In short
The episode is a live Bloomberg Businessweek Daily panel from Future Proof in Huntington Beach, California, focused on investing trends and worries across private markets, AI, retirement, and ETFs. Guests discuss: (1) private markets’ scale ($75T public equities vs ~$16–$20T private markets), SpaceX/Anthropic/OpenAI as examples of public-private convergence, and valuation resets after 2021 peak levels; (2) whether private credit could become systemic risk (they say no), while flagging SaaS exposure and redemption/liquidity mechanics; (3) macro risks: AI concentration in earnings and deficit concerns, plus gold/Bitcoin long-term views; (4) retirement planning and how AI can help advisors; (5) ETF demand for income and active strategies.
Guests
Tony Davidow (Franklin Templeton Institute senior private market strategist); Jan VanEck (VanEck Funds CEO); Jamie Madera (BlackRock head of U.S. wealth/retirement); Scott Dennis (TCW head of ETFs). Notable claims: a “sober” view that not all private companies will succeed; suggested alternatives allocation starting around 10% (wealth channel ~5–6%); AI as advisor productivity tool, not human replacement.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOMarket Overview: Public vs. Private
1:59 to 3:21
A discussion about the scale of public and private equity markets.
“We are also on Bloomberg Television and on YouTube and across our streaming.”
The SpaceX Example in Markets
3:21 to 4:52
Exploring the significance of SpaceX's market journey and implications.
“Because I do feel like we increasingly are talking about private markets.”
Valuations and the IPO Calendar
4:52 to 6:30
Analyzing market conditions and valuation resets affecting IPOs.
“without talking about those two companies.”
Alternative Investments Discussion
6:30 to 10:58
Delving into the importance of alternative investments in a portfolio.
“Just talk to a PE or private credit house, right?”
Risks in Current Market Environment
12:58 to 14:08
Investigating the risks present in the current economic climate.
“We've got a great voice when it comes to watching the trade, watching the markets overall, longer-term market view.”
Economic Resilience and Consumer Spending
14:08 to 16:52
Learn about how wealthy consumers influence market trends and the economy's resilience despite challenges.
“And so that's the second risk, Tim, that I would see in the market.”
Concerns on Budget Deficit and Market Timing
16:52 to 18:20
Explore the risks associated with budget deficits and the complexities of market timing decisions.
“Now, it may be a slow move because there's a lot of consolidation.”
Gold, Bitcoin, and Global Economic Factors
18:20 to 21:55
Discuss the dynamics of gold and Bitcoin markets in relation to global economic trends and investor sentiment.
“And look, I think at the end of the day, Americans know this when I speak to people at conferences.”
AI's Role in Investment and Market Predictions
21:55 to 23:09
Understand the implications of AI development on financial markets and investment strategies.
“And, of course, they were on stage here.”
Retirement Planning and AI Integration
24:56 to 28:00
Examine how AI can assist financial advisors in retirement planning and client management.
“Well, as we mentioned earlier, it's a gathering of the wealth management ecosystem.”
Show all 21 chapters
The Role of Customization in Asset Management
28:00 to 29:40
Learn about the importance of customization in portfolio management for advisors and clients.
“They're using our asset allocation IP so that they can build these portfolios for their clients, whether it's customized portfolios or just strategic asset allocation.”
AI's Impact on Financial Services
29:40 to 31:20
Discuss how AI is reshaping productivity in financial services without replacing human roles.
“lot of people are asking, does it remove any humans from the equation and make companies more productive because it has to pay fewer humans to do the work?”
Navigating Market Trends and Investor Needs
31:20 to 32:50
Explore the challenges of guiding clients through market noise and the importance of long-term investing.
“And that's why BlackRock is so vocal about making sure that our portfolio intelligence is actually powering a lot of those tools.”
Insights from Future Proof Conference
34:11 to 35:07
Hear firsthand experiences and insights from the Future Proof conference attendees.
“Let's talk about healthcare for a second.”
Insights from Future Proof Conference
35:23 to 36:10
Hear firsthand experiences and insights from the Future Proof conference attendees.
“They were probably looking for some water.”
The Growth of TCW's ETF Business
36:10 to 37:50
Discuss the strategy and growth of TCW's ETF offerings in a competitive market.
“It's amazing, but I'm shocked at how many people are here.”
Market Dynamics and Securitized Income Products
37:50 to 42:00
Examine the timing and market dynamics for securitized income ETFs and their demand.
“And I was surprised that we didn't have a securitized product.”
Exploring Securitized Assets and Income Needs
42:00 to 42:51
Learn about the importance of securitized assets and their role in providing income.
“Going back to the securitized discussion, it's about two-thirds securitized assets.”
Innovation in ETF Product Pipeline
42:51 to 44:13
Discover the factors driving innovation in ETF products and the competitive landscape.
“Scott, when you're in the room thinking about the innovation pipeline at TCW for ETFs, what does the product pipeline look like?”
Active ETFs and Portfolio Strategy
44:13 to 45:58
Understand how active ETFs are being integrated into portfolios amid market volatility.
“Is it hard to, when you talk active, you know, compete with the S &P 500 and what it's done since, like, 2008?”
Analyzing Market Risks and Credit Resilience
45:58 to 47:04
Examine current market risks, credit spread behavior, and the implications for investors.
“you want income, but you also want to have something that's diversified across the rest of the asset mix over there.”
