Embracing Global Opportunities with Jeffrey Becker of Jennison Associates

29:19In Europe, increased defense spending has really ignited the markets over there. And so I think the international markets might have some legs. We do still favor the U.S., you know, in the medium term and longer term right now. But certainly international markets, after being beaten down for years, have come back strongly. So let's talk a little bit about risk management. I know you guys employ the traditional sector diversification, geographic diversification, different strategies, but talk a little bit about your risk management and the downside protection you deploy to make sure that volatility, like we've been seeing, doesn't hit the bottom line too hard.

30:05Yeah, and as we discussed, Barry, we are concentrated managers, high conviction managers. So, you know, we're paid to take risk. And as a result, our portfolios do tend to be more volatile than the benchmark, certainly, and many other managers who are more diversified. So, you know, we will have periods where we wildly outperform the benchmark and periods where we underperform the benchmark. We're looking typically at a holding period in our names of, you know, three to five years and much longer. And so, you know, we are long-term investors. We want to align interests with our clients who are long-term investors and try to filter out the quarter-to-quarter noise and the volatility that comes in between those periods.

30:51So again, if we can identify those companies early that are going to be the longer-term winners, that's where we go. From a risk perspective, what we want to protect against is unintended risk. So we're taking very deliberate and concentrated risk, But we have every kind of risk management report that you would expect in an asset manager to make sure we don't have unintended risks, to check our dispersion, and to make sure that at the end of the day, the risks we're taking are stock selection risk and not unintended risk around size, geography, sector. So I don't usually hear the phrase unintended risk.

31:30So I certainly understand the risk of performance relative to a benchmark. You're going to underperform. You're going to outperform. What are some other unintended risks? Is it strictly just sector concentration or geographic concentration? Or is there a little more nuance to it? We want to make sure at the end of the day that the risk we're taking is stock specific. That's who we are on the equity side. We are stock pickers. And so we want to make sure that what's coming through our portfolio from a risk perspective is all based on stock selection and not some of the more factor-based influences that can take shape in portfolios.

32:13And as you mentioned, sector and geography and other exposures. Really interesting. So given that PGM is the parent company and they run a sort of multi-boutique, multi-strategy approach, how does your concentrated alpha approach to investing fit in? Do you have to think about, well, maybe this group or that group is doing something similar or do you do your thing and it's up to the parent company to select the allocation they want? Yeah, the great thing about the multi-manager model at PGM is each of the affiliates, as we call them, versus boutiques, are free to pursue their asset class and their specialty in their own way.

33:03Now, to the extent that there are multi-asset portfolios put together within PGM that might select components of the different affiliates or boutiques, that'll be determined by the multi-asset team doing the asset allocation. You know, for Jenison, given, you know, the highly concentrated, you know, nature of our equity portfolios, we fit into some of those multi-asset products. But in other cases, we don't. We're too high octane for that. But we are in a number of annuity and other asset allocation products throughout Prudential that avail themselves of our various capabilities. And the other thing that Jenison can do is we have a small quantitative equity team, not to be confused with PGM Quantitative Services, which is a sister company.

33:58Our team is there to customize our fundamental alpha from our equity portfolios. So if a client is looking for a targeted tracking error, a targeted volatility, likes what we do but maybe can't quite take the tracking error or volatility, we can manipulate the portfolio to fit within their requirements. They might be someone who wants a sustainable portfolio and has some exclusions or types of industries they don't want to include. So having this little quant group within Genison to customize our outcomes for our clients has been a terrific addition of value that has allowed us to get into some of these multi-asset products.

34:40The other great thing about the PGM multi-manager model that I'll comment on is that we have virtually no overlap among the different affiliates or boutiques. So Jenison is the fundamental active equity manager. PGM Quantitative Services is the quant manager. PGM Fixed Income has broad-based fixed income capabilities. We have private real estate, private credit, et cetera. And we're not fighting with each other over shelf space in different products because we're all experts in what we do. Now, it's taken me about 10 years to stop saying Prudential and start saying PGM. You did mention Prudential.

35:23When you think about the parent company, it traces back to Prudential Insurance, which is still a giant brand. And how does the relationship between Genesys and PGM and PGM Prudential just affect the nomenclature? It's a lot of stuff to keep straight. It is. You have the master brand of Prudential, 150 years. You have the PGM brand, a little over a decade old. And then you have the brands underneath, Genesys at 55 years being the oldest of the investment management brands. It's also why Jenison tends to be the most independent of the affiliates or boutiques. It was an acquired business. About 75 % of the assets were sourced by Jenison versus assets that have come through some of the Prudential or PGM channels.

