Christine Hurtsellers on the Business of Trust (Podcast)

Christine Hurtsels has really a fascinating background. In addition to being on all the most important, most influential lists, She's worked in everything from structured product to fixed income to the c i O of foy you before becoming the CEO of Void Investment Management. Really very knowledgeable person about all aspects of investing and one of the things that Voya is best known for are there um defined contribution business.

Uh really, I just found this to be a fascinating, fascinating conversation and I think you will also, so, with no further ado, my conversation with Voya Investment Management CEO Christine hurt Sellers. This is mesters in Business with Very Renaults on Bluebird Radio. My special guest this week is Christine hurt Sellers. She is the CEO of Voya Investment Management. The firm manages over two hundred and forty five billion dollars in assets and generates more than seven billion dollars

in revenue annually. Previously, she was the Chief Investment Officer of the fixed Income group at Voya and has had a number of interesting positions throughout her career. Hurt Sellers has been named to numerous most Influential and finance lists. Most recently, she was named Baron's Top ten most Influential Women in Wealth Management. Christine Hert Sellers, Welcome to Bloomberg. Thank you so much, Barry. So let's start out with your current gig and then work our way back a

little bit. Your chief executive officer avoida investment management but previously you were chief investment officer. How do you make the leap from c i O to CEO. It seems like it's a very different set of skills, very you know, in some respects as different skills, but in a lot of boys, very similar skills. And so what in the world do I mean by that? You know, a lot of what you need in the role of CEO is

good strategic thinking. So really being able to think about where the markets, where's the business going out, you know, three, three to five years from now. And so I've been an investor most of my career, so when you think about strategic thinking and reading the markets and opportunities, there's a lot of similarity there as well, as you have to have a team approach, really have good intuition and figure out how are we going to set a strategy, how are we going to get people excited and really

moving in this direction? And so what they call e Q that emotional intelligence. Uh. You know, the more senior you become over time, the more important that actually is, and less so pure technical skills that you develop early in your career. So really it was a pretty natural move. But I will tell you Bury, the one thing that I really miss, uh is my I miss being in the markets for sure. I mean just the joy of being with an investment team. That isn't my day job anymore.

But again, I love strategy, love working with people, and so I think it's just a wonderful role for anybody to have. So despite some pretty big challenges, Voya had a pretty good tell us a little bit about last year. How did you guys do so well. Wow, well, there's no very I mean last year Judd started out in such a crazy fashion, and I would say the way

that Voya did so well. I mean, number one, you know, we have great customer relationships, um, and you know, really differentiated products so much today you know, people are talking about alternatives and private markets and seventy billion of the assets that we manage are in that category. So number one, you know, we we certainly have great products that our clients want. But but more importantly, you know, it was really leveraging our culture into a period of real uncertainty.

I mean, as you recall, the markets just completely froze uh in the in the spring and uh and so you know, what did we do as as things just got so disconnected? It was leveraging the culture of of just being transparent and and talking to our clients and really walking them through. We did tons of webinars, uh, talked about what was working, what was not, what was in the portfolio, what were we doing, and what we're

our views and we got the feedback from clients. Hey, not all asset managers are doing that, right, But at the end of the day, we're in the trust business. It's their money we're managing, and we want to be that trusted partner. So how you behave and how your people rallied together in times of stress, those are moments in life and in careers that truly define you. So couldn't be prouder of the team. As we work through two thousand and twenty two push ahead through a lot

of uncertainty. So given how successful two thousand and twenty was, did that momentum carry over to is things began to

open up and sort of return to normal? You know, it has and a lot of the a lot of the momentum that we continued to see just based on where yields are in the world and what's going on really are and some of those more private asset classes that we managed, so I think commercial real estate or you know, actually what we call private credit, meaning issuers that don't come to a public credit market, and we

have a very strong business there. So as a result, is people continue to struggle with where am I going to put my money? I'm uncertain? You know, the yields are really low. We tend to see quite a bit of demand in those assets that we manage. Really kind of interesting. So you guys are one of the larger investment managers in the defined contribution space. But for your size, you kind of fly a little bit onto the radar. Tell us a little bit about that practice and how

you became as large as you have in that space. Yeah, you know, voy overall, you're absolutely right, Verry. We are one of the largest companies that work with define contribution plans and managing them for employers and and really having you know, good good tools really to engage employees and to help them save. And so I would say, though, as you say, you know, we ourselves small but mighty

as a company. We've got a great brand, great brand recognition, and our brand is really only as Voia only about I'm gonna say, seven years old, uh at this point. And yet you know we're we're our brand recognition is very attached to retirement. So going back over all, like like how do we do this? And and again we're kind of small and mighty, we like to think, and it's actually true that we're more agile. We can pivot

more carefully or quickly actually than than other people. And one of the things that we tell our clients are when we engage on asset management specifically is we call ourselves big enough to deliver, but small enough to care. And when you think about that, uh, you know, what do those two things mean? Because you know when you wake up and you look at the newspaper today and you say, oh my gosh, you know these asset managers that call them between two hundred billion to a trillion