Transcript
Automatic transcript. May contain errors.0:00Bloomberg Businessweek Daily is brought to you by HPE, bringing you the self-driving network, a network that's self-optimizing, self-healing, and self-protecting, and only continues to get smarter. Learn more at hpe.com slash networking. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version.
0:36So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. Healthcare doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy, and everything else. So healthcare is connected, not complicated.
1:13What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person. How you need it. Optum is helping make healthcare work as one for everyone. Learn more at business.optum.com. Bloomberg Audio Studios, podcasts, radio, news. This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenebeck. Carol Masser along with Tim Stenovic live here at Future Proof in Huntington Beach, California.
2:03We are on Bloomberg Radio. We are also on Bloomberg Television and on YouTube and across our streaming. Throwing a couple numbers, public versus private markets, the U.S. public equity market around $75 trillion market cap alone. Global, global private markets quoted often at$16 trillion, some say nearly$20 trillion. Okay. Just a couple of comparisons. Not always mark to market at the same. rate, but that's pretty huge. It is. No matter which way you slice it or no matter how often you market to market. And we kind of have a real treat because we're going to talk private markets and then we're going to get public markets by two members of the Franklin Templeton Institute team.
2:41And I want to get right to it. Tony Davidow is with us. He's senior private market strategist at Franklin Templeton Institute. And he has been covering this area for a while. You actually came to Franklin Templeton, right, to help kind of create a platform. I was originally hired to build all of our alternative education as we recognize this is new to the space. So again, some of the concerns about how did these strategies work? Are they illiquid in nature? Yes. So I built all the alternative education and then I create content. I write white papers. I have a podcast. You do have a podcast. We're busy getting - Alternative allocations, right?
3:17Alternative allocations. An award-winning podcast, I might add. Congratulations. Because I do feel like we increasingly are talking about private markets. But we also live in this world where like private and public, like look at SpaceX. I think that's such a great example of something that stayed private for so long, public markets with quite a bang, and we're waiting for a couple of others. This kind of crisscross, what does it say to you? I think SpaceX is a perfect example. It's one I use a lot when I'm speaking to advisors because I think for some of us who have been around for a while, remember the dot-com era.
3:49And during the dot-com era, I actually worked at Morgan Stanley, so I worked with a lot of our banking clients. And typically there, of course, those companies were public. They were private for three or four years. They went public. It was the only way to monetize the opportunity. You think of SpaceX. SpaceX was a 24-year-old company. It's basically, you know, older than Facebook. Yeah. Not even a teenager. It's like a young adult. And a lot of different sort of dynamics because SpaceX had the ability to raise capital in the private domain. So they raised capital. Elon Musk had the ability to have a long-term plan to execute that plan.
4:23And, of course, when it went public at a$2 trillion valuation, it was a much more mature company than those companies in the dot-com era. So I'd argue there's this convergence of public and private. We need to think of them differently. So to us, it's an exciting time. But we look at it through a very sober lens. These are new companies. Not all of them are going to be great. They're not all going to go on the journey of a SpaceX or Anthropic or OpenAI. But what a great opportunity if we can give those to individual investors. I'm glad you brought up Anthropic and OpenAI because you can't talk about the private markets without talking about those two companies.
4:57We don't know when they're going to IPO, but likely the valuations, if we go with what's out there right now in the private markets, over a trillion dollars. I'm wondering what the consequence of that is for other companies. that have raised money for other companies that are trying to succeed. Is there a crowding out effect happening in private markets? I'm not sure. I think it's a valid discussion, and I think there's been a lot of debate in the market about do you suck the oxygen out of the room with these large IPOs. I'd argue we need to take a little bit of a step back. Think of 21 peak valuations, all the money is going into private equity.
5:33We've had a dramatic slowdown of exits in the form of IPOs and M &A activity. roughly half the size since 21. So there's been this illiquidity mismatch in the marketplace where a lot of institutions needed to get liquidity. So we'd argue we still have a lot of liquidity that we need to get to the market. So I think that we can definitely bring more companies public, but I think you're right that I think with those two big IPOs, does it hurt some of the smaller ones? I'd argue overall it's a good thing though, right? Because what it does is it resets the valuation, something you were referring to earlier about the marked markets.
6:06It forces you to reset the valuation of the overall marketplace, it forces you to kind of look at those companies that are going to be successful or not. So I suspect we're going to see a pickup of the IPO calendar. We're going to see a pickup of M &A activity. Of course, we'll talk a lot about Anthropica and OpenAI, but there's a lot of these great young companies who need to find more capital in the public markets, and many will be successful and some will not. Just talk to a PE or private credit house, right? Like you think about that's been kind of the problem, that they haven't been able to do the exits, right, as much.
6:38And I do wonder when we start to see it, are we potentially, I think they keep waiting for a market that's going to give them the valuations they want, but at some point they've got to move along. Are we likely to see a bunch of valuations being brought down? I think you're going to see definitely some markdowns. I mean, I think that's just the reality, 21 peak valuations. And I think as you reset and you think about going public, you're going to have to say, what is my company worth today versus what it was worth 21? So I think we've seen some resetting of the valuations, a little slower maybe in the private equity market than real estate, for example.
7:11We think real estate has come down quite a bit since 21. They were getting all the negative headlines. So reset valuations there are probably oftentimes below replacement cost. So what should an alternative... Oh, go ahead. No crisis in private credit or private... I think everybody keeps wondering in the private markets. We just had Bill Cohen on, who's written about a lot of former investment banker, has a book out about Apollo, but we were like, what's the big risk? And we talked a little bit about private markets. And I just think there's this opaqueness and lack of understanding of everything that's there.
