Friends Reunion 3 – Five Allocators Riff on Investing (EP.454)

Summary

Capital Allocators – Inside the Institutional Investment Industry
Episode: Friends Reunion 3 – Five Allocators Riff on Investing (EP.454)
Release Date: June 30, 2025
Host: Ted Seides
Guests: Brett Barth (BBR Partners), Meredith Jenkins (Trinity Wall Street), John Harris (AIM), Casey Whalen (Lazard Family Office)

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1. Introduction and Episode Overview

In this engaging third installment of the Friends Reunion series, Ted Seides reunites with four seasoned allocators—Brett Barth, Meredith Jenkins, John Harris, and Casey Whalen—for an unscripted discussion covering a broad spectrum of investment topics. Building on over two decades of shared experiences, the conversation delves into private markets, portfolio liquidity, tax strategies, public equities, the integration of AI in investment processes, and leadership dynamics within asset management teams.

Notable Quote:
Ted Seides [04:01]: "Today’s episode brings together four of my oldest friends in the allocator business for an unscripted conversation on markets, portfolios, and life."

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2. Private Markets and Portfolio Liquidity

The discussion begins with an in-depth analysis of private market allocations and portfolio liquidity. Each allocator shares their current stance on private investments relative to their targets, highlighting recent trends and strategic adjustments.

• Casey Whalen [07:37]: Indicates an over-allocation to privates but maintains comfort due to strategic focus areas like small buyouts and defense tech.

• Meredith Jenkins [08:58]: Discusses holding back income from real estate exposures for leasing and capital reinvestment, adjusting their private equity target to 20-25%, and engaging in secondary sales based on valuation rather than rebalancing.

• John Harris [09:16]: Describes a customized allocation program for clients, emphasizing expected returns over market value percentages to avoid over-allocation during bubbles. Notes no recent secondary sales unless targeting specific managers.

• Brett Barth [10:02]: Reports steady increases in illiquid asset allocations without significant secondary sales, citing above-industry realizations in 2024 and 2025.

Notable Quote:
Meredith Jenkins [08:58]: "We will actively use secondary sales, both purchases and sales. And that is valuation driven purely. It's not rebalancing per se."

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3. Tax Considerations for Different Investor Types

The conversation shifts to tax implications affecting investment decisions, particularly for taxable versus tax-exempt investors.

• Brett Barth [24:40]: Emphasizes the importance of tax-adjusted risk-adjusted returns, noting that illiquid assets are less favored by taxable investors due to tax inefficiencies, especially multi-manager hedge funds.

• Kasey Whalen [26:01]: Highlights the lack of tax awareness among retail investors and managers, stressing the importance of understanding tax rules like the 475 election.

• Brett Barth [27:13]: Explains the 475 election's impact on portfolio taxation, turning gains into ordinary income and complicating loss offsets.

Notable Quote:
Brett Barth [24:40]: "Everything we do is think about risk-adjusted returns. But those returns have to be tax adjusted."

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4. Public Equities and Investment Strategies

The panel examines current trends in public equities, debating active versus passive management approaches amidst market uncertainties.

• John Harris [27:21]: Advocates for a conservative approach in US large-cap stocks while valuing active management in non-US markets for compelling value opportunities.

• Meredith Jenkins [28:32]: Focuses on making confident bets away from benchmarks, increasing exposure to emerging markets correlating with strong commodity demand.

• Brett Barth [33:35]: Discusses the diminishing correlation of international markets with the US, presenting diversification as a "free lunch" in portfolio construction.

Notable Quote:
John Harris [27:21]: "On the US equity side we've taken a more conservative approach... active managers today because we always say being passive, you're still active."

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5. The Role of AI in Investment Processes

AI's integration into investment workflows is explored, with each allocator sharing current applications and future prospects.

• Brett Barth [39:14]: Describes early-stage AI applications focused on efficiency, such as drafting investment memos and analyzing return streams.

• Meredith Jenkins [41:04]: Expresses optimism about AI's potential while acknowledging the importance of interpersonal skills in apprenticeship-based roles.

• John Harris [42:59]: Highlights AI's role in enhancing data architecture and facilitating innovative uses of proprietary data, emphasizing the need for robust data systems.

Notable Quote:
Ted Seides [39:05]: "How are you using AI in your investment processes right now?"

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6. Leadership and Team Building in Asset Management

The panel transitions to leadership strategies, reflecting on team dynamics, coaching, and adapting management styles to modern workforce expectations.

• Brett Barth [44:18]: Discusses empowering team members by giving responsibility and authority, coupled with outcome measurement and coaching for decision-making.

• Meredith Jenkins [48:35]: Stresses the importance of positive feedback and developing interpersonal skills to enhance team performance.

• Kasey Whalen [49:20]: Focuses on teaching younger team members to listen and ask the right questions, fostering a culture of curiosity and thoughtful engagement.

Notable Quote:
Meredith Jenkins [48:35]: "I've found it is much more effective to ask questions so they answer them... helping them own it."

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7. Closing Insights and Future Topics

As the conversation winds down, the allocators share personal updates and discuss upcoming topics for future episodes, hinting at deeper dives into geopolitical impacts and evolving market dynamics.

• Brett Barth [54:20]: Raises concerns about the future of the traditional 60/40 portfolio split amidst rising interest rates and the dominance of the US dollar.

• Meredith Jenkins [56:34]: Reflects on the necessity of not becoming complacent with portfolio allocations and remaining adaptable.

• Kasey Whalen [59:10]: Mentions upcoming discussions on geopolitical issues, such as Middle Eastern developments and their global impact.

Notable Quote:
Meredith Jenkins [56:34]: "I hope that [the 60/40 split] continues to serve all of us well and we don't just set it and walk away and think that 60/40 is just what it's going to be forever."

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8. Favorite Resources and Weekend Activities

In a light-hearted finale, the panel shares their favorite newsletters and weekend pastimes, reinforcing the camaraderie among the group.

Notable Quotes:
Brett Barth [57:11]: "Capital Allocators Weekly."
Kasey Whalen [58:44]: "We're just trying to enjoy as much time with [my son] when he's willing to talk to me."

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Conclusion

This episode of Capital Allocators offers a rich tapestry of insights from leading institutional investors, blending strategic investment discussions with personal anecdotes. From navigating the complexities of private markets and tax strategies to embracing AI and fostering effective leadership, the conversation provides valuable takeaways for both seasoned professionals and aspiring allocators keen on understanding the multifaceted world of capital allocation.

For more insights and to join the community, visit capitalallocators.com.

Transcript

[Ted Seides]

Capital Allocators is brought to you by my friends at WCM Investment Management. To outperform the markets, you have to do something differently from others. In my 30 something years investing in managers, there may be no one I've come across who does that as clearly and as well as wcm. I've seen it up close. As an investor in their international growth strategy for the last five years, WCM is a global equity investment manager majority owned by its employees. They believe that being based on the west coast, away from the influence of Wall street groupthink provides them with the freedom to live out their investment team's core values, think different and get better as advocates of integrating culture research into the investment process and advancing wide moat investing. With the concept of moat trajectory, WCM has delivered differentiated returns while building concentrated portfolios designed to stand out from the crowd. WCM is committed to defying the status quo by dismantling outdated practices, believing in the extraordinary capabilities of its people, and fostering optimism to inspire each individual to become the best version of themselves. To learn more about WCM, visit their [e-mail] and tune into this slot on the show to hear more about WCM all year long.