are just going to go away. Right. The industry is consolidating. But at the end of the day, I just don't think clients want to wake up and and just have a few select partners where they're gigantic and that customization in that high touch isn't really available. And over half of our assets that we manage barrier what we call customized, meaning the client has specific needs that they need. It's not just to what we call a generic benchmark in

the marketplace. So again that that's our brand, that's our value, and it's really resonating with clients. And so we're growing as a company, you know, despite the rhetoric around the difficulty to compete in the in the trillion dollar club. So let's talk a little bit about that customization. What does a typical client look like and what do they want beyond just a standard six or these days stock and bond portfolio. Well, you know, we have a variety

of clients. But but on the institutional side, specifically, when you think about insurance companies or some of the pension funds, Uh, they have unique liabilities that they're managing assets against, so

so they need somebody that's going to engage them. And then plus, when you look at the context of the market and where the equity markets are and all the liquidity in the world, more and more clients are nervous about, you know, yields being so low, and where can I really put things in terms of what asset classes offer great returns? And so what does customization look like? Um, let's just take a somewhat simple example in the fixed

income market. And so there's a there's a product or a trend called l d I or liability you know, sort of immunizing liabilities for pension funds, right, And so as the equity markets have done well, so many of the pension funds are saying, wow, I want to do what I call immunize and actually move my overall pension funds that I have as a corporation into more of a fixed income laddered bond portfolio, so that that's essentially

what's happening. And yet that fixed income laddered bond portfolio, there aren't a lot of corporate issuers out there, so you end up taking trading equity volatility for concentrated credit risk. So what do we do We actually blend in private credit with public bonds for those clients to offer them a unique solution where they can diversify some of the

exposure to the companies that they're invested in. So that would just be one small example of how do we customize something to help our clients come up with a better solution. So that sounds not so much like you're reaching for yield with different credit risk or higher credit risk, but you're diversifying into yield that might be a little more attractive because it's not yet part of the public market.

Absolutely right, Perry. Really intriguing. And you mentioned some of your clients are big insurance companies and um pension plans.

They have very specific liabilities at specific future dates. How do you manage towards that future you know date certain liability, Hey, we're gonna have to have X in two You really it's it's as you say, it's just that that dialogue with the clients in terms of do they have specific liquidity needs and impointant time that that they're looking to us to help them deliver do a lot of the specifically, some of these clients more and more asking how can

I get yield and maybe uh not need as much liquidity. So when you think about when you think about the markets today and really the growth of private markets, I think that a lot of institutions are waking up and saying is liquidity necessarily as necessary meaning that they can quickly liquidate their bond portfolios right within a few days? Or do I actually have opportunities in my business model where I can have you know, long term investments and

tuck it away. So when you think about that, uh and what we can do across floy a private credit could be a great example. We also have what a private equity business that focuses on what we call secondaries. So think about buying secondary private equity investments in you know, the marketplace at a at a very attractive kind of

going in investment level. So when you think about those things, very those those really are opportunities where yes, you you don't necessarily call void tomorrow tomorrow and say please liquidate my real estate or my private equity portfolio. But if your patients and you have a long run business strategy, these can be some great opportunities to enhance your yield in your return. So tradeoff is a little better yield

in exchange for less liquidity. But if you have that future liability and you don't need it for a decade, seems like a pretty reasonable trade off. Absolutely. And so again, is we hear a lot of the rhetoric in the market of oh, you know, our private assets, do people really understand them? Or you know, is it a bubble you know, with the growth of private assets? And again I would say no. I mean, certainly there are risks

and opportunities within any broadbrush sector of the market. But again it's highly logical just given the state of the world and investment opportunities, that these types of asset classes continue to grow. Let's talk a little bit about what sort of challenges did you face managing Voya's investment management group during the lockdown and the pandemic and work from home. How did you work your way through that? Well, Barry, we do all of us I think the industry right,

we didn't have a lot of answers. It was really surprising, and in fact, I think at the beginning, you know, if you would have asked me, hate Christine, how long do you think the people are going to be working from home as a result of this pandemic, I would have told you six weeks. Uh, you know, the summer's coming, things that are going to get better, and and and actually, uh, you know, we've been at work from home for over a year at this point, and we're still working from

home and won't be back until the fall. So so what do we do? Um didn't have a playbook, but a lot of listening. We were able from a technology standpoint to move pretty seamlessly, you know, from in the office to out of the office. But but then it was a matter of how in the world, how in the world do we keep our employees engaged. So we tried a lot of different things. We did you know, web tests where you know, I would I would talk about, you know, how the business was doing, how the clients

were feeling. U We tried a lot of things with our team. We do no meeting fridays in the summer to try to give them some bandwidths because you know, people are just plugged in all the time, and so some of the issues really when I think about the business, you know, the markets after the FED came in sort of calmed down, right, So the real challenges once we got through the spring really is keeping our employees healthy as they were dealing with working from home, kids, kids

not in school, a feeling admit detached. So we spend a lot of time and energy and we still do on thinking about how can we be a good place to work for employees in the world like we have today, which is virtual. So let's jump right to that question. Pensions and Investments named Void Investment Management one of the best places to work in money management. I think it's like your sixth year in a row on that list.

