tv Whatd You Miss Bloomberg November 19, 2021 4:30pm-5:00pm EST
♪ romaine: we are talking about alternative investments. a 60/40 portfolio. that was a strategy for a lot of pension funds that does not work anymore. they are looking to allocate a greater proportion of their riskier securities if they want to hit the 7% target. state and local governments are doing more to invest in digital
assets like cryptocurrency. we will talk about that and really traditional and nontraditional forms of alternative investing. how about investing in art? dennis traditional. wine is relatively traditional. vineyards. and's, is that traditional? we heard from various people at an economic forum on the elements of the new world of alternative investing including crypto. >> what looks like a very interesting and somewhat exotic effort to literally mine new coins in order to trade with them has the potential for undermining currencies, for undermining the role of the dollar, and the reserve currency, for destabilizing. >> any financial institution, any bank, any person should be looking at crypto. if you learn about it and understand it and don't like it,
that is ok. not learning it is irresponsible. >> we are now working very much. it is in addressing customer needs. in the same manner, we want to help them recognize how to handle it. >> we do not have a view on the asset process still. we say it is a volatile institution with assets. we also do not think the technology is going away anytime soon and so we want to understand it. we see risk anticipating bigger risk. caroline: some of those are the retirement funds around the u.s. that have been pushing into alternative assets. taylor: this week, the board of the nations largest pension fund voted to increase exposure to the base. joining us is annie laughlin. it is purely math. your actuarial discount rate is 7%. it anymore. annie: that is right.
you see calpers, the nation's biggest pension fund, moving even deeper into alternative assets, increasing its allocation to private equity, which it already has from eight or touch a percent to 13% and adding 5% of its portfolio is private debt as well. caroline: before we get excited, they are not saying we are buying crypto and fts yet. -- nfts. annie: what you're really seeing is these pension plans, given the persistent low rate environment we have been stuck in. they have moved into alternative and private investments, but nowhere near as far as nft's. romaine: alternative and private investments were viewed as a lot riskier to a certain extent and a little bit more complex with a little bit more time and money to subsidize the research. i heard an argument when you look at where rates are and the
negative real yields we have out there, that risk dynamic has changed and what private equity offers what alternative investments offer does not contain or carry those historical risk measures. annie: you ease and saw -- even saw calpers investment director say the times have changed with huge pension funds where things have changed in the past couple of years. it is not feasible anymore to meet their return target without taking on additional risk. beyond private investments, these moves add leverage to the portfolios, which is a first for calpers. taylor: back in the good old days, super easy to just get, you are two and 20 or hedge fund or private equity, 30% return. you are lucky if you can get 15% with the leveraged return. how much of this is excess
risk-taking, and you see sort of going beyond the traditional asset alternative assets? frankly, does not cut it after you pay the high fees. annie: that is a good point. the fees always come into the equation. if you look at active mutual funds here, those came under extremely high pressure. in the private equity world, if you are an investment manager at a pension plan, you have to take this into account. part of the reason calpers would have -- add leverage is another avenue to try and get those returns near where they need to be over 20 years. caroline: is calpers being more transparent and letting us know this is a new development or would we see others do the same? annie: calpers is one of many
and you will see public announcements. this has been a trend that has been ongoing with pension funds over time. what this development with calpers marks is a push further into alternatives than before. additional private deb t -- debt and the addition of of leverage are two of the of what came out of that decision this week. romaine: a big decision by calpers and we will see this more on some of these big pension and retirement funds. management for us, helping us take off the discussion. we will go from that and talk about the roles of non-fungible tokens, and fts, which are popular now. this is all about -- caroline: fundamentals. romaine: rewards. it is not about how to properly value something. you can do that with stocks and real estate. how do you do that with an nft? taylor: caroline and i know the
