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00:00By the way thank you for taking the time to come here today and I think it's
00:03interesting in terms of the placements and how some of the editorial
00:08conversations have been curated here. So from from Paul Chan we've had pretty
00:14much a very big presence of private market allocations and conversations. We
00:20just had one with Lulu of course and here and we have of course Chris here
00:24from PAG and shortly after this Apollo is coming on as well with Eric and I
00:29think that's a really good sort of place to start. We were just having this
00:34conversation before we came up here in terms of how you think global investors
00:41are under allocated to this part of the world. I wonder if you could support that
00:46with some numbers Chris. Yeah I mean I think traditionally there has been this
00:53trend you go to the US first and then you go to Europe and then you do a little
00:56bit of Asia and you know you still see that in the numbers where APAC is 37% of
01:04GDP, global GDP, but only 15% of alternatives. So you know I think the
01:10region continues to be relatively under allocated. I have to say hopefully that
01:18is starting to change. We've definitely seen in the last 18 months starting to see
01:23some pick up again as I think you know our clients we talked to are generally all
01:28looking for a little bit more diversification in their portfolios and
01:31starting to look more at the at the region as well. So you know on the
01:38positive side that means there is relatively speaking less competition you
01:42know so that's good. Right. But I think overall it's still you know very much
01:49under allocated. I guess we'll talk about some things but you know I think there's
01:52actually some real positive factors that hopefully should change that over time.
01:59Is what what do you think the reasons are behind that under allocation? Is it is it home bias? Is
02:06it
02:06lack of opportunities? Is it is it politics? I think obviously there's been a bit of
02:13geopolitics in recent years which has affected some China allocations perhaps but I think
02:21you know there's still you know I was talking to one allocator yesterday who still said oh we do
02:55the US and Europe have actually seen a reduction greater concentration. Asia's total market cap is now more than double
03:06Europe and trading volumes are eight times Europe so you know I think there's a
03:13lack of a lack of appreciation and just how much markets have grown the depth of markets and the quality
03:20again one one area we're active in is convertible bonds for example 80% of Asian convertible bonds are large
03:30cap versus 50% in the US.
03:34It's again the Asian convertible bond market is bigger than the European convertible bond market now so you know there's
03:40quality liquidity you know has grown dramatically you know and we see it's easy to quantify it easier to quantify
03:50that on the public side but you also see that on the private side so I think you know there
03:56have been some fundamental changes as these keep on developing that you know haven't quite perhaps been
04:03recognized yet in allocations but that should hopefully change.
04:08Private credits come up as you know I'm sure you've seen the news. Where are the best opportunities in your
04:13view for private lending as far as you guys are concerned?
04:17Again I think Asia's a little bit different on private credit to US and Europe. US and Europe very much
04:24dominated by corporate dominated by sort of mid-market lending sponsor back financing.
04:29Those are the big sort of giant blocks of private credit and you know when you look at Asia the
04:37markets are just a little bit better banked.
04:41The lending gap is smaller the regular regulatory and you know burden on the banks has been a little bit
04:49less particularly on the corporate side.
04:51So you know we've just seen less opportunity there the pricing is not so interesting.
04:58You know where Asia has seen more regulatory sort of pressure on the banks in terms of capital it's been
05:07on the real estate side.
05:08So we actually think that you know that's where you know we're one of the largest private debt credit firms
05:15in the region.
05:38You know stuff which you know see you're going up the going up the risk curve and everything else.
05:43Yeah.
05:45Before we get into China because once we get into China that's quite a deep hole we'll get into.
05:50But just the opportunities outside China as far as real estate and your franchise is concerned.
05:56Like what's been most active for you this year and where do you think things will remain active?
06:00Yeah so real estate again is a major business for us.
06:04We're I guess most active in three markets currently in Japan Korea and Australia and New Zealand.
06:11Sure.
06:12Japan continues to be you know a great market.
06:16Again that corporate governance reform theme pushing through.
06:23You know there's just so much activist capital now pushing public companies to you know streamline sell non-core businesses.