So what do you guys do that's different than the average money manager as a as an employer that makes it so attractive. Well, Barry, thank you for mentioning that, and that's something you're absolutely right. We've we've been named that buyer employees for six consecutive years and it's not something that we take lightly. It's an honor and it's something our employees vote on and and you know, in the context overall as far as why are we um

winning this year after year? And then I'll pivot to COVID specifically really as goes to two things that come out from our employees consistently. They love the teamwork, you know, the the approach, the open mindedness, and we spent a lot of time investing in that and psychological safety and

different things as a company. So they love the teamwork, and they also love the fact that that voys mission driven and we give back to our communities and so we have we give as an example, we give all employees forty forty hours there a full week of paid leave to go and go out and volunteer in the

community whatever cause that they want. And so that would just be one small example of the things that we do that make our employees really feel proud of what Voya does and that we make the world better for our communities and our our clients. But I would say pivoting to two thousand and twenties specifically, uh, because you know, certainly, I mean as a leader, I was like, I don't know if we're gonna win this again, how are people doing?

And we're certainly surveying them and trying to stay connected

in a virtual world. But I think I think what really resonated with the team in two thousand and twenty was, uh, you know, just a transparency, the transparency of leadership um of seeing them and you know, trying to say, well, this is what I know, and this is what I don't know, and and here's kind of what we're gonna do about it, because again, when you think about it, times, we're pretty uncertain last year, and so just being authentic present Voya pivoted very quickly in terms of benefits and

trying to help people adjust through this more flexibility things like that. And so when when employees really feel like they they understand where you're coming from, that you're authentic, that they believe you, and then also you see them and you're becoming more flexible, expanding your mental health benefits.

As an example, as people were dealing with COVID, and certainly as the summer continued and we had George Floyd, the murder of George Floyd and the emotions associated with that, and having conversations and really working towards how our employees feeling about all of these different things are dealing with I think those are the key things that that really helped get us through two thousand and twenty and uh and and so as a result, thankfully, our employees continued

to really be engaged and want to work with Folly Investment Management. So we've been hearing from from some CEOs of very large wealth managers like JP Morgan Chase and Morgan Stanley, both talking about we want everybody back in the office. It's time to go back to work. What do you think is going to happen with work from home in the future. Are we just going to go straight back to pre pandemic offices or is it going to be some different hybrid model in the future. And

what are you guys doing? Well, you know, it's so interesting watching all of this unfolds as we learn very so starting with with what we're doing and thinking about it broadly, is you know, we're we're going to be what's called hybrid. I mean, we don't think a hundred percent in the office is right, nor do we think a hundred percent virtual is right. And so we've gone through very robust surveying of our people and thinking what's

the right thing to do? So why are JP Morgan and Morgan Stanley going back, Um, you know, I would say, you know, very real, you want to maintain your culture,

you want to maintain teamwork. And then the investment side, particularly when you think about alpha an idea generating, you know, being a part like this for so long can intact your investment results because sort of those sidebar conversations where you get good ideas as an investor from your people, you know, you really can't replicate that on zoom or with the telephone calls. So so, yes, you know people need to come back. Do they need to be here

five days a week? Absolutely not. Do I think that people should be mandating you have to be in you know, Tuesday, Wednesday, Thursday. No, that's also not flexibility. So we're taking an in office flexible approach and and bury it. I could go on and on. I have so many views around this, but you know what our employees telling us? And where am I really concerned and where do I think people and

leaders may be missing it? It's it's our it's our female employees particularly, and when you think about you know what a female person is dealing with uniquely and all employees, all employees. But when you think about you know, children and balancing, and you look at the overall US statistics about who's dropping out of the workforce, it's it's working mothers.

And so if you as an employer saying okay, you have to come in, just as the industry is really really an industry that has has not done well in terms of diversity and inclusion with our employee population, and now you're coming in and saying okay, well, you guys all have to come into the office. I just think that that could create some real challenges as that as people are trying to work through more inclusion, more diversity. So again, our choices, let's listen to our people, let's

figure out what's what works. We're going to learn as we go. But we want to we want to be an employer of choice for all of our employees. So maybe this is an obvious observation slash question, but let me ask in anyway, if you're flexible and you're offering a hybrid model, is this going to help you in terms of recruitment and retention? It seems like from a employment strategic perspective, it's a big advantage. I agree with you,

I Verry, I think it is a big advantage. And and listen, we don't have all the answers yet, but some of the things that we're doing as far as this hybrid world is is we're going through a whole process as far as well, what different technology do we need to be putting into people's homes, and how do we change what our workplace looks like if it's a little bit more of a hoteling space. So we're literally renovating as we speak too, of our offices to accommodate that.

Our New York office, in our Atlanta office. So we don't have all of the answers, but we're giving it a lot of thought. And we do think that this is going to make void Investment Management, you know, continue to be the best places to work in a in a place of choice. And again just going to flexibility, going to workforce diversity, we've got to pivot, so you know, and I'm very mindful of this. And this is a little bit different to barry from from some of our competitors.

