Milken Institute Global Conference 5/06/2024
Welcome to our special coverage today from the 27th annual Milken Institute Global Conference here in beautiful Beverly Hills, California. A mash up today of two of your favorite programs right here on Bloomberg, the Close and Bloomberg Businessweek. I’m Romaine Bostick and I’m Carol Massar. There’s so much going on. You can see the excitement behind us. The theme of this year’s conference is shaping a shared future. And we are going to talk to several folks today who are doing just that, including the founder of biotech incubator, flagship Pioneer. But he founded Maddern. So that’s known for returning the amount of money he puts into all of these other products. Unbelievable. And just the whole focus, the whole mission of ideas, really just trying to get the world right, exactly, and find treatments that are unlike no others. A lot more coming up. Yeah, a lot going on in the crypto space. We’re going to hear from Jeremy Allaire, the co-founder of Circle, which manages the second largest crypto Stablecoin watching the regulatory environment in a big way. Kyle Bass, who leads the hedge fund in Capital Management. Great call in the great financial Crisis. Curious to see what he has to say. He’s got a big play on Asia, so we’ll talk to him about that. And one of my interviews, the favorites coming up here. So it’s my autumn now. So I know you’re big into sports. My favorite. But he’s you know, he’s a big sports guy. Milwaukee Brewers, He also has got, you know, investment firm, Pressing capital. I’m going to have a sit down with him in just a bit. We also are going to catch up with Carlyle Group, Soulja Boy, who is spearheading billions of dollars in infrastructure and climate project. Safe to say that’s one of the main themes of Milken this year. And Marc Lipschultz to go head over at Blue Owl Capital, one of the largest direct lenders in North America here, and an event that ostensibly is about the private markets, about the alternative market. But we of course, we keep an eye on the public as well. A three day rally going on right now in US equities. A little bit of enthusiasm, if you will, now that many people think maybe maybe the Fed is going to step back from now. We got an inflation print next week, so we’ll see if that changes things. But absolutely, it feels like there’s some clarity. All right, folks, we do want to get to our first guest Investment partners is a global investment firm, a major player in the booming $1.7 trillion private credit market, managing various strategies across the capital structure. Simply put, it’s a direct lender with 91 billion in assets under management and private credit alone, another 20 billion in public. Private sector credit strategist at 111 billion in assets under management. Overall, it’s a lot of money and she’s ready to talk about it. One of the key figures of the firm is back with us. It’s great to have you with us. Her name, operations governing partner, head of Liquid Credit over an Hpf investment. That was a great intro, by the way. That’s a lot more done now. How are you? Good. How are you? Good, good, good. It feels like the last couple of years, a lot has been thrown at us, right? We had the Ukraine war break out. We had the concerns about regional banking. It felt like credit markets, things were tightening up. How are you feeling about supply this year and how does it feel overall? This year has been a little bit of a tricky year because I think everyone’s waiting for the bottom to fall out and people came into the year with expectations of a ton of Fed cuts and things. We’re going to we’re nailing the soft landing, you know, six or seven cuts and off you go. And I think, you know, we’ve seen it. Expectations have tempered a lot over the course of the course of the first quarter. And I think now everyone’s kind of sitting on their hands saying, okay, will there be one type? Will be there are no cuts, will there be two cuts? And I think sort of three is off the table. Our view on this has been that, you know, one, we think credit is interesting. I mean, we’re living in this kind of circa four and a half percent ten year environment. And and in that environment, you’ve got pretty high quality yields in credit, ranging from 8 to 13%, depending on where you want to sit. So I think that would be one thing that we think things are interesting. I think two is that the markets have opened back up. So we’ve seen a lot of pendulum swinging between liquid markets and private markets. I think as the private market has grown, it’s become a very real competitor to the liquid market and the two have sort of operated in tandem. I think that’s good and healthy actually. So they’re not really competing against each other anymore. Competing and not, I think, you know, last year or the year prior, you saw a ton of private credit deals that were over $2 billion in size. We hadn’t seen that before. I think the number is like 80 plus billion dollars in the last two years. This year there’s been a lot of refinancing on the liquid of the private deals. So I think these markets operate in tandem. I would say two things. One is that private credit has grown and as a result of it growing, they’re competing with bigger businesses that they used to compete in. And you’re seeing that with larger and larger credits. I think you’ll probably hear that from other folks as well. I think that’s that’s one one important distinction. I think the second important distinction is that within the markets, liquid markets have opened up this year, but it’s been predominantly for higher quality credits. So there’s a huge segment of the market that investors are doing. Yeah, not doing B-minus and they’re not doing unrated. And that’s that’s an important piece of the equation in terms of the functioning of the market. Private credit is a participant in that market. So the. Com, though, because of the stability or relative stability that you say in the rate environment. Sorry, ask your question. With rates being a little bit more stable, is that helping? I think it’s helping taking a little bit of the volatility out of the equation. I think it’s also, you know, people are trying to figure out people being issuers are trying to figure out where they want to refinance their credit and when they want to. I think when people were expecting lots of rate cuts, you might have seen folks waiting a little bit longer. I think now we’re living in what’s broadly expected to be the zip code. And you are seeing refinancing. But I would say the difference in illiquid in private is the buyer base. The buyer base in illiquid markets likes a clean box. They like a clean rating. They like a clean box. They can do that. The private credit markets still need that clean box. They can do a lot of structural stuff to protect their investments in a different way. Does it matter in terms of the rate environment where we top out or whether or not we get a cut this year or it’s not until next year, does it matter to you in terms of your investment decisions right now? I personally don’t think it matters, but that’s largely because we believe that we’re going to live here in the longer end of the system. Normal, right? I think this is the new normal now, is it for new quarters at four and a half? I have no idea. You know, in the zone of know 25 basis points, we think we’re living here. So for us, that’s it’s less relevant. I don’t think there’s going to be a lot of cuts. And I think that’s one thing that would give people lots of convexity. And look, if you’re living here, that’s a good place to live for you and for an investor. Are you finding more opportunities, though, domestically? Is there still a case to be made for outside the U.S.? I mean, we’re focused in our private credit, you know, across across the globe. And I would say on our liquid side, sort of mostly Europe and in the US, the U.S. has a lot of opportunities right now. Yeah, what is it? Okay. So it’s interesting because we hear certainly on the equity side of things, we talk about how the U.S. is carrying so many things. Is it Europe? Its carrying it more on the credit. Some things are like what? What are you seeing specifically geographically? Talk a little bit more about that. Yeah, I would say, you know, a couple of things. I think the U.S. has been a great market for us and so there’s a robust opportunity set. We know that. We know that from the size of the markets in Europe, there’s particular regions and areas that we’ve seen a lot of opportunity and more in our private credit side, truthfully, than on our liquid side. We’ve seen opportunities in Australia. We’ve done a lot there in terms of our private credit side over the last several years. So we’ve been able to see the reach across across the globe. Well, I mean, what’s the big go risk out there or at least one that you have your eye on right now? I think there’s two big risks. I think on a micro level, you know, people focus on default rates. I think default rates is the wrong focus as recovery rates are a big focus. And I think the recovery rate in the liquid markets we’ve seen it has been significantly lower than in prior times. And there’s a lot of protection in the private markets where I think those recovery rates will be higher. So I think one is recovery rates on sort of a more micro level. On a macro level, you know, we’re we’re focused on federal deficit, We’re focused on the fact that you’re seeing slow creep and it feels like people aren’t that focused on that. Yeah. Why is it different, though, this time on the federal deficit? Because we’ve had this conversation ten years ago, ten years ago, 30 years ago, four plus percent. Okay. And so you think that could be leveraged higher? You know, you have a if a 100% debt to GDP. And over time, if we live in this land and you’re refinancing it for two, four and a half percent and you’re growing at 2%, your federal deficit is ticking up. And then you layer on lots of potential spend issues which are defense spending, globalization, green economy, transition. So there’s a lot of spend that has to come into play unless you believe the economy can grow at that same clip. So implications for investors over that. I agree with you that we’ve talked about the deficit for so long. I feel like from the beginning of our careers, but it does feel like something’s different in this great environment. How do you think about that in terms of the implications for investors and what they need to be thinking about? Yeah, I mean, I think part of it is sort of this equity equity credit piece of the pie, right? So, you know, when we lived in a four and a half percent ten year environment fleeing financial crisis, 2008, 2008, and the S&P was trading at 14 and a half times forward multiples. We’re living in a four and a half percent. The S&P for 18 times forward multiples. So I think equity credit is one sort of decision point in the tree. And then within credit, I think there’s a lot of places to go. I would say on this theme, you know, we’re not huge fans of taking too much risk because you don’t really need to own the tail risk of defaults because the recovery piece of it can really hurt. Sure, you. But go ahead. Are you guys going to do an IPO? Oh, my gosh. Let’s say yes on your your opportunity next, Carol. All right. Remain. You finished? You tried. Her name is great to have you here. And maybe we’ll get an answer to that last question from David. Name a period H-e-b’s Investment partners helping us kick us off to the close today. Carol Massar had to do with our special time. I know it’s such an interesting environment in terms of firms figuring out where they want to go as well. So a lot going on it. Let’s get an update on the markets. A lot going on. Let’s head back to New York. Here’s Tim standing back next. I like that answer. I think I might say that next time you ask me something. Carol. Hey, good morning out there in Beverly Hills, guys. Stocks higher this afternoon in New York, heading to their best three day rally so far this year. The S&P 500 is higher right now on the day by more than 7/10 of 1%, led higher by shares of video Microsoft, Eli Lilly and Metta Platforms. Though on the other side, you’ve got Apple shares down more than 1%. This after Warren Buffett revealed at the Berkshire Hathaway annual meeting over the weekend that he’d cut his stake in Apple. That said, he did say that unless something big changes, Apple will remain Berkshire’s largest investment. So after Vanguard and BlackRock, Berkshire is the largest shareholder in Apple with over 5% of shares. This according to Bloomberg data. The NASDAQ 100, though higher as we speak right now by about 8/10 of 1%. Small caps, though, the outperformer, the Russell 2000 higher right now by more than 1%. We do see on the Treasury front, yields down across the curve the yield on the ten year Treasury note lower right now. We’re also keeping an eye, though, on the Israeli shekel, which trimmed earlier losses after Hamas says it had agreed to a cease fire proposal put forward by Qatar and Egypt. As for economic news today and this week, we’re a little light on the economic data front. We do get wholesale inventories on Wednesday and University of Michigan consumer sentiment on Friday. We’ll also hear from a handful of Fed speakers this week, including Minneapolis Fed President Neel Kashkari tomorrow, and the Fed governor Lisa Cook, on Wednesday. And we are not yet done with earnings season on the earnings front. After the bell, we’re going to get earnings from Vornado, Simon Property, Palantir and Microchip Technology, among others. Well, we do have a much more coming up from our live coverage from the Milken Institute Annual Global Conference. I’ll be colleague Stein, the co-founder and CEO of Hunter Point Capital, is going to be joining us a little later. And then later this week, of course, we’re going to bring you all the earnings, including those from Disney, Airbnb, Uber Technologies and more. We’ve got much more coming up from the Milken Institute Global Conference in Beverly Hills, California. This is Bloomberg. The Middle East and Africa. Vibrant resources and high yield investment opportunities abound. Join me on Horizon, Middle East and Africa for the stories, newsmakers and insights from this exciting region. Call me on Bloomberg. Welcome back to our live coverage of the Milken Global Investment Conference. I’m Romaine Bostick alongside Carol Massar. A big focus today here on debt financing, which remains more difficult than it was in years past. That means private equity funds are getting a lot more creative. Increasingly, selling minority interest in their general partnerships or a stake to other alternative asset managers. One of the newest and fastest growing firms in this space is hundred point capital. With just a few weeks ago closed a near-record $3.3 billion deal for a first time fund dedicated to buying stakes and other private fund managers. The co-founder and CEO of 100 Point, Abbey Kazakhstan, joins us right now here on the Milken stage. Great to have you here. It’s delightful to be here with you and great to be back. And Milken. Yeah, And it’s the energy here is pretty exciting here. I mean, money is flowing. I know the fundraising environment maybe isn’t as loose at what it was in years past, but the fact that you were able to raise $3.3 billion more than you had anticipated here seem to show there’s still appetite for this. Well, I would say it’s true that we raised more than we anticipated, but that’s all due to an incredible team we work with. And so I’m honored to be able to go to work every day with such an amazing group of people. But I want to step back for a moment to what what we’re really trying to accomplish in the two key themes that are driving our outlook every day at the firm right now. And the first is that we’re the only firm of our type that’s trying to build the next generation of leadership in alternative investment management. That’s across private equity firms, private credit, real estate and infrastructure. And some examples of those firms would be l catterton right dollar capital Vistry inflexion in Europe. So every day we go to work and we’re trying to build a portfolio of the next leading brands. When you say build up, that sounds like more than just an investment. This is more than just about cutting a check, right? That’s exactly what differentiates our firm. Okay, So we’ve really built a strategic model as opposed to just an investment model. And we’ve we have we think that’s what guys want in this environment. We’re calling that sort of stakes 2.0. And we’re trying to build a competitive edge by being more strategic than just providing capital to the next generation of investment managers. Why does it have to be something different? What is the goal here? How are you thinking about it and shaping that? It’s a great question. I think what investors are looking for in managers is differentiation and something special. So LPs are looking not just for what you can get at the supermarket, but what you can get at the boutique store. And so that’s really what’s driving, I think, a lot of what we’re doing in the upper middle market. So what is that going to mean in terms of strategy, in terms of maybe what these managers then do ultimately? Well, it’s very broad. Okay. So we are looking at some really interesting real estate managers, for example. And I’ll give you a most recent example. We invested in a group called Freddie Rice, which is, you know, the. Well, good. Well, Freddie is not yet a household name, but we think it’s on its way to becoming a household name as it’s really solving a social problem and trying to fix the housing shortage that we have for American families. When we talk about, though, fixing problems here, you’re not the only one in this space. There’s a lot of competition, right? You talk about differentiating yourself, having a little bit more handholding with the guys here. What do you see as your direct competitor right now? Are you going against the behemoth, you know, the Blackstones, the BlackRock, or the more like the Blue Owls of the world? Or do you see yourself more eye to eye with? I think our competition is really do nothing. So most of the guys we focus on don’t need to do this and it’s the ones who are opportunistic and are looking at some growth opportunity. L Catterton is a great example of that. There’s, there’s been a firm that’s been around for a long time. They already have a strategic partnership with LVMH. So in a sense they didn’t need anything from us, but they were interested in growing an area of their business where we had expertise in credit. Yeah. And so they chose us. So they didn’t have to do that. And I think the competition was do nothing. But I have to ask you about about the whole stakes of the business overall from your end. It makes sense from the other end, meaning those guys who are selling their stakes here. Is that not a reflection of maybe their own financing troubles or is that a misinterpretation? I would say that’s misinterpreted. We’re not interested in any firm that’s not doing really well. This is not a remedial strategy. This is about firms that are looking for growth and think they’re strategic partner. And in this case, 100 point capital can help them achieve their goals either faster or with a little bit less risk. And so they don’t need to do a transaction, at least in our case. But they’re looking for someone and they’re going to hold 80 to 90% of their firms after the deal. So they look at the totality of what they’re going to end up with and they think it’s better off with a partner than without. But it’s an interesting