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- [00:00]
Carol Massar
Is your multi entity management creating more confusion than clarity. You need the Intuit ERP Intuit Enterprise Suite. It's the AI native ERP solution that's powerful, painless and proven. Learn more@intuit.com ERP. If you follow markets, you know the value of long term thinking. You plan, you diversify, you prepare for volatility. But even the best strategies can't prevent every bad day. For more than 75 years, Cincinnati Insurance has helped individuals and businesses navigate tough moments. With expertise, personal attention and independent agents who focus on relationships, not transactions, the Cincinnati Insurance companies let them make your bad day better. Find an agent@cin fin.com so there's a
- [00:53]
Jim Carrey
lot of noise about AI. But time's too tight for more promises. So let's talk about results. At IBM, we work with our employees
- [01:00]
Carol Massar
to integrate technology right into the systems they need.
- [01:04]
Jim Carrey
Now a global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business.
- [01:22]
Michael Gross
IBM,
- [01:25]
Carol Massar
Bloomberg Audio Studios Podcasts Radio News
- [01:31]
Tim Stenovec
this is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg Business Week Daily podcast with Carol Massar and Tim Stanback on Bloomberg Radio.
- [01:55]
Carol Massar
Well, stocks paring losses, oil moving away from session highs as traders weighed prospects for Iran to negotiate a deal to end the war with President Donald Trump's deadline approaching. We've talked about this a lot, Tim.
- [02:06]
Tim Stenovec
Yeah, things looked a little bleaker this morning. President Trump took to social media at just after 8am Eastern time. Here's what he wrote. Quote, a whole civilization will die tonight, never to be brought back again. I don't want that to happen, but it probably will. However, now that we have complete and total regime change where different, smarter and less radicalized minds prevail, maybe something revolutionary wonderful can happen. Who knows? We will find out. Tonight, one of the most important moments in the long and complex history of
- [02:35]
Carol Massar
the world, which maybe explains in a big way the trade. We're going to get into that in just a moment. But first up, let's get an update on the President's deadline and the latest from the White House. Back with us is Bloomberg Economics Chief Geo Economics analyst Jennifer Welch. She is in The Bloomberg Washington, D.C. bureau. Jenny, we lean on you a lot. We are still counting down to this 8:00pm deadline, correct?
- [02:57]
Jennifer Welch
Yeah, we are still in a countdown. And even though there are conflicting reports right now about whether or not negotiations are still proceeding and whether or not Trump might be contemplating punting that deadline even further, I think all eyes are still expecting that we're likely to hear further from the president before we can officially call this.
- [03:15]
Tim Stenovec
You and the team have a great piece out along with Becca Wasser, Jenny, about really the different options that are out there. Can you just give us your base case about what could actually happen?
- [03:29]
Jennifer Welch
Sure. So the four categories of options for what might happen this evening could include, first, that the two sides do end up reaching a ceasefire or maybe just a partial ceasefire or something that essentially is enough pretext to delay an attack. We see that as increasingly unlikely. It was always going to be a challenge, but especially given this tight timeline and now reports that Iran isn't even talking to the United States anymore, we think it's even less likely. That leads to a second category of options, which would be for President Trump to punt the deadline further. He's already delayed it twice. It's a self imposed deadline. He has the ability to delay it further. And obviously it's something that he is known to have done in the past, although we see that as possibly less likely because he's backed himself into a corner so much around not just this particular day, but a specific time. And the more he punts, the lower his credibility becomes. That leads to a third category of options, which are airstrikes. And there, there's sort of a spectrum of options. Trump could, for example, fully attempt to follow through on his threat of obliteration, massive airstrikes on not just Iranian military targets, but he's also threatened civilian infrastructure. Or he could choose to engage in more limited strikes. So following through on his threat, but with sort of an off ramp in place. And then the final category of options would be another major U.S. military operation that could look something like an attack on Kharg Island, Iran's or export hub, or along its coastline. We see that as relatively unlikely just given the risk to US Forces that those operations would pose. But probably something that is still on the table at some point for President Trump.
