[GAIC 2020] Global Alternative Investment Conference - Eng. Channel (LIVE)

Summary

Highlights

• Discussions on the future of private equity highlighted the resilience and opportunities in tech and bio sectors. 📈
• There's a notable shift in investor focus towards sustainable and impact-driven investments. 🌍
• Real estate presented mixed prospects; while traditional sectors struggled, logistics and data center investments surged. 📊
• Key sessions emphasized the need for digital transformations to mitigate investment risks post-COVID-19. 💻
• The conference underscored the complexity of balancing risk and return in a rapidly changing global market. ⚖️

Key Takeaways

• The COVID-19 pandemic has accelerated the shift towards non-face-to-face interactions, impacting alternative investments significantly. 🌐
• There's a growing focus on ESG and impact investing, as investors seek sustainable and responsible options. 🌱
• Private equity and venture capital are adapting to new market realities, with tech and healthcare sectors thriving. 💼
• Logistics real estate is booming due to the rise of e-commerce and changes in global supply chain strategies. 🏗️
• Real estate investments face new challenges, but opportunities abound in logistics and data centers. 🏢

Overview

Chapters

• 00:00 - 00:20: Introduction to GAIC 2020 Conference The Introduction to GAIC 2020 Conference chapter provides an overview of the Global AI Conference held in 2020. The chapter likely sets the stage for the discussions and presentations that took place during the event, outlining the conference's main objectives, key themes, and anticipated outcomes.
• 00:20 - 00:48: Opening Remarks by MC and Chairman The chapter includes opening remarks made by the MC and Chairman set to music.
• 00:48 - 01:32: Keynote Speech by John W. Snow The chapter starts with the traditional opening of music, creating an anticipatory atmosphere for the keynote speech by John W. Snow.
• 01:32 - 02:04: Q&A with John W. Snow This chapter features a Q&A session with John W. Snow. Although the transcript begins with music, the main focus is on the exchange of questions and answers with John W. Snow, providing insights into his perspectives and experiences.
• 02:04 - 03:36: Session 1: ESG in Alternative Investments Welcome to Session 1 on ESG in Alternative Investments.
• 03:36 - 04:12: Lunch Break The chapter titled 'Lunch Break' begins with background music, setting the scene for a transitional moment in the narrative.
• 04:12 - 05:32: Session 2: PE and Hedge Funds Strategy This chapter begins with [Music] introduction, setting a thematic tone for the discussion. The listener can anticipate a deep dive into Private Equity (PE) and Hedge Funds Strategy, likely exploring investment techniques, risk management, portfolio diversification, and market trends specific to PE and hedge funds.
• 05:32 - 06:54: Session 3: Real Estate and Real Assets It's likely that this chapter explores the theme of real estate and real assets in the context of a broader subject, possibly related to finance or investment. The mention of music at the beginning suggests that it might be part of a podcast or a video series where such elements are typical. However, the real content of the chapter cannot be discerned from just this information, as no actual details or discussions from the chapter are provided in the transcript.
• 06:54 - 08:46: Panel Discussion: Global Alternative Investment Strategies The chapter features a panel discussion focused on global alternative investment strategies. Industry experts share insights on emerging trends and innovative approaches within the sector. They explore opportunities in different markets, highlight key challenges faced by investors, and discuss ways to mitigate risks while maximizing returns. The panelists also delve into the impact of geopolitical events on investment strategies and the role of technology in reshaping the landscape. Engaging audience questions further enrich the conversation, offering a comprehensive overview of the future of alternative investments on a global scale.

[GAIC 2020] Global Alternative Investment Conference - Eng. Channel (LIVE) Transcription

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• 10:00 - 10:30 [Music] [Music] ladies and genten pleas shortly beginning at 9 a.m. we will begin GIC
• 10:30 - 11:00 [Music] today's conference will be broadcast Live on YouTube in both Korean and English so if you have any questions or comments while listening to and partaking in this conference please feel free to join in the messages in our chat box then we will begin the opening ceremony for jic 2020 momentarily I'll be back with you shortly
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• 12:30 - 13:00 GIC 2020 we'll begin momentarily mic testing
• 13:00 - 13:30 mic testing on the English Channel for the interpretation Booth mic testing one two 3 mik testing the 2020 Global alternative investment conference will begin momentarily mic testing in the interpretation booth on the English Channel
• 13:30 - 14:00 [Music] ladies and gentlemen good morning welcome to GIC 2020 my name is e and I will be your MC for today ladies and gentlemen thank you for joining us at GIC 2020 which is now in its second year thank you once again everyone for joining us
• 14:00 - 14:30 today today's Global alternative investment conference 2020 will be held under the theme of Reinventing alternative Investments postco its challenges and opportunities for sustainable growth we are joined by experts from investment and economic fields and we'll be looking at opportunities and strategy changes required in the world postco 19 so please stay with us until the end of the conference so that we May map
• 14:30 - 15:00 out uh strategies and breakthroughs that will help us navigate out of this crisis this year's GIC will be broadcast Live on YouTube in both Korean and English so if you have any questions or comments please leave them in the chat box while the conference is in session then without further Ado let us begin the global alternative investment conference 20 joint hosted by e da and
• 15:00 - 15:30 kg0 let us watch a short video clip to kick off today's conference before we [Music] begin
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• 18:00 - 18:30 ladies and gentlemen once again welcome to GIC 2020 co-hosted by eily in kg jro in you just uh watched the video clip about the conference the climate change and also the um pandemic crisis is very serious and therefore today we're going to talk about different challenges and opportunities for sustainable growth going forward so we have prepared a very insightful presentation throughout today so stay tuned first of all we're going
• 18:30 - 19:00 to invite over Chon from E daily for his book um opening address good morning ladies and gentlemen I am C from kg welcome to the GIC 2020 Co hosted by E daily and kg0 in this year we celebrate the second anniversary Following last year successful GIC uh it's a great honor and pleasure of mine to welcome all of you here today uh despite the covid-19 crisis
• 19:00 - 19:30 I would like to thank all of you for joining us and sparing us with your time and support uh I believe that alternative investment or AI is undergoing a lot of transition at the time uh at this moment the global economy is slowing down and uh the um environment for investment is getting worse and there is a growing uncertainty and in Good Times uh anyone can uh post returns how however when things go bad
• 19:30 - 20:00 then we can separate graen from Chef as the investment environment changes I believe that AI um is uh experiencing both opportunities and risks uh depending on how we strategically manage our asset allocation I believe that the outcome or the performance of our investment is going to be very different eily and kg in have prepared this conference so that we can seek some answers to a lot of concerns that we have covid-19 definitely create a labyrinth uh for our
• 20:00 - 20:30 investment environment so we hope to get some Compass or Guiding Light and knowledge and wisdom through today's conference we are going to listen to experts from both home and abroad uh to learn about promising investment vehicles and Innovative investment tactics and strategies uh this conference is being broadcast both online and offline are going Beyond Time and uh space constraints U to meet many participants throughout the world e daily and kg zero in has have had
• 20:30 - 21:00 special sessions since last April we had monthly webinars Al together we had 20 experts from both who and abroad uh they shared their Global AI Trend PE hedge fund and real estate market uh asset U classes uh were reviewed by these experts so uh in this GIC 2020 we are going to uh based on the knowledge and wisdom that we have accumulated ated over the past months have a grand finale
• 21:00 - 21:30 to look at the future trends for AI I believe that uh today's uh conference is going to be very rewarding and helpful for foreign asset managers uh who are trying to enter or expand presence in Korea uh although uh one-on-one meetings offline is going to be very limited I believe that we can have some IND Meetings online and uh through these rewarding programs through this I believe that we can serve as a very rewarding and helpful investment
• 21:30 - 22:00 platform e was launched back in 2000 it was the Korea's very first internet-based news service provider and led online news Innovations over the years and uh by interacting with the market continuously I believe that we were able to grow into Korea's the very best information media provider leading uh the non-c contct era kg Zin also started uh 20 years ago as a fund assessment service provider and today I
• 22:00 - 22:30 believe that it has grown into a comprehensive financial consulting uh service provider and is contributing to many Innovations in the financial sector these two companies going forward is going to reflect and corporate opinions from the market and will spare no effort in order to contribute to the development of Capital Market and also the alternative investment uh Market we look forward to your many interest and support thank you thank you for the welcoming
• 22:30 - 23:00 remarks this is the second rendition of the global alternative investment conference and as the chairman stated we have held monthly webinars since April so this is the culmination of our six monthong journey in a sense so we look forward to very insightful and constructive sessions so please stay with us
• 23:00 - 23:30 co-hosted by e da and kg0 in once again this is the global alternative investment conference 2020 where we will provide you with insights and wisdom about alternative Investments thank you for the well pramming remarks once again chman Quack and next up we will hear congratulatory remarks from the chairman of the national pension service Kim yongin ladies and gentlemen as
• 23:30 - 24:00 introduced my name is yungin Kim and I am the chairman of the national pension service first off allow me to congratulate you on the successful opening of the global alternative investment conference 2020 hosted by E daily my special Thanks goes to president tessan quak and CEO wanik Lee of e da and thank you to everyone for putting this amazing event together I'd also like to extend my deepest gratitude to to everyone for joining us here
• 24:00 - 24:30 online although we are unable to meet in person offline thank you once again for being with us ladies and gentlemen the global investment landscape has for the past few months been riddled with difficulties brought on by the covid-19 pandemic new challenges to which old Solutions are futile abound in our current investment landscape and investors across the world are grappling to find a breakthrough that can turn this challenge into an
• 24:30 - 25:00 opportunity it goes without saying that the world postco in the world postco nonface Toof face or contact free are the new investment keywords just look at today's conference we are here in a virtual setting free from restrictions of time and space and all thanks to the internet and technological developments may I say the pandemic
• 25:00 - 25:30 has forced us to scale back on face tof face offline meetings and increase online interactions relevant industrial and technological growth will continue to soar which will open up new investment opportunities for us in turn the national pension service will keep a close watch on alternative investments in various fields that are aligned with this changing environment and Landscape risk management is also key and in that context in 2016 the
• 25:30 - 26:00 national pension Service established a risk management team dedicated to Alternative investments in an effort to enhance efficiency and timeliness for reviewing alternative investment opportunities while major cities are in lockdown making face-to-face offline due diligence procedures near impossible our efforts at NPS have paid off and we have been able to carry out due diligence virtually ladies and gentlemen distinguished guests the pandemic has
• 26:00 - 26:30 brought with it unprecedented levels of uncertainty but may also be a blessing in disguise this is why today's theme of Reinventing alternative Investments postco couldn't be more timely and pertinent in closing I hope that today's conference provides us with a meaningful opportunity for mapping out investment strategies fit for the Post covid-19 world thank you for taking time out of
• 26:30 - 27:00 your busy schedules thank you to the presenters speakers and participants once again thank you for thank you to everyone for being here thank you thank you that was uh Mr chairman Yong Jin Kim from MPS I understand that he took his office August 31st and I understand that this is his very first congratulatory remarks at a conference so thank you very much so I think that this is all part of Paradigm Shift we have to go beyond uh
• 27:00 - 27:30 time and spatial restrictions and we have to utilize different tools available for non-ace Toof face U interactions so U MPS has been investing a lot in those areas so I believe that uh the future is very bright for MPS so again I believe that thank you very much uh for your kind remarks for um eily and kg in I hope that through this uh
• 27:30 - 28:00 conference we can seek a breakthrough to um survive in this uh covid-19 pandemic next I would like to invite over chairman ham Choy from Korea Investment corporation good morning ladies and gentlemen uh I would like to hardly congratulate uh J 2020 um celebrating its second anniversary this year and I would like to also extend my heartfelt gratitude uh to Chairman
• 28:00 - 28:30 Tesson coock of e daily for inviting me to deliver this keynote address also my special thanks go to the organizing committee uh for putting together this uh conference as you all know because of covid-19 pandemic uh economic slowdown uh is being witnessed throughout the world and uh there are many uncertainties delaying economic recoveries and we see a lot of volatility in the financial Market Co is affecting us in various segments we
• 28:30 - 29:00 see drastic changes in our economies and societies and uh there is a growing call for sustainable investment so again I believe that there is a growing tide of transition in the investment sector uh in this light I believe that the theme uh re Reinventing alternative investment postco challenges and opportunities for sustainable growth is very timely and uh I believe that GIC 2020 is going to as a very important Forum to discuss that very topic ladies and gentlemen uh
• 29:00 - 29:30 covid-19 has brought us with a lot of shocks and Chaos unforeseen since 2008 GFC uh thankfully thanks to government interventions and central banks interventions I believe uh that expansionary monetary and fiscal policies help to restore the financial Market but uh we still have uh impacts of covid-19 being felt throughout our societies uh there are concerns about covid-19 Resurgence cities are still in
• 29:30 - 30:00 lockdowns and um we see business activities in slowdown Millions lost their jobs and went bankrupt but the US Stock Market post a record-breaking rallies so you see a growing gap between real economy and financial uh indices and uh we see also growing uh dispute between us China trade uh segment and therefore these are hindering uh the long-term returns and economic uh global economic rebound because of this pandemic I believe that
• 30:00 - 30:30 political economic societal cultural changes will take place uh having said that kic is going to analyze different risks and opportunities associated with covid-19 so that we can nimbly adopt to the market changes we're going to work out strategic uh asset allocation methods and we're going to also work on enhancing competitiveness in better Asset Management per asset class so from now on I would like to share with you kic's uh different uh investment strategies for different AI um assets
• 30:30 - 31:00 kic has uh invested in uh alternative assets uh starting from 2009 we have also increased exposure to Ai and as of last year uh they took up 15.6% uh in our total AUM um I believe that AI brings us diversification and also enhance efficiency in our portfolio so uh post the pandemic era we we are going to maintain the existing strategy of EX increasing the exposure of
• 31:00 - 31:30 alternative investment when it comes to PE we're going to uh constantly constantly work on improving or enhancing our investments in Tech sector we're going to uh work with uh talented GPS and uh invest in promising tech companies and uh we're going to also C invest uh in startups with growth potential they are all included in our portfolio also we're going to look at early stage startups and invest more in those uh startups last year kic um
• 31:30 - 32:00 initiated a Target to expand its investment in promising Venture companies and uh launched a kvg worth 200 million US dollars so we're going to try and uh identify competitive businesses that will F in the footsteps of companies like Amazon and Google we're also looking at Healthcare sectors the US Europe and China they're aging really fast and we see also demographic changes taking place very rapidly and uh
• 32:00 - 32:30 the pandemic uh crisis also unveiled issues in medical system capacities of Western countries so I believe that uh there will be some new market trends uh in the near future when it comes to real estate market uh prior to covid-19 the protracted economic expansions U led to asset price increases and also there are some looming concerns about uh Market correction possibilities kic if despite the possible Market
• 32:30 - 33:00 Corrections uh we're going to strengthen core strategies uh that can bring about to stable investment performance and we're going to um try and invest in logistics and data centers uh that can benefit from secular Trends so that will be our key strategies when it comes to real estate segment also um we believe that uh we can identify and monitor and identify assets with strong fundamentals so that we can get them at discounted prices when it comes to infrastructure
• 33:00 - 33:30 we believe that we will have to constantly work on responding to climate change and uh there is going to be a growth in new and renewable energy sources we're going to invest in large platforms related to Renewables and I believe that reaching econom economy of scale is going to be very important so and we're going to have distributed portfolio by region when it comes to ICT infrastructure um we believe that there's going to be long-term demand uh continued gra demand so we're going to uh explore investment opportunities for
• 33:30 - 34:00 optical networks and communication towers that are going to be very essential in the future last but not least uh when it comes to hedge fund um I believe that performance Gap is growing uh post covid-19 depending on the Strategic positions I believe that investments will be concentrated in high performing funds while there's going to be capital outflows from low performing funds there's going to be growing polarization however when it comes to uh relative Val value or low beta strategy um will attract more capital inflow kic
• 34:00 - 34:30 is going to select and seek out managers with lower beta and higher Alpha and we're going to constantly work on portfolio rebalancing ladies and gentlemen kic um in the first half of this year U amended our guidelin so that we can um select external fund managers uh in a non-phase 2 pH manner because of trouble restrictions uh due to covid-19 We
• 34:30 - 35:00 believe that this flexible review is going to be very important uh this pandemic not only affected kic but also affected Global Investors and therefore I believe that uh not only macroeconomic changes but we now have to seek out new investment tools befitting this environment so we're going to stick to the principles and Basics while maintaining open and flexible position Sir Winston TR said never let a good