question because you do think about credit. Right. And I guess the thinking or the reporting has been that freeing up some capital to pursue some of their other objectives. Right. Their investment and financial objectives. Having said that, you do wonder it’s because they can’t kind of cash out their existing investor base. But I do wonder what you guys are doing. Is it providing another level kind of in the liquidity investing space? Well, that’s such a fantastic example. So Freddie has just completed an acquisition that they announced last week using the capital that we gave to them. So I think what you found over the past 10 to 15 years is that peers have realized that their businesses are capital intensive. So to grow, so they invest further in their funds to buy new teams, to start and seed new strategies order or to perform M&A in these, you need a balance sheet. And most GP’s weren’t equipped to have a balance sheet. Does the higher rate environment make it even more necessity, you know, necessary to be able to have this access to do this? Have you I’m curious how that plays into your thinking and your strategy or does it not impact it? Well, I would say the higher rate environment certainly impacts different kinds of firms differently. So for private equity firms, obviously that’s created a kind of molasses in the deal business that we’ve seen. But in private credit, it’s actually created boom times. So the higher rate environment itself is not really a driver. I would say there’s a select few firms that are opportunistic about how they want to grow. They have great support from their LPs and they’re thinking about the future of their businesses as businesses and not just as successive funds. I have to ask you about exit strategies. You are a closed on fund, is that correct? Correct. Large listing and you’re primarily generating your revenue off fee income for those folks who are invested in there. If they get to a point where they want to exit, can they exit? What are the options that they would have their various exit options available? And I would say the market is developing in this regard. So when stakes first started, let’s say 15 to 20 years ago, there was not much thought to exit and permanent seemed fine until some help said, it’s time for me to move on and how am I going to do that? We at one point were thoughtful about that in advance. And so there are various mechanisms for LPs to get out through a secondary transaction or potentially a refinancing. Over time. So I think that you’re going to see more and more of this activity over the coming years. Are you already thinking about a second fund raise? We are so focused on investing for our doing the best job we possibly can for our investors. We are we’ve made eight investments to date already in the current fund. Yeah, we got about 3.3 billion. We have and we’ve got a terrific pipeline. So we’re looking forward to continuing keeping our heads down and making sure we’re doing the best job we can. Is that a no? You’ll have to invite me back. We’ll talk about it later on. Are you going to ask him if he’s going to go public so that this time. I’ll be great to have you. So nice to be here. Thank you. Thank you. I’ll be calling sign over at one point a capital. And I’m really fascinated by the whole stakes because I am, too. Our next guest, Mark Little, really a pioneer in that space, but they’ve actually started to really expand. I mean, I was talking about the investment and and the real estate company. And of course, Blue Eye has done something similar. Yeah, I’d be interesting to do the comparison, but I do think it’s really interesting for those original investors and companies that want to free up some capital so that they can do other businesses in this environment. I think it’s interesting to have this optionality in terms of their procedure and strategy. And I feel like you’re seeing that. I mean, go back even just a couple of years ago at this conference, it was a lot more rigid in terms of the terms of these deals, what they were willing to talk about. Now you hear it’s a little bit more negotiation and there’s always like to tie back to private credit that really has provided so many different options for firms. So looking forward to it, I see the conversation that’s basically taking over the world. Yeah, it is. And the next conversation we’re going to have is, of course, one of those folks you were just talking about, the co CEO of Blue Owl, Mark Litt Schultz, joining us on the Milken stage in just a second with our special coverage here from Beverly Hills, California, Romaine Bostick alongside Carol Massar. This is Bloomberg. Welcome back to our special live coverage here at Bloomberg at the Milken Global Institute Conference in Beverly Hills, California. Romaine Bostick here alongside Carol Massar for the next couple of hours here. And with more than $170 billion in assets. Our next guest runs one of the largest private lenders in North America. Blue out. The firm is best known for taking stakes in asset managers and offering direct lending to companies backing some big firms along the way, including Robert Smith, Vista Equity, as well as Tower Brook Capital. Wealth Mission, though, has broadened as of late with acquisitions tied to real estate and insurance. The co-CEO of Blue Owl joining us right now, Marc Rich. So it’s great to have you here on the melt. Great to be here. Let’s talk about those recent acquisitions. Not a terrible surprise, but certainly a shows maybe a broader look that blue eye was taking out the industry. Right now, it’s a continuation of the blue collar strategy. Look, our DNA is pretty straight forward now. We’ve gotten large but very focused. Our DNA is about delivering lower risk alternative products. That is to say it’s about protecting the downside and generating really attractive returns generally with an income component for our investors. That’s really the product suite we have. And when you look around that access, that solutions provider is the way we we provide capital to deliver that for our investors. All of the things we’ve done wrapped very tightly around that core and the importance of generating income, as you say, kind of ties in to the insurance deal. Right. I mean, this is basically, I will say, a new market, but for a lot of folks, there are fine alternative asset managers really starting to wake up to what you can get out of the insurance base, out of annuities. Exactly right. So from our point of view, having I mean, started nearly a decade ago and with our business, we had two things we did really early on. We very early on worked on this focus of take in private credit from being a lender of last resort to lender first choice. And we did that by creating pathways for investors, institutional investors, and then we were very early and pioneer in the wealth opportunity individuals participating as true peers. Insurance is the third. Insurance is that third leg that allows us to tailor an access point for people that likewise want durable income inflation-protected solutions. At the end of the day, that’s what private credit is. It’s about creating durable solutions that generate an inflation protected income stream. We’re going to ask you, everyone is chasing the insurance industry to help them put that money and cash to work. Having said that, regular regulators are a little bit worried. Why shouldn’t we be worried about that and the involvement of private credit? So blog is helping solve exactly perhaps that question, that quandary. Look, I think there’s a lot of wonderful protections built around the insurance industry as it is, and there’s a lot of regulations built around what all of us do in this ecosystem. With that said, I should highlight the law’s approach. And part of what took us a while to take this step with regard to insurance was finding something was really distinct. And what for us is distinctive is we’re not getting into the insurance business. In fact, our partnership with Cover is allowing Cover to refocus all their time and energy on liability management and insurance and not on the asset management side, and allow us to focus on asset management and not bringing ourselves into the insurance business, which is not our core competence. So it’s actually going kind of the other way, which is why don’t we all do what we’re really good at and focus our time and energy in that spot. Having said that, what are the conversations that you’re having with the there about how they want to see that money managed? That’s what any good partnership looks like, right? It’s a dialogue. It’s about working together on a common goal. And the beauty of that DNA I talked about with Blue Owl, our DNA is built around risk reduction, stability and principal protection, but together we tailor What’s that? What’s that model, what’s that allocation look like? And then they say, Listen, your job and hopefully we are good at asset management. You go do that so we can be the best insurance company out there. So it’s really a very wise strategic choice I think, that allows them to do what they’re great at and allows us to do what we’re great to talk about. The relationship right now that we’re seeing with private credit managers, alternative asset managers and the more traditional banks. So people often like to set this up as a competition. What’s happening in these in these fights? And I actually think that that misses the more complete and important underlying principle, which is we in this country, global, but this country has the most vibrant capital markets there are. And we need liquid markets and we need private markets. And a lot of people like to argue about, you know, although the pluses and minuses to every, you know, hammer everything looks like a nail. But the truth is to have a vibrant economy, you need durable private solutions. And there’s a big role that we provide. And you need durable liquid markets. And there’s a big role the liquid markets provide is the private side. Is that providing the liquidity to the public market? The private side is providing the durability to the market as a whole. I’ve been in alternative investments for nearly 30 years. And you go back 30 years ago, the alternative investments wasn’t even a term. Private equity wasn’t a term, but say, elbows or other things like it. Highly opportunistic, right? It was market. Public markets would do almost everything. And then we’d shop and do one thing and disappear shopping. Do one thing just for we were the opportunistic market. 30 years later, it’s flipped the private markets. Well, we do. We’ve been providers of capital all through Covid, all through when the Ukraine war started, inflation raged when we had problems in the regional banks every step of the way. But all provided credit and the public market is the one that’s become the high amplitude in and out provider. Do you really feel like the private markets have been tested yet, especially if you think how much they’ve grown in just the last couple of years? They have been tested and this is one of those, hey, you never know sort of arguments that I’d say the antagonist sometimes like to make. We do know we have decades of information on credit performance. The difference this time versus any other credit moment is we as private lenders have long dated capital. So we will not have the liquidity mismatch that has often driven credit market problems. We’ve done more underwriting, We have stricter credit documents, we have lower loan to value. The one thing I think we can deduce from all the data, private credit will hold up better during the next downturn. So, okay, but you know, nothing’s perfect, Mark, and you’ve seen a lot of investment cycles where we say everything’s fine, everything’s fine. Who what areas of private credit will get into trouble, in your view? Nothing is perfect for sure. We’ll be the first ones to acknowledge that. I’m sure I make a lot more mistakes than I do. Right Choices. But what I am describing, I think, is an ecosystem that is durable, that is about matching long term investors with long term uses of capital. At the end of the day, the real problems come from mismatches of liquidity. And here in the private markets, what we’re doing is matching long term commitments of capital to long term uses of capital that’s inherently more stable. That doesn’t mean returns in every asset class will be good. There are clearly places that are more economically sensitive that I would imagine everyone would be more cautious about. There are places businesses that are more exposed to the geographic or the geopolitical risks we face today than others. Those are risks. I’ll tell you that as our business, we’ve done almost $100 billion in loans and what our losses have been since inception seven basis points a year. Now, it can only go one direction from, you know, nearly zero. But the point is, this model works over the time. Doesn’t mean every person will work, every manager, every asset class. But the ecosystem of private markets are additive to the financial markets about that ecosystem. And not to pile on. But just to piggyback off her question, we’ve also seen a lot more deals when on terms of the liquidity side where it’s basically one private asset manager selling or buying from another private asset manager. That wasn’t always the case. We had much more of an exit strategy that took these companies and these deals into the public market or into bigger banks. Why is that not still there? Because the private markets have gotten bigger, deeper and more reliable. And so people are often saying, you know, the cost of being public, the quarterly treadmill, the daily treadmill in a market where things trade on there and see there, I mean, you know what’s going on because you have the books. But for those investors trying to peer in and figuring out whether they want to be here, is that transparency there? Well, on the credit side, the transparency is very high because we run, as you know, BDCs, business development companies every quarter. We literally file a list of every loan we make. So the transparency in credit, private credit is higher than it is in the banking system. You don’t know what’s on the bank’s books, you know what’s on our books. But in the private system writ large, there’s no doubt a tradeoff between liquidity and the return opportunity is a tradeoff between transparency, which is a very positive word. I like transparency, but what I don’t like is people having to make quarterly choices versus making long term commitments to build better businesses. So all these things, to your point, nothing’s perfect. It comes with trade offs. One has to assume that bad private credit managers will go out of business if they’re not making good deals for their investors. I do want to ask you something, though, that you said on the call earnings last week. You guys, private credit firms are in good shape to withstand a sharp rise in loan defaults, despite fears that the young market has yet to be tested by a serious economic downturn. That’s when will ultimately see the health or the problems in private credit that we’ve got to have. What, a recession or something? Well, let’s let’s hope we don’t. But I think we should all plan for one. That’s the way we operate. Listen, we live in a downside focus world, but I’m saying yes, so to speak, This the the elimination of managers that aren’t doing a good job will come from that shakeout. I think we already can conclude the market writ large will be durable. The capital structures are sound, the borrowers are sound, and the responsible managers are doing a good job. But of course, indeed some managers will prove that they were very marginal and they will be shaken out of the system. But with regard to that competition and to bring up the conference call, I think you said this on the conference call as well. You gave this analogy of. Sort of being a car on kind of a northbound highway and that that offered some degree of differentiation from your competitors. Explain that to me. So our business is focused, which is to say that we’re not as broad, we’re not trying to be all things to all people. We’re trying to be a handful of things that match that DNA imprint. I talked about lower risk products, strong returns, strong income, and do that by being a partner, a solutions provider to the other alternative firms, to the firms that you mentioned when we started to the insurance partner. We have to wealth investors that are saying, look, I need something durable in this world, something special. So we’re we’re looking at a series of lanes, not a single lane, because risk to a single lane because when you have one product and see the world through one lens, we have multiple lanes, but they all tie together as important for us to be the lead car or a lead car in those lanes. But that narrowness here, you think that’s going to work to your advantage, particularly as you scale? I mean, you guys are a behemoth now. You’re not the new kid on the block and you know, you’re going up against, you know, the big gorillas now who look at you and they see you as a threat. You know that, Mark? Well, it’s kind of you to say to that. I you know, I look at our still in a very focused fashion. We are. But listen, in what we do, we’re very big. And when I talk about that northbound lane, the difference is I could take all my time and energies and go all directions in the compass. And I worry about that. Not something we’re going to do. We’re on northbound lanes and the result of that is we’re very big. We are the number one provider of strategic capital stakes by a country mile to stay with kind of the metaphorical lanes to build out lease real estate. Same thing by a country mile in London, one of the biggest few. So look, we lead those lanes. Yeah, it’s just we’re not trying to drive on every lane. Yeah. Did you ever, ever imagine this is what the lanes would look like? 30 years ago, we would not have known as a country road back down. Now I’m talking about this at KKR. Dreaming perhaps. All right, Well, you’ve come a long way. A blue owl has come a long way. And of course, the entire private capital just come a long way. Mark Lipschultz. All right, Blue Owl, thank you for your time here on the Milken stage. I think what’s interesting in talking to Mark and others is just the spread of private credit so that you think if when we do a downturn of some sort and there is some risk that it’s going to be spread out and then hopefully not problematic to the overall financials. And that’s the argument right there. Absolutely. That this has been, to a certain degree, a natural diversification of some of that risk, whether regulators buy it or not. That’s a whole nother conversation. All right. We’ve got a lot more coming up here from the Beverly Hilton in California, a live on the Milken stage. But we want to kick it back to New York, where your colleague and my colleague to some scientific standing by with an update on the markets still. Hey, thanks, Carol and Ramon. Well, investors certainly aren’t seeing any problems in the financial markets today, seeing quite a bit of buying to start the week. In fact, stocks heading to their best three day rally so far this year. Right now, the S&P 500 higher by 8/10 of 1%, the NASDAQ 100 higher by 8/10 of 1%. And we’re seeing yield on the ten year down two basis points right now. The best performers in the S&P 500 today include Micron in video and KLA Corp Micron higher after Baird raised the stock’s rating to outperform from neutral. On the other side, Amgen down by nearly 4% After last week, investors piled into the stock in search of the next obesity drug payout. Remember, shares