A Conversation with Marshall Wace

[Music] good afternoon everyone hi Paul and so for those of you who don't know me our partner centrica sag Javid uh used to be the chancellor of the exer in the UK and before that before politics 20 years of uh trading experience in banking it's great to be here with the founder the chairman and the CIO at Marshall was uh so Paul Marshall welcome to ADF W and let's get right into it uh Paul so first of all you there might be some people in this audience that for whatever reason haven't heard of Marshall waste so just tell us a bit about the firm uh we're about 25 years old uh we basically do a combination of uh Equity long short discretionary which was our original calling and systematic Equity long short and we run about $70 billion uh completely Global 60% now of gross Assets in the United States like like the market indexes uh we have offices in um seven places around the world and we've just opened which is why we're here today I think we just opened uh our office in Abu Dhabi which we're very excited about well congratulations on that and uh and you'll know there's many you whether it's hedge funds uh finance companies all sorts of companies moving to Abu Dhabi you so first of all what have you set up here and and why did you choose Abu so we're starting small but I think we're going to grow pretty pretty fast uh we from here what we're doing is public Equity investing in the region and that includes India and this is a very natural place to invest into India the head of our uh Emerging Market strategy is based going to be based here is here as of three days ago uh we're also going to be doing digital Finance uh we have a growing digital Finance business both in terms of private privates and trading tokens and investing in uh digital crypto credit markets so that's all going to be here and I expect it to grow fast a lot of discussion uh recently especially the last few weeks about digital assets I think especially on the back of the the US uh presidential election uh result I know that Marshall was has been looking at digital assets investing for for for a long time now but but just a word about you how you're positioning yourself with digital assets and what what what difference do you think the election of Donald Trump makes to the asset class so we started off uh about three years ago investing in what we call crossover digital assets so the ones that were poised to be listed on public markets because public markets is our original calling our timing of the fund wasn't very good but actually even though the timing was poor the the Investments have done very well uh but it was initially targeting companies that would be coming to Market quickly some of them are now going to be coming to Market in the next six months uh which is exciting uh but then we're also we've evolved it to be also encompassing trading uh of uh crypto tokens through this fund and and and Credit in these so the credit markets for crypto are very attractive very high yields and uh that's a small business but it's going to be one that grows fast in our opinion and what difference do you think the US election makes so uh for crypto specifically uh obviously it's very exciting um Trump has appointed as we know Paul Atkins a and David Sachs into that space they are both crypto Believers that's a very big contrast from what happened under the Democrats if we're if we understand Mark andrees correctly a lot of crypto Founders were actually debanked so it was actively discouraged um so they're going to be very embracing of this Market uh and I think it's very very important strategically what happens in the United States because there are different models of embracing crypto the key difference perhaps is your attitude to cbdc where some countries will use cbdc as essentially only a central bank uh instrument um and effectively an instrument which will increase social control and and other countries will will seek to have a much more liberal approach to how they use um how they allow digital currencies to circulate and we're very EXC I I I think uh Jeremy Lair is speaking later we we're invested in his company but stable coins are a very um exciting area Abu Dhabi is one of the pioneers of stable coin way ahead of the UK for example who still haven't passed the stable coin law uh and the US I think we'll have a stable coin law either before inauguration or quite soon after that opens up a much more liberal attitude to the way currency works in the economy it allows decentralized versions of um of of currency of digital currency to be used by the private sector uh rather than relying on the central bank to to drive currency adoption and so that is that will be an alternative model to what everybody else is doing and and did you say a little bit you I think you said that uh in Abu Dhabi you will be doing a some of the activity will be around digital yes coins and and will will you be sort of running that activity out of Abu Dhabi now or between Abu Dhabi and London and I should I wanted to say a word about why Abu is such a great place absolutely let's hear it uh a the time zone uh which actually is as good as London if not better because you really do Encompass all three regions be the tax and I obviously I'm making comparisons with London because we're both Brits you're a former Chancellor responsible for some of the things that have happened um but Britain but if you look at the the tax rates income tax Brit uh Britain 45% Abu Dhabi zero corporation tax Abu Dhabi 9% Britain 19 just just in recently increased to 25 capital gain tax Abu Dhabi zero Britain 20 just gone to 20 before so in terms of tax Abu Dhabi is absolutely nailing it uh and is a very very attractive place but then the other thing is regulat regulatory Clarity and Regulatory dynamism if I compare this country the Emirates with uh what's happening in Britain and Europe it's just night and day uh in terms of the speed and the uh inventiveness of the regulatory framework uh basically Abu Dhabi had uh a framework for digital for for crypto by 2019 and stablecoin the same year or even 18 Britain just introduced the framework this year hasn't got a stable coin law so basically Abu Dhabi is leading the way along with maybe Singapore maybe Japan in terms of of Regulation and is really doing incredibly well well first I just want to say a lot of those tax Rises you refer to the UK happened after I left office so just for the record but but but seriously uh the you're what you're pointing out there absolutely is that it's a the world clearly is globally competitive whether it's Finance or broader uh economic factors and uh and as you say Abu Dhabi has taken a lead on on many of those issues and and probably would you agree not just the UK but if you look actually