7:46And if you talk to somebody who has private credit or private equity, they're going to say, no, my book's good. But I mean, do you think that there is some risk of this being a crisis at some point? So I think it's important to separate the discussion. Private equity is different than private credit, which is different than real estate. Responding to different fundamentals, different stages. So private credit. I'm glad you mentioned private credit. Private credit certainly has got the headlines. And it started with a comment about cockroaches and would there be systemic risk in the marketplace?
8:15And we would argue, we don't see any signs of systemic risk. The faults have remained very low. It's something we're watching very carefully. So we don't think there's systemic risk. That's issue one. The second issue that came along was the SAS exposure. And there's clearly some pretty substantial exposure in some of the funds, not all of the funds, but some of the funds have large SaaS exposure. Again, I'll go back to the dot-com era. Do we believe that all of the SaaS sectors should be treated equally? No, but we're starting to see a right down there. We suspect there will be some problems there.
8:44Other companies are going to emerge and evolve into different vertical businesses. So it's difficult to paint everyone with the same brush. And then I think the third issue is something that I know you guys have covered really well, which is the redemption process in some of these funds. And I would tell you as an industry, and again, my job is helping advisors and investors make better informed decisions. We need to do a better job making it clear to people on the way in the door, these are illiquid investments. That's what makes them special. There's nothing wrong with the structure, but they all have, or typically have a 5 % liquidity provision to protect the long-term investors so you can allocate capital for the long run.
9:22So that's something I would argue is a little self-inflicted. But it is a, for most portfolios, it's a small portion of a portfolio. So if we're talking about an alternatives allocation in a portfolio, what is the right makeup? And look, every experience is different and every portfolio is different. But if you were to look at the opportunities out there, private credit, private equity, venture capital, what is the real estate? What is the right sort of mix in that, let's say, 10 % slice of alternatives that are in a portfolio? Yeah, it clearly is different depending on your age and what you're solving for.
9:59But again, I like the starting point of a 10 % allocation. The wealth channel is roughly a 5 % to 6 % allocation. Just in a naive sort of way, if you just did pure modeling, it would suggest a 20 % to 30 % allocation would be appropriate just because of favorable risk return characteristics. Wow, that's much higher than I thought you'd say. Well, actually, the UBS Global Family Office report cites data that family offices are 43 % allocation, and we know institutions are 40 to 50. So it's definitely a runway of getting there. But I think it is a very individual sort of decision, and the individual decisions typically focus on what's your time horizon.
10:32If you're not willing to allocate or unable to allocate capital for 5 to 10 years, you shouldn't be allocating at all, right? So it depends a little bit. If I'm younger and I'm more growth-oriented, I might have more private equity. or if I need more income, I'm going to have more private credit.
10:50Stay with us. More from Bloomberg Businessweek Daily coming up after this.
10:58Bloomberg Businessweek Daily is brought to you by HPE, bringing you the self-driving network, a network that's self-optimizing, self-healing, and self-protecting, and only continues to get smarter. Learn more at hpe.com slash networking. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version.
11:35So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChachiPT to work on your most ambitious ideas and projects. Get started at ChachiPT.com by selecting Work Mode, available on Plus and Pro plans. Let's talk about healthcare for a second. It doesn't always work the way people expect it to. If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling. The system should just work better for everyone. That's exactly what the people at Optum are trying to do every day.
12:12They're a health care company linking patient care and pharmacy services and using data and technology to drive the whole system so care is connected, not complicated, for patients and providers. Things like making it easier to get care that looks at the whole person, from primary care doctors to mental health support and even in-home care, and then using technology to make sure they all work together. Technology designed to help doctors spend less time on busy work and more time with their patients. And those prescriptions? Optum is working to bring costs down, save patients money, and make it easier to get refills.
12:46Little by little, Optum is helping make healthcare work as one for everyone. Head to business.optum.com to see how.
12:58We've got a great voice when it comes to watching the trade, watching the markets overall, longer-term market view. You guys all know him. He's Jan VanEck. He's back with us. He's CEO of VanEck Funds. It's got about$237 billion in asset center management at the end of June. Jan, we are asking everybody about the risks, and that's where we want to start with you. We're going to get to your hat, though. Okay. which says HODL, if you're just listening to us on Bloomberg Radio, and we're going to talk crypto. Risks out there for the market right now, what are they? I think our economy is actually concentrated in two areas, and one relates to this conference.
13:35One is obviously AI, where the tech industry is providing so much of the earnings of the overall market and the earnings growth, right, even despite the size, which has all of us shaking our heads. So tech, that's kind of obvious and well discussed. Our economy, people talk about K-shape and they usually care about the leg that's going down. We are such a rich country. I think there's a reflexology a little bit that if we have a big downturn in the market, that will pull the economy down. I mean, because the wealthy consumers are the ones that drive a lot of economic spending. And so that's the second risk, Tim, that I would see in the market.
14:17Is that why we haven't seen, Carol brought this point up earlier, and I thought it was really good. Given the challenges that we're seeing right now, higher yields, higher energy prices, concerns about a slowing economy, yet equity markets are through only 3 % off their highs. Are we seeing that because of the people who do have the money in this country continuing to spend with gas prices higher, with energy prices higher? Is that why we're seeing the resilience? Yeah. Well, you know, I like to focus on the big 10-year macro trends, right? And post-COVID, we had, if you look at monetary policy and fiscal policy, I call it two feet on the gas, both on monetary, right?
