Interview With Elizabeth Burton And Purnima Puri From The CNBC Delivering Alpha Conference

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Following are excerpts from the unofficial transcript of a CNBC EXCLUSIVE interview with Elizabeth Burton, Employees’ Retirement System of the State of Hawaii Chief Investment Officer, and Purnima Puri, HPS Investment Partners Governing Partner and Public Credit Strategies Portfolio Manager, from the CNBC Delivering Alpha Conference, which took place on Wednesday, September 29th.

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Elizabeth Burton On A Risk Of Higher Inflation

I think there are parts of things that have gone out that are transitory, and I think you saw that in airline prices in August, right. So you saw a pullback there, some of that, yes, but I think a lot of the things you mentioned like home prices I don't see a sign of that slowing. Owners equivalent rent and these are large parts of CPI, and we can debate all day long whether or not CPI is a good thing to be tracking anyway, but I do see a risk of higher inflation. And I also think even if you don't agree with that, the confidence intervals are wider right so you have to care about it and you have to position your portfolio for that because literally everyone is screwed if they don't.

Purnima Puri On Fed Chair Rate Hikes

I do think you’re going to have, whoever is in that seat likely to be in that same range of that four to six number of hikes in the near term because I don't think you need a lot of flexibility in economic policy to continue the growth, right? GDP is expected to continue to go and all the estimates that went down this year, actually just transitioned to next year a little bit so you went from sort of five, you know, it went down to, I guess 50 basis points plus or minus, but that went to sort of north of 4% for 2022. So, it’s not clear that you need a whole lot of easy policy right now.

Elizabeth Burton On Negative Outlook

I just have a more negative outlook and I think I'm not alone, right. Look at how many times people have mentioned growth recently it's, it's meaningfully equalized than they were six months ago. But, you know, that opens the opportunity for other things but I think, I think if I had the best of the two, I would say it would definitely be on the inflationary front.

Elizabeth Burton On Wage Disparity

It's not potentially just all about chain disruptions, but I think one of the biggest risks right now is wage disparity, right. And also, labor shortages like trying to get people back into the office you're having to pay them more they're not coming back. So, I think that's actually the long-term issue as well, the some of the supplies theme stuff. Sure, it'll get resolved, and maybe some of the wage stuff will too. I don’t know how long people can hold out but I think that that's a risk factor that needs to be taken into consideration.

Purnima Puri On Default Rates

I don't think in the near-term default rates are going to go up. I think estimates, you know, default rates peaked last year around 9% I want to say plus or minus, and their estimates are down at two and a half percent. I think if there's a surprise it's actually default rates will continue to go lower, not higher. So, I don't think that, I do think the high yield market is priced pretty much to perfection.

Purnima Puri On Hospitality & Real Estate

We've actually found some pockets in real estate which we haven't been finding for a long time so, you know, there's hospitality which has daily reset of rate so, you know, you can catch up with inflation or multifamily where you can reset rate, you know, reset lease prices every year and keep up with inflation. So, so I would say, real estate is an area we have started to focus more on in, in the, in the sort of originated credit markets.