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David Hunt Discusses Rates after the Financial Crisis (Podcast) · Masters in Business

0:02
Speaker 1: This is Masters in Business with very Ridholts on Bloomberg Radio.
0:09
Speaker 1: This week on Masters in Business, I have an extra
0:12
Speaker 1: special guest. His name is David Hunt, and he is
0:15
Speaker 1: president and CEO of Pigum, which could be the largest
0:19
Speaker 1: asset manager that you are unfamiliar with. Uh. They manage
0:24
Speaker 1: one point to trillion dollars UH and they are the
0:28
Speaker 1: tenth largest asset manager in the world. Pijam has a
0:32
Speaker 1: really fascinating business model. UH. They are a variety of
0:37
Speaker 1: different groups that have a very very long history in
0:43
Speaker 1: the world of asset management. UH. They've been around over
0:46
Speaker 1: a hundred years. Their quantitative group dates back to seventy five.
0:51
Speaker 1: It it could be the oldest quand group h that's
0:54
Speaker 1: out there. Pigam is somewhat unique, not just in their
0:59
Speaker 1: institute cutional um focus, but they are a very interesting
1:05
Speaker 1: mix of fixed income, real estate and real estate financing. UH.
1:11
Speaker 1: That makes for a really, really fascinating combination of asset classes. UH.
1:17
Speaker 1: They David is as knowledgeable as anybody on these various subjects.
1:24
Speaker 1: If you're at all interested in private credit, real estate investing,
1:28
Speaker 1: fixed income investing, as well as traditional public markets, UH,
1:33
Speaker 1: you're gonna find this to be absolutely fascinating. So, with
1:37
Speaker 1: no further ado, my conversation with Piegams David Hunt. I'm
1:46
Speaker 1: Barry rid Hilts. You're listening to Masters in Business on
1:48
Speaker 1: Bloomberg Radio. My extra special guest this week is David Hunt.
1:53
Speaker 1: He is president and CEO of Piegam. This is the
1:57
Speaker 1: investment arm of Prudential, the insurance and asset management giant. Uh.
2:04
Speaker 1: You might not be familiar with PI jim, but they
2:06
Speaker 1: manage one point to trillion dollars in assets. They may
2:11
Speaker 1: be one of the largest top ten asset managers. You
2:16
Speaker 1: might not have heard of. Uh. David comes to us
2:18
Speaker 1: with a bachelor's degree in engineering and he spent about
2:22
Speaker 1: twenty two years at Mackenzie. That's a really unusual background
2:27
Speaker 1: to go into the asset management business. Tell us a
2:30
Speaker 1: little bit about how you found your way uh to
2:32
Speaker 1: PI JIM. Well, to be honest, it's not that unusual. Actually,
2:36
Speaker 1: the asset management world has quite a few people who have,
2:40
Speaker 1: you know, management consulting backgrounds UM. And part of it,
2:45
Speaker 1: I think is that UM, we are fundamentally wired to
2:49
Speaker 1: be client oriented. And I think one of the aspects
2:54
Speaker 1: of a great asset manager is the fiduciary part of
2:57
Speaker 1: that culture, and I think you get that and spades
3:00
Speaker 1: when you're working uh in in a firm like McKinsey,
3:04
Speaker 1: and I really have appreciated that set of values from
3:06
Speaker 1: the very beginning. So you mentioned being client oriented. Who
3:10
Speaker 1: were the clients of pigum. So PIGAM, as you were
3:14
Speaker 1: nice enough to point out, is the tenth largest asset
3:16
Speaker 1: manager in the world. UM we serve most of the
3:20
Speaker 1: world's largest pension plans and other large sovereign wealth funds
3:25
Speaker 1: central banks, so we are predominantly an institutional manager. We
3:30
Speaker 1: do have a retail business here in the United States
3:34
Speaker 1: which has been growing quite quite rapidly, but we're better
3:36
Speaker 1: known in the institutional market. UM we UH serve I
3:41
Speaker 1: would say the world's most sophisticated client based with a
3:45
Speaker 1: broad range of products. So we offer obviously public equities
3:49
Speaker 1: and public fixed income. But maybe less known is that
3:52
Speaker 1: we're the third largest real estate UH manager in the world,
3:57
Speaker 1: and we do a lot of other alternatives, including things
4:00
Speaker 1: like private credit, which have obviously been very UH hot
4:03
Speaker 1: in in recent years. So we have both a public
4:06
Speaker 1: and a private business. And when I when I was
4:09
Speaker 1: working my way through the various websites of PJAM. Not
4:13
Speaker 1: only are you one of the largest real estate managers,
4:16
Speaker 1: but you're also a fairly substantial real estate financer. Did
4:20
Speaker 1: did I read that correct? No, you're You're absolutely right.
4:23
Speaker 1: I mean, for many, many years, and this really does
4:25
Speaker 1: go back to the history as an insurance company. Obviously,
4:30
Speaker 1: we financed a lot of office buildings. Prudential at one
4:33
Speaker 1: point was the largest direct owner of of real estate
4:36
Speaker 1: and the United States. But we also have been lending
4:39
Speaker 1: into the real estate business for many, many years. So
4:41
Speaker 1: those are old insurance businesses, and what we've done is
4:44
Speaker 1: to take in them and essentially make them available to
4:48
Speaker 1: third party investors. So at this point PIJAM, although it
4:51
Speaker 1: started out with an insurance heritage, only about twenty percent
4:55
Speaker 1: of my fees come from Prudential. Eighty percent of it
4:58
Speaker 1: actually comes from a third party clients. So when you're
5:01
Speaker 1: dealing with some and wealth funds and central banks and
5:04
Speaker 1: pension funds, how is that different than the traditional base
5:09
Speaker 1: of insurance clients. Um, it is quite different. I mean,
5:13
Speaker 1: insurers need their money managed in very specific ways. They
5:17
Speaker 1: have they have real specific liabilities that set future dates
5:21
Speaker 1: based on the tables and in general, they want to
5:25
Speaker 1: manage their money so that they effectively match those liabilities
5:29
Speaker 1: with the cash flow of their of their assets and
5:32
Speaker 1: so done. Well, there's actually not that much investment risk
5:37
Speaker 1: that is inherent in those in those books. Third parties
5:41
Speaker 1: tend to want a more active approach. They have less
5:45
Speaker 1: specific liabilities that they're matching, and they will often want
5:49
Speaker 1: a more active um and higher active share style of
5:52
Speaker 1: management than insurance company will. That's quite fascinating. So you
5:57
Speaker 1: spent twenty two years at McKenzie. How did that prepare
6:01
Speaker 1: you for running what is now the tenth largest investment
6:05
Speaker 1: manager in the world. Well, I think maybe in two ways.
6:09
Speaker 1: One is that UH, I ran UH the asset management
6:14
Speaker 1: practice at mckensey, so the group of people who actually
6:17
Speaker 1: served asset managers. So I've spent a lot of the
6:21
Speaker 1: last year's working with the leading CEOs in the asset
6:25
Speaker 1: management industry, and so I think my pattern recognition of
6:28
Speaker 1: what's worked and what hasn't is reasonably good UM over
6:32
Speaker 1: that period of time. And the second one is that
6:34
Speaker 1: I do think that UH managing and leading in a
6:39
Speaker 1: professional services context UH is a lot has a lot
6:43
Speaker 1: of parallels with the investment world. Uh, investors are people
6:47
Speaker 1: with strong convictions. They don't need a lot of management.
6:50
Speaker 1: They might need a little inspiration and leadership. Um, there
6:53
Speaker 1: are people who have deep convictions, which are only good
6:56
Speaker 1: if they're contrarian. There's no point in having the same
6:58
Speaker 1: view as the rest of the market. And so by nature, uh,
7:01
Speaker 1: they're very independent thinkers. And I would say the same
7:04
Speaker 1: things as true of good consultants. And so having a
7:07
Speaker 1: style where you're able to inspire and lead but not
7:11
Speaker 1: manage is a is a style that works very well
7:15
Speaker 1: in the investment world. What about the engineering background? Undergrad
7:19
Speaker 1: you want to Princeton? Did you plan on going into finance?
7:23
Speaker 1: Was the engineering background something? So? I think the engineering
7:27
Speaker 1: is a little bit of a misnomer in the sense
7:29
Speaker 1: that effectively the econometrics program at Princeton is in the
7:32
Speaker 1: engineering school. And so I actually, I actually really majored
7:38
Speaker 1: in econometrics, and I my senior thesis was on the
7:41
Speaker 1: emerging markets debt crisis of the early eighties. You may
7:46
Speaker 1: remember that, you know, City and many others got themselves
7:49
Speaker 1: an enormous amount of trouble, and I built a model
7:52
Speaker 1: of how that worked out in order to help predict
7:55
Speaker 1: some of the future trouble spots. But so it was
7:59
Speaker 1: effectively in an a metric which led me obviously very
8:01
Speaker 1: easily into finance. Quite fascinating. You were at McKenzie prior
8:06
Speaker 1: to joining Pigeum. What was your first job at Paigeum? Like?
8:12
Speaker 1: What was your role when you first joined the company?
8:14
Speaker 1: So I joined in the same role that I that
8:16
Speaker 1: I have now. I came in as the president and
8:19
Speaker 1: UH and CEO UM, and I think that in many
8:22
Speaker 1: ways it was a very a very natural fit with
8:25
Speaker 1: my with my background. I probably spend about half of
8:28
Speaker 1: my time leading but not managing the investment units. I
8:32
Speaker 1: spend about a third of my time externally with UH,
8:36
Speaker 1: with clients at conferences, are really trying to keep my
8:39
Speaker 1: ear to the market. And then I spend some time
8:42
Speaker 1: on my kind of corporate duties for Prudential more broadly
8:45
Speaker 1: and with our board. So what's it like leading but
8:49
Speaker 1: not managing the various asset units. That sounds kind of interesting.