- [05:08]
Carol Massar
Jen, just to wrap up, you know, we've had folks come into this studio around the table and say this could go on until the end of June. I'm just curious what you're hearing at this point, especially as we try to assess the impact U.S. economy, global economy and on global markets.
- [05:25]
Jennifer Welch
Our base case is that we're likely to see a near term escalation, including starting possibly tonight, and that the conflict will then dip into what we call a lower intensity or a protracted conflict, that it won't be resolved anytime soon. And these disruptions, particularly in the Strait of Hormuz, might be with us for some time.
- [05:41]
Carol Massar
Okay. That's our reality and that's our life. Of course, though we'll continue to track all of the headlines and we know we'll be checking in with you. Jenny Welch, she's Bloomberg Economics, chief geoeconomics analyst joining us from the Bloomberg D.C. washington News Bureau.
- [05:54]
Tim Stenovec
You promised we get to financial markets, Carol. We always do. And that is where we are going right now. As we mentioned, stocks lower, oil higher, concern that the war in the Middle east is intensifying ahead of this deadline at 8pm for Iran to agree to a cease fire and as Jenny mentioned, reopening that crucial Strait of Hormuz.
- [06:10]
Carol Massar
Let's get to it. Jim Carrey's in the House, chief investment officer of Portfolio Solutions over at Morgan Stanley Investment Management, their portfolio solutions group. And he joins us, as we said, in studio. Welcome, welcome.
- [06:21]
Jim Carrey
Afternoon.
- [06:22]
Carol Massar
We kidded when you walked in. It's a shame there's nothing going on. Jenny just laid out a lot of different scenarios. How are you guys thinking about it in your group?
- [06:29]
Jim Carrey
Look, I mean the first thing that we're doing is taking a healthy dose of reality and recognize that we're managing a lot of noise right now. So we're jumping headline to headline. This person's having a conversation with this person and that person denies it. It's very, very noisy. So what we're trying to do is take a step back and look at some of trying to look at what some of the fundamentals are. The first place that we start is the initial conditions in the markets going into this war, which is that, you know, the economy was relatively strong, a lot of fiscal stim, inflation was on the way down. The fiscal stimulus has put a lot of money in consumers pockets just due to tax refunds. That means that the consumer can probably absorb some of the shock of higher energy prices for the near term. The question that you asked, Jenny, and the right question is so how long does this last? Right. What's the duration? What's the tipping point where this becomes something worse? We don't know what the answer to that is. But I do believe though that we are in a period here of negotiated escalation where there's going to likely be an escalation before we get to What Trump highlighted as a deadline somewhere between April 11 and April 18. And there'll be a campaign of maximum pressure until hopefully a deal comes to the table. Now, what I think Iran believes and what the US Believes is that the longer we wait, the better deal that we're going to get. There's going to, there's going to be a breaking point someplace. I don't think that's today. So I would expect, fully expect there to be an amplification of some of the, you know, bombings and everything else that may go on. But the escalation is part of the negotiated endgame settlement process. So I think the markets are seeing this escalation the exact same way that Jenny laid it out is part of the end game settlement process.
- [08:17]
Tim Stenovec
A lot to go with here. I want to start with what markets you think are pricing in right now, because if, if the President is correct in saying that at 8pm tonight is, you know, the final deadline and the U.S. could attack civilian infrastructure and essentially put Iran back to the Stone Age as he's threatened in recent days, it doesn't seem like that the market is taking that threat seriously. Is that fair?
- [08:41]
Jim Carrey
So market pricing is, if you think of this as like a distribution, like a normal distribution, there's definitely a left tail where things can go really, really badly and the markets may not be fully accounting for that. However, there's also a right tail where things could go a lot better and oil prices could come down and then we could resume those initial conditions. What the market does is it finds the midpoint. So what we're really saying is that, yes, things could get materially worse, but there's also another tale out there where things could get a little bit better. So it's a good question that you're asking. Does the market fully anticipate this on a probability distribution, on a weighted probability distribution, depending on how you think of these events and how much you weigh these events? Yes, it is. It just means that the tails are pretty far. What that also tells me is that there could be a lot more volatility because depending on which way it goes, be volatility to the downside, it could be volatility to the upside. So that's what the markets are effectively pricing in right now.
