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Jason Schwarz Discusses Asset Management (Podcast) · Masters in Business

• 0:02
  Speaker 1: This is Master's in Business with Barry Ridholts on Bloomberg Radio.
• 0:07
  Speaker 1: This week on the podcast, I have a special guest.
• 0:09
  Speaker 1: His name is Jason Schwartz, and he is the president
• 0:13
  Speaker 1: of Wilshire Funds Management and Wilshire Analytics, a company that
• 0:17
  Speaker 1: has been around since ninety two and is perhaps best
• 0:21
  Speaker 1: known for its famous index, the Wilshire five thousand, really
• 0:26
  Speaker 1: the first total market index that existed. Wilsher is a
• 0:32
  Speaker 1: fairly substantial company that advises on a ton of assets
• 0:35
  Speaker 1: and manages a decent sum of assets themselves. But they
• 0:39
  Speaker 1: are a far more interesting and complicated firm that I
• 0:44
  Speaker 1: had any idea prior to doing some research for this conversation. Uh.
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  Speaker 1: They are involved in all sorts of really fascinating things,
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  Speaker 1: and I think the average person or even the person
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  Speaker 1: who works in finance may not really be all that
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  Speaker 1: familiar uh with what Wilshire actually does. And I found
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  Speaker 1: this conversation to be quite fascinating. So, with no further ado,
• 1:09
  Speaker 1: my interview of Jason Schwartz of will Share fund Management.
• 1:16
  Speaker 1: My special guest this week is Jason Schwartz. He is
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  Speaker 1: the president of Wilshire Funds Management and will Share Analytics,
• 1:23
  Speaker 1: where he has worked since two thousand and five. He
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  Speaker 1: has an A bian government from Hamilton College and an
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  Speaker 1: MBA from the Marshall School of Business at USC. Will
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  Speaker 1: Shire is probably best known for the Wilshire five thousand
• 1:37
  Speaker 1: stock index. They advise on approximately a trillion dollars in
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  Speaker 1: institutional assets, another hundred and eighty billion dollars in broker
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  Speaker 1: dealer and r i A assets, and their mutual fund
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  Speaker 1: and other related businesses have approximately fifty billion dollars in
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  Speaker 1: assets under management. Jason Schwartz, Welcome to Bloomberg. Thanks very
• 2:00
  Speaker 1: great to be here. Um So, I was really fascinated
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  Speaker 1: about talking to you because, like many people, I'm familiar
• 2:08
  Speaker 1: with Willshire due to the five thousand index, and we'll
• 2:11
  Speaker 1: get into that index a little later. But as I
• 2:14
  Speaker 1: was doing a little reading about the farm before our conversation,
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  Speaker 1: I was really astonished at the history, the various business
• 2:24
  Speaker 1: lines you you guys have. It's it's really a fascinating company.
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  Speaker 1: Tell us a little bit about your background and how
• 2:31
  Speaker 1: did you find your way to Wilshire. Sure so, um
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  Speaker 1: I uh, I grew up here in New York and
• 2:40
  Speaker 1: you know it was was exposed to finance, um investment management.
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  Speaker 1: I had an early kind of internship at at an
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  Speaker 1: R I a a multi family office here that was
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  Speaker 1: engaged in some you know, manager research, manager selection activities.
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  Speaker 1: So I had a bit of a uh some early
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  Speaker 1: exposure to to that, you know, being able to sit
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  Speaker 1: across the tabble from uh you know, portfolio managers and
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  Speaker 1: investment managers and really really interesting um. But I, you know,
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  Speaker 1: like a lot of young people, I I sort of
• 3:10
  Speaker 1: had a number of um uh you know, career experiences
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  Speaker 1: in my twenties before I went to business school. I
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  Speaker 1: did a little bit of sales and marketing, a little
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  Speaker 1: bit of technology, a little bit of finance, and I
• 3:21
  Speaker 1: got to business school. Uh and I and I chose
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  Speaker 1: to go to uh spend two years in southern California
• 3:29
  Speaker 1: at USC not nothing worse weather in the world, you know,
• 3:32
  Speaker 1: and and it you know, as a twenty six year
• 3:34
  Speaker 1: old it it seemed like a nice place to to
• 3:36
  Speaker 1: park for a couple of years. But uh, you know,
• 3:38
  Speaker 1: as a as a you know, as a New Yorker,
• 3:40
  Speaker 1: I would then you know, immediately return right. It was
• 3:43
  Speaker 1: not a place to stay. Um and you know, after
• 3:45
  Speaker 1: about three months, uh there felt like, um, you know,
• 3:50
  Speaker 1: this place certainly isn't isn't so bad? And and I'll
• 3:53
  Speaker 1: say that's really where um we all have sort of
• 3:56
  Speaker 1: pivotal moments. And and I was uh started business school
• 4:00
  Speaker 1: in two thousand and one, right, so post kind of
• 4:02
  Speaker 1: dot com bubble, and uh, you know, job market was
• 4:05
  Speaker 1: still was still tough, and you know, after business school,
• 4:09
  Speaker 1: I just needed a job, right And and was um,
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  Speaker 1: I think like a lot of young people, was you know,
• 4:16
  Speaker 1: cast a wide net and wash you know, looking for jobs.
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  Speaker 1: I would say not necessarily in in my areas of passion,
• 4:23
  Speaker 1: per se um and and and um. In my second
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  Speaker 1: year of business school, Barry we uh I was I
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  Speaker 1: was part of this um seminar and applied portfolio management,
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  Speaker 1: which allowed us to kind of manage a portion of
• 4:35
  Speaker 1: the school's endowment and really get kind of a taste
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  Speaker 1: for for managing assets, managing money. And as part of that,
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  Speaker 1: we were able to visit a number of of different
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  Speaker 1: investment organizations up and down the West Coast. And one
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  Speaker 1: of the firms that we met was Dimensional Fund Advisors
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  Speaker 1: d f A, which if you've ever been to their
• 4:53
  Speaker 1: office in Santa Monica, they had at the time they
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  Speaker 1: had the top uh two floors of this gorgeous ability
• 5:00
  Speaker 1: looking right out at the ocean, and we're being hosted
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  Speaker 1: by a number of folks at at at d f A,
• 5:05
  Speaker 1: and there's maybe ten of us, and we're sitting in
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  Speaker 1: this boardroom looking out over the ocean. It's maybe eighty degrees.
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  Speaker 1: The beach is packed with spectacular And I reached to
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  Speaker 1: my friend who's sitting next to me, Craig Greenwald, and
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  Speaker 1: I said, Craig, I don't care what I do. I
• 5:21
  Speaker 1: just want to work in this building. And so, you know,
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  Speaker 1: flash forward two years. I was working as a management
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  Speaker 1: consultant because I just needed a job after business school
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  Speaker 1: and that seemed like a respectable thing to do. And um,
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  Speaker 1: I was still, you know, sending out resumes and uh,
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  Speaker 1: two years after business school, I you know, i'd probably
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  Speaker 1: sent Wilshire um a bunch of resumes. Had done some
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  Speaker 1: research and it turned out willsher was in the same
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  Speaker 1: building as d f A and so and so is
• 5:50
  Speaker 1: that where you were still working or has the headquarters
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  Speaker 1: since moved? We are still there, and so you get
• 5:55
  Speaker 1: you get that actual view that you were every single
• 5:58
  Speaker 1: moving for. And I'm more impressed that USC actually gave
• 6:03
  Speaker 1: their NBA students part of the endowments and run How
• 6:06
  Speaker 1: how did that work out? That was great? I mean
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  Speaker 1: that was you know, I UM owe a huge debt
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  Speaker 1: of gratitude to that program and the UM professor Supin
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  Speaker 1: cou who worked with us. It was a great, a
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  Speaker 1: great opportunity and UM we we were divided into a
• 6:24
  Speaker 1: few different teams. UM there was like a MidCap group,
• 6:27
  Speaker 1: there was a large cap group. You know, some folks
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  Speaker 1: in the community had had donated money for us to
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  Speaker 1: UM you know, kind of mess around with an experiment
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  Speaker 1: with you mean, separate from the usual alumni donation to
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  Speaker 1: the foundation. A separate pool of money was raised for
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  Speaker 1: this is for the NBA students to sort of get
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  Speaker 1: their feet wet correct managing real asset. That's right, that's wow,
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  Speaker 1: that's fast. What was the performance like? Oh man, it
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  Speaker 1: was you know, that's a long time ago Thererea's I
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  Speaker 1: would say that was not an easy period to be
• 6:58
  Speaker 1: an investor, right after the dot COM's, right before the
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  Speaker 1: financial core certainly, right, I mean it was it was
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  Speaker 1: you know, we were still we had all through the nineties, right,
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  Speaker 1: were raised on you know, go go growth stocks and technology,
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  Speaker 1: and so it was a completely different you know, paradigm shift. Uh.
