Diamond Sees 'Healthy Correction' in Risk Assets

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00:00We're repricing risk in a way. It's equities, it's AI, it's Bitcoin, it's really across the

00:07piece. So I don't think this is specifically about crypto or digital assets. I think for us,

00:14what's really interesting is we're a big investor in hype, the native token of Hyperliquid. Hyperliquid,

00:22as you know, is developed right here in Singapore by Jeff Yann and his team, and it's a decentralized,

00:26non-custodian exchange, and its native token hype over the last seven days is up a bit,

00:35where Bitcoin and most of the other tokens are down. But I would say that's rare. It's unusual.

00:41Really, across the piece, we've seen risk assets be repriced. In my sense, this is a healthy

00:47correction, not something that's turning into a bear market. So I think for many reasons,

00:53I was just at the GIC Insights over the last day. Anybody associated with GIC appreciates who they

01:02bring together once a year to talk about these trends. And one of the things we're talking about

01:07there was the big numbers in AI. I mean, the billions here, trillions there, billions here,

01:14data centers. And I think most people have a hard time really processing it. And that doesn't really

01:21work against the fact that we can be really, really positive on AI over the next five to 10 years

01:28and the impact it's going to have. But the big numbers are scary, especially at a time when they

01:33continue to invest in sort of each other, right? And these concerns about a circular deal, about whether

01:39this is just a bubble. So you don't buy into that. Will there be demand down the line?

01:44What I feel comfortable in is taking a two, three, five-year view of the impact of AI. I think it

01:51will be a real positive in dampening inflation. I think it's going to be incredibly important in

01:57terms of productivity in the global economy. And I think some people are confused right now over the

02:03valuations. And many people say this. They look back, you know, to the internet bubble in 2000,

02:09right? It had a real bubble because there was some, you know, some fringe equities that probably

02:16weren't legitimate as much as kind of the core. But nothing stopped the development of the internet

02:22over the next 10, 15, 20 years. And I think the consensus over the last day has been where really

02:28we, the group, are very, very positive on what AI can bring in terms of productivity, dampening

02:35inflation, global growth, really comfortable. So I think this is a correction in risk assets across

02:41the piece. And I think, you know, AI, partly because there's so many big numbers out there

02:47that people really don't understand yet, and particularly around data centers.

02:53Yeah, I think it's hard to decipher. And to your point about the internet economy,

02:59it was also about sifting out the froth at that stage early on in the game. When it comes to digital

03:05assets, you look at tokenization, as you highlighted earlier, as a key driver,

03:11how are you viewing, say, stable coins? And how that might be shaping the financial system?

03:17Well, that's the other big investment we made at Atlas Merchant Capital. We're an early investor

03:21in Circle in 2021. We've worked with Jeremy Allaire and his team very closely over the years. They have

03:29a tremendous relationship here in Singapore with the monetary authority of Singapore and the developments

03:36that they've had. And I think we've learned so much about the impact of blockchain in terms of we believe

03:43will be a real source of the underlying foundation of financial services over the next two, three, five years.

03:51Stable coins are really here to stay. And I think the acceptance of Circle as the most regulated,

04:01the most conservative, really has reserves behind it that are managed by BlackRock, as you know. So

04:08I think the best of the best in stable coins is Circle. Highly regulated. They want to be highly regulated.

04:14They want to be an OCC bank in the U.S. So I think the developments there are very strong. And I think

04:21what we've seen this year is a sea change in the U.S. in terms of tailwinds. With this administration,

04:29with Scott Bessent in the Treasury, with Paul Atkins in the SEC, with Jay Clayton, this team is so highly

04:39respected and so supportive of regulation that covers both digital assets and financial services,

04:47not two separate regulatory. What else in your mind in terms of deliverables left to go

04:53on these regulatory guardrails for the environment? Well, I think the most important thing from my point

04:59of view as we look at stable coins is the increase in institutional use. You know, a move from crypto

05:08traders using stable coins and using digital currencies to treasures, to Visa and MasterCard,

05:16to the big banks like JP Morgan and B of A developing it. We're certainly seeing in the Middle East with

05:22some of the best banks in Abu Dhabi and Dubai already developing use cases for blockchain and

05:29in stable coins, particularly dollar stable coins, particularly USDC. So I know that you talked about

05:35perhaps the U.S. regional banks and the consolidation in that sector, right? What scares me right now is all

05:42the froth, not only in the crypto space, but of course, we talked about tech and the buildup around

05:47artificial intelligence. Where do you go to hide when you could potentially see, as Jamie Dimon said,

05:53cockroaches, one means more. And you've seen even around banks in the U.S. where you had isolated

05:58incidents with tricolor or first brands. So is there a hedging mechanism at the moment?

06:04Well, I think there's two different questions there. In terms of the comment on cockroaches,

06:09I mean, I think it was a statement of credit. And if we're being very, very honest with ourselves,

06:15you know, we had 12 years of zero interest rates after the great financial crisis in 2008.

06:21Then we had a steep increase from zero to five and a half percent. I would have thought back then we

06:28would have seen cracks in credit because it was such a long period of credit was really very,

06:34very available. And I think today it would be unsurprising to me, given how tight credit spreads

06:40are, that we see some correction in credit spreads. To be fair, a lot of people say that credit

06:46spreads are tight right now because they're not really thinking about the fiscal risk that's

06:50already baked in because you can't even really count on sovereigns at the moment with their

06:55building debt load that they're actually safe. Well, you have, I think, Sherry, what you just

07:01brought up is the darkest cloud overhanging the markets, which are the debt levels. You know,

07:06we're talking about the credit markets, but what you're referring to now is sovereign credit,

07:11and in particular from the U.S. and the much higher debt levels. And that is the dark cloud

07:17hanging over the market for sure. What about PE? How are you approaching fundraising going into

07:23next year? Well, you know, with all this volatility, it makes what we do in private equity

07:27even more sustainable. And I think when you look at, you know, the correction in equities,

07:35for example, in the U.S., it's primarily around those seven or eight or nine equities

07:40in tech that have really been leading the rally. You move from that to the smaller companies in the

07:47index, and then you move from that to the private companies. We're seeing very, very good

07:52opportunities in private equity. We focus on financial services. We do a lot in the U.S.

07:58One of the things that we see is a terrific opportunity is consolidation in regional and

08:04community banks. Their ability to pull costs out to create centered cost synergies almost

08:10immediately with consolidation. I mean, particularly here, when I mentioned to people that there's

08:15four and a half thousand banks in the U.S., they usually look at me like, what? United States has

08:21four and a half thousand banks. And they're really good. And as Scott Besson, the Secretary of the Treasury,

08:26has pointed out many times, about half of the lending to small businesses in the U.S. come from

08:32regional and community banks, not from kind of the big four. So there are a lot of great opportunities

08:37out there in private markets. Well, Diamond, really good to have you with us. Thanks for finishing the

08:42conversation on an upbeat note here at the New Economy Forum. 2025 is the founding partner

08:47and CEO at Atlas Merchant Capital. We'll be back with more. This is Bloomberg.

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