So let me just tell you this is them. I've heard some competitors say, well, you know, the senior people, you know, we're going into the office. Um, we want people to see us because you kind of lead by example, right. Well, you know, Verry, I've I've had five children. I have one of the things about me, I have five sons, right, and one of my sons, um is on the autism spectrum, which has its own unique challenges and opportunities. And I think long and hard, how do I want to lead

by examples for really investment management in our people? And it's with understanding flexibility and enabling them to succeed in their careers. And so that's the approach we're taking. So are you seeing Christine hurt Sellers every day in the office even though we're still closed, hoping that people will follow my example? Absolutely not. M that's really interesting and we do a lot of research and preparation for these conversations. I did not know any of that about you, and

that's really intriguing. It's more than just let me show up and and pretend to be productive in the office. You're living the actual life work balance that so many employees aspired to. Yep, that's right, yeah, yeah, And I and I know Barry. You know a lot of times people will will say, oh, well, you know, who are you? What's your role? And wouldn't expect that. I have raised five children, including one with special needs. So yeah, so

you see, you're absolutely right. So that drives a lot of my passion right when I think about the industry and where we need to go and what can we do differently and how can the legacy or the world. You know that I leap behind you my story how to make it a better place. So I do think I bring a certain level of understanding and empathy as far as how complex, uh, you know, the working world can be to navigate. Well, thank you for sharing that. That's really very very entry thing and I think a

lot of listeners are going to appreciate that. Let's talk about Alliance Capital. What did you do for them in terms of their securitized assets? Verry At Alliance I was I was part of a team that really just focused on mortgage mortgage product, mortgage derivatives way back in the day it's such a bad word now post the g FC. We actually managed sort of c d O s that's they recalled. So think about you know, structured mortgage product.

It was a growing business at Alliance Capital. That again, most of my career, you know, from the very beginning has been was focused on really the housing market aspect securities and and so that sort of was my original task in in my love. So let's let's stay with that. You were Freddie Mac for a while, right, I recall reading your portfolio team had about six hundred and fifty billion dollars in assets. Tell us a little bit about

your Freddy Mac experience. Yes, yes, Verry, I were Freddie Mack and left there, uh right at the end of two thousand and four, but but worked there and managed

a variety of assets there. So back in the day, you know, pre g SC or Global Financial Crisis, you know, they had these very large what they called retained portfolios, and so kind of going into Freddy, I worked quite a bit on what are called collateralized mortgage obligations or cmos than what we call mortgage derivatives, so think really esoteric product, uh you know, sort of what we call

interests only your principle only securities. So a lot of structuring, just a lot of deep knowledge around the housing market. Really interesting time in my career because at that point in time, the g s s of Freddie and Fanny were huge in terms of their participation in the mortgage market, and they had these very large portfolios at the time. So in the early days anyway, in the early two thousands and throughout most of the nineties, the g s

s we're doing all um conforming mortgages. There were none of the subprime or at least very very little subprime all day no money down, no income check sort of stuff. They were pretty safe mortgages. It was only later in the cycle that and they were losing so much market share to private banks that they dove into it. I think you might have missed most of the crazy stuff if you left Fanny in Freddie in two thousand and four, tell us what your experience was like pre financial crisis

at Freddie Mack. It's sure berry and and this is something you know when when you think about it. So certainly Freddie and Fanny were prominent in the GFC right as we went through the financial crisis in the US housing market. So the seeds of the global financial crisis,

you know, began in the nineties. And uh, you know, as the market screw and Freddie and Fanny got more aggressive on what they were underwriting and compete against one another, uh things, you know that that explains part of that journey. But but again, you know, lessons learned though, you know, they were highly levered institutions and they had no guaranteed debt that then enabled them to lever. So so again, lots of lots of crazy, you know, interesting things going

on at the time. You know, I did resigner, I moved on to the company I'm now with, you know, before the global financial crisis happened. But again a lot of these things within broader housing and the financial markets were many years in the making before it's sort of all kind of imploded on us, if you will, in two thousand and seven. So let's talk housing a little bit. Housing prices have blown up over the past year, in

large part because there's almost no supply around. Whatever comes out seems to get a just an overwhelming amount of bids. What do you think of the state of the housing market here and what's the likely out come going forward? Well, Bury, just from a kind of an investor or a tactical view, you know, when you think about asset classes and what you recommend to your clients, um, housing related securities would

be really towards the bottom of the list. Um because as you say, you know, house prices have gone very quickly. That what the governments, the Federal Reserve has them buying securities, you know, agency securities associated with housing. So you have a combination of a sort of a federal push liquidity event there as well as you've suddenly got all of these people all over the place. You know, we're bidding

up the housing market. And in fact, you know, just recently housing prices came up again and they continue to skyrockets so so so thinking about but as a housing market today within itself, uh, you know, enough to really be the seeds of yet another financial crisis, I would say no, I would say it's a little bit more isolated now. Granted, houses are you know, the largest asset for most Americans. It's a very important part of their net worth, and so the housing market getting volatile on

us is not a good thing. I mean, however, as you just referenced Verry, I think a lot of this is a combination of low interest rates, uh, and it's it's demands right now, we see even building houses is getting more challenging based on commodity prices going up. So so this is a period of time we're going through. Plus finally, you know, millennials are forming housing finally or

