we have been parcipating a lot theworking with banks in medium enterprise areas and commercial real estate in trying to restructure those because one of the ways to get an economy on ands so they can get help drive gdp. is the wrong question. being very active, what foracteristics do you look before investing in markets? >> we have invested in brazil,

particularly in health care. an industry that has a laterally torsal it. different regulations from one of to country, but the things we remind people is when you look at asia, it is not one thing. there is different ways of doing business from country to country. , we arerivate space rights,for creditors court systems. we don't have to like the way it works, but it has to work in a tangible way that the rules

don't change. for any emerging market to develop a court system and creditor system that gives people faith to own money. with commonwealth law are quite simple. hard toia is working implement a chapter 11 system and a court system that will look like a northern european system and that will attract small business lending. let's take a step back. there's a distinction between the credit and business cycle.

what do you think is the relationship between the -- some cycle and the have said they influenced one another. think that is true that you cannot have one without the other. if you look at any long-term isrt, the growth of directly correlated the growth at the and,d then if credit grows too much, it starts being inversely related. i think credit can go back a supplyhere has been

demand problem. sometimes it is very narrow. going to a different area of going to a different area of credit, it can have a massive impact on the economy and the busine. going the other way, if the , theres cycle does turn will definitely be an increase in bankruptcies, so the two are verysometimes it is very much it doesn't always mean one takes the other. because in the u.s. you have scal policy changes. people wondering whether that

can extend the cycle. jason has written about how business owners in red state are more optimistic than those states.tates -- blue -- cuts can help spur in but then it is not new anymore. , there is a lot we

need to understand. that there are effectke away % of the tax cuts. 25%, i don't, think there have been a lot of people who have done the full study. drag onoing to have a the economy because of this. >> bayne recently took on harvard university's portfolio. strategichis a

position. >> this is an investment would have done at any point in the cycle. we were looking at a different strategy. they are structured by industry for like we are in look , health industries care, warehouses, things like that. estate which -- all real is to some degree. the strategic way they

approached we asked ourselves, we were not get in there and higher 22 people. we would only do something if we partht this was an added of our business. these people add to the holding capital team. was the caset tha and we think it will be a great part of the firm. bloomberg has reported that harvard is contributing. are you raising money? >> i cannot comment on the fundraising plans. you graduated from columbia

university. you are a humanities student. you majored in political science. talk to us about your background because it is not the same. >> i think investors need to be thinkers and know what's going on around the world. it is more than doing math in your head. think about how many questions you asked today that had to do with geopolitical issues. english literature teaches the

pattern recognition and when you read novels and study literature, you are looking for certain patterns and understanding how to combine make a dunce. i think the skills they taught me as an undergrad in columbia. all students have to take a and musictheory class and in our course. they want to make sure people around them are thinkers and i think it serves them pretty well. credit is a group of people.

i wonder how that helps drive people and respond to events e is a >> that helps when there is a lot of datas gohe same ratios. in my last letter, i showed a picture of the moon lnd ishut it to everyone because wanted to make the point that just because you have never seen that before doesn't mean it can't happen. i think we have to ask ourselves, does this make sense. makeis not necessarily sense because the person at the roadshow loves it. i joke because i did not take a in college.mics

i think most problems in the market actuallboil down to people forgetting supply and level.at its most basic i think that more people try to , i thinktheir analysis we would have fewer problems. >> where is supply and demand most lopsided? the triple part of the investment grade. thank you so much.

>> bain capital copartner. .oming up, we will have more that is coming up in this is bloomberg. ♪

kelly is looking down. listen in. we consolidated pubs, nursing outs, so trying to figure what worked in the u.s. and applied it.