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  Speaker 1: You know, value was was obviously doing well, um, but
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  Speaker 1: small caps and growth were not. You know. But what
• 7:21
  Speaker 1: was interesting is is for me, UM, it brought to
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  Speaker 1: the forefront the different roles really within investment organizations. And
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  Speaker 1: so interestingly, I, you know, had at that point developed
• 7:32
  Speaker 1: a facility with numbers and was you know, kind of
• 7:33
  Speaker 1: studying the space and and all of the you know,
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  Speaker 1: modern portfolio theory and uh, but I, you know, had
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  Speaker 1: realized that where my passion really um was at at
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  Speaker 1: that point was was not so much being an analyst
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  Speaker 1: in the trenches with the numbers every day all day.
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  Speaker 1: But but if I could, gosh, if I could get
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  Speaker 1: a role that allowed me to engage with clients and
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  Speaker 1: and and do some of the other things related to
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  Speaker 1: working in this industry, wouldn't that be great. Let's talk
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  Speaker 1: a little bit about the product you're probably best known for,
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  Speaker 1: the Wilshire five thousand, which contains these days about thirty
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  Speaker 1: five hundred stocks. Is that right? Why doesn't the Wilshire
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  Speaker 1: five thousand have five thousand stocks? So, um, you're you're
• 8:19
  Speaker 1: correct that there's just under thirty five hundred stocks today
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  Speaker 1: in the Wilshire five thousand. UH. The Wilshire five thousand
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  Speaker 1: was UM created in nineteen seventy four, and at the
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  Speaker 1: time it was the first really broad based measurement of
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  Speaker 1: the US equity market. And still today when people refer
• 8:38
  Speaker 1: to the total you know, US stock market, they're often
• 8:42
  Speaker 1: referencing the Wilshire five thousand. So UM, you know, it
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  Speaker 1: was a really important innovation for US, UH dating back
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  Speaker 1: to the to the seventies. And and the reason um
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  Speaker 1: there was roughly five thousand securities when the Wilshire five
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  Speaker 1: thousand was launched. UH, the peak was UM as you
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  Speaker 1: probably know about seventy five hundred securities UH in right,
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  Speaker 1: So that was you know, in an environment where companies
• 9:07
  Speaker 1: were racing to go public right to say the least,
• 9:11
  Speaker 1: to say the least, and so uh you know, post
• 9:14
  Speaker 1: dot Com crash, there were a number of de listings.
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  Speaker 1: There were companies that clearly went out of business, so
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  Speaker 1: that dramatically lowered the count delistings. A lot of listed
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  Speaker 1: stocks ended up going pink sheets and boarding boards, and
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  Speaker 1: especially the micro I think there was some thousand or
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  Speaker 1: two thousand microcaps that fell off fell off the radar,
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  Speaker 1: So there really aren't five thousand investable companies to put
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  Speaker 1: in the in the five thousand even if you wanted
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  Speaker 1: to write and I think the other the other. Um.
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  Speaker 1: You know, key theme in today's environment really is around
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  Speaker 1: private capital, right, so companies are staying private for longer
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  Speaker 1: UM and are able to do so without needing to
• 9:56
  Speaker 1: go to the public equity markets to raise capital. So
• 9:58
  Speaker 1: so there is you know, the the I p O
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  Speaker 1: environment has not been what it was in the nineties,
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  Speaker 1: and so therefore there are roughly publicly traded securities today.
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  Speaker 1: Look at look at companies like uber and we Works
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  Speaker 1: and giant multibillion dollar firms years ago, they never would
• 10:15
  Speaker 1: have been able to get that large, to say the least.
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  Speaker 1: So so let's talk a little bit about UM what
• 10:20
  Speaker 1: your assets look like and what the company actually does.
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  Speaker 1: So you have we were talking to all, you have
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  Speaker 1: about a hundred and eighty billion dollars in assets under management.
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  Speaker 1: How does that break down? Is that stocks, bonds, non
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  Speaker 1: public assets? That what's the mix of that? So UM
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  Speaker 1: we UM we have about a hundred eighty billion dollars
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  Speaker 1: in assets that we advise on for what we call
• 10:44
  Speaker 1: financial intermediaries, and these are organizations financial institutions that ultimately
• 10:48
  Speaker 1: serve individual investors. And so this this really for us,
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  Speaker 1: for for our organization, stems from the work that we've
• 10:54
  Speaker 1: done in the institutional space. So um, you know, we
• 10:58
  Speaker 1: talked about the Wilshore five thousand. The Wilshur's first decade
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  Speaker 1: in the nineteen seventies was really as a as one
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  Speaker 1: of the early pioneers in applying technology to solve investment
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  Speaker 1: management problems, and so um, the WISH five. I have
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  Speaker 1: to interrupt you at this point and point out that
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  Speaker 1: your founder is literally a rocket scientist who was that
• 11:19
  Speaker 1: JPL before forming Uh will shure that's right, Yeah, that's right.
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  Speaker 1: So that's that is a really important it's a great story,
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  Speaker 1: but it's also a really important part of our heritage.
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  Speaker 1: So Dennis Tito, Uh Wilshre's founder, currently our our chairman
• 11:34
  Speaker 1: and CEO, still active in the business. Uh was a
• 11:37
  Speaker 1: JPL and was was an aerospace engineer. And this was
• 11:40
  Speaker 1: at a time where the most powerful computer technology, UH
• 11:43
  Speaker 1: was resident NASA JPL where they were, you know, trying
• 11:47
  Speaker 1: to figure out how to how to program the trajectory
• 11:50
  Speaker 1: of of unmanned spacecraft. And so as the space race
• 11:53
  Speaker 1: was winding down and that was really Dennis's calling. He
• 11:56
  Speaker 1: was called to, uh to participate in that um so
• 12:00
  Speaker 1: late sixties, early seventies, Dennis was was thinking about how
• 12:02
  Speaker 1: to transition and and you know, ultimately how to make
• 12:05
  Speaker 1: some money and and really recognized at an early point
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  Speaker 1: that intersection of investment technology UM or information technology and
• 12:14
  Speaker 1: and finance. And so the first product that Wilshare launched
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  Speaker 1: in nineteen seventy two was was one of the first
• 12:20
  Speaker 1: commercially viable ways to calculate an equity beta. And so
• 12:23
  Speaker 1: that was nine seventy two. And take you for granted,
• 12:26
  Speaker 1: you could do the log onto a Bloomberg or even
• 12:28
  Speaker 1: use a website and generate half the data points. We
• 12:34
  Speaker 1: just take for granted that didn't exist back and this
• 12:36
  Speaker 1: was the stuff of I mean, this predates me um uh.
• 12:39
  Speaker 1: This was the stuff of slide rules and and and
• 12:42
  Speaker 1: you know really sort of you know, uh, hard computational
• 12:46
  Speaker 1: math and so applying really strong math to solve investment challenges.
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  Speaker 1: Um So, the first you know, commercially viable way to
• 12:55
  Speaker 1: measure an equity beta, which became our kind of multi
• 12:58
  Speaker 1: factor risk attribution model which exist today. By the way,
• 13:00
  Speaker 1: multi factor attribution risk model. Right, so you're trying to
• 13:04
  Speaker 1: figure out what is it it is that's actually driving
• 13:07
  Speaker 1: a market's gains? How do you attribute that to to
• 13:10
  Speaker 1: what specific elements? In fact, that's exactly right. So if
• 13:13
  Speaker 1: you are able to decompose a manager's return into its
• 13:16
  Speaker 1: component pieces and isolate, you know, all sorts of different factors, um,
• 13:21
  Speaker 1: you can basically separate was this manager good at picking
• 13:25
  Speaker 1: stocks or was this manager Benett fitting from an overweight
• 13:28
  Speaker 1: to energy or technology or momentum or certain just really
• 13:33
  Speaker 1: leveraging up and taking a lot of risks or a
• 13:35
  Speaker 1: lot of right. So so it's it's for us the
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  Speaker 1: essence ultimately of investment management. And we talk about how
• 13:41
  Speaker 1: we got there starts with with the foundation and risk management,
• 13:44
  Speaker 1: and so those tools didn't exist, so will surebuild them
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  Speaker 1: through the seventies and you know other tools like UM.
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  Speaker 1: You know, one of the first asset liability models for
• 13:53
  Speaker 1: pension funds in order to match the future liabilities and
• 13:56
  Speaker 1: obligations to their current portfolio. Is that that's exactly what'sing
• 14:00
  Speaker 1: that all these things we take for granted did not
• 14:02
  Speaker 1: exist at one point in time, and not a hundred
• 14:05
  Speaker 1: years ago. We're talking thirty five years. That's right, and
• 14:09
  Speaker 1: and and and the pace of change continues to be
• 14:12
  Speaker 1: you know, rapid, but as much as uh, the business
• 14:14
  Speaker 1: has changed clearly um, you know, risk and the ability
• 14:18
  Speaker 1: to measure UM and present that information is critically important.
• 14:22
  Speaker 1: So this was this was Wilshur's first decade and was
• 14:25
  Speaker 1: you know, really known as a as a pioneering provider
• 14:28
  Speaker 1: of these types of risk applications. In one we we
• 14:32
  Speaker 1: launched one of the first full service US consulting businesses.
