# Swiss Re's Velina Peneva on the Business of Reinsurance

An episode of [Masters in Business](https://invisiblenetwork.ai/podcast/730188152), 27 Jun 2025, 1 h 13 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/4e4cd910-40a1-4619-a5f3-ae2b0012ffff/dd0b4f96-fc1d-43f0-b4c6-b3080183259e/audio.mp3?utm_source=Podcast&in_playlist=5873a3cb-298f-40bc-b71f-ae2b0013000d

Barry speaks with Velina Peneva, group chief investment officer at Swiss Re about the business of reinsurance, managing risk, her career path and more. Peneva started her career at Bain & Company in 1998 and later became Partner in 2011. While she was there, she worked with fund managers and investors, became a leader in the private equity practice in Zurich and became a member of the firm's global investment committee. Peneva joined Swiss Re in 2017, becoming co-head of client solutions & analytics, before being named Group Chief Investment Office and member of the Group Executive Comittee in 2023. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Masters in
[0:12] Speaker 1: Business with Barry Ritholtz on Bloomberg Radio.
[0:16] Speaker 2: On the latest Masters in Business podcast, I have another
[0:20] Speaker 2: extra special guest. Billina Penove is Group Chief Investment Officer
[0:25] Speaker 2: for insurance giant Swiss Ray. She runs their private internal
[0:30] Speaker 2: fund about a one hundred and eight billion dollars that
[0:33] Speaker 2: she manages primarily in fixed income, private credit, a variety
[0:39] Speaker 2: of other assets. Really a fascinating conversation with someone who
[0:44] Speaker 2: is uniquely situated in the investment world. Swiss Ray is
[0:49] Speaker 2: a global, very well known insurer and reinsurer. They cover
[0:54] Speaker 2: just about everything that's out there. Not only are they
[0:57] Speaker 2: the insurance company for insurance company, but they have a
[1:01] Speaker 2: variety of lines of business. She has a fascinating career.
[1:04] Speaker 2: She helped develop the private equity group for Banning Company
[1:09] Speaker 2: in Zurich before heading over to Swiss Ray. I thought
[1:13] Speaker 2: this conversation was fascinating and I think you will also
[1:17] Speaker 2: with no further ado my discussion with Swiss Reees Velina Pennava.
[1:23] Speaker 2: Velena Penava, Welcome to Bloomberg.
[1:27] Speaker 3: Thank you Berry. It's a pleasure to be here.
[1:29] Speaker 2: Well, it's a pleasure to have you. Let's start out
[1:31] Speaker 2: with your background. Bachelors in economics and a BS in
[1:36] Speaker 2: computer science from Wellesley in Boston, and then an MBA
[1:40] Speaker 2: from Harvard Business School. What were the original career plans?
[1:46] Speaker 3: So I was one of the first generations of Eastern
[1:49] Speaker 3: Europeans after the Wall came down, who had the opportunity
[1:54] Speaker 3: to come to the US. If I had not come
[1:57] Speaker 3: to the US, my passion was to become a doctor.
[2:01] Speaker 3: And in Bulgaria, where I came from, getting a medical
[2:06] Speaker 3: degree meant that after high school you go to medical
[2:08] Speaker 3: school for five.
[2:09] Speaker 2: Years, no college, high school, real college.
[2:12] Speaker 3: And then after five years you can practice. So I
[2:16] Speaker 3: arrived at Wellesley with the plan to do pre med.
[2:20] Speaker 3: And when I got there, I realized that pre med
[2:23] Speaker 3: meant that I study some generic biology in chemistry for
[2:28] Speaker 3: four years. Then I have to apply to medical school.
[2:32] Speaker 3: Then I have to go to residency, and during that
[2:36] Speaker 3: whole time I have to keep on accumulating debt, and
[2:39] Speaker 3: at some point in my late twenties I may be
[2:42] Speaker 3: able to practice.
[2:43] Speaker 2: Right, it's like a twelve year process. It's pretty it's
[2:46] Speaker 2: pretty intimidating for and yet all the medical schools seemed
[2:51] Speaker 2: to be filled up exactly.
[2:52] Speaker 3: But for me, this was not an option. And what
[2:56] Speaker 3: I decided to do is just experiment and see what
[3:00] Speaker 3: else I could do. And I'm pretty mathematically oriented. I
[3:04] Speaker 3: took a lot of math classes. I took a computer
[3:07] Speaker 3: science class, which I found super fascinating. I mean, back then,
[3:10] Speaker 3: in ninety four it was the early days.
[3:12] Speaker 2: Of punch cards. Were you were you still in the
[3:14] Speaker 2: punch No, but I was.
[3:15] Speaker 3: I started coding in Pascal. Okay, so I think a
[3:19] Speaker 3: lot of your listeners probably don't know what that computer
[3:22] Speaker 3: language is. So it was Pascal, then C plus plus,
[3:25] Speaker 3: and then I took an economics class, and that's when
[3:30] Speaker 3: the lights went off because it was a very mathematical
[3:34] Speaker 3: field in many ways, but also with a link to
[3:37] Speaker 3: the real economy. I couldn't give up math and computer science.
[3:42] Speaker 3: So I ended up finishing with two majors and a minor.
[3:47] Speaker 3: But business and applying economic concepts and actually going into
[3:51] Speaker 3: business was what I decided to do after the second
[3:55] Speaker 3: year at Wellesley.
[3:57] Speaker 2: That's really interesting, but at some point you spend time
[4:01] Speaker 2: within the high speed data division of a company that
[4:05] Speaker 2: eventually became part of AT and T. That was in
[4:09] Speaker 2: the nineteen nineties. What was that experience like?
[4:12] Speaker 3: So when I was a junior in college, I tried
[4:14] Speaker 3: to get an internship and I was looking at the
[4:17] Speaker 3: typical paths of consulting or banking. It is very difficult
[4:23] Speaker 3: to get an internship in junior year. And I had
[4:25] Speaker 3: a professor in economics who suggested that I look at
[4:29] Speaker 3: this company called Media One in Boston that had recently
[4:32] Speaker 3: been acquired by no it was it used to be
[4:37] Speaker 3: called Continental Cable Vision. It had been acquired by US West,
[4:41] Speaker 3: a Denver based company, and they had rebranded it as
[4:44] Speaker 3: Media One. And there I worked in strategy and the
[4:47] Speaker 3: strategy focus was on rolling out high speed data through
[4:52] Speaker 3: coax cable.
[4:55] Speaker 2: And broadband before we really knew broad what broadband was.
[4:59] Speaker 3: Absolutely and the tea team actually that did all the
[5:01] Speaker 3: technology in Media One ended up being the core technology
[5:06] Speaker 3: team for Cisco. So it was really cutting edge at
[5:11] Speaker 3: that point.
[5:11] Speaker 2: Huh huh. Really interesting. So how did you end up
[5:15] Speaker 2: as a consultant in Boston at Bain When did that start?
[5:19] Speaker 3: So if the company had stayed in Boston, if Media
[5:22] Speaker 3: One had stayed in Boston, I probably would have gone
[5:25] Speaker 3: back after I graduated. I had an offer, but they
[5:29] Speaker 3: decided to relocate to Denver, and I really wanted to
[5:33] Speaker 3: stay on the East Coast. So given I had been
[5:35] Speaker 3: doing strategy work and the fact that I wanted to
[5:40] Speaker 3: learn as much about business as possible, I thought consulting
[5:44] Speaker 3: would be the right next step. So it was similar
[5:46] Speaker 3: enough to what I'd been doing, but consulting would allow
[5:49] Speaker 3: me to broaden and view.
[5:52] Speaker 2: And Baine and Company is one of the biggest consultancies
[5:55] Speaker 2: in the United States. What was it like working in
[5:59] Speaker 2: Boston at Bain? What sort of projects were you working on?
[6:02] Speaker 3: So Boston is the headquarters, biggest office when I joined,
[6:07] Speaker 3: and it was a huge variety of projects. So I
[6:10] Speaker 3: did a project for MX looking at their credit card
[6:17] Speaker 3: solicitation program, how can they can be better competitive with
[6:21] Speaker 3: other credit card companies. I worked for Motorola and then
[6:25] Speaker 3: I spent quite a bit of time in the emerging
[6:28] Speaker 3: private equity practice. So Bain was the pioneer in consulting
[6:33] Speaker 3: two private equity companies focusing on strategic due diligence of
[6:39] Speaker 3: M and A transactions, and it was very past fast
[6:45] Speaker 3: paced environment. You do a due diligence in one, two,
[6:49] Speaker 3: three weeks and you need to basically keep pace with
[6:52] Speaker 3: a private equity team to make sure that the assumptions
[6:56] Speaker 3: they need for the model and the conviction for buying
[6:59] Speaker 3: an asset could be backed by the analysis the bank team.
[7:04] Speaker 2: So this is in the nineteen nineties, private equity was
[7:07] Speaker 2: still relatively small. Back then, this is almost thirty years ago.
[7:13] Speaker 2: Did you have any sense as to how rapidly private
[7:17] Speaker 2: equity would grow and how big it could have it
[7:20] Speaker 2: eventually became.
[7:22] Speaker 3: I mean it was, I would say in its second inning,
[7:25] Speaker 3: back in the nineteen eighty nineteen ninety eight, ninety seven,
[7:32] Speaker 3: ninety eight, it was. I mean, it was attracting a
[7:37] Speaker 3: lot of talent. So if you look at who was
[7:39] Speaker 3: going to private equity, it was the best from the
[7:42] Speaker 3: consulting teams, it was the best from the investment banking teams.
[7:47] Speaker 3: And I think the value proposition was just very compelling, right,
[7:50] Speaker 3: I mean the returns at those times were easily in
[7:54] Speaker 3: the mid to upper twenties.
[7:56] Speaker 2: Really wow, that's impressive. At the time, I remember NASDA
[8:00] Speaker 2: was similarly putting up high twenty twenty twenty five thirty
[8:05] Speaker 2: percent returns, very unusual number years in a row. I
[8:09] Speaker 2: had no idea private equity was putting up those sort
[8:11] Speaker 2: of numbers back then you end up as the head
[8:15] Speaker 2: of Bain's private equity experience was that in the US
[8:20] Speaker 2: or overseas.
