it is such a privilege to have the four of you with us today Greg Howard what a way to start this conference today that was incredible thank you so much we are now joined by Jin and Patrick and we'll aim to take the discussion further so if I interrupt any of you please bear with me this is just to make the most of the time that you have kindly given us Jin I'll start with you so Greg and Howard uh runner through their investment philosophy and the need for an investment Creed you run Wellington uh which can be seen as a Federation of investment boutiques what are really the advantages and the pitfalls of not having to have an overarching investment philosophy?

Thank you and um thank you for sharing all your insights that was really fascinating um when I was sitting there listening it made me think you know we have about 60 teams like you said we're or we're not organized by one overarching philosophy and process I guess our overwatching philosophy and process is that we believe a philosophy and process is critical um to the investment team we have about 60 teams um and um and and each of those teams we have we have a few in the audience today each of those teams have a very strong philosophy and process very similar to what um Greg and Howard um do and that's what they practice every day and that's what they believe um we combine that at Wellington um every I think every company has an edge I think our Edge is um that we are really collaborative so we have over the you know I've been at Wellington for 33 years over those 33 years we have really broken down silos and so that our long only investors on in equity collaborate with our fixed income um um colleagues who collaborate with our private call colleagues who do private assets and who do long short um.

that's the secret sauce like how do we we don't have one CIO we have 600 cios and we have normalized debates having different perspectives on any topic and then and then each of those teams can go and practice their very well thought out strong strongly held beliefs about how they're going to make money for clients that that's how we're organized.

very good Patrick I'll pull you into the conversation that the private nature of what you do have any direct implications on your investment process is there anything intrinsically different between private Market investing and public market investing?

Well, um, I suppose given my deme of nature I might sound like the poster child for private Equity but I'll say um look I think private Equity is an advantaged asset class if you're going to be in the investment business um and you sort of start with just the structure you know we have a 10 we have a a 5-year investment period we can have the money invested for 10 maybe 12 years so we don't have to be invested all the time you can pick your spots that's a huge Advantage you get to do inside diligence that's an absolutely huge Advantage you get to choose and select your management teams you get to borrow money and I've been doing this for 30 years and I can remember I really over you know my first 15 years you actually borrowed money with covenants but for the last 15 years we get lent money without covenants so that's sort of extraordinary you get to choose when you want to sell a business um and you get to have alignment you know in the boardroom it's sort of the investor and the management team you get to choose three to four things that you really want to go for I think that's a huge Advantage.

So as we think about sort of our own investment process and sort of managing risk like Howard and Greg you know talked about you know it's really about being super micro obsessed with the specifics of the business and ensuring that we you know maintain our standards that way.

MH and you really invest for the longterm and that could be like a good say segue into long-term investing um Greg Howard how do you incorporate how does investment Horizon fit into your investment philosophy and your invest or like philosophic breed?

Well like uh Patrick says um maybe half of our assets are closed in funds where you have the money for a period of time and the great Advantage is that the clients can't withdraw so you know they people out of control of their situation love to buy when they're excited and sell when they're depressed and our our this approach keeps them from doing so that's one of the greatest Advantage one can have in the investment business.

um I think that everybody at Oak Tree understands our culture we don't we actually don't even have a tenant of our philosophy to talks about long-term investing it's just understood you know when I when I travel especially to Europe and people find out I'm in the investment business they say oh what do you trade my back goes up I said we don't trade trading is guessing what something's going to do tomorrow we're investors we're in it for the long term and I think that um I think everybody on this stage is more of an investor than a Trader uh it I I don't I don't understand how one gets an advantage in the short term running such a systematic strategy correct do you agree?

Well I think the mean things when I listen to Howard and and what everybody on the stage saying I think the main thing is is in the long term you have to know what your advantage is and that's the big thing right so for us our our time frame that we really understand well we focus on is 6 to 18 months so for some that's very long term for some that's very short term but but 6 to 18 months is what we've thought really hard about is and um and believe despite Howard's thoughts on macro investing that that we have an edge in understanding what's happened in the world.

mhm you are known as a very long-term investor in your portfolio manager days which still um one how do you encourage your portfolio managers at Wellington to think long term so part of it is our structure because we are a private partnership we are we we can incent investors we can evaluate them we develop them over long periods of time so that that structure enables that that we are we are really paying our investors over very aligned with our clients I think that's that's one of the very key advantages um.

and then because we have 60 investors like I'm one of the longest term I'm probably very similar to Howard I don't quite have a 12year horizon but I have a really low turnover my turnover is 10 to 12% it very much aligns with the industry that I invest in which is a very long cycle low turnover low turnover industry and Healthcare um but but there are others that have higher turnover and so one of the things that we try to do is we we do a lot of trading analytics are you making money off your trading if you're not if you have a shorter term time Horizon um back to what Greg said what's your sweet spot of of them H having insights and and being able to so there.