- [09:42]
Carol Massar
What's the longer term impact of all of this? And I guess I keep thinking about increased defense spending around the world. So then what isn't there money for? Or there's growing deficits. Jim, I also think about. Every nation seems to be thinking about their national security and Whether that means water, energy, technology. And there's a cost of doing this on our home front.
- [10:03]
Jim Carrey
Yeah.
- [10:03]
Carol Massar
What's, what's the cost of that and what's the impact of that?
- [10:05]
Jim Carrey
So that's a great question, and this is exactly what our team is trying to think through is the second and third order effects. The first order effect is oil prices are high and that hurts the consumer. Second, third, fourth order effects go much further down the line. So the cost ultimately is, it's not obviously just in the U.S. it's also in Europe as well. It's raw materials, it's, it's agriculture, it's fertilizer, it's food, it's PVC pipes, it's all these shortages. I mean, I just saw today that used car prices are going back up again and they've reached highest levels since 2023, like during the COVID pandemic. Right. Because the chips and all of these various things. So, so when we start to have
- [10:44]
Carol Massar
a conversation later about inflation and they're saying it's more like 2022 versus some other inflation spikes.
- [10:50]
Jim Carrey
Yeah, no, no, no, no, that's exactly right. So, so, so the way that we're thinking through this as, as an investment team, because that's what we're qualified to do, is we're starting to find out and trying to identify where those shortage, those choke points might actually be that could have a positive impact on asset prices and also where there could be a negative impact on asset prices. What does it do to the consumer? The consumer gets hurt. So if you had an expectation for GDP to grow at say 2.5% this year, it's got to be a lower number than that. How much lower? How much damage have we incurred and what's the cost of that repair and can it be repaired in and over what time frame? What the markets are saying is that it's going to be tough in 2026, but if you look at the forward earnings forecasts going into 2027, they're still high. Analysts are always high. They will come down. Right, but it does, does it, does it come down to the point where earnings growth rates go to the low single dig, or do we stay around low double digits like 8, 9, 10, 11?
- [11:47]
Carol Massar
We don't know yet.
- [11:48]
Jim Carrey
We don't fully know yet. But what the market's trying to discount is it probably stays somewhere around like 10, 11% on average. Could be wrong. Yeah, but so far, you know, we're going to get first quarter data, you know, for earnings coming up. It's not, you know, the month of March was bad, but you know, January and February were good. So it's going to be a mixed message right now.
- [12:05]
Tim Stenovec
Yeah. JP Morgan, one week from today, we'll hear from JP Morgan and then the other banks as well. Hey, okay, so this in the context of politics because everything you're saying right now about affordability and questions about American consumers I think is front and center when it comes to midterms. How do you think about that in the context of markets?
- [12:26]
Jim Carrey
So the affordability is obviously it's a major issue. Right. Gasoline prices moving higher. The consumer is going to feel that every single day, every time they fill up their, know, their car with, with gas. Look, the midterms are going to be tough. I mean, I'm hearing a lot of different people, you know, very upset about what's going on. Who wouldn't be, right? But I think ultimately we have to see how this all ends because there's another contingent of people that are saying, well, is it better to have a nuclear armed Iran or is this the right, you know, this, we had a date with this destiny at some point. We didn't know when that date was. The date's now. And so do you want to take this on right now or is it, or is it a can kicking exercise where you just kick the can down the road and deal with it later? So I think, I think the American people, once they get past the shock of higher gas prices and the dust settles on this, so to speak, ultimately it's going to be the choice was a nuclear powered Iran or nuclear, you know, armed Iran with nuclear missiles or, or something else. Which one would you have picked and how much damage or how much pain did you have to take in the meantime? So it is, it's a complicated question. So we'll see how it shakes out in the midterms though.