8:55
Speaker 1: It's it is absolutely a delicate, a delicate balance. And
8:58
Speaker 1: I do like to say that the right style of
9:02
Speaker 1: leadership for a role like this is much more as
9:05
Speaker 1: as a servant leader. So I come into the office
9:08
Speaker 1: in the morning, and what's in my mind is what
9:11
Speaker 1: do I need to do to help the people running
9:14
Speaker 1: our businesses be successful. I do not come in the
9:17
Speaker 1: morning and think these guys somehow report to me in
9:20
Speaker 1: a classic corporate style. And I think that's an extremely
9:24
Speaker 1: important mindset in the investment world. Investors don't want to
9:28
Speaker 1: work for a large corporate hierarchy. They want to work
9:31
Speaker 1: in a place where they have autonomy and freedom to
9:33
Speaker 1: express their often contrarian points of view. And you need
9:37
Speaker 1: to create an environment where that's not just acceptable but
9:40
Speaker 1: actually encouraged. So what happens if one of these contrarians
9:44
Speaker 1: suddenly go off the rails and they're talking about, Hey,
9:48
Speaker 1: this this X y Z is terrible and we need
9:51
Speaker 1: to move to golden bottled water and we're gonna hide
9:55
Speaker 1: in a cave somewhere. How do you deal with the
9:57
Speaker 1: occasional um over reactions of managers Because all of us
10:03
Speaker 1: have a tendency to allow our emotions to get get
10:05
Speaker 1: the best of us without a doubt. And I think
10:07
Speaker 1: one of the things that we do well is we
10:10
Speaker 1: have a very discipline, team based investing process. So one
10:15
Speaker 1: is that we have very few individuals who are making
10:17
Speaker 1: those decisions. We have a clearly defined process which lays
10:22
Speaker 1: out how we believe in investment UH thesis should work,
10:27
Speaker 1: and we stick with high conviction trades that stay within
10:31
Speaker 1: that philosophy and oftentimes will be wrong for some period
10:35
Speaker 1: of time. Um, and that's okay. But we make a
10:39
Speaker 1: very clear distinction between high conviction within a process versus
10:44
Speaker 1: somebody who would make a move outside of what we've
10:46
Speaker 1: told clients that we're actually investing behind. And in that
10:50
Speaker 1: case we ran it back very quickly and very abruptly.
10:53
Speaker 1: What was the environment like during the financial crisis? Was
10:56
Speaker 1: everybody on point and thinking, Um, hey was something I
11:03
Speaker 1: wasn't in this role during you you missed it? So
11:06
Speaker 1: timing is important in all of Yes, moved over in
11:09
Speaker 1: two thousand eleven. Okay, so you've been there for seven
11:12
Speaker 1: years decent um. So your whole experience at PIGEM has
11:17
Speaker 1: been during what pretty much looks like a rip roaring
11:20
Speaker 1: bull market. Certainly domestically if we're talking emerging markets, perhaps
11:25
Speaker 1: not so much. How do you think your role might
11:28
Speaker 1: change when the wheel turns? Well? I think it's a great,
11:32
Speaker 1: a great question. There's no doubt that in the years
11:36
Speaker 1: since I've been in this seat, we've had pretty friendly markets. Um.
11:41
Speaker 1: And for our mix of business, I would say that's
11:43
Speaker 1: been particularly true because not only do you have you know, uh,
11:48
Speaker 1: the equity markets which have been uh, you know, moving up,
11:51
Speaker 1: but you've also had relatively low rates around the world
11:54
Speaker 1: and pretty stable UM. And then you've had a pretty
11:57
Speaker 1: attractive real estate business coupled with our private businesses, which
12:03
Speaker 1: really have thrived as banks have pulled back from lending.
12:06
Speaker 1: So we lend money into the middle market, we lend
12:08
Speaker 1: money into the real estate business, and banks really pulled
12:11
Speaker 1: out of that or or or substantially out of it,
12:14
Speaker 1: and as a result, those businesses grew very rapidly for
12:17
Speaker 1: us as well. So I think the macro environment for
12:20
Speaker 1: us has been extremely strong. UM. We all know that
12:23
Speaker 1: will turn. UM. Nobody can predict exactly when, but it will.
12:26
Speaker 1: And part of the art of all of these managerial
12:30
Speaker 1: roles are being willing to stay a bit ahead of
12:34
Speaker 1: that and begin to prepare uh portfolios for a for
12:38
Speaker 1: a downturn. So you guys have about you, guys, Pigium
12:44
Speaker 1: has one point two trillion in assets about if I'm
12:48
Speaker 1: doing this from memory, so far into me if I'm
12:50
Speaker 1: off a little bit, a little less than two thirds
12:52
Speaker 1: is fixed income? Is that? Is that about right? Seven
12:55
Speaker 1: hundred plus? Yes, that's that's right. UM. We tend to
12:59
Speaker 1: look at it a little bit more in terms of
13:01
Speaker 1: fees rather than assets, because that tends to give you
13:03
Speaker 1: a better picture. And from that, about forty of our
13:06
Speaker 1: fees are public fixed income, about a third of it
13:09
Speaker 1: is public fixed income, and the rest of it at alternatives,
13:13
Speaker 1: including quite quite interesting. So given that we've just had
13:17
Speaker 1: a thirty plus year bullmarket in fixed income, and last
13:22
Speaker 1: year was the first year we really saw that sort
13:25
Speaker 1: of coming to an end. What does this make your
13:29
Speaker 1: group think in terms of UM, how you're going to
13:32
Speaker 1: manage duration, risk, UM, et cetera. Are there big changes
13:37
Speaker 1: coming or is it hey, we have a thirty year
13:40
Speaker 1: time horizon, we don't care about last quarter. No, I
13:43
Speaker 1: think absolutely. We spend a lot of time thinking about
13:46
Speaker 1: the effect of rates on our portfolios. UM. If you
13:49
Speaker 1: go back in time, we were one of the first
13:52
Speaker 1: people after the financial crisis that said that we believe
13:55
Speaker 1: that rates would stay low for a very long time.
13:57
Speaker 1: And actually that was an out of consensus call. Most
14:00
Speaker 1: people thought, oh, it'll be like the last time, it
14:02
Speaker 1: will snap back quickly, And we really didn't think so.
14:06
Speaker 1: And the reasons behind that had less to do with
14:08
Speaker 1: the FED and more to do with the fundamental problems
14:11
Speaker 1: we have in our economy, which are low productivity and
14:15
Speaker 1: really low growth, and we felt that until either of
14:19
Speaker 1: those got fixed, rates were going to stay really low
14:21
Speaker 1: around the world. And you coupled that with very accommodative
14:24
Speaker 1: central bank policies, and obviously that turned out to be true.
14:27
Speaker 1: I would say as we went into thirteen and fourteen,
14:30
Speaker 1: more and more people piled into our point of view,
14:32
Speaker 1: and I would say lower for longer kind of became
14:35
Speaker 1: the consensus view. Now you see many more people are
14:39
Speaker 1: beginning again to say, finally, growth is beginning to pick up.
14:43
Speaker 1: We actually do believe now that rates are going to rise.
14:47
Speaker 1: We would agree to an extent, but probably to a
14:50
Speaker 1: much less extent than most other people. We still have
14:53
Speaker 1: lower numbers on our our yield curve than most other people.
14:57
Speaker 1: We just see, uh, this lack of productivity, lack of growth,
15:02
Speaker 1: and importantly the demographics around the world as keeping rates
15:06
Speaker 1: much lower than they've been historically and for a very
15:09
Speaker 1: long time. So let me ask a wonky question, giving
15:13
Speaker 1: your econometric background, how much of the so called weakness
15:18
Speaker 1: and productivity growth is a measurement issue. I know in
15:22
Speaker 1: my firm, or even here in Bloomberg Technology, software algorithms
15:29
Speaker 1: allow us to do so much more per individual employee
15:34
Speaker 1: than was even imaginable ten or twenty years ago. So
15:36
Speaker 1: I'm always shocked. I want to hear, oh, there's no
15:39
Speaker 1: productivity gains, I see massive productivity gains. Or is that
15:43
Speaker 1: my narrow biased technology oriented service sector perspective. So I
15:50
Speaker 1: think there are two different ideas in your in your question, UM.
15:53
Speaker 1: One of them is whether or not there's a measurement
15:56
Speaker 1: problem with productivity, and the answer to that is absolutely yes.
16:00
Speaker 1: But the more relevant question is is there any worse
16:02
Speaker 1: the productivity problem measuring that than there was in the past,
16:06
Speaker 1: and that we would actually say, there's no real evidence
16:08
Speaker 1: of that. It's always been badly measured, UM, and we
16:11
Speaker 1: don't see that it's necessarily any worse than it has been,
16:15
Speaker 1: So we don't think you can attribute the productivity problem
16:18
Speaker 1: to measurement at this point. The second the second point
16:21
Speaker 1: you made though, is you know is your is your
16:24
Speaker 1: lens on the world just unique and different, and I
16:26
Speaker 1: would say that, I would say yes. One of the
16:28
Speaker 1: interesting things about productivity when you break it down industry
16:31
Speaker 1: by industry is it's just massively different. So communications and
16:36
Speaker 1: media and some I've seen enormous growth in productivity telecommunications,
16:40
Speaker 1: but very large, very large portions of the economy in
16:44
Speaker 1: terms of healthcare, in terms of retail, have not seen that.
16:48
Speaker 1: And so, uh, the productivity story is not a kind
16:51
Speaker 1: of flat average. It's very much a tale of two studies.
16:54
Speaker 1: But much of the economy is not seeing the productivity
16:56
Speaker 1: lifts that you described. Quite fascinating. Let's let's talk about UM.
17:02
Speaker 1: Where we are today in the markets, we see the
17:05
Speaker 1: yield curve flattening. Everybody seems to be jumping up and
17:10
Speaker 1: down and saying this fortends a recession in the in
17:14
Speaker 1: the near future. What what is pigeons view on this?
17:19
Speaker 1: So we believe that the yield curve will continue to flatten. UM.