surged 12% on Friday. It was the biggest one day jump for Amgen in nearly 15 years, fueled by fresh optimism about the company’s future in the lucrative market for weight loss drugs after upbeat commentary from the company’s CEO. All right. Well, Smallcaps today are certainly the outperformer, though. Nasdaq 100 higher by 8/10 of 1%, the Russell 2000 higher by more than 1%. We are seeing yields down across the curve. The yield on the ten year lower by a couple of basis points, 4.48% is the yield we’re seeing. Also keeping an eye on the Israeli shekel, which trimmed earlier losses after Hamas said it had agreed to a cease fire proposal put forward by guitar in Egypt. We’re going to pick CPI, retail sales and more next week, though we’re a little light on economic data. This week, we are going to hear from a handful of Fed speakers, Neel Kashkari tomorrow, Fed Governor Lisa Cook on Wednesday. And honoring the earnings front, we got quite a few after the bell tornadoes, Simon property, Palantir, among others, coming up from the Milken Institute Global Conference. We have Pooja Goyal, Infrastructure Group, CIO at Carlyle. This is Bloomberg and. Welcome back, everybody, to our live coverage of the Milken Global Investment Conference. I’m Carol Massar alongside Romaine Bostick. Well, global investment in the low carbon energy transition surged 17% last year, reaching $1.8 trillion, according to Bloomberg. NEA This number is a new record level of annual investment. You bring up the topic of artificial intelligence and all the energy intensive power needed to do all that computing, and we are once again reminded of the ever increasing need to power our world and the pressure to do it in a sustainable way. One player involved in this, and more broadly in infrastructure is the global investment firm Carlyle. Let’s bring in Pooja Goyal, partner and Chief Investment officer of Infrastructure Carlyle. She is also co-head of the Carlyle Global Infrastructure Opportunity Fund and head of Renewable and Sustainable Energy. So you are the perfect person to talk about this. How are you? I’m doing well. Tell us about this face. It does feel like there’s a lot going on with bring up. I mean, energy demands are just magnified many times over. Tell us a little bit more broadly about kind of the investment needs in this space. Well, you know, what you are seeing right now in the infrastructure space is a significant shift in the demand for hard assets or infrastructure assets. You know, take Milton, for example. You have some fantastic macro content here. The opening session this morning was with the IMF. And guess what? In the first 3 minutes you were talking about energy transition and the session actually concluded, talking about energy security and the supply chain. So if you take a step back, you’re in the middle of an energy transition, which is a supply side dynamic. Compounding that dynamic is now this new demand for energy. What we are seeing at the micro level is actually very consistent with what you are hearing about at the macro level. There’s a real convergence that’s taking place between this asset light, high growth, very glamorous technology sector suddenly converging with this capital intensive development cycle oriented infrastructure sector. All of this investment in technology and AI is going to require a significant amount of investment downstream in data centers as well as power generation capacity. It’s amazing how it has upended the technology space in terms of capital intensity. Having said that, all the power that’s needed to run artificial intelligence and all the computation that’s needed, can we do it in a sustainable way or we’re going to have to rely on some of the old fossil fuel burning, if you will, ways in terms of energy? Look, we tend to be very thoughtful as we think about investing in the energy transition at Carlyle. In fact, one of our chief energy strategist, Jeff Currie, has recently published a lot of research on this topic as well. And Harvey Schwartz this morning also said that, look, we have to be very practical as to how we approach the energy transition. You can’t just flip a switch and go green immediately. We have a thesis driven approach to investing at Carlyle, and we knew four or five years back that there was going to be a significant demand for clean and sustainable energy sources. We actually didn’t like any of the existing investment opportunities that were available in the market. So any of the incumbents, we didn’t like how they were organized to take advantage of that growth opportunity set. So guess what? We started our own company from scratch, right? It’s called Copia Power. We started with four employees and as of the first quarter of this year, we are developing 20 gigawatts of power generation capacity in the U.S.. What’s interesting about this company is not only generating power generation capacity, it is actually building that capacity in areas, but you can also develop green data centers. So now you’re talking about a paradigm shift. You’re talking about locating data centers to where you’re actually going to produce power. And that’s the forward thinking that you tend to see in the private markets, in the private equity infrastructure equity space. The Copia deal was a big one and it got a lot of attention. You can’t do what you do, whether it’s that deal or the other ones without an eye on regulation when it comes to regulation and how disjointed, disjointed regulation is around this country when it comes to power generation and power sustainability here. How do you navigate that? Because you’re trying to sort of build something that in one state might be different than another state when federal regulation that could easily change, I don’t know, a year or two from now. I think you’re so spot on, which is why you need to focus on the micro and you can’t just simply focus on the macro. Look at investing in these kind of infrastructure assets requires time, patience, but a lot of deep sector expertise. You know, regulatory insights is one thing you need to have capital markets, expertise, development, expertise, permitting, procurement and obviously commodity markets expertise as well. The view that we take at Carlyle is that you have to work in collaboration with your regulators as well as your public and private sector participants. It has to be a collaborative approach that has to be with policymakers as well as utilities and grid operators. Remember, that is a significant bottleneck right now. You know, you’re hearing about transmission constraints even for the buildout of new data center capacity. But we just have been very good at working hand in hand with local constituents, as well as public market stakeholders that have an important seat at the table. One fantastic example of that is how we’re redeveloping the international terminal at JFK Airport. You know, I flew out of JFK last night a lot better than we have. I have to thank you and we all thank you. And look, it requires patience. It requires a lot of capital. This is a project we got involved in in 2019. And we worked with the Port Authority of New York and New Jersey through the pandemic. That was incredibly challenging. And today you have a new terminal that’s getting built. It is the international terminal at JFK Airport. But yes, you absolutely need to have those insights, but you also need to be practical and you need to be humble and you need to approach those projects in that way. A little bit later, we have to ask you what you can do for LAX because they need some help out here. In all seriousness, though, when I hear about the project JFK reboot Copia, you talk about the complexity of doing that, but part of that complexity is also you’re exposing yourself to a lot of supply chain risk. And we know that supply chains have been disrupted a million times over over the past four or five years, from the pandemic to the trade tariff wars and everything else. How do you deal with that? So we actually think it’s an important tool that we have in our toolkit at Carlyle to drive value creation and our portfolio companies. If you think about infrastructure as an asset class, what are the levers you have to drive economic outcomes? Building your assets as cost effectively and efficiently and on time as possible is important. So managing that supply chain, both from a cost perspective as well as certainty of time perspective is important. We have some very good strategic relationships globally and the supply chain is a global supply chain. I think it’s very easy to say that you’re going to onshore the entirety of your supply chain. It depends on how further upstream you go in your supply chain. So you have to be very strategic about it. And we think that it’s an edge that we have right now. How much is politics play into all of this? And I think about the upcoming November election. Does that change anything in terms of the sustainable investment initiatives that certainly the government has had its hand in it pretty aggressively, or will the public or will the private markets and private companies just continue that march towards more sustainable energy uses? How do you see it? It’s a completely fair question. Look, the Inflation Reduction Act was extremely meaningful, but you cannot call all politics the same. You have federal policy. You also have state specific policy as well as mandates. And look, we have fantastic insights for headquartered in Washington, D.C. We work very closely with our stakeholders, and those include policymakers, both at the federal level as well as the state and local level. What I go back to is the fundamental issue. There is a need to invest in this infrastructure. That demand is coming both from the private as well as public sector. That simply isn’t enough public policy or public capital that can actually fill the gap. There’s plenty of room for private capital to actually play a very important role here. And candidly, when I take a step back and I always think about, you know, relative value comparison between what you’re seeing in the public markets right now, when I’m talking about equity or the credit markets right now versus the results you can achieve in private markets, I actually think that private equity has a very important role to play, yo. Simply because we’re not managing outcomes to a quarterly basis. We have the ability to be patient as well as strategic with our portfolio companies and drive the right outcomes. All right, Pooja. All right. This is now a time for the big, broad questions. Normally Carol does this, but I’ll pick it up. I gave it to you. Thank. Thank you. What is kind of the big risk, though, that you’re focusing on over at Carlyle? I’m talking about longer term. Look, I always tend to approach everything from a commodities market perspective because they’re just important trade. Even if you think about what could be a constraint, all this investment that’s going into gender of AI and technology. It’s commodity. It’s energy. So being long energy is incredibly important from our perspective. But what could cause disruptions in energy markets? Obviously, weather related batons, but obviously geopolitical uncertainty as well. So that is a dynamic that we’re very focused on and that can happen, have an impact on supply chains and ultimately even monetary policy. So we’re very focused on all of these variables as we think about risk management across the entirety of a portfolio. All right. We’re going to leave it there. Alison, thank you so much. Really appreciate great overview in terms of what’s going on in the space. Would you go? Of course. Infrastructure Group chief investment officer over at Carlyle. Thank you so much. Thank you for having me. Great vantage point. Yeah, I mean, I love and I think, you know, it’s funny, you you mentioned the JFK. I mean, we both are in New York. We’ve flown out of JFK. We know how important these projects are, right? Absolutely. You think about all of the airports in the tri state area that have really gotten extreme makeovers in the last couple of years. It’s pretty remarkable how far they’ve come and the need and I’m thinking about outside Washington Baltimore and that Francis Scott Key Bridge. I mean, you know we talk about the importance of infrastructure what you. Needs to be done. All right. Well, coming up, everybody, Dana DeLorenzo, Guggenheim Investments president, this is Bloomberg. We’re live from Milken, Carol Massar Romaine Bostick, and this is Bloomberg. Welcome back to our special coverage of the Milken Global Conference here in Beverly Hills, California. I’m Romaine Bostick alongside Carol Massar. We are broadcasting live on TV and radio Carol Massar The countdown to the close. That’s right. We’ve got the close. I forget we kind of get Pacific Coast time and forget that we’ve got about an hour to go. We’ve got a rally underway. But I have to say there is it’s packed. I haven’t seen milk in this, packed in a while. And it feels like there’s more of an upbeat outlook than where we were a year ago. Just coming off of the regional bank concerns and crisis. Still talking about recession. Does it feel like anybody’s talking a lot more optimism? There was a lot of defensiveness last year, but definitely a lot more optimism this year around. And you brought it up here, the crowd here, I mean, probably the biggest we’ve seen since the storm, since prior to the pandemic. We just got in line up for David Beckham. Beckham, Beckham, bacon, Beckmann backing Beckham. I can’t I never say it right. I know who he is. Yeah, but there was a lineup. All right, We’re going to let Carl Law practice. Hello, Linguistics. I should know. Meanwhile, we’re going to continue our conversation here about the world of investing. That’s where we focus much of our attention. And often we focus our attention on the money managers themselves Carol Massar, but less on the people actually managing those money managers, if you will. The people at the top with investment companies really trying to stay in sync or even ahead of massive changes to our economy and to markets. It’s always good to get that view from the top, from the people managing the entire operation. And one of those people is none other than Deal dealer Dina DiLorenzo. See, now I’m doing the right thing. She’s president of Guggenheim Investments Asset Management and investment arm of Guggenheim Partners. Dina, great to have you here on the milking stage. Hi, everyone. You’re right. Look at how exciting this is. So I thought that line around the block, around the corner here was for you. But anyway, you’re probably actually, I did have a 7 a.m. panel, so yeah, it could have been four. Maybe. You did a big panel this morning. Yeah. On the so-called bridging the gap between vision and action with three wonderful female leaders. Yeah, Desiree Gruber, Anastasia Suarez, and Dawn Ostroff. We were oversubscribed. It was really exciting. And it was a good kickoff, you know, And I was really happy that people were willing to come out so early in the morning. But, you know, us East Coasters. Yeah, we’re okay with that. So did you solve the problem? How do you actually bridge that gap? Well, I mean, we had some great advice was really about telling your story. Right. And being able to tell your stories in a way that others can repeat it and we’ll buy into it and help you facilitate. And sometimes finding that that those sponsors. Right. Will facilitate the strategy and then lead to execution and listening to the stories of these three fabulous women, you know, during this moderation, it was really interesting to hear how they each had different journeys within their career path. It was it was great. Everybody really enjoyed it. Always helpful to hear, right, in terms of how they did. I can’t hear you because my mike came up. But this is I think this is a thing with you and I whenever we meet. Yeah, the mike. Yeah. We should point out, Dana and I, we did an event last month and same thing. We had all kinds of microphone issues and then we got through it, so we got to power through this. Yeah, we went and we brought you on because we really want you to talk about what it’s like to actually run an asset management business from the business side, the people we’ve met, we’ve talked a lot about II, how that’s replacing some functions. We’ve talked a lot about the need for more staff, particularly as clients have greater demands. What are you hearing? Well, first of all, I love being the president of Guggenheim Investments. You know, asset management is just part of it, but it’s really working with all the different, you know, people that built the firm for a long time. And one thing that, you know, people don’t know about Guggenheim Investments is that our employees, the average tenure is approximately nine years, and we’re a relatively young firm. And I think that speaks volumes about the culture of our organization. We hear so much about one firm trying to poach the talent from another firm. I assume you still have to deal with that, right? Yeah, you always do. Right. But I think that creating, you know, a variety of different programs for your employees and having them be invested in what you do and making sure that the mission is is shared and aligned. You know, people want to be there, a part of it. And, you know, right now we’re seeing tremendous momentum in the fixed income markets. You know, we we manage approximately 320 billion in assets across multiple asset classes, but predominantly fixed income. Private credit is one of our areas of expertise. As you know, it’s a hot market. We’ve been really busy innovating products as a response to our clients needs and that particular investment class. And, you know, we’ve seen a lot of inflows this quarter, almost 2 billion predominantly in total return and macro opportunities. And last year our performance and total return was 200 basis points over the benchmark. So we did really well with regards to the offering, although strategies of those products. I mean, traditionally you’ve been much more wedded high net worth folks, institutional folks. Are you sort of moving down the ladder a little bit in terms of the type of client the. I have a potential client that you would welcome into the fold. Yeah. So, you know, my background was predominantly I used to be a partner of a wealth management team. I used to oversee wealth management for Guggenheim when we had that business. And a lot of my relationships in the wealth management channel had approached, approached me and said it would be really great to have access to Guggenheim expertise, not only in the mutual funds, which we are big supporters of, but we’d love to be able to access those core strategies in separately managed account formats. So as a response to that and listening to our clients, we are launching probably around the third quarter of this year to strategy is into the financial advisory channel for a plus and limited duration, which we think captures, you know, our capabilities in that space. Yeah, depending on the duration needs of the clients. How where are those clients coming from? Are they primarily, geographically speaking? Are they primarily in the U.S. or are they obviously they’re primarily in the US, but we do see a lot of interest from our Middle Eastern clients, our clients in Tokyo as well as the Middle East. Does the interest rate environment change that demand at all? Well, I think that right now, because you’re looking at a potential, you know, the easing of the rates. Right. There’s a lot less risk received in the fixed income markets versus equities. And I do think that we’re starting to see an uptick just by virtue of the flows I