Guys, thanks for joining. You guys have been talking non-stop for the last 10 minutes, so let's just see what we get through with the time we have. Let's start. We just had the French finance minister on. Let's start with where investors are deploying their capital these days. Jenny, I don't know if you have thoughts about it. It seems to me as though even as America's industrial might is supposedly onshoring, as everyone is sort of hunkering down, it seems that the same thing is happening in the capital markets. What do you see about where investors are choosing to deploy their capital geographically?
Look, I mean, I was just looking at a stat on this. You know, the US is like 30% of GDP and something like 70% of the capital markets, right? Everybody's been coming to the US. I think innovation is still very real in the US and people recognize that. The issue has been the headwind of the dollar. So, if you're a European investor last year, the problem was the dollar was such a massive headwind that it ate away a bunch of returns. I think that's one thing going on. But I still, if you ask me where innovation is, I think the US is still the greatest economy for innovation. But there are some big trends happening: supply chain realignment, alliances changing, and I think a fundamental recognition that economies need to have a certain amount of basically self-reliance, right? So energy independence, I mean, huge problem in Europe, huge problem in Japan, a lot of places with what's obviously gone on in the Middle East. And so people are recognizing we need to invest in our own country in ways that can make us more resilient. So I think you do see that trend going on.
Thoughts? I came to talk about Jesus. I must be in the wrong room. Sorry. No, whatever she said is good with me. I've got to go to the next question.
She's a brilliant person. You need to hear from me.
He's a doctor. It's medicine. It's a field of medicine.
But look, actually, while somebody called my cell phone yesterday and said, 'I'm from Dr. Donald J. Trump's clinic. You're late for your proctology exam.' Whoever did that won the internet.
You're just giving your phone out to too many people here. But let's talk about the administration. It is both
No, it's for both of you, actually. It's simultaneously more accessible than any other administration and more transactional than any other administration that we've seen. And that has actually benefited crypto for a time far more so than any other presidency has before it. Is there a risk where you sit that this is going to partisanize, sort of hyperpartitize crypto to the point where it becomes a Republican versus Democrat issue to you?
Want me to take that one?
All right. So, I'm going to be very serious now. I will tell you that I lived through the Biden administration's war on crypto. I don't know if Jenny you were at this meeting, but we went to the White House. It was Mark Cuban, me, Mike Novogratz, a whole selection of people from the industry, and it was reasonably hostile until we got to Treasury where it became incredibly hostile. And of course they had this thing called Operation Chokepoint 2.0 where they were debanking people in our industry. And so, you know, however critical I've been of Donald Trump or what's going on in the administration aspects of it, they have been more pro-crypto friendly than the past administration. And I don't think this is a left or right issue. This is a right or wrong issue. And I think if the Americans want to maintain the mantle of financial leadership that we have had for the last 125 years, we've got to get this right. This cannot be a partisan issue. I think one of the things that the president did which I was against, and you and I were on a panel together with Brian Armstrong in Davos in January of 2025, is said these meme coins are going to hurt us because if you're in opposition to the president and he's launching meme coins, which are now down 96-97%, that's going to hurt our ability to get the legislation done that's important for the industry. And so it's been a mixed bag if we're going to be honest with people. I would way more prefer the Trump administration on crypto than the Biden administration, but I would like the president to get out of the crypto business because I think it's hurting the ability to get these laws passed.
Before we go to Jenny, is all the progress that crypto has made or you expect to make under this administration worth everything else that comes with it to you personally?
No. I mean, I can give a longer answer than that, but no.
So, let me take that a little bit. So we actually had a tokenized, we have the only at Franklin Templeton on-chain, natively on-chain tokenized money market fund, which is really cool because the blockchain technology, and I remind Benji, yeah, so I ran Franklin Templeton's technology and we had four different shareholder recordkeeping systems when I ran it across the globe. And when we filed for our tokenized money market fund, I said that's funny, nobody ever asked me what programming language our shareholder recordkeeping system was on until it was on blockchain. Like that's how an obvious question. Nor should you care as long as it's following all the rules of a money market fund, right? Because that's very, very well scripted as far as what those rules are. And we did manage to get it through at the Biden administration. But I totally agree with Anthony here that it was really tough and unfortunately, you know, we ended up just deciding we can't do anything in the US. This is way too much work. Let's go work in the UAE, Hong Kong, Singapore, much more constructive environments where we started to focus our attention. That's a problem. You know, if you're in the US, you want to be leaders on innovation. And if anybody questions, you know, where does this go and why, I'm just happy that any administration is engaging. This technology is hugely efficient. When the SEC approved our money market fund, we had the parallel process on our old system and the new system. We did about 50,000 transactions in that window. Cost us about $130 a transaction to do it on the old system. It cost us in total $11.13 in total on the 50,000. We picked the right chain. There's a lot in it, but the difference in efficiency, and we talk about inclusive finance being able to democratize access, you need to make it cheaper which means you have to take out some of the toll takers. It has to be more efficient. Our money market fund, our old money market fund, you needed $500 to open an account because anything less than that meant the other participants were subsidizing you. Our Benji product you need $20 and we probably could go down to $5 because it's built on blockchain. So there's a lot in the crypto world, as you know, something happens and everybody runs away but they miss the story which is the tremendous efficiency that exists because of the nature of this programming language.