- [13:41]
Carol Massar
Yeah, it's interesting. We've had a lot of folks say, listen, this was a war long overdue. This has been, you know, tension, stress, dislike between the US and Iran for a long time, as we all know. Does the US come out stronger on the other side as a result of this? It's an interesting time in our history. Here we are a quarter of a century, another quarter of a century, 250 years old. But I just wonder how you think the role of the U.S. you know,
- [14:05]
Jim Carrey
I think, I think we're going to have to wait five or six years to answer that question with, with accuracy. Right now it seems pretty chaotic right now. It seems like the, the, you know, the rules based order is not being, we're not following the rules. In the rules based order we can make the argument that that rules based order really wouldn't tell us to do nothing right now. And is that the right solution too? So I honestly don't know the answer to that and I think it'll be debated for decades going forward. I don't know that we're going to have an answer anytime soon. I certainly don't.
- [14:38]
Carol Massar
So do you have an answer in 40 seconds of what an investor should do in this environment? I know you like the US Over Europe. Just quickly we listen.
- [14:46]
Jim Carrey
I think that there were some great value opportunities in the value sector. Dividend, dividends, quality and defensive sectors are pretty good. Health care, health care has been one of our biggest sectors. We think that benefits the most from AI over the long run. Love the health care sector, particularly in the managed care areas. That's really good technology, AI and defense related. That's another area that I think is going to see exceptional growth. That's how we're positioning portfolios.
- [15:09]
Carol Massar
Interesting. Interesting. Come back soon.
- [15:12]
Jim Carrey
Absolutely.
- [15:12]
Carol Massar
We would love it. We would love it. Great to have Jim Carrey and with us. He's chief investment officer of Portfolio solutions over at Morgan Stanley Stanley Investment Management Portfolio Solutions Group joining us right here in studio.
- [15:23]
Tim Stenovec
Stay with us. More from Bloomberg businessweek Daily coming up after this.
- [15:30]
Carol Massar
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Public Representative
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- [16:53]
Michael Gross
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- [17:17]
Tim Stenovec
Visibility Gap, a podcast presented by Cigna Healthcare. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5pm Eastern. Listen on Apple, Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [17:37]
Carol Massar
Well, every day. Highs and lows when it comes to the world of private markets and in particular private credit. Just today we reported out how Blackstone raised $10 billion for its latest opportunistic credit fund, signaling sustained appetite from institutional investors to capitalize on the upheaval that we've been seeing in the private debt market. It's the firm's largest ever haul for opportunistic credit.
- [17:59]
Tim Stenovec
Meantime, a swelling wave of redemptions has driven Moody's Ratings. This is an interesting one to revise its outlook for private credit investment vehicles to negative after holding the line, it's stable for the last two years and
- [18:10]
Carol Massar
they're talking about BDCS here. Hey, our next guest was recently featured on the Bloomberg Intelligence Credit Edge podcast hosted by James Crombie, Bloomberg News Senior Editor for Credit. Great to have with us here in studio is Michael Gross. He's co founder of SLR Capital Partners. It's an independent asset manager. It's all about dealing with the US based middlemarch market businesses and delivering really debt capital solutions to it. He's also one of the co founders of Apollo Management now Apollo Global Management. Welcome, welcome, welcome.
- [18:37]
Michael Gross
So thank you for having me. Much appreciate it. Good to be here.
- [18:40]
Carol Massar
Yeah, great to have you here. I want to ask you long kind of view here when you guys started Apollo back in 1990. Here we are 36 years later. What's changed when it comes to the private markets other than just size,
- [18:59]
Tim Stenovec
size,
- [18:59]
Michael Gross
complexity, the solutions that private capital providers can provide. Back in 1990 all the commercial banks were providing senior debt financing which is where the BDCs and private credit picked up the slack since the GFC. Back in 1990, none of us were doing senior secured financing. We were all doing junior type capital. Whether it's equity or mezzanine or sub debt. Today the private credit world has evolved to the point where it's kind of taken over the senior secured market because banks have been forced to exit because of increased regulation.
- [19:34]
Carol Massar
Good or bad? Was that a good thing? Great, great for the growth of an industry. But what's your take?
