Bloomberg Audio Studios, podcasts, radio news. This is Master's in Business with Barry red Holds on Bloomberg Radio.
This week on the podcast, I have an extra spatial guest. If you are at all interested in fixed income, how you assess bonds, how you evaluate the economy, the market, what the Fed's gonna do, what clients want, how to assess risk in credit markets, Well, then you're going to really enjoy this conversation. Matt Egan has spent his entire career in fixed income, from credit analysts to portfolio manager.
Now he's the head of the discretion team at Loomis Sales, which manages well over three hundred and thirty five billion dollars in client assets. He's really seen every aspect of the fixed income side more than just a bond manager, but someone who has really covered it, from credit analyst to research analysts, to fixed income member to full unconstrained bond manager and now running this discretionary team. His group
has about seventy five billion that they're responsible for. I don't know what else to say other than there are a few people in the world that understand running a fixed income portfolio on behalf of institutional for retail clients as well as Matt Egan does. I thought this conversation was fascinating and I think you will also with no further ado, Loomis Sales.
Matt Egan, thanks for having me Berry.
Well, well, thanks for coming. Let's talk a little bit about your background. You get a bachelor's from Northeastern and an NBA from Boston University. Was finance always the career plan?
It was not. I started northeasterners an electrical engineering. Oh that's a major. And the good thing about Northeastern University that they've tremendously great quad education program. That saved my life because it made me understand it did not want to be a double or an engineering in my profession. And the key was I started after one year. I
kind of gutted through one year of engineering classes. It wasn't really that interested, but I gutted through it, and I started interviewing for the first internships and I started, you know, I had a number of them. I realized I am not like these people and this is not what I want to do, and so I transferred to the business.
School after it. It's so funny you say that I started out math and physics, And in high school I was a rock star in math and physics. And you get to college and suddenly it's like, oh, I'm okay at this, but those guys are great, and you quickly realize, hey, this is way above my pig. I need to figure out what I need to do. So Northeastern and Boston. Were you a Boston kid?
Boston kid? Well, I grew up outside in a relatively small city, and of course moved to the city to go to school and just fell in love with Boston and stayed ever since.
Right, Oh, that's interesting, And is that where you are today? You're not New York, You're boss. I'm in Boston, right, And there's a giant set of finance farms in Boston. That must be fun there.
Yeah, there was a lot to choose from you as a you know, newly minted financed major coming out of school. There were a lot of things to do. This profession wasn't necessarily my first choice coming out of undergrad, but there were plenty of other things to do in the field too. It's a broad field, to say the least.
So you start out credit analyst at Century Back Bank and Trust prior to getting an MBA. What was it like being a credit analyst in the nineteen eighties.
Yeah, I gravitated to I had to envision myself as a commercial banker. You know. Back when I graduated and I had done an internship at Bank of Boston, one of the first things I did was spread financial statements. This in the old days before really there were spreadsheets there, and we would take fortune five hundred annual reports or ten queues and put them into a spreadsheet give them to the commercial armorms. That was when I first started
getting involved with looking at company. So when I fancy myself as a loan officer, there were great programs in that field. There was a super regional banking industry in Boston. However, when I graduated, there was a really kind of a nasty correction in the market. What year nineteen eighty nine, and you remember, there's a pretty nasty recession, believe it
or not, Massachusetts U employment was over ten percent back then. Wow, which is hard to believe because mass always had relatively low But there was a real estate crisis back then.
We were just talking about this over the weekends. You know, the problem with the financial crisis, models were Supposedly many failed to contemplate real estate prices going down. But I remember coming out of grad school in the late eighties and friends who had purchased co ops in New York City in like eighty seven, eighty eight, eighty nine. You didn't get back to break even until like the late nineties.
There was a major dip. It might have been worse in some areas than others, but nationally, real estate foundered in.
The ninth right, New England was crushed. There was a big glut of condos. You know, you'd walk it bride by certain you know, you'd be on the highway you go by, say a one hundred unit condo building there was one light on right. You know. It also hit hard in Texas too, which was you know, after the oil bus the sea through buildings, right, that was the origination to see through buildings. And it was a great
learning experience for me. But first of all, when I was in the you know, looking for jobs, you had to go to the placement office back then, And as I was looking at jobs, I remember looking at a g finance job and as I was looking at as somebody pulled it down in front of me. It's not available anymore. That's where the economy was at that point. And so but I I knew a fella, this guy, George Duncan, who was a friend of my dad's. He he was a president of a small bank, enterprise bank
up in Lowell. He didn't have a job for me, but he got me in touch with Century Bank and Trust. I had an interview there, became credit analyst. I was thankful I had an opportunity at that point. So I did that first, and that was a good learning experience. Again, you know what I witnessed then, as you know that real estate bubble kind of burst, is those same loan officers with their underwriting loans that was helping them. Do they became landlords?
Oh?
No, that was the thing, you know, because they were you know, they were taking on some losses and they would have to go and then show the buildings.
You know, they would take over the.
Yeah, I mean that thing did fine. We were fine, but you know, that was it was an experience.
So essentially they go from underwriters to default managers to suddenly we're real estate portfolio.
Right. It's like working with the borrower, right, you know that whole that concept. But but I didn't stay there a lot that long. I learned how commercial banking worked, but I had an opportunity after that to move over back to Bank Boston, which is where I was interested in at the time.
So, so, how did you end up as a senior fixed income analyst at Liberty Mutual Insurance.
It was funny that same fellow, George Duncan, when I talked to him, he said, go go check out this bank. He said, you know, whatever you do, you're gonna need to go back for a graduate career. You go get your MBA and make sure your company pays for it. And the guy ran Centry Bank and Trust was an older fella, guy Sloan. He was a family owned bank. And I asked him, mister Sloan, will you will you pay for my MBA? He said absolutely not. He said you're going to get it and you're going to move on.
And I said, all right, you know, And actually so that's why I went to Back of Possum. From there I started. I enrolled in Boston University, and that's when I started meeting people that were actually in the investment business. And I met a really good friend of mine at
that time. We went through our entire career together, NBA career, and he said, why don't you come over to Liberty Mutual and applied for a job in the investment apartment, and so I did that and I started working there, and that was to me, really my first sort of entry into you know, investing.
So I'm assuming a Liberty mutual, what you're investing is the firm's own capital from the insurance, right.
It's the pot of money that it's the insurance money.
And what was that experience, like, how did that affect how you approach fixed income today?
