Transcript: Elizabeth Burton, Goldman Sachs Asset Management




The transcript from this week’s, MiB: Elizabeth Burton, Goldman Sachs Asset Management, is below.

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Barry Ritholtz: This week on the podcast, I have an extra special guest. Elizabeth Burton is Goldman Sachs asset management’s client investment strategist. Previously she was Chief Investment Officer at various state pension funds, including Maryland and Hawaii. I, I found this to be really an intriguing conversation with somebody who, whose investment charge is unconstrained. She can go anywhere, do anything. She provides advice to institutions in high net worth investors that isn’t limited by the typical buckets or lines or structure that you, you so often see. Her job is portfolio and product solutions and that means she could go anywhere in the world and do anything. I thought this conversation was absolutely fascinating and I think you will also, with no further ado, Goldman Sachs asset managements Elizabeth Burton.

Elizabeth Burton: Hi Barry. Thank you for having me.

That is quite a resume. Let’s start a little bit before we get to what you do at Goldman Sachs. Let’s talk about your background, which is really kind of fascinating. First, you, you have a degree in French. How, how does that lead to a degree, to a focus on investment management?

Elizabeth Burton: I do have a degree in French. A little bit of a cheat there unless you consider English majors cheating as well, who speak English. But my, my grandmother’s from Normandy and so I’ve been speaking French since I can, as long as I can remember. And I love French literature. I actually have some relationship far, far away to Jules Var. So how does that relate to finance? It doesn’t, but my parents told me, college is the last time you can study an R dime, anything you would like. And so they were both in finance and I decided that must be the absolute last thing I ever wanted it to do.

Barry Ritholtz: So University of Chicago, Booth School of Business, was this just an inevitable, unavoidable thing your parents come from that it seems like you’re getting a lot of, of your focus from, from your genetics. What led to Booth?

Elizabeth Burton: Well, so I will be, this will be the first time I’m telling honestly why I went to Booth. Two reasons. One, one is true and I’ve always said is that I wanted people to stop, ask if I could doing math. And no one asked me if I can do math anymore with a degree from Booth, particularly in econometrics and statistics. But the other reason was Booth rejected me in undergrad and Oh

Barry Ritholtz: Really?.

Elizabeth Burton: I’ll show him. Or University of Chicago. So Right. And then the third and final reason was my dad got his PhD in Econ from Northwestern, but he’s so ancient. Back then it was taught at the University of Chicago. And so

Barry Ritholtz: Wait so Northwestern grad students took classes at the uc? At

Elizabeth Burton: UChicago, yeah. And my dad lived in the international house. He’s from Houston so I don’t know how he pulled that one,

Barry Ritholtz: But, well the humidity makes Houston feel like you’re in the tropics. So it’s close.

Elizabeth Burton: Totally.

Barry Ritholtz: That’s Very amusing. So people really ask you,  you take French and can you do math. Is that like still the sort of thing that we ask people?

Elizabeth Burton: I think it’s because I went into risk management straight out school on the risk side of fund to funds and, and various other industries. And without a formal degree in, in math and statistics, I think there was some hesitation on whether or not it was capable of doing it, which, which may be fair. And I wanted to bolster my resume a little bit away from politics and French. And so I thought what better place to go And you know, it might hurt a little, but Chicago’s a pretty good place to learn some math and finance. Yeah, I

00:03:50 [Speaker Changed] I I’ll say for sure. So how do you go from coming out of Booth School in University of Chicago to getting named c I O magazines? Top 40 under 40. So

00:04:02 [Speaker Changed] That was kind of a meandering path a little bit. What ended up happening was I met my husband right before I went to business school. He was living in Maryland, my boyfriend during business school and he was living in Maryland. And so after school I decided I should probably move there, not back to New York and not back to California. And the hedge funds down there looked like post Madoff, post G F C, that they were really gonna struggle. So I had to switch industries. So I actually went to work in m and a and payments and I enjoyed that. After three years I decided I don’t love payments enough to continue to do consulting and m and a and payments. So I actually went and worked in economics, I was an econometrician. And then when my second child was born, I needed a little bit of a different lifestyle to, I had two kids, they were both young.

00:04:50 My, my father had worked with public pensions and he said this is a pretty good place to be in finance if you wanna raise kids. It’s a little bit letter better of a lifestyle. So I applied to Maryland State retirement. I actually think I interviewed there a couple days after my child was born ’cause they were cutting off the application and I luckily, thankfully got the job, got to work for the, one of the most amazing CIOs in the businesses and a close friend Andy Palmer. But how I got the award, I’m not sure. I think, you know, I was in my mid thirties at the time and I think I was a little bit outspoken. And I also believe that I have never really believed in bucketing very much in investments. And so I often would look at investments in my portfolio that may be different from what most other people put in their portfolios.

00:05:37 [Speaker Changed] So I have like a half a dozen questions that has led me to, but let’s start with bucketing or what some people call silos. Sure. Different types of investing. When you say you haven’t been much for bucketing, tell us what you mean by that.

00:05:52 [Speaker Changed] Well, let me give you an example. I don’t know if you’re in the market for a house currently, but let’s say your realtor goes and, and says, talks to you and you say, I love Cape Cods. And he’s like, okay, okay, I’ve also got this amazing condo that overlooks all of Central Park and it’s only

a $1 million. Right? Or it’s only $200,000. And you say, wow, $200,000 for a condo overlooking Central Park. That sounds great, but I only have spots in my portfolio for a Cape Cod. How ridiculous is that? Right? So it’s a problem that institutions offer often suffer from that retail investors do not like you and me, we probably don’t have this bucketing issue. And so I always felt in institutional management that we were hamstrung by these bucketing issues because we weren’t able to invest in things because of these prescribed rules, which I’m not saying are bad, but they can be limiting. Anytime you have a rule, you limit your availability of options.

00:06:47 [Speaker Changed] So let’s, let’s stay with this. So when, when I think of bucketing, I think of a large institution that says, well we’re going to, we like this space, pick a space, private credit, venture capital, real estate doesn’t matter. Okay? And we wanna allocate 10% of our portfolio to that particular space. What you’re suggesting is, regardless of whether there are fantastic deals elsewhere or this space is pricey, you think that that sort of bucket very much hamstrings, the, the c I o to make the best decisions. I

00:07:27 [Speaker Changed] Believe it can, I believe it can save you from making poor decisions. But I, outside of your mandate, but here’s a good example that’s come up in recent years real estate that has been something in recent years that is something that we’re seeing in institutional portfolios. So does that go in real estate or does that go in debt? Right, right. It can be a tricky problem and if the credit,

00:07:46 [Speaker Changed] Well, it depends on how it’s financed, right?

00:07:47 [Speaker Changed] It it could, it could also depend on the bogey or the target return for either the, if the person managing those two portfolios are different, they may have different objectives. So it may slip through the cracks even though it’s a good investment. There’s also some sort of, some hedge fund structures that have private equity like investments. If the private equity team doesn’t feel that the return is higher enough, they will pass. But if the hedge fund team feels like it has too high of an equity beta, right, they may pass on that. So you may miss out on a good investment. So I always try to find a way to not miss out on those investments. Plus often those investments are some of the better investments because a lot of people have these constraints, right? So there’s not as much capital flying, flying in there. And when you have limited capital chasing, you know, these really amazing deals, you can often earn a higher return.

