The Post 2024 Investment Firm

[Music] thank you very much uh for the energizing introduction of this panel and many congratulations for adgm uh putting together such a fantastic event we can feel here in the room and outside as well we can hear it as well the big energy the passion and the ambition of the Falcon economy and I think it's great to see that private markets are definitely part of it it is my pleasure to take on the stage with a group of insightful and I would say courageous private Equity investors I say courageous because the topic we are supposed to cover in only 25 minutes is quite bold what's the future of this big industry what will the investment firm of the future look like in five years time just as a matter of introduction I'd like to uh give a few quick reminders first reminder this industry has grown from a niche alternative asset class into a massive industry managing over 12 trillion and growing by 15% a year over the last decades private markets are generating 50% of the revenue of the asset management industry globally become a massive industry second reminder probably worth mentioning the roots of this industry are clearly in the west the global champions of private markets were born and raised in North America in Europe that are still managing about 70 75% of the Assets in private markets right now third reminder the playbook in private markets has evolved a lot used to be the pure leverage buyout uh Playbook uh buyout now represent I would say only 28% of private markets AUM and it's now being challenged by Venture and growth representing about a third of the assets and management in this industry and another private Market asset classes especially credit infrastructure that together represent about 40% and then last reminder as it grew the this this private Market industry has moved from a small entrepreneurial space of shops to Wall Street Titans embracing their roles and responsibility of corporates and that's something new in the industry that probably leads to the Future so I'd like to start with you UDA after this quick reminders that maybe hopefully useful to comment on the this last Bonanza cycle we've had it's been great will we talk about it as the golden times or there m to come in the future you think yeah thank you um so look I think obviously the allocation to private capital is increased dramatically uh there's a BC report that says that it you know public markets AUM over a 15-year period grow by grew by 2.6 times and in the same time private markets AUM grew by 5x so clearly a huge allocation shift now the way I would say it is that it has been a great era there's been a lot of uh acceptance but I don't see that Trend uh uh going away and I don't see it as dramatic but I do see it continuing why do I see it continuing because the the secular drivers of those Trends were wealth effect uh portfolios requirement for higher returns uh access through private wealth channels now even retail channels and increased products private market products being brought on by all the private Equity managers so those secular Trends continue and therefore the growth will continue why I say it might not be as dramatic is obviously one of the big barriers to private Market allocation is liquidity and that has been an easier give over the last uh decade another important thing I want to highlight is that if you double click on that growth that the private Capital allocation is seen it's not been all equal right I think we there was a mention of the number of um funds has decrease there's been a lot of focus on the Bigger Pockets there's been a lot of focus on developed markets in fact Emerging Markets did not see that dramatic allocation to private Capital but that's been an era where leverage and scale because of the cost of capital have been drivers of return as growth and uh uh KN strategies become more important and people start looking for growth drivers Commodities consumer I think that boods well for private markets specifically in the in the Emerging Market G any comment about the the last cycle and about the the the future of this industry yes thank you for having me I would suggest that you know the cost of capital is we've seen a dramatic change in the cost of capital and as long as you've seen this huge rise in the cost of capital there is this um demand for private credit um I think in the short term that will continue simply because you're getting Equity like Returns on a debt-like instrument um with obviously all the protections that come with it however the Capital Market is there for the transition mechanism for capital and risk and typically the cost of capital has been lowered in the public markets however over time for whatever reason regulation maybe other things has meant that the cost of capital in the public markets has become more expensive than in the private markets the capital Market's efficient so what has happened is you've seen that Capital migrate having a company like stripe or bite dance you know in the private Market that valued at 90 billion or 50 billion was unheard of 20 30 years ago but that is no longer the case so my suggestion will be that in our in a short period of time um I suggest that what could happen is the amount of money that's gone into private markets will force Regulators to have a look at that particularly not just from the issuers perspective where I think they've had a lower cost of capital but in secondary trading and you just have to look at the the debate around um open Ai and the secondary transaction that's happening there and the protections that are not pro provided in secondary transactions in the private market and it could be that you will see uh regulation move into that space in which case you may see a migration back into the public markets and you'll see the public markets become a better transmission mechanism for risk um and that's what I I think will most probably happen over time um I would also say to you that you know over the next I don't know 10 years the rate of change will be much faster than it has been over the last 10 years and therefore you could start to see that happen incredibly fast um because I think it will behoove Regulators to do something about the size of the private Market the