[Brett Barth]

This testimonial is being provided by Ted Seides and Capital Allocators who have been compensated a flat fee by wcm. This payment was made in connection with Capital Allocators testimonial and production of podcasts and does not depend on the success.

[Ted Seides]

Or level of business generated.

[Brett Barth]

The opinions expressed are solely those of Capital Allocators and may not reflect the opinions of others. Investing involves risk, including the possible loss of principle. Past performance is not indicative of future results. Please visit wcminvest.com for WCM's ADB and further information.

[Ted Seides]

Capital Allocators is also brought to you by AlphaSense, a platform trusted by the world's top institutional investors and now bringing their cutting edge research tools to our audience. AlphaSense has become a core part of the research workflow for 75% of the world's top hedge funds as they look to beat the market. It combines high quality content from company filings, broker research and expert interview transcripts with AI that's built to think like an analyst and not just summarize. And now they've launched Deep Research, the latest addition to their AI suite. Unlike other deep research tools, AlphaSense's version is purpose built for investment research. It runs multi step iterate analysis using Alphasensis proprietary content which includes over 200,000 expert transcripts and in minutes, surfaces, insights that would take multiple interviews and days of digging to uncover. It's like adding 10 analysts to your team, helping you move faster, go deeper and make sharper decisions. It's very cool. See it in [e-mail] capital that's AlphaSense.com capital hello, I'm Ted Seides and this is Capital Allocators. This show is an open exploration of the people and process behind capital allocation. Through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital. Join our mailing list and access Premium [e-mail] All opinions expressed by Ted and.

[Meredith Jenkins]

Podcast guests are solely their own opinions and do not reflect the opinion of.

[John Harris]

Capital Allocators or their firms.

[Meredith Jenkins]

This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

[John Harris]

Clients of Capital Allocators or podcast guests may maintain positions in securities discussed on this podcast.

[Ted Seides]

Today's episode brings together four of my oldest friends in the allocator business for the third time for an unscripted conversation on markets, portfolios and life. My guests are Brett Barth of BBR Partners, Meredith Jenkins of Trinity Wall Street, John Harris of AIM and Casey Whalen of Lazard Family Office. Over two decades, our dinner crew has shared investment ideas and perspectives through cycles and this conversation continues the tradition. Two years after their last appearance on the show, we kick off with a lighthearted round of Final Jeopardy before diving into the current state of private markets and portfolio liquidity, tax considerations for different investor types, public equities, niche ideas, the role of AI in the investment process and leadership and team building. Before we get going, it's time to remind you about Capital Allocators Coaching, an initiative we started this year to help managers tell their story. We gathered an all star cast of former CIOs and asset management executives and have seen a lot of traction. In the early going we've had interest from lots of small funds as well as different portfolio management teams from multi product shops. Our coaches get it. They've been in these meetings thousands of times and can help in every aspect of the pitch, the why, the what, the how and everything in between. We offer one offs and continuing engagements depending on your needs and interests and while there's a cost to the service, it's at a massive discount to the value our coaches provide. They're all in it to help and improve communication across the industry. If you're Interested, go to capitalallocators.com coaching to learn more. Thanks so much for spreading the word about capital Allocators coaching. Please enjoy my always entertaining conversation with Brett Barth, Meredith Jenkins, John Harris, and Casey Whale. We are going to start in a different way than we have in the past. We're going to start with Final Jeopardy. The category is Trans Reunion Podcast. You each have a card. I want you to write down your answer. Here is the answer. AI Private credit, Bitcoin, Scott Besant, Warren Buffett's retirement and kids going to college. I'll repeat it. AI Private credit, Bitcoin, Scott Besant, Warren Buffett's retirement and kids going to college. Pens down. Okay, we're going to go in order. Brett, you want to hold up your answer.

[Brett Barth]

What Ted lies awake thinking about.

[Ted Seides]

That is incorrect.

[Meredith Jenkins]

Meredith, what are things the friends will be talking about today?

[Ted Seides]

Also incorrect.

[Kasey Whalen]

John, what are the topics this group has discussed and lived through?

[Ted Seides]

Incorrect.

[John Harris]

Kasey, what is trending up lately?

[Ted Seides]

Also incorrect. The correct question was what are things we did not talk about two years ago?

[Meredith Jenkins]

I was the other side of that coin. I think it's very close language.

[Ted Seides]

It's very close.

[Kasey Whalen]

I was wondering.

[Brett Barth]

I think you said it the other.

[Kasey Whalen]

Side of that coin.

[John Harris]

Yeah.

[Ted Seides]

All right, let's jump in on private liquidity. And I think the way to start is to go through each of your situations and privates. Where are you allocated relative to your targets and what are you seeing in your portfolio on liquidity? John, you want to jump in?

[Kasey Whalen]

We've actually in the last four months have seen a number of liquidity events. We're seeing a lot of the bigger managers buy from the smaller managers. We're probably a little over allocated to privates right now, but feel comfortable to it and are still focused in areas that we've always been small buyout, defense tech, things like that.

[Meredith Jenkins]

I'll give a little context on our situation. As many of you know, we have a lot of real estate exposure that is relatively illiquid in normal times. We get income off of that. Right now we're actually holding the income back and keeping it there for leasing, for some capital reinvestment that we're doing. So there's no money coming from that. The 60% of the portfolio that's diversified is providing 100% of our payout and we're very focused on what our liquidity is and how much we have in private equity. So our target is 20 to 25%. We were a little over going into year end. We're now a little under. We actually undertook a couple secondary sales In December and January. In the world of better lucky than smart, that was not a read on the secondary market per se. We did line by line work on those particular secondaries and we had gotten a decent amount of money from them and felt like the juice looking ahead was going to be much longer dated and was going to be a mid single digit return for what was still in the ground. So it made more sense to sell them.

[Ted Seides]

How normal of a part of your process is secondary sale?

[Meredith Jenkins]

Very. We will actively use secondary sales, both purchases and sales. And that is valuation driven purely. It's not rebalancing per se.

[John Harris]

We have lots of clients that have very customized allocations. We create a private program for them across private equity, real assets and private credit and then we model it, updating it every quarter. It's a budget to tell you how much to commit every year to be thoughtful about diversification around vintage year. We changed it in 08 because we realized the model that we had used early days at Yale. We were targeting market value as a percentage. And so when you're in a bubble, it tells you to overalllocate at the top and under allocate when you're in the bottom. So we changed that to grow every client's portfolio by their expected return. It's helped us not get out over our skis on privates. We haven't had to do any secondary sales. We'll do it one off more if we want the manager, if we're targeting the actual manager to get more exposure.

[Brett Barth]

Brett, we have been steadily rising our allocations to illiquid asset classes writ large. Each one we're pretty excited about, but pretty niche. We don't love private credit overall or real estate per se overall, but there's things within all those asset classes we like a lot, particularly in private equity. Not dissimilar modeling to what Kasey mentioned, but given that we have been leaning in and being able to be pretty aggressive with making commitments. So we have not looked at any secondary sales. We did really well in 24 and so far year to date in 25 with realizations we had well above industry realization activity. So we're seeing slightly below our budget turnover in illiquid portfolios in terms of what we're seeing in distributions, but not much. Certainly not what the industry's seen overall.

