Talks at GS With AT&T CEO...Battle for Our Screens...TPG's Jim Coulter

[Goldman Sachs]( [BRIEFINGS] September 24, 2020 Talks at GS With AT&T’s John Stankey Above (L to R): John Waldron of Goldman Sachs and John Stankey of AT&T The pandemic has “put an exclamation point” on trends that were already reshaping the technology and media industries, said AT&T Corp. CEO John Stankey. “The march to direct-to-consumer and the ability for customers to watch content when they want and where they want, that trend was clear,” he said in a Talks at GS episode moderated by Goldman Sachs COO John Waldron at the firm's annual Communacopia conference. “But, boy, is it on steroids right now.” Stankey also talked about the critical role broadband has played over the past six months, and drew on AT&T’s history as a telephone company to argue for more ambitious government policy today when it comes to expanding broadband access. “The government understood that if we wanted everybody connected to a telephone,” he said, “there were places where markets would not economically build infrastructure to reach those customers. And that’s why the universal service policy was put into place.” A similar approach, Stankey said, is needed today. “It’s time as a nation we step back and say, ‘We accomplished that with voice, but…just like voice allowed us to do so many things a century ago that facilitated commerce, facilitated social strata and social engagement, the same thing could happen with broadband today.'” [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Talks%20at%20GS%20With%20AT%26T%E2%80%99s%20John%20Stankey&body=https%3A%2F%2Fyoutu.be%2FT6SIALh15wo) Exchanges Deep Dive: The Battle for Our Screens The pandemic has forever changed the future of entertainment, work and social media, say leaders across Goldman Sachs. Understanding how those changes will play out is at the center of a new four-part podcast miniseries called Exchanges Deep Dive: The Battle for Our Screens. Experts from inside and outside GS join hosts Jake Siewert and Heath Terry to look at how entertainment, work, social connection and government policy will adapt to our sudden digital migration. Contributors include members of Goldman Sachs Research, the firm’s Investment Banking, Consumer and Investment Management, and Engineering divisions, as well as our Office of Government Affairs. Listen on Apple Podcasts, Spotify, or your favorite podcast platform. [Listen to podcast]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Exchanges%20Deep%20Dive%3A%20The%20Battle%20for%20Our%20Screens&body=https%3A%2F%2Fwww.goldmansachs.com%2Finsights%2Fpodcasts%2Fepisodes%2F09-22-2020-the-battle-for-our-screens-part-1.html) Talks at GS: Insights from Great Investors Above (L to R): Alison Mass of Goldman Sachs and Jim Coulter of TPG In navigating an investment landscape fundamentally altered by the pandemic, Jim Coulter, co-CEO and founding partner of TPG, takes a Maginot Line perspective on investing. “So as we come out of this, we're going to look back and say, ‘What are the things we wish we had?’ Well, we wish we had a much better healthcare IT system. So I think this could be a revolution in healthcare IT,” says Coulter, who also sees opportunities in “better stockpiles” across the medical supply chain, e-commerce infrastructure and redundant local supply chains. In an episode of our new series, Talks at GS: Insights from Great Investors, moderated by Alison Mass, chairman of Goldman Sachs’ Investment Banking Division, Coulter says successful investors have what he describes as uncommon wisdom, a willingness to act on their convictions again and again, as well as the ability to influence others. “There are people who can walk into a room and help that room move in a positive direction,” he explains. [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Talks%20at%20GS%3A%20Insights%20from%20Great%20Investors&body=https%3A%2F%2Fyoutu.be%2FunVOTu6RqRo) September QuickPoll: Markets Pricing in More Uncertainty on Election Night Heading into the US presidential election, investors are not expecting a decisive election night, according to the latest Marquee QuickPoll survey of more than 1,000 Goldman Sachs institutional investor clients. Here are highlights from this month’s poll, which [Anne Marie Darling]( of the Global Markets Division explains in an episode of The Daily Check-In. Not your usual election night. Less than a quarter of clients responding to the poll expect the results to be called on November 3rd or 4th. Rather, there seems to be a strong consensus in the market that they will come out later in November. “There remains two significant tail risks,” said Oscar Ostlund, who oversees the QuickPoll and is head of Marquee Sales Strats in the Global Markets Division. “First, a too-close-to-call result, similar to the 2000 election, could lead this to spill over into December or even January. The options markets are already pricing in additional variance around that scenario,” he said. “Second, a decisive win by one of the candidates and a swift concession could lead to a ‘relief rally’ and push up markets significantly.” A technical correction. The equity sell-off at the beginning of September took many market operators by surprise but it seems to have been rather technical in nature and not a sign of “irrational exuberance,” Ostlund noted. An analysis of the QuickPoll results over the summer shows that sentiment had, in fact, been net bearish and stable with investors expressing a negative outlook