17:23
Speaker 1: We do believe that the Fed quite properly will continue
17:28
Speaker 1: to raise rates at the at the short end, I mean,
17:31
Speaker 1: the economy is doing very well, UM, and we think
17:34
Speaker 1: that's entirely an appropriate policy response. On the other hand,
17:37
Speaker 1: as we spoke about a moment ago. We do believe
17:40
Speaker 1: that there is an enormous amount of money that's coming
17:44
Speaker 1: from the aging population, so in the retirement systems and
17:48
Speaker 1: pension funds, which will continue to weigh down on the
17:51
Speaker 1: long end of the curve. So we think that flat
17:55
Speaker 1: meaning that they're big long term investors, big want to
17:57
Speaker 1: stay with long duration for they are because remember they're
18:01
Speaker 1: matching liabilities for that as opposed to looking for the
18:04
Speaker 1: absolute return. So we think that will continue to weigh
18:07
Speaker 1: on that, which will just flatten that curve even further. Now,
18:11
Speaker 1: at some point does it become inverted, quite possibly, But
18:15
Speaker 1: remember an inverted yield curve doesn't cause anything. It's more
18:18
Speaker 1: a symbol of what may happen, because what the market
18:22
Speaker 1: is telling you when that happens is that people think
18:25
Speaker 1: long term growth is actually below what short term rates are,
18:28
Speaker 1: and that's actually the symbol that the signal that's being
18:31
Speaker 1: sent out by an inverted yield curve. But we've also
18:35
Speaker 1: had inverted yield curves which have not led ultimately to recessions,
18:38
Speaker 1: and there's certainly a lag that goes with that. So
18:42
Speaker 1: you're still looking at kind of eighteen to twenty four
18:45
Speaker 1: months before that signal even really kicks out. Thank you
18:47
Speaker 1: so much for saying that it's a symbol and not
18:50
Speaker 1: a cause. I can't tell you how many people seem
18:53
Speaker 1: to get that wrong. And it's absolutely um infuriating. We're
18:57
Speaker 1: also starting from such low rates, and as the FED normalizes,
19:02
Speaker 1: shouldn't the yield curve flatten anyway during that process? It
19:06
Speaker 1: should and and remember kind of low all depends on
19:09
Speaker 1: your perspective. So if you're in Japan, rates over here
19:13
Speaker 1: look positively luxurious, um. And it's even true in large
19:17
Speaker 1: parts of continental Europe. So while we if you have
19:21
Speaker 1: a view on our our rates, many others around the
19:25
Speaker 1: world see US as an attractive rate play and certainly
19:28
Speaker 1: as a business we uh, we see quite significant flows
19:32
Speaker 1: from outside the United States coming back into credit products
19:37
Speaker 1: for that very reason. This is a yield pick up
19:39
Speaker 1: for them. But that of course in turn keeps our
19:41
Speaker 1: rates lower. Sure makes a lot of sense. UM. So
19:43
Speaker 1: you have a substantial exposure in the private equity world,
19:48
Speaker 1: and in that side of the market, how do you,
19:51
Speaker 1: um look at that? Some people have been calling it frothy?
19:54
Speaker 1: What's what's the pigem view on private markets and private
19:58
Speaker 1: equity these days? So I would say that our view
20:01
Speaker 1: on alternatives broadly defined which I would include private equity,
20:05
Speaker 1: I would include real estate in particular in that and
20:09
Speaker 1: our private credit businesses, UH is very positive. We actually
20:13
Speaker 1: think that UH private forms of investment will continue to
20:17
Speaker 1: grow pretty rapidly. We're seeing a lot of demand from
20:21
Speaker 1: our big institutional clients for that. Many of them have
20:24
Speaker 1: actually been taking money out of public equities and moving
20:27
Speaker 1: it into into alternatives. One of the important things to
20:32
Speaker 1: remember about private markets is that in many ways they
20:35
Speaker 1: can weather a downturn a bit better, right because it
20:39
Speaker 1: is no daily prices, and so if you think we're
20:43
Speaker 1: twenty four months away or whatever your particular time frame is, UH,
20:47
Speaker 1: you may decide that a better way to play this
20:49
Speaker 1: market is through the private the private businesses. So we
20:53
Speaker 1: we have a very attractive view of that UM and
20:57
Speaker 1: much of the dry powder that's been raised in p
21:00
Speaker 1: but equity, and we are not in the large buyout
21:02
Speaker 1: business ourselves, but much of the dry powder and there
21:05
Speaker 1: we think will actually probably sit on the sidelines until
21:08
Speaker 1: pricing gets a little bit more reasonable. I was going
21:10
Speaker 1: to ask about valuations. A lot of people seem to
21:13
Speaker 1: think stocks and bonds are our price. We can we
21:17
Speaker 1: can debate that it's certainly not historically cheap on on
21:21
Speaker 1: the equity side. But that said, when we look at
21:24
Speaker 1: venture capital, when we look at some of the private
21:27
Speaker 1: equity firms, it seems to be a little frothy, seems
21:30
Speaker 1: like a lot of money has flowed into those spaces.
21:33
Speaker 1: Do you see the same valuation issue in private equity
21:37
Speaker 1: or is it a hey, we don't get daily prices,
21:40
Speaker 1: so we can ride out a downtown a little more
21:43
Speaker 1: comfortably in that space. So this is where I think
21:46
Speaker 1: having an institutional perspective is maybe very different than what
21:50
Speaker 1: you hear in the in the retail world. So our
21:53
Speaker 1: view is the biggest risk the markets present today is
21:56
Speaker 1: high prices, not volatility. Actually, most of our clients would
22:01
Speaker 1: be quite happy if we had a bit of a
22:02
Speaker 1: correction in the market, because their biggest problem is today's
22:06
Speaker 1: vintage of money that they're putting out. What kind of
22:08
Speaker 1: return over ten years will they be able to earn
22:11
Speaker 1: on that? Given the high prices that are almost any
22:14
Speaker 1: asset class that you've got. So actually a bit more
22:17
Speaker 1: volatility would be better and probably lower risk for most institutions.
22:22
Speaker 1: From where we stand today, and I think that's with
22:25
Speaker 1: the focus on what is the level of the market,
22:27
Speaker 1: it completely misses the point that that volatility is not risk,
22:32
Speaker 1: and actually a bit more volatility would give people an
22:35
Speaker 1: opportunity to get into markets that they've been priced out of.
22:38
Speaker 1: High valuations mean forward looking expected returns are lower, and
22:43
Speaker 1: lower valuations are the opposite means. Quite quite interesting. Let's
22:49
Speaker 1: talk a little bit about the industry, because you've gotten
22:53
Speaker 1: to see how it's evolved from multiple perspectives um over
22:58
Speaker 1: the past almost three decades. What do you see as
23:03
Speaker 1: the evolution of the industry. What's the most significant thing
23:07
Speaker 1: from your sort of institutional approach. So, I think the
23:11
Speaker 1: most important trend that we see right now in the
23:14
Speaker 1: industry is very much the fact that the two worlds
23:19
Speaker 1: of alternatives and long only asset managers are coming together.
23:23
Speaker 1: So the the entire universe was broken into these two.
23:27
Speaker 1: I mean, there were the black Stones and Carlyles and
23:30
Speaker 1: kkrs on the one hand, and they did they started
23:33
Speaker 1: in private equity but expanded out broadly from that. And
23:36
Speaker 1: then there was the broad variety of people who largely
23:38
Speaker 1: did long only public securities, and these were covered by
23:41
Speaker 1: different analysts. They were talked about by different parsons. Even
23:45
Speaker 1: the press had very different people who covered those two groups. UM.
23:49
Speaker 1: That really is now UM, we're seeing a fundamental merging
23:54
Speaker 1: of those. So more and more you'll see firms like
23:57
Speaker 1: PIGIM where we are very much a blend of those.
24:00
Speaker 1: We have a big alternative business. We have a big
24:03
Speaker 1: long only business as well. And you're seeing many more
24:06
Speaker 1: of the UH historically alternatives guys getting into long only
24:10
Speaker 1: all of a sudden they think core real estate is
24:12
Speaker 1: just great, UM. And you see a lot of other
24:15
Speaker 1: long only managers deciding that they'd like to really launch
24:18
Speaker 1: private credit and infrastructure funds. So you're really seeing this
24:22
Speaker 1: merger and that is driving a need for scale. So
24:26
Speaker 1: the other I would say secondary trend you're seeing is
24:30
Speaker 1: that the large global firms are winning and they are
24:33
Speaker 1: taking share away from individual country specific firms UM, who
24:38
Speaker 1: have largely grown up in an individual asset class. So
24:41
Speaker 1: on the retail side, the biggest change over the past
24:45
Speaker 1: decade has to be the rise of low cost passive indexing.
24:50
Speaker 1: How are you seeing the reverberations of that. On the
24:55
Speaker 1: institutional side, what what you guys do very much is
24:59
Speaker 1: not passive by design, you're looking for active share, you're
25:04
Speaker 1: looking for non correlated assets. It's a completely different it's
25:07
Speaker 1: very a very different game. In fact, we've designed our
25:09
Speaker 1: approach to the equity markets to work with passive, and
25:13
Speaker 1: we believe that passive will continue to grow. We think
25:16
Speaker 1: that it has an important role in many investors portfolios.
25:21
Speaker 1: But what you need with that is than other high
25:25
Speaker 1: active share strategies which will allow you to drive alpha
25:29
Speaker 1: over longer periods of time. And most of the money
25:31
Speaker 1: that we manage is done in either that style, or
25:35
Speaker 1: we have a pretty big quantitative business um where we
25:39
Speaker 1: actually use computer algorithms which capture very consistent alpha over
25:44
Speaker 1: long periods of time at pricing that's just slightly above
25:47
Speaker 1: what you would find in an index fund. So those
25:50
Speaker 1: two strategies are designed to work with, not against, passive strategies,
25:54
Speaker 1: and we've actually seen that approach be far more effective
25:58
Speaker 1: than what many others have done, which is effectively try
26:02
Speaker 1: to fight passive, particularly in the retail side, which has
26:05
Speaker 1: not been a winning strategy. So my assumption is that
26:08
Speaker 1: your clients have a big slug of passive exposure and
26:12
Speaker 1: they come to you for the active side. That's correct
26:16
Speaker 1: and and you mentioned the quantitative group. Pardon me if
26:20
Speaker 1: I get the dates wrong. You had one of the
26:23
Speaker 1: first quantitative groups on Wall Street. Does that date back
26:27
Speaker 1: to like nineteen seventy five? You have a very good memory,
26:29
Speaker 1: it absolutely does. That's uh, that's not from the notes.
26:33
Speaker 1: Remember being a little startled in saying nineteen we were
26:37
Speaker 1: we were, We were absolutely one of the very first
26:39
Speaker 1: people into pioneer the use of computer algorithms. For that.
26:44
Speaker 1: The business goes under the brand q M A a
26:46
Speaker 1: pig in business and uh, you know, it's been remarkably
26:49
Speaker 1: successful in both the US and in global markets. They
26:53
Speaker 1: also do a lot of our multi asset class UH investing,
26:57
Speaker 1: which again has had very attractive returns through through a cycle.