[Ted Seides]

So across the board, none of you are having any significant excess allocation to privates. Are you hearing from peers that people are?

[John Harris]

We're hearing it from the GPS because it's taking them longer to raise the capital on the endowment side with the impending potential tax hike, if you were thinking about wanting to get your allocation down or you were thinking a lot of monetization events might be more concentrated in the next couple of years and you have that tax, you're very incentivized to have a secondary sale now, even if you take a little bit of a hit, as long as it's from a break even perspective, better than paying the tax.

[Kasey Whalen]

But people aren't being forced, they're choosing. There's no downside to exploring the market right now. I think a lot of people are looking but I'm not hearing anybody who's in a force situation that's a lot.

[Ted Seides]

Different from 08 then the market itself.

[Meredith Jenkins]

It's been a ride for sure. But at the headline level and over time the public markets have helped in that regard.

[Brett Barth]

And notwithstanding the endowment headlines, we think a much bigger fund flow that's going to swamp that is the democratization. It's the retail flows. Almost everything we're doing in illiquids is either to get paid to access that seed things that can take advantage of retail flows or invest in things that will be sellers into funds that are tapping.

[John Harris]

So that's the biggest thing going on.

[Brett Barth]

And those are much bigger dollars than Ivy league endowments that are over or underweight.

[John Harris]

And there's a huge bifurcation going on now because of that. Most of that is going into the big funds, the brand names you even see in real estate where the mid sized funds can't raise capital. So you have a big gap and a weird inefficiency in the lower end because a lot of institutional capital now can't reach it.

[Ted Seides]

I want to dive into the modeling issue that Kasey brought up. How do you model your privates? And you could do a rough question of if you want $100 in the ground, how much are you targeting to commit over time to get that we've.

[Meredith Jenkins]

Extended the lives on stuff in terms of what we assume it's going to take in terms of getting our money back. And so we've reduced the commitments at the headline level. And so we've brought the headline annual commitment budget down about 20% for that.

[Kasey Whalen]

And are you doing co investments in directs and how's that impacting it?

[Meredith Jenkins]

That's part of that's in that annual.

[John Harris]

Budget amount more co invest you do though, the harder the model gets because you have to assume a sale of that co invest and it removes itself completely. Unlike a private equity fund where you're calling down over time and you're distributing over time. This happens in real estate more commonly when they're selling their whole portfolio. But the co invests are a little bit harder to model.

[Brett Barth]

Yeah, we think of co invest like a manager because the co invest portfolio is diversified in and of itself and the pacing of that is pretty consistent as it relates to call activity. The more call activity there is, generally speaking, the more co investment activity we see. We've done the same thing Meredith has where we're expecting distributions to be a little slower. As I said, they've been a little slower, but not a lot slower. More tail end nav, more performance, front loaded. I feel like we're seeing more nav markups sooner. After a few years, you don't tend to see the same amount of nav markups. We model the percent of the total portfolio using an assumed portfolio return for the portfolio to grow. Not only are you seeing money come in and out, you're seeing your nav of your illiquids change and you're seeing the total value of your portfolio change. So you just have to put all those in. It's not the world's most complicated model, but you just got to be thoughtful about it and tweak it as the world changes.

[Ted Seides]

Any other big changes in your modeling? Meredith mentioned a pretty significant reduction in commitments because of the duration of assets. Any other thoughts, John? Anything you guys are doing?

[Kasey Whalen]

Nothing significant. It's really on the co investments and directs the impact there. They can act like a portfolio but it seems to be a lot more correlated. The sales happen together, deal flow happens together. So you just got to sort of tweak, look at the impact there.

[Ted Seides]

What is the status of late stage growth privates as a component of your venture portfolios with all these larger companies stripe and databricks staying private for longer?

[Meredith Jenkins]

Mayor, I don't think the valuations have adjusted enough personally. The whole category writ large, so not specific companies. It's like a thousand overpriced unicorns out there. Not everyone is going to make it through the door. We've ended up skewing more to early stage because the math is a lot easier early seed stuff that in my longer span of history I would have stayed away from.

[Ted Seides]

How do you think about the dynamic of power law distribution where if the winners keep winning, you may be skewing new commitments to the earliest stages, but you may have a lot of those legacy winners dominating your venture allocation.

[Meredith Jenkins]

Yeah, and that's to the secondary piece is staying on top of what's the valuation in the market for our managers who do cover more of the waterfront in venture and all the way to late stage, understanding what their historical accuracy has been at putting more money into the stuff that has ended up being the winners.

[Ted Seides]

As you look at your venture portfolio today, how much of it is in profitable, fast growing existing businesses that have succeeded through the rounds of venture?

[Meredith Jenkins]

So remember we started from scratch in 2017. Now we did a big continuation vehicle secondary purchase in early 2019. So we have some though a lot of that has been realized right now. The growth piece of it is probably smaller than most of you guys.

[Brett Barth]

We do a lot in the cash flowing growth equity as new investments. It's always nice when a venture investment turns into one of those companies, but doing a lot starting there. Just a strong belief that the public markets are going to continue to get smaller. There's just a lot of disadvantages with being a public company. It's a nature of the beast. There will be fewer public companies, therefore private companies will stay private longer, if not forever. And we're okay with longer holds. We're very focused on multiple, not irr. If we end up owning a good cash flowing, profitable, growing business for longer, that's fine. We also have done more and more, especially recently, earlier stage vc, not a lot of mid late vc. I worry about the valuations. We have not seen markdowns and we have seen realizations at and above marks for the most part. So it feels like there's nothing to see here yet.

[John Harris]

We've always leaned early stage. That seemed like the best risk reward. We also just don't love in general strategies where you have to rely on the public equity markets. We do a lot of bootstrap growth equity, which isn't venture, but a lot of family owned businesses. I tell my clients at a certain size of wealth, I view what we're doing in the private space as inherently less risky than the public markets. Because if we can back smaller back groups that have depth on the operational side and the financial side, you're actually creating real value in those companies. And then you can use the multiple arbitrage of buying at low valuations, build it up and then sell it to these huge pools of capital that exists today.

[Kasey Whalen]

And it also reduces the volatility, which is an added benefit. But there's going to be some good opportunities. One question is the continuation funds as we continue to see the development of those, what's that going to do on the liquidity side? So I think that trying to figure out what your options are between the secondary market and the continuation funds has really changed the whole game. You look at these pools of capital that are being raised by some of the larger firms, they got to put it to work. You're going to start seeing everything out there for sale.

[John Harris]

There's just so many more players with different costs of capital in privates today than there has been since we started in the business. And that's going to create a lot of different dynamics you're seeing sometimes within the same firm.

[Brett Barth]

Yes.

[Kasey Whalen]

No conflict at all.

[Meredith Jenkins]

Can I ask a related question on the exposure to late stage growth profitable companies? Thoughts on getting that through a big traditional venture capital firm or what started as a venture capital firm and perhaps has become big in sort of these late stage growth companies or hybrid hedge fund who has a side vehicle where they're doing this stuff?

