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00:00I'm here at Carlisle's event and sitting down with the man of the hour. It is the CEO of Carlisle,
00:05Harvey Schwartz. Harvey, great to see you and thank you for having us. Great to be here and thanks for
00:09joining us. And look, you're convening hundreds of your investors here today. And it's probably not lost in anyone that
00:15if we were to just walk about a mile away, we'd be at the Eccles building where the Fed is
00:19starting their rate decision. If you were to give them advice, Harvey, because you see into the lens of hundreds
00:25of your companies, what are you seeing? Are rates restrictive? Is inflation
00:29a problem? Is this a Fed that needs to be hiking rates tomorrow?
00:33Again, thanks for being here. As you said, we have 400 investors from all over the world have traveled here.
00:39Some of the most sophisticated investors in the world. And these are questions that are front of mind. And we
00:45have a very, we've talked about this a lot. We have a very unique proprietary data set, as you mentioned.
00:51And 15 years ago, we started breaking down the data set and the insights into these portfolio companies. So it's
00:58several hundred portfolio companies.
00:59That employ about 750,000 people around the world. What that data set says is amidst all the backdrop of
01:09noise of, you know, structural change around the world, de-globalization, the conflict in Iran, the war in Europe.
01:16What that data tells us is the economy is doing quite well. GDP coming out of August looks like two
01:23and a quarter, two and a half percent. The consumer has been quite resilient. EBITDA is growing. And so really
01:30against a backdrop of uncertainty,
01:34the economic engine is doing quite well. Inflation has remained sticky, but it's not accelerating, but it's not decelerating. And
01:42so I think in terms of the Fed, our folks are not that focused on what any one individual Fed
01:50decision means.
01:51I would say we're at a period where the Fed will continue to watch the data. The markets obviously are
01:55expecting a hike, but it doesn't feel like we're entering a hiking cycle.
01:58It doesn't feel like we're entering a cycle where we're going to be cutting rates aggressively. And for those that
02:02are always wishing for rates to go back to zero, that generally is not consistent with an economy that's doing
02:10as well as ours is.
02:11So I think the Fed's got their hands full, but I think the market's already made its prediction on what
02:17the Fed's going to do.
02:18Well, I remember in the last rate hiking cycle in 2023, you basically had said, look, we can handle higher
02:23rates. It's predictability that's important.
02:26Harvey, we're in a scenario now where you have a Fed chair who wants to give less forward guidance. You
02:30have an activist treasury.
02:32You have issuance from the hyperscalers that's moving around rates. You have an energy crisis. Do we have a predictability
02:38problem with rates right now?
02:40I don't know that we have a predictability problem. I think that the Fed chair has announced a series of
02:46initiatives which we think are welcomed by the markets over the long run.
02:50I think it's a question of the pacing of how those get implemented. I think that there was a series
02:56of policies for the past decade which really were anchored around lower rates, lower rates globally.
03:03We have for years now, for three years, been working under the assumption that rates would be structurally higher. Why?
03:10Because deficits are larger. The demand for capital around the world is very high.
03:17De-globalization is really driving a complete reordering of priorities around the world in terms of how governments and companies
03:25think about economic growth.
03:26And these structural changes are not going away. And when you think about the priorities that countries have, companies have
03:34around security, whether it's national defense in a traditional sense or investing in economic growth, data security, energy security, all
03:45of this investment requires durable capital.
03:49And with deficits being as large as they are, we would expect rates to be structurally higher.
03:56But on any relative basis, historically, they're really not that high.
04:00For us, in working with our clients, it's about the cost of capital, being disciplined about deploying that capital, and
04:08that's how we're focused.
04:09And you've been really active throughout this whole period. Presumably, higher rates doesn't really curve that activity.
04:14If it's not higher rates, it's not oil at $100. It's not 10-year yields at 5%.
04:19Is there anything that can slow this train down at the moment, Harvey?
04:22Well, when you have economic growth, like we're seeing in the United States, and when you talk about, for example,
04:30the stimulus that is being brought to the marketplace globally from the hyperscalers,
04:37if we were talking about fiscal stimulus on this order, we'd be talking about a massive fiscal stimulus.
04:41And we're seeing that across the economy. We're seeing it spread globally across the global economy.
04:47And so this massive period of investment does have a crowding-out effect.
04:52So it puts pressure on bond spreads. It puts pressure on the cost of capital.
04:56That should be expected, not feared, but it's fueling economic growth in a very, very powerful way.
05:03And we're seeing very unique opportunities to deploy capital.
05:06And unlike a lot of other people in the industry, we've been returning a lot of capital.
05:10I was going to say, you've returned $37 billion over the past 12 months.
05:13It's a large amount. But, Harvey, I do have to ask, because there does seem to be this disconnect.
05:17You're leading the market there, but shares of Carlisle itself are lagging your peers.
05:21You're down something close to 30 percent year-to-date. What do you think accounts for that?
05:26You know, the industry went through a period of really accelerated share growth.
05:30And then when we were sitting here a year ago, the whole conversation might have been about private credit.
05:35It seems like the private credit window's in the rearview mirror.
05:38You're probably happy about it, by the way.
05:40I would be happy to talk to you about it. We had very strong views on it.
05:43They seem to have come to fruition. So at least we were right about that.
