The transcript from this week’s, MiB: Mike Freno, Barings Chairman and CEO, is below.
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Bloomberg Audio Studios, podcasts, radio News. This is Masters in business with Barry Ritholtz on Bloomberg Radio
Barry Ritholtz: This week on the podcast. What a fascinating guest. Mike Freno is chairman and CEO of Barings. They run over $431 billion in global assets. Fascinating combination. Not really related to the Barings Bank of, of old, you know, if I think of Barings Bank, you think of the, the bank that blew up when you had an unauthorized trader acting out, as well as the first bank in China and Japan and finance. The, the Louisiana purchase that is not this entity, ING purchased them out of bankruptcy. I think it was for like a dollar or a Euro, and some years later, sold them to MassMutual. And then MassMutual combined Barings investing with a number of other shops, including Babson, a very well regarded investing firm. The shop manages about well over $430 billion. About half of that comes from MassMutual. The other half comes from institutional investors. What they do is really fascinating.
They have been working in various credit and other private areas for decades. I know there’s been a big rush into private credit and private debt over the past few years. Barings has been doing this and MassMutual has been doing this for decades and decades. They, they run a ton of money in order to manage their future liabilities as an insurer. And it’s pretty much non equities. I think they have about $10 billion out of the 400 and change billion that’s in, in public equities. Most of what they do are, are real assets, credit debt, middle market banking. They’re looking for a fairly reasonable stream of, of future income, less volatility, and the potential to meet those as an insurer. Those future liabilities down the road, really not just a fascinating area, but Mike Freno is, is so knowledgeable. He worked as a trader. He worked as a, essentially a high yield portfolio manager before going to the president and then CEO of the company. So he has seen the world of private investing from both sides, both as, as an investor and as part of the management team. Super knowledgeable, super informative. I found this conversation to be absolutely fascinating and, and I think you will also, with no further ado, my discussion with Mike Freno, chairman and CEO of Barings. Yeah,
Mike Freno: Thank you. Thanks for having me. Great to see you. Great,
Barry Ritholtz: Great to have you here. Let’s talk a little bit about your background and, and what led you to this career? A BA from Furman University and MBA from Wake Forest Business School. Was finance always the career plan.
Mike Freno: Well, originally started out in accounting, so I was an accounting major coming out of, out of Furman and worked with the legacy firm for the date myself a little bit. Coopers and Rin Oh, sure. Briefly before it was merged into PricewaterhouseCoopers. And so I spent a couple years on the audit side and then actually transferred over to the tax side. So my first four working years were spent in public accounting. And so that was, that was really the intention at the time was I was interested in accounting. I loved many people, won’t, won’t appreciate this, but loved the way financial statements work. I liked to see how, how businesses make money and, and so I always envisioned myself doing that. But it did have a good, a fortunate opportunity to go really work at a startup hedge fund. It was m and m partners at the time.
It was relatively small. We were just over a hundred million when I went to work there. Went as a controller. So to, to kind of help out on the, the accounting side of things and the, the fun side of things. And then as as companies grow and, and you’re only five people, you tend to start to wear a lot of hats. And as a result of that, had the opportunity to start trading, had to start the opportunity to start doing some analysis. We had a multi strategies that we ran. We ran a merger ARB strategy, also distressed debt, which is really where I, I probably gravitated to the most just because of the, the fundamental analysis that’s associated with, with, with debt investing.
Barry Ritholtz: Alright. So you start out as an accountant at PricewaterhouseCoopers, you’re a controller at m and m Partners, a hedge funds. How do you go from there to Babson? A fairly large investment shop.
Mike Freno: Yeah. So it was, again, often these things, you have to be in the right spot at the right time and, and, and fortune was there for me. And so again, I I was, I was gravitating more towards, I did some trading, so I was, I was working on the trading desk, but really gravitated toward our distressed and event driven strategy, which was largely around at that point in time. It was, it was the mid early two thousands. You had a number of bankruptcies going on. We were, we were analyzing all sorts of things and I really enjoyed the analysis around that. And then had the opportunity to, to speak to the folks at, at Babson, which was one of the predecessor firms to, to Barings. And they were really down there running a leveraged loan in a high yield business again, which was fit really nicely with what I was doing. They were moving into more event driven strategies as well and had the opportunity to go over there and, and, and start working with them. At the time, Babson had about 20 some odd people in Charlotte. We can talk more about this later, but we’re up to over 700 now. Wow. So there’s been a tremendous amount of growth there. But really in 2005 I made that, that shift to, to, to Babson and, and really still doing what I was doing focused on, on, you know, fundamental fixed income analysis.
Barry Ritholtz: Hmm. It, it’s kind of fascinating ’cause you almost defensively said how much you enjoy accounting, but if you’re a good accountant, you look at a balance sheet, you can imagine what’s going on in the company, where their growth areas are, where their problem areas are, where they’re spending too much money, I would imagine that would lend itself very well to distressed asset investing and leveraged asset investing. Tell us a little bit
Mike Freno: About that. Yeah, I, I think it has and, and I do, I I, I say this to folks and, and folks in other industries when you talk about the excitement of analyzing of financial statements and, and going through, but it does tell a story. I mean, if you, if you know how right how ca income statements and cash flow statements and tr translate into balance sheets, it will tell a story of, of how companies are are doing. And if you, you have the intellectual curiosity to dig deeper into it, you can really get a full picture of who’s got a sustainable business, who, who possibly doesn’t. And so you couple the fundamental analysis that with some general understanding of a business. And I think it’s an exciting, exciting combination and, and one that I really had had passion, passionate around and enjoyed doing. So again, was, was very fortunate to find myself in, in many roles, which allowed me to do that.
Barry Ritholtz: And, and you mentioned Charlotte. My firm has an office in Charlotte. I seem to visit Charlotte like every few years, and every time I show up it’s like, oh my God, this place is double the size it was 18 months ago. The growth in Charlotte is really quite amazing and it’s become this giant finance hub. Tell us a little bit about, and you’ve been there your whole career, right? Just
Mike Freno: About Yeah, I’ve been there largely. I, I started out in, in, in South Carolina, I went to to school, Furman was, was in Greenville, South Carolina. So really started my work there. But then ultimately the majority of my time since since 1999, has been spent in Charlotte. And to your point, it continues to grow at a rapid pace. It is a financial services hub. It’s certainly not New York City, but it’s, it’s definitely the top two or three in terms of large financial services. We had the benefit of having Bank of America be located there. Right. Wachovia in First Union, the predecessors to now Wells Fargo had a headquarters there. They keep, they, they do continue to keep a large presence there. But what’s interesting about, it’s when we first started, you know, going around and, and, and marketing to the world and, and our institutional clients, we would often get questions, how do you retain talent? How do you attract talent in Charlotte? And the response was just come, come see it.
