BlackRock's Tighe Likes Trade: Swap Treasuries for TIPS (Audio)

the first time in six months. Brent crude right now forty barrel, down seven tenths of one percent. West Texas Intermediate thirty four a dropped there of point four percent, Gold down three fifty the ounce to twelve twenty a drop of three tenths of one percent, the tenure of ten thirty seconds that yield one point eight three percent.

I'm Charlie Pellet, and that's a Bloomberg Business Flash. It's time now for the e t F Report, brought to you by Van Eck Vectors et f S. Expect more from your muni's target tax exempt income by maturity and credit quality. All with low cost ETFs. Visit vaneck dot com slash Muni van Eck access the opportunities. That's go to Katherine Cowdery for the e t F report. The Bank of Japan is taking an innovative approach to quantitative easing.

It's using e t F s. The Bank of Japan now owns fifty nine percent of all the e t F sets in Japan. Bloomberg Intelligence analist Eric Altuna says that b o J turned to e t s after exhausting other more traditional forms of asset purchases. Now what's interesting is the last round of buying they did were products that they basically custom made with a asset manager there um. In fact, SMP was one of the index writers.

They basically said, look, if we're gonna buy e t s, we want to buy e t s the track companies that are you know, investing in the human capital, physical capital like you know, capital expenditures. According to bel tunis that b o J is using its e t F purchases to send a strong message to Japanese companies to spend their money on people and capital instead of financial engineering.

It's trying to eliminate some of the worst side effects of que including corporate cash hoarding, wage stagnation, and income inequality. That's your Bloomberg ETFF report. I'm Catherine Cowdery. You're listening to Taking Stock with Kathleen Hayes and Pin Fox on bloom Bird Radio. So what do you do with your money? As May often comes to a close. We've heard people tell us this week that two stocks are pretty much fully valued. We know bond yields are low and prices

are pretty high. We've heard some people say, hey, maybe real estate is not a bad place to be. We're gonna put this question now to Heather loomas tie market strategists for Black Rocks Family Office, foundations and endowments, to get our sense of where things are and where they're heading. Welcome back, Good to CEO. So of where shall we start? Bottom line? You are dealing with very interesting universe of investors, right, so you're getting a window into hopes, fears, what where

people think it might be good to go. Where are you seeing the most interest now, Heather? Right, the most interests we're seeing right now is in private market opportunities. When you think about the public market landscape, and I know black Rock recently came out and said for a sixty forty stock bond blend, you could expect something close to three percent for the next three to five years.

That number is shocking to a lot of family offices, especially endowments and foundations, which actually have outflows which they need to take care of. Family offices have been earning a good amount of money and how they accumulated it for a while, and so they have an internal rate of return expectation. So into that environment, people are looking to the asset classes which haven't been bit up by central banks by the massive inflows which we're seeing across

the globe. Is quantitative easing, and monetary policy continues into places where they can extract value, extracting a liquidity premium, and everyone's sitting on cash. Not just to be clear here, if you're going to earn an estimated three percent return on an annual basis, aren't you just earning the return in order to pay the fees to have someone get you that three percent in the first place? That is going to become so essentially important because if you think

of that three percent is before taxes, before fees. If you are paying something like fifty basis points to have your assets managed in a six to seven percent return environment. When that becomes three, that number is a lot more important. So absolutely to your point. When we're talking um with our kind of you know, billion or even our billionaire

family offices, they're saying what exactly are we paying. They're looking at all of their active managers on a line by line basis and saying, we are only going to be paying for active management when it is giving us outside returns absent that we must control the bottom line. It's kind of like, you know, into tough times for equity markets. You know, when you don't beat on the top line, you know, how do you make your earnings growth?

You cut costs. So let's look at equities because the earning season was not so hot, and more and more people have said, well, you can probably make some money in stocks. More people are saying mid to high single digits. If you're lucky, then it's like we used to have a couple of years ago double digit gains. But you have to be more selective in terms of the companies you invest in as opposed tos just behind the market. What are you doing, what are you advising your clients

to do yes, Um, and and that was you. You're you hit the nail on the head. You need to be thinking about the actual corporations which you are owning. We UM are seeing some value in the dividend grower space, so so paying dividends, growing dividends, clean balance sheets, with the ability to grow those dividends, so kind of an organic level of dividend growth embedded in some of those companies.

