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Thank you for joining us today. Um it's a privilege to be here with two um leaders of financial services industry. Um CS Banka Krishnan, CEO of Barclays and Jeffrey Gundac, founder CEO and CIO of Double Eight. The idea here is really to discuss um the collaboration and partnership between Double Line and Barclays.
perhaps use that as a um jumping board into markets and how clients are thinking about engaging with Farlays and Double Line. So perhaps Jeffrey I could ask you um how the collaboration with Barclays came about and also how it's informed strategy of Double Line as you've been growing in business. Yeah, thanks.
Um, we started out go a relationship back I'm going to say it was 2011 or 2012 and I think it was uh something to do with our total return strategy getting like clients some sort of note or warrant some some synthetic exposure to it and that's how we sort of got to know each other and uh there was this uh index that used the Dr.
Schiller from Yale his c his sickly adjusted cape ratio and there was this idea that maybe we could offer a mutual fund with that as the underlying decision rule but it's been a really good working relationship and uh the team at Barclay's working with Sherman early on to do the the Cape strategies the European and the US was really helpful very open and it's really been a pleasure Thank you Jeffrey.
Um banker what about yourselves? How when you think about partnerships collaboration what are the factors that you consider when you're trying to work with a firm like double line? Well there's French philosopher Victor Hugo said there's nothing more powerful than an idea whose time has come which has two parts.
The idea has to be good and its time has to come. And I would say when you think about a partner on top of that the idea has to be good the time has to be right and you've got to have a great partner. Now uh I spent the first 15 years of my life in finance as a fixed income portfolio manager and uh was from a very far distant spot on the east coast admiring what Jeff had done uh not just at double line but before double line as a fixed income manager and so while we are not in the asset management business we spend a lot of time thinking about what good investment strategies are for those who provide them which we don't but we like to work with you to provide them.
The second thing is I think you know over time you see inefficiencies in public benchmarks as they are constructed. So what we try to do is to create that kind of benchmark which we did with the case index which has a good general property of risk return sharp ratios to it. And then there's a delivery vehicle.
That's important because you've got to cover the costs and you've got to generate enough alpha so that you get that index and you get a little bit more and and and cover fees and costs which is what your fixed income capabilities working with us do and then ultimately to sort of you know the idea has to be there and the packaged well with a good partner and the time has to come.
Yeah. Thank you. Um Jeffrey maybe stepping back a little bit um just in terms of clients as they think about the next 12 to 18 months some of the broad themes I think you've already touched on more publicly people are familiar with but maybe for the the Barlays network what are the sort of opportunities you see ahead in the next 12 to 18 months.
Well, I I think that you have uh the beginning of what's going to be a long-term trend of the US no longer outperforming the rest of the world in stocks. And in fact, if you're a dollar-based investor, I'm so bold as to recommend that people think about buying foreign stocks and not, you know, and taking the currency risk because I I I've been talking about this publicly for a while that I think the dollar is not not no longer acting as a safe haven.
I don't I don't think that's an opinion any longer. I think you've just have to analyze the data. When the S&P 500 fell, it corrected back around April 2nd with the tariffs. You know, the dollar typically in a S&P correction going back couple of decades, there's been 13 market corrections. The S&P 500, the first 12 of those 13, the dollar rallied every time.
It went up about 8 to 10%. But during the tape, the tariff tantrum earlier here in 2025, the dollar dropped. And I think that is very very telling that it's no longer being treated as a safe haven asset the way it is to be and you see that in the dollar value of gold as well which uh is very uh moment you want momentum you've got momentum in gold for sure.
I was on I do a slot on CNBC after the Fed press conference. I've been doing it I think it's about 37 or 38 times which is amazing and spend that that that many because it feels like yesterday I did did the first one and I was predicting uh I had predicted that gold was going to go to 3,000 in 2025 and when I was on the show the um I was asked the question do do you still think it's going to go above 3,000 and I said what kind of a question is that it's a 20 2970 you know you're asking me can it go up another percent and so I said you know I think gold is going to go to 4,000 this year and so here this week as the gold price made made a honest man of me but I think we have moved and we're seeing demand this our our uh emerging market team is starting to see demand for em that was non-existent as the dollar was going up and we're seeing crossover buying we're seeing uh interest in emerging markets and I recommend emerging markets as part of a portfolio.