27:00
Speaker 1: And clearly that's a business that's highly scalable once you've
27:05
Speaker 1: you know, got your got your algorithms thoroughly thoroughly tested.
27:10
Speaker 1: So we're talking about active versus passive and quantitative versus traditional. Uh.
27:16
Speaker 1: One of the things that keeps coming up in those
27:19
Speaker 1: discussions is the declining number of companies that are publicly
27:24
Speaker 1: available to trade, especially here in the United States. Any
27:27
Speaker 1: thoughts on that? What how do you how do how
27:30
Speaker 1: does pigam view that in terms of your public market exposure.
27:36
Speaker 1: So we uh, we are quite troubled by the health
27:40
Speaker 1: of the public equity markets in the US. While they
27:44
Speaker 1: hit all time highs, we think that that actually UH
27:48
Speaker 1: masks what's going on underneath, and that is that our
27:51
Speaker 1: public markets in this country have ceased to be the
27:55
Speaker 1: home of choice for fast growing UH, mid sized or
27:59
Speaker 1: smaller companies. So if you go back to there were
28:02
Speaker 1: almost eight thousand publicly traded companies, there are now three thousand,
28:07
Speaker 1: seven hundred, so almost more than half falling in terms
28:11
Speaker 1: of number. As worrying or maybe even more worrying is
28:14
Speaker 1: the is the I P O trend. So again, if
28:17
Speaker 1: you go back to the nineties, we were looking at
28:19
Speaker 1: five companies a year that we're coming in. I mean,
28:22
Speaker 1: if you were a tech and UH entrepreneur, then your
28:25
Speaker 1: your holy grail was to become public. Now your holy
28:29
Speaker 1: grail is to take another dollarp of private capital and
28:32
Speaker 1: stay private for as long as you can. And so
28:35
Speaker 1: what we're seeing is that basically private equity is becoming
28:39
Speaker 1: the owner of choice for these companies. And at one
28:42
Speaker 1: level you can say, well, maybe that doesn't matter. At
28:44
Speaker 1: least we're funding it, and the capitalist system is working.
28:47
Speaker 1: But what's hidden in that is that it used to
28:49
Speaker 1: be the returns from these fast scoring companies were available
28:52
Speaker 1: to retail investors, and they now aren't. Um they're actually
28:56
Speaker 1: captured by institutions through private equity, and you know, that's
29:00
Speaker 1: a bit of a shame. I think that the democrazation
29:02
Speaker 1: of our capital market has always be an important part
29:04
Speaker 1: of the American story, and that's becoming less true. But
29:08
Speaker 1: the public markets are going to have to raise their
29:11
Speaker 1: game because private equity has been very successful. They're getting
29:14
Speaker 1: better better at what they do. They have proven to
29:17
Speaker 1: be good owners of businesses, and the public markets are
29:19
Speaker 1: going to have to raise their game if they're going
29:21
Speaker 1: to work really turn this around. I don't necessarily disagree
29:25
Speaker 1: with you, but here's the pushback here on this subject.
29:30
Speaker 1: When you control for the number of teeny tiny pink
29:33
Speaker 1: sheet companies that were a dry cleaner trading at three
29:37
Speaker 1: million dollar valuation, when you remove all that, the big
29:42
Speaker 1: decrease from eight thousand to four thousand, most of that
29:46
Speaker 1: goes away, says some uh AN analysts. And then you
29:51
Speaker 1: take the Jobs Act under the Bush administration, which really
29:55
Speaker 1: opened up the ability for more people to make investments
29:59
Speaker 1: in then private companies, plus the ton of venture capital
30:03
Speaker 1: cash flowing around, I mean there is a uh tsunami
30:07
Speaker 1: of cash out there. Is it a shock that that
30:10
Speaker 1: we're not seeing as many companies trading publicly as we
30:13
Speaker 1: did ten and twenty years ago. I don't necessarily say
30:17
Speaker 1: I was it's a shock, but I do think that
30:19
Speaker 1: our public markets are very much under threat by this
30:23
Speaker 1: um And almost all of the sources of capital that
30:26
Speaker 1: you describe, whether it's private equity or venture um, those
30:30
Speaker 1: are institutional pools of money for the most part. So yeah,
30:33
Speaker 1: as an institutional money manager, I will be able to
30:35
Speaker 1: capture a good deal of that, but it won't be
30:38
Speaker 1: available the way it was in the ninety nineties. Two
30:42
Speaker 1: people through their four oh one K plans, and I
30:44
Speaker 1: think that is a bit of a shame, and it's
30:46
Speaker 1: certainly a big change in our capital markets. I don't
30:48
Speaker 1: know if we ever made the decision that we wanted
30:51
Speaker 1: to have private equity be, you know, a dominant funder
30:56
Speaker 1: of of midsized companies, but I think cats often they've
30:59
Speaker 1: been really good job at it. So what's the prescription
31:02
Speaker 1: for the various NASADAC nys c um various forces around
31:08
Speaker 1: the world to repair that. So the so the popular
31:11
Speaker 1: whipping boy for this has been regulation. That regulation has
31:15
Speaker 1: gotten so onerous on public markets that many people don't
31:18
Speaker 1: want to kind of bear the scrutiny of that. And indeed,
31:21
Speaker 1: UH last year, in two thousands seventeen, we had more
31:24
Speaker 1: companies go from public to private than we've ever had. UM.
31:28
Speaker 1: I personally think that that is true a bit, but
31:31
Speaker 1: it's actually far from the full the full story. The
31:34
Speaker 1: reality is, over the last ten years, effectively the banks
31:38
Speaker 1: and the cell side have withdrawn their support of small
31:41
Speaker 1: of small stocks. There's no analysts covering these anymore. They're
31:45
Speaker 1: not putting out capital in order to trade UH these,
31:48
Speaker 1: they're not supporting them. And so we would actually need
31:51
Speaker 1: to go back and rewire a good deal of the
31:54
Speaker 1: ecosystem that supports public trading and small companies in order
31:58
Speaker 1: to fix this problem. And of course it's exacerbated by
32:02
Speaker 1: the huge flow into index funds that you described earlier,
32:05
Speaker 1: because there's a big difference between being in the know
32:08
Speaker 1: SMP not being Most of these companies would come in
32:11
Speaker 1: they wouldn't be in that and so they're not drawing
32:14
Speaker 1: the kind of capital that they would have pre pre indexing.
32:18
Speaker 1: Post financial crisis, we've seen a huge consolidation amongst the
32:22
Speaker 1: big banks, amongst the big investment banks as well. How
32:26
Speaker 1: much does that top heavy much fewer banks managing the
32:32
Speaker 1: top half of assets effect what you're describing as the
32:36
Speaker 1: lack of enthusiasm for small and MidCap companies and for
32:40
Speaker 1: for I. P. O. S Oh, I think I think
32:42
Speaker 1: it's had a very significant impact. We have not only
32:46
Speaker 1: the consolidation that you refer to, but we've also had
32:49
Speaker 1: a massive retrenchment. Right so the continental European banks have
32:52
Speaker 1: gone back to continental Europe, the Brits have gone back
32:55
Speaker 1: to their island for the most part. And whereas you
32:58
Speaker 1: used to have a whole series of large global banks
33:01
Speaker 1: who staked their ambitions on doing that, you now really don't.
33:06
Speaker 1: And so we see that even in our own trading businesses,
33:09
Speaker 1: where we have less options for counterparties um than we
33:14
Speaker 1: did UH ten years ago. We also get a lot
33:17
Speaker 1: less UH of our our analyst work done by the
33:21
Speaker 1: cell side, and as a result, we have many more
33:23
Speaker 1: of our own researchers and analysts than we would have
33:26
Speaker 1: had a decade ago. For sure, quite fascinating. Can you
33:29
Speaker 1: stick around a bit? I have a ton more questions.
33:32
Speaker 1: We have been speaking with David Hunt's CEO of Pigam
33:36
Speaker 1: asset Management. If you enjoy this conversation, be sure and
33:39
Speaker 1: come back for the podcast extras, where we keep the
33:42
Speaker 1: tape rolling and continue discussing all things asset management. We
33:47
Speaker 1: love your comments, feedback and suggestions right to us at
33:51
Speaker 1: m IB podcast at Bloomberg dot net. You can check
33:54
Speaker 1: out my daily columns at Bloomberg dot com or follow
33:57
Speaker 1: me on Twitter at Ridoltz. I'm Barry Ritolts. You're listening
34:01
Speaker 1: to Masters in Business on Bloomberg Radio. Welcome to the podcast. David,
34:19
Speaker 1: Thank you so much for doing this. I've been looking
34:22
Speaker 1: forward to this. I'm fascinated by Pigamin and you hinted
34:27
Speaker 1: it at something I have to bring up. How do
34:30
Speaker 1: you get to be the tenth largest asset manager with
34:34
Speaker 1: a hundred year track record and not only does the
34:38
Speaker 1: average retail investor not know who you are? Half the
34:42
Speaker 1: people from the industry I spoke to I said, oh,
34:45
Speaker 1: I'm interviewing the CEO of of Pigam and they're like, who,
34:51
Speaker 1: It's a trillion dollar firm and and I'm I'm guilty
34:54
Speaker 1: of it. Also, how have you guys managed to stay
34:58
Speaker 1: so under the radar grow as rapidly as you have?
35:02
Speaker 1: So the grow as rapidly as you have a part
35:05
Speaker 1: as the easy question to answer, and that is because
35:08
Speaker 1: we uh, we believe that we have some of the
35:11
Speaker 1: best investment performance in the industry. At the end of
35:14
Speaker 1: the day, that's how we measure our success as to
35:16
Speaker 1: whether or not our clients are doing well. We actually
35:19
Speaker 1: don't care about how much a U M we have.
35:22
Speaker 1: We don't uh, we don't have a goal around that.
35:25
Speaker 1: We don't have financial goals, but we have a lot
35:28
Speaker 1: of goals around creating excess returns for clients. And if
35:31
Speaker 1: you do that well, the rest of the things take
35:33
Speaker 1: care of themselves. You'll have more clients, you'll have more
35:36
Speaker 1: money for existing clients, and your growth will happen. So
35:39
Speaker 1: let's come on to your other question, which is about
35:41
Speaker 1: what about the What about the brand? So PGIM is
35:44
Speaker 1: only two and a half years old as a brand um.