14:57Zero interest rates, throwing money at everything, and two feet on the gas for fiscal policy, government spending. I think we're neutralish. I mean, everyone has an opinion on the Fed, but I think we're neutralish on monetary policy. I think we still have a foot on the gas when it comes to government spending, right? And That relates to debt and deficits. So I think that's why the economy is at full employment. We're kind of in good shape. But you've been worried about the budget deficit for a long, long time. And I remember earlier in my career, every conversation we brought it up, and then it just went away, and we were okay not talking about it.
15:33Now it's kind of front and center, and I feel like increasingly more and more people are talking about this is a major risk. How do you see it? I'm going to disappoint you, Carol, because you're right. You're not worried. I'm one of the biggest bond bears. I talk about it all the time. Yeah. But we know that timing in the markets is super hard. And so what I've been asking people at this conference is, when do you buy the 10-year? At 5%, 5.5%, 6 %? At some point, and when people are so negative about bonds, the conturing in me makes me want to go buy bonds. So I'm a little bit more neutral. And I think, listen, at these yields, people were talking about, you know, muni yields on the long end of duration of high single digits.
16:16That's going to compete against equities and other parts of the portfolio. So, you know, probably long term, listen, long term bearish, long term bull on gold, right? Ten years out, it's the new global currency. But short term, I kind of react against all the bearishness. Where do you think gold's then headed? We saw a couple of good strong years last two years. I think it was up more than 50 % last year. This year, it's a little bit not as, you know, investors seem so eager to go to move into gold. But where do you see it going? Well, Bitcoin and gold hit all-time highs last year. And I think they have effectively bottomed and are heading towards all-time highs again.
16:52Now, it may be a slow move because there's a lot of consolidation. If you look at a five-year chart of gold, it looks like it just went up, you know, the Himalayan mountains. So it's got to reset, even though I think it's got that long-term bid. So even if it takes another year of going sideways. The other thing is I tell people gold is not driven by U.S. inflation. We're not a U.S. – it doesn't dominate the world anymore. We're a global world. And global growth in Asia drives a lot of demand for gold. And this war is really bad for Asian growth, right, India in particular. So that's why it's not surprising that it's sort of struggling a little bit here.
17:31I want to go back to something that you said earlier, and we'll get back to more Bitcoin and gold in a minute. But you mentioned the deficit. And earlier today, Treasury Secretary Scott Besson was on Capitol Hill. He said that$5 ,000 checks will not affect the deficit. There are ways to do this without affecting the deficit. Is he right? You know, President Trump and Scott Besson are risk takers. And I think they're taking a lot of risks here. They're toying with the market. I mean, that's a flat-out silly statement. And he was there when Trump made the comment in Texas. And that really kind of, it's really undermining confidence and risking confidence.
18:08Because confidence is everything. That's what prices long-term interest rates. So, you know, I think that's not to be taken at face value. It's going to add to the deficit. Of course it is. Of course it is. And look, I think at the end of the day, Americans know this when I speak to people at conferences. Welcome to high. In the next five years, we're getting higher taxes and lower government spending. We just can't. We can't. It's not sustainable any other way. It's not. That's what you're saying. I mean, a Social Security loan, right, is going to run out of money in 32. I'm already paying higher taxes.
18:42Yeah. I'm just saying. You're not the only one. Yeah, I know. By the way, if you ask me to pay payments, today is September 15th, just to remind everybody. Thanks, everybody. Thanks. It's also my anniversary. Oh, happy anniversary. Do you want to talk about the hat? I want to talk about the hat. HODL is what the hat says. You're HODLing. Yeah. Listen, VanEck's long-term macro view, the number one thing we think about is investors in alignment with investors. And so in our quarterly outlooks, we're very straightforward. We can be bullish or bearish. I was bearish Bitcoin coming into this year because of the four-year happening cycle.
19:16I said time to buy in Q2. And that's why I think, you know, I'm wearing my hat again. HODL is our Bitcoin ETF. We were the first company to file for a Bitcoin ETF in 2017. Long-term bullish. And, you know, even BlackRock is putting it into portfolios. So I don't think it's as crazy. It's a forgotten asset a little bit now, right? Because the crypto world has changed so much. We don't talk about it as much. A lot of crypto bros moved on. What did they move on to? Data centers. No, sorry. Yeah, well, no, the PMs, like at VanEck, We moved into data centers, right? The Bitcoin miners shifted heavily into compute.
19:51But no, I think there were a bunch of shiny objects, you know, Zcash. And people hate when I talk about stuff like that. There's concerns about quantum breaking Bitcoin, just like with other technologies. Look at the two recent examples of, let's say, vulnerabilities that we've seen. Yeah, yeah. I mean, those are more AI related. But I think, anyway, so I think the risks are all in the Bitcoin. It started to rally. And that's looking juicy here to me. You know, we talk about AI a lot, and it's being talked a lot about at this conference. What do you think of where we are in that AI cycle specifically?
20:23I want to talk a little bit more about that. You guys sponsor the SMH. It's the biggest semiconductor ETF. It's up 50 % year to date. Yeah. I have two comments. First of all, you know, as an asset manager, I don't know what people think we do, but that 26-year-old ruined my weekend. I had so many talks and reading blogs and everything going on social media, like, you know, is AI going to kill the world? because we have a lot of assets in SMH. We're a big Nvidia shareholder, obviously. So what's the truth there? At the end of the day, I think that kind of fear-mongering is wrong. Why? And it's dangerous.