Barry Ritholtz: Oh my God, it’s, so, first of all, it’s beautiful. Second of all, everything is very reasonably priced and you have great barbecue and the NASCAR museum and headquarters. Absolutely. Really, there there are worst places in the world. Yeah. And, and the weather is like temperate and reasonable.
Mike Freno: And you sound like you’re working for the Chamber of Commerce.
Barry Ritholtz: Well, we have an office there and every time I go down there, it, it’s, it’s very funky and hip. It feels like a southern version of Brooklyn. And so I don’t see attracting and retaining talent as very difficult in Charlotte. Yeah.
Mike Freno: It’s become, it’s become an asset for us to be located there for, for sure. And, and, and we’ve the talent’s there. And so you’ve seen a number of, of smaller financial services firms start up around there because, and, and, and financial services firms like yourself Yeah. Have moved down there because that’s where talent is and that’s where people wanna live. So it’s been, it’s been great. It’s been nice to see the growth and there’s a real commitment to the city there. So I think we’ve got a few more years of growth for sure.
Barry Ritholtz: Yeah, no, to say the very least. There’s, there’s a bright future there. So I wanna talk a little bit about leadership, especially leadership at a, a large investment firm. First, what was the transition like going from being on a training desk and managing portfolios to running the complete organization to CEO? Yeah,
Mike Freno: It’s, it, it was a, I stepped in in November of 2020, so it’s ’cause a lot of things were going on during that period of time. And yeah, so there was a, there was, it was a, it’s a change, but I, I was fortunate, as I said before, I came from an accounting background. I was also at, at the hedge fund. I was involved in the operations early day of getting things up, understanding how settlements work, things of, of that nature. That, that is in the, they call it the back office today, but is increase increasingly important and complex candidly when you move into different types of asset classes. So I had some familiarity with that. I did have a stepping stone from when I was managing portfolios to, before I took over the CEOI briefly for about eight months, sat in the president’s role, which gave me also oversight over investments.
I had the investments to sales, technology and operations. And while a brief period, it, it gave me an appreciation for things I didn’t know well. And I think actually provided me a pretty good roadmap for starting to rely on on other people, because you’re not gonna know everything about everything. I was investments that’s in my background. But running a company requires a lot of other people to do a lot of other things and making sure that you are comfortable and we’ll say in, in this way, letting the plumbers fix the sink. So I wasn’t an expert in technology, I wasn’t an expert in, in, in operations. So I had to rely on and make sure I had people there I trusted to make the decisions. And I think that was one of the things I learned early on was I should probably make few decisions as the leader of the company and entrust my people to make a lot of them, but make sure you’ve got the right people there to, to do it.
And then the transition is, it’s different. Managing money and managing people is dramatically different. And, and this is a people business. Our asset is our, is our people. It’s an incredibly valuable asset. And then running something that’s global creates a whole nother set of challenges. We’re in over 20 countries and when people talk about culture, we have different cultures, candidly, in different regions because there’s different behaviors and things that that, that are accept are, are done there. But I will say what we do when we describe it is we have a set of philosophies, a set of principles and a set of values that are consistent in understanding that. And recognizing what works in Charlotte, North Carolina may not work necessarily in Seoul. Korea was actually a pretty big learning curve for me.
Barry Ritholtz: Yeah, I can imagine. So you’re, it’s interesting, your, your background is at Eminem, started out with five people at PricewaterhouseCoopers or even back in the day when it was just Leber and Cooper’s, Coopers, Leber, Coopers and Leber. They’re giant. There are thousands and thousands of people. What did the experience at both this small firm and a a a giant firm, how did that shape your leadership at Barings? Yeah,
Mike Freno: It, I think working at a small firm, you begin to appreciate how, how effective quick decision making can be, but understanding, working at a large corporation that you need to have controls, you need to have some element of controls and process that goes along. And so balancing those two out and creating an environment where you’re empowering people to make relatively quick decisions and, and failing fast as well, make decisions to invest, makes decisions to go grow businesses, to acquire businesses. And if things don’t work, let’s be, let’s be intellectual honest about it and, and move quickly. So I think the balance of those two and marrying those two together, and while we’re a large company, we’re around 200, 2000 people, again in, in over 2020 countries, it’s big enough where it requires, you know, certain process. You, you can’t have the decision makers all sitting in a room every single day, just, just making them. It does require some ability to decentralize the decision making process. And as I said earlier, you know, as you move further and further up an organization, you probably should be making less, less decisions. And you’re empowering, you make the big decisions, the ones that are, that are critical to the survival and, and effectiveness of the company. But outside of that, really relying on your team to do to a lot of that. So I think working at both and having the experience of both gave me the appreciation for both.
Barry Ritholtz: So you’ve spent about 20 years, maybe a little over 20 years at the same company now increasingly becoming a rarity. Everybody seems to move jobs and companies pretty regularly these days. Tell us what keeps you at the same firm for so long?
Mike Freno: Yeah, it’s, so, so it’s coming up on 20, I’ve been over, over 19 years now. So we’re, we’re coming in on 20 and, and I was very fortunate to find myself working at Babson at the time in a place that fit my personality and my skill sets. Well it was a very much a team-based approach. It was very much a collaborative approach. It was built on fundamental analysis which fit my skillset, get well. And, and so I think when you’re, when you’re fortunate enough to find an environment where your skillset can be amplified by those around you and by the, the, the business process or the culture that’s there, it works. And, and I was again, very, and, and had an o an opportunity to take on a lot of responsibilities. I was entrusted with things early on in my tenure there and was able to, to start new products, to go out and market those products to see how things worked. And so I’ve, I hopefully have, have created what I enjoyed or at least fostered what I enjoyed so much when I joined the legacy company, Babson. And it’s allowed me to stay there. And, and again, I can’t thank my, my predecessors enough for giving me the opportunity and chance to really, to really grow as a person but, but also grow the business.
Barry Ritholtz: Last question in, in, in this section, you alluded to something that I’m kind of fascinated by and I’ve observed it in a number of different companies. I, I’d love to get your thoughts on this. As a company grows, as you add more assets, more people, more divisions, exactly what you said about you making the critical decisions, but being willing and able to delegate decision making authority to people underneath you, I have heard a number of people talk about how challenging that is to let go. Tell us a little bit about your experience with it.