the development of the capital markets in europe and the and normative economic growth that .e all understand here. you're back how are your partners feeling right now #>> europe has great businesses. at the end of the day, we can do something to pay reasonable price and make sure the business has some sustainable advantage. germany, also in

good businesses, although fewer i would say in southern europe. this wind inyour sales. all of that is probably going .lightly in reverse i don't see that changing anytime soon, so the bar is higher. a fair price.nd it is harder to get large-scale deals done. of the shareholders and the u, 75, so it is really

middle-market in terms of the size of transactions. expensive is it right now? >> it is historically expensive and we are subject to that and we have to navigate in that. we have 140 people out in the world trying to source transactions. there is not a single industry or country where we would say it is time to buy. can onlyonment approve, i think we only have headwinds with the exception of

energy, but that has come roaring back. about ayou think possibility of a recession, how worried are you that is looming? at our companies and the data we get, i would say the andomy is globally improved i don't see any signs of that leaving the anytime. is 2015strial rebound and it did not really done much il 2015. we now have businesses that are growing and our traditional's --

think consumer businesses are more on trend. changingee that anytime soon. less than way recession comes, but i don't think it will be near the same magnitude. i think global cost is poised to and obviously the treasury rate come that i think will be the risk were people assume they can sell high multiples and it won't necessarily come to fruition. >> you mentioned your global equity fund.

how much early worried about chasing deals at this point it is notark >> whether you have eight or 10 people in auction. that does not enter into our thinking. one thing that makes the isironment more difficult that you have buyers in the market that were not there a decade ago. family offices, people who used ,o work at a firm raising money we are seeing a criminal

competitors coming into our market. there was a while where chinese firms were competing. we were all beneficiaries to some extent. the bigger issue. one of the issues that has .een a theme throughout the day youave a chart right behind and it disappeared at exactly the right time. steve schwarzman has lamented on that -- what fact

are they getting wro? >> i will start by saying my privateis to invest equity funds. and my team do our job welcome, the price will go higher, so it was -- it is hard for me to understand. biggest asset pe, but i think about it , thef we do our job well cash flow should change. we are still in a show me moment as a firm. i think it will work out if we do our jobs. >> the single holy grail is

access to retail investors. is 401k' or some other method, how far along are we and what is the next step forward? think retail is virtually nonexistent, which is a big has beent my partner driving. i think it is inevitable that that will change because having allocation to private equity would better balance people's individual portfolios. there's no reason they shouldn't have exposure. it is harder to access we tell money for my type of business

which is quite the liquid. the dollar and you .ill see two or three dollars a long time fr now and you cannot hit it back. what i do is not the perfect product, although i think there is a percentage that everyone's that.lio is exposed to benefits to private ownership. .e can attract great talent we never have capital permanent costs we sell below are

ever.we will not do because ofis hard the liquidity, but i think that will change in their other things we invest in that are gaining enormous momentum as we speak. our firm is well-placed to manage that. i think private equity will be a longer road.

>> let me give you a snapshot of the majors. thcontinues to add on. this is bloomberg. . retail.

. under pressure like never before. and it's nnected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers lyt buness to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. the last of the uncertainty, and that does drive investor views that i'm not optimal sometimes. ♪

julia: "what'd you miss?" stocks ease slightly from a 12-year high. tech leading the way. you are tuning in liveon twitte you to our closing bell coverage every weekday from 4:00 to 5:00 p.m. scarlet: we begin with our market minutes. it seems like we have a seen here with nasdaq extending its record high, up by .4%, and the russell 2000 also building on its all-time high as well, gaining .7%. the dow edging lower and s&p 500 barely moving north. a mixed day, just look at the major indexes, but clearly a lot of positives. techwell, like text -- stocks. skied: people -- scarlet: people like tech stocks. that is a theme that has carried

over. you are looking at twitter, of by 5%.ercent -- of -- monsantoill replace starting june 20, so getting a there.t i wanted to mention carnival and norwegian cruise lines, both declining after morgan stanley analysts warned of possible weakness in the coming quarters. : let's take a look at the government bond market starting in the u.s. rates fell lower across the board, which is interesting. again, not a lot of direction in risky assets. a little bit of maybe anxiety creep around the world causing and you seeven bid, it in the italian two-year, which continues to bounce around quite a bit. these are huge swings, even though things have come down from last week. making prime minister

his first speech to parliament, perceived as radical. even though there will not be fearede push people had a few days ago, there will be some aggressive policy moves perhaps that will make people a little bit anxious, and south africa, one big movry dismal d. thes selling off a long-term. some anxiety out there perhaps explaining some of the flight to treasuries. oria: let's talk about nafta at least the bilateral agreement as far as canada and mexico are concerned. reaction,e the clearly seen as ultimately going to be the worst if indeed nafta does fall apart. weaker by .3%.

