00:00I understand you haven't been to this part of the world in six years, so pre-pandemic.
00:04Yeah, right.
00:05I hate to tell you, a lot has changed.
00:07What's your key takeaway from what you've seen?
00:10Well, I tell you, I think the excitement is back in Hong Kong.
00:14You know, that's one thing.
00:15That's kind of the key takeaway, kind of informally.
00:19But, you know, things have changed a lot.
00:21And six years ago, it was kind of a rough spot for Hong Kong.
00:26Sure, there was political uncertainty and, of course, the pandemic really walloped the whole world.
00:31But a lot has changed on the technology side in China and the innovation.
00:36Is there a key takeaway for investors that you've gotten from what has happened across the border with the innovative trends?
00:44Well, I think, you know, globally, the trends are somewhat similar.
00:49I mean, increased technology has changed, you know, reducing costs, for example, dramatically.
00:59So to the point where investors, you know, get a much better deal today than when I started in business in 1971.
01:07You know, there's no reason for people to pay really high fees anymore.
01:12For U.S. pension funds or endowments that are investing through you, do they have less of a preference now for China, though, than they did in years past now?
01:24I think a lot of it's kind of political.
01:27It depends on, you know, the state and their policies.
01:30I mean, there are some state legislators that have mandated a no China, you know, policy.
01:40So there's a bit of that.
01:42But we still invest in China.
01:46So then if funds then are needing to switch to EMX China, how does that impact you as a business?
01:54And clients.
01:55Well, you know, it's the client's money.
01:59So if they want to X China, we do it X China.
02:02And if they want China by itself, we can do that as well.
02:06How do you see the trends?
02:07You just mentioned it in an answer or two ago about lowering the fees and lowering the costs for the investor.
02:12And I understand more recently you were given approval by the SEC to essentially do what Vanguard has been doing as well.
02:20And that is essentially combining the ETF structure with mutual funds to allow access to these in a single fund.
02:29Well, that's right.
02:29I mean, ETF business, as you know, globally has exploded.
02:32And that's one of the reasons I'm here this week is talking to people about our active ETFs.
02:39We're the largest active ETF manager, at least in the U.S. and maybe globally.
02:47Then on that point, I mean, because the ETF market in Asia is much smaller, of course, compared to the U.S.
02:54What's sort of the appetite for it here?
02:57And is there enough awareness of, say, the preference for active versus passive?
03:02Well, I mean, we were in some ways we were late to the game for years.
03:07Our clients weren't all that interested in ETFs.
03:11And then all of a sudden they were very interested.
03:13I imagine the same thing will happen here.
03:15There's quite a bit of discussion about ETFs, and I imagine it will be an increasingly hot topic going forward.
03:24Wealth management also is a key topic here, obviously, as Hong Kong looking to get the family office money versus Singapore.
03:30But also, again, you're seeing the mainland family money wants to come to offshore places like Hong Kong to have more of a global exposure for their portfolios.
03:41What are you seeing in the trends for wealth management?
03:43Well, I mean, for one thing, over the last 50 years, there's been a huge increase in wealth.
03:49So once again, a lot of the trends will be global trends.
03:56The move away from commission-based services to fee-based services, I think that's been the big change in the U.S. over the last 30 years.
04:06And I think it's maybe starting a bit here.
04:12Slowly, like all these trends, new ideas don't usually blossom into huge outcomes right away.
04:23It's usually good ideas start slowly and then compound and wake up one day and it's huge.
04:30And I think that will be this move towards fee-only in the wealth management space.
04:38But it increased, you know, a big interest, obviously, in retirement income.
04:42You know, it's a – and, you know, every year there are more tools being developed to help people think through their asset allocation decision for retirement income.
04:57Pretty exciting.
04:57How do you think about those tools?
04:59Because there has been as well a shift to, say, robo-advisors or AI-led technologies.
05:05How do you look at integrating those into your offering?
05:10Well, AI, of course, is going to be huge in every – big part of everybody's business.
05:15At the end of the day, though, people don't really trust algorithms.
05:20I mean, anybody that's used AI realizes sometimes it comes back with a real goofy answer, you know.
05:26So there's always going to be plenty of room for trusted advice.
05:33I mean –
05:34Trust but verify is what Ronald Reagan used to say, right?
05:37Yeah, trust but verify, yeah.
05:38Trust but verify.
05:39So do you trust and have to verify the market's boom that we've seen?
05:44You know, we've seen a little bit of a pullback because of – I'm talking about in the United States – because of the AI boom.
05:50Some would say it is a bubble.
05:52Is it a bubble?
05:53Does the data – because I know you look really at the facts rather than the rhetoric.
05:57Is it in a bubble, first off?
05:59Well, you know, bubbles, I think, are things that usually are measured after the fact.
06:06I mean, after it pops.
06:07After it pops.
06:08Now you go, that was a bubble.
06:09Well, why didn't you tell me before the fact?
06:11I mean, now that's – so all we know is AI is going to be huge.
06:17AI is going to – and the leaders in the field right now are investing hundreds of billions of dollars.
06:23It's just not a few billions building out this infrastructure.
06:27And my take on it is there will be big winners and big losers in all of that.
06:34But are you seeing indications, like with the Russell 200 was up, I think, at a record high, so a broadening of this rally?
06:44I would think so.
06:45I mean, it's – people are – it's really kind of funny.
06:51On the one hand, they're optimistic about this AI boom and so forth.
06:55And then at the same time, they go, well, I would expect a higher return.
06:59I mean, I don't – at some point, risk and return have to be related a bit more.
07:04I don't know how all that will shake out.
07:06But there are – over the last 10 years, of course, you know, the Magnificent Seven has kind of dominated everything.
07:12But the rest of the market, it seems to be picking up, you know, recently.
07:18So maybe it's broadening out or – but clearly, the Magnificent Seven can't keep growing at the current rate they are without being – having to go to some other galaxy.
07:30Well, I guess I'm trying to ask, what's your risk appetite like right now?
07:34That's – I have pretty much – we have pretty much constant, you know, risk appetite.
07:40I mean, it's – the volatility of the market changes quite a bit.
07:45But, you know, it's – in those periods of time when there's a big drop, for example, and people start getting stressed out, you wonder, maybe that's the time when the expected return is the highest.
07:55So, we're kind of in the normal range.
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