Asset Abu Dhabi - Investment Risk Across Asset Classes

foreign ladies and gentlemen your excellencies thank you for attending our panel today my name is I am the founder and chief investment officer of vibrant Capital partners we are headquartered in New York and our specialty is credit structured credit and securitized products as we decided to expand globally into the east and south we received the warmest welcome from Abu Dhabi in particular adgm therefore please let me expand our deepest thanks to our chairman of adgm his Excellency Mr Ahmed azim azabi thank you very much for having us here sir we have distinguished panelists I will let them introduce themselves maybe we start with the question as you speak you can introduce yourself thank you for the sake of time Arnold let's start with you and how they maybe we can continue with you great financial crisis versus the last two years the next two years similarities contrast thank you for your question Swiss bank we um we have seen uh over uh our Recreation 226 years ago more than 40 crises so it's just one of one of many but what's different with this time with 2008 actually few things seven points quick ones first one is uh that we have today persistent inflationary pressure that's the elephant in the room the second one that we see is that the U.S debt to GDP ratio is has doubled you know in the U.S as an example relative to uh 15 years ago and take the one in Italy as an example 150 percent we also have the uh of course the obvious acute geopolitical risk nowadays the fourth one is that U.S savings rates have fallen sharply and the highest cost of living is going to make you know households quite tough days in order to uh to withstand this uh hardship but in order to remain still reasonably positive we can see that the labor markets is quite robust much more than much healthier than 2008. as well the banking sector you know the balance sheet has been have been you know de-risked over time and a number of large corporations have solid balance sheet today and the housing market typically in the U.

S is more resilient indeed again new home sales in September in the U.S have decreased minus 11 percent but we're not in 2008 but probably there is a wider The Wider some Reflections that we might have as him well the question was how does the current crisis differ from the financial crisis um first of all the financial crisis in 2008 was the crisis of liquidity and Trust I think you all remember that there were points where we're debating show keep our money in this bank or put at the other bank or open more bank accounts because we don't know which one is safe um and In fairness to thank and congratulate the AGM and other Regulators The Regulators have done an incredible job over the last 10 years putting a financial system which is more responsible and more thoughtful than what it was pre-2008 so in reality is today none of us have looked at the financial system with a question mark or the lack of trust today what triggered all this is an inflationary environment driven by a supply demand imbalance is that temporary or permanent time will tell and that inflation environment obviously led to an interest rate kind of uphill and then from there you have all the macro challenges but if I can make two observations which is very important first of all this is neither the first nor the last crisis we will live it's okay this is the nature of economies they go through Cycles okay but here's what's very important a financial crisis it's like an exam you prepare for an exam you don't show up on the day of the exam and you say oh my God I didn't know there's an exam okay we had a 14-year expansionary economic cycle I think every single one in this room expected some kind of a downturn at some point in the future at some point in the near term and you prepare for it accordingly and that's why I think what you see today in investors those who have prepared for that for this situation and those who haven't kind of and that's where the bridge I think the Gap is going to be between the two thank you crisis also means opportunities right so recently during the pandemic and post pandemic we have seen a shift in economic opportunities even economic power from west to east and to South maybe cutting you can share with us your views on that thank you delighted to be here we are seeing a chef from the U.S Europe to this part of the world because the growth is clearly here if you look at the last quarter Saudi grew at 12.2 percent the UE at eight percent the region will grow at seven percent in 2022. I just came back from uh Roadshow in the US last night and the last two years investors were telling me Kareem don't bother us we're having a party in the U.