on the S&P 500 for the past four months, despite the strong performance. Same themes but with lower conviction. Overall, investors continue to move out of nominal USD assets and into “real” assets, such as gold, and “growth” assets, especially developed market equities. Investors’ levels of conviction in these assets, however, have declined heading into the election period, Ostlund added. For more information about QuickPoll and Marquee, [reach out to the team](mailto:gs-marquee-sales@ny.email.gs.com?subject=Briefings%20Follow-Up%3A%20Interested%20in%20Learning%20More%20About%20Marquee&body=Briefings%20follow-up%3A%20I%20am%20interested%20in%20learning%20more%20about%20Marquee.). SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=September%20QuickPoll%3A%20Markets%20Pricing%20in%20More%20Uncertainty%20on%20Election%20Night&body=) The Daily Check-In With Goldman Sachs With Japan’s new Prime Minister Yoshihide Suga having been a key architect of his predecessor’s Abenomics program, “Suganomics” is likely to involve a continuation of expansionary fiscal and monetary policies, explains [Kathy Matsui]( chief Japan equity strategist for Goldman Sachs Research on a recent episode of The Daily Check-In. Deregulation across certain industries is also likely to be in focus, and an area where Suga may carve out a space for himself, Matsui adds. “He’s talked about the need to consolidate the regional bank sector. He's actually very vocal about that: Too many banks, not enough profitability, very thin margins and we need to consolidate,” explains Matsui. “I think it's a lot about not just finding areas of potential growth, but also how to improve productivity and efficiency.” In other episodes of The Daily Check-In, [Jeff Gido]( global head of the Financial Technology sector in Goldman Sachs’ Investment Banking Division, looks at fintech’s transformation over the past decade and how companies today are thinking about strategic activity, while [Greg Lee]( who covers the airline industry for the Investment Banking Division, explains how airlines are managing the pandemic. Meanwhile, [Lilia Peytavin]( equity strategist on Goldman Sachs Research’s European Portfolio Strategy team, discusses the equity risk premium and what the measure says about the attractiveness of equities relative to bonds. For more Daily Check-In videos, [subscribe to our channel]( on YouTube. [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=The%20Daily%20Check-In%20With%20Goldman%20Sachs&body=https%3A%2F%2Fyoutu.be%2F603dpWk_Qm4) A Conversation with the CIO of the Minnesota State Board of Investment As the CIO and Executive Director for the Minnesota State Board of Investment (MSBI), [Mansco Perry]( oversees approximately $100 billion in assets. At a recent Goldman Sachs Asset Management (GSAM) Forum discussion, Perry spoke with GSAM’s Katie Koch, co-head of GSAM’s Fundamental Equity business, and Mike Swell, head of Global Portfolio Management within the Global Fixed Income team, on his core investment philosophies and processes, asset class preferences, and the role of diversity. Katie Koch: Mansco, prior to becoming CIO of MSBI in 2013, you were CIO at Macalester College and at the Maryland State Retirement and Pension System. How has your investment philosophy and approach evolved over time and how are you implementing it at MSBI? Mansco Perry: Historically, we’ve had a pretty small team at MSBI and my predecessor, Howard Bicker, kept things simple. So if you look back over the last 40 years, our pension portfolios haven’t changed very much. The majority of our portfolio is still in public equities—in international and domestic equities—and in fixed income. But over time, our allocation to the private markets has increased. When I first joined MSBI in 1990, we had a target allocation to the private markets of 10%, which we gradually raised to 15%, then to 20% and now we’re at 25%. Currently, our actual allocation in the private markets is more around 15%. My personal philosophy is that there are basically two things an investor can do: Own good assets or lend money to good borrowers to ensure you’re receiving a reasonable return. Mike Swell: Having invested through multiple economic cycles, how did your philosophy help you navigate what’s been one of the biggest dislocations in markets this year that we’ve seen in recent history? Mansco Perry: Fortunately, my first CIO job was at the Maryland pension system in 2008 where I quickly appreciated the need for liquidity during the global financial crisis. You figure out pretty quickly that your job isn’t to make the most money in portfolios, but to ensure that you can meet your liabilities to make pension plan payments—and I gained a greater appreciation for Treasuries during that time period. Since I’ve been back in Minnesota, I’ve been pushing the need to increase our allocation to Treasuries which we did a few years ago and which has turned out to be our best-performing asset in the last two years. Mike Swell: Speaking of liquidity, you had mentioned earlier that your target for private assets is about 25% and that you’re currently at a 15% allocation. What are your views on private markets as an asset class? Mansco Perry: We’ve been in the private markets—and predominantly private equity—since 1981. Historically, PE has been our best-returning asset class. And while we recognize there’s a so-called lack of liquidity, I believe you do get fair values in the private markets over the long term. When I look at the roller