Mike Freno: Yeah, it, I I think one thing I’m, I’m, I’m fortunate and blessed to have is, is self-awareness. I know what I, I don’t know. And, and I’ve been proven that’s been proven to me a number of times through some mistakes, but I’ve have the scars to, to show it. But, but knowing what you’re, what you’re good at, and we all have very good gifts and we all have weaknesses. And I think it’s okay to accept that and say, I have a gap here. I need to build people around me who, who fill in that gap. But it’s, it’s hard because I think, you know, inherently, most of us believe that we make the best decisions. And so you do have to start moving that. And I try what I’ll, what I’ll tell when new people join the team or when I take over a new, in the past when I’ve taken over a new team is because often what happens is people are making a decision.
They’re looking to their boss. Well what would, what, what kind of lean would would you go, I’m not looking for an answer, but just kind of gimme a direction of where you go and maybe that’s where I’ll go. But I’ve often said you’ll have 10 decisions to make this year. They’re your 10 decisions. Eight of ’em I’ll support a hundred percent and I’ll love them. Two of ’em I may hate, but that’s okay. ’cause they’re your decisions and they’re probably better than I would do because you’re closer to it. And I, I have to remind myself of that too because there’s sometimes when I get uncomfortable, I wanna go back to the areas where I’m comfortable and, and everyone hates to see me sitting on the trading desk. ’cause then they’re like, oh, here we goes.
Barry Ritholtz: Micromanaging for the wind. Yeah. So, so let’s talk a little bit about the modern version of Barings and a little bit of history. What people think of as Barings Bank from the nineties and two thousands. ING bought them after their little mishap and then some years later MassMutual purchased them, the big insurance company and eventually MassMutual put together Babson Capital, Barings Asset Management, cornerstone and Woods Creek. Do, do I have that more or less, right? Yep,
Mike Freno: That’s, that’s right. That’s right.
Barry Ritholtz: So, so tell us, what did this combination of four firms do? Tell us about the reach and capabilities and, and why mashup for fairly substantial investment firms. Yeah,
Mike Freno: So at the time, MassMutual was, was really, you know, saw the, the value in asset management, not only for its general account, but also to be a third party business. And, and at times was, was opportunistic and purchasing up smaller asset management. At, at the time, Barings was one that was purchased from ING as, as you mentioned, to really be, it was the multi-asset international equity business. There was also Wood Creek, which, which you mentioned, which was a real assets business. Think of it in music rights, royalty streams, huh. Infrastructure type things that have tractor trailers that have longer term cash flow profiles. And then there was Babson Capital of which I was a part of, which was the largest, and Babson was actually, the predecessor to that was dl. Babson, the equity manager. MassMutual had purchased that and then ultimately had spun out what was the MassMutual investment management into Babson Capital.
And so we had four affiliates at the time, there was actually five affiliates because MassMutual at the time also owned Oppenheimer Funds. Oh. Which has subsequently been sold to, to Invesco. But we took, we made a decision to combine the four brands, the four aforementioned brands together under the new, the new Barings. And Babson was actually the largest, it was the fixed income manager, but it was the largest in terms of a UM. But what we recognized was the Barings brand actually carried more value than, than the Babson brand, certainly internationally, where our presence was, was very well known. And so we made the decision to combine all four of those businesses together under what was now titled bearings. So
Barry Ritholtz: How do you create and maintain a corporate culture when you’re starting with four very distinct entities? Yeah,
Mike Freno: It’s, it’s, it’s, it’s a challenge at times. And, and what was interesting is, is Babson itself had been a series of acquisitions as well. I mentioned dl Babson was the first. There was a group called IDM, which was Institutional Debt Management that was purchased out of First Union Bank. It was really a CLO and loan manager. That was actually the group that I, I joined at the time. We also bought a, a, a business in, in the UK that was a, a parallel, it was a, a leveraged loan and mezzanine investor called Duke Street Capital Partners. So we had, we had brought companies in together all with the philosophy that we want to fully integrate these. And I’ll, I’ll talk a little bit about the philosophy on that and some of the, the, the challenges that, that come along. But really when the decision was to bring them together, we felt to get the, the most scale and the most long-term value to our ultimate owner owners, which are the policy owners of, of MassMutual, was to combine these businesses under one brand, under one operating model and under one culture.
Now, not everyone made the transition. I’d love to say that it was, it was real easy to do. But, but you know, at, at what we decided to do was really have an investment committee driven team-based approach in some of the portfolio managers of some of the firms. Were, were more driven towards the, the, i I have sole discretion on everything I do. There’s not a process. It’s, it’s my decision to make these with, and I have the support of a research team. And that, that didn’t always mesh up, but we made the decision to move, to move to, to the one standard of, of investing and, and created what is now bearings and have subsequently been able to bring in additional acquisitions. Again, all under the idea of we wanna fully integrate these.
Barry Ritholtz: So we’re talking about corporate culture November, 2020, you’re elevated from president to CEOI recall lots and lots of CEOs talking about in 2020 and 2021, right in the midst of the Covid pandemic, Hey, how are we gonna maintain a form of corporate culture? How do we keep everybody on the same page? What, what were your experiences like? Yeah,
Mike Freno: I would say communications was key and it, it was, it was much more regular speaking to the entire company as opposed to, you know, episodic. And we would do town halls on a, on a, I would say an infrequent basis, but you very much every week you needed to be out there speaking to, to the company. You know, one of the things that was, was fortunate we were, we were global to begin with. So we had an operating model that didn’t have us fully face-to-face all the time.
Virtual at that point, we had invested in some technology, the ama it was amazing how quickly the technology took over at that, at that point in time. But we did have regional heads that were able to continue to, to stay engaged with, with, with our teammates. And I think the, the, the communications was the big part. It was really making sure that you’re constantly and consistently out there telling everyone what’s going on in, in full transparency. And one of the things we’ve really tried to do throughout the company, and it’s, it’s something that I’ve appreciated as I’ve worked my way up to my career, is as much transparency as we can. I have, I have always had this belief in, and the folks at Barings have heard me say this many, many, many times. I would rather know what’s going on and know I don’t like it than not know what’s going on and think I don’t like it. And I think it just creates a level of anxiety when people suspect something. And so when you’re going through tough periods like that, having transparency as much as you can, there’s certain things you can’t share obviously, but to provide that level of clarity to people, I think provides some level of ease and it makes ’em feel more that they’re a part of, of, of what we’re doing. And, and candidly they are, they’re a part of the solution, they’re a part of the growth and they’re a part of the success.