00:08:35 [Speaker Changed] So before you said you, you perhaps it was because you were outspoken and I was gonna say how, how do people work in public pensions? Be outspoken, but I get the sense of what you’re saying. You are pushing back at established assumptions of investing that we can create these broad categories, right? Regardless of whether it helps our performance or not. In fact, it sounds like you think these rigid rules get in the way of good investors making good decisions.

00:09:07 [Speaker Changed] I think sometimes, but I, you could also take that and apply it to a company, right? So you could say that if you have a company that has people working there for 25 years, they all have seen the same thing for 25 years. When you get one person that comes in and has a year of experience in that industry, they’re gonna bring a new vision to it. And they may be wrong, but there might be parts of that that are really interesting. And I feel that because I was only there for a year when I won that award, there might’ve been flaws in my argument, right? But ’cause I hadn’t grown up in the public pension space, I had a different perspective on what might work and that’s what I applied.

00:09:41 [Speaker Changed] Right. So not only diversity as we tend to think of it broadly, but diversity of experience, diversity of ideas. Yes. Just different ways of, of looking at things. So let’s talk about your prior experience. You worked at a South African based hedge fund or fund to funds,

00:09:58 [Speaker Changed] Well fund to funds and they did have an F three product as well, if you can believe it. A fund, A fund to funds.

00:10:03 [Speaker Changed] Oh, so that, that’s a fund to fund squared. Tell us about that experience. Were you actually in South Africa or were you working in the states?

00:10:12 [Speaker Changed] I was working, so they had four offices. One in Switzerland, one in Johannesburg, one in Cape Town and one in New York. And so the New York team was the diligence team and we had a couple products. I had originally started out on the multi-strategy product. I had gone to work there because I’d previously worked in mortgages in mortgage back. And as you know, that was around 7 0 8. Right. Tricky time. Wanted to diversify my skillset.

00:10:37 [Speaker Changed] Skillset, yeah. Something, something happened around,

00:10:38 [Speaker Changed] Something happened. So I wanted to try other strategies and multi-Strat sounded like a good place to learn about a bunch of different types of strategies. I was really interested in hedge funds. Our clientele was mostly x u s, almost exclusively X U s. And it was great. It was the best part about that job actually wasn’t even the investing and and the meeting funds, it was actually that I worked on a team across multiple continents and like just trying to stay in touch and, and trying to work together on this portfolio and coordinate meetings. And we all had different backgrounds and different investment ideas and different clients like us clients are very different from clients in other countries. So it was really a unique experience. I still keep in touch with them. I eventually moved over to the global macro C t A type side of the business, a little bit of a diversifier, which is funny because later at Maryland and then at Hawaii, that is was a big part of our investment strategy was investing in macro or C T A and trend type funds. So it was a great learning ground for me.

00:11:37 [Speaker Changed] Was there a lot of travel you were back and forth to Geneva or London or Johannesburg?

00:11:43 [Speaker Changed] Zurich. Johannesburg and Cape Town, the majority of the trips. And we tried to go a couple times a year to each of the different offices. They would come here as well. And, but at that point I was still fairly young and it wasn’t as much client facing x u s Right. Not as much explaining and because I was on the diligence team, so more research based that

00:12:04 [Speaker Changed] That flight to, to South Africa is a bear

00:12:07 [Speaker Changed] 20, 22 hours with a layover in Dakar. Right. And I remember one the before they airline rules, I got stuck on the tarmac ones for five hours. Wow.

00:12:15 [Speaker Changed] No fun. So you end up going from the fund of funds to pension funds. And what was first Maryland or Hawaii?

00:12:28 [Speaker Changed] So Maryland was first. I had a a two brief jobs between the, the fund of funds in Maryland and business school in between there. Maryland was first and I never attended to

leave Maryland. I, it was one of my favorite jobs really. My current job is probably my favorite job, but that is a very close second.

00:12:43 [Speaker Changed] Good, safe
00:12:46 [Speaker Changed] For very similar reasons actually, but,
00:12:48 [Speaker Changed] Well tell us why, why was Marilyn and Goldman your favorite jobs?

00:12:53 [Speaker Changed] I think number one, the team, my team at Goldman and the, a broader team even and the team at Maryland are, are some of my favorite people. Just really wonderful, smart, fun human beings to work with, with a very clear mission. I also really like the access, talking to really smart people at Goldman. It’s the internal access, talking to the traders and the PMs and the CIOs and we have so many offices across the world that are willing to give you have

00:13:17 [Speaker Changed] A unique vision of what’s going on in the world, right? I mean I have to, I have to think the intelligence that comes from that team in, in what they see everywhere has to be incomparable to just about anything else in the world.

00:13:31 [Speaker Changed] It is amazing. I, I sometimes wonder if I would’ve rather having started with this experience and then got what I would’ve been better at Maryland having known what I know now or am I better now having learned how things work on the client side. So I go back and forth, but I’m lucky to have had both. And at Maryland we’ve, it was a giant pool of capital fi 55 billion back then. I’m not sure exactly what it is now, but you could talk to pretty much whoever you wanted to talk to. If you had a question, if you had a question on high yield, it’s not inconceivable. One day you might get to talk to Milken about it. Right, right. And that is just so cool. And, and I learned a lot ’cause remember I majored in French and politics. I did go to Chicago, but they teach, you know, more finance less about like these esoteric strategies. Yeah. And that’s one of the things I love about Goldman and I also loved about Maryland is like good people and you’re constantly learning and it never is boring.

00:14:21 [Speaker Changed] Huh. That sounds fascinating. Let’s talk a little bit about your time as c i O at hires. Is that how that’s pronounced? Yes. The acronym for the Hawaii Investment Employ Retirement System or, or words to that effect. How did that come about? That seems like such a fascinating position and so far away from Maryland.

00:14:45 [Speaker Changed] It, it, it is interesting how it happened. I guess I got lucky in January or February of 2018. Hawaii had parted ways with their then chief investment officer and there was an article in a, a magazine for institutional allocators about it and how they were hiring. And I still have the email I sent to my husband and I said, haha, want to move to Hawaii? And I forwarded it to him and I, I was very happy at Maryland, wasn’t planning on leaving. And I had a lot of ties to Maryland that, that I didn’t think I wanted to break. But on a whim I applied and at the same time had mentioned to a friend of mine that I had applied. And it turns out the recruiter had called my friend about the job and he said, I’m not interested, but I know someone who applied and she’s got a risk background and I know you at Hawaii care about risk.

00:15:31 And so he put me in contact with a recruiter. They reached out and they said, look, you’re one of 140. It’s unlikely. So I actually went on vacation. I went to work in Asia, I was gone for a couple months here and there. When I got back they said, okay, it’s, that’s still unlikely, but you’re down to

about 40. I was like, oh, oh, I like those odds. Those are okay. And then by June I was telling my husband, I’m in the final four, we gotta fly out there. And he said, I’m, I’m absolutely not moving to Hawaii. He had a, he had a great job. He’s very senior in his career. Both our families are on the east coast. So we went out there for about a week and at the end of the week and I interviewed and we got the job and we accepted by the end of the week.