just told you about and the AWAM growth that we had from the end of 2020 to 285 billion were at 320 right now. So, you know, I think that says a lot. All right, Dana, great to have you. A nice view here of the asset management industry. Dana DiLorenzo over at Guggenheim Partners. All right. We’re going to get an update here on the markets. Girl, do you have something to say? No, I’m okay. All right. That’s really interesting. I love hearing about the culture of different firms, especially a massive firm. And it’s really important when it gets to be so big and the importance of remembering the people that do it all. Yeah. And just a behemoth of a job really trying to that many people on that much money. Let’s go back to New York here. It’s incentive extended by with an update on where we stand as we count you down to the close. Hey, good afternoon, Carol and Ramon. I’m keeping an eye on shares of Boeing. This after The Wall Street Journal reported another another investigation into what’s going on over at Boeing. This one about the 787 Dreamliner. We’re seeing shares move sharply lower for Boeing, down 1.4%. This again after a headline from the Wall Street Journal that says the FAA probes Boeing 787 inspections, possible false records. We’re also seeing shares of Spirit Aerosystems move lower on the news as well. Taking a wider step back, though, and looking at the markets, we’re still seeing some buying to start the week. Stocks are close to their best levels of the day with the S&P 500 up 8/10 of 1%. The NASDAQ 100 higher by 8/10 of 1% and the Russell 2000 higher by 1.2%. Right now, stocks are close to their best levels of the day as a result of some optimism about what’s going to happen with the Federal Reserve. And if we saw a little bit of dovish ness last week from Fed Chair Jay Powell, I also keep an eye on shares of Tyson Foods. This is because the company reported earlier today that there are some chicken production headwinds right now, ongoing beef challenges. There’s a pressured consumer. We’re seeing shares down by 6.8% on Tyson Foods. Finally, geopolitics certainly front and center, keeping an eye on the Israeli shekel, which trimmed earlier losses after Hamas said it had agreed to a cease fire proposal put forward by Qatar and Egypt. Finally, keeping an eye on what’s going on with earnings after the bell, because we are not done yet, guys. We’re going to get Vornado, Simon property, Palantir, microchip Technology, among others. We’re going to bring those numbers to you live as soon as they cross. Carol, back to you and remain at the Milken Institute Global Conference. Well, capital invested in health care and science is going into betting on a single asset where the odds of success are pretty low. Rather than transformative ideas like messenger RNA. So says our next guest. You did that at Bloomberg’s new economy forum that was held in Singapore last November. He is, by the way, the co-founder and chairman of Moderna. We’re talking about Noubar, a fan. He’s also the founder and CEO of Flagship Pioneering, which has done a lot of things, including developing more than 100 scientific ventures, resulting in over $100 billion in aggregate value, thousands of patents and also patent applications, and more than 50 drugs in clinical development development. Excuse me. We welcome him here at Milken. Great to have you here with us. How are you? I’m doing well, thank you. Thanks for having me. We want to start with Moderna and we’re going to broaden out a little bit. But what do you think of Moderna in terms of its future? The company is certainly been cost cutting, kind of trying to find its way still after the pandemic, where it really was just on fire, as you know, in terms of the performance and the demand. We’re in a different environment. How do you think of modernity going forward? Well, look, there now was a company that was already ten years old when COVID hit our shores. And while the world didn’t know about it, there had been a lot of investment made and platform development to be to be able to serve lots of vaccine and drug needs. We had not anticipated a pandemic, but when that came, we basically pivoted the company to be able to rise to the challenge. And we didn’t know if it Marconi technology would work, but it certainly was ready to be tried. We tried it. We scaled it up. We went from 1000 to 1000000000 doses of something that that really didn’t have an impact. And during that time, we scaled up. We made a lot of investments and we knew all along that those would have to de-escalate and we would have to back into the platform we had already been developing, which today has 50 different programs in the clinic being tested in humans and three very late stage assets beyond just COVID. So it’s having impact on other infectious diseases like influenza, like RSV, very late stage. It’s also having impact on cancer. And the cancer is not just one cancer, but eventually we hope it will be many. So it’s a real kind of pharmaceutical company in the making. But importantly, the reason we can do all this at same time is that it really is the first class of information molecules that we can put in the body that can do different things. The way we instruct them and that we’ve never seen before. So where this goes really is a function of all the different tests that we’re doing, working with the FDA to get drug after drug vaccine after vaccine to the market where patients need them. Hey, I artificial intelligence. I know this is something that you think about, certainly in terms of drug development. Where do you see it all going and how does it help us in terms of future applications and future treatments and maybe even better ideas when it comes to treatments for individuals? So I has gotten a lot of notoriety, especially in the consumer or business space, as a productivity. And in our world, in science, I will be very different. It will be a way to augment human intelligence. We can come up with new ideas, new hypotheses in science by the thousands where humans has to come up with a few. We can test them through automated lab systems by the millions where we used to be able to do thousands. And that compresses the time and searches vast spaces for new solutions that it’s very timely because when you marry an information technology revolution like an AI, what an information molecule like RNA and others, suddenly you begin to be able to unlock what’s been a black box and how you develop drugs. Very low probability success. Two 3%. I think it’s going to increase significantly what happened overnight. It will be predictable which which one goes first. But I think over time we’re in for a period where we’re going to have much more effective drugs that are also more affordably developed and hopefully eventually more affordable society. Does that mean that it will be more cost effective using this technology? We’ve talked a lot about the cost of AI. The cost of these programs is the end cost to you or to whatever the drug developer. Is that going to be lower or at least more manageable? It should be in the sense that a lot of the cost in drug development has to do with the low probability of success. So every drug that makes it has to essentially subsidize all the ones that don’t. From any given platform, from any given research group. So the reason the pharmaceutical industry has tended to struggle with that is the low odds. If we can get the odds to be increased through automation, through convergence of I.T., that is a different calculus. So we have to ramp, But really great to get some time with you. Thank you so much. Our thanks to majority chairman and co-founder Umar Fayad. Coming up, Jeff Aronson, managing principal at Centerbridge Centerbridge. This is. The Middle East and Africa. Vibrant resources and high yield investment opportunities abound. Join me on Horizon, Middle East and Africa for the stories, newsmakers and insights from this exciting region now. Call me on Bloomberg. Welcome back to our live coverage of a Milken Global Investment Conference. I’m Carol Massar along today alongside Romaine Bostick. A lot going on and we’ve got a great guest to kind of give us the macro environment. New York based centerbridge investment plus private equity, Private credit real estate has about $37 billion in capital under management, 18 billion in P e, 16 billion in private credit and 3 billion in real estate. Just to give you a little bit of the backdrop, our next guest is a co-founder of Centerbridge and is participating in a panel here at Milken. It’s looking at how private investors continue to step in where traditional banks do not. Here to talk more about that is Jeffrey Aronson, co-founder and managing principal of Centerbridge Partners. Jeff, great to have you here with Romain and myself. Great topic. We talk a lot about this, about private credit helping out. The banks are stepping in. Step back first, the macro environment, because the last two years at Milken, we’ve had very distinct things, whether it was the war in Ukraine, whether it was concerns about regionals last year. What’s the environment this year? I would say economically, at least in the U.S., the environment feels pretty good. Economy is growing. The consumer, at least for now, seems to be in pretty good shape. And companies, I think, are generally prospering. If you now if you focus a little bit more on our world of private credit, it has been an excellent time to be in the space. And that’s because of one where base rates are, you know, spreads are good, but when the base rate is at five and a half percent versus 1%, that obviously makes an enormous difference in terms of yield. And second, I would say the willingness of companies to engage in a private credit solution now compared to five or even ten years ago. Drill down on that in terms of the types of companies that are looking to tap the private credit markets right now. Well, today I would say the vast majority of them have been companies that are subject of a private equity buyout. If you actually look at the vast majority of direct lending in the United States and private credit in particular, it’s been devoted to financing, sponsor buyouts. And we know that business really works really well because we’re also a sponsor. So we’re a big user of direct lenders in financing our buyouts. What we’re trying to do, at least at our firm, is to expand that envelope a bit and take direct lending from what up to now has been mostly focused on financing buyouts and trying to bring it to that vast majority of companies in the United States that have nothing to do with the buyout world. Well, so what does that look like then? What type of companies are there certain industries that are going to be more amenable to that and the offset in the onset? I don’t know if it’s certain industries, but if you think about the U.S. middle market and we focus on middle market businesses, I’ve seen estimates there are roughly 200,000 middle market businesses in the United States, only about 5% of them 10,000 companies, which is a lot of companies are owned by private equity sponsors. And again, these are estimates. But from our perspective, if you can bring direct lending and private credit to that, roughly 190,000 companies in the United States that have nothing to do with our world of private equity, private credit and Wall Street, that would be something different. In theory, those 190,000 companies, whatever the number is, should be going to a traditional bank. We know that necessarily there for them, but in an ideal world, that’s what it would have looked like in the past. Are you working with the more traditional banks now on expanding into that 190,000 space? We are, and I think those companies will continue to use the big that the big, big banks for the bulk of their financing needs. But there is going to be a subsection of those companies that are perhaps looking for a little more financing than a traditional bank would be willing to provide because of risk concerns or regulatory concerns, but not so much lending that they’re looking to do a buyout of their company. So we have an exclusive relationship with Wells Fargo, which is a leading middle market lender, United States, where we are effectively their private credit solution for Wells Fargo customers who are looking for something a little different than banks historically have been willing to do. What can you tell us if you guys have named the board on that partnership? What about the deployment of capital in it? So in terms of deployment of capital, literally we just activated the fund just time just recently. So we are we are doing that right now and bringing this product to thousands and thousands of Wells Fargo middle market customers that are looking again for something a bit different than the bank historically done. Do you anticipate doing this kind of formula, this partnerships with a lot of. Other banks? No, I think we’re good at what we are. We’re working with Wells. I mean, Wells is an enormous institution. And as as a leading middle market lender, United States, they have plenty of deal flow. So we’re going to stick with Wells. But I think I think other I think other banks and other firms such as ourselves will end up adopting a similar model. This may be a dumb question, but why don’t you think some of those bigger banks just create their own divisions to do this, rather than partnering with Centerbridge or some of the other competitors? It’s hard for me to know because I’m not working at those banks. But there are regulatory implications. Some banks have their own asset management divisions. That raises potential conflicts of interest. I think there’s a host of issues that a bank has to think about whether they should do it themselves. If so, did they do it on balance sheet or they do it part of asset management? Or do they work with a third party like ourselves? That’s something, though, that you, yourself and Centerbridge now have to start thinking about the regulatory aspect as direct lending and private capital just really exploded. You’re now having a lot more conversations out there about potential conflicts of interest, potential a lack of reporting requirements and things like that. How much of a conversation are you having to have about that? I mean, we think about it all the time. I mean, because it’s very much front and center. We’re highly attuned to conflicts. For example, we would never finance one of our own portfolio companies because I think that would just if it all worked, it’d be great. But in the event that it wasn’t working, well, then you’re caught in this terrible tug of war internally. What do you do? So we’ve just taken the posture. We’re not going to do that. Just, you know, the relationship of the Wells Fargo or any, you know, private credit firm that’s working with the major, one of the kind of traditional big banks. Does it automatically bring more oversight, more transparency to the private credit world in your view? I think it ultimately will. So we’re affecting our relationship with Wells through a BDC. Okay. And even though it’s a private BDC, it is registered, it’s registered, it’s registered with the FCC. So obviously we’re following every rule and there’s a lot more transparency with a registered product than a private product. We’ve seen several BDCs go public. The idea of expanding those offerings to a broader pool of investors, that’s something Centerbridge has is considering now. Right now, again, this is this is a new venture. This is a private BDC and we think that works well for us. Is there any sort of opportunity where, at least for you, where you would see a scenario where maybe you went down the client list a little bit more meaning from high net worth to maybe sort of high ish network? Is that an opportunity? I think it’s possible, but I don’t really see that over the near to the near to medium term. I wonder if we have just time real quick, 25 seconds here. Real estate. You guys also have real estate. Would you tell us that’s kind of maybe we should add to the narrative that’s out there about the real estate area right now? I think the sentiment in real estate, particularly commercial real estate, particularly office buildings, is so negative, it’s so awful that I am just attracted to it. It can’t be. It cannot be. It is it cannot be that every office building in the United States is like a poor investment. I don’t buy that. So it’s something that we’re thinking really hard about it, just as the sentiment is so poor but haven’t pulled the trigger yet. Haven’t pulled the trigger yet is the word yesterday. Stay interesting. All right. Thank you, Carol. I’m not going to pose. You got to get young. You got to go jump back. Yes. To that cliffhanger. So I appreciate Jeff Aronson of Centerbridge Partners. Thank you so much. That’s very great. Thank you. Yeah, it’s really fascinating. I love talking to all of these different individuals in terms of having their hands in different buckets. Yeah, I’m sorry. I’m just distracted by this long line that is now foreign. But the last time we had as long as David Beckham apparently was going to Posh. Posh must be coming up next. I have my own Musk is Romney and Grover to Elon Musk at 5 p.m. today. That’s right. Lot more coming up. We don’t have Elon Musk, but we do have the CEO of CIRCLE, Jeremy Elliot, going to be joining Outlook and really back in Focus. Remember years ago, Milken, they got rocked by the SUV crisis. Get back on top, though. We’re going to have a conversation with him coming up after the break. He’s watching the regulatory environment for a good reason. We’ll get the details. That’s coming up. This is Bloomberg. We are live from Milken in Beverly Hills. More to come in just a moment. I hear from the lobby of the Beverly Hilton in California. Welcome back to our live coverage of the Milken Global Institute Conference. I’m Romaine Bostick. I’m Carol Massar. A lot going on. Another lineup, I think the grand ballroom here for another conversation. I mean, they are jam packed in terms of the discussions they share. And we know it’s all about the financial markets in a big way. Everybody who’s managing trillions of dollars around the globe, it’s sports, it’s wellness. There’s a lot going on. A lot of celebrities Also making their way around is a lot different, too, because remember, we came in for the Milken Conference last year. You were dealing with the fallout of the regional banking crisis here in the U.S. There was a lot of concern about what the Fed was going to do next. I remember recession calls. People were saying 100% chance we get a recession in 2023. Things are a little bit dour. Yeah, it’s not the recession. It’s the recession that never has happened. I don’t feel like anybody is talking about that. I’m looking at our live blog here at Bloomberg. We recorded President John Williams earlier making some comments. Eventually there will be rate cuts. I love that. You know, yeah, this is kind of been the big narrative in terms of what happens for financial markets, what happens to the economy. Although I do feel like we brought up great discussions, but it’s not been dominating our conversation. So for a lot of these folks here, they’ll tell you it doesn’t matter as much. Obviously, a lot of their fees, a lot of their returns are kind of a little bit variable with rates. So I think a lot they make more money. Of course, there are broader issues about the health of these companies that are reliant on that financing and whether maybe something is sort of obscured. Anyway, we do want to check in on the public markets, Carol, because there’s a lot of enthusiasm there, too. I know, Jim. Some of it’s been keeping an