Matthew Benkendorf on Managing Equities

active manager. He oversees six different areas including Asia, Global, European US, and Global means go anywhere, as well as emerging markets. They have a very unique approach. A single team puts money to work in all those areas. A lot of UH firms do not operate that way. They have amassed quite an outstanding track record beating comparable firms and their benchmark for quite a long number of years.

And if you're at all interested in how to manage assets, how to run a high conviction UH portfolio, how to think about a process for stock selection and risk management UH, then you're going to find this to be an absolutely fascinating conversation. So with no further ado. My interview of Matt Benkendorf of n Toble Quality Growth. This is Masters in Business with Barry Ridholts on Bloomberg Radio. My special

guest this week is Matt Benkendorf. He is the CEO of Untoble Quality Growth, a thirty five billion dollar global growth equity boutique division of investment giant Von Toble out of Switzerland's. Matt joined the firm in He became deputy portfolio manager in two thousand and six, lead portfolio manager of the European Equity Strategy and OH eight and since two thousand and twelve he has been lead portfolio manager for US Equity Strategy. Matt Benkendorff, Welcome to Bloombark. Thanks Barry,

thanks for having me. Did I did I get your name right? I feel like I'm mispronouncing It's a tough one, but you got it right. There's been many variations over the years, but you got the best one there, I think so so. Von Tobol has been around since nine eight four. You joined the firm in How was your investment philosophy shaped by those years? That was quite a era of equity investing. Yeah, he could, UH say, I was very much brought up and steeped within Von Tobel.

You know. I came to Von Toba lad of undergraduate, which is a little bit rare in this business, you know. And I think if you even take a further step back and look at the longer arc of my life, you know, I'm sitting here today doing what I always wanted to do as a kid. Now, So the journey started a long time ago. I grew up in a family business. I was always interested in business. I always thought in terms of what works in business, what doesn't profitability?

And then when I was a kid, I found the stock market to be an interesting outlet for that because so as a kid, you you if I'm guessing your age is right. So you're talking about late seven of these early eighties, So that was the beginning of what ended up being an eighteen year bull market. How did that thousand percent down increase affect uh the way you look at equities. Yeah, it's interesting if you look at my upbringing to uh. You know, my father was a

farmer from New Jersey at a landscaping business. We had a garden center, uh in northwestern New Jersey. So I wasn't around the markets at all, you know, it wasn't something we talked about at all at home. I don't know how I found it. I just sort of stumbled upon it once I got into high school. Really and uh, that backdrop you know, of what was going on then, as you described, that wasn't you know, as close to me, which is actually interesting, and that it was more about

the process itself. It wasn't the results, you know, it was the It was the item of being able to invest in a business via stock. So I was actually disconnected, which is kind of back to I think what ends up successful today not focusing on that aspect of it, the forward thinking, what the numbers, it's the fundamentals. So it's a very fundamental basis too, so less of a stock market investor, more of a specific company that happens to be public investors. That a fair That's exactly it.

You know I I you know I as a kid and even now today, you know, and on my way up here to the studio, I just am wired that way that I'm always looking around at things wondering how they work, and then generally looking at businesses and wondering how they work. And it kind of gets to you asked about the philosophy what we describe as quality quality growth. Today it's always breaking down businesses quantitatively and qualitatively into what makes certain it's great and what makes most businesses

quite frankly average. And why would you want to get out of bed in the morning, you know, to sort of engage in something. What's in it for you as an owner of the business. So coming into midtown Manhattan today, it's a lovely September morning. What did you notice what caught your eye that you started thinking of in terms of is this particular business doing well? What what businesses aren't doing well? I've noticed a lot of the retail

shops around Manhattan seemed to be closing their doors. Yeah. Yeah, that's the interesting thing when you get into this city and you realize sort of the commoditized nature of most of the businesses here, particularly restaurants. Right, You just wonder you drive up any of the avenues, you wonder how how all these places stay in business? You know, what are the margins on certain areas of their business? What

is it about certain locations that make them thrive? So I see a lot of average, you know, businesses that I wonder, you know, what, what why would you be in that business? Not the denigrade the business by any means, but I'm always sort of ranking and contrasting, and I think of it in a lot of ways in terms of, you know, even though my upbringing wasn't a different business,

would you want to own this business? I think that's the foundation that people miss a lot in stocks and in stock market investing when they think about purchasing something, you should really think about it in terms of, you know, if I was born or had the good fortune to be in a wealthy family that came from generations of owning a business, is this the one business I would want to own? You know? That would critically achieve the two goals. You're looking for capital preservation over the long

term and then an attractive rate of capital compounding. And I think when you scrutinize businesses at that higher level and think about it generationally, that really helps you when you get down to even a short term vehicle like the stock market, because you then really dig down into what it is that, as I said, makes you want to get out of bed in the morning and operate

that business. And that gets into basic things that play out in financial analysis, cash flow returns on invested capital, incremental returns invested capital, why you want a strong balance sheet, aspects like that. So how do those actors play And I should really be careful about the word factors, But

how do they play into the philosophy of quote quality growth? Yeah, and and and it's interesting, you know, we've been exercising this investment philosophy for twenty years now very consistently, and as I talked about it today, I always have to sort of smile and chuckle because twenty years ago, what we're saying now, quality and growth, they really weren't a

style by any means. They weren't a box that now investors are sort of put in a little bit in mimicking, And I think that's important to recognize because you know, one of the important lessons you learn in this business too is financial products are sold and not bought. So a lot of people use that nomenclature now because that's

what's worked and it sells well. But I think when you peel back a layer of the onion, you find when talking to a number of managers who describe themselves either as growth or as in now a lot more describing them as quality growth. There's a big differentiation in

terms of how people see businesses. What are they attracted to, you know, and an alogy I use a lot as you know, business attraction or investment attraction is a lot like personal attraction, right, individuals, We are attracted to certain other individuals with certain characteristics, and it's very similar I think in the investment world those characteristics you're asking about, right, we tend to have an affinity and and magnetize towards

generally less cyclical businesses. Those businesses are just more attractive to us on the margin. Less capital intensity in general is something that sort of we magnate towards, you know, the pre cash flow conversion, the stronger balance sheets, very basic principles, but at high standards. I think that's a differentiation as well. You know, we life is you know, full of as they are, average people and average businesses. Right, that's just the nature. There's a lot of us, and

it's a law of numbers. But when you crank up scrutiny to a much smaller subsegment of either highly successful people or highly successful businesses, there's a great divergence and that divergence, quite frankly, in today's world has gotten even wider. Let's talk little bit about your process for selecting stocks. Are you purely bottoms up? Do you think about any other top down sort of stuff? Tell us a little

bit about how you approach stock selection. Yeah, I think this is also you know what's a common misnomer, uh in investing, Uh? That you know you have to get the top down right, you know, you have to predict things. I think it's just general human nature, you know. I think one of the greatest advantages in investing is typically behavior management of that's the key of it all. Really. You know, the financial analysis, the investment philosophy we're talking

about today and that i'll describe is one piece. But you know, also another powerful analogy I use and explaining it is investing is a lot like dieting. Uh. You know a lot of people know the keys to living typically a longer, healthier, happier life, right, what you should eat, what you shouldn't eat, how you should exercise, and those elements. The key is discipline, right, and investing I think is

very similar to that. It comes down to discipline. The roadmap is fairly clear and it's been well haide out by Warren Buffett years ago. Uh In the roadmap really needs to be centered on the business. It's all about the business. How good is the business, How will that business grow? And how is that sustainable? How that business will grow, how will that business endure through economic cycles which you inherently will not be able to predict. So I think ignoring the top down, while is easier said

than done, is a key. So we do that. I think we really do when we think about businesses and as I as I mentioned earlier businesses you'd want to own, it sort of forces you we we sort of have a private business owner I would say somewhat private equity mentality, but we happen to be operating in the listed equity sphere, which gives us a liquidity advantage, you know. So it also allows us to own great businesses which we choose

bottom up. But we can wake up every day and look at the screens and see what values the market is striking on those businesses and improve the quality of what we own for our investors, which is something as a dynamic a private investor can't do, or a private equity investor can't do. As quickly. So, so let's talk about that bottoms up approach. When you're thinking about stock selection, how does that process begin? Are you screening things based on value? What tell us what what the process is

like of ultimately saying we're gonna buy this but not that. Yeah, I think the key as you start quant and you go than heavy qualitative after that, and I think, so what's the plant screen to begin with? The quant piece is key, and that I think first where you should approach quant is first from an elimination standpoint, negative screening.