36:20But, you know, we do have to be careful about the branding, and sometimes it's at the product level. For example, PGM runs a lot of the consolidated platforms like the mutual fund platform and in Europe the USIP platform that are used to structure the funds that are sold into the wealth management channels. And there, for example, if you want to buy Jenison in a growth fund through the PGM Mutual Fund company, it's the PGM Jenison Growth Fund. So sometimes we have multiple brands at play. Really interesting. This is Tom Keen inviting you to join me for the Bloomberg Surveillance Podcast. It's about making you smarter each and every business day.

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37:52On the East Coast, listen at lunch, and on the West Coast, when you wake up. That's the Bloomberg Surveillance Podcast with me, Tom Keen, along with Paul Sweeney and Lisa Mateo. Subscribe today wherever you get your podcasts. So let's talk a little bit about the current environment. It certainly has been a chaotic first quarter with tariffs on and off again. You guys are deep fundamental investors. How do you think about news flow and all this noisy stuff when you're looking at the fundamentals of companies? It's hard to do, but it really comes down to focus at the end of the day. We have to try to filter out the noise.

38:38Now, we're not macro investors, but we have to be macro aware. We have to understand if policy shifts or anything in the macro environment will ultimately affect the environment in which our companies operate. So we always bring it back to the fundamentals. You know, we can't put blinders on and say, this is a great company. But if the landscape in which they operate changes, it can affect the fundamentals of the company. So, you know, we work very hard to try to separate the noise from the fundamentals. But at the end of the day, sometimes that macro environment can affect the fundamentals. So when it starts affecting the fundamentals, how do you manage it?

39:20I'm assuming since you're the alpha managers, you don't have an option of saying, we're going to go to cash or we're going to go to bonds. Is it a matter of saying, hey, Europe seems to be doing better. We're going to rotate, shift some of our exposure from the U.S. to overseas. How do you deal with the macro once it starts affecting the fundamentals? Yeah, it's exactly as you described. We're paid to invest in a certain strategy for a client. So we hold very little cash just for liquidity and trading. We're paid to be fully invested. And so, you know, as we see either a sector or a supply chain or a company's fundamentals coming under pressure, we'll either underweight or get out of the company completely and look for the next best opportunity.

40:09Really kind of interesting. You had a piece recently at Jenison titled, Is Value Investing Dead? Tell us a little bit about that. Well, growth indexes have certainly outperformed value for well over a decade. I think we're all aware of that. That's been good for Jenison. Two-thirds of our equity assets are growth-oriented assets, and we've benefited during this period and also outperformed and raised money in new clients. So a lot of that has been a great tailwind for our business. But we also have a high-performing value team that's put up some very good numbers. The way we manage in value is called an intrinsic value approach, which is very opportunistic.

40:57It's not deep value or a fallen angel type strategy. We look for companies with temporarily depressed earnings versus a permanent situation. We try to identify those. And periods of short-term volatility can actually favor our approach if we can decipher, you know, which companies have hit an inflection point and get into those early and hold them long-term. Now, the market has broadened out recently from the MAG-7 and some of the, you know, the most concentrated positions that have led the market. And we're being rewarded, you know, for executing in the value space. They're still good companies and good growth in value.

41:39I don't think investors really think about growth versus value investing like they used to. I think they think about it as portions of the portfolio, stable growers maybe with dividends versus innovators and disruptors that might lead the way in the future. That's really kind of interesting. It's funny because you're talking about your approach to intrinsic value. And I would imagine that as the MAG7 and traditional growth equity falters, the volatility of this market would be great for an opportunistic intrinsic value investor. Tell us how the value guys are salivating these days over what the state of markets are with volatility spiking up close to 30.

42:32Yeah, I think volatility actually can be good on the growth side as well. So I think when you're a fundamental stock picker, you want, number one, as little correlation as possible. If everything goes up, it's hard to differentiate yourself. of when markets broaden out, when volatility is elevated, you really have to have skill to differentiate and to separate the noise from the fundamentals of the company. And so we think we can benefit in these periods, both on the value and the growth side. Certainly, the growth side has pulled back most recently in the first quarter. you're starting to see that shift back already.

43:20It appears that mid-March was perhaps the bottom, and we seem to be starting to bounce off of that. I, for one, don't see a recession on the horizon, at least not a severe one. So I think we will continue to see, as we filter through the noise, we learn that tariffs may be a little more targeted and forgiven in some instances that the supply chains don't get as disrupted as we thought, and we could see a good period for growth equity again. So you have large cap growth equity as a focus. You have global equity opportunity. What are some of the other areas where you guys focus in terms of looking for alpha?