households quicker than ever as a result of COVID. So I would call this more of a tactical risk, if you will, not a systemic risk like the global financial crisis was. There's just not enough leverage in the system. Yeah. That that household formation data is fascinating because it fell off a cliff after the financial crisis. The first i don't know, five or seven years was way below average, and then over the past two years it really seems to tick up. How closely do you pay attention to

data points like household formation? Yeah, we we watch it pretty closely. And I think you know, we've we've always had a big you know, a big level of assets and securitized product. We're very good at it avoid investment management, and we do watch it. It's a little bit of a slower moving train. Berry. But I think what what people had often forgotten about the millennials is this is that they would say, well, you know, they're different. They want to travel, they want to do X, Y and Z,

and they don't want houses. And we've had the theme that no, no, you just forget these these people are going to live until they're one hundreds, right, So you just they're growing up slower, they're doing things slowly. But ultimately our millennials, is house holformation going to happen? Absolutely it is, and these are important demographic trends to watch.

So I think COVID just accelerated it as uh as people were, you know, work in apartments as well as it's certainly the work flexibility of being able to work in the suburbs and not commune as accelerated. But this is just an acceleration of a very natural trend that we see. M quite interesting. So I've always found that fixed income people approach stocks generally, but investing and risk management different than the folks who kinda grew up on the equity side of the street. Tell us a little bit,

how did your background prepare you for your current job? Well, Barry, you know, first of all, as you say, with with fixed income versus equity investors, now you know I get to work with with both. Is your absolutely right? Just to start out? You know, fixed income investors tend to be cynical or more cynical because you know, for them, successes par right, like get every dollar that you invested, and you have you know, all kinds of downside risk.

So I got a dollar back from coupon. Yeah, I got a dollar back in a little bit of coupon or I love you know, uh what we call or fifty or points, you know, like high yield. So so that sort of explains to everybody. Whereas equity they're optimistic, right,

Oh this company is going, isn't Loos wonderful? And so even in our employees, you do see a mindset difference, and so kind of going back to your your question though of of how did fixed income prepare me for this role, I would say, uh, you know, certainly a certain level of of um really focused on the facts, right, But but also I would say, uh, you know, for my career specifically, you know, I spent most of it in what we call structured products, as we were talking about,

And I think that that is a great market because you can kind of combine the discipline of the fixed income investor also with the enthusiasm of of the housing market and interesting things going on in the world. But overall, I think coming out of it, you know, just balance of as a leader. As a leader, I like to use this this phrase with people when you lead people, you need to have what I call authentic optimism. And why is that It's like you have to believe that

the world is a better place than that. Your strategy is going to deliver and you're adding value, but you have to, you know, face things authentically because also employees don't want you to just be telling the stuff that isn't true. Right, So so it's kind of that balance as investors or as leaders is what I call authentic optimism. That's really intriguing. So you mentioned, um when we were talking about housing and mortgage backed securities, the Federal Reserve

was a big buyer. They're keeping rates low. What other reasons are there for rates being so low? We really we know the central banks can affect short term bond yields, but even the long term yields are are way down. What's the driver of today's UH lower eights? Is it inflation price and sensitive buyers, just demand for yield or

something else? Entirely, very certainly one contribution, as you say, is really the Federal reserves buying program, right, so they continue to buy lots of treasury securities UH and certainly mortgage backed securities as well. So that's an effect. But when you when you peel it back, why is the long run bond market or those ten uere yields still anchored is so low? It's it's we think about it. It's it's telling you what does the world believe what

we call terminal FED funds really is. And so when you think about that, what does that mean? That's like the real rate where FED funds can be in order to sort of have economic growth, and it's it's pretty low. So the market is still telling you, yeah, they're going to be some inflation risks potentially, but long run, you know, lots of people around the world are aging. Uh, so you think about China, you think about you know, the

United States and productivity, what's it going to be? But at the end of the day, you know, people are telling you we don't think that real growth is really going to be that that that's strong or that robust. And so really that is the reasoning behind why are long term rates still so low? Tides of growth rates. So so when I look around, um, the spectrum of credit quality, seven year junk bonds were just trading at

two point five percent, actually a touch under that. That seems to be unthinkable that something relatively risky is paying so little yield. Tell us a little bit about the dynamics behind that. Why would I want to buy a high risk piece of supposedly safe investment with so little yield? Well, Barry, we call high yield, you know. One of the things we say is we call it the asset class and you know, formally known as as high yield. And you're absolutely right right that that is what we call it.

And as you say, you know, it's it's been challenged for quite some time, and so what what really is going on inside of there? And it goes back to, you know, the issue you were raising is that treasury

rates or interest rates are so low. So when we think about high yields specifically, we kind of divided up into two things, and we think about the risk premium versus treasuries are sort of the spread and when you look at you know, say, the higher quality high yield um they're all, you know, called a hundred and sixty basis points over treasuries. Is that's not the tightest they've ever been. Um, you know, they have been narrower, right,

believe it or not. If you look at spread relative to the risk free rate, and plus you know, you have good economic momentum and you have you know, the market. When you think about how yield there these credit rating agencies right that rate the debt and we're seeing more upgrade then downgrades, meaning the credit you know, the balance sheets to repairing, and so the economy is helping the sector. So near term it's logical that the yields are this low,

but you know it's certainly longer run. This isn't our call for today. The longer run when the economy gives a hiccup and things get choppy. We've seen this before. These these assets yields, if you will, can go from two fifty to north of six percent in a heartbeat. So a little treacherous, but yes, I mean you saw this kind of activity actually really in in the spring of two thousand and twenty. I mean just prices gapped

out so wide. So people do need to be mindful that emotion and fragility can you know, certainly affect this sector, and that's why it was called high yield, not your best quality. But again for now, logical words price just given how low interest rates are and how many clients and business models really need higher yields in order to you know, to have the savings or hit their targets.