- [19:39]
Michael Gross
Kind of depends who you are. Yeah, it's interesting if you explain that. So if you think about, you know, the explosion that's taken place in private credit over the last five years, there's been $250 billion raised for these non traded BDCs. Question, is that a good thing or a bad thing? And as I think about private credit, there's kind of three very important constituents. There's the borrowers who are borrowing from people ourselves, there's the asset managers like ourselves who are raising this money and investing it, and then there's the investors. So is this increased scale good for certain people? It's certainly good for the borrowers because they've had increased leverage with all the capital raised to kind of get very advantaged terms. It's certainly been very powerful for the asset managers, the public ass manager in particular, because it's fee generating. But arguably is it good for investors? Is this increased scale good? Is it improving returns? I would argue that it's not that the need to put out all this capital in a relatively short period of time has put pressure on returns and so yields have come down over the last several years not because of interest rates coming down, because spreads compress and because of all the increased competition.
- [20:49]
Tim Stenovec
Are these just growing pains?
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Michael Gross
Look, I think our industry is here to stay. So the answer is yes, it's growing pains, but it's also a question of kind of where the right incentives are. You know, our job as an investment manager is to find the best risk reward for investors and not just grow for growth's sake.
- [21:08]
Tim Stenovec
You made an interesting comment moments ago where you talked about the type of lending that has gone to private credit in recent years as a result of of banks not being able to do it because of the regulatory environment. I think for a lot of people hearing that on itself might be a reason for concern. It's an asset class or an area of the market that doesn't have the same transparency, the same regulation as a traditional quote unquote big bank. Does it need to be regulated in a different way?
- [21:33]
Michael Gross
I personally don't think so. Because if you think about where people are concerned about risk, it's systemic risk, it's too much leverage in the system. Private BDCs, private credit funds, public BDCs are not levered more than one to one and a half to one. Banks are levered 10 to one, CLOs are levered nine to one. So there's not a bunch of systemic risk in the system where a series of defaults is going to create a downfall. So I personally don't think there needs to be increased regulation.
- [22:03]
Carol Massar
Michael, is it just as simple like playing off of what Tim said about growing pains? Is it just a case that it became too big and too much money chasing deals and so it leads to maybe deals that maybe shouldn't be done and that kind of thing?
- [22:18]
Michael Gross
It's, it's too much money raised too fast having to get invested.
- [22:23]
Carol Massar
Yeah.
- [22:23]
Michael Gross
And what that's created is significant competition such that the private equity sponsors who are the primary issuers of this debt on behalf of the portfolio companies have increased leverage over the debt capital providers. So they can go to them and say if I'm going to give you my loan or let you finance my company, you're going to have to accept a lower rate, a higher leverage ratio and less covenants. And so that I think has relaxed underwriting standards and has potential risk going forward of increased defaults and increased losses given defaults.
- [22:57]
Carol Massar
There's things going on to macro and I just want to throw in a couple of headlines just because they're crossing the Bloomberg whether it relates to what we're talking about but I just want to bring them to us. Pimco weighing $14 billion debt deal for Oracle Data Cent center. So that plays into the AI. And then we have dated Brent oil price hitting a record of $144.42 a barrel. There are macro issues, things not unrelated
- [23:19]
Tim Stenovec
to what's happening in private credit, but we think.
- [23:22]
Carol Massar
No, exactly like I think about artificial intelligence. We've talked so much about the SAS world like so. So roll those in and how that has also been major factors or they have been major.
- [23:32]
Michael Gross
So the macro factors can definitely have an impact on performance. If we're in a world where oil's going to be 150 for a period of time that's going to have a tremendous impact on the economy.
- [23:44]
Carol Massar
And even if not just private credit. Exactly.
- [23:47]
Michael Gross
But because private credit are levered companies, that impact is magnified. Companies that were created three, four years ago when rates were zero and companies were leveraged six or seven times that haven't grown to date to support those capital structures are even more at risk because of these macro factors. I think it's very important within private credit today to focus on areas that may be more immune from that. Primarily like asset based lending, lending against hard assets as opposed to against cash flows that are more volatile.
- [24:20]
Tim Stenovec
Well, that's a big category. So sort of dive into that a little bit for us. And where you are finding opportunities.
