David Hunt, the President and CEO of PGIM, shares insights from his more than a decade of leadership at a major global asset management firm. He discusses the exciting convergence of public and private markets and the implications for risk assessment and volatility. David dives into how technology and AI are reshaping investment strategies. He also reflects on the shifting dynamics of commercial real estate and emphasizes the importance of delivering superior investment returns while fostering strong client relationships.
David Hunt emphasizes that investment excellence, rather than just asset growth, is crucial for building client trust and achieving organic growth in AUM.
The future of asset management is moving towards a convergence of public and private markets, requiring firms to offer integrated investment solutions to remain competitive.
Technological advancements, particularly AI, are set to transform investment decision-making and operational efficiency, though managers must manage expectations amidst the hype.
Deep dives
Investment Performance Over AUM
The focus at PGM is primarily on delivering superior investment performance rather than simply increasing assets under management (AUM). David Hunt emphasizes that success in generating excess returns for clients builds trust and leads to organic growth in AUM over time. He argues that the correlation between size and performance can be complex, suggesting that a larger asset base does not always equate to better investor outcomes. Thus, investment excellence remains the core goal, with growth in AUM seen as a positive byproduct of achieving that excellence.
The Competitive Landscape of Asset Management
The asset management industry is witnessing a merging of public and private markets, compelling firms to adapt to clients' desires for integrated investment solutions. PGM recognizes that the competitive landscape is increasingly defined by firms that can operate effectively in both spheres, making it crucial for their strategy going forward. David Hunt notes that the company's most significant competitors are those adept at managing a blended portfolio of public and private assets. Additionally, the competitive edge of passive investment firms, like BlackRock and Vanguard, remains strong, highlighting the need for active managers to differentiate their services.
Managing Contrarian Investment Strategies
To effectively manage a large group of investment professionals characterized by contrarian thinking, a robust culture of debate is essential. David emphasizes the importance of fostering an environment where investment managers can develop and defend non-consensus views, even when they might initially appear unpopular. This requires a solid support system that allows for continued belief in these strategies during periods of underperformance, demonstrated by the recent recovery of quantitative strategies at PGM after a challenging phase. As investment professionals develop unique insights, they must also be backed by a diligent risk management structure to mitigate exposure while maintaining conviction.
The Impact of Technology and AI on Investing
Technological advancements, particularly AI, stand to significantly enhance the investment landscape, reshaping how asset managers operate. PGM is investing in AI to streamline operational tasks and improve investment decision-making processes. David Hunt believes that while short-term hype can lead to inflated expectations, the long-term potential of AI to transform asset management is substantial. This includes integrating diverse data types into analysis, resulting in more informed investment strategies and ultimately better outcomes for clients.
Navigating Commercial Real Estate Trends
In the face of recent challenges within the commercial real estate sector, PGM maintains a well-diversified investment strategy across equity and debt markets. Although office space faces headwinds, segments like industrial and multifamily housing have shown resilience, leading to positive performance in the debt side of real estate. David anticipates a turning point where transaction values in U.S. real estate will pick up, especially as the pain from previous downturns is absorbed. He expresses optimism about PGM's future engagement in the sector, believing that strong relative performance will attract investors back to real estate.
Willy was joined by David Hunt, President and Chief Executive Officer of global asset management firm PGIM.
He and Willy discussed his experience leading PGIM for more than a decade, the convergence of the public and private markets, David’s CRE outlook by asset class, assessing risk and volatility, how tech and AI will impact PGIM and the broader investment world, and much more.
