Bloomberg Audio Studios, podcasts, radio news will. Joining us now is Jenny Johnson, Chief executive Franklin Templeton, which oversees around one point seven trillion dollars in assets, and I have to say it's called colder this morning than yesterday, but at least it wakes us up to try and understand and figure out the world economy and everything that goes with it. Jenny, thank you so much for joining us.
A lot of the participants here, we're looking at the inauguration, a lot of the bankers here and fight the world of finance is expecting deregulation and Donald Trump to not kickstart because the economy is doing okay but actually better the economy in the US.
Well, I think that's right. I think, you know, the view on Trump is it and he's been very clear he wants less regulation. I think he said he's going to, you know, for every new one enacted, take away to regulations. So I think that's positive for business. You know, I think that he'll continue spending, which you know is positive in the short run for economy. I do think we have a concern with debt, and you know, I think he'll extend the tax cuts. I think people view that
as all positive. You know, obviously there's a lot of rhetoric around the tariffs, and you know, the reality is actually I think two things. One is he's a deal maker, right, and if you're a deal maker, the first thing you do is you show your you know, your powerful stance. So you make a broad statement, I'm going to tax Canada and Mexico by twenty five percent. Well, and then you sit down at the table, you get them to the table, and you say, this is what I need.
I need some help on immigration, I need I want you to import more of our goods. And so, you know, I think we've seen that that's his kind of approach. He makes big, broad statements I'm going to buy Greenland and then and then from there goes in with a more kind of practical deal approach.
But is there a danger that actually you're a CEO, you don't invest because you're never quite sure what's policy and what's negotiation tactics.
Oh, I think that that most people have a clear well I don't know most people have a clear understantion. I think you know, you under stand under the covers because he's he makes his statements in Europe right he wants Europe to import more from the US. He wants is particularly energy. He wants help on you know, funding from a you know, NATO. As far as military funding, he probably wants him to lay off a little bit
on the tech companies. I mean, so there's an understanding of what his desire is, and so you know, then then you get to the table and you start to negotiate those things.
I mean, is it impossible to know whether he's better for private markets than public markets?
Well, I don't necessarily I think he's I think the view is that he's going to be good for the economy and that therefore is good for both public and private markets.
What are you seeing in private markets right now?
Look, you know, I think you're starting to see more movement on IPOs, which is good for the private equity business. You know. I think that the areas that I'm most focused on is, or that I think I have tremendous opportunity, is secondary private equity. There's just been so much deployed in private equity. There hasn't been that kind of liquidity ability.
There's been about one hundred and fifty billion deployed in secondary pe and we're still seeing you know, Lexington Partners raised a fund, they closed a twenty two point seven billion dollar fund last year. I think they've deployed about seventy percent of it with very large discounts, almost you know, sixty percent more than the average discount historically. So secondary PE.
We also think real estate debts really interesting. Banks aren't able to lend, they're clogged up with office Regional banks were the big real estate lenders and so as they haven't been able to lean in. Those private credit managers who have real estate expertise can fill in that void and benefits Street Partners. We have as about nine billion in real estate, and they think it's a really interesting opportunity.
Mainly in the US or there are there are also other parts of the world where you could actually see distress.
Yeah, I think in the secondary PE space, you're seeing it all over because there's a need for you know, for LPs to get their liquidity. I think in the real estate that is more of a US issue. Look at I think office all over the world, you know, has issues, but it be office space, its not a office space. But in the US it was the regional banks who were the primary lenders and they're just not able to capital requirements have changed in the US, is they're just not able to lend like they used to.
There's also so much talk about, you know, crypto being at the center of the Trump administration's kind of second mandate.
Did you participate in the Trump and Millennia mean coin or whatever?
I haven't, but this has everyone excited. They were even talking about in Davos. Does it change an appetite for ETFs, does it change you know, is it market liquidity in some places? And does it impact basically your company?
First of all, I think it's really important to think of blockchain as a technology. It's a programming language, right that does certain things really well. I do think that it will It's likely that ETFs and mutual funds will ultimately be built on block changes because it's an incredibly efficient, efficient technology. And then there's the crypto world, some of which I think has tremendous opportunity and some of which
I think it'll be noise. It'll be a little bit like the dot com era, when you know, eventually you had some of the biggest companies of the next decade that came out of it, and then you had a lot that kind of blew away to the side, and so I think the crypto world is similar. I think the thing with the Trump administration is we're going to start to see them converge more, the trad fi and
the crypto, which is something that we need. We need to have some sort of regulatory clarity so that you could bring these together because the fundamentally it will drive out costs and there is great innovation that the technology enables.
Is that going to be overlaid by inflation?
Well so inflation, you know, I actually I do think that if I were to predict, I think that you could have at the end of twenty five the ten year at five percent, you know, I just and by the way, from nineteen fifty to the to the GFC kind of the neutral rate on FED funds was about four percent, and the ten year of five percent, that's actually much more normalized. I think that's what we're going to see. And I think that the Fed is going
to pause right now. They're going to try to you know, this gives them time to see how Trump's policies impact the economy. Some of them can be inflation area, and let's face it, the US consumer is still very strong. You know, the inflation numbers, Unemployment still still pretty low, so the inflation numbers are pretty sticky. And I just don't know that we go back to that period of much lower interest rates.
But that again changes everything, which is maybe why you're seeing opportunities probably if you're higher for longer.
So but kind of more normal for longer. Right, it's much more of a normal rate. And I do think that for example, on the private equity side and private market side, look at it was easier to make money when cash costs nothing. Now you have to be very skilled because your carry costs of say five to eight percent, means that your investments are going to have a drag on them, and so you have to be very good. And so I think you'll see those who are skilled and others will fall away.
Jenny. For the integration of Western, how's it going. I know you've started with you know, some big chunks of it.
We are working through the integration of westerd yes, and that you know that we've done it. I think now when we bought Lake Mason, it was actually like buying seven managers. Plus we've been integrating Putnam investments and we've done. There's less integration that happens on a private market acquisition than a traditional acquisition, and so we've been methodically going along and so we're in that process.
And so it's going to plan. Is it quicker than I expected?
Slower? It's probably quicker than expected because we were not planning to do it until, you know, after July twenty five. And now we've started that process earlier.
And that's Are you happy with the progress so far? I mean, you started earlier, Will it finish earlier? And is that's a positive.
For I think it's definitely a positive.
I mean, look, our.
Whole model is to keep the investment teams independent and to build scale around them, and it's become even more important. Actually one of the acquisitions, it was actually a private credit manager said she's when Franklin bought us, we thought they'd help us on distribution. But now that I see what's happening on AI and the cost of data, I realize we could never participate at this level without the
kind of scale and breadth of Franklin doubled in. So that's what we try to build at the center and then leave the independence of the investment team and I.
Know there's been an issue of course with one of the managers.
There any updates, We are still working through it, you know.
Okay, Jennie Johnson, thank you so much for joining us the first of us. Actually, yes, we have to catch up at the end of the week to see how how's that been going so far?
Fun, so far, it's great. Yeah, no, it's good to be here.
There you go. Jenny Johnson, Chief executive Officer of course of Franklin Templeton