• 35:00 - 35:30 crisis go to waste therefore I believe that we should not let today's crisis go to waste I believe that we should utilize those crisis and so that we can use it as an opportunity for future growth through GIC 2020 I hope that we can share latest information about latest trends and Outlook about the global AI market and I hope that uh can seek uh investment opportunities going forward thank you very
• 35:30 - 36:00 much thank you chairman Choy of the Korea Investment corporation for your welcoming address he talked about the massive wave that we are witnessing in the investment landscape due to covid-19 and talked about the strategies needed in the future from the Sovereign wealth funds perspective as it's a
• 36:00 - 36:30 sovereign wealth Fund in South Korea kic so we will keep in mind all that was said during this opening ceremony and with that let me give you a rundown of today's agenda today we will have a keynote speech and three sessions each session will be followed by a 10 to 15 minute break before moving on first off we will be talking about investment Paradigm
• 36:30 - 37:00 shifts challenges and opportunities of global alternative investment a speech will be delivered by John W snow chairman of cbus Capital Management after which we will have a Q&A session moderated by chairman of IG Kang uon who will discuss about investment Paradigm shifts with chairman snow next up in session one we'll be talking uh about LP time New Horizons on alternative
• 37:00 - 37:30 Investments assessments and Prospects of ESG we will have three uh we will have uh panel discussions led by moderators and in session two we will be talking about PE and hedge funds increasing credit risks reverse conversion strategies we will listen to Three speakers and have a panel discussion with four panelists that will be preceded by session three
• 37:30 - 38:00 where we'll be talking about real estate and real assets searching for prospective Investments it will be moderated and we will have three speeches and a panel discussion joined by four panelists as well and as a wrap up session we'll be talking about discussion and policy proposals PE and crisis opportunities and risks so this will be the end of of today's agenda so without further Ado let's kick off the first part of our
• 38:00 - 38:30 conference GIC 2020 let us welcome chairman John W snow service Capital Management and former US Treasury secretary who will be talking about investment Paradigm shifts challenges and opportunities of global alternative investment please give a big ground of applause I think that's your cue
• 38:30 - 39:00 John do I say hello sir please please uh please speak your please speak your your speech all right yes I'm delighted to be with you for this uh important conference and wish we didn't have covid and we could be meeting in
• 39:00 - 39:30 person but Co has become the defining issue of our times affecting everything uh now and for years to come tonight I'd like to talk with you uh about some of the consequences of co uh how the US and the global economy
• 39:30 - 40:00 is responding to co uh offer some thoughts on when we might see a recovery and uh go beyond that issue to the issue of the legacy of covid and the question of how the governments of the world uh will respond respond to the large uh public deficits and debt
• 40:00 - 40:30 burdens that have been created as well as how the central banks of the world will work off the extraordinary increase in their balance sheets which have seen the biggest increase in money supply and liquidity uh certainly in my Lifetime and I think uh
• 40:30 - 41:00 ever uh so let's go back beginning of the year the United States was enjoying extraordinarily good economic times we had the lowest unemployment rates in 50 years we had Rising income across the board for all workers of of of every type uh and we had declining poverty and
• 41:00 - 41:30 Rising income uh then covid hit in February and March and in order to cope with covid and avoid overrunning the overwhelming the Health Care System uh we and many other countries around the world made the decision to suspend our economies effectively to close down
• 41:30 - 42:00 large parts of our economy as we did that the world entered uh a deep uh recession in the United States unemployment went from only a little over 3% to uh over 15% 30 million people found themselves without jobs uh the leaders of our country and the leaders of other
• 42:00 - 42:30 countries faced with this huge challenge to the well-being of their citizens responded with massive increase in spending to fight the effects the economic effects of covid in the United States uh the Republicans and the Democrats in the Congress got together with the White House [Music] and passed a six a three
• 42:30 - 43:00 trillion spending Bill 3.6 trillion spending and at the same time the Federal Reserve the Central Bank of the United States expanded its balance sheet by over Six Trillion so together uh the the spending from the fiscal policy and and the increased
• 43:00 - 43:30 liquidity and and money in the system from the FED amounted to up to nearly 10 trillion doar uh well the GDP of the United States is only was only a little over 19 so you can see uh for a number of months the US economy was operating uh at the largest of our Congress and of the and of the FED
• 43:30 - 44:00 now those policies were were were were welld designed and necessary but the support from Congress has expired that program is over and there is a big debate in in our Congress about whether to extend the program the Republicans are saying no uh it's too expensive and it has some bad features
• 44:00 - 44:30 like making unemployment too attractive with the $600 a month that the program makes available to unemployed people uh many workers in America found they were making more money unemployed than they were when they were when they were working um the president of the United States Mr Trump president Trump announced today that he wants to see a new fiscal stimulus package and he's
• 44:30 - 45:00 putting his support behind it and with that action by the president I think we will see uh another big spending Bill uh of two or three or maybe even more trillion coming down the road which is probably necessary for the American economy to stay to stay on on course uh for all all of us who are interested in public policy as you are and in
• 45:00 - 45:30 finance markets and in economics and in Public Finance uh these are extraordinary times for the for for for the global economy we've never seen such an expansion in uh in the in federal budgets we've never seen deficits this large the United States uh will have a a debt level that's larger than our GDP we've never
• 45:30 - 46:00 had that except in times of War uh and all of the the the major nations of the world find themselves in the same situation as do their central banks so here's a an issue to ponder uh how do the great nations of the world pay down this extraordinary amount of debt that they've taken on uh do they raise
• 46:00 - 46:30 taxes well we're in a recession we're in a global recession a serious recession and we probably won't get back to full economic strength until we find a cure for the covid uh vaccines or antivirals and that may be some time so we're in a recession a global recession uh how do you how do you pay down debt in a global recession well the normal
• 46:30 - 47:00 way to do it the traditional way of course is to raise taxes but you can't raise taxes during during a recession it's the wrong policy uh you you you could pay it down by cutting Social Services but that's very unpopular in the United States and and elsewhere and that would be deflationary and you don't want to pursue defl aary policies at a at a time like this so it's a
• 47:00 - 47:30 dilemma and the same sort of problem faces central banks uh they've greatly expanded their balance sheets they've vastly increased the global liquidity and Global money supply uh and at some point they're they will want to to go the other direction they'll want to uh restructure their balance sheets they they'll want to uh bring their balance sheets back to more
• 47:30 - 48:00 normal circumstances but there's a big risk there too because the way you bring your balance sheet down if you're the if you're a Central Bank of course is uh is is to is to sell those Bonds in the commercial paper and the mortgage paper and the other and and the treasuries that you hold but if you do that that you raise interest rates so the central banks are facing an enormous dilemma
• 48:00 - 48:30 here in the United States uh chairman Powell uh the head of our fed our Central Bank has made it clear that we're going to continue with low interest rates for the indefinite future uh until inflation gets well above 2% and in a deflationary environment as we face today the prospect of of having
• 48:30 - 49:00 inflation rates rise above 2% uh looks far far into the future so far into the future we can expect very very low interest rates in the US and uh uh most most of the world so the central banks uh of the of the world are are facing serious problems problems uh and if they move too quickly to fix their balance sheets they'll surely raise
• 49:00 - 49:30 interest rates and create uh create serious disruption in financial markets uh in effect in effect the markets have a put to the central banks they know that the central banks can not raise interest rates so that uh monetary policy will be very accommodative for uh for the indefinite uh future so that's
• 49:30 - 50:00 one big consequence of of of covid these big big uh balance sheets at the central banks and the big debt levels at the major countries um of of the world uh when will we get out of this situation uh I think we won't really make make a lot of progress on it until we until people feel comfortable going
• 50:00 - 50:30 into the marketplace going to restaurants uh going to movie theaters going to public Gatherings going into the malls and the American Experience is people people today aren't confident uh they're we've made a recovery of of of some measure uh We've recovered about half of the jobs in the unemploy employment rate is which was over 15% is now
• 50:30 - 51:00 8.4 but we're far from out of this and uh it it may take uh 18 months or two years or so for the for us to recover fully um but I'm confident we will once we get the the uh the vaccine and uh many people are working on the vaccine in in in the great Laboratories of the world and the great
• 51:00 - 51:30 pH pharmaceutical companies of the world the great health care centers of the world and at some point we will have that vaccine and when we have it uh I'm confident that we will we will find our way back to strong to strong growth uh but in the interim I think it's going to be a slow difficult difficult process uh the uh you know the co has had a lot of
• 51:30 - 52:00 other implications for the world uh it's certainly intensified the conflict between the United States and China uh and created what some people think is a cold war reminiscent of the cold war between the Soviet Union and the United States back in the 70s and 80s and 90s uh ending in the 90s uh this has great implications for you as investors and for Korea of course as
• 52:00 - 52:30 a as a neighbor there uh but clearly uh the uh the relationship between the United States and China has deteriorated and and it's not a political matter in the United States it's it's a view held by Republicans and democ rats that China hasn't played fair that China has taken advantage of the WTO
• 52:30 - 53:00 rules that it that it is is not making its markets open and that it is uh playing uh taking advantage of intellectual property so I think there's a lot of anger in the United States hostility towards China right now uh you can ask the question and it's a good one
• 53:00 - 53:30 uh will this be changed by the election and what will be changed by the election we have an election here in in early November in the United States and we have the first debate between the Democratic candidate uh Mr Biden the former vice president and president Trump in just two weeks uh it'll be very interesting to see how that how that goes right now uh it looks like Mr Biden has a has
• 53:30 - 54:00 a has an advantage uh he uh in all the polls he in most of the polls anyway virtually all of them he seems to be leading uh and president Trump has uh a nonfavorable rating with many many voters across the country uh but the president is very resilient and and resourceful and effective and I think it would be a
• 54:00 - 54:30 mistake to assume that the polls uh are are right and that there will be a democratic sweep of the White House there's also the issue of what happens with the Senate uh and uh that's going to be another very close race as you know the Senate is extremely important in what happens in in in our country and uh uh today the Republicans control the
• 54:30 - 55:00 Senate if if president if if Mr Biden is elected president uh and there is a Republican Senate it will be able to uh offset many of of his initiatives but if the Democrats take back the Senate uh and have the White House and the House of Representatives then we could well see
• 55:00 - 55:30 major changes in public policy uh in the United States what would a Biden Administration look like in all likelihood a Biden Administration would repeal the central feature of the Trump Administration which has been corporate tax ta cuts and individual tax cuts those tax cuts have done a lot of
• 55:30 - 56:00 good for the American economy they've stimulated a lot of growth and created a lot of jobs and created a lot of prosperity U but the Democrats feel that the the tax cuts have been too advantageous to those who are well off and they are are bound and determined to uh to raise taxes on the on the so-called wealthy and and to repeal the Trump tax cuts on business
• 56:00 - 56:30 the other thing that is likely to happen if we have a democratic Administration is the repeal of the deregulation proposals that that President Trump uh put put in put in place uh the combination of the deregulation proposals and the tax cuts have really given a lift to the US economy and uh resulted in the strong
• 56:30 - 57:00 growth that we've seen uh and resulted in the uh the very significant increase in uh in in in jobs and employment in Pro in prosperity so uh if if Vice President Biden wins the election uh his he will he will be confronted with a party his party the
• 57:00 - 57:30 Democratic party that has moved quite away left uh and I don't think the Vice President Biden is himself uh a genuine U uh socialist liberal but many in his party are and they have the energy in the party today so a question in a Biden Administration will be uh who controls the agenda who will serve in the major cabinet seats
• 57:30 - 58:00 Treasury and the attorney generals uh and defense and and uh and uh Secretary State those are the four jobs that really really count in the United States uh uh My Hope Is that uh that a President Biden would would remain a moderate and would avoid the extremes of of his party but many in his party would like
• 58:00 - 58:30 to see extremely high tax rates uh on individuals wealthy individuals and on corporations they would like to see a mark to Market on on all assets which of course would create significant liquidity problems for people uh they uh they would like to re-regulate large parts of the economy that uh have been deregulated under
• 58:30 - 59:00 under President under President Trump uh the election is still way up in the air and nobody knows for sure uh but uh clearly there's a lot at risk here in this election and uh we'll we'll know a lot more in two weeks after after that debate what does Biden have to do to win I think Vice President Biden to
• 59:00 - 59:30 win uh has to uh make the president the issue and the failings and shortcomings of the of the Trump Administration the issue uh for the president to win he has to make Biden and the liberal agenda of the of of the Democrat party the issue uh the Democratic party agenda doesn't poll nearly as well isn't
• 59:30 - 60:00 nearly as popular as is Vice President as is the vice president and while the president Trump falls short on most measures of favorability how how do you feel about the president on healthc care how do you feel about the president on foreign policy how do you feel about the president on Integrity all those issues he falls down below 50% and Biden beats
• 60:00 - 60:30 him but on the issue of the economy president Trump does better he seen is strong on the economy and lately in the United States another issue has come to the Forefront and that's uh Law and Order that's the disruptions that are occurring across so many of our cities uh the Vandal the vandalism uh and the outright violence
• 60:30 - 61:00 and and and deaths murders that are that are occurring in so many of our major cities uh on this issue uh if it be if it takes on more latency if it becomes more important as it as it might uh the president probably stands a good chance of picking up uh a lot of votes right now i' say it's too close to call uh probably Biden in in the
• 61:00 - 61:30 lead uh if he does well in the debate uh two weeks out that'll be a big plus for him because there are a lot of questions being raised about how uh vital the vice president is his physical vitality and mental acuity have been been been put in in issue uh if he does well in the debate those issues will be put to the side if he doesn't uh president Trump will have an
• 61:30 - 62:00 enormous Advantage for the president he's got to make Biden and the and the economy the issue not himself and uh for this President that's hard to do uh with that I look forward to our the moderator and our our discussion thank you very much thank you for your Kino spe it was very impressive we are preparing for our discussion so please wait for a
• 62:00 - 62:30 minute ladies and gentlemen we just listen to the keynote speech from chairman John Snow who talked about how the unprecedented economic circumstances has brought about massive liquidity and imbalance in an expansionary balance sheet at the central bank and in countries across the
• 62:30 - 63:00 world so moving forward uh super or hyper low interest rates will continue as said by chairman snow who also talked about the US China trade spat and conflicts and talked about the upcoming US presidential elections as well and talked about how Joe Biden is now up in the and what we need to look forward to of course because of Co in po the postco
• 63:00 - 63:30 world there will be a lot of changes and we will be talking about those tumultuous changes in this Q&A session that is now upcoming we have as the moderator the chairman of IG the mic is yours Hi how are nice to see you very well thank you thank you okay very well uh how should I call you you have so many different titles Mr
• 63:30 - 64:00 secretary chairman doctor any person John or you just John is the best John John is good let's just do that that's the informal okay let's do that yeah uh thank you very much for your brilliant opening speech kot speech that covered pretty much the uh the core issues we face in the aftermath of covid-19 now for next uh 30 minutes or so I would like to uh explore a little
• 64:00 - 64:30 bit more of what you have already said uh for our audience uh to uh have uh uh more wisdom out of uh this uh uh short conversation uh through webinar um first of all uh let me start with the global economic Outlook you have already uh uh delineated uh the uh the impact of covid-19 on US economy and you did
• 64:30 - 65:00 mention already that uh uh the path to recovery will be uh tough difficult and could take quite long time um now we hear that uh just a today the report from oecd uh they revised upward uh the this year's uh growth prospective but at the same time we hear different stories from uh um like IMF World Bank
• 65:00 - 65:30 so it's as always uh is uh forecasting is difficult especially for the future you know we have that famous uh uh quote uh right now aside from us obviously US economy is the most important uh here when you look at uh the global Outlook uh but China um at least uh showed so far
• 65:30 - 66:00 especially from the second quarter of this year uh Positive Growth uh very rare in this uh devastating environment now all together um what is your sense about uh global economy this year and the year after um because with that we can further talk about policy responses that you have already
• 66:00 - 66:30 mentioned well thank you uh it's it's uh interesting that economists and forecasters have such different outlooks uh the the Federal Reserve today in their meetings announced that they're more positive about the US economy uh and uh foresee getting back to high unemployment I think in
