Bloomberg Invest Global – Day 1
By Bloomberg Live
Even as a vaccine light at the end of the pandemic tunnel grows brighter every day, institutional investors are still predicting significant headwinds in the near term as social, political and economic upheaval continues to dominate headlines and roil markets. The economic effects of the pandemic in many ways significantly altered the financial landscape that faced investors at the beginning of 2020, and while the core issues—fee pressures, low rates, volatility—have not fundamentally changed, they have been greatly exacerbated. But among the uncertainty lies opportunity.
Even as many investors begin 2021 in defensive postures, there is a case to be made that those who adopt aggressive, active postures throughout the year may be best positioned to benefit the most from any significant economic rebounds. An increased risk appetite could mean outsized returns for those with the mettle to put money to work in sectors such as emerging market equities and alternatives, including Bitcoin, private debt and private equity.
At this year’s Bloomberg Invest Global we will again focus on the key issues driving institutional investment strategies, offering valuable insights from top investors on how smart money can safely navigate an uncertain and risky environment. We’ll take the measure of the recovery and put 2021’s most popular strategies under the microscope to see what has worked and what hasn’t as we look ahead to 2022.
Click here to view video of today’s event.
- Alex Aravanis, Chief Technology Officer, Illumina
- Sebastian Bea, President of One River Digital, One River Asset Management
- Guru Chahal, Partner, Lightspeed Venture Partners
- Don Cornwell, Partner, PJT Partners
- Luke Ellis, CEO, Man Group
- Dawn Fitzpatrick, CEO and Chief Investment Officer, Soros Fund Management, LLC
- Bruce Flatt, CEO, Brookfield
- Jonathan Gray, President and Chief Operating Officer, Blackstone
- Nick Kalivas, Head of Factor and Core Equity Product Strategy, Invesco
- Lim Chow Kiat, CEO, GIC
- Jonathan Pollock, Co-CEO and Co-Chief Investment Officer, Elliott Investment Management LP
- Michael Sonnenshein, CEO, Grayscale Investments
- Haslinda Amin, Anchor, Bloomberg Television
- Eric Balchunas, Senior ETF Analyst, Bloomberg Intelligence
- Sonali Basak, Wall Street Correspondent, Bloomberg
- Scott Deveau, Deals Reporter, Bloomberg
- Guy Johnson, Anchor, Bloomberg Television
- Jason Kelly, Chief Correspondent, Bloomberg Quicktake
- Carol Massar, Co-Anchor Bloomberg Businessweek, Bloomberg Television and Radio
- Mark Milian, Technology Managing Editor, Bloomberg
- Naomi Nix, Technology Reporter, Bloomberg
- Erik Schatzker, Editor-at-Large, Bloomberg Television
- Alix Steel, Anchor, Bloomberg Television
To start Day 1, The Future of Business: Spotlight on Abu Dhabi and the GCC focused on growth opportunities in the Middle East. The pandemic has inspired governments and businesses to build back better and refocus a drive towards new innovations across a variety of sectors. In this briefing, we looked at the role that innovation is playing in the economic recovery in the GCC.
To begin, we explored how innovation can fuel Middle Eastern economies. As businesses look ahead to future growth opportunities and skilled workers reassess their priorities and circumstances in a post-pandemic world, economies are at a juncture of new beginnings. In this new era, how do they attract top talent, which sectors should be prioritized for growth and what are the innovations that are being embraced to diversify and futureproof economies?
Waleed Al Mokarrab Al Muhairi, Deputy Group Chief Executive Officer, Mubadala Investment Company spoke with Bloomberg Television’s Manus Cranny about GlobalFoundries IPO: “This is a core company to Mubadala, it’s been a key holding for us for many years. We think we are well-positioned from a sectoral position, and that this company is a leader in its space.”
Next, Ismail Ali Abdulla, CEO, Strata, Elissar Farah Antonios, Cluster Head for MENA, Citi, and Sky Kurtz, Co-Founder and CEO, Pure Harvest Smart Farms, discussed private sector resurgence and growth opportunities with Manus Cranny. What will next steps look like in practice for businesses and investors looking to take advantage of opportunities in Abu Dhabi, other GCC territories and the greater Middle East region and which sectors show the most promise for the year ahead?
