00:00How do you take into consideration the changing political landscape?
00:04Japan's just elected a new prime minister.
00:07What opportunities do you see there?
00:10What challenges do you see on the back of that?
00:14I think the key in Japan is really the continuity of the policy.
00:19Really starting with Abe, right?
00:20We've had a number of prime ministers since then.
00:23But each of these successive prime ministers has continued and expanded
00:26the reform agenda here in Japan.
00:28And our hope and expectation is this new prime minister
00:31will be committed to that same reform path.
00:34If that happens, I think the future is very, very bright for Japan.
00:38What's the plan then, Joe?
00:39What's the plan for Japan?
00:40What is the strategy?
00:41How do you grow your foothold in that important market for you?
00:46Well, there's an evolving marketplace here, right?
00:50So traditional private equity focused on corporate carve-outs
00:53will be our bread and butter.
00:54We're seeing more and more activity there.
00:56You're seeing more secondary transactions, more public to privates.
01:00So I think that speaks to how the private equity industry is maturing here.
01:04And beyond that, it's the emergence of new asset classes.
01:08So infrastructure investing in Japan is starting to pick up.
01:11The need for data centers and digital infrastructure is a really attractive theme.
01:16Energy in Japan is a critical issue for the Japanese economy.
01:20That's going to take a lot of capital and a lot of private capital to support that.
01:24You're also starting to see the emergence of private credit in this marketplace
01:28to partner and complement what the Japanese banks are doing.
01:32It's going to provide more risk capital and more sources of capital to Japanese companies
01:36and entrepreneurs.
01:37So there are a lot of different ways to scale our platform here in the market.
01:41And most recently, it's around insurance.
01:44We have a very large insurance platform called Global Atlantic.
01:47We are partnering with Japanese insurance companies to bring them solutions for their policyholders.
01:53You talked about private credit, private equity.
01:56You talked about infrastructure.
01:59India comes to mind as well.
02:00This is one market that has enormous potential.
02:04How are you looking at the Indian market?
02:05They say that it is coming of age right now.
02:08Yeah, India is an amazing country to invest in.
02:11After Japan, India is our second largest destination of investment in Asia.
02:16It's underpinned, I think, by what everybody knows.
02:191.4 billion people, an incredible demographic story, an incredible consumption story.
02:26And you start layering on top of that, more recently, a manufacturing industry that's starting to blossom as well.
02:31And what's the plan for infrastructure in India in particular?
02:35We know that this is a growing business for you.
02:37In fact, if you take a look at the numbers, it's grown from $13 billion in 2018 to $60 billion right now.
02:45And your Asia Infrastructure Fund has been looking to deploy capital.
02:50And India could be the biggest beneficiary.
02:52It sheds some light on the plan there.
02:54Sure.
02:55Sure.
02:56I mean, India, for us, is a big destination for both private equity investments as well as infrastructure investments.
03:02Our Asian private equity fund and our Asian infrastructure fund are the two largest vehicles in their asset classes in the region today.
03:10And India is a core destination.
03:12So already today in India, we've invested behind toll roads, transmission grids, renewable energy, and digital infrastructure.
03:20So I think we're just getting started, but it's going to be one of the largest destinations for infrastructure capital going forward.
03:25It is hard to talk about Asia without looking at China.
03:30This is a huge market, but we know that when it comes to top PE companies, they've pretty much put a break on investing in the deals in China.
03:39What's your take on the environment there?
03:41Yeah, given the current geopolitical climate, certainly the aperture of what's investable for us today is a little bit more narrow than what it was five years ago or 10 years ago.
03:53Our approach, though, is we have definitely not pulled back from the China market in terms of our commitment there.
03:59We just need to be much more tailored in terms of the sectors and the themes that we think are investable.
04:04Our focus really for the last 20 years in China has been focused on domestic consumption and value-added services, which we think is a sweet spot of the Chinese economy, actually.
04:15Just recently, we announced one of the largest control buyouts in China and the largest domestic brand is soft drinks business, over a $2 billion transaction.
04:25So if it's in that sweet spot of domestic consumption, local champions, we're very, very excited to invest in China today.
04:31Are you seeing signs of M&A revival?
04:35And what do you think it will take to see a real reversal and sentiment when it comes to the Chinese market?
04:42I think the biggest catalyst, positive catalyst for Chinese private equity, the industry, would be a clearer path to liquidity, to monetization.
04:52The stock markets need to open up so investors can exit their positions more easily.
04:57And the M&A market needs to continue to expand.
04:59It's going to be more probably sponsor to sponsor in the next three to five years.
05:05The strategic bid from international companies is probably not going to come back as quickly in China.
05:10But as the Chinese stock market improves, that path to liquidity, I think, is going to be critical for investors.
05:15Joe, let's take a look at some of the macro trends happening today.
05:21We've been talking a lot about de-dollarization, how investors are pulling back from the USD.
05:27Do you see that?
05:28There is a debate.
05:29Where do you stand on the issue?
05:31Yeah, I don't think it's a question of global investors exiting the U.S. market by any means.
05:39I think it's more a question of diversifying their portfolios with that incremental dollar.
05:44Where do you want to invest it?
05:46I do think it's fair to say that most global investors have a lot of exposure to the U.S. right now.
05:51And as the U.S. dollar weakens and other markets like Asia continue to have these fundamental tailwinds in terms of growth, I think you're going to see people diversify their portfolios more and more to Asia over time.
06:04And that makes sense in a multipolar world, right?
06:07As regional economies are becoming more important, as Asia is getting more dependent on intra-Asia trade and growth, I think you're going to see more and more capital flow to Asia.
06:15It doesn't mean they're pulling out of the U.S. though.
06:18But do you see that getting momentum then, Joe?
06:20I think it really depends on who you are and what your portfolio looks like today.
06:24You know, there are clearly some investors that probably have really very large exposures to the U.S., maybe a lot of tech exposure to the U.S. and are looking to diversify.
06:34There are lots of investors in the U.S. that have very small allocations to Asia today.
06:39And I think that's going to start shifting as well with the incremental dollar of investment.
06:43They want diversification.
06:45They want access to the growth that people are seeing in Asia.
06:48And I think you're going to see more and more capital flow to this part of the world.
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