Um we for the first time in the 16 years that double line's been around here. 2025 was the first time we bought uh local currency emerging market debt and we think that's the early innings of that and we're seeing a lot of inquiry coming in about those ideas. So, a lot of a lot of people thinking about protecting themselves from a falling dollar or, you know, adding some real safe haven assets, which some people will buy cryptocurrencies for that.
They're the risktakers. Others will go with the tried and true gold or some of the small money players, they like silver because when it really gets going, silver is the high beta asset. And that has happened this year. And so those are those are things we're really looking at. Um we're also very um leerary of long-term Treasury yields.
We think that just like the dollar could go down during a recession rather than going up during a whenever a recession would come, we think that uh we we we we think that there's a lot of of momentum in some of these true hard asset plays. So that's where what we've been doing and recommending very unusual asset allocations for relative to where we would have been because I think that the paradigm that defined the first 40 years of my career has ended and that is there's not going to be secularly falling at least long-term interest rates and there's there's a lot of of of inquiry about that and and and demand for things that might be seven years in which is what we recommend in taxable fixed income.
uh as as unattractive on a historical spread basis as most fixed income sectors are. We're only lerary of things that are very down in the capital structure. Triple C uh things like that which are starting to default particularly in the bank loan market. Uh so we're interested in things that are have a spread over treasuries but and that that means asset back securities uh some mortgage back securities uh commercial uh mortgage related security mostly securitized assets credit cards asset backs where you don't have to do a lot of gymnastics to avoid the long end because there isn't anything at the long end and so uh for the time being we have very little interest in long-term uh treasuries and yet we We are mindful of the fact that the the uh administration may do some interesting things in case the interest expense becomes a really big problem.
It's gone from $300 billion five years ago per year to 1.4 trillion and there's a lot couple trillion of bonds keep getting issued every year. So the these are these are the themes that we're talking about. Um, clients tell us that this idea of avoiding the lower credit and also of avoiding the long bond and thinking that the the Fed will ease and will steepen out the curve.
Some of our biggest clients use many money managers. They say it's like everybody is saying this and so doesn't that make you worried and yes it's it's an invitation to be worried but sometimes the consensus is right and I and I and I think that people are on to that. One last thing uh we're talking a lot and noticing a lot of of flows uh for for about 18 years money flowed into the US market from foreigners.
It went from $3 trillion on a net basis back 18 years ago to by one measure 28 trillion uh earlier maybe maybe three quarters ago. That's $25 trillion that came into the US market over about an 18-year period. So you're talking about a trillion and a half a year. No wonder the US outperformed. But the dollar isn't going up anymore.
So that doesn't make a a good thing for a foreign investor who comes into the US. you know, so uh and and the money has started to leave the last couple of quarters. So, all of this leads us to uh think carefully and we're getting a lot of discussions and inquiry on this as I said about diversifying more than you used to into non-dollar investing particularly for dollar investors.
Thank you Jeffrey. I mean Venet you have the privilege with Barclays at the bread the depths of the Barclays network. What are you hearing from clients and investors and maybe specifically within your wealth channel and your institutional channel? I mean, I'll focus a little less on where relative value sits now, but more what we think about and and concern ourselves with longerterm trends.
It's absolutely true what what Jeffrey said which is that we have had over the last 3540 years uh quote unquote secularly declining uh level of interest rates which has now begun renormalizing. Um it's still even now below sort of normalish levels um and what people in the bond market call the term premium uh has slowly reasserted itself.
Now there are two other things though. one is uh you've had as Jeff pointed out an appreciating dollar in this period because of an asset flow that's coming to the US. It's coming for two reasons. One is US markets themselves have been attractive and second is as global trade bloomed uh and the and and there was enormous globalization there was a movement of dollars into the hands of exporters and away from the United States.