To me, it was sort of the boot camp for fixed income investing. So we were pretty lean group of individuals by nature. Most of us were research people and we were giving corporate insurance. Companies do a lot of corporate investing, so we've had our own sectors. I took on the banking sector, which was interesting. I had a number of other things as well. But we also traded for our sector. So we had an empty trading room
and the tartphones were in there. If you wanted to trade, you say, hey, fellas were you know, I'm going to go do some bank trades, you know, come on in and we'd call Wall Street and we you know, we'd do the trades right there and when we're done, we would go back to our research. And also dabbled in a little portfolio management. At the time, I ran a
Mexican peso denominated portfolio believe it or not. So it was a really great boot camp, and you know, I had a really interesting manager there who was really disciplined people. In terms of research, it was deep dive research. We did a really good job.
Huh. Really interesting. So, from Century Bank to Liberty Mutual, the rest of your career has been primarily on the fixed income side. Was that happenstance? By design? What led to that outcome?
You know, I think it just was a natural fit for me, you know, with the training as a as a commercial bank analyst, and then it just really kind of fascinated me more. And so I think, you know, my skill set when I was, you know, approaching employers, it just naturally gravitated towards the fixed income area. And for me, surprising to say, it's a little bit more exciting than stocks, and the stocks are interesting, but there's so many different facets to fixed income. It's become highly
much more specialized. But I'm fortunate. I span a lot of different areas, you know, my career, which has been.
So let's talk about that. So not only a head of the full discretionary team, and we'll get to exactly what that means in a bit, but you run ten different mutual funds and ten institutional strategies. I assume there's a lot of overlap, and it covers the spectrum of fixed income from treasuries here to high you'el there, and everything.
In between, everything in between globally, So we're kind of an eclectic group, you know, in terms of investment style. It sounds like there's a lot of strategies that we do, and that's true, but really there's the same common investment engine underneath it, and that's really what we're focused on. I spend most of my time on that. And what does that mean. It means the frameworks and the investment processes that we put in place provide through that provide
the raw materials for investing. That's views on rates, you know, where you want your duration to be, et cetera, Views on the value in certain sectors, views on individual securities, you know. So that's the raw material that we get and then we can mix and match that to our various portfolios, most of our portfolios. Really it's a spectrum, just to kind of think about it. And it's a spectrum for I would say lower risk to a higher degree of risk. That's usually but not always defined by
the quality that you can invest in. So as you go down more non investment great for example.
Huh So I like the idea of this engine as the underlying driver of all these different strategies. It's not that there are ten completely novel approaches and ten different funds. It's really the core and you're just playing with how much returns you want and how much risk you have to take to get that, what sort of duration you're looking at, what sort of geographies. But the underlying engine is the same across all these different portfolios.
That's right, that's right. And you know we can expand that risk depending on the client. And so when you look across our least risky RAN, we run a really great core plus product. It's a bit more out there than the typical court plus that you'll see, you know, other words got cor plus meaning treasury treasure corporates, you know, but we don't do for example, we don't do a lot of agency. We don't know agency works back securities. We definitely tilt into corporates. That's our you know, our
bread and butter. What Loomis is known for our research. Uh and so that'll have you know, the least amount of risk, let's say, relative to say a multisector bond fund style portfolio or strategic income that's going to tilt down. But when you look across those, you'll see commonalities in terms of interest rate, positioning, names, exposures from a top down and a bottom up perspective.
So you are now the head of the discretion team. Tell us what that means. Certain funds have discretion, others don't. I think the average lay person is not familiar with discretion in that context.
You know, the business sometimes does a poor job of labeling things, and this is not no different, you know. And the way I kind of describe it is that, you know, a more constrained approach is typically something wrapped around it index, you know, And a lot of our competitors in the core plus space are like this. They
take a benchmark. In that case, the Agrid index is bi bar the most common one used, and they'll have a very low tracking, or that they'll just ebb and flow with pretty much the beta that's you know, assigned to that with maybe generating a little bit of excess return for the good managers that are there. You know, when you start to get into something that has full discretion, the client says, Okay, let's sort of go or lean
into your opportunity set where your skills are. Let's allow you to do more and have a wider degree of risk and off benchmarkting sector. And that's where that full discretion notion. So when you think of core plus, it's those plus sectors, non investment grade, you know, emerging markets, things like that that somebody was looking to you to have discretion. But full discretion doesn't mean you don't have any limits, right you still we all have constraints, right, there's always constraints.
So the phrase I always hear is it's an unconstrained fund. What's the difference between constraints and discretion or or they just really the same terms to me?
They can be used interchangeably. I think the nomenclature typically, you know when I started and multisector for example, has changed. We run the bond fund, which is kind of a go anywhere strategy or strategy come. Those used to be called multisector even before they were medium grade or something like that.
See today when I think of multisector, I think of corporates, treasuries, high yield equities, and private including private credit. All that seems to be multi sector unconstrained.
Yeah, it's this is where the nomenclature changes over time. I've known and it causes some confusion. And then you know what emerged too, and I launched one of these over ten years ago. Is that unconstrained or non traditional space. That was the you know, what's the difference between unconstrained and multisector. Well, there's not really that much difference. The young constraint typically does not have a benchmark. That was one aspect of it. So so does.
That mean it's an absolute return fund? Yes, so, and then we'll care about relative performance and what's.
The difference between absolute return and total return? In some ways, because like the bond fund we're looking, I don't really manage on a tracking your I don't like managing on a relative return. Let's say, you know, like it's like, oh, mister client, you know, we outperformed your index was down ten percent and we were only down nine That's not really a great outcome, right, Right. We're looking to make money, and that's absolute return or total return, whatever you want to call it.
That's what we see. We talk about jargon and confusing labels. To me, total return on the equity side is equity plus dividends. As on the bond side, it means something else.
Income, right, income and principal return.
That's right. So you've spent more than twenty seven years at Loomis Sales and Company. That's rather unusual these days. What has kept you around so long? What's it like growing with the firm that that's been in business? You're coming up on one hundred years.
Sometimes you're you know, you're you're looking and doing your job and you wake up, you know, you look up and you go, wow, I've been here this long. It's been fun. I've enjoyed it. You know. When I first came to Loomis, you know, I encountered this guy named Dan Fuss, and I was to me, it was like a duck to water. I just took to his style. I can't imagine doing investing any of the way. It just suited me to.
Attend and he is a little bit of a legend this and he.
Is a he is a legend.
Yeah, he's been around a while. And how long have you did you work with him?
Well, the funny story, when I first came to Loomis interviewed, there was a sort of an arms race for research analysts on the street on the by side. At that point in time, Wall Street had tons of research analysts, but the by side was really ramping up. And I had a lot of opportunities to interview and one of them was at Looma Sales and I got the job and a fella helped me, This guy, Dan Holland at Golden Sacks was instrumental helping me and took at the job.
And I'm like, well, there's this guy Dan Fuss there and I know I don't really know him that well, but he's sixty five, let's say. At the time, he said, I don't know, you know, it seems like he's really a key marque part of that firm. Maybe there's a risk there. And Dan told me was great advice, He said, Matt five years as an eternity, take the job. So many eternities later, because Dan worked is still working. He's ninety really yeah, he could still comes out here.