i also want to bring in dollar brazil, but -- because you can see the brazilian real weakening. the central bank bolstering their efforts to shore up the currency and try to reduce somo. they may offer an additional 1.5 billion dollars of swap contracts, beyond the $750 million they had already been auctioning on a daily basis. investors increasingly concerned about the october election, ushering in a new president less attuned to investors and business. quickly flip onto what is going on as far as the european central bank is concerned as well. policymakers anticipating holding a pivotal discussion at the meeting next week that could make a public announcement time if they intend to cease the asset purchases going into your area, officials familiar with the matter, if they intend to do positive andurope

we did see the euro higher in the session. joe: big central bank meetings coming up. finally, on commodities, some green across the board. slump. been on quite a technically i think it is a correction. recently getting a little bit of a lift despite what we've seen on the show to expand. some industrial metals doing well. some of the biggest gainers in commodities. people buying the commodities today, so those make sense. scarlet: we bring in family cio more.'s industry groups are up.

this is unusual given we were pocalypse.out retail what does it say to you about the consumer? >> this tailwinds. consumers are building up equity in their homes and even across the board, i think a lot of stocks have started to rally. they have taken such a big hit over the last year or two that i think it might the a little bit of a sympathy rally. i don't like the term dead cat bounce, but valuations can get to a turn where they can make sense where short-sellers give up and take their gains and longs come in a bit. julia: are they supported by the ongoing strength we have seen in the tech sector, making fresh record highs? we were kind of concerned about theft, very no longer? i think it is

remarkable. thousandooking about points performance year-to-date among s&p companies, but it has gotten to the point where there is an element of momentum, a fear of missing out, a lot of things, but i think it's very remarkable and difficult to justify some of these valuations any way you look at it. scarlet: you have some value stocks rising like retailers and growth stocks rising. joe: it's unbelievable. you mentioned consumers continuing to build up equity. the homeowner balance sheet looking pretty good. i feelike thert ofdierent movind housing right now. on the one hand, you have home prices continuing to rise. on the other hand, homebuilders have had a pretty awful year. what in the housing space, which i know you look at closely, is most interesting to you right now?

i think--mr. schawel: it's interesting that billion dust builders had a big run up and it got hit really hard. interest rates have gone up and as a result, mortgage rates. i think the price sensitivity to rising mortgages is very overstated. i think the true impact of that, people are not going to stop by and homes because mortgage rates are up a corner of a point or half a point. i think the other thing is commodity inflation. there is inflation and some of the input, but i think even considering all those things, i think that that space has been hit way too hard. tech,ok at a space like they are building in best case scenario everything. i look at homebuilders and the housing space, andat aplace whee are under building homes, and i think it's as good of a supply

teacher as we have seen in 30 years. julia: why do we estimate the sensitivity -- why do we overestimate the sensitivity that the -- sensitivity? mr. schawel: the actual impact is not that much, and when the consumer is doing well and wages are going up, i think the impact is further muted, but you are right. the legacy, the headline risk of it's going to be less affordable. : you mentioned affordability. there's a lot of moving parts and i think we have a chart showing historical affordability and where we stand, but of ofrse, is a combination prices themselves, mortgages, and how much money people are making. the affordability picture looking like to you? mr. schawel: historically, it is

still very good. looking at median mortgage payments, it is still well below precrisis levels. urban areas like california, new york, thea -- they are outliers, but the median is very different than average, so we cannot speak for the whole country when we talk about the aggregate numbers, but by and large, affordability is still very good. even if you assume mortgage rates go up 5.5% -- laurie a good pictur this recently, but i think the fear of rising mortgage rates has been overblown when it comes to affordability and building stocks in general. what could halt this advance for homebuilders or the housing market overall? mr. scwe i think it will