[Brett Barth]

None of the above. Exactly. None of the above. No thoughts? No. We have not generally done any venture capital funds who have gotten larger and merged into growth equity funds. And they're obviously the well known hedge funds that have launched big growth equity private equity funds. We've done neither. It has been much more private equity investors who have been focused on, as Kasey highlighted, operational improvement, who have been thoughtful about investing in growth industries and or growth companies. And they might pay a modest premium for that growth. But you can grow into a multiple really fast, especially in a smaller mid sized company where EBITDA is growing a lot. Folks with a private equity background, not a venture all time.

[John Harris]

Yeah.

[Ted Seides]

There's a premise that all of you had on your private liquidity that you're going to just sell to the bigger guy. Right. You mentioned the flood of capital from democratization of finance private wealth. What are you seeing happening?

[Brett Barth]

We're seeing exactly that happening. 25 years ago if we had a private equity investment that got sold to another private equity fund, there was a lot of like eye rolling and frustration. Now that's the preferred exit and it's the predominance of the exits. Unequivocally it's happening.

[Ted Seides]

What are you seeing on the wealth interest of that fund flow?

[Brett Barth]

I think it's very high. A lot of it comes from the wirehouses and you look at some of the big rolled up independent IRAs, I'm seeing numbers like, oh, we're moving from 5% privates to 8% privates. These are giant pools of capital that are in the very early innings of having meaningful private equity allocations nowhere near where the endowments are. And as I said, the pools are much bigger and they're higher fee products. And you also see firms like BlackRock getting much more aggressive in illiquids and trying to distribute those products. It's not just the brand name private equity firms doing it.

[John Harris]

What we've seen from the wirehouse is it's almost more transactional. It's an individual name, it's a brand name, it's easy to distribute, there's lots of fees on top of it. The cost of capital they're targeting is lower. It makes sense to go with those big guys. We're seeing that with our managers. The number one group they're selling to is other sponsors. But what's nice about that size is if your only exit because of your size is public markets that's inherently tied to your global equity portfolio.

[Brett Barth]

I would say we worry about markets on those exits because if you're exiting to other sponsors, you still need the credit markets to be open and lively. But given the fund flows you've seen to private credit, it's really attractive. Those private credit markets stay open more than they used to because there's so much source of private credit versus public credit and even a blurring of the lines on what's public and what's private. But the credit markets being open is still really important to selling to one of these larger private equity firms.

[Ted Seides]

So to date, the money from private wealth has been disproportionate private credit to private equity. How would that shut off?

[Brett Barth]

Taxes are a real problem, but you don't worry about it. When you see a high top line return number, oh boy, I'm getting 12. Isn't that really interesting? But when you're getting six and you start writing those tax checks a year or two later, it takes a little while for that portfolio to ramp. Not till it's ramped. You start getting those distributions and then those K1s come later. I think folks are really starting to wake up to what the after tax is. Especially these on the run credit strategies.

[Ted Seides]

That interval fund structure, do you think that then slows down because of the tax implications?

[Brett Barth]

I do think it slows down, but it does continue to grow. It really just depends on the after tax yield. We've ceded some interval funds and some private credit bdcs because if I can turn a high single digit, low double digit into a high double digit return, I'll pay tax on that and be really excited about it. We're expecting to see those flows and if you can back a really high quality manager who has the ability to sell through wirehouses but for lots of different reasons, needs to be seated, to get up and running. We've done that three times in the last several months. We like that opportunity set a lot.

[Kasey Whalen]

There's still a ton of capital out there that has fomo. People are coming in late. You talk to a lot of these places and they're going, yeah, look at this area. People have done well. Everybody I talked to has done well in it and they're jumping in. It will slow down the pace, but it will continue to grow.

[John Harris]

One of the things again about the retail area is it's a lot of cash flow lending and it's levered and that's inherently tied to equity because it's tied to how the business is doing. You get into a recession, you get into a drawdown period and that collateral goes away. And we haven't experienced that yet. If things don't go well, that could impact flows slowing down to that space.

[Kasey Whalen]

You go back to B, REIT and sreit. You had a serious liquidity issue there, which got fixed very quickly. I think that people look at that and go, oh, it's not a problem. It's like the discussions we had back in 08 when people go, yeah, I have quarterly liquidity. No, you actually don't. And I don't think that people have realized that yet.

[Ted Seides]

Pulling on the thread of the tax implications of credit, there's this possibility, the endowment tax. And I'm curious to hear, because most of you, I'm not sure about Meredith, have managed both tax exempt and taxable pools. How would you recommend if people are calling and saying, I now have a 20% tax, I didn't used to have that. What changes in the decisions that get made for taxable investor from a formerly tax exempt investor.

[Brett Barth]

Everything we do, and we being all of us, is think about risk adjusted returns. But those returns have to be tax adjusted. And so there are certain flows of returns that are more tax efficient than others. I mean, I don't mean to gloss over it. It's a different mindset in terms of how you calculate the return profile, but it's not a different mindset in terms of how you think about allocating among different relative opportunities. You just have to tax adjust it.

[Ted Seides]

And when you look at side by side taxable investor, tax exempt investor, what are the big differences in the asset allocation or the investment strategies that you pursue for a tax exempt investor, because of the tax inefficiency for a taxable.

[Brett Barth]

Investor, the biggest ones are not in illiquids because if you look at endowments, this is where the issue is they've actually been pretty tax efficient. The big Ivy League endowments haven't been huge private credit owners. They've done a lot of growth equity in vc. It's actually pretty tax efficient and they've done a lot of public equity that's not been high turnover. The places where you're going to see bigger hits are on the multi manager pod hedge funds which are incredibly tax inefficient but have been a good source of risk adjusted returns for some of the larger tax exempt allocators. That's where I think the bigger difference is going to be if those allocators are in a foundation or an endowment where taxes are going to matter.

[Ted Seides]

John, anything else?

[Kasey Whalen]

We've always joked about you talk to managers who manage their offshore and onshore funds identically. So many people have not looked at taxes. Don't pay attention to taxes, especially retail investors. There was a manager who had a position that had a run up. It was less than 12 months. They held onto it. It collapsed before the 12 month mark. You asked them why. They said well we were looking at taxes. He said well why didn't you sell it in the offshore? Oh, I didn't even think about that. This was a sophisticated manager. Or you ask families who have hedge fund exposure how many of them have taken the 475 election. I just talked to a manager who didn't know what the 475election was and they had taken it. I think at the end of the day when we talk about behavior, if you're being paid the incentive off of your gross return, that's what you're going to focus on.

[Ted Seides]

So for Those who have 475 blank stairs, why don't you explain what it.

[Kasey Whalen]

Is it allows you to get around the wash sale rule. Every year on December 31st your whole portfolio is mark to market. So therefore you cannot have any long term or you can't have any unrealized everything is short term realized.

[Brett Barth]

It's actually all ordinary income. All ordinary income. Worse because you can't take losses to offset.

[Ted Seides]

Everyone generally is quiet these days about public equities. So all this talk about privates, what are you thinking about active versus passive.

[John Harris]

On the US equity side we've taken a more conservative approach that we just want to be in larger cap stocks now even though that was where you should have been but more just because it's such an uncertain world and there's all these paths that we could be taking. I just would rather be there and still actually active managers today because we always say being passive, you're still active, you're actively choosing because it's so concentrated to own those securities. I think in the non US markets we continue to find compelling value from being active in more concentrated positions. The only big shift in our world is really the rise of ETFs which we're happy when our managers decide they want to do an ETF because they're fantastic vehicles for taxable clients. That's been a huge area that's actually helping us. So we'll have the exact same manager we had before. But because they're in an ETF it's helpful to the clients.