06:33So it creates opportunities for private equity but also you know corporate Japan still owns huge amounts of real estate.
06:39which really is non-core to the businesses.
06:43So just you know just earlier this year we led the acquisition of Sapporo bears real estate portfolio in Japan.
06:53which was a three billion dollar transaction and we're seeing you know again just more and more pressure on companies
07:02to sort of sell their non-core real estate.
07:05So we think this is again this is a theme that has legs and that corporate governance theme again you
07:11know drives lots of opportunities in Japan across multiple asset asset classes.
07:17Let's bring China in the I guess the starting point there just to build on what we started on just
07:26how underweight global investors are.
07:28So maybe just a mental exercise if you say you went to the US a room of 10 people and
07:36you brought up the topic of China.
07:38How many would remain in the room how many would walk out.
07:41I'm not sure they would I'd hope they wouldn't walk out but yeah I think there's still probably nine out
07:47of 10 people will just not do China and in in the US.
07:53So let's see I think maybe there's a little bit has that change friendly relationship it hasn't really changed yet.
08:00I think it's a couple of years ago maybe people didn't even want to they weren't even interested in asking
08:08you know.
08:09I think now people at least are interested again from a macro point of view what's going on in China
08:15but not allocating capital yet maybe a little bit on the public side.
08:20But on the private side still I think there's from the US not not much interest.
08:27Sure your your call on China is underpinned by your view on the macro.
08:32Yeah.
08:32We've had this conversation and I think what underpins that macro view is what happens in the property market.
08:39I think we have a graph.
08:40Thank you so much.
08:41Right on cue.
08:41Thank you to our producers here.
08:43I think what you're looking at just for the audience.
08:45This is a month and month changing.
08:46I believe new home prices across 70 cities.
08:51This is across six years.
08:53So effectively what you're seeing here is for the better part of last six seven years.
08:56It's been declines month and month as far as home new home prices go.
09:03What's the direction of travel that you see and does this need to improve for the macro to turn.
09:11I think you know China's growth in recent times have been really largely driven by exports and consumption has stayed
09:18very weak.
09:18Right.
09:18You know we believe you know we strongly felt that household consumption is not going to return until property the
09:27property market stabilizes.
09:29You know this was a major hit to household balance sheets and really impacted confidence.
09:37So we've been watching very closely to see you know are when are there signs of that property market stabilizing.
09:46And also watching at the same time consumption to see you know because you know while this property price crisis
09:54been going on Chinese households have been saving like crazy.
09:57So there's about 23 trillion RMB of household cash savings in the bank.
10:03And you only need a little bit of that 3% of that is a 4% GDP impulse.
10:10You know so we believe once that comes out it could be a huge demand impulse into China.
10:17Some of that will also go into equity markets and other investments.
10:20And that can be you know I think that's something that's a an extra sort of boost to China and
10:27the global economy that maybe isn't fully sort of baked into people's.
10:32Assumption.
10:33So I think that that is there but you know so I think the property market is looking a little
10:38bit better.
10:39Okay.
10:40In first-year cities prices are starting to stabilize even go up a little bit in Shanghai.
10:45In second-tier cities the rate of decline is slowing.
10:50You know we've seen we did last year the buyout.
10:53We led the buyout of Wanda commercial which is the largest shopping mall manager in the world.
10:59Not a lot of people know that.
11:01You're actually the biggest mall operator in China.
11:03Yeah it's an amazing business actually.
11:06So we get it's very interesting seeing the retail sales data across the whole country.
11:14And again for the first time we've actually seen the data tick sales per visitor actually tick positive.
11:22And then we do you know we do sentiment surveys among staff etc.
11:26And again we've just seen little signs of things turning positive.
11:31So I think you know this is something which you know and maybe slowed down a bit by Iran.
11:39And if there's some demand destruction on the sort of side through that.
11:44But I think at some point in the next 12, 18 months you know I think there's positive.
11:50You could see a nice demand impulse coming through.
11:53That could create then more employment positive cycle through services employment.
12:01Because again manufacturing is not really generating new jobs.
12:04I think you could see a nice virtual cycle coming through in China.