eye on it. We’re just about 29 minutes until we get to those closing bells, Tim. Yeah, that’s right. Less than a half hour and continuing to see buying into the close. The Dow, the S&P 500 and NASDAQ near their best levels of the day, just off of those. The Dow right now higher by close to 2/10 of a little more than 2/10 of 1%. The S&P 500 higher by 7/10 of 1% and the NASDAQ 100 higher by 8/10 of 1%. I do want to talk about Boeing, though, and keep an eye on shares of Boeing. They were higher on the day by more than 2%. Then they moved sharply lower. This after The Wall Street Journal reported that Boeing faces a new investigation by US aviation safety regulators tied to inspections of the company’s 787 Dreamliner and whether employees may have falsified records. Boeing voluntarily informed the US FAA in April that it may not have completed required inspections of work involving how these 787 wings joined to the airplane’s body. This according to the FAA in a statement. This news overshadowing what is set to be a momentous day for Boeing, the company’s first crewed flight and a first of its kind test for the company and its rocket making joint venture United launch Alliance shares are going down by about 1.1% right now. Now, the Starliner space taxi with two now two astronauts on board. It’s expected to launch at 10:34 p.m. local time tonight from Cape Canaveral. And it marks the first time that United launch Alliance Alliance’s Atlas Rocket will launch humans into space. I’m also keeping an eye on shares of Palantir, the company set to report after the bell today. That stock right now on track for its fourth straight day of gains. It’s the longest winning streak since December. Shares over the last week goes higher by more than 10%. Back to you in Beverly Hills. All right. Thanks to Tim. They’re here. And we were just talking, Carol, about the mood last year. I remember that was coming off the heels of the collapse of Silicon Valley Bank. It really shook the world of finance and it shook the world of cryptocurrencies, including Stablecoin operator circle. But what a difference a year makes as the crypto rebound kicks in. Those crypto really rebound Stablecoins are now back in favor and Circle is back on top. Elissa Bernstein They’re actually going so far as to predict that the total value of all Stablecoins could reach $2.8 trillion by 2028. That would be an almost 18 fold increase in their combined circulation right now. Jeremy Allaire joining us. He’s the CEO and co-founder of Circle, which manages the Stablecoin USD. Jeremy, great to have you here on the program. Thank you. Great to be here. And you know, some of the optimism that we’re seeing around Stablecoins has less to do with stability coming out of the regional banking crisis, but about the embrace that we’re starting to see from a lot of the payments companies, whether it’s PayPal, whether it’s Stripe, a few others really saying not only do we want this, we need this. Absolutely. I mean, we’re really seeing this market developing not just in the U.S., but around the world. We’re seeing top global super apps like Grab. We’re seeing major Neobanks like Nubank in Brazil. You know, the most successful fintech of recent years in the United States. Stripe announcing that they’re rolling out usdc payment acceptance for their merchant base. BlackRock, who’s issuing a tokenized asset, tokenized, you know, government money fund enabling usdc transfers from that fund using smart contracts. So we’re seeing some of the biggest institutions in the world embracing usdc. There’s a lot of momentum right now, but I have to ask, why did it take so long to get that momentum? Because everything that’s going on with Stablecoins right now. I heard this story several years ago, but we never really saw the mass adoption. Well, you know, people always ask me, you know, when’s mainstream adoption going to happen? What are the things that are there? And I’ve always said you need regulatory clarity. You need the technology to become much more scalable and usable. Right. And then you need the people, the mainstream applications that people are going to be interacting with this through, whether you’re a business, accepting a payment or an end user. You need those to connect up to that. All three of those have been happening. We’re getting regulatory clarity on payment stablecoins all around the world and almost every jurisdiction we have a payment stablecoin act that’s at the proverbial one yard line here in the U.S. You’ve got the infrastructure now finally in a place where you can handle large amounts of transactions very inexpensively and you can kind of make the crypto of it all become something in the background so users can be interacting with more familiar products and applications as opposed to needing to know a lot of the technical jargon and complexity of what you kind of saw in the last cycles of this technology. Jeremy I so get it. Like if you build it, they will come. I get it. You got all the pieces coming in place. So what can you tell us about the velocity and the utilization of actually people using it and that volume building? Well, since we launched Usdc nearly six years ago, obviously it’s grown tremendously. The the amount of volume, the transaction volume. You know, we’ve handled, I think now over $14 trillion of transactions using usdc on on blockchains. One of the really key shifts, though, that we’ve been seeing in particular over the past couple of years has been growth in cross-border settlements. You know, this this ability to take a digital dollar transacted anywhere on the Internet exists. Small and medium enterprises, households, firms really seeing the benefits of this and leapfrogging kind of the legacy banking system to do that. So we’re seeing a lot more growth internationally. We often talk about this, but the significant majority of the holders and users of Usdc are not in the United States. They’re in markets like Latin America, Southeast Asia and other markets. And so that’s a really significant and valuable driver in the adoption of Stablecoins right now. Having a daughter overseas, yes, I could understand how it can make it much, much easier and cheaper. Having said that, the regulatory component of it reading over the weekend that there might be some stumbling blocks, you know, we kind of get so far it feels like sometimes with legislation and then don’t get across the line, if you will. What are your expectations and why the regulatory component is so important to your business and the utilization of it? Well, the first thing to note is, you know, we have always been a regulated operator. We’re regulated from sea to shining sea in the United States. We have major, you know, prudential regulators like New York. We’ve got regulators in Singapore, in the U.K., in the European Union to we’re a well-regulated company. But Stablecoin laws in particular are key because once you have those, then corporations, households, financial institutions will know how to use this, how to. Read it. So everywhere in the world. In major markets, there’s now stablecoin laws. In Japan, there’s now stablecoin laws in the entire EU. And in fact, the European Union is regulating digital dollars before the United States. That will go effective June 30th in the United States. The Payment Stablecoin Act. There’s been a huge amount of work on that very bipartisan, you know, the administration, the agencies across the aisle to everyone sees the critical need here across national competitiveness, national security issues and consumer protection. And so I think that’s there. It’s really at this point of when, not if. Yeah. And and what what’s the right legislative vehicle given that our Congress doesn’t have a lot of ways to put things in though. That’s what I’m curious what what when is the win I mean, I know you have some big champions in Congress. Patrick Henry’s obviously done a lot on this year, but do you think there is enough bipartisan support to move a bill soon or is it something where to still be talking about it now? You’re hearing, I think, very positive things from Senate leaders, from Senate banking leaders, from you know, there’s a lot of reporting on this. You know, and these are across the aisle. You’re seeing this interest, Republican and Democrat. So I feel like that’s there. And again, it’s just, you know, the complexity of of you know, what are the vehicles that that that become available for laws to kind of go into effect. That’s really where we are. I mean, one of the wrinkles and what Congress is sorting out, of course, is the idea that obviously stablecoins are backed by real assets. In this case, the. We’re looking like we’re having some issues with the connection out there in Beverly Hills. That was Jeremy Blair of Circle talking to Romaine Bostick and Carol Massar. We’re going to bring you back to the conversation with them in just a few minutes. In the meantime. Let’s check the markets as we do get into the final 20 minutes of trading here in New York. The S&P 500 higher by 8/10 of 1% right now. The Dow Jones Industrial Average higher. But we can go ahead and round that up to 3/10 of 1%. The Nasdaq higher right now by close to a full percentage point. The Russell 2000, though, that is the outperformer on the day today, higher by more than 1%. I do want to check in on shares of Boeing. It’s a story that I continue to follow. They move sharply lower after they are higher by more than 2.3% today. The embattled airliner right now facing a new investigation by U.S. aviation safety regulators tied to inspections of the company’s 787 Dreamliner and whether employees may have falsified records. Boeing did voluntarily inform the US Federal Aviation Administration in April that it may not have completed required inspections of work involving how the 787 wings joints to the airplane’s body. The agency said in a statement. Shares down now by 1.8%, moving sharply lower after The Wall Street Journal first reported this news. Again, higher by more than 2%. The shares fell as much as 2.8% after the news, which was first reported by the Wall Street Journal. We’re going to head now to an interview with Austan Goolsbee, speaking earlier with Bloomberg 175. Thousands of very solid report. The sum of the root of our of our frictions here might be there’s a it’s kind of a day traders timetable and there’s an economic timetable for setting monetary policy. Of course, you got to take a longer arc view on inflation, on employment. And we’re just trying to figure out after the excellent dual mandate performance of 2023, let’s call it where inflation fell almost as much as it has fallen on record, and it did so without a recession. How much can we continue that into 2024? We hit a bump for sure at the start of the year on the inflation front. And now everybody’s just got to take a step back and try to figure out, is that a sign that the economy’s overheating or is that a sign of some other thing? The more jobs reports you get like this where they’re solid, but it’s clearly moving back into something that looks like pre-COVID and conventional times, the more confident we can be that the economy’s not overheating. But we just got to we got to just got to watch this. You are one of the I don’t want to use the word dovish, but more optimistic people about the possibility that rates could be cut this year. How do you feel now? We do see this slow down. The ICM numbers show slowdowns spending numbers were lower than anticipated and lower than in the last quarter. Are we setting up to go back to the idea that rate cuts are going to happen this year? I don’t like to committing to in our hands of even for the next meeting, much less when it comes to the fall and going into next year. I will say the I was optimistic in 2023 that we could hit what I was calling the Golden path, that there were reasons why in an unprecedented way we potentially could get inflation down significantly without having a big recession, which previous to 2023. That really doesn’t happen. We did that in 23 as we’re looking in 24. Like I said, we we clearly hit a bump at the start of this year and we’ve just got to get comfort that it’s not a sign of of a re acceleration of the economy. Well, there you have it, a part of Mike McKee’s interview with Austan Goolsbee from last Friday out at Stanford University. And coming up, a new Iron Guard global head of M&A at JPMorgan will be joining us live from the Milken Institute Global Conference in Beverly Hills, California. This is Bloomberg. Welcome back to our special live coverage of the Milken Global Institute Conference here in Beverly Hills, California. I’m Romaine Bostick alongside Carol Massar and the lines that just keep queuing up, Carl. And I’m trying to think like, who is going to be the biggest draw? All right. We had John Williams of the New York Fed a little bit earlier, right? We had David Beckham, right? I didn’t see, but we saw the line waiting for him right here. Now, a long line of people waiting to see how we’re correct. And we still got Elon Musk stopping by at some point today. It’s unbelievable. If you look at the recording like this is considered to be, I think, one of the years where you’re seeing the most people here and really the highest profile of speakers and you can definitely see it. I mean, the excitement, but I’ve never I never remember in terms of all of our broadcasts in the lineup, just people packed. And you can really tell also by the amount of security so much faster this year than what we had in years past, A testament really to all the big players here. And we have another one coming up on the show right now. We want to talk a little bit about rising stock markets and kind of that plateau in Fed rate hikes, which is actually giving a lot of corporate buyers more confidence in pursuing mergers and acquisitions, M&A volumes here in the U.S., there are 60% year to date to more than $400 billion. Our next guest, she’s advised on at least $40 billion in M&A attractions transactions last year alone. And over the course of her career, almost $1 trillion worth in a lot. That includes big deals like Subway, the whole LVMH acquisition of Tiffany, as well as Home Depot’s purchase a while back of supply. And I agr joining us right now, she’s has been the global head of mergers and acquisitions at Jp morgan but just last month had her role expanded and is now also the firm’s global head of advisory. Andrew, great to have you here on the big program. Lovely to be here. So M&A, it’s back. Yeah, yeah. Much better than last year. Yeah, that was a low bar. Yeah. And I feel like we should have David Beckham advertise on air. Maybe that’ll be the day. I think he could get a lot of people on board with it. I mean, your job, of course, is to kind of whisper in these folks ears and really sort of get them on board with what you’re doing. Why is the environment now maybe a little bit more amenable than what it was a year or two years ago? It’s all just about interest rates now. The biggest difference, I’d say, is certainty, a more realistic valuation expectation from sellers and a bit more. What are you saying? Courage in dealing with the regulatory environment. So if I break it down right, last year you didn’t know whether interest rates were going to continue to go up This year. We began by saying they’re going down, but we don’t know how much and how many times. Right now it looks like maybe it’s less than you expected, but it’s still either a stable or declining environment. So that’s a positive. There is more realism among sellers in terms of what is the value at which to trade. Well, I want to expand on that on the realism, because this was a big issue even a year ago. So what sellers saw in the value of the company and what the buyers saw in the value of the company were way different. So that gap closed. Now in certain areas I has or buyers have become smarter in terms of using structure. So one of the things we advise people is to say if you have dramatically different views, there is a way in which to say, if you’re right, I’ll pay you more. Right? And so that should be sleeves off your west, because if the company is actually worth more and does better, then it’s okay to pay more. Now, it doesn’t work all the time because if you had a very large company buying a smaller company, you don’t want to wait to integrate it. So it’s not one answer fits all but one. There is more realism among sellers, there is more confidence among buyers, and there is more structure in bridging the gap. So the combination of all three, you’ve seen more deal activity. I mean, what can you tell us about sectors and industries where you think things are really percolating and you anticipate some more deal activity? So healthcare continues to be very active. We kind of saw a few years where healthcare was fairly down because everybody was focused on coming up with a vaccine treatment testing. That was kind of the focus and now you see more activity in health care. So I’d say that we expect to continue to be active. You’ve seen a lot of activity in broadly defined commodities, oil and gas mining that you’ll continue to see in that sector as well. Infrastructure, I expect that to be a pretty busy area by private equity is still not as robust as it should be. The interest slice of private equity is pretty active. Tax levels down. And I think the regulatory environment continues to be challenging for us. What about in terms of getting exposure to air? Is there anything interesting in there in a deal environment? So everyone is trying to figure that out now. Well, everybody right. I’m sure your company, our company, we are all trying to figure out how is it that you responsibly unlock the potential of air. Yeah, and I actually think it’s really exciting in terms of what you can do, because literally every industry’s future is affected by how you use air. So we as a firm are doing a ton in terms of looking at different tools, testing and in terms of deal activity. I’d say it’s more broader tech capability where we see on firms, strategics are looking to see, can I scales? Is this a commercially proven business that we can skip? If so, they’re willing to make a bet. I am just wondering. Earlier, a conversation we had about just how A.I. like is unlocking things in health care in terms of drug development and how that ultimately will lead to deals like it’s just interesting how things are kind of moving along and about, you know, industrial land where you’ve seen a lot of activity. Yeah, industrial companies kind of buying either doing energy transition or buying capabilities and tech supply chain solutions when it’s buying versus builds. Yeah. So that’s another pocket where you’ll see an activity also. Just curious, do you think the election cycle is going to affect M&A volumes in the short term? It hasn’t really. I mean, if you look at it historically, election years haven’t had any big ups and downs. But, you know, this is not a traditional election and there are a lot of big differences, potential big differences between the two candidates that could affect regulatory issues, particularly antitrust issues, particularly antitrust. So the area which when it has affected is cross-border. So the U.S. is still one of the most attractive markets for companies, one of the rounds to either buy in the listing rights, especially UK, U.S., you’ve seen a valuation differential. You’ve seen a lot of companies demerge into the U.S. and there is many more companies in Europe and Asia who would like to buy into the U.S. to stay in the regulatory environment for better and for them, elections. Clarity is going to be important. All right. I got to leave it there. A