# GE to Buy Consolidated Precision Products for $11.75 Billion

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 8 Sep 2026, 22 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7f534b8c-9e91-429a-b102-ae3c00090c6d/2e2f9c91-8eea-4c72-a647-b4bf0113e0b0/audio.mp3?utm_source=Podcast&in_playlist=0ad812bf-fd15-4012-a18c-ae3c00090c76

Watch Paul and Scarlet LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu - George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense, & Airlines Analyst, discusses GE Aerospace agreeing to buy castings manufacturer Consolidated Precision Products from Warburg Pincus and Berkshire Partners for $11.75 billion. The deal will significantly expand the jet-engine manufacturer’s capacity for critical components and is expected to close in the second half of 2027. GE Aerospace aims to boost capacity to help fulfill surging demand for new jet engines and spare parts needed by airlines and components for the defense industry. - Mandeep Singh, Global Head of Tech Research for Bloomberg Intelligence, discusses top tech stories. Anthropic PBC has decided against acquiring artificial intelligence startup Decart AI, people familiar with the matter said. Separately, Qualcomm Inc. said it signed up Amazon.com Inc. as a data center chip customer in a deal that will span "multiple generations" and gives Amazon the right to acquire as much as $4 billion in shares. -Derek Mogull, Bloomberg Intelligence Technology Analyst, discusses his research: “AI Storage Model Shows 5x Spending Growth by 2030.” According to Bloomberg Intelligence: AI is set to expand storage spending almost 5x by 2030, with data-center revenue rising about 8x and inference driving roughly 85% of incremental data-center NAND flash bit growth. This marks a structural break from storage's mature, cyclical past: AI lifts bit growth into the mid-20s, raises value per bit and reinforces the storage hierarchy, most directly benefiting Seagate, Western Digital, SanDisk, Kioxia and Everpure. -Hema Parmer, Bloomberg Hedge Fund Reporter, discusses the Bloomberg Big Take story: “Milennium Nears $100 Billion in New Era for Giant Hedge Funds.” Millennium Management's assets have hit $97 billion, more than double what the firm oversaw six years ago, and is speeding toward $100 billion. The firm's founder, Izzy Englander, is ramping up an unusual model of seeding dozens of smaller would-be rivals to give his firm more capacity to take on investor cash, with $22 billion of new commitments set to close on Oct. 1. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios. Podcasts.
[0:05] Speaker 2: Radio.
[0:06] Speaker 3: News.
[0:09] Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[0:13] Speaker 4: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[0:16] Speaker 4: Auto with the Bloomberg Business App. Listen on demand wherever
[0:19] Speaker 4: you get your podcasts or watch us live on YouTube.
[0:23] Speaker 5: I had an M & A trade here today that
[0:26] Speaker 5: I think got the attention of a lot of folks.
[0:28] Speaker 5: General Electric, GE. to buy consolidated precision products for $ 11. 75 billion.
[0:35] Speaker 5: I have no idea what consolidated precision products does for
[0:38] Speaker 5: a living, but our next guest does. George Ferguson joins us.
[0:41] Speaker 5: He covers all the airlines, all the aerospace companies. George,
[0:45] Speaker 5: first of all, I was talking earlier this morning to
[0:47] Speaker 5: John Tucker. I can't remember the last time GE made
[0:50] Speaker 5: a major acquisition. I've spent the last 20 years hearing
[0:53] Speaker 5: about all the stuff they're divesting.
[0:55] Speaker 6: Good point.
[0:55] Speaker 5: Here's GE buying it. George, talk to us about this deal.
[0:57] Speaker 5: What's GE doing here?
[0:59] Speaker 6: Yeah, they have, like you said, largely been divesting and
[1:02] Speaker 6: turning themselves into a pure play arrow. This looks to
[1:05] Speaker 6: me like GE is going out and buying into their
[1:09] Speaker 6: supply chain. My guess is they're looking for obstacles to
[1:13] Speaker 6: building more engines and more engine parts because everybody's having
[1:17] Speaker 6: a problem right now getting the throughput they want. And look,
[1:21] Speaker 6: I think it probably sets GE up for the potential,
[1:27] Speaker 6: maybe even to take more share on this generation of
[1:31] Speaker 6: jet engines. So one of the big challenges right now
[1:35] Speaker 6: for the air framers, Boeing and Airbus, especially Airbus, is
[1:39] Speaker 6: getting enough engines to build aircraft and deliver to customers.