Bless him.
He stopped managing money a while ago. But never did I expect what was to come, and nor did I expect that I would become a successor for him. That was the entry point. And I'll tell you a story. But when I first came, there was not seven ninety eight, Okay,
the Asian crisis was just getting going. Remember the tie Bot the value it went down like fifty percent, and you know LTCM was going to hit Russia default and so it was you know, bonds were coming out, and back then there was the the Brady bond market was still big. Brazilian Sea bond was the most liquid bond in the universe. The market was going down, and I witnessed Dan with a big smile on his face in the trading room in the morning meetings. I'd go there
and he would be snapping up all these bargains. Our portfolios went from you know, close to zero in the Asian market to reaching like we were talking about constraints, reaching the limits that we could do by specified by the guidelines at thirty thirty five percent, right, And so that was a huge lesson for me, first of all, I said, this is where I want to be. What he was doing there was providing liquidity to illoquin markets.
Now I participated in some of that as a research analyst by looking at companies like Total Access Communications, a tie wireless comme, PLD, Philippine long Distance Telecom. It's like AT and TuS.
And all these companies have fixed income.
They had fixed income, and they're trading wavelessens in the dollar sense of dollar. In the case of Total Access Communication, bought the stock at eleven cents, went to five.
You know, it's a five cents or five dollars dollars. That's a good rate.
Yeah, I should have specified that. So these were you know, like in my formative stages like as a as a research channelst and becoming you know, not just a research chanalyst in making calls or you know, sort of opining on the credit quality or the opportunities and risks of a particular credit. It's really becoming an investor. And that's that's sort of what they end taught me.
I love the expression providing liquidity to ill liquid markets, which usually means picking up things at fractions of their actual value. The same phrase was during the financial crisis when people talked about toxic assets, and my answer was always, there's no such thing as a toxic asset. It is only a toxic price. At the right price, everything has value.
Without a doubt, and it introduced me to sort of that concept of margin and safety. A lot of people talk about it, but with bonds it's really interesting, particularly the corporate bonds. As the dollar prices come down, your risk goes down because there's a recovery. In the worst case scenario, you end up you know, owning the company basically, right. So the recovery value, and sometimes those recovery values are the trading value you could come close to or if
not below, the actual recovery value in those situations. So because like a quant person would come in and say, oh, your value at risk is going bonkers right now, you know, of all, if your portfolio is nine percent and you're backwards, it's like, no, no, this is the time you want to go. And in fact, at that point the returns are skewed in your favor. Before looking returns, huh.
Really fascinating. So let's talk a little bit about the team you work with. Your head of the full discretion team. What does the team do, how are they working with various funds and strategies, and how do they work with client?
Right, So we're managing roughly about seventy four billion dollars and fixing come portfolio. We have four main product categories. That talked about our Core plus offering, which is our largest over twenty eight billion dollars, and then it goes into sort of multisector, and then after that you're into the high yield. We do all our dedicated high land BANKO and investing as well. Like I said, we're pretty eclectic.
We tend to not look like our benchmarks. We have a lot of discretion to go outside, and we're you know, really interested in just generating the best total returns we can from a very wide opportunity set.
Really really interesting. You talk a bit about various strategies across all the funds. I want to dive into these and get a handle on what they mean. So I often see the phrase research driven, bottom up approach. I assume that means we're not making big macro calls. We're looking at quality, we're looking at duration, we're looking at risk.
Right, I mean it's hard to get away from macro calls altogether. Fixing come portfolio for example, duration is a big call you got to but you know a lot of our alpha are so called total access. Sort of return is driven buy our bottom up security selection and that comes through really excellent research. When you look at our process, we do think about a macro. We are credit cycle investors. As I said before, we lean into the credit markets. Where we're going to make our money
is tilting into risk. So for us, you know, most of our intermediate quality is going to be triple B average quality of our portfolios.
So that's a little below of investment.
Yeah, and we think that it really makes sense to tilt in through the cycle. Okay, to get that spread premium, you get compensated for it as an investor. You know, maybe it's only one hundred or two hundred basis points, but compound that over five years you got more than double the money. It's significant. Yes, The key is to not to avoid permanent losses, and that's where you know
the individual security selection comes out. We tend to be concentrated in those so we when we find something we like, we'll buy it relatively big size, not as big as they say a forty You know, you look at the stocks, you might say something like a thirty five star portfolio. You can't do that in the fixed income. You got to diversify more. But that's what we seek to do.
Opportunistic we'll get to value driven That is so interesting on the fixed income side and so different than what people mean when they say value inequity. What are you getting paid for the risk you assume and fixed income?
Like if we look currently, especially with an inverted yield curve, you're not getting paid a lot for very long duration, but there's some risk with very short duration that hey, if the Fed decides to eventually one of these days cut rates, well, your short term duration now you have reinvestment risk. How do you think of value relative to fixed income?
You bringing up a point. There are a lot of different types of risk premium and fixed income more so than there are just in the stock market. And that's interesting because you can build really interesting portfolios that have different risk factors that co vary very well together, not perfectly correlated. So that's diversification. So let's just focus on
the interest rate risk premium that you're talking about. You bring up a good point here, So first, and I've learned a lot of this from Dan, But you think about this. Let's take a big, big step back about interest rates. You know, we all know for a long time your concept of reinvestment rate risk and principle risk are the key big picture risks that you take in fixed income for many decades. You know, after the poll
Vocar slayed inflation, right, your biggest risk. People really didn't understand this, but your biggest rist of reinvestment rate risks.
Right, especially when you're in a thirty year market where rates continue to fall. I remember my father in law saying to me back in like two thousand, he had a bunch of NYC GEO bonds that were fifteen percent when New York City was in trouble, and he's like, what can I do with this? I'm like, ah, we get six and a half seven on a treasury. He's like seven percent. That's why would I want seven percent going lower? We'll talk in a few years it will be five percent, no, can't be yes?
Yes, yes, So rates start came down more and more more than people are expecting over time. You know, it's interesting Dan used to run a ten year duration in his portfolio. That's for people to know, that's very difficult to do. You have to buy basically thirty years zeros right to kind of get you out there, and he was doing that in the Canadians bond market zero. So it was very interesting. People ask them, well, well, you don't manage duration just sort of artifact of your PORTFOLI.
He's like, no, no, no, I want to maximize that because I want to capture this yield for as long as possible. Don't worry about the cycles. You're going to have lower lows and lower highs. And that persisted until about two thousand and three. Remember the conundrum, the bond conundrum. Right rates started getting really lower. It was kind of back then, even approaching the lower bound.
That whole excess savings nonsense we heard from at least I thought it was nonsense. Fixed income people might have a.