• 14:36
  Speaker 1: And and the goal here was to not just provide tools,
• 14:39
  Speaker 1: but to provide advice to pension funds and foundations and
• 14:44
  Speaker 1: endowments to help them apply some of these tools, asset
• 14:48
  Speaker 1: liability management, to create acid allocation policies, to help them
• 14:53
  Speaker 1: select managers, to help them build their portfolios. UM. And
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  Speaker 1: So this is this, this is when you think of UM,
• 15:01
  Speaker 1: the work that investment consultants do in helping pension funds
• 15:05
  Speaker 1: uh you know, create uh you know investment programs designed
• 15:10
  Speaker 1: to serve their participants really in perpetuity. Wilshire has been
• 15:15
  Speaker 1: at the forefront of that business for UM for almost
• 15:18
  Speaker 1: three decades. Wow, quite fascinating. Let's talk a little bit
• 15:21
  Speaker 1: about how the business has changed at will Share over
• 15:25
  Speaker 1: the past, um a couple of decades. You've been there
• 15:29
  Speaker 1: for fifteen years. You've certainly seen a lot of changes.
• 15:33
  Speaker 1: And we were discussing previously how the firm just really
• 15:37
  Speaker 1: began as a technology and analytics company. How has the
• 15:41
  Speaker 1: past decade or two changed your business model? Sure? Well,
• 15:45
  Speaker 1: I I joined Wilshare in two thousand five into what
• 15:49
  Speaker 1: was at the time of relatively new, um new business
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  Speaker 1: that Wilsher had created called Wilshire Funds Management and UM,
• 15:58
  Speaker 1: you know, this was in its early days, and that
• 16:00
  Speaker 1: the idea behind Wilsher Funds Management was to take the
• 16:02
  Speaker 1: firm's institutional expertise, it's risk management capabilities and provide investment
• 16:08
  Speaker 1: advisory solutions designed really for financial advisors and their individual
• 16:12
  Speaker 1: investor clients. And so UM, you know, our first clients
• 16:17
  Speaker 1: at at the time and we only had a handful
• 16:19
  Speaker 1: were insurance companies, UM and some broker dealers that we're
• 16:24
  Speaker 1: looking for the same types of multi asset, multi manager
• 16:28
  Speaker 1: kind of risk managed solutions that that you know, our
• 16:31
  Speaker 1: pension fund clients were were able to to, you know,
• 16:34
  Speaker 1: to have. So that means not just going out and
• 16:36
  Speaker 1: buying a mutual fund. But having access to a suite
• 16:39
  Speaker 1: of different different managers and different asset classes, is that right? Right?
• 16:44
  Speaker 1: So it's it's you know, when we look at the
• 16:46
  Speaker 1: things that institutional investors UM do well, and they tend
• 16:50
  Speaker 1: to invest in a lot of things, a lot of
• 16:52
  Speaker 1: asset classes, right, they own a lot of asset classes.
• 16:54
  Speaker 1: They're highly diversified. UM. They typically implement those views with
• 16:58
  Speaker 1: managers UM also now increasingly you know, passive components of
• 17:03
  Speaker 1: those portfolios UM, and they blend everything together in a
• 17:07
  Speaker 1: way that's designed to to really optimize a particular outcome.
• 17:10
  Speaker 1: Financial advisors, you know, in many cases and most cases
• 17:13
  Speaker 1: are doing the same thing. Uh, certainly those that are
• 17:16
  Speaker 1: using funds or fund products or ETFs to build portfolios.
• 17:20
  Speaker 1: And so you know, the market has been shifting to UM.
• 17:24
  Speaker 1: You know that of of more of an advice embedded model,
• 17:26
  Speaker 1: and Will Shure has been able to participate in that,
• 17:29
  Speaker 1: and so I you know, it's fortuitous the timing of
• 17:31
  Speaker 1: when I joined the firm. But you know, over the
• 17:34
  Speaker 1: last you know, decade or so, we've grown, you know, rapidly,
• 17:38
  Speaker 1: UM as one of the you know, premier providers of
• 17:41
  Speaker 1: these types of services to the intermediary market. So let
• 17:45
  Speaker 1: me ask you about a division that caught my eye
• 17:47
  Speaker 1: when I was doing a little homework. What is the
• 17:49
  Speaker 1: Wilshire Segregated Portfolio Companies. Right, so these are, um, these
• 17:55
  Speaker 1: are at a fancy name for our Cayman hedge fund
• 17:58
  Speaker 1: platform and so these are you know, this is a
• 18:03
  Speaker 1: platform that was created actually in two thousand and five,
• 18:08
  Speaker 1: right around the time that I joined. At the time
• 18:09
  Speaker 1: it was created, there was this this belief that still
• 18:12
  Speaker 1: exists in some respects today that that you know, if
• 18:15
  Speaker 1: you're able to, you want to hire a hedge fund, right,
• 18:17
  Speaker 1: you want that that hedge funds trading prowess, You want
• 18:21
  Speaker 1: their exceptional ability to uh to to buy securities and
• 18:25
  Speaker 1: generate performance. But um, you know, many people may be
• 18:29
  Speaker 1: uncomfortable with the operational risk that comes with that, the
• 18:32
  Speaker 1: fact that, uh you know, you don't have a lot
• 18:35
  Speaker 1: of transparency or control over those assets. Necessarily you're just
• 18:38
  Speaker 1: a an investor in an LP. And how do you
• 18:40
  Speaker 1: pick out of the eleven thousand funds and pick out
• 18:43
  Speaker 1: of the eleven thousand So we set out to solve
• 18:45
  Speaker 1: that in two ways, one of which was structural, where
• 18:47
  Speaker 1: if we could essentially just have the hedge fund manager
• 18:50
  Speaker 1: run a separate account right where they just have trading authority,
• 18:52
  Speaker 1: but will share controls the counterparty relationships, etcetera. UM and
• 18:57
  Speaker 1: will share as a fiduciary. Right, would would vide a
• 19:00
  Speaker 1: level of of you know, trust to the market, to
• 19:02
  Speaker 1: our clients. And then the other you know element of
• 19:05
  Speaker 1: that is if we could identify you know, highly skilled
• 19:08
  Speaker 1: investment managers using our research platform, using the fact that
• 19:12
  Speaker 1: we you know obviously are engaged in a lot of
• 19:14
  Speaker 1: these activities for you know, a trillion dollars in assets.
• 19:17
  Speaker 1: We have a combination of buying power we have we
• 19:20
  Speaker 1: think the ability to separate you know, skill from luck, etcetera.
• 19:23
  Speaker 1: So and a pretty big network, Uh contain their ind
• 19:27
  Speaker 1: correct you guys do something similar on the private equity side,
• 19:30
  Speaker 1: you break it out separately or is it all part
• 19:31
  Speaker 1: of the same platform. So that's a different that's a
• 19:33
  Speaker 1: different business unit wills for private markets UM and and
• 19:36
  Speaker 1: you know, similar in the sense that that that businesses
• 19:39
  Speaker 1: is you know today looks much like a private equity
• 19:42
  Speaker 1: asset manager. UM you know started out as as building
• 19:46
  Speaker 1: customized fund of funds for for institutional investors and today uh,
• 19:50
  Speaker 1: you know, has a large array of a fund of
• 19:53
  Speaker 1: funds increasingly customized advisory work in the private markets. Uh
• 19:58
  Speaker 1: makes sense. I've been racking my brain trying to figure
• 20:02
  Speaker 1: out who a competitor tools sure is and I can't
• 20:06
  Speaker 1: really think of anybody. I mean maybe S and P,
• 20:09
  Speaker 1: but even them, it's not really the same. Like who
• 20:12
  Speaker 1: do you look at as actual competitors, if anybody? Right, So,
• 20:17
  Speaker 1: I think you have to look at the different components
• 20:19
  Speaker 1: of our business business, which you know, as you've noted,
• 20:22
  Speaker 1: is broad based. You know, look on the consulting side
• 20:25
  Speaker 1: of our business. UM, a lot of you know, large
• 20:28
  Speaker 1: fortuitous competitors there, the the you know, the the Towers,
• 20:32
  Speaker 1: the AONs um, the mercers of the world. Uh, you know,
• 20:37
  Speaker 1: as well as a number of mid market players you
• 20:40
  Speaker 1: know in the work that we do. UM in the
• 20:43
  Speaker 1: financial intermediary market. UM. You know morning Star is a
• 20:47
  Speaker 1: you know, a formidable competitor obviously as a great brand
• 20:51
  Speaker 1: in the retail advisor community. UM, you know, certainly on
• 20:56
  Speaker 1: the index side of our business, right uh. Uh you
• 20:59
  Speaker 1: know foot see M, S, C, I, SMP. On the
• 21:02
  Speaker 1: private market side, probably firms like Hamilton, Lane and and others. So,
• 21:05
  Speaker 1: so you know, because we don't do one thing we have, um,
• 21:09
  Speaker 1: which I think is a great strength. Um. You know,
• 21:12
  Speaker 1: we compete with different people in different parts of the market.