have to be earnings. they are performing very well. a lot of builders are trading in single digit multiples. nothing only way to look at builders, but it's one way to look at it, and i think the overall supply and demand picture, housing specs is still way below historical levels, so i think you look at houses that ay that are demolished each year, and population is growing more than housing supplys growing, so there's more homes that need to be built. these fundamental tailwinds, can you have a recession? skyler: good question. it's veryl: i think difficult to have one. every recession is different, but things are very different than they have been in the past. when you look at the last recession, housing let it -- housing led it. stated a lot tighter recently.

still lagging the broader economy, and there's many years left of housing on the housing market. julia: great to talk to you, as always. up, washington is working nd the scenes to relieve some of the pressure on gas prices. this is bloomberg. ♪

mark crumpton with first word news. members of the foreign relations committee say the senate should beed on any possible treaty that comes out of the summit between president trump and north korea's kim jong-un. >> it's very important we speak with is close to one voice as we can on this. we all want to succeed.

this should not be a partisan issue. this suld be an opportunity for a successful singapore mmit. is going to be ultimately called upon to ratify any agreement which is reached, and it is going to be critical as a result of congress is brought along. mark: another member of the foreign relations committee, iowa republican jim rich, told reporters he haseen inrmed by the white house that the intent is to have a treaty submitted. hundreds of hawaii residents who already evacuated will return home to find nothing there. officials say lava from the corrupting kilauea volcano destroyed hundreds of homes overnight. love a has been flowing from lava has been flowing from fissures.

the prime minister has promised a citizens income for the poor, curbs on immigration, and calls for a stronger, fairer euro in italy. changes could include fiscal regulations around the euro. he has defended populism as the ruling class listening to the people and faces a second confidence vote monday afternoon. andmberg news on their powered by tictoc on twitter powered by 2700 analysts in more than 120 countries. ulia: "what'd you miss?" crude diplomacy. the us government asking some opec members to increase oil production by one million barrels a day. this comes as u.s. gas prices are at their highest level in three years.

of's bring in the editor america's oil team. great to chat with you again. we've been calling it unique in terms of policy earlier. russia potentially organizing themselves on oil output. >> u.s. prices are going up. definitely a factor in donald trump plus tweet a couple of months ago where he was going after opec for keepin oil of the markets, and it makes sense he wants prices to come down a little bit. joe: is there a president for asking something like that and getting it? or first of all, is there precedent for asking for something like that? >> i think 2000 was the first time a president asked for an increase in production, and i did not go over well. they have enough trouble not arguing amongst themselves, that

alone bringing in another party. i wonder what the reaction is among the guys who supported him. this is not necessarily their best interest. scarlet: harold hamm is one of his biggest boosters. >> maybe there is intense conversations going on over there. scarlet: opec is obviously different than it was in 2000 when bill richardson may be asked and opec and non-opec members, notably russia, are working together in a way we might not have expected back then. what is the incentive for saudi arabia and russia to continue to work together? how long will their interests be aligned? david: the concern is that too fast andoo far you hurt demand. in the end, these guys need demand for oil, the products you diesel,h oil, gasoline, and if you hurt global demand growth, in the end, that hurts everybody. while they want higher prices,

too high is not necessarily what they want to see at all. julia: it's kind of a you myk and i'll yours element to it, too, because some of the concern is as a result of iran. david: i think the venezuela situation surprised everyone a little bit, how fast and how cuts through production or the lack of production the drop of has been and that will continue. there's no end in sight. in to maybe step temper some of these increases? joe: a story i've been fascinated by at which bloomberg has done a lot of great reporting on is the supply bottleneck in texas and

difficulty of getting oil out of the permian to other places ,ecause trucks and pipeline it's all full. i'm curious about the .ensitivity if prices go higher or not, is there a limit right now on the variability of what they can produce given the challenge of getting it out of their? david: maybe is happening at a time when -- you know, producers are still drilling. they can still drill in west texas, still drill in north dakota. at some point, natural gas prices in west texas and crude, you're getting to the point where you are running out of takeaway capacity. how do you get it to the shore? we can export crude, it has been great for producers, but they wrapped up so fast there are bottlenecks, and it is starting to hurt them. julia: longer-term oil prices have been important for the future equity play.