00:16:11 [Speaker Changed] Really? Yes. So what changed to make your husband say, yeah, I could live in Tropical Paradise if I have to? I think,

00:16:18 [Speaker Changed] You know, he’s a really good guy. I, I basically said I I’ve been working my whole life for something like this. I was 34, I was a female. It was, you know, a Hawaii pension. There’s only so many pensions, take pensions in the US And I said, who knows what the next one to crop up will be. Right. This is unique. Like there’s just, there aren’t that many young or female CIOs like I have got to try this. And I think he could tell how badly I wanted it. And he sweetly gave up his job and 15 years and wow. Followed me out there.

00:16:49 [Speaker Changed] Wow. So how long did you stay in Hawaii for? Four 00:16:51 [Speaker Changed] Years.

00:16:52 [Speaker Changed] You lived on the island? We did. So part of me thinks of Hawaii as this tropical paradise, but I’ve spent time on other islands and I know at a certain point you get a little island fever you’re stuck with, you’re seeing the same things. How long did it take before it was no longer tropical paradise? It’s just where we lived.

00:17:13 [Speaker Changed] Well, I think Covid sped up the process a little bit. I also, I don’t, I don’t know if you’ve ever experienced this. There’s like one day when your parents are really young and then within 30 minutes they all of a sudden age. Right. And you miss them and you’ve gotta take care of them. And so my parents, if they listen to this, are gonna kill me for calling them old. But you know, I had little kids I had, when I moved there, my daughter was two, my son was four and I think they saw them two, three times. Right. And I was realizing I was sacrificing my family to live in this beautiful location. I I also really missed being in New York. York. I like, it’s an island too. And that’s an island. Right. And I missed being around the buzz of finance. It’s very easy in Hawaii to get wrapped up in the water and surfing in the mountains and the hiking and all of that is lovely. But I run it about 160 miles an hour. Right. And I like to be at a place where people run, at least at that. And I have to say Goldman Sachs definitely runs at 160 miles an hour. And I, I just, I wanted to go back to, to finance and being more like in the middle of all the frenzy.

00:18:18 [Speaker Changed] I totally get that. I, I know this is sort of old school, but it’s true. Once you, you leave New York, you’ve left town. Yeah. You really have. And it’s, and I don’t just mean waiting 20 minutes for an egg McMuffin in Richmond, Virginia. I mean the, I leave New York, I make a concerted effort to like take it down a gear. ’cause the rest of the world has a very different pace than New York City. And I imagine places like London and Hong Kong and other financial capitals Yeah. Where it’s pedal to the metal. Did it take you a while to get back into the rhythm here or like riding a bike? You were just right back into it. It’s

00:18:57 [Speaker Changed] Funny you say that. Hong Kong’s my second favorite city in the world. New York is number one. No, it took all of 30 seconds. In fact, I very much wanted to live in Manhattan. I

wanted to go back to the West Village where I lived in my twenties. But my husband was like, well with two kids and a dog and a cat, maybe we should Right. Not do that. But no, I actually, I pretty long commute. I love coming into the city every day. I don’t think, for me personally, there’s no better city in the world. I love

00:19:20 [Speaker Changed] New York. Well, your commute is not bad. There are much worse commutes than it’s about

00:19:24 [Speaker Changed] An hour 45.

00:19:25 [Speaker Changed] Oh really? Oh. ’cause you have to go downtown. Yes. That’s why see, they, they need to move into the, into the space just for me space between Right. Between Penn Station and Grand Central. Knock a half hour off your commute each one. Absolutely. So, so let’s talk a little bit about risk management. How, how does that come into play when you’re looking at an, a big pension fund that has all of these obligations for employees in perpetuity?

00:19:55 [Speaker Changed] Right. Well, risk management is tough at a public pension and Goldman Sachs provides itself on being a good manager of risk. And, but Goldman Sachs has fewer constraints. We actually have a budget for risk management and technology and tools. That is not something your typical pension is able to do. And it’s a critical need. And they often have to find multiple tools that they can use. Some free, some not free to try to, to make a good and robust risk management system. But it’s definitely a challenge. And it’s really important because to your point, especially now, it’s always been important. But I think post covid, the industry is starting to realize that liquidity for pension funds is, is extremely important. It affects almost everything they do. And the lack of it could have really dire outcomes for the pensioners and for the system itself and have a host of other consequences.

00:20:47 [Speaker Changed] I, is it something that can be outsourced or does it have to be managed in- house?

00:20:52 [Speaker Changed] I think it would be tough to outsource all of it unless also the investment team was partially outsourced. Right. I think there needs to be some marriage between the two. But I do think that you can outsource certain functions of it or you can have a consultant assist with the risk management. But I think the most important thing that you have to do at a pension fund for that is get a hold on your, you have to have good lawyers and good contracts. You have to have a clear view of your liquidity and your cash flows. It’s critical.

00:21:18 [Speaker Changed] So, so let’s talk a little bit about that. ’cause that’s kind of fascinating. When I, when I think of a pension fund, I think of existing employees contributing into the funds a source of, of liquidity Sure. And retirees drawing down on the fund, which is the, the liability or the future obligations when, when the pandemic shuts everything down, does this mean the current employees are not making contributions? What happened during that period?

00:21:45 [Speaker Changed] So we actually never fully shut down. We were always in operations and we were, I was in the office pretty much full time. But one thing I wanna point out is that not all employees at all pension funds contribute. Some don’t. There are certain types of employer sponsored plans where some portion of the employees are potentially all are part of non-contributory plans. Now their multipliers are different and their payouts are different. But that’s a tough situation when you’re not paying in and you’re only receiving. Right. But what you did mention, so in covid I d a bunch of pension

funds experienced or thought they were gonna experience furloughs or cuts in their work week, which are essentially cuts in wages. Right? Right. So if you have 50% furloughed, you’re also 50% wage cut. Those would slow contributions into the system. But it depends on how you calculate the multiplier going out. So if it’s based on their highest wage ever, it could be that your contributions actually stay constant while the incoming cash flows are not also, and many pension funds, while there are technically penalties for employers not contributing to the system, it’s very politically unpopular for a pension fund to go after it’s counties or teachers or police for payments. Right. I could imagine. So it’s very unlikely that would happen,

00:22:59 [Speaker Changed] Especially in the middle of a crazy pandemic with Right. Everything associated there too.

00:23:04 [Speaker Changed] So it’s a very precarious position. Luckily it, it actually, as you probably know, the market turned around rather sharply. There was a good equity rebound. A lot of this didn’t end up happening. In fact, state revenues were often at all time highs from taxes when this happened. So the, the worst was somewhat avoided in the US I’ll say, but it, but it did shed a light on the fact that, you know, you still can have equities and bonds right down at the same time you can have a challenging liquidity environment. Just like we had no weight, which I don’t think, you know, they’re not the same thing, but similar challenges at some, in some respects.