• 66:30 - 67:00 2022 back to the you know the the low low unemployment type level we saw in in 2019 uh I don't think anybody has a real good crystal ball on this frankly uh Co when covid came along at a time when the world economy was already suffering from from something the economists call it secular stagnation the idea that we have slow
• 67:00 - 67:30 growth uh limited population growth in large parts of the world uh and the lack of uh lack of productivity growth that means overall growth is is uh is constrained growth as you know is your audience knows is is really the the product of Workforce participation how many people are going
• 67:30 - 68:00 to work and uh how productive are they well when when world population at least in in in the in your part of the world and our part of the world is not expanding much and uh when productivity isn't Rising much uh it paints a picture of slow slow growth and there a number of prominent economists who think that we're in that world of secular
• 68:00 - 68:30 stagnation where it we will require negative interest rates and and massive budget deficits in order to create the aggregate demand to absorb all the productive capacity of the of the economies uh I'm a skeptic on that I don't really think that's that's where we are are but there's a lot of evidence that that that suggests uh the the engine of the global
• 68:30 - 69:00 economy really isn't isn't turning as fast as it as it used to thank you yeah go ahead yeah thank you very much uh for I I I think you made a very important point about uh the role of uh productivity in the process of of recovery because uh uh monetary expansion fiscal stimulus
• 69:00 - 69:30 they're all important and indispensable at this stage but the key here is that how that enormous amount of liquidity will be used uh whether that will be used to uh to enhance the productivity of uh of uh our economy or just uh as it turned out maybe uh is to pump up uh inflation uh uh the adverse side effects
• 69:30 - 70:00 so I think that that point uh uh has to be taken very seriously on the part of uh uh government officials um now relating to this now fiscal stimulus uh you mentioned the three trillion dollars uh in the United States have been already spent an additional one trillion dollars or so uh is being uh debated with yes
• 70:00 - 70:30 yeah on the hill um now what is your sense about uh whether that will be forthcoming very shortly and how that additional stimulus will make any difference for US economy well I I I think now that the president Trump has decided to support it uh that the Republicans will get on board and join with Mrs Pelosi and the
• 70:30 - 71:00 Democrats and we will have by year end uh an expanded uh an expanded stimulus Bill uh almost for sure if the president's for it the Republicans will be for it we know the Democrats are for it and we probably need it because uh the uh the American economy has been really operating uh without the normal
• 71:00 - 71:30 principles of a market economy we closed the market economy down in many many sectors and many sectors of the American economy are really uh desperate Airlines Leisure hotels uh travel companies and so on have have seen their their their uh their out put Fall by 60 70 80 80% uh and we're unless there is
• 71:30 - 72:00 something to support spending uh outside of what people earn because they can't earn that much now I think the American economy would would would would would would suffer so I I would support some some continued uh U stimulus and I think I think we'll I think we'll see it uh but I hope it goes to things that raise productivity to your to your point and
• 72:00 - 72:30 uh the the the difficulty with with the economy right now is businesses don't seem to see high return investment opportunities right and if they saw more High return investment opportunities they they would invest and as they invest that would put more Capital out there and as people have more Capital they become more productive productivity goes up the economy gets bigger and stronger and it's a it's a virtuous cycle but we're not in a virtuous cycle
• 72:30 - 73:00 now and it's one of the great mysteries of Economics why and when productivity goes down and why and when productivity goes up nobody really is very good at at foreseeing that or predicting it uh and there's not a particularly good theory of of why productivity runs along well for years and then all of a sudden slows down in reverses but I agree with you ultimately we have to get higher productivity all
• 73:00 - 73:30 across the global economy I would like to uh turn our attention to uh something uh closer to the theme of this conference uh that has to do with uh uh the reshaping of alternative investment in the change economic Paradigm uh after uh uh 19 now
• 73:30 - 74:00 we have uh massive fiscal stimulus and very accommodative monetary policy and Jerry Powell is saying that uh we may expect near zero interest rate for next uh three years 2023 which is a very unusual statement from the FED uh because they're talking about very long-term accommodative monetary policy now with that uh obviously would and at
• 74:00 - 74:30 the same time we have a very uh in a way overheated stock market I'm I'm not sure whether I should say overhear it but is there is enormous amount of energy coming out of stock market around the world uh now given this situation how would you see the the attractiveness of AI alternative investment because on the one hand the
• 74:30 - 75:00 stock market perhaps maybe too bullish and uh uh bond market as well meaning they very low interest rate uh investors should look for a decent return from somewhere else AI are meant to be those Alternatives and uh what is your sense about this and what sort of areas uh uh you you find more interesting in this changing environment well you you put your finger
• 75:00 - 75:30 on the fundamental uh dilemma here we we all face uh support for the economy was called for but the the support has negative consequences when you underprice risk a lot of people undertake more risks than they should and they take on more debt than they should and in effect the fed's policy
• 75:30 - 76:00 and the policy of the central banks around the world is to force investors into riskier assets uh when the return on the risk-free asset is negative uh which is it is today the 10y year in the United States in real terms is negative uh I don't know where it ended up today but maybe 60 basis points or something like that across Europe rates are are actually nominal rates are are nominal rates are
• 76:00 - 76:30 negative real rates are are quite negative so in an environment like that uh you got to be worried that uh uh investors are chasing risky propositions and that we're building too much risk into the system uh and while we don't have inflation today in the normal areas of goods and
• 76:30 - 77:00 services I think you can make a good case that we've got inflation in Assets in bonds and stocks and real estate and uh and and some Commodities gold silver uh our our our as you say all that uh it's like physics all that gas that gets put into the engine has to go somewhere into the balloon has to go somewhere and if it doesn't go out one side it goes out the
• 77:00 - 77:30 other side uh because of the broadscale deflationary pressures the secular stagnation forces in the world we're not seeing uh we're not seeing traditional inflation of goods and services but we are seeing I think elevated prices in a lot of assets so the alternative investment angle has to be uh figuring out what's
• 77:30 - 78:00 gotten where the discontinuities are uh and uh bring good hard analysis to the discontinuities that have been created and another thing I think is is bring good analysis to the restructuring that's going on fundamental sharian type restructuring that's going on right now as uh many many Industries are being reshaped and remade uh as as a result of response to
• 78:00 - 78:30 covid uh Co has certainly accelerated a lot of trends that were probably already underway and it's probably created new and different opportunities as as well look at us on a zoom call tonight as as as as one as one example okay so I think the alternative investment uh the appeal of it is lots of bright able people who
• 78:30 - 79:00 are looking at these discontinuities in the market and looking at these sharian forces of creative destruction that are restructuring the economy with a lot of winners there are a lot of winners we we think of the losers there are a lot of losers but they're going to be a lot of winners out of this as well I I think your point on uh uh the um the importance of uh uh industrial restructuring as an opportunity for AI
• 79:00 - 79:30 investment that is that is very very good one as very timely uh in this uh uh post Corona uh uh period uh now the as you said in your uh keynote speech uh the investment environment not to mention overall economic prospects will be greatly affected by the the future direction of us China
• 79:30 - 80:00 relations uh this G2 decoupling is a is a big source of uncertainty uh for uh the entire world and and fact of the matter is that that is that has a very special meaning for uh Northeast Asia including uh Korea uh down the road now I would like to pursue this question a little bit further uh now recently this uh trade War seems to be
• 80:00 - 80:30 escalating into Tech War uh with uh uh with the US government's tough stance on Huawei the Chinese uh uh Tech Giant and that is expanding all along now how how do you see uh this um escalating relationship between us and
• 80:30 - 81:00 China uh through November and after the uh the election on November 3D you said you did mention that there may be uh at least according to the current poll uh Mr Biden may have an edge but don't you know I certainly agree that uh uh it happened last time uh Mr Trump trailed but eventually prevailed so uh we we don't
• 81:00 - 81:30 know it's not over until it's over so uh uh So within this uh changing political environment the United States how a country like Korea and outside of the United States should Envision the future direction of us China relationship uh that is a that the $64 question that is a big and important important question uh the United States
• 81:30 - 82:00 is critical of China uh for a couple of reasons one is is just trade itself and the feeling that China doesn't play by the the rules they don't let people into China's markets on the same basis that other people let China into their markets that all of that there's all this concern about uh intellectual property and property theft and and so on and so forth
• 82:00 - 82:30 uh and there's a bigger issue though and that's in huawe you mentioned Huawei H is at the center of this the United States intelligence agencies and defense people are concerned that a company like Huawei is actually part of the Chinese uh government government's National Security and intelligence apparatus and if their devices are are
• 82:30 - 83:00 widespread throughout the world that in effect China will gain a huge National Security Advantage there's there're also concern that China has an advantage on 5G 5G depends on having massive markets to get the data to uh to develop the artificial intelligence uh and the United States is worried that if that if China gets ahead
• 83:00 - 83:30 on 5G the US will will be left behind so we're taking a hard stand on on on China on on on Hawaii and other firms like that but in the end the economic interests are so powerful and so strong together the United States and China are something like 40% of the global economy there are many many uh businesses in the United States that are entirely dependent on China there are many Chinese businesses
• 83:30 - 84:00 entirely dependent on the United States I think we'll find accommodation because it'll be in our interest to to find accommodations but uh globalization is going to be a different animal than it has been and uh I like the line that we'll we'll continue to have globalization but probably with with fewer Chinese characteristics borrowing the Chinese phrase well these days uh
• 84:00 - 84:30 deglobalization is often referred to as uh uh out of China so there some uh well there is a uh change taking place uh with respect to Global Supply Chain which used to be concentrated in China now there there is a worldwide uh movement uh toward more Diversified
• 84:30 - 85:00 approach uh glowal supply chain so that will happen now I have a somewhat tricky question tricky whether tricky or tough question for you okay that is that uh speaking of us China tensions uh country like Korea is in a very delicate situ situation because certainly we have a strong security uh relationship with uh with the United
• 85:00 - 85:30 States of course that is a Lynch pin for our uh security and to protect our uh freedom and free market economy um but at the same time uh China is very close neighbor to Korea uh we have uh uh more than a quarter of our export going to uh uh China very uh close uh trade and investment relationship there and also
• 85:30 - 86:00 North Korea factor is also something to be seriously considered now if you're are in Korean president or top decision makers shoes what position would you take in this uh us China you know escalated tension situation I think it's going to be hard to stay on the
• 86:00 - 86:30 sidelines uh remember the Cold War uh there was an effort on the part of the United States to bring people in to the US side and uh the Soviet did the same and wanted Partners uh it's going to be a Highwire act it's going to be a difficult you need you need China and you need the United States and you have lots of brilliant people who have great diplomatic skills
• 86:30 - 87:00 for my dealings with them over the years and I'm sure you'll you'll find a way but it's not easy uh it's it's not going to be easy and what the best hope here is that the United States and China each find a way to accommodate each other uh more more effectively uh but the United States is is clearly putting pressure on countries around the world not to buy uh Chinese devices produced by
• 87:00 - 87:30 huawe and it's finding Boris Johnson you know the prime minister of the UK is now leading a coalition that's it's taking the American line that we can't trust those devices coming from China because in effect all the information that's being generated in our countries is going right back to the intelligence agencies of of of of of China so on some of those issues I'm
• 87:30 - 88:00 sure the United States is going to be be uh talking to your leaders and saying we don't want you I hope you won't be buying those Hawaii a devices Huawei devices all right thank you uh I think as we have only three minutes left just to signal I'm getting um from the organizers so perhaps this would be uh the last question now serus is an
• 88:00 - 88:30 important uh uh investor uh you know in in the global uh uh uh Community uh I've known that uh prestigious uh company dur especially during my tenure as chairman of national pension service which is one of the uh the largest uh uh pension fund in the world with over $600 billion doll of asset under management now I'm asking
• 88:30 - 89:00 you uh company like subus would you be interested in making investment in Korea on something like a structured deal or uh would you like to find Korean uh Investment Partners uh like NPS or kic or other uh
• 89:00 - 89:30 uh key investors uh from Korea maybe both but could you could you say something about cus uh sort of vision or investment uh strategy well cerberus's uh basic investment strategy is to be opportunistic and to go where good opportunities are and I can assure you if uh if if uh The Business Leaders and
• 89:30 - 90:00 investors of of Korea can bring us good investment opportunities will we'll be all ears as they say we'll be anxious to sit down and and and talk absolutely absolutely we uh we know Korea I have a great uh respect for Korea and what enormous accomplishments of the Korean people and the Korean economy and we'd like to be a bigger part of it so absolutely okay great uh should I finish or may have one more question somebody
• 90:00 - 90:30 should tell me uh perhaps one last question let me let me explore given that uh uh you had a very distinguished career not only as a secretary of uh treasury but also Transportation so we you you have a wide spectrum of knowledge in different Industries now at the end of the uh the covid-19 who would be the the winners or losers by industry
• 90:30 - 91:00 sectors uh great great question I think the the the winners are going to be uh a technology the technology sector is getting a big big boost here uh the health care sector has gotten will get a good boost uh as we realize how dependent we are on antivirals and good R&D and and vaccines uh and America and and the
• 91:00 - 91:30 world really the whole world is awakened to the fact that we don't want to be so dependent on one place China for these critical inputs uh for these uh products like like that are that the essential product products that that underpin our our health and our well-being so that supply chain is going to get get get
• 91:30 - 92:00 narrowed uh and the United States is going to bring a lot of that back I think EUR European countries will bring a lot of that back and production that's now in that we have in in China will probably get moved uh to other places uh Asia but maybe South America South America as well I think the the industries that in that involve lots of human interaction close contact are gonna are
• 92:00 - 92:30 going to continue to suffer for a long time theaters in the United States are now open but nobody's going to okay uh as an example okay thank you very much it's time to close um I would like to thank you John uh for your brilliant speech and very simulating discussion uh today thank you very much hope you stay safe and healthy throughout this covid-19 thank you thank you you too
• 92:30 - 93:00 okay thank you bye now bye bye bye ladies and gentlemen uh once again I would like to thank mrwang and also former secretary Mr John snow we talked about what are we going to do with the massive uh liquidity and um it was mentioned that
• 93:00 - 93:30 it's really difficult to uh put our finger on the current economic status and we also looked at the attractiveness of AI and uh we also talked about how win-win models are required Tech Healthcare and vaccines were also pointed out as important elements going forward so once again I would like to thank uh both secretary snow and Mr John for the insightful discussion session we're going to break for a minute and
• 93:30 - 94:00 then uh starting from 10:30 we're going to begin session number one so please be back uh at [Music] [Music] 10:30 [Music]
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• 101:30 - 102:00 glob ladies and gentlemen session one of
• 102:00 - 102:30 the GIC 2020 will now begin session one
• 102:30 - 103:00 will be moderated by Professor Tong Sam
• 103:00 - 103:30 Yong from Long Island University and brand M the founder and CEO of alternative investment Forum we will have panel discussions from Jay Yun the CIO of New York Life Investment Management ran Miron head of impact investing at Massachusetts Mutual Life Insurance company and Scott drizzle the head of ESG initiatives of La K County Employees Retirement Association Harold
• 103:30 - 104:00 WKA the global head of ESG at NEX investment managers and Tang CIO of public officials benefit Association CIO of and CIO Lee Kong Hong of the Korea teachers pension and CEO CH from the career investment management we will be talking about LP time New Horizon on alternative Investments and assessments and Prospects of ESG let's welcome our nine panelists online here on screen
• 104:00 - 104:30 hello everyone I hope everyone can clearly hear my voice and welcome to the session of ESG uh my name is Sam Yong chong chong samyong I've been teaching at Long Island University in New York for a long time and these days I'm teaching at yon University in one of the major Korean private university in Korea uh we have nine speakers session
• 104:30 - 105:00 participants today pretty big session uh for about let's say 80 minutes next 80 minutes so uh it is very important session maybe it's a key session of the whole events today please stay on your YouTube do not get out of the YouTube for the next 80 minutes uh the session topic what is the session topic ESG ESG what is ESG if you
• 105:00 - 105:30 Google those three letters ESG I just did this morning uh we have more than 49 million different theories definitions articles and documents you can found which means that the ESG scope an area is too broad it's a ocean maybe more than an ocean it's a universe so we want to figure it out
• 105:30 - 106:00 what is ESG for our industry Asset Management industry or investment industry or wealth management industry uh what I found out this morning from ESG Google there is something about ESG data ESG rating Theory value and interestingly there is a climate outside board member Alternative