answer, better than i do when you think about, fundamentals,. it brings up issues about cooperate infringement -- copyright infringement. caroline: finding a price point at a value system in the markets. romaine: especially --exactly. we need a growth model. she works a lot with valuing these things and will be joining us here on bloomberg in a minute. ♪
it is all the rage onto you have a lawsuit and fortunately, we are in uncharted territory with a great conversation a few weeks ago when you were selling the unseen pulp fiction and fts --- nft's. that was from quentin tarantino. miramax came out and sued him in federal court, in district court, and said i don't think so. miramax owns all rights including copyrights and trademarks for all current and future media. tarantino's lawyer, for their part, saying miramax is wrong. the film director has the right to sell. this was not in the contract so we are in uncharted territory. romaine: this is a big deal going back to valuation. you have to have a claim of ownership or verification over -- of ownership there. . is a story about australian stop work -- software developers
making nft's free on the internet. it is an experiment of saying what is of value to this? you could say i own this. it doesn't matter? he is saying, is it the image in the block chain or is it verification? caroline: there was a man who knows. in the world of nft's, here is the chief investment officer of idx digital assets. it has been an area you would have to have arguments about day in and day out and i'm interested what you say good the age old argument is looking at t he jpeg, but when something is making something breaded -- readily available, how do you argue about the underlying value about this product. >> from ours perspective, idx --
we are focused on the digital assets space. we bring risk management solutions to digital aspects. what was interesting was how the conversation around and fts evolved -- nft's evolved. their institutions, fiduciaries, managing other peoples money so they are focused on risk, and you start hearing them ask questions about and fts and, is there a plague and how should we think about it? what is interesting for us and part of the interesting thing about offering digital assets, these questions come up between nft's that are significant culturally. those are the crypto punks. it is important to remember that there is another layer. those are nft's that, because of their properties, they are built on top of the block chain.
you can start to see early examples of that in gameplay. the idea of the metaverse, which facebook is going all in on, the intersection of social congregation in the next evolution of the internet. from an investing perspective in the long-term durability of value, that is the interesting part. you just highlighted all the issues with it infringement, copyrights, who owns what. that is an overhang on the nft's. taylor: talk to us about the art bates -- based nft's you mentioned as we think about valuing an asset we have not valued before. what is price discovery? >> it is the big issue. let's use crypto punks as a perfect example. these are digital jpeg's and
when they first launched, a lot of people in the community were owning them. they quickly skyrocketed in price. you started seeing auction houses selling these things for millions of dollars. the issue is -- it was a first art based nft where we got real question from people. what is going on here? there was a punk sale last week for $500 million that ended up being spooked. you know, right there, there is bad pricing in the market. it is a very heterogeneous market. they are unique because they are nonfungible so one crypto might be worth several million dollars because of the rarity. another one that is less rare might cost less. one of the things that is interesting that we have seen in the blockchain adaptation is the idea of fractional ownership of
pools of nft. all points of nft acts is an interesting protocol. it is a block chain powered protocol. you can buy fractional ownership in a pool of collateralized pool of crypto and fts. not only do you benefit with diversification, you get better price discovery because there is more liquidity at the fractional ownership. this is like etf's for something like emerging markets. the emerging market bonds themselves might be difficult to trade. if the market is not at or above the etf market, providing that number provides liquidity layer that if one were to invest in the market, those are the things to look at. you hit the nail on the head. price discovery is a real issue in and fts -- nfts. caroline: i store -- i am sure one of the questions is about regulation. there is a lot of focus on itself regulation.