[1:43] Speaker 6: Both of them have backlogs that are about a decade long,
[1:48] Speaker 6: definitely drive well into the 2030s because it's not a
[1:51] Speaker 6: sequential backlog. But Airbus keeps asking RTX to give them
[1:55] Speaker 6: more engines so they can make more new aircraft. RTX
[2:00] Speaker 6: keeps begging that off right now because they're in the
[2:03] Speaker 6: midst of trying to fix their problems with their geared
[2:06] Speaker 6: turbofan engine. This could give GE the opportunity to build
[2:10] Speaker 6: more LEAPs, which is their next generation engine, deliver into
[2:14] Speaker 6: Airbus potentially, which wants to go to 75 a month
[2:17] Speaker 6: for the A320 and take even more share in the
[2:21] Speaker 6: current cycle of the aircraft business.
[2:24] Speaker 5: Okay.
[2:24] Speaker 2: I also have to get used to the fact that
[2:26] Speaker 2: GE is actually GE Aerospace, which, you know, kind of
[2:29] Speaker 2: requires me to, you know, rewire my brain a little bit,
[2:32] Speaker 2: but GE Aerospace to fund this deal with $ 7 billion
[2:35] Speaker 2: in cash, the remainder in new debt. You mentioned that
[2:38] Speaker 2: it's solidifying its supply chain. Does that mean that regulators
[2:43] Speaker 2: might jump in and look at this, um, with some skepticism?
[2:47] Speaker 7: Look, I, I, yeah, I, I don't, I think regulators
[2:51] Speaker 7: will absolutely look at it, um, I can't tell you
[2:55] Speaker 7: what the supply chain for precision casters look like. But
[3:00] Speaker 7: what we hear from GE, because it is a private company,
[3:03] Speaker 7: what we hear from GE is they are a supplier
[3:05] Speaker 7: to the industry. So I'm almost certain you're going to
[3:09] Speaker 7: see some, you know, some judicial oversight whether or not
[3:13] Speaker 7: there's too much concentration there.
[3:15] Speaker 5: I had the DES function on the Bloomberg terminal for
[3:17] Speaker 5: consolidated precision products. They manufacture precision metal castings for the
[3:22] Speaker 5: aerospace defense and power generation industries. That seems like right
[3:26] Speaker 5: up George's alley, like manufacturing aerospace. And they're located in
[3:31] Speaker 5: the city of Industry, California.
[3:32] Speaker 1: I don't know where that is, but Southern California, I believe.
[3:35] Speaker 1: Southern California.
[3:36] Speaker 5: OK. So, George, while we've got you on the horn here, Boeing,
[3:40] Speaker 5: I got to ask, I mean, where are we on
[3:43] Speaker 5: deliveries of 737s? That's all I know about the Boeing story.
[3:46] Speaker 5: I'm sticking with that strategy. Tell me what the delivery
[3:49] Speaker 5: situation looks like for the 737.
[3:50] Speaker 6: Well, so I have to tell you, it's been a
[3:53] Speaker 6: busy morning here in aerospace, right? Airbus reported their deliveries.
[3:59] Speaker 7: Yesterday.
[4:00] Speaker 6: So they tried to sneak them in on Labor Day.
[4:01] Speaker 6: And they were a bit weak. And Boeing just announced
[4:04] Speaker 6: something as we were going on the air. So honestly,
[4:07] Speaker 6: I have not seen it. I will tell you that
[4:10] Speaker 6: Boeing has been doing better than Airbus. We looked at
[4:13] Speaker 6: Airbus August numbers. Airbus is going to have to build
[4:17] Speaker 6: 75 A320s per month till the end of the year
[4:21] Speaker 6: to get to their guidance for A320s. They've never done
[4:24] Speaker 6: that every four months sequentially. Again, Boeing's been having a
[4:28] Speaker 6: better time at it, but Boeing's coming from, you know,
[4:31] Speaker 6: from the easier end of the curve, I'd say, because
[4:34] Speaker 6: they're not sort of approaching those, approaching the levels they
[4:38] Speaker 6: were delivering prior to the pandemics. But we'll be on
[4:41] Speaker 6: Boeing here in a minute. It's been kind of a,
[4:43] Speaker 6: it's been a busy airspace.