• 21:14
  Speaker 1: Makes sense. You know. Earlier we were discussing Dennis Tito,
• 21:19
  Speaker 1: whose background was astronautics and aeronautics and uh, he also
• 21:26
  Speaker 1: is somewhat famous for being the world's first paying space tourist.
• 21:30
  Speaker 1: He went up to the was it the International Space Station?
• 21:33
  Speaker 1: Is that right? Um? So given that background, how did
• 21:37
  Speaker 1: that impact how will Shure developed? Was that significant or
• 21:42
  Speaker 1: just an interesting footnote? Yeah? I mean I think we
• 21:47
  Speaker 1: it's consistent with our you know, our heritage. UM. And Dennis, uh,
• 21:53
  Speaker 1: you know, this was this was his passion early in
• 21:57
  Speaker 1: his career and um, you know, had an opportunity. It's
• 22:01
  Speaker 1: actually a remarkable story of persistence. UM, because you know,
• 22:06
  Speaker 1: it was a difficult thing to do. He was I
• 22:08
  Speaker 1: think at the time, the oldest Uh. I think it
• 22:11
  Speaker 1: might have been the oldest person. He's gonna kill me
• 22:13
  Speaker 1: for saying this, but the oldest person um launched into
• 22:16
  Speaker 1: launched into space, let alone as a as a civilian. Uh.
• 22:19
  Speaker 1: He had to train you know for six months in
• 22:22
  Speaker 1: in in in Russia, where they you know, really tried
• 22:24
  Speaker 1: to get him to drop out. Um, and you know,
• 22:27
  Speaker 1: and will we tell the way we tell the story is,
• 22:30
  Speaker 1: you know, this is a guy who's has been focused
• 22:31
  Speaker 1: on risk management his whole career. You know, My understanding
• 22:34
  Speaker 1: of the way that the payment of structed was structured was,
• 22:37
  Speaker 1: you know, there was you know, a certain amount to
• 22:39
  Speaker 1: pay him up, bring him up to space, and then uh,
• 22:42
  Speaker 1: you know, a larger amount to bring him back down.
• 22:44
  Speaker 1: Another words, create an incentive to keep him alive. That's
• 22:47
  Speaker 1: exactly right, That's very that's very, very funny. So we
• 22:50
  Speaker 1: were we were discussing, Um, I'm gonna say that again.
• 22:54
  Speaker 1: So the firm was pretty early in the world of
• 22:57
  Speaker 1: index is the wilsh for five thousand and seventy war
• 23:00
  Speaker 1: I think that was the year Van Guard launched. So
• 23:02
  Speaker 1: you were right there at the beginning of uh the indusseries.
• 23:07
  Speaker 1: Back then, most indexes were used as benchmarks. Now they're
• 23:12
  Speaker 1: really used as investment vehicles. How has that affected, uh,
• 23:17
  Speaker 1: the world of investing and how has it affected your firm? Sure, well,
• 23:22
  Speaker 1: it's you know, for as a manufacturer of of indexes,
• 23:24
  Speaker 1: it's it's certainly an economic opportunity. I think you know
• 23:28
  Speaker 1: what started out as you know, indexes as benchmarks as
• 23:30
  Speaker 1: you as you know it is as really uh blossomed
• 23:33
  Speaker 1: or skyrocketed into is a great proliferation of indexes UM,
• 23:39
  Speaker 1: you know, and part of that is because you know,
• 23:41
  Speaker 1: asset managers are looking for very discrete ways of measuring
• 23:44
  Speaker 1: their performance and in some cases, you know, looking for
• 23:47
  Speaker 1: ways to to tell a story against a benchmark. Let's
• 23:50
  Speaker 1: just get a better benchmark or different benchmark UM, which
• 23:53
  Speaker 1: which you know, I think is is I would say,
• 23:55
  Speaker 1: isn't uh not a particularly healthy part of the industry.
• 23:59
  Speaker 1: But I think the their element which has been you know,
• 24:01
  Speaker 1: good for our business UM and those that are that
• 24:04
  Speaker 1: are able to you know, as a as a branded
• 24:07
  Speaker 1: entity create indexes is you know, you have all this
• 24:10
  Speaker 1: this intellectual property, You've got these smart people, You've got
• 24:13
  Speaker 1: these quants, right and now increasingly with you know, factor
• 24:16
  Speaker 1: based you know, quantitative strategies UM, one can create UM
• 24:23
  Speaker 1: you know, investment ideas, right, and so the pace of
• 24:25
  Speaker 1: innovation around investment ideas, which can then be translated into
• 24:28
  Speaker 1: an index right, which can then be licensed to a
• 24:31
  Speaker 1: manufacturer and et F firm to package that license package
• 24:36
  Speaker 1: that that index UM and deliver that to the marketplace.
• 24:40
  Speaker 1: Is you know, is creating another wave of of uh
• 24:43
  Speaker 1: you know, product growth. And that's everything. That's everything from
• 24:46
  Speaker 1: smart data to factor based investing too, E s G too,
• 24:50
  Speaker 1: pretty much you name it. There's an index for there's
• 24:52
  Speaker 1: an index underlying that strategy. Um, there's a crypto index
• 24:56
  Speaker 1: coming out, there's a weed index coming out. I mean
• 24:59
  Speaker 1: it's it's astonishing if you could come up with an
• 25:02
  Speaker 1: investing style someone either has or is about to make
• 25:07
  Speaker 1: an index. Is that a growth opportunity or are we
• 25:10
  Speaker 1: now over indexed? Well? I think um, uh, probably both.
• 25:14
  Speaker 1: I mean it's a huge opportunity for us. Um we're
• 25:17
  Speaker 1: participating in that. I think, you know, for us, it's
• 25:20
  Speaker 1: it's where can we bring great ideas with with partners um,
• 25:25
  Speaker 1: you know, not in a desire to just just flood
• 25:28
  Speaker 1: the market with with product, but it's a great way
• 25:30
  Speaker 1: to uh you know, we think bring new innovative concepts
• 25:34
  Speaker 1: to the marketplace. But but yeah, I mean I read
• 25:37
  Speaker 1: there was a study recently that that looked at the
• 25:40
  Speaker 1: number of indexes relative to total listed stocks and it
• 25:43
  Speaker 1: was like, you know, like there's something like four times
• 25:45
  Speaker 1: the amount of indexes as there are just global stocks. Right,
• 25:50
  Speaker 1: so there is clearly this vast proliferation of indexes um
• 25:54
  Speaker 1: you know, and and you know, we could also ask
• 25:56
  Speaker 1: the question of, you know, does the does the market
• 25:59
  Speaker 1: need you know, to we're three thousand ETFs and I
• 26:01
  Speaker 1: think the answer to that is probably no. There's a
• 26:04
  Speaker 1: there's a real Darwinian battle for survival. And when we
• 26:08
  Speaker 1: look at the distribution of assets and e t f s,
• 26:11
  Speaker 1: it's very much a fat head long tail sort of
• 26:14
  Speaker 1: there's a handful of winners, it's black Rock, Vanguard and
• 26:18
  Speaker 1: then pulling up at the number three State Street and
• 26:21
  Speaker 1: then everybody else. Our our index is more or less
• 26:25
  Speaker 1: the same way as it a handful of big winners
• 26:27
  Speaker 1: and then a thousand also rounds, right. I think in
• 26:29
  Speaker 1: the beta space that's correct, Berry, I think you know
• 26:33
  Speaker 1: the beta race has has has essentially is it's that's
• 26:37
  Speaker 1: pretty much correct. And and you know and and uh
• 26:40
  Speaker 1: I shares and and and Vanguard and um you know
• 26:43
  Speaker 1: now Schwab and you know, a select few really own
• 26:46
  Speaker 1: and own that market, right and and you know what
• 26:48
  Speaker 1: is the what are the prices for you know, broad
• 26:51
  Speaker 1: market beta it's you know, increasingly free, right. But I
• 26:56
  Speaker 1: think that the market for UM, you know, value add strategies,
• 27:02
  Speaker 1: for more niche strategies, for for strategies that are designed
• 27:05
  Speaker 1: to provide differential types of exposure, is still strong, and
• 27:11
  Speaker 1: you know, ideas that can be packaged into solutions, not
• 27:15
  Speaker 1: just you know, beta market beta per se um. You know,
• 27:18
  Speaker 1: I think the market for that will continue to be strong,
• 27:21
  Speaker 1: and great ideas will always have a place in investor portfolios.
• 27:25
  Speaker 1: So so let's talk a little bit about indexing and
• 27:28
  Speaker 1: passive and I would be remiss if I did not
• 27:31
  Speaker 1: bring up the so called robo advisors or algorithmic asset allocations.
• 27:36
  Speaker 1: How does that fit into the Wilshire worldview? Are these
• 27:41
  Speaker 1: potential clients? Are they competitors? Are they just hey, here's
• 27:45
  Speaker 1: a cheap way to probably do it better than you're
• 27:47
  Speaker 1: gonna do it yourself. What's your view on that on robos?
