Go Big or Stay Steady The Ultimate Investment Face Off

[Music] great thank you very much um I think uh we are going to try and make it a bit more exciting um I know you heard uh some fantastic speakers over here talking about uh sucession planning to investment opportunities but we just thought we'll try and mix it up a bit so um the background to this particular session is all about allocations and obviously we are in a place uh and time where um the standard uh allocations for family businesses are uh well let just put this way slightly open for question whether we're talking about the macroeconomics or we're talking about insurance the inflation or the election that has happened um it's causing for a lot of family offices to rethink uh where and how and and in which format to actually invest me personally I'm I'm trending towards some interesting opportunities but we just thought that it might be a good idea to have um two sets of uh teams uh arguing for people who want to actually keep on investing and perhaps even increase the investment in traditional Securities such as public equities real estate fixed income so on and so forth and my colleagues on the right uh will be arguing for that position and on my left my colleagues will be arguing about and debating about uh alternative assets we will be following the Oxford debating style uh in which each of the participants will be given three minutes to give uh their arguments and then the opposing side will start and give their arguments and then each of the teams will have a chance to rebut what the other team has mentioned we will wrap up and off we go so without further Ado I'm going to ask my colleagues on my left starting with Christina if she wants to kick off sure traditional Securities are no longer enough to ensure growth or resilience for institutions in traditional markets it's necessary for institutions to diversify inj J Al natives like Venture Capital digital assets and fund management alternatives are reshaping the new Global Financial markets it's the new Norm offering high yields diversification and Innovative Market entries with Technologies backing with that said it's crucial for the capturing of asymmetric returns and future proofing your wealth 61% % of family offices are actively seeking into new investment opportunities digital assets and tokenized assets unlock liquidity and returns from traditionally illiquid real estate and private Equity the alternative investment space is bound to grow from 15 trillion into 24 trillion Market by 2028 signaling a remarkable shifts from Beyond traditional asset classes the market cap of digital assets alone is currently 5 trillion presenting an exponential growth for stable coins alone accumulating 190 billion dollars we all heard uh great news for our industry last year's last week sorry Bitcoin hitting $100,000 mark this means that now Bitcoin is the largest asset class in the world totaling of two trillion market cap highlighting the growing significance of theal assets and Global Financial markets Bitcoin ETFs have now surpassed the $350 billion in trading making Black Rock ETFs the most successful ETF launches in the 30 year history 47% of traditional headphon already have access to digital asset and tokenization the institutional confidence is driven by the confidence and Regulatory uptake with new Financial projects launching either Bitcoin or ethereum ETFs and we have salana upcoming major financial institutions like Black Rock Fidelity and American Express are adopting tokenization and digital assets to streamline their operations reduce operational cost and enhanc portfolio liquidity recognizing The Innovation to out based traditional markets with that said increased Regulatory Compliance is transforming Regulatory and digital assets from a wild wild west to a structured investment opportunity by diversifying into alternative assets investors gain exposure to realtime Alpha High returns with the secondary Market liquidity and building resilience against the limitations of traditional markets thank you great bang on time deborra ladies and gentlemen in a world where traditional s classes have long dominated investment portfolios the rise of alternative Investments is redefining the landscape Alternatives encompassing private Equity private debt real assets present a compelling opportunity for investors they offer diversification potential risk adjusted returns and access to Unique growth sectors that traditional markets simply cannot replicate private markets are where companies that are not listed on a stock exchange can raise Capital Growth and mature here the investors have the opportunity to engage in businesses with the potential for substantial growth often before their reach stability and maturity of public listings the true value of a company is largely created before its ipu this is why companies stay much longer private and the IPOs nowadays ex are executed at a much higher valuation than in previous years private markets are when many of today's most iconic firms such as Uber MAA Airbnb spasic Grew From Fletchling startups to Global Giants globally the potential in the alternative space is staggering consider this while number of public companies in the US decreased by about a third over the past 25 years the number of private Equity backed companies increased seven times up to more than 10,000 companies over the same time period this is an immense Universe of untapped opportunities that only Alternatives can access public markets no longer longer reflect the duw Dynamics of the real economies public companies driven by short-term shareholder pressures and quarterly earning Cycles are often disconnected from the long-term value creation that characterizes a healthy economy meanwhile private companies freed from the scrutiny of the stock market can focus on Innovation sustainable growth and the long-term well-being of the employees customers and communities as 86% of the companies with revenues higher than 250 million per Anum are private and Achieve 64% of their revenue it is fair to say that the real economy is built on private markets in conclusion private markets are dispensable to a balanced investment strategy offering unique