david: deferred prices, longer-term prices have actually outperformed short-term recently. and that has to give equity that thissome comfort is here to stay for a while, and that has helped the equities sort of catch up with the outright commodity prices. onrlet: we will keep an eye it. thank you so much. we have breaking news on international paper. the company says it will not and irishfer to buy packaging manufacturer after it rebuffed two takeover offers and refused to engage. intend to it does not make that formal bid ahead of a deadline.dublin we will keep you posted on further developments. coming up, switching up the

playbook on nafta. top economicmp's adviser teases splitting up when mexico's finance minister is not biting. this is bloomberg. ♪

carlet: "what'd you miss?" trump's to nafta -- president p once a different approach to nafta. economic adviser to the current front runner in mexico's presidential election told bloomberg that is not what his boss is looking for. >> what we are looking for is actually an improved nafta. we are not really looking for a

bilateral agreement with the u.s. we want to have a nafta 2.0, not a nafta 0.5. president trump has a lot of people to convince on the trade front. he still has to win over numbers of the republican party by them for talks this afternoon -- members of therepu. it sounds like he just wants to play mexico and canada off against one another in negotiations. >> right. i think that is what we are seeing here. 't think it is a surprise to anyone to see that trump is preferring bilateral talks over multilateral talks. that is exactly why he withdrew from the transpacific partnership in the first place, but i think it's interesting that we saw larry kudlow, who seems to have been told to tell us this message, the president

is seriously considering this option to send us a message and maybe also the counterparts, to float the idea that nafta talks have dragged on a little bit too long. the president is getting anxious to do something about this. we're looking at a new approach. the presidentow hastened in the past to withdraw the u.s. from nafta. as far as we know, he has not done that. no one has given that six months' notice. >> correct. larry kudlow said the president is not looking at that option. he's looking at a new approach which seems to have not been resonating at all with canada and mexico, but is not looking to walk away from the talks. joe: philosophically, why does the president prefer these bilateral deals? jenny: from his background in real estate, it seems like he thinks he has a lot more leverage when he deals with a partner one-on-one than when you are in a big group and you can really use that leverage against

one another. that's why i think he just translates his past into how trade negotiations work, which, of course, cannot be translated just that way. scarlet: it is comfort level really. julia: are we in a checkmate situation? if none of the companies in nafta decide to give their the united states wanting tove talk about bilaterals, the canadians and mexicans wanting to as a result of the united states, change nafta but ultimately keep it together, is it checkmate and we just wait until after the mexican elections and see perhaps what happens in the midterm? jenny: that is maybe what we are going for. the u.s. congress wants to maintain nafta. they don't want talks to fall apart, but they have no rush whatsoever. at this point, there's no one in is -- . congress who

in favor of doing after the way president trp wants to. we have canadian elections, so that is all up in the air. it's not going to be more certain or easier if we just wait until next year. julia: we're not actually sure what the president wants. leonard injenny washington, thank you so much. coming up, taking the pulse of tech ipo's. 2018 or at least what the rest of it may hold. this is bloomberg. ♪

mark: i'm mark crumpton with first word news. eight states are holding primaries today with implications for control of the house and senate after several governors races. primaries are being held in alabama, california, iowa, mississippi, montana, new jersey, new mexico, and south dakota. disgraced former movie mogul ha weinstein pleaded not guilty to rape and two criminal sex act charges. today's arraignment comes days after a manhattan grand jury indicted him on charges .nvolving two women his lawyer has challenged the credibility of his alleged victims. >> we are going to file a series