So you both feel, I mean obviously Anthony I know you feel this way, that this is a durable sort of sea change that is happening at the institutional level that outlasts, you know, this presidency or the next presidency. It changes how you run your business. And so what that leads me into is the way that we finance and pay for things is under a lot of pressure right now. There have been geopolitical risks. There have been macroeconomic risks. Let's turn to private credit for a second. You guys take a very long-term view at Franklin Templeton and there's been a lot of rush in there, Blue Owl, you know, Blackstone, what have you. What's your perspective on was it a mistake for those guys to rush into retail the way that they did?
So, first of all, private credit exists because post the financial crisis, the rules globally were changed on banks and such that their capital requirements changed and they cannot possibly lend at the same amount they used to lend in the past. And so if you were a huge customer of JP Morgan Chase, you could get a loan. If you were a small, you know, startup or middle market firm or others, you weren't able to get a loan. And so it created this environment for private credit. Private credit is absolutely illiquid. Okay? I cannot stand it when I hear people say, 'Oh, it's more liquid than you think.' No, it's illiquid. Having said that, just investment grade private credit, you can earn say 100 to 150 basis points more on your investment for the equivalent risk in traditional fixed income. Over a 20-year period, somebody's in a retirement account, that'll mean at the end your balance will have 20% more when you compound it. Just do the math on it. You will see you'll have 20% more. It's that important that we provide access to it. But then how do you manage illiquidity? Now, not every, I love retirement accounts as a way to do it. I think they are the most liquid space of anywhere and so I actually think it's going to be slow to get there even with the
Do you think it's a good idea for people to be able to hold these assets in
If you can afford the illiquidity? Absolutely. And whether it's private equity or venture, some amount of allocation in there depending on your ability to withstand the illiquidity, I think is valuable because the compounded return can be significant into people's returns over the long run. And then the only other thing I would say on the private credit side, look, you know, this is what happens when the market overreacts to something. I look at enterprise software and all the risks around enterprise software. That is not a debt issue because if you lent to a company that had a good installed base and good cash flow, they're going to be able to pay it back. AI is not going to impact those firms. And so AI will over time impact those firms. You know, 20 years from now, will Salesforce look the same? Will they be able to or will people be writing their own code? Probably. But today in the window that your debt is to those companies is such I think that was a complete overreaction by the market and we're seeing it because people are coming back into it.
Anthony, I want to get your perspective on
Can I add something just quickly before we go to the next question. Again, this is a regulatory issue because after the financial crisis, we basically pushed all of this lending into this private lending and so a result of which it was relatively unregulated and so people got overaggressive similar to what the banks did prior to 2008. So again, we're back in Washington talking about not left or right leaning regulation, but what's right or wrong for the industry? That industry should have never migrated out of the banks the way it did because inside the banks there were stricter underwriting standards and you wouldn't have had the fiasco that's brewing now. So again, we're back to regulation.
Okay, I'm going to challenge you on the fiasco. So number one remember when you lend, when a bank lends, the bank is often the counterparty which means you have a systemic risk if there are poor underwriting, right? Which is why the underwriting standards in the case of a private credit fund, it is limited to the pool of assets in the fund, okay? So you don't have the domino effect.
Okay, but you're having micro domino effects now throughout the industry. So the point that I'm making is that those people had fairly lax or lenient underwriting standards primarily because of what you just said. You don't have systemic risk as a result of the loans that you're putting out and you're trying to shoot for higher returns because guess how people get paid? They get paid on the higher returns. They get paid on the fees of higher asset prices. And so the lack of regulation in that industry, you're correct. It's not going to cause a systemic implosion, but it's caused unnecessary strife for the economy because it wasn't properly regulated and at a scale.
I still disagree with that comment.
Keep disagreeing. But there's also, we should do a, you got the right hair color. We should do a podcast together.