Barry Ritholtz: So you guys are not that far away from 500 billion in assets. Let’s talk a little bit about who your clients are. Obviously Mass Mutual insurer as the parent company is a big client. I’m assuming that’s where the genesis of all these different asset management strategies came from. Who are your other clients?
Mike Freno: Yeah, so MassMutual makes up roughly half of our, of, of our assets. And that’s for the, for the general account. And then outside of that, we are, we are predominantly an institutional manager at this time. We do have some, some penetration into the, we’ll say, wealth and retail channel globally.
Barry Ritholtz: Is that family office more like as opposed to mom and pop investors? Yeah,
Mike Freno: It’s, it’s through some some RIA relationships we have. And then over internationally we, we, we go through wealth as well through, through some of the larger banks, but we’re, we’re definitely more skewed towards what we would consider an institutional or intermediary type relationship. But, but it’s gonna make up the full, full spectrum of that. Obviously insurance is, is a big component of what we do just given our heritage and our DNA, that’s a large component of our third party business, but also sovereign wealth funds, family offices, pensions really across the spectrum in terms of where any, any institutional client really globally. And that’s one of the benefit we have. We do have client base that’s split relatively easy amongst the three regions, I’ll say with the Americas, EMEA and then, and then AsiaPac in Australia.
Barry Ritholtz: So I wanna wrap my head around a large insurer like MassMutual as a client, I would imagine very long term in perspective, but I don’t really grasp what sort of risk tolerance an insurance company has. I assume they don’t want you swinging for the fences, but on the other hand, hey, they could buy treasuries without you. What is that sort of risk embracing, like how, how does that settle out? What are, what are they looking for in terms of returns?
Mike Freno: Yeah, and so I would say, you know, not many of our clients wanna swing in for the cha fences and usually that we’re not the ones to hire to do that. We, we are more very much focused on, on fundamental long-term type in type investing. We do it all up and down and we, we do it within fixed income, we do it within real assets and we do it within what we call capital solutions. But, you know, insurance companies and, and I’ll say this, the O masses, MassMutual obviously is a mutual company and you mentioned a long term horizon, I think is one of the best ownership structures we could have because they are owned by their policy holders who have a very, very long time horizon at the current time. I think our, our oldest policy holder has owned a policy for 80 years.
Wow. And that’s a long-term horizon that that policy holder would loves to see us pay dividends and then would wants us to be there to pay the benefits to their, to their descendants. So it’s really taking a long-term horizon, which allows us not only will we make investments on behalf of our clients, but we make investments in the business, which is equally important for the longevity and sustainability of our company. We have a longer term horizon. We’re not necessarily worried about quarterly earnings or even annual earnings. We’re fiduciaries of what we’ve been given, but we can take a long term look and, and in fact our middle market direct lending business, we started building that in 2013, well ahead of, of a lot of the conversations that had, knowing we may be a little bit early in terms of the acceptance from LPs to move into middle market direct lending of the size and scale it is.
But we took a view that long term we think this is gonna be a valuable place to be. We also knew that MassMutual had a, a, an interest in the asset class, which helps us start new, new strategies. And so I think it’s it’s a good, it’s a good blend of that. And as we move further and further, the the, you know, insurance companies have been buying private or illiquid assets really for forever. Forever, right? Yeah. I mean it’s, you know, back in Massachusetts a hundred, almost 175 years old, 175 years ago, there wasn’t a lot of public bonds that were trading outside of, of, of, of government bonds. So they’ve been in this space for a long period of time and now we’re just, you know, somewhat showing it to other, other parties. So they’re, they’re obviously skewed more towards higher rated assets just given the, the rating of, of the company as AA entity. But that being said, our business, you know, has other things further down the risk spectrum that, that allows us to grow and service other clients.
BR: I wanna better define what capital solutions and real assets are. Let, let’s start with real assets. So you mentioned music royalties and, and copyrights. Yeah. And things like long haul trucks. What other real assets do you guys own and is the goal? We’re just looking for a steady low volatility income stream
MF: In, in most of our strategies, it’s that. And so I would say real assets for, for us is broadly defined as as real estate and infrastructure and, and even infrastructure and real estate can blur at some point in time when you start to look at logistics and things of that nature. They’re,
00:28:19 [Speaker Changed] So when you say infrastructure, are we talking highways and bridges or are we talking trucks and rails? You
00:28:24 [Speaker Changed] Think? Trucks and truck. It, it’s all of the above for us. It’s more along the, the, the trucks and, and rails and, and towers, wireless towers, things of, of, of that nature that fits within their data centers can fall into to either either one of those type type things. So that’s, that’s the real assets. But we do have the capabilities, again, we own, we own trailers. We own an aircraft leasing business. And so those things that are, are, are longer term more stable type cash flows, capital solutions is really encompasses all of it to, to be honest, it’s, it’s more of a unique solution, a more bespoke solution for a client when it comes to, it’s not something that would, and certainly when we originate things in all of our private assets, there’s some level of some level of customization for those clients. But when you get into Capital Solutions, it’s really a unique solution to a client who has a, a financing need of some side. It can be a preferred equity piece, it can be an equity or a debt piece with, with equity kickers, all sorts of things that, that fit within that. That’s, that’s slightly unique and that will come more than likely with higher returns. It’s a little heavier lift to be able to do a little bit different analysis that goes along with it, but it’s a higher returning profile.
00:29:33 [Speaker Changed] So, so I get the sense that there are some advantages to working with a large insurance firm, not just the, the longevity, but it seems like there is the freedom to do the sort of things that a lot of investors just don’t have the patience to wait for.
00:29:52 [Speaker Changed] Yeah, and there’s, there’s also an alignment. I mean, MassMutual is a, is alongside our investors on almost everything we we do. They’re in the same strategies and, and varying sizes and scales. So, so there is a complete alignment from where we are investing our parent company’s capital as well as where we’re investing our, our third party event. But it does help to have a, a parent company like this who allows us to seed, seed investments, allows us to grow things. And you’ve seen more and more frequently now the tie up of, of what we’ll call alternative managers with insurance companies because there is a need on the asset side as well as the liability side. So the liabilities coming from the insurance company, those assets or those, those liabilities, the cash that comes with those needs to be invested in assets that, that provide a return, that meet that liability.
00:30:38 And so there’s naturally this move. Now we did this 20 years ago, and so we’re seeing a lot of this happen now, but this is something that we had done a long, long time ago. And seeing that a, a captive, which is what we started as an ask captive asset manager for an insurance company, can also be a great service provider to, to other clients as well. And that’s really in 2000 when we started this focus of making what was Babson and the other brands more focused on third party as well as the com parent company.
