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BNY's La Salla on Brexit Uncertainty Impacting Investing(Audio) · Bloomberg Intelligence

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  Speaker 1: I'm Katherine Cowdery. This is taking Stock with pim Box
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  Speaker 1: and Kathleen Hayes on Bloomberg Radio. We are broadcasting live
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  Speaker 1: from the b n Y Melan asset a Servicing a
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  Speaker 1: conference in Tucson, Arizona. This is taking Stock on pim Fox.
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  Speaker 1: My co host Kathleen Hayes, our next guest here to
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  Speaker 1: tell us a little bit about what I think of
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  Speaker 1: as alternatives to ordinary investments that we may have been
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  Speaker 1: taught to understand, such as stocks, bonds and cash. And
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  Speaker 1: who better to help us? And then Frank Losala. He
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  Speaker 1: is the chief executive officer of Global uxtured products and
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  Speaker 1: alternative investment services for b N. Why Melan and he
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  Speaker 1: joins us, Now, thanks for being here. Um, I was
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  Speaker 1: gonna really say that the best qualification you have for
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  Speaker 1: this job is you have an m a In theology.
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  Speaker 1: I do, right, and I didn't know you had that.
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  Speaker 1: Right you have, you have an m a in in theology,
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  Speaker 1: And I gotta say at certain times that must come
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  Speaker 1: in very handy when you because there's no one size
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  Speaker 1: fits all. Every everything has become so particular and specific. Now,
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  Speaker 1: what if you could tell us in your mind you've
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  Speaker 1: got a lot of experience and read the whole bio. Um,
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  Speaker 1: how is alternative How do you see alternative investments? How
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  Speaker 1: do you describe it to people? Well, let me say
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  Speaker 1: one thing about the theology. Uh, master's Um, there was
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  Speaker 1: a spiritual component to this business. When you try to
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  Speaker 1: continue to forecast and you fail regularly, you it's an
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  Speaker 1: exercise and humility. So so you learn a lot about
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  Speaker 1: um just being humble. But no, Um, it's true him.
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  Speaker 1: There is a structural shift going on. The way we
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  Speaker 1: see it is when we speak to investors, asset owners,
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  Speaker 1: investment managers. There is a structural shift in terms of
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  Speaker 1: the way people have to think about investing. And although
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  Speaker 1: we've heard a lot about the demise of alternative investments
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  Speaker 1: and hedge funds, the fact is, um, when you look
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  Speaker 1: at the market, whether it's a zero interest rate market
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  Speaker 1: for bonds which seems to be you know, fully priced in,
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  Speaker 1: fully priced domestic equity portfolio cash doing nothing, UM, investors
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  Speaker 1: really a hungry for cash flow. And what we found
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  Speaker 1: in a couple of the white papers that we've recently issued,
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  Speaker 1: there is clearly more and more interest in private equity,
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  Speaker 1: real asset investment and real estate assets, which by the way,
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  Speaker 1: are not priced cheaply either, but when you think about
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  Speaker 1: the alternatives, it becomes a more attractive investment vehicle as
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  Speaker 1: part of a broader portfolio. Frank, we've been sing off
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  Speaker 1: and on for many years. And when you look back
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  Speaker 1: and think UM, and when I started into this business
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  Speaker 1: as a as a journalist, interest rates way higher. There
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  Speaker 1: was so much room for the ball market trolley and
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  Speaker 1: make money on that side of it, not just holding
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  Speaker 1: onto it for yield, but making money in the capital
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  Speaker 1: appreciation stocks much lower you know, market crash come back up.
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  Speaker 1: But when you talk about how things have changed, structurally.
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  Speaker 1: How much does it have to do with just some
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  Speaker 1: of these underlying changes in inflation and globalization pushing things down,
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  Speaker 1: and the rise of technology as and as an investment opportunity,
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  Speaker 1: but also as something that is sucked a lot of
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  Speaker 1: jobs out of the middle of the economy. You know, Kathleen,
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  Speaker 1: I think that's there's a lot to it, and I
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  Speaker 1: think part of the challenge, and I'm not sure anyone
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  Speaker 1: has really been effectively able to get their heads around it,
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  Speaker 1: but there are significant changes. As you say, we're we
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  Speaker 1: would have never thought, at least when I was going
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  Speaker 1: to graduate school in business, that we would be in
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  Speaker 1: a zero and negative interest rate environment. No one would
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  Speaker 1: have ever thought that. No one would have ever thought
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  Speaker 1: we could have big productivity gains without having to have
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  Speaker 1: to hire people. Um, the demographic shifts in terms of
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  Speaker 1: the aging population in some parts of the world, and
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  Speaker 1: I'm not sure we know how to how to handle that,
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  Speaker 1: but well understand it and then invest effectively to take
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  Speaker 1: advantage of the opportunities that those shifts present to us.
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  Speaker 1: And that said, um, I think we're learning about you know,
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  Speaker 1: if you want to call it the new norm, that's fine.