are some people who are fantastic who have high turnover and then and then I strongly believe for me as a as an investor having a a low turnover strategy is and really taking advantage of the insights I have over the long term is what has enabled me to do well over many years but really having that self-awareness of how you generate insights how you're going to make money for your clients with whatever asset class you have I think is key to that.

excellent Howard you touched on on market efficiency and the importance of that there's now endless information and a lot of noise in the market um but markets arguably become more efficient over time so a question to both of you how do you compare the alpha generation opportunity of your investment strategies now compared to say 10 20 years ago?

I think it's gotten a lot harder over time Pedro you know Warren Buffett talks about having bought dollars for 50 cents 60 uh years ago you could do that uh 50 40 years ago I myself bought things that I said this this can't be exist and yet you you got Bargains virtually that couldn't miss it's very hard today uh if you think about it everybody knows everything today there's no such thing today as not knowing something something if it's if it's fact uh today it's rather easy for portfolio managers to screen for Securities that satisfy certain criteria.

you know you used to be able to buy companies for less than their the cash in the till uh we called that net net investing you can't do that anymore and so over time uh knowledge is cumulative markets become more efficient uh it has become harder uh to beat markets still I believe believe some people can be superior their margin of superiority May shrink their their work day may get longer uh but I I still it's possible but it becomes harder every day.

yeah I think again it depends on the nature like even when you describe it 50 years ago people could but not most people didn't right like even like at some point having a calculator was an advantage and obviously having a calculator is no longer an advantage but I I look at it a little differently I think it's like the nd500 or whatever the cars get better every year so you have to get better every year but they's still a winner.

um and so if you stay if you don't get better then you for sure any advantage will will seep into General understanding but if you continue to get better it is like the n500 and the core at least the core things that I believe our Alpha is generated from really aren't changing much I don't think we're getting any better as a species on things like love and fear and and greed like we keep doing the same things more or less over and over again so I agree on things like calculating and Arbitrage that is like much easier to do it's generally well known those things are not there anymore.

but the fact that people are going to make we all will make really dumb mistakes and if you have ways of understanding that and doing that that that continues and I really when I look at the markets and the volatility of the prices relative to the fundamental conditions or whatever it doesn't look like we're getting that much smarter um it's true on arbitrages are going away I think that is the case things that you can calculate are going away things that are very hard to calculate seem as volatile as ever um and the miscalculations of human beings continue um so I I don't know that again I would agree if it's an established Arbitrage it will not exist for like it'll get learned but other things um continue more or less as they have through all human history it appears to me.

are there still more inefficiencies in a in private markets to be explored relative to public and for how long?

I think the PRI I mean private markets were what 40 years now into ins institutionalization of private markets and you know for sure private Equity um I think that there uh you know is a whole class of uh investing that goes on of my world where we buy from each other's portfolios cuz like uh you know why do you rob a bank because that's where the money is so many assets are owned in private hands so I look at Christian we bought a business from you Nick humph is here from HG we bought misses from them and what's really interesting is the return profile of buying things in the private markets even from professional owners like sponsors is really the same as it would be for a primary buyout and so you sort of sit there you say you ask yourself why and I think it's a whole bunch of factors including you know having a differentiated point of view which Howard spoke about it's having professionally trained management teams that really you know know what they're doing in terms of businesses.

so I actually think right now uh there's a lot of inefficiencies in in the public markets I think there's a ton of really good businesses but crummy stocks you know 25% of the public markets are 50% or below their highs so you know in terms of my shopping list um I'm spending a little bit more time at the public markets right now because I think you get much more volatility in the Public Public markets than you do in the private markets because when you're private and if you don't have to sell you don't sell.

changing tack a bit Greg talked about the power of compounding learning um things may not always pan out the way that we thought that we think that they will um how do you instit institutionalize learning from mistakes in your organization?

so um we do we do a number of things some shortterm we have a daily meeting every day and in that daily meeting which happens in our London office between Asia and London and and in between Boston and our us offices in in London every day we talk about um all kinds of things and including sometimes we talk about if something's happening in the market you know what did you learn from the last time the market was like that what what mistakes did you learn so we do that that's sort of a constant a constant and back to like having different perspectives there will be people that will come to our daily meeting and said I got this wrong and this is what I learned so we have normalized um sort of not being a star and not being right all the time which is as we know being an investor you're wrong quite often um so that so those are some of the things we do.