That's really fascinating and it raises again an obvious question, how do you run a big fixed income portfolio as a manager when yields are this low, when the spread is this tight, and when investors are not necessarily getting paid for taking risk there? Yeah, you have to you know, you can't. The cost of sitting in cash berry or is also quite high, right, so call return on cash and zero U. So you've got to come up with with some things you know to do for your clients.

And so as you say, you know, what do you do? Uh, you flail, You fly a little closer to you know, sort of your lower risk budget. So you don't want to be over your skis in terms of the overall risk that you would take, because the opportunity to stretch just isn't there in many of the sectors that you and I've been talking about. So you gotta be careful. You've got to be super super diligent as far as what areas makes sense, what securities do you really believe?

And try to keep some dry powder to react. But you know, when when is this going to happen. You know, you wake up every day and early in my career, very for for people that might be listening that are earliest, is this axiom is that it always feels terrible at the lows, and it always feels great at the top of the market. Right you're at the top of the market. It's like, of course, the economy is great, you know, life is good, and that's when it all falls apart.

So you've got to be mindful. Are we there yet? No? But as the FED starts to over the next year or two drain liquidity, they have been doing massive support of risk assets. Uh, you know, things are going to get choppy, so we're trying to be very diligent. Look at what we're doing. But keep some dry powder. That's pretty Uh, that's pretty interesting. Another silly question, are we ever going to see rates on the tenure over four in our lifetime or is this U And I know

that this is a classic magazine cover indicator. We'll never see rates back to normal in our lifetime, but it feels like rates are stuck down here for at least the foreseeable future. What are your what are your views on I know this is a ridiculous question. Hey, where's the tenure likely to be in one? Yeah, and so ten year tenure? Um? Well, you know what, that's right?

That is a That is a that is a great question because you've got to balance very the ingenuity and the productivity of the human spirit, which is pro growth and very exciting, which is some of these these natural headwinds of you know, and and an aging world people needing yield. I remember sort of conventional wisdom is like, oh, you know, you know when people age are actually going to start draining assets and that's going to be inflationary.

I don't really believe that. So so it's a good question. Can we get back to you know, four percent ten year and real growth being stronger than where we are to day ten years from now if we have you know, Tesla has automatic cars and all kinds of wonderful things are happening, Yes we can. Is it going to happen near term? If it is, it's an investment opportunity for folks. Um, and so you should jump on board if yields really rise, because people may over index right now on inflationary pressures.

But you know, can the economy the way that I'm looking at it sustain you know, a real growth rate this year's different, a real growth rate that high, particularly given challenges with immigration and labor force. No, so if yields sort to go high due to inflation, it would be very damaging, more of the stagflation event and again not good for real growth. So very is is an much as I think, Oh gosh, this is consensus. Am I still saying that treasuries are going to stay low? Yeah?

I do. I just think it's really challenging to get what we call escape velocity out of this low growth world structurally that we're living in right now. And you know, the massive amount of debt that the US I mean, just a lot of things you know, could could point you to say not. It's going to be really hard to believe the FED can completely walk away from the

markets in terms of everything they've done. Uh, and that this, you know, the world economy, to US economy is strong enough on its own without intervention to support those types of YELD levels. I don't see it. So speaking of the FED, let me give you a promotion and put you in the role of Jerome Powell. Is FED share, what do you think you would do? What should the

FED be doing given the current circumstances. Yeah, I think actually, I think Jerome pal is exceptional, as was Janet Yellen, and I would do what he's doing, and it's communicate, communicate, because there's a lot of risk in the market, given that the FED does have so much that they're doing in terms of unconventional support of the markets, and they're they're being very slow, they're communicating, being very careful, and

so all this. You know, sometimes market participants will say, oh, my gosh, you know that FED us behind the curve and inflate. They're gonna lose control of the market. Well as if you're the Federal Reserve. It's like fool me once, foolmy twice. You know, we sort of believe that, you know, growth was strong and inflation was strong, and kind of got worried, you know, in taper tantrum or you know, fill in the blank of different things that have happened

in the market. Uh, And they're like, well, you know what, we're gonna be judicious, we're gonna be careful, we're going to be slow, and and I believe absolutely it's the right thing to do. And I think what market participants

are missing right now. Some that that talk a lot about this, I think they're still underestimating how important all of the stimulation has been to the calm, to the markets and the growth that we have in addition to in addition to fiscal So again, I think the room pulse and in the governors are spot on in in what they're doing, and I fully support, you know, everything that they've done. So let's stay with that, and and stay with the concept of the taper tantrum and the