Those dollars had to be reinvested somewhere. They came back into US assets, including government bonds, treasuries, and all the way up to equities. With what's happening with tariffs, you've got to assume that some of that flow is going to correct. So that on the margin, those flows are going to decrease.
The second thing, as Jeffree just referred to, we have been in probably an 18-year bull market bred assets, right? I mean there was a hiccup during Kul the Dutch didn't last any length of time. Yeah. The hiccups. No, the hiccups did not. Um so what keeps that going? What keeps that going is the strength of individual consumers and actually of corporates.
I don't know what's going to cause that change, but it is something that you've got to if you've got a medium-term asset allocation be prepared for. So to answer your question, I think there is obviously a role for a broad diversified set of both currencies and government bonds and assets. Second is the shifts are going to be less favorable to dollar assets and more favorable to non-dollar assets.
Now having said that there is also a huge amount of investment that's taking place. You know data centers and AI is one one notable example. But the tech economy is creating both requiring both investment and potentially can create disruption in the employment market based on what productivity gains people are able to realize or even if they don't realize them companies feel they have to show them right.
Uh so from our side it is to get the broadest exposure to try to do it in such a way that in the medium-term gives you some protection against um defaults and and the turn in the credit cycle. I think parts of the world economy and emerging markets are growing very well and they represent an attractiveness and I think though from our wealth and our private banking channels people are looking for the breadth of that exposure.
Yeah. Thank you for that. And related and following on given the sort of ongoing shifts in the market, um you've obviously had a strategic plan you're implementing favor of Barclays. Very well received so far by the market. So congratulations on that. Um and really wanted to ask you about leadership questions and what you've learned as you navigate the bank but also the markets and what's going on in terms of the world.
It's, you know, we live in a complicated world and our tendency is to make it more complicated than it is. So, I think it's really important whether it's an individual or a company or a business to identify what you're good at, identify what your customers uniquely need from you, how best to deliver it in a cheap way and a cost-effective way, but also in high quality service.
uh and and and and to manage your businesses, your business footprint and your business targets with that aim in mind. That's what we are trying to do. There's a lot more to go. But I think for an investor in Barclays, they've got to know what this bank stands for, what it's capable of doing, and that our customers like our products.
And then as a result of that, show the financial metrics they'd look for in any bank, right? interest income earnings, good risk management, management of credit losses. Thank you. Um actually on that point Jeffrey for yourself for double line uh where do you see the opportunities for growth and you know how are you positioning the firm?
The most important thing from my seat is to keep turnover of the investment team as low as possible and we've certainly accomplished that. How how do you do that? Well, you make people partners for starters. and you have a culture that is a good one to work at. There's a lot of competitive kind of aggressive people in the financial business.
A lot of times money managers have very big egos and uh it's having a culture where nobody is sad when somebody else succeeds that everybody rose their ore in the boat in the same direction. So I believe that if people h are to have responsibility, they have to have accountability. And if you have if they're going to be accountable, they they need responsibility as well.
Those things go together. And uh I'm not yelling at people ever. You know, we're all working together. I I remember when um really good example was when the lockdown came and it was just absolutely dead center bullseye on commercial real estate and the commercial real estate securities market had no bid and my CRA team Morris Chen after a strategy meeting where it was really grim.
I mean, I remember that that one week where we had some redemptions going on and in the emerging market se sector and the and there was no bid. The bid was zero. I mean, the bid was pass. Yeah. Exactly. And and and uh Morris was really feeling bad about it because commercial research is the hardest hit.
And he called me up and I said, "This isn't your fault. You know, I've been through this stuff a lot of times. We're going to get through it. It's not as bad as you think and all you can do is stop worrying about it and work on it. Not worry about it, work on it. And it's turned out to be one of the best investing areas.
Uh, of course, it was very hard to get clients to even pick up the phone when he talked about commercial real estate. You could say we're not talking about office. There's there's a lot of things. There's data centers. Yes. You know, there's other things. Um but we had we we ended up get getting traction with that.
The model in investment management is often silos that actually compete with each other and so there's a parent company. It's often owned by a bank or insurance company, often non US. And they have sometimes they have equities and they might have five value teams and five growth teams and they're all competing with each other.