[4:44] Speaker 3: Exactly.
[4:44] Speaker 5: Well, I'll give you the Bloomberg News reporting. Boeing delivered
[4:47] Speaker 5: 51 commercial aircraft in August, its lowest number in four months,
[4:50] Speaker 5: as output of the wide-body 787 Dreamliner dropped Importantly for me,
[4:55] Speaker 5: because I listen to you and I read your research,
[4:57] Speaker 5: the 737 type aircraft, they delivered 42.
[5:01] Speaker 8: So there you go.
[5:02] Speaker 5: So everybody's reporting their deliveries.
[5:04] Speaker 6: Which isn't bad. 47 is what their target is, and
[5:07] Speaker 6: it's August, right?
[5:08] Speaker 5: Yeah.
[5:09] Speaker 6: So we know August is light, but the question is,
[5:11] Speaker 6: what's the setup for the end of the year?
[5:13] Speaker 7: We'll be looking at that shortly.
[5:15] Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
[5:22] Speaker 4: You're listening to the Bloomberg Intelligence Podcast.
[5:25] Speaker 1: Catch us live weekdays at 10 a.m.
[5:27] Speaker 4: Eastern on Apple CarPlay and Android Auto with the Bloomberg
[5:30] Speaker 4: Business App. Listen on demand wherever you get your podcasts
[5:34] Speaker 4: or watch us live on YouTube.
[5:37] Speaker 2: Let's turn back to the tech sector because we can't
[5:39] Speaker 2: stray too far away from it. There have been a
[5:41] Speaker 2: couple of deals, an actual deal and then a non-deal
[5:45] Speaker 2: this morning in the tech sector. You have Qualcomm making
[5:49] Speaker 2: a deal with Amazon, but then you also have Anthropic
[5:52] Speaker 2: walking away from a purchase. So we had to bring
[5:55] Speaker 2: in Mandeep Singh. He is our global head of tech
[5:57] Speaker 2: research here at Bloomberg Intelligence. Mandeep, let's start with Anthropic.
[6:01] Speaker 2: Our reporting shows that it has decided to walk away
[6:04] Speaker 2: from a $ 6 billion purchase of Descartes AI, which is
[6:07] Speaker 2: an AI startup. What does that say about what Anthropic
[6:12] Speaker 2: wants to do or can do before it goes public?
[6:15] Speaker 3: Well, right now, you know, we've seen these companies are
[6:19] Speaker 3: super active when it comes to just partnerships and any deals.
[6:23] Speaker 3: NVIDIA hugging face was a big deal last week. And
[6:28] Speaker 3: to my mind, I mean, Anthropic really has a lot
[6:30] Speaker 3: going right for them. And it is about plugging whatever
[6:34] Speaker 3: gaps they have. So in this case, this company does
[6:37] Speaker 3: chip optimization. And we know Anthropic has the most premium
[6:42] Speaker 3: tokens in the market. So when it comes to the
[6:44] Speaker 3: token pricing, they are able to charge a premium. And
[6:47] Speaker 3: if they are able to optimize the infrastructure that they
[6:51] Speaker 3: run on, that makes sense. But obviously, they didn't agree
[6:54] Speaker 3: on something. We don't know what it was. I don't
[6:58] Speaker 3: think it would be the price, given Anthropic really has
[7:01] Speaker 3: the deep pockets now to make any acquisition. So it
[7:04] Speaker 3: was something, I think, more strategic in terms of aligning.
[7:07] Speaker 3: And this company did get an offer from NVIDIA, Descartes,
[7:12] Speaker 3: and they turned down the offer. But to my mind,
[7:15] Speaker 3: Anthropic has done everything organically. And look, they have the
[7:19] Speaker 3: best coding agents, so they could code anything if they
[7:21] Speaker 3: wanted to.
[7:23] Speaker 5: Are we expecting them to come public and when?
[7:26] Speaker 9: It could be as soon as this week.
[7:27] Speaker 3: Again, I don't know the exact details on when they
[7:33] Speaker 3: will file the S-1, but there are rumors it could
[7:36] Speaker 3: be as soon as this week or next.
