Repositioning for Growth Smart Moves Ahead

[Music] hi good morning everyone and uh welcome to today's discussion and repositioning for growth for family offices and um over the past two years the world has witnessed uh unprecedented shift and economic uncertainty Market volatility and Global geopolitical instability and these challenges have tested the resilience of the family offices around the world uh but just as the Chinese word for crisis uh also embodies the opportunity uh that's inside um today's discussion we will be centered around the positive sentiment of opportunity um a chance to uh reposition our investment and recalibrate for the future so to start with Alton Chan from BMS group of Hong Kong so Alton you have been focused exclusively on the private alternative investment space in China but we know that China has gone through a very very difficult time and it's absolutely in Trump stockhouse and we don't know why it's going to come out and with the intensifying of us us China relations what have you been doing and what do you plan to do wow thank you Lou well first of all uh great pleasure to be here at the finance street and of course thanks for uh the invitation from uh adgm and it's great organization so going to your first question um maybe a rewind a little bit we what we've been doing for the last 20 years or so uh in the F Century we've been managing capital and invest in capital for some of the largest families in in in Hong Kong and in mland China they are probably some of the largest families you can find globally in fact and you are right we have been very much focused on China investment in mainland China in terms of investment into like China VC um early stage all the way down to pre-ip investment for this family and since about not so recently um since about 2016 17 or so we' started pivoting away and helping these families to diversify away from China mainly for the reason that not so much because we can claim we have the foresight to see the downturn that happened since then in round about 2021 22 down to now but because the space was getting crowded it's very bubbly and too hot so the sort of valuation that you are seeing um is too sustain unsustainable and and then the upside you can see the the return you can generate from this Investments is getting smaller and smaller that's why we started pting Away by partnering mainly with um other especially motique investment managers or other people who can Source Ste outside of China so in terms of diversification geographically we have done that for a few years already but again when the downturn comes um especially in the um China econ iic situation the the with the benefit of hindsight you can see have you done enough so going forward and especially like you mention with a new uh Administration coming into place in in in the US the geopolitical situation is probably you're not probably seeing any easing hopefully it's not going to get worse I mean we can spend more time to talk about that in a minute but the the theme is still continue to find geographical and other diversification for these families um we continue to to to look at the portfolio that we've invested for them and on the more I think ton down scale basis there would still be China investment opportunities for the families but the the main aim is to find something outside of China including potentially in the US but at the same time we've actually done a fair bit of investments in the Europe um region and then of course naturally Middle East we are here sitting here capital of capital it it is a place that we cannot forget forget about so there are a lot of opportunities to help us and and and to help our clients and then in terms of lastly um before I hand over to to to to my fellow panelists is um the essay classes previously not well not previously up to now we've been very much uh skilled towards the private elate space um going forward and especially this is what we're hearing from not only our current clients but a lot of new family officers that we start to work with they say they want liquidity they want something that they can look at what number one no no longer the close-ended fund structure with seven 10 years lock up but more something that they can look at quarterly or even monthly liquidity so the hash fund space and then I think of course and another class that we should not forget about we previously haven't been in it but that's clearly a greater and greater demand is in digital asset that's something that we looking very seriously at the moment very nice so nor unlike out you have been having a fantastic time by based in Dubai and running a wealth management firm uh just like Ray Delio said yesterday that uh he thinks the Abu Dhabi is entering into a period of Renaissance and I tended to be wholeheartedly agreed so what have you seen from the uh inflow of capital and the trend given the rest of the world it's in turmoil what is your experience here I mean there's no better place to be talking about you know what is capital doing and how's the capital moving then from the capital of capital um talking about how changes have come into the markets when you look at the UAE you've had so much new inflow of capital people who want to use the UAE the adgm the DC as a base um to put their structures set up their businesses even come and move and up you know start their life here so there's been as opposed to six years ago when you look at someone who sat in my seat today who are the prospects who are the people we're talking to is very much the local families today it's very sophisticated uh businessmen and women who have set up very successful businesses across Industries and who are now looking to move here and so it's really um you've got such a huge inflow of s of very interesting people in their own fields now talking about opportunities and you know where is H what are they doing I think it really depends on the maturity of the family office are they fully invested been invested for many years where it's a machine that's kind of running or is it new capital being deployed when you talk about New Capital there are so many interesting pockets and if I just focus on liquid markets and I like liquid markets the moment recently because you know interest rates have been high for the last couple of years I believe High rates are here to stay which means you don't need to take on that much of liquidity to make a really decent level of returns take fixed income as an example you've got some great fixed income pockets in investment grade and very good quality high yield a bit an Emerging Market debt and you know across the rate space that are giving you Equity like returns you look at the equity space and you know you add a bit of convexity into your portfolio by tilting tactically but then you know if you don't want to be into the kind of the typical high tech Etc but you know these pockets of convexity can include commodity producers and emerging in Frontier markets who for the last two and a half years have basically doubled in price and still have a PE which hasn't moved because earnings have grown so much so I think it's just these family offices and families and people deploying money overall they need to look