three of you have something in common you all have a operations Offices here uh in Abu Dhabi uh and investing in the Gulf area Karim do you think here Abu Dhabi or the Gulf region can become the hot bed of a new generation of investment managers that would SAR in private markets I think uh this is a great ecosystem to launch a private Equity Firm from we've been in Abu Dhabi for 17 years as Gulf Capital we're one of the largest private Equity firms and um the growth we're seeing on the ground is phenomenal it's a great time to be investing in the gulf and actually at a time when the US and Europe are slowing down this region is entering its golden age I mean if you look at uh Saudi last year grew at 8.7% uh Abu Dhabi at 9% and the momentum is continuing uh so it's an exciting time to be here and private Equity are is generating some interesting exits we've worked on five exits the last five years we have five in the pipeline and the returns are interesting and by the way these are not return fueled by Cheap leverage it's all about iida growth we are very laser focused on growing our companies on average we've tripled the profitability of the companies we sold so the growth we're seeing on the ground here is phenomenal so it's a good time to be invested in the Gulf you obviously agree with Kim with absolutely some insights about the the region perhaps in as an investor so look I think um what's we've always been a wealthy set of markets in the gulf and we've had liquidity but I think the mindset shift that's taken place over the last 5 years has created this fantastic opportunity and I like to characterize it as follows we've always as governments as big you know as a big ticket writers have spent money in our countries and invested it outside I think that mindset shift was no we're going to invest in our countries and not only accept but energize and catalyze asset classes such as private Equity to be conver of that Capital into the economy and not just stay at the top level so I think that's what's creating a fantastic opportunity I would just add that I think that typically the Region's been an exporter of capital I think that it will become a Hu continue to be a huge importer of human capital because this is a place where you have you have safety you have security you have a tolerant um environment and I think therefore young people will leave some of the other major places and migrate here and therefore the ecosystem for what has been built here in Abu Dhabi and in other places in in the region I think will continue to flourish let's take perhaps um the the question of the future of the industry to to your firm's level how do you think at your firm's level about the challenges you know the industry is facing what what big changes or shifts are you preparing at your firm's level look I think one of the things that we have to Grapple with is the next Generation as the Next Generation enters a Workforce and the existing generation and you have a demand for work from home um that is incredibly challenging because it's very difficult to build a culture when people are not in the same place it's very difficult to train people when they're not in the same place the meeting about the meeting is where there's a transmission of of knowledge and knowhow and as long as um we need to Grapple with that because we need to get a better balance um in terms of how we grow our company and then obviously we just believe that if you think that you know we talk about AI what does that do robotics means that the production line may become obsolete therefore there's going to be tremendous change in employment and how will we grapple with that and what we trying to do is position ourselves in a place in which we're there to help in uh providing capital and some NOA as that happens and we believe that will happen incredibly rapidly over the next 5 to 10 years Karim perhaps what big changes are you bringing to the firm to be ready for the next cycle I think one thing we're doing very well is building global leaders out of the gulf every time we buy a company in the Gulf we take it to Asia Africa and Europe and Beyond uh our companies operate in 65 countries around the world for example we bought one of the largest intellectual property platform in Middle East we did a bolt on Eastern Europe bolt on Africa we're doing one in China and one Latin America will be in 120 countries so big is beautiful and we like to build global leaders which are become very attractive to strategic buyer as an ex exit route for us with that big changes within the firm well I won't call it changes my firm is only 2 years old so as I build it up but but but look I think what we focus three things you really have to focus on um one is obviously the talent I think Talent is the most and the most challenging aspect of building a firm uh and as mentioned it is you know it's a different culture it's a different generation many times and you do have to uh find the right balance so we really look for people who have both the right attitude as well as the right aptitude to do the job H and then build the culture together second is technology I think technology is is uh very empowering uh the way people do things changes but the more you use technology the more uh sustainable a system you're creating we use technology in the small ways within our firm within our portfolio it's our biggest lever for Value creation within the firm and I think finally is agility you know everything we talk about you know who knows about interest is it higher for longer or secular decline or whatever it is or we talked about changes in private markets but what we can all sign up for is volatility and comp complexity so I think building agility in your systems and the way you build things is crucial something I haven't mentioned you coined the word in Arabic to say private Equity how do you say it again M 2004 so now we have to remember that that word it will become a mainstream and very big in the region I would like to thank you for uh taking on this very ambitious uh topic 25 minutes was probably a bit too short we'll probably have the opportunity to meet back in 5 years time and hopefully look in insight and and take on the next challenges thank you very much thank you very