When most people think of quant and screening use the word screening typically it sort of has a connoctation that you're looking for something when actually what you should be doing is eliminating things. First and foremost, you want to really narrow the world down because one, there's only so many hours in a day, there's a much, so much so much firepower you have it or bring to bear

in the research process. But also you want to just fishing a riper pond of opportunity because that greatly reduces risk as well over the long run by eliminating as I've described, average or lower quality businesses. So we squat screen to begin with it's not highly complicated. I'd say in terms of variables, you're looking for returns on invested capital, returns on equity, stability and operating margins, strength of balance sheet.

I think the basic variables are easy. You then, though, improve it by looking for levels of those variables, so cranking up the scrutiny of the levels of variables you're willing to accept. But also then critically, what's key is the track record, So you want clean track records as well, and I think that's glossed over once again going back to this human element, right, and when you say track record, you're not referring to the stock performance. You're referring specifically

to the performance of the underlying business exactly. You want to start with businesses that have been great, that have proven to be great, and are demonstrating that in numbers, and that's what you're looking for. You're eliminating the poor numbers, and you're critically looking for the clean track record of good numbers because that's not a perfect predictor of future SESS, it does get you over a one ft hurdle and points you in the right direction and makes your future

looking decision much higher. Probability that Sh'll be right about that. So I think that's that's a big key track record, and that's where I'd say go back to this human element or behavioral aspect. A lot of people don't want to do that because we have a human tendency to try to want to be smart or smarter. Right. We want to try to predict what's going to be great tomorrow that wasn't great yesterday, Right, But we try to start in a good place, things that have been great,

and then make an easier, albeit still difficult decision. I can they keep doing it. Let's talk a little bit about high conviction. How does that come into play. You've gone through the negative screen, remove the names you're not interested in. Now you've done the positive work, and you've identified fundamentally what you like. How do you take that somewhat lengthy list I would imagine, and reduce it down to a smaller concentrated high conviction list. Yeah. I think

the sort of genesis of that is two things. You know, if I look back at you know, college, I sort of learned two things, one related to your question and one that comes before it. I think one the power of protecting capital and down markets and then being long though consistently through markets to participateate and and really be

able to compound capital over the long term. You know, the classic numbers of you don't want to miss out the biggest updates and markets by trying to time the market once again, trying to get away from this top down you know, pitfall that most people fall into. So I learned that very valuable lesson about preservation, but staying long through the market, and you do that. I think through quality you can do that, uh. And I think the second aspect then of it, UH is risk management.

You know, you learn to throw out a lot of unfortunately what you learn in college about classic risk management because at the heart of your question about concentration, that's really about risk management, and that flies in the face of classic risk management theory right of owning smaller pieces of more things to be diversifated, diversified to be lower risk. Actually, I think that's completely wrong. What you want to do is more own more of less things, but better things

to reduce risk. And that's something we really capitalize on and our portfolios just make sure we are concentrated with capital with much larger positions behind just inherently much better businesses, much more stable, predictable, higher economic return businesses, better cash flow profiles. If you put more money behind them, it is much lower risk than buying smaller slivers of relatively

lower quality companies. And then what goes hand in hand with that, as you build that portfolio bottom up, you end up looking what's now called a new term that's been coined more recently benchmark agnostic or benchmarking different. You end up looking a whole lot different than the market by as a byproduct of your concentration and bottom up stock picking, which people are also finding adds a whole lot of value to in terms of delivering outphit and

avoiding mistakes. So you have a lot of institutional investors. They're measured by a benchmark, and I would imagine they have pressure to measure you by a benchmark. What are those conversations like when one says, hey, you're either beating or under performing a benchmark, how do you explain, well, we're kind of indifferent to the benchmark. What are those conversations like, Yeah, this is UH. I think there's two keys to this. UH number one. And then since we're

in you know, new York City. I'll use the great Billy Joel quote. You know, when we spend a lot of time bringing our investors on board, I say, you know, you might think we're crazy, but we might. We just might be the lunatic you're looking for, as a classic quote goes, because you've got to really see risk as we see it, and it's a binary thing. Some people don't buy into that, you know, they can't wrap their head around it, or they just fundamentally don't believe it.

They believe more in the classic risk theory we've talked about. But if you can get people to buy into that and understand it, and it really helps to show them the past success of utilizing a strategy like that, I think that's step one. Step two is your question is right on point. You know, you're managing people who all have constituents, and your constituents have constituents, and that's what's made this business generally more complicated over time, more people watching,

with more visibility and more numbers. How do you how do you explain things over the short term where benchmark in different can cause meaningful relative underperformance. Right, But that's the price of admission, you know, that's the price to be paid. For great long term out performance, you have to absolutely underperform in certain certain shorter periods. And the key to that is education and communication, you know. So it's the buying and the client institutional or retail on

the onset. So we are that we are the person they're looking for. We are the match because our strategy in terms of what we want to own, what we won't own, and how we view risk resonates with them. And then once they are on board, you know, I also say there's two pieces of the job from an investing standpoint. One is to deliver the returns on paper, which is important, but the second aspect, which is equally as important, is getting the client to realize those returns

by staying on board with you for that journey. And that's why the client journey is very important to us. And you manage that through a lot of transparency, a lot of open communication, a lot of hand holding. That's that's half of your job as an investment manager, you know, not just to put the returns on the paper, but to keep the person on the bus over that journey.

And the key to that is less volatility. Typically, you know, it's good it's by products of equality growth style, whereby your downside capture protection is high, right, you preserve capital much better when things fall apart recession comes about. And then also your overall volatility is dampened over time because your businesses are just better and they're not subject to

wild swings of volatility. So if you can keep the ride less bumpy, you definitely have a much better chance of keeping your investor in their seat over the ride, and then you can accomplish the two key features the returns and having the client there at the end point. So so let's address that concept of client journey, because

I find that very fascinating. There have been a number of del Bar studies and other studies that look at investor behavior here, and the most common takeaway seems to be investors underperform their own investments, meaning they'll join the bus at the top of the hill and they'll jump out at the first move down, but it might just be a little dip and then we're back heading up the hill. Meaning they buy high, they sell low. They

don't write it out for a full cycle. They don't give a manager an opportunity to demonstrate, hey, if you bind the philosophy, here's where you should end up over five or ten years. How do you deal with that client journey aspect. Is it just education and communication from the beginning or is that an ongoing issue that requires regular reinforcement. I think it's two things. It's one the piece you just mentioned, the ladder, the communication. But one

it's via this investment philosophy and style that's critical. And I'll explain that because at the heart of it is what you mentioned. You know this these old studies, and I actually haven't seen the study in a while, but I'm sure that the numbers are quite similar those classic studies of US mutual fund investors. As you pointed out, the returns of look great over the long term on paper, but most investors have never achieved those returns because of

the dynamic you're talking about. And quite frankly, for average or lower quality businesses, and often a benchmark, you might need to have a higher timing element because those businesses can be mean reverting. If you have a portfolio of lower quality businesses, whether benchmark or an active manager with just lower quality businesses, your timing is very important. Right The businesses themselves are going to be mean reverting in

their economics. If you're in the energy space or bastion materials ships, those are commodity industries and those commodity prices are going to fluctuate, so you better buy low and sell high to make your money. What we want to do alongside the communication is with higher quality businesses that have these elements we've talked about, lesstality, more durability, a real long tail or runway of growth not just one year, but five, seven, ten, fifty. When you have those types

of businesses, you really can hold through downturns. It's a it's a it's a slight nuanced to understand. Right, it's a fallacy to hold a really great business when when a cycle turns, because it is going to mean reverting. So the buy and hold strategy actually, as it's sort of taught and sold. If you have the wrong businesses, it shouldn't be aplical. Actually you're you're following the wrong approach.