and then we also do these things called Lessons Learned so we would have someone who's been investing for 25 years or 30 years and um and we asked them to be vulnerable like what like what was what really was the reason and the seminal moments in your investing career and it's really about investing these these talks who they are as a person what do they believe and how are they're investing what are the four or five guide posts that sort of made their career and those are all recorded and people watch them and and learn from them um and it gives you a good appreciation of of just that people people are human beings um we try to you know we don't have a star culture and the more people are willing to teach others um and teach themselves that and you know as we know you you you haven't learned everything like I'm in my mid-50s I've been investing for 33 years I'm still learning um and so how do you how do you make sure that that's part of the everyday language so those are some of the sort of the the things we do constantly over time that sort of normalizes the fact that you're making mistakes all the time.

good Howard any views on the institutionalization of M mistakes?

um you know we we don't have a process for that uh your question suggests to me maybe that we should uh and maybe and maybe that's why I'm curious and maybe we will uh but uh our uh we have groups as as Jean says uh and and a high degree of uh Independence uh we're decentralized in our decision making process as long as in our case everybody follows the same philosophy and goal system uh but uh but we don't have a process for uh post-mortems and I think it's a it's a good way to learn.

MH it's so so critical to our philosophy and we to be clear it's very hard because the thing that she's talking about was so important which is you you the last thing you want to do is punish mistakes you have to help people learn and and so we struggled with the right institutionalization but I've been institutionalizing this for a long time so just to share quickly thoughts on it.

I mean the first thing I would say if I were in anybody's organization that doesn't like having a real issue log is so valuable and it actually works like for us it's very easy for people to enter issues and again when you think through what are the issues that matter everybody's got issues but the issues that matter to us are the things that are preventing you from achieving your goals and so to me then having a diagnosis process that we let people make it easy for people to enter and make it easy for people like to diagnose what's happening there's two levels of that there's the level of like in the org problems but then you have this record you actually diagnose and decide are you going to change anything as a result of this right it's easy to talk about problems but are you actually changing anything and often times the right answer is I'm not changing anything.

um like that mistakes are a normal part of it but knowing whether actively deciding are we going to change something or are we not going to change something super important so having a simple way for people to do that and see that it's actually happening is super important encouraging it mostly most important is that the most senior leaders the CEO the CIO they're the ones getting issue logged and they're the ones staring because they make the biggest most important decisions so making sure the arrow of accountability goes up not down um super critical lesson in R I think we had a lot of the arrow going down and it was a big mistake encouraging the arrow of accountability to go up uh was a huge lesson in our organization i' change everything honestly believe.

and the um and then on the investment process I one of the great things back to systematic investing is you we know on attribution every mistake down to every data every little piece of logic every data we know exactly why we got everything wrong like speaking to his to his point about terrible macro investing right like I really thought we were going into a recession two and two years ago or so and man was I wrong right and and but okay we learned something about the world that we didn't know and um and by being able to attribute that to every line of reasoning everything that we had ever learned that led us to that pretty strong conclusion not so strong that was disastrous in the way he's saying but pretty strong strong conclusion knowing that we could easily be wrong but that that but being able to attribute that to everything else and then attribute well where did the money come from that prevented that recession attribute every one of those things and what do you learn from that super super critical thing to get to get right.

and I would just say the thing I think everybody can do and I would highly recommend just have an issue log diagnose important issues get in the habit of it and normaliz it don't make the organization so much better.

excellent one last topic before we wrap up specialization um so when investing what are the tradeoffs uh between specializing too much and missing the big picture?

Well I used to have a yellowed clipping above my desk 50 years ago orange so it came from the ft and it said that an analyst is somebody who knows a lot about a few things and learns more and more about less and less until he knows everything about nothing a portfolio manager is somebody who knows a little bit about a lot of things and learns less and less about more and more until he knows nothing about everything we have to bridge that Gap we have to know that there's information in our organization that some people have and other people need and we have to get it to them and the people who need it have to know that it exists and where this is one of the greatest uh challenges in our in any organiz ganization.

Greg described uh the way all of their learnings and findings are actually uh computerize and computerized and shared and I think it's a good idea but um you know how will the portfolio manager who has to put together a large number of assets about which he knows less ever get full advantage of of the knowledge that the analysts who know so much about a few things have and it's you know we struggle with it all the time there's no easy answer.

very good we could go on forever but we must finish now we will take a break now Refreshments will be served uh at the back in the Canen uh for those of you watching live somewhere there uh we will back in the room at 11: at 1:45 p.m. sorry um but before closing let me thank you all for spending the time with us uh in Oso today it was an immense pleasure to have the four of you in this panel please join me for a round of applause.