MARIA: WELCOME BACK MARKETS LOOK
TO END THE WEEK ON STRONG NOTE,
DOW INDUSTRIALS TO OPEN 820
POINTS.
JOINING US CHIEF INVESTMENT
OFFICER TED, LARGEST FUND OF
ROUGHLY WITH $385 BILLION.
>> MARIA, THANK YOU SO MUCH FOR
HAVING ME.
MARIA: LOTS TO TALK ABOUT AND
WHAT YOU'RE DOING RIGHT NOW.
WHAT'S YOUR TAKE ON THE
INVESTMENT ENVIRONMENT RIGHT
NOW, THE MARKETS?
>> WELL, THE MARKETS ARE ROBUST
IN MANY WAYS, THE ECONOMY IS
SURGING HERE IN THE U.S. UP TO
3% GROWTH RATE IN THE FIRST HALF
OF THE YEAR FROM LONG-GRINDING
RECOVERY OF 2 AND A QUARTER
PERCENT.
OTHER GLOBAL ECONOMIES ARE
MOVING UP AS WELL, EUROPE, ASIA.
IN ADDITION, EARNING SEASON HAS
BEEN HUGELY STRONG.
MARIA: WHICH IS WHY YOU HAVE 50%
OF MONEY IN STOCK.
>> YES.
MARIA: SHIFTING STRATEGY TO
LAUNCH PRIVATE EQUITY FUNDS.
>> THAT'S RIGHT.
AS LONG-TERM INVESTOR WE ARE
LOOKING AT THE FUTURE.
WE HAVE A VERY STRONG EQUITY
PORTFOLIO AS YOU SAID AND NOW WE
ARE LOOKING AT HOW CAN WE
INCREASE AND GROW AT SCALE OUR
PRIVATE HOLDINGS OF PORTFOLIO
COMPANIES, WE ARE ANNOUNCING TWO
NEW VEHICLE THAT IS WE ARE
EXPLORING TO DO JUST THAT, TO
INVEST OVER THE VERY LONG TERM
IN PRIVATE COMPANIES IN ADDITION
TO THE OTHER STRATEGIES WE HAVE
IN OUR PORTFOLIO.
>> TED, LIKE A PRIVET EQUITY
MODEL WHERE YOU WILL HAVE DIRECT
INVESTMENT IN PORTFOLIO
COMPANIES?
>> THAT'S EXACTLY IT.
TWO VEHICLES TO INVEST DIRECTLY
INTO PORTFOLIO COMPANIES AND WE
ARE GOING TO OWN THEM FOR LONG
PERIOD OF TIME, EVERGREEN
STRUCTURES TO INVEST IN
PARTICULAR SECTORS OF THE
ECONOMY, ONE VEHICLE WILL TARGET
INNOVATION, TECHNOLOGY, SCIENCE
AND HEALTH CARE SECTORS, THE
OTHER WILL TARGET MAIN ECONOMY,
INDUSTRIAL AND CONSUMER SECTORS
AND OWN THOSE COMPANIES FOR LONG
PERIODS OF TIME.
DAGEN: TED, WHY DO THIS NOW?
ARE THE VALUATIONS ON PRIVATE
HOLDINGS ON PRIVATE COMPANIES
BETTER THAN THOSE THAT ARE
PUBLICLY TRADED?
>> NO, VALUATIONS ARE ELEVATED
ACROSS, ACROSS ASSET CLASSES
GENERALLY.
WE ARE A LONG-TERM INVESTOR, WE
ARE LOOKING OUT HOW TO INVEST
OVER THE NEXT 10, 20, LITERALLY
60 YEARS, THIS IS ACTUALLY A
GOOD TIME FOR US TO REVIEW OUR
STRUCTURE, BUSINESS MODELS AND
SET UP A VEHICLE FOR PRIVATE
INVESTING THAT REALLY IS LOOKING
OUT 10, 20, 30, 40 YEARS FROM
NOW THAT WE HAVEN'T HAD THAT
ABILITY TO DO IN THE PAST.
LEE: DESPITE ALL THE GROWTH IN
THE MARKET, A LOT OF INDIVIDUAL
INVESTORS, WE HAVE SEEN STUDY
THAT IS SAY THEY ARE STILL
NERVOUS, THEY ARE AFRAID THAT
RETIREMENT SAVINGS ARE GOING TO
GO AWAY, SHOULD THEY BE?