But if you have great businesses where you can put your head on your pillow at night and no, look, not only are they not going out of business even in this recession for reasons of A, B and C, they're going to continue to grow their underlying earnings power. Those type businesses one you can hold onto and sleep well, but two you should add to them because the market

is starting to give you a gift there. But in the mean reverting business that we're with, most businesses that most investors hold by nature their average and you better buy low and sell high to make a return. You know, what we're trying to capture is long term earnings compounding. You know, stock returns and earnings growth are correlated over the long term. Interestingly enough, stock returns and GDP growth

aren't very correlated over the long term. But if you get the business right and the earnings compounding right, and you own a portfolio and aggregate that has a collective weighted average rate of earnings compounding, that's attractive. That's what your investment returns will be, and that's real add value. Let's talk a little bit about the investment industry. It's been going through a lot of changes. Your firm has been around since nine four, uh. Let's let's discuss some

of these changes. We'll start with active management. It's been a rough couple of years. What has for active as a lot of the money flows have gone towards passive indexing. What's your experience been like over the past, let's call a decade. Yeah, I think, as first, our investment experience has been very good, you know, owning great businesses that grow faster than the benchmark, that are durable and predictable, you know, has worked and will continue to work. We're

highly confident of that. The industry though, Look, I think one I always have a sort of split personality on on this in that you know, I hunt, and I don't think I should defend most active managers, right because I think the numbers are what they are. I think a lot of active managers and most don't add value quite frankly. So the carnage that goes on and what should be a meritocracy of an industry is absolutely proper

and corrective carnage. The word carnage. Yeah, Look, it's it's an industry that's probably had, like a lot of other industries along come up and right we've seen you know, all the other classic industries hollowed out by either tech or new iterations. Right, but this industry, it took a while to get to it. You know, there's a lot of honey there and it took a while to people to focus in on and start squeezing, but it's there a lot of complacency for decades, absolutely, so that's coming.

And if you are you know, average or lower quality like the businesses we look at, you just you shouldn't be on the playing field, right, So that part I think is do and proper and there is no defense for that, right you have to add value. And the great thing about this this is a performance oriented business, just like sports, but unlike sports. Actually we play the game every day and our score is there every day and the long term. So if you can't deliver, you

shouldn't be there. That's one part. But to the passive side, you know, there's there's two elements that that are driving it and one I think is a little more questionable. One lower cost and technology certain has helped right e t s different vehicles. There's been good innovation there, you know, as uh Volker said, you know, the best innovation the financial industry has been the A t M. Only probably technology has really helped would investment products too. For a

vehicle to get passive even cheaper, that's good. I think. The other thing though, people need to be a little bit cautious about when they look at this huge swing we've had to passive over the last decade, roughly has

been monetary policy. Right? If I always ask it, and when we look at a business, even I I often ask either my members of my team or or I asked myself with this business through all your analysis, if I could ask you or give you access to, just the answer to one question that would really help you with this business when you look forward, what would it be? Try to synthesize and boil things down into a list of things you would like to know but maybe can't

because they're unpredictable. But try to get to the crux of the matter. What's the most important issue that will help this business or drive its future growth or success. I think when you look at the overall investing landscape, you can ask yourself that similar question about monetary policy. Right. If I was going to give you the access to a magic lamp with just one wish, right, and it would help you to to set the landscape investing wise

for the next decade. You know, if I had that crystal ball, I'd probably ask the genie, you know, what's monetary policy for the That's a pretty powerful variable you can compound and build a whole lot of decisions around. Right, and look at the backdrop we've had. We had a FED policy that was at zero, with absolute visibility and certainty of where it wasn't going for so long. That's

a pretty good backdrop for passive. I think you know now that we've had some at least uncertainty and volatility and what I would call normalcy back in monetary policy. Some people might differ with that opinion, but I think this is actually what should be normal. Is it going towards well? I think people think I'm normal. I think I have to be careful in two terms, normal terms of where the rate should be, but I'm talking about normal more in terms of you just shouldn't know exactly

where it's going. There should be a little bit of uncertainty, is it going up down? Staying the same? A little bit of uncertainty, not probability, Right, I think that's kind of normal. That That goes back to Bernanke during the financial crisis saying the way we'll stabilize this is to give people enough guidance that they become comfortable that there's a liquidly backstop. However, that certainty seems to have carried

forward far beyond the crisis. I totally agree with the concept. Hey, a little uncertainty is not a bad thing when it comes to monetary policy. Yeah, I think and and I think good for us. Would we kind of agree on that. You're starting to hear some murmurs of that of people kind of talk about this. You know, it is maybe the FED talking a little bit too much, right that that I think that should be a part of the

conversation now a little bit. You know, they went to this strategy you know, a while ago of more transparency and maybe less transparency is a little bit healthier for risk and risk in the markets. I actually, you know, I I differ on this maybe generally with with my opinion too. And Paul, you know, I think Pal is doing a great job. Quite frankly, I think there's a lot of criticism of him, but if you step back, he's probably the right guy at the right point in

time for the job. In terms of his background, we always wanted this sort of pragmatic, business oriented guy sort of clamored for it versus non economists. And then it's like life, you know, then you finally get what you want and everybody change their mind. I'll take it a step further. I think you can make the argument that this could very well be the single best appointment from

the Trump administration. Yeah, I think I think there's a lot of credibility in that, you know, definitely, I think Paul, you know, as the other quote I'd like to share, I think he's trying to do the impossible for the ungrateful, right. I mean, you're gonna he's gonna get a whole lot of criticism no matter what. He doesn't matter what. But I I respect, you know, the steadfastness he's he's falling through, he's doing what he said. Maybe he could die by communication,

but I'm not here to micro manage. But I and he's he's doing the best to get us back to normalcy, which is very hard, right, I mean, getting off that emergency footing is it's taken much longer than anyone could have expected. And it's not just monetary policy, right. I think. I think the world we live in today, as much as you know, the hypersensitivity of the news cycle and the mediums of delivering news have made it, I actually think what we are in is a normal world, right,

now right, the world is supposed to be uncertain. We're supposed to be have geopolitical issues, even physical conflict, right, monetary policy uncertainty, difficulty for businesses. That's what the world's largely been like for a long period of time. We're just adjusting and adapting out of an abnormal period, which is why people are kicking and screaming a little bit more so here, let me bring this back to the

active versus passive question. The thing that I find astonishing over the past decade is there are a whole slew of funds I can think of one of two fidelity I could think of without naming fund names or managers or whatever. There is a run of funds that I have watched shoot the lights out for a decade and

they're still seeing outflows. That's sort of hard to reconcile. Yeah, I think, you know, that's the one part that I think, uh As I mentioned, you know, technology is gonna bring about cheaper vehicles as there's been a tremendously difficult asset allocation questions people have had to, you know, answer as well. As you have an aging population and you have to shift towards fixed income, you have actually the wrong time. You want those sorts of coupons and yields and fixed

income as the assets are shifting that way. So I think that's that's a bit of the element I think you're you're seeing explaining there in that even if you've done a good job, you're still seeing outflows because there is great at your asset allocation equation going on outside of us. But I don't mean equity to fixed income. You're seeing outflows from outperforming equity net of fees, even after fees towards passive. I'm kind of perplexed by that. Yeah,

it's a baby with the bathwater sort of them. Yeah, you know, I think there's there's probably a little bit of element of that. I think, you know, they also maybe slightly underappreciated thing to that. You know, I also have to remind myself and point out to people sometimes as if we actually do our job for our clients, they're going to take all their money because that's the job. Our job is to take their money from point A

to point B and then they take it all from you. Right, But they don't do it because you didn't do your your job, or they're unhappy with you. It's because you actually accomplished the goal and there you actually should take

some great satisfaction. You know, we've had some clients like that, particularly, you know in the last couple of years where they've made now they've reached their goals in terms of their pension fund you know, uh, targeted returns, and now they need to shift and ask allocation to a different mode or a different time horizon or fitting their liability Matt, you know, match now and we've just done our jobs. So thank you very much. We've we've delivered what we

had to do. So you you you're gonna always get a constant ooment of that too, even with great managers, I think losing money. So along those lines, I know some people are focused on demographics as an input into markets. I don't know if I've been especially persuaded by it, but some people really buy into that thesis. Do you think this generational shift into retirement from equities to fixed income is going to have an impact on the market overall or is it just all built in and people

are are stressing over that shift generational shift way too much. Yeah, I think it's people were a little bit hyper sensitive into near term issues. You know, I think sort of the more things changed, the more they stay the same

in the long run, you know. So I'm not hypersentive to you shift there, and in fact, even if you look at your options, I think as an investor, and here maybe i'll sound a little bit biased as an equity guy, I'm actually happy I'm an equity investor and not a fixed income investor right now, because I think that's a hard job. Seven percent is an appealing that's very hard job. So call me lazy, but I just think I have an easier job right now as an

equity investor versus fixed income. To be fair, they've had a really easy thirty years and now that seems to be coming to its end um, whereas equity investors have had a little more challenging couple of decades with between the dot com and the financial crisis. I would say the roles are now starting to reve No, I agree, So that's you know, that's that So maybe yes, now it's time for them to pay a little bit of a price of admission, right and us to have a