ability to get off of emergency footing forget four. I'm with you that that isn't happening anytime soon barring some catastrophe. But um, how far can can interest rates rise without disrupting the equity markets? Can we see a two and a half percent ten year without the equity markets freaking out? How do we get back to normal, whatever normal might be these days. Yeah, And I think it's we're in

a tricky spot right as Barry is. You know, the FED starts to remove the support of the bond market through purchases, and you said, can we at what level on the tenure does it start to disrupt the growth? I think you hit on a really important theme early on, it really goes a lot down to the housing market. You know, again that is the most important asset that

most Americans have. And so if you get you get ten years, uh, you know, up to say two and a quarter two and a half, I think that really starts to create some potential challenges for for the equity market because it does housing start to roll over. So

that reduces the momentum at what level. If you going back to our conversation about high yield earlier on, so let's just say to ourselves, okay, uh, you know, ten year interest rates go up two and a half you know, say, excuse me, say that the you know how you'll spread you know, to a tenure treasury. Let's just call it um, you know, two percent or two and a half percent.

So if you get some of these competing asset classes that attractive yields relative to equities where you're like, huh, I can clip the coupon and I can earn four and a half five again, I think that's where things get pretty challenging for the equity market. So a long way of saying, I think once you get to like two and a quarter or two and a half, it's going to take the air out of the bond balloon,

so we've got to be very careful. And that is not that far away, although I guess in terms of of interest rate increases, I guess it's a a good couple of years away. Let's let's stick with the Fed for a bit. You know, the consensus seems to be we're not going to see any increases this year and probably no increases into late two. Do you think the consensus is spot on or or is this really going to be subject to new economic data and that will

impact the FEDS thought process. It's certainly very you know, the Fed is going to watch data, so they're you know, they're mindful of all of that. But again I would say the set also loves to not loves that has learned right as post global financial crisis to try not

to surprise the market and to move slowly. So so typically, you know, they announced that they're thinking about tapering, and then they start to give you more details and so realistically, what's the soonest that they're probably gonna really back office from some of their initial support. Uh call that early next year, so early twenty two. And then once they do that, we've learned from them. They're going to wait at least another year eighteen months most likely before they

actually try to raise the rate. So the market is pricing in I believe called a hundred basis points in twenty three. You know, is the market wrong in this? I think no. I think that it's gonna be a while. I think they're gonna be, you know, very slow. I think what will happen is the market even a hundred is pretty aggressive in that time frame. You know, they think the FET is going to then start raising rates

and move quickly. So again I think that the market is probably going to get ahead of itself and forcecasting too many FET increases and what actually is delivered. But for now, you know that that part of the market, that part of the curve, what the FET is doing, move slow seems pretty logical to me. So I hope this isn't too silly of a question. But but it comes up from time to time. So you're responsible for billions of dollars in bonds, and yet investors are looking

for more yield. Do you want to see rates rise? It arguably hurts your existing positions, but when you're laddered, it generates more yield on the back end, What are your thoughts as a fixed income manager about the possibility of of yields going higher from here? Yeah, very you know, with our client's eyes in the world eyes on, you know, higher rates would be a good thing, right if you

think that real growth justicies it. And also there are a lot of business models, a lot of our clients, whether it's pension funds or insurance companies, where their business models are really struggling to work, right given how low rates are. And what do I mean by that? You know, pensions that need a certain level of return in the market in order to deliver the pension benefits to their employees.

An insurance company that may be sold an annuity UH to its clients that now needs higher yields in order to make the profit margins and build capital that they need. So again, there are a lot of parts of the world and no retirees who need rely on income and so as low as rates are, this creates you know,

societal and business challenges. So again, higher rates from where we are today is a good thing now if it were some sort of disruptive stagflation quick thing, And certainly we've seen fragility in markets in the last ten years that I think are concerning. But as long as it's a natural outcome, gradual and as a result of real growth, then it's a good thing for clients and for the United States in the world. Really interesting. I know, I only have you for a finite amount of time, so

let's jump to our favorite questions. We ask all our guests, starting with tell us about what you're streaming these days. Give us your favorite uh work from home, Netflix and Amazon Prime shows? Okay, you verry. One of my favorites that I met recommending is a show on HBO Max called ted Lasso, and so I highly recommended to viewers.

Why do I like it, I'll just give you in a nutshell, it's a it's a funny, funny series, and it's about an American football coach from a college who's hired by a major soccer franchise in the UK to

be their coach. And he's kind of this goofy Southern person, you know, he's, uh, he's and I live in the South, so I didn't mean anything by that, but he's just really you know, wonderful and in overs his head and people should just watch it because it's sort of one of these things where you're in over your head, you've got to pivot. But the qualities of the human being, you know, his his compassion, his ability to motivate and communicate as a leader are actually they shine through in

the series. It's funny. And so when you think about leading, and you think about leading through COVID nineteen and everything, right, it goes back to just trying to have a sense of humor and to really care about your people. And so even though it's a comedy about soccer, I find that it has a lot of good messages as far as how to lead. Well, yeah, it's a it's a charming series. I believe it's Apple Plus or Apple TV. And I know season two starts, uh last week in July,

so I'm looking forward to seeing that. Also, tell us about some of your early mentors who helped to shape your career. Well, one of my early mentors was Rob Compito, who's president Black Rock and uh, kind of funny story. I met him years and years ago giving a kind of a talk at a at a conference, and uh, why was he an important mentor to me? Uh? He said to me, I was working in Ohio at the time, and he said, Christine, you got to get out of Ohio and moved to the East coast for your career.