S and Europe who can't be bothered to come to the gulf I'm telling them guess what the party is over there you have to come here because the growth is clearly in this part of the world and not only in the Gulf we are also looking towards South and Southeast Asia we open offices across the region if you look 30 years out if you are a sovereign pension fund investor Europe will grow by one and a half times the U.S 1.8 times the gulf will triple in GDP southeast Asia will quadruple and India will quintuple so if you want growth you really have to be here thank you so as an investor there are macro Trends which you just cannot um you have to follow so we have the two the world's two most populous nations India and China aggressively going to improve the live hood of their people we have the mineral Rich Southeast Asian countries that are have now a very clear and concise plan of how to develop their Nations and also the sad reality which is that China and the US is decoupling it's happening this is bringing two set of opportunities first of all the migration of the supply chain to other parts of Asia but second of all very interestingly is the emergence of the china-centric tech space and this is really kind of there is a a thriving rush into the um uh venture capital and the whole Tech ecosystem in China which I say it was sadness because we all like to think of the world being interconnected um and finally the steeping Beauty uh Japan uh a nation that has lived three decades of deflation a nation that is sitting on 14 trillion of household savings uh suddenly realizing there is inflation there's something called inflation and with inflation that 14 trillion has got to go to work so in that respect where we see opportunities is private wealth in uh in Japan uh very interesting industrial opportunities in Southeast Asia Tech space in China Asian population Thailand and China these are the single biggest issue aging population Healthcare comes on the back of that and really I have to Echo what Korean says it is so exciting to see that the Middle East in general UAE more specifically and Saudi and others are really hopefully this is the beginning of an incredible boom in the next decades and ourselves like many others I hope will be a very active player in that momentum thank you our panel is investment risk across asset classes so I would like to get your views about sectors Investments within the context of risk of inflation increasing interest rate slowing Revenue slowing growth maybe I don't know we get your views first we continue with Kareem and Courtney will get to you well uh we are at a critical point in the in the cycle that's that's for sure and we have seen um just very recently maybe inflation decelerating that has created last Wednesday a big impact and what we have to remember is that the capacities of all the fund managers to inject a huge amounts of money in the system now are there okay so that's going to be playing a big role now to suggest at this panel except private Equity that we are a big fan of I'm sure you do as well that are definitely the case we tend to favor sectors like Pharma companies you know large equities with very solid balance sheet we like the region as well not just because we are here and we are nice but we've seen recently some very nice IPOs and very positive ones we like infrastructure and sustainability is definitely one thing which is of course after Sharma Sheikh is uh is on the in the heads of everyone but it's definitely something where we see including including in Europe some ACT fantastic companies you know improving typically recycling or other infrastructure where it is worth investing nowadays so these that would be the main you know you know you told me to be very quick which is very difficult on this subjects because we talk for hours but I think these are the key elements that we look at before we go to our panelists let me actually pick up on that because the the recent geopolitical situation since last February what's going on in Eastern Europe seems to have changed the perspective about you know Net Zero carbon coal Etc do you have a certainty that you want to we see that this is actually probably it hasn't changed this is probably accelerating what was going on already very substantially and what my colleagues have said today is very true there is definitely a shift to Asia and to the region here it's also a geopolitical shift to to uh to the region and to Asia not only Russia as we saw recent and not because just because of the war in Ukraine had already shifted to China and to and to export more oil actually in this direction but we have seen also all some diplomatic relations between countries from the region which were not so much uh so to say which are more Western mandido us-minded until recently and now just exclusively so these have shifted definitely a lot and to The Net Zero of course when we have these serious financial crisis priorities may be shifting okay so you you speak less and you think less and you invest less potentially into a sustainable future and ecology that may be the case but it's there and because don't forget there is one key element also which is the regulatory aspect of it the rules in Europe typically are so stiff and strong in this domain that companies will have no choice but to adapt and that is leaving lots of opportunities for investing Karim how about your views on sexual allocation we focus very much we're always trying to look into the future and seeing where is the growth in this part of the world so very early on we started investing in Tech and fintech Healthcare business services and sustainability we're big investors on water food security we look at Renewables and that that really paid off for us I was mentioning the economy is growing up seven percent here our portfolio companies are growing at 21 