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BNY Mellon's Studley on Finding Yield in Global Markets (Audio) · Bloomberg Intelligence

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  Speaker 1: low volatility products. That's your Bloomberg ETF report. I'm Katherine Caldary.
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  Speaker 1: You're listening to Taking Stock with Kathleen Hayes and Kim
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  Speaker 1: Fox on Bloomberg Radio. We're broadcasting live from Pershing's Insite
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  Speaker 1: Tien conference at the Highatt Regency in Orlando. Kind of
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  Speaker 1: ready to take a look at the markets today broadly
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  Speaker 1: as we do every day around this time, going into
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  Speaker 1: the market close. Ralph Studley is joining us now. He's
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  Speaker 1: head of investment strategy for b n Y Melon. He's
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  Speaker 1: based in Boston, and of course he's here in Orlando today. Raul,
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  Speaker 1: thank you for joining us, Thank you for having so
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  Speaker 1: thig part. But what b and my mel and does Pershing?
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  Speaker 1: This this very powerful uh organization, many services, all kinds
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  Speaker 1: of things invited to provided to investment advisors, but of
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  Speaker 1: course one of them is just market intelligence, a sense
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  Speaker 1: of trends where things are going. You started out as
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  Speaker 1: a muti bond trader. I did you know about dealing
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  Speaker 1: with volatility, which is investors have been dealing with that
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  Speaker 1: in spades this year. What what what would use? How
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  Speaker 1: whe would you start with the volatility? Where we are?
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  Speaker 1: Where we're going? Yeah, I think you know it's it's
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  Speaker 1: certainly an interesting topic and one that's on everybody's minds.
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  Speaker 1: Myself and my team. We have a unique position within
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  Speaker 1: this you know massive organization that you talk about. We
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  Speaker 1: we have a unique little investment management business that has
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  Speaker 1: about one point six trillion in assets under managements. Were
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  Speaker 1: actually the seventh largest, and that's comprised of thirteen investment
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  Speaker 1: management boutiques. So we have the ability, my team and
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  Speaker 1: I to sit in the middle of all that and
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  Speaker 1: listen to you know, a lot of really smart portfolio managers,
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  Speaker 1: a lot of really smart market strategist and economists talk
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  Speaker 1: about how they think about volatility, and then it allows
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  Speaker 1: us to go out and position that overall holistically to
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  Speaker 1: our clients. So when I think about volatility, when we
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  Speaker 1: think about volatility, our biggest concerns, how do we take
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  Speaker 1: that out of portfolio today? How do we prepare prepare
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  Speaker 1: clients for things that they may not necessarily be prepared for.
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  Speaker 1: A lot of clients tend to have a significant US bias.
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  Speaker 1: A lot of clients tend to have forgotten maybe what
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  Speaker 1: two thousand and eight did to their portfolios and what
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  Speaker 1: a significant market turn can do to your overall glide paths.