20:59Why is it wrong? I think, look, it's really weird. Like what Dario said, right? The CEO of Anthropic. Dario Amadei. Right, right. It was very responsible in his blog. And they're basically saying, for national security reasons, we can't hold back AI, right? There are wars going on in the Mideast, and neither China or the U.S. are going to hold back AI development. So it's almost silly to start, but any responsible company needs to have protections in place. And so visibility, third-party monitors, Elon said, well, why don't we have our competitors act as a kind of compliance check, which I think is the industry is having a healthy dialogue, and what Daria said is very responsible.
21:40I don't think it interferes with our IPO. So we're still overweight, you know, semis. So just talk and not action, ultimately? I think the doomerism is that element where you just have to really understand, is Anthropic being a good corporate citizen? And, of course, they were on stage here. They're trying to partner with industry. It's not in their self-interest, Carol, right, to have one of these models go rogue, even in a minor way. That's true, because it would throw cold water extremely on the entire industry, right? Yeah. I would say the last thing on AI... Just quickly, 10 seconds. Very quickly.
22:14NVIDIA forward earnings are drifting slowly lower. So I think the air is slowly coming out of the AI trade. That's my one indicator.
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22:25Stay with us. More from Bloomberg Businessweek Daily coming up after this.
22:33Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans.
23:16As industries evolve faster than ever, companies need an environment that accelerates strategic growth, and Michigan delivers on that promise. From emerging startups to global enterprises, Michigan offers what executives value most, a resilient, innovative ecosystem, diverse communities that attract top talent, and a quality of life that supports work-life balance. With our unified Team Michigan approach, businesses scale faster and compete at the highest level. Michigan, pure opportunity. Seize your opportunity at michiganbusiness.org. Let's talk about healthcare for a second. It doesn't always work the way people expect it to.
23:51If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling. The system should just work better for everyone. That's exactly what the people at Optum are trying to do every day. They're a health care company linking patient care and pharmacy services and using data and technology to drive the whole system so care is connected, not complicated, for patients and providers. Things like making it easier to get care that looks at the whole person, from primary care doctors to mental health support and even in-home care, and then using technology to make sure they all work together.
24:25Technology designed to help doctors spend less time on busy work and more time with their patients. And those prescriptions? Optum is working to bring costs down, save patients money, and make it easier to get refills. Little by little, Optum is helping make healthcare work as one for everyone. Head to business.optum.com to see how.
24:49We are live at Future Proof in Huntington Beach. A special edition of Bloomberg Business Week Daily is brought to you by Allspring Global Investments. Well, as we mentioned earlier, it's a gathering of the wealth management ecosystem. More than 3 ,000 financial advisors, wealth management executives, limited partners, more than 5 ,000 attendees representing an anticipated$20 trillion in assets under management. Yeah, great to have back with us too here at Future Proof. Jamie Madera, she is Senior Managing Director, Head of U.S. Wealth and Head of Retirement at BlackRock, the world's largest asset manager.
25:19It notched a record$15.3 trillion in assets when it reported in July. Jamie, good to have you back with us. How are you? It's great to be here. I mean, how could you not be great? This is gorgeous, right? It's beautiful to be here. So what's the question you get most when it comes to retirement planning? Retirement planning. How much do I need to retire? Actually, the more important question is, how can I save enough to fund the income and the life I want? So the biggest challenge is people can't figure out how to do the math, right? And how should we expect them to? How, well, I was going to say, can't, you know, we can't - Can you help us with the math, right?
25:53But the math is so difficult because we have no idea how much things are going to cost in the future. And you don't know how long you're going to live. So trying to do a math equation with the unknown of how long am I going to live? How much will things cost in the future? What are health expenses is going to be? What about my family? Maybe I need to help my family. Will there even be a world because of AI and there's going to be an apocalypse? I'm actually not joking. I had that conversation with a friend of mine earlier today. He's deeply concerned about this AI stuff. Are you? So I think, look, there are many conversations that we can have about AI.
26:26Let me bring it to this industry. We'll take it away from society for a second. I think AI is a way to help financial advisors, the humans that are serving people all over this country and beyond, I think it's a way to help them become more effective and more efficient, right? Advisors are spending so much time doing things that are more administrative in nature. And if you could free up that time and instead talk to your clients and really understand their life situations and give them holistic advice across their entire financial life, help them live the life they want to live, then I think that's a really powerful proposition.
27:02So, okay. I do. I have a follow-up. Mr. Doomsday, here we go. I had a feeling he had a little bit... Well, I do because yesterday I'm on the plane and right at noon, this story crosses on the Bloomberg Terminal about Anthropik deepening its finance industry ties with BlackRock and Vanguard. You're quoted in that story. We have Anthropik representatives here at Future Proof today. In fact, Peter Nolan, head of asset and wealth management at Anthropik, is here. what is the deepening engagement that BlackRock is doing with Anthropic? What are you guys doing and what are they doing for you? Yeah, so I'll start with what we're doing.
27:39For BlackRock, this is a story about outsourcing. It's about the biggest trend we see in the wealth management industry is financial advisors need help building better portfolios or even just outsourcing the portfolio management to asset managers they really trust. And so if you think about for BlackRock, I mean, we work with 55 ,000 advisors who today ask us to build custom portfolios for them. They're using our asset allocation IP so that they can build these portfolios for their clients, whether it's customized portfolios or just strategic asset allocation. We have$300 billion in assets that we manage on behalf of our advisors' clients in models and custom model solutions.