try and look at where others aren't looking or are less tempted to go and if it doesn't exist well come to people and you know go to people and have them build it for you very well said um drawing on your comment on fixed income uh we as a family office based in New York you know obviously our fundamental principle Is wealth preservation meaning not to lose money so we've been uh given the uh economic uncertainty and with a very high inflationary environment we've we've been actually uh looking at a lot of uh hedging strategies uh back when I was at uh New York University one of the world renowned uh Professor from NYU Professor nual rubini actually just launched uh ETF that we've been looking at very very care uh closely uh it is a tool to combat High inflation and it is alternative uh to test the US treasuries uh uh resilience so that being said um we are definitely more on the uh conservative side so George you are running a family office uh based in Dubai so are you more growth oriented and uh what have you been doing given the uh environment and what do you plan to do yeah no thank you that's a great event great to be here yes so we opposite to yours we're looking for growth we're not looking to preserve preserve capital and because of that you know we are definitely exploring more risky strategies and uh I think overall what we are always looking at the IC is the risk return you know are we compensated enough for the risk we're taking and what are the best risk adjusted uh uh return opportunities at the moment and to be very honest we are very much into private markets very much into private credit and also secondaries so two areas where we quite like the the cash flow profile we quite like the the the balance of risk and reward and and to be very honest you know we are a bit disappointed with the other alternative classes because we're not seeing distributions we're not seeing Capital calls and uh things are not really really moving much so for us uh we've been very very focused on that strategies and then de you know deep dive on credit we also like uncorrelated strategies the more Niche plays around litigation Finance Law Firm Landing Bridge loans um you know insur claims things like that which are completely uncorrelated not variable rates some a lot of times like very high fixed rates we have even an upside component warrants Etc so those are areas that we're exploring a lot mostly in the US to be very honest we we we have a large portfolio here of equities and and real estate but but on the private side we definitely look at the US oh wow I like music to my ear uh what about your investments in the region so in region you know the family it's a local family they've been around for over 100 years so they have a lot of real estate and it's something we manage ourselves at part of the family office uh real estate has been you know what saved the day back in 2022 uh it's been doing extremely well here in the region and uh and that's definitely one area the other one is the family also has large positions on local equities uh I think it's more for historic reasons than Investments uh but but nevertheless you know as as the tide is moving up everything is moving up with it and uh you know those are shares that have very good dividends and uh it's been uh it's all been very positive so those are the things we look locally sometimes we could look at some Partnerships for direct investment but that's uh that's not our Focus well wonderful so we do tend it to agree that our primary focus is uh hedging risk and seeking returns so uh draw upon the hedging risks element of it our last but not the least panelist Philipe I I do personally believe uh offering a very unique and product that is for risk hedging that is not a typical Financial product but very interesting nevertheless so would you like to draw more about it yeah thank you very much and good afternoon it's good seeing a few familiar faces and a few new ones and uh yeah absolutely right um we see a rise in stockk appetite to maintain access to global markets uh however the world as it's developing right now we heard the world turmoil um is not always fair right so what family offices principles wealthy clients seek is having instant and constant access to markets uh for financial Capital purposes for lifestyle purposes longevity health healthare education you name it right on the other hand you see that um around the world there's a fight on talent and capital as well and we're here in Abu Dhabi UAE I think maybe one of the institutional leading forces right now in attracting talent and capital um giving people giving investors um a feeling of being treated in the right way uh being treated fairly not just being a number um and that basically is the backdrop of the rise of investment based migration where jurisdictions countries provide policies or legislation for investors um to basically gain that residential right and or even citizenship right to that extent and and that is very much sought after right now so the firm is very much growing and also we have a very interesting eye on the US right now maybe not so much for the growth in there but more concerns that are coming out of you know geopolitical events which are maybe pandemics can be elections can be conflict and that basically stems the entire industry that we're representing right now wow Americans high alert so indeed indeed oh good for you so Alton yeah going back to you um what um given the geopolitical and economic challenges how are you collaborating with other family office or institutions to mitigate risks right and share insights on emerging opportunities are you completely let go of China and uh um how do you hedge the US China relation risks aspect of it right uh well Lou I don't pretend to be a political Economist or Economist but at the same time the our way of seeing things is the geopolitical tension between for example the US and China and and elsewhere it's not going to get too much better and then again especially with a new Administration in the US coming into coming into office there would be some uncertainty in terms of potentially new restrictions there be new sanctions coming through you don't know so how do you hatch against that is naturally I mean we we talk to a lot of whether it's our families that we work with very closely or other family offices sometimes we collaborate to look at potential Co investment opportunities the the general consensus is let's wait and see what happens when when the dust settles with with the new Administration coming in and they need some time to come up with a new policy especially on the international cooperation fund but in the meantime and and and going forward I think the approach will be more or less the same as what we've been taking which is a bifurcated approach is we will continue to look at China opportunities just that of course compared to let's say 10 years ago where we were betting very heavily and with a predominant of the ass allocation being in mainland China now we look at opportunities um a lot more carefully and so at the same time we'll continue to diversify by building more building blocks both in terms of s classes as well as um geographical spread outside of China