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00:00So, you know, lots of debate about where you should pug your money in terms of AI.
00:04It does seem like perhaps China's the way to go if you listen to Jensen Huang.
00:12Yes, well, I think Asia is going to be a leader in AI.
00:16We see it happening on the ground all over the region.
00:20I think it's still early days, and I think, you know, it's clear that this is going to transform almost every single industry.
00:27So I think as investors, we need to pay attention to how this is affecting all of our investments, not just those in the technology sector, but literally every company that we look at now.
00:38One of the first things we try to understand is what are the opportunities from AI?
00:42What are the risks presented by AI in that particular business?
00:46How is your exposure looking like?
00:53Well, at the moment, we're really bullish on what's happening in Japan.
00:56We see that as one of the biggest private equity opportunities in the region right now.
01:01The focus on shareholder value as a result of the shareholder reforms that are happening in Japan, the kind of mindset shift that we've seen, the now for the first time, you know, positive inflation, positive wage growth that you're seeing on the ground, and a real willingness to transact.
01:16And I'm actually quite impressed with the sophistication of the management teams that we're finding in Japan now, which is quite different than what we used to see in the past.
01:23So Japan is a very active market.
01:26India, I would say, is probably the second most interesting market right now that we're looking at from our fund standpoint in Asia.
01:32And that's a market that continues to be a domestically driven story about consumption, demographics, technology, and I would say also services like health care.
01:41There's a lot of talk about the attractiveness of the PE space in Japan as well as in India.
01:52Given so much interest, is that sending prices higher, valuations higher?
01:57What kind of follow through are you seeing on the back of that?
02:00Well, I think what's been going on in the world in the last, really since April, I would say, you know, since the tariff announcements,
02:10is that people have been looking at their concentration in their portfolios in the U.S. and thinking that they're not diversified enough.
02:17And so people have been looking to Europe and to Asia as a way to diversify.
02:22And that's driving more flows into the region, which, as you say, is elevating valuations.
02:29I mean, you look at the stock market performance this year in Hong Kong, in Japan, in Korea, which is one of the top performing markets in the world.
02:38Who would have guessed?
02:39And this is a result of this kind of rebalancing that we're seeing in the world and people wanting to be less correlated, less concentrated.
02:46It doesn't mean that they're exiting the U.S., but they're just reducing weightings.
02:49And that marginal flow here into the region does affect valuations.
02:53But on the flip side for us as private equity investors, it also creates a lot more liquidity, liquidity for our exits.
02:59And that's very important to keep our business liquid.
03:03And we've actually had a record year for exits this year in Asia.
03:06We distributed $14 billion out of our Asian program versus investments, new investments of only $2 billion.
03:14So we've literally distributed seven times more than we've invested this year on the back of this increasing liquidity.
03:20So it's very much a favorable tailwind, we believe, for the region's investors.
03:25Is it too soon to be talking about PE consolidation?
03:29When might that happen?
03:35Industry consolidation in the private equity industry, is that the question?
03:39Yes, that's right.
03:40Yes, so I think this is the trend that we're going to continue to see.
03:47It's already happening.
03:49What we're hearing from clients, institutional clients, is that they want to have fewer, larger relationships with their alternative investment firms.
03:58They don't want to have 150 managers doing different things for them.
04:02They want to have really a handful of strategic relationships with people that do multiple asset classes in multiple geographies for them.
04:10And that can also provide them with a lot of strategic co-investment deal flow, which is another important part of our industry.
04:17And so as this sort of industry consolidation takes shape, what you're seeing is the larger percentage of fundraising going to the larger global, in many cases, listed private equity firms.
04:29And that, I think, is benefiting the larger players in our industry.
04:33You also have a very, very fragmented industry historically.
04:36We have something like 15,000 private equity firms in the world.
04:40It's just too many.
04:41And so I think there is going to be this shakeout where you're going to have some specialist firms that do very interesting niche strategies.
04:47And you're going to have these large global franchises that do multiple strategies for clients at scale.