28:19And the reason advisors are doing this is because, one, the capital markets are just expanding. understanding they're getting more complex and they need trusted partners who can actually figure out how to put the pieces together and help them customize it and meet the outcomes their clients want and then the second piece is i need time if i'm an advisor i'm under a capacity crisis right i don't have time to figure out all of these custom solutions for my client if i could find a partner like blackrock who does this and is expert in doing so and is a leader in doing so then that saves me time and allows me to spend time with my clients what does customization mean that everybody gets their own portfolio, like requirements, a code?
28:56What is that? What does it really mean? It could mean everyone gets their own. It could mean that you have, if you're an advisor, you have a certain type of client set. Maybe it's a high net worth or an ultra high net worth client that has tax needs, after tax management needs. Maybe they have concentrated stock and they need solutions to help them manage out of that concentrated stock. Maybe they want access to private markets. So if you think about it, it's putting it all together in our portfolio. It's why BlackRock acquired Appirio, direct indexing a few years ago, SpiderRock, option overlays, HPS for private credit, GIP for infrastructure, so that we can build this portfolio of public-private, index active, tax management, option overlays, and deliver that through our advisors to their clients.
29:39On the AI side of it, the question that I think a lot of people are asking, does it remove any humans from the equation and make companies more productive because it has to pay fewer humans to do the work? Well, look, I think there's a lot of conversation around the role of AI in certain sectors, in certain functions. It's well beyond financial services. You know, for me, I look at my own experience with my AI and the way I use AI is to get information, to get more context, maybe to prepare myself for a meeting or prepare myself for going to visit my doctor. When I go to the doctor, I ask AI, what are some questions I should desk.
30:17AI is not replacing my doctor, right? I'm going to the doctor, but now I'm more informed. I feel like I have a bit more confidence to go have that conversation. That's what I think AI can do. I was talking to some friends recently, Carol, a friend specifically, you know who you are, chat GPT for parenting advice. He's like typing in, you know, the things that are challenging with his kids. And he said it was super helpful. I have to say, I'm kind of blown away by it when you do ask it questions for a problem and what it can come back. And we're just scratching, Again, reminder, we just scratched the surface with this stuff.
30:47Like, we're not, you know. But, Jamie, do you see kind of a tiered process again? Like, you know, we've gone through as a world, the robo-advisors. I know they hate that phrase. But, you know, can you have folks who are younger, maybe not as much, you know, in terms of net worth, and that you can create customization but you don't necessarily have a person? Like, is that part of it? Look, I think there's people who are investing by themselves or through technology platforms today. Right. They are. So of course there will be people doing that. Of course, AI may make that even better. What our job is as an industry is to make sure that people are actually getting the right information from trusted sources.
31:27And that's why BlackRock is so vocal about making sure that our portfolio intelligence is actually powering a lot of those tools. It's not just about Anthropic. We're powering many technology platforms. We want to be wherever advisors are and wherever advisors are building portfolios. And so that's what we're doing. Our value to the industry is to help people build better portfolios and manage portfolios on their half. I mean, I'm just thinking back to the conversation. Last time we spoke with you, the entire world has changed since then. That is what's wild to me about this. Well, and if you think about it, this is so well-timed to be here because it's not just one trend or one technology, right?
32:06You think about wealth creation and wealth transfer. You think about demographics and the new face of investors. You think about people living longer and how do you plan for that? You think about the expanding capital markets. I mean, all of these things together are causing, in some ways, a massive reinvention cycle for our industry. And that's what we're here for. Biggest challenge and biggest risk, actually. That's what I've been asking everybody. Got about 15 seconds. Biggest challenge is helping people, especially end customers, look through the noise and the headlines. Like this is about long-term investing, right?
32:42This is about building portfolios for the future, not reacting to every headline.
32:49Stay with us. More from Bloomberg Businessweek Daily coming up after this.
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35:13We might be at the beach, but we're working. We are live at Future Proof in Huntington Beach with a special edition of Bloomberg Business Week Daily. It's brought to you by Allspring Global Investments. Carol, do you know how you can look around this conference and tell if it's somebody's first future-proof? Oh, because they've got a suit on? They've got a suit on. I saw a couple of guys walk by. They were sweating. They were probably looking for some water. And they're the only ones not wearing shorts. They're like, why are I not in flip-flops? Yeah. That was me last year. Flip-flops down here.
35:43It is my first future-proof. And? You got the memo? It was like the memo. I'm just upset that there was a flip-flop. You have kind of nice pants on. I'm just going to say. You've got to walk the fine line. That's Scott Dennis. He's head of ETFs at TCW. The ETF portion of TCW, relatively new, more than$7.6 billion in assets under management. TCW itself has around$200 billion in AUM. Scott, welcome, welcome. How are you? Thank you for having me. I'm great and happy to be on. How is your first Future Proof? It's amazing, but I'm shocked at how many people are here. I was here last night for the walk around, and you couldn't even move, but it's good.
36:21Yeah. It's kind of everybody, right, in the financial industry. Is it, you know, I think a lot of people, I mean, it's hard to find a hotel room around here. This entire, like, basically, excuse me, Huntington Beach, down to Newport Beach, hotels are all filled up with future proof attendees. What are you trying to accomplish here? Yeah, so it's my first future proof, as you guys said. You know, why I'm here is, A, to get TCW's ETF business out in terms of outlets like this, as well as talk to advisors about it. As you said, we're still a relatively new ETF provider, but a firm that's been in business for three decades.