And uh, I had three kids at the time. Uh so, so not the most obvious thing, but you know, I listened to him and he gave me great advice over that period of time in my career, and I moved east and I never looked back. Let's talk about reading in books. What are some of your favorites and what are you reading right now? Well, you know, right now I'm reading of The Handmaid's Tale is going to uh, you know, shows and series and things that you stream.

I thought, wow, you know, I've I've actually never read anything by Margaret Atwood and books are always better than than TV, and so I'm reading that one thing. It's it's funny. You know, people in my lives, whether it's team members or whatever, will give me gift me, you know, the latest nonfiction book about you know, leadership or markets and things. And you know what, Barry, I almost never read that kind of stuff now, so if you were to look at my reading list, it's all fiction. It

has nothing to do with finance. But again, I think, you know, when you look back over the years. I think to be a good investor, and and advice for young people that are thinking about it is to really push the way that your brain works through creativity, through reading fiction, through music. Those are the things qualities in a highly technical world that I think are underrated. As far as what to do to be a good investor,

you want to give us a couple of titles. Oh as far as um my favorite books that I've read? Oh yeah, I would say, you know, one of my very favorite books I love. I love Steinbeck, going back to being sort of a dark fixed income investor. If you read something like Grapes of Wrath, you absolutely want to jump out a window. But one of my favorite books is East of Eden and I and by Steinbeck, And again I just love you know, nonfiction that has

you study human nature and human interaction. Those are the types of things that that I absolutely love. What sort of advice would you give to a recent college grad who was interested in a career in investment management or finance. Well, you know, certainly expand your mind in creative ways, as we just talked about. But also I would say, you know, for for our young talent, I always remind them, don't don't specialize too quickly. Take some risks with your career

as you go into finance. There's so many great people that you can learn from, so make sure that you start building relationships early on. And the thing that I find, you know, sometimes on the investment side, senior investors can be kind of scary. You know, sometimes you get these like big personalities or whatever. But you find, you know, human nature with people if you catch them at the right time. People love to share, they love to give back, They love to explain to you why did I do

this trade? Why am I thinking about this way? So just for our young talent to not be shy to find those manners to create those relationships, and and to make sure that you try a lot of different things early in your career. And then after that point in time and you find your true genius or passion, that's when you actually start to specialize and go a little deeper. Really interesting, and our final question, what do you know

about the world of investing today? You wish you knew thirty plus years ago when you were first getting started. I would say, oh, that's such a great question, Terry. One of the things is um uh, get comfortable being wrong, and so you know, and and what I tell you, why why do I say that is UM Back when I was running fixed income, I put UM a picture out on the training floor and it was a picture

of a deer in the headlights. And why I had that is I would everybody every day look at that and say, am I being that deer in the headlights? Because as much as you know you can say in the investment game, oh, it's like six of the time you're right, in the rest of you the wrong. People don't like to be wrong, and sometimes we're naturally risk averse. And so what I would do I kept that deer

in the headlight photo right on my desk. And one thing that I would say to the team, and I continue to say to myself, and advice that I would give you as far as investments in career, I always tell people to and this would go to UM markets from oil, don't doubt in the darkness things you decided in the light. And what do I mean by that is that there are dark times where the markets go crazy. You know, certainly Spring of two thousand and twenty was

one of those examples. But the decisions that you make in the light are when you're thinking about the facts, when you're kind of meditating and you have a calm mind, because that's where people make mistakes. They get over overly emotional,

they react, they panic, things happen. So again, are you being a deer in the headlights and don't doubt decisions she's made when you were calm and in the light when things give ros h Google tells me a version of that is Raymond's Edmund But I've never heard that quote before. Very very intriguing. Christine, Thank you so much for being so generous with your time. We have been speaking with Christine Hurt Sellers. She is the CEO of OIA Investment Managed Man, which runs about two hundred and

forty five billion dollars in assets. If you don't know the void in name, there have been around forty years. But their previous name was I N G U S. And and that might be uh, how you might be more familiar with them. If you enjoyed this conversation, well check out all of our previous interviews. You can find them at iTunes, Spotify, wherever finer podcasts are sold. We love your comments, feedback and suggestions. Right to us at m IB podcast at Bloomberg dot net. Give us a

review at Apple iTunes UH. You can sign up from my daily reading list at rit Halts dot com. Check out my weekly column on Bloomberg dot com slash Opinion. Follow me on Twitter at rit Halts. I would be remiss if I did not thank the crack staff that helps put these conversations together each week. Paris Wald is my producer, Atika val Bronn is my project manager. Tim Harrow is my audio engineer. Michael Batnick is my head

of research. I'm Barry Ridults. You've been listening to Masters in Business on Bloomberg Radio