00:23:40 [Speaker Changed] So, so how do you think about, I I’m, I’m still looking at the liquidity issue. How do you think about under normal circumstances matching future liabilities with, with liquidity or cash flows? I, I’m sure there are all sorts of actuarial tables that you’re working with, but you have to think, what are obligations gonna be five years, 10 years, 20 years out? Most investors don’t think in those terms.

00:24:08 [Speaker Changed] No, they, they probably don’t. Unless they’re investing in private markets or in your house, you’re probably thinking about how to, how to afford those payments. So in the US and Europe or abroad, they’re actually two separate things. So in the US corporate pensions, other than public pensions, right, corporate pensions tend to focus more on the liability driven side. Meaning they’re matching their cash flows very carefully on the public side. Usually they’re, it’s not an L D I type format. They are monitoring their liquidity. So they might have a coverage ratio. So they might say, how many times can we meet our pension payments and private market, private equity capital commitment pacing over a certain ratio with no contributions over a certain number of years. So maybe they say, okay, we want it to be quarters, we want it to be 20 times, and then they can manage to that or something like that. And they, they often have models for modeling their cash flows and corporate pensions or European pensions. They most likely are involved in either liability driven investing or this cashflow matching. But I will say of the top 10 questions I get from allocators this year, one of ’em is can we implement cash flow matching to try to help our liquidity issues because of the denominator effect. Right now a lot of pension funds in the US are still suffering from some liquidity issues since they’re, they’re super overweight private equity and the equity markets had stumbled.

00:25:28 [Speaker Changed] Right. So that means while the value of the fund is where they want it to be, the liquidity in the ability to send out cash is, is somewhat compromised by it.

00:25:37 [Speaker Changed] It’s challenging, especially because private equity funds are not distributing as much as they used to because there haven’t, you know, been as many sales in the market or exits. Right. So they’re getting hit on sort of both ends.

00:25:48 [Speaker Changed] So in 2022 when equities were down and fixed income were down, they were both down double digits. Yes. Were you saying to yourself, I I’m glad I’m not running a, a state pension fund this year? Or like what was that experience like from your perspective where you are now?

00:26:07 [Speaker Changed] No. So I, you know, Hawaii should have done probably quite well during that time. It depends on your asset allocation. I also don’t think you should ever really beat yourself up for sticking to your asset allocation and your beliefs. I also think that was a great learning experience. But more importantly, I have always struggled with why there seems to be some belief that equities and bonds will be negatively correlated throughout time. Oh, it’s right. It’s just simply not the case.

00:26:35 [Speaker Changed] Go back to 1981, you had both stocks and bonds down, I believe double digits that year and, and Right. The year before was pretty close as well. Right.

00:26:45 [Speaker Changed] And if you look at inflationary environments, a positive correlation between the two is also not uncommon. And I think sitting back in 20 20, 20 21, I was adamant that inflation was not transitory adamant and super public about it. I I had many people, super famous people telling me I was completely wrong. Right. It’s the one good call I made ever my entire life. But, so I felt confident that I had prepared myself for this type of environment. It’s tricky though because one of the things that can help you in this sort of environment is a diversifier. It could be hedge funds, it could be commodities, it could be cash, right. But commodities were often taken out of institutional portfolios a decade or so ago because Oh really? They, so there was at one point right after, I think actually the Goldman Sachs commodities index came into existence.

00:27:31 Commodities actually struggled right after that index came out for, for a while. Right. And also the makeup of that index has changed over time. But it used to be, I believe mostly like cattle futures but in commodities indices. But, so a lot of institutional investors got tired of like the challenging returns and the volatility and commodities also, it can be challenging to invest in, in something without like an in, you know, that’s based on supply and demand and not some sort of like intrinsic value. And they took it out of their asset allocation in favor of other strategies. So when the pandemic came, they didn’t have that as a diversifier outright. They might’ve had it through, it’s also hard to invest in certain, it

00:28:08 [Speaker Changed] Would’ve been a good inflation diversifier. You would’ve,

00:28:10 [Speaker Changed] But it wasn’t there. And once you start looking for something when the ship’s already sinking Right. Too late. It’s, it’s a little late. Late. Yeah. So I was, what I was most curious about actually in 2022 is if, when we saw asset liability studies come out in 2023 for pension funds, were we gonna see people putting commodities back into their portfolio And no, but out of the cash allocations at some endowments and foundations, at some pensions, there’s gold allocations. Like they’re outright gold allocations. That’s interesting. But they’re not, they’re not in the investment policy statement. Oh that’s interesting. Yes. And for the most part, this is not, you know, ubi. But, so that was an interesting play. And then, but another question I got in 2023 that I haven’t heard in a long time is people asking for information on CTAs trend following and portable alpha in order to have diversified buyers and try to raise cash in this environment. Huh.

00:29:01 [Speaker Changed] That’s intriguing. Let me stick with either gold or commodities or both. How much of the large allocators caters avoidance of that has to do with the fact that academia is not a big fan of commodities. They are not just gold. Yeah. But when you look at commodities general as opposed to trend following and specific trading systems, the academics always look at it and say, we don’t see a real return here over longer periods of time. You know, there are specific short periods of time where they do spectacular but over long time and eventually mean reverts. I, is the allocator issue with commodities a function of, hey, we just don’t have the white papers to show this is a good long-term investment or is it something else? And I, I know I’m calling on you to speculate. No, ’cause it’s a, that’s a goofy question. Well

00:29:52 [Speaker Changed] I’m not, I would love to agree with you that it is the academia, but not academia doesn’t always predict the best outcomes in, I can say this ’cause my dad’s an academic, don’t always have the best outcomes in terms of investing. I do think there’s some merit in staying that. But I would also point out that risk parity doesn’t have a deep history in academia and doesn’t have a ton of support. And yet risk parity was historically very popular and

00:30:16 [Speaker Changed] Continues to and it’s done fairly well recently too.

00:30:18 [Speaker Changed] Right. So I don’t know if it’s purely academic based. I think part of it is the volatility and part of it is that it is genuinely, unless you’re doing it through a hedged vehicle or a hedge fund or a alternative investment, it is hard to get access to commodities typically. It’s just not the easiest thing to invest in. And a lot of funds historically were prohibited from investing in alternatives.

00:30:37 [Speaker Changed] Meaning they can’t invest in futures or anything with the liability component to it. Right. So let’s talk a little bit about what you do at Goldman Sachs Asset management, starting with, how did you end up at, at Goldman? It sounds like things were delightful on the island of Oahu where you were working in Hawaii. Is that where you were living or on

00:30:56 [Speaker Changed] Oahu? Yes.
00:30:57 [Speaker Changed] It was not, not a terrible place to, to set up shop. Right.

00:31:01 [Speaker Changed] No, it was a wonderful place to live. Yes. I I would’ve bet you money I wouldn’t have ended up at Goldman Sachs two years ago. I Right.