35:48
Speaker 1: Prior to that, all of our different affiliates had their
35:50
Speaker 1: own brand names, and they also have their own independent
35:55
Speaker 1: websites right under the parent companies. Jurisprunce and while while
36:01
Speaker 1: this business was largely a US business in some ways,
36:04
Speaker 1: I don't know if that mattered very much. But as
36:07
Speaker 1: you may know, we can't use the Prudential name outside
36:12
Speaker 1: really of the U S and Japan, and there are
36:14
Speaker 1: a few other exceptions. Is that is that due to
36:16
Speaker 1: contract or is it because of the Prudential Plc, which
36:20
Speaker 1: is based in the UK and which is not in
36:22
Speaker 1: any way affiliated with US, but they own the rights
36:25
Speaker 1: to the name Prudential. So as I came into this role,
36:29
Speaker 1: um it was clear if I wanted to expand the
36:32
Speaker 1: business to be truly a global leader in the investment world,
36:36
Speaker 1: we needed a single name that we could use around
36:38
Speaker 1: the world, and so we looked around. We obviously did
36:42
Speaker 1: a lot of test marketing, as you can imagine, and
36:44
Speaker 1: we came up with with p Jim, which is a
36:47
Speaker 1: name that we can use everywhere. But that is only
36:50
Speaker 1: two and a half years old, and like with any brand,
36:52
Speaker 1: it takes time for that to really sink in and
36:55
Speaker 1: be associated and it's a new brand. We didn't have
36:59
Speaker 1: really a name that we used externally for the the
37:02
Speaker 1: entire investment business, so it's not surprising to me at
37:05
Speaker 1: all that you've you've found that, but I do think
37:08
Speaker 1: that's in the process of changing. And my hope is
37:10
Speaker 1: that when we sit down three years from now and
37:13
Speaker 1: you've talked to your colleague, that they will say, oh, yes,
37:15
Speaker 1: I have heard of them a bit. And there are
37:17
Speaker 1: a handful of acronym based asset managers from every M,
37:22
Speaker 1: S C I, UM, D F A. There are a
37:25
Speaker 1: bunch of them around UM, Ge Sam, M sim GAM,
37:29
Speaker 1: I mean, pick your favorite. Yeah, although ge Sam and
37:32
Speaker 1: those you know you they're really under golden sacks, So
37:35
Speaker 1: you really think I don't think of them as an
37:36
Speaker 1: acronym business the way I do. Uh an M, S
37:40
Speaker 1: C I or A d F A UM. So that's
37:43
Speaker 1: probably old enough to know what PIMCO stands for. Uh. Yeah,
37:46
Speaker 1: Pacific Insurance Management Co R and uh. Not only that,
37:52
Speaker 1: I'm old enough to remember, uh And it helps to
37:56
Speaker 1: having had Bill grows here. The story of how pim
38:00
Speaker 1: was launched out of the Pacific Life Insurance Company began as, hey,
38:04
Speaker 1: why don't you let us manage your fixed income and
38:07
Speaker 1: maybe we'll find some other people. Yeah, so it's it's
38:10
Speaker 1: it's one of those things, and UM, I guess you
38:13
Speaker 1: forget I forget PIMCO is an acronym because I'm just
38:16
Speaker 1: so used to it as PIMCO. And then that happens
38:18
Speaker 1: over over time, well thirty five years later. Sure, So
38:22
Speaker 1: well let's revisit this and and we'll see how how
38:27
Speaker 1: broadly pigem pigem has been has been accepted. So there's
38:31
Speaker 1: a bunch of other questions I wanted to to get
38:33
Speaker 1: to UM that we kind of skipped. We talked about
38:37
Speaker 1: market valuation, We talked about UM, your your role at
38:43
Speaker 1: at pigam. UM, Let's talk a little bit about consultants,
38:47
Speaker 1: because I think consultants these days have gotten a bad rap,
38:53
Speaker 1: some of which is not deserved, but some of which
38:56
Speaker 1: is how do you how does your office work with
39:00
Speaker 1: various consultants two different large UM by side customers like
39:06
Speaker 1: pension funds, insurers and and solein wealth funds. Well, the
39:10
Speaker 1: pension consultants are obviously extremely important partners of ours in
39:14
Speaker 1: in the whole ecosystem of money management. UM. You know,
39:18
Speaker 1: they are the people who the trustees look to for
39:21
Speaker 1: advice and guidance. There are also the people that do
39:24
Speaker 1: a lot of the asset and liability studies UM that
39:27
Speaker 1: the underpin the strategic asset allocation. So here's my question
39:31
Speaker 1: about that, and and this is really off the top
39:34
Speaker 1: of my head. Why does a investment committee at a
39:39
Speaker 1: big pension fund need and outside consultant. Isn't what the
39:43
Speaker 1: consultant does really their job? I think that's a fairly
39:48
Speaker 1: common um perspective from people. Why why is that view
39:51
Speaker 1: wrong or is it wrong? Well? I think that there
39:54
Speaker 1: are two aspects of of the question. I mean, one
39:58
Speaker 1: of them is just are they doing the same job,
40:00
Speaker 1: And the answer to that is, in general no, Um.
40:03
Speaker 1: If you look at what goes into a detailed liability
40:06
Speaker 1: study of one of these uh, most pension funds are
40:09
Speaker 1: not staff to do that. And by the way, they
40:11
Speaker 1: only do that every few years, and it would be
40:13
Speaker 1: still leave for them to do it. So I think
40:15
Speaker 1: that's actually an effective way. In other words, they have
40:17
Speaker 1: an expert from the outside as opposed to needing to
40:20
Speaker 1: develop any house for the occasional you know, quadrennial need.
40:24
Speaker 1: And the the other then is is having a second
40:27
Speaker 1: opinion on asset asset allocation sessions. Most c i O
40:31
Speaker 1: s do have their own internal views and group that
40:34
Speaker 1: does that. They have a pension group. They may even
40:37
Speaker 1: have a second pension group UM that they get views
40:40
Speaker 1: on that because they do want to get the very
40:42
Speaker 1: best thinking on those questions. And I think that's completely
40:45
Speaker 1: completely appropriate. Quite quite interesting. Um, we discussed your clients,
40:50
Speaker 1: We talked about UM pensions a little bit. Lots of
40:55
Speaker 1: pensions in the United States, especially public pensions, seem to
40:59
Speaker 1: be somewhat underfunded, although there are plenty of corporate pensions
41:03
Speaker 1: that are underfunded. Also, how is that going to play out?
41:07
Speaker 1: What what should these underfunded public pensions be doing today
41:12
Speaker 1: so that the rest of the taxpayers aren't on the hook,
41:17
Speaker 1: uh for for a big bill twenty thirty years down
41:20
Speaker 1: the road of the pension guaranteed trust is eventually going
41:23
Speaker 1: to run out of money. How do we deal with this? Well,
41:27
Speaker 1: I think it's a great question. I mean, for most
41:29
Speaker 1: of my career, you could walk into a corporate pension
41:32
Speaker 1: and a public pension and guess that the asset allocation
41:37
Speaker 1: was and you largely be right within a few percentages.
41:41
Speaker 1: Now you go into a corporate plan and for the
41:43
Speaker 1: most part, uh, they have fundamentally de risk their portfolios.
41:47
Speaker 1: They have moved out of risk assets. They're much heavier
41:51
Speaker 1: into fixed income, they started to match through UH liability
41:55
Speaker 1: driven investing match their investment and in some extreme cases
41:59
Speaker 1: they've even done UM a pension risk transfer, which is
42:02
Speaker 1: to literally take that pension off their balance sheet and
42:05
Speaker 1: give it to an insurance company to manage. But they've
42:08
Speaker 1: really worked very hard to d risk because what they
42:11
Speaker 1: care about is not absolute return. They care about whether
42:15
Speaker 1: or not their funding level relative to their liabilities is
42:19
Speaker 1: UM going to be appropriate so they can meet their
42:22
Speaker 1: meet their obligations. So they've been de risking. At the
42:25
Speaker 1: same time, the public plants have really been going in
42:28
Speaker 1: the other direction because the assets and the liabilities there
42:31
Speaker 1: are not actually managed in the same place. The politicians
42:35
Speaker 1: generally control how large the liabilities get by what's promised
42:39
Speaker 1: to unions and others UM. The c i O S
42:43
Speaker 1: tends then need to manage those assets to match that,
42:47
Speaker 1: and the only even if it's unrealistic, even if it's unrealistic,
42:50
Speaker 1: and so the only way they've been able to do
42:52
Speaker 1: that has been to continue to move out on the
42:54
Speaker 1: on the risk curve so real and leverage all equity,
42:58
Speaker 1: a lot of private equity, a lot of hedge funds
43:01
Speaker 1: UH to try to do that now, if you do
43:03
Speaker 1: the math, you really can't convince yourself that investment returns
43:08
Speaker 1: will actually make up for the shortfalls in a lot
43:11
Speaker 1: of this. There's really no way. And when you look
43:13
Speaker 1: at the recent decade of alternatives that most of these
43:16
Speaker 1: pension funds are in, I know they for some reason,
43:19
Speaker 1: I can't explain it. They all have higher expected returns,
43:23
Speaker 1: but the actual performance for the most part across the
43:26
Speaker 1: whole industry has been pretty poor. That's true. Uh, And
43:30
Speaker 1: I would say that that's been uh as we've been.