• 106:00 - 106:30 Energy green fund and from Korean Google there is a new deal fund maybe it is familiar to some of you these days and interestingly there is one asset management company name in Korea eest Asset Management Company their real estate private fund I don't know why exactly it is linked so we have a broad topic today and we
• 106:30 - 107:00 try to narrow down and why we talking about ESG these days this pandemic period is ESG talking itself is too much luxurious Concept in this situation companies an asset management forms they just need to survive this pandemic period do we need talking about ESG why now y ESG all whole lot of different topics
• 107:00 - 107:30 different issues we are dealing with again we have 80 minutes with nine participants we have five participants from us side and we have including myself four speakers from local and uh next 15 minutes 50 minutes or so will be focused on offshore us participant discussion and Mr brand
• 107:30 - 108:00 merer who is a founder and president of aif will lead the discussion and I will lead our local discussion so let me introduce the local speakers first uh we have here Mr Joe hung uh Mr Joong is a CEO of the Korea Investment Management thank you thank you for attending we have Mr leeq
• 108:00 - 108:30 Hong uh from Korea teachers pension CIO and also we have Jang Mr jangan POA public officials benefit Association in Korea he's a c of the poba and Mr BR merer can you start your part it's your Ro I'll pass my mic to you please introduce yourself and aif who
• 108:30 - 109:00 who are you and what is aif and please introduce your colleagues and then you can start your discussion thank you my name is brtt maler I founded uh aif Global about 15 years ago it's an Investments Think Tank um so our we work uh with the institutional uh Institutional Investor Community um and our board is chaired by the uh Harvard Business School professor of investment
• 109:00 - 109:30 banking Josh Lerner uh along with Ash Williams who runs the pension plan for the State of Florida uh our focus is on how the world's largest institutional investors use particularly illiquid assets and and and investment structures uh to achieve their investment objectives so our focus is largely on what you'd call alternative Investments um we work with those investment teams as I say with their consultants and advisers and with those leading academics to present research and to help investors reach the most
• 109:30 - 110:00 informed decisions basically to educate and to inform um so I regard myself as a bit of a generalist and I like to I like to know where my expertise uh starts and stops uh we have an Institute uh that is run by the deputy treasurer of the state of North Carolina former deputy Treasurer um who is not here tonight uh that conducts educational and training programs We Run The Educational Foundation for the the US state treasurers which are really the chief financial officers of the 50 states of
• 110:00 - 110:30 the United States and we do training for senior treasury officials and other board members in fact uh former treasury secretary snow who just spoke uh is a member of our group and and has been actively involved uh with us in the in over the years I was proud to be able to help line him up we've been working with Professor Chung who is a member of our Advisory Board um and members of the South Korean Institutional Investor Community now for several years and we're very honored uh to be asked to present tonight about the topic of ESG
• 110:30 - 111:00 and impact investing um Professor Chung and I have have watched uh as as ESG and impact inventing investing has gained momentum seemingly every year over the last several years and we've gotten I think to the point now where as we travel around the world uh together sometimes uh we we hear from investors almost everywhere that ESG and impact investing are topics they feel that they must consider that their boards feel must be addressed um even if they
• 111:00 - 111:30 ultimately decide uh not to incorporate it into their into their programs um and I think that's because it covers such a broad range of topics I mean each one of the letters of ESG you know the environmental social or governance each one of those is probably too broad in and of itself um and then you have impact investing which which again carries its own definition um which and and and many um sort of values implied along with it I suppose as to what's good for the world um so so really uh
• 111:30 - 112:00 from my point of view even though Sam says I'm leading the session what I thought was best was to bring in a group of true experts that are part of our group and Seed my time to Dave goodso from nixus as the person who will facilitate the conversation um and uh and with him uh he will uh he will be speaking from my part to New York Life Insurance CIO Jay Yun uh really a distinguished group uh Los Angeles County Employees Retirement Association
• 112:00 - 112:30 Lera senior investment officer Scott drazzle uh Lera has about 60 billion I think Scott of us assets there thereabouts um and Mass Mutual another enormous insurance company a portfolio manager real Juan Miran who also focuses on sustainable Investments so with that I'm going to see my time to to Dave goodel uh and ask Dave to to pick up the conversation thank you br um as bran said my name is Dave Goodell I am the
• 112:30 - 113:00 executive director of the center for investor Insight a Global Research initiative at nixus investment managers um as a global multi- affiliate organization we own 20 independent managers in Asia Europe North America we have a firm belief in bringing together a wide array of perspectives for a healthy debate we think it offers insight into the issue and that's what we hope to do tonight with our esteemed panelists um environmental social and governance has been at the front of the conversation for the past five to seven
• 113:00 - 113:30 years uh in the investment industry and across the whether it be individuals or institutions or even the wholesale channels over that time the industry has seen a transformation in its thinking about what it is and how it should be implemented across Investments the challenge is though the result of this is that there are many approaches and different strategies have emerged there's ESG integration there's exclusionary screening there's impact investing and active ownership those are just four of the more frequently
• 113:30 - 114:00 mentioned under the ESG Banner so when we talk about ESG we have to be clear what kind of ESG we're discussing and in most cases that depends on what investors are trying to accomplish in our own research to nitic Center for investor Insight we're finding that institutional investors are really warming to the idea of ESG and their motives for adopting are evolving as well they're moving from something they did because it was in their investment policy statement into a more clearly defined investment thesis our 2019
• 114:00 - 114:30 survey found that while majority of investors we spoke with said their primary motive for ESG investing was to align their assets and their values what we did find though is more than half believe there's Alpha to be found in ESG and seven in head said it's going to become an industry standard within the next five years but then came the coron virus pandemic Mark markets experienced record declines volatility came back in force and uncertainty returned to the markets and the world it was a
• 114:30 - 115:00 convergence of powerful forces ESG already had a record year in 2019 now in more volatile Market investors found that ESG contributed to better investment results all the while the pandemic underscored the need to consider the broad set of variables in investment analysis while many institution investors like yourself are considering how ESG can fit into your investment schemes we want to help clarify what it is we mean by ESG investing and offer practical insight into how it works with
• 115:00 - 115:30 our panelists tonight we're really going to focus on three important issues we're going to start by clarifying what we do mean by ESG we're going to look at motives and objectives for implementing ESG and most importantly our panelists are going to share the Practical experiences in what's working and why so we think about it ESG has become a catchall phrase and includes many different approaches what we want to do here is really find out how each of our panelists are defining it and how they're putting it to work within their
• 115:30 - 116:00 organization Scott let's start with you as senior investment officer you're focused on governance with Lera acting as a fiduciary on retirement Savings of thousands of police officers firefighters teachers civil servants how does your organization look at governance as part of that investment process sure thanks Dave and and thank you for the invitation to participate in this uh dialogue today um I I work with ler as as mentioned which is the pension
• 116:00 - 116:30 plan for 160,000 active and retired members uh of the LA County government system so we we represent a wide swath uh of public servants uh including right now as many participants might be aware uh California is suffering from some significant wildfires uh so our members are up in the mountains behind me uh as I speak uh
• 116:30 - 117:00 and what our mission is is to try to produce and protect a Secure Retirement for those members uh not only the firefighters uh that are on the front lines uh today uh but the wide SWA of all of our members uh today uh and for Generations uh to come as as long as LA county has government employees so as I mentioned everything we do is driven by that mission to produce and protect the benefits that
• 117:00 - 117:30 we've promised to our members uh to do so we think very longterm in our investment strategies uh and we're Guided by our fiduciary duty to act in the exclusive interest of our members and to act with uh prudence and care and skill uh on on forming our investment analysis and decisions so when we think about ESG uh we do so in consideration of a recognition that ESG factors could
• 117:30 - 118:00 impact our ability to produce and protect those benefits for our members uh they might impact the ability of the companies in our portfolio to generate uh and sustain value these are factors like as you mentioned uh the quality of the directors we elect to serve on the boards of portfolio companies getting the incentives right in executive compensation schemes uh for
• 118:00 - 118:30 uh CEOs uh the accuracy and integrity of accounting and financial reporting that we rely on to make informed investment decisions all of these are very traditional G considerations governance but in the last 10 years we have this new acronym of ESG which in our mind is the how environmental and social risks and factors are identified and governed es includes factors like uh human
• 118:30 - 119:00 capital the workforce at the companies we're investing in every company tends to say that the workers are their most valuable asset we tend to agree that uh how companies motivate access retain Talent can uh imp impact their ability to actually achieve success and similarly on environmental uh considerations Energy Efficiency the companies that are more attentive to
• 119:00 - 119:30 Energy Efficiency are saving operating costs that ACR straight to the bottom line so when we look at ESG we're thinking of how these factors might impact the risk return analysis and ultimately our the financial performance of of our investments we try to distinguish ESG from Impact investing which I think is the opposite it's the impact of Investments on the environment or on society these two concepts of ESG
• 119:30 - 120:00 integration versus impact are not mutually exclusive uh and in fact Investments can achieve a number of ends at the same time but we find it useful to Define upfront what we're talking about and from our Miss driven uh angle to produce and protect benefits for our members uh and operating within fiduciary duty our focus is on the impact on uh of ESG factors on our
• 120:00 - 120:30 ultimate mission to provide those benefits uh we do so in incorporating ESG into investment analysis and we do so in exercising our legal rights in communicating with portfolio companies voting our proxies to encourage prudent practices in not only sound governance uh but also consideration of financially relevant material ESG
• 120:30 - 121:00 factors thank you very much Jay what about you your firm has Affiliates who've been involved in ESG for 20 plus years can you talk about investment managers are integrating ESG into their broader process right so um right so New York Life Investment Management is a multi-boutique model uh we have 12 entities that um uh claim it its own investment culture and and process and we're specifically talking about our European entity uh we named that
• 121:00 - 121:30 candriam or they named that candriam rather which uh stands for conviction and U conviction and responsible investment so actually the name in itself I think I'm getting it slightly off uh represents um um so-called ESG invest and the theme behind their ESG and I think they started this in 1996 it's it's been 26 years here um obviously Europe's been clearly the leader here in
• 121:30 - 122:00 this aspect and and as as as the moderator or the host mentioned Sam that you know when you look up Google um the definition there's so many different versions so for us uh it's more of a long-term sustainability and responsible in investing uh that we stand for and we actually um in that Krum entity obviously they have dedicated ESG mandated which is about 25 to maybe
• 122:00 - 122:30 close to 30% of the Mandate are mandate is dedicated ESG but broadly every uh investment uh uh Team whether it's an ESG mandate or not this aspect of of of the theme behind sustainable and responsible investing within um the value framework that they invest is is ingrained in in what they do and now as you then transition to the US uh boutiques um as well as the holding company that I sit in and we actually
• 122:30 - 123:00 manage money sitting in the holding company on macro funds we've actually in the last perhaps like three four years here um been very heavily getting involved in in in the uh ESG now what I will say is um here in in the the US I guess it really goes state by state I think if you're in certain particular more um liberal states or the coastal States I think you've embraced ESG earlier uh you go down south of Southern
• 123:00 - 123:30 belts of United States and they actually will maybe even kick you out of the room for talking ESG U they're very oil um proud of their oil Heritage now what I will say what's really been really interesting and and I appreciate this panel uh here for all of us is ESG was something that for America was and and maybe for Korea as well something that The Regulators or some certain large asset owners uh are are driving but I
• 123:30 - 124:00 think we're at a point just like technology and pandemic has driven technology and such to where it is today and expedited the shift I think we're finding that ESG is going to build so much momentum here for right reasons uh um that even if you don't believe in ESG you have to believe in the economics of the movement of money uh it's building momentum and so everybody should pay
• 124:00 - 124:30 very close attention uh sorry for the long answer no J thank you very much and you know similarly you know the idea of how does ESG fit into the equation you ran we'd like to man talk to you about how you manage impact Investments for the general ledger side of the business you're Mass Mutual how do you see it fitting into your U overall strategy yeah thank you David and thank you Bren for inviting me today um we we look at ESG it fits into three areas
• 124:30 - 125:00 within Mass mutuals general account we use ESG as an exclusionary screen meaning we don't actively buy things like private prisons and tobacco and arms and so forth secondly ESG integration we look at alongside traditional financial analysis we look at ESG criteria climate change social inequality corporate governance because we feel like that will have a long-term value for the companies we invest in and finally we're building out an impact portfolio Diversified across sector
• 125:00 - 125:30 stage in geography because impact investing is is in investing with the intentionality to extract a market rate return across all asset classes but also extract that additional additionality on the social environmental side and we think we can play a large role by in best-in-class managers on the impact side thank you very much Robert you're your portfolio strategist with Jay at New York Life Investments tell us a
• 125:30 - 126:00 little bit about how you're looking at ESG in your in your kind of day-to-day business you're on you're on mute Robert oh I'm on mute thank um me Robert I'm glad about that hey it's all right uh I think there's going to be a little bit of an echo on this Zoom call because we're reiterating a lot of the same themes but that's a good thing because when I first joined the industry and in uh about seven years ago I was brought on explicitly to do research for
• 126:00 - 126:30 portfolio strategy for New York Life Investments our retail funds and one of the first things I noticed being in the space was that there was no consistent definition or idea of how investors in the United States were going to implement this in the portfolio very quickly uh after I joined the firm I I joined uh the office of the chief investment officer so working under Jay Yun and his large purview within the the
• 126:30 - 127:00 organization I sit specifically on the multi-asset solutions team our team is New York Life Investment specialist in Cross asset class investing so we guide our partners through this rapidly changing investment environment and since since the start of the year it's really been rapidly changing uh and one of those ways that we help guide investors is uh through ESG investing uh
• 127:00 - 127:30 so we leverage all the the breadth and depth that New York Life Investments multi-boutique platform has that Jay spoke to to help guide our partners through um through the space and allocate their assets and I think the the the one thing I want to re reiterate is something you started with Dave and you said that when you're thinking about ESG it it differs by an Investor's goals and circumstances and what they're trying to achieve and you heard that directly from uh what our two investors
• 127:30 - 128:00 on the panel were talking about in terms of their goals that's the same story we're hearing consistently when we talk to our investors but at the end of the day I think the most important thing to recognize about ESG is how it aligns with investment priorities in general so at New York Life we believe strongly in prioritizing wise investing over the maximization of short-term returns uh risk control and
• 128:00 - 128:30 consistency are therefore probably the most important thing you can Implement in a portfolio to help uh a client achieve their goals or to help achieve your own goals and that that comes down to portfolio construction and that comes down to the factors you're using to analyze Securities and this is very true in in the retail sense and it should also be true in the the institutional sense investors when they pick a security they should be
• 128:30 - 129:00 thinking about it as long-term ownership especially when you're dealing with uh insurance companies and and large institutional managers who have to manage their liabilities you need to be assessing the prospects of that business you want to be investing in a management team and you want to pay a reasonable price for that security this that's the value of active management and so I think about ESG and and we think about it as a toolkit that these are just fact additional factors like everybody's been
• 129:00 - 129:30 talking about integrated into an investment process that play a material role in determining how an investment will behave what's its risk what's its return what will the performance be like and therefore we believe that it's integral to a fiduciary Duty uh to financial managers and if so if I were to sum up anything from this conversation I would I would say that uh ESG is good for investors it's good for
• 129:30 - 130:00 asset managers because it'll add active it will add Alpha and it's it's good for the world well that about summarizes it um you know what I'd like to to think about here is you know we asked could we Define ESG and as you see there's many different ways of looking at this um so there's this wide range in front of us but the the key question isn't which one I should choose uh when we speak with investors it's really important to understand why you're doing it clearly