“Clients have had time to reflect on their efficiency,” Antonios said. “We’ve seen a lot of activity, specifically from the region in terms of consolidation. We’ve seen a lot of monetization discussions as well and reflection on how to create further efficiencies?” Antonios also noted high amounts of liquidity both in markets and banks.
Kurtz, who formerly worked in the U.S market, spoke about risk in the international market, and how businesses in the Middle East often find themselves vulnerable to a spread of misinformation and disinformation amongst outsiders. He said investors often make non-sequential comparisons between countries they are investing in and neighboring countries they are not.
There is a perception “that there’s some eminent domain power hiding in the back room affecting companies,” Kurtz said. “And yet in…a very vibrant and open capital market…this type of behavior doesn’t exist. In fact, it would be antithetical to what the governments are trying to do to open the economy and lead to foreign direct investment.
“People point to failures like an emergency or a barrage as if they are commonplace yet they are the exception, not the rule,” Kurtz said. “Of course, there are risks to an emerging market. However, the opportunity is great.”
Abdulla shared Strata’s strategies for securing investment streams. “We don’t only talk to [investors], we bring them here. If we have a vision to enter into a new vertical, the whole ecosystem is behind that company to deliver. They always look for reliable partners. If the partnership is not strong, we try to match them with any other entity within the UAE that meets their requirements and can do the job with them.”
Bloomberg’s Carol Massar then spoke with Michael Sonnenshein, CEO, Grayscale Investments and Sebastian Bea, President of One River Digital, One River Asset Management about the challenges still facing institutional adoption of cryptocurrencies.
“Many of the pensions, university endowments, and corporate endowments actually have long had allocations to many venture capital funds,” Sonnenshein said. “And as you know, many of the VC’s have been on the crypto train for quite some time. Through our conversations at Grayscale with many of these folks, they’ve come to realize that that’s probably not enough exposure for them. So we have begun to see endowments, pensions move into crypto directly so that they now really have an appreciation for not only making investments in crypto, but also recognizing that having exposure to tokens directly could be a very liquid way to gain exposure to this asset class.”
Bea said in order to get sovereign funds, institutions, and individual investors on board, “the key thing is to abstract from just talking about two assets to talking about the transformative power of this technology. People say that they believe in blockchain, but they really need to engage with how these assets could change how all of their assets are eventually traded. It really is to understand how much change is coming to asset management, finance, and to not be focused on the volatile, the unit price of two assets [Bitcoin and Ethereum] but to be focused on how assets move around the world.”
Next, Bruce Flatt, CEO, Brookfield discussed return to office, 5G, and the clean energy economy with Bloomberg Quicktake’s Jason Kelly. Flatt explained all of Brookfield’s businesses are transitioning to net zero, and described the multi-decade stage where they can provide money to companies looking to transition their power stack. Flatt also offered some insight on the reinsurance industry: “It’s an ideal time to have gotten into reinsurance. We think it’s going to be an excellent business for the next 5-10 years.”
Bloomberg’s Scott Deveau then spoke with Jonathan Pollock, Co-CEO and Co-Chief Investment Officer, Elliott Investment Management LP. Pollock discussed the credit markets and displacing traditional lenders with private equity institutions and non-bank lenders. “It could mean that opportunities are less plentiful. As we saw in energy, there have been opportunities for organizations like ourselves. It’s important to have depth of industry coverage, but it’s important to have some platform companies of your own to originate your own volumes, to put money to work and work throughout the cycle.”
Dawn Fitzpatrick, CEO and Chief Investment Officer, Soros Fund Management, LLC, discussed inflation and tapering with Bloomberg Editor-at-Large Erik Schatzker. When it comes to how Soros will play their predictions on a longer stretch of inflation, Fitzpatrick said, “We’ve been long on some commodities and we are short on government bonds. Real rates are really negative here, and it’s a reasonably safe bet that rates are going to go higher. Deposits keep going higher, and the amount of bonds banks need to buy on the other side of those deposits is enormous.”
