00:00Are you worried at all about the fact that there's been so much spending?
00:02So yes, you get that return eventually, you get that growth eventually,
00:05but there's so much front-running in terms of spending that it's not worth it.
00:09So I think part of the intensity of the spending has been linked to really strong demand.
00:15And I think that that is one of the reasons why we've seen this rebound in semiconductors,
00:20for instance, where yes, valuations declined as we were moving through the last few months,
00:26but what's important is that earnings revisions actually moved higher.
00:29So that signifies to us that the demand, I think, is still very much there.
00:33And so when we think about that corporate CapEx story,
00:36I think we also have to have a conversation around what does sustainable really mean?
00:41We've seen CapEx from the hyperscalers increase what's expected to be 77% this year
00:49on top of a similar magnitude last year.
00:52Sustained could just mean maintaining that high level,
00:56not necessarily that really robust growth rate.
00:58I think we do have to also be reasonable around that.
01:01What is your current regional bias, Europe versus the US?
01:04So for us, the US remains core for portfolios.
01:07We would have more of a preference towards the US,
01:10given I think its higher exposure towards growth and innovation,
01:14resilient economic backdrop.
01:15And I think also just broadly speaking, again, this corporate profit margin story.
01:20When it comes to European equities, I think that we have seen valuations come up to a level
01:26that is, I think, in line with the inflection higher in earnings growth.
01:31I think it's recognizing that earnings growth already.
01:34So I think we would be taking more of a selective approach around the sectors that we like,
01:38which are predominantly around financials, industrials.
01:42So linking that, I think, stronger cyclical story,
01:45but also with more of this continued halo theme around heavy assets,
01:51low obsolescence, and focusing on some of this real economy intensity.
01:54What are clients doing?
01:56What questions do you get?
01:58What are they asking?
01:59You sound very confident.
02:03Is that what they're saying?
02:04Are they buying buffer funds?
02:05Are they willing to give up some upside for downside protection?
02:09Are you seeing any shift in terms of what they're actually doing?
02:12I think what we are seeing is clients being really intentional about the risk that they want to take.
02:19So perhaps over the last few years,
02:22you've had more of a conversation around a rising tide lifting all boats,
02:26especially, for instance, when it comes to tech.
02:27But you are certainly seeing, I think, more fragmentation within trades themselves.
02:31And certainly when you look at, you know, broader S&P 500 volatility,
02:35that might mask a lot of the churn underneath the surface.
02:38So, for instance, within the S&P 500,
02:41the correlation between stocks is actually at a multi-decade low.
02:45So this, I think, does signify more of an environment for individual stock picking.
02:49So we have seen more interest, I think, in terms of being more intentional and more selective.
02:54Is that paying off?
02:55Because everybody I'm talking to is saying stock picking is still really hard.
02:58And the returns are really hard to deliver.
03:02I think that when it comes to active management,
03:04it is always about, you know, where and how you are positioned
03:07and then how you are diversifying even within that.
03:10And so that comes back to the regional story.
03:13It comes back to the sector story.
03:14And then it drills down all the way into single stock selection.
03:17So it's going to differ dramatically across the spectrum.
03:20When you look at any active manager,
03:21the difference between the top and the bottom performing quartile managers
03:25is, of course, very large.
03:26So it depends where you focus.
03:28And then the other thing that I would say is that
03:30there are also a lot of investors that are still sitting in cash.
03:34We have now seen, as we were talking about the start of this conversation,
03:38bond yields have reset meaningfully higher.
03:40We do think that the opportunity to move out of cash
03:43into the short to intermediate dated part of the yield curve,
03:47I think to lock in that carry for a more prolonged period of time
03:51is something that our clients have been interested in
03:54and which we think is also a prudent step to diversify,
03:57again, towards a range of different market outcomes.
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