The Power of Co Investing

[Music] all right good morning everybody um my name is Asel mansuri and I'm the executive director of the Emirates family office Association today I'm joined uh by a host of Family office experts uh which will discuss with you how families can effectively harness co-investing as a tool to access bigger deals share risk and build valuable Partnerships I'd like to hand over to my esteemed panelists just to give a short introduction about themselves please limit it to time because I can see the timer here ticking so in order for us to enjoy this panel I'll start with the hands and go over to the rest so just a brief introduction please so Abu Dhabi the capital of capital we have seen that everywhere and Luxembourg the capital of funds and it's the leading and oldest luxembourgish bank B that I'm representing here today thank you H Peter ACTA um thank you so much I'm glad to be here my name is ikani I lead Investments for his Royal Highness Prince Khaled bin aled bin tal Al sa we are a technology portfolio focusing on venture capital thank you JRE thank you first of all a big thank you to abua before organizing this um I'm just PR head of Investments for birken World Investments as a single family office based out of the United States but I'm based locally here chairman hi good morning um my name is chiman Kuan I'm co-founder and group CEO Raffles family office as a panasia multif family office based in six cities across Asia at the moment um very happy to be here thank you thank you so much um ecta I'll start with you um and then we'll include achievement in the same question but to begin with what are the Strategic advantages does con investing with family offices and are you seeing an increase in Co Investments across the ecosystem um thank you for that question of course there are a lot of advantages one of the best Advantage I would say is that you have sort of a redimed due diligence conducted by the lead investor and the generally the key purpose of co-investing is that some people who may not want to cut bigger checks may still be able to participate in those deals have access to really curated deals uh when they come along with someone who is an expert in that area so that serves as um sort of expertise on the table and I would say at KBW 50% of the portfolio or probably more than 50% of our portfolio is co Investments and we heavily heavily um not only just rely but I would say collaborate a lot with our strategic partners for the kind of deals that we like it gives us uh gives us an opportunity to cherry pick uh on the sectors that we prefer or which align more with our long-term strategic goals thank you thank you chman um over to you as well um answering the same question but actually touching upon on co-investing is often used as a tool by families to manage risks within your portfolio can you explain why this or how is it used effectively sure um I think I I can speak on behalf of agian family offices I think um the newer Generations tend to pick up um information and look at the financial industry very different way I mean one of the very fundamental way is uh differentiation between buy side and sell side which means that co-investments is a combination of two buy sides or even more two more buy sides together right so I think there's alignment of interest uh is really a very powerful strategy because can you imagine somebody coming out to you and say you know what you know I'm I I think this is a good company we should invest in together uh and my money is in I have skin in the game so I think that uh plays a much bigger part and and at the moment I would say it's not even a increased Trend but I think um that is going to be a dominant strategy for a lot of family offices being having co-investment which means that they want to listen to buy sides advice from buyid rather than sell side that's very interesting takes me back to just if you can tell us what are the biggest challenges faced when co-investing and is it ensuring the alignments of interests among co-investors of course um so I just want to preface that uh that when we co-invest as a family office the funding Gap is very rarely the motivation most times it's about strategic alignment that ecta talked about and Gman talked about as well so but in terms of challenges though it's always about who is the right co-investor so I'll give an example anytime we are like one of the recent Investments we made because we typically do investments in pre-ipo companies so picking the investors there the co-investors with us is extremely strategic and important because we cannot afford to make a mistake and it's very rarely financially driven it cannot be actually so a company that we invested in recently is edgi company called Blaze based out of California it's about to go public on NASDAQ within a week now actually and of course we're very excited about it but when we went to look for coin investors for that like I said earlier it wasn't to fill the funding Gap even though we we did raise 150 million for the preo pipe it was about who can open doors for them who can be strategic who can help in the long-term growth of that company and who aligns very well with our portfolio company that Target company and also with us even in terms of culture because you want to have a long-term view as if any of those things are missing it can become a very big problem so as a result Blaze is very well positioned because of uh that investment in terms of Market access and expertise that a CO investors brought and just what are the sectors that are most exciting to you right now when it comes to co investing opportunities yeah so in terms of sectors uh infrastructure is most exciting to us and even to most family officers we are talking about and when I say infrastructure is particularly AI infrastructure with the growth in AI that we seeing you do need the backend infrastructure and I'm talking data centers and when you talk infrastructure it has a lot of components there's land there's power there's connectivity there's actual physical buildings there's the racks there's the gpus there's a lot of things so how do you focus on the that's where the coin investment piece becomes very important and I think it's probably the ideal approach for coin investing because here we have a shared pool of resources and expertise in order to take these Investments forward thank you JRE ecta I come back to you on and if you can elaborate a bit more on what are the biggest challenges faced when co-investing um and ensuring the alignment and can you please give an explain to us how can this be achieved from your perspective that's the most relevant question when it comes to co-investing I think uh when we