little easier time. But if you look at the two against each other, to your question of whether people will or should continue to shift out of equities. I mean, if you look at the prospect in the right equity strategy, still the yield even you're getting there on a coupon. If you have real cash flow and real access cash flow to distribute to your owners of the business, your shareholders, you know, you can get growth which gives you some

inflation protection plus a coupon. You know. I think equities are still very compelling, and that's why. Actually, you know, when people ask me about the market now recently, my my word for the market, you know, where I was a bit more concerned at the beginning of the years. I think this market has potential. And I use that word very carefully because it is the word deliberately. I think you used to describe often a bad sports team or an unruly child. Right, here's all these bad things

you see, But hey, this kid's got potential, right. I think the markets a little bit like that. In a lot of the issues are correctable that we're concerned about or weighing down economics or geopolitics or you know, in

the way of monetary policy. So people should be a little bit careful on the equity side to not swing too far in sentiment particularly too far negative, because this market could have a lot of potential when you look at what you can buy, what you pay, and what you get still when you pay for it in terms of a coupon and growth, it's still quite attractive. And then particularly when you start to look at some of your alternatives for your capital. Let's talk about markets today

a little bit. Um. You mentioned earlier equities have potential. Where do you think we are in the overall equity cycle and does that impact the way you construct a portfolio? Yeah? I think, uh, you know, now we're digging into the trillion dollar question right right where is the world going? Uh? You know, and and not to dodge it in classic faction, but you know, we want to build a portfolio where I don't need to know the answer to the question

number one. I think that's the key to investment success, not having to answer these trillion dollar questions. And you can, remarkably you can invest that way without having to need to know that answer. But putting that aside, and just

which by the way, is arguably unknowable. Yeah, exactly, you know, the the the unknown owns or however the Rumsfeld and you know quote goes Uh, but if I think if you step back, you know, honestly, in terms of looking at the data and the facts, you know, uh, the economic cycle you know has still good underpinnings if you

look at the fundamentals of the U. S economy. But we gotta say we're later stage at an earlier stage, right, I mean, I think just having some context of where you are is the only thing you can kind of get down to if you are top down. And I think even that can help though as well. And that I say that too in that you know, you've seen this little fits and start around the market and in this concern of well people shift out of growth to

value again. You know, we've also we've talked a little about fixed income equity and passive active, but there's also been this other battle going on or raging between styles and growth and value. And value had had a long period of success and then has now been in the dulgrums and people are just waiting with bated breath for

this big rotation back. And the problem there I have to your you know, sort of where are we in the cycle question is the only place where you find a bit of rel to cheapness comes with a lot more commisure at risk in terms of cyclicality. So if you want to wade into those waters here, you better know the answer to the question you're asking me, because that's the danger in investing when you look at a p that might look relatively cheaper, but the E disappears.

So actually you thought you underpaid, but you ended up overpaying because your E wasn't predictable and disappeared, which is also a big piece of the risk you want to mitigate with better quality businesses as a starting point, as long as you know where the E is or should roughly be, you can actually can start to strike a more appropriate approximation of what that business is worth. But when the E is uncertain, you've got to know where you are in the cycle. And as I said in context,

you have to think we're later rather than earlier. So if you can identify a company with a predictable, reliable E, a reliable earning stream, does that company demands a premium as an investor? Is it a higher valuation for that earning stream? Yeah? I think that's you know, the other human nature element. You know, we capitalize on, and I think people need to capitalize on right we're, as people were, sort of generally a bit cheap. Right. We're always looking

for a deal. Right. That's why sales work, signs work, advertising works. Deal deal, deal x per cent off. It's like a magnet, right, we are attracted to that. That's human nature and what you miss and that when you take that behavior aspect to the finance world into investing is the reality that you get what you pay for in life, very much so in investing. So to your question, yes, you should pay more for a better business with a

longer tale of earnings growth. Because also one problem we have in investing in the finance world is we're as many smart people are in this industry and as sophisticated as the industry is, it's actually still pretty rudimentary when we look at important things like valuation. Right, people often are looking at pe simplistically pe one or f y

one p out one year. There's a real lack of imagination right in that in that analysis, right, because the earnings where they are in five years should be what really matters. Where they are in ten years should be where what really matters. Right, So, if you're myopically stuck in this world where you're looking at current p or even just f y one or f y two p E, you're really missing the forest for the trees there. You

need that E five and ten years out. And that's where quote unquote paying up for it or paying more for it today actually is delivering you a lot of inherent investment value because that embedded value is out in the tail, the tail of the growth of the business and the sustainability of the business. That so, in other words, you're a long term investor, is what you're saying here. It's one of the only advantages you can have, right,

it's the basics. And when we stick to the basics, and look, you know, call us you know, or say maybe we have a lack of imagination because like all great things, often great business is great fortunes. Right, we we stole it from someone else. We we took it from Warren Buffett. Right, we took the playbook and we just try to apply discipline with a great team and a stable team to that. I think that's where you add a lot of value to and continuity knowledge is cumulative.

Having a great team intact for a long period of time. All buying in buying into the investment religion being disciplined. You have to be long term to your question, it's it's the one basic advantage you need to exercise. Yet we live in a world in an investment construct where everything is happening to fight that right, Everything is trying to break you down from the long term right. And that's also why when people look about you're talking about

investing today, you know, has it gotten harder, easier? Actually, you know, the dynamics are are quite similar. Once again, you know, the more they change, the more they stay the same. The environment has probably gotten more volatile and more violent. So the advantage of buying hold or patience is as prevalent, I think as it ever was. I think the distractions are greater today and faster today than ever before. But I have to ask you a question,

Um that you alluded to with um predictions. And I'm not asking you to make a prediction. I'm asking you, how do you, as a portfolio manager deal with what seems like a never ending stream of geopolitical events occurring in real time. So earlier in the fall, we had the impeachment inquiry begin in the House of Representatives, you had the Brexit slash. Um UK Supreme Court eleven two. Oh, repudiate, Boris Johnson. You've been a global investor, a European investor,

now a US investor. Do you look at or even think about these geopolitical events or are they just background noise that do not affect the E five years out? I think there's two pieces, you know. One, you really do, as we've talked a lot about, have to be just

focused on the business, business, business. But on the other hand, you do have to have a pulse, a finger on the pulse you know, of the market where they're at, because that's what can bring you greater opportunity, right understanding what the general feeling and sentiment is and where that's detached from real long term reality. So you do as

a portfolio manager and as investor. I think I have to have your hand in both of those buckets, right, the most important one though, still being get the business right and the key to managing as you've said, and we've done it quite successfully fortunately, all this as I called it earlier, to this return to normalcy and volatility, uncertainty with tariffs and trades and and and and political shifts.

You know, the best way we've been prepared for that is having businesses that wouldn't be largely affected by that, and that sort of shocked people sometimes, Yeah, you can do that. Actually, you know, you you can have businesses that are much less affected by the macro, much less affected by the geopolitics, you know, much better, less affected

by shifts in disruption in certain industries. That's been your best game plan over the last couple of years versus trying to predict the next tweet and where tariffs are going or the next outcome of the next election. Right, that has been your road to success. But having your finger on the pulse, as I mentioned though, does help when you realize people are getting a bit mannic about it. You know, we are we are people, and we get frenzied and we get manic. So if you do follow this,

and we do, you know you follow closely. I read three newspapers a day. I think you you have to keep keep your finger in the flow of how public sentiment is moving because you can use that to your advantage. Back in the investment world, even with quality companies taking advantage of excessive pestimism or optimism. What about something that UH started regionally and now is looking like it might

become global something like negative interest rates. Japan has had them for a while, they seem to be now expanding. In Europe they are literally trillions of dollars with a negative coupon. Can this come to the United States? Do you worry about whether or not this will have an impact on your portfolio? Yeah? I'm much more worried longer term about binary events, you know, than I need to because of our style of day to day or cyclical events.

And there's two I worry about one. I think, you know, there is no such thing as a free lunch in this this this these experiments and exaggeration and extremism and monetary policy, they have a payback, right, and we all we all kind of have an idea of what it could be, but we won't guess it exactly and will probably miss out on the magnitude of it. But there will be a payback for the negative interest rate environment, right.