44:11Yeah, growth equity, as we've talked about, was the foundation of the firm and the largest book of assets, about half the assets of the firm. We have a global growth team that was built and extended off of that, getting into global, international, and emerging market equity, also following a growth style and philosophy. That team leverages a lot of the same research of our growth analysts. Then we have a small SMID mid-cap team. They are a little more growth managers, but a little more valuation sensitive there. And we offer that in sort of growth and core portfolios. Our value team, we talked about our intrinsic value capabilities, but on the value side, we also have certain sector funds, infrastructure, utilities, energy, and other things, including some strategies that are in demand in Europe, like a carbon solution strategy.

45:16That's a sort of a brown to green strategy, if you will. And then we have our$50 billion fixed income shop based up in Boston. They are really the antithesis of what we do in high conviction focused, concentrated equity. They are a high quality credit shop staying in the higher end of the space there, down the fairway, core fixed income manager managing for the largest pension plans in the world, and also in stable value and LDI mandates. So it's also a nice diversifier for the business. We have this very stable core credit manager and this high conviction, high alpha equity manager. So given that there seems to be a consensus at your shop of hire for longer, at least when it comes to rates, since you brought up fixed income and you brought up credit, does this allow your clients to say, hey, we could take a little off the table with equity and focus a little more on stable fixed income?

46:25How does that balance work? Yeah, we've seen that over the last several years as rates ticked up and there was something to earn in fixed income again. We watch pension plans, you know, adjust their asset allocations. You know, one of the double-edged swords of being a high-performing equity manager is when the equity markets run up and you outperform the benchmark you get allocated against. You're the one they take the money away from. So So we've had that happen and have been a victim of our success, if you will, in some of these areas. So we have seen that over the last couple of years as rates ticked up where we did see some of our clients maintain us but shift some of that.

47:07Just sort of rebalance from alpha generating concentrated equity into more stable, lower-yielding fixed income. Exactly, exactly. I mean, we do – I'm not one to call rates per se, but I agree with the base case out there that we'll probably see two cuts. Hopefully, they're for the right reasons and not bad news cuts, if you will. So that's interesting you say that because originally last year Wall Street was looking for a lot more cuts than we got. and the sort of pushback to the expectation was, hey, the economy is really robust. Consumers are spending. Companies are hiring. CapEx spending is up.

47:52Revenue and profits are up. Why are you guys expecting cuts? How does that transition now where, you know, I'm in your camp. I don't really see an imminent recession. But at the same time, it certainly appears that recession risks are ticking up. They're still relatively low, but they're appreciably higher than they were at the end of 2024. So if we're going to get two cuts, is that because the Fed wants to normalize rates to where they've been over the past 20, 25 years as inflation sort of settles down? Or are we going to see cuts because the economy is beginning to slow? Yeah, I agree with you completely.

48:37I hope it's the former and not the latter. We are starting to see some signs of some potential slowing of growth. I do think we could see growth slow down from what it's been. And it's been red hot for a good couple of years. And it's been red hot. There's still some good signs out there. Housing starts are up, services PMI is up, retail sales and manufacturing are down, consumer sentiment's down. The income and labor markets, importantly, are still decent. I think that'll be a major determinant of where we go. Inflation is stubborn, but it's showing signs of coming down in key areas, tariffs notwithstanding.

49:16And, you know, I think the tariff path will determine a lot of where we go here. So it sounds like you guys stick to your knitting, you do fundamental research, you focus on intrinsic value, but you're certainly aware that, hey, what's going on in the rest of the world, it could have an impact and bleed over. if you're advising pension funds or foundations that have a perpetual lifespan or at least future liabilities that are decades off, is the best advice, hey, it's going to get bumpy for a while, but you have to look past this, look to the other side of whatever happens over the next one, two, four years, or is it everybody man their battle stations?

50:02Yeah, I think keeping a long-term focus is good advice for the pension plans who obviously have teams of experts focused on their asset allocation, but also for the retail investor who obviously has the financial advisor as well. But as you know, Barry, staying invested is key. When people try to time the markets and exit, they've always regretted that. And being in the market during those key points of inflection when markets tick up or missing that last large spike really can have a dramatically negative impact on your returns overall. Yeah, we've seen a lot of studies that show the worst days and the best days tend to come clustered together, and it's very hard to miss one and catch the other.

50:56Absolutely. So I know I only have you for a limited amount of time. Let's jump to our favorite questions that we ask all of our guests, starting with what's keeping you entertained these days? What are you either watching or listening to? Tell us about your favorite podcast, Netflix, whatever. You know, I'm always well behind where everyone else is. I didn't watch the first episode of The Sopranos until the series was over. Oh, really? And I'm just starting Yellowstone, so that tells you how up to date. You're ahead of me in Yellowstone. It's the next one up in my queue. Are you enjoying it? I just started it, so far so good.

