Somehow I managed to get invited to the #BloombergLive conference – “Bloomberg Invest New York” – which is currently being held at Bloomberg’s midtown headquarters in New York City. Since I was planning to be Stateside in October anyhow, I requested to attend in person, and the very generous folks at #Bloomberg accepted my request. Of course, as is often the case since the pandemic, the conference is streamed and available in real-time, and is available now on YouTubehere:
Day 1 / session 1: Intro to conference, Bridgewater’s Nir Bar Dea, Apollo’s John Zito, Ariel Investments’ John Rogers, Carlyle’s Megan Starr, Thrive Capital’s Josh Kushner, PJT Partners’ Allison Bennington, and more
Day 1/ session 2: Saba Capital Management’s Boaz Weinstein, Pantera Capital’s Dan Morehead, HBO Industry’s Myha’la Herrold, Clearlake Capital Group’s José Feliciano, and more
Day 2 / session 1: Ares' Michael Arougheti, Franklin Templeton’s Jenny Johnson, Blackstone’s Kathleen McCarthy, PGIM’s David Hunt, IronNet’s General (Ret.) Keith Alexander, BNY Mellon’s Hanneke Smits, and more
The two-day event featured a variety of speakers covering a broad cross-section of topics that are very relevant in financial markets and the global economy at the moment. The agenda from the Bloomberg Live website can be found here.
Before I get into the details of the conference, let me describe my first impression of Bloomberg’s headquarters –“wow”! What a beautiful, bright, modern building with such an energetic vibe, exactly the opposite of most banks, at least most European banks. I suppose you can look at this two ways. On one hand, you could conclude that Bloomberg makes too much money. On the other hand, you could say that Bloomberg provides a very essential service to the global financial community, and try as they may, there’s simply no rival to the quality and scope of services that Bloomberg provides its users. Perhaps the reality is somewhere in between, but I personally believe that the scope and quality of services and reporting are amazing. When I was a DCM banker, Bloomberg was simply essential to what I did every day. Unfortunately, as a poor blogger, I can no longer afford the full monthly terminal service. However, I have managed to scrape through though thanks to a combination of Bloomberg TV (I love all of the pre-market / early market commentary), and bloomberg.com, for which I pay a modest monthly fee that is worth every penny. As far as E-MorningCoffee, the Bloomberg services I use are essential for what I do. This sounds like a plug for Bloomberg, and I reckon it is as I read it back myself!
So let’s get back to the conference. I haven’t been to a conference in years, certainly not since I left banking. Back then, these sorts of conferences were a rather dull slog featuring mainly self-congratulating bankers and issuers, “networking” as they focused on both originating new business and finding their next job. This conference is far different in terms of the quality of content, speakers, topics and logistics, all absolutely top drawer. This isn’t really surprising given the calibre of Bloomberg and its sprawling and switched-on reporter base located in financial centres around the world.
Day one: my thoughts
Speakers on the first day included very high-level professionals from Bridgewater, Apollo, Carlyle, Ariel, Thrive Capital, CalPERS, PJT Partners, Saba Capital, Pantera Capital, Graham Capital and Clearlake Capital (recent investors in Chelsea FC), all of whom were interviewed by Bloomberg reporters at the event. Most interviews were done on a one-on-one basis, and the questions were excellent. The speakers touched on a variety of topics, including things like firm culture, macro investing/outlook, credit/fundamental investing, crypto and so on. I took all sorts of notes, but let me distil the handful of major conclusions from day one that I think you might appreciate:
Credit is seen as an opportunity, less so in unsecured high yield bonds (because conditions will likely worsen) and much more so in “top-of-the-capital structure” senior secured debt. John Zito from #Apollo said that the firm was a recent purchaser of CLO tranches from UK pension funds (along with other credit investors) as UK pensions try to sort themselves out by unloading high calibre credit assets to generate much-needed liquidity. Apollo also sees opportunities in cases where banks are long recently underwritten leveraged loans like that of Royal Caribbean and #Citrix, and they are willing and able to selectively scoop up senior secured debt of these companies at deeply discounted levels.
Also on the theme of credit, Boaz Weinstein from #Saba Capital sees ongoing opportunities in asymmetric credit risk in the CDS market driven mainly by banks de-risking too aggressively and indiscriminately, which I interpreted to mean banks are almost panicking in this very uncertain economic environment. This sort of behaviour means that there are opportunities for hedge funds to sell selective CDS to banks which want to hedge their portfolios across the board, including some stronger credits that have seen spread widening (but are very unlikely to default). He also spoke about the uncertainties of QT, noting that the Fed turned very accommodative during downturns caused by the dot.com bubble, the GFC and the pandemic, but is now tightening with both rate rises and QT, necessities to address persistently high inflation.
#Clearlake’s José Feliciano said most banks are saying the same thing – “we are open for business (regarding LBO financing)”. However, the reality is that most are closed in terms of underwriting leveraged loans until at least the end of the year. He also very interestingly discussed the motivation of investing in #Chelsea FC and the opportunity that the firm believes is available to significantly increase revenues.
Macro money has been made from low equity positions, shorting bonds (“could see inflation persisting and Fed tightening coming”) and long the US Dollar. Not many investors spoke about equities today, perhaps not surprisingly. The one investor that did so – value investor John Rogers from #Ariel – believes that value is back after 12 years in the doldrums during the nil interest rate period. In a poll, those in attendance agreed, with 80% saying that they thought value would trump growth in the coming years.