00:31:09 [Speaker Changed] So you weren’t gonna leave Maryland. You were never gonna end up in Hawaii. You weren’t gonna go in Goldman. I’m taking the other side of your trades,

00:31:16 [Speaker Changed] Your career trades. That’s a
00:31:17 [Speaker Changed] Good idea. So how did, how did this come about?

00:31:19 [Speaker Changed] Well, I, I decided to leave Hawaii, I believe in about maybe March, April, may of, of, of 2022. And I gave a couple months notice and I did not have another job lined up. I did not know what I wanted to do.

00:31:33 [Speaker Changed] Oh
00:31:34 [Speaker Changed] Wow. So that is a common trend with me. I, I usually, 00:31:37 [Speaker Changed] Ah, something will come up.

00:31:39 [Speaker Changed] I just can’t quiet quit. So I, I need to just say, Hey, this isn’t the right fit. Something will happen and I evaluated what I wanted to do next and I sort of just assumed, okay, I’ll go be a C I O somewhere else. We’ll see what happens. And I was close to taking another role and when I started thinking about working at Goldman Sachs, I thought this is again, just like Chicago. This may hurt, this may be really hard. It’s going to be a lot of very smart people. But I really, like I said earlier, I missed running at like 160 miles an hour. I wanted a challenge. I was, you know, 40 and I, I figured I have a couple more moves in me and I wanted something different. And I thought, let’s see if I can do this. And most importantly, like I said before, I loved the team. Some of my favorite investors right now are people that came outta Goldman Sachs, mostly hedge funds. ’cause I, I love hedge funds, but to me it was like joining the Yankees. Like I, I had followed their versions of Derek Jeter and I was like, wow, I could, I could go work for these people that I idolized. This would be amazing.

00:32:41 [Speaker Changed] And I’m assuming, you know, a lot of these people through both Maryland and Hawaii as c i o Yes. You’re interacting with them on a regular basis. What, what made you think, Hey, I can, I can keep up with these guys, I wanna play on this team.

00:32:57 [Speaker Changed] I think Goldman was the one that said, you can keep up with us, you can play on this team. And the amount that they letting me come here and do this interview, the amount that Goldman believes in me every day, I have to tell you it’s, it’s like the best feeling in the world to wake up and put on the Goldman jersey. Like they put believe in me. And it’s crazy. I think they believe in me. My family does don’t crazy. Come

00:33:15 [Speaker Changed] On. I’m gonna tell you right now. I don’t think it’s crazy at all given your history and your, your track record. But at what point in, in the process was it, who was, who was interviewing? Who were they recruiting you or had, had you kind of quietly reached out? How, how did this specific position come about?

00:33:34 [Speaker Changed] You know, I don’t even know if, if, if the position itself even came about till very late in the summer until, you know, I started in September and I don’t even know that it was fully ironed out like way much before then. I think for me though, the opportunity to, to join the group that I was joining, I, I have so much respect for this group and to be part of what they wanted to do, which was, you know, reignite their asset management business. I really like, I really like to join places that have something that they need to get done

00:34:06 [Speaker Changed] And that you can help contribute to get making that happen.

00:34:09 [Speaker Changed] Yes. And I thought, you know, why don’t I try something different? And if you look at my career and all the next steps, they’re all a little different and in some cases very different. And I think actually all those different careers I had led me to be a really good c i o. So I thought if I add this in, what does that make me next? I don’t know. But

00:34:25 [Speaker Changed] So, so let’s talk a little bit about what you do with the team you work with at, at Goldman Sachs. Are, are the clients primarily retail? Are they institutional? Is it a mix? What does that group focus on?

00:34:38 [Speaker Changed] It is, well the whole group of the client solutions group is a mix of all different kinds of clients. Right. But I mostly step in with the institutional clients. I don’t own the client

relationships, but I do help advise from the perspective of, as a former institutional allocator. And occasionally have comments on the retail side that may be tangential, but it’s mostly institutions.

00:34:58 [Speaker Changed] So this sounds like this is a very unconstrained position. You can help clients work on setting goals, put together an investment policy statement. Like you’ve done all the stuff from the, from the client side and now you’re saying what can we, what can we do for you?

00:35:14 [Speaker Changed] They can ask confidential questions. They can say, do you think we should sell part of this portfolio? Do you like this private equity fund? Do you like that? Do you like this equity in this country? Do you like emerging markets right now? Do you like local bonds? They can ask me anything and because I’m not running my portfolio, I can have a more honest position on what I would do if I were them in that environment.

00:35:37 [Speaker Changed] Huh. So this is much broader than the typical relationship with a client. Yes. So that sounds quite fascinating. You mentioned you really like hedge funds. Let’s talk a little bit about alternative investments within a portfolio. What do you think of those various, I’m gonna use a dirty word, buckets of different types of investments.

00:35:59 [Speaker Changed] So I wanna qualify that. I don’t know that everyone should be invested in alternative investments. And I don’t mean you and me, I mean institutions as well. But I have to say I think they’re alternatives are the most fascinating part of the investment landscape to me. And it’s why I love them.

00:36:13 [Speaker Changed] So tell us a little bit, why, why are alternatives so fascinating? Here’s the pushback, let’s start with this. The pushback is alternatives are great. If you’re in the top decile of hedge funds, venture capital funds, private equity, that stuff is awesome. But there’s so much competition, so much dilution of talent, so many people chasing so few deals that unless you’re really in the best funds, it’s a challenge to generate alpha. How do you respond to that sort of criticism?

00:36:43 [Speaker Changed] Well, I think that’s true in the public equity markets as well, in the mid large cap rate. It,

00:36:48 [Speaker Changed] It’s certainly true in individual stocks, right? It’s, what was it, BES and binders research, right? 2.3% of equities are responsible for all the returns, right? It’s not even top decile. That’s a teeny tiny percentage. Right? So you you’re saying that hey, if you can be in a better fund, you want to be in a better fund. I think

00:37:07 [Speaker Changed] That’s true across everything. You always wanna be in the best possible fund. Picking funds is is very challenging. I think it is most challenging in, in the private market space. There’s, you know, an infin information gap, which makes it pretty challenging. But I think what, what I love most about it is, so I think I’ve always loved credit and part of that is that I love contracts. I should have been a lawyer and for me, private equity, private credit and some other ill liquid strategies, real estate included, they have a a complexity component to it. And a lot of that is contract related. And you have to get very, like my favorite class in business school is taxes. I should tell you I like loopholes and I like figuring out unique ways to structure. It’s

00:37:48 [Speaker Changed] A

00:37:48 [Speaker Changed] Puzzle, right? But for private equity, private credit, private real estate, for me those make sense. Those are complex deals and there’s ways to derive value out of them. And if you can get access to those, I think it’s brilliant If you can’t get access to those. The other way I think it’s interesting to play in those markets is to is to play the discrepancy and value between public equity and private equity, public real estate and private real estate, public infrastructure, private infrastructure. So for those reasons, I just think they’re the most interesting place to look. And, and in terms of hedge funds, specifically where I started my career, they invested in every asset class. So if you wanna learn about commodities, fixed income rates, equities, bonds, they’re all there. Right? And so I think it’s a really great proving ground and it also teaches you to understand relative value and which trades are better. Relatively speaking, not absolutely speaking in an environment like today and probably the next 10 years relative value is gonna be critical.

