together each week. My audio engineer is Steve Gonzalez. Anna
55:39
Speaker 2: Luke is my producer. Sean Russo is my researcher. Sage
55:43
Speaker 2: Bauman is the head of podcasts at Bloomberg. I'm Barry
55:47
Speaker 2: rud Haunts. You've been listening to Masters in Business on
55:51
Speaker 2: Bloomberg Radio