Right and so then now you had to get to a point where you start, okay, now you have to start considering the principal risk. Now, it took a long time before principal risks has become a problem, but even I would say even before the pandemic, there were signs that you need to start flipping your calculus as a fixed incoming vector investor on a secular.
Basis another word saying, hey, we've been at zero for a long time. Eventually rates are going to go up, and I would rather be sooner than later, because if I wait too long, especially with long duration, rising rates in long duration fixed income leads to capital laws.
In twenty twenty to ten years fifty basis points, we ran a very low duration there, and you would say, well, it wasn't a big risk because you're at the zero lower bound. What are the chances they're going to go lower.
And you weren't getting paid for it.
And you weren't getting paid for it. Now that seems like any decision now, but it not necessarily at the time because people weren't sure. But that was a really good call for us. And before you used to be able to ride the like Dan did the tenure you could just stay long. You can not stay short right in this market and expect to do well over the long run. You've got to manage through the FED cycle. So I like to think about it as a FED cycle. I think we're, you know, obviously coming to a cutting
cycle soon. Your risk now on reinvestment rate risk is in the short end, and I think it's time to kind of move out into the intermedia of the part of.
The cur I totally agree. We've sort of taken the same approach internally. Let's go over the rest of your core principles for the for the key strategies we briefly mentioned multi asset. Does that include equities? That does that include private credit? How multi is multi asset?
Multi asset does include for certain portfolios, you know, the more risky portfolios, we can start putting in stocks, our most risky strategic income. We can do up to thirty five percent stocks in that portfolio. Then you go into something called global allocation, which I manage the bonds leave but with a couple of great equity managers and a great global manager. On the fixed income side, that is typically like seventy percent stocks. So we do bottom up stock selection as well.
So in your multi asset, where you're looking at the equities, is it a particular type of equities? Are you looking at diven m payers, are you looking at convertibles? What sort of equities complement the fixed income side and the multi asid.
Yeah, you bring a good point. Equity premium can be gotten from not just stocks but also from converts. Yeah, right, So we do that across all our portfolios. Right, even once that don't necessarily allow us to buy outright stocks, we can buy convertible bonds, and we've made hay in that market because it's I think it's less efficient.
So it's a challenging space because if done right, you get the best of both worlds. Yes, and have done poorly, it's the worst of both worlds. Hey, low yield, but at least as principal risk that wants that.
Well, it's the only kind of bond that's a growth bond too. So if you're right, you're really right. And we've had some really great winters like cornering over the years.
Well if the underlying if the if the paying company has some positive corporate event, well obviously the convertibles do really well, and some of them have you know, the terms that say, hey, well this is going to convert at this low price. When the price is up here, it's a win win other than having to pay the taxes.
Right, So we do that and we're very good at that, always have been. And on the stock side, you know we are we're fixed income investors our investors expect us to generate yield, so that pushes us into the dibbinit paying stocks. For the most part, I would say from a bottom up perspective, you know, our research group does a tremendous job at uncovering value. What I asked my nis to do is really understand what the assets of a company are worth. Okay, this is our fixed income analysts.
You know.
This is typically you know, you think of equity.
Meaning an event of a default. What do we end up with as what is? Yeah?
But what is the value? Because then I can look at the cap structure and I can say how well is that debt cover But and then I can look at have a view on the stock too. So oftentimes where we see the best value is that in the equity market. Is it is when a company is going from say, you know, a low quality but is all of a sudden moving up rapidly from a credit fundamental perspective that starts to accrue eventually to the stock. It sort of goes from sort of worry about the leverage too, Oh,
we're not worried about it. The risk premium starts to come down stock and it starts.
To so when you're doing your fixed income corporate analysis of bonds, you can also identify mispricing on the equity side. Absolutely, yes, we see you know all the time that that explains this sort of pet thesis I've had for many, many years. A lot of my favorite equity analysts began as bond analysts or are bond analysts with opinions on equities, and it's very different than the equity side, perhaps because of
that exact reason. They're really in the minutia of cap table, the corporate structure, what the priorities are, and that really seems to provide a lot of insight into what does this compon been really worth going forward?
I agree, we see it all the time.
So let's talk a little bit about your clients. Loomis sales manages well over three hundred billion dollars three hundred and thirty three hundred and forty billion dollars. Who are your clients? I know they're primarily institutional and they're spread out over twenty countries, is it US, Europe? Asia? Who and where are your clients?
But most of our asset bases in North America, as you would expect being a US manager. But we've expanded both in Europe. Asia, I think is the biggest pot of money outside of the United States, so we're pretty much everywhere. We have offices now in Singapore for Loomis offices in Singapore and in London, and that's something that's grown as I've grown over there. It's been fun to kind of expand internationally. My client base. Half of it is retail. You know, we're either doing our own funds
or subadvising on that half. And you know, so we're dealing mainly with the big wirehouses like the Merrill Lynches of the world, et cetera. You know, the fas are investing in the funds. That's for the most part. Oria's two places like that. And then on the institutional side we do of course all private pensions, somber wealth funds, public pensions, tapped, Hartley plans, insurance, all of that.
Huh. Really interesting how often you get to London or Singapore.
I go to Asia. My wife's from Sydney. I was just in Sydney a couple of weeks ago. Interesting contrast between the US and Sydney right now.
But why is that?
Well, this goes back to the FED and the transmission of policy here in the United States, we've bet what's the the average mortgage now is like a three handle.
Yeah, So like if you look at the pool of mortgages five percent below, it's like sixty five seventy percent of yes, well outstanding, whereas most of the rest of the world is variable, not fixed mortgages.
That's just it. So that transmission is muted on the upside for when they're raising rates for the FED. On the downside, refine it refined. Every penis some mortgage once a long time ago before I made one coupon payment. But that so there's a sort of asymmetry now. When I was over in Sydney visiting family and doing some business, you talk to people there, their mortgage bills is hitting their pocketbuts right away a little bit of a lab but it's killing them right now. And you know, inflation
is tough there. The same themes here are there, but you can start to see it more there is.
That why we've seen who's cut rates over the past few weeks. The Bank of Canada, Canada, Bank of Australia right cb RBA has not done that. They have not yet.
Yeah, and they're even talking about raising because inflation is still a problem there. Now. The difference there is I got way more immigration, right, and it's a growing population. You talk to a developer there, they have the same housing problem. Not they just can't and you can't find skilled labors to do the job. So that's that's where the similarities are.
It's still a robust economy that's doing pretty well.
It's a robust economy. Yeah, so in Australia has always been like that because that growth.
Plus they have China. They're a giant supplier to China for commodities everything else. I would love to go to Australia. I am just so intimidated by that flight. It's on a flight, it's like eighteen twenty hours something crazy.
You bring a good book with you.
You've got to bring a couple of books, a couple of movies, and some sleeping pills and you're halfway there, right. It's it's really tough, all right. So across your career at Loomis, for twenty seven years, you have gone from analysts to portfolio manager to head of the full discretionary team. Tell us what that transition was like and how are you able to relate with some of the younger analysts in the firm. Considering you started out where they.