• 130:00 - 130:30 the the objectives for implementing esj will go along way to finding the strategies could be aligning assets and values uh we see our surveys that's the reason cited most frequently by institutions but a growing number are also trying to minimize headline risk and find more diversification I think it's helpful to hear from each of you about the motivations behind your decisions and ran as as impact investing is um a big you know kind of interesting area on that can you tell us that the process the thought process that went
• 130:30 - 131:00 behind Mass mutual's decision to focus in this area yeah thank you Dave you know ESG focus is is ensuring that our business is sustainable since it perfectly aligns with our purpose as a Mutual Life Insurance company right we want to ensure that we're here for the next 100 70 years for our policy holders um that's number one secondly the owners of capital are asking for this product they're asking for how do I get into a green life insurance how do I get access
• 131:00 - 131:30 to these products in you know Mass Mutual has 9,000 some employees across the United States and a lot of them are financial advisors selling different Financial products and they're constantly being asked to us in Investment Management saying everyone's asking for this what do we do and and I we we hope that one day closed end funds like impact funds will be more democratic where retail investors will be able to access these great products but today through the Gia we decided
• 131:30 - 132:00 alongside investing in public and private and fixed income we thought we will build a diversified impact portfolio because that's an area that we can build on our existing infrastructure as being an LP in funds and investing alongside of them investing class opportunities as a co-investor I think it's interesting that you you mentioned this is part of long-term sustainability in terms of your business and how you look at this and I think that parallels with what Scott had been talking about with what he's doing on governance side you know um Scott it
• 132:00 - 132:30 sounds like an added layer of due diligence you can you talk about why it's so necessary to have this Approach at this particular point in time sure i' I'd say you know within that framework that everything we do is driven by our mission to produce benefits I think increasingly ESG is is becoming front and center for at least two reasons um one is as investors we'd all love to have the luxury uh of
• 132:30 - 133:00 looking into the future and seeing what performance might look like uh but inevitably Financial metrics are backward looking uh they tell us the performance of the firm up to dat or over a snapshot of time what I think we're seeing with ESG factors is some insights into prospective future performance or future risks to returns uh so it might not tell us the actual performance of a company uh but a
• 133:00 - 133:30 company with better workplace safety uh uh metrics uh better attentiveness and uh focus on customer relations or Regulatory Affairs might benefit from a license to operate that fac facilitates their expansion uh and a more stable less volatile uh performance track record so I think that we're looking uh not only in ourselves but for Investment
• 133:30 - 134:00 Partners and the asset managers to whom we allocate Capital to assess to what extent do they have robust research processes that focus on factors that could impact uh that future performance through an ESG lens the second quick point I'd add is that the we've seen a flip in the balance of intangible and tangible Assets in the last 50 years so whereas in 1975 83% of the balance sheet was
• 134:00 - 134:30 comprised of tangible assets uh factories equipment so forth the shift to a more service-based tech-based economy now has that ratio flipped so questions like brand Equity uh uh intellectual property mean much more and that's where ESG kind of becomes an Insight uh into the future valuation of firms I'm sorry if I can just ask a question of Scott um I I can see where
• 134:30 - 135:00 um for instance with Rowan he has individuals retail investors who may have their own particular reasons why they want to they have certain values or they want to see reflected in their insurance company but you have you have to make sure you get you you pay benefits right and probably like almost all US public Pension funds you're probably less than 100% funded right so you have to make sure that every dollar that you invest really is invested you get the best risk adjusted return so how do you do that how do you go about quantifying or measuring that risk
• 135:00 - 135:30 that's in the future that isn't the you know the the you know reflected in data that's easy how what's your process sure so we we rely in part on Broad industry research empirical evidence of what kind of uh factors could be financially relevant so that helps inform it uh we as a fund do not manage the assets internally uh we select uh external asset managers uh so
• 135:30 - 136:00 across all of our asset classes be it real estate fixed income public Equity private Equity uh our process is to ask every mandate to what extent are they identifying uh material factors on ESG that could bear upon the financial performance of that specific mandate and how is it incorporated into their portfolio construction and what can they provide us uh that is convincing that it's genuinely uh related to material
• 136:00 - 136:30 factors and financial performance either attribution uh or examples or combination uh and as ESG grows uh we're looking to measure leading practices within that and Factor it into a holistic View on the quality of our of our Investment Partners what we found with that to date is that there tends to be a correlation uh but you know the ESG assessment might just be a consideration
• 136:30 - 137:00 of uh the research quality uh of the investment process of of our partners that's it's almost like thinking about the the risk factor section of a private placement memor random or something like that right where you're you're asking them to flag for you things that may not be reduced to a number but that are risks that need to be taken into account on a prospective basis it's correct and it gets a little bit tricky with ESG in the sense that what's material may vary uh by industry
• 137:00 - 137:30 uh it might vary by the investment time Horizon it might vary by the geographic exposure I so by not having a a singular and prescribed approach but rather invite a dialogue with our man managers were trying to Probe on to what extent they're focused on genuinely meaningful uh factors so to some extent this could be regarded as things that investors always did in terms of looking at
• 137:30 - 138:00 prospective risks right but taking a particular approach to it I mean it feels like that's what you're sure in in some regards ESG is a no new name for old-fashioned fundamental research analysis and uh uh composition you know if we ask the inevitable question of the co-panelists what happens in five years you know I think in some regards you know we'd anticipate that ESG is not a separate pillar of consideration uh but simply uh
• 138:00 - 138:30 incorporated into a fundamental uh investment analysis thank you can I make a comment on Scott's speech because I think I can interrupt this I'm moderator one of the co- moderators so please allow me to ask you one question uh as Scott mentioned the ESG concept uh is not the the New Concept it's a it's a it's kind of the
• 138:30 - 139:00 repacking different the concept these days uh one thing I uh remind is that the Korean national pension service NPS the for the first time they adopt the the concept of ESG was not ESG it was SRI it was year 2005 about 15 years ago they initiate SRI investment and they made a team of
• 139:00 - 139:30 Sri uh initiative team but they haven't done the SRI considered investment actively because uh they're not sure about the impact or effect of that SRI con considered investment of their uh risk return profile of NPS hu's portfolio uh after that uh I think year 2015 10 years after later uh in November
• 139:30 - 140:00 they for the first time made uh their NPS ESG estimate system with creating 52 different factors it was only for the domestic Equity investment and right now uh uh year to 2020 about 25% of their domestic equ and fixed income is undercovered about that the
• 140:00 - 140:30 ESG estimates that that consideration when the investment and they have a plan to increase that the ESG based on investment uh up to almost 100% by year 2023 it it is a plan in three years they increase that ESG concept to cover all other asset classes not only domestic but the offshore I think it's pretty much optimistic concept but still we're not
• 140:30 - 141:00 sure because the effect of the ESG whether it will increase enhance of return or alpha or reduce the risk uh uh especially academics when you look at the academics the research there are very inconclusive results about the impact of the ESG research one research I've been done several years ago with my
• 141:00 - 141:30 other colleague was the uh it's a it's a narrow concept but not only not looking at the ESG as a general but we look at the corporate reputation the most admired company uh ranked by The Fortune Magazine and Economist magazine since 1985 and we looked at is that factor can be used as a explanation factor of return or risk not conclusive res not
• 141:30 - 142:00 not a clear result it's a foggy very unclear so I'd like to ask you the Scott and Mr Yun from the nework life Mr Yun said you you're new life also about 25% of your investment is covered by the ESG at this time uh what is your plan what is your hopes and dreams in the nearby future about USG do you want
• 142:00 - 142:30 to increase yes so I need to clarify that um the investment side of New York Life is actually um that I refer to is for client business so the fact that um and I specifically mentioned our European business candriam the fact that you know that about 30 you know plus percent is in um dedicated ESG uh that's at clients choosing um and the fact that so-called non-g mandates
• 142:30 - 143:00 all do incorporate aspects of of um ESG best practices as um I believe uh Scott has mentioned some of the framework behind ESG is just good value investing so um you know you know some of our managers even here in the US that Embrace ESG later uh they look at some of the you know the concepts behind ESG and many of them say oh we do some of that already so the fact that getting to
• 143:00 - 143:30 100% for an asset manager that manage money for client is not a goal we can obviously set NPS is obviously asset owner he can absolutely decide uh uh at least as a goal set as much as it would like to to dedicate to ESG what I'll say is and maybe you know to follow on on the U the insurance aspect our parent company U um um obviously we uh the general account Embraces uh
• 143:30 - 144:00 ESG in concept but we also get emails from our um you know we're Mutual company but we get emails from our agents and hold uh our clients which are our our um policy owners and asking us why don't we buy more of some Alternative Energy company or solar P you know Etc well we have a simple we we we we even within obviously insurance company we or ESG philosophy we don't like exclusion
• 144:00 - 144:30 rules but there are some things that we absolutely do have exclusion rules the easy ones are tobacco gun companies that may generate majority of their their revenue from guns or Firearms so we actually do have exclusion roles in certain asps ects coal is an easy one to to to pick on and use as an example but energy sector as a whole up to this point it's been difficult because of the size of our general account and we're not the biggest insurance company in the
• 144:30 - 145:00 US but nevertheless our size we need to buy 20 30y year uh uh debt cor corporate debt or private uh debt in certain um issuers and unfortunately some of these Alternative Energy are starting to be improving their technology and now they're getting cheaper and and some of these companies are getting larger and sizable but up to more recent times we had no real choice in the matter but to in get get to to invest in some of these
• 145:00 - 145:30 energy companies they may not be deemed uh ESG by certain um framework however we do believe in best and breed uh companies so we do have to work with utility companies and the utility companies that actually are embracing move to Alternatives faster better in in in a smarter way so we do tilt to to best in breed but we are not going to make an
• 145:30 - 146:00 exclusion or inclusion to small alternative firms so we can only do so much when you have large asset size and policy holders to take care of so 100% seems quite aspirational though I I I do appreciate NPS is aspiration is very respectful thank you thank you so Jay and Robert both you multi- affiliate I know that well as well uh from n tias what is the challenge of you
• 146:00 - 146:30 know the many different definitions within the organization and how do you kind of rationalize what's going to qualify and fit within your own view of of ESG and what you're going to bring to Market yeah so I I'll go first and I Robert can add if you would like um first you almost do it's hard to have one one process overarching process that you can uh dictate to your boutiques for one thing each Boutique has a specialization we don't um we have some
• 146:30 - 147:00 overlaps but majority of our boutiques are are expert in certain particular asset class our European entity happens to be the one that's exception to that because one of their capabilities multi-asset similar to us so when you so for for them they actually have to have a defining screen for everything around the world right including Frontier Market where to be able to apply the same rigor that you would apply to European Equity or or corporate bond you
• 147:00 - 147:30 can actually get access to so much abundant of data that you can apply riger down to you know individual security and Os syncratic whereas in you know as you get into emerging in Frontier Market you unfortunately have to come up with certain country rules Etc to get over the fact that the data quality isn't isn't there to apply the similar rigor um also when you go into the Other Extreme like our us fixed income manager maai Shield sitting here in in New York because some of the asset
• 147:30 - 148:00 classes are our structure product Etc it gets a little more difficult to apply the strictest ESG lens that our European entity does in applying looking at a specific company so each asset class needs to embrace you know how how they apply ESG you know traditional ESG rules that you could look Google and look up to a particular asset class and specificity so we do leave it uh uh to the managers to uh come up with u how
• 148:00 - 148:30 they evolve their best practice and it's hard to dictate um beyond the philosophy and theme Robert you want to add anything to that we find it a a great answer there Jay I don't have anything to add to that I think what I would say is that it come always comes down to portfolio construction no matter what factors you're talking about uh one thing that we're noticing to to go away
• 148:30 - 149:00 from ESG for a second is that investors are hunting for yield and there's a lot of different ways you can hunt for yield but you're gonna are you going to take duration risk credit risk Sovereign risk all these different risks to get yield uh and and how do you how do you balance all those different risks to not lose your shirt all at once when the environment changes and so thinking about how you implement ESG factors to a portfolio it all comes back to portfolio construction as well and so that's why a
• 149:00 - 149:30 lot of our funds we as Jay said we have negative screening we have ESG integration and we have best-in-class screening ultimately it comes down to what the client wants and what's best for their goals and circumstances but in in the multi-asset solutions team's opinion uh it requires having a a sector neutral strategy which is basically a best-in-class approach where you're selecting the highest rated ESG companies for every
• 149:30 - 150:00 sector and the reason that's important is because as you know I think I forget who said it Dave I think you said it but ESG factors are non-stationary they change over time how they impact security uh their impact Chang changes over time and they're also they interact with sectors very differently an escore in the energy sector is totally different than an ecore in the technology sector um and and that's why it's it's it's really
• 150:00 - 150:30 important uh to to make sure you have the right portfolio construction process when you're integrating or uh impact investing well I think you rais an Point ran I wanted to go back to you on this in terms of how you're implementing impact how do you look at that universe that's available to you how do you find the um the project some of the stuff we see in our research is uh institutions believe that they would uh invest more if they could find more projects how
• 150:30 - 151:00 does that process work for you well what we did was we decided to break impact down into six categories right so larger PE strategies VC private debt secondaries women minority and Emerging Markets and within those six buckets we've decided to hunt for the best-in-class managers that are going to derive impact across the UN sdgs that uh have a strong institutional track record that we can back and we can track those
• 151:00 - 151:30 metrics over the life of the investment that's how we look at impact on building this kind of diverse portfolio right and is the diversity there that you you can find the the mix that you'd like to have there well you know there well it's it's a tough question because there's a lot of regular Market funds that maybe did not have a lot of a success raising a traditional private Equity Fund they hire one person they Rebrand themselves as an impact fund and they come to Reb
• 151:30 - 152:00 back into the market for that so there is a lot of due diligence to be done but there's no shortage of um managers coming um to Market I think there's a lot of opportunity uh that's only accelerated over the last 12 months um so the number of managers available um I think has grown probably double double double that's uh that's quite deep on that and and just to kind of Bring It full circle with Scott you know talking about that that universe that you're looking at and how you're approaching it
• 152:00 - 152:30 much more kind of a a broad-based global scale within your portfolio what's the process like as you're going through that and considering the governance and the different factors in there what do you how do you break it down how do you start looking at those um factors and kind of find what material as you'd said sure I I would maybe add two points for us at this point uh ESG integration for the fund is more about process uh
• 152:30 - 153:00 assessing and scrutinizing asset managers uh process for identifying what actually might be material and impact uh financial performance not necessarily a designated product uh which can take different shades of themes or focus on one thing or the other we we are looking at uh investment process but I think at this point in the broad Market uh wherever we are uh in the world uh what we critically need to move the
• 153:00 - 153:30 discussion forward uh is more uh standardized comparable data inputs uh so when we think about ESG factors you know we've got a whole history of developing uh standardized financial reporting we have very little standardized uh reporting disclosure of material ens factors in the US up until a recent SEC uh regulatory reform the
• 153:30 - 154:00 only uh Workforce metric that's disclosed is the number of employees uh we we like and need much more insight so part of our process is also advocating for Frameworks for disclosure such as a sustainable ability Accounting Standards border SAS uh which breaks down across 77 Industries with the input of investors and companies what's actually material and financially relevant on ESG
• 154:00 - 154:30 factors for each industry so that's a two-fold approach of both due diligence of managers as well as some Market Regulatory and uh structural reforms which we think can move the needle in the years to come thank David David I think now uh the Korean speakers can involve this discussion we have about 30 minutes or so so uh you already talked and asked uh most of the questions I was
• 154:30 - 155:00 thinking about uh to the the speakers and now we have again three Korean panelist and uh we are uh about same issue talking about what and how and why ESG in your organization and yourself how do you think about ESG and and what is your