43:33
Speaker 1: We did a big study on different forms of alternatives,
43:36
Speaker 1: and the group that did come in for the toughest
43:39
Speaker 1: test was was hedge funds, because not only did you
43:42
Speaker 1: have the return problem, but actually most of them turned
43:45
Speaker 1: out to be quite correlated with the equity podats. And
43:48
Speaker 1: so you know, one of the reasons they were called
43:50
Speaker 1: alternatives was supposed to give you a different risk profile,
43:54
Speaker 1: right than then you had with your public markets, and
43:56
Speaker 1: they really haven't delivered on that. Private equity interestingly did,
44:00
Speaker 1: as did real estate. Private equity least correlated and returns
44:04
Speaker 1: than than the rest of the alternatives. And and and
44:07
Speaker 1: some of that has to do I would imagine with
44:10
Speaker 1: the ability to not only have these longer holding periods
44:13
Speaker 1: where you're not more absolutely to market, but the ability
44:16
Speaker 1: to take advantages of the volatility and the dislocations when
44:20
Speaker 1: value presents itself. Private equity has the best seat to
44:24
Speaker 1: jump into that or am I overstating it No? I
44:27
Speaker 1: think I think that that that ability to take the
44:29
Speaker 1: kind of seven to ten year view and not be
44:32
Speaker 1: forced to either mark the market or necessarily to invest
44:36
Speaker 1: this year even is a very attractive piece of the
44:40
Speaker 1: business model. I wouldn't underplay though, the role that getting
44:45
Speaker 1: kind of common incentives have played. I think that if
44:48
Speaker 1: you go back in the history of private equity, they
44:50
Speaker 1: the early days, a lot of this was financial engineering,
44:54
Speaker 1: and it was it was done with leverage. That's the
44:57
Speaker 1: l b O side. That was not true today you
44:59
Speaker 1: really do you find that, uh, you know, private equity
45:02
Speaker 1: have been good owners, They've been investing behind their businesses.
45:06
Speaker 1: They get the incentives right with management um and I
45:09
Speaker 1: think they've proven that when you have a longer time frame,
45:13
Speaker 1: that's actually a very effective way uh to run to
45:16
Speaker 1: run a firm. So I pulled this off of the
45:19
Speaker 1: website that under your bio, I have to have you
45:24
Speaker 1: UM explain this a bit. Mr Hunt oversees all aspects
45:29
Speaker 1: of the AST asset management business, including its public fixed income,
45:33
Speaker 1: real estate, public equity, private fixed income, and mutual fund units.
45:39
Speaker 1: That sounds like an enormous job. What is your day
45:43
Speaker 1: to day like? What what is a day in the
45:45
Speaker 1: life of David Hunt like at Pigeon? So I'm not
45:50
Speaker 1: sure there's any typical day, which is one of the
45:53
Speaker 1: wonderful things about a role like this is that it's endlessly,
45:57
Speaker 1: endlessly varied, UM. But I can say that over the
46:00
Speaker 1: period of a year, UM, I would say about half
46:03
Speaker 1: of my time is spent um leading but not managing
46:07
Speaker 1: the businesses that you described. About a third of my
46:10
Speaker 1: time is spent out with clients UM and and kind
46:13
Speaker 1: of outwardly focused, so I'm trying to keep my ear
46:16
Speaker 1: to the market of what clients are really needing and wanting.
46:20
Speaker 1: And then the remaining time is spent more on kind
46:22
Speaker 1: of corporate governance issues and working with prudential executives in
46:26
Speaker 1: our and our board. So it's a it's a pretty
46:29
Speaker 1: nice mix of activities. So you mentioned you have your
46:32
Speaker 1: ear to the ground and listening to what clients UM
46:36
Speaker 1: are talking about what our clients saying today, What what
46:40
Speaker 1: are they concerned about, and what do you think is
46:43
Speaker 1: kind of interesting that's bubbling up from that client base.
46:47
Speaker 1: So I would say the most interesting thing is that
46:49
Speaker 1: to watch the battle between the head and the heart
46:52
Speaker 1: of many of our clients right now. So they look
46:55
Speaker 1: at all the numbers and they the economy is doing
46:57
Speaker 1: really well. Um, you know, we've got four percent growth
47:01
Speaker 1: in the second quarter, earnings were up, inflation looks really good. Um,
47:07
Speaker 1: you know, they should be feeling pretty um, you know,
47:10
Speaker 1: comfortable with with risk assets. And then that conversation ends
47:15
Speaker 1: pretty quickly and and the heart comes in and they
47:18
Speaker 1: are very defensive. All of the questions they asked me
47:22
Speaker 1: are about positioning their portfolio to get through the next downturn.
47:26
Speaker 1: They're worried about trade and political risk. They're not worried
47:29
Speaker 1: about the traditional business cycles. So you have this very
47:33
Speaker 1: strange paradox where the numbers all actually look really good,
47:37
Speaker 1: and yet people's questions and behavior is actually much more
47:41
Speaker 1: of a group of people who is worried that, um,
47:45
Speaker 1: we're going to have a pullback. That that's that's quite
47:49
Speaker 1: quite fascinating. It's um, that battle between head and heart
47:54
Speaker 1: is is an ongoing is an ongoing issue amongst all investors.
47:59
Speaker 1: So how do you how do you respond to people
48:01
Speaker 1: when they say, you know, we want to be defensive
48:04
Speaker 1: and and how much of that is still the scar
48:08
Speaker 1: tissue left over from the oh eight oh nine. I
48:11
Speaker 1: think it's a great point. There's there's a fascinating anthropological
48:16
Speaker 1: study to look at those c I O s who
48:18
Speaker 1: were in their seats when we went through the crisis
48:20
Speaker 1: versus the guys who got their job more recently, and
48:23
Speaker 1: they have very different behaviors. And there's no question there's
48:27
Speaker 1: a lot of scar tissue that that still remains from
48:30
Speaker 1: the people that have their jobs. I don't know if
48:31
Speaker 1: you remember the book The Money Game by Adam Smith.
48:35
Speaker 1: He within the book there's a chapter that describes a
48:38
Speaker 1: person running of funds and he says, I have to
48:41
Speaker 1: hire all these young turks to trade because I would
48:44
Speaker 1: never touch any of this stuff. I've been through the
48:47
Speaker 1: previous cycles and all this stuff looks like junk to me.
48:50
Speaker 1: But I would underperform if I didn't have the hot shots.
48:52
Speaker 1: And when they blow up, I'll still be around afterwards.
48:55
Speaker 1: They'll lose their jobs, but I'll capture the return now
48:58
Speaker 1: that I wouldn't have otherwise. It's kind of an interesting thing.
49:02
Speaker 1: You were at Mackenzie in the middle of the financial crisis.
49:06
Speaker 1: What was the experience like there when it looked like
49:09
Speaker 1: the world was teetering on the abyss. Well, I think
49:13
Speaker 1: like almost anybody who was working in the financial industry,
49:17
Speaker 1: it was. It was absolutely frightening, particularly because of the
49:21
Speaker 1: ramifications all around the world on almost any industry of
49:24
Speaker 1: what was happening in the in the financial world, um,
49:28
Speaker 1: you know, to some extent for consulting firms. Uh, there
49:32
Speaker 1: was an enormous amount of problems to be solved coming
49:35
Speaker 1: out of it. And if you're in the business of
49:36
Speaker 1: solving problems, that tends to be a good thing. That
49:40
Speaker 1: type of problems. Let me tell you, growth strategies pretty
49:43
Speaker 1: much came to a grinding halt. But but workouts and
49:47
Speaker 1: liquidity and risk management really came to the came to
49:50
Speaker 1: the four So the mix of work changed. But it
49:53
Speaker 1: was absolutely fascinating and terrifying at the same time. So
49:56
Speaker 1: the one question I didn't get to that I would
50:00
Speaker 1: be remiss if I did not bring up, is the
50:03
Speaker 1: role of all the new financial technologies, both for managing
50:07
Speaker 1: assets and for running an asset management business. How is
50:12
Speaker 1: pi JAM looking at all the new fintech that's out
50:15
Speaker 1: there and what does this mean for the industry going forward. Well,
50:19
Speaker 1: I would say we're at peak hype on the technology
50:24
Speaker 1: front at the moment. I'm convinced that if I just
50:26
Speaker 1: slap the word AI on the name of any mutual fund,
50:29
Speaker 1: I could raise another billion dollars. That's really not a
50:32
Speaker 1: good place to be. Um So, I I think that
50:35
Speaker 1: it's important to focus on technology, but I also think
50:38
Speaker 1: you can't be carried away with a lot of the
50:40
Speaker 1: things that you're reading in the in the press. At
50:42
Speaker 1: the moment um, we have spent a lot of time
50:46
Speaker 1: on artificial intelligence and how to apply it to the
50:48
Speaker 1: investment process, and we do think, uh, there are some
50:51
Speaker 1: real possible breakthroughs in that particularly come coming from the
50:55
Speaker 1: use of satellite imagery and also the use of location
50:59
Speaker 1: device is for example, in our real estate business, we're
51:02
Speaker 1: able to underwrite an office building using that kind of
51:06
Speaker 1: information in a far more sophisticated way than we would
51:08
Speaker 1: have before. What satellite information or I mean imagine you
51:12
Speaker 1: you you you you're about to buy in an office
51:15
Speaker 1: complex and you'd like to know for the last you know,
51:18
Speaker 1: five years, what is the traffic been like at how
51:21
Speaker 1: many cars have been parked in there, what is the
51:23
Speaker 1: foot traffic around it? And you can actually get real
51:27
Speaker 1: data on that, you don't just have to look at
51:29
Speaker 1: what's happened to UH two sales. So there's there. The
51:32
Speaker 1: alternative data is important, but it's going to be an
51:35
Speaker 1: evolution um and many people will find false signals for
51:39
Speaker 1: a long time. And we we know running money quantitatively,
51:42
Speaker 1: you look at a hundred signals before you find one
51:44
Speaker 1: that has real staying power, and so it'll take time
51:47
Speaker 1: before we we figure this out. But I think that
51:49
Speaker 1: is an important piece of it. The other side of
51:52
Speaker 1: it is the the use of robotics, and we do
51:56
Speaker 1: see a lot of the kinds of repetitive tasks that
51:59
Speaker 1: happen in UH an asset manager as being able to
52:03
Speaker 1: be done through bots. UM. We are certainly using those
52:07
Speaker 1: and have plans to do more of that, which simply
52:10
Speaker 1: allows us to UM use our associates in ways that
52:15
Speaker 1: make better use of their talents than doing repetitive tasks.
52:19
Speaker 1: What does this mean for head count in the world
52:22
Speaker 1: of finance going forward? So far, we've post financial crisis
52:27
Speaker 1: seeing not just fee compression but an ongoing reduction in
52:32
Speaker 1: total employee head count. UM is that going to continue
52:35
Speaker 1: for the foreseeable future. So I would say let's leave
52:40
Speaker 1: for the financial services broadly out of it. We just
52:42
Speaker 1: talked about the investment world. UM. I think that broadly,
52:47
Speaker 1: fee compression has been uh concentrated in a couple of
52:51
Speaker 1: different areas, mostly in public equities. But there's been relatively
52:56
Speaker 1: little fee compression in the alternatives world in private equity, uh,
53:00
Speaker 1: in private credit. So if you look at PIGIM for example, UM,
53:04
Speaker 1: we really haven't seen any uh any real price compression. UM.