• 27:53
  Speaker 1: You know, I think, um, look, I mean, I think
• 27:57
  Speaker 1: there's a number of things here. I think if you
• 27:58
  Speaker 1: if you think about the way in which um, you know,
• 28:02
  Speaker 1: in some respect, asset managers engage with the market, it's
• 28:05
  Speaker 1: it's archaic in the sense that most asset managers don't
• 28:09
  Speaker 1: actually communicate directly with their clients, right they that makes sense, right,
• 28:15
  Speaker 1: and so so I think there's this opportunity which we're seeing,
• 28:19
  Speaker 1: you know, a level of disruption where you've got this
• 28:22
  Speaker 1: really what is a direct to consumer model? Right? So, Um,
• 28:26
  Speaker 1: which if we're talking about Van Gord or Swab for sure,
• 28:30
  Speaker 1: if you're talking about all the third party robots were
• 28:35
  Speaker 1: using State Street, Black Rock, Vangard, etcetera, they are the intermediary,
• 28:41
  Speaker 1: right but there but you know, we take like a
• 28:44
  Speaker 1: Better Men or a well Front or or some of
• 28:46
  Speaker 1: these firms. Um, it strikes me that they are you know,
• 28:50
  Speaker 1: in in many respects disintermediate and the traditional relationship between
• 28:54
  Speaker 1: a financial advisor and a financial advisor's client to some
• 28:58
  Speaker 1: to something. The question I've always won it about are
• 29:01
  Speaker 1: they pulling their clients from advisors or they pulling their
• 29:04
  Speaker 1: clients from previous do it yourselfers who kind of said
• 29:07
  Speaker 1: maybe I need a little help with this, and I
• 29:09
  Speaker 1: honestly don't know. I don't know either, and I think
• 29:11
  Speaker 1: I think probably both. I think, you know, maybe it's
• 29:14
  Speaker 1: similar to online banking, right, online banking and the thought
• 29:17
  Speaker 1: there would people no longer go to branches and um,
• 29:20
  Speaker 1: you know, self directed brokerage was going to put everybody
• 29:22
  Speaker 1: out of business. But but no, I mean there's there's
• 29:25
  Speaker 1: a level of self selection. I think. I think clients
• 29:27
  Speaker 1: will matriculate from a um, you know, from essentially a
• 29:33
  Speaker 1: self directed uh experience to a financial advisor. I think,
• 29:39
  Speaker 1: you know, uh, you know, as as one's needs become
• 29:44
  Speaker 1: more complex, more of the financial planning component becomes more relevant.
• 29:49
  Speaker 1: So you know, I see this as a as as
• 29:51
  Speaker 1: sort of an app as an application. I also, by
• 29:54
  Speaker 1: the way, when we think about millennials and how millennials
• 29:57
  Speaker 1: are going to consume investment advice, I I you know,
• 30:00
  Speaker 1: the notion of you know, when I was a kid
• 30:02
  Speaker 1: having dinner right around six or seven o'clock, the phone's ringing,
• 30:04
  Speaker 1: and it's like a you know, Smith Barney broker, right
• 30:07
  Speaker 1: and and so you know, our our kids gonna get
• 30:10
  Speaker 1: coal called by uh, you know, by a broker at
• 30:15
  Speaker 1: dinner time. They don't even have landlines. The last interesting
• 30:19
  Speaker 1: data point I saw on that was by next summer,
• 30:21
  Speaker 1: by the summer of half of the calls coming into
• 30:25
  Speaker 1: your mobile phone are going to be spam. So I
• 30:27
  Speaker 1: don't know if they're gonna be people pitching stock, but
• 30:30
  Speaker 1: I think that method of selling certainly has if not
• 30:34
  Speaker 1: disappeared fullen by the wayside to a large degree, and
• 30:38
  Speaker 1: was the last time anyone got a call from someone
• 30:40
  Speaker 1: pitching them you gotta buy this, I p O. I
• 30:43
  Speaker 1: don't think that's happened recently. We have been speaking with
• 30:47
  Speaker 1: Jason Schwartz, president of will Share Funds Management and will
• 30:50
  Speaker 1: Share Analytics. If you enjoy this conversation about all things
• 30:55
  Speaker 1: index analytics, fund management and institutional advisement, be sure and
• 31:00
  Speaker 1: come back and check out the podcast extras, where we
• 31:03
  Speaker 1: keep the tape rolling and continue discussing all of the above.
• 31:06
  Speaker 1: You can find that at Apple, iTunes, Overcast, Stitcher, Bloomberg
• 31:11
  Speaker 1: dot com, wherever finer podcasts are sold. Be sure and
• 31:15
  Speaker 1: check out my daily column that's at Bloomberg dot com.
• 31:18
  Speaker 1: You could follow me on Twitter at rid Halts. We
• 31:21
  Speaker 1: love your comments, feedback and suggestions right to us at
• 31:26
  Speaker 1: m IB podcast at Bloomberg dot net. I'm Barry rid Halts.
• 31:30
  Speaker 1: You're listening to Masters in Business on Bloomberg Radio. Welcome
• 31:41
  Speaker 1: to the podcast, Jason, thank you so much for doing this.
• 31:43
  Speaker 1: I've been looking forward to having this conversation for quite
• 31:47
  Speaker 1: a while. I'm sort of fascinated by what Wilsher does.
• 31:51
  Speaker 1: It really is a unique firm compared to just about
• 31:55
  Speaker 1: any other firm you want to put your your finger on.
• 32:00
  Speaker 1: You guys do a lot of different things across a
• 32:03
  Speaker 1: lot of different business lines. One business sector that I
• 32:07
  Speaker 1: didn't get to during the broadcast portion, but I have
• 32:11
  Speaker 1: to ask you about is and I know you don't
• 32:14
  Speaker 1: run this division, but I'm fascinated by it. The outsourced
• 32:19
  Speaker 1: chief Investment Officer or O c I. Oh what exactly
• 32:24
  Speaker 1: is that? Because I'm I'm somewhat familiar with it, but
• 32:26
  Speaker 1: probably not as much as I should be sure, So, UM,
• 32:30
  Speaker 1: the O c I O business model is UM essentially
• 32:35
  Speaker 1: calls for the discretionary management of and acid owners fund
• 32:40
  Speaker 1: more portfolio. And so so if I'm an R I
• 32:42
  Speaker 1: A and I have a chief investment officer, or I
• 32:45
  Speaker 1: don't have a chief investment officer, I could outsource that
• 32:49
  Speaker 1: that responsibility. Well, so O C I O is you,
• 32:52
  Speaker 1: as you reference in our consulting business provides this service.
• 32:55
  Speaker 1: UM is really resident within the institutional pension on foundation
• 33:01
  Speaker 1: and endowment community. And what what it refers to really
• 33:03
  Speaker 1: is is, you know the traditional way historically that that
• 33:06
  Speaker 1: pension funds have consumed investment advices through a consultant meeting
• 33:10
  Speaker 1: with an investment committee and board of trustees, generally providing
• 33:14
  Speaker 1: non discretionary advice. So the consultant would make recommendations and say,
• 33:17
  Speaker 1: I think we should be uh, you know, using these
• 33:20
  Speaker 1: managers and we'll do an asset liability study and and
• 33:22
  Speaker 1: we'll you know, construct this this really powerful acid allocation.
• 33:25
  Speaker 1: And then it's either followed or not. It's either followed
• 33:28
  Speaker 1: or not um And you know, so with that, the uh,
• 33:31
  Speaker 1: you know, the the asset owner has to have professional staff,
• 33:35
  Speaker 1: they have to have governance frameworks, they have to have meetings, etcetera.
• 33:38
  Speaker 1: And so with O C I oh, it's all right, consultant,
• 33:41
  Speaker 1: all right, wil Shure, here's a billion dollars. Do it
• 33:44
  Speaker 1: for me, right, you make the decisions, will set up
• 33:47
  Speaker 1: the frameworks, the governance. Uh you know, there'll be certain parameters.
