How I Invest with David Weisburd
00:19:02 · David Weisburd, Christopher Donahue
[00:19:02] S0: Is that not a good idea? Oh, it's [00:19:04] S1: a great idea. But for the corporation, it's got to be almost like a flip of the yields where they look at what they're getting on the if there's a disparity in the municipal market where the yields are so high that they're happy to do it, then they're they're happy to do it almost on a taxable basis. And that happens once in a while, but that's not the general rule at all.
00:19:30 · S2
[00:19:30] S2: One thing I've learned from talking to hundreds of investors is that great investment firms aren't built on investment returns alone. The firms under are great at the things most people don't see, their operations, relationship with LPs, and the quality of information they use to make decisions. And here's what AI has changed. Every firm now has access to the very same models, so the intelligence isn't the edge anymore. The edge is what you could feed it. Firm with its operations and data in one connected record can actually put AI to work. A firm running on disconnected systems simply can't. That's why thousands of GPs run their funds on Juniper Square. Juniper Square puts your fund operations, data, and administration together in one connected record. That means less time managing disconnected systems and more time investing, working with LPs, and building your firm. This episode is brought to you by Juniper Square, the operations partner for private market GPs. Learn more at junipersquare.com/howiinvest. That's junipersquare.com/howiinvest. Everyone I talked on the show is chasing the same thing, an edge. And more and more of the edge comes down to your information, not just having it, but being able to trust it when the stakes are highest. AI is doing more of that information gathering for you every day and most tools are very good at sounding right. The summary reads clean, but can you trace it back to filing the transcript, the specific passage that drove the answer, or are you just trusting the confidence of the output? For investors, that's not a minor concern. A miss filing, miss weighted source, context that got lost somewhere in the retrieval chain, those aren't edge cases, they're how decisions go wrong. AlphaSense is the AI market intelligence platform built specifically for this. They own the content over 500,000,000 curated documents from broker research and expert transcripts to filings and earnings calls, and they own the retrieval layer on top of that. So every answer links back to an exact verifiable source because the answer is only as good as what's underneath it. And with AlphaSense, you know exactly what that is. The edge goes to whoever can trust their information and prove it. See it for yourself. Start your free trial at alpha-sense.com/howiinvest. That's alpha-sense.com/howiinvest.
00:21:39 · David Weisburd, Christopher Donahue
[00:21:39] S0: It's funny because a lot of people might say, why do a podcast on cash? And I think there's somewhat of a cognitive dissonance here in that everybody wants to think that they're... They have some crisp... Perfect crystal ball. They're perfectly efficient allocator of capital where they they look on their balance sheet, and there's always just a couple $100 in their cash, and everything is perfectly allocated. But if you look at people's behavior, and it's rational, you have to have... If you look at... You know, I'm probably up $2,030,000 dollars in just cash. Why? Because I have to pay rent, or I just have to make some decisions with it, or I'm busy those couple weeks that I got that cash in, and I have to make a decision. So having this default strategy on your cash is actually pretty [00:22:24] S1: Or you get to pay for a growing family. These are new expenses that didn't exist five minutes ago. We are well experienced in that. [00:22:33] S0: Talk to me about your business model for Federated Hermes. How is it that you guys get money?
00:22:33 · David Weisburd, Christopher Donahue
[00:22:33] S0: Talk to me about your business model for Federated Hermes. How is it that you guys get money? [00:22:43] S1: We are investment advisers, and so what we do is present the product to the customer. The funds generally are headed up by an independent board of directors as per SEC regulation, and that's the fund side. And then we go direct where we offer mandate to get mandates from institutions, pension plans, and the like. Now, we charge an investment advisory fee, an administrative fee, and then we have two thirty some salespeople who go out and tell the story. So, the best way to think about Federated is really the Pittsburgh geography, where we have three rivers. The one river the Allegheny comes down, that's investment performance. You got to have that or you are out of business. The other river is about Monongahela, which is the sails. You got have somebody tell them the story. Then you have the banks of both rivers are important. They flood. They commit. They have to be controlled. One bank is the bank of compliance, also known to humans as trust, because you've got to have trust. The other bank, customer service. You've to have that. We call that love. So in each bank, both the rivers, you have love and trust. Then they form together in the Ohio, and you go West, young American, go West. And that's how Federated Hermes is basically structured. You've got to have the investment management. You've to have somebody telling the story on the distribution side. And you've got to get each of those banks with love and trust. And that's our business model.
00:24:18 · David Weisburd
[00:24:18] S0: We referenced earlier the the data center build out and the large tech companies. AI is coming for every industry. What risks or opportunities does AI pose to your company?
00:24:32 · Christopher Donahue
[00:24:32] S1: I would look at it as primarily opportunities, although there is some beware the jabber walk. Okay? But to me, we aren't gonna have less than 2,000 people which survive what we have now down in the road. When we have our summer interns come in, the first question is always, Well, AI is going to take care of me. I won't be able to have a job. And my answer is always, Look, pay the extra $20 a month, learn how to use AI, and then you'll get the job. And we are going to be looking at it more as a developer of quality. I tend not to use the word efficiency when we're talking about AI, especially in an employment circle, because efficiency means FTE, I'm dead. Quality means, Oh, I could do it better. One example of that is we get a lot of phone calls from investors, and they have to be screened, and then you have to have quality control and all that. And the managers do that. And then they grade them. Well, when you have AI do that, all of a sudden, instead of only listening to one out of every 50 or 100 calls, you listen to them all. And then the AI grades them on things that are really good. Did you show love? Did you use the name of the customer while you were doing this? Were there a lot of I don't know. So, you know, things that distract from a direct communication? Did you get the answer right? What about the substance? Do we have less managers because they don't have to do that job anymore? No. We have higher quality calls, higher quality training, and a better overall result. And the same is true with requests for proposal, RFPs, where you can continually enhance them. Humans involved all the time. But those are just a couple of examples where it's going to work. The fears, they're all well publicized in the marketplace. And, you know, I don't buy that they're gonna blow up human beings. You know, 2001, A Space Odyssey. I know Hal wins, but I don't think Hal is gonna win. And I think it's no different in pattern than product liability. Your responsibility put a good product on. If you don't, you're gonna get hammered. So be responsible for what you put out. And I think a lot of that is hitting home with the AI companies. You know, when they delay coming out with something because they're worried about what it's gonna do And all the stories about escaping the sandbox, well, you let them escape the sandbox.