And the business philosophy is one of these is going to have a hot dot. Somebody's going to be in the upper desk aisle just because of the just because of the the randomness of it. And the marketing of that of that those entities is typically push the hot dot. So when team A has a median dot and team B has a top decile dot, the marketing force is unleashed on the hot dot and the people who are the median dot.
Whenever the hot dot people get an account, they have it look like a death in the family has happened, right? And and so I I I reject any kind of marketing on hot dot. I think it's I think it's like a really dumb idea. It's the epitome of buy high. Yeah. And then if you are a hot dot buyer, you're going to be a a low dot seller and you just end up spinning your wheels.
And so we're much more interested in, you know, having pure plays on sectors and maybe being able to to glue them together for a combined core core plus or diversified portfolio. And nobody a lot a lot of places you sort of eat what you kill. You know, your your your compensation depends on your team's AUM.
We have none of that at double. If somebody if if if bank loans gets a $300 million account, everybody's happy. Everybody. And that's a that's a culture that a lot of our clients really appreciate because I mean somebody said to us, you you guys are much friendlier and in a certain sense a little bit more laidback than a lot of you know your your uh your high-powered you know jam the hot dot products competitors.
Thank you Jeffrey. Um just looking forward now perhaps in a slightly more optimistic sense. What are you optimistic about for 2026? Maybe perhaps Wank I could stop start with you. Well, what I'm optimistic about is that the uh you know the global economy in 2025 has survived shocks that we would have thought might have dented it.
You know, if you go back to January, people gather at Davos in Switzerland, everybody was using the term American exceptionalism, right? That's that's a synonym for American US markets outperformed other markets. Exactly. That's all it is. Exactly. Um then by April people have their doubts and now it's come back up.
All the way. All the way back. All the way back up. Um but I think you've got to look more fundamentally. You've got to look at the fundamental issues of inflation, employment, and corporate profits, wage growth. I have reasonable I'm I'm I'm reasonably confident that the momentum will continue but there have been shocks to the system that require a lot of rewiring in in the corporate world.
Um so I don't think the risk has be you know we're past the risk point of risk. So we've got to be watchful and I would say cautiously optimistic. Thank you Jeffrey. Were you optimistic for for 26? I'm more optimistic than a lot of people uh on on not the the lower tiers of corporate credit. Uh the spreads on investment grade corporate bonds are basically at the tightest of all time other than back in the early 80s when I started in this business when we had a a shocking development that's IBM bonds traded through treasuries.
Well, that's happening now again. Yeah, Microsoft is trading through treasuries and I think that's not random. I think that's because people realize that the corporate public market uh is of doesn't face maturity wall. The CFOs did a much better job than the the US government in managing their debt burden.
You know, when rates were low, we we're running 84% T bill issuance. You know, you should you should be locking in lower rates for longer. But but what's happened is that while spreads are tight very tight by Wester corporates the quality is higher than it used to be and the same can be said for the high yield bond market where yes the spreads are very low by his historical ranges.
Uh they were only lower back in 2007 and not by very much but the market was so much worse in 2007. So what's happened is with the the deluge of private credit being raised, uh it's my belief and my observation that a lot of the junky stuff that used to find its way into single B minus and triple C junk bonds is now going to private credit.
And so where the real risks lie on the default cycle in my view are more in these lockup situations, private equity and private credit because their heyday was was over about two years ago even though the money keeps piling in on funny arguments like you know sharp ratio arguments that rely on the fact that you don't mark to market on the private side.
uh five-year past performance, which was two years ago, private credit looked great on a relative basis because when you marked down your your corporate bonds in the public market, you know, there was a bare market and and you had to show those marks and what typically happens with private vehicles is they're not kind of a lag.
The prices are almost a moving average rather than a spot price. So, I'm pretty optimistic about that. Um I'm optimistic about uh way I said local currency emerging market for the first time. Uh I like non- US investing broadly and I have I'm always optimistic for the long term. I'd say this has been for the last 10 years.
I've always been optimistic on India. Not as a 30-day 30 week you're not even 30 months. I'm talking about 30 years because of the demographic shifts that forced, I guess I would say, China to change its economy and bring people in and employ them with hundreds of millions of people entering the workforce.