look at co-investment opportunities there one thing that we definitely want to be sure about is who are we partnering with right there has to be strategic alignment and how do we check whether there is strategic alignment other than yes our uh risk return and Horizon timeline is same those are the basics but other than that who is bringing in that opportunity is it the principal bringing in the opportunity or is there some advisor SL middleman I'm sorry if somebody is offended with that but we do like to see that somebody who is proposing the opportunity do they have their own skin in the game right uh and sometimes we get opportunities when even it is family offices they say we invested in this company early on at an early stage and now this company is growing to this level you should invest my question would be are you investing again because do you see upside from here or is it just multiplying on your AUM right now so those are the kind of questions we need to ask uh to really assess one at what timeline we are getting in with the ones who are already in so that's a good way to gauge the alignment we do want to collaborate on a long-term basis uh also which is sort of in in some way either um align with our businesses investment goals also with the people because we tend to continue to invest again and again with the kind of people that we've already built relationships with so this is the kind of alignment we would like to have thank you so much ECT you do touch upon a very important point which is the human element and I mean a lot of the Investments that happen or people that co-invest actually look into this element it's not always about right the numbers they are important but there is that very special element when it comes to the human interaction relationship which I really think you would all on this panel really agree to um let me hand over a bit to chiman and speak about the co-investment deals they often result in complex negotiations between multiple parties do you have any advice when it comes to managing these negotiations or structuring co-investing deals thank you I think you know it's funny that you just mentioned the human factor the human element of it is actually very very very very very important and it is something that has always been understated in a lot of what we do um I can give you a bit of context uh Raff's family office we are Pan Asia uh we manage about slightly more than 200 families money um across Asia um about 40% of our client actually are single family office and then the next question is why do single family office still use you know a multif family office first of all you know Raffles we have have eight pillars right so it's is it's almost like a supermarket that you know the single family office they might be very strong in certain pillars and they say you know what I don't have this one or two or three pillars so I want to come in Raffles and pick it up and one of them is private Equity so to answer your question all of this 70 to 80 single family offices that you know uses our platform and one of the key thing that we do sometimes is to connect the dot between them right so let's say there is a a Target company that is there alignment between two or three or four families and when they come together generally you I I would say that from my experience more than 50% of the time actually is a nogo and that is down to the human element the negotiation who's taking charge of it so ultimately the the one of the first advice that we give to the family not just between families sometimes even within one family because when you get to third generation the stakeholders just exponentially increase first generation you generally have two or four or five stakeholders by the time you get to a third generation there's probably like 25 right but how do you get them to work together I think the first thing is is to really first of all to get somebody independent kind of from outside the family but at the same time professional you know license maybe I think that is important and then after that instead of agreeing everything on a handshake put everything in Black and White in a legal structure and you know in Hong Kong and Singapore generally is is very popular to have a local fund structure where you put everything into a a PPM where is legally documented and and is all being spelled out very legally by you know um you know lawyers and and legal professionals and once you sign on it there's no way back to say that I I didn't agree or I didn't understand this term I mean you know so I think that is important you need to have a independent third party professional um most preferred license to take charge of the whole um I would say execution part because without that even the alignment of Interest sometime more than 50% of the time it doesn't happen thank you so much you that was really very insightful and especially that you bring the Asian element into the market um H Peter apologies left you to the end but like um we're going to have a very interesting session with you and Jasper in conjunction so it would be great if you can both discuss examples of the co-investment deals that you have been involved in recently and if you can please explain these details and share them with our a audience why are they really successful I'll start with you Hansen and then I'll hand over to jper thank you and building on what shean said I think that human import and that family engagement is is so important and the example I want to share with you that as a bank we advise and we also Finance family offices when it comes to co Investments and one example coming to mind is a traditional European entrepreneur whose holding company overtime evolved into a family office as excess capital and liquidity became available in the holding and gradually the holding transformed into a single family office which was established in Luxembourg initially investing in public assets later in private markets and progressively also open to co-investments and direct now client came to us because of the second generation actually being interested in a very early stage Venture opportunity to make a meaningful investment in an online sports related Global platform which could actually become as the potential to become a next unicorn now client was looking for financing to help him to finance that investment in that early stage investment and normally as Bankers you wouldn't invest a very early stage investment but because of the potential the ticket size was actually very very meaningful so we helped to the family to make it happen even though the family's strategy was to focus on more mature U Investments and and as SC investments in general we actually put in place an NA