00:31:06 [Speaker Changed] And, and when you discuss liabilities for an insurance company, those future obligations are, are fairly predictable. I mean, there’s some variability, hey, you’re working with annuity tables and things like that, but it’s a pretty predictable set of obligations. How does that impact how you think about the risk tolerances and, and where you want to go with the investment dollars? Yeah, I
00:31:29 [Speaker Changed] Mean it’s all, as with most fixed, all fixed income investing, candidly, it’s, it is you, you want to get your return, you get your coupon and then you get paid back at the end of the day. So it, it really is. And then how, how things are measured in terms of duration long in terms of tenor and all those things, really that’s something that we don’t do as much. The parent company handles all the asset liability management side of things. They give us asset allocations, we go ahead and and and and invest those dollars. So whether security selectors if, if you will. But yeah, when you look at the liabilities of, of a number of insurance companies out there and you think of whether there’s, there’s, there’s the life business, it could be term or it could be whole life, you also then look at the annuities, the pension risk transfer, all of those have a set, you know, pension risk transfer, a longer, much longer dated set of liabilities.
00:32:17 But it’s, it is, it creates a, an interesting opportunity in different asset classes to refine excess returns. And I think what, what folks are are starting to see, and this is certainly the case with us, we have always recognized that we would be happy to pick up additional returns for illiquid an illiquidity premium without taking additional risk. And that’s, that’s really what I think, think insurance companies have. The, the, the flexibility to do is to take that illiquidity premium because they, they have a, a much better idea of what their liabilities look like and and matching those up.
00:32:48 [Speaker Changed] And you’re a member of the executive leadership team at MassMutual, discuss a little bit, if you will, what those conversations are like. It must be fascinating to sit on that board that’s essentially overseeing your day job.
00:33:04 [Speaker Changed] Yeah, it’s, it, it was very insightful for me. I had, I had some knowledge of the insurance industry and, and really just how it touched the asset management industry, but it does give me a bigger perspective on, on the, the industry as a whole. And I think more and more as you, you see, and certainly there are really deep cases of this where alternative asset managers, whether it’s with reinsurers or insurance companies have become one, we have a front row seat to how the two are, are, are managed. And so I think it’s just given us a much better perspective. And I also think it’s made barings and, and hopefully myself as a better partner to some of our other clients is, is recognizing and have a better understanding of that.
00:33:45 [Speaker Changed] Hmm. Really, really interesting. Before we get into the details of investment management, I have to ask you a question. There was a quote of yours that kind of grabbed me. You, you’ve self described your own leadership style as confident humility. Explain what that means, that, that’s a fascinating phrase. Yeah,
00:34:05 [Speaker Changed] Thank you for asking that. I, I use it, I use it a lot. I’m not sure where I, where I picked it up, but I, but I love it and I think it describes how we operate at, at Barings. It, it goes back to the element of having some self-awareness and I think understanding we need to be confident in what we do. We make big decisions whether we’re on the investment team making decisions for clients’ portfolios or whether we’re in management or any other part of the business. We have to be confident in the decisions that, that we make. And we have to, you know, rebound from, from mistakes at times. But at the same time recognizing with an element of humility, which I think is a gift for people to have that, that we don’t have all the answers all the time. And, and seeking counsel and seeking partnerships and seeking people to do that isn’t necessarily a sign of of, of not knowing things. It’s a sign of just saying, Hey, I need, I need a little bit of help here. So I, I use the phrase very frequently. I, I love it. Again, I’m whoever, whoever came up with it, I I, I’ll attribute it to ’em if I find out. But it is, it is, it is something I think, and I hope i, I live by and I, I think most of the teammates at Barings do as well.
00:35:05 [Speaker Changed] So let’s talk a little bit about how the asset management industry is going to evolve over the next decade. You guys aren’t very equity heavy, but you’re much more focused on private markets, on anything that is a fairly regular income stream. How do you see not just insurance, but the entire asset management industry evolving in the future? Well,
00:35:29 [Speaker Changed] There’s clearly a growth into to what folks are calling private assets. I think that’s, that’s definitely gonna continue to be the trend. I also think in some of the more established private assets, there’s a blurring of lines between public and private and, and what, you know, what was in leveraged loan, the leveraged loan market is a pretty good market for that. You’ve got deals that are several billion, which are going to private credit firms. You’ve got deals that, that were started in the middle market space would’ve, which would’ve been 500 million. And like I said, now there there’re several billion and so is that a syndicated market or is that a, a private market? So you’re seeing the ebbs and flows of that, and I think that makes sense. There’s relative values that change between public and private markets over the time. But also more and more what you’re seeing is, is an, is kind of a, an emergence of more private asset classes being purchased by, by, by individuals and, and probably more by institutionals, less by individuals at this time.
00:36:24 But over time you’ll see that it’s in the asset based finance space, the securitization space, things that were always somewhat in the private space but didn’t come out into the public markets through, through cusip actually coming off a bank’s balance sheet. So I think that’s gonna continue. And you’ve, you’ve seen any numbers of 3 trillion to 5 trillion of how big the market can be. Really anything that’s in a public market from a debt standpoint can really operate in the private market. And so it just depends on what borrowers are candidly looking for. Are they looking for some sort of certainty of execution? Can I get that better in the public market? Can I get it better in the private market? What terms can I get in each, do I want, do I want my information in the public market perhaps I, I prefer to keep, I’m a closely held company prefer maybe I’d prefer to keep my information amongst a a private and small group of of lenders.
00:37:16 So that’s, that’s moving, you know, you, you see new things like portfolio finance, which which is something we do on a large scale, which is, it’s slightly different from from nav lending, but it’s, it is lending to GPS and lending to, to portfolios. It’s a growing business, highly customized, highly bespoke structures that take a lot of heavy lifting to do. But I think more and more we’re gonna see that as, as people try to find, and I described it earlier, possibly take getting more higher yields, higher returns, but not taking more risk, but picking that up through either complexity premium or an illiquidity premium.