>> WELL, WE ARE ALWAYS
CONCERNED, WE ARE ALWAYS
NERVOUS.
THERE ARE THINGS TO WORRY ABOUT
GOING FORWARD, INTEREST RATES
ARE MOVING, INFLATION, WHILE WE
HAVEN'T SEEN ANY SIGNS OF IT
LATELY, THAT'S A CONCERN ON THE
-- ON THE HORIZON.
TRADE NEGOTIATIONS, WE ARE
SEEING GROWTH SLOW IN EUROPE A
BIT.
SO THERE'S ALWAYS -- THERE'S
ALWAYS CONSIDERATIONS TO TAKE IN
ACCOUNT WHEN YOU SEE VALUATIONS
AT THESE LEVELS, BUT THE MAIN
THING FOR CALPERS AND
INDIVIDUALS, THINK OF ASSET OH
ALLOCATION AS A WHOLE AND TO
STAY TRUE TO STRATEGY AND
DIVERSIFY YOUR ASSETS THROUGH
ALL OF THE CYCLES.
MARIA: DOES YOUR INVESTMENT IN
PRIVATE EQUITY AND THE
INNOVATION THAT YOU WERE TALKING
ABOUT, SOME OF THE NEW
INDUSTRIES LIKE ROBOTICS AND
AUTONOMOUS, DOES THAT CHANGE THE
SCOPE OF INVESTING IN THE STOCK
SIDE?
SO TELL US HOW YOU ALLOCATE YOUR
MONEY IN STOCKS, IS IT ETF'S,
INDIVIDUAL COMPANIES?
>> IT'S INDIVIDUAL COMPANIES, WE
OWN BROADLY-BASED INDEX THAT WE
INVEST INTERNALLY, WE ARE ABLE
TO INVEST IN THE STOCK MARKET
FOR A BASIS POINT OR TWO.
MARIA: DOES THAT CHANGE NOW YOU
ARE PUTTING SOME OF THE MONEY IN
TECHNOLOGY COMPANIES?
>> IT'S A GREAT QUESTION.
SO THIS -- THIS NEW VEHICLE
ALLOWS US TO MANAGE OUR ENTIRE
EQUITY PORTFOLIO FROM A RISK
STANDPOINT AS ONE, SO WHAT IT
REALLY DOES FOR OUR PRIVATE
EQUITY EXPOSURES WE CAN TAKE
MUCH MORE CON TRAITED POSITIONS
BECAUSE WE CAN OFFSET THESE
LARGE CONCENTRATED INVESTMENTS
IN PRIVATE COMPANIES THROUGH OUR
EQUITY PORTFOLIO, PUBLIC
PORTFOLIO.
DAGEN: IN TERMS OF BONDS,
PARTICULARLY TREASURIES, ARE WE
AT THE BEGINNING OF TREASURY
MARKET, IS THIS GOING TO BE A
MULTIDECADE RISE IN LONGER-TERM
INTEREST RATES AND DECLINE IN
THE PRICES, AGAIN, WE HAVE BEEN
ENJOYED MORE THAN 30 YEARS OF A
BOND'S BULL MARKET?
>> WE HAVE SEEN THE 30-YEAR
DECLINE.
I DON'T KNOW THAT WE WILL SEE A
30-YEAR, YOU KNOW, RISE, BUT WE
ANTICIPATE INCREASES AN INTEREST
RATES COMING FORWARD IN THE KNEE
FUTURE.
MARIA: DO YOU THINK THE FED
OVERSHOOTS OR ARE YOU
COMFORTABLE WITH COMFORTABLE
WITH 3 OR 4 RATE HIKES TOTAL?
>> WE ARE CONVINCED LIKE OTHERS
OF 3 TO 4 RATE HIKES.
I DON'T THINK THEY WILL
OVERSHOOT AND WILL BE VERY
MODERATE IN THEIR APPROACH GOING
FORWARD.
MARIA: TED, YOU ANNOUNCED THIS
WEEK THAT YOU WILL BE STEPPING
DOWN?
>> I DID AFTER A LONG CAREER AT
CALPERSI WILL BE STEPPING DOWN.
I WORKED TOO HARD TOO MUCH OF MY
PROFESSIONAL CAREER TO LET THIS
TRANSITION AFFECT ANY OF OUR
BUSINESS, FOR FAMILY REASON WE
WILL BE MOVING TO NEW YORK TO BE
CLOSE TO MY DAUGHTERS.
MARIA: FANTASTIC, CONGRESS --