There is no free lunch on that. So that going to be you know, I think in the bond market it's going to be very difficult because you know, this is often where we don't sort of see around the corner, right, We're focused on the near term goals. You know, a major central banking goal, right is to spur inflation, right, and let's you know, if if God forbid, they're successful

in that, you're going to decimate coupon investors, right. So it's in order to achieve their goal, they're actually going to cause the great damage at the end of the day. So I think that is clearly still the problem. You know, there is this tendency, and I know it's sort of been like the you know, screaming fire in a crowded movie theater for a while. You know, fear of inflation,

fear of inflation, fear of inflation. I can't tell you when it's going to happen, but I can tell you there's great effort to do it, and there are tools to really do it if you want to go to extreme end. So that will end up in a poor payback, I think for investors who are in negative yielding security, and I think that's a problem. The other issue I think, aside from that in the Interest rate Act drop is what we're facing in terms of I call it this

sort of Balkanization of the world. You know, what we see and playing out in geopolitics is not about terrorists it's not about a current account deficit, you know, has wider framifications. If we continue, we're sort of pushing this world. And I'm not saying continue in terms of a political sense of being right or wrong, but just the path we're on generally speaking, which I think doesn't have to do with just one present or one admits, meaning deglobalization

or something more special, not necessarily a total deglobalization. But you you split the world into two spheres, you know, they'll be the US Western sphere, and then they'll be the Chinese sphere, right, and they'll be people who have to make a choice or countries that have to make a choice of which sandbox you want to play in? Right, the rules are going to be different in the two

different sandboxes, which is where the tension is today. Right, the the US and the Lightheisers are saying, look, you're in our sandbox. There's rules to playing in our sandbox, and you haven't been following the rules. You know, we let you go for a while, but now you need to follow the rules or you gotta get out of the sandbox. As the extreme sort of outcome, and the outcome, as I said, the extreme result could be a balkanization where they say, look, we'll get out of your sandbox.

Who wants to come in our sandbox? You know? And and then you have this whole ecosystem around Asia, word becomes a bigger shoe. Like Taiwan. They're in a pickle, right, which sandbox are you in there? South Korea? Which sandbox are you in there? That's alongside interest rates, that's a These are both longer term issues, clearly, but those are longer term binary issues that if anything, worry me a little bit, right. It makes the world a bit more complicated.

It makes the success or collective success a lot of us could have had a lot harder to achieve. Uh, it's very disruptive and and and in the downside, as I said, mostly is we just miss out on what we could have had, you know, in a collective world. But it look at it's life. It is what it is. I in a passing judgment whether it's good or about it either, you know, I think it's just the reality. And that's investing what we have to deal with reality,

not hopes and dreams. Hope isn't a strategy, as they say, We've got to deal with reality and the reality is we're fracturing. So so let's talk about strategies. Since you mentioned that Von Tobel has six broad investment strategies, what areas do you focus on within those six and how much of this is global, European, Asian and US or more specifically different approaches by style. This is where we're

actually a little bit unique. You know, it's hard to say you're unique and different in the asset management industry. Poor fully managers analysts products. It seems pretty homogeneous, right, But our team is is sort of rare and unique in that the same team manage manages those six strategies, you know, not just myself sitting at the head of it. I have a collective group of really talented individuals who

support all these products simultaneously and as analysts. And there's a lot of investment value in that having the same analyst work on a US equity fund and an emerging market's equity fund. And it's the way we've been doing it for two decades. Same skill sets can apply anywhere in the world, and the world in the businesses compete across geography surprise surprise, right, and and analyzing a fundamental business of whether it's a great business and average or

a poor quality business. Perspective is the key to that, right. Life is all about perspective, and invest things about perspective too, you know, as the old saying goes, Also, you know, to a man with a hammer, everything looks like a nail. So you don't want to pigeonhole people, right. You need them to see a lot of nails. You need to

see broad perspective. So being global and structure as analysts really helps the scrutinization of what's a great business because we can look at one in Indonesia, and we can look at one in Ohio and try to figure out what are the nuts and bolts that make these great businesses, And then we're totally agnostic to where it is because we have a group of portfolios where that name will then try to compete to get entrance into and all of our portfolios from a regional basis, our competitions for

capital our universe eliminates. It creates a smaller pond. Out of the pond comes a smaller subsegment of names. Out of those names, we build regional portfolios. The best of those investment opportunities compete up the pyramid up to the top to our global portfolio. So it's not just an amalgamation of the geographic portfolios, but it's the best of the best of those names competing for each other and having the proper you know, risk diversification alongside of it.

What the businesses do where they do it, so the fundamental risk is contained and managed. That that's absolutely fascinating. The one question I have to ask about that are there any particular geographic regions around the world that you find are either misunderstood by investors or for reasons that aren't especially clear, significantly underinvested. When you look around the world, I think the emerging markets is the class quite frankly, and uh, you know, I've been actually talking to some

clients recently about this. I'm gonna bring up a name you might know, the name Elmer Wheeler, right, I don't know if you've ever familiar. You know, he was around in the nineteen thirties and the depression. He was a newspaper reporter in a near and dear to your heart, and he was fired in the depression as a newspaper reporter because his boss said, I don't need any reporters.

Amore I needs salespeople, and Elmer Wheeler, you know, as a pragmatic guy, said all right, I'm gonna be a great salesperson, and he coined the term that sort of a lot of us know today is an old fashioned marketing term. Don't sell the stake, sell the sizzle, right, And it's sort of a classic you think about how marketing has evolved, a classic thought, right, don't sell the stake,

sell the sizzle. And I think the misunderstanding to your question on emerging markets is largely because there's been a lot of sizzle sold. You know, emerging markets has a great sizzle story. You know, people consume less of this and they'll consume more of that. You know, they're they're these poor people, they'll get richer, you know, all these elements. It's a great sizzle right on top of everything else.

The new expensive world. It plays right into it. And I think that's been fundamentally wrong in that not that emerging markets aren't attractive, but it should be about the stake of emerging markets, and that you should go to emerging markets, and you really should because there are great

businesses there. I forget the sizzle story. And and let's also take the fact into consideration that if you bought the sizzle story, which if you sort of play that out in a number in GDP growth, right, the emerging markets take out China and India over the last two decades, basically their composition or percentage of GDP has been flat. So you haven't seen the sizzle sizzle, sizzle story outside of India and China. So if you bought the sizzle,

you've been disappointed. Good news, as I mentioned earlier, as GDP growth isn't necessarily correlated with stock returns. So if you've got the steak right, if you've got the great businesses right, and what's unique and misunderstood about emerging markets I think is there's actually steak there you can't get in the developed markets. There's actually businesses and business models you can't get back in the developed markets, And that to me is why you should be in emerging markets.

It should be about the businesses, as all investing I think should be, as we've talked about today. So go to emerging markets for the steak, not the sizzle. Go there because there's great businesses you can't get in the SMP five hundred, or you can't get elsewhere. I think that's a big misunderstanding, stiff, quite fascinating. Can you stick around a little bit. I have a few more questions for you. Absolutely, we have been speaking with Matt Benkendorf,

ce IO of Untomble Quality Growth. If you enjoy this conversation, be sure and come back for the podcast extras, where we keep the tape rolling and continue discussing all all things quality growth. You can find that at Apple iTunes, Google podcast stitchers, Spotify, wherever your final podcasts are sold. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. Be sure to give us a review on Apple iTunes. You can

check out my weekly column on Bloomberg dot com. Sign up from my daily reads at Rid Halts dot com. Follow me on Twitter at Rid Halts. I'm Barry Ritolts. You are listening to Masters in Business on Bloomberg Radio. Welcome to the podcast, Matt. Thank you so much for doing this. I have to tell you, I find your approach and what Untable Quality Growth does to be kind

of unique and interesting. I know everybody thinks they're unique, but really, the the approach you guys take especially with a single investment committee investing all around the world Europe, Asia, Global and US that it's kind of rare. How has this structure worked out in terms of your your various