In the murky world of defining exactly what “#ESG” means today, a three-person panel agreed that the general view was that companies need to be clearer and more vocal as far as articulating how their business strategies align with environmental, social and governance policies. One private equity investor (I believe #Carlyle) went on to say that they had done an analysis of 300 portfolio companies, and those with social diversity had generated better returns on average over time than those without. All investors on this panel would like to do away with the overly-generic “ESG” moniker, or that’s the way I interpreted the comments.
There was some discussion on crypto’s, but I didn’t find these particularly insightful because #crypto investors love crypto no matter what. #VC was addressed by Josh Kushner and Kareem Zaki of #Thrive Capital, and this VC firm seems currently focused on firms at the convergence of software and hardware.
Day two: my thoughts
I will be brief regarding the second day of the #BloombergInvest New York conference since many of the themes were similar to those mentioned by investors on the first day of the conference. In fact, it is remarkable how similar some of the themes have been considering the diversity of investor types and their differing profiles, including asset managers, hedge funds (with varying strategies), insurance companies and pension funds. Credit was discussed again with some frequency today, although there were also interesting takes on real estate (#Blackstone) and equities (Bloomberg Intelligence equity strategist).
The agenda for today’s session is here, including the line-up of speakers. Unlike the first day, today’s session was morning only. Again, the session is available on YouTube, and the link is here. Key takeaways during the second day included:
Opportunities abound in terms of banks lightening / hedging loan exposure, including selling some high yield risk at steep discounts, according to Mike Arougheti, co-founder, President and CEO of #Ares. He noted that it is an unusual time in that credit spreads remain reasonably stable, and there has been no noticeable increases in defaults or deterioration in credit fundamentals (like coverage ratios). Similar to yesterday’s speakers, he likes short duration “top-of-the-capital structure” senior secured loans, where he said returns are around 10%-12% in private credit. When asked about the U.K., Mr Arougheti said that the government is suffering from a lack of credibility and clarity as far as their fiscal policies. Similar to Apollo yesterday, it sounded as if Ares was also a buyer of corporate loans / bonds from U.K. pension funds, as pension funds seek to address liquidity issues related to the sharp rise in Gilt yields.
A view expressed by more than one investor is that inflation will take longer to contain than expected. Bloomberg Intelligence chief equity strategist Gina Martin Adams said that for this reason, equity investors should focus on short-duration equities and value stocks (rather than growth/momentum stocks). This makes perfect sense in a high inflation environment. She also thinks that longer-term secular inflation will be sticky, caused by a combination of deglobalisation, decarbonisation and demographics (“three D’s”).
The three-institution AM panel was very interesting, too, because I consider these “old school” investors, arguably the smartest out there since they have invested through several business cycles. David Hunt (#PGIM) noted that the fiscal response to the pandemic was much greater than during the GFC, because governments learned then that they had not done enough to restore economic growth during the GFC. The Fed, on the other hand, was using a 1970s playbook to address inflation when in fact inflation was much higher and more entrenched back then. 1970s inflation required a more drastic approach by the Volcker-led Fed to bring inflation under control. Mr Hunt also said one statement I will not forget: during times like now when we are being bombarded with a barrage of news daily, including some conflicting data, the hardest thing an investor can do is nothing. That’s a terrific statement about the time perspective for long-term investors. My interpretation is: allocate across asset classes based on your objectives / risk profile; buy (fundamentally) strong core stocks or bonds, and don’t fiddle with your portfolio every day because you will not be right enough of the time.
Kathleen McCarthy, co-head of real estate at #Blackstone, provided a good overview of the real estate market, one of the only speakers to touch specifically on this segment. As far as categories of real estate, Blackstone favours residential rental properties and logistics centres / warehouses near population centres over retail, office and residential owned real estate. Retail has been under pressure for a long time, well before the pandemic although the pandemic obviously made it much worse. Her view on office-use real estate is mixed. She believes that most companies want their employees to come back to the office. But she added that to draw employees back in, the office spaces need to be much higher quality and welcoming.
If you want to listen to a retired general speak about Ukraine-Russia conflict, give a listen to Gen (ret) Keith Alexander, founder, chairman and CEO of IronNet, a cyber-protection company that he founded in 2014. I was expecting to hear about general cyber security industry, but instead, the questions were nearly all about Ukraine-Russia conflict and possible scenarios as the conflict evolves. (Perhaps this was a good thing because IronNet as a company appears to be in trouble.) Mr Alexander was super-informative as far as speaking about the Ukraine-Russia war, given he is a retired general. He believes that Russia will not use tactical nuclear weapons because it would likely lead to the end of Putin. He also believes that the support of Mr Putin from Russian intelligence agencies, the media and the military is waning slowly. Lastly, he said that cyber protection in the US and amongst our allies based on one-off situations / solutions isn’t good enough, but rather, there should be a coordinated cyber-defence strategy in place. He believes US infrastructure could be vulnerable to cyber-attacks from Russia.
This was a great conference, at least from my perspective, and I must thank @BloombergLive and the team at #Bloomberg for organising such a solid event. Watch or listen to the segments that interest you, since they are available on YouTube.
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