Mapping Asset Allocation Making Sense of Modern Portfolios

Uh thank you to the audience for taking the time to be here. Uh I'm delighted to be back in Abu Dhabi finance week. Uh people that know me know that this is my favorite time of year. I am joined by four leaders in the space, three leaders in the space. Unfortunately, one person got held up.

Um if we could just take a minute and please have a quick introduction to what you do.

Starting with you William.

Morning. My name is William Ma CIO of Grow Investment Group. Um we manage one of the largest and longest history uh China multi strategy uh multi-manager fund in China and at the same time a lot of our clients are the big fam office in China. Uh last but not least you know I'm a very proud board member of Kaya CIA. So I'll share more about the uh investment opportunity in China and alternative investment.

My name is Steven Shia. First I'd like to thank Yasmine uh for moderating my fellow panelists, the organizers of Abu Dhabi Finance Week, and I especially like to thank my mother. I can't leave our family business without her permission. I love you, Mom. Thank you.

Hope someone's recording this. Uh so I'm a family practice physician by trade. I've done a hundred deliveries of babies in my career, albeit I did not deliver my three children, probably for good reason. My family owns a company called J&B Medical, started in 1996. My mother owns 100% of J&B, so we say she's boss at home and at work, hence the the shout out to her.

Um, we have 18 different business enterprises. Uh we run the gamut from medical distribution where we sell everything that that goes in a hospital, pharmacy, physicians office, supply equipment, pharmaceuticals to specialty businesses like animal health. Our claim to fame is we're one of the largest thirdparty billers of consumable medical products to the homes in the United States. We reach 260 million people via our contracts. We have a telealth company.

We do mental health screenings reaching over a million people every month. We're in 49 states. We're in 28 countries. It's a family business. I get fired quite regularly, but fortunately I have three grandchildren for my mother.

And then I have a family office called the COD Holdings where we're investing in opportunities that could leverage our global distribution channels. Um, today we're building a $5.8 billion biotech life sciences vertical. We're building a $6.5 billion health sports and media vertical.

Our meaning, our purpose, our why is to make healthcare as affordable and accessible to as many people as we can globally.

Good morning everyone. Uh, my name is K. I'm the chief commercial officer at XBTO. We're a digital asset firm around since 2015. So 10 years in the space now.

Um became client facing in 2023. Uh and we work with family offices, institutional sovereigns, help them navigate uh the space. So we've been regulated in Bermuda since 2019. We're very happy to call Abu Dhabi our home since last year and regulated by the FSR this year. And we offer different trade jump services from custody and trading um asset management uh products so active strategies um long short multistrat market neutral uh as well as offering tokenization services to our clients.

Thank you gentlemen. Um William I'd like to start with you. Uh your firm you oversee one of the most significant multistrategy investment platforms in Asia. How are large Asian family offices allocating capital today and what does a modern diversified portfolio look like from your perspective?

Well, I'll start with a Steven story. You know, thanks to my mom. You know, my mom teach me there is no free lunch in the world until I joined, you know, the hedge fund industry 25 years ago. The free lunch for asset allocation is diversification. So I'll give you three so-called free lunch that I see from a Asian family office perspective that we're interesting.

The first one is I think it's is the first time in recent history that the two big economic system China and US is both undergoing interest rate cut cycle and that create a lot of volatility and certainty and liquidity. So the first one is currency diversification. We do see a big trend of RAM appreciation starting from now. So consider you are a US, Europe or other investor. You know the currency what is your dominant currency?

The base is super important. So number one currency diversification rem. Number two is the growth diversification. We do see a lot of Asian and Chinese company. They are growing at very high speed but the valuation is trading at a quarter or half of the valuation of the US market.

as the U uh UBS you know strategist mentioned uh 70 uh 90 uh 92% of the earnings or the growth of the equity market driven by nine companies. So there is a lot of concentration but diversification of the growth opportunity in the region. The last is I'm wearing my CA hat. I think diversification towards strategy alternative investment is the key and we do see a lot of so-called alpha opportunity for the family office to increase their allocation. So three free lunch.

Thank you. Um and if we talk about diversification I think it would be interesting to talk about geographic diversification. Stephen I know that you are uh looking at building something in the UAE and creating deeper ties. Um, are you seeing this region to become an important part of family office global allocation from US investors perspective?

Well, really the UAE has become the epicenter. Thank you. of where east meets west. Um, there's an incredible energy here. There's an incredible can do spirit.

Uh literally every week I get two to three family offices telling me they're going to the region um you know for the first time and they're excited to learn more. Uh over the last month I have six friends that have purchased homes here and three have moved here. Uh so it really it's it's more than just the resources. It's the mindset and energy. Um in our case uh we're looking at building a whole new global uh medical supply chain.