Did, I kind of got lucky and that there was an opening as a portfolio manager. And you know, I had spent only three years in the research group. I was sort of snake bitten as an analyst. Anything I touched as an industry seemed to blow up. But when I came to Loomis, I was covering oil and gas when oil went to five dollars a barrel, right, or ten dollars something like that, and then I also pa.
Dollars a barrel, I want to say, late nineties.
Something like that was yeah, with late nineties and on the cover of the Economists that said five dollars with a I'm like that.
And that was low. So it's so funny you say that I sat in on a meeting I won't mention the firm and listen to the market strategist slash managing partner scream about two and three dollars oil, and I leaned over the guy next to him, I'm like, you will never see in the lower print of oil in our lifetime, literally read the same nonsense that this guy was spewing in Barns that week, and I'm like, gee, this sounds kind of like the opposite of what you
get at the tops and equity markets. That's it. Oil is bottomed, and that was fair enough.
It was, yeah, and so we made some good money. We made tons of money of chutspeak energy back then and the Asian crisis. Have made a lot of money with Dan in the trading desk. At that time. I also covered wireless telecoms, so that entered into a you know. So anyways, I had a lot of swings there that went really well, and I was asked to manage money with Dan and I didn't expect it at that time, but it just happened, and so I fell into that. Back then, it was a lot different. You ate what
you killed. What I mean by that is you were loosely affiliated as a portfolio manager. You know. I basically would hang my name up on a shingles, say Maddie and portfolio manager, and a client would hire me right, not necessarily Loomis, and we were loosely affiliated around like the Dan Fuss style, and I love the Dan Fust style. So I was investing like that. But my first opportunity as a as a portfolio manager, you know, you had to go where other people didn't want to go. The
other senior managers didn't want to go. So an opportunity came up in the middle of January to go to Helsinki, Finland for a highyield opportunity, and.
I raised me in the middle of January.
In the middle of January, which is quite interesting, is very cold and very dark and very dark, and I went there and I got it. It was like two or three hundred million dollar mandate for high yield, so that was great. At the same time, we started institutionalizing as a business because Loomis was really created as an investment counselor back in the day. The manager did bonds and stocks and worked directly with that client one on one,
and we needed to institutionalize. When I first started Loomis, we were eighty billion in AUM and we were growing right so now we're almost three under fifty billions, so it's been a lot of growth, and that's one of the reasons. Growth creates opportunities right for people, So we need institutionalize. We hired a new CEO, Cio came in to help us do that, and we created teams and that's when we started to create the team that you
know Dan was on. I was on Elaine Stokes. Everybody's retired except for me, off that original team, you know. From there, I started creating that product team that you see over twenty people today. We institutionalized the products, the product offerings, which really makes you think about how do you explicitly state what the objectives are?
Right?
And then we institutionalized the framework. And I think behind every great shop, equity bonds, whatever, behind every great manager is a great framework, a repeatable framework.
That's the hardest thing we did developing the process that you can do over and over again.
We had the foundation, we had it up in our brains. The idea was to put it on paper and write it out, and that took a long time. And then, of course succession for Dan was a huge part of my microphone.
So let's let's talk a little bit about what you described as the Dan Fuss approach. I love the concept of opportunistic investing, So a few questions. Let me just start with explain what is the Dan Fuss approach?
Before I answer that question, let me just describe, you know, a situation when I became a portfolio manager. I was a credit guy, you know, I was a credit research channels and I really liked hy yield investing. And you know, Dan was covering all these markets and it looked really daunting. I mean when I say everything, everything around the globe. He was reading, you know, uh Asian papers, he was covering Canadian bond markets and all the Ozzie bond markets,
et cetera. I said, hmm, maybe I can just do hi, I said, Dan, you know, I think I just want to focus on our Higeld portfolios. What do you think about that? And Dan said, You're not going to get away with that too easy. You're not gonna get away with that. So you are. You are going to be a better investor. Trust me, You're gonna be a better vestor if you can cast a wire net. So that's one of the first things, cast a wye net. Okay, So I said, all right, how does he do that?
So what I started observing him and what people know Dan very well. Most of the times when this to this day, he still does this. He stands up in his office and there's a sort of a table that he's at and he charts things by hand. He charts, commodities, bond prices, stock, all of these market information. So I asked him to show me this and it was done on green Ledger paper, you know, the old Green County paper. And he started flipping this thing open and it just
flipped page after page after page. He used to have a he has a slide ruler that he says he used to scratch his back and also to do straight lines. And I said, wow, right, I said, why do you do this? He said, I learned through the end of a pencil, okay. And what it does is it allows you to connect disparate spots and connect points that seem unconnected and then you see that they are connected, right, And that's where how you learn as an investor. So
I started doing that. I did it through spreadsheets. It's different than just looking at a chart. You pull up a bloom chart, you look at it right, doesn't stay with you as well. Another way method is actually either writing it out or putting it into a spreadsheet and looking at the data over time and tracking it economic data,
GDP data, employment data, bond prices, auction. I have auction, you know, data going back on a spreadsheet, back to the two thousand, So that helped me become a multisector investor.
Huh, really intriguing. I took the technical analyst course in the nineties with Ralph Akmpora, and I had not only heard something very similar from him to what you're describing with Dan, but a number of traders and fund managers and technicians all had said, I like the expression learning from the end of a pencil. Looking at a chart
is not the same as drawing a chart. You end up feeling something viscerally that you can't get just by visually viewing it, especially when you're doing it every day with a whole run of different assets. What you begin to feel is a real rhythm, a real intuition as to what's going on. It may look random, and often is, but when you're doing it manually, day by day, you kind of get a sense of what's happening.
Yeah. In fact, as it's your intuition that everybody talks about, you start to build this kind of intuition about the market and these funny feelings that something's going on, you know, on the surface, and then you know, I would like to listen to that, and you start sort of on peeling that and it leads you to start to focus on areas that maybe other people aren't focusing on.
That that's the art, not the science. When I think of opportunistic investing on the equity side, it's very much, you know, buying when there's blood in the streets. Taking the opposite side of panic. It's a little harder tops than bottoms. Bottoms are very visible tops or this long, slow process, but it's really visceral and emotional and people are panicking and I'll make a little liquidity over here. What you described in terms of opportunistic investing on the
fixed income side seems somewhat qualitatively different. What is opportunistic investing on the bond side.
I think it's it's similar. I mean, like I said, we provide liquidity to illocan markets, so we're looking for dislocations in the market and that because of greed and fear, you know, or different differences in timing of horizons of investments. You know, for the street is very short, you know, we can be longer. I think you know the temperament for my style, I think you have to really enjoy volatility.