UM funds performances? Yeah, I think you know, two keys there were quite proud of our results, right, and we're quite proud one and what we've achieved in terms of annualized out performance of a couple hundred basis points across different geographies, so that the style and philosophy has achieved alpha generation in places like Europe and the US and emerging markets and global equity simultaneously. That's you've maybe surprising, right,

one mouse trap does work. Actually, you don't need a different emerging markets mouse trap, which is also I think a bit of a fallacy. Sometimes you don't need a different mouse trap for this market. You need one good style approach. You just need discipline then in a good team. How how rare is that approach where one team is doing US and the same team is doing emerging market and Asia and Europe and global investing from the same

group of analysts. I think it was extremely rare. Two decades ago, I think more of started to move that way A little it in more recent years, probably the last five or seven years, just because businesses have launched and then they've launched simultaneous products, so they've just sort of had technology has to admit it easier to sit in the US and be global as opposed to the

old days where boots on the ground were required. Yeah. Absolutely, And as you know, businesses have developed now, and those analysts found this false wall between you know, the Asian tech analysts and the US tech analysts to be a little bit, you know, lower than the wall used to seem. I think that's led people towards our model, but I

think I still think the model is more rare. I think it does add a lot of value for investors at the end of the day, particularly as I always have to be careful with our investment philosophy, you know. I think that's something people often misunderstood. You misunderstand rather, you know, they can find something that works, but certain things that work work in the right situation, right and and people often try to take that what works and put it in the wrong situation and they wonder why

it failed. So when you are very narrow and restrictive in what you're trying to look at and what you're only willing to ever buy. You know, when you think about risk the way we think about it, when you think knowledge is cumulative, when you have longer term holding periods, when you have lower turnover, right, you can really then

do this successfully with one team. You know, we have across all of our portfolios, you know, a hundred and sixty odd names right in the turnover of names annually is maybe so with a team of twenty one, you don't need a whole lot of new idea generation. We do have good new idea generation. You do have to sell in harvest names. We have evaluation sensitivity and a strict valuation approach, so you do have to replace names

that do reach fair value. But the process and the philosophy is what enables us to have success on a global basis with the structure. I don't know if that necessarily would work for people who are more benchmark oriented, right they just want to plus or mind us the benchmark wade in country and sector. They might need a whole lot more people, and they might need to be a little more focused from a strategic standpoint of certain products. I don't know, it's not it's not my you know approach,

but I think for us it works very well. So so a hundred and sixty names, constantly servicing new names, how do you make the determination? And so we went earlier, we went over negative screen, get rid of stuff you don't want to look at, a handful of fundamental bottoms up approach to narrow your list. And and I'm assuming that the top of that list is still a pretty

big grouping how do you make the determination? This is the best idea of that group because it feels like some of that is quantitative, but a lot of it is subjective and a little squishy. Yeah, there's two elements. I think. One that's often underappreciated when people think about what you buy, and they often think of it very

much in a clean slate approach, right. But one is perspective once again in that we have a live portfolio, and that live portfolio isn't sort of an organic organism, right, It's an accumulation of thousands of decisions already that have been built upon each other. Why we own what we own today and what size is a consequence of millions of interacting things. So that I think is im and to understand as your litmus tests or starting point be meaning the new new idea has to be a fit relative.

You don't want excess concentration geographically, sector, whatever, or how does the existing portfolio help decide what the next idea that comes in is. That's what you mentioned is the latter I would mention before that, though, the key determinant is this new idea or business, how is it better than what we already own? That's the first litmus test. We've accumulated over time via several decisions, this group of concentration of these businesses that we like for these reasons.

So now when we evaluate this next business there, how is it better than the weaker links in the current portfolio in terms of their relative lower quality versus the highest quality names in the portfolio? That is a litmus test is very important to the long term investment journey, you know, holding yourself to get over that hurdle over time.

I think that's one piece first, and then the other pieces you point out then is okay, if you hold that first hard crew test there where you've got to replace a name if it's going to gain entrance, right, Maybe sometimes it isn't about replacement. This business is equally as good as a name we already owned, but it offers something else from a risk dynamic, which is nice.

And that's where we think about risk very fundamentally. I think there's way too much focus on the Greek letters as I as I call them the bait as, the standard deviations, et cetera. I think they're a byproduct or they fall out of a good risk management process and approach. They're not the starting point. The starting point of a good rich management appross is fundamental, good old fashioned risk management. What is the business, What drives the business? What are

the economics of the business, what does it do? Where does it do it? Forget the statistics first that and then the accumulation of several businesses together as you own them, having if you can get there, some idiosyncratic drivers, right, equally good businesses. But what drives this horse is different from what drives this horse over here. That's great risk

management if you can achieve that over time. So in your question, you know the decision to get into the portfolios, you need to upgrade the quality of the portfolio if you do it, or to hand in hand with that, how do you improve the fundamental risk dynamics the portfolio by giving your investors a collective group of business which is still growing attractively, still durable and predictable, but maybe has a slightly different of syncratic driver, whereby you do

have some diversification benefits. So I'm gonna ask you a question. I suspect I know the answer, but I'm compelled to ask it. Anyway, Most investors have a tendency to swap out something that is just suffering a temporary price setback, not necessarily a decrease in business quality, for whatever the

shiny new thing of the day happens to be. How do you avoid that sort of process where something maybe is just you know, under performing for a quarter or two, but there's nothing along with the fundamental business, and yet here comes is the pretty new thing. How do you avoid that temptation? Yeah? I think one element is certainly human temperament, right, I think that's the skill that you add as a portfolio manager, on top of being a

good analyst over time. It's temperament. Temperament comes with experience, but temperament is somewhat chemically wired in you as a being. As you said, you know that tendency to not jump for the next shiny object. You you have to have a temperament for that, or at least develop a good temperament for that. And I think, as you describe properly, a lot of times, particularly with great businesses, you need

a little bit of patients rights. Even the greatest businesses with even as Buffett has described them, the widest moats, face threats. There's people always trying to sack the castle, you know, and cross the moat of the best businesses with the biggest moats, and you can't be too hyper sensitive to that. Over time, you have to realize that what seems like a crack on the wall of your castle, when you get a cloth and start to wipe it,

it's just a blemish, right, and it wipes away. So I think you do need to balance great sound decision making with good temperament and patients perspective, experience and also some innate chemical composition helps so that. But the other piece then you have to appreciate is your own limitations too, right and where you can fall into these classic pitfalls.

So you do have to know yourself too as an investor, and they're one element that also makes us different a little bit as a team and as a firm, we know, with all these good things I've just talked about, the single biggest risk with our style over time is complacency

with patients. Patients can easily be synonymous with complacency sometimes also, so what we've done very successfully to combat complacency, which is the single biggest investment risk with great businesses complacency is we have three members of our twenty one member investment team that are former investigative journalists. They're not classic investment analysts. They're not your classic NBA's or come out

of consultancy or business. They don't have sector coverage, they don't have stock responsibility, they don't pick stocks, value stocks. They're there to fight complacency. They're there as former instigative journalists from you know, from New York. We it's like I always use the analogy here too. It's like if you're getting married and you you wanted the dossier on your spouse before you got married. You want to know everything just you want to face it, accept it, you know.

Kind of That's kind of where we want to be as investors, right. We want to know everything bad about the business, large or small, and then The success in investing then ultimately comes with calibrating the sensitivity to those large and small negative aspects. But every business, like every person, has some negative things to be learned or gleamed. The key as an investors just to make sure you know them,

make sure you know all available information. So you have you have three people looking at all the individual names in the portfolio or the possible adds to the portfolio.

Were both constantly challenging from a devil's advocacy position, weaknesses in our businesses when anything new comes up, digging deeper and into those issues and ferreting out the real facts of the matter so we can accumulate at least determine our own, you know, our own view of the issue, rather than just read the headline of the issue which someone else built upon their own facts. So they're fact finders, their devil's advocates. They're there to challenge us day to day.

They're there to challenge even great businesses over the long term, and then very specifically where they've also been able to help us. A lot is looking into narrower issues with the business which might not be negative, could be positive, but a fundamental analyst maybe when they prioritize their time.