great discussion. And I should point out, shameless plug. I’m going to be moderating a panel with you tomorrow on the future of M&A. Always, always be selling a new iron guy who heads out M&A strategies over at J.P. Morgan. They are here on the Milken stage and a little bit earlier right here on the stage. We had a chance to catch up with the CEO of State Street, Ron O’hanley, who says there’s still a strong resilience right now in the global economy. And he believes the U.S. has led the way in sustaining it. Take a listen. Before talking about the future, let’s just talk about the recent past. I mean, if you think about the what the world has been through in terms of the challenges it’s faced and any kind of challenge in the real economy translates to the financial economy. So we’ve had a pandemic, you know, a once in a century kind of pandemic. And we saw we’ve also had ground war break out in Europe. And if you think about how capital markets have actually adapted to that, how you’ve seen underlying economies repair themselves. And again, the capital markets is very much a function of what goes on in the real economy. And you’ve seen, I think, extraordinary resilience in the real economy relative to what any of us would have expected. What do you think was behind that resilience? Not to sound jingoistic, but I think a lot of it was in the U.S. led the way in terms of certainly in the repair of supply chains. I mean, what we were talking about in the middle of 2020 was the potential for this going on for four or five, six years, and the rebalancing would take that long and in fact, really led by U.S. corporations, but also just large corporations around the world. It was really led by large companies figuring this out and saying, what do we need to do here? You know, it’s interesting that you bring that up, Ron, because if you think about the pandemic, companies, global companies are rethinking their supply chains, and that is led to a new kind of investable idea. Walk us through kind of the new investable ideas coming off of the pandemic and just a lot of things being different. Well, let’s just stick with supply chains for a moment. I think that maybe with globalization we went a little bit too far because supply chains became highly, highly optimized with very little built in, if you will, slack or for that matter, capacity for the unexpected. So what you’re seeing now is really a much more resiliency being built in supply chains, that of having single source that might be double source, triple source. You’re seeing some activities being brought back to countries reshoring. And it’s not so much a those aren’t political statements as much as they are. You know what? We really ought to have a little capacity in whatever country here in the U.S., here in Germany, here in the UK. And then finally, we’re seeing opportunities being created by other for other countries where it may be that a country like China had at all or had a large portion of it. And China is not going to lose everything. But you’re starting to see other countries in Southeast Asia. All of these represent investment ideas. We’re seeing a lot of more things shift into like South America, Latin America. One thing I want to ask you, we were all focused this weekend over the annual meeting out at Berkshire Hathaway and Warren Buffett, Warren saying Wall Street creating kind of a. Like atmosphere. He’s talked about this before for investors. Do you agree with that assessment or how do you see it? So I think there’s there’s a concern about market valuations and it’s really a concern about a relatively small number of companies that are seeing lots of valuation expansion driven by things like AI and the belief of AI. So a couple of things I’d say about that. If you if you take the S&P 500 index, right, which is cap weighted and it just equal weighted, you actually say it’s actually not that overvalued. And by the way, there’s opportunities in lots of other companies, right? You’re talking about seven companies in the S&P 500. So that would be point number one. Point number two, which I do think we do need to think about. And I’m old enough to remember the advent of the Internet. And if you think about the mid to late model of actually if you think about the mid to the late nineties, there was that same kind of excitement, same kind of exuberance around a few companies. The Internet was going to change everything. It was going to change everything right away. And then 1999 and 2000 came and we could find ourselves in a situation like that again, because the the hype of a technology oftentimes isn’t met by the actual implementation of it. So if you ask me, what do I believe, I think that artificial intelligence in all of its forms will be a fundamental, a fundamental game changer for many industries. Is it going to happen overnight and is it going to kind of reflect the valuations that we’re seeing in a few companies? Probably not. And that was the CEO of State Street, Ron O’hanley. We had a chance to catch up with him earlier. He was fresh off that panel and that was kind of the big panel that started off today’s session was Christina Gheorghiu. And then that was followed by him and a few others, including Jane Fraser, really talking about the future of capital markets. Well, you know, the IMF recently has been updating and raising its forecasts for global growth. And I feel like there’s a continuation of the enthusiasm in terms of the outlook. And what’s interesting is you’re looking at a market close, a three day rally here, and it’s the best three day rally that we’ve seen since November. So you’re seeing optimism come back certainly to the equities. And I wonder what’s driving that? Is that coming from the Fed kind of settling down? Is that coming from the clarity of that or just clarity, as a lot of folks are talking about a little bit earlier? Puja Goyal, a really sort of hit at that here. Of course, we are just about 30 seconds away from those closing bells. Let’s go back to New York and ten cent a victim. Hey, that’s absolutely right. A best three days for US equities going all the way back to November and certainly seeing some buying into the close with the S&P 500 and Nasdaq poised to finish at their best levels of the day. Just a few seconds away from the close here on this Monday afternoon. There you have it, the closing bells from the New York Stock Exchange and the Nasdaq in midtown. On the day today. The S&P 500 finishing higher right now. But look at that, more than 1%, 52 points to the upside. Going to wait for these numbers to get settled a little bit, but this is the picture green across the screen. Nasdaq composite higher by 1.2% on the day to the upside of 192 points. The Dow Jones Industrial average higher by more than 176 points. That’s close to 5/10 of 1%. The Russell 2000, though, the outperformer on the day today higher by more than 1%. Let’s take a look now at how the everything did on the day today in terms of the eye map function here on the Bloomberg terminal. Kind of hard to find red in there for the S&P 500. You have the best performing sector in the information technology sector, higher by more than 1%. The only red you can see right down there is real estate, and that’s down just fractionally on the day today. Let’s talk a little bit about some of the best performers on the S&P 500 and in US equities today. Look at in video right now, shares higher by more than 3.7% to close out the day today, there was really no news that came out about Nvidia, but still shares reaching their highest levels, going all the way back to March. We should note earnings for the company are set for the 22nd of this month. Shares of volunteer also finishing the day higher today by a whopping 8%. We’re expecting those numbers to cross at any moment. The stock set for its fourth day of gains. It’s the longest winning streak going all the way back to December to the downside of the S&P 500 and the Dow. We got to talk about Boeing. This after this moving lower today after the FAA said that they’ve opened a new investigation into Boeing related to the company’s inspections of its 787 Dreamliner and whether company employees falsified records. Boeing shares were higher by more than 2.2% earlier in the day. Share is going to finish the day down by 8/10 of 1%. And finally, Apple, you heard Carol talking about Warren Buffett in Berkshire Hathaway’s annual meeting over the weekend in Omaha. That’s where we did learn that Warren Buffett and Berkshire Hathaway said that they’ve trimmed Berkshire stake in Apple. Berkshire, still the third largest shareholder in Apple after Vanguard and BlackRock still owns more than 5% of the company. Apple shares closing down 9/10 of 1% today. We should note Buffett did say that unless something changes dramatically, Apple will remain Berkshire Hathaway’s largest investment. Carol, back to you. All right. Palantir just crossing, boosted its fiscal year revenue and also beating on sales estimates. So let’s not forget, we’re still in earnings season. All right. We got to talk about something that’s very important and near and dear, I think safe to milk in as well as to Bloomberg. And that is the intersection of sports and finance is a big topic for us at Bloomberg also here. Someone in the middle of all of it is Mark Attanasio. He’s co-founder and managing partner at the Global Alternative Asset Manager, Crescent Capital Managing Partner. They’ve got some 40 billion in assets under management. That’s as of June of last year. Mark is also chairman and owner of the Milwaukee Brewers Baseball Club. So nice to have you here. We’ve had a fun conversation kind of warming up. What’s easier right now, investing our sports? I would I would actually I was going to give a pretty good answer and say investing. And I thought that that was going to then bring some bad juju to our investment business, which has gone very nicely in this period. Let’s talk about this. You. Several years ago, a big Bloomberg story. We talked about you and some comments you said about the golden age, an era of credit, private credit. Where are we? Is it still the golden age? Has it matured a little bit? How do you see it? Well, it’s matured, and I think that’s a good thing. When markets mature, there’s many more participants and and so there’s less, you know, one sense, there’s less inefficiency. As president, we like to invest over 33 years and things that are inefficient. But there’s plenty of opportunity, you know, in the world right now. And I think some of the stability we’ve seen, you know, in the capital markets and interest rates and so forth is enhancing that. Well, we’ll talk a little bit about the interest rate picture, because a couple of years ago, everyone was pulling their hair out about all of those rate hikes. And then, of course, we started, I think late last year, everyone was talking about rate cuts. Now we’re just kind of where we are. You can live with that. You can live with five and a quarter or five and a half percent on the Fed funds rate. Oh, absolutely. And you know, a lot of the guys in sports, when things go wrong, that’s the challenge. In sports, you really can’t manage what goes on in the field or I’m an investor in English football now also Norwich City canaries on what goes on in the pitch. You think you can figure out in companies quarter to quarter privately what goes on And we you know we can we can manage through 5% it actually and we’re now making loans at over 10% interest rate. That’s better for us than when we have low rates and our investors for the same credit. Basically, we’re only 7% concerns with inflation and rate hikes were such. Jamie Dimon was talking a lot about if rates went to, you know, reference rates seven plus percent, you’d have a number of defaults. Yeah, that’s true. But in this we’ve seen very few defaults in any market and high yields. Does that continue? Forgive me? Does the low level of defaults, does that continue, you think? I think it I think it does. You know, there’s always a tail risk at the end and maybe secular risk by industry. But we see growth in our companies to this day. There was there was a risk at one point of lowering rates too fast and tipping into a recession. If you have a recession now, it should be manageable because the Fed has been calibrating really well. I want to talk about his investments in sports, so they’re going to walk you through it here in the U.S. But you mentioned let’s go to the U.K., You mentioned the Norwegian soccer club. I think you were referring to it. I don’t know if you saw the story. New York Times did a great story about how the folks in the U.K., they’re upset about all these Yankees coming in there and buying up their teams here. But it was actually a serious thing because they’re saying, hey, it’s changing the complexion of how we root for sports. Obviously, your mission is to broaden the sport here. How do you balance that out? And that’s a that’s a challenge. And by the way, they they mentioned the championship clubs that are looking to move up and we’re one of those four in the playoffs. And I did not get mentioned. I was happy to not be mentioned. It was announced just a week ago there were code majority owner with Delia Smith and Michael Wyn Jones is long time celebrity chef. She’s sold over 30 million cookbooks. So I’m going to let her handle the love. Yeah. When things we see in like Milwaukee is I want to cherish what the fans enjoy. So we wouldn’t try to change too much, I think, to do it in the larger markets, you know, which which I’ve seen effectively. But yeah, in a market like New York City, which is city of 200,000, a county of of a million. Yeah. Where everybody grew up passionate for this team. We’re going to go slow in that regard. Golf You were part of a team that I had a recent investment in the PGA. Talk a little bit about what was behind that investment, why this strategic sort of sports group was organized by John Henry, who is the chairman of the Red Sox and more broadly, Liverpool and Fenway Sports Group. So he had an idea that a group of owners could maybe. He managed to bring some management skills and manage things more effectively than a private equity firm could, or a big broadcasting firm could depict the types of a large family office to pick the types of bidders that were in the process. And ultimately, he and Arthur Blank and Steve Cohen actually, and the three major investors sold that vision to the to the golfers. And we’re going to try to manage there’s some basketball owners in it as well. There’s seven or so of us who own teams. I’m sort of the small market representative, but we can bring management of of a league right to a different level. And I think we made some headway on that. Well, I think it’s great to see golf. I’m from a family of golfers, so it’s great to see golf coming back. Thank you so much, Mark. Really appreciate it. I always appreciate getting invited. And good to see you all. Mark, out of Nazia, of course, of Crescent Capital and of the Milwaukee Brewers. All right. Let’s get an update on some breaking earnings news. They’ve been crossing the Bloomberg back over to Tim standing in our New York headquarters. Hey, guys. The earnings are coming fast and furious. I do want to start with shares of Palantir, which are actually down in the after hours right now. Palantir did boost its fiscal year revenue to 2.68 billion to 2.6. 9 billion. Estimates were for a $2.68 billion. First quarter adjusted EBIT did come in above estimates at 239 234.9 million, beating estimates of 204.7 million first quarter adjusted EPS also did come in above estimates at $0.08 versus estimates of 7.9 cents. Ex expectations were high going into this. You saw what shares did over the last week. You saw what shares did today. Shares narrow now down by 3%. Let’s talk reason head on over to Simon Property Group, which also just reported earnings shares higher right now by 1%. Simon property Group shares just shot at Simon property Group just crossing the Bloomberg terminal right now. The company increasing its fiscal year 2024 guidance. It’s also raising its quarterly dividend for first quarter FFO share, $3.56. That beat estimates of $2.81. Let’s also check in on EB Maker Lucid Lucid shares crossing. Lucid, I should say shares are lower today. This after earnings just crossed, shares now down 5.9%. First quarter revenue did come in above estimates, 172.7 million beating estimates. 158.9 million first quarter vehicles delivered was hired by one 1967 estimates for 1698 First quarter adjusted EBIT loss, though, did come in above expectations and that could be why we’re seeing shares lower. All right. I’ll keep watching this. You guys check out what’s going on at the Milken Institute Global Conference. Ramon, take it away. Yeah, we’re still out here on the stage at the Nokia Conference in Beverly Hills. And let’s get right to it with our next guest, Ken, Council president and CEO of Churchill Asset Management. Of course, that’s an affiliate of Nuveen, the asset manager of TIAA 50 billion and Private Capital Investments Area is fresh off his panel here at Milken on credit markets and the shifts in interest rates. Are you tired of being asked about interest rates? I get that question everywhere I go, I got to tell you. Great to see you remaining always. It’s always a pleasure to see. So naturally, my first question is going to be about interest rates compared to what we look at. In all seriousness, and we were just speaking with Mark on an IPO and you kind of talked about this idea that stability, stability is an interest rate market that has to be good for you. Stability is a good thing. And I would say stability is more important than whether we get six moves or four moves or two moves or maybe no moves. All right. I mean, it’s gotten down to the point now where I’m hearing maybe one move in December. I think it’s all about stability. And in that stability and interest rates in the in the industry environment leads to dealmaking more certainty with respect to transaction activity. And we’re seeing that now in the market. Now, the flip side of that, though, is rates stay higher for longer. You have a lot of portfolio companies that have financing issues that when they come back to the market, they’re going to have to pay a lot more than what they did, you know, just two or three years ago. Yeah, I figured you’re going to ask that question. Yeah. Thank you. You know me well, yeah. Look, I think I think a lot of this gets to the the dynamics in in and around the credit markets today. Look, I think if you went back a year ago, you had just private credit. That was the only game in town that was really the option. Look, the theme of the first quarter has been the Empire Strikes Back. Right? Liquid gold markets, the banks are back. Right. And now companies have two options for financing. They can go to the public markets, certainly the larger companies, or they can continue to look to direct lending. So I think that the availability of financing is easing some of that burden on companies that strike back as well. Yeah. So Darth Vader. All right, So we got a theme with this one right here that. Well, having said that, all right, so there’s accessibility to more accessibility. Okay. Good thing check out that. But at a higher price. Potentially get a higher price. So is. That’s problematic for some companies. For some companies it is. But remember, we’re not just talking about senior lending. We’re talking about, you know, securities that may be more junior in the capital structure that can be brought in to support, maybe even picked securities. Right. So. So I think a lot of what’s going on right now in the market is