[Kasey Whalen]

From that perspective, I think you're seeing on some of the more long only but disguised as hedge funds that the fees are coming down. With returns coming down, people are starting to push back. You're seeing a lot more 0 and 30 more alignment where you're not going to be able to get away with the one and a half or two on the long only.

[Meredith Jenkins]

In general we've focused much more on what bets we're making away from the benchmark just to be very, very clear and confident that those are bets we want to make. And in some cases we've taken certain bets off or we've taken them down a bit. So we have a bit more of Kasey sort of large cap US exposure. I think we are potentially on the verge of a lot more dispersion globally, a lot more dispersion in markets. There's an opportunity for the things in the US that haven't done as well from a small cap basis and certain more value looking things. I think there's an interesting case to be made for EM right now in terms of EM really runs when commodities run. And I think we could potentially be in the early stages of commodities just the demand being high.

[Ted Seides]

Two years ago you hinted at being interested in Africa.

[Meredith Jenkins]

Africa up about 30% this year so far and we are in that manager thankfully.

[Ted Seides]

What's the case that has you continue to be excited about African equities?

[Meredith Jenkins]

The original case for that was just value and no one was looking at it. And there was a total dearth of capital there. Africa tends to do quite well when the commodity cycle is strong. They benefit. There's an argument to be made that it is an easier China play than China itself.

[Brett Barth]

There's an argument to be made.

[Meredith Jenkins]

I think there are a couple things that could benefit it and you haven't seen a ton of capital flow in yet. You're starting from a low base.

[Brett Barth]

Brad.

[Ted Seides]

Any Thoughts?

[Brett Barth]

Unfortunately, I feel a little like consensus because I agree with a lot of what's been said if everyone else is different and I'm just agreeing with all these smart people. Okay, we are passive in US large cap, that has worked out really, really well. We have been reducing that exposure. We've been overweight, non us all active. That's actually worked out well too, especially this year. I mean they didn't work out well. At the same time we're also reducing that a little bit, but not nearly as much. We have not done Africa. We have a different view on frontier markets and what the risk return is and liquidity and all the rules do share. You're taking a lot, a lot, a lot of risk and you don't know about repatriation of currencies, liquidity of the markets. And at the end of the day it's fund flows that drive a lot of those returns. Basic commodities have done really well this year. That's really good for emerging markets, particularly emerging market countries that are both central banks are easing and they're big exporters of basic commodities. But for us that's a cyclical play, not a long term hold. And I worry about what the long term risks are in a lot of these countries. If we could do it tactically. But it's hard to do tactically given the liquidity in those markets. And most of the managers tend to be believers, not tactical traders of those markets. But there are things like Korea that we've liked a lot, value ups for real. And it's working great this year and we've been leaning into that and in Japan and obviously not emerging markets. But there are places you can be outside the US that have been phenomenal this year. But I think the biggest opportunity, both alpha and relative valuations in US small cap. I'd agree with that, Brett.

[Ted Seides]

That sounds pretty compelling. Anyone want to poke and prod on that thesis?

[Meredith Jenkins]

Everything's interesting at a price and I agree with you. You do have to be very on top of what the situation looks like on what you hold and be willing to rebalance when it's run.

[John Harris]

We're on the same page as Meredith in terms of emerging markets. A next level too is you have to be disciplined about selling high and buying low. You just have to be really careful about when things are running up because it is true emerging markets tied to commodities that tends to run faster. We made a lot of money in the early days, in the mid-90s, early 2000s, playing off the volatility of our managers, the One nice thing about global equities is we're long term investors. But you can trim on the margin, add to your other managers, things are kind of running up or coming down. This is one of those markets, even managers actively saying I'm going to look at things that aren't tied to tariffs, then that all gets bid up. You have to have some sort of mechanism to be disciplined about it.

[Kasey Whalen]

Well, how do you guys think about premium? What type of return expectation do you think people should be looking for or accepting?

[Brett Barth]

I'm going to give you the terrible answer which is it depends. In something like small cap, I want a real premium which you're getting today and I want a very high expected alpha and I want that alpha to come from fundamental research that is picking winners that we can then hold for a while that are going to be long term winners. I want to get paid that premium. Two ways, buy and hold. If we're going to trade or have a manager who's involved in commodities or emerging markets, I want them to think like a trader. We have been able to find managers that upside downside capture is really skewed because they're really good at those markets. For there I'm not thinking as much about what is the premium I'm getting to buy that and more of the how much volatility is there and can we capture that volatility versus just be penalized by that volatility.

[John Harris]

I think you hit on this key thing that it's rare when alpha and beta line up. Alpha you've always had to some degree in the non US markets because they're inefficient. That's why we've always liked them. But you now have the beta, you have the valuation piece. And so if you can get those two pieces like Brett said together, it's compelling.

[Brett Barth]

I think the betas are more interesting than they've been in 15 or 20 years because of not just the entry point but because of the deglobalization. And you've got a declining correlation of those markets. And the only free lunch we get as allocators is diversification. If I can have international markets that are decoupling with the US market, that's just a portfolio benefit that's free to us. There aren't a lot of those around.

[Kasey Whalen]

Sorry Ted, you asked the questions.

[Ted Seides]

No, no, no, no.

[Kasey Whalen]

I felt him staring at me.

[Meredith Jenkins]

You're very good.

[Ted Seides]

What are you guys excited about?

[Brett Barth]

I'm excited. It's my anniversary today. I just want to get that out there.

[Kasey Whalen]

Thank goodness For Natalie, shout out to.

[John Harris]

Nat for letting Brett be here.

[Ted Seides]

Yeah.

[Brett Barth]

Thank you.

[Kasey Whalen]

Without her, where would we be?

[Meredith Jenkins]

I'm excited. My baby's graduating from high school tomorrow.

[Kasey Whalen]

Speaking of kids going to college, graduated last week.

[Meredith Jenkins]

Here's what I'm hopefully looking forward to. And I hesitate to put this out into the world because it feels like that might not happen. But the free lunch on diversification might come back because it hasn't been that way for. It felt like a long time. You had to have the bet to truly keep up. I'm happy to underperform when the markets are running if we can protect on the downside. But to year after year feel like you can't keep up is a lot. That's what I'm looking forward to and happy about.

[Kasey Whalen]

My new BBR pen is one thing.

[Ted Seides]

I'm very excited about.

[Brett Barth]

So leave that when it's over.

[Kasey Whalen]

John, the camera.

[Brett Barth]

We're not giving that away.

[Kasey Whalen]

I'll take nil dollars for that. Areas that we're looking at are. We do a lot in the defense tech space, obviously drones. I think it's a lot more difficult than nine and a half years ago when we first got in a lot of players figuring out how to manufacture cheap, inexpensive drones is one area within there we're spending time on nuclear, trying to figure out picks and shovels, things like standard nuclear supplying the fuel. We think that that trend is one to stay and if we can figure out the tailwinds, try and take advantage of that.