- [24:25]
Michael Gross
We, we beginning in 2009, coming out the great financial crisis, identified the fact that banks are being forced to exit not only cash flow lending, but asset based lending. So we began building out a series of strategies, a series of infrastructure to support asset based lending strategies like lending against receivables, factoring businesses, lending against inventory, lending to other commercial lenders against their portfolios. Where we can do highly structured transactions, lend against hard assets that we can then monitor on a daily basis.
- [24:56]
Carol Massar
You can protect ourselves, figure out values. Right. You actually know what you're investing.
- [25:00]
Michael Gross
Because we tend to be the sole, sole lender to these companies. So the control we have is tremendous. The documents allow us to go in on a monthly, weekly basis and adjust the collateral value. If we think there's a diminution of
- [25:12]
Carol Massar
value, for example, we'll go there. Because I think one of the things we talk so much about with private credit is transparency or lack of transparency. But as an investor or, or doing a deal, how much are you able to look into the investment itself, how often, how regular? And does every shop do it differently?
- [25:30]
Michael Gross
Every shop does it differently, I think. Cause we primarily view this business as an investment business and not an asset gathering business. We're extremely hands on. So when we make an asset based loan, we do a field audit, we send people in the field, we verify the existence of the inventory, we value it, we, we simply feel, we value that these, these receivables exist. There's been a lot of talk about First First Brands and Tricolor and those frauds. Those were all avoidable. Had people done the work to verify the assets and were they in control of the documentation and been the sole lender of these companies, those things wouldn't have happened. And so what we do is all our transactions are directly originated with the counterparty. We do direct due diligence that on an ongoing basis. We're directly monitoring it on a weekly and monthly basis to ensure that our assets are being covered.
- [26:20]
Carol Massar
Which makes you wonder if that's where regulate regulation should be, that there is some, I don't know, like some hard thing to regulate.
- [26:26]
Michael Gross
Yeah, I mean it's a hard thing to do. But the good news for us is that again back to the theme Commercial banks continue to be forced to kind of downsize that part of the business because the capital charge to carry those types of loans is very high. Whether we, whereas we as an unregulated entity don't have those capital charges.
- [26:43]
Tim Stenovec
When you hear people say they're worried about contagion from this asset class sparking issues in other asset classes, you're shaking your head. You don't see it happen?
- [26:53]
Michael Gross
I don't see it. Because if you think about it, you know, people like JP Morgan, Wells Fargo are big lenders to people like ourselves. They hold billions and billions of dollars. Yeah, but they're lending at 50 cents to the dollar against a portfolio of senior secured loans. So the risk they're taking is fairly de minimis. And if you look back historically, no one has ever lost a dollar lending to a private credit fund or a public BDC or private BDC. Why? Because the regulatory environment for BDCs is such that you can't lever them more than 2 to 1. So there's already that very important check and balance in place to kind of prevent that type of contagion.
- [27:32]
Carol Massar
So what do you say to investors, like we talk about, you know, 40% of investors wanting out of certain funds. I'm just curious what you make of that. And then what, what went wrong? Did somebody you know as our James Crombie, and I know you've talked with him, he says, look at that first page. It tells you that these things aren't that liquid. So who, who's at fault?
- [27:54]
Michael Gross
So a couple of comments and one thing I've learned from 40 years investing in private equity and private credit is things are never as good as they look and things are never as bad as they look. So on the way up, when this $250 was raised, things weren't necessarily that great. A lot of money put out, but they went, people went attractive. Significant retail dollars. It was fully disclosed that the structures were semi liquid, that you had 5% restrictions, which was frankly the right thing to do. But it's painful on the way down. What's happened is the primarily people who are looking for redemptions are retail. It's not institutional. We raise money both retail and institutional. We're still seeing tremendous demand institutionally for private credit. Why? Because you hit on earlier? Blackstone just raised $10 billion to be opportunistic. Well, this is a great environment to possibly invest in because capital's pulling back. That's going to put pressure on yields the wrong way for borrowers and the right way for us. As investors, we view that dislocation as a good thing provided you have liquidity to take advantage of it.
- [28:58]
Carol Massar
So potentially a good good time to launch new BDCs quickly, right?