That's going on. That's the that's now in reverse gear in China and that's coming now for the next quarter century, I think. And demographics, you know, the future that's already been determined. Yes. And I I'm a big believer in demographic based investing. The the that's one of the challenges in the United States is we now have negative net mig immigration which uh you know obviously it's going to change a little bit of the way we think about the employment data.
So with negative immigration and we have the the births versus deaths situation is is turning ne negative in terms of shrinking population based on very low fertility rates and very you know rapidly aging baby boomers. I'm pretty optimistic on uh on the five-year type of US bond market and I I'm optimistic on currency translation.
I know I'm repeating myself, but it's by far my highest conviction is that you're going to make money on currency translation because it's already happened. And on the recession thing, it's interesting how once we went from secularly declining interest rates into what appears to be secularly rising,
the old inflation indicators aren't working very leading economic indicators have been signaling recession for for years. Yeah. And they're they're still just totally bombed out. And you've got the yield curve stuff where when the yield curve uh when twos tens uh st inverts and steepens that's almost always the front door of a recession.
That hasn't worked. The the unemployment rate versus the yield curve hasn't really worked. But again what we've got is this strange pattern of a reduction in demand for workers being matched with a d a reduction supply of workers. And so we we have Jay Powell discussing this openly at his last press press conference with the range of jobs was 100 to 150,000 per per month and now it might be 0 to 50,000 and it might just be zero.
I mean the ADP just came out negative although that's a flaky number. It's all over the place. come out at zero. But I'm a little bit concerned that we might uh run an inflationary policy somewhat intentionally because Trump wants short rates down, but maybe not entirely intentionally. If you use the data interpretations of the past, zero would encourage easing and you know that zero zero jobs, say we have a three-month stretch where the average is zero, there's going to be a lot of lot of jaw boning on we got to get this interest rate down pronto and it might not really be have to do with the hiring firing balances.
It might just have to do with these demographic changes and so we're watching out for that. And you know, uh, we have a we have a a test case on what might be happening when Jay Powell leaves because we got that guy Myron who got on there and right out of the gun he desented. He wanted a 50 basis point cut last September and he wanted five more by year end.
So the guy the guy's out there at 175 basis point cuts by end of the year and Powell's out in in May and he's going to be as stubborn as as he possibly can be because he doesn't want to be one of these uh guys that's gets inflation pinned on him. But Trump is going to ask people who are the candidates prevented presented by Scott Bess and he's going to say will you put the rate where I ask you to?
Maybe not that directly, but that's certainly been kind of his his complaint. And if that were to happen, the inflationary policy would be uh increasingly more likely. This is another reason why I'm not really interested in long-term Treasury bonds. Thank you, Jeffrey. Perhaps to end on a slightly more non-correlated topic of sport, I understand you're a passionate cricket fan, which I don't know in the United States whether that translates.
You wake up early in the morning. Yeah. Just curious how 25 has been for you in terms of uh It's been good actually. I managed to see a few matches in London. Um few entertaining matches but it's been a good season. It's been a good season. Did you watch the England? I watched I watched Yeah. two days of England.
Yeah. Yeah. How was that for you? It was good. It was the wire. Get out of the wire. I can't watch cricket because I don't understand the rules. You know, Jeffrey, for you beloved Bills, what's your view for them in the coming season? Uh very optimistic. It's but in football it's really always comes down to injuries.
If you have significant injuries your season kind of evaporates and we've had a few injuries. Obviously the one that matters is the quarterback and he has started every single game in his career and he's really never been injured. Yeah. But seriously. But, you know, as long as you got Josh Allen, you have a chance to go all the way.
And so, we're going to remain uh in bull mode on on the Bill's chances this year. I'm almost certain they'll be the number one in the AFC. We we need a serious injury for to stop that, I think. Okay. Well, we hope so. Um, thank you very much. Thank you for your generosity and hosting us here. And Jeffrey, thank you for your time. Pleasure. Thank you. I enjoyed it. Yeah. Thank you. Thank you.
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