It could be smaller yet important. But we can dedicate a journalist to dig deeper on a singular issue rather than the analyst, you know, get Meyer down in the fog of war in this one small issue, while they accumulate the bigger, broader picture of the underlying company. That's where they can add a lot of value too. So here's the question, and really it's how do you deal with this? It's very tempting to get sucked in by some of the negative narratives. They seem to be much

more resonant emotionally. It's what sells right, they're compelling. You know, someone wrote a piece sometime ago, and I don't want to quote the wrong author, about when when the Right brothers did their first flight, there was no newspaper story, No one paid attention. You guys have going around with flight. What is this gonna become some real industry? It was like a ten years before anyone really took notice. Positive stories sort of fall by the wayside because it requires

some imagination. Here's how this could change the world. Negative stories, it's a genuine existential threat to yourself. It's a risk we're wired to respond to negative threats in a much more robust manner than we are to um respond to positive incentives, or so it seems sometimes, how do you avoid that? Hey, all this negative stuff is so easily

emotionally compelling. Let's just get rid of this joke. Yeah, I think experience, you know, experience working in this way with the structure of a team with these individuals has been very important. It's been a learning curve from the beginning. So it was an idea at the beginning of how they could fit really well with how we invest and the idea was very simple, right one. Given that period you go back, you know, ten fifteen years ago, the

carnage and the news industry had already started. You had read a great smart people there where the industry was being affected by technology, and they were now available, so to speak. Number one. Number two, what reporters clearly do very well, uh in their job is find a subject they often maybe know nothing about, and figure it out, you know, start the building blocks of what makes it tick, to figure out whether to you know, not to skip head to your end point, whether story is good or bad,

or just what the story is. Number one. So that was a great analytical skill, and the other one that's most underappreciated. I think where you actually find a differentiation between good or bad or better or worse analysts is everybody can be smart. Everybody can find facts. Everybody can then maybe even put the story together. But can you actually then spit it out and regurgitate it so someone

can do something with the information. And that's I think something that investors struggle with two and really smart people sometimes struggle with. Right, they just know so much and they can put it together in their own mind, but they either aren't in the position to make a decision or they can't make a decision because they just can't

spit it out. And newspaper reporters obviously that's their job, right they need to put it into a sellable fashion, which means it's articulate, and you need the articulation to be able to make a decision and know what you're dealing with. So I know of a couple of hedge funds that do something very similar. Describe um Vannabelle's structure. How are you form investors? Are they s m A s? Are they funds? How are they putting dollars to work with?

With your firm. Our business is roughly a mix I would say of half half, you know, between more institutional oriented investors and then more retail and oriented investors. And in that world, we're a manufacturer of an investment product where a style approach of discipline, we deliver an investment product. And then our partner, who in the u S is Vertus Investment Advisors. They're the distributor of the product to the end retail investors. So we're removed from them, but

we help hold them along a journey. So the retail investor they buying s m A separately managed accounts, are they buying mutual funds? They're generally buying mutual funds. You know, we have a we actually as a firm and a well developed firm. We have the whole suite of structures products for our end investors. So we can manage subadvised accounts, we can subadvise mutual funds, we can manage mutual funds.

And we have basically half half our business. And then also i'd cut our business also again another half half North America, US focused and international. We have quite a global business, right the parent company Switzerland based, is that right? And they've been around quite a long time. My assumption is institutions tend to be direct investments, not through a

fund vehicles that accurate. Yeah, Typically they want to be registered locally, uh and and and they want to an account that maybe sometimes has some customization that they may need. We don't and won't accept a lot of customization. We need to be able to do what we promised we could deliver. You know, I think this business is about integrity. It's saying saying what you're going to do and sticking to it, you know, saying doing what you mean you mean to set out upon. I think integrity is very

very important. So our clients, we need to make sure we can deliver with integrity the philosophy process that they bought into, they saw the results for. But sometimes at the institutional level, maybe there's a nuance where there's a market they can't be in for an institutional reason, et cetera. Sometimes we can we can allow that. Quite quite interesting. I want to get to my favorite questions, sort of our speed round that we ask all of our guests. Feel free to uh answer these as as long or

as short as you like. Tell us the first car you ever owned, year, make and model. Yeah. As I said, I grew up from a farming family and a landscaping business. So my first car, not surprisingly, was a Chevy pickup truck. I got my license in New Jersey at fifteen because I got a farmer's license because you know, we had a farm, so to speak. And I drove around town with the name of our business and phone number plastered on the side, which could be a good or bad

thing depending on how you're driving or where you're driving. What. What's the most important thing that people don't know about you? Uh? Boy? Uh? Look, Uh, I'm I'm a person who cares a lot about other people. You know, I think the other the other half of my job has been managing money, and half of my job has been managing people. And I really do care about the success of my people. Uh it would, And I'm not saying that sort of a way to promote myself.

It's admittedly what makes me feel good. You know, people do things for self motivation, and I really do take a tremendous amount of personal satisfaction in the success and others. I've taken great lengths over the last three to four years to build a deeper broader team to build real lead capable portfolio managers. I think we should have a team for our investors where we're all redundant. I think

that's a better situation for our investors. So I think maybe not a star system that is one person in the headlines, everybody else is, uh working behind the scene. And I think it's suboptimal for your clients, you know, And I think it's suboptimal for retaining great people longer term, because why do most of us change jobs is because we need opportunity, you know it. Financial is important, right, but people are people and they want self you know, achievement.

And I take a lot of satisfaction and that half of my job of really I really smile and I really feel good when I see the accomplishment and achievement of others. And I'm saying that, like I said, not in a self promotional way, in a selfish way. It's what makes me feel good. Uh, let's talk about mentors. Who were your mentors who helped guide your career in law? Yeah, look, there's been several. I think, Uh, you know, you have to go back to your childhood clearly, you know, as

most people do their parents. You know, I grew up in one of the traits I try to push once again today is just the the idea of hard work. You know, As I said, we had a small business. We had a business where we dug our hands in the dirt. We worked seven days a week. Uh, work ethic is extremely important to me. And my father in that way and my mother were very important, you know, And we worked when we were out of school. I was at work after school, and we're at work on

the weekend, Saturday and Sunday. And I think hard work, that old puritanical work ethic, you know, is very important to me. So from a mentorship, definitely my father instilling that in me, and then from the investment side, which is key you know, to where I am today after that or subsequent to that. You know, there's been a litany of people. I think a lot of it has

been read. To start with two. You know. One of the great piece of advice my co manager on our US equity product, did Walls, that gave me earlier in my career, was to read a lot of these money master's books, right, even if it wasn't just equities, Read how other people invest, how they make money. You know whether and fixed income, whether commodities, whether equities, because also the key to long term successful investing is finding something

that fits for you. And maybe maybe then equities, maybe it's ficting Tom. Maybe in equities it's value, it's not growth. But a key to success is finding what fits for you. So reading a lot about how other people invest, how they think. Probably you know the nature of what your podcast audience is. I think that's all that's very important that where you can drive mentorship from in a lot of ways, you know how reading and learning from how

they think. But then you know, the obvious key instruments in my life have been a lot of the investment professionals around me at the um. You know, it's my team and colleagues today, it's the d Walls as you know, the Henry Schlegel's who's a founding, you know, father of

our firm. It's our former colleague, Regieve Jane. It's a number of people at our firm that have helped build me from this kid who came out of you know, university in and has has built his way, you know, like Michael J. Fox did in Secret to my success from the mail room to the top you know, I literally started at the bottom. I started trade processing and settlement, and I worked my way through the organization and along

that journey. To your question, there's been people at every stage that have helped me, you know, that have really helped me in certain aspects that i've you know, now put together. You mentioned reading. Tell us some of your favorite books, be they investing related, nonfiction fiction. What do you like to read? You know, I'm boring in a way and that I like to read nonfiction. I like history a lot, you know, some sci fi like I liked. And it's funny the books you end up with, you know,

sometimes you wonder how you ended up there. But the current book I'm reading is a biography of f DR from Gene Smith, and it's a really good piece of perspective as you read about that time period and related to the time period today, because I think a lot of investment success also, and why I read history is this element of perspective, getting out of the frenzy and flurry and and and feeling of this is also different and also wild of today to looking back at the

way things have been and were, And I think FDRs period is actually quite interesting, right, I mean, you look at what was going on at geopolitical stage, you look at geopolitical missteps. You mentioned it earlier in terms of Powell, in terms of a cabinet committee nomination by Trump, but you know, look what past cabinets were filled with, right, the chrony ism and the lack of experience and capability

or poor capability. Have some perspective that over time. You know, I'm not making indictment on a on a political you know, a party or group, but it's pervasive everywhere. Right, So just have that perspective of how decisions in history have played out. Maybe in the short term seemingly difficult or

scary or risky. But as Buffett also pointed out to from that period, you know, as he's first investing in the forties, right, who would have ever invested in the environment in the face of you know, carnage in the South Pacific with World War Two? Right, But it was the time to invest. It's for the Yeah, for the long term, it's always a good time to invest. But you've got to have perspective then and sent and and sort of dampen your sensitivity through experience that this stuff

we all see and read and hear about today. It has a lot of rhythm to what happened even you know, in the thirties and forties, for one example. So I read a lot of biographies like the FDR is one, give us another book or biography? Look the other one you know that I liked. Unfortunately. You know, this is like you know when you like sports teams and they were unpopular then become popular, right, you know, the the