-- self regulation. the fact that there is so much transparency and you could see the crypto sold for $532 million but was a smooth trade and trying to rally up the rise overall, is that the inherent undoing of bad behavior in the market, self-regulation working? do you need some sort of regulatory quality that you haven't? ben: that is an interesting question. i do think that a lot of -i think the-regulators in general have a smart approach. we just look at bitcoin futures with 40 points. we just launched a rich management --. . risk management strategy this week. there is a lot of reasons where exchange traded futures refers to market as opposed to bitcoin. on the other side of the equation, shadow we coders --
shadowy coders and money laundering has been touted as issues of the block chain. because it is transparent and immutable, anybody with a modicum of engagement with the block chain from the early days knows it is not a lot of money to do illegal activity. you routinely have hacker walls being blocked down unilaterally on exchanges. it is a lot easier to detect bad behavior. in a self-governing fashion, that doesn't mean there should be regulation or there won't be. i agree with your point. i think the community as an interest in self belief and the tools to do it in the term -- form of transparent blockchain. caroline: really good insight. we want to thank you, chief investment officer of idx digital assets. we will discuss more alternatives but some interesting developments when it
comes to some of the thin textbased. the development of further abilities to estrange --exchange crypto assets. romaine: square has --they were talking about decentralized exchange of bitcoin, a platform for lack of a better world -- word. they say this is the starting point for discussion, but they make it clear they plan to move forward with this. they are staking their claim to what is a space with a lot of growing legitimacy's. you talked with the idx guy and what he is trying to do. caroline: a lot of institutional trends one centralization within a decentralized space because it is is something they know and understand. we will see a decentralized exchange in the next generation. romaine: i am excited about all the stuff. a couple of years ago, i pooh-poohed you for talking about it. now it is mildly interesting. taylor: playing around on
♪ ♪ romaine: we have been having intense discussions off-camera about record highs, talking about alternative investments and nft's. it may be the new way to invest but physical objects are viable. you're taking a look at the record how value -- high value. taylor: i show up at 2:00 and the only thing i can do is discuss nasdaq and bonds. wait for the start. not only record highs for the
nasdaq, but a fine line. we do this for caroline, the classy one on the set. this is the fine wine at 100 index that tracks the price performance of the 100 most sought out winds on the secondary market. it is up 2.2% in october. again, a record as we look and kind of going back to the 2011 piece and beyond. guess what drove it, caroline? caroline: can i just say the fed? can i blame money? taylor: liquidity is popping in. romaine: you have all the answers you need. taylor: after the fed, it was pushed to a record. caroline: let's talk fine burgundy. atlas fine wine is holding their first ever wine auction. simon is with us. talk to us about -- a prize
collection you have helped build up through an online arch and bypassing these collections before. i'm interested who the buyer is for collection like this. simon: good evening. it is an incredibly rare range of wines. it has its origins in the 1950s and 960s when it was on buying young lines and trading them in burgundy. it was 1988 that it moved forward. it has become one of the most expensive and sought after domains in france, producing a range of --some of which trade for in sorting -- sterling $3 0,000 per bottle. incredibly rare, 800 bottles produced each year. these are some of the rarest wines anyone is likely to own. who is likely to purchase?
that becomes a difficult question to answer. we have global demand coming into the auction. it has been fascinating to understand where the bidders are from. so many different countries are represented. romaine: maybe you should talk about the motivation. get us into the heads of these folks because we talk about how hard it is to value these alternative assets. how do you seat fine wine like the laroy, it is difficult to say what is this worth. are people buying this for the bragging rights or because they really see a longer-term investment opportunity? simon: i think a combination of factors. you are correct that what drew us to the idea is having an auction that you can't find data points to ascertain the true value. you only find the true value when a rarity such as that in the sale comes to auction like this in an original case, which is more unusual, with
established prominence. it is a combination of those factors. there is some joy of ownership for those wealthy enough to be able to purchase. equally, there are times we will want to consume these winds, because they are reference points for burgundy, among the finest in the world. caroline: we have a minute left. let's talk about drinking this stuff. it dates to 1996. has it been kept in a manner it was so delicious? simon: it was professionally stored. as i started working for the clients that built this collection in the early 2000's, i have followed this collection all the way through my wine life, my career. it has been professionally stored in a drought there. as you can see, on the auction pages, we have high resolution images that document the c ondition as well as supporting data and invoices. yeah, it's highly unusual.