12:08So that's something which you know again we're fairly positive on the outlook for China.
12:14Okay on the hedge fund side of the business.
12:16Yeah.
12:17This might apply to China.
12:18It could apply to other markets as well.
12:20You firmly believe this is a stock pickers market.
12:23Yeah I think the market has changed you know.
12:25I think people always talked about the death of active investing.
12:30The death of stock picking.
12:31It's all passive.
12:32You know huge money going into ETFs etc.
12:34And I think there's been some elements of truth to that.
12:38But again we've seen.
12:41And it really started.
12:42I would say around Liberation Day.
12:46With tariffs.
12:49A lot of export firms in the region.
12:51Lots of winners and losers.
12:54Or relative winners and losers.
12:57And started to see dispersion really pick up significantly.
13:01Then we also obviously we have the corporate governance reforms in Japan.
13:05Which had a huge impact.
13:06Korea now.
13:07Looking and taking inspiration from that.
13:09With our value up program.
13:11China also looking at some of those lessons learned from Japan.
13:15You know you've seen dividend payouts go up.
13:18Dramatically in China over the past two years.
13:21So you know we've just seen.
13:23We have in our hedge fund.
13:27Our polymer hedge fund business.
13:28We have 70 teams running different strategies across the region.
13:32Mostly equity long short.
13:34And we've just seen the hit rates go up dramatically.
13:37Just seen dispersion go up.
13:39Hit rates go up.
13:39And performance.
13:40It's been excellent.
13:41So I actually think a lot of these factors have some legs as well.
13:45Also AI of course.
13:47Again another factor.
13:48Global factor.
13:49Sure.
13:49Creating more dispersion.
13:51More winners.
13:51Losers.
13:52Out performance.
13:53Relative under performance.
13:54So you know I think.
13:56I actually think we could be heading into a really great period.
14:00For equity long short.
14:02And sort of stock picking.
14:04In general.
14:04Sort of within your verticals then.
14:06Do you think that specifically hedge funds will provide.
14:09Likely the most alpha.
14:11This year.
14:12I think there's lots of interesting stuff.
14:14Actually.
14:15You know.
14:16I think actually the lending is great.
14:17The real estate's been good.
14:19Energy transition.
14:20Another theme we really like.
14:21The public performance has been.
14:24It's been our record year for performance from our hedge funds.
14:27Actually.
14:28It's been.
14:28So it's been a great environment.
14:30Buyouts in China.
14:31We think are really interesting now as well actually.
14:34That came up earlier.
14:35Yeah.
14:35Because again.
14:36There's very little competition.
14:38Valuations are reasonable.
14:39You cannot borrow cheaply.
14:41You can borrow more cheaply in China than Japan for a buyout.
14:44That's crazy if you think about it.
14:45Which is really amazing.
14:47Yeah.
14:47So you know.
14:48I think there's actually lots of interesting stuff.
14:51You know.
14:52To do across the region.
14:53One of the things I also wanted to.
14:55And this is an abrupt shift in the topic.
14:58But since you brought up AI.
14:58One of the things that stood out to me last week was.
15:01When you had SpaceX come out and say.
15:03We were going to raise X amount of money.
15:05It wasn't even the biggest fundraise of the week.
15:07I mean.
15:08Google came out and did an 80 plus billion.
15:10Yeah.
15:11Follow-up placement.
15:12And Anthropic came out with a.
15:14I think series H.
15:16Of 60, 70 B.
15:18So it's clearly companies don't need to IPO now.
15:20To raise a lot of money.
15:21Do you think it's allowing companies to remain private.
15:24Longer.
15:24Forever.
15:25Or do you think at some point.
15:26The public markets is still.
15:29The sort of.
15:30Yeah.
15:30Look.
15:31I think still all these companies will ultimately be public.
15:34And.
15:35You know.
15:35I still think the public market gives you more.
15:39Options and flexibility for raising capital.
15:42Sure.
15:42So.
15:43I think ultimately.
15:44But.
15:45You know.
15:45There is a lot of.
15:46More.