36:55So that is partly why I'm here is to spread the word on our product. There is so much competition in this space. How are you standing out? Our growth rate has been exceptional. I would say that we are one of the top fastest growing ETF providers out there in terms of asset growth. But we are being smart in terms of how we're going about what we're looking at. As I said, TCW has been around for three decades. We have proven track records of variety of different products. So from my perspective, we're producing products that we are already known for, that we're already good for. So things like Powered, PWRD.
37:29We just launched a new fund called Ties, which is a securitized income fund. Those are products that we've worked on for years. So we're just wrapping it in an ETF and producing it. We're having a lot of success. I mean, the numbers are great. Why was securitized income ETF, right? Like why now? Why was this the time to do this one? So long story short, I joined TCW about a year and a half ago, and I always had known TCW as sort of a securitized shop or securitized credit shop sort of in that vein, mortgage shop. And I was surprised that we didn't have a securitized product. There's not a lot of securitized products out there.
38:01They're somewhat challenging to put into an ETF wrapper. But it was my goal to get that done because, again, I wanted to put products out that TCW was really good at. Now, from a market perspective, I think it worked out really well because you could take a look at it. You guys know this, how yield credit spreads and IG spreads are extremely tight. So from a relative value shop, an active fixed income shop, there is value there, but we don't see as much value as we are in something like securitized products. And also, if you think about the ETF wrapper, in some ways it's democratizing in terms of distribution of product.
38:31Securitized products historically have been very institutionally owned. As a matter of fact, if you take a look at the ag, it's actually securitized credit is really not even a large portion of that. So investors' portfolios are underweighted in sort of the securitized market, even though it's things that people finance their daily lives with. So we feel that it's the right time and the right expertise that we have to produce a product and generate some alpha. Scott, I'm wondering about the relationship between you and the mutual fund folks. Is this the idea that you're going to create ETFs at TCW that sort of mimic what's held in some of the mutual funds?
39:05That is a question that we talk about all the time internally. So we are a mutual fund shop. We are an ETF shop. There's not one that we feel is better than the other. But there's one that's way bigger. There's one that's way bigger, but there's one that's growing quickly. So when we take a look at what we're going to produce, we just take a look at what solution the advisor is looking to fill. So if they're not a taxable client, a mutual fund really fits a good role in that. If they're a taxable client, they would think that ETFs, because of tax efficiency, might be the better vehicle. But we're taking a look at all the different things that we can provide and how we can produce alpha and deciding which wrapper is the best for a given solution the client's looking for.
39:42We should know. You're not the only shop grappling with this question right now. Everybody is. Exactly. Everybody is. I mean, I think about my first job was all about mutual funds and getting it out to the masses. And now we don't have a mutual fund show. We have an ETF show. We have an ETF show. And then you meld the picture with the dual share class of ETFs and mutual funds. And that's also a component that you have to think about as an ETF provider. When you think of the growth, though, is it more in the ETF world at this point for you guys? At this point, it is. Yeah, I mean, we've grown in the last, back to 2020, end of 2024, we've grown almost 250 % in terms of assets.
40:15So that's definitely outpacing. But it's a new wrapper for us. And I don't want to say that the ETF is any better than anything else we have. It's just, again, packaging products that we're very good at, and as you guys are saying, in a product that's very hot and taking off. Where are the flows? Talk to us about where money's coming in, money's going out right now. Yeah, so we have two flagship products, one on the equity side and one on the fixed income side. One is powered, PWRD, which is all about picks and shovels and energy transformation. There's going to be a tremendous amount of capex that goes as the U.S.
40:42infrastructure from an energy and power perspective transitions. So we have PWRD, which is a long-term thematic play. We feel that this isn't a one - to two-year type of environment. This is a much longer type of a ramp, and it's active. So as the market changes and there's different opportunities, we will do that. On the fixed income side, our largest... Is money continuing to flow into that? Yes. That has been, this year alone, I think it's close to$400 million that have come into that product. Nothing is slowing down? Nothing is slowing down. I mean, returns. This market is very tough, which is why we're active.
41:14So it's not a product that we feel is going to be killing it every single day. You have to take a look at it from a long-term approach. Where is this product, from a CapEx expenditure perspective, going to generate alpha in the long term? Is it like watch the AI headlines basically because of it, or is the power story a bigger one? I mean, that's not for me to answer in terms of which is bigger. We do have an AI fund as well. We have not seen as many assets in that, even though performance has been tremendous in that. So that's probably specific to our lineup. There's obviously a lot of, as you said before, a lot of competition in that.
41:45But right now, our powered fund is taking in more assets and growing faster than the AI product. To the fixed income side. Yes. Our flagship fund is Flexer. It's a flexible income fund, FLXR. It's got about$3.6 billion in it, and that has been our agent of growth since we've been going. Going back to the securitized discussion, it's about two-thirds securitized assets. So we've had really good returns, which is really interesting about Flexer is that it also provides income at the same point. If you take a look at your question, like what's driving growth in fixed income, it's income, the second part of that.
42:16People want income. Interest rates are still elevated. There's still value in terms of where they are. I've looked at the news today, but 5 % is right there. There's good value in that. And if you provide a fund that is flexible and can move from asset class and be overweight in something like securitized assets, underweight in credit, but provide income and risk-adjusted returns, that's been a home run for us. We're speaking with Scott Dennis. He's head of ETFs at TCW. The ETF business at TCW has about$7.6 billion in assets under management. And the firm has more than$200 billion in assets under management.