- [29:02]
Michael Gross
Or to be involved in BDCs that are not fully ramped and have the dry powder to take advantage of this cycle and not be embedded with kind of older vintage investments.
- [29:11]
Carol Massar
So appreciate. I hope we can lure you back here.
- [29:14]
Michael Gross
Love to.
- [29:14]
Carol Massar
We would love it. Yeah, we appreciate your time. Michael Gross, co founder of SLR Capital Partners.
- [29:21]
Tim Stenovec
Stay with us. More from Bloomberg Businessweek Daily Coming up after this.
- [29:28]
Public Representative
Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds and crypto, and they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R and D spend, small cap stocks with improving operating margins, or the S&P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on Public you just type in a prompt and their AI screens thousands of stocks and builds a one of a kind index. You can even backtest it against the S&P 500. Then you can invest in a few clicks, go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing member finra SIPC Advisory Services by Public Advisors SEC Registered Advisor crypto services by ZeroHash sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures@public.com Disclosures for many men,
- [30:42]
Michael Gross
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Tim Stenovec
In season three of the Visibility Gap, Dr.
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Michael Gross
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Tim Stenovec
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Carol Massar
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- [31:43]
Tim Stenovec
You're listening to the Bloomberg Business Week daily podcast. Catch us live weekday afternoons from 2 to 5pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [31:57]
Carol Massar
Hey, every day, tons of things related to artificial intelligence. Just today we've been reporting out anthropic. Anthropic, excuse me, letting tech firms access a more powerful unreleased AI model to help prepare for possible cyber attacks that might result from the company making the advanced AI system more widely available. It's an initiative, it's called Project Glasswing. It's with Amazon, Apple, Microsoft, Cisco Systems and a bunch of other organizations. And basically, Tim, they're going to get access to this new model from Anthropic called Mythos to hunt for flaws in their product and share findings with industry peers. So it sounds like a collective and they're going to be collaborating on some level.
- [32:36]
Tim Stenovec
Are you having trouble keeping up with like all of the different iterations that we're hearing from this company? Had to be possible ipo.
- [32:43]
Carol Massar
Yes, yes, yes and yes.
- [32:44]
Tim Stenovec
Okay. Well, also on AI, the president of the New York Fed, John Williams, spoke to Bloomberg's Michael McKee earlier this morning at the New York Fed. Check out what he had to say. I think a lot of CEOs have said, well, we're past that. So now we just have to navigate a world with, with higher uncertainty, make the decisions that make sense, make the investments that make sense. And you hear about that a lot
- [33:04]
Jim Carrey
with AI and investments in AI.
- [33:07]
Tim Stenovec
So I think we're, we're kind of in the second stage. You will respond to uncertainty is really about, okay, we need to make decisions. Let's, let's move forward. John Williams of the New York fed with Michael McKee a little earlier on AI investments. Great to have with us Sastry Darvasala, TIA's chief operating information and Digital Officer. He joins us here in the studio. Sastry, good to have you on the program. We all know tia, more than a century old retirement fund for teachers and other professionals. Carol and I were talking in the newsroom a little earlier. It's a basic question but I think a really important one to set the conversation. What does the chief Operating Information and Digital Officer do day to day?
- [33:47]
Sastry Darvasala
So I lead all the global technology for all of our businesses. You know, principal businesses are retirement services, which was the genesis of TIA when it was founded by Andrew Carnegie 100 plus years ago. Wealth management business, which is our retail business and our asset management business called Nuveen, where we manage close to $1.4 trillion in assets. So global technology, global digital capabilities and client experience and global operations across all three businesses. So one way I always talk about is part of my team actually cooks the meal in technology and products and experiences. The other part of the team actually consumes the meal because they are serving our clients. You know, whether it's participants, our plan sponsors or consultants that we work with.
- [34:31]
Tim Stenovec
Well, a big part of the task involves deploying AI and that technology across the organization. Not just for people within your organization, but for customers you serve. Which one is sort of like the priority right now? Is it on the consumer facing side or is it on the internal side to really get productivity? It's both.
