- June 1, 2018: Vol. 5, Number 6

Roundtable: Spoken and written


Kathleen Fisher, head of wealth and investment strategies, Bernstein Private Wealth Management

Speaking on a Masters in Business podcast about the biggest retirement threat many people face: We always remind clients that longevity risk is the biggest risk they have. People worry about market returns, but nothing in human history has prepared people for a world where they work for 40 years, and may have to live on what they’ve saved for the next 30 or 40 years. For very wealthy people, it’s a different dynamic, but still it’s a very different thing when you’re living for perhaps as long as you have worked. When you go back to when Social Security was created, people used to die a few years after they retired. The dynamics have changed dramatically, and it’s very important now to think about money lasting for many decades.


Larry Fink, CEO, BlackRock

Speaking in a McKinsey & Co. podcast about recruiting “diversity of mind:” It’s very easy to see across a business and ask: How many women are there? What’s the gender mix? It’s very easy to see if there is a diverse group of men and women with diversity of race. We don’t spend enough time asking: Do we have an organization with diversity of mind? I think this is where most companies fall down. People who are engineers like to be around other engineers. People with a background in political theory are generally around other people in political theory. People who have an affinity with one political party or another are generally friends with people in that political party. There are so many places where you see congregations of people around ideals, around education, around race. We have to break that down. Firms fail when you have groupthink. You generally have groupthink when you have replicants all around you. The most important component of good management, good leadership and good stewardship is making sure that you have diversity of mind.


William Frey, senior fellow, The Brookings Institution

Writing in his report on migration patterns among U.S. citizens: Newly released census data for the first seven years of this decade signal a resumption of the population dispersal that was put “on hold” for a good part of the post–Great Recession period. The Census Bureau’s annual county and metropolitan area estimates through 2017 reveal a revival of suburbanization and movement to rural areas, along with Snow Belt-to-Sun Belt population shifts. In addition, the data show a new dispersal to large- and moderate-sized metro areas in the middle of the country — especially in the Northeast and Midwest. If these shifts continue, they could call into question the sharp clustering of the nation’s population — in large metropolitan areas and their cities — that characterized the first half of the 2010s. The new numbers leave little doubt that suburbanization is on the rise, after a decided lull in the first part of the decade.


Joe Davis, global chief economist, The Vanguard Group

Commenting during a Real Assets Adviser podcast on technology’s downward pressure on inflation: Twenty years ago, for $1 of GDP we used an average of $8 of digital technology. Today, we use 20 cents of technology to produce that $1 of GDP. It’s ironic that computers, digital technology and social platforms are pervasive, and they’re all in front of us, yet until recently we had not quantified that drag on inflation. It is an effect of what’s called Moore’s Law, the fact that the relative price of this technology is falling so rapidly that it allows price pressures to be offset at the margins by companies. It’s not that we can’t have core inflation of 2.5 percent or 3 percent — we can. It’s just that the cyclical thrust of the economy or tightness in the labor market has to be stronger today than it needed to be in the 1980s or 1990s to offset that 50 basis point drag from Moore’s Law.

Ted Rappaport, electrical and computer engineering professor, New York University Tandon School of Engineering

Writing in Fortune magazine about the impact of fifth-generation wireless technology: 5G promises almost unimaginable capabilities that have never been available before, as it will bring the power of the Internet and ubiquitous fiber-optic communication speeds to the pocket of every human being. Immersive virtual reality, real-time television viewing, see-in-the-dark cameras, hard drives that provide nearly infinite content for instant downloads from any location, and virtual meet-ups with friends and family — where they appear in the space in front of your phone — are just some of the many features that we will experience with 5G. The massive bandwidths and ever-increasing processing power of cellphones (thanks to Moore’s Law) will enable 3-D volumetric displays, such as those depicted in Star Wars when R2-D2 displayed Princess Leia’s emotional plea: “Help me, Obi-Wan Kenobi. You’re my only hope.” Even factories, for instance, will be able to remotely operate robots and machinery, while doctors will be able to perform remote surgeries using a phone to operate machinery in the hospital.


Aly Jeddy, senior partner, McKinsey & Co.

Talking about private equity: What is interesting, and this is a marked change over the last, say, 12 to 24 months, is the very structure of how people think about portfolios has started to change. So as opposed to alternatives — which was that corner allocation, the 5 or 7 percent that folks put in the corner and said, “That’s where I’m looking for alpha” — what has happened is people have started to think about their portfolio in a more sophisticated way, where they will say equities, within which are public and private, or credit, within which are publicly traded fixed income and private credit. The reason that is important is, rather than playing in that corner allocation of 5, 10, 15, 20 percent, which alternatives or private equity used to do, we are now playing in the mainstay of the portfolio.