You You're going to need to be very selective going into this time period because you know, as we've seen now, equit price to earning multiples with flat returns for the year. This is this is a harder game going forward. In your conversation with the representatives of these family offices and foundations, do you get the impression that they're excited about investing their money? Were they just looking for the return? There used to be a day in which people were excited

about specific companies. Oh I've got to buy Apple because I'm so thrilled. Is that going away? And they just want to look at the number? Now? UM, I'm laughing a little bit because you're right, some of that excitement has been replaced with um, how can you do this for less, and I just want to know if I'm beating the averages let's say exactly when they hear okay, so we're going to earn less with more volatility. It's almost like, you know, this is the environment and we're

all going to be working with it. But it's it's it's not a great one to be in. Certain things have excited family offices over the years. Those are private direct deals. Those still excite family offices. That in many cases is where principles have made their wealth over time, and it's still very interesting place to do business. Non syndicated parts of the market. UM where you're looking at unique deals which tends not to be correlated to public

equity and fixed income markets. That's still exciting. There are places to which which um tied to people's passions, so the impact space, renewable energy, things like that, where there is an intersection for what they want to see in the world going forward, and they can also make an investment return in that call at seven to eight nine percent range. Those are things which get people excited in today's market. Uh, fix income. A lot of time that

space didn't you and you're still in that space. Just you're just look at all the markets. More broadly, Uh, we have a story today on the Bloomberg about what a two billion dollar corporate bond bender. I mean, corporations are issuing debt like crazy. Do you see value in that space? And if so, we're um. We have gone neutral on corporate credit um and not to differentiate a view where we were more positive going into the beginning

of the year. We think that you're not going to experience price return from here for the for the foreseeable time period until we change that view, and you're going to be dependent to bonding income. Uh. There are also risks corporate balance sheet risk out there, leverage, business model risks, and so from that standpoint, UM, we this would not be our top recommendations to clients to think about the

corporate bonds space today. We would urge them to think about different places to find that yield, to find that return, and those are what those kinds of private, non syndicated deals that you're talking about something you know, but for for family offices, we could even just take it even even more basic. Communis are still okay. You know, the immunity treasury ratios look good. We're seeing good demand in this space. Picking credits, just like the question on equities

is still critical even in a high quality space. So we like munis. But then yes, as we say, alternative sources where you could pick up an income stream which isn't correlated, which has some tax benefits. That in the private space, if you're willing to give up liquidity, can be very interesting in terms of so you're so, so get credit your neutral there? You do like munies. Does anybody have any reason invest in treasury these days besides foreign central banks and people just want to grab some

yield in a world of negative bond yields. I mean, we see it at the very short end where people are just holding them as a cash proxy. Um, they're saying, you know, we want to keep some dry powder in case we see some market volatility. Everyone is still waiting for the next you know, two thousand and eight, two thousand nine to come, and that's still very real in

the lives. So we see that there. But at the margin, what we've been saying, for people who are natural holders of treasuries and that's a position for them, think about swapping that into tips. You know, we're deflation is no longer something that we're worried about. We're not ready to say that we're in an inflationary environment, but it's certainly not dead. Thanks very much for coming in and spending

time with us. Interesting. Heather Loomas Tie is the managing director and market strategist for Family Office, Foundations and Endowments at black Rock. Thanks very much for coming in. Thank you. This is taking Stock on Bloomberg. I'm PIM Fox my co host Kathleen Hayes. Kathy, We're gonna take everyone through to the clothes and uh, I think that we're going to take a look at maybe Dollar Tree stores. You know that they are up more than thirteen percent today

after that earnings report. I want to take a look at Costcoe. PIM, that's another one that's leaving higher, Yes, by more than three and a half percent. We're gonna take you through to the clothes right here on Bloomberg Radio.