- [34:49]
Sastry Darvasala
I mean, definitely it starts with the client. Okay, so our clients are institutional clients. Right. So we have a large B2B firm in that sense because we work with all the higher ed and healthcare clients in the United States on the global front in our asset management, we have a lot of institutional clients that we work with. So we work with institutional clients. Then it comes down to the millions of Americans we try to help with our lifetime income solutions, which is our participants. So it's more consumer on that side and then institutional on the other side. But then to be able to service them, we need our internal associates to be equipped with AI. So I do believe that we got to start the work internally first, which is what we've been doing for the last year and a half, two years. We put AI in the hands of every colleague in the company. So we have our own proprietary platform called GATE and generative and agentic intelligence technology. And we put it as my gate in the hands of every colleague. It started with 300 people in a pilot mode. Now we have the entire company of associates using that because to be able to serve the clients, we need to experience that first ourselves. But we have some client facing capabilities that are live in production as well.
- [35:56]
Carol Massar
Sastry. It feels like the conversation around AI is moving increasingly from these large language models to vertical data sets that are really catered to a specific industry or an entity. Talk to us about that if that's the case, that it's not going to be just about these big data dumps of everything, but what's going to matter to you and your client base is a very smart data set that pertains to them.
- [36:23]
Sastry Darvasala
Yeah, because you're basically trying to rewire the company with AI, just like what we've done with the Internet, with mobile, et cetera. So when you try to rewire the company, what you need is the industry depth. TIA obviously has decades of codified knowledge and wisdom and insights and data assets that we have proprietary insights into and proprietary capabilities for. So what we're doing is building this large language model agnostic platform so that it's obviously plugged into all the tools that companies that you just mentioned earlier in the prior segment. And we are basically leveraging those industry capabilities with our data assets in a secure way and providing intelligent insight. So for instance, when we serve our customers, clients and the call comes in, our customer service professionals who are on my team have a screen and they actually have AI agents giving them information in a secure way so that they can actually give all the way from their carol to giving empathetic communications. We have an empathy agent. I know it's counterintuitive to talk about, but like you know, you're calling in, you're calling in with a transaction or a complaint and we are trying to serve that, you know, within time. But then we want to be able to give you the right level of empathetic communication as well. So the agent, the empathy agent is actually prompting the care professional, even drafting the email based on that transaction that we are serving to give you an empathetic solution because we are dealing with retired participants here. So they need empathy. Or the other example I'll give you that's live in production at scale is what we call our scam AI detector. Longevity is on the rise, which is a great thing for humanity. Which means we have more older adults that are our participants who are retired. They are the most vulnerable population from a financial fraud and cyber attacks point of view. The cognitive decline is also on the rise in older adults. That's the problem you're trying to solve when you have a retired professor who is getting a lifetime income paycheck from us and getting scammed by all these artists that are out there, whether it's impersonators like IRS agents, I'm from Microsoft IT desk, or romance scams and all kinds of scams. We have realized that AI is the best capability to deploy at scale at this point.
- [38:41]
Tim Stenovec
How though?
- [38:41]
Sastry Darvasala
Yeah, so it's actually looking for signals. So for instance, these are real life participant examples where a participant gets a call saying where are the IT support? We found a bug in your computer and then lures them into getting into some website and then asking them to give the information and the next thing you know, another impersonator comes and says, I'm from the ftc. We need to protect you. We need to move your assets. Now we're getting a call into our call center. These AI capabilities are detecting that there is fraud involved, there's a potential scam here, and then it actually activates the whole chain of agents to the point this is the best part. At the end of the day, there is a human in the loop for everything, right? So we also activate a call to the trusted advisor or trusted contact that this person may have and engage them in the conversation. And in fact, we have real life use cases where our participants are saying, tia, saved my bacon.
- [39:37]
Carol Massar
Will you come back soon?
- [39:38]
Sastry Darvasala
Yes.
- [39:39]
Carol Massar
Okay, we've run out of time.
- [39:41]
Tim Stenovec
Sebastre Dibasola, TIA's chief operations, operating information and digital officer, here in the studio. This is the Bloomberg Business Week daily podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live weekday afternoons from 2 to 5pm Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.
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Carol Massar
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Jim Carrey
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Michael Gross
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