We saw during COVID incredible uh challenges. Uh the global medical supply chain is the equivalent of the eighttrack tape and we're trying to make it the proverbial iPhone. Uh we are looking at the UAE and making up to a $500 million US dollar direct investment here and try to make this the mecca of medical manufacturing particularly to provide US FDA approved products pharma IV fluid injectables active pharmaceutical ingredients biosimilars to the to the whole Mina region 84 countries. So we see tremendous opportunities. We're very excited.

Uh we've set up two companies here and uh we're on our way.

Thank you. And just to quickly take a break, Ali, thank you for joining us. I know you had trouble getting here. If we can maybe do a quick intro on what you do and who you are.

What what do what do we do? Up until about five, six year well six years ago, we were single family office managing our own aum. Right now we have about 130 investors, non-family investors from two million to half a billion pounds uh from Asia all the way to western US and we invest in alternatives PE real estate venture capital. I guess I guess we're on the crossroads of moving away from just being a family office to being an asset manager. I think I'm hoping anyway this is the ma this is the magical recipe.

If it's not I'm in the wrong place. So uh we are originally based out of IstAnul, Turkey, but we have offices in continental Europe, UK, US and also in Dubai. So this is what we're trying to do and the headline is you know the we have four four funds that non-family members invest into and the returns are above 20% IRRa net to the IPS investment partners. We don't like to call them LPS because we don't want them to be limited to just giving us money. I know that's not what an LP is, but I want them to also give us deal flow in which they do.

And this is one of the reasons why I am here in the UAE, not just to get money, but to get deal flow. Thank you.

Fantastic. Thank you. Um, and speaking of alternatives, William, I'll go back to you. I know that you've done a DD on thousands of hedge funds. Which alternative strategies or themes have you seen generate consistent alpha?

Well, volatility and you know kind of like low interest rate environment is great for hedge funds and we see a lot of alpha opportunity and two example is uh for example in Asia the first one is we do see a lot of idiosyncratic opportunity on Japan event driven strategy and I think in a low rate environment you know diversification local relation is key you know mines type of return the second one is the most exciting one is China alpha uh as you can see 80% of the market volume in China is driven by retail. So by running a multist strategy multi-manager fund you see a lot of alpha opportunity in quan market neutral CBR CTA China macro etc. So those are the good complimentary uh alpha source for global allocators in the alternative investment.

Thank you Ali. What is your view on PE? You had mentioned that you invest in private equity. Tell us a little bit. Whatever you do, PE, real estate, venture capital, hedge funds, I think it's key to be an investor as opposed to a deployer, you know, to yes, we do work with and invest in traditional PS, but we are very well aware of the conflict of interest between the LP and the GP in terms of fundraising.

So, the pace of investment for us depends on the quality of the flow. not deploying private equity right now. Now, I'm going to give you, sounds like I'm marketing my home country, Turkey, but I'm going to give you a figure that surprised many of our investors. We have a platform in in in Istanul that invests only in Turkey. Okay.

Last 20-year irrra is net 25% in dollar terms. That's almost seven times our money back. We make at most two to three investments a year. So it's not deploying, it's investing and also contributing to the management. You know, this is what a traditional at least my family office used to do to contribute into the management and can we take the golden nuggets from what we learned from there and have other people invest with us so that we can jointly enjoy the returns.

So this is what number one not to be deployers. If you want in, if if you want deployers that do a deal a month, that's not us. Okay? If you want six, seven deals in our international P platform, which is managed out of London, that's us. all you know twothirds in the in the US mainly in resilient industries uh retail finance uh and in Turkey mainly in industries where we are commercially hedged to the currency risk which everybody loves and hates at the same time.

So P is up there for us. P real estate is also very interesting. You know, everybody's talking about the data center, the IP, the AI boom, you know, all that. We will we will all benefit from that. Not as much as we think and we hope we will, but a lot more than the worst case scenario.

So, we have to be somewhere in between investing in data centers, industrial real estate, inflation protecting multifamily assets in the US. So, this is the kind of thing. So we have a a Turkish origin but we invest globally. I want to reiterate.

Thank you. And um we can't discuss modern portfolios without discussing digital assets. Carl, I'd like to shift to you.

Um are you seeing in your efforts with the family offices? Is investing in dig digital assets a niche or is it becoming more mainstream for family offices? Very interesting question and maybe I'll I'll ask the audience to to help me there and depending on that how I will answer. So would love to have a show of hands of anyone who's invested in digital assets one way or another just to get temperature in the room. Okay.

Uh I believe if I had asked that question last year I wasn't here at least on on stage we would have even less hands uh showing up. But what we're seeing uh in the last two years is quite exciting in the space right there's been a lot of developments. Obviously, it's an asset class that moves very very fast, that's never off, right? It's a the market structure is 247. But when we were speaking to family officers or institutional investor in the region, we've been here for the past two years.