[8:22] Speaker 3: So I spent in total nineteen years at Bain, if
[8:26] Speaker 3: you at the time, I spent in business school, and
[8:30] Speaker 3: I was first in Boston. I actually spent six months
[8:34] Speaker 3: in Australia as well.
[8:36] Speaker 2: Wow.
[8:37] Speaker 3: And then I moved to San Francisco after business school
[8:41] Speaker 3: and was again quite focused on the private equity space.
[8:46] Speaker 3: Right before two thousand and nine, I felt I was
[8:50] Speaker 3: ready to do something else, and that's something else was
[8:54] Speaker 3: renewable infrastructure private equity. So that was an emerging space
[8:59] Speaker 3: back then.
[9:00] Speaker 2: And my renewable infrastructure so this is everything from solar
[9:05] Speaker 2: and wind to battery to more efficient lines, I'm still
[9:10] Speaker 2: a burgeoning area. How long did you work in that space?
[9:13] Speaker 3: So I didn't, Oh you did not. The catch was
[9:17] Speaker 3: that the fund had to raise money, and me going
[9:22] Speaker 3: to that fund was contingent on them raising the next round.
[9:27] Speaker 2: And oh nine got in the way.
[9:28] Speaker 3: And oh nine got in the way. And I had
[9:30] Speaker 3: already told Bane. I had told Baine. Listen, I you know,
[9:33] Speaker 3: I've been here for a long time. It had been
[9:35] Speaker 3: you know ten years by then I need to look
[9:38] Speaker 3: at something else. I need to do something else. And
[9:42] Speaker 3: they told me, listen, instead of leaving, why don't you
[9:45] Speaker 3: do a six month transfer in Europe? Why don't you
[9:49] Speaker 3: go to Zurich, for example. It's a small office, there's
[9:54] Speaker 3: interesting clients, there's quite a lot of US partners there.
[9:57] Speaker 3: Why don't you see how you like another office, and
[10:00] Speaker 3: then you can come back in six months and we
[10:02] Speaker 3: can think about whether you want to still leave or
[10:06] Speaker 3: pick up and go down the partner track.
[10:09] Speaker 2: So that was six months, and that six months turned
[10:12] Speaker 2: into how long?
[10:13] Speaker 3: That six months turned into a year, and that year
[10:17] Speaker 3: turned into a permanent relocation.
[10:20] Speaker 2: And how long did you stay with Bain in Zurich
[10:23] Speaker 2: for So?
[10:24] Speaker 3: I stayed until I came to Swiss Free. So I
[10:27] Speaker 3: moved to Zurich in two thousand and nine and I
[10:31] Speaker 3: left Bain in twenty seventeen.
[10:33] Speaker 2: So US London, a lot of money centers were kind
[10:37] Speaker 2: of imploding during two thousand and nine. What was the
[10:42] Speaker 2: view like from Zurich?
[10:45] Speaker 3: I would say not that different. Really, it was a
[10:47] Speaker 3: glob we call it a global financial crisis. So business
[10:51] Speaker 3: was difficult across the globe. Europe was in a difficult situation.
[10:55] Speaker 3: I mean I was in Zurich, but I was serving
[10:57] Speaker 3: a lot of the European clients and it was hard.
[11:01] Speaker 3: But what was different about Zurich compared to San Francisco
[11:06] Speaker 3: is zeroch at that time was a very small office
[11:10] Speaker 3: with very few partners on a growth trajectory. So it
[11:15] Speaker 3: felt like going from a well established company to a startup,
[11:20] Speaker 3: and that's where I could develop also business lines and
[11:27] Speaker 3: service areas that were not so established across Bain so
[11:32] Speaker 3: institution supporting institutional investors. Right, we had worked a lot
[11:36] Speaker 3: with private equity funds, but we had not done as
[11:41] Speaker 3: much work with solvereign wealth funds, pension funds, and the
[11:44] Speaker 3: problems that those institutional investors face when investing in private
[11:49] Speaker 3: markets are well served by the knowledge that Bain had
[11:53] Speaker 3: in the space. So that's where I found a niche
[11:56] Speaker 3: and that's where I focused when I moved to Zurich.
[12:00] Speaker 2: So you have a history and an expertise in private
[12:04] Speaker 2: equity consulting analysis just generally the space which was small
[12:11] Speaker 2: but rapidly growing. How far were you able to take
[12:15] Speaker 2: that for Baine? At what point did you realize, Hey,
[12:18] Speaker 2: I've gone as far as I can go with this.
[12:20] Speaker 2: We can only do so much as as a consultant.
[12:23] Speaker 2: I really want to deploy capital in the space.
[12:28] Speaker 3: So that had been on the back of my mind
[12:30] Speaker 3: for a long time. I mean, obviously, when you work
[12:32] Speaker 3: with investors, you're always quite vested in the decisions being made.
[12:38] Speaker 3: You're advising on setting up of a new mandate or
[12:42] Speaker 3: executing an investment strategy, and that's super intellectually challenging. But
[12:48] Speaker 3: the issue is that at some point you need to
[12:51] Speaker 3: hand it over right. Here is the plan, here's how
[12:54] Speaker 3: you should go about in this deal or in this
[12:58] Speaker 3: new asset class. But then it's up to the client
[13:01] Speaker 3: to implement it. And what swiss Ree provided me with
[13:07] Speaker 3: was the platform to actually do the investing and to
[13:12] Speaker 3: take the strategy that I had helped them develop and
[13:15] Speaker 3: implement it.
[13:16] Speaker 2: We're going to come back to swiss Ree in a
[13:18] Speaker 2: few minutes. I want to just stay with your time
[13:21] Speaker 2: at Bain in Zurich. So you're on the investment committee
[13:26] Speaker 2: in Zurich. Were you looking at global opportunities just Europe,
[13:32] Speaker 2: the rest of the world x US? What was your playground?
[13:36] Speaker 3: So I'll give a bit of background on what this
[13:39] Speaker 3: investment committee is so Bain does a lot of due
[13:42] Speaker 3: diligence for private equity clients and as part of that relationship,
[13:48] Speaker 3: we as a partnership were allowed by the private equity
[13:52] Speaker 3: fund to co invest in transactions that we had diligenced.
[13:58] Speaker 2: And that's a voter coninence. Oh we think you should
[14:01] Speaker 2: put money into this and we're going to co invest
[14:03] Speaker 2: along with you.
[14:04] Speaker 3: Absolutely. Well, it's it helps with with kind of the
[14:09] Speaker 3: broader relationship, and it's it's an attractive opportunity for the
[14:16] Speaker 3: employees of Bane who invest in those co invest vehicles
[14:20] Speaker 3: because you're able to do that co investment without fee
[14:23] Speaker 3: and carry.
[14:24] Speaker 2: Wow.
[14:25] Speaker 3: And as you know, well those v and carries are
[14:28] Speaker 3: a pretty big chunk of the cost of the product.
[14:32] Speaker 3: So the Investment Committee was a small group of global
[14:36] Speaker 3: partners that had to decide which ideas that came from
[14:41] Speaker 3: the teams we would put into the Bane co Investment Fund.
[14:47] Speaker 3: So we were the diligence on the diligence team.
[14:50] Speaker 2: Wow. So you really have to know your stuff if
[14:54] Speaker 2: you're doing the due diligence for the due diligence team.
[14:57] Speaker 3: I mean, that's well, and you need to be willing
[14:59] Speaker 3: to say I know two colleagues and friends, who then
[15:03] Speaker 3: have to deal with the repercussions of saying to the
[15:06] Speaker 3: private equity fund, well, we think it's a good deal,
[15:08] Speaker 3: but our investment committee decided to pass.
[15:12] Speaker 2: Really, so does that create a problem or is it, hey,
[15:16] Speaker 2: we only have so much money to do and this
[15:19] Speaker 2: is broader than we usually like, or how do they
[15:22] Speaker 2: manage around that?
[15:23] Speaker 3: I think that the clients understand that when you're thinking
[15:28] Speaker 3: about portfolio construction, you can have only so much allocation
[15:31] Speaker 3: to a given geography, to a different industry. So I
[15:37] Speaker 3: think that nobody took it personally. I think if you
[15:39] Speaker 3: consistently say no to a co investment from a particular client,
[15:43] Speaker 3: it may raise questions, but generally the quality of those
[15:47] Speaker 3: proposals was very high.
[15:50] Speaker 2: Really interesting. So the question that's going to lead us
[15:55] Speaker 2: to Swiss Ree is how did your time at Bane
[15:58] Speaker 2: and Company influence your coach to investment management strategy private
[16:03] Speaker 2: equity selection. This had to be pretty seminal in your
[16:08] Speaker 2: developments as an investor.
[16:11] Speaker 3: Yeah, So if you think about what you learn as
[16:14] Speaker 3: a consultant, first of all, you observe a lot of
[16:16] Speaker 3: management teams, right, So ultimately it's all about the team
[16:23] Speaker 3: and the quality of the team and the people. That's
[16:26] Speaker 3: both with clients and also within Bain. And I think
[16:30] Speaker 3: that's also very true about how you set up an
[16:32] Speaker 3: investment organization. You can have the frameworks, you can have
[16:37] Speaker 3: the processes, but at the end of the day, it's
[16:40] Speaker 3: about the quality of the team, the trust between team members,
[16:44] Speaker 3: and the culture you create. And I think you know,
[16:47] Speaker 3: you may be surprised here, that's the first thing I
[16:49] Speaker 3: start with, But I truly believe that quality investment requires
[16:54] Speaker 3: just a very strong team behind it.
[16:57] Speaker 2: It's the venture capitalists we like to bet on the
[17:01] Speaker 2: jockey and not the horse. It's very much a people business.
[17:04] Speaker 2: You have to be able to evaluate not just folks
[17:08] Speaker 2: ability and insight, but their ability to execute and make
[17:13] Speaker 2: stuff happen. So is it safe to say all of
[17:18] Speaker 2: the decade you spent in private equity at Bain carried
[17:21] Speaker 2: forward to Swiss Rea. No.