• 155:00 - 155:30 objective when you think about ESG is that top down or bottom up concept one one one issue I I've been heard a couple of days ago was that if ESG been ES is initiated or derived derived from the as a top down like a government or Regulators it could be maybe it could be uh there is a chance to be a at a mercy
• 155:30 - 156:00 of politicians or it could be a a double edge knife the concept of ESG is itself and if you can you can also get some comments on that kind of issue as well uh so why don't we start uh the discussion from the MR Chung the CEO of Korea investment management and please
• 156:00 - 156:30 uh give us a wonderful comments Mr chair thank you um well as a matter of fact I um I must take the the last turn because I'm just the asset manager instead of the asset owner so um but uh uh when I have a chance I need to respond to your you know order um thank you very much and uh it's so such a nice place to be with you from the US and uh my name is
• 156:30 - 157:00 Chung and uh I'll just take just one minute to introduce my my my company career investment management um we had the oldest as management company in Korea which was established in 1974 and uh we do have the assets of on the management the size is roughly um um more than uh 50 billion US do that is the official uh figure and um we are the U the largest ass management company amongst the the so-called stand alone
• 157:00 - 157:30 companies by which uh we mean that we are not affiliated with the large insurance companies nor the large commercial Banks and also what is important is that the fact that we are the probably the number one one uh well as a matter of fact number one but at least one of the most one of the largest um ESG as a manager in Korea in terms of the Korean Equity uh we manage more than 700 million US dollar worth of the uh
• 157:30 - 158:00 Korean Equity uh with the guidance of the benchmarks and uh uh detailed uh mandates and um also um before I came to this place I went through some researches on the Korean equ equ in terms of the ESG management ESG investment and I just realized that um uh we do have a huge amount of es Equity manage Equity investment and at the same time we do have a also growing and
• 158:00 - 158:30 fastly growing number of uh issues of green Bond I mean the ESG fixed income investment as well in in domestic Market but I I like to I would like to focus on the equity investment today because that's the area that we do have the uh expertise and um um one thing from the macro perspective in the ESG investment and and allocation I just real uh found out that uh it is heavily uh focused on
• 158:30 - 159:00 active out of the equity investment categories uh is active and large cap and growth instead of value and and hybrid so um and also one thing that potentially bothers people uh in this room is the is there a a research uh where we can find that uh when you go through the factor analysis on on various you know ESG mandates or
• 159:00 - 159:30 portfolios there is a a not that big uh tilt I mean tendency towards the ESG Factor so as I just mentioned U the ESG Mand dates are heavily um you know um concentrated in the areas of in in the categories of active and growth and and large cap and probably that's the one reason why we cannot exactly you know um single out the ESG factors out of those
• 159:30 - 160:00 portfolios and and the other thing but well it is only back test so we need more research to figure out what exactly that it that means but at the same time uh one of the experiences we we had from the front line management is the fact that um uh it is not clear whether or not we are uh posting higher definitely higher uh returns from the ESG Equity investment where many research is uh uh
• 160:00 - 160:30 um um saying that research results saying that uh we do have a slightly higher you know returns compared to the average of the market but it is not clear whether whether or not those findings um you know statistically significant or not so well that is the homework to um not exactly the ass managers but I'm just telling these stories in order to you know get the uh first time look at the Korean investment
• 160:30 - 161:00 I mean uh the ESG investment in Korean Equity Market well uh let me just give you um I just take three minutes to give you several points that we found from the Frontline experience uh number one is the um um I just mentioned the the ESG scoring system does not exactly guarantee any you know significantly or meaningful our performance but that's the homework to everybody especially um
• 161:00 - 161:30 uh the asset owners who are giving uh giving out the mandates and also uh The Benchmark providers it's everybody's homework and second thing is that um uh it is a rather related with the um strategy or method uh you know perspective and um the the the the Korea um ass managers who have the ESG portfolios are heavily depending on the negative screening
• 161:30 - 162:00 methodology and that's what happened in the past and these days more and more s managers are focusing I mean deviating or applying additional methodology which is called ESG uh integration ation which were you know covered about 30 minutes ago here and well well people would say uh I me would would call it a financial integration or ESG integration that's anyway is kind of you know somewhere between the ESG scoring system and the traditional
• 162:00 - 162:30 financial analysis and another thing um one other perspective that is pretty new I I like to to uh I like to um make a comment on two points number one is that um the E out of ESG is um more or less very closely related with the revolution industrial revolution that you are facing so um it's kind of the um well for example um many ESG portfolio we can
• 162:30 - 163:00 find out um you know stocks in in in electric vehicles or hydrogen cell vehicles or uh fuel cells or some other things like uh you know renewable energies so that is a good thing and um and and at the same time in in in this year we just found out that some of the portfolios have a pretty you know big investment in in BIO stocks which are uh related with the you know um
• 163:00 - 163:30 people I mean helping to escape from this pandemic so that's a good thing and also uh the other thing is uh which gives you um pretty you know a long-term dynamism I mean make us to expect a long-term dynamism is the fact that uh compared to the Past um uh past habit of of SM and portfolio managers just focusing on the end
• 163:30 - 164:00 products they are just deviating from that habit to the embracing um processes and uh and Supply Chain management and also the environmental opportunities so for example they are um you know uh investing more and more stocks with the uh uh better uh I mean uh the environmentally friendly uh production processes and also um the stocks with uh with um better venders in terms of ESG
• 164:00 - 164:30 compliance and also um they have stocks with the uh uh more future oriented you know Technologies definitely uh related with environmentally uh environmentally opportunities so that's one good thing in in which we can find out um in those portfolios and the the the last thing I should mention is that the kind of a short-term homework for the S managers
• 164:30 - 165:00 in Korea that is the um the well because we need to Everybody Must embrace the future so um we we have a homework like this uh that's one uh that is the we needed to hire more and more you know ESG specialist in the market because um up until now almost every SM managers are just heavily dependent on the scoring system from the outside uh outside advisors uh we do have several you know uh professional ESG um scoring
• 165:00 - 165:30 system providers in in in in Korean market but at the same time even with those help from outside uh advisors every as managers uh especially the biz companies should hire more and more analyst or specialist who are specializing in ESG um investment strategies or prospectives in the future okay thank you thank you Mr CH uh I think from now on it is two-way communication so anyone of you in the
• 165:30 - 166:00 zoom can ask or comments any questions and comment uh to us so I think it's open is it okay David okay so so we we can talk each other now uh uh I have one question to uh five of you on the jom from the states uh Mr so just mentioned very uh uh briefly and uh important
• 166:00 - 166:30 issues about the ESG in Korean industry especially asset management companies uh to me it seems like ESG might be it would be another burden or cost of the asset managers in in the industry do you have some kind of the similar experience in the states how can we overcome such the burden and cost of
• 166:30 - 167:00 the ESG excuse me Professor J that is not exactly what we are experiencing sorry no extra burden or cost well that's what we do for our you know um for businesses I understand it's a homework it's yeah do you do you understand Brun meller yes yes how do you think about that do I think that that there's that one sacrifices something in order to take ESG into account is that the
• 167:00 - 167:30 question yes I I think that's a legitimate question um I would ask maybe some of our Scott or realan who deal with this or Jay um what their view is on that topic I I I do think that's leg legitimate concept uh but it sounds like particularly with theera they they've they've go out of their way to avoid having it cost them anything when they make investments if I understand Laser's position correctly I don't know if if ran or Jay has a different view on that
• 167:30 - 168:00 but certainly to the extent you you get something you could potentially be giving up something so I could see where there would there could be a cost well I think U on a short-term basis year-over-year or you know even two to three years you know I think the maybe possibly example might be tobacco stocks um I think you know there some periods when you know when tobacco stock has a great year and and you read an article about you know so cpers so you
• 168:00 - 168:30 know whoever big pension in in American pension you know underperformed because they were you know practicing ESG or exclusion on on Tobacco and yeah over a shorter period it's very possible but I think the framework of USU were talking about is longer term and also I I guess I I wasn't very clear at the beginning of this which is I think like you know I I'm like big believer on that this pandemic has expedited events that might unfold over the next decade or to and to
• 168:30 - 169:00 a much shorter frame work and that we can very clearly see and I think everybody here is seeing that in technology and and and Healthcare and in these two categories I think um it's not that pandemic created this change I think pandemic speeded up the pace of change that was going to happen over longer period quicker I think ESG uhu particularly with energy and some of the themes that are playing through I think
• 169:00 - 169:30 would have eventually happened because of the regulation uh commitment by regulators and European uh uh companies or countries to uh U conformed to climate change we were going to get to Energy prices much lower and and I and pandemic has exp expedited that process so I think I think same thing for ESG the the non-believers of ESG and that's what I was trying to explain about America are on board because not because
• 169:30 - 170:00 they believe in it but because the the change of pace is speed speeding up and and and many of us who believe in it are quickening our pace so it's like move to indexation or move to certain there's a thematic trend uh uh that you've seen in past with other events guess what ESG is about to make that leap so get on board now for Pure for Alpha reasons or you can uh come follow us later uh and collect a
• 170:00 - 170:30 few pennies we left you behind so I'm I'm I'm already a Believer so I'm I'm talking my own book but I do believe uh it's time for those that are being told by Regulators to do it that it's eventually going to uh going to get there faster and it's actually going to generate Alpha again longer term but he might not be as slow thank you I if it's a it's a more sophisticated way to analyze risk which I think is a lot of what you guys have been saying then
• 170:30 - 171:00 that's clearly additive right I'm sure I'm sure it's I'm sure it's it's cheap in the short run to dump your garbage in the river but over you know over the longer term people have to drink that water or or what have you thank you I think that's I think that's a great point I use the a similar analogy I talk about maintenance on a house it is costly to do maintenance on your house but if you don't fix your foundation when you have uh infestation of something that's eroding it then it's
• 171:00 - 171:30 going to be a lot more expensive down the road right and yeah and so I think about e which is probably the factor that gets the least attention among all investors historically for whatever reason it might be maybe it doesn't have that much Factor exposure but climate or human induced climate change is one of the biggest things we're going to be facing as a society in the next two decades and the regulatory burden that's likely to come out of that will be large and so if you think about two companies company X that has plans to be carbon
• 171:30 - 172:00 neutral by 2025 versus company y that has no thought about how they're going to reach carbon neutrality who's better positioned for that regulation thank you I understand now now we have uh other speakers in Korea uh why don't we listen from Mr changan from public officers benefit Association Mr CH you know the questions we have a uh uh very important questions several
• 172:00 - 172:30 questions you can answer all those questions in like let's say 10 minutes yes thank you for having me here well basically I think you know uh as a as an owner in Korean uh as industry poba has been pretty much committed to that es issues for the time for the long time but uh I think you know at least uh in Korean industry is just nent uh stages
• 172:30 - 173:00 so we still have a long uh way to go but uh you know I just would like to briefly give you the snapshot of the how you know POA have been doing uh before uh basically we uh have uh increased our uh socially responsible investment in Korean public Equity spaces in um 2018 and uh we uh selected uh in external uh
• 173:00 - 173:30 independent uh what the boarding right advisor we we hired so we uh exercised our boarding right very responsibly and in that uh alternative spaces we have been increasing our investment in renewable energy and wind farm project uh globally and uh these days we are interested well not actually these days uh we have been increased our investment in residential sector in the global uh
• 173:30 - 174:00 area uh however after the uh covid situation I have started to interest in uh affordable housing area in real estate uh residential sector so uh anyway um why Puba have started to interested in investing I mean expanding ESG investment because our members they are all Korean Regional public officials they have been serving uh during their
• 174:00 - 174:30 whole life to Korean society and Regional Society so uh they think their retirement fund would like to be uh invested in such a you know a best manner to in in accordance with ESG uh issues so I think Puba uh well uh it will be a bottom up approach so whenever we invest in uh we will uh continue to Monitor and examine ESG issues very
• 174:30 - 175:00 carefully uh not to violate it and finally I think the after the uh Corona virus issues uh we not as a lot of other panelist mentioned we noticed that the uh uh the uh D Divergence between the rich and the poor is getting more severe and also educational uh I mean capacity has
• 175:00 - 175:30 been uh still uh I mean um I mean EXA uh deteriorated maybe you know uh rich people can still uh were uh uh they can they can do their own way by uh you know spending their money for you know in their personal uh education system or whatever it is issues but you know poor people have not been uh doing that kind
• 175:30 - 176:00 of way so I think you know uh after the co issues Divergence between HS and have not and I I mean in society as a whole we we will notice more uh differentiation and Divergence issues more so uh as a responsible investor in the world uh I think we still continue to uh be more focused on that ESG issues thank you thank you thank you now Mr IG Hong
• 176:00 - 176:30 from create teachers pension it's your turn you know the question how's the create teacher pension think about the ESG do do you consider ESG this time gu finally finally it's my turn Okay uh before answering your questions uh like uh SI Jang I'd like to briefly talk about how teachers pension Korea is doing about ESG investment uh as the second largest
• 176:30 - 177:00 public pension fund in Korea we are also very keen on ESD investment however the amount of investment in ESG side is is quite minimal so far so going forward we we we're definitely trying to increase the ESG investment uh currently we are investing ESG area in four different categories the first one is as uh the professor uh Jang mentioned like uh NPS we started
• 177:00 - 177:30 SRI mandate for domestic equities uh over 10 years ago and this mandate requires external asset manage managers to integrate the uh active SG uh consideration into a stock selection process also it applies the exclusive screen methodology as well the second category is investment in new renewable energy power plants through Global
• 177:30 - 178:00 infrastructure funds and over 20% of our Global infrastructure investment is uh focused on renewable energy power plants the third category is investment in local commun community projects to create jobs this could be considered as a impact investing because the outcome of job creation is evaluated and measured by the uh government on a
• 178:00 - 178:30 regular basis and the fourth category we are investing is green bond to finance uh to support Finance for electric cars those are the four areas in addition to that we are in the process of adap adapting Korea Steward chip code uh for now uh we the creative teacher pension is qualified as a official study code pass participant by a third party evalu
• 178:30 - 179:00 evaluator by end of last year and this year we are in the process of uh making detailed uh Steward activities uh guidelines for stewardship code activi which will be du which will be done by end of this year so going forward we will have more ESG investment going forward and moving back to your question how the YG investment approach should be uh done uh my answer should be quite B
• 179:00 - 179:30 uh quite simple it should be done both way not only top down but also bottom up as many speakers said uh today the asset owners and asset managed companies they should uh continue to develop further regarding the ESG research capability and integrate uh their uh integrate estd factors more actively uh in their investment
• 179:30 - 180:00 processes uh if you know fortunately MPS MPS is taking the greater or or stronger leadership in this area so I think uh I'm I'm quite positive uh regarding the future of the uh ESG evolvement in Korea and from the top down side I would like to say two points a one is as Mr Cho said the ESG scoring uh uh area the
• 180:00 - 180:30 these days currently the the ratings for a single company varies widely across different uh scoring data providers so uh I think when is to improve in that area to build up uh the common standard of ESG measurement and I think that will help to uh F facilitate the EST uh investing faster and second point is
• 180:30 - 181:00 more active role of The Regulators uh Regulators are doing a lot of things uh already but I think there are more rooms for Regulators to attract more private money into US area going forward uh so yeah that's my answers thank you thank you for nice comments so we have about five minutes or less now I think uh in New York time it's almost
• 181:00 - 181:30 11:00 p.m. very late night so let's try to wrapping up our session do you have any questions to Korean speakers and if also the Korean speakers do we have any questions to ask them about the ESG Scott David I have one question to us pension um asset owners um based upon your long experience uh in investment in ESG
• 181:30 - 182:00 issues uh as I mentioned what is the uh biggest risk factors uh Korean investors should consider uh as a beginner when in the stages of investing uh phases you know our thoughts are uh that there's a lot of power in asking a question uh so perhaps the biggest risk would be
• 182:00 - 182:30 to launch an approach towards ESG with a prescribed uh preset determination of uh what it might be consistently across the fund uh since it ESG factors that are financially relevant may vary uh by mandate as class industry so forth uh we we find it instructive to ask a question and then evaluate the quality of our asset manager response uh and evolve
