- 18 hours ago
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00:00The U.S. needs China and China needs the U.S., right? And so there's always going to be this
00:05opportunity to coordinate. You want them talking. I mean, as Trump said, you know, we're now having
00:11conversations. President Xi said we need to be able to be more cordial and work together.
00:18We need each other. The good news is I think there's a recognition of that. And so when you
00:24look at who the delegation is, both parties have brought to the table kind of what each other
00:29needs. I think that the other side of this is there will always be a distrust around technology.
00:34But the fact that you have, you know, Elon there, Jensen there, Dina from Meta there, right? Like
00:41that's a sign that the U.S. is coming in to have conversations. We need them. We need them for
00:46rare earths. I think, you know, that's just the reality. What do you see? I mean, the market are
00:52very optimistic, right, in general, even despite and that's partly driven by technology, despite
00:57everything that we're seeing in the Middle East with no real resolution in sight. Is there too
01:01much euphoria when you speak to clients? What are they telling you? Well, if you look at it just in
01:04this first quarter earnings, 85 percent of the companies beat their projections, right? I mean,
01:09like that's and it's a broad basis. This is not just a technology AI driven. That's the reality.
01:13The U.S. market is very, very and the economy is still very healthy. And so I actually think that
01:19the market, there's reasons for the euphoria around it. And I get it that there's partly the U.S.
01:26is a little bit as a, you know, a energy independent. We're a little bit more isolated
01:30from some of the problems in the Middle East, which it means that it's having less of an impact
01:35on it. Is there anything you worry about? So you also you're here in London for, you know,
01:39an IPO from Uzbekistan, which I'll get to in a second. But do you worry about inflation? Do you
01:44worry about, you know, private markets? Is there something underlying that you could see some
01:48dislocation or something that makes you uneasy? Yeah. So here's what I'd say. Look, I think inflation,
01:52I think the market has underestimated the realities around inflation. I know that there's a lot of
01:58concern that's raised around Kevin Warsh and will he be independent? The reality is, remember,
02:02it takes 12 governors to vote for whatever the changes are in rates. And Kevin Warsh's term,
02:07it's going to be two years under President Trump and then two years after that. So he's got to look
02:12at his legacy, too. I think he's going to be very practical. So I, you know, I think inflation,
02:17the reality of inflation is it's sticky and it's probably, you know, going to be more difficult
02:23than even the market. I think the market's probably underestimating it a little bit.
02:27So you're here in London because there's, you know, a company from Uzbekistan that listed,
02:31which so far 24 hours has been doing very well. I mean, are you expecting more companies to?
02:37Well, so let me give a little bit of background on that because it's actually very unique.
02:41So this is, the Uzbekistan government is, has been very progressive with the reforms,
02:47actually have one of the top performing economies. I think this current quarter,
02:51they're at 9% GDP growth. Last year, they're almost 8%. And so what they've done is they've
02:56hired Franklin Templeton to help them privatize state-owned enterprises. So they contribute into
03:02a fund, 13 companies, they cover transportation, utilities, financial services. And in that fund,
03:10we are then, we actually have the ability to change management, control the corporate governance.
03:15So what they're trying to do is bring FDI and forward direct investment into Uzbekistan to help
03:20them do the reforms. This is a great way to do it. And so we actually did this in Romania
03:2615 years ago.
03:28The returns were better than the S&P 500, which is why we have a lot of institutional clients who
03:32are
03:32very interested. The actual, the IPO on the London Stock Exchange, which will happen on Monday,
03:37so Tashkent, it's already opened up, is oversubscribed by four times, right? So this is
03:42institutional investors looking to invest in Uzbekistan. And I have to say, it really takes
03:49leadership to be able to do something like this, but it's critical to be able to reform an economy.
03:54So we're excited to do it.
03:55So Jenny, what's the next, I guess, you know, this is a portfolio of companies. What's next to IPO? I
03:59know
03:59there's a lot of rumors about Uzbekistan Airways, which would get a lot of investors quite excited.
04:04I mean, are you looking at it in terms of potential?
04:07Yes. So the objective within the fund is that actually all the companies ultimately IPO and
04:13you wind the fund down, which is what happened in Romania. There's a few of them left. In fact,
04:17in Romania, at the time that the hydropower plant was contributed to the fund, it was insolvent.
04:25We had to completely change the management team, restructure the business. It was the largest IPO
04:30in Europe in 2023. So the goal is, is to take the companies, you know, and state run companies
04:35often don't have the corporate governance that's acceptable to the institutional investor.
04:40And so our job is to ensure, and by kind of putting the stamp of Franklin Templeton on it,
04:45you're saying to the market, it will be at those international standards as far as corporate
04:49governance. And Jenny, I mean, you're right that the reforms have been incredible. It's still,
04:53you know, everything depends on the president. I think he still has presidential approval for
04:57everything. I mean, for investors, how do they weigh, I guess, this concentration of power
05:01compared to the investment opportunities?