[17:23] Speaker 3: Absolutely, And maybe there are two more things that I
[17:25] Speaker 3: would say carry over. When we talk about investing, we
[17:31] Speaker 3: really focus a lot on macro right, but at the
[17:34] Speaker 3: end of the day, good investing is a good balance
[17:37] Speaker 3: between macro thinking. So, what's happening with the global economy,
[17:40] Speaker 3: what's happening with interest rates, what is the FED going
[17:43] Speaker 3: to do? And micro right, and understanding how different segments
[17:49] Speaker 3: of the economy, how different businesses make money, make profit,
[17:54] Speaker 3: what you know, not everything is correlated to GDP growth.
[17:58] Speaker 3: And I think that balance. I brought that balance from
[18:02] Speaker 3: my consulting days because a lot of the colleagues in
[18:07] Speaker 3: the investment organization think first macro and then micro, and
[18:11] Speaker 3: I think both in private equity and in consulting, it
[18:14] Speaker 3: is more of.
[18:15] Speaker 2: That balance, really really interesting.
[18:17] Speaker 3: And the third is decision making right, So decision making.
[18:21] Speaker 3: I'm an analytical person, and in consulting you focus on
[18:25] Speaker 3: the data, on the model, but also observing behavior and
[18:31] Speaker 3: stakeholder management. So understanding how the data and how the
[18:37] Speaker 3: analytics drives the decision, but then also how do the
[18:41] Speaker 3: biases of different stakeholders drive the decisions?
[18:46] Speaker 2: Huh, absolutely fascinating. Coming up, we continue our conversation with
[18:51] Speaker 2: Billina Penava, Group chief Investment Officer for Swiss Ray, discussing
[18:56] Speaker 2: how she found her way to the insurance giant. Let's
[19:00] Speaker 2: jump into Swiss Ray a little bit. You join in
[19:03] Speaker 2: twenty seventeen after you had been a consultant for Banning
[19:07] Speaker 2: Company for nineteen years. What motivated the transition to full
[19:13] Speaker 2: time asset management, so Barrie.
[19:15] Speaker 3: As we spoke, consulting is exciting because you get to
[19:19] Speaker 3: work on your client's most challenging problems. It is super
[19:24] Speaker 3: intellectually stimulating and rewarding. However, you lack ownership in the
[19:29] Speaker 3: solution that you bring, so for me, that was always
[19:35] Speaker 3: the one piece missing in my consulting job. You can
[19:39] Speaker 3: come up with the best framework with the best answer,
[19:42] Speaker 3: but then you hand it over and how it gets
[19:44] Speaker 3: implemented and whether it succeeds. You don't get to follow
[19:48] Speaker 3: the whole journey. So the opportunity for me to come
[19:52] Speaker 3: to Swiss Free and actually invest and implement a strategy
[19:59] Speaker 3: was extremely exciting.
[20:01] Speaker 2: I'm curious if consultants run into the same problem that
[20:06] Speaker 2: I call it the cocktail party problem. If someone asks
[20:10] Speaker 2: you about a particular stock at a cocktail party and
[20:14] Speaker 2: you give them an answer, well, if it works out,
[20:17] Speaker 2: it's because they're a genius. But if it doesn't work out,
[20:20] Speaker 2: it's your fault. Do consultants run into that same lack
[20:24] Speaker 2: of agency issue.
[20:26] Speaker 3: I don't think it's lack of agency, I think it's
[20:28] Speaker 3: lack of opportunity. To follow through, right. I mean consultants
[20:31] Speaker 3: are expensive, right, So if you're a company and you
[20:35] Speaker 3: want to hire consultants, you want to focus them on
[20:40] Speaker 3: getting you the answer that's hard. Right. Consultants often ask
[20:44] Speaker 3: the question why is the client's problem so hard? And
[20:48] Speaker 3: if you can't really answer that question, then it's you know,
[20:53] Speaker 3: why are you then at the client in the first
[20:56] Speaker 3: place if the problem is not hard, And that's why
[21:02] Speaker 3: companies focus their resources on consulting, on really solving the
[21:06] Speaker 3: hardest piece of the problem. But companies run big operations
[21:10] Speaker 3: and the implementation is typically something that takes a long time.
[21:15] Speaker 3: And even if you were to bring a consultant in
[21:18] Speaker 3: to help you with implementation, it's the cost benefit is
[21:21] Speaker 3: just not there. So I think if you ask many
[21:25] Speaker 3: people who were in consulting, that's always the complaint did
[21:28] Speaker 3: they have is yes, I follow through. You know, you
[21:32] Speaker 3: obviously keep in touch with your client, you have multier clients,
[21:36] Speaker 3: but you have a huge sense of ownership for the
[21:40] Speaker 3: solution you have created. You have a huge sense of responsibility.
[21:45] Speaker 3: But then you don't have control, You don't have control
[21:48] Speaker 3: over the outcome.
[21:49] Speaker 2: So you moved to Swiss Ray in twenty seventeen as
[21:54] Speaker 2: head of private equity, did you have ownership and control?
[21:58] Speaker 2: What was that transition? Like?
[22:00] Speaker 3: Absolutely, I had a P and L. So the mandate
[22:05] Speaker 3: that I had to set up was selecting private equity funds,
[22:12] Speaker 3: co investments, secondaries to put into Swiss frees portfolio and
[22:17] Speaker 3: then to make sure that we beat the private equity
[22:21] Speaker 3: benchmark or the equity benchmark with that selection.
[22:26] Speaker 2: How do they figure out what the targets are for
[22:29] Speaker 2: private equity? I know there's a bunch of different benchmarks.
[22:33] Speaker 2: There's US, the Europe, this global. Did you have the
[22:37] Speaker 2: mandate to go anywhere just find us the best deals
[22:41] Speaker 2: or were they focused focusing you in particular sectors or geographies?
[22:47] Speaker 3: So I was also responsible for deciding that, and ultimately
[22:50] Speaker 3: the decision was to focus more on developed markets, so
[22:53] Speaker 3: we really emphasize US Europe, Developed Asia.
[23:00] Speaker 2: Which is primarily Japan and Korea.
[23:03] Speaker 3: Or Australia, Krea.
[23:05] Speaker 2: Yes, all right, So how long were you running private
[23:08] Speaker 2: equity for Swiss Ree before they said, hey, we think
[23:13] Speaker 2: we have bigger things in mind for you.
[23:16] Speaker 3: So sadly only two years it was exact.
[23:19] Speaker 2: Sadly you got a giant promotion, right, Sadly.
[23:22] Speaker 3: Well, because I just set the mandate up right, it
[23:25] Speaker 3: was it was a lot of effort to you know,
[23:27] Speaker 3: get with the relationships back with private equity funds, to
[23:31] Speaker 3: build the team, to build the operations, to build the systems,
[23:35] Speaker 3: and just when things were running and we're looking like
[23:40] Speaker 3: you could cruise for a while, you know, opportunity knocked
[23:45] Speaker 3: and I had to jump into a completely new and
[23:49] Speaker 3: unknown area to me at the time.
[23:50] Speaker 2: So we'll talk a little bit about your role as
[23:54] Speaker 2: group chief investment Officer for Swiss Ree. But I'm curious
[23:59] Speaker 2: as when you're running private equity, are you allocating capital
[24:04] Speaker 2: to different private equity funds? Were you investing directly into
[24:09] Speaker 2: private equity opportunities as a co investor along with p funds?
[24:14] Speaker 2: A little bit of everything? How are you alcanning Swiss
[24:17] Speaker 2: rays internal capital?
[24:20] Speaker 3: So it's a little bit of all, but it's mostly
[24:24] Speaker 3: investing in private equity funds. So I would say about
[24:27] Speaker 3: seventy eighty percent of the allocation is in funds and
[24:31] Speaker 3: then the rest is in co investments alongside the funds
[24:35] Speaker 3: that we have invested in.
[24:36] Speaker 2: Huh, really interesting, all right, So two years later you
[24:40] Speaker 2: get a promotion, you're head of Swiss Rays Group, your
[24:44] Speaker 2: chief investment officer for Swiss Rays Group. That's their internal
[24:49] Speaker 2: pool of assets.
[24:50] Speaker 3: They yet not yet, Yeah, I had an intermediate promotion.
[24:54] Speaker 2: So what was the twenty nineteen promotion?
[24:56] Speaker 3: So the twenty nineteen promotion was Head of Client co
[24:59] Speaker 3: Head of c Solutions and Analytics, and I was focused
[25:03] Speaker 3: more on the ALM side of the business ALMB asset
[25:09] Speaker 3: liability management. So it was if you think about insurance
[25:13] Speaker 3: asset management, we have you know, we obviously served the group,
[25:16] Speaker 3: but we have business units and Lego entities, and each
[25:20] Speaker 3: of these business units and Lego entities have their own
[25:25] Speaker 3: strategic asset allocations. So my role was to manage those
[25:32] Speaker 3: business unit and Lego entity ACID allocations.
[25:36] Speaker 2: So how long did you do that for? From twenty
[25:38] Speaker 2: nineteen till.
[25:39] Speaker 3: One until I got the CIO job, which was in twenty.
[25:43] Speaker 2: Three Okay, so seventeen nineteen twenty three. So for the
[25:46] Speaker 2: past two years, you've been chief investment officer for Swiss
[25:50] Speaker 2: Ray's internal fund, which is one hundred something billion dollars
[25:56] Speaker 2: Is that right?
[25:57] Speaker 3: One hundred and eight hundred, one hundred and eight.
[26:00] Speaker 2: It's a billionaire or two between friends. How much of
[26:04] Speaker 2: that is allocated to private equity and alternatives. How much
[26:08] Speaker 2: of that goes to public assets like stocks and bonds?
[26:12] Speaker 2: Is it a different set of strategies, a very different
[26:15] Speaker 2: mandate than you had when you were running private equity.
[26:18] Speaker 3: So maybe before I answer this question for your listeners,
[26:22] Speaker 3: I want to give a very quick primer of what
[26:24] Speaker 3: insurance asset management is and how it's different from asset
[26:30] Speaker 3: management for other institutional investors, because I think you know
[26:35] Speaker 3: the answer will make a lot more sense with that.