a price discovery, if you will, In terms of valuations, I think we’re getting a little bit more certainty around valuations and more stability around the dynamics. So I think what you’re seeing is the companies that fundamentally are good businesses that may be a bit over levered are now finding that they can actually raise financing, but at higher cost. I’ve got one minute left. Kind of a random question, but I do feel like the man of the year once again is Fed Chair Jay Powell. Yes, I’m sitting down with him. We have one question to ask him. What is it? That’s an interesting that’s a tough one. No, I look, I think I think how long he is going to continue to to portray the patients that he’s had with respect to the market, recognizing that that patient’s right now is probably going to last through the election. Right. It’s rare that the Fed would intervene before November. Right. So it will he remain patient through the election? Will he remain as typically? Will he stay out of the markets? You know, in terms of making moves through through November? I think he will. And I think that that, you know, I think that will lend itself to a bit more stability there, too. All right. We’re going to have to leave it there. Always great to see you. You can get fell over at Churchill Asset Management. Stick with us. A lot more coming up, including Joe Corrado over at Blackstone. This is Bloomberg. All right. Your first time. Your first time milking. Why is this your first time milking? You know, we just hadn’t gotten together as a firm to come here, and we decided that we ought to be here. The entire finance investment ecosystems here, our capital providers, companies, CEOs, a lot of other JP’s who are our friends and competitors. And we’re glad we’re here. It’s been a great event. I mean, the aim in this room went up dramatically when you walked in. But I am curious. I mean, were you are you welcome with open arms here or do you hear like the Death Star music when you walk in? You No, my incredible I mean, no, I mean, we’re we’re important counterparties. And Mike has been a friend of the firm, Mike Milken, for a long time. And a lot of us know all. And we’ve always talked about coming in. We just you have to get it together. You got to organize yourselves. We’re here with 20 people, some of the senior most people at our firm. And it’s been great. Yeah, everybody’s super receptive. A lot of our good friends and relationships. Are you looking to do deals here? No, it’s just about making connections, seeing our important investors, seeing other guys in our industry, seeing maybe potential new sources of capital. So it’s not really a deal specific. I love talking to private equity, and I just want to make sure I get the numbers right. You’ve got 126 roughly portfolio companies that you guys are invested in, about 143 billion. You said under assets, under management, you see a lot through them. They give you some great visibility on what’s going on globally. So what do you see for them? Well, we’re seeing the economy being still quite strong. The rate of growth is decelerating. We’ve got full employment in this economy. We got good wage growth, growth decelerating. The rate of growth is decelerating. We’re actually seeing inflation under control largely for us. You know, everything in our portfolio. I think the the big sort of revenge travel and leisure spending is beginning to come down a little bit. But overall, the economy is strong and we’re not seeing evidence of the big inflation. To us, that’s in the rearview mirror. That’s something those specific to just your companies or is or is that really what I really think that’s more writ large across the economy? I think it’s not quite as low as the Fed’s looking for, but we’re not seeing it as problematic in our portfolio in the way that we were 18, 24 months ago. So the trajectory is favorable. Yes, not just on inflation, because when you talk, as Carol said, about the idea of that growth rate coming down, is that going down to, I guess, a normal level? You mean in inflation or the or economic economic growth? I mean, I don’t quite know what a normal level is, but I would say the economy is slowing for sure. Yeah. And that’s across all the industries. In terms of the growth, I mean, there’s a couple of bright spots, of course, the whole and we can talk about themes. There’s a very significant investment is going to be required in the power grid in this country over the next decade on the back of data center demand and electric vehicles. So, you know, there are certain parts of the economy, narrow seams that are growing rapidly. But I’d say general consumer spending, industrial production, that’s going to slow down a little bit. Joe, what’s the environment like to find deals and, you know, private equity than there’s private credit out there? I am curious that there’s a lot of capital chasing similar deals and what that does to pricing. Yeah, I honestly it’s it’s hard to raise money and GP’s understand that the amount of capital available to them is going to be a little bit lower than it was three or four years ago. At the top of the market when money was free and rates were low. So I would say there is more discipline in the market that we’re seeing as we’re looking to buy assets. We’ve invested from the summer of 22 until the summer of 23, we invested about $9 billion in drug companies at much better pricing than we would have been looking at it. Discipline is a good thing. This one is a good thing. I think this is a good time to be a buyer. Higher cost to capital. You know, when it’s when it’s cheap and debts plentiful, it accrues to the sellers of assets. Yeah. Now I think we’re being able to price things a little more rationally, sort of as you probably had to be a little bit more creative as well. I’m curious if you can give us some specific examples. I mean, for example, I was taking a look at the deal for Rover, the dog walking service. Yes. Which I actually use of full disclosure. I hope everybody uses it. Maybe you can just talk about kind of how that was structured and why. Well, I mean, that was a public to private. Yeah. Of a of a company that had great growth, but it kind of got lost in the shuffle. It was a SPAC and SPACs were kind of, you know, not that loved it wasn’t well followed, had a couple of major shareholders and we were able to, you know, to to strike, I think, a fair price for a really good company that had been overlooked and unloved in the public markets. We’ve been talking so much about the idea of the IPO pipeline, the avenue to public markets being not closed, certainly not as greased as they were in years past. Yes. But we’ve also seen a lot of take privates as well. So basically the traffic going the other way. Which one do you think is going to kind of dominate over the next six months to a year? I think the IPO market cyclical. I’ve been doing this for 30 years and you see. IPO markets open and close. A lot of people are saying the IPO markets are dead. I do not subscribe to that. I think IPO markets will come back for really good companies and may be more discerning. It’s going to be different kind of businesses is probably going to be the larger scale businesses in our portfolio that are going to be most attractive for IPOs. But I think it’s I think it’s going to come back. You just have to be they have to be priced attractively so public market investors can make a good return. So there’s coming back, right? And then there’s coming back to what it was. So when you say it’s coming back, it’s got meaning that what we’re going to see a little bit more activity or does it go back to some of the higher levels that we’ve seen where it seems like there were new issues almost every other week? No, I think it will find some kind of mid-cycle. If you look at 21 when everything could go public and it was just a rush. Yeah. You know, do the public better or worse. That’s that wasn’t that was not sustainable. I think we’ll go back to some sort of mid-cycle concept where you have to go back to probably 2017, 18, 19 and look at IPO levels then. But my point is we own a lot of really high quality companies and public market investors are going to want to own those. And I think the IPO market will come. I can’t tell you exactly when, but I think it will come back. Do you feel the pressure, though, to start exiting investments? I’m just curious from your investors how much pressure you’re feeling. I mean, fortunately, we’ve been able to return in the lap since the end of 2021. So since the market began to turn down almost $20 billion of capital back to our investors, we had many companies that were already public that have held up well where we sold positions, we sold companies to buyers, we sold companies to some of our competitors. So we’ve actually been able to return capital. We’re not feeling a lot of undue pressure. And that’s one of the beauties of private equity, is we control the exit, we get to decide when to sell. And I think that’s part of the reason we’ve been able to outperform public markets over a long period of time. Joe, I want to ask you specifically about your business meeting, how you’re managing people internally. You’re involved with a program called Career Pathways. The idea was to find kind of a untapped talent pools, if you will. So whether that was minority groups or veterans, things like that, you know, there’s been a little bit of a public pushback to some of those initiatives here. How much of a commitment do you still have to that? So I’ve been on the board of Year Up, which is an org for about ten years, which is an organization that helps people who haven’t had access to career sustaining jobs, get the training and an internship that converts into a full time employment. And I’ve seen that is fundamentally change worthy people’s lives. And I wanted to bring that across our portfolio companies to look systematically at how we are recruiting talent. What’s the educational requirements? Do you need a B.A. degree to do a particular job? Are you accessing talent pools that historically didn’t have access? And and we’re fully committed that I think that is an unequivocal good for society, for our companies. And we’ll continue to do that. All right. Great stuff. Many would argue that that pipeline is so important. Yes. No doubt about it. Joe, thank you. Mike, you for stopping by Citi within the first year. Yeah, first timer. Nice to see you. Got to get some sleep, too. Thank you. It’s hard to Bharata, of course, the black studies head of private equity there. Yeah, absolutely. And perspectives, too. I mean, like I said, the fact that they’re even here. Yeah. How much have we heard from some of the sort of midsize and smaller sized firms basically saying that, look, they’re now working with the big players, whether it’s the big institutional banks or whether it’s a big asset managers like a Blackstone, BlackRock. You know, we spent so much time talking about the big publicly held companies. Yep. Very important in terms of the investment universe. But that middle market space is so important in terms of when you talk about economic growth, economic momentum. So good to catch up with, Joe. Absolutely. A lot more coming up here, including with Stephanie Dresser, chief client and product development officer over at Apollo. They’ve been making a lot of changes there, The type of clients they go after and the type of products that they offer. That’s coming up next year. After the break, our special coverage from the Milken Stage here in Beverly Hills, California. This is Bloomberg. And yet so far. Welcome back to our special live coverage of the Milken Global Investment Conference in Beverly Hills, California. Romaine Bostick, you’re alongside Carol Massar with a look at, well, everything that’s going on at this forum today. And then, of course, that involves a lot of alternative investment firms have really been bulking up their offerings for individuals as institutional clients really start to bump up against the limit of new capital they can allocate to private assets. Apollo Global Management. They’ve leaned in to that opportunity led by the efforts. Stephanie Drescher, the firm’s chief client and product development officer. She joins us now on the Milken stage. Stephanie, great to have you here. Great to see you both. And you guys have never been shy about chasing opportunities and we’ve seen much more of an opportunity now with individual investors and even going down the ladder, not just the ultra high net worth individuals. Maybe one day even somebody like me will have a shot at investing in these things. Most definitely, yeah. You know, we we absolutely see an opportunity for for the individual investor, for the family to be able to benefit from the excess return that institutions have for decades. And when we think about being able to deliver the institutional quality offerings to the individual, we have expanded. We’ve innovated in the last few years in particular taking the same rigorous investment approach and the excess returns that you can get from alternatives and packaging them in ways that are designed deliberately for the family and the individual. How hard is that process being, if at all? You know, it’s it’s a big commitment. It’s actually pretty massive if you’re going to do it well, because when when you step back, we want to ensure that we not only deliver the investment performance, which of course is core to what we do at Apollo, but we also want to ensure that we’re taking a full product suite view. We want it to be holistic and being able to create portfolios that cross private investments. At the same time, we want there to be education and advisor and client service and frankly, the whole holistic view of the client. So it starts at the top. You need the CEO on down to be committed to the wealth effort, dig a little bit deeper, do that in terms of the precautions that you want to make sure that investors who are getting in the space understand what they are investing in and what you guys are doing on your side to mitigate risk, but also provide certainly returns. Right. Well, the the partnerships that we have are critical. We are working with with private banks and wires and registered investment advisors to work with the advisor community ultimately to ensure that they understand all of the benefits of and considerations of private investments as they speak to their clients about portfolio construction. But what’s interesting is that historically I think people have thought of the public markets as safe and private markets maybe as riskier. In reality, I think as we look at correlation and volatility and just the results across, let’s say, public active managers, it’s interesting, those active equity managers and the public realm have failed to meet the benchmark 93% of the time over 15 years. So when we look at the potential nature of the public markets, what we realize is that they are safe and risky at the same time that the private markets are as well. And it’s really construction of the portfolio that matters. I guess I would say, though, Stephanie, to that, that public markets. Right. Every day there’s tons of information that come out. There’s folks like us who are reporting on it and the markets act as kind of a clearing mechanism in a big way in terms of getting any bad news through it or really a lot of transparency. How do you bring that to private credit? Look, we believe in transparency and in what we do as a firm and certainly with our investors and we lead with this the our different offerings that we have that are often registered have nearly the entire portfolio available, if not 100% of the portfolio available to investors. So we’re very confident that our construction of the portfolio and the diversification that we bring as currently a complement, if not a replacement to a piece of the fixed income portfolio that they may have in public public markets or frankly the same for being a complement in their public equity portfolio with private markets exposure. One of the challenges as more people allocate to private strategies is this idea of the duration of those investments, which are a lot different and for public and. Estimates, as you know. And certainly for a retail investor that’s used to being able to sell whatever they want to sell or buy whenever they have to buy, that’s that requires a little bit more hand-holding or at least a little bit more of a, I don’t know, therapist’s couch, if you will, to sort of prepare them for that. I mean, how do you sort of sell them on that idea? Look, I think the promise of alternatives as to deliver an excess return above the public markets, the the the reality is that there is an element of additional illiquidity that one does accept in order to achieve those excess returns. Now, in many instances, that could be quarterly or potentially even in monthly segments. But we absolutely, absolutely do look at the underlying liquidity needs of the client. On the flip side, when we speak with advisors on behalf of their clients, it’s very rare for us to find a client that needs all of their liquidity tomorrow. And if you take one of the most extreme cases out there, kind of a41k, let’s say that is today managed on with a very heavy daily focus. Whether that’s mutual funds are ETFs. But in reality, the average duration, to your point, could be over decades, if not 50 years. So making sure that an investor has access to the solutions that allow them to forego a bit of the liquidity but generate the excess return that they can they can disappear. So I get it. Like kind of where we are right now in terms of offering private credit to a wider swath of investors. How long do you think it takes? What does it take? So that we normal people are actually tapping into the private credit markets in our 401k and elsewhere? Well, look, if we if we look at the different structures that are out there, the information and we’re certainly a key part of it is already taking place. There are certain interval funds, for example, that by design offer access at minimums of 20 $500, and that could actually provide pretty broad exposure to both corporate credit and in the future asset backed as well, which we actually see both the landscape of corporate private credit as well as asset backed being really important diversifier as to what a client may have in their fixed income public portfolio today. I think we’re going to see a fundamental kind of rethink of how clients and their advisors look at portfolios, public and private exposure and credit or fixed income, and the same for equities in order to achieve their long term goals. Well. Well, the conversations with our eyes. Right, Right. That’s a big part of it. Right. Having said that, so in a time frame where it’s much more widespread, you know, in terms of use are tapped into by all retail investors, Is it a couple of years like. I think we’ll see a major change even in the next 2 to 5 years for sure. Okay. And I do see those trends. I mean, we’ve had a massive acceleration really exceeding expectations for the relationships that we have in well, which spans those areas like the the private banks, the wires. And they ultimately want to deliver solutions to their full breadth of client, whether that is an ultra high net worth through to the mass affluent with appropriate products in private markets. And they’re they’re seeing the benefits given the public market volatility and correlation concentration. Diversifying in these areas is valuable. You obviously are a global company. I am curious about the opportunities outside the U.S.. I know you’ve been building up your teams in certain parts of Asia and the