00:38:42 [Speaker Changed] Huh. That’s really interesting. Let’s stay focused on, on the complications of the private side. ’cause you’re touching on something that’s really fascinating and a a little bit contrarian to the consensus view, which is complications tend to be expensive and, and very often simple is better. What you’re saying on the private side is if you have an ability, and correct me if I’m, I’m getting this wrong. If you have an ability to manage through that complexity in a way that doesn’t disadvantage you as an investor, there’s potential upside from complexity because most investors aren’t finding that thread that really leads you to, to, Hitchcock used to call it the McGinty, but it that’s whatever everybody is chasing that’s driving the action. You’re, you’re looking through complexity to define where is the, the piece of alpha that everybody is missing.

00:39:42 [Speaker Changed] If that is your edge. And that is the one thing I wanna be very clear on. You should not be investing in complex issues that you do not understand. So if you do not understand technology, do not go do a technology co-investment. Right?

00:39:53 [Speaker Changed] We shouldn’t all be plowing our money into AI startups. You’re you don’t think that’s a, a savvy thing to do today?

00:39:59 [Speaker Changed] I think plowing money into anything is usually a, a good idea. But I mean, to use an example, so I did Kilimanjaro a year ago and I didn’t get altitude sickness and so to, to do hiking at high elevations, when something isn’t a challenge for you but is a challenge for other people, that’s not a terrible idea. An experience that you get that’s unique, right? And so I think that if there are managers you can find or if you yourself are good at certain parts of these markets, then I do think you in any investment, if you have an edge, you should lean into that edge, right? Right. And I think that is why, or I believe that’s why alternatives, there are people who have edges, there are people who don’t and they raise money and that’s the world, right? Right. But if you can find, when you find a good manager or you find a good investment, I mean, I think that’s one of the best feelings in life. And when it comes to fruition, it’s like incredible and unique and you learn so much and you learn so much about the industry you’re investing in.

00:40:50 [Speaker Changed] Huh. Know your skillset, know your blind spot, know your edge. Right. That, that sounds like very savvy advice. Let’s talk a little bit about an institutional investing. What’s happening these years? We had rates and yields on fixed income shoot up in 2022 and 2023. And pension funds, especially in Europe seem to stumble around that. Tell us a little bit what’s been going on with institutions as you see it from the 30,000 foot view. Why was last year into this year so challenging for many large institutions?

00:41:27 [Speaker Changed] Well I think in Europe it was some of what we mentioned earlier with the liability driven investing, they had, you know, rates go up precipitously as well, right? For various reasons. Twice in a very short amount of time. And you know, because they had leveraged in some cases bond portfolios when rates go up as you know, prices go down, they had margin calls ’cause they were trading on margin in a

00:41:52 [Speaker Changed] Lot of cases. Were there duration issues also? ’cause I know some, some areas seem to be invested very long and they’re much more sensitive to rate moves than, than others. Is that part of the issue? Were they mandated to have longer dated bonds? What, what seemed to happen in Europe,

00:42:08 [Speaker Changed] It’s part, part of the liability matching, right? So if you have a infinitely live asset or a very long-lived asset, you’re gonna wanna match the, your, your investments to that. So that’s why they had some of these longer term bonds. US pension funds also had a fair degree of long bond exposure and they hurt. You know, I think in, in in the 2008 crisis, a lot of pension fund boards struggled with the fact that their equity portfolio and their bond portfolio and credit portfolio all stumbled around the same time. And it’s, it’s why you saw in 2010, 2011, 2012, a lot of the investment policy statements of pension funds changed from saying equity and fixed income to saying growth risk and diversifying risk. Hmm. And I, I don’t know that anyone would really notice that and unless they were working in it. But that is what changed in, in a large part because if you have your growth bucket draw down, so credit and equity, it, it feels less bad then if you thought something that was diversifying all of a sudden wasn’t diversifying.

00:43:04 Right. So I think last year potentially we still hadn’t quite learned the lesson as we were discussing earlier that, that these things can all kind of suffer at the same time. And that’s true of diversifying strategies too. That’s true of alternatives. It’s true of CTAs. Unless you have a short term trend follower, usually in the instant the market drops, you’re gonna get all those things to kind of drop too beauty about alternatives is they, they’re not gonna mark. So you might just not notice it for, for quite a bit of time. So you have, you have some cushion there and by that time they may have rebounded. Right? But the, the biggest issue that happened with both Europe and the US and you can look up abroad elsewhere, was that when these things drop, when your equity portfolio, which is supposed to be some return generating mainly and your fixed income portfolio, which is supposed to be your liquidity provider, right?

00:43:52 But then you don’t have a job necessarily in your, in your private markets bucket. You’re in a really tricky position for funding new investments, for funding, you know, retirement benefits, healthcare benefits, the like. And so they were all kind of in this illiquidity spiral for a, for a little bit of time. And so they actually had to alter a lot of funds altered their investment policy statements, which were never supposed to do, right? These are supposed to be set in stone and reviewed every couple years in order to allow them to have wider bands in the, in the private markets until things sort of reset.

00:44:23 [Speaker Changed] Now, now to be fair, you’re not really getting marked in private markets where you are in stocks and bonds every tick, right? So you could kind of ignore that for a while

00:44:33 [Speaker Changed] And they actually might’ve liked to have been marked down. Right? Right. ’cause it would’ve reset.

00:44:36 [Speaker Changed] That’s

00:44:37 [Speaker Changed] Right. It would’ve hurt your return as

00:44:38 [Speaker Changed] Long as, as long as the year

00:44:39 [Speaker Changed] Would’ve reset.

00:44:40 [Speaker Changed] Yeah. But the year was a, was a loser anyway. You might as well clear the decks, get everything off and start fresh the following year. You can’t really do that with private equity.

00:44:48 [Speaker Changed] But it also makes it challenging if you’re an investor and you decide, well what do I do about this? I illiquidity, I’d like to sell part of my privates market book. Well then where are you pricing it? Because if you go with these inflated asset values and you try to sell them and they know you’re a forced seller and they know that the value is likely lower, it actually made it a really tricky environment to kind of close those transactions as well.

00:45:07 [Speaker Changed] No, no one wants to be a distressed seller. No, 00:45:09 [Speaker Changed] Avoid.

00:45:10 [Speaker Changed] So let’s stick with Europe a little bit and I’m gonna ask you to put your econometricians hat on for a second. Us our, our C P I peaked around 9% a year and a half ago or so. And the last C p I print was what, 3.2%? 3.3% year over year it seems. And that’s with this massive fiscal stimulus, the, the pig is still working its way through the Python. Europe seems to be having a harder time wrestling inflation into submission. What, why do we think that is?

00:45:44 [Speaker Changed] I think that, well I I believe that the u our US economics team would say that the wage pressures in Europe are, are part of the reason they still remain greater

00:45:53 [Speaker Changed] Than here in the US where there seems to be such a shortage in, in almost every sector of people willing come in and, and work for a living.