[26:37] Speaker 3: With that in mind, So, if you think about insurance
[26:41] Speaker 3: asset management, the optimizing function that we have is in
[26:46] Speaker 3: three pillars. First is long term value creation. We'd focus
[26:51] Speaker 3: on stable, sustainable returns and cash flows. And our liabilities
[26:57] Speaker 3: if you think about especially the life business, are long term.
[27:02] Speaker 2: But you do have annuity to.
[27:05] Speaker 3: We don't have annuities, but we have not annuities.
[27:07] Speaker 2: I'm using the wrong word, so I'm gonna have to
[27:09] Speaker 2: pull that out. You have life expectancy tables, so you
[27:13] Speaker 2: have some sense of what you're exactly. Life insurers have
[27:16] Speaker 2: a sense of, hey, we have this much of a
[27:19] Speaker 2: future liability in twenty five thirty years down the road.
[27:22] Speaker 2: We don't know who's going to pass away when but
[27:25] Speaker 2: with a large enough group we can more or less
[27:28] Speaker 2: have a sense of future liabilities.
[27:30] Speaker 3: No, no, we have a decent scent of future liabilities.
[27:33] Speaker 3: But we also need to make sure we have a
[27:36] Speaker 3: portfolio that's resilient across cycles. The second pillar is asset
[27:42] Speaker 3: liability management. Right, so because we have a view on
[27:47] Speaker 3: our liability profile, we need to make sure we match
[27:52] Speaker 3: our assets on a currency, duration, and liquidity basis. So
[27:57] Speaker 3: the strategy is very intricately linked with what's happening on
[28:02] Speaker 3: the other side of the balance sheet. And then the
[28:05] Speaker 3: third pillar is capital efficiency and diversification. I think that
[28:09] Speaker 3: is one of the big differences with other institutional investors.
[28:14] Speaker 3: We are regulated and we have a risk based capital regime,
[28:22] Speaker 3: which means that the cost that we have for holding
[28:26] Speaker 3: certain high volatility asset classes is very high, such as
[28:30] Speaker 3: equities or high yield, and that means that we maximize
[28:35] Speaker 3: return on a risk adjusted basis. So it's you know,
[28:40] Speaker 3: maximizing risk adjusted return per unit of capital.
[28:44] Speaker 2: That makes sense. When we were talking about private equity,
[28:48] Speaker 2: I was thinking about those future liabilities. A lot of
[28:52] Speaker 2: people realize private equity has tends to be liquid for
[28:56] Speaker 2: five or seven years at a time, but I would
[28:59] Speaker 2: imagine that you could ladder or stagger that, so there's
[29:04] Speaker 2: always some fun coming up when a future liability arises.
[29:09] Speaker 2: It may be you liquid for five years or seven years,
[29:12] Speaker 2: but you're talking about twenty thirty, forty years in the future.
[29:15] Speaker 3: On the life side, I mean, we also have a
[29:17] Speaker 3: property and casualty business, which is.
[29:19] Speaker 2: Much short random.
[29:21] Speaker 3: Yeah, well, it's annual renewal, and it's a function of
[29:25] Speaker 3: what happens with natural catastrophes, so whether you have a
[29:29] Speaker 3: hurricane or an earthquake, but that business renews every year,
[29:33] Speaker 3: so it's a very short tail.
[29:35] Speaker 2: On the liability side of that. It feels these days
[29:39] Speaker 2: like natural catastrophes are not just more frequent, but so random.
[29:45] Speaker 2: I don't know if we're just paying more attention to
[29:47] Speaker 2: them or if they're actually happening more frequently. How do
[29:51] Speaker 2: you manage around having that sort of future liability when
[29:56] Speaker 2: it kind of feels a little random. When a hurricane hits,
[29:59] Speaker 2: a tornado hit, it's a wildfire happens, all these things
[30:03] Speaker 2: just seem to come out of nowhere.
[30:06] Speaker 3: Well, so I think that's why the whole element of
[30:10] Speaker 3: liquidity and stability is so important on the asset side,
[30:14] Speaker 3: we need to have a sustainable portfolio regardless of psycho
[30:19] Speaker 3: and regardless of what happens, which means we need to
[30:21] Speaker 3: hold more liquidity then you would think at first glance,
[30:25] Speaker 3: and we need to have a portfolio that can cover liability.
[30:28] Speaker 3: So it cannot be the case that if a hurricane
[30:31] Speaker 3: hits and we have claims and people are waiting to
[30:35] Speaker 3: get paid to rebuild their roof, we say we're sorry, but.
[30:38] Speaker 2: There is a market alternatives. We're locked up.
[30:41] Speaker 3: We can't see exactly so and then keep that in mind.
[30:44] Speaker 2: You know, in the US, I think Swiss Rea is
[30:47] Speaker 2: known primarily as a giant reinsurer. Same situation. Obviously, you
[30:53] Speaker 2: never know when some insurance company gets to make a
[30:57] Speaker 2: claim on their reinsurance policy. I'm going to assume that
[31:01] Speaker 2: having stability, sustainability and liquidity is really important for those
[31:07] Speaker 2: future liabilities as well.
[31:09] Speaker 3: No, no, absolutely, I mean we are ultimately the insure
[31:12] Speaker 3: of insurance companies. We ensure the tail. So every time
[31:18] Speaker 3: you open the paper and there's a big event, you
[31:21] Speaker 3: should think of Swiss Rea real and what the impact is.
[31:24] Speaker 3: So whether there is a you know, the Suez Canal
[31:28] Speaker 3: is blocked, or there's a big earthquake, or the airplanes
[31:33] Speaker 3: have been cannot be returned to the lessers in Russia.
[31:38] Speaker 3: All of these macro big events ultimately hit reinsurance. Or
[31:43] Speaker 3: if there's a big pandemic and the Tokyo Olympics are delayed,
[31:49] Speaker 3: that is a reinsurance level event.
[31:51] Speaker 2: So it's interesting because you spend so much time in
[31:54] Speaker 2: private equity, but it sounds like what Swiss raid does
[31:59] Speaker 2: in internally is going to be a little less alternative focused,
[32:05] Speaker 2: a little more liquidly focused. Is that a fair statement? No?
[32:09] Speaker 3: Absolutely, And if you look at our portfolio, we are
[32:13] Speaker 3: eighty five percent fixed income, oh no kidding, of which
[32:16] Speaker 3: half is government bonds and we use government bonds to
[32:21] Speaker 3: match liabilities. That is our risk freeway of matching liabilities.
[32:27] Speaker 3: And then the rest is corporate credit and private debt.
[32:30] Speaker 3: And private debt has been one of the acid classes
[32:33] Speaker 3: that we have participated in for a long time, but
[32:37] Speaker 3: where we're seeing a lot of opportunities. So if you
[32:39] Speaker 3: say eighty five percent fixed income, the rest is private equity,
[32:44] Speaker 3: listed equity, we have some minority positions, and then real estate.
[32:47] Speaker 2: Huh, that's really fascinating. I wouldn't have guessed so much.
[32:51] Speaker 2: We're in government bonds. But I guess if you want
[32:57] Speaker 2: liquid and you want stable, and you want just buy,
[33:01] Speaker 2: what's the tenure now? Four and a half percent.
[33:03] Speaker 3: That's not so bad.
[33:05] Speaker 2: Well with inflation two and a half percent, it's not
[33:07] Speaker 2: so good. So what do you how do you think
[33:10] Speaker 2: about the return. It's it's really more about staying ahead
[33:14] Speaker 2: of inflation than it is about generating market beating returns.
[33:19] Speaker 2: Is that is that fair?
[33:21] Speaker 3: Well? You want to so, as I mentioned, we we
[33:25] Speaker 3: do focus on long term value creation. And if you
[33:29] Speaker 3: think about again our optimizing function, most institutional investors focus
[33:35] Speaker 3: on economic returns. We focus on economic returns and accounting returns,
[33:41] Speaker 3: and we always need to strike that balance.
[33:44] Speaker 2: To find accounting returns versus economic returns.
[33:48] Speaker 3: So economic returns is you know, if you have a
[33:50] Speaker 3: bond and you know the market value of that bond
[33:54] Speaker 3: moves in a negative direction, even if it pays your yield,
[33:59] Speaker 3: you know, net, you might be losing economic value on
[34:02] Speaker 3: holding that position. In ifs, if you hold a corporate bond,
[34:07] Speaker 3: the market movements do not go through.
[34:10] Speaker 2: P and L, so you'll eventually get par when it because.
[34:14] Speaker 3: We hold it to maturity right, exactly, all right, So
[34:18] Speaker 3: what features into our I for us result is only
[34:21] Speaker 3: the yield on that bond, not the market movement.
[34:25] Speaker 2: So here we are in twenty twenty five, we're still
[34:28] Speaker 2: debating whether or not the FED is going to cut.
[34:31] Speaker 2: How much attention do you pay as chief chief investment
[34:37] Speaker 2: officer to all of the noise around? Will the Fed cut?
[34:42] Speaker 2: Will they not cut? Are they staying put? Oh? Here
[34:44] Speaker 2: comes the dot plot like how noisy and and or
[34:49] Speaker 2: insignificant is everything around central bank activity.
[34:54] Speaker 3: We start the year always with highlighting where we think
[34:58] Speaker 3: markets will go and what is our baseline and what
[35:01] Speaker 3: are our scenarios. So of course what the FED will
[35:05] Speaker 3: do impact markets, impact valuations, impact interest rates, so of
[35:11] Speaker 3: course we follow it. We are a long term investors,
[35:14] Speaker 3: so we try to While we i'd say sometimes obsessively
[35:19] Speaker 3: follow the market news, we try to separate the noise
[35:24] Speaker 3: from what we really need to do.
[35:27] Speaker 2: You guys were in private credit before it became very popular,
[35:32] Speaker 2: as it seems to have done recently. At what point
[35:35] Speaker 2: does that become a little bit of a crowded trade
[35:40] Speaker 2: or given the size and the history of Swiss ray
[35:44] Speaker 2: in the space, you have your favorite places to play
[35:49] Speaker 2: in you know, the funds you like, the private credit
[35:52] Speaker 2: shops you like, like, how are you looking at the
[35:55] Speaker 2: change in private credit over the past five years, How's
[35:58] Speaker 2: that affecting your investment strategy?
[36:01] Speaker 3: Private credit is in the usual lot these days. The
[36:05] Speaker 3: reality is that private credit is not one asset class.