[7:38] Speaker 5: All right, so here's a Qualcomm deal. They're the largest
[7:42] Speaker 5: maker of smartphone processors, Qualcomm is. They signed up Amazon.com
[7:46] Speaker 5: as a data center chip customer. That's good news, I think,
[7:49] Speaker 5: for Qualcomm. But what's even better, they gave Amazon the
[7:53] Speaker 5: right to acquire as much as $ 4 billion in shares.
[7:56] Speaker 5: What's going on there? Is this another one of your
[7:58] Speaker 5: circular deals, Mandip, that I'm worried about?
[8:00] Speaker 3: I mean, look, at this point of time, all the
[8:03] Speaker 3: chip companies, especially the ones that are not NVIDIA. So
[8:07] Speaker 3: AMD ended up doing a similar warrant structure with OpenAI
[8:11] Speaker 3: and Meta. And I'm not surprised Qualcomm being the new
[8:15] Speaker 3: player on the block when it comes to the data
[8:18] Speaker 3: center market, which is in trillions of dollars. And everyone
[8:21] Speaker 3: knows that. So Qualcomm being a more consumer device centric
[8:25] Speaker 3: chip player wants to expand in data center. And what
[8:29] Speaker 3: better way to do it than partner with Amazon? And
[8:32] Speaker 3: they had to give Amazon some incentive. So in this case,
[8:35] Speaker 3: it was the warrant. I mean, the existing shareholders may
[8:38] Speaker 3: complain and say, why are they diluting the existing shareholders?
[8:43] Speaker 3: But to my mind, strategically, it makes a ton of
[8:45] Speaker 3: sense and it gives Qualcomm, some skin in the game
[8:48] Speaker 3: when it comes to this large data center market.
[8:50] Speaker 2: And investors seem to agree because there's no fear of
[8:53] Speaker 2: dilution showing up in the share price today. Qualcomm is
[8:55] Speaker 2: up about 5% in trading. Amazon obviously not putting all
[9:00] Speaker 2: its chips with Qualcomm, right? I mean, it's spreading out.
[9:02] Speaker 2: It's not risk, but it's definitely... Relying on a number
[9:07] Speaker 2: of different suppliers.
[9:08] Speaker 3: Yeah, and they make their own chips. So right now,
[9:10] Speaker 3: the real limiting factor is the fab capacity. So what
[9:15] Speaker 3: kind of TSMC allocation can you get? So Amazon has
[9:19] Speaker 3: its own allocation. NVIDIA has prepaid for 70% plus of
[9:23] Speaker 3: TSMC's capacity for the foreseeable future. So how do you
[9:27] Speaker 3: make more chips? You got to partner with whoever is remaining.
[9:31] Speaker 3: So it's your Qualcomm's, your AMD's, and you know, whoever
[9:34] Speaker 3: is remaining there.
[9:35] Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
[9:42] Speaker 4: You're listening to the Bloomberg Intelligence podcast. Catch us live
[9:46] Speaker 4: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[9:49] Speaker 4: Auto with the Bloomberg Business app. Listen on demand wherever
[9:53] Speaker 4: you get your podcasts or watch us live on YouTube.
[9:57] Speaker 5: Our tech team, research team at Bloomberg Intelligence which Mandeep
[10:00] Speaker 5: Singh and Anurag Rana.
[10:02] Speaker 1: It keeps growing.
[10:03] Speaker 5: Yeah, thankfully, we get some new voices. I'm sick and
[10:05] Speaker 5: tired of talking to those guys. I mean, they're pretty
[10:07] Speaker 5: good and all, but I want some new voices. Fresh perspective. Yeah,
[10:11] Speaker 5: Derek Mogul joins us here. He's the technology analyst for
[10:13] Speaker 5: Bloomberg Intelligence. I recently joined the team. Appreciate it. Talk
[10:17] Speaker 5: to us about AI storage. Are your companies, are they
[10:21] Speaker 5: riding this AI wave? And if so, how are they
[10:23] Speaker 5: doing that?
[10:24] Speaker 3: Oh, well, they are.