Um the question at the time was why should I invest in digital assets? At least that was last year and obviously apart from talking about portfolio diversification, low correlation to other liquid asset classes like fixed income or public equities, digital gold etc. It's an asset class that has grown significantly. I mean, today Bitcoin's market cap is is around two trillion. Obviously, there's been a bit of a correction in the past two months.

So, at the time it was the why. And the question or what was missing was the regulatory certainty which wasn't existing until President Trump came into power in the US. Even though a lot of jurisdictions like the UAE have been at the forefront of digital assets, the FSR, VAR, and others. So last year regulatory certainty was the main blocker for mainstream adoption. This has been lifted.

The second is family offices usually deal with banks right wealth managers and they're very comfortable with uh an asset class that they know but also an instrument that they know. So the ETF launch by Black Rockck was the most successful ETF launch in in in history for them and that was the second trigger that allowed family offices and institutional investor to start allocating to the space but most of these still remain limited right this year it's no longer about why is how do I invest in the space you can invest directly in the coins but that comes with other concerns which is custody regulated custody counterparty risk and all of that I think now we have a very strong infrastructure out there and many even traditional players banks that offer custody. I mean I'm not going to point fingers but JP Morgan has always been against uh the space for many many years and again this has shifted. So the more banks are getting into the space the more family office will be able to invest across different ways. You can invest in the ETF which has been the most successful um tool to invest.

Now there structured products the digital asset class. Bitcoin has a very deep derivatives market. So you're able to do structured products which family offices are very you know familiar with. And then finally apart from the beta exposure is investing in active manager right generating alpha out of an asset class that's very volatile. A lot of people are not comfortable with 60% draw downs.

you that's why you get active managers in the space like ourselves and others that are able to basically frame from a risk risk adjusted return basis giving you more comfort to get exposure to the asset class

and do you feel that governance and risk management is something that is a barrier with a lot of families that are not familiar with digital assets

it's one of the main barriers today right so um when we deal with institutions and I mean it's public out there everyone has heard about Mubadella and ADIC investing in in in the asset class last year and again this year. They've done that in a in a way they understand which is we invest in the ETF because they're comfortable with the issuer, they're comfortable with the uh the the tool to get access to it. Now when they talk about how do we get exposure to the coin itself, one of the big concern like I mentioned earlier is custody, right? Dealing with a counterparty they're not comfortable with, when they invest, they invest in size, right? So that's also another u um reason.

Now one thing we always say is risk adjusted returns right and when we ask people ask us how much should we invest in the asset class everyone says between one and 5%. And if you look at that asset class over the last 14 years it has outperformed 11 out of the 14. But it comes with a lot of draw downs and a lot of volatility. But again volatility is your friend. And if you're able to harness that volatility, you can then from a riskmanage approach be able to access that asset class with lower volatility and generate extra return on your portfolio.

Thank you. I feel like I need to rush through the next questions. So I'll we'll just get an answer in 30 seconds from each. Um Stephen, I'd like to move over to the role of families with their uh social value proposition and what they do to help ecosystems and you are extremely active in this space. How do you balance your financial returns with the social system level outcomes when you allocate capital?

So my late father used to say no margin no mission. Um I've changed it a little bit um like good or big margin and big mission. So, uh, for us, we not only do we want to make the returns, but we want to have the impact. And I think you need both. And a lot of people, it's it's, you know, one or the other, but, um, we really try to balance both.

Um, and I really believe on a personal level, um, everyone's got something that energizes them, excites them. So, one take-home thing I would leave for everyone in the audience, chase your passion and find your purpose. And I think family offices that's a a big thing to know what they're excited about, what they're passionate about, and ultimately where where they put their time, talent, and treasure.

Thank you. Quick round 20 seconds. William, one global trend that family offices should not ignore in the next 12 months.

China period.

Stephen, one sector where family offices are underallocated. Well, I'm in healthcare. Obviously, health to me is the area. Just to give you an idea, US healthcare is 4.5 trillion today.

It's the third largest economy in the world. The opportunities and need for healthcare are only going to grow exponentially.

Carl, one digital asset trend that is more substance than hype. I'm not going to say tokenization even though maybe tokenization of real world assets is is a lot of hype but I think tokenization of private credit private credit is obviously a team out there and tokenizing private credit is something that's already real that happens a lot uh and that allows anyone to be able to access it 247. So yeah,

thank you Ali. one governance practice that would help families stay disciplined across multiple asset classes.

I think not don't be handcuffed to your genes. Expand your expand your true res sustainable resource of HR beyond your family.

Thank you so much. We are just out of time. Thank you to my speakers. Thank you to the audience, to the organizers, and hope everybody enjoys the rest of their day.