42:49Scott joins us here at Future Proof. Scott, when you're in the room thinking about the innovation pipeline at TCW for ETFs, what does the product pipeline look like? Yeah. So, again, going back to what we're really good at and taking a look at where we can provide alpha in certain situations. You said this again. It's a very saturated market. So you have to consider. They're more to ETFs than single stocks. 100%. You have to think about, are there a lot of competition in this particular sector of the market? Are we good at it? Can we fit in there? Where do we want to price it? So all of these sort of quantitative but also qualitative things that go into it.
43:25Okay, so let me flip the question a little bit. The 4 ,999 other folks who are here who are talking to you about what their customers want to see from them as advisors, what are they telling you where the demand is? So on the fixed income side, they're 100 % talking about income. And they're also talking about the current market regime in terms of rate uncertainty, rate volatility, geopolitical risk is this active story. So ETFs have become very mainstream. And beta is obviously the huge horse in the room, but it's looking at active flows. Like, even though active ETFs are only 13 % of the market, they've taken in close to 40 % of flows this year.
43:59So advisors are asking us, like, we have our index exposure in beta. We're actually looking to move with the market in terms of what's going on in providing alpha in different types of regimes that are going on, whether it's on a monthly, yearly, or even longer time period. Is it hard to, when you talk active, you know, compete with the S &P 500 and what it's done since, like, 2008? I mean, I think it is very challenging. You know, honestly, in advisor conversations, that doesn't come up. Really? We produce. Well, same on them. So on the equity side specifically, I mean, I shouldn't say it doesn't come up.
44:31I think our distribution does a very good job in saying we are not the S &P 500. So if you take a look at our ETF lineup, it's very highly concentrated on a thematic. So we have 20 to 30 stocks empowered in PWRD with concentrations in certain sectors. And that's going to evolve as the markets change. I don't think it's a real fair assumption to compare that to a 500 cap weighted stock index portfolio. So, I mean, I'm sure everybody wants to be at the S &P 500, but I wouldn't say that we're going in and saying Powered, for example, is a competitor to this index. So in the words of our ETF analyst at Bloomberg, Eric Balchunas, check out his research on the Bloomberg terminal.
45:08I do. Everybody does. He's amazing. think. Is it more of the hot sauce side of things, of the portfolio? So it's not necessarily the core of the portfolio. It's sort of the 5 % or 10%. Yeah, I would say in the equity side, I think that, yeah, I would say in the equity side, that's a true statement if you're looking at active ETFs. Like again, a 20 % to 30 % concentrated stock portfolio that's looking after a powered thing. On the fixed income side, I would say it's the contrary. Active is the hot sauce, but it's also we're seeing become sort of a satellite where people are taking overweight in something like securitized credit and actually moving into their core of their portfolio.
45:47I think people are generally, or we think generally people are overweight credit, overweight rates. In this environment, there's not a lot of relative value in that particular aspect. So if you take a look at something like Flexer, in a core portfolio, you want income, but you also want to have something that's diversified across the rest of the asset mix over there. So again, back to ties. We feel like all my other questions, it is underrepresented. Securitized assets are underrepresented in wealth portfolios in general. So we feel like there's a good opportunity for growth there. We're asking everybody, just 20, 25 seconds, biggest risk to the market environment right now as you see it.
46:19Yeah. I just don't want people to become complacent. So it's really interesting in terms of you look at it. Like credit spreads are extremely low volatility and they're extremely tight. Equity markets are volatile and they're telling a very different picture in terms of what's going on in fixed income. So we're taking a close look at, I'm taking a close look at that sort of association. It's like, is the equity market telling us something about companies in credit that's not? And is that something that could have sort of like an effect on that? I'm always surprised that the resilience and the low volatility we've seen in credit spreads has been tremendous this year compared to everything that's going on in the world and also with asset pools.
46:57Which is why we always ask, what are we missing? What are we missing, maybe? We'll find out when it hits us. Scott Davis. Thank you so much. Thank you. This was a pleasure. This was fun. This is the Bloomberg Business Week Daily Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.
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48:35Healthcare doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy, and everything else. So healthcare is connected, not complicated. What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person. How you need it. Optum is helping make healthcare work as one for everyone. Learn more at business.optum.com.
From the publisher
The people, companies and trends shaping the global economy. Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF
Wall Street traders refrained from making riskier bets in the countdown to the Federal Reserve decision, with stocks falling as elevated oil prices drove bond yields to multi-year highs. Almost 350 firms in the S&P 500 dropped.
Benchmark 10-year yields hit the highest level in nearly two decades. Longer-dated Treasuries extended losses after a weak $13 billion sale of 20-year bonds. Brent crude settled above $108, fueling inflation worries. Bitcoin tumbled as the US Senate blocked a landmark crypto bill in an industry loss.
On this special edition of the show, Carol Massar and Tim Stenovec host live from Huntington Beach, California from the Future Proof Festival.
Today's show features:
- Tony Davidow, Senior Private Market Strategist, Franklin Templeton Institute
- Jan van Eck, VanEck Funds CEO
- Jaime Magyera, Senior Managing Director, Head of U.S. Wealth and Head of Retirement, BlackRock
- Scott Dennis, Head of ETFs, TCW
See omnystudio.com/listener for privacy information.