I noticed that, well, I'm smiling when the market is down and I think that's an important kind of trait to have. I get antsy and kind of more grouchy. Unfortunately, a lot of the times you're in these markets where they're just kind of going sideways and there's not a lot of bad right, that makes me grouchy. I try not to bring that home.
But nauci or is it just boring?
It's boring, which makes you a little bit irritable, you know, And I think, you know, I really enjoy I probably would have been a good er doctor.
I like it.
You know, in twenty twenty, you know, we're in the pandemic right right, and that's going on, and you can buy McDonald's at seventy cents of the dollar. I love that kind of market.
That's hilarious. That's I remember in the middle of even the early months of eight and after being kind of a goat for a year saying warning, hey, it's coming. I don't know exactly when it's going to start, but you could see this can't last. In eight I used to play free Falling by Tom Petty on the computer and one of the older senior people said, listen, I understand what you went through, and you're finally getting a little come up in for everybody who doubted the analysis.
But people are getting fired blood in the streets. You got to take it down, right, so that like smile is like okay, you got to kind of exactly got to kind of keep it on the inside. But when I was younger and dumber, I didn't realize that. Now I'm older and dumber, and I kind of figured some of that out. So let's talk about the state of the bond market. You and I kind of began around the same time, around mid nineties. We were the beneficiary
of Paul Volker's breaking the back of inflation. For anybody who has been working in markets for most of the past, you know, forty years, rates primarily trended downwards. How does that impact how you think about fixed income? Sure, there have been occasional spasms upwards, and we'll talk about the twenty twenties next, But what does that framework do to how you were running a bond portfolio in a multi decade long bond bull market.
Right, Well, you know, of course went into the Q years, and you know you had to look at like real What QUI does is it pulls real rates into the negative market and the Fed basically sells set tells you do something else, go by risk. Right, during those periods, we just had to follow what the Fed was doing, you know, and if they were providing liquidity in the market, you could feel pretty comfortable taking risk.
And that's literally the past twenty years. You got to go back to the two thousand and one recession and then September eleventh, we were pretty close to zero for decades.
Yeah, so we know the bond market really changed during that and you remember, you know, you used to earn you know, you think about the Yeld curve around the classical thinking thought processes, what the FED doing, what the economy is doing. During those Q years, you just worried about what the balance sheet of the FED look like, is it expanding or contracting? And that pretty much told you what to do. Really, I think que now is sort of in the rear view mirror for now. I
don't think it's going to come back. I think we're in a different type of market where people who have not witnessed an era where inflation is driving more decisions. I think you really should look, you know, at longer history. I was telling some of the younger people, like, do not try to expect to extrapolate what's going to happen based on recent I mean I'm talking like decade or two type of bond markets.
Mean, reversion doesn't mean going back to zero, it means it goes to five percent, right.
So I think that you know, it kind of goes back to that concept we were talking about reinvestment rate risk and principal risk. Now going forward, your biggest concern or your challenge, and it's manageable, is how do you preserve principle while getting to a higher level yield. So you think of today's market, it used to be we were walking down a steep staircase. It was going down, down, down. Now you're looking at steps going up before you.
I believe is that the new trend.
I believe it is. I think we can talk about that there's a structural feature to this market that's going to keep it higher for longer, let's call at least over the next decade or so. And then there's a cyclical component, which we can talk about in a moment. But the structural components are there are tailwinds to in and the biggest driver is a fiscal deficit.
I was going to ask about that we've had this giant regime change that during those twenty years, the prime driver was monetary policy. Now it feels like, not only do we have a massive fiscal stimulus first with the tax cuts under Trump and then kars Act one and two, which were giant fiscal stimulus, but now you have Karz Act three plus all of these ten year long the Infrastructure Bill, the Semiconductive Bill, the Inflation Reduction Bill, whatever the name of the bill was, that added a whole
bunch of money to the veterans' hospitals. And those are all ten year ongoing fiscal stimulus. Is that what you mean when you talk about.
I started this actually really predates the when I started thinking about this. Like for example, you know, I was always asking me during those Q years what fundamentally needs to change for us to start thinking differently about structurally where rates are going, because we were starting to see labor market conditions tight. Remember around eighteen nineteen, the FED was starting to you know, it started going the other way.
Q four eighteen was a major draw down in the equity market almost twenty percent.
Yeah, so you could see wages were just starting to lift up. And now all of that was hidden by the pandemic after that. But there's a tightening in the labor force underneath all of this, and that's the demographics. I was reading The Great Demographic Reversal at that time by good Heart at All. It was talking about the aging of the population. People used to think aging the population is deflationary. Well, he put a different spin on it,
and it kind of got me thinking. And the big thing there is, globally in the industrialized world, this is true.
Wait, the aging of the population is deflationary or is this not so? The traditional discussion is people get older, they stop consuming as much as they do when they're younger. They already own their house, the mortgage paid off, they own their cars, they'll drive them forever, and that's somewhat deflationary. What's the counter, Well, he talks about it's really about
the working population. And if you looked at the big event that we had was the ascension of China to the World Trade Organization around two thousand and one or something like that, they brought eight hundred million people to the working age population. So our wages in the developed world were crushed on a you know, on a real basis. So there was sort of stagnation in there, and their
wages grew in the emerging markets, they became richer. Now we all know the story now that China's you know, population is rolling over now globally in the industrialized world, the working age population is kind of stagnant, and that's the tightness there you're seeing there. The people who spend are the young folks and the older folks in the middle of the way working age populations where the saving takes place. So as you age, you actually spend your wealth. And so that's what's going on.
I think, you know, a lot of people will push against that theory, and I understand a lot of that, but I look at it anecdotally. What did we see. We saw, you know, some unionization efforts happening in this country for the first time, small but an Amazon and so on. And we can feel it, you know, in our spending it wages, you know, having necessarily kept up with this boost and inflation, but they're continuing. So that
was one aspect of it. The other thing was going on, and Trump was you know, really started more or less a trade war with China. Trade had been sort of you had the Chimerica, you know, you all understood that it worked well for both parties. Now we're in a situation where it's not working well. There's tensions there, securities concerns are rising, have risen. So now you have near shoring, you have chips war things like that. You have this fence spending going up. So all of these things are
adding to that inflation. And then on top of that you have electrification through climate change and other factors evs, all of that stuff.
Well, what's the impact of electrification, which I saw a chart this morning that just showed China's electrification has just blown everybody else away. They are moving towards full electrification faster than anybody else by in order of magnitude.