annually we're growing at three times the speed of the economy because we picked the right sectors so I think focusing on where's the growth which sectors are going to outperform is very important thank you Courtney you are an expert in Venture Capital so I want to ask you about the tech sector we have seen very high evaluations last year there seems to be some reality coming back to the market what are your views on that sure well as the loan venture capitalist here on the panel today I think I may have a slightly uh different view on the next 18 months our firm 500 Global invests in 80 countries today we're managing about three billion dollars that's primarily been deployed into early stage technology Investments and one of the things that we're most excited about and having done an analysis A couple of years back we identified 15 countries that we felt the youth population the expected GDP growth the digital penetration and the mobile adoption all meant that these economies would eventually when combined dwarf that of the U.S and China in terms of expected GDP growth so for us over the next 18 months we're really looking to invest multi-stage in these 15 countries that we identified the UAE Saudi Egypt and many others being included in that assessment and we believe that continued investment in early stage technology companies is key to the economic growth as we see regions like the Middle East diversifying their Investments outside of oil and continuing to really Drive knowledge economies so for us it's going to be all about continuing being very focused on early stage and growth stage Investments across technology fintech of course is going to continue to be a huge driver we also expect edtech as well as a general Financial inclusion and infrastructure in these developing markets also continuing to play a huge role so an exciting time to be in Venture but also a time where we expect there to be continued regulatory growth coming our way as well which I believe is natural in any of these Cycles but certainly continuing to invest heavily in in Venture as an asset class thank you azim how about your views on sector and investment allocation so um obviously everything we say needs to be within the context of the environment today um we are in the middle of a financial crisis as a fact if you look through TV you know kind of markets down four percent up four percent uh crypto Market is I don't know 40 50 60 I don't know what the number is right these days um during periods of Crisis the issue is we don't know when the crisis is over and so you don't have your parameters to make your investment strategy it could be and nobody wants to catch a falling knife but by the same token nobody wants to miss a great opportunity so during tough times the approach we take is very clear you got to be defensive and you're going to be opportunistic how can I be defensive what are the sectors that benefit from rising interest rates inflation what have you real assets whether it's real estate or infrastructure Investments second for credit you may not make your 20 return on credits but if you don't lose money that is the single biggest step forward to being top quartile not losing money you don't have to be a genius if you make money or don't lose money and kind of in tough times you just you're stable that will comfortably put you top quartile which is quite attractive second of all opportunist areas such as distressed debt Europe I'm actually I'm a big fan of Europe where we have made the best Returns on our private Equity Investments have been during difficult times during challenging times so in that respect a certain asset light businesses in in Europe I think could be quite attractive the US is always compelling I think every single one in this room can point to that they have made money in the US but more importantly than making money you can easily go in and go out you can't talk about that in many asset classes in other parts of the world so in the US have this robust manner of always just bouncing back from macro challenges and what have you so in terms of regions it's got to be kind of a continuing focus on the stable or the certain markets of the US the opportunistic market of Europe the exciting markets in the Middle East and Asia and in terms of sectors it's defensive sectors and also opportunists and also the final thing is it's okay to do nothing for six months it's not the end of the world just having your pennies in your pockets is sometimes more valuable than stressing about it thank you a few words on credit markets my area in U.S just if we take that there's over six trillion dollar invest with great bonds but over 30 percent of this trip will be minus rated so one much downgrade and your high yield in the Royal Market The Higher One Mark is about 1.

5 trillion one third of that is B minus so one large 100 you are triples downgrades and defaults will come but last time that happened was 2009 and in if 2009 you focused on credit markets you do actually make the 20 return with relative safety so I do ask the investors to keep an eye on credit markets for next 18 months they could be very exciting opportunities would you like to add any further comments I think when it comes to being opportunistic the next two years are going to show some really interesting opportunities I think valuations are becoming more sane there is a lot of growth definitely in this region so you're buying right we're entering as a private actual firms at a very attractive entry multiples but we're buying growth so this price to growth ratio is very interesting and I think the 23 vintage is going to be very interesting in this region thank you everyone my last message as an investor please don't invest with the fear of missing out I will say ladies and gentlemen your excellencies thanks for attending our panel thank you [Applause]