[36:09] Speaker 3: There are many, many flavors, and you have private credit
[36:14] Speaker 3: that is mostly IG like investment grade, like senior secured loans.
[36:19] Speaker 3: You have some pretty speculative asset classes, and Swiss Free
[36:26] Speaker 3: has been focusing on the former. So we started building
[36:31] Speaker 3: and we play in that aset class in a more
[36:33] Speaker 3: direct way. So we provide infrastructure loans directly to projects
[36:40] Speaker 3: and we underwrite each of those loans, so we have
[36:45] Speaker 3: a pretty high bar of what we see as quality.
[36:49] Speaker 3: And also the private debt premium, so that's the premium
[36:53] Speaker 3: above the spread that those loans provide in order to
[36:58] Speaker 3: put those in our portfolio.
[37:00] Speaker 2: So I mentioned the ten years about four and a
[37:02] Speaker 2: half percent today. Go back before twenty twenty two and
[37:08] Speaker 2: the yield on government bonds were half or worse. Were
[37:15] Speaker 2: what were you guys doing when we were in an
[37:17] Speaker 2: era of one percent inflation and two and a half
[37:21] Speaker 2: percent yield, Does that get you to where you want
[37:24] Speaker 2: to be? Or is that still did that raise problems
[37:28] Speaker 2: for being insurers like Swiss Ree.
[37:31] Speaker 3: I think this was a problem for the whole industry,
[37:33] Speaker 3: especially for the insurance industry, given how much reliance we
[37:37] Speaker 3: have on fixed income. And that was the driver in
[37:41] Speaker 3: a way for us to start looking at areas like
[37:44] Speaker 3: private debt, because there you have bespoke transactions and you
[37:49] Speaker 3: can definitely earn a premium versus what you get even
[37:53] Speaker 3: in the corporate bond space. But I mean, I'm not
[37:55] Speaker 3: going to lie. You're looking to you're reaching for yield
[37:58] Speaker 3: right in those in the those moments, well.
[38:01] Speaker 2: There's reaching for yield like people did during the financial crisis,
[38:04] Speaker 2: and then there's senior secured privately due diligenced debt that
[38:12] Speaker 2: didn't carry the same leverage and risk characteristics like we
[38:15] Speaker 2: saw with securitized junk mortgages. That was a very different world.
[38:20] Speaker 2: But I guess the insight that I'm picking up from
[38:24] Speaker 2: you is, hey, two decades of zero percent interest rate
[38:28] Speaker 2: from the US Central Bank and other central banks really
[38:33] Speaker 2: is the key driver of what's expanded private debt, private credit,
[38:37] Speaker 2: private equity, and a whole slew of alternatives that substituted
[38:44] Speaker 2: for sovereign treasuries and other issuances. Fair insight, No.
[38:50] Speaker 3: It's a fair insight. And I think if there's one
[38:53] Speaker 3: concern that we have is if you look at when
[38:56] Speaker 3: this space really exploded, it was after the financial crime
[39:01] Speaker 3: and there hasn't been a test of the market. So
[39:06] Speaker 3: since two thousand and ten, there hasn't been a real
[39:11] Speaker 3: credit crisis to really test the quality of these of
[39:15] Speaker 3: these products. And I think they have. You know, new
[39:20] Speaker 3: products have kept coming to the market, some with a
[39:24] Speaker 3: very short history, and we still don't know how private
[39:29] Speaker 3: credit will actually react in a more prolonged crisis.
[39:33] Speaker 2: Well, well, twenty twenty two was pretty much a down
[39:37] Speaker 2: fifteen percent year for treasuries and down twenty plus for equities.
[39:42] Speaker 2: That's kind of unusual. I think you have to go
[39:44] Speaker 2: back to nineteen eighty one to have them both down
[39:46] Speaker 2: double digits in the same year.
[39:49] Speaker 3: But we had no defaults, so our portfolio had no
[39:52] Speaker 3: default So.
[39:53] Speaker 2: The fact that and the accounting hold till maturity means
[39:57] Speaker 2: we don't care what the noisy day to day stuff is.
[40:00] Speaker 2: We're in it until this matures.
[40:01] Speaker 3: So well, we care about quality because what hurts us
[40:04] Speaker 3: is defaults and reratings.
[40:08] Speaker 2: So you had no defaults, any reratings.
[40:11] Speaker 3: We've had some reratings, but I mean we also have
[40:14] Speaker 3: middle market lending, so we have been expecting to see
[40:18] Speaker 3: some wobble, but not so much and not so much. Yeah,
[40:23] Speaker 3: and I think, and you know, you always attribute good
[40:28] Speaker 3: outcomes to skill when maybe some of it is attributable
[40:32] Speaker 3: to luck. But so far our very conservative underwriting has
[40:37] Speaker 3: paid off.
[40:38] Speaker 2: Huh really really very interesting. Coming up, we continue our
[40:41] Speaker 2: conversation with Elena Heneva, Group chief Investment Officer for Swiss
[40:46] Speaker 2: Ray discussing the state of markets and fixed income today.
[40:52] Speaker 2: So it's twenty twenty five. The year is just about
[40:56] Speaker 2: halfway done. Kind of been a wacky year. What surprised
[41:00] Speaker 2: you most about the global economy in twenty twenty five?
[41:06] Speaker 3: So I have to say coming into the year, sentiment
[41:10] Speaker 3: was very bullish. I was in the Valce in January,
[41:13] Speaker 3: and there's always the joke of whatever you hear in
[41:15] Speaker 3: the vals, the reverse will happen. Whatever you hear where
[41:19] Speaker 3: in the vals at the world economic for.
[41:22] Speaker 2: Oh, Davos, okay, yeah, yeah, so yeah, it's Davos has
[41:25] Speaker 2: a tendency to pick tops and bombs accidentally exactly.
[41:30] Speaker 3: But back in January, the sentiment was super bullish. It
[41:34] Speaker 3: was all about us exceptionalism. It was all about Ai
[41:40] Speaker 3: and how AI will drive returns to the moon. And
[41:47] Speaker 3: the sentiment has vastly shifted. So just the speed with
[41:51] Speaker 3: which we saw sentiment reverse and the narrative reverse this
[41:57] Speaker 3: year a few times now has been to some degree surprising.
[42:02] Speaker 2: To be fair, As much as the US President has
[42:07] Speaker 2: been talking about Tariff's whole adult life, it's his favored word,
[42:11] Speaker 2: call me tariff man. You know, I believe that everybody
[42:16] Speaker 2: saw his first term. All right, we'll get some ten
[42:19] Speaker 2: percent tariffs. We can live with that. It feels like
[42:24] Speaker 2: a collective failure of imagination as to what took place
[42:28] Speaker 2: on April second. I'm loath to call it liberation Day
[42:33] Speaker 2: because the only thing that was liberated were a bunch
[42:36] Speaker 2: of people were liberated from their money. But other than that,
[42:41] Speaker 2: everybody seemed to be surprised by that. And should we
[42:47] Speaker 2: have been should we have expected that, or just collectively knowing,
[42:53] Speaker 2: why would you mess with this? This is going so well?
[42:55] Speaker 2: Seems to be the Wall Street consensus. Hey, you've inherited
[42:58] Speaker 2: a great economy, in the stockho markets trending higher. Just
[43:02] Speaker 2: leave it alone, like, how does that perceived from Europe?
[43:07] Speaker 3: So I wish I said that we were super surprised.
[43:10] Speaker 3: I mean, we do always tend to be a little
[43:13] Speaker 3: bit glass half empty, because you know, we are risk company,
[43:16] Speaker 3: We're a risk knowledge company.
[43:18] Speaker 2: Bond investors are always about return of capital, not return
[43:22] Speaker 2: on capital. So you're the glass half empty. The equity
[43:26] Speaker 2: side is the glass half full. But even given that,
[43:30] Speaker 2: it still feels like this was really a surprising year.
[43:33] Speaker 3: I think the extent of the announcement on April second
[43:38] Speaker 3: was a shock. I don't think that. I mean, if
[43:41] Speaker 3: you remember that day, people couldn't understand the magnitude of
[43:46] Speaker 3: some of the numbers that were shown on that chart, right,
[43:49] Speaker 3: and what the formula was and what it really meant.
[43:52] Speaker 3: But I think the direction of travel was you know,
[43:57] Speaker 3: if you had listened to also what President said before
[44:01] Speaker 3: the election, you know that you know we expect at
[44:04] Speaker 3: some level of increase in terroris. I think it was
[44:07] Speaker 3: just the weight was communicated right and the execution of
[44:12] Speaker 3: it that that caught many, including us, off guard.
[44:15] Speaker 2: It seemed to be a little ham fisted, especially when
[44:19] Speaker 2: we see how the pains the Federal Reserve takes to
[44:23] Speaker 2: not surprise the markets. Hey there's a rate increase coming
[44:27] Speaker 2: a couple of months. Get ready, Hey we're two months away.
[44:30] Speaker 2: Look at CPI, look at PCE, and then all the
[44:34] Speaker 2: Fed governors go out and they all speak at the
[44:36] Speaker 2: various clubs, like the Fed really takes pains to not
[44:41] Speaker 2: surprise the market. It kind of felt like this was
[44:44] Speaker 2: a purposeful surprise to the markets. How big of an
[44:48] Speaker 2: impact did that have?
[44:51] Speaker 3: I think the good news for us was that we
[44:53] Speaker 3: don't hold a lot of listed equities, right, so it
[44:58] Speaker 3: was more an opportunity to think about our playbook of
[45:01] Speaker 3: when do we add exposure in the market versus you know, stressing.
[45:05] Speaker 3: So we actually if we look back at that period
[45:09] Speaker 3: of about a month where you had extreme volatility, we
[45:13] Speaker 3: didn't make a lot of sharp turns, right. It was about,
[45:16] Speaker 3: you know, are we still comfortable with the portfolio we're holding.
[45:20] Speaker 3: We had come into the year with cautious optimism, right,
[45:24] Speaker 3: but I think the emphasis on cautious and we felt
[45:29] Speaker 3: comfortable holding the risk that we had in the book.