financing on the divers portfolio to help to make that Venture uh investment possible now last example is an Co investment from another perspective because we often talk about Equity but here I'm talking about debt and this involves a swiss-based Founder investing in Poland in a very large solar project where to make a long story short we in the end advised him to raise green Bonds on the Luxemburg Stock Exchange to actually offer short-term debt to investor as co-investors with the founders through an a private placement Bond instrument with a very high coupon so there different angles from which go Investments could be approached and that's what I try to share thank you so much Hans um just PR I'd like to hear it from you as well sure absolutely so as a family office we have three verticals real estate Mining and technology and within technology AI is a very big Focus for us and it became a focus not because you know AI is the hottest thing and everyone looking for the growth but we do see AI very strategically even as a family of what it can do to the world so that angle of impact is very important to us because AI in the hands of the wrong people can be extremely dangerous so which brings me to the the co-investment piece that when we go look for co-investors we have to make sure that it's not just financially aligned which I I'm probably repeating myself but it's the non-financial part is even more important to us is that what kind of Investments are you making where is your mindset at and where are you looking to take this investment and then as part of that of course uh the um I'll talk the same example I gave earlier Blaze that we're taking public it's Edge AI which is a very useful technology but at the same time can be very dangerous in the hands of wrong people so when we looked for coin investors of course they made the financial investment but for them once we were aligned with them in terms of culture and strategy the next thing was how do these co-investors fit in the overall picture beyond the financial investment and we very carefully chose investors who could help us with Market access and also with operational abilities and uh investors we chose have very deep networks in the GCC and that was important to us as a family because we know the GCC especially UAE has made such a strong pushed towards Ai and Innovation so we wanted to make sure we do something here and the second piece of course was who car the operational expertise to bring in it and especially because this company is going public which is most of our investments is going to be in the news in the light so even more important that you're aligned with the right investors um thank you J PR um Hans Peter what are the major challenges faced by families who co-invest and how can those be mitigated I think it's a question that is very interesting to me and I think to many people in the audience now if I reflect on what I see with the clients that we are involved in I would say the things that go well but also the things that have gone less well I would say the first thing is to get a clear strategy to avoid that your portfolio is all over the place mean you need skills in the sectors that you're focusing on and knowledge about the fundamental Trends underpinning those and so on think second establish a comprehensive framework with your GPS so that you truly have full access to their deal flow and not only to the ones that they cherry pick to present to you and maybe finally uh think also of the after effects or the the the followon activities of from your investment so you may see topups you may have to deal with exits you may have to deal hopefully you have to deal with exits and you have to deal you may have to deal with restructuring so prepare your your your resources and your skills and and potentially prepare your team for direct investment capabilities going forward thank you so much Hans I think you left the audience with three very key pillars I can say that they can think of if they decide to do anything related to co investment we'll end this panel with just prit um can you please share your Insight on the future evolution of global co-investment landscape and what is the role of family offices set to play Within this that's a great question so the uh Co investment landscape is transforming very very fast and family office is actually right at the center of it so when we start looking at as a US family office we're always looking to align with other family office globally uh obviously to co invest but also for access to interesting and high return opportunities but when we when we're looking at the industry right now and I talked of infrastructure earlier that is especially a infrastructure which is really top of mind for a lot of people and a lot of investors that we talking to it's U and as it become gets bigger and more sophisticated I believe family officers are placed very well in that space especially because infrastructure Investments are very large and very complex so the more expertise and more varied experience you can bring in the more interesting it gets and also it helps with the growth of the portfolio companies and family offices have the ability the agility to move to deploy patient capital and be at the center and help actually build an ecosystem around that in terms of where the industry is going on three Trends I would say probably three that we look at all the time one is obviously Global collaboration the co-investment deals across the world with other family officers will continue to happen the other uh other other component we're looking at is um sustainability and scarcity so assets like renewable energy and land for example for AI infrastructure these are finite assets so that's where family officers can again play a very big role by co-investing because it's a long patient game with very very high returns and AI is on a growth path so that's not actually changing in and the last I would say is impact through technology and again uh technology is on our lives AI is probably one of the biggest things out there right now and the impact can make where family officers can again uh really get together support an ecosystem and support the direction of where this technolog is going and getting deployed so in terms of trends of where this Market is going if you take of a look at a macro look at everything that's happening and the Ro family office can play instead of just being Capital providers we actually have an opportunity to become the structural architects of the future global economy thank you so much JRE um thank you so much dear panelist and thank you so much to the audience for attending can you please give them a round of applause after this [Music]