00:46:01 [Speaker Changed] We’re seeing improvement and I think we’re about four or 5%. It could be off on the wage increase number somewhere around there. So we’ve got stickier inflation still happening in Europe. Europe and in the US we are starting to see signs of improvement. Now who knows what could happen between now and the end of the year. You can’t, some sometimes can’t predict, but Right. But we’re, we’re seeing improvement here, but, and you’ve got emerging markets, we’re receiving more improvement on the inflation front than you’re seeing in the, in the US so,

00:46:27 [Speaker Changed] Huh. Just kind of interesting that that’s what’s taking place there. So let’s stay with the concept of we had inflation, we now have higher fed funds rates and we have what a number of people have been calling very attractive yields, certainly much higher than, than they’ve been in decades. One of the ag funds of, of I wanna say about seven years duration is 5% for investment grade that we haven’t seen that in, you know, 10, 15 years. What, how do you work around those sort of numbers? What does that do to the sort of advice you give to clients?

00:47:05 [Speaker Changed] So if we just take the US public pension market and kind of separate it from the corporates and, and other institutional investors for a moment, 5% is still below most target returns. Most target returns are still around on average, like let’s call it 7%, right? It might be six and three

quarters, but it’s not five. So in order to take advantage of some of those, so like agency mortgages may be a good good trade right now, right? But you probably wanna even that’s what the thirties at seven plus, right? So you even wanna think about that more in like a credit long short context than an outright buy. But in terms of a higher rate environment, I still think, look, Goldman would probably say they were aggressively neutral on, on bonds the next, I

00:47:46 [Speaker Changed] Love that phrase. The next

00:47:47 [Speaker Changed] Aggressively neutral, right? The next three to three to 12 months because there is still some duration risk. Now the numbers that have been recently coming out that are showing we’re likely to, you know, the economy’s slowing, we, we should have avoid a recession. And then I will say Goldman’s opinion on this is that there’s a 20% out of a recession in the next 12 months that is still meaningfully higher than the 12% in any given year. Right? But it’s, it, it’s not a hundred percent, it’s also not zero, right? But there’s still risk that rates could rise, right? There still could be something that happens and we get another rate increase. Our view is that there’s not gonna be another hike this year and that in the back half of next year, we’ll start seeing fed funds comes down back

00:48:25 [Speaker Changed] Half of 2024. Yeah. So, so hypothetically an investor has listened to you three years ago when you were screaming about inflation is not transitory. It, it actually turned out to be transitory. Transitory just took a whole lot longer than everybody expected. Everything in life is transitory. Alright? So a couple of years ago you had said, Hey, this inflation thing is for real, the fed’s gonna raise rates substantially. And given how sensitive longer dated bonds are to moves up in fed funds rate, investors should be thinking about shortening their duration. Clients who listened to that advice avoided at least some of the bloodshed last year. Now though that rates have gone up 500 and something basis points and you can actually get five, five and a half percent yield. At what point are, are clients gonna want to think about taking advantage and extending duration? You, you mentioned Goldman says there’s a 20% chance of recession in the coming 2024 and we may see rate cuts in the back half of 2024. How do you respond to, I have to think clients are asking about duration at this point. What’s your response to people who shortened duration a few years ago and, and we’re very successful because of it?

00:49:51 [Speaker Changed] Right? So I do get asked quite a bit, when can we start adding duration back to the portfolio? It’s probably the third biggest question that I, I have been getting in 2023. A lot of clients weren’t able to shorten their duration. Some were, some can take advantage of, of two years, right? And you could get a pretty good return there, but some couldn’t. It’s not in their investment policy or they didn’t want the reinvestment risk, right? So some are still holding onto those long bonds portfolio. But what I would say is I would, I would look to see where you could add duration, but I would be cautious. There’s still risk to the upside on rates. And the other part of that, I would say that let’s say inflation is coming down and it’s moderating, it’s, it’s coming down from a very high level, but it’s not coming down to zero.

00:50:30 Right? So we could see a 3% level for a while. We could see and, and that you know, in the grand scheme of life, grand scheme of history, maybe that’s not exorbitant, but it is a higher cost of capital, right? So if you think about where term premiums might end up off of that number 150, 200 basis points, you’re still looking at a pretty high cost of capital compared to the last 10 years. Right? Right. So for firms and, and for refinancing risks, so if you can add a duration then where you can and take your pockets, then yes, but I still think there’s still risk to the upside there. And so, huh. Again, I

would reiterate that Goldman’s views right now are pretty neutral on equities and, and bonds in next three to 12 bonds,

00:51:08 [Speaker Changed] Aggressively neutral agre, 00:51:10 [Speaker Changed] Because

00:51:11 [Speaker Changed] I, I like that. So, and, and you know, you’re pointing out that it’s a very different regime today in the 2010s. Not only did you have cheap capital, but, but real returns were so low, given how low inflation was. So now capital costs more. Yes. Inflation is higher. So how do we think about real returns when discussing fixed income?

00:51:34 [Speaker Changed] Right. Interestingly enough, there’s only, you know, a handful of validators actually benchmark themselves to real returns. And I think Oh, really? Yeah. That’s interesting. It’s not as popular as, as one would think, particularly when they’re, they’re having to worry about that on the backend and their payouts and their liability side. But I think it’s gonna be coming increasingly more important. And it might very well, to your point, I believe this is where you, it might change what you’re looking at and what you evaluate in, in terms of, of your outcomes. You also probably will see a change in benchmarking if you think about some of the real asset and infrastructure and real estate investments that were benchmarked the c p i plus a spread, for example, or even absolute return that likely was challenged in the last couple years. So you may see portfolios change as a result of, of benchmarking. I, I do believe the next couple years we’ll probably start to get more questions on deflation, what that means for portfolios. And that can be very tricky if you haven’t figured out your liabilities, because that can hurt the liabilities side of your balance sheet. And if your liabilities are, are, are really struggling, then the ability of what you can invest in will be truncated.

00:52:38 [Speaker Changed] Alright. So you said the duration question is the third most asked question you get from institutional investors? Yes. I’m curious, what, what are questions one and two?

00:52:51 [Speaker Changed] So number one would be give me ideas on how to raise liquidity in my portfolio. And,

00:52:56 [Speaker Changed] And this is mostly from institutional investors.

00:52:58 [Speaker Changed] Mostly from institutional investors.

00:53:00 [Speaker Changed] So when someone says, I want more liquidity, I, is this because they’re kind of tied up with long dated bonds, or is it more because they’re, they’re tied up with illiquid investments looking for the illiquidity premium.

00:53:13 [Speaker Changed] Typically it’s because they’re tied up in illiquid investments and they don’t wanna miss out on a vintage cycle. Or they wanna, they see good deals that they wanna get done. Another option is that they’re, their pension is got, is, is finite. And so they’re not able, in certain cases to make the same investments that they used to make, but they see interesting deals and they wanna find a way to do them without hurting the, the liquidity of their structure. And, and those would be the, the two biggest cases, but usually it’s, it’s funding other investments or trying to stay within their policy bounds. The second most asked question I get is around either crisis positions, crisis risk offset positions, or tail risk hedging or diversifying strategies. People are looking for ways, investors, I should say, are looking for ways to be protected should this happen again.