[10:25] Speaker 10: So with AI, inference is actually driving storage from a
[10:28] Speaker 10: passive capacity to more active extension of memory. So it's
[10:33] Speaker 10: creating an enormous amount of active data, but this data
[10:36] Speaker 10: has to be accessed repeatedly and concurrently. So basically what's
[10:40] Speaker 10: going on is that's overwhelming DRAM and HBMs What's HBM?
[10:44] Speaker 5: High bandwidth memory.
[10:47] Speaker 10: So it's overwhelming these memory sources, and it's actually flowing
[10:50] Speaker 10: into other layers of storage. So this is creating huge demand,
[10:54] Speaker 10: and it's creating what we call a memory and storage hierarchy.
[10:58] Speaker 10: So you have HBM and DRAM at the top of
[11:00] Speaker 10: the pyramid, and then as data flows down, it flows
[11:03] Speaker 10: down into Flash, and then it flows down to HDD.
[11:05] Speaker 10: So it's reinvigorating the storage industry for sure.
[11:08] Speaker 1: Yeah.
[11:09] Speaker 2: It seems like any company that's modestly involved in memory
[11:12] Speaker 2: chips has just, you know, the stock has gone haywire
[11:15] Speaker 2: over the last couple of months.
[11:16] Speaker 1: You do a lot of work on this.
[11:18] Speaker 2: Your modeling points to almost five times growth in storage
[11:21] Speaker 2: spending by 2030.
[11:22] Speaker 1: And all of that is just part of the whole
[11:24] Speaker 1: build out of AI infrastructure?
[11:26] Speaker 9: Yeah, that's exactly right.
[11:27] Speaker 10: So it really comes down to more data being created
[11:31] Speaker 10: by AI and The data being costing more to store.
[11:35] Speaker 10: So we do model about 25% CAGR in the underlying
[11:38] Speaker 10: BIT demand growth through 2030. And this is really based
[11:41] Speaker 10: on the supplier guidance. And I mean, we've all heard
[11:43] Speaker 10: about these LTAs. LTAs are now spanning out to the 2030s.
[11:46] Speaker 1: Long-term agreements.
[11:47] Speaker 6: Long-term agreements, sorry.
[11:48] Speaker 1: Yep.
[11:49] Speaker 10: And then compounding that is ASPs. So storage has historically
[11:53] Speaker 10: been a deflationary industry, but we're seeing price increases for
[11:55] Speaker 10: the first time in decades. So if you add two
[11:58] Speaker 10: and two together, yeah, that's 5x increase in the storage TAM.
[12:01] Speaker 6: All right.
[12:02] Speaker 5: Let's be honest. You were born on third base. You
[12:04] Speaker 5: thought you hit a triple. Look at some of these
[12:06] Speaker 5: names on your list. Seagate Technologies, Western Digital, Micron. These
[12:10] Speaker 5: things are up like 100, 200% this year.
[12:12] Speaker 1: It's like flashback to the 90s.
[12:14] Speaker 6: Yeah.
[12:14] Speaker 5: I mean, so what's going on with these names? Are
[12:17] Speaker 5: people just trying to, are they just sensing that there's
[12:20] Speaker 5: going to be demand for these products?
[12:22] Speaker 2: Yeah.
[12:22] Speaker 10: Like really for like next several years? I mean, these
[12:26] Speaker 10: guys are guiding as such. I mean, they're guiding sustained
[12:28] Speaker 10: bit demand into the 2030s. And they're talking about LTAs
[12:32] Speaker 10: going out. I mean, Western Digital, I believe, talked about
[12:34] Speaker 10: LTAs out to 2032.
[12:36] Speaker 5: So as an analyst, as an investor, you have some
[12:38] Speaker 5: visibility on revenue, right?
[12:41] Speaker 3: Yeah.
[12:41] Speaker 10: I mean, it's up massively, especially on the flash side.
[12:44] Speaker 10: I mean, ASPs in flash are up three to four
[12:46] Speaker 10: X this year alone that compounds upon 20, 25% bid growth.
[12:49] Speaker 10: I mean, that, that, I mean, those are enormous numbers.
[12:54] Speaker 2: So for a company like Western Digital, trading at 36
[12:57] Speaker 2: times earnings, I mean, this, like you said, once upon
[13:00] Speaker 2: a time was a very cyclical company, and the products
[13:03] Speaker 2: it made were, you know, they just kind of went
[13:04] Speaker 2: down in price overall. Is that expensive for Western Digital,
[13:08] Speaker 2: 36 times earnings?