Right, they're winning sort of in the battery in the V space. We know, we know that they're leapfrogging in certain areas where they can just sort of jump technologies, if you will. That happens a lot in the emerging market. So the electrification, though, you know, in the United States and the developed world, it's all about the grid and how you know, we've got to get our grid able to handle all these evs, all the electrification that's going
to take place. And that's going to require just a massive amount of investment and also stranded assets down the road. So all you add all of these factors, I think structurally there are tailwinds to inflation. Now what I think that means, what the consequences of that are is that inflation will be unstable and so you'll have syckicality inflation. Think of it as like the saw tooth where the teeth become you know, steeper. You probably remember this. You
have more variability in the economic cycle. Because what inflation does is it adds uncertainty to consumers spending. It adds uncertainty planning for businesses, and so you get these fits and starts. It's a more compacted business cycle. It makes it difficult or trickier for the FED to deal with. So I think that's what we're going to see.
This last cycle was.
Really weird, you know, and I think we're going to see more of these types of cycles, and so I just think you need to have that in your brain about how this market's going to behave and you know, we can talk about the cyclical component of that today and how you play it in the near term.
The big counter to higher for longer. That I keep hearing is, you know, the things that are bringing rates down hasn't been higher interest rates because of the lack of pass through in the housing market. Although it is impacting the bottom half of the economic stratas credit spending, it'squesting them more. But wherever we look, we see these structural shortages. So you mentioned how tight the labor market is.
A lot of that is a reduction in legal immigration, not just under Biden and under Trump, but going back about fifteen years that kind of post nine to eleven, we tightened our rules. Some people have said the entire jobs growth over the past few years has been primarily immigration.
Giant shortage in housing in the United States, mostly because since the financial crisis, we pivoted to multifamily homes and didn't build enough homes to keep up with population growth, and suddenly there's a giant surge even things like cars and a shortage of semiconductors, and how long it took to get all that back online. We haven't had enough
automobiles out there. That's what's elevated prices. So that's a long winded way to say, how much can the FED influence this current cycle of inflation when it's driven in part by so many things that are responsive to policies outside of the Federal Reserve.
Yeah, and I think that's been their number one problem here. And there's been supply side issues. I know you've talked before about the housing market. Raise rates and then people stop building new homes, and how does that unpacked the supply of housing?
It's counter you know, right, counteract raising rates makes inflation higher.
It's a weird situation. I think all of that is true. I do not know for sure that we're structurally on a higher for longer type of scenario, higher highs and higher lows. That that is the way I think you should bet right now, based upon what I see other factors that I think are gonna you know, particularly on the democraphic side. What about AI, right, how does that affect you know, productivity, the productivity mirror.
I mean outside of the AI companies, the rest of the marketplace.
The rest of that, you know, just uh, how does it affect wages? How does it affect productivity? Can you actually have rising wages and rising productivity and growth without you know, wage inflation, Because if you don't have wage inflation, it's tough to get kind of like a more of a sort of spiral of if not a structural right, it's not structural. So if you if you start those things start to fall away, you kind of have to say, oh, maybe we're back to a two percent. I think it's
it's not. I'm not talking about a reverse. I saw the seventies as a young you know, a young person. I know what that's. I'm not suggesting it it's going to be like that, but I just think that what's important for a bond investment to understand is that inflation, which was stuck below structurally blow too, is going to be above two to some level. How much I don't know, but I think it's going to spend more of his
time above there. Higher for longer, in my mind means higher real rates and higher inflation premiums for the uncertainty of that inflation. So what does that mean? I think, for example, like on tenure today, like long term, you know, maybe fair value in the ten you're somewhere on four and a half percent.
So that would suggest now is the time to start lengthening duration if you haven't already.
Yes, and with a caveat that, I think there's going to be a shallow rate cutting cycle. I think they start at sometime at the end of this year be my expectation. I think the economy cyclically is losing momentum.
You're seeing it on the consumer spending side starting to drift flow.
And retail sales the while there's a lot of problems with the job data that I you know, can't even want to go into. It's hard to trust that data. But when you look at claims data. But even when you start digging into the job data, you know, you look at permanent job losers rising, you see you know, part time overtaking sort of full time. So on the you know it's I'm not this is not a big correction.
Let's face it. Unployment is really low. But on the margin, you know you're going to see that acceleration.
It's a robust economy. But cracks are starting to show in the foundation.
And you know, like you always see, like people are not going to know you're let's say you go into a recession. I don't think it's going to be a full blown recession. Those numbers are revised. Like I always it's funny to me that we spend so much time. But you know, job Report Friday comes out and everybody trades all over the number, the most important number though, and a year later all those numbers are revised in
a big, big way. Yes, and you'll often see, oh, we actually were losing jobs in that period of time. You know, I don't know if that's going to happen. It can go both way. It can revise to the upside too, But I do sense my senses that it, you know, looking at the tea leaves out there that were decelerated.
If that's the case, then I have to ask you to put on your FED chairman hat and say, what are we waiting for?
I think that the FED has been job owning rates as they Yeah, they've been job owning. So remember they last November time frame they did the Dubbes pivot. I think they did that to get ahead of the election cycle. I know people say, well, FED doesn't respond to elections. I talked to a prominent FED chairman and says, you know, in a week moment said, you know, you kind of have to take that into consideration. I do think they're political animals at the end of the day to a certain degree.
Although they have raised in previews what they need to do. They've done rate changes in prior election years, but this election.
Is a big one, right, and so I think they just wanted to be out of the way and then they could be in position to job own the rates because they knew they had done a yeoman's work already to reduce the spike in inflation to get down to that beginning of the last mile, so class mile, that's been more difficult than it expected. We were thinking that as well. We faded that bond rally in the fourth quarter the curve. I think it's a shallow rate cycle. Most of the ray cuts are going to come from
the front end of the market. Remember the FED controls the front end of the market out to the two year, maybe even a little bit in the five year.
After that, it's all the Bunne.
It's all the pond market, particularly thirty year, it's in its own it's its own beast. It runs to supply and demand. I don't want to get stuck long the long end, especially going to this election uncertainty. So I think you don't want to get that reinvestment rate risk on a T bill and you know, watch that five percent go down with four to three percent handle. In short order, you want to move out in that five seven year part of the curve. That's the best risk reward.
I think the belly of the curve in the middle of the duration. So let me throw one more question at you and then we'll get to our favorites. The curve ball question is tell us what Boston Scores is. What do you do working with kids and team environments to help build character.
It's an interesting organization I've been involved in for a while now. And what Boston Scores does. It's the largest K through twelve after school program for Boston Public school so they partner with Boston Public schools. They're known for their soccer program, so they provide free soccer programs after school for children to get involved a number of days of weeks. And they also in addition that provide other Richmond like poetry, and they actually have an entrepreneurial type class,
which I find interesting. So this is a terrific way to get these kids together working as groups. It's about mind, body, and spirit really and they learn how they can solve problems in their community, get them prepared for potentially going into to college. You know, as they come towards their twelve year So it's terrific. I've seen the outcome for kids, and they have so much confidence. Some of these kids that are coming out. I look at him from where,
you know, when I was graduating at that time. It's just amazing what these kids in this program.