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  Speaker 1: So we're we're very concerned about talking about those types
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  Speaker 1: of events and how they can head your position themselves
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  Speaker 1: to whether those events are whether those storms. Is there
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  Speaker 1: a behavioral finance components all this in the conversation, I
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  Speaker 1: think there certainly is. There certainly is there's there's certainly
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  Speaker 1: a component of people, uh, you know, feeling comfortable with
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  Speaker 1: certain things. You know, you you mentioned uni bonds, you know,
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  Speaker 1: for there's plenty muni bond investors out there that, uh
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  Speaker 1: that are afraid to get away from municipal bonds because
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  Speaker 1: it's what they know and what they love. And we've
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  Speaker 1: been telling people for years that, you know, interest rates
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  Speaker 1: are gonna rise and bonds are gonna work against you,
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  Speaker 1: but that hasn't happened yet. So there's certainly a behavioral
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  Speaker 1: finance component of how people invest in and getting them
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  Speaker 1: to think more broadly, about how to manage volatility. There's
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  Speaker 1: no doubt about it. Okay, So since you are at
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  Speaker 1: heart a bond guy, let's take a look just at
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  Speaker 1: at the at the broadly, where bond yields haven't haven't
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  Speaker 1: gone four or five years in a row that Fed
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  Speaker 1: was supposed to start moving and then we'd have bond
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  Speaker 1: we have that tenure benchmark Treasury note up around three
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  Speaker 1: percent easily, we'll guess what here we are once again,
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  Speaker 1: it hasn't happened. What is your sense of where the
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  Speaker 1: where the risk and reward lies in the bond market
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  Speaker 1: right now? Yeah? I think you know, there's certainly there's
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  Speaker 1: certainly the reality that we're going to be facing a
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  Speaker 1: rising interest rate environment at some point. It's just a
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  Speaker 1: matter of when. Right. The market doesn't seem to think
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  Speaker 1: that the Fed's gonna do anything and Jill in June,
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  Speaker 1: excuse me, and less likely in July. That's mostly because
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  Speaker 1: of there's no scheduled press conference. Um. But Yellen's comments
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  Speaker 1: yesterday give us some belief that will most likely see
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  Speaker 1: something this year. And there's a lot of you know,
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  Speaker 1: people out there that believe we'll see one or two rises.
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  Speaker 1: I don't think it's gonna be dramatic and we're gonna
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  Speaker 1: see that, you know, the ten year ago from self
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  Speaker 1: to two to over three. But I do think it's
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  Speaker 1: something that investors need to be aware of. I think
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  Speaker 1: the beautiful part about the bond market though, is this
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  Speaker 1: it's not correlated globally anymore like it used to be.
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  Speaker 1: So there's plenty of opportunity outside the US and good
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  Speaker 1: quality credits to get you know, diversification away from the
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  Speaker 1: potential monetary policy US that we have here in the US.
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  Speaker 1: So you know, while I think, you know, our our
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  Speaker 1: rise will be slow and steady, I do think that
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  Speaker 1: there is opportunity out them. What about opportunity in alternative assets,
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  Speaker 1: assets that are not correlated either to the bond market
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  Speaker 1: or to the equity market. And I'm keep thinking, for example,
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  Speaker 1: of things such as annuities and insurance and other elements
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  Speaker 1: of a portfolio to plan for retirement. Yeah, I mean
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  Speaker 1: retirements a big components something that we we spend a
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  Speaker 1: lot of you know, spend a lot of time worrying about.
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  Speaker 1: You know, when we look at you know the majority
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  Speaker 1: of US investors have actually have not saved the proper
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  Speaker 1: amount for retirement when we look at you know, pensions
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  Speaker 1: and endowments, most of them are unfunded. So there's certainly
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  Speaker 1: a huge focus now on looking at alternative sources of
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  Speaker 1: return um for you know, for for two reasons. One
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  Speaker 1: is to insulate those portfolios so you can stay on
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  Speaker 1: the correct clypath and look for alternative sources and return.
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  Speaker 1: I think the key to that, though, PIM is is
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  Speaker 1: manager due diligence. Right, it's not just the asset class itself,
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  Speaker 1: but who's investing that money for you? How have they done? Uh?