[13:09] Speaker 10: It is expensive, but again, the company is now guiding
[13:12] Speaker 10: to 25% demand bid growth through 2030. 10 points of that,
[13:18] Speaker 10: I estimate, is from AI alone. So they do get
[13:21] Speaker 10: some upside from the AI.
[13:21] Speaker 6: I'll just add a quick comment.
[13:26] Speaker 2: Seagate trading at 59 times reported earnings.
[13:29] Speaker 5: But you look to the forward earnings, that multiple's cut
[13:32] Speaker 5: in half 25 times. So again, like we saw with NVIDIA,
[13:36] Speaker 5: these companies are earning their way into their multiples. So
[13:39] Speaker 5: it's just amazing. Is your business, like one of the
[13:42] Speaker 5: first things I learned about your business, which is the
[13:44] Speaker 5: hardware side of tech, is it's cyclical and you got
[13:47] Speaker 5: to get the cycle right. Is it still cyclical these days?
[13:50] Speaker 1: I mean, that's a great question.
[13:52] Speaker 10: So the way I see it is the storage industry
[13:54] Speaker 10: has bifurcated into the legacy cyclical industry. So it's cell
[13:57] Speaker 10: phone storage, PC storage. That still rides the normal cycles,
[14:01] Speaker 10: like high highs and low lows. But I would say
[14:04] Speaker 10: on the AI side, it seems like it's more sustained.
[14:07] Speaker 1: It's less cyclical.
[14:08] Speaker 10: Of course, it could crash at some point. But for
[14:11] Speaker 10: the time being, I mean, we're seeing long-term demand and
[14:13] Speaker 10: sustained demand.
[14:14] Speaker 5: Okay.
[14:14] Speaker 1: What could cause it to crash?
[14:16] Speaker 10: Well, I mean, number one, I mean, this can cause
[14:18] Speaker 10: the whole market to crash if hyperscalers stop spending. I mean,
[14:22] Speaker 10: that's the bottom line.
[14:23] Speaker 5: And we haven't seen or heard any of that, have we?
[14:25] Speaker 10: No, there's no inkling of that at the current moment.
[14:28] Speaker 10: I mean, if you think about it, are we going
[14:30] Speaker 10: to use less and less AI? Are you going to
[14:32] Speaker 10: use chat GPT less? No, I mean, you're going to
[14:34] Speaker 10: continue to use it, and I think it'll continue to proliferate.
[14:37] Speaker 10: Enterprises are using it more and more, Claude. So, I mean,
[14:40] Speaker 10: over time, I think you can make a strong case
[14:42] Speaker 10: that demand will hold up.
[14:44] Speaker 1: So for these stores.
[14:45] Speaker 2: For these storage companies that are seeing so much more demand,
[14:49] Speaker 2: will they need to spend more as well in order
[14:51] Speaker 2: to meet this demand?
[14:53] Speaker 10: Yeah, that's a great question. So on the flash side,
[14:56] Speaker 10: they are increasing capacity. I mean, prices are up 3
[15:00] Speaker 10: to 4x just due to the insufficiency of supply. So
[15:03] Speaker 10: they are ramping new facilities, and they should come online
[15:06] Speaker 10: in the 2028 through 2030 timeframe. And of course, they're
[15:08] Speaker 10: spending massive amounts of CapEx on that. The HDD players
[15:11] Speaker 10: are taking a more measured approach. So they're not actually
[15:14] Speaker 10: increasing supply through increasing manufacturing capacity, but what they're doing
[15:18] Speaker 10: is just increasing the aerial density of the platters, like
[15:21] Speaker 10: the spinning disc platters in their HDDs.
[15:24] Speaker 1: Stay with us.
[15:25] Speaker 4: More from Bloomberg Intelligence coming up after this. You're listening
[15:32] Speaker 4: to the Bloomberg Intelligence Podcast. Catch us live weekdays at
[15:35] Speaker 4: 10 a.m. Eastern on Apple CarPlay and Android Auto with
[15:38] Speaker 4: the Bloomberg Business App. Listen on demand wherever you get
[15:41] Speaker 4: your podcasts or watch us live on YouTube.