turn off. Hamilton's biography was awesome, Right, But Hamilton's now this global sensation because of the deserved success, right of the play. But Hamilton's, you know, was a character that I, long before all this recent success, had a lot of admiration for in his contribution to our country, which people now I'm proud and I'm glad they broadly learned more about. But that's obviously a great biography. I try to lead

a lot of president, you know, sort of presidence. I think you learn a lot about it before you move off of Hamilton's. I have to say, there aren't a lot of authors that you could say, yeah, just grib Any chron out book, it'll be great. He's one of those authors that anything he's written is just spectacular. Fantastic too, right. You know the Jobs book was great, right, Isaacson too. So you get there's certain authors, right what they they

what they write is just always great. But I tend to read about people in history and in periods too, so it's not just always people. You know, I've finished a book on the Crusades, you know, certain periods of history. What's the name of the book? Uh? That ish gosh, Now I can't remember the name of that one. Now, you got me? Because so I read a book email to me. I'll make the book I had um Jim Chanos recommended was a World Lit Only by Fire, which

covers that sort of Crusades Enlightenment era. And it's just mind and I think visually, and I can picture the book now on my table and sitting there after I finished it. I'll have to come back to you with the name of it. But it wasn't that specific one. But also, you know, I'm not looking for carnage when I read about it the thirties and forties and in the Crusades. But there are lessons to be tremendous lessons to be learned longer term, and that's why I think

reading is important. You know unfortunately. I think you know, first of all, radio versus TV isn't important as a medium because you have more time to be thoughtful and reading is time to be thoughtful, and we all need a little bit more of that than a hundred and thirty characters or whatever. We're um. If you ever get a chance to see Walter Isaacson speak in public, I believe it was the t D event their annual conference

in June. They had Isaacson speak and I read the Jobs Book and I have UM I forgot what his most recent book was on UM innovators or inventors or whatever it was. I haven't gotten to it yet, but he is a fascinating person doing exactly what you're describing, taking the biography of people from today and using history as a context to show. I think you said this early. The more things change, the more it remains the same.

That's the crucial lesson we all need to hold on to, you know, through all the turmoil we see every day on the news, right, that's why? And why is that because we're people right Where people we talked about certain elements where people were animals. We have animalists animalistic nature in certain ways to we really like the negative and and and we just need to step back and appreciate that.

I think at the end of the day, and then I like to read also, as you can pick up in my books, leadership right, which is also something we wonder about the world today. Right, we need collective leadership rightly where maybe in a vacuum here where we're looking for real clear leadership, because historically there are times where leadership mattered a lot, you know, so I think reading about that's interesting. Tell us about a time you failed

and what you learn from the experience. Yeah, you know, uh, when it comes to failure, I I have obviously all the classic pitfalls and investing. You know, we we all sell too early, even great businesses. We do it because we have some valuation sensitivity on top of that, you know, on the other side of the coin, you often hold

on too long. But you know, I think my greater failures I hone in on our more personal failures, you know, not you know, not in interpersonal relationship speaking up or or stepping up you know, both in family or friends or things like that. You know, not to get too specific, but those are the failures that I think you hold a little bit closer. Uh, And those are ones that are more important to learn from, because I think the investment ones, they are critical and you do learn from

what they are. The obvious ones. I think the real failures we all need to focus on, and I do are are ones where you've fallen short personally and we all we all need to do a better job. What do you do for fun? What do you do when you're not reading biographies or are in the office. Yeah, you know, I um a University of Denver alumni, So I ski. You know. I like to ski, certainly. I

love the mountains. I'm a mountain person, even though I live in Fort Lauderdale, Florida, which is a little bit funny. But I got a little best best of both the worlds are in that way, I can live in in the worm and go skiing, and I can wander skiing. I guess that's one way to get it out of my system. The hills are a little lower there. Uh, So I do like to ski. Look, I'm a I'm a family person, you know, so I have two young kids. Quality of life is important for me too. We work hard,

we work seven days a week. But I think you need to balance at and keep you know, faith and family and all those elements very very close to your life. They're important, is important. So let's talk about the industry. What are you most optimistic about? What are you most pessimistic about? In the investing industry, I think you've got to be optimistic that, you know, despite all the noise and change, you know, success and investing still comes back to the same playbook, you know, and if you can

be disciplined around it. So that excites me, right, where other industries have gotten hollowed out, and they are fundamentally different. Right, if you're a taxi driver and your compete against Uber, your business is different. Right. If you're a restaurant and delivery has come in and delivery apps, your business is different. Our business has had a lot of technological change and influence, and people talk about AI and the snap. But I'm actually quite excited in that we have a we have

an employable skill still here. That's kind of nice, right, We still have some value added to bring even as much as things have changed. So I'm really quite excited about that, you know, I'm I'm sort of you know, if I get in negative at all and downtrodden it is sort of around these sort of you know, fissures you know where and as I mentioned very briefly there, you know, community is important to me. We were supposedly living in an age where technology was enhancing community and

creating a greater community. But in fact, I think what people are hopefully and seeing and recognizing as we're actually seeing a fracturing of community, you know, because of maybe technology perversely social media and all that. So that scares me, right, because you know, politics are politics, economics are economics, but you know, strong community is very important and locally and on a political stage as well. So I'm a bit

negative on that, you know. I know though over the long term, as we said, it's never you know, paid to be a pessimist, as as Buffett also said, I believe, you know, investing is an optimist game and you have to be that and it's been the right way to be. So you don't want to be too near term pessimistic. But you know, a near term me, you get a little bit down. And as you see this, you know,

this key element of life fracturing a bit interesting. So a recent college graduate comes to you and is looking for advice about a career in finance. What would you tell them, Yeah, I'd say a lot of things we've talked about. To say, I'll have to point them towards the podcast. But you know, I think you need to find the investment philosophy that works for you number one,

because there are a million roads to heaven. You gotta pick the right one for you in the investing world, you know, I I have a mouse trap that works for me and my team and our firm and our temperament and our skill set and our investors. Critically, so you've got to find the right path for you. I think reading and perspective is critical. Being a little less sensitive, being a little bit patient. I think those are the basic things you tell them to work on, you know,

be a voracious reader. Uh. And that you know, as we've talked about, there is a good future. You still have an employable skill set, you know. I think the human element is going to continue to create opportunity, continue to drive most people to make mistakes. That's just the law of numbers. And you can stand there ready to

capitalize upon them and and and make money. But critically preserve capital, you know, preserve one compound Number two and our final question, what do you know about the world of investing today that you wish you knew twenty years ago or so when you were first starting out. Yeah, that's a good one. What would I have wanted to

know twenty years ago today? Uh, you know, aside from the generic things that would leave to two general investment success, you know, you'd want to know how complicated the businesses outside of just the you know, the investing aspect, in the analytical aspect, right. I think it's why it's important for people, and it was helpful in my own background, as I mentioned my past, to know how the plumbing works, right,

the plumbing is becoming even more important. You know how markets trade, how trades to element works, how that those elements work. I think that's twenty years ago. That was something that wasn't paris not taught in school. You know, you don't learn about the plumbing. You try to get a job, go to graduate school and come out and be an analyst or be a successful investor. You sort of skip ahead, you know. So I think that's an

important aspect. Do you want to really know with investing or any thing, have that foundation of how things work first? Where generally people have a tendency to want to jump ahead and solve the problems, you know, or so go to the headline of the issue without backing down and understanding the plumbing. So I think that's the that's the

advice I would have known. I want to know more of the plumbing, and I think I think we've done a decent job preparing for that, and I think we're ahead of that certainly where we are today, because that's another key element we didn't even get into today, you know, the mechanics and plumbing of the markets, and where we are now versus where we used to be in that interaction with investing is going to be more important, quite quite interesting. Matt, thank you for being so generous with

your time. We have been speaking with Matt Benkendorff, ce IO of on Tobol Quality Growth. UH. If you enjoy this conversation, well be sure and look up an Inch or down an Inch on Apple iTunes and you could see any of the previous two hundred and sixty or so of these we've had over the past five plus years. UH. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. Be sure

and give us a review on Apple iTunes. I would be remiss if I did not thank the Crack staff that helps put these conversations together each week. Karen O'Brien is my audio engineer. Michael Batnick is my head of research. I'm Barry Hults. You've been listening to Masters in Business on Bloomberg Radio