[45:32] Speaker 3: At the same time, we were surprised by the resilience
[45:36] Speaker 3: of the market right. I mean, this was a very
[45:39] Speaker 3: sharp reaction, but the recovery was also lightning fast.
[45:46] Speaker 2: So I'm glad you use the word resilience because that's
[45:49] Speaker 2: the word that keeps coming up. Resilience in the economy,
[45:53] Speaker 2: resilience in consumer spending even if their consumer sentiment is
[45:58] Speaker 2: kind of weak, and resilience in both equity and bond markets.
[46:04] Speaker 2: It seems that you can throw anything at this economy,
[46:07] Speaker 2: in this market, and at least so far, it brushes
[46:10] Speaker 2: itself up often and just keeps going. How surprising has
[46:14] Speaker 2: that been?
[46:16] Speaker 3: I mean, if you look at the valuations, if you
[46:18] Speaker 3: look at the fundamentals, it is it's surprising, right, because
[46:23] Speaker 3: you would expect I mean, you're seeing the consumer slowing down,
[46:28] Speaker 3: you still have high interest rates, valuations especially in the US,
[46:32] Speaker 3: are in their top test styles, and outlook is not
[46:39] Speaker 3: looking as promising as a few months back. So I
[46:42] Speaker 3: think from a pure fundamentals perspective, it's surprising. But markets
[46:48] Speaker 3: are not you know better than me, Markets are not
[46:51] Speaker 3: driven purely by fundamentals. There are a lot of technicals
[46:56] Speaker 3: that have maintained the resilience of the market. First of all,
[46:58] Speaker 3: there's just a lot of money.
[47:00] Speaker 2: There endless amounts of capital slashing around.
[47:03] Speaker 3: And there's not that many assets to invest in. So
[47:05] Speaker 3: if you look at the size of the US stock
[47:09] Speaker 3: market versus the amount of money that needs to be invested,
[47:15] Speaker 3: you have a bit of a supply demand and balance,
[47:18] Speaker 3: which basically is keeping valuations higher than historically.
[47:22] Speaker 2: And isn't the same true in sovereign treasuries not just
[47:26] Speaker 2: the US, but there really isn't a lot of sovereign paper,
[47:30] Speaker 2: at least a rated paper around. It's almost as if
[47:33] Speaker 2: there's a shortfall of sovereign treasury paper.
[47:38] Speaker 3: Well, and if you think about also ig credit investment
[47:42] Speaker 3: great credit, you could almost argue. Now the other surprise
[47:47] Speaker 3: has been how tight spreads have become in high quality credit.
[47:53] Speaker 2: Right, Why go risky if you're not getting paid to
[47:55] Speaker 2: take that risk.
[47:56] Speaker 3: But if you think about what companies are issuing that
[47:59] Speaker 3: credit are maybe this will sound controversial, some of these
[48:05] Speaker 3: companies are more credit worthy than some governments. So in
[48:11] Speaker 3: a way, you could imagine a situation where you know,
[48:15] Speaker 3: some investment great credit even goes tighter, you know the
[48:19] Speaker 3: crazy Yeah, Microsoft could have negative spread.
[48:22] Speaker 2: Right, Microsoft is more credit worthy than a lot of
[48:25] Speaker 2: large nations out there exactly, that's.
[48:28] Speaker 3: Right, and that is what I think has been keeping
[48:30] Speaker 3: you know, both equities higher and spreads as tight as
[48:35] Speaker 3: they are.
[48:35] Speaker 2: So you mentioned we're in the top death style evaluation
[48:38] Speaker 2: in the US, But for almost a year now Europe
[48:44] Speaker 2: has been outperforming, very quietly, at least for the first
[48:48] Speaker 2: for the tail end of twenty twenty four, but a
[48:51] Speaker 2: little more visibly in twenty twenty five, Europe has been
[48:56] Speaker 2: significantly outperforming the US. You know, people been waiting for
[49:00] Speaker 2: this mean reversion to take place, this leadership swap for
[49:04] Speaker 2: a decade. It finally seems to be happening. First, why
[49:08] Speaker 2: do you think that is? Is it strictly a function
[49:11] Speaker 2: of valuation, or are some of these things being driven
[49:15] Speaker 2: by policy, by the US dollar, by a return of
[49:20] Speaker 2: capital away from the United States? What is leading to
[49:24] Speaker 2: this outperformance elsewhere in the world.
[49:27] Speaker 3: So I want to start by saying that Europe still
[49:29] Speaker 3: has a lot of catching up to do, for sure.
[49:32] Speaker 3: So if you look at multiples in Europe, there in
[49:35] Speaker 3: kind of the mid teens. Now multiples in the US
[49:40] Speaker 3: are you know, mid twenties, slow mid twenties, So there's
[49:43] Speaker 3: still a pretty big valuation gap, and some of that
[49:46] Speaker 3: is just the constitution of the market. You know, you
[49:48] Speaker 3: have more high tech, more high growth, but some of
[49:52] Speaker 3: it is kind of a European penalty, just given all
[49:56] Speaker 3: the you know, regulation and slow growth and challenges that
[49:59] Speaker 3: you has been facing. So yes, we have done better
[50:04] Speaker 3: in Europe in the equity space in the last year,
[50:08] Speaker 3: you know, then in the last ten, but I think
[50:12] Speaker 3: the gap is still pretty meaningful, and I think there's
[50:14] Speaker 3: some level of optimism that Europe will need to really
[50:19] Speaker 3: speed up investments, whether it's military or infrastructure. I think
[50:23] Speaker 3: that Europe has woken up to the fact that in
[50:26] Speaker 3: order to quote unquote survive in this new geopolitical environment,
[50:31] Speaker 3: they need to get their act together and they need
[50:34] Speaker 3: to start focusing on investing and reducing a bit the
[50:38] Speaker 3: regulatory burden that that we've had on companies on the continent.
[50:46] Speaker 2: It's much greater on the content. And but the flip
[50:49] Speaker 2: side of that is I vividly recall in two thousand,
[50:54] Speaker 2: right in the middle of the dot com implosion, going
[50:57] Speaker 2: to London, going to and New York was very stressed out, Hey,
[51:04] Speaker 2: I lose my job, I lose my healthcare. What happens
[51:07] Speaker 2: if my kid needs a surgery? In Europe, people were
[51:11] Speaker 2: still having cappuccino and cigarettes in the cafes there was.
[51:15] Speaker 2: It just felt a lot looser and a lot less stressful.
[51:19] Speaker 2: Is that simply a quality of life trade off that, Hey,
[51:23] Speaker 2: the Europeans know how to live. Yeah, the Americans can
[51:26] Speaker 2: make fast growth tech companies, but we have a better lifestyle.
[51:32] Speaker 2: How do you respond to that sort of position?
[51:36] Speaker 3: I mean, I think the European expectation for what a
[51:39] Speaker 3: good life is is probably quite a bit different from
[51:43] Speaker 3: the American definition. I think that there's some people see
[51:48] Speaker 3: certain elements of government service as basic right, so be healthcare, education, Right.
[51:58] Speaker 3: I can send my kids to a Swiss university for
[52:01] Speaker 3: I don't know, a thousand francs a year, and you know,
[52:05] Speaker 3: you can get an MIT type education for you know,
[52:08] Speaker 3: a small fraction of what you pay in the US. Right,
[52:10] Speaker 3: And and that's considered a social good.
[52:12] Speaker 1: Right.
[52:13] Speaker 2: So I think the taxes are much higher, so you pay,
[52:16] Speaker 2: taxes are higher.
[52:18] Speaker 3: Taxes are higher, but there is this social web that
[52:25] Speaker 3: you know that people value, right. You Also, you know,
[52:27] Speaker 3: you go to most European cities, you don't see homeless
[52:31] Speaker 3: people right on the street. To the degree you don't
[52:34] Speaker 3: have you don't have some of these, you know, extreme
[52:37] Speaker 3: situations that you have in the US. And another question
[52:40] Speaker 3: is how far is you know what's the right balance.
[52:44] Speaker 3: So I'm not saying that it's all good, right because
[52:47] Speaker 3: you also have a generation in Europe that expects this
[52:54] Speaker 3: but doesn't understand the cost that it comes it comes at,
[52:58] Speaker 3: and expects the life though and expects work like life balance.
[53:02] Speaker 3: But at the same time, you know it doesn't have
[53:07] Speaker 3: the work ethic required to keep the economy successful.
[53:14] Speaker 2: So we're recording this. The Russian Ukraine War is still ongoing,
[53:19] Speaker 2: the Israel Hamas War has now become an Israel Iran war.
[53:25] Speaker 2: There are all these geopolitical tensions and shifts taking place.
[53:31] Speaker 2: How do you think about what's going on in the
[53:33] Speaker 2: broader geopolitical area when you're thinking about making investments for
[53:40] Speaker 2: ten twenty years down the road. Is it significant or
[53:43] Speaker 2: is it something that, hey, there's a war every year.
[53:46] Speaker 2: It's just something we have to deal with.
[53:49] Speaker 3: So if you look at history and what impact wars
[53:54] Speaker 3: have on markets, the conclusion is that yes, there's a
[53:59] Speaker 3: short term show, but in the long term, even within
[54:02] Speaker 3: a few months, that dissipates. So making near term investment
[54:08] Speaker 3: decisions driven by geopolitics is probably not the best investment strategy.
[54:16] Speaker 3: I think what matters is what is the symptom behind
[54:21] Speaker 3: these events? So these wars are a symptom of the
[54:26] Speaker 3: fact that we have deglobalization, We are moving in different
[54:31] Speaker 3: spheres of influence, and Swiss Free is a truly global company.
[54:38] Speaker 3: So the value we bring is that we can ensure
[54:44] Speaker 3: tail risks because we can diversify a lot of tail
[54:48] Speaker 3: risks at a global level. Right we reinsure earthquakes in
[54:54] Speaker 3: California and in Japan, and hurricanes in Florida and pandemics
[55:01] Speaker 3: and those risks are uncorrelated at a global level. And
[55:05] Speaker 3: in order to provide that extra cover, you need to
[55:09] Speaker 3: have a global mindset. And in an environment where globalization
[55:16] Speaker 3: is no longer what it was ten years ago, one
[55:19] Speaker 3: needs to think about how does that impact truly global businesses.