15:47There's more private capital.
15:48There's more.
15:49Different types of flexible solutions from the private market.
15:52So.
15:53You know.
15:54I think companies have got the maybe.
15:56More luxury of waiting to a point.
15:59You know.
15:59Where you're ready.
16:00And obviously being public.
16:01Adds a lot of pressure.
16:03Um.
16:04And.
16:05Extra pressures.
16:06Okay.
16:06From.
16:07To being a private company.
16:09So.
16:09You know.
16:10You probably want to.
16:11Only go public when you're ready.
16:13Okay.
16:13From an asset allocator perspective.
16:15How much do you think people should allocate to private markets?
16:18I know that.
16:18That's an it depends question.
16:20But what's.
16:20And coming from someone like you of course as well.
16:22But.
16:22Yeah.
16:23Give me a sense of what's.
16:24What's appropriate.
16:25Um.
16:27I don't know.
16:28Well.
16:28I have 90% of my private.
16:30My personal investments in.
16:32Alternatives.
16:33Okay.
16:33Mostly PAG funds.
16:35Because that's what we have to do.
16:36Yeah.
16:37Big surprise there.
16:38Yeah.
16:39I think.
16:40You know.
16:40Half private.
16:41Half public.
16:42Half.
16:42Half.
16:43But.
16:44You know.
16:44I'm talking my own book as well.
16:46That.
16:46I was about to say.
16:48It depends.
16:49Well.
16:49I mean.
16:49Okay.
16:49It's a final question for you.
16:50How do you think your performance has.
16:52Fared.
16:54Through.
16:55Almost 30 years now.
16:56Through cycles.
16:57We've seen every.
16:58I mean you've seen everything.
16:58Well.
16:59I mean.
16:59I think.
17:01You know.
17:01Hopefully.
17:02Touch wood.
17:02You know.
17:03We've been around for a long time.
17:05So.
17:05We've survived.
17:08The world economy and markets throwing a lot of stuff at us.
17:11So.
17:12I like to think.
17:14We've.
17:14Hopefully.
17:14Been doing something right.
17:17You know.
17:18I.
17:18I think.
17:20You know.
17:21There's always going to be some challenges.
17:22Right.
17:23But I think right now.
17:24Performance is actually being.
17:25It's been very good across asset classes actually.
17:28Again.
17:29I get nervous.
17:29When you look at areas where too much capital is raised too quickly.
17:33That's usually when you start to see.
17:35You know.
17:36A more difficult investing environment.
17:38You tend to then see funds underperforming.
17:41How do you know.
17:42How do you know.
17:42When something is about to become a problem.
17:45And.
17:46Something that you could ignore.
17:47Like.
17:47What.
17:47What scares you.
17:49I think you just have to stay.
17:53Disciplined.
17:54And.
17:54You know.
17:54For us.
17:55As a firm.
17:56It's always been very important.
17:57That we're diversified enough.
17:58So.
17:58We don't depend.
17:59On any one thing.
18:01So.
18:01If an opportunity set goes away.
18:03We can just stop doing it.
18:05You know.
18:072018.
18:08Australia and real estate.
18:09Was getting very frothy.
18:11We sold everything.
18:12We didn't go back in until 2024.
18:16So.
18:16You know.
18:16I think it's.
18:17Having the.
18:20Flexibility.
18:21It's hard.
18:22To keep that.
18:23Discipline.
18:24You know.
18:24You know.
18:25But.
18:27Yeah.
18:28I think.
18:28You know.
18:29If prices get.
18:30If valuations get stretched.
18:33Sell.
18:34You know.
18:34Take profits.
18:35You know.
18:35I think.
18:36And don't be.
18:37I think it was Rockefeller.
18:38Somebody once said.
18:39You know.
18:40I've become very wealthy.
18:41By selling too early.
18:43So.
18:43You know.
18:44I think.
18:44Never regret.
18:45Also.
18:46If you make a good return.
18:47Yeah.
18:48All right.
18:48Chris.
18:48Fantastic.
18:49Thank you so much.
18:50Wonderful.
18:50Applause.
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