Does for the Boston school sounds really interesting. All right, our favorite questions, and we're going to turn this into a speed round. Tell us what's keeping you entertained these days? What are you watching or listening to?
I'm watching Three Body Problem on loved It. Yeah, so I read the book a while ago. Somebody I was reading New York Times, like, what is this book? You know?
There's such a love to get through?
It was. I read all three of them. Actually there was a fourth one written by a fan. Finish it interesting to read if you want to continue that saga. But you know that that's on Amazon and Netflix. There's there's a Chinese version on Amazon.
Oh really, yeeah, I get that one. Did you see did You? Subtitled did You?
I started that one and I flipped to the Netflix one because it's faster moving. I think that's a hard book to translate.
I picked it up and tried to read it a few times and just got It's like, it's like the first ninety two pages of nineteen eighty four is a tough, tough, tough slug. But I was I was down with COVID in March and just binged it and it was I thought it was fabulous.
Yeah, typically don't read a lot of sci fi. But I read that and somebody said, if you like that, read Isaac as them off and I was a read foundation. It's an old you know classic.
You know, once you go down that rabbit hole, there's no coming back. You should be you should be aware what else? What are the other ones you're watching?
So I have more I have a bigger group of portfolio managers now, we went from forward to about eight, like managing different kinds of portfolios. And what I'm most interested in is behavior biases now because you get more people in the you know, in this in making decisions, it's important for a strategy have consistency and temperament and all that. The problem is you get eight people, they don't all have the same temperament. So I want people
to really understand what their bias is. So the greatest guy to go do is is a comment on thinking fast and slow, right, or all those behavioral biases. I read that again, thinking fast and slow, and you know, the fast part reminds me is that that's the intuitive side of investing right, And we were talking a little bit about that. That's really important. I want to you know, foster that, but that can lead to a lot of behavioral biases. And the slow part, which is more difficult
to slow down and really think about. That's sort of the checks. So you know, you have your investment thesis, you're like, go, We're ready to go. You want to keep checking it on those.
Any other books you want to mention as long as.
We're I think going into the elections, I've been reading a lot. I've done a lot of reading on China over the years. Cultural Revolution from now to now is a great want to understand what's going on in China. I think our Eastern civilization history was never that good for a lot of people in the United States, so revisiting that and what I'm reading now is called economic Independence in War by Copeland I think his name is Copeman.
Interesting talking about even though you have trade that's very interdependent, that doesn't mean there won't be conflict. And it's about trade expectations. This is really key. It's key going up to the election because we're talking about big tariffs on both sides of the aisle.
Right, and that's a tax on consumers.
That's a tax on consumers. It's I think it's that's inflationary, by the way, and we have to be careful how we as a nation respond to these challenges. You know, it's going to be a rivalry, right, but expectations and you know if people think one is au serping the other or boxing people out, that's going to lead to possibility conflict.
You know you mentioned China. The other book that's next up in my cueue is Chip Wars. People keep telling me I have to read that, you read it.
I have not, but I want to read it yet.
All right, Next question, who are your mentors who helped shape your career?
Yeah, so there's so many. I mean I remember that there was an old guy, old banker Don Lang at Central Bank of Trust. He taught me how commercial lending works. You know, he's basically, somebody puts a deposit in, we lend the back their money and we make this amount of money. You went through the math and I'm like, wow, that's a great return. You lend people their own money. But he also said to me, Matt, because as I was leaving, he said, Matt, whatever you do, stay close
to the revenues. It was a good advice career wise. Career wise, yeah, no matter what you do. I think that's that's something I always tell, you know, graduating students. Obviously, Dan Fuss has been an amazing you know, he's a non traditional mentor, but he really, you know, taught me how to invest. He also taught me this is a people business, our clients. Really understanding your clients. He was very close to his clients. But it's also about people
in your work in the organization. There's a lot of stress of investing. We don't try to create that at work. And that was an important lesson I learned from him. And I would say, you know, I don't think he would know he's a mentor, but Howard Marx is just fantastic thinker. I read all of his stuff. He's got the I would say total force on the most wrote on liquidity, which was amazing. I think people should read that.
What was the name of that it's one of the letters he wrote about liquidity. I'll dig that up and link to it and the book. The most important thing was really super seminal. Dan Fuss has all these affors and rules. Did anybody ever put that together? Says there ever been something like that?
Essentially you did. It was our investment framework, right. I'd like to think we made it better because Dan was one person, and you know we've extended that into other markets like securitized bank loans, but it's the same underlying principles.
I would love to see his quotes in like Top ten or Top twenty list. I know, in prepping for this, I keep coming across him in various articles and stuff being quoted. I thought it was really some fascinating stuff. Our last two questions, what advice would you give to a recent college grad interested in a career in fixed income or investing?
One thing I would. I'd say, as soon as you can figure out what type of investor you are, understand what your temperament is. And that sounds easy, but it's really you really got to think about this, and you know describes you know where you might fit the best as you and I think that's important. You really got
to gel with what you're doing. I also think I wish I knew this, you know, coming into the to the market is really don't wait, even if you don't know what you're doing, just pretend you're in the business and you're trying to invest and make money. Start reading things and you know, you know all the jargon and all the shows that go in, start reading it. If you don't understand something, go figure out what it is, and that will just you know, keep you going to
the the next thing and the next. Before you know, you'll get it.
And our final question, what do you know about the world of investing today? You wish you knew thirty five years or so ago when you were first getting started.
Well, I think I was sort of this view. I was a pure fundamental person. I thought, you know, there was this hard fast number that you get and you could transact on pretty much all the ideas that you would get. And what I realized is that there are a lot of other things that move prices in the market, including technicals, and you know, things can say cheap for a lot longer, and you really have to understand what the other side of the argument is and understand what's
being priced in. So you might have this great idea, but if it's already priced into the market, it ain't worth anything. So you really have to understand that and see where your edge is and understand why that edge is pertinent.
Huh, really fascinating, Matt. Thank you for being so generous with your time. We have been speaking with Matt Egan, portfolio manager and head of the Full Discretion team at Loomis Sales. If you enjoy this conversation, well, be sure and check out any of the previous five hundred plus interviews we've done over the past ten years. You can find those at Bloomberg iTunes, Spotify, YouTube, wherever you find
your favorite podcasts. Be sure and check out my new podcast, At the Money, short ten minute conversations with experts about topics related to your money, earning it, spending it, and most importantly, investing it. At the Money, in the Master's and Business feed, or wherever you find your favorite podcasts. I would be remiss if I did not thank the Cracked team who helps me put these conversations together each week. My audio engineer is Meredith Frank, My producer is Anna
Luke Attika of Albron is my project manager. Short Russo is my head of research. Sage Bauman is the head of podcasts at Bloomberg. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.