[55:24] Speaker 3: So we think about it as long term trend and
[55:28] Speaker 3: impact on where we think the portfolio needs to go,
[55:31] Speaker 3: versus making tactical decisions influenced by short term events.
[55:37] Speaker 2: So given that that you're a long term thinker, you're
[55:41] Speaker 2: not playing the tactical game, you still end up with
[55:45] Speaker 2: these disruptions and risks and opportunities. How do you assess
[55:50] Speaker 2: the state of the market today? Where do you see opportunities?
[55:53] Speaker 2: Where do you see risks?
[55:58] Speaker 3: So I would say that and maybe that's my private
[56:03] Speaker 3: markets background. I continue to see opportunities in private markets
[56:09] Speaker 3: in part because you have imperfect information. You can actually
[56:14] Speaker 3: add value to your portfolio if you really have the
[56:16] Speaker 3: channels and expertise. I think areas like infrastructure debt are
[56:22] Speaker 3: ones that will only grow in the next few years
[56:27] Speaker 3: because the world needs a lot more new infrastructure and
[56:32] Speaker 3: companies that provide loans but also equity in the infrastructure space,
[56:38] Speaker 3: we'll both find a lot of deals but also have
[56:42] Speaker 3: a lot of opportunities. So you need to think of
[56:44] Speaker 3: it from a macro perspective of what you know, where
[56:49] Speaker 3: is the need for capital and can do we have
[56:53] Speaker 3: the expertise as a team to provide a solution that
[56:57] Speaker 3: is uniquely fitted to.
[56:58] Speaker 2: This mentioned private equity and private credit. European Central Bank
[57:04] Speaker 2: has cut rates recently a number of times. Does that
[57:08] Speaker 2: work as a tailwind for private credit? How does that
[57:11] Speaker 2: impact what you see out there?
[57:14] Speaker 3: It's definitely a tailwind for private equity, right, So what
[57:18] Speaker 3: we see is European funding cost has actually fallen twenty
[57:23] Speaker 3: basis points since Liberation Day versus in the US funding
[57:28] Speaker 3: costs has gone up twenty points. And if you think
[57:31] Speaker 3: about what makes private equity successful, it is, you know,
[57:34] Speaker 3: it's a leveraged buyout right that's ultimately part of the
[57:39] Speaker 3: value of those transactions is in the leverage part. And
[57:42] Speaker 3: lower interest rates clearly are beneficial for the private equity space.
[57:48] Speaker 2: So the phrase we hear and quite honestly hear way
[57:52] Speaker 2: too much in the US is so much uncertainty, so
[57:55] Speaker 2: much economic uncertainty. How do you see this lack of
[58:00] Speaker 2: clarity at least around policy decisions in the US affecting
[58:05] Speaker 2: your outlook for the markets, for the economy. How does
[58:09] Speaker 2: this sort of new regime in Washington, d C. Affect
[58:13] Speaker 2: the global economy?
[58:17] Speaker 3: So if you think about how we plan right on
[58:20] Speaker 3: an annual or three year basis for many years, we
[58:24] Speaker 3: would have a baseline, right would say we think there's
[58:27] Speaker 3: a seventy percent chance that this will happen, and we'll
[58:30] Speaker 3: set up our portfolio and our decisions based on this
[58:34] Speaker 3: core scenario. And then there's some tail scenarios which we
[58:38] Speaker 3: will assess and we'll look at you know water, you know,
[58:43] Speaker 3: how could we assess whether we're moving into those scenarios today?
[58:48] Speaker 3: Our baseline quote unquote is a forty percent odds, so
[58:53] Speaker 3: I don't want to even call it a baseline. And
[58:56] Speaker 3: we have moved from thinking in baseline and other scenarios
[58:59] Speaker 3: to what is the range of outcomes that we should
[59:02] Speaker 3: expect and what do we need to be tracking on
[59:06] Speaker 3: the macro side, on kind of the high frequency data
[59:10] Speaker 3: site to understand how we're moving from the scenario we
[59:13] Speaker 3: think we're in right now to something else. But if
[59:16] Speaker 3: you have that path, you have fewer surprises, right. So
[59:21] Speaker 3: that's one thing that we have done, and we dynamically
[59:24] Speaker 3: assess the probabilities of those scenarios on a monthly basis.
[59:28] Speaker 3: We have an investment committee and we do a survey
[59:32] Speaker 3: of fifteen investment committee members to say, you know, what
[59:35] Speaker 3: do you think the odds are? It's kind of the
[59:37] Speaker 3: wisdom of the crowd's idea, and we discuss, you know,
[59:40] Speaker 3: where in which scenario are we moving. So that's one
[59:44] Speaker 3: thing we have done and I think that provides a
[59:46] Speaker 3: lot more flexibility in thinking. And the second is we
[59:50] Speaker 3: think ahead of risk events. So markets are much more
[59:56] Speaker 3: volatile today, and typically at the depth of a correction,
[1:00:03] Speaker 3: you're scared, you don't know how to interpret the information
[1:00:09] Speaker 3: you're getting, and you're paralyzed in making decisions. So what
[1:00:13] Speaker 3: we do is we have playbooks to say, if the
[1:00:17] Speaker 3: market moves up or down at certain levels, these are
[1:00:24] Speaker 3: the levels at which we'll add risk. This amount of
[1:00:28] Speaker 3: risk and is you know, as the market goes down,
[1:00:31] Speaker 3: we'll continue to add risk. And then we have playbooks
[1:00:34] Speaker 3: to think about, okay, at what levels if the market
[1:00:36] Speaker 3: recovers has gone too far and we lighten up on risk,
[1:00:41] Speaker 3: And those playbooks have taken the emotion and the bias
[1:00:44] Speaker 3: out of the decisions and it makes it much, you know,
[1:00:49] Speaker 3: much less stressful in a way to execute on strategy because.
[1:00:53] Speaker 2: You have a plan that you created when you were
[1:00:55] Speaker 2: calm and relaxed, as opposed to responding when you're stressful. We'
[1:01:00] Speaker 2: kind of fascinated by the seventy percent baseline in normal circumstances,
[1:01:06] Speaker 2: but this year it's more of a forty percent baseline.
[1:01:09] Speaker 2: It sounds like you're saying that tail risk is rising.
[1:01:15] Speaker 2: Is that a fair assessment?
[1:01:18] Speaker 3: Yeah, this is you call it fatter tails. So we
[1:01:24] Speaker 3: see the more uncertainty means that it's less clear what
[1:01:29] Speaker 3: will turn out to be, so there are more scenarios
[1:01:32] Speaker 3: that are more.
[1:01:33] Speaker 2: Likely, including the possibility of something really extreme on either
[1:01:39] Speaker 2: end of the tail exactly.
[1:01:40] Speaker 3: And we do I mean again, we're in the business
[1:01:42] Speaker 3: of til tail risk, so we also do think about
[1:01:46] Speaker 3: what could be a really really tail scenario and what
[1:01:49] Speaker 3: that means for our business. But we do it not
[1:01:51] Speaker 3: just at the acid management level, more broadly at.
[1:01:55] Speaker 2: The group, do across the entire insurance company. I would imagine,
[1:01:58] Speaker 2: all right, I only have you for a few more minutes,
[1:02:01] Speaker 2: so let's jump to our favorite section, our favorite questions
[1:02:05] Speaker 2: we ask all of our guests starting with what are
[1:02:08] Speaker 2: you watching or listening to these days? What's keeping you entertained?
[1:02:14] Speaker 2: So I have two.
[1:02:14] Speaker 3: Kids and I try to show them some more, you know,
[1:02:21] Speaker 3: intellectual programming. And the latest show we've been watching is
[1:02:25] Speaker 3: called The Real Bugs Life on Disney, which is, if
[1:02:31] Speaker 3: you know, a bugs life, it was a Disney movie.
[1:02:34] Speaker 3: This is real. So it's amazing technology that's being used
[1:02:40] Speaker 3: to record this. But it follows different insects in their
[1:02:44] Speaker 3: natural environment at a very with amazing cameras. Right, So
[1:02:49] Speaker 3: they have you basically get a macro view of you know,
[1:02:54] Speaker 3: how a dragonfly flies and how a dragonfly you know,
[1:03:00] Speaker 3: runs away from from it's from frogs or other animals.
[1:03:05] Speaker 3: So it's a it's a fascinating show. So that's on
[1:03:08] Speaker 3: the on the TV side. On podcasts in good Company,
[1:03:13] Speaker 3: I guess this might be a competitive podcast to yours.
[1:03:16] Speaker 3: It's Nicolai Tongan.
[1:03:19] Speaker 2: Who hosts that.
[1:03:20] Speaker 3: It's Nikolaye Tongan. He's the CEO of the Norges Bank.
[1:03:26] Speaker 3: So that's the largest sovereign wealth fund in Norway and
[1:03:30] Speaker 3: they're a large equity investor and.
[1:03:33] Speaker 2: They I'm going to look into that.
[1:03:35] Speaker 3: They hold one or two percent share in some of
[1:03:37] Speaker 3: the largest companies. So he gets to interview CEOs of
[1:03:41] Speaker 3: these companies and it's a it's always pretty fascinating discusion.
[1:03:45] Speaker 2: I'm gonna definitely check that out. That sounds good. Tell
[1:03:48] Speaker 2: us about your mentors who helped to shape your career.
[1:03:53] Speaker 3: Early on. It was definitely my grandmother. She she was
[1:03:58] Speaker 3: a professor of agronomy.
[1:04:01] Speaker 2: Back in the day.
[1:04:03] Speaker 3: Agronomy is the science of agriculture, and she took a
[1:04:08] Speaker 3: keen interest in my education and really pushing me to
[1:04:14] Speaker 3: push myself to do better, to have the right moral compass.
[1:04:19] Speaker 3: So some of the lessons that weren't instilled in me
[1:04:22] Speaker 3: are still from her time. And then during the Bay years,
[1:04:28] Speaker 3: a partner called Dan has who was one of the
[1:04:31] Speaker 3: founders of our private equity practice back in Boston and
[1:04:35] Speaker 3: whom I met in Zurich and who I blame for
[1:04:38] Speaker 3: staying in Zurich permanently after I came in two thousand
[1:04:42] Speaker 3: and nine. But he really has played a fundamental role
[1:04:46] Speaker 3: in kind of coaching me, you know, on both my
[1:04:49] Speaker 3: career moves, on how I approach problems, just listening at
[1:04:55] Speaker 3: times and really being an invaluable friend and co.