coaster ride that equities have been on this past spring, it’s hard for me to believe those values truly represent a steady stream of those companies’ future cash flows. Of our allocation to private markets, about 50% to 60% is typically in private equity, where I believe there’s a strong principal-agency connection. We’ve also invested a fair amount in private credit, mostly mezzanine loans, and have recently been investing in direct lending. And while we don’t invest in hedge funds, we have been looking at some opportunistic and distressed assets. Our real estate allocation—which was large in the 1980s and 1990s—had declined to less than 1% of our portfolio shortly before I re-joined MSBI, but we’re reevaluating that sector on both the debt and equity side. Katie Koch: One of the ways that we’re long-term oriented in our public equity investments is that we’ve integrated ESG into our investment processes to help identify risks and opportunities. Our philosophy is that it’s not just an issue of equitability but it’s also one of profitability. In fact, we’ve aligned our proxy voting process in that way to get more corporate boards to get more diversity on their boards. How do you think about ESG in your investment philosophies? Mansco Perry: I’ve come to believe that ESG, more than anything, is a philosophy rather than a product we would buy. For my part, I believe that plan sponsors should be pushing, promoting and prodding all of their managers to pay attention to ESG, regardless of the asset class. We recently signed a petition opposing the Department of Labor’s recent rule which could discourage retirement funds from making investments based on ESG considerations. We’re also pulling out of any thermal coal investments. On social issues, we have been pushing our proxy committees to expand the number of women and people of color on their boards. Given my background and personal history, I believe it’s something that’s pretty important. I grew up Newark, New Jersey and back in 1967, a similar situation to George Floyd’s murder took place. A number of moves and efforts were enacted back then. But people soon forget and here we are, 50 years later and going through the same reawakening. I do think the investment industry can play a larger part, but unless there’s a concerted effort, I’m very concerned about the future. Katie Koch: When you think about the world from a macro perspective, how much of a threat is income inequality in the current environment? Mansco Perry: I think it’s a big threat. I started thinking more about these issues when we had the Occupy Wall Street movement in 2011. Personally, I think there’s enough wealth and innovation in this country to make our economy much larger. Outside of urban America, if we put the type of effort that we put into developing say, emerging markets, into areas such as the Appalachians, the Mississippi Delta and many of the areas in the Rust Belt economies, we could expand the economic pie and create a more vital economy. I’m convinced that through innovation and advances in technology we could educate everyone. And if we could do that, we could eradicate poverty and truly give an everyone an opportunity to participate in the economy. Mike Swell: Can you talk about how you look at the funded status as a public plan versus a corporate plan, and how it’s impacted your asset allocation? Mansco Perry: Fortunately, we are a public plan not a corporate plan, so we haven’t had to be very liability driven. We’ve been fortunate that our funded status in aggregate across the pension plans and retirement systems that we manage have been in the high 70s, low 80s and in one of the plan I manage in the low 90s. Still, we recognize that whatever we do, we’re going to have be equities-centric in our public and private investments. We have to make the returns. Fortunately, we’re able to take a long-term investment horizon. We did just raise our fixed income allocation to 25% and will likely have between 12% to 15% in Treasuries going forward. Our concern there, however, is that we’ve had a pretty good run with rates going down—and I have some concern about rates going negative. So we’re looking at our long-dated Treasuries now and thinking we need to set some triggers where we might have some discussions to lower the duration of our portfolios. At some point, with all the money being printed, if markets were to behave as they should, rates should go up—and I don’t think I want to be there at that point in time. [Read more Briefly Q&As]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=A%20Conversation%20with%20the%20CIO%20of%20the%20Minnesota%20State%20Board%20of%20Investment&body=https%3A%2F%2Fwww.goldmansachs.com%2Finsights%2Fseries%2Fbriefly%2Findex.html) Goldman Sachs Media Highlights Bloomberg - September 23 [Softbank’s Nyatta, Goldman Sachs’ Wolfe on Supporting Diverse Entrepreneurs]( (19:44) Bloomberg - September 23 [Wall Street Women Say There’s More to Be Done 100 Years After Suffrage]( Bloomberg - September 21 [Goldman Promotes Minnis, Raman, Wheeler in Push to Advance Women]( The Wall Street Journal - September 21 [Goldman’s Veteran Deal Makers Pass the Torch to New Leaders]( CNBC - September 21 [We’re constructive on the European recovery, Goldman’s Stehn says]( (5:05) Bloomberg - September 16 [Stocks Entering New Bull Market Phase: Goldman's Oppenheimer]( (3:31) [Subscribe]( [Unsubscribe]( The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. 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