• 33:50
  Speaker 1: But instead of you having to run all your recommendations
• 33:53
  Speaker 1: through us and we meet for you know, three months
• 33:55
  Speaker 1: six months and discuss, it's bring your best, you know,
• 33:58
  Speaker 1: your best thought leadership to bear, but under an environment
• 34:01
  Speaker 1: where you have discretion. And so basically that I'm guessing here,
• 34:07
  Speaker 1: is that really aimed at some of the smaller funds
• 34:09
  Speaker 1: that may not have the administrative and staff and the
• 34:14
  Speaker 1: resources to run a full ce I O office, and
• 34:18
  Speaker 1: with all the bells, whistles and analysts, et cetera, is
• 34:21
  Speaker 1: that the sweet spot of that. That's that's fair. I
• 34:24
  Speaker 1: mean there's been some some larger um you know, some
• 34:26
  Speaker 1: larger of O c IO engagements, but generally, I think
• 34:29
  Speaker 1: you're starting to see a pretty clear bifurcation, you know,
• 34:33
  Speaker 1: sub a billion dollars. I think it's getting increasingly difficult
• 34:36
  Speaker 1: to make that case for lots of overhead um, you know,
• 34:41
  Speaker 1: and increasingly we think the market's going to go more
• 34:43
  Speaker 1: O c I oh, sub one billion, you know, an
• 34:46
  Speaker 1: over over a billion. They'll be all sorts of different
• 34:48
  Speaker 1: levels of customization. And that's especially if again I'm guessing here,
• 34:52
  Speaker 1: but small endowments, small pension funds where there are future liabilities,
• 34:57
  Speaker 1: and if you have a big and expensive stay relative
• 35:01
  Speaker 1: to the size of the assets and the management, it
• 35:03
  Speaker 1: really could be a drig on long term returns. That's
• 35:05
  Speaker 1: absolutely right. It makes a lot of sense. I think
• 35:08
  Speaker 1: of ETFs is just a rapper that happens to be
• 35:11
  Speaker 1: tax advantaged versus traditional forty act mutual funds. Am I
• 35:17
  Speaker 1: grossly oversimplifying it? Or is that basically what E t
• 35:20
  Speaker 1: F s are? I think that's I think that's right. So,
• 35:24
  Speaker 1: so what does that mean in terms of you just
• 35:27
  Speaker 1: discussed intellectual property involved in managing and creating indexes. Are
• 35:33
  Speaker 1: we going to see more and more of those type
• 35:35
  Speaker 1: of indexes become et F s? Uh? What's the future
• 35:41
  Speaker 1: we we talked about a few thousand of them are
• 35:43
  Speaker 1: out there, not all of which are attracting assets. What
• 35:48
  Speaker 1: what's your view on the direction of the t F industry? Yeah,
• 35:51
  Speaker 1: I mean I think that they'll continue to be a
• 35:53
  Speaker 1: proliferation of of e t s. I think will continue
• 35:56
  Speaker 1: to see kind of a winner take all. Um. You know,
• 35:59
  Speaker 1: it's early on the beta side with more simplistic et
• 36:03
  Speaker 1: F s. Scale matters, you know, brand matters, but but
• 36:07
  Speaker 1: you know, the barriers to entry are are pretty low, right,
• 36:10
  Speaker 1: and and so I think you're you're going to continue
• 36:12
  Speaker 1: to see a lot of additional e t F s. Um,
• 36:15
  Speaker 1: You're also going to see more funds, right. I think
• 36:17
  Speaker 1: last year was was the first year that we uns. Yeah,
• 36:20
  Speaker 1: I think we're gonna see more more fun products to
• 36:23
  Speaker 1: mutual funds have just about a century of history. What
• 36:27
  Speaker 1: what does it look like going forward for them? We
• 36:30
  Speaker 1: think that the mutual funds will continue to exist. We're
• 36:34
  Speaker 1: seeing fees come down, We're seeing increasingly um, you know,
• 36:39
  Speaker 1: fees being stripped out of mutual funds. Uh, that trend
• 36:42
  Speaker 1: will continue. UM. You know E t f s are
• 36:45
  Speaker 1: are certainly helpful in that respect. UM. But you know,
• 36:48
  Speaker 1: I think we ask ourselves the bigger question of could
• 36:51
  Speaker 1: we offer personalized s m as for individuals? Right? So,
• 36:55
  Speaker 1: so instead of everybody's in a pool vehicle, uh, in
• 36:59
  Speaker 1: this mutual fund via coal, Um, maybe we get to
• 37:01
  Speaker 1: a point where technology will allow for for more mass customization,
• 37:05
  Speaker 1: so everybody gets their own kind of s m A UM.
• 37:08
  Speaker 1: And I think that is something that um, you know,
• 37:11
  Speaker 1: model delivery u m as. These are all sorts of
• 37:14
  Speaker 1: innovations that are kind of at the at the fringe here.
• 37:17
  Speaker 1: So someone says, I want the SMP five hundred, but
• 37:19
  Speaker 1: I don't want I don't want gunstocks, or I don't
• 37:22
  Speaker 1: want gambling stocks or whatever it happens to be. You
• 37:25
  Speaker 1: get the SMP minus whatever or plus whatever it is
• 37:29
  Speaker 1: you want. Is that what you mean by customers? Right?
• 37:31
  Speaker 1: And that exists today at the higher end of the market,
• 37:33
  Speaker 1: right where where a wealthy individual can have an investment
• 37:37
  Speaker 1: firm create a customized strategy, whether it's for for tax
• 37:40
  Speaker 1: planning purposes or for um, you know, stripping out certain
• 37:43
  Speaker 1: types of securities. UM. You know, E s G does
• 37:47
  Speaker 1: this right pretty well, pretty well. But I think that
• 37:50
  Speaker 1: the the ability to create those types of vehicles for
• 37:55
  Speaker 1: smaller accounts sizes will become increasingly a reality, which you know,
• 38:02
  Speaker 1: then calls into question the viability of the mutual fund
• 38:06
  Speaker 1: as really the kind of default package for many UH individuals.
• 38:12
  Speaker 1: Dave Nadig is UM managing director of ETF dot com,
• 38:16
  Speaker 1: which is owned by A. S BOW, and he is
• 38:19
  Speaker 1: a big believer in that exact approach. Everybody gets a
• 38:23
  Speaker 1: custom s m A because the technology has made what
• 38:28
  Speaker 1: used to be complicated in time consuming and expensive pretty
• 38:32
  Speaker 1: much a couple of lines of software and off you go.
• 38:36
  Speaker 1: I remain in unconvinced, but he and and you both
• 38:40
  Speaker 1: seem to be thinking along the same lines with that.
• 38:42
  Speaker 1: Is there really a big market for that today or
• 38:45
  Speaker 1: is that a future sort of sort of UM product
• 38:52
  Speaker 1: that people could customize if that's what they want. I'm
• 38:54
  Speaker 1: also thinking of things like motif where you could kind
• 38:58
  Speaker 1: of create a theme and it's very low cost to
• 39:01
  Speaker 1: do that. Yeah, I think it's I think it's in
• 39:04
  Speaker 1: the future. I think the look I think their structural
• 39:06
  Speaker 1: impediments to change in the traditional way in which investment
• 39:10
  Speaker 1: services are are distributed. It's why you don't see e
• 39:12
  Speaker 1: t fs on on d C menus. Right from a
• 39:15
  Speaker 1: record keeping standpoint, it's difficult. So I think they're they're
• 39:18
  Speaker 1: going to continue to be kind of institutional impediments to change.
• 39:22
  Speaker 1: But you know when we talk about robos and digital
• 39:24
  Speaker 1: advisors and and some of these new startups, you know
• 39:27
  Speaker 1: where you've got this sort of algorithmic way of creating
• 39:31
  Speaker 1: you know, high volume portfolios, highly customized portfolios, and we're
• 39:35
  Speaker 1: doing parts of this too. Um. I think we'll start
• 39:39
  Speaker 1: to get there, but it may not be the start
• 39:41
  Speaker 1: with the more entrenched players. Why is it that we
• 39:44
  Speaker 1: don't see more ETFs in four oh one K type vehicles?
• 39:49
  Speaker 1: Is it just inertia? Are the mutual the the I'm
• 39:52
  Speaker 1: thinking of the admiral type shares of mutual funds are
• 39:55
  Speaker 1: very very inexpensive compared to the average et F. Certainly
• 40:00
  Speaker 1: the spider SMP five is dirt cheap. But for for
• 40:06
  Speaker 1: most four oh one k is the mutual funds. I
• 40:09
  Speaker 1: want to phrase this correctly. For the better four oh
• 40:12
  Speaker 1: one kse you have options of very very inexpensive mutual funds.
• 40:17
  Speaker 1: Why have any TFS fund that found their way into that?
• 40:20
  Speaker 1: Is it simply inertia or are there other reasons? I
• 40:22
  Speaker 1: think I think there are other reasons related to record
• 40:26
  Speaker 1: keep the way in which record keepers UM and those
• 40:29
  Speaker 1: you know systems, some of which are are you know,
• 40:32
  Speaker 1: kind of older systems are designed really to for mutual funds,
• 40:36
  Speaker 1: not for e t fs. And is that simple? Huh?
• 40:39
  Speaker 1: That's quite fascinating. So I know, uh, I only have
• 40:43
  Speaker 1: you for a finite amount of time. Let me jump
• 40:46
  Speaker 1: to my favorite questions. UM tell us the most important
• 40:50
  Speaker 1: thing that we don't know about Jason Schwartz, How about UM?
• 40:56
  Speaker 1: I actually started my career in Hanoi, Vietnam. Really, that's fascinating.
• 41:03
  Speaker 1: What were you doing in Vietnam? So I I had
• 41:05
  Speaker 1: an opportunity to go over there for a summer really
• 41:07
  Speaker 1: as an internship UM in and UM and ended up
• 41:13
  Speaker 1: staying for a period of time. I worked for a
• 41:15
  Speaker 1: private equity firm Uh, the US normalized trade relations with Vietnam,
• 41:21
  Speaker 1: and so I stayed and worked for the Department of Commerce.