[1:05:01] Speaker 2: Let's talk about books. What are some of your favorites?
[1:05:03] Speaker 2: What are you reading right now?
[1:05:06] Speaker 3: I'd say my all time favorite is The Three Body Problem.
[1:05:10] Speaker 3: It's a trilogy by now miss pronounce the name Lord
[1:05:14] Speaker 3: Tsushin right, And it's sci fi mixed with history, philosophy,
[1:05:22] Speaker 3: game theory, you name it. I don't know if you
[1:05:26] Speaker 3: were familiar with it.
[1:05:27] Speaker 2: Oh, I'm very familiar with the book. And I actually
[1:05:30] Speaker 2: watched the Apple TV.
[1:05:32] Speaker 3: Series, which is not as good.
[1:05:34] Speaker 2: Well, it seems like it just pulls a handful of
[1:05:37] Speaker 2: things out of it. Although, to be honest, I started
[1:05:42] Speaker 2: reading the first book, and the three body problem for
[1:05:46] Speaker 2: those people who aren't physical nerds are we can predict
[1:05:50] Speaker 2: two bodies, but once you introduce a third body, the
[1:05:53] Speaker 2: range of outcomes are practically infinite, and you really have
[1:05:56] Speaker 2: no idea where these three gravitational bodies are going to
[1:06:00] Speaker 2: are going to take us. But it was I believe
[1:06:03] Speaker 2: the author is Chinese. It was originally written in Chinese
[1:06:06] Speaker 2: and then translated. The US translation is a little challenging
[1:06:11] Speaker 2: to fight you.
[1:06:12] Speaker 3: With, especially the second book.
[1:06:13] Speaker 2: I'd say so I found the first book difficult, Like
[1:06:18] Speaker 2: it's a little like you could see that whoever did
[1:06:20] Speaker 2: the translation English wasn't necessarily their their native land.
[1:06:24] Speaker 3: But the concepts were pretty fascinating, yeah, to think about.
[1:06:28] Speaker 3: I mean, it was a lot about game theory, right,
[1:06:30] Speaker 3: and and and the fact that humanity lacks the ability
[1:06:34] Speaker 3: of reacting to you know, existential long term threats, right
[1:06:40] Speaker 3: and what is the psychology behind it? Even when faced
[1:06:44] Speaker 3: with something that you know guarantees destruction of humanity, we
[1:06:49] Speaker 3: still squabble around more earthly, earthly.
[1:06:53] Speaker 2: Problems, tribal arguments as opposed to, hey, we're all going
[1:06:57] Speaker 2: to die. We better do something.
[1:06:58] Speaker 3: The aliens are coming, right, that's right.
[1:07:00] Speaker 2: And we know you get fifty years to prepare.
[1:07:02] Speaker 3: It was five hundred in the book.
[1:07:04] Speaker 2: Five hundred.
[1:07:05] Speaker 3: Yeah. And even with that, I mean on the positive side,
[1:07:08] Speaker 3: it also awoke amazing innovation. Right, So it shows you
[1:07:12] Speaker 3: also the best of humanity that you know, when people
[1:07:16] Speaker 3: put their mind to it, they can solve really impossible problems.
[1:07:22] Speaker 3: But I think that the outcome is a mixed bag
[1:07:24] Speaker 3: for humanity.
[1:07:25] Speaker 2: What else are you reading? What else are you?
[1:07:27] Speaker 3: So? Today I'm reading a book called Human Kind. It's
[1:07:31] Speaker 3: by Dutch writer called Rodger Bragmann, and the premise of
[1:07:36] Speaker 3: the book is that humans are innately kind. And meanwhile,
[1:07:43] Speaker 3: so our human nature is not savage, but it's actually good, right,
[1:07:49] Speaker 3: And he goes through.
[1:07:51] Speaker 2: Cooperative social primates right exactly.
[1:07:55] Speaker 3: But a lot of history has been telling us that,
[1:07:56] Speaker 3: you know, we have this veneer of civility and underneath
[1:08:01] Speaker 3: we we're untrustworthy and evil beings. And I think he
[1:08:06] Speaker 3: goes through a lot of that, and this proves a
[1:08:08] Speaker 3: lot of historical beliefs. And you know, in this day
[1:08:13] Speaker 3: and age, you need some optimism, and I'd say this
[1:08:16] Speaker 3: this book gives you belief and trust in humanity.
[1:08:20] Speaker 2: So humankind kind of the opposite of sapiens exactly like
[1:08:27] Speaker 2: that that that book was fascinating, but like a little bit, gee,
[1:08:31] Speaker 2: we really suck as a species or the selfish gene.
[1:08:35] Speaker 3: Right, So Richard Dawkins book that also, I mean he
[1:08:38] Speaker 3: did this author disproves some of the thesis, right because
[1:08:42] Speaker 3: Richard Dawkins basically says, well, ey genes basically make us,
[1:08:47] Speaker 3: you know, the species we are, and there's a lot
[1:08:49] Speaker 3: of not so on good features. This version says, well,
[1:08:53] Speaker 3: there's a lot of misrepresentation there, and ultimately he shows
[1:08:57] Speaker 3: examples of you know, why people I mean, he gets
[1:09:00] Speaker 3: and the example of when soldiers in the First World War,
[1:09:04] Speaker 3: you know what percent of debts was caused by people
[1:09:08] Speaker 3: directly shooting at the enemy, and that was a tiny
[1:09:11] Speaker 3: percent because soldiers had a very difficult time to look
[1:09:15] Speaker 3: the enemy in the eye and kill them. So most
[1:09:18] Speaker 3: of the debts were done by you know, grenade or
[1:09:21] Speaker 3: kind of indirect means. Because ultimately, you know, humans don't
[1:09:26] Speaker 3: want to hurt other humans.
[1:09:28] Speaker 2: That's that's really fascinating. Our final two questions, what sort
[1:09:32] Speaker 2: of advice would you give a recent college grad interested
[1:09:35] Speaker 2: in a career in either investing or private equity or finance.
[1:09:42] Speaker 3: I would say, don't narrow down your options too early.
[1:09:47] Speaker 3: As as I've experienced in my career, I've done a
[1:09:50] Speaker 3: lot of different things, and I learned in each experience,
[1:09:54] Speaker 3: even though they might not look related. I've learned things
[1:09:57] Speaker 3: that have made me a better investor, a better leader.
[1:10:02] Speaker 3: And I think a lot of young people today come
[1:10:04] Speaker 3: in to the workforce and say I know what I
[1:10:06] Speaker 3: want to do, and I think that they actually don't.
[1:10:12] Speaker 2: And your experience going from consulting to private equity to
[1:10:17] Speaker 2: being CIO. Did you have any idea that would be
[1:10:21] Speaker 2: your path when you first started.
[1:10:22] Speaker 3: Well, I thought I wanted to be a doctor.
[1:10:24] Speaker 1: There you go.
[1:10:25] Speaker 2: Well, so not just one pivot, but multiple pivots exactly.
[1:10:29] Speaker 3: So I think that young people really need to be
[1:10:31] Speaker 3: open minded and explore and you know, take opportunities for
[1:10:36] Speaker 3: what they are. Right. So, if you're given the chance
[1:10:39] Speaker 3: to if you're loving what you do, but you're given
[1:10:41] Speaker 3: the chance to experiment with something else, instead of immediately
[1:10:44] Speaker 3: saying no, think twice and think you know, what could
[1:10:46] Speaker 3: I learn? How could this be good for me? Because
[1:10:49] Speaker 3: I think that richness of experience at the end makes
[1:10:52] Speaker 3: you makes you a better business person.
[1:10:56] Speaker 2: And our final question, what do you know about the
[1:10:58] Speaker 2: world of investing today that would have been helpful back
[1:11:01] Speaker 2: in the nineties when you were first getting started.
[1:11:04] Speaker 3: Well, so, when you study in academia, you do a
[1:11:07] Speaker 3: lot of analysis, right, So we talked about markets are overvalued,
[1:11:11] Speaker 3: multiples are high. I think when I was starting out,
[1:11:16] Speaker 3: I had a lot more belief in you know, rigorous
[1:11:20] Speaker 3: analysis and numbers give you the right answer. I think
[1:11:24] Speaker 3: investing is much more messy, right, So putting in the
[1:11:28] Speaker 3: rigor of the analysis, with understanding behavior and human biases,
[1:11:35] Speaker 3: technicals flows, that is the way you get a fuller
[1:11:40] Speaker 3: picture of the investment space. And I think we talk
[1:11:43] Speaker 3: I mean, there's a lot of very smart people that
[1:11:45] Speaker 3: are very good with numbers, but I think understanding behavior
[1:11:49] Speaker 3: and people is just as important.
[1:11:51] Speaker 2: Huh, really, really fascinating. We have been speaking with Felina Panava,
[1:11:58] Speaker 2: Group chief investment Officer for WIS Ray. If you enjoy
[1:12:02] Speaker 2: this conversation, well, be sure and check any of the
[1:12:04] Speaker 2: five hundred we've done over the past eleven years. You
[1:12:08] Speaker 2: can find those at iTunes, Spotify, YouTube, Bloomberg, wherever. Week
[1:12:13] Speaker 2: you find your favorite podcasts, be sure and check out
[1:12:16] Speaker 2: my new book How Not to Invest The Ideas, numbers,
[1:12:20] Speaker 2: and behaviors that destroy wealth and how to avoid them
[1:12:24] Speaker 2: How Not to Invest. Wherever you find your favorite books,
[1:12:27] Speaker 2: I would be remiss if I did not thank the
[1:12:29] Speaker 2: Crack staff that helps put these conversations together each week.
[1:12:33] Speaker 2: Peter Nicolina is my audio engineer. Anna Luke is my producer.
[1:12:38] Speaker 2: Sean Russo is my researcher. I'm Battery Results. You've been
[1:12:43] Speaker 2: listening to pastors in business on Boomberg Radio

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