at Europe sort of more generally when you look across uh the UK to whether it's France it's Germany other big economies even some of the small economies aren't they facing similar issues and how are you positioning yourself for that um so yes UK and Europe I bracket together UK could have diverged in terms of having more regulatory dynamism but hasn't uh and the U EU has really shot itself on the in the foot both in relation to Ai and digital Assets in terms of their regulation which is very restrictive um and really the US is leading almost the world on almost everything in relation to Innovation there's a few things happening in China which are exciting but the the US is really where it's at um Europe is you know there's the saying uh us innovates China replicates Europe regulates and that's where we are and so in terms of Europe it's still a very from our point of view a very good Alpha market in terms of marketing efficiency but it's not a great market for beer of course that's understood by the market that there's a huge valuation spread now between the US and Europe in particular but I think that is deserved unfortunately and uh it's not going to change and in terms of sort of uh navigating through these markets you know you refer to obviously we talk about digital assets we talk about you just refer to AI you know as we speak today on the globe you know we've got two uh two shooting Wars going on we've got a cold war a trade War uh there's uh climate change issues and many other sort of issues uh let's call them broadly big geopol iCal issues how how are you sort of Martial waste how you how you managing all this uncertainty um so we we our our day-to-day job is is obviously extracting Alpha at the stock level but in 2008 we had a rude surprise because we neglected the macro so we now and then so immediately after that we introduced a strategy team and a macro team so we actually spent quite a lot of time trying to understand the macro which is essentially about obviously understanding tail risks uh and where they are um and not ever getting caught by surprise by anything happening in the world and and and one of those um big changes I think fair to say going on in the world today is and and you referenced it earlier is artificial intelligence yeah it's been a big topic of discussion already at ADF W and and I and I happen to think I think like a lot of people that uh the artificial uh intelligence it's real Revolution I think there's going to be no aspect of society that's left untouched by it it's going to be very profound at scale and very fast and and do you share that view and if so you know how do you again a funder successful as yours but looking to the Future how do you position yourself that with the sort of profound changes that aren't sort of 10 20 years away but but perhaps only a couple of years away yeah so first to say we were fortunate in the sense that we' over for over 10 years have been invested in machine learning very heavily drives all of our systematic decisionmaking um so we weren't we had a lot of the infrastructure in place for artificial general intelligence when that emerged in the last 18 months two years and I can only judge uh what's going to happen in the world by what's happening in our own business and we seeing it just it's transformative uh in all parts of the business coding is where there is the most amount of use cases uh but it's clearly impacting everything to do with processing data and language everywhere across the firm uh it'll lead it is leading to very significant productivity changes and of course most importantly in terms of our investment approaches we've embedded all the large language models and we are inviting all our teams to innovate come up with new ways of doing patent recognition and we're seeing Innovations every day from all across the firm so it is it is going to be it is transformational for us and and the investment business is going to become a very different business it's going all of the kind of mama papa shops where you relied on the single team to do kind of traditional analysis of a of a balance sheet in the company they're going to be unless they invest in technology they're going to be left behind so fund management is becoming much more in capital intensive you're having to invest in this and the winners will be those who do invest and the losers will be those who don't and that of course applies to every other business across the planet so one of the biggest challenges as a of a stock picker now is to work out which companies are using AI well and which are being left behind yeah look I I agree with all that and uh perhaps the last question just leading on from that you given the the set of profound changes that are coming from AI when you look across the world you look at different economies which ones do you think or one or ones do you think are are sort of well placed for the change to take advantages of AI and the the increasing productivity and all that and which ones you just think you know just haven't shown that that inclination yet so I think this is kind of like a third Industrial Revolution um it's of hu huge magnitude uh but I also think that the US election was probably the most important geopolitical event since uh the Berlin war came down and because it it's a complete reorientation of the US for a number whole host of reasons the US dominates almost all of the industries where there is big innovation uh and new things happening and they are going to win I I don't think there's any question and and what they will set an example and it'll be up to other economies the extent to which they follow that example or extent to which they restrict themselves and impede their own Innovation Europe is in a very bad place in terms of its failure to innovate um Britain has kind of got a unique opportunity that they could turn turn towards the US do a after deal become part of that exciting story or they could just stick sit in stick in the slow lane China and Asia obviously are different there is a lot of innovation going on in Asia actually much more willingness of government some governments to embra this I think Japan is uh well governed well placed Singapore obviously and China itself is very strategic and their issue as we all know is the fact that is the US attempts to cut them off from uh the most advanced semiconductor technology and uh so they'll be able to compete in a lot of traditional manufacturing and advanced manufacturing but not necessarily in some of the areas where the US will lead look uh absolutely fascinating all of that unfortunately we are we have actually ran out of time we could have gone on for ages thank you very much support it's great to be up here with you thank you so much s thank you thanks thank you all [Music]