of legal motions that will get us more information and may impact the process, and if we , there may not be a trial, and if there is a trial, we will proceed expeditiously and vigorously to try and clear mr. win's name. mark: manhattan's district it was predictable that weinstein's camp would intact it -- attacked the integrity of the women and of the legal system. the deputy who has been criticized for his actions during the shooting at a florida high school says he's haunted by what happened. nbc's "theson told today show" "those were my kids in their." unfolded so fast on the afternoon of february 14 that there was no time to intervene. the shooter was inside marjorie stoneman douglas high for six

minutes. peterson resigned eight days after the shooting when surveillance video showed him standing outside the building. 17 people were killed. education secretary betsy devos says the federal commin on school safety set up after the shooting will not be looking at the role of guns in school violence. she told a congressional hearing today that it's not part of the commission's. today, she is chairing the panel president trump created inlowing that shooting parkland, florida. i'm mark crumpton. this is bloomberg. a recap oft's get today's market action. the nasdaq continues to build on record highs with mega cap tech names pushing the nasdaq up by .4%. small caps also in the green as well. the s&p 500 managed to tick

higher by the close. you can see the dow edged lower by 14 points in today's trade. we saw shares of nxp semiconductors spike higher into the close after a report from reuters said a chinese had an agreement signed -- no signs -- yes, signed an thatprinciple would ban them from buying from u.s. providers. that was heading into the close. we also see the deal includes a $1 billion fee or five plus 400 -- 14 -- $1400 in escrow. no definitive have a -- no definitive agreement seems to have been signed by both parties, but in principle. julia: that's the perfect segue for our next guest. "what'd you miss?" last year may have been dismal for ipo's, but it's a different story in 2018. the landscape for tech ipo's

heats up. don't crack open the champagne just yet. our next guest says there may be some downside. great to have you with us. , andt to talk more broadly you cited an article, which is classic, that if you are a value or growth investor, you are going gangbusters right now for tech investments. >> correct. this story is very funny. it says the reason valuations don't make any sense is because the value investors showed up. when i was here last, we had five ipo's in the first quarter, ended at once did badly and the good ones did well and everything was, like, anchored to reality. since then, the crummy ones from the first quarter have all shot to the moon. them all trading like gangbusters, way above with a should rationally be. joe: we talk a lot about the fangs when it comes to tech, but

there's a bunch of other names right now that are getting did like crazy. today a bunch of year performance. dropbox, people know. a chinese m&a website that a bunch of hedge funds are piled into. the gains are massive for these names right now. julia: this is the first quarter performance ofhese guys. >> with more interesting is to seems to be no differentiation between the good ones and bad ones. in the first quarter, it was like chinese tech deals don't work. chinese tech deals work now, so watching the change in the trajectory has been really interesting, even above and beyond what the people that buy these names for a living actually think about it. carlitics is an example. to the moon since the last time we talked. julia: you are basically saying

initially investors probably read it right in terms of how d and how they performed afterwards, but now just indiscriminate, ipo, we are buying. mr. wallace: dropbox is the highest scoring game in the first quarter and people know it really well. of the five companies that went public in the first quarter including dropbox, it had the highest score, and it's the worst return of all five including the two weirdo chinese companies. we seem to be in bizarro land, performance should map together, but they don't right now. scarlet: what tends to lead to that? you've been through a couple of these cycles. mr. wallace: some people think thatis the uber market, we're just going to run until it happens. people get excited for the big ones. alibaba did this. the market opens up getting ready for a big one, and then it

will change its nature. this could run for a year at this point. julia: you pare the risk you currently hold in order to invest in an uber ipo or you simply do not invest in big ipo ipo's and the interim? mr. wallace: it seems people might not know what risk they are holding. joe: you said scores because that is what your firm does, find ways to evaluate new tech companies -- sorry, new ipo's in general outside the traditional metrics that people would look at in a q1 filing. when you say that some of these do not score well, what specifically about them -- i think you've referred to crummy chinese tech companies. what about them made them crummy? mr. wallace: fundamentals do matter right now. the thing that was funny to us