[John Harris]

I'm actually really excited about real estate, both on the equity and credit side. If you take away all the macro noise, real estate can still be an area disconnected from that. I think a lot of people forget 2022 when rates were high. They've come down. They've not come down enough. A lot of capital structures don't work. We forgot about the wall of maturities coming due. We're seeing groups buying things very small one off, like self storage, for example, and then rolling it up all into a portfolio and handing it to everyone who's running interval funds and other things for purchase. You're seeing a lot more price realization things coming to market and therefore deal activity. If you're a veteran and you've been in the industry through multiple cycles, I think you have the conviction to move forward faster. Sourcing is key in this situation because you want to be that phone call with the broker at the small end who's like, I got to move this quickly. These guys need liquidity. Can you do it? People have been through Multiple market cycles and understand that and have the deep relationships from a sourcing have a huge advantage.

[Ted Seides]

Are there particular subsectors multifamily?

[John Harris]

We're doing it in self storage, we're doing it industrial. We're seeing it across the board. The other area we were finding is just niche real assets. For example, we're doing a thing on container ships. A lot of them are not coming to the us. It's within non US ports. Your downside is scrap metal, which is actually pretty compelling. Your upside is huge. So there's a lot of niche opportunities we're finding that are really compelling in this marketplace.

[Brett Barth]

I'd agree with a lot of what's been said on the real estate side. I completely agree. Public private credit, the Nichier areas, in addition to the ones Kasey mentioned, we're spending a lot of time and have done work and have made some investments. Industrial, outdoor storage, RV parks, all kinds of things like that. On the infrastructure side, rail cars, barges. Been really interesting for us. One of the places where we see public, private and credit incredibly dislocated, unloved and where we think there's huge opportunity is biotech.

[Ted Seides]

Keep going.

[Brett Barth]

It has been such a bubble through the pandemic where biotech and vaccines were going to solve everything. And now we've had a massive dearth of capital for years. The public markets cratered in 22 and have yet to meaningfully bounce. The capital markets, except for brief windows, have not been open. No one's reallocating to venture capital funds. It's incredibly unloved. You've got an FDA that doesn't think vaccines should be around. Drug development has really gone sideways. And then you've got a massive decrease in investment in basic science here in the United States. And so you got to be able to look outside the us. The story's terrible, but we think it's going to climb that wall of woe and back to entry point. You've got companies with great management teams, great science, cash on the balance sheet and trading at massive discounts to cash or are desperate for money. And you can structure private credit transactions that are really equity transactions. These are pre revenue companies but where you've got massive seniority and wonderful preferred returns and really neat structures and so you can buy that through public companies, vc, private equity and private credit. There's all kinds of things you can be doing in biotech today.

[Ted Seides]

Kasey mentioned the two letters that everyone talks about these days. AI. Thoughts on how are you using AI in your investment processes right now?

[Brett Barth]

It's early innings. Most of the stuff we've either been able to do or is in our roadmap to do, I would say are more efficiency enhancements. First drafts of investment committee memos, sorting of presentations, creating analysis of return streams. That's stuff that a junior mid level professional does and it takes some time and it makes them more efficient. That's where we are today. I think we're a little ways away, but I'm much more optimistic that we're going to be able to do things. I mean, I think what GA is doing is really cool in terms of having an AI bot on their investment committee. Thinking about investment decisions they made in the past and having that institutional memory in a bot, I don't think we'll get there, if ever. But things like triaging managers, understanding what our preferences are and to be able to make those kind of initial spend more time, not spend time decisions. The other place that I am really optimistic are things that are time consuming but thoughtful, like rebalancing portfolios or flagging things that are out of balance. You can do that through analog software that is just looking at equations and rebalancing, but doing it more thoughtfully, especially when you've got things like taxes and liquidity which make those rebalancing decisions more complicated. I'm really optimistic there.

[Kasey Whalen]

We just hired a young guy who just finished up a project for a major endowment. How they do it, we're in the early innings. Brett's point about efficiencies, trying to figure it out. Somebody said if you're over 50, you basically use ChatGPT as an enhanced Google. And I think it's great with some managers that we've been with for two decades trying to figure out how do we take all that past letters, the past data, how do we summarize it, how do we figure out biases? How do we hold ourselves accountable? I think there's going to be tremendous opportunities. We'll have to see.

[Meredith Jenkins]

We're even earlier than you guys remember. I work for a church, very, very, very slow. I am extremely positive about the opportunities. I remember at one point in like 2000, 2001, a manager we were meeting with was like, it's not the Internet. The Internet is just a means to what is going to come. And it's just a means to what is going to come that's going to be so much more efficient and ultimately I think get so embedded in everything that everyone does that it's hard to imagine right now exactly how it actually plays out economically.

[John Harris]

I Found after talks with people at varying age levels, we were hitting some roadblocks and we were really focused on starting bottoms up. What are one off things we can do. So we created a committee within our wealth platform that was made up of the most recent grads and we had them do work on how they're using it. People are using it more than we even realize. We wanted to both have a way to say give guidance, you shouldn't be using it in that way or you should, but also learn because our brains can't possibly come up with the things they're coming up with. That has been amazing and they've really taught us new ways to think about it and we've been able to mentor them on certain things that shouldn't go into the AI or that you have to check it. It hallucinates once you come out. It's really important and that it's most powerful. We found when we use our own data, when we're putting in our own information and asking for things on top of that. This has been like a huge initiative across the firm thinking about AI and how it integrates across. So they're doing a lot of cross functional contests and they have groups present proposals and then sharing that information. And then lastly the most important thing is data architecture. Putting on a new software is a big exercise. What's most important actually is your data and your data architecture because the switching costs are going to be going down, down and down. So focus more on that aspect of it and then come up with ideas how to use it.

[Meredith Jenkins]

Right.

[Brett Barth]

I agree completely. We have spent so much time the last several years on data and it goes back to one. We've got some regulatory constraints. We can't use ChatGPT in the office and there's a lot of LLM we're not allowed to use. So the key is what can you learn on your own data but you can only learn off of 25 years of our data. If your data is organized really, really well. And there's a lot of advantages to that part of it switching vendors. A lot of it is being able to train models on our own decision making in our own portfolios.

[Ted Seides]

What are some of the best practices or best use cases you've seen at managers with AI?

[Meredith Jenkins]

I don't know that I've heard one yet.

[Brett Barth]

Things like lending against hard assets. A lot of that is more smaller balance loans. There's a lot of underwriting to that. The underwriting process might have software that scores something first, but if that score can be a LLM that is looking at your data and outcomes and learning it will do that better than a human.

[Ted Seides]

Compared to 25 years ago when we started doing this, you're all in more senior leadership seats than you were 10 or 15 years ago. And I'd love to hear how you think about leading a team differently now from how you did in the past.

[Kasey Whalen]

Try to have a lot more patience.

[Ted Seides]

You're not throwing things around the office.

[Kasey Whalen]

Try not to throw things. Best lessons are just no two people are the same. I'm going to sound like the old guy, but this generation, it's really understanding what motivates different people. What I found is that it's network, network, network. Talk to any 22 year old and that's all they want to build. You hear this in interviews and I'm thinking, don't mention network if you're interviewing someplace. I also have a problem. As I look back and I look at a 35 year old manager, I go, I'd never give them money, they're too young. And then you look at Andreas Halvorson, 99 when he started. So it's a little bit of adapting, it's a little bit of perception, it's a little bit of taking a deep breath and trying to think things through a little bit and understanding that things are more individualistic than the straight management style.

