00:00Are you such a big asset manager that you're more concerned about the things that you buy
00:04than the things that you have to pay for? No, we're concerned about both. But first of all,
00:09thank you for having me this morning. It's a real pleasure to be with you.
00:12I'm happy to have you here as well. Thank you very much. So we are obviously driven by what
00:18we invest for. And it's very important to understand that we are long term liability
00:22driven investor. So we have lots of pension obligations for people. And we tend to forget
00:28in these really exciting moments that people need to have stable, reliable income for retirement.
00:34So we know the world is under invested in retirement income and we need to therefore allocate capital
00:39in a way that make sure that these people do not just get the return on capital, but the return
00:44of capital also. So you've you've passed the two trillion euro mark. Yeah. In the midst of all of
00:51this. Right. In the midst of war of inflation, trade uncertainty, AI disruption. I would estimate they
00:57have more than three trillion euros under management. I think you've but you've like just recently passed
01:01the two trillion, I believe. Right. It's a lot. It's a lot. It's a lot. It's a lot. Let's agree.
01:06It's a lot. Let's agree. It's a lot. All of these big forces that are just reshaping society. Have
01:11they reshaped how the team at Allianz thinks about longer term capital allocation? Yes, we are. And we
01:17are also rethinking the way we think about what our role in society is. And if I can just give
01:23you an
01:23example in a very short stint, we used to be about sort of taking premiums and paying out claims.
01:29And the problem with that is if claims inflation is higher than disposable income growth over time,
01:34you become a problem for society because you are benefiting from increasing cost to consumers. So we
01:40are changing our business model, helping consumers to actually reduce their cost of risk by helping them,
01:46for example, to prepare better for losses to make sure if they have a loss that we reduce the cost
01:52of the loss,
01:52rather than just paying for it. It's a fundamental departure from what we used to do for the last 136
01:58years. So there's a lot of things that are changing, but we're not talking about them because
02:02we're always talking about the war here, the AI there, but we're not talking about what's going on
02:08in many fundamental industries. Well, I mean, one of the most important industries that you
02:15look at is fixed income. I mean, you're 100 years, what did you say, 136 years of experiences. I mean,
02:22all of that is as a master of the debt class. And I wonder if you think, because spreads are
02:30so tight,
02:31we were looking at the tightest spreads in the 20 year window. Now we're looking at the tightest spreads
02:34in the 30 year window. Are these assets being priced appropriately? No. And we have to go through that.
02:42We have been talking about irrational exuberance for a long time. Every now and then they come back.
02:47We need to look for them. Risk is not properly priced at the moment for various reasons. We don't
02:52have the time to go through all of them. We have time. Yeah, but we need to be very careful
02:56in terms
02:56of how we allocate money. And we rely on now, for example, our colleagues in PIMCO are the world's best
03:02in allocating capital to fixed income to navigate these very treacherous waters. So, for example,
03:07on government debt, I would always advise people when they think about fixed income, we can talk
03:12about credit default and liquidity. Really look at what the debt levels are that we have today,
03:18both the ones that you see and the ones that are invisible because they are pension promises that are
03:23not funded. And look at the spreads and they don't make make a lot of sense. Well, specifically,
03:28private credit has garnered a lot of the headlines. A lot of it has to do with retail fund flows
03:33and
03:33redemptions. And the liquidity mismatch always makes way more sense for insurance because a policy
03:39holder, there's, you know, years, if not like a century in which you need to pay that out. But I
03:44wonder how you think about this overall market, because obviously the illiquidity is not an issue
03:49for you. But what about underprice risks specifically in private credit? Do you think there's a lot lurking
03:55there? I'm not sure there's a lot lurking in our portfolio. We're very conservative, so we barely have any
04:00non-investment grade risk. It starts with that. The second one is people often confused even the
04:07methodology. So they say you have unrated private credit. That means it's bad. No, it's not bad.
04:13It's just unrated. And by the way, even some of the ratings and you've probably discussed it many times
04:18in the past do not make a lot of sense. We really try to do exactly what you say. We
04:22try to match the cash
04:23cash flows very, very carefully. And people do underestimate the risks from illiquidity.
04:30Both, by the way, on the asset side of the balance sheets. But life insurance companies can be exposed to
04:35higher lapsation. So you want to make sure that you have always enough liquidity if there's outflows that
04:41you don't have to sell any of these assets whether private credit or anything else at a loss. So we
04:46have some
04:47exposure to liquidity mismatches if they're not properly managed. I would normally ask you about
04:54Christine Lagarde if we were in Munich or in Frankfurt. But we're here in New York. And you're global
04:58investors anyway. What do you expect from Kevin Warsh today? And do you think that a Fed chair or an
05:06ECB
05:06chair should be more focused on inflation or growth right now? So I'm not Dan Iverson. You should ask him
05:13the
05:13question. And you should be very happy as an investor in Allianz that the CEO doesn't pretend to be the
05:18best bond
05:19investor on the interest rate reader in the world. You're probably pretty good. But I don't know. But I'm paid
05:25for
05:25making sure we don't take undue risk. We get proper return. But on a serious note I think the United
05:30States is very happy to
05:31have him as the new Fed chair. So because he's highly from what we know is highly competent. And he
05:38also knows how to build
05:40credibility in markets. And there's something that we were as investors very worried about that you get an appointee that
05:45was just following the boss's will. So America has proven again that he can combine the two. So I'm we're
05:51very happy and we wish him all the very best.
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