• 41:25
  Speaker 1: Is fascinating, absolutely fascinating. I have a buddy who was
• 41:30
  Speaker 1: doing a speaking tour of Asia, Michael Covil, who was
• 41:34
  Speaker 1: a prior guest way back when did a speaking tour
• 41:37
  Speaker 1: of Asia, Hong Kong, Beijing, went went through everywhere, ended
• 41:42
  Speaker 1: up in Hanoi and called his roommate and San Diego
• 41:46
  Speaker 1: and said, send my stuff, I'm not coming home. He said.
• 41:49
  Speaker 1: It was that fascinating of a place. Yeah, it was amazing.
• 41:52
  Speaker 1: It's it's it's the wild West and the new face
• 41:55
  Speaker 1: of capitalism. Is that well right, And at the time
• 41:57
  Speaker 1: it was it was really kind of early Lee and
• 42:00
  Speaker 1: in opening up and liberalizing the economy, and uh, you know,
• 42:03
  Speaker 1: up until U S companies were not able to do
• 42:07
  Speaker 1: business in Vietnam and so maybe legally right, and so
• 42:10
  Speaker 1: it was absolutely fascinating, absolute wild West. But it really
• 42:14
  Speaker 1: a great way for me as a young you know,
• 42:17
  Speaker 1: as a young person to be introduced to business, to
• 42:21
  Speaker 1: do so in a different in a third world communist country.
• 42:23
  Speaker 1: You know, it's where everybody should start their careers. That's
• 42:27
  Speaker 1: very funny. Tell us about some of your early mentors
• 42:29
  Speaker 1: who helped guide your career. Um. Yeah, so there was
• 42:34
  Speaker 1: a guy here, Bill Aaron at at Executive Monetary Management,
• 42:37
  Speaker 1: was was when I first kind of um investment related jobs. Um.
• 42:42
  Speaker 1: You know remember him telling me to really, uh you know,
• 42:45
  Speaker 1: focus on a calling, not so much a job, and
• 42:48
  Speaker 1: that always stayed with me. You know it will sure,
• 42:51
  Speaker 1: you know, uh cliche, but I certainly wouldn't be where
• 42:55
  Speaker 1: I am today without the time UM that folks like, um,
• 43:00
  Speaker 1: you know certainly uh Larry Devonzo who hired me, a
• 43:05
  Speaker 1: guy named Chuck Roth Chip Castile who was a former
• 43:07
  Speaker 1: b G. I was our c I oh, is the
• 43:10
  Speaker 1: smartest person I ever uh worked with and was one
• 43:13
  Speaker 1: of those guys where you know when you have them
• 43:15
  Speaker 1: on your team and you go into a meeting, you
• 43:17
  Speaker 1: just know you have the smartest person in the room
• 43:18
  Speaker 1: on your side. But I would ask these these all
• 43:21
  Speaker 1: of these folks questions and they were gracious with their
• 43:23
  Speaker 1: time and um, and that's really you know, Dennis became
• 43:27
  Speaker 1: a has become a mentor to me as as as
• 43:30
  Speaker 1: as as we've moved along. UM, that's a pretty good list.
• 43:34
  Speaker 1: That's a good list. So let's talk about investors. What
• 43:37
  Speaker 1: investors out there influenced the way you think about markets,
• 43:40
  Speaker 1: thinking about investing. Who's affected your your perspective? So I
• 43:45
  Speaker 1: for us um and for me more kind of in
• 43:48
  Speaker 1: that acid allocation manager selection space. Um. You know Harry
• 43:52
  Speaker 1: marko Witz. I knew you were going to go. Yeah,
• 43:54
  Speaker 1: it was the name on the tip of my time. Yeah.
• 43:56
  Speaker 1: So so you know that the grandfather father of modern
• 43:58
  Speaker 1: portfolio theory, Bill Still by the way, very active both
• 44:02
  Speaker 1: in me and Sharon both active writing, publishing. Interesting. Yeah,
• 44:08
  Speaker 1: anyone else before I interrupted you? Anyway, there was a
• 44:11
  Speaker 1: gentleman Barton wearing Um who wrote some papers. Uh he
• 44:15
  Speaker 1: was at at at b G. I. You know that
• 44:17
  Speaker 1: was a group that was doing some of the most
• 44:18
  Speaker 1: powerful work in kind of we call active risk optimization. Right,
• 44:22
  Speaker 1: how do you how do you build a portfolio of
• 44:24
  Speaker 1: managers and really optimize that outcome and control for risk,
• 44:28
  Speaker 1: moving from you know, sort of total return total risk
• 44:31
  Speaker 1: to active return active risk. And I, um, you know,
• 44:34
  Speaker 1: devoured that literature when I was early and trying to
• 44:37
  Speaker 1: figure things out. Very interesting. Um, everybody's favorite question. Tell
• 44:42
  Speaker 1: us about some of your favorite books, be they fiction, nonfiction,
• 44:45
  Speaker 1: invest and related or otherwise. Well, I you know, um,
• 44:49
  Speaker 1: sheep is sheepish Lee. I will say that my list
• 44:52
  Speaker 1: isn't particularly long. I have, um, I have three kids
• 44:55
  Speaker 1: under the age of ten, so your busy. Um. But
• 45:00
  Speaker 1: but uh, I you know I did read Shoe doog
• 45:02
  Speaker 1: um Phil Knight, Phil Knight very recently, and I I
• 45:06
  Speaker 1: it was one of those books that I literally couldn't
• 45:09
  Speaker 1: put down uh fast. They were on the verge of
• 45:12
  Speaker 1: collapse for like the first ten years of their existence.
• 45:15
  Speaker 1: It's amazing starting on the edge, right, and that you
• 45:19
  Speaker 1: know that, Um, I think how he how the definition
• 45:23
  Speaker 1: of winning changed for him. You know, originally it was,
• 45:27
  Speaker 1: you know, win it all costs. It was this ultra competitive,
• 45:29
  Speaker 1: sort of more narrowly defined I must be successful, um,
• 45:34
  Speaker 1: which ultimately kind of became more of you know, we
• 45:38
  Speaker 1: want to make contributions. We wanna you know, do things
• 45:41
  Speaker 1: to change people's lives. You know that it became bigger, right,
• 45:45
  Speaker 1: And I really could relate. You know. I think a
• 45:48
  Speaker 1: lot of us, as we sort of move along in
• 45:50
  Speaker 1: our careers, what becomes of Gosh, you just want to
• 45:53
  Speaker 1: I want to be successful. I wanted the company to
• 45:55
  Speaker 1: be successful. Moves to I want. We want to you know,
• 45:58
  Speaker 1: help help change or improve people's lives, improve their outcomes.
• 46:02
  Speaker 1: And I really you know, he talked about that and
• 46:04
  Speaker 1: it really resonated with me quite quite interesting. What are
• 46:07
  Speaker 1: you excited about right now? Uh, in the industry in whatever? Well,
• 46:15
  Speaker 1: I think that the you know, we talked a little
• 46:17
  Speaker 1: bit about technology. UM, I think there's a lot to
• 46:20
  Speaker 1: be excited about technology, both as a disruptive force in
• 46:24
  Speaker 1: changing the way that people consume investment advice. Um. You know,
• 46:29
  Speaker 1: the things that the ways in which we use technology
• 46:31
  Speaker 1: today to to automate certain tasks and you know, increasingly
• 46:36
  Speaker 1: really automating elements of the investment process, even um, the
• 46:40
  Speaker 1: delivery of materials to clients, you know, as we think
• 46:42
  Speaker 1: about like you know, from paper to portal. Right, the
• 46:45
  Speaker 1: pace of change I think that we're living in right
• 46:47
  Speaker 1: now is so rapid and it's exciting because you know,
• 46:51
  Speaker 1: there are elements within the financial services space that, um,
• 46:55
  Speaker 1: you know, I've probably been untouched for a long time
• 46:58
  Speaker 1: and to say the least at least, and so that
• 47:01
  Speaker 1: you know, that's either horrifying, right and scary, or it's
• 47:05
  Speaker 1: a huge opportunity. And I think it's a huge opportunity,
• 47:08
  Speaker 1: and I'm excited to be able to participate in it.