05:03So while it's concentration of power, the president understood that he had to bring in
05:08a third party to represent the minority shareholders. That's our role. And gave us
05:13the ability to change the leadership in the underlying companies, which oftentimes in state-owned
05:19enterprises, the argument is, oh, it's a bunch of cronies of the government. We have the ability to
05:23change that if we don't think it's the right leadership. That kind of, I think, vision around
05:30doing it is what, you know, shows a real leader. Jenny, if we look at the amount of private equity
05:36firms, I guess that could exit from deal. I mean, there's just a lot of IPOs that could come to
05:40market in the next 16 to 18 months. Can the markets cope with that amount? Or does it have
05:45to move to secondary markets? You know, I mean, obviously, you're talking about the big IPOs,
05:50SpaceX, the Anthropics. You know, it seems that they can, and you can always reduce the amount
05:56you float, right, if you're concerned about it. But, you know, I think as long as the market is
06:01strong, and actually a healthy market, we need to see more private equity companies have liquidity
06:07exits, because that's been one of the issues in private equity is that they've really held out
06:12too long. And so it's frustrated a lot of the investors. So yes, you know. At some point,
06:18could you see the secondary market actually exceeds the, you know, the, the, meaning private
06:22market? Yeah. Look, I, I hope that never happens. I mean, at Franklin Templeton, look, today,
06:29you still, the average investor is better served in a liquid public market. Now, there are excess
06:35returns in the private markets, particularly as you see the differential in like private credit
06:38versus traditional fixed income. Those returns matter when you're saving for retirement. So both
06:44markets need to be healthy, healthy. But I think it would be really unfortunate. And I think that,
06:49that one of the things that the SEC leadership is trying to do is make being a public company more
06:54attractive. That needs to happen. It's not just about, you know, quarterly earnings, there needs
07:00to be kind of some other reforms that go into place. But I think that it's a really good sign
07:05that
07:05we're seeing. And really, it's a global IPO market. So it's not just the US, what you see it in
07:10Hong Kong, you see it in India, that those are good things. And I think a sign of a healthy
07:14economy.
07:15Yeah. I mean, if we call them like the mega IPOs, right, and you're right, it's, you know,
07:18the Tesla, the Anthropics or the SpaceX, not the Tesla. I mean, should they be allowed once IPO to
07:24enter the index earlier than they currently can?
07:28So, you know, I think there's some question on, because you have people locked up in there. And
07:34what does that do? Does that distort? Because now suddenly you have buyers that have to buy the stock.
07:39You know, I'm sort of of the view that it would be better to wait and give it a little
07:43bit of time
07:44until those original are actually have exited. Otherwise, they sort of get this benefit of the
07:51but, you know, the other side of it is how does the individual investor who's in a passive fund get
07:56access to those if they're not in the index? But this is one of the challenges, I think, with the
08:00index,
08:00because if you're a company that doesn't get in the index, and you have 50% of the investors just
08:05investing in index, then it's really hard to compete.
08:10Do you think that these will change? I mean, even a lot of, you know, there's been a data
08:14center boom. Does it change the nature of markets? I don't know if there's like investor fatigue with
08:19data centers.
08:21I'll tell you my one worry on data centers. I just think anytime you are planning for 20 years,
08:27based on today's technology, with the pace in which we see innovation happening,
08:31that can be risky. And so, you know, you have things like photonic computing that doesn't
08:36need nearly as much energy. And I know it's complicated, and it's probably hybrid, but
08:41like you're making assumptions based on today's technology needs and energy needs. So I personally
08:48am sort of watching that trade as those investments go. Now, it's really good for the economy. There's a
08:53lot of capex that's being spent that has been put into the economy that's helping, you know, keep it
08:59going. So where do you see the biggest disruptions? You mentioned, you know, technology, but also
09:03energy needs. And you're right, that can significantly change how we use everything.
09:07For sure. I mean, look at the breakthroughs that we're seeing happening. And so, again,
09:12we're basing these assumptions on today's computing approach and today's innovation around energy.
09:17And we know that these things are both very, very quickly evolving.
09:21What are you spending most of your time thinking about, given all of that? I mean,
09:24you know, we could go in any number of directions. We touched on inflation, geopolitics.
09:29But is there something fundamentally that you think will change in how the markets operate?
09:33Look, I think so. I think the fundamental change is around bringing private markets so you have true
09:40democratization to the average investor. Right now, just here's why it matters. Just take investment
09:48grade fixed income. So if you invest in investment grade fixed income in the private markets, you're
09:52getting a one to one and a half percent excess return on that. Problem is you can't get your money
09:58for 10 years. So you really need to be able to withstand that illiquidity. On the other
10:03half, on the other hand, a one percent additional return can mean 20 percent more just over a
10:0820-year period in your retirement. Like, that can make the difference between whether you
10:12have enough money or not. So to me, it's all about matching the right vehicles with the
10:19needs. Because these are illiquid. It drives me nuts when I hear people acting like, oh, no,
10:23private credit's more liquid than you think. It's not. But it can be put in vehicles as a
10:29percentage of a vehicle that keeps the vehicle very liquid. And so I think that that's very
10:34important. And honestly, I think the best place for this is in retirement accounts, like in the U.S.
10:39But in the challenge, because people, you know, put money in their retirement thinking that they're
10:44not going to get it until they, so they don't need the liquidity. And it's opening up a bit.
10:47It is, but the reality is it's probably the highest, most litigious space in investments.
10:52And so, you know, it's all focused on fees. And these aren't cheap products.
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