51:40I've heard so many great things about it, so I'm looking forward to it. I'm a bit of a history buff, so I've been working my way through the Ken Burns documentaries. I've seen the Brooklyn Bridge, the Statue of Liberty, the Civil War, the Vietnam War, and the Great War. And the next one up for me is Benjamin Franklin. So I really enjoy Ken Burns and how he approaches the documentary. Really interesting. You mentioned one of your mentors previously. tell us about the folks who helped shape your career who who were your mentors yeah i would say first uh you know it it was my mother from uh values and from a work ethic perspective first generation college grad went to got a master's at georgetown worked in politics ran some non-profits uh and then uh ultimately worked in in education um she's she's 90 years old and still alive and doing well.

52:39And, you know, she's been a great inspiration to me, again, from a values and work ethic perspective. I've also had the great opportunity to work for some great leaders and managers. I tried to learn from each one of them along the way, take the styles or the characteristics that I most admired of each of them, and try to incorporate that into my leadership style. And at Altus, it was John Kim and Scott Fox at, you know, Bob Crispin, Rob Leary at ING, and then Alon Cara-Oglin at Voya, to name a few. Sig Sigalis, who I mentioned passed about two years ago, I worked with him for only about six years.

53:21And while, you know, he wasn't necessarily a mentor in the sense of helping me do my job, which was terrific. When I came on board, Sig said, I manage the money, you manage the firm. and he kept his word there and allowed me to do what we felt we needed to do to help grow the business and set the strategy. And it was a terrific partnership and I have great admiration for him. So he was more an inspiration to me, just his will to win and the way he impacted everyone around him and the quality and the values of the firm that he built, really inspirational. Really interesting. Let's talk about books.

54:02What are you reading currently? What are some of your favorites? Yeah, right now I just started Leadership in Turbulent Times from Doris Kearns Goodwin. It seems a little apropos right now. And it's a book about Lincoln, Teddy Roosevelt, FDR, and LBJ. And it kind of takes you through their administrations and some of the challenges that they faced. It's a big book. It sat on my coffee table for a few years, and I looked at it, and I wanted to kind of tap in, but it was four inches high. And finally, I did tap in, and I'm glad I did. Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either investment, credit, finance, anything along the lines of your career experiences?

55:00Yeah, I would say first thing, you know, getting into finance, the path to finance starts so much earlier than it ever did. And in our day, you know, it was senior year. It was time to look for a job. Maybe you had an internship, you know, the year before. But now undergrads going into finance, they need to be lining up their internships sophomore summer, junior summer, senior summer. So it really starts a lot sooner. But once they're on the job, my advice to them is always build a resume of skills, not a resume of jobs. Try to develop as many skills as you can along the way and ask questions early and often.

55:42You're not expected to know anything when you're young and in the job, but as you move on in your career, you're expected to know more and it becomes a little harder to ask questions. And then ask for experiences outside of your current duties. So if you see something going on in the next department over, ask if you can be exposed to that, you know, while doing the job you were hired for and try to get more exposure. But don't expect anything to be given to you. You own your career. Seek out mentors and try to learn. But at the end of the day, you have to take ownership of your career, and your advancement will really depend on the success of your current role.

56:25And if you focus on that and do it well, you'll be recognized. Really good advice. And our final question, what do you know about the world of investing today you wish you knew 30, 40 years ago when you were first getting started? Well, as I mentioned, I didn't know anything about it 40 years ago when I was getting started coming out of college. But in reflecting back, what I think would be helpful would have been how many different types of finance careers there actually are. Everyone thinks sort of Wall Street, investment banking, M &A, but there's investment management, there's wealth management, there's insurance, there's commercial banking, there's institutional banking.

57:07So many, many careers in finance and past that you can go down. I had a very narrow view of the investment world. And, you know, my journey really, you know, happened because of the next role that I got and the next role that I got. I didn't have a plan per se. And I think, you know, I wish I knew more earlier on and I might have set a plan. The plan turned out okay and I've been happy with it. But, you know, who knows what the path would have taken had I known a little more about it. Huh, really interesting stuff. Jeff, thank you for being so generous with your time. We have been speaking with Jeff Becker.

57:44He's chairman and CEO of Jenison Associates, helping to run the firm that manages well over$200 billion in assets. If you enjoyed this conversation, be sure to check out any of the 550 or so we've done over the past 11 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcasts. Be sure to check out my new book, How Not to Invest, The Ideas, Numbers, and Behaviors That Destroy Wealth and How to Avoid Them, out now at your favorite bookseller. I would be remiss if I did not thank the crack team that helps put these conversations together each week.

58:28My audio engineer is Steve Gonzalez. Anna Luke is my producer. Sean Russo is my researcher. Sage Bauman is the head of podcasts at Bloomberg. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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