04:54Jean, your global CEO talked about the rise of zombie funds in Europe.
05:01Might that be happening in Asia as well?
05:07I think it's a global phenomenon.
05:08It's happening in Europe.
05:09It's happening in Asia, for sure.
05:11It's also happening in the United States.
05:13It's really about, you know, have you been able to get distributions back to your clients?
05:18Are you delivering alpha?
05:20The reason to invest in private markets is to outperform the public markets.
05:24Otherwise, you're tying your money up for no reason.
05:27And so what we focus on at EQT, first and foremost, is delivering investment outperformance versus public markets.
05:33That is what keeps us in business.
05:35That's our number one priority as a firm.
05:37And it's our culture here to start with that.
05:39Then we figure out how much money we can invest well, and then we figure out how much money we can raise.
05:44Not the other way around.
05:45How much money can we raise?
05:46And then figure out how do we invest it.
05:48So I think this focus on performance, and particularly I would say now the focus on distributions back to clients, is extremely important in terms of getting, making sure your business has longevity and continuity.
06:00I think the second big trend in our industry, and I'm here at the Private Wealth Conference in Hong Kong, there's 1,500 private wealth advisors here today, so record attendance, is the new inflow of private wealth into our industry.
06:14And the question is, how is that capital going to be deployed, and where is it going to end up?
06:18And really what's happening there, again, is this consolidation story around it's going to a handful of the branded firms globally that have the brand, that have the distribution capability, that have really the multi-strategy and diversification that suits the needs of this new class of the democratization of our asset class to individual investors.
06:37Before we talk about the allocation of that capital you were talking about, I'm just wondering, in terms of Asia's PE cycle, compare that to the rest of the world.
06:47Might that be, you know, different from perhaps the U.S. and Europe?
06:54I think it is different.
06:56I think the correlation, there's actually not as high a correlation as people imagine.
07:01And I think that's actually important for portfolio construction, because what investors are looking for is uncorrelated exposure to the asset class.
07:10So I think, you know, what's driving Asian private equity, if you look at, for example, the distributions that we're having, it's the level of activity in markets like India.
07:19India last year was, I think, the second largest IPO market in the world.
07:23Hong Kong this year is the number one IPO market in the world.
07:25And so when you have this kind of liquidity here at a time when liquidity is not as prominent in other markets, it does balance out the overall profile of an investor's portfolio by having some exposure to this part of the world.
07:38The other thing we have in Asia is we have a lot more growth.
07:42India is growing at over 6%.
07:44It's one of the largest economies in the world.
07:46It's the highest growth rate in the world of large economies.
07:48You have, I mentioned before, the deconsolidation story in Japan.
07:52You've also got some very exciting things happening in Southeast Asia.
07:55And even, I would say, in China now, we're starting to see a real growth engine coming from the innovation that's happening in China and the technology that we see emerging from China.
08:07And the domestic story there is also starting to look much more interesting.
08:12You talked about wealth creation earlier and capital getting deployed.
08:16How is capital getting deployed?
08:18Well, I think at the moment, as I mentioned earlier, I think more people are looking to rebalance away from U.S. assets and into Europe and Asia.
08:31I think Asia is a big beneficiary of that.
08:34I think the alternative asset space amongst individuals is starting to attract a lot of interest, particularly with the innovation around evergreen products.
08:42So, evergreen products, you know, our industry typically raise drawdown funds, which means you commit a certain amount of capital, it gets drawn down over a four or five year period, and then it gets invested and returned back to you.
08:53That's an institutional model.
08:55It doesn't work well for individuals.
08:57For the individuals, we have evergreen products now, which are essentially a vehicle that you can invest 100% of your money in on day one.
09:03It tracks the value of the investments on a quarterly basis.
09:08You have the ability to invest and redeem your money, although they're not really liquid.
09:12They're more open-ended structures, I would say.
09:14And that NAV progression is similar to what you track in the private equity structures of the drawdown funds, but in a much more approachable format and with much lower minimum investment thresholds.