opportunities for growth diversification and Innovation by embracing private markets investment we not only enhance our portfolios but also contribute to the broader economic landscape's dynamism and resilience let us size the potential of private markets to foster a more prosperous and inclusive future thank you great again bang on time you would have seen Andrew is frantically uh jotting down notes because uh he's got to give the rtal um but in this case I'm going to ask Spike if he doesn't want doesn't mind starting uh his speech while you'll see Christina uh doing the reverse thing so Spike if you don't mind please thank you um just uh yeah I'm Spike quick introduction um 30 years in the asset management industry we're a manager here in adgm our specialities Indian public markets and my partners uh guy in India called Madu Keller who's been one of the most successful Public Market investors for the last 30 years um prior to that I was in the UK before moving to the UAE and um set up and ran the 00 harrian fund management company and was one of the founders of the Scandia Investment Group which was uh became the biggest player in the UK in its sector so to focus on this um session I think this is the the Dilemma that investors face we're in a world where opportunities for growth are scarce and probably more accurate to say opportunities for strong and predictable growth you normally have to choose between between one and the other many investors are lured into unknown territory when they're seeking higher returns only to just then drown in Risk so I think one thing I've learned over the years is that the most successful Investments have three things in common one uh they're built on markets that have strong unpredictable growth in other words big Tailwinds that are driving the the growth which which can give you a pretty much inevitable outcome inevitable growth if you got a big Tailwind underpinning it second thing you need after the Tailwind is access you need someone that can really unlock the True Value that that Tailwind opportunity someone that's done it for longer more successfully uh to get the most out of that potential and the third thing is time and I don't just mean the time that you get in and the time you get out of an investment but the time you actually hold it I think one of my favorite Warren Buffett quotes was when Warren Buffett was asked how long should you hold a good investment he laughed and he said forever uh the power of compounding was Einstein's Eighth Wonder of the world so here's the thing I think the challenge is can you find a market that's got a really big uh growth trajectory a big tailwind and also find the best person to unlock that for you that's the the challenge for investors now we're all familiar I'm sure with India as an investment my simple uh thing on India is it really does take that first box because it's not only a very big uh growth trajectory in traditional Equity but it's also comes with a very high degree predictability and certainty provided you have the right time frame um now a lot of people might think that um investing in India means you have to pick high-risk companies actually I don't think that is the case um in the Western World in the past if you wanted to get a 5x 10x 100x return you probably had to invest in something like an early stage biotech company or a startup company whereas in India you've been able to achieve these returns with boring companies in boring sectors because they've got such a big uh Tailwind driving their growth so I think I stop exactly on time great thank you spake Andrew thank you my name is Andrew gunlock I'm the CEO of Blazer I've been on Wall Street all my life and there is a well-known book from the 20s by Fred schwed where are the customers Yachts where are the customers Yachts which means you got to be skeptical as well as opportunistic so in ask ass allocation the first question is how much risk which is another way of saying how much equities and the second question is how much duration which is another way of saying how much a liquidity the more duration the more compounding you can take and that is as you said Spike the secret to making yourself rich and then the second uh if you got have less duration there's less trading as you know from Trading it's very hard to outperform the market most fund managers don't the other question you got to ask yourself is are you managing money at scale or not if you're mubadala moving 500 billion dollars a year that's very different than moving 5 million a year um traditional portfolios will always have two asset classes as their core one is the US Treasury Market which is ballast every portfolio needs a hedge and that is the cheapest hedge and the safest hedge in the world and then the second is the US Equity markets which are the deepest cheapest and frankly bestr run companies in the world uh they work and they're time tested over many many cycles uh they have a happen to have a network effect remember markets are software and they have a network effect which is why you see the markets gaining share and as a result contrary to what the Press likes to write the US dollar also gaining share and the dollar digitizing ation of the dollar via the stable coins uh is an additional gaining of share so there the alpha opportunities as my colleagues on the left said are smaller in these liquid markets there's no question about it but remember 90% of your return is beta always the alpha spreads of course are also much bigger in the private markets we can come back to that um of course everybody needs an alternative bucket you could call it a fun bucket you you can do you can call an opportunistic bucket you can call it Venture whatever you want there's always a room for that here's the bad news for those that love those Alpha opportunities as a result of Il liquidity the tokenization of these assets will make them more easy to trade and therefore the what I would call fake accounting volatility of not marking them every day will tend to go away and therefore you'll have more of the traditional volatility great thank you very much you're welcome so um now you have heard both sides um of the debate uh whether alternatives are good