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  Speaker 1: I think I think that's good. But what we what
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  Speaker 1: I think we're doing now is taking those different currents
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  Speaker 1: that you just sort of outlined and trying to figure out,
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  Speaker 1: So then where will the next investment opportunity be. And
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  Speaker 1: right now, as I said earlier, we see a lot
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  Speaker 1: of it going to real assets, where you know, there
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  Speaker 1: is a cash flow, a certain degree of of stability,
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  Speaker 1: less volatility than we get in fixed income or or equities,
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  Speaker 1: and it's becoming more and more attractive. And as um,
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  Speaker 1: someone very smart was telling me just a few minutes ago,
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  Speaker 1: there is a psychological change in the market that um,
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  Speaker 1: we have to we have to deal with and make
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  Speaker 1: sure investments understand what that psychology is. It's a psycho
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  Speaker 1: psychology of low risk uh, good solid cash flow uh,
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  Speaker 1: not a lot of volatility, and being able to just
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  Speaker 1: invest for the long haul. And people, as we heard
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  Speaker 1: on a panel earlier today, people don't want to pay
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  Speaker 1: for beta. They will pay for alpha, but investors are
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  Speaker 1: very smart and they only want to pay for out
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  Speaker 1: performing the market. And right now, that's very, very hard
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  Speaker 1: to do. Real estate. Let's talk about real estate as
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  Speaker 1: an alternative investment because that may fit many of the
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  Speaker 1: criteria that you've just described, but there is liquidity, and
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  Speaker 1: maybe there's a premium for liquidity that you would have
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  Speaker 1: to pay if you don't know, if you don't get
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  Speaker 1: it in real estate, then that's not not for you.
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  Speaker 1: That's exactly right. Well, well, Pim, I'll tell you something else.
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  Speaker 1: What we see with a lot of the managers that
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  Speaker 1: we interact with is there is a lot of cash
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  Speaker 1: on the side from investors that want to be in
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  Speaker 1: real estate assets. The problem is finding a quality piece
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  Speaker 1: of real estate to put in the portfolio, and that
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  Speaker 1: could take years. So you can launch a fund, and
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  Speaker 1: we see this now. You can launch a fund and
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  Speaker 1: you can have capital lined up, but it could take
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  Speaker 1: you forever to find a quality piece of property. And
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  Speaker 1: what we're starting to see to your point about cash froll,
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  Speaker 1: if you look at the traditional areas like the New
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  Speaker 1: York area, the northeast to southwest, you see that that
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  Speaker 1: those assets they're looking for assets now outside of what
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  Speaker 1: you would what we would consider the primary areas. They're
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  Speaker 1: going to, you know, the midwest to can't you know,
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  Speaker 1: Kansas City and the areas that we otherwise wouldn't think
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  Speaker 1: would be attractive, and that's where the money on the
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  Speaker 1: real estate side, is actually moving to big picture? I mean,
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  Speaker 1: is anything changed on this front where breggsit whether or
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  Speaker 1: not the UK is going to leave European Union, of
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  Speaker 1: the UK government saying today, oh, it throw us into
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  Speaker 1: a terrible recession, and you know the naysayers that are
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  Speaker 1: who want to leave her Sami, we are just playing politics.
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  Speaker 1: But when you look at it from an investment management
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  Speaker 1: standpoint is have we always been dealing with things to
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  Speaker 1: have that much impact on our markets or do you
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  Speaker 1: think this is a larger force to contend with in
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  Speaker 1: a very globalized world. I think the political dynamics of
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  Speaker 1: something like a bregsit will become more pronounced as we
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  Speaker 1: moved down the path towards globalization, or some people would
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  Speaker 1: say the reversal of globalization more of a domestic uh
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  Speaker 1: lean in a lot of the western countries which we
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  Speaker 1: see going on right now. I think bregsit in of
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  Speaker 1: itself is probably well, it's clearly on everybody's right off screen.
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  Speaker 1: Um when when you look at you know, I was
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  Speaker 1: looking at at some of the the statistics this morning
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  Speaker 1: on some of the um the oddsmakers which I look
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  Speaker 1: at the London the London City odds they have that
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  Speaker 1: down to on the fifty percent. Now that that breads
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  Speaker 1: that might happen, obviously that would be an enormous, enormously
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  Speaker 1: disruptive to the market. Um the consequences I think are
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  Speaker 1: unimaginable and and the fact that there would be a Brexit,
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  Speaker 1: to my mind's eye, is unimaginable. I do think though,
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  Speaker 1: the political uncertainty that we're going to deal with will continue,
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  Speaker 1: and investment managers have to be ready for that. And
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  Speaker 1: again I would I would say that plays into this
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  Speaker 1: desire to move into more real assets because it's viewed
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  Speaker 1: as less risky, well put, very well put. Frankly, so,
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  Speaker 1: thank you so much for joining us. Thank you, got
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  Speaker 1: to have you back soon. He's CEO Global Structure Products
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  Speaker 1: and Alternative Investment Services where B and mind Melon and
• 10:51
  Speaker 1: of course we are broadcasting Live and Invested sixteen the
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  Speaker 1: Power of Big Ideas. It's a B and mind Melon
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  Speaker 1: about thirty miles from Tucson, Arizona. Movers and shakers coming up.
• 11:04
  Speaker 1: Market's about ready to close our stocks there. Dave Wilson
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  Speaker 1: will be joining us this is taking stock on Globrig radio. Yeah.