[15:45] Speaker 5: Here's the first story I read when I got in
[15:47] Speaker 5: the car at 4.40 a.m. this morning. It's about Millennium,
[15:50] Speaker 5: the big hedge fund. I thought they were big. I
[15:52] Speaker 5: had no idea how big Izzy and his folks are
[15:55] Speaker 5: there at Millennium. nearing $ 100 billion in assets under management.
[16:00] Speaker 5: Just blew me away. That's the subject of our big
[16:02] Speaker 5: take story on the Bloomberg Tribune. You know how we
[16:04] Speaker 5: love the big take stories. I got a green bee,
[16:06] Speaker 5: which I think is important for the reporters on the story.
[16:08] Speaker 5: I like to call that out. Hema Parmar joins us here.
[16:11] Speaker 5: She co-wrote this with Catherine Burton. Hema, talk to us
[16:14] Speaker 5: about Millennium Management, one of the biggest, or I think
[16:17] Speaker 5: the biggest hedge fund out there in the world. What
[16:19] Speaker 5: is your reporting?
[16:20] Speaker 1: Discover.
[16:21] Speaker 3: It's big.
[16:22] Speaker 1: It's huge.
[16:22] Speaker 8: It's swelled in size, as the industry has as well.
[16:28] Speaker 8: And now they're at $ 97 billion, making it the world's
[16:31] Speaker 8: second biggest hedge fund.
[16:32] Speaker 9: They're close to.
[16:33] Speaker 8: Topping $ 100 billion soon enough. There's no plans to slow down.
[16:37] Speaker 8: He's raising $ 22 billion. On top of that, he's planning
[16:43] Speaker 8: to potentially in talks to raise another $ 3 billion for
[16:46] Speaker 8: an illiquid credit fund.
[16:48] Speaker 9: There's a lot happening.
[16:49] Speaker 8: Soon enough, within a few years, it wouldn't be a
[16:51] Speaker 8: surprise for Millennium to run more than $ 130 billion.
[16:54] Speaker 5: It's extraordinary. I mean, a lot of managers will tell you,
[16:58] Speaker 5: I'm capping the size of my book because I can't
[17:01] Speaker 5: generate the returns with more capital. There's only so many
[17:05] Speaker 5: names out there.
[17:05] Speaker 4: How does.
[17:07] Speaker 5: Mr. Englander, known on the street as Izzy. How does
[17:10] Speaker 5: he kind of deal with that? How does he set
[17:11] Speaker 5: up his firm?
[17:13] Speaker 3: Yes.
[17:13] Speaker 8: So this idea of being capacity constrained, where you get
[17:16] Speaker 8: so big that it now impedes returns. This has been
[17:20] Speaker 8: felled a number of hedge funds. It's something that we
[17:23] Speaker 8: see across the space. A lot of other multistrats have
[17:26] Speaker 8: either capped their size or some firms have given money back. Bridgewater,
[17:31] Speaker 8: which was the world's biggest hedgerow for a long time,
[17:34] Speaker 8: they had their performance curbed because they grew too big
[17:37] Speaker 8: and had to shrink their pure alpha fund so that
[17:41] Speaker 8: they can get back on track. What Izzy's done with
[17:44] Speaker 8: his firm is is managed to avoid this capacity-constrained problem.
[17:49] Speaker 9: And the way he's done that is by having his.
[17:52] Speaker 8: Fund do so many different types of strategies, by spawning
[17:56] Speaker 8: this movement to invest in outside hedge funds. So now
[18:00] Speaker 8: they invest a hedge fund investing in another hedge fund.
[18:03] Speaker 8: And now they're even plugging in full businesses like Bobby
[18:06] Speaker 8: Jane's Jane Capital, which has seven business lines and 400
[18:11] Speaker 8: staff of its own to really spread out all the
[18:14] Speaker 8: investments across different things. And so they've built this kind
[18:19] Speaker 8: of new, more complicated model to be market neutral, but
[18:23] Speaker 8: to have a ton of money and a ton of
[18:26] Speaker 8: things invested across all these little, little siloed pods that
[18:30] Speaker 8: trade independently.
[18:31] Speaker 3: Wow.
[18:32] Speaker 5: Now, Izzy Englander, the founder of this firm, he's 77
[18:36] Speaker 5: years old. Has he discussed succession planning at all?