00:37:53 [Speaker Changed] So you, you mentioned a couple of things earlier that I want to hit back on, which is how various markets have, have kind of moved up. And I see this across lots of different things, whether it’s public financing or even public companies, whether they stay private or go public, it seems that everything has gotten bigger, higher assets higher a UM and it almost feels as if Wall Street has kind of abandoned that middle market. You, you mentioned things that, that used to be private at, at three, four, 500 million are now still private at two three 4 billion. This seems to be going across every sector I look at, is this just a natural evolution of capital markets or have valuations and size just gotten so large that Wall Street can only service these giant shops and it creates this void in, in the middle underneath? Well, I think
00:38:53 [Speaker Changed] The ability for companies to stay private longer is a good thing, right? And I think it’s actually, and there’s definitely a need for the public markets. We don’t wanna lose those all together and we don’t want it to only be for the trillion dollar market cap companies. I think it’s healthy to have a, a moving market because people at times will want some sort of monetization event. They will want some sort of liquidity and you, you can get some of that in the private markets, but it’s, it’s not nearly the, the, the way you can get it in the public markets. But I I I go back to using the leverage loan and your example’s exactly right. When I started out in the business, a a broadly syndicated leverage loan deal could have been $500 million, a bank would’ve brought that deal and 10 people would’ve owned it and traded it.
00:39:33 Now that’s, that’s not the case. You, you gotta be moving up. And so I think it is an evolution of things and I think, you know, banking reg regulations have changed some of the bank’s ability to do some of this, this type of lending. We’ll see if that changes in the future. But the good thing about the capital markets in general is it’s efficient and if there’s a, if, if there’s a way for people to get excess returns, capital will flow into that and over time if spreads become compressed there, they’ll move to other areas, which I think is overall healthy, healthy for a market.
00:40:03 [Speaker Changed] And you talked about the relative value as assets shift between public and private and back. How do you capture that gap, that difference? Is it just a function of all this capital flowing into private markets? There’s no doubt public markets are historically pricey today, but it feels like so much cash chasing all these private assets, you’re gonna end up with a very similar situation.
00:40:31 [Speaker Changed] Yeah, and the, the, well, I think one of the distinct differences is obviously the, the quickness of the rapidness at which a public market changes price, whether it’s valuation
00:40:42 [Speaker Changed] Second by second,
00:40:43 [Speaker Changed] Whether it’s valuation or whether it’s, it’s it’s spreads on yields going wider or going tighter. That’s, that’s effectively real time. It takes longer in the private markets because these deals take a long time to longer to, to originate, to close and to move on. And so the reaction time is slightly there and if it’s, if it’s a brief correction in the market, maybe the private markets get it right and the public markets just had a, a period of inefficiency, but over time those two should converge and, and you should be getting a premium if you’re moving into private assets, there’s nothing to suggest that you should be getting tighter spreads in a private market, giving up your liquidity and there’s some liquidity. But that nearly the case of the public markets, if you’re giving that up, you should be getting a premium. So over time there needs to be a premium given into the private markets, over the public markets, which would also suggest that over time companies who are looking to as much as possible reduce their cost of capital, will gravitate to where the financing is, is most appropriate to them. And that may be in the publics and maybe in the private.
00:41:46 [Speaker Changed] So Barings has been in the space for decades now. It seems that certainly since the financial crisis and and more intensely since the pandemic, just huge flows of capital are going to to private. At what point does that become a crowded trade? What’s the capacity like on the private side? Yeah,
00:42:10 [Speaker Changed] It’s big because in theory you can start taking market share from the public side. And that’s where I think some, you know, our, our, our direct lending business is really purely in the middle market space. And so think of us looking at companies with 75 million of EBITDA and below rather than the multi-billion. We don’t currently traffic in that and we traffic in the middle market and then we traffic in the syndicated space. But the, the direct lending space in between is somewhat of a, of a white space for us. But I think that’s what you’ve seen is as large capital allocators and aggregators have billions and tens of billions and twenties of billions to put to work it, it becomes hard to do that in chunks of 250 million. Much easier to do in 2.5 billion. And so there’s a, there’s a tug of war between the public and private markets as who’s taking market share from from that all good companies. It’s just that what what is your strategy necessarily looking to, to do, but without the private market seeing new deal volume. And so whether we start to see m and a transactions come back, whether we start to see club deals being formed for public companies and things that
00:43:16 [Speaker Changed] Club deals being
00:43:17 [Speaker Changed] Club deals will have to club deals being you get four or five lenders together and they take down the a $4 billion deal and say it’s, it’s a club of us rather than one person doing it on a
00:43:27 [Speaker Changed] Bilateral, not quite a syndicate, not quite a simple person.
00:43:29 [Speaker Changed] It’s that great. It’s that it’s that white space in between that evolves in there that you’ve got. And so they’ll, there’ll have to be either new deal volume, as I said, or, or the, the private markets will have to take market share, continue to take market share from the public markets.
00:43:42 [Speaker Changed] So you we’re talking about institutional investors. Do they want fewer but larger and more strategic relationships? What, what are they looking for in terms of capabilities and portfolio solutions from from an investment shop like yours?
00:43:56 [Speaker Changed] Well, absolutely, and I think probably everyone is looking for fewer relationships they have. They have to deal with a lot of, of relationships and a lot of partners. So the more you can have a robust or a broad sense of capabilities, the the, the more value you are to be. And I think what’s interesting for, and what we’ve tried to build and how we’ve kind of gone through acquisitions and how we’ve gone through organic growth is to really make sure we cover all of that. And so we’ve, if you look at our acquisitions over time, if you look at what we’ve grown, we’ve tried to be global and so we, we make acquisitions of things that are adjacent or tangential to our currently Strat current strategies.
00:44:31 [Speaker Changed] Is that strategic or tactical?
00:44:33 [Speaker Changed] That’s strategic and that’s just the view that we take. We wanna have global capabilities for what we do. And so if we, if we do direct lending in the US we do direct lending in Europe and we do direct lending in AsiaPac. And it’s, it’s basically what saying to into to companies, if you have the desire for a global portfolio, if you have the desire for us to determine where the best relative value is, we can do that capability. You don’t need to select three different managers to cover three different parts of the globe Equally, we’ve done that with the liquid and illiquid side. And so if, if folks come and say, I want, I wanna leverage finance pro product, I want something that’s below investment grade, but I know at times high yield’s more attractive at times, leveraged loans are at attract more attractive and at times direct lending’s more attractive. You determine where that best relative value is and I think that’s been a hallmark of how we viewed it. Let’s do what we do well and let’s make sure we do it globally and we have deep enough capabilities to service all those needs.
00:45:27 [Speaker Changed] You’ve been on the investing side of global high yield. How has your perspective been affected as, as CEO from your background in, as a trader investor in that space?