Moving internationally, Lim Chow Kiat, CEO, GIC, discussed the Chinese market with Bloomberg Television’s Haslinda Amin. Regarding the current volatility risks in China, Kiat said: “There are many things happening in the market. In a way, it is also just like another day.” Zooming out, he said, “Our view remains constructive. The various policy actions are analyzable. The big picture is that if you were to invest in China, you would see bouts of very high volatility every three to four years. Each time, things come down and come back. Expect volatility, especially in a place like China. Do a lot of bottom-up work. Of course, you have to try and be agile, but in the main menu, you analyze these policy actions.”
Don Cornwell, Partner, PJT Partners, discussed investing in the sports industry with Jason Kelly. Cornwell explained that the investment landscape now goes beyond just buying a stake in literal sports. Now, there is opportunity through fantasy leagues to capture valuable data. “Teams don’t have great data on who their fans are,” Cornwell noted. But with fantasy leagues, “they’re getting direct data about their customer, and that allows them to market other products and NFT’s [non-fungible tokens].” The venture community knows that by unlocking this information, “The win is big.”
Next, Luke Ellis, CEO, Man Group spoke about the implications of Evergrande with Bloomberg Television’s Guy Johnson. When asked whether China is investable, Ellis said, “It definitely makes it less attractive than it was a year ago. You can see the trends which we would take advantage of: the big winners in the tech space and some other spaces, those have been broken. Now you have to invest in the knowledge of China’s shared prosperity idea and how that’s going to affect things.”
Bloomberg Intelligence’s Eric Balchunas then presented Bloomberg’s Institutional ETF Outlook. Balchunas used Bloomberg analysis to share their prediction that a bitcoin ETF would likely be approved in October.
Jonathan Gray, President and Chief Operating Officer, Blackstone then spoke with Bloomberg Television’s Alix Steel. Steel asked Gray to respond to Flatt’s comment that right now is a good time to be liquidating assets. He agreed that because markets are liquid, it’s worth making exits. Gray then took a big picture view of global growth: “I think we’ve got some runway here in terms of revenue and economic growth globally for the next couple of years as we come out of [Covid-19 pandemic]. We’ll probably revert again to a lower growth society around the world, but near-term, I’m more worried about overheating. I think that will potentially put additional pressure on the Fed and other central banks to move a little sooner than people may have thought three or six months ago.”
Next, Alex Aravanis, Chief Technology Officer, Illumina and Nick Kalivas, Head of Factor and Core Equity Product Strategy, Invesco explored investing in innovation with Bloomberg’s Naomi Nix. “Research and development is the new currency,” said Kalivas. “That spend is driving strong earnings growth and strong sales growth. One of the implications of the pandemic was the R&D spend. NASDAQ 100 companies, because of that spend, overperformed. Investors are paying a lot more attention to a company’s ability to develop business–that is, to create opportunities. There are characteristics that that spend has that are attractive to investors because they’re seen as more durable to weather different adverse economic conditions.”
Aravinas contextualized how this outlook has played out at Illumina: “There’s a positive feedback cycle when you get it right. That gives you tremendous confidence in your model. We think a lot about disrupting ourselves. We don’t want to be disrupted by someone else. You need that cultural mindset, so you don’t just rest your market position if that’s a good one.”
To end the day, Guru Chahal, Partner, Lightspeed Venture Partners spoke about technology infrastructure and the implications of the Facebook shutdown with Bloomberg’s Mark Milian. “Yesterday, all of us got introduced very quickly to how critical that underlying infrastructure is,” Chahal said. “This was an operating error, and no one knew how to get to a Facebook data center.”
Chahal stated that the error reveals key innovation demands. “The total spend in all of the Internet underneath consists of about 15 to 20 billion dollars of elements called routers or switches. They are the ones that really move all the traffic between our devices to Data Centers to applications, or to the cloud and back over the last about 10 to 20 years. The remarkable thing about that market is it hasn’t seen much innovation. And there’s for all practical purposes, only one company called Arista Networks.”
“We are very excited about other parts of the network infrastructure that are seeing an increased amount of innovation right now, and that’s thanks to what happened yesterday,” Chahal said. “There’s an increased need for capacity in the internet, the ability to troubleshoot, keep it reliable and to use 5G, which is now enabling us to get rhigh speed, high performance connections. We are investors in companies like Arcus for instance, that are rebuilding that part of the BGP stack, which is one of the contributing factors to the outage yesterday.”
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