• 47:11
  Speaker 1: Tell us about a time you failed and what you
• 47:14
  Speaker 1: learned from the experience. Um. So you know long list here,
• 47:20
  Speaker 1: um I you know, I hiring is an area where
• 47:26
  Speaker 1: um so challenging, so challenging, right, and I think it's
• 47:29
  Speaker 1: it's an area to where you know, uh, you go
• 47:32
  Speaker 1: to school and you learn. You you go to graduate school,
• 47:35
  Speaker 1: you learn a little bit more. Uh. You know, you
• 47:38
  Speaker 1: you have opportunities to to work in different jobs and
• 47:41
  Speaker 1: assuming one doesn't work in a human resources capacity, you know,
• 47:44
  Speaker 1: hiring is not ever really something that that I think
• 47:48
  Speaker 1: we learn how to do right. Not it's not a
• 47:50
  Speaker 1: class and class it's not taught. Um. So you have
• 47:53
  Speaker 1: this you know belief that it's kind of intuitive. Great
• 47:56
  Speaker 1: people just hire great people. Um And and I think
• 47:59
  Speaker 1: it's something at I personally actually spend a lot of
• 48:03
  Speaker 1: time on trying to get better, trying to approach it
• 48:06
  Speaker 1: from more scientific way. And and you know, so failure
• 48:09
  Speaker 1: would failures would clearly be the times we got it wrong,
• 48:13
  Speaker 1: the times I made a mistake, Um, wrong person, want,
• 48:16
  Speaker 1: wrong role, not a great fit. Um you know in
• 48:19
  Speaker 1: all of this sort of classic in retrospect biases that
• 48:23
  Speaker 1: that that prevail. Um, but there's you know, that's sort
• 48:26
  Speaker 1: of top of my list right now in terms of
• 48:29
  Speaker 1: I think that's the hardest thing that any company has
• 48:31
  Speaker 1: to do. It. It's just this is a little bit
• 48:34
  Speaker 1: of luck. It's just one of those things that I've had.
• 48:37
  Speaker 1: I've had numerous people sitting in that seat say variations
• 48:41
  Speaker 1: of what you're saying. Hiring good people is the hardest
• 48:44
  Speaker 1: thing to do because it's just not a natural skill set.
• 48:48
  Speaker 1: It's amazing. What do you do for fun? What do
• 48:50
  Speaker 1: you do out of the office to kick back, relax
• 48:53
  Speaker 1: and uh have a good time. So, um, I have
• 48:58
  Speaker 1: um actually become slightly obsessed with Olympic weightlifting really yeah,
• 49:05
  Speaker 1: so that's that's become kind of my my hobby. What
• 49:09
  Speaker 1: do you what do you be? No, no, no, it's this.
• 49:11
  Speaker 1: This is this is the clean and jerk and this
• 49:13
  Speaker 1: is the snatch. So these are the two lifts that
• 49:15
  Speaker 1: are in the Olympic. Yeah. That is not easy to do. Yeah.
• 49:18
  Speaker 1: So so that's I mean, and there there's a reason
• 49:21
  Speaker 1: the Olympic lifts, right, and that's become um a real
• 49:25
  Speaker 1: probably you know, the most challenging and a physical thing. Um,
• 49:30
  Speaker 1: and I've done which which has been how did you
• 49:32
  Speaker 1: find your way into that? That's a yeah. So so
• 49:34
  Speaker 1: I think a lot of if you're going to gyms
• 49:36
  Speaker 1: these days, the sort of cross fit, um, you know,
• 49:41
  Speaker 1: flipping over tires, slipping over tires and harpies and and
• 49:45
  Speaker 1: and uh pull ups and and including some of these
• 49:48
  Speaker 1: lifts and she you know folks you know dropping barbells
• 49:51
  Speaker 1: and you know, chalk flying, and you know, after years
• 49:54
  Speaker 1: of just you know, more of kind of the bench
• 49:56
  Speaker 1: press and and you know, whatever it was to kind
• 49:58
  Speaker 1: of just stay in shape. You see these guys slamming
• 50:01
  Speaker 1: bars and and that would be a great way to
• 50:03
  Speaker 1: to kind of blow off scheme and um and yeah,
• 50:06
  Speaker 1: I just started, you know basically just you know, had
• 50:09
  Speaker 1: somebody kind of walk me through it and continue to
• 50:13
  Speaker 1: to uh to try to progress and and enjoy it. So,
• 50:17
  Speaker 1: so what do the Olympians do in in those sort
• 50:20
  Speaker 1: of way what sort of numbers? Well, so we think
• 50:22
  Speaker 1: about the the the some of the best lifters are
• 50:26
  Speaker 1: lifting from a barbell from the ground, from a dead yeah,
• 50:31
  Speaker 1: on the ground, over two times their body weight over
• 50:33
  Speaker 1: their heads. So if you just think about it from
• 50:36
  Speaker 1: the standpoint four hundred plus pounds, you know, over their
• 50:40
  Speaker 1: head um in a variety of ways. And and what's
• 50:44
  Speaker 1: what's what's really interesting is it's not just about brute strength.
• 50:47
  Speaker 1: It's about speed and technique and and that's where it
• 50:51
  Speaker 1: becomes this, you know, and and obviously the sort of
• 50:54
  Speaker 1: the mental kind of agility. But um so, it's funny.
• 50:58
  Speaker 1: It's funny you say speeding technique. I was just having
• 51:01
  Speaker 1: a conversation last night. The woman who won the US
• 51:04
  Speaker 1: Open in in Forest Hills. I'm drawing a blank on
• 51:08
  Speaker 1: her name, was a whole big issue with Simmena Williams.
• 51:11
  Speaker 1: And she crushes the ball like a hundred and thirty five.
• 51:17
  Speaker 1: She can't be more than a hundred pounds, soaking wet,
• 51:20
  Speaker 1: she's this tiny thing. And the answer is it's all technique.
• 51:24
  Speaker 1: It's not power. You're not just muscling it through. I
• 51:27
  Speaker 1: had no idea that was true for U, for Olympic
• 51:30
  Speaker 1: deadlifts like well, and I would sort of say that
• 51:32
  Speaker 1: it's it's actually true for a lot of things in life, thankfully,
• 51:36
  Speaker 1: thankfully right for those of us who aren't necessarily six
• 51:39
  Speaker 1: to inject yes absolutely and um our our last two questions,
• 51:46
  Speaker 1: what sort of advice would you give to a millennial
• 51:48
  Speaker 1: or someone just starting their career, uh, if they were
• 51:51
  Speaker 1: interested in going into finance first, I would say, there's
• 51:54
  Speaker 1: a lot of different roles within, you know, within the
• 51:56
  Speaker 1: finance realm, and so you know, I'm a good example
• 51:59
  Speaker 1: of I'm actually I didn't rise to the ranks as
• 52:01
  Speaker 1: an investor and so um, you know, I've been always
• 52:04
  Speaker 1: more focused on the client and business side of the
• 52:07
  Speaker 1: business of investment management. And so you know, there's there's
• 52:11
  Speaker 1: a number of different roles available and to sort of
• 52:13
  Speaker 1: learn about industries and roles, um, you know, is incredibly important. Um.
• 52:20
  Speaker 1: The other I would say, and sort of take a
• 52:21
  Speaker 1: page from Phil knights um memoir about seeking a calling
• 52:26
  Speaker 1: and and really using your twenties, where the currency is
• 52:29
  Speaker 1: really less about you know, how much money you're making
• 52:33
  Speaker 1: and should be more about the knowledge both about you know,
• 52:38
  Speaker 1: what makes you tick um and what you did what
• 52:42
  Speaker 1: doesn't and and really to ultimately try to find that calling,
• 52:45
  Speaker 1: because it's it's the true calling that's gonna make uh,
• 52:48
  Speaker 1: you know, the hard work more fulfilling, the disappointments you
• 52:52
  Speaker 1: know easier to bear, and the highs you know when
• 52:55
  Speaker 1: those highs come. UM, and this is what what Phil
• 52:58
  Speaker 1: Knights says, that there's nothing like it. And that's been
• 53:00
  Speaker 1: certainly my experience and our final question, what is it
• 53:04
  Speaker 1: that you know about the world of investing today that
• 53:07
  Speaker 1: you wish you knew twenty years ago? Well, you know,
• 53:11
  Speaker 1: I'll say that, UM, simple beats complex almost all the time.
• 53:16
  Speaker 1: And UM, you know, I think that's something that you know,
• 53:20
  Speaker 1: the further I've come, you know, the more kind of
• 53:25
  Speaker 1: the realization that the really complex difficult to unpack. UM,
• 53:31
  Speaker 1: you know, strategies, whether it's investment managers, whether it's you know,
• 53:35
  Speaker 1: the latest kind of whiz bang you know idea. UM.
• 53:39
  Speaker 1: Oftentimes you know really well diversified uh, portfolios, UM you
• 53:47
  Speaker 1: know really good Uh you know investment managers or passive products,
• 53:53
  Speaker 1: UM do really really well. We have been speaking with
• 53:58
  Speaker 1: Jason Schwartz. He used the president of Willsher Funds Management
• 54:02
  Speaker 1: and wilsh your analytics. If you enjoyed this conversation, we'll
• 54:06
  Speaker 1: be sure to look up an inch rore down an
• 54:07
  Speaker 1: inch on Apple iTunes and you could see any of
• 54:10
  Speaker 1: the previous let's call it two dred and twenty prior
• 54:15
  Speaker 1: conversations that we've had. We love your comments, feedback, end
• 54:20
  Speaker 1: suggestions right to us at m IB podcast at Bloomberg
• 54:24
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• 54:26
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• 54:30
  Speaker 1: Attica val Brun is our project manager, Medina Parwana is
• 54:34
  Speaker 1: my producer. Taylor Riggs is our booker. Michael Batnick is
• 54:38
  Speaker 1: our head of research. I'm Barry Rehults. You've been listening
• 54:42
  Speaker 1: to Masters in Business on Bloomberg Radio