was investors rushing in to pay these prices. when you look at the fundamentals of a company that has negative gross margins, you kind of wonder -- is this the tech company? tech companies are supposed to grow fast and have really good margins. that has a low multiple, not very fast-growing, low margin that is spamming you with your bank's data -- why is that exciting? except when it's a tech company, exciting. is julia: can i defend inveinvestiy companies? mr. wallace do. how do investors post-ipo better differentiate? mr. wallace: when we were sorting the good ones from the bad ones in the first quarter, you can do real work on the

things and it mattered because they traded in line. now doing your work does not matter. have nowion investors is wn will fundamentals matter againat that point, you need toe ready. julia: when is another opportunity for investing? it's tough to find other investments. mr. wallace: we've seen other investments -- i think doc you , good companyign and people understood it well, but on price, it did not expense anymore.- expense scarlet: value investors are chasing and there's this indiscriminate buying. or companies see this as an open window where they have to get in and they will all rebrand themselves as tech companies. mr. wallace: you guys should start a tech company, the three of you. to pick assets

and put them in your portfolio for the long-term. right now, this is the trade and it's a great trade. people are making a lot money. our high schoolers are 50% above with a should be right now. our low scores are three x what they should be. if you have these bad names in your portfolio, you are loving it for right now, but you had better get out in time. scarlet: our company is going to e wdym for "what'd you miss?" mr. wallace: i like it. scarlet: this is bloomberg. ♪

arlet: "what'd you miss?"

fueling the fight between active and passive managers. ceo of texase is at the summit onrs. the future of active management. when you look at the debate between passive and active, what is new on this front? how has evolved? >> when i joined the debate couple of years ago, the debate was how far it can go, and it was all about active value. today, the debate is much more nuanced in the public narrative because people see that and an environment which is more volatile, less correlated asset then you have investors nothing seeing the value that active asset particular when you really want to be discriminatory abouthat you do and selective about the

strategies you want to pursue, and i think that opposition is again coming to the public narrative, which is a change from last year. julia: it should be performance against cost, if it's passive or you look at the net return. you are saying it is already happening. we look at performance net of fees, but is the feed just a bit on the comparative basis? mr. raby: we have let the public narrative be focused too much on fees. the real value you bring to your client is the returns after fees. unfortunately, it is easy to have a debate -- it is so simple for the regulator or for investors or for observers of the industry to be really focused on the since the -- the feele the -- the simple number that exists. we are trying also to evolve the narrative. there has been this dichotomy or

conflict between active and passive. both can coexist, but the real us is value delivering active and mispriced active, and that is the part that has generated mistrust in our industry and that we hope will be called out by the markets and by regulators. you stipulate, and many people do, that there are active managers who can deliver ofe value, taking advantage less correlated assets, is still poses the puzzle, and i think that is part of the appeal of passive, how do you distinguish between who is delivering value and who has had a run of lucky years, because that is the sort of physiological question that is difficult for investors to answer. how to you make the case that a given manager has delivered value versus having had some luck? mr. raby: you have to be transparent. you need to explain where your performance is coming from. i think you want to be

disciplined about a few things, notably capacity. are disciplined and self closing. some of our best-performing funds because we want to preserve performance. we have a broad organization, 25 different affiliates. there are certain strategies that do not deliver the value th pmised. we try to close them down, and our industry has not been diligent enough in doing that. a number of things where i think you could put forward our case to investors, and investors see that. right now, we continue to be growing. scarlet: you were formerly the cfo of a media and telecom operator in france. you come from the media and telecom industry. when you joined finance, i wonder if you see the etf wrapper, which so many people equate passive with, as

technical luck -- as technological advancement that can be used active strategies but not itself problematic. correct. it is complex even in active management. even though it may not be such a complex industry. isn't insurance policy. why is that? because it provides tax advantages, so you have to have those circumstances. maybe the fund in the u.s. will it evolved as well. maybe it is an antiquated way of distributing products. seen interviews, these passive strategies, robo rs, chickens are going to come home to roost and crash and people are going to wish they had someone holding their hand. that there iss still so much money in active that even with all the outflows, it has been incredibly profitable and that any crash

when it just hits that will just decimate the profits in your industry, outflows aside, so how does this environment look? if i look at how other industries have evolved over the past two or three years, it has been up and down. at the end of the day, we are managing the retirement savings of the entire world population. in the u.s., about $70 trillion of assets under management. that money will continue to peoplend a number of will leave with substantial sums of money. in our industry, long-term trends are favorable. i would want to see our managers being focused on the long-term and our client being focused on the long-term. because you are investing for the long-term. visibly, when you think about retirement, that is the time horizon you need to have.