00:45:38 [Speaker Changed] Yeah, so one of the, the things that came out of is I was a part of a US loan group originally. So a syndicated loan group was where I, I first started at Babson. We then made the decision of, you know, these are similar, two sides to the same coin. High yield bonds and leveraged loans are often in the same capital structure. One just comes with a fixed coupon, one just got a cusip and one’s more private, but, but often it’s the same company. So we decided to combine those two businesses together. Then we went and said, you know what, what’s what’s unique about us is we’ve got great capabilities in Europe and we’ve got great capabilities in us. And so in 2009 we said let’s create a global high yield platform, which was really one of the first of its of its kind. And so that that experience and per perspective said to me, we, this is really something that’s here. Clients will value our global perspective. They’ll still may want to only allocate to one region or another or one asset or another, but who those who are interested, let’s take a look at that. And that as much as as, as the, the investing side of it was there, it was really the business side of it I think, which has helped me in my, my current role.
00:46:42 [Speaker Changed] So I keep reading and hearing about new credit asset classes. What’s the appetite like for that?
00:46:47 [Speaker Changed] Yeah, it, it’s becoming more and more popular. I think it’s really on the asset base side of things. So there’s a lot of different things that can fall into that category and and if you’re talking about origination platforms, whether it’s a mortgage origination platform where someone will, will take all the mortgages originated by that and package it into something so as, as more and more it becomes more and more accepted to have a portion of your portfolio in illiquid assets. And I don’t think it’s just for insurance companies, I think insurance companies are well equipped to do that because their liabilities are, are fairly well known. But pensions also have a, a bucket for things that are illiquid and I think historically they’ve used them for higher yielding things. But I suspect going forward and where a number of our conversations are taking place is around the IG portion of their portfolio, the investment grade portion of their portfolio, that if I can pick up an additional a hundred to 150 basis points of spread or yield in a private market, I don’t need all of my assets in my portfolio to be on the liquid side.
00:47:49 That’s usually the bucket I use for liquidity is in my investment grade, in in government bond side of things. But maybe I move a little bit into illi illiquid assets and pick up additional yield for that portion because I don’t need 5% I can sacrifice for, for illiquidity purposes.
00:48:05 [Speaker Changed] So it sounds like there are a ton of tailwinds for the private credit and, and debt sides. What do you think is the next phase of growth? What’s the, what’s the next area that’s ripe that perhaps hasn’t really been been well explored?
00:48:23 [Speaker Changed] Yeah, the, we’ve canvased a lot of it. I mean I think there’s, there’s a lot, but I do think the, in the private investment grade side of the market is really going to be the area where it’s gonna grow. And when people talk about
00:48:33 [Speaker Changed] Investment grade that’s private,
00:48:35 [Speaker Changed] Not public private. Yes. And so I think when people originally, even as early as last year when you have said direct lending or private credit, everyone would’ve moved to middle market, corporate direct lending. And that’s what was in everyone’s mind. And, and that was a component of it, it’s a component of it, but it’s actually one of the smaller components of it. Candidly, when you expand to all the other types of lending that can be done and has traditionally been done by, by banks and has now been done by, is being done by asset managers and insurance companies, the, the, the opportunities are vast. And so I, I think that’s going to be an area that continues to grow and continues to, to offer investors on the institutional side. And I, I suspect it will start to gravitate more and more towards the, the individual and wealth side of it business as well.
00:49:20 [Speaker Changed] Hmm. Really interesting. So you mentioned in passing some previous acquisitions, I know Altus and, and Gron most recently. What are your plans? Are you thinking about more acquisitions? Is this deliberative or is it merely opportunistic or a little bit of both?
00:49:38 [Speaker Changed] It’s, it’s, it’s really strategic. You know, I think we, we have looked at and where we, we love the portfolio of capabilities that we have and we’re, we’re willing to expand on those both organically and inorganically. We’ve had a history of building out teams. I, I referenced earlier we started building our middle market team in 2013. At that same time we built our emerging market debt team at that time. But also as you you referenced, we’ve just made two acquisitions, both happened to be in, in Australia but they were extensions of capabilities we had. One was a real estate business, which gave us more of a global real estate presence and the other was a securitizations business, which gave us global capabilities and securitization. So hopefully you’re seeing a theme here that, that we really want to continue to have the global and so we are, we are very much open and looking for acquisitions.
00:50:24 As I mentioned before, we want to, to fully integrate those. And so this is a people business. And so when you’re looking at spec, you know specifically principally owned businesses, businesses that are owned by a founder, you’ve gotta make sure your interests are aligned there and that there’s an expectation that this is gonna be an over time an integrated company. Now what we don’t do is we don’t mess with the investment process. That’s what’s got them there. What we do look to do is integrate operations, integrate sales to get a globe. We have a global sales force. We think it’s best to leverage that way, but we’re absolutely always looking for good opportunities and, and good things that hopefully will all fit within the strategic lens. So we’re not gonna be looking to buy something that doesn’t fit with where we’re going as a company, but certainly there are a lot of good companies out there, and we’re looking at a, at a few now and hopefully be able to have a few more to announce over the coming years.
00:51:15 [Speaker Changed] Hmm. Really, really interesting. Let me throw you a curve ball. All right. So you oversaw sales operations technology, you were on the investment side. Now you’re CEO and chairman. How do you think about artificial intelligence affecting your business? What is the future of the sort of very personal relationships, very specific types of credit you guys swim in? How is AI gonna impact that?
00:51:46 [Speaker Changed] It is going to impact for sure. And so what we’ve created a, we have an innovation team that, that really focuses on this. ’cause I think the, the use cases for, for AI and for all of these technologies is gonna come throughout everyone of our teammates. It’s not necessarily gonna be me sitting at the top of the organization saying, this is how we should use it. I I the applications are, are yet to be determined exactly how vast, how, how the art of the possible is here. I think one of the things we are finding is the data, especially in the private markets, has become so, so important. And right now a lot of it is unstructured data from historical and that we’re, everyone’s doing a better job of cataloging that data today. But the ability to use these machines to, to make decisions really depends on the excess to, to data, right? And our data on private companies and others, data on private companies is very, very valuable to help inform investment decisions and inform business decisions. But if it’s not in a structure that works, it’s not in a structure that can be accessible. It’s of no value,
00:52:49 [Speaker Changed] Not machine ready quite yet.
00:52:50 [Speaker Changed] It’s not, it’s not. It, it, look, the technology’s getting better to go out and find unstructured data and, and bring it in. But it’s, it’s still a ways away. The public markets have done an incredible job of, of bringing things together and having it to be able to mine that information. But really the private data that exists out there is so large in it’s in many cases, certainly the historical data is, is very unstructured.
00:53:14 [Speaker Changed] Hmm. Really interesting. So 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 watching or listening
00:53:24 [Speaker Changed] To? Yeah, in terms of, of, of streaming. I’m, I’m, you know, I’ve just finished or almost finished with season two of Silo, so that’s Oh, really? Yeah, it’s an interesting one.