[18:39] Speaker 7: Yes.
[18:39] Speaker 8: So the firm recently, I think last year or so,
[18:43] Speaker 8: sold an equity stake. It was the first time that
[18:46] Speaker 8: Izzy had given up some of his equity stake. He
[18:47] Speaker 8: was basically a full owner of the firm. and sold
[18:51] Speaker 8: about 15% of it. This was one of many things
[18:54] Speaker 8: the firm has done to be more institutional, so that
[18:57] Speaker 8: when Izzy steps back, or as he ages, the firm
[19:02] Speaker 8: can still continue.
[19:03] Speaker 9: And we see that through the.
[19:05] Speaker 8: Creation of an office of the CIO, which, as this group,
[19:09] Speaker 8: they make decisions for the firm. And you see that
[19:12] Speaker 8: the firm in general is no longer... a smaller pawn shop, right?
[19:16] Speaker 8: They are this now big institution in the industry. You
[19:19] Speaker 8: see that with the size. You see that with the
[19:21] Speaker 8: way the firm is run. You see that with the
[19:23] Speaker 8: new things they're doing. And so the firm should live
[19:28] Speaker 8: on beyond Izzy's participation in the firm.
[19:32] Speaker 9: And that's the whole goal, that it sustains.
[19:34] Speaker 5: You know, back in my day, so let's call it
[19:36] Speaker 5: late 90s, early 2000s, wasn't that uncommon for somebody to
[19:40] Speaker 5: have a good three, four year run on the city
[19:42] Speaker 5: currency desk or the Morgan Stanley Bond desk and go
[19:45] Speaker 5: out and raise a billion or two and start their
[19:46] Speaker 5: own hedge fund? Does that still happen in a world where...
[19:49] Speaker 5: Millennium has a hundred billion in assets under management?
[19:52] Speaker 1: It's a lot harder.
[19:52] Speaker 8: I mean, it's been hard to launch a hedge fund
[19:55] Speaker 8: for years. And you see some people like Bobby Jane
[19:58] Speaker 8: raise five billion for his hedge fund. Even he had
[20:01] Speaker 8: his own struggles. What you're seeing now is a PM
[20:05] Speaker 8: have to think about Do I start my own firm,
[20:08] Speaker 8: have my name on the shop, raise money independently, and
[20:12] Speaker 8: try to make it?
[20:13] Speaker 9: Or do I now take this other door, which.
[20:16] Speaker 8: Is potentially allow myself to take money from Millennium, be
[20:21] Speaker 8: an external pod? In some cases, you do get your
[20:23] Speaker 8: own name on the door, right? And you are.
[20:26] Speaker 9: Allowed to take on outside capital as well.
[20:29] Speaker 8: Sometimes Millennium will demand exclusivity. And then you are faced
[20:33] Speaker 8: with those same risk constraints that Izzy's famous for.
[20:36] Speaker 5: One of the greatest business models on global Wall Street
[20:39] Speaker 5: is 2 in 20. You get 2% fee on assets
[20:43] Speaker 5: under management. You get 20% of the upside. If I
[20:46] Speaker 5: do the math for Mr. Engler, $ 100 billion, that's $ 2
[20:51] Speaker 5: billion a year of just management fees. That is extraordinary.
[20:55] Speaker 1: It's extraordinary.
[20:56] Speaker 8: And then when you think about multistrats, they have pass-through fees.
[20:59] Speaker 8: So they make the investor, the LP... pay for basically
[21:03] Speaker 8: the cost of running the firm. It could be the
[21:06] Speaker 8: terminal cost, the PM salaries, which are so expensive, the
[21:11] Speaker 8: costs of desks and chairs and tables, printer paper. You
[21:15] Speaker 8: can really pass through so many of those expenses onto
[21:19] Speaker 8: the investor. And look, investors really care about the net return.
[21:22] Speaker 8: So Izzy has a track record of producing annual returns
[21:26] Speaker 8: of at least 10%. And that's what the goal is.
[21:30] Speaker 8: But the expenses on top of that are pretty incredible.
[21:35] Speaker 8: The 10% return typically is net of fees. So they
[21:38] Speaker 8: would have had to have done.
[21:38] Speaker 7: 20% or more.
[21:40] Speaker 4: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
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