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  Speaker 1: Through somewhat baldom markets. Have they stayed the course in
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  Speaker 1: terms of what their direction is. If you have a
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  Speaker 1: real return strategy that you know is looking to get you,
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  Speaker 1: you know, cash plus three or four percent, have they
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  Speaker 1: returned twelve percent in certain years? If so, maybe that's
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  Speaker 1: not exactly what you're looking for. So there's a lot
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  Speaker 1: of manager do a big manager due diligence component that
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  Speaker 1: I want to come back to this point you just
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  Speaker 1: made about opportunities outside the US. High quality credits offer
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  Speaker 1: more yield because if you just look at the sovereign
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  Speaker 1: think at the government bond yields around the world, they're
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  Speaker 1: low and uh, just about negative in some cases. Right, Uh, Brazil,
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  Speaker 1: of course that the bench their benchmark tenure government's at
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  Speaker 1: five point three percent. Where where are you and your
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  Speaker 1: team looking for value? And again are you looking not
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  Speaker 1: just at a country, but at a sector like investment
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  Speaker 1: grade corporates for example. Yeah, So just to be clear,
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  Speaker 1: I mean, we're not investing my team and I write
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  Speaker 1: so you know, I would look to our our our
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  Speaker 1: our our portfolio managers on our teams, and some of
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  Speaker 1: our boutiques for more specific comment. Ever, what I will
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  Speaker 1: tell you is that less about the yield and more
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  Speaker 1: specifically about the monetary policy and the environment. Right. So,
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  Speaker 1: you know, Australia is a perfect example. They seem to
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  Speaker 1: be going in a little bit of a different direction
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  Speaker 1: than us. They tend to be you know, to be
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  Speaker 1: easy and as a result, you know that will be
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  Speaker 1: somewhat more beneficial to the fixed income markets, similar to
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  Speaker 1: what we've seen here in the US for the past
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  Speaker 1: several years. So when I talk about opportunity, that's more
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  Speaker 1: what I'm thinking through Japan, Australia peripherally, you based on
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  Speaker 1: the e c B. You know, those are places where
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  Speaker 1: we send tendency our fixed income managers with global lens,
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  Speaker 1: with a global lens looking more proactively. We are here,
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  Speaker 1: obviously at at your conference inside sixteen, you've got over
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  Speaker 1: two thousand investment of professionals. Here is the conversation more
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  Speaker 1: about volatility or do you believe it really is? The
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  Speaker 1: subtext is I can't live on two percent, so you've
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  Speaker 1: got to give me more. And as a client, you're
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  Speaker 1: probably not going to tell the complete truth, which is, oh, yes,
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  Speaker 1: I can stomach lots of volatility if you get me
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  Speaker 1: the return I want. Except when that doesn't happen. Yeah,
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  Speaker 1: you are you gonna make me pick one or the other? Well,
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  Speaker 1: I mean you can pick, you can, you can do both.
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  Speaker 1: But I but from a professional perspective, because it's as
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  Speaker 1: much about educating the client as it is about having
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  Speaker 1: the information as a as an advisor, what I would
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  Speaker 1: say is, I think those two things go hand in hand. Him.
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  Speaker 1: I think, you know, there's certainly a concern from clients
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  Speaker 1: that I can't live on this, but you know, so
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  Speaker 1: let's find something else for me that I can live on.
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  Speaker 1: But you have to be willing to have that really
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  Speaker 1: difficult conversation with a client in terms of what taking
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  Speaker 1: more risk means to you what it can do to
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  Speaker 1: your overall portfolio, what it can do to your ride,
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  Speaker 1: or at least the perception of your you know, your investment, uh,
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  Speaker 1: your your investment return. So I think those two things
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  Speaker 1: go hand in hand. I would say, you know, I
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  Speaker 1: spend the majority of my year traveling around and talking
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  Speaker 1: to financial advisors at times talking to their clients. I think, um,
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  Speaker 1: while the short search for yield is important, volatility is
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  Speaker 1: a big concern for people. People do not want to,
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  Speaker 1: you know, two thousand and eight, while it's you know,
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  Speaker 1: we we've had a relatively well, it hasn't necessarily felt great,
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  Speaker 1: a relatively reasonable rights. Since then, it's still very much
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  Speaker 1: on the forefront of people's minds, and I don't think
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  Speaker 1: anybody wants to experience that again. So you do see
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  Speaker 1: people willing to give up some yield because of all.
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  Speaker 1: Thanks very much for spending time with us. Ralph Studley
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  Speaker 1: is the head of investment strategy at b N Y Melon.
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  Speaker 1: Thank you for being here and thank you for having us.
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  Speaker 1: We're broadcasting live from Pershing Insights sixteen conference at the
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