00:53:33 [Speaker Changed] Sci-fi that’s on Apple, if I
00:53:34 [Speaker Changed] Remember. It’s sci-fi. It’s on Apple. It’s, it’s, yeah, it’s, it’s entertainment for, for sure. I, I watched three Body Problem a while ago as
00:53:41 [Speaker Changed] Well, so Good. Yes, so
00:53:42 [Speaker Changed] Good. Yeah, like waiting and anxious for the second and third season of, of, of that to come up. So I get my fiction when I watch and I mostly read nonfiction. I’ve, you know, I’m in the, just at the end.
00:53:53 [Speaker Changed] Well, we’ll talk a little bit about books in a moment. Before we get there, I want to ask, who were your mentors who helped shape your career?
00:54:01 [Speaker Changed] Yeah, so I, I, I’ve used these two and these, these two are really pivotal. One was my, my second boss at PricewaterhouseCoopers. What, what he taught me was really the caring nature of business and how it should, how people should view others and retos. And it was an interest. I worked for ’em for only two years, and ever since I’ve left, I still get a call on my birthday. Oh really? Without fail, I talk to ’em other times, but without fail, I get a call on my birthday and that’s always resonated. I mean, working for someone for two years, but then for decades afterwards, they continue to remember something that is, you know, it’s birthdays become, come and go every year. But it was important enough or I was important enough to him as a person to make that, to make that call. So that’s something I’ve tried to take away and be conscious of that people care about those things. Talk,
00:54:49 [Speaker Changed] Talk about people skills and people business.
00:54:51 [Speaker Changed] It was an admirable trait, certainly. And then another one was, was a, a coach of, of youth sports was really one who taught me that the individual will never be above the team. And no matter how valuable someone is, no matter how important or capabilities or skillset are, if they don’t fit within the strategy of a team or the approach and philosoph Phil philosophy of a team, it won’t matter. It will be destructive. And so learning those on really, again, and I think my skillset and my, my personality fits well within a team-based structure, which is to your earlier question about how, why did I stay at, or how have I stayed at Barings for so long? It was a fit. And so I recognizing that always made
me understand, and again, I think it pointed out to having some self-awareness that these companies and, and part of my job as a steward of the company right now. But MassMutual, as I mentioned, has been around for 175 years. As long as it owns bearings, it’s gonna be around many, many years after I’m gone. And I’m a steward of it currently at this, but my job is to bring other people along and so therefore it has to be a team.
00:55:53 [Speaker Changed] Let’s talk about books. What are some of your favorites? What are you reading right now?
00:55:56 [Speaker Changed] Yeah, I’m just finishing up the, the Steve Jobs book by Walter Isaacson. I, I, he’s fantastic. I, before that I read the Musk book and then actually read a book by him called Codebreakers, which was at the, about the mRNA technology. So I, I get most, I read mostly non-fiction when it, when it comes to that. So I’m, I’m, I’m going through those kind of juggle books at the same time. I just also finished 1776 by David McCullough. So that’s, that’s really what I’m reading. But most of the stuff is nonfiction.
00:56:27 [Speaker Changed] I, I, every time someone brings up McCullough, I have to bring up the Wright Brothers book by him. Amazing.
00:56:32 [Speaker Changed] Yeah. I’ve never, okay, well that’ll, we’ll put that on the list. I haven’t read it yet, but I’ll, I’ll put that on the list. And, and a good writer is so gifted. I mean, it’s, it’s amazing what they can do with, with stories. So I’ve enjoyed reading, reading those.
00:56:43 [Speaker Changed] Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either private investing, insurance investing, or in general, if, if that was what they were interested in a, as a career? Yeah,
00:57:00 [Speaker Changed] I mean, first it’s a great, it’s a great industry. I love it. And there’s a lot of aspects of financial services, and this is somewhat timely. I’ve got a, I’ve got a sophomore in, in college now who I’m somewhat counseling on, although he listens less to me and more to other people. But, but I, I, I’ve always advised when we bring in two year analysts out of college, we have a two year analyst program. And I’m fortunate enough to speak with them. It’s, take it all in you, you, you don’t know exactly what you want to do today, but, but look around, ask a lot of questions. Intellectual curiosity is key. If you’ve got intellectual curiosity about something, you’ll be better at it. But, but most importantly, find a place where you want to be working with who you wanna work with, doing what you want to do.
00:57:42 And that, that to me is the key. If, if you find yourself in any of those three, don’t match up. I really think it’s, it’s irrespective of how great you think the industry is, the prestige of it. You just won’t be, be happy long term. And I, I think I was, again, fortunate, I loved public accounting, but I couldn’t see myself doing that forever. I enjoyed it. And I was fortunate again to find myself in a situation like this. So if you’re not where you are with who you want to be with doing what you want, it’s, it’d be, it’d be time to move on.
00:58:12 [Speaker Changed] And our final question, what do you know about the world of finance credit lending and investing today? You wish you knew 25 years or so ago when you were really first getting started?
00:58:23 [Speaker Changed] Yeah, I, I think what I, what I would say is what I knew back then or thought I knew back then, that fundamentals ultimately will, will, will, are, are key. You lose track of that sometimes when you see euphoria and you see bubbles and you start to get away from, from really long- term cash flows of things or, or what really matters over time. So I think it’s not what I wish I knew then it was what I, I had wish I hadn’t forgotten over time because mistakes are made really when you lose sight of the fundamentals of things. And so I would, I’d encourage folks that long term valuation should be based off an expectation of growth, an expectation that that sooner or later will turn into earnings, which will ultimately turn into cash flows. And keeping that in mind that, that, you know, that’s the fundamental for all investments and what investments that are people are made and ultimately valuations.
00:59:12 [Speaker Changed] Hmm. Really, really very fascinating. Mike Freno, thank you for being so generous with your time. We have been speaking with Mike Freno, chairman and CEO of Barings, which manages over $430 billion in global financial assets. If you enjoy this conversation, check out any of the 500 previous interviews we’ve done over the past 10 years. You can find those at Bloomberg, iTunes, Spotify, YouTube, wherever you find your favorite podcasts. And be sure and check out my new book, how Not to Invest the ideas, numbers, and behaviors that destroy wealth and how to avoid them coming March 18th, 2025. I would be remiss if I did not thank the crack team that helps put these conversations together. Anna Luke is my producer. John Wasserman is my audio engineer. Sean Russo is my researcher. Sage Bauman is the head of podcast here at Bloomberg. I’m Barry Riol. You’ve been listening to Masters in Business on Bloomberg Radio.
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