Scott Minerd, global CIO, Guggenheim Partners

Writing about the investment awakening around sustainable development: Today there are pockets of capital devoted to sustainable development investing, but not in sufficient size. Publicly traded or bank-owned asset managers have so-called retail money and other portfolios devoted to classic environmental, social and governance (ESG) mandates or impact investing, but that capital does not approach the scale of investment needed. Other sources of funding seek to leave the world a better place, but without much of a return expectation. This is philanthropy, not investment, capital. But an awakening is near for insurance companies and pension funds that control some $60 trillion in assets with 30- or 50-year investment horizons. These stewards of capital are increasingly being held accountable for the types of investments they make. Increased portfolio transparency, a growing social consciousness among younger people, and empowered citizen-reporters using their smart phones and social media are exposing and calling out institutions that do not use their investment might to serve a higher purpose. We have reached an inflection point where doing right for the world and doing well for investors are converging.


Mark McCall, vice president of business development iSelect Fund

Writing for the iSelect Fund blog about rising corporate venture capital deals: The numbers don’t lie. Global corporate venture capital activity reached record highs in 2017: $31.2 billion in funding across 1,791 deals, according to CB Insights. That’s up nearly 19 percent over 2016 in terms of deals completed, and 18 percent in total capital invested, and triple what the figure was in 2013. Just Q4 of 2017 saw a record 470 corporate venture capital deals, totaling $9.3 billion in funding — the most since Q3 2015 — amid the global upswing in venture capital. That means corporate VCs took part in about 16 percent of the 11,042 VC deals last year, covering about 19 percent of the $164 billion in VC transaction value. Among the sectors with the most activity are healthcare and consumer packaged goods, as corporates look to gain an edge on organic, healthy, sustainable options. These investors are most active in countries like India, China and the U.K.


Jenny Schuetz, David M. Rubenstein Fellow, The Brookings Institution

Writing about the nine rules for a better U.S. housing policy: State, regional and national policymakers should reduce barriers to housing supply erected by local governments. Housing supply is critical to economic growth. In regions where housing is scarce or too expensive, firms will have difficulty hiring and retaining workers, and young people will delay forming new households. In aggregate, the nation’s productivity will suffer. Local governments in some of the country’s most productive regions, particularly the West Coast and the Northeast, have adopted overly restrictive land-use regulation that constrains housing growth and drives up prices. These policies are popular with current homeowners, but they reduce state and national economic well-being. Moreover, they systematically exclude young workers and lower-income families from living near employment centers and in communities that provide economic opportunity.


Dominic Marella, editor,

Writing for the about Bitcoin’s so-called bubble: Simply put, Bitcoin doesn’t fit the definition of a bubble. A bubble is a one-sided event in which a significant amount of money is poured into one investment, creating an unhealthy market. Even though a large sell-off has occurred, with another likely at some point, it doesn’t make it a bubble. Emerging markets, or assets classes, naturally have boom and bust cycles. There is no reason to think that Bitcoin will be any different. However, just because there is a temporary bust doesn’t mean there is a total paradigm shift as you often see with “bubbles.”


David Semple, portfolio manager for emerging markets, VanEck

Responding to a question about the 2018 outlook for investing in emerging markets: Fundamentals on the ground in emerging markets are looking pretty good. That’s not to say there aren’t concerns. For instance, trade, tariffs and protectionism have been rearing their ugly heads this year, and we are keeping an eye on how these issues may develop. It would be disappointing if things progressed in a negative direction, but it’s not inconceivable. Clearly there’s some concern globally that rates in the developed markets might increase too much, too quickly and engender a bit of a slowdown. However, generally speaking, emerging markets are fairly early in their business cycles, as opposed to a maturing developed market. Overall we believe things look positive.


Peter Mallouk, CEO, Creative Planning Inc.

Discussing compliance and regulation during a cover profile interview with Real Assets Adviser: The burden of compliance is borderline ridiculous; it is just completely out of control. The industry doesn’t even know what the rules are half the time — they are fairly arbitrary, and you have to dedicate a lot of time and resources and money. If the rules were: (1) Everyone has to be a fiduciary when it comes to investments; (2) advisers cannot receive commissions on investments, so the inherent conflict of interest is eliminated; (3) advisers cannot be paid to recommend their own funds, because that is an inherent conflict — you set those three rules, and you solve 95 percent of the problems.

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