[Ted Seides]

John, is there an irony in your telling people not to focus on their network?

[Kasey Whalen]

Seriously, I just give my network so we all share but good point.

[Brett Barth]

That's so funny.

[Meredith Jenkins]

I need to be better at and try to spend more deliberate time thinking about positive feedback. I'm the kind of person who just puts my head down and does the work and I don't care as much about feedback but I realize that I'm an n of 1. I need to be more thoughtful about that in terms of the team and thinking about, okay, where are opportunities to elevate the work that someone did in front of more people than just me? And where can I let this person step up and get positive feedback from me and from others in a more public setting versus assuming we're all going to come and put our heads down and do our work?

[John Harris]

There's no better lesson than raising kids and I'm in teenage land right now that people, individuals, human beings are motivated by different things. That's probably the biggest thing I've learned over the last 25 years. Also, just having had my own private partnership that was really strong and amazing because we each brought something very unique, both in our knowledge but also in Our vantage points in the way we attack problems. There's a benefit to having people being different. The other piece that we're really focused on right now is excellence and hiring. We've always hired really smart, capable people and we have an amazing team with longevity. We're increasingly also wanting to make sure that the next person we add incrementally every time is this. Strive for excellence. Not just excellence in one area, like grades, but excellence in other areas that you've shown resiliency and perseverance pushing through. If we can find that type of person combined with varying vantage points of the team together, we're just going to come to better answers because you get much better debate out of that. You get the ability to debate those things coming together. We're like highly focused on right now.

[Brett Barth]

We've always had a management philosophy for most of our history where the concepts are giving somebody the responsibility for the outcomes and giving them the authority to make those decisions. Those go hand in hand. And then you measure those outcomes. That doesn't mean putting someone on an island. So what I find I'm spending more and more time on, even though you've given somebody the authority to drive a process, is coaching them to come to decisions on their own faster. It's pattern recognition. History doesn't repeat itself, but it rhymes. I've not invested in that particular area before, but it looks a lot like these three mistakes we've made in the past. Here are the things we really should worry about before you decide to move forward. More times than not, that helps them figure out that it's really special because those three things that I brought up aren't impacting or listen. Yeah, you're right. These are some things I didn't think about. I appreciate that I got to dive into it and I got to say no faster. It's a lot of coaching.

[Meredith Jenkins]

The other piece related to that that I've found and continue to work on developing the skill because I find it is much more effective in that regard. In terms of the coaching is instead of telling them, asking the questions so they answer it. Because I've found frustration sometimes with when I've told Totally. It's not necessarily just like parenting. Ask the question that helps them own it.

[Kasey Whalen]

One of the things we've been talking about is how do we help younger people in the office learn to listen? And we have all the sayings, listen, understand, don't listen or respond. You have two ears, one mouth. Use them proportionally. Our new one is invert the ratio of question marks. To periods. It's really trying to get them to step back and think about, what's the question? What don't they know? That has been something that I've been spending more time trying to help them do. I haven't been fully successful. Again, it's individuals. I think that that's the most important thing, especially with these. Today, everybody's just taking information. They want it, they want it immediately. And they're not stepping back and listening and reading and saying, what questions have I not asked?

[John Harris]

We're actually doing sales coaching. I'm all in on it. One of the key things they say, communication's tough at every level. Kids, relationships, managers, teams. And people often assume they know what the question is, or if you're telling someone, you don't get any feedback. Asking questions, which is kind of what we all do for a living with our managers, is one of the key things to getting at making sure you're actually on the same page, which I've also realized in so many areas, including work. Sometimes you think you're on the same page and you're not, and that can lead to a lot of frustration, especially when you're in the leadership position. I love asking the questions because you learn so many more things from that.

[Meredith Jenkins]

The other thing that pulls in AI too, I was talking to someone and they were talking about like, oh, it's going to make it so much easier and we're not going to have to spend so much time training people. I actually totally disagree. What we do is an apprenticeship business, and I don't think that AI's going to change that. Ultimately, the most effective are these interpersonal. How do you ask questions, hear the answer, and realize what the next question should be from what you heard?

[John Harris]

Nuance, right? The nuance piece of it.

[Brett Barth]

What I worry about, though, I completely agree with the premise, and that's clearly how we all were trained and will be training the people who will ultimately replace us. But if there's fewer junior people, if what we're really using AI for early is efficiency enhancements, that just means in the future I'm going to be hiring less junior people because the junior people I have are going to be more efficient. That's going to make their jobs better and they're going to be able to think more and I can train them more, but I'm going to have a lot fewer people going into that pipeline. It puts a premium on hiring the right people, which I hope we do, and I have confidence that we're doing, but we're just Going to have a lot fewer people at the entry levels of our industry. That's going to have some negative ramifications down the road.

[Kasey Whalen]

Where are they going to go?

[Brett Barth]

Right now they're just unemployed. Recent graduate, as high as it's ever been. And we can talk about kids going off to college. I'm more worried about my kids leaving college right now.

[Kasey Whalen]

We have seven interns this summer. They all are worried that they're not going to have jobs after college.

[Brett Barth]

Appropriately.

[Ted Seides]

Kasey, that gets back to this question about sales. Because as much as all the seats are buying investments, everyone's in the sales business. What have you learned from doing the sales training that we may not have been exposed to?

[John Harris]

A lot of people feel like a person is inherently good at sales because they're outgoing, they form connections. There's amazing networking. I think that's been completely debunked. There actually is this whole concept of a framework. A framework for the initial meeting, a framework for follow up, a framework for questioning. We have this thing, a pause in terms of you get a tough question. The one other thing that I learned that is really helpful for us is one of my internal guys calls my head of business development. The expert issue, which is someone asks a question, we get this example like gold, and you start saying why you do or do not agree with gold versus trying to first understand why is the client asking you about gold. Gold's a good one because there's so many different ideas of what people use. This sales coach we use calls it you're focusing on the bridge, which really quickly means you're standing on one side, it's gloomy, rainy and gross. You have to walk over a bridge and on the other side of the bridge is rainbows and puppies. He said you guys are getting stuck in talking about how amazing your bridge is. We used the best engineering. We paid top notch. We did this, this and this. And our bridge is so much better than the other bridge, but nobody actually cares. They just want to walk over the bridge to get to the rainbows and the unicorns. Teaching the team to stop getting into that bridge unless you're asked to get in that bridge and focus more on understanding what the client's actually trying to ask you.

[Kasey Whalen]

Goes to listening and understanding.

[John Harris]

Exactly.

[Ted Seides]

I have a couple of closing questions I'm going to ask before we do that. Curious if there are any questions or topics you have of each other that you'd like to probe to either learn more or share some insight that you've had of late.

[Brett Barth]

There are two that I've been grappling with. What is 60, 40 going to look like over the next five, 10 years? We have a lot of equity exposure in our portfolios. We're trying to be thoughtful about how we get it. Interest rates are at a level that are a lot more interesting than they've been over a lot of our careers. They may be going higher. I'm not sure that's a prediction. And if higher interest rates mean lower multiples, that's a really bad outcome for 60, 40. My premise is I'm a little worried about traditional portfolio construction. We've been leaning into, I think we all are with non traditional. And the other one is the dollar. At the end of the day, we own dollar denominated assets or assets where I look at performance converted back to dollars. We think about that as it relates to asset liability. What's the money for? Asking clients that question. Whatever it's for, it's charity, intergenerational lifestyle that is spent in dollars. So I have to worry about inflation, I have to worry about returns, but I think about it in dollars. And we've really had the exorbitant privilege of the dollar being a reserve currency. Do I have to worry about that or not going forward?