that is we need to be close to our client. there will be a downturn. the questions --ow do you deal with it and how do you adapt your strategy to face it? -- julia: the suggestion coming into 2018 was we were going to see greater volatility. vein, doan -- in that you think we have seen the peak for inflows, or do you think those continue to grow? mr. raby: i will not tell you what i think. i will tell you what our survey sa we have quite a robust institute that does surveys regularly around the year and tatts institution investors around the world. in 2015, that survey said that investors thought they would have more than 40% of their assets allocated to passive strategies in 2018. in 2018, 30 2%, and our survey this year said that this would

stay flat. institutional investors are telling us they have the right allocation and they have right sized it and they will much decrease it. scarlet: it depends and where you see the market heading as well. passive gives you what the market gives you, good or bad. active gives you what your manager gives you. julia: coming up, some total investors think the company is in need of change, including standing back -- scaling back in some tesla -- investors think the company is in need of change, including 's role.back elon musk scarlet: no, say it isn't so. julia: this is bloomberg. ♪

julia: "what'd you miss?"

under pressure. activist shareholders want to remove its three directors from the board and one proposal calls chair to be seated to an independent director. ray to have you with us. explain to me why elon musk might want to replace these board members or might want to give up the ceo/chairman role, .plit the roles we talk about tesla all the time. why should elon do it? >> elon probably will not want to remove those directors, and he has probably enough support among shareholders to keep them. it is not really anticipated that they will be voted out. he may want to give up the chairman's job. i don't see it happening, but he might want to because he is a busy guy. he has talked recently about taking a more product-focused

role with tesla. he sort of hinted about it, but i don't see much changing out of this shareholders meeting simple because he has the support to it, and he does not really like to be told h to run his company or how to do anything, so i see him kind digging in on it. i think he will have plenty of backing, but the shareholders do have a legitimate complaint in that you do have some directors who are awfully close to elon, one, of course, being his brother. that are seen as not really outside directors, but they are in his inner circle. they really want someone given some of the governance issues the company has had, more independent. joe: i'm trying to picture in my head the venn diagram of people who currently own tesla shares and people who would want to

reject what elon wants in some ways, and i cannot imagine there's a lot of overlap. i feel like if you are in this stock, you are theruch because you beli elon vision. is there any factionjust d what he wants? >> the momentum started with advisors of union pension funds that owns stock in tesla. it's not a large amount of stock that they hold, and you are right if you look at the touch shareholders, they have been in the company a long time. they had very big holdings, so it's tough to see that. you think that to the solarcity deal, which was very controversial because elon was basically buying the troubled company owned by him and his cousins. a lot of shareholders left. initially after that, the stock went down. some of the bigger shareholders actually bought more at that time, doubling down on the vision. going back to that period did of

years ago, you could say that right now, the group of shareholders, the top ones behind elon, they are the true believers, perhaps even more starch than the ones that stuck with him through the solarcity controversy a couple of years ago. joe: coming up, what you need to know for tomorrow' this is bloomberg. ♪

scarlet: "what'd you miss?" a mixed day for the major indexes, but the nasdaq close it yet another high. don't miss it -- our exclusive interview with the founding partner of galaxy investment. joe: tomorrow, i will be looking for u.s. trade balance data for april coming out of it: 30 -- at-bat 8:30 a.m. -- coming out at 8:30 a.m. joe: have a great evening. this is bloomberg. ♪

emily: i am emily chang in san emily: i am emily chang in san francisco and this is "bloomberg technology." is a turf for blurring between apple and facebook? apple takes another shot at the worldwide developers conference. why it is part of policy for both companies. plus, a former apple and google executive joins us to talk about apples moves to curb tech addiction and whet