53:11
Speaker 1: If you look across the total the total platform that
53:13
Speaker 1: that's fascinating. The two areas where I'm where it's noticeable
53:18
Speaker 1: active mutual funds clearly under pressure from low cost um indexes,
53:24
Speaker 1: and then the hedge fund world that was known as
53:26
Speaker 1: two and twenty has become one in fifteen or less.
53:30
Speaker 1: And there are some really interesting alternative fee structures where
53:34
Speaker 1: it's UM fifty basis points and then a percentage of
53:38
Speaker 1: alpha as opposed to profits, much of which is beta.
53:44
Speaker 1: So that's really been under pressure. You're not seeing that
53:48
Speaker 1: in the private equity side or the real estate side. No,
53:51
Speaker 1: you really, um, you really aren't. I mean, if you're
53:53
Speaker 1: able to generate alpha and you have a scarce source
53:57
Speaker 1: of that, I would say that people are willing to
54:00
Speaker 1: for it um and you know it's uh, it's very
54:04
Speaker 1: interesting if you were to ask yourself the question from
54:06
Speaker 1: the client's point of view, So do you think that
54:09
Speaker 1: large pension plans pay more or less for asset management
54:12
Speaker 1: now than they did ten years ago? I would assume
54:15
Speaker 1: less because the mix has changed. Because we were talking
54:20
Speaker 1: about before how the asset allocation has worked. As they've
54:23
Speaker 1: moved much more into risk assets and alternatives, they're actually
54:27
Speaker 1: paying more now. A lot of that's in performance fees,
54:29
Speaker 1: so they're getting the return for it, but they're actually
54:31
Speaker 1: their total bill um in many cases has gone up.
54:35
Speaker 1: What they're paying for beta has definitely gone down. And
54:38
Speaker 1: I'd say that's good, right. I think people are very
54:41
Speaker 1: comfortable paying up for performance if they get if they perform.
54:46
Speaker 1: What they were doing before was paying up for the
54:48
Speaker 1: possibility of performance and then not getting it. That business
54:51
Speaker 1: seems to really be on depression. I think it is.
54:54
Speaker 1: I think if you were a closet index guy, and
54:56
Speaker 1: charging actual fees for it. You're having a really tough time,
54:59
Speaker 1: and my view would be and so you should be
55:01
Speaker 1: that that. Bill Miller, the famous fund manager, said the
55:05
Speaker 1: exact same thing. It's not necessarily passive overactive. It's closet
55:10
Speaker 1: passive with active fees because there's no reason people should
55:14
Speaker 1: be doing that. I would agree with. And I think
55:16
Speaker 1: for a long time people, uh, people didn't recognize that.
55:20
Speaker 1: But a little bit of turmoil and suddenly everybody comes
55:23
Speaker 1: a little uh clus conscience. I know I only have
55:26
Speaker 1: you for a finite amount of time, So let me
55:29
Speaker 1: jump into my favorite questions. Uh. These are what we
55:32
Speaker 1: ask all of our guests tell us. The most important
55:36
Speaker 1: thing that people don't know about you? What? What? What
55:40
Speaker 1: is it that? Uh? Is the deep dark secret of
55:42
Speaker 1: David Hunt. I don't think there's any deep dark secrets
55:46
Speaker 1: whre I hope not, but I think that, Uh. The
55:50
Speaker 1: one of the most important things about my development has
55:53
Speaker 1: been the fact that I've had the opportunity to work
55:55
Speaker 1: around the world for much of my life. What word world?
55:58
Speaker 1: I worked when I first graduated from school, I worked
56:01
Speaker 1: in Asia for several years. Um, I mean I I remember,
56:06
Speaker 1: you know, traveling throughout China when there were literally very
56:09
Speaker 1: few roads and only those big, you know, Russian black
56:12
Speaker 1: cars to ferry the government officials around. UM. I worked
56:17
Speaker 1: in in Paris, I've Worre, I worked for six years
56:20
Speaker 1: in London, UM and so I really feel that I
56:24
Speaker 1: have been able to develop a much broader perspective on
56:28
Speaker 1: on business and on people and on management because I've
56:32
Speaker 1: actually not just traveled, but worked and lived in different
56:35
Speaker 1: cultures around the world. And I think that's so important
56:38
Speaker 1: for people to have. That experience gives you a global
56:40
Speaker 1: perspective as opposed to h home country bias. Who are
56:43
Speaker 1: some of your early mentors who helped guide your career
56:46
Speaker 1: when you were getting started out. So I really feel
56:51
Speaker 1: very fortunate in that having grown up at McKenzie, which
56:55
Speaker 1: is a partnership, that there were many other senior partners
56:58
Speaker 1: around who wanted to help and mentor people and explicitly
57:02
Speaker 1: made it a part of their day to day life
57:04
Speaker 1: to do that. And I would point out particularly a
57:08
Speaker 1: guy named Ron Daniel, who was the managing director for
57:11
Speaker 1: many years, who was the person who urged me UM
57:16
Speaker 1: to really step out of the consulting world and go
57:20
Speaker 1: on a series of not for profit boards UM as
57:22
Speaker 1: a way of building a whole different perspective and different
57:26
Speaker 1: set of skills. And so he's the person who got
57:29
Speaker 1: me really onto uh, both the International Rescue Committee and
57:32
Speaker 1: then ultimately onto the Lincoln Center Board, where I've been
57:35
Speaker 1: for about fifteen years. And these are incredibly important and
57:39
Speaker 1: formative experiences for people to have today. I urge many
57:44
Speaker 1: of my colleagues to try to go on boards because
57:47
Speaker 1: it does open an entirely different world to you. And
57:50
Speaker 1: the mentorship that I had early on really encouraged and
57:53
Speaker 1: supported that, and I'm I'm forever grateful. Quite quite interesting. Um,
57:57
Speaker 1: what about investors who influenced the way you look at
58:00
Speaker 1: the world of finance and investing as as you were
58:04
Speaker 1: coming up through Princeton and Wharton and beyond. I think
58:09
Speaker 1: it's uh, I think it's hard to pick on any
58:11
Speaker 1: particular person in all of this because I think that, uh,
58:15
Speaker 1: you know, one does pick a style that depends on
58:19
Speaker 1: who your clients are, so uh, for uh, for for
58:23
Speaker 1: large institutional investors, the whole theory of asset pricing and
58:29
Speaker 1: what Marco wits and the work that they did, or FAMA,
58:31
Speaker 1: where the people that I studied the most. But I
58:34
Speaker 1: also think that the world changes and uh as we
58:38
Speaker 1: see now what as an efficient frontier and how pricing
58:42
Speaker 1: work is very different in a world now with with
58:45
Speaker 1: beta the way we have it than it was when
58:46
Speaker 1: they did their work. So I think that uh, I
58:49
Speaker 1: think that while it's good to have early informative you
58:53
Speaker 1: know kind of uh stars that you study, you need
58:56
Speaker 1: to be willing to continue to update those views as well.
58:59
Speaker 1: Have to be into lexually flexible. UM, let's talk about
59:02
Speaker 1: some of your favorite books. This is everybody's favorite question.
59:05
Speaker 1: What have you been reading fiction, non fiction? What do
59:08
Speaker 1: you like to recommend to people? So my my pick
59:11
Speaker 1: for the summer has been Why We Sleep? Why We Sleep?
59:16
Speaker 1: Which is written by the head of the Berkeley Sleep Lab,
59:21
Speaker 1: and it is an absolutely fascinating exposay on what does
59:28
Speaker 1: sleep really do for you? Why? Why do you sleep?
59:30
Speaker 1: And it starts even with the broadest range of why
59:33
Speaker 1: do all animals sleep? Do you know that giraffes need
59:37
Speaker 1: four hours? Uh? Did you did you know that dolphins
59:40
Speaker 1: sleep with one half of their brain and then they
59:43
Speaker 1: wake up and the other half goes to sleep because
59:45
Speaker 1: they need to keep moving in the water. Talks about
59:48
Speaker 1: the importance of of rem and non rem sleep and
59:51
Speaker 1: what the two do and their involvement in that in learning.
59:55
Speaker 1: And then it does talk a bit about how, uh,
59:57
Speaker 1: you know, as a society we don't nearly get enough
1:00:00
Speaker 1: sleep and don't uh and don't value it nearly as
1:00:04
Speaker 1: much as that we should, and how the technological wave
1:00:07
Speaker 1: that we were talking about earlier UM has actually intruded
1:00:11
Speaker 1: on people sleep in very important and fundamental ways. And
1:00:15
Speaker 1: he makes the case that America is an incredibly sleep
1:00:17
Speaker 1: star of society. And not only are we asleep star
1:00:21
Speaker 1: of society, we've exported that around the world, and other
1:00:25
Speaker 1: countries have unfortunately been following our lead. That that sounds fascinating.
1:00:29
Speaker 1: I'm gonna put that on us and any other books
1:00:31
Speaker 1: you uh, I think that's a that's a good one
1:00:33
Speaker 1: for this all right for sure? UM, tell us about
1:00:37
Speaker 1: what excites you right now about the industry. What do
1:00:40
Speaker 1: you think is the most interesting development that's taking place today? Oh?
1:00:45
Speaker 1: I think it's a it's a fabulous time to be
1:00:47
Speaker 1: in the investment world. UM. We are really seeing that
1:00:51
Speaker 1: the change of business models in almost every single UH
1:00:56
Speaker 1: aspect of the industry, whether or not it is in
1:00:59
Speaker 1: what is the technology g company, what's happening to online retail,
1:01:03
Speaker 1: what's happening with internet companies in the developing countries. So,
1:01:07
Speaker 1: you know, we see some of the most interesting opportunities
1:01:10
Speaker 1: in China and India actually being in technology companies there
1:01:14
Speaker 1: because they don't have all these legacy systems. They are
1:01:16
Speaker 1: going right to the smartphones, and we see fascinating opportunities
1:01:21
Speaker 1: disrupt industries in that. So I think there's never been
1:01:24
Speaker 1: a more interesting time, given the pace of change, to
1:01:28
Speaker 1: be an active manager, because there's so many places where
1:01:31
Speaker 1: you can add significant excess returns. Quite quite interesting. Um,
1:01:36
Speaker 1: what changes are you looking forward to? What do you
1:01:38
Speaker 1: think is in flux? What does the next decade look like,
1:01:42
Speaker 1: and how is it going to be different than what
1:01:44
Speaker 1: we just came out of. I think the biggest change
1:01:47
Speaker 1: is going to be this uh confluence of private and
1:01:50
Speaker 1: public into a very different form of asset manager who
1:01:54
Speaker 1: is able to do both of those and to deliver
1:01:57
Speaker 1: integrated solutions to their their clients. And we will no
1:02:00
Speaker 1: longer have a world where you know, Bloomberg as a
1:02:03
Speaker 1: reporter for private equity and a reporter for long only.