[Meredith Jenkins]

I agree with you. I have concerns about the dollar too. And I try to separate my concerns about the dollar in terms of why I have them.

[Brett Barth]

Right, exactly.

[Meredith Jenkins]

Yeah, so. So there's that.

[Kasey Whalen]

Not that it's a good bridge.

[Brett Barth]

Right.

[Meredith Jenkins]

Separate from that, I don't know, at least where we sit today, what has the scale. Some people say it's bitcoin and whatever. There's nothing right now that even comes close. Even if you said it's going to be these three things or these two things, whatever. My concern about the dollar then is more near term in terms of. Yeah, it's pretty overvalued. It's had a run of being overvalued. I think it's a fair consideration that you should have diversification away from it, but that it's still for all intents and purposes, the major form of currency in our portfolio dollar.

[Ted Seides]

Thoughts, Kasey?

[John Harris]

John that's the question mark. I think when Liberation Day was announced, we were down your summit the night the bond yields started trading off and I was on with my head of credit, Alison. I'm like, this is feeling like 08 when the tarp didn't get passed right away in the house where things were about to like fall off of clouds October 3rd. So as the bond yields are trading, I'M like, oh, my God, who's dumping our debt? That's the question. And then we always say, there's not another one. But there's lots of easy reasons for why they might start dumping our debt, which then cascades into all of these other things. The question I have is with the democratization and the fees, because you're paying higher fees to administer everything else for that, it costs more. Are those returns and correlations going to be compelling enough to get the diversification that we're able to get with our sized clients by going multi asset class? Because we have a huge advantage to be able to do that in a big way. That's things worth thinking about on the 60 40.

[Meredith Jenkins]

I always come back to Brett Barth on this, actually. And when I quote the, you know, if I'm happy with everything in my portfolio, I've done something wrong. You can criticize me that I'm being overly flip about this, but I think the way we all manage is we're constantly looking at the 6040 is something on the margin changing private equity, do we need to extend the years? So I hope that that continues to serve all of us well and we don't just set it and walk away and think that 6040 is just what it's going to be forever.

[Ted Seides]

John, thoughts?

[Kasey Whalen]

I'm just worried because Brett's been very agreeable today and so strange. That's really concerning.

[Ted Seides]

I can see that.

[Kasey Whalen]

Okay.

[Brett Barth]

It's.

[Meredith Jenkins]

His animal is going.

[Brett Barth]

All the management coaching I've gotten.

[Kasey Whalen]

I mean, we got puppy dogs over here. We got Brad Green. I mean, Meredith helped me here.

[Brett Barth]

Okay.

[Kasey Whalen]

I'm even a little bullish. What the hell's happened with this world?

[Ted Seides]

This is very, very strange. On that note, I want to do a quick round of closing questions. So your favorite newsletter, something you read, something you listen to regularly.

[Brett Barth]

Capital Allocators.

[Kasey Whalen]

Capital Allocators.

[Ted Seides]

Come on.

[John Harris]

Yes.

[Brett Barth]

Capital Allocators Weekly.

[Ted Seides]

And.

[Kasey Whalen]

Howard Marks still.

[Meredith Jenkins]

Yeah, Howard Marks. I always read Howard Marks and then the other one, Eric Peters. What's his name?

[Ted Seides]

Yeah, Weekend Notes.

[Kasey Whalen]

Weekend Notes.

[Meredith Jenkins]

Those two.

[Brett Barth]

Brett, there's a great piece that comes out from Jefferies every morning that I read every morning off their sales desk. That's really interesting about what's topical today. I do try very hard not to be looking at the screen thinking about what's daily, but just being really informed. Used to be reading the front page of the Wall Street Journal. Now you read the front page of the Wall Street Journal, and it's all stuff you learned about yesterday or the Day before. They've got a great sell side piece that goes out. The guys at Strategus we think are excellent. I really like their stuff. The Washington Research Group at TD Cowan has some great DC stuff that I read all the time. Chris is great. I love the way he quotes songs.

[John Harris]

It's a good point on the manager letters. We get so much wonderful data from each of our underlying managers in terms of what what's going on.

[Ted Seides]

All right, last one. What's your favorite weekend activity?

[John Harris]

We get to have one. I spent the rain in a soccer tournament all weekends.

[Brett Barth]

I'm an MD nester so whenever the kids are home, whatever I can do with my kids. Boating, golfing, watching sports, whatever it is.

[Ted Seides]

And when it's just you and Nat.

[Brett Barth]

Whatever Nat wants to do.

[Kasey Whalen]

I do miss the Saturday afternoon or Saturday morning Randall's island soccer games is.

[Brett Barth]

I do not miss that.

[Ted Seides]

As much soccer as much as you can play.

[Brett Barth]

The coldest place on the planet is Randall's island.

[Kasey Whalen]

In April, even in June sometimes.

[Brett Barth]

Seriously.

[Kasey Whalen]

Same thing with kids. My son's going off to college so just trying to enjoy as much time with him when he's willing to talk to me.

[Meredith Jenkins]

Having a good meal, enjoying a great trip with them.

[Kasey Whalen]

Just saw Cole play with my daughter.

[Brett Barth]

Nice mount.

[Ted Seides]

Taylor Swift.

[Kasey Whalen]

That was two years ago. Last year we do our annual concert. So I'm a Tay Tay fan still. Am I giving up on her?

[Ted Seides]

What are we going to be talking about when we do this next?

[Kasey Whalen]

Impact of geopolitical. I think we got a lot of stuff coming down the pipe. The Middle east this past week is a major, major reshuffling that is going to have impacts globally. We're going to be going into midterms. You got a lot there. And I'm very concerned about college campuses. This fall geopolitical will be back on the table.

[Brett Barth]

Deficits, we talk about it, but it hasn't mattered to the US and to our conversation about the dollar and 60, 40. And you've got places like Germany and the EU writ large where deficit spending is now much more common at a much bigger level than it used to be.

[Meredith Jenkins]

There's all the follow on effects of that interest rates and inflation.

[Brett Barth]

Geopolitical is an interesting1 because 30 years ago, 20 years ago, a geopolitical event would have massive market implications. Since then, geopolitical events have had less and less and less implications to the market. I feel like the pendulum went from overreacting for geopolitical to now we're really underreacting.

[Ted Seides]

Well, I'm pretty convinced that whatever it is we're talking about is not going to be any of that, really.

[Kasey Whalen]

Always. It's always something we're not talking about.

[Ted Seides]

All right, Brett, Meredith, John Casey, thanks. So much fun.

[Kasey Whalen]

Great to see you guys.

[Ted Seides]

Thanks for listening to the show. To learn more, hop on our [e-mail] where you can join our mailing list, access past shows, learn about our gatherings, and sign up for premium content, including podcast transcripts, my investment portfolio, and a lot more. Have a good one and see you next time.