that's the best hasch but then at the same time if you go back to to China if you ask me the the question of okay then will there be opportunities that come out of this potentially increasing or or more less not improving tension with the us or other parts of the of the West the answer is yes um naturally you can see a lot of tension on the let's say the AI development front there's a chip war going on so-call right um one side of the the equation is you can say hey that would mean uh the leadership in China will have a lot of policy and other structural support for the chip industry because they can't import anymore they have to rely on themselves to be self-sufficient does that mean that's an opportunity for you to pick out good chip companies yes but then if you ask us do we want to invest into those companies unfortunately no matter how good this company might be we need to be very cautious because there could be sanctions coming through that that hurt these companies not because of fundamental reason so we are actually looking at the ship space in the US but then in the China what we could be looking at is other Industries where it's a lot less sensitive to this sort of tension including for example education um there was some U reform and new policies that came out about a couple of years ago in China that hurt the kind of hurt or structur the the the industry but now we see it's starting to thrive again so that could be drawing on the education sector in China there was the abrupt policy came up that wiped away 90% of the market share overnight right and now you're looking that you're not afraid of another policy change my goodness we haven't we haven't gone into it yet but then we see I mean we because we are very close to some of the policy makers in China and the word is that especially with the the reform and the restructuring and the new policy that came out after the restructuring there should be a lot less surprise in that industry but of course again there could be other opportunities even less sensitive but Healthcare there were some reform as well there were some restructuring so-call um anti-corruption Crackdown but then on drug development on um Hospital quality of hospital or higher hand Hospital Services provision I mean that's something that the what number one the people in in in the country wants it and number two there should be policy support for that s sort of sector so these are some of the areas that people can look at yes nothing short of controversial answer but that's that's unfortunately with that sort of geopolitical backdrop and some of the policy Crackdown you've seen a lot of the things we will be seeing or saying would be quite controversial but if I can just weigh in very quickly I think it depends on China are you short-term investor or long-term investor short-term is too political long term the way we're looking at it is you know we're long what Chinese consumers in mainland China consume and that's what we're along through a cheap and efficient ETF and you know we're looking at the long game but shortterm if you're a short-term investor it's definitely too political well well the the money goes to the Brave and the daring so I think Al absolutely doing a fantastic thing here I think China is too big of a market to ignore absolutely and I think it has one of the strongest consumer power in the world and that's not going to go away anytime soon um and it so it doesn't have cheap labor anymore but it does have one of the most skilled uh labor in the world that probably will be replaced by India what would you say given the intensifying of us China relations do your Fel panelist do you shift a little bit of investment looking at alternative replacement of China like India or elsewhere I'm not an India expert you want to go first yeah no we we actually are yeah we we we think China at the moment you know it's a wait and see especially What's happen next year uh India is definitely an alternative but very pricey um so we are in a we explore we look at southeast Asia um but at the end of the day if you look at historic if you look at the shortterm you know us is still unbeatable and it's just a power and the size and a ecosystem and escale and the currency you know there's no risk there so at the end it's it's very hard to go away from that gravity the you are having a but you are having an exactly opposing view with Philip you are so positive on us yet Philip is saying the capitals are flowing out of us because of the unstable unpredictable political climate a lot of issues surrounding there so that the both of you are directly contradictory to each other yeah it's not only on the US right just to uh comment on on China I mean China is still one of the biggest producers of millionaires ultra high net worth um and you know the data suggests that the people are not necessarily staying there or they take parts of the assets and bring them to other jurisdictions such as Abu Dhabi for instance of course Singapore or or Hong Kong for that matter so I I think when it comes to the investment conversation you might look at it from you know two perspectives obviously there's the professionals institutional uh industry but then there's also the emotional psychological Private Matter um particularly within those families and what we just see AS Global practitioners um you know the trend clearly goes towards engaging with jurisdictions markets where you have reliability transparency efficiency little red tape and you know being a German coming from Central Europe I would say these are you know values that you ain't find there so one again one of the driving forces of you know the ecosystem that Abu Dhabi has created and therefore attracting exactly that part of audience right but just because we're seeing money of you know family officers and Wealthy individuals flowing out of the US and let's say coming here doesn't mean they're not then reinvesting back into US assets which they very much are and I think they're it's differentiating the two which is important so it's a love and hate relationship that's where the opportunities are at the moment I totally agree um so um that shall be uh so drawing in a very positive note uh I think uh we're entering into a ERA with a lot of uncertainties yet at the same time lot of uh excitement and opportunities for the future behold I recently just came back from Peru for the APAC conference and I remember clearly and vividly what Jamie Diamond said during the conference and he said uh we are entering into a golden era right now and the banker should be dancing on the street so I think that is a very positive sentiment that I am uh looking at and uh um and at the end I think uh by being in Abu Dhabi I I am so impressed with the uh Administration the governance the cleanliness and the safety of the country and uh I think this is an incredible place to be and I am positive that there will be more and more Investments and capitals uh will flow into the region regardless of how the world is turning and uh that being said uh we as family offices and fellow investors we all hope to live longer make more money and upon that note that's the uh conclusion of our panel today thank you very much again thank you [Music]