and increasing or uh will the traditional uh standard pieces of investments in uh equities uh you heard from Andrew and Spike so now uh again following the mechanism that I talked about we'll now have autle so I'm looking at you Christina I hope you can get some real punches in absolutely thank you gentlemen um we talk a lot about risk and understanding the conversion between risk and volatility especially in our industry is in coloration risk and inherit is in all Investments but alternatives are increasingly der risk through regulatory oversights now especially in UAE we have M and we have Asia with really strong Regulatory and compliance oversight largely in institutional adoption and us now moving into more mainstream markets with the technology advancements shows the maturity that we are just starting to enter with our markets with major players moving into digital assets and tokenized Alternatives with tokenization we are also transforming liquid assets into tradable units enhancing the liquidity which is great for secondary markets that private security and public sectors don't have um additionally family offices can balance their portfolios with liquid alternative products that are fully regulated and we have heard today with Bitcoin and ethereum ETFs and lastly while digital assets have shown significant growth and resilience with increasing institutional adoption providing confidence a adoption for family offices allows them to capitalize on dis Emerging Markets before it matures so my question is how family offices are ignoring token us and digital assets with Alpha that we provide driving the younger generational and future proofing their wealth great good points Andrew so let's talk about some of the uh themes that have been brought up here one is risk risk is not volatility unless you believe in the academic capm model risk is very simply the permanent loss of capital correct is the way Buffett and most serious investors look at it um number two diversification Venture and alts are not diversification if you track Venture it has the the more the NASDAQ goes up the more Venture Capital companies raise money with a confidence uh and correlation Factor about 08 so VC is essentially the NASDAQ on steroids uh it is not a diversifier let's also talk about the IL liquidity discount I'm on the faculty at Columbia uh business school I'm also on the board and I work with the endowment officer there uh and the former endowment officer is now at Harvard when Colombia looks at alts it starts with a 3 and a half% per anom illiquidity hurdle Ken Griffin arguably the best hedge fund manager in the world and certainly one of the best CEOs thinks that's way too low he doesn't want to give up IL liquidity when he can trade in in markets so what's the cost or what's the price of the liquidity has never been agreed upon but it's not zero that's for sure it's quite High lastly if you think about Bitcoin for a second there's no question it's getting bigger no question about it and the dollar coins are taking serious share from a 1950s technology called Swift which bothers us all when we move money across borders um there's a traditional way to play Bitcoin which is won't be as sexy it's called Amazon uh AWS is the base of all of these currencies and it will grow essentially dollariz and digitizing these markets so let's also go to Alpha for a second last point the alpha spreads in the private markets are massive truly massive I just happened to be at the MUA Capital um LP meeting on Friday they have 200 people it's a first class firm in every way I live in New York where Blackstone Carlile Etc have similar types of extremely intelligent extremely well-paid people if you think on your own you're going to be able to outperform them in the private markets be it real estate venture Etc you know this is a scale game there's no question about it great thank you very much so here we go um you heard the opening statement from both teams about uh the traditional assets as well as the alternative assets and then you heard the rebuttal now let me just uh try and uh summarize this um and and a few uh words from my side first is when you look at Family offices there you have to realize that most of them actually have their own family businesses so if you're talking about where they have invested in especially the first and the second generation a substantial amount of their wealth is actually in their family business the second thing that you have to understand and that in uh in a way has to be considered slightly separately the next thing and especially if you're looking at the Middle East you generally have got two major areas where the family offices have invested and we are sponsored by UBS and their recent report actually gives Credence to this this is that a substantial amount of their Investments maybe about 50 or 60 of the remainder outside the family business is in public equities and fixed income but then a huge amount of their Investments also go into what I would call as real estate and that's where the liquidity and the risk element comes in differently and especially if you're talking about Middle East the financing of real estate Acquisitions or Investments are mainly done on leverage but then the final point from the perspective of uh of Alternatives over here and we are sitting in abudhabi which as it says capital of capital yes a huge amount of money and the Investments is going into public markets but the availability of alternative investment sources over here whether you're talking about virtual assets whether you're talking about hedge funds whether you're talking about tokenization of assets this place is absolutely growing like crazy so um I was hoping that we would have some kind of a voting system which would allow the house to actually vote on this um but I'm going to say that I think each of us has to take a decision and whether you're uh yourself investing your money or advising your your families and your clients to invest hopefully the points that my colleagues uh on the alternative side or on the traditional side have given you uh some food for thought thank you very much uh my colleagues both on both sides and thank you for listening thank you [Music]