Pacific, even in Europe as well outside of the U.S.. Where’s the biggest opportunity? So Asia for us has already seen a material growth and I believe more to come. Hong Kong, Singapore as core areas along with Japan, Korea and other local markets. So we’ve we’ve seen that development in Asia, increasing partnerships in EMEA as well. So Europe as well as the Middle East. And we see it both in terms of regional players along with the global partners that we have with offices around the world. So we’re committed absolutely. Globally, we see the same trend of needing to save for retirement and build wealth. And we’ve had a jump start in the U.S., but we’re building internationally, as are you spending a lot of time in the Middle East. And I should point out, even you walk around looking at the number of representatives that we’re seeing here. And even last year, relative to five years ago, it’s pretty exponential coming from the Middle East to Milken. Right. We we’ve had a presence in the Middle East and great partnerships that run deep over a good 15, 20 years now. So the relationships are absolutely global in just about every jurisdiction. Yeah, that’s fascinating. I do feel like more and more investment, it’s it’s partnering up with someone, a middle Eastern major fund, if you will, or investor. So great stuff. Thank you so much for stopping by. Thank you. Appreciate it. Stephanie Dresser, of course, client and product development officer over at Apollo here at Milk. Yeah. Yeah. And I mean, look, I think the whole expansion of not only expansion off to more retail clients, if you will, a high end retail composite of retail clients, as well as expansion overseas, is a big part of the story. Absolutely. I mean, I think there is investor demand that is ultimately going to bring about change. I think ultimately what investors are asking for, whether it’s high net worth individuals family offices, is where it starts. And then there’s, you know, the wider retail investor that wants a piece of it. And certainly when they’re looking for returns. Yeah. And that changes already here as well. We’re hearing that from everybody. Oh, we continue our coverage, our special coverage here at the Milken stage in Beverly Hills, California. But let’s go back to New York. Jim set of extended by for a closer look at some of the earnings crossing the Bloomberg wire. Hey, guys. We’re seeing some after market moves from Apple into your hands, Lucid and Vornado, all of those companies reporting earnings after the bell today. Let’s check in on what’s happening with shares of Palantir down by 7.8% in the after hours right now, even though it beat analyst estimates for sales in the first quarter, even though it raised its forecast for annual revenue, citing demand from U.S. companies for its new AI software. Shares were higher by more than 45% going into this print, so expectations were certainly high. And then the health care company hims and hers up 10.4% in the after hours. It boosted its health. Any better guidance or boosted its adjusted EBITA guidance for the full year beat the average analyst estimates lucid group shares down by close to 7% right now. It did report a wider than expected loss to start the year. The company is contending with production challenges, also uneven demand for those high end EVs. They started about $70,000 go all the way up to $250,000 for one of those lucid vehicles and then a Vornado Realty Trust down by 1.8%. The company did report revenue for the first quarter that missed the average analyst estimate should note that they also announced today that they extended one of their two unsecured revolving credit facilities from April 2026 to April 2029. Once again, shares down by 1.8%. Carol, back to you. All right, everybody. Well, last week, Microsoft and Brookfield Asset Management’s green energy arm signed the biggest clean energy power deal ever announced. The technology giant ramps up its investment in artificial intelligence. We talk about the theme here. It is a theme. Well, they’re going to focus on wind and solar. Brookfield continues to raise new funds. More on that in a moment. Brookfield Asset Management, as you know, 900 billion in assets under management transactions in more than 30 countries along five continents. We see a lot really not in Antarctica. I don’t know. We’re going to find out. Real estate, still the bulk of investments under management. Here to talk about it all in 5 minutes or 7 minutes, Connor Teskey, he’s president of Brookfield Asset Management, also the head of Brookfield’s Renewable Power and Transmission Business and chief executive officer of Brookfield Renewable Partners. So much going on that area alone. Renewable 102 billion in assets under management, I should point out. Mark Carney, the chair of Brookfield Asset Management, is also Chair of Bloomberg’s board. We’d like to be full disclosure. How are you? We’re great. We’re great. Thank you for having us. Well, it’s great to have you here with us. We just mentioned the Microsoft deal. Renewables is a big space. How many how much activity is going on in that space to do deals? It’s tremendous. And very simply there the demand outweighs the supply. And today around the world, trends around decarbonization, energy security that have been driving renewables are now being multiplied by the increased energy demand for air. And we feel thrilled to be an enabler and a partner of Microsoft, too, to help them build out their air business. Well, tell us a bit more, too, in terms of renewables, like we’ve talked about it earlier today, Connor. And I just feel like the demands, particularly for air for data centers tell us about and to do this all in a renewable way, tell us about some of the deals, the other deals that also you guys are thinking about. Well, I think the important thing to recognize about renewables is why have they taken off? They are the cheapest form of electricity around the world. This is driven by economics. This is driven by capitalism. And as the world electrifies, whether it’s industrials or transportation or data centers, capitalism is going to prevail. And that’s going to lead to this exponential growth in clean power. And we like to feel fortunate that we’re on the forefront of that. And the Microsoft deal is very exciting, but we no doubt think there’s more like it to come. I mean, private industry is driving this, corporate America is driving this. But you you need a little bit of a tailwind from government and regulations as well. I would if that in your way right now I would say it a little bit differently, which is energy transition today is far more of a corporate pull than it is a government push. The the trend line on energy transition is being driven by corporate demand. The ebb and flow above and below that trend line is being driven by government policy. And therefore we often get the question what if government changes? What if policy changes? We’re still going to see a tremendous amount of growth for years and decades in this space. How do you find, though, the best opportunity? I mean, there’s got to be a discovery process here because there’s there’s a lot of junk out there as well. I mean, that literally. But I mean, obviously, there’s a lot of great opportunities. Well, how do you separate the wheat from the chaff? Well, you’re tying to a fantastic point, which is the market environment today is going to lead to a ton of transaction activity. Interest rates have stabilized. Banks are lending again. The corporate bit is back. And therefore, we’re not only seeing tons of opportunities to put money to work at very attractive levels in the exact same environment where equally seeing opportunity to monetize high quality, de-risked best in class assets at very attractive levels, it’s unique to be in such a constructive market where you can be doing both at the same time. So both sides of the spectrum in terms of buying and selling, you’ve got I got to ask you about real estate. Of course. All right. So what’s your what’s your thought? I mean, you guys have walked away from some properties. I mean, how are you feeling about the office space right now? So we’re very bullish on real estate. It is the biggest industry in the world. It’s not going anywhere. We can’t have events like this. People have nowhere to live. People have nowhere to work in less. There is great real estate and what we are seeing around the world is a bifurcation. High quality real estate across all sectors of real estate are not performing well. They’re performing exceptionally well. But the same is true on the other end of the spectrum. Low quality real estate is not performing poorly in certain cases, it’s becoming obsolete. We are very fortunate that we are heavily indexed to the more attractive side of that equation and have been for decades. And therefore we will continue to invest and we think it’s a fantastic time to be putting money to work. Are you happy with your office real estate portfolio as it sits now, or do you feel like that there might be some other properties that you might need to walk away from? All all? Wrong here. We’re thrilled with our office portfolio right now. Feel confident. It is highly biased to trophy our prime assets. We just sold an asset in Dubai, one of the best office towers in all of the Middle East at one of the most attractive levels that we’ve seen any real estate in that region sell ever. And that’s a real indication of the gains that can be made in high quality real estate even in this market. And we see this as absolutely catching the rebound on what’s going to be a fantastic vintage. What does the diversification of your portfolio, your real estate portfolio look like today? We’re across every major real estate asset class and and yes, we are in office, but we’re in office around the world. And while there are some concerns about small parts of U.S. office, we have de minimis exposure to those. But in the key core financial cities around the world, that is where we are overindexed and that’s where we’re seeing the greatest. But with regard to how you index that, when we talk about diversification, that diversification, at least the way you structure the portfolio is more geographic or is it by industry and sector? What I would say it’s much more asset by asset. And if we see opportunities and this is not specific to real estate, if we see very attractive opportunities, whether it be infrastructure or renewables or real estate, we’ll invest with conviction. And we’ve been doing that in the real estate space for four decades and will continue to do it through this cycle as well. All right. I had like five pages of questions. I’ve got to run. So you’re going to have to come back. Absolutely. Thank you for having us on our thanks for finding time for us. All right. Connor Teskey, of course, Brookfield president, joining us here right at Milk. Earlier, we spoke with. co-CEO of Blue Owl Capital, Martin Schulz. We need liquid markets and we need private markets. And a lot of people like to argue about, you know, the pluses and minuses to every, you know, hammer Everything looks like a nail. But the truth is to have a vibrant economy, you need durable, private solutions. And there’s a big role that we provide. And you need durable liquid markets. And there’s a big role the liquid markets provide. The private side is providing the durability to the market as a whole. I’ve been in alternative investments for nearly 30 years and you go back 30 years ago. The alternative investments wasn’t even a term. Private equity wasn’t a term, but say, elbows or other things like it. Highly opportunistic, right? It was market. Public markets would do almost everything. And then we’d chop, do one thing and disappear shopping. Do one thing does where we were the opportunistic market. All right, everybody, we’ve got one more guess for you. Event driven and with a contrarian approach. That is the strategy of our next guest who carries with him a legacy, and I should say very much so. A smart investment call from the great financial crisis. Here with us is Kyle Bass, founder and chief investment officer of the hedge fund Haven Capital Management, joining us here at Milken. Hello. Hello, how are you? Great. How are you? I’m doing well. What’s your like when you think about kind of what’s going on in the world and there’s a lot of ways things could go. What is the thing that kind of occupies your mind the most? Yeah. Well, first of all, pleasure to be here. Thank you. You know, we sit at a hinge in history right now. I think the last 30 years have been driven by economics. And I think the next 30 will be driven by geopolitics. And, you know, with the ground war in Europe, with Israel, Hamas, Iran going on, and now China threatening in the South China Sea on the second on the show, on the Philippines and Taiwan. Our world is is in a state of flux that I’m not sure we all we really all we all really understand how important what’s happening is because we’re at a financial conference and everything feels pretty good that the financial architecture of the world writ large has not been this bad in a very long time, which is adding to the the problems that are geopolitical. We want to get into some of your investment plays as of late. But having said that, for investors who were listening, when you give that kind of broad macro overview, what does that mean in terms of how people need to be looking at the investment environment more critically, if you will? Yeah, when you look at even since COVID and you look at the money supply, we all know the inflation that that we experienced here in the U.S. But you have a scenario where we also pushed that dollar inflation to the rest of the world. Yeah. And we we we had there were countries that were emerging that were already having trouble, that were already mismanaged, but we really just broke them. And so when I think about investing, the U.S. is 4% of the world’s population or a quarter of the world’s GDP. We’re 40% of the world’s capital markets. Investors better be thinking stay home and invest in the innovation that you guys have been talking about all day in North America. And don’t focus your capital outside of North America right now because the rest of the world has got some real problems that we’re on the front end, not on the back end. Well, we’ve seen that echoed by a lot of folks, including money managers overseas who, of course, are looking to us. I do want to talk about in the capacity of some of the initiatives to onshore near shore morning manufacturing. That’s those that goes to the same issue is not just about what investors want and it’s also about what corporations and ultimately what consumers are looking for as well. Yeah, and you have to add one more element to that thought as investors, consumers and in corporations. But it’s also national security. Yeah, we can’t allow we let the frog boil for a long time. You know, we allowed 95% of the active pharmaceutical ingredients for all of our antibiotics to be made in Wuhan. It’s actually hard to believe that that’s true, but that’s true. All of our blood pressure medicine, 750,000 people take it every single day. All of it’s made in China. We have allowed things to happen without being thoughtful and reshoring. Yeah. Is is being more thoughtful about our supply chain. Yeah. And that’s going to take a while because there are cost structures that have benefited us by having a lot of that stuff overseas. So bringing it back home requires a bit of a rethink as to how we do that. Do you have confidence in the government administrators and the politicians who are trying to orchestrate this, that they are doing it the right way? You know, I don’t think they’re doing it fast enough, but at least we’re moving in the right direction. And as you know, in the usual economy of the world and how wars go, there’s never a great time for a war and there’s never a great time to set an end point for when you’re going to restructure that supply chain. It’s just going to happen. And you ask me what I worry about. It’s obvious to me that the belligerence of the Chinese Communist Party working together with Russia, working together with Iran and North Korea, all the bad guys are working together. That’s a real problem. So I think it happens sooner rather than later. China is still a threat to us. China is the biggest threat in the world to us, actually. Geopolitically. Geopolitically. I mean, financially, it’s like whatever we have invested over there, we’re going to lose it. Yeah, I mean, that’s fine. It’s not the end of the world, but you’ve got to sort of your investment back to been Hong Kong sorry on the Hong Kong dollar continue to that continues to be a strategy for you. Yeah I mean the reason currency pegs used to work is they had synchronicity in their economies. As the US went, so did Hong Kong in the past. Now they have a completely divergent economy and we have dynamism here that they don’t have there and vice versa. And Hong Kong and China are having a real estate collapse, a banking crisis, an unemployment crisis while we’re doing pretty well over here. So those interest rate differentials and the needs, that’s a 40 year old peg that’s rigid and to do. Dynamic economies. In the end, it will break like the U.S.. Real estate, Texas. Other places. You’ve been buying up land? Yes. What we focus on is where the population migration is going. So we love the US writ large. Where that where the businesses are out moving their businesses. People can move to Aspen and other places like that, but you can’t move the whole business there. So Florida, Tennessee, Texas, all of the states that you see positive migration, I think is a great place to put your capital. 15 seconds data centers. Yeah, I mean, think about this. The new hyperscale data centers pull 200 to 600 megawatts each. Each. They used to put like 90 and last. So we’re going to have to build a lot of new power plants fast. And I think that’s coming. All right, Kyle, really great to have you here. Going after this spotter. Kyle Bath over at Human Capital helping us wrap up our coverage day by day. We have to do this. Two more days here. 3 hours of programming. Nice match up between our two programs. A lot of great guests coming up tomorrow, including Katie Kotch over at the CEO of TCW. They actually had some news today. So looking forward to that. We’re talk venture capital with Victor Khosla, Whole Foods CEO, also with us to get into some business names and some company names, the NYSE opening video that could be interesting. A lot has been going on in the world of management consulting here. So we’re going to kick off the show tomorrow with that. Really appreciate you joining us today out here in Beverly Hills, Romaine Bostick. And she is Carol Massar. And this is Bloomberg.
Join our dynamic community of 4,000 participants and over 1,000 thought leaders as we delve into the theme “Shaping a Shared Future,” addressing pivotal topics ranging from geopolitics to artificial intelligence.
Romaine Bostick and Carol Massar has guests HPS Investment Partners’ Purnima Puri, Hunter Point’s Avshalom Kalichstein, Blue Owl Capital Co-CEO, Marc Lipschultz, Carlyle’s Pooja Goyal, Guggenheim Investments’ Dina DiLorenzo, Moderna, Co-Founder, Noubar Afeyan, Centerbridge Partners’ Jeffrey Aronson, Circle CEO, Jeremy Allaire, JPMorgan’s Anu Aiyengar, State Street CEO, Ron O’Hanley, Milwaukee Brewers Chairman, Mark Attanasio, Churchill’s Ken Kencel, Blackstone’s Joe Baratta, Apollo’s Stephanie Drescher, Brookfield’s Connor Teskey, Hayman Capital, Kyle Bass.
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4 Comments
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