05:46So we feel good about that.
05:47But in terms of the industry, look, we are very focused on executing our plan.
05:54We announced a three-year plan. Second quarter, we had record results.
05:57We just keep doing our job. The share price will follow.
06:00We're very active. Our board approved a $2 billion share buyback in the first quarter.
06:04We were very active in the second quarter.
06:06We like where the shares are priced. We'll keep buying back shares.
06:08We do our job. The share price will follow.
06:09By the way, you're also announcing today that you're joining MIT's AI Impact Consortium.
06:17Its explicit goal is to help deploy AI in a way that's good for society and industry.
06:22That's an interesting time for that.
06:23What exactly is this? Why are you joining it?
06:25What data are you giving them? And how does that impact your investment process?
06:28So as I said before, for 15 years, we've been rolling up this proprietary data.
06:33When I joined Carlyle three and a half years ago, I got very lucky.
06:36One of the things that we were working on was how to think about using machine learning to make better
06:41investment choices.
06:43Taking a step back, we think about this transformative technology really most simply in three ways.
06:49How can we run Carlyle better? How can we make better investments?
06:51How can we improve the value of the portfolio companies?
06:53Full stop, that's it.
06:55In terms of the data we have, we have a huge history of proprietary data, which is unique to Carlyle.
07:02It's unique to being in D.C. for almost 40 years where David Rubenstein, the founders, formed the firm.
07:07And so we've been working on how to harness that data, which really prior to the advancement of large language
07:13models,
07:13wasn't achievable and you couldn't do it in the way we can do it today.
07:17And we've been very focused on how to build out the ecosystem around the data,
07:22how to make better investment choices, how to really create alpha.
07:27Working with MIT, leading researchers in the world, it's a huge partnership.
07:31We're super excited about it.
07:33But we have partnerships around the world where we are working with the leaders in the space
07:37to see how we can best use our data to make the best investments at every opportunity across the entire
07:44platform.
07:44Well, Harvey, as someone who's, again, implementing AI, looking at how you use it among your portfolio companies,
07:50surely within Carlyle, too, helping finance AI, maybe not as much as your peers.
07:55But we've reached this fever pitch and concern about what AI means for humanity.
07:59As someone involved in this ecosystem and, frankly, just as a leader of thousands of employees, are you concerned?
08:05I think any time you see transformative technology and we're in a step function change,
08:11I think questions should be raised.
08:13I think these are important questions.
08:15I don't think anyone knows the answers to these questions, but they're important questions to raise.
08:20And I think the debate that's happening today around the safety, the social awareness,
08:25I think this is a healthy part of the process.
08:27I don't think it means that growth will stop.
08:30I don't think it means that anyone's saying we should put a halt to this.
08:33I think this is a really important technology.
08:35I think we're going to, I truly do believe we will see breakthroughs in industry growth.
08:39We'll see breakthroughs in medical science.
08:41I think we'll see extraordinary opportunities here with this technology.
08:45As we go through this, there are going to be moments of growing pains and nervousness.
08:48I think it's important as policymakers and the leaders of the technology themselves,
08:52and you've seen them start to do this, make sure we have the proper guardrails.
08:55Hey, people figured out how to put airbags in cars.
08:57We can be able to do two things at once.
08:59We can grow one of the most important transformative aspects of technology ever,
09:04and at the same time do it in a safe way.
09:06I'm very confident that can happen.
09:08Hey, Harvey, we have less than a minute here, and I have to ask you before we go,
09:11exciting news for you all in your minority investment in the Seahawks,
09:15and perfect timing considering the Seahawks just won the opening game, too.
09:19Why do this?
09:19Your first franchise, why do it with the NFL?
09:22Why back the Node Kostela's purchase of the Seahawks?
09:25Well, we're thrilled to support the Kostelas in their purchase of the Seahawks.
09:30You know, for everything we just talked about, everything in the AI world,
09:33you can't walk anywhere without someone being on their phone.
09:36If you walk through the cities of New York or the streets of New York or you're walking through D
09:39.C.,
09:40everybody's on their phone all the time.
09:41You know, one thing people crave, they crave content.
09:45They crave being together.
09:48They like arguing with their friends about their teams and then being friends afterwards in a very polarized world.
09:53And so we're big believers in the opportunity to play capital in a space that brings people together.
10:01So is this more to come then, it sounds like?
10:03So, yeah, sports mean entertainment is not something new for us.
10:06We've been doing it for a long time.
10:08There are other investments we've made and announced.
10:10I won't go through those given I know we're short on time.
10:13But we're thrilled for the Seahawks.
10:14It was a fantastic game.
10:15Did you watch it?
10:15I caught part of it, yes.
10:17I'm not a big football person, but I had to watch, you know, one of the first games.
10:20We can cut that part out of the show.
10:22But we're thrilled to be part of the NFL.
10:25It is the world's leading sports franchise.
10:27I was rooting for the Seahawks for what it's worth.
10:28Okay, well, great.
10:28We'll get you some swag.
10:29Okay, perfect.
10:30I don't know if I can accept it.
10:31We might need to cut that from the interview if my bosses are listening.
10:33Harvey, thank you so much for your time.
10:34Danny, thank you for being here.
10:35It's a real pleasure to see you.
10:36Really appreciate it.
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