00:54:02 But the, you know, one interesting statistic I like to mention is, if you think of 22 diversifiers that are typically involved in a sort of crisis portfolio or 22 or in a tail hedge 10 22, take 22 of the most common ones, there’s a paper that that Goldman has done on this no two in these three periods. So there are no one in these three periods, pre 2020 from 2020 through end of 2021 and then post 2022 we’re positive. Huh. So you need more, more options than you think to kind of hedge, hedge the risk there. But, but more than I’ve heard probably in the last decade, investors are asking, I would like to put a tail hedge on, how can I do that? What should I be looking at?

00:54:39 [Speaker Changed] Let’s jump to our favorite questions that we ask all of our guests, starting with, Hey, what are you streaming these days? What kept you entertained during the pandemic?

00:54:49 [Speaker Changed] So I don’t watch a ton of tv. I will say I am a Shark tank addict. I am a huge fan of Kevin O’Leary. I, I think he’s the absolute greatest, but that is really the extent of my TV watching other than of course, Berg.

00:55:04 [Speaker Changed] So let me throw a Kevin O’Leary thing at you that you probably haven’t seen. Okay. Or, or if you have, I would be surprised. So there’s a young watch geek named Teddy, I’m gonna get his last name wrong. Der Asser. Der Asay, something like that. And, and he is, is pretty well known in the timepiece community and somehow he, him and Kevin O’Leary became friendly and the two of them go on these watch shopping, for lack of a better word, expeditions. And they’re just shockingly hilarious. So if you’re a Kevin O’Leary fan, watch it. This is him up close and personal talking about why he likes certain things and doesn’t, and you know, Teddy’s a young guy, Kevin is a different generation and the interaction, it’s just charming. And if you’re a fan of o of O’Leary’s, you’ll find this absolutely delightful.

00:56:03 [Speaker Changed] Thank you for the tip. I’ll get

00:56:05 [Speaker Changed] Up. So yeah, you, you, you’ll thank me for that for sure. Let’s talk about mentors who helped shape your career.

00:56:12 [Speaker Changed] Number one would be my dad. We are very close. We’ve had very similar career careers. We look alike. He’s my best friend by far. We talk two, three times a day. I’m admittedly super codependent. He’s awesome. He, he, I was joking earlier, I think Goldman believes me more than he does. And I’m, I am totally joking. He is wonderful and he’s the one person I can trust to give me honest advice. Other than that, my, I think second grade soccer coach, a guy named Jeff Easter, he, he actually told me to read this book, golf is not a Game of Perfect, but he, he taught me to, like, it was a good lesson for being a traitor. He taught me to like, move on from your last, you know, mys goal. Like just stop stressing over it. And then finally, someone I used to work with is at Hawaii, my deputy, c i o. He has 30 more years probably of investment experience than me, but always treated me as an equal even though I was his boss and gave me wonderful advice. And to this day is a, a close friend that I can ask anything of.

00:57:16 [Speaker Changed] Let’s talk about books. What, what are some of your favorites? What are you reading right now?

00:57:20 [Speaker Changed] I just finished the Wager and Endurance and

00:57:26 [Speaker Changed] Wait, so The Wager, I’m not familiar with Endurance is the Shackleton story. Yeah. So, God, which is insane. I’m, I can’t believe that’s never even made into a movie that, that anyone knows of. What’s the wager?

00:57:38 [Speaker Changed] The wager is a shipwreck actually around the same area, but is a sh true story of a shipwreck. And similar to the reasons I like the Shackleford story, it’s a interesting examination of leadership in crisis. And also it helps me when I’m running in the morning and I’m tired. I’m like, well, I have eaten and I’ve had water and I’m not covered in lice. Right,

00:58:02 [Speaker Changed] Right. Or or sub subzero temperature with leopard seals trying to eat 00:58:07 [Speaker Changed] You. Oh, it’s, I know, it’s, it’s incredible story. I,

00:58:09 [Speaker Changed] I think I just read not too long ago that they found the shackleford ship, the, the

00:58:18 [Speaker Changed] No way.

00:58:19 [Speaker Changed] And, and it’s, it, the water is so cold, everything is preserved. Normally the wood would’ve rotted away a long time ago, but nothing eats it away because it’s barely above freezing mostly. Yeah.

00:58:30 [Speaker Changed] It’s unbelievable. The, the Shackleford story really struck me because if you look at the, the wager, I won’t, this is not a spoiler, but they’re mostly negative in this story and he’s just like, continually positive and Right. It’s incredible. It’s just, it’s a great story in leadership.

00:58:43 [Speaker Changed] Like if you would’ve told me, Hey, you’re gonna lose your ship and you’re stuck somewhere in the Antarctic, my assumption is you are a goner. You have no chance of survival. Yes. Like the fact that I, if you, if you’ve never read the book, endurance It, it’s just one of the most amazing, it, it couldn’t be fiction ’cause it just wouldn’t be believable. Right. The fact that it’s a true story makes it really amazing. Right,

00:59:06 [Speaker Changed] Right. Yes.

00:59:08 [Speaker Changed] So two books. Books, the Wager and Endurance. I’m gonna have to check out the wager. Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either investment or risk management or public pensions or anything else in finance?

00:59:25 [Speaker Changed] I think I would encourage them to know the full scope of what jobs you can have in investments. You can be in marketing, you can be in communications. We need writers. Everybody needs good writers these days. We need good public speakers. We also need traders, we need PMs, we need leaders, we need hr, need legal. So I, it always strikes me how the young people seem to think you’re just a banker or you’re a trader. Nope. There’s a lot of other things.

00:59:50 [Speaker Changed] And our final question, what do you know about the world of investing today? You wish you knew, let, let’s say 20 years ago. So

00:59:57 [Speaker Changed] Thank you
00:59:58 [Speaker Changed] When you, when you first got it started,

01:00:01 [Speaker Changed] That no one knows all the right answers all the time. They all act like they do, but they don’t. And if you get it wrong, they’ve gotten it wrong too.

01:00:08 [Speaker Changed] Really interesting. Elizabeth, thank you for being so generous with your time. This was absolutely fascinating. Thank

01:00:13 [Speaker Changed] You for having me.

01:00:14 [Speaker Changed] We have been speaking with Elizabeth Burton of Goldman Sachs Asset Management. If you enjoy this conversation, be sure and check out any of the 500 previous conversations we’ve had over the past eight years. You can find those at iTunes, Spotify, YouTube, wherever you get your favorite podcast. Sign up for my daily reading Follow me on Twitter @ritholtz or @Barry_ritholtz. Follow all of the Bloomberg family of podcasts on Twitter at podcast. I would be remiss if I did not thank the crack team that helps us put these conversations together each week. Anna Luke is my producer, Sean Russo is my researcher. Atika Valbrun is my project manager. Sam Danziger is my audio engineer. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.




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