• 182:30 - 183:00 with them over time uh since there's rapid progression in the space thank you is that all any other questions uh we may have a question from The Zo I mean the YouTube audience or any audience from the line
• 183:00 - 183:30 if not why don't we uh close our session this time now so thank you so much for your time and efforts on this great session and I appreciate appreciate and uh we wish you have a safe and healthy days and we'll talk to you again thank you thank you very much thank you everybody thank
• 183:30 - 184:00 you session up session one with our nine panelists we looked at LP time New Horizon on alternative Investments assessments and Prospects of ESG we talked about how covid-19 has changed the landscape of ESG how there are new challenges and also New Opportunities and tasks ahead for us as
• 184:00 - 184:30 well I look forward to and I'm sure all of us are looking forward to the uh work that all of our nine panelists will be doing in ESG moving forward as well and thank you so much for your inputs so this concludes the morning session that we've prepared for Global alternative investment conference 2020 so we will now break for lunch and please be back
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• 251:30 - 252:00 is leading online use Innovations and we also have kg0 in which is one of the um
• 252:00 - 252:30 career's best fund assessment uh company so uh this GIC 2020 is co-hosted by these two businesses and uh in this session we're going to talk about alternative Investments and uh future strategies going forward so in this session we're going to talk about uh PE and hedge funds increasing increasing credit risks and reverse conversion strategy the first speaker is uh Mr
• 252:30 - 253:00 conin Tam from Black Rock so please uh hello I'm Conan Tam managing director and co-head of private Equity secondaries and liquidity Solutions at Black Rock based in New York I'm going to speak with you today about private Equity secondaries first I'll describe what are secondaries and why does the private private Equity secondary Market exists then I'll touch on what is the role of private Equity secondaries and portfolios and finally I'll briefly
• 253:00 - 253:30 touch on what is the current market opportunity right now especially after the covid driven market dislocations so first a brief introduction to secondaries a private Equity secondary transaction is in its simplest form the sale and the purchase of investors existing interests in private Equity buyout Venture and other alternative investment funds there are
• 253:30 - 254:00 lots of other similar forms of this but that in its simplest form what a private Equity sector secondary is private Equity secondaries is really a natural growth or derivative in the evolution of global private Equity as private Equity as an asset class started and grown over the last 30 to 40 years we've now seen significant growth in secondaries starting 20 to 30 years ago so the
• 254:00 - 254:30 secondary Market really has been around since the beginning of institutionalized private equity and has has grown in size and sophistication together with the broader private Equity Market the secondary sale really is the only way for an investor or we also call them limited partner or LP in a private Equity Fund to get early liquidity a typical private equ fund investment is 10 or more years and some of you who have invested in private
• 254:30 - 255:00 Equity knows that sometimes it longer to be fully liquidated from private Equity Fund so today we see about one and a half to 2% of the global private Equity Market transact in secondaries this was about 90 billion usar last year and as the market in private Equity continues to grow you know right now we estimate the current Global private Equity Market to
• 255:00 - 255:30 represent over two and a half trillion in net asset value and this is based on three and a half trillion US dollars that was raised in the last decade so secondaries are very unique and special in that there are clear reasons why there should be continued growth in the market over the coming years as I will soon discuss persistent inefficiencies that the strategy really takes advantage of as
• 255:30 - 256:00 well let me discuss the role of secondaries in a broad portfolio now secondaries We Believe are attractive for investors allocating to private Equity both new investors to private Equity as well as existing investors to private Equity secondaries now have posted more than two decades of performance that show the strategy really generates some consistent and strong returns for relatively lower standard deviation or risk the loss
• 256:00 - 256:30 ratios in secondaries are also lower than in broader private Equity now aside from returns secondary's role in the portfolio could also include jcr mitigation because you invest quicker and you see money and distributions come back quicker diversification given that secondaries you're buying into highly Diversified portfolios and countercyclicality as we'll talk about
• 256:30 - 257:00 during uneven times are when secondary well positioned to make good investment ments as well but how are returns actually generated in secondaries so there are few parts to this I think one is the discount to the stated net asset value but it's not the only thing that matters it's also the growth of what you acquire within the portfolios of the underlying companies and the value that the
• 257:00 - 257:30 managers of those companies are really generated so secondaries returns are strong because the strategy is really based on taking advantage of inefficiencies that are just a part of private Equity investing specifically delayed reporting so it's quarterly reporting at best uneven information given every private Equity manager reports differently information that's not readily available or accessible and
• 257:30 - 258:00 the need to both a high level top down view on investing as well as being able to do fundamental Bottoms Up company underwriting I think that in addition to all this there's also different layers of inefficiency in secondaries not only what you're buying and at what price but also who you're buying from matters for example uh if you have many investors in
• 258:00 - 258:30 one private Equity Fund today if you get a price from a let's say university endowment seller chances are that will be a very different price than you would get from uh let's say a large Sovereign wealth fund both of whom are investors in the same fund so a lot is said about discounts which do matter but historical returns show that discounts are just one component of overall Returns the quality of the underlying companies in what
• 258:30 - 259:00 you're buying and of the private of the funds being acquired are of equal or even more importance I would say that's what makes it challenging and fun to invest in secondaries and that's how strong returns are consistently generated in strategies finally let me talk about the current environment for secondaries especially how things may have changed in 2020 now before then let me give you a recap of what the market looked like
• 259:00 - 259:30 at the end of 2019 before the market volatility this year 2019 was a record year in secondary transactions we think about $150 billion dollar of deals was brought to the market and 90 billion US dollar transacted but this was less than 2% of outstanding private Equity so as I've noted before we think there's still room to grow despite This Record level of secondary deal volume the amount of capital or dry powder pursuing
• 259:30 - 260:00 secondaries was balanced against available deal flow so the buyer seller Dynamic is really quite favorable to informed buyers there were discounts last year but pricing really softened or weakened especially in the second half of 2019 Market data would show that full year pricing for secondaries transacted at about 88% of net asset value in 2019
• 260:00 - 260:30 and this was down from 92% % of net asset value in 2018 now this pricing and in weakness in pricing was really driven by supply and demand and also secondary transactions take time to come to the market and so by the time sellers were convinced to want to sell private Equity portfolios the buyer demand was already very very selective so postco since March the op
• 260:30 - 261:00 has really really changed a lot as we said as recently as the beginning of this year secondaries is really the perfect counter cyclical strategy and really great for a distressed environment now that we're in a stressed cycle what we spoke about in the beginning of the year is playing out real time we think that there's more Supply coming now into the coming year
• 261:00 - 261:30 or two or more because this dislocation is forcing more to come to the market looking for liquidity this SE search for liquidity is really driven by budget constraints and revenue stress at some of these selling entities that is not linked to where the public markets may be trading globally and so in addition to this what has been a very busy part of the secondary Market since March is really
• 261:30 - 262:00 this new non-traditional or manag manager Le secondaries specifically where secondary funds and and buyers are providing flexible Capital to private Equity Funds themselves it's a relatively more recent innovation in the market but that's really represented I think a substantial portion of the market conversations since March and so we
• 262:00 - 262:30 think that it just represents continued innovation in the secondary market so overall we're seeing the beginnings of a very attractive and interesting investing cycle that will translate over many years and not necessarily just weeks or months we saw this after the global financial crisis in 2008 where buying opportunities were attractive in 2009 through 2012 or 2013 and we think the same is happening now so with that I thank you for listening to this overview
• 262:30 - 263:00 on the private Equity secondaries Market thank you very much that was Mr con managing director and co-head of secondaries and liquidity solutions from Black Rock he talked about uh the transaction method uh and the characteristics of the secondary Market uh with regard to uh private Equity as Market changes uh secondaries uh uh got evolved as one of the Der derivatives
• 263:00 - 263:30 and the size and uh the assets classifications are also growing and despite cyclical factors you can still generate profits and uh generate high yield even uh despite uh deteriorating environment investment environments he also talked about um the future growth potential of the secondary products so please take note of that moving on I would like to invite over
• 263:30 - 264:00 our second presenter it's Hans R fman uh he is the global at a business chairman upstep John welcome from Switzerland to Asia uh while it's daytime in Asia it's late at night here in Switzerland um for me a bit unpleasant not to be in Asia I would have loved to come directly to your conference but as we all know New Times New Challenges uh
• 264:00 - 264:30 that's the reason why we give our best today by the virtual conferences choosen the title choice is the luxury of the informed that means you'd like to have always freedom to act and for that you need also a lot of information to assess different situations allow me first to give a short feedback on stepstone we are one of the leading um uh asset managers in private Market activities we solely focus on private Equity
• 264:30 - 265:00 infrastructure real estate and private debt uh we are extremely research oriented we have one of the deepest and largest database that means we have a two-fold approach on one side a solid bottom up analyis when it comes to private credit uh the credit analyzis when it comes to private Equity company analyzis uh and on the other side we have millions of data points that allows us to have also a top- down approach on strategic asset allocation for the
• 265:00 - 265:30 various um private Market Investments uh in terms of deploying capital we have three different approaches one is the classical primary funds investment then obviously we have developed a lot of expertise and capabilities over the course of the last several years on secondaries Investments and co-investments and we only serve uh large institutional clients uh all over the globe and for the clients we deploy approximately 300 billion just into the
• 265:30 - 266:00 private Market activities an important figure we deploy 40 billion US Dollar on an annual basis that gives us a tremendous insight into the market that gives us also bargaining power to the benefit of our investors today I will talk mainly about private debt where we allocated bit more than 25 billion into various sub strategies uh last year for instance we have allocated more than six billion uh predominantly lost here into the direct
• 266:00 - 266:30 lending uh space when it comes to to the asset claes on the private debt side as I said last year late cycle investing we have favored the direct Landing first lean so we have shifted several billions of U allocations over the course of the last year years away from second lane from more volatile strategies into the direct Landing first Lane but uh we are not just focusing on the direct Landing
• 266:30 - 267:00 we also have a substantial investments into trade Finance opportunistic Landing non control distress so the whole range of private debt activities um we analyze uh attractive risk adjusted returns uh in order to achieve broad diversification we emphasize also a lot on the deployment side that means uh pretty fast ramping situations in order to maximize money multiple uh we want to understand the capacity in the market
• 267:00 - 267:30 and obviously there is a large space of managers so we want to understand the managers when it comes to due diligence strategy due diligence as well as operational due diligence for that we have applied uh very thorough techniques when it comes to data analyzing we say power of data gives us a lot of knowledge and with this we can also create impact into the portfolio for instance just on the private debt first lean side we have more than 15,500 single loans on our database and of each
• 267:30 - 268:00 of the loan we have more than 100 transaction details that gives us several uh that gives us more than 1,700,000 data points just to understand the pricing of the various loans uh corporate loans first lean when it comes to the covid-19 situation obviously we did another survey we have analyzed in the midst of the crisis April 2020 more than 4,700 single funds uh we
• 268:00 - 268:30 wanted to do that because it's always easy to look back in insight and say that's happened but we wanted to understand during the crisis what is really happening with a the single loans with the portfolios we wanted to understand valuation and we want to understand also the challenges of the manager for that we have conducted more than 80 GP calls and have gained therefore tremendous insight into the covid-19 situation the current market situation let's come back first to the pricing U uh as I said we have more than
• 268:30 - 269:00 1,700,000 data points and we look at at the pricing of each single loan and can say that the lowest lowest risky base loan that exists uh on the direct Landing site generates 5.5% in average is 8.1 so if any manager comes and tells you he generates 11 or 12 or 133% obviously that's not without entering certain return premiums or certain risk premiums for that and we have broken them down and by no surprise
• 269:00 - 269:30 obviously the biggest variance on return uh is L to the capital structure depends if you go first Lane if you go second lane if you go unit range but uh the same is true also for leverage means company leverage loan to value abito so we' have broken it down that we really can decompose these return premiums and not only just to come up and say it's in a liquidity premium clearly there is in a liquidity premium but all the rest is explainable if you really analyze the
• 269:30 - 270:00 different SE uh segments uh of the pricing of a singal loan ultimately we do that because we want to understand loss rate loss rate variance because if you're an Mak investor you go for capital appreciation if you're a fixed income investor obviously you go for Capital preservation and capital preservation means uh you want to minimize your loss rates for that we did a thorough analysis on loss rate variances and here for instance you see um vintage years 2007 that means uh
• 270:00 - 270:30 loans being originated in 2007 and went into the crisis the the uh GFC crisis they only um experienced a loss of 2.9% and vintage years 2006 only 2.2 uh that's for us resilience that gives us a lot of also uh credibility that firstly Investments is a Sound Investment from a capital preservation
• 270:30 - 271:00 point of view if you look at the at the last years obviously loss rates have been minimal but that has has been anyway wonderful years late cycle investing for us it's important just to see the variance and obesity behavior in the midst of the crisis and that's what we also did in the covid-19 situation to understand what's really happening on the valuation Point uh side as well as on impairments that usually managers undertake in situations of uncertainty um what is interesting if
• 271:00 - 271:30 you analyze the different vintage years that means if you go back and take the G C situation by no surprise um every um investment prior to the GFC crisis when it comes to Second Lan and mezanine you have seen a pretty flat distribution that means the variance on returns have been pretty big but also unfortunately when it comes to secondly and mine when it comes to loss rates so the loss rates of all the vintages prior
• 271:30 - 272:00 of the crisis have been substantial however if you go into first lean and analyze upper part of the Middle Market middle part and the lower part of the Middle Market you see these loans have been extremely resilient and hardly any losses that means the loss rate variance there has been approximately one and a half to two% uh which clearly is from a fixed income point of view and investment side uh a pretty conservative good sound
• 272:00 - 272:30 approach when it comes to post GFC that means after the crisis Investments also by now no surprise obviously the loss rates have come down tremendously that has to do with better underwriting standards that has to do with other criterias when it comes to the origination but also the returns have been slightly higher not so much when it comes to First lean investment usually there has been an ex an additional spread uh of 1% to one and a half
• 272:30 - 273:00 percent uh different uh it's with second line and with mezanine where you got higher returns But ultimately you can say this in a very simple form uh usually late cycle investment is very borrower friendly and less investor friendly and after the crisis all the conditions usually change that it becomes very investor friendly due to uh different underwriting standard and it's another risk profile now when it comes
• 273:00 - 273:30 to allocation many investors ask us where should we allocate now given that covid-19 has been a a game changer when it comes to private debt and pricing and we tell uh all the clients that obviously look a core investment for us is still first lean it's a fixed income replacement strategy it should not be cyclical credit is cyclical but if you go first lean it's hardly cyclical uh it is performing and you generate about 6
• 273:30 - 274:00 to 8% return if you believe that obviously now in the midst of the C not the midst of the crisis but in the covid-19 crisis you would get 12 133% for first Lan you're wrong the pricing has changed maybe a percentage point to one and a half percentage point but as we said first Lan very resilient and we clearly say that's a core investment for every insurance company for every pension fund as well as for um Sovereign wealth fund because it's a cash yield
• 274:00 - 274:30 oriented strategies um different uh parameters you have have to said when it comes to opportunistic landing and dist stressed npls uh Investments opportunistic Landing offers a 3 to 4% higher returns uh we believe it's an attractive field it is performing it is also first lean and not every company gets easily these days the refinancing down so therefore opportunistic Landing is a strategy that we also blend in our portfolios and it
• 274:30 - 275:00 can generate as I said approximately 12% for firstly performing loan so it's for us a blend into the portfolio which is Justified and the same is true when it comes to this location and distress situation we believe that now the market starts to offer and Main mainly that in the next 12 to 24 months as we believe more Supply to come into the market which has to do on one side Mis match supply and demand so that's a dislocation situation