1:02:06
Speaker 1: I mean, all of a sudden, these will become fundamentally
1:02:09
Speaker 1: integrated with each other. Quite quite interesting. Tell us about
1:02:13
Speaker 1: a time you failed and what you learned from the experience.
1:02:18
Speaker 1: I mean, so so many times it's uh, it's really
1:02:22
Speaker 1: hard to uh, it's hard to know what to pick. Um.
1:02:25
Speaker 1: So if I you you asked earlier about the financial crisis, Um,
1:02:30
Speaker 1: if I go back even beyond that to uh, the
1:02:33
Speaker 1: early nots w and we had the big meltdown around
1:02:36
Speaker 1: technology stocks. So I was the leader of the capital
1:02:40
Speaker 1: markets practice at that point, and literally our revenue went
1:02:44
Speaker 1: from very large and global to zero in about four months.
1:02:49
Speaker 1: And I had partners all around the world who, uh,
1:02:53
Speaker 1: you know, we're very worried about what this is going
1:02:55
Speaker 1: to mean for their careers and families. We had clients
1:02:58
Speaker 1: who were obviously in deep array about what they were
1:03:01
Speaker 1: going to do, and uh, you know, it was a
1:03:04
Speaker 1: monumental task to try to get that group up and
1:03:08
Speaker 1: running and confident and staying with clients and being willing
1:03:12
Speaker 1: to take the five year view on their success rather
1:03:15
Speaker 1: than whether or not that there would be anything to
1:03:17
Speaker 1: do over six months. And I would say in the
1:03:20
Speaker 1: beginnings of that I failed utterly at finding the right
1:03:23
Speaker 1: way to motivate into enhance that. And it took me
1:03:26
Speaker 1: a lot of trial and error before I got to
1:03:29
Speaker 1: the point where I realized that what was needed here
1:03:32
Speaker 1: again was not management, but inspiration of the role that
1:03:36
Speaker 1: they could play with their clients. Those are two very
1:03:39
Speaker 1: different things, very different things, and I really learned to
1:03:43
Speaker 1: shift between the two. People didn't need, you know, day
1:03:46
Speaker 1: to day instruction on what they ought to be doing,
1:03:48
Speaker 1: and mostly they felt badly because they weren't generating any
1:03:51
Speaker 1: revenue and that wasn't the point. But they needed to
1:03:53
Speaker 1: feel that they were making a difference with their clients.
1:03:56
Speaker 1: And once I got that right, then good things began
1:03:59
Speaker 1: to happen quite quite fascinating. Um, what do you do
1:04:03
Speaker 1: for fun when you're not in the office, What do
1:04:04
Speaker 1: you do to relax or for entertainment? So I'm a
1:04:10
Speaker 1: a a poor but enthusiastic tennis player and have been
1:04:14
Speaker 1: for a long time. Um and Uh, I have found
1:04:18
Speaker 1: that tennis has been a really important part of my life.
1:04:21
Speaker 1: We talked earlier about living all over the world. Well,
1:04:23
Speaker 1: you know, you go to Hong Kong, you don't know anybody,
1:04:25
Speaker 1: You take your little rackets and you go down to
1:04:27
Speaker 1: the local tennis club, and in two weeks you have
1:04:30
Speaker 1: a whole set of friends. And by the way, they're
1:04:32
Speaker 1: friends that you wouldn't necessarily meet through your regular work day.
1:04:36
Speaker 1: So you're you're all of a sudden involved in a
1:04:38
Speaker 1: different society. Uh. It's it's really a wonderful sports of life, sport,
1:04:45
Speaker 1: and it's one that you can do anywhere. So I
1:04:48
Speaker 1: when I travel, I take my tennis racket and I
1:04:50
Speaker 1: always try to get my tom on the courts. Have
1:04:53
Speaker 1: you been watching the US Open we're recording this right,
1:04:56
Speaker 1: of course I have. I went on Monday. In fact,
1:05:00
Speaker 1: why I I saw. I saw Madison's big match on Monday,
1:05:03
Speaker 1: So I do. I I watch as much of it,
1:05:05
Speaker 1: uh as as I can. I think it's one of
1:05:08
Speaker 1: the great terms world. I even went to the French
1:05:10
Speaker 1: Open this year as well, No kidding, I was a
1:05:12
Speaker 1: little shocked by Federer. That was That was a surprise.
1:05:15
Speaker 1: It was a big surprise, and uh, you know, it's
1:05:18
Speaker 1: a reminder to all of us that even even the
1:05:21
Speaker 1: great ones do begin to slow down a little something
1:05:25
Speaker 1: like that. But that but that heat was really intense,
1:05:28
Speaker 1: I can tell you. On Monday when I was there,
1:05:30
Speaker 1: it was the hottest I can ever remember, and human
1:05:35
Speaker 1: feels like five and you got to play for four hours.
1:05:38
Speaker 1: It's just I don't know how they do it actually, Um,
1:05:40
Speaker 1: and and Serena Williams, this is a pretty amazing just
1:05:44
Speaker 1: had a baby wonderful months ago. It's crazyerful story and
1:05:49
Speaker 1: incredible level of athleticism and most importantly ability to compete.
1:05:54
Speaker 1: You know, and you think about that even in a
1:05:56
Speaker 1: corporate context, of how difficult it is to actually play
1:06:00
Speaker 1: better when you're under pressure, and that is a unique
1:06:03
Speaker 1: and wonderful skill. And she does it time and again.
1:06:06
Speaker 1: She very easily could be the greatest tennis player of
1:06:09
Speaker 1: all time. By the time her career is done, she
1:06:11
Speaker 1: will certainly have more opens in the modern era than anybody,
1:06:16
Speaker 1: maybe more of all time. That that'll be interesting. UM,
1:06:19
Speaker 1: So let's talk a little bit about we were discussing
1:06:21
Speaker 1: millennials earlier. UM, what would you say to a recent
1:06:25
Speaker 1: college grad or a millennial who was looking for some
1:06:28
Speaker 1: career advice and was interested in the world to finance?
1:06:32
Speaker 1: So very similar to the story I talked about in
1:06:35
Speaker 1: In terms of my own career, I my biggest piece
1:06:38
Speaker 1: of advice is while you're young, make sure you have
1:06:41
Speaker 1: an opportunity to live and work abroad. UM, it's really
1:06:45
Speaker 1: important that you gain that broad based experience. It will
1:06:48
Speaker 1: change what who you are as a person. It will
1:06:51
Speaker 1: change how you feel about being an American, it will
1:06:54
Speaker 1: change how you learn to interact with other cultures and people.
1:06:58
Speaker 1: And so while you're young and you don't have kids
1:07:01
Speaker 1: and you have some flexibility moved to Europe for two years.
1:07:05
Speaker 1: That that that is sounds like really good advice. And
1:07:09
Speaker 1: our final question, what is it that you know about
1:07:12
Speaker 1: the world of business and finance today that you wish
1:07:15
Speaker 1: you knew thirty years ago when you were just getting started.
1:07:20
Speaker 1: The value of time. I think that when you're young,
1:07:23
Speaker 1: it's really hard to understand what twenty years can do
1:07:27
Speaker 1: in the investment world. And uh, it's very easy to
1:07:30
Speaker 1: get wound up and what happens to markets today and
1:07:33
Speaker 1: tomorrow and whether or not they go up and down.
1:07:36
Speaker 1: And Uh, what you learn as you get older is
1:07:39
Speaker 1: you have the perspective of cycles. You know what it's
1:07:42
Speaker 1: like to take the perspective of a broad portfolio, and
1:07:46
Speaker 1: you actually uh embrace difficult times. You embrace volatility as
1:07:51
Speaker 1: opportunity rather than concern. And when you're younger and you
1:07:55
Speaker 1: haven't been through a downturn or a crisis, it's very
1:07:59
Speaker 1: easy to overreact to those things. And I do think
1:08:03
Speaker 1: there's a reason why many of the great investors are older.
1:08:05
Speaker 1: And I do think it's one of the few things
1:08:07
Speaker 1: that you can potentially get better at as you get older,
1:08:10
Speaker 1: because you have more pattern recognition of how things happen
1:08:14
Speaker 1: through you know, a ten year a ten year cycle.
1:08:17
Speaker 1: And I do think that the appreciation of time is
1:08:20
Speaker 1: really important, quite fascinating. We have been speaking with David Hunt,
1:08:25
Speaker 1: president and CEO of Pigam. If you enjoy this conversation, well,
1:08:30
Speaker 1: Bi Sean looked up an inch or down an inch
1:08:32
Speaker 1: on Apple iTunes and you can see any of the
1:08:34
Speaker 1: other two hundred such interviews we have conducted over the
1:08:38
Speaker 1: past four years. Uh you can find that wherever Finder
1:08:42
Speaker 1: podcasts are sold Apple iTunes, Bloomberg, Stitcher, Overcast, etcetera. We
1:08:49
Speaker 1: love your comments, feedback and suggestions right to us at
1:08:53
Speaker 1: m IB podcast at Bloomberg dot net. I would be
1:08:57
Speaker 1: remiss if I did not thank our crack staff who
1:08:59
Speaker 1: helped put together these conversations each week. Medina Parwana is
1:09:04
Speaker 1: my producer. Slash Audio engineer Taylor Riggs is our booker.
1:09:08
Speaker 1: Slash producer Michael bat Nick is our head of research.
1:09:12
Speaker 1: I'm Barry Ritolts. You've been listening to Masters in Business
1:09:16
Speaker 1: on Bloomberg Radio.