09:27And so this enables a whole new class of investors to invest.
09:30On the flip side, I would say that it's important, it's incumbent actually on us as private equity firms to make sure that the people investing in our products are well-educated and understand that these are different products.
09:41It's not like investing in the stock market.
09:43It's not like investing in a hedge fund or in a mutual fund where you have a lot more liquidity and where the risk profile could be different.
09:50So we need to do a good job of managing the way we educate and the way we manage the growth of this asset class.
09:56But it will ultimately result, we believe, in more people having exposure to what we do, which is delivering better returns over time than what's available in pure publicly liquid strategies.
10:09When you take a look at the Indian market, are the deals generally too small for you?
10:13Actually, India is really developing as a buyout market.
10:20So we're a buyout investor.
10:21We do control investments.
10:23And India's buyout market last year was about 10 years.
10:27If you go back, say, 10 years ago, it was only a $2 billion buyout market.
10:31Last year was a $10 billion buyout market, so a 5x increase.
10:35This year, it's going to be a $15 billion buyout market, up 50%.
10:38And the kinds of companies that we're seeing now are scale businesses in sectors like technology services companies, in sectors like healthcare, in sectors like financial services.
10:51And so there's a whole new generation of companies that have grown.
10:54As the economy has compounded, it's now one of the largest economies in the world.
10:59As the economy has compounded, the size of company has compounded.
11:02And the other interesting thing that's happening in India is the market cap of the Indian stock market is now something like $6 trillion, which makes it one of the largest stock markets in the world, which makes it a very viable exit market for private equity investors that can now exit larger investments at scale and get liquidity on those investments.
11:21So the whole financial ecosystem has really come a long way in the last, I'd say, five years, certainly in the last 10 years, which makes it a much more interesting market for investors like us.
11:30So India looking attractive as a buyout market, but you remain cautious when it comes to China's buyout market.
11:38Is that a fair assessment?
11:43I think China is an interesting market more on the growth equity and venture capital side of the spectrum because there's a lot more early stage innovative type growth companies there.
11:54There's less maturity around established businesses that are looking to sell 100 percent of their business or the generational change, which often drives buyouts, is just starting to happen in China.
12:06It's relatively early days.
12:08You have some corporate divestitures starting to happen.
12:11But again, it's a very small market, I would say, overall.
12:14So it's not really a buyout market per se.
12:17It's much more of a growth equity market.
12:18What risks do you still see in that market, John?
12:27I think the biggest risk is AI.
12:32I think, you know, we all talk about the exciting opportunity around AI, but it is also a risk.
12:36And I think the risk there is that we shouldn't underestimate the impact that AI is having in every single business.
12:41And if you're not moving quickly enough as a leader, a CEO in the business to adopt AI, then you could be disrupted by a new entrant that's more AI native than you are.
12:57On the flip side, I would say that incumbents at the moment probably have an edge in that they have the scale, they have the customer relationships, they're embedded in the processes and systems of companies.
13:10So if you can quickly embed AI into the functionality of what you do, say you're a software company, if you can quickly add AI features and AI functionality into your software, there's no reason, not necessarily a given, that an AI native company can come in and displace you.
13:26I think the incumbents actually have the upper hand, but they need to move quickly.
13:31And so I think that's our job from a governance standpoint as owners of businesses is to make sure we have the right leadership in place and that this is at the very, very top of the strategic agenda of the companies that we're invested in.
13:41John, just one final question before we let you go.
13:43I'd like you to look into the crystal ball to 2026.
13:46Which market do you think will be the most active market for you?
13:53If I had to guess right now, I would probably say it would be Japan, just in terms of the deal flow.
13:59We've never had as active a pipeline as we have in Japan today.
14:02We have something like $8 to $10 billion of advanced investments that we're working on there.
14:08We announced the Fujitek elevator deal just a few months ago that we signed.
14:12And I think the other one to keep an eye on is Korea, actually, which we think there'll be some more increasing opportunities there.
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