• 275:00 - 275:30 uh but on the other side we also believe there will be many companies who will s offer in terms of credit quality they will go into workout situation and in this field we believe you generate these days 15% Plus on the return side but that's not cash Shield oriented as a strategy this is much more capital appreciation so today you have at least three different uh approaches into the private debt uh investment core direct
• 275:30 - 276:00 Landing always performing opportunistic Landing also first lean and the distress situation which has to do mainly with capital appreciation the true challenges these days that investors face is there's still a lot of deployment uncertainty so the moving forward the macroeconomic picture the the liquidity situation in the market is uh is unclear that means the prices could easily come up and uh access into good Investments is
• 276:00 - 276:30 something that needs to be uh selectively done as the time to Market allocation is a crucial Factor because you'd like to have your money at work uh that means faster ramp there will be Legacy Investments around in the market and then obviously to assess the different opportunities as we said or as I said before distinguish into three different U approaches core direct lending slightly increased spreads and Tighter underwriting standards the shortterm
• 276:30 - 277:00 midterm opportunities We Believe yes you get them in syndicated loans you get it into secondaries you get get it also in structure credit there will be more dislocation situation to come over the next one two years and then obviously as uh as said before we believe there will be more workout situations to come which offer also pretty attractive opportunities we call this Credit Opportunity investment longterm Horizon I think you don't need to run uh but you have to prepare for the Investments we always say um think before you shoot you
• 277:00 - 277:30 don't need to overact but but the cycle has really started also for this type of Investments That means defense is for us um corporate uh corporate uh first lean uh loans uh we act mainly through GP managed accounts we have built one of the leading um private debt uh platforms where we operate on with GP managed accounts we operate with secondaries and
• 277:30 - 278:00 co-investments so um a powerful platform defense and then offense there we just uh uh increase also the scope and go into distress funds and non-performing Loans structural credit indicated loans it doesn't need just to be the corporate credit side it can be all different credits real estate credit infrastructure credit the full scope where we say there is a dislocation and you can go and try to optimize in the strategy proper credit analyzes for
• 278:00 - 278:30 crystallization with capital appreciation now if you you have an interest to learn more about the situation uh on the private debt side during the covid-19 sit uh crisis feel free to contact us we have established a white paper uh where we have analyzed thousand of loans we we are happy to share this information with you uh you can contact us and we would love to discuss it with you on the other side you can also ask for the white paper
• 278:30 - 279:00 when it comes to private debt just call us we are delighted to discuss with you the different opportunities I wish you an excellent continuation and have a good time many thanks stay fit and
• 279:00 - 279:30 stay we just heard from H about man chairman of stepstone of Global Credit business who talked about the future of uh private debt and credit so on and so forth comparing a first lean and second lean as well in terms of the opportunities that are offered postco and how we need to increase the
• 279:30 - 280:00 efficiency and effectiveness of asset at allocations talking about some Innovations in investment strategies thank you so much for all your Insight full uh comments and during your presentation we're going to be moving on to the third speaker Ty Lyn managing partner of proera Asia good afternoon my name is Ty I'm the managing partner of ptera
• 280:00 - 280:30 Asia ptera is a global PE fund manager uh that's focused on food and Agri businesses we started as part of kill's inhouse investment team before we spun out in 2016 today I would like to talk to you a little bit about the food sector in Asia the food sector is a very complex
• 280:30 - 281:00 ecosystem there are many industry participants uh from Upstream to Downstream there are seed producers Farmers Logistics providers there's food processing factories Distributors wholesalers retailers and of course restaurants I would like to talk to you about some of the structural industry trends that we see happening at this time and in the next 10
• 281:00 - 281:30 years a Asia as you know is a very strong consumption story Asia will add around 1 billion people over the next 10 years and at that point in time around two3 of middle class people will be living and eating in Asia so what we see is the food
• 281:30 - 282:00 industry will double from 4 trillion US dollar today to 8 trillion by 2030 we think this is the most interesting time in the Asian food sector in our history and that's thanks to the very strong Asian macro growth story as well as due to all the changes that covid has brought about we think that the trends within
• 282:00 - 282:30 Asia will closely mimic what we see in the US and Western Europe not so long ago as Asian incomes grow food consumption will shift from purely getting enough food to getting safe food to getting much much better food so what we see today in the Asian markets is that consumers have a very strong preference these days for foods that
• 282:30 - 283:00 address health and nutrition sustain ability but also life lifestyle and all these changes also mean that many companies that participate in food production and food processing need to change with the consumers we see many new consumer Brands coming up into the markets that address exactly those new
• 283:00 - 283:30 demands now let's look at what Co has brought about and what Co has meant to this sector there are two important changes that we have seen number one many International Supply chains have been disrupted at one point or the other some remain disrupted today as well so local governments literally
• 283:30 - 284:00 across all the world and especially in in many of the Asian food deficit countries are now encouraging local production for local consumption in fact this has now become one of the most important industry sectors for every government and local production of food is highly encouraged and highly subsidized in many
• 284:00 - 284:30 cases now all these Chang changes also mean that all the companies that are participating anywhere in the supply chain need to make changes to their own business models that means there will be Investments required there will be changes required and at the same time there will be many different opportunities for investors in this
• 284:30 - 285:00 segment let me tell you that I would say the food sector has historically proven to be exceptionally resilient through times of economic crisis you can go back uh 10 years 20 years 30 years and look at how food companies have performed during good and bad times and you will find that people always eat and therefore companies in
• 285:00 - 285:30 this sector on average have shown much more stable performances through crisis I believe that our own portfolio pra has done very very well during this covid phase and they're set up to continue to perform relatively well compared to the rest of the industry sectors our strong management teams on the ground have not only managed the
• 285:30 - 286:00 crisis very well they have taken opportunities out of this situation and we believe that many of our portfolio companies are set up for further growth over the next couple of years covid has of course made and brought about many changes and that always creates investment opportunities for investors like us at pra we have spent well over 10
• 286:00 - 286:30 years investing and building companies in food across Asia and we've now built a wide portfolio footprint a wide Network a presence and a reputation if you're interested to learn more about opportunities in the food sector in Asia please feel free to reach out to us and we would love to share our thoughts with you and learn from you thank you very
• 286:30 - 287:00 much the end of the third speech for session two delivered by Ty Lynn the managing partner of proa Asia who talked about Asia's food industry more specifically the changing a trend for the next decade was elaborated on by our speaker and it was enthralling the level of income that is going
• 287:00 - 287:30 up as with the impact of Co is going to increase people's attention on healthy foods nutrition high nutrition Foods so definitely a changing landscape that we can foresee for the next decade so good targets and goals that are set for Investments can lead to uh good results and in particular um his remarks based on his
• 287:30 - 288:00 experience working with Asia Asia's food companies gave us a lot of food for thought and as he said since the food industry has always been comparatively resilient even in times of economic crisis it's definitely an industry that we need to look closer at ladies and gentlemen you are currently watching GIC
• 288:00 - 288:30 2020 as we deal with this um pandemic contact free contactless economy is on the rise and so in that sense we're talking about this reverse conversion strategy that we can employ in alternative Investments so interactions online are going to be increasing moving on so relevant industry such as Tech are going to be on the rise and with accelerated growth so
• 288:30 - 289:00 definitely areas that we we need to keep an eye on although we are here online we look forward to the insightful uh comments that will be delivered by our panel discussions later on now GIC 2020 I hope will provide you with an opportunity to look at more Innovative in Investments and with that
• 289:00 - 289:30 we're going to be moving on to the panel disc session I told you about which will be chaired by which will be moderated by chairperson which will be joined by chairperson Wan dongan from the national pension service investment policy professional committee CEO Kim heok of Hana alternative asset management and CEO rim mutar of hnq Korea and CEO hung
• 289:30 - 290:00 Wan from SV investment and the session will be moderated by Professor Shin in from junga University will our panelist and moderator please come up to the stage [Music]
• 290:00 - 290:30 [Music] please [Music] [Music]
• 290:30 - 291:00 [Music] [Music] hand over the microphone to our moderator Professor Shin yes thank you very
• 291:00 - 291:30 much so this is session number two very first session in the afternoon session of GIC 2020 as was introduced my name is inin the overarching theme of today's conference is Reinventing alternative investment postco 19 challenges and opportunities for sustainable growth and I believe that this is very appropriate topic um because covid-19 is still very much ongoing I'm not sure whether uh the expression postco 19 is appropriate here but anyways um not just the investment
• 291:30 - 292:00 Market uh but for the overall economy I believe that the biggest variable that we see is covid-19 so obviously our markets are affected uh and our economies are affected so we're going to think about the right strategies to respond to this challenge today um we are going to uh think about and talk about PE and hedge fund out of all other asset classes all our overseas uh speakers
• 292:00 - 292:30 mostly talked about PE I'm not sure whether or not this was a coincidence however our four panel discussions here today are more focused on PE and VC rather than hedge fund of course we do have MPS which invests in various asset classes so he will be probably covering all asset classes so this is how I would like to go about uh we only have limited amount of time so
• 292:30 - 293:00 I'm going to give opportunity to speak for each P of discuss and we have two topics that I would like to talk about first uh is I would like to um talk about the current status of our investment uh environment so that's uh in other words diagnosis of the current situation so macroeconomic uh the real economy is compressed and it's not just uh going to
• 293:00 - 293:30 be a short-term impact uh but could be a me to long-term impact so the growth uh Industries uh could take a very different form uh than in the past so we do have a lot of questions so if you look at the public market movement uh you see many growth uh stocks um skyrocketing and uh we are trying to seek and explore the next up and cominging growth stocks but uh we have our pan discussion mostly from private
• 293:30 - 294:00 market so um I believe that from the private Market point of view the market conditions can be received and considered very differently but there can be some common uh uh fundamental elements that uh affect all different markets so I would appreciate it if the panel discussion uh can share some general comments about those I would like to um introduce our panel discussions rather I would like to ask Mr Hong to go first you have five
• 294:00 - 294:30 minutes yes uh thank you very much I'm from SP investment I'm the CEO my name is ju H for your information SP investment looks at U PE especially Venture Capital we're dedicated to V VC and we have an AUM of about 1 trillion Korean one compared to other other asset managers if you say 1 trillion AUM uh is relatively small however if you think
• 294:30 - 295:00 about it uh it's dedicated to BC so you can see that uh relatively speaking it's quite a huge volume 2020 in 2020 because of covid-19 uh obviously um I think the question was uh do we experience any new changes so um I would like to share my experience with regard to PC in 2020 I believe that uh the most
• 295:00 - 295:30 memorable I believe that 2020 is going to be the most memorable um year I've been in this uh investment market for about 30 years now and I've uh experienced the Asian financial crisis but then ever since then I believe that uh we see a lot of uncertainties and a lot of changes uh since the Asian financial crisis early this year when we first uh
• 295:30 - 296:00 experienced covid-19 we had some internal investment meetings and yes uh we projected that there will be some challenges the global economic growth um we thought is going to be negative and uh globally I believe that GDP is going to record minus growth and I believe that this is like for the first time since um the second world war so we thought that business fundamentals
• 296:00 - 296:30 will also be very much hurt so not just us but other Venture Capital uh investors probably thought the same way so we delayed our investments because we thought that the valuations will be adjusted so instead of searching for new Investments we reviewed our existing portfolio so if uh things uh go uh things get worse then we thought that we would uh uh concentrate
• 296:30 - 297:00 our investment in a handful of classes that was our response early this year but uh I believe that we saw a massive Global liquidity inflow uh we saw a lot of uh Capital flowing into public Capital Public assets and I believe that we have come to wonder how we're going to perceive this
• 297:00 - 297:30 Market anyways so originally we thought that the investment uh is going to be contracted however if you look at VC I believe that Investments activities are very much uh Lively at the moment and I believe that Korea was one of the successful countries in responding covid-19 so perhaps that is the one of the reasons but uh we invested last year about 4 trillion one in VC but
• 297:30 - 298:00 um I believe that in the first half of this year about 1.3 trillion one was invested in VC uh this is slight declined year on year however this is um quite a strong figure and the US is not that different uh I believe that uh uh in other regular Investments there is a compress compression of 20 to 30% however the public market is doing really well and
• 298:00 - 298:30 so um out of our existing um asset classes for example uh some of the startups that we've been investing in we thought that we should have it go public um earlier than schedule so yes investment wise things are relatively okay I believe that with covid-19 there were a lot of changes now the focus is on non-face tace uh meetings and people's lifestyle
• 298:30 - 299:00 have been have changed and the way we work uh also changed and everything is done using mobile we do online shopping we do online [Music] banking and uh we also do uh spend a lot of leisure time using our mobile phones so I believe that uh sector wise tech
• 299:00 - 299:30 companies or Tech sector especially mobile and online tech companies will be getting a lot of attention going forward unlike in the past um I believe that we see a lot of business transactions uh done over the Internet so Ai and other tech companies if you look at our portfolio you can see that their performance is really good so they're definitely getting our attention so in
• 299:30 - 300:00 the second half I believe that uh especially in the VC area a lot of uh active Investments are going to be made in Paradigm shifting startups tech companies uh and that can also serve as a game changer they will definitely get more Investments thank you thank you for your comments VC portfolios uh are your area of expertise
• 300:00 - 300:30 so I think it's somewhat of an advantage for you is it not the situation so then I'd like to move on to uh Mr Rim from hmq Korea do you have a different strategy for pees good afternoon my name is UT rim and I'm the CEO of H andq Korea we have uh an accumulated AUM of about 2
• 300:30 - 301:00 trillion Korean one in Korea's private Equity Market about 22 year years ago about 12 years ago that was uh during the financial crisis and 22 years ago that was during the uh Asian financial crisis and after that we have seen a growth in the PE Market in
• 301:00 - 301:30 Korea so so it really is surprising to me at the speed of growth of private equity in Korea the PE Market in part is about getting the commitments and the other part is about uh finding the right Investments and restructuring the companies and uh and the buyout stage so when you first uh in the Vintage year when you're creating or establishing the fund before Co
• 301:30 - 302:00 the Paradigm in the industries in Korea was changing we had protracted a long growth so these signs were already all there but the uh investments in PE in Korea tended to be more longterm taking a more mic view so the that was the type of
• 302:00 - 302:30 commitments that we got but after covid uh outbreak even up until the end of 2020 this is going to be what is going on so LPS and GPS as well we are thinking that when we go long term after this after we recover or get ourselves out of this pandemic and crisis is going to be there the
• 302:30 - 303:00 opportunities are there for long-term Investments and GPS are definitely busy right now because there are a lot of new opportunities but uh there are there uh difficulties as well but right now Investments are active and on the other hand there is a duality that we see in the Investments that have already been made dep depending on the portfolio some are seeing challenges difficulties and some are seeing New Opportunities so if you
• 303:00 - 303:30 effectively manage the portfolios that you already have that's going to make your returns and profits different so in the larger schema of things there is a lot of Duality there the promising Industries postco aren't new Industries and these aren't new trends a nonface tace interactions uh Big Data bio and
• 303:30 - 304:00 Pharmaceuticals these businesses and industries were already on the rise even before covid-19 broke out it's just that the these Trends have been accelerated and have been brought even more into the Limelight than before so in the larger scheme of things I would like to say that uh after the two rounds financial crisis in Korea in the past 1520 years it was still there it was there in the
• 304:00 - 304:30 larger scheme of things but the pandemic has just accelerated this and we are investing with that larger picture in mind yes I do have a question that will come back to you later so uh Mr he Kim from Hana alternative Asset Management uh company I understand that you have multiple as a classes that you're looking into U perhaps in the past you focused
• 304:30 - 305:00 on special assets so I would appreciate it if you can cover all of them uh so Venture and PE I think we're covered by the two speakers before me um during lunch I think that when we were having lunch uh we were sitting uh diagonally no one was sitting next to me so for like decades uh we were sitting side by side when having lunch but nowadays uh things have
• 305:00 - 305:30 changed so dramatically perhaps a younger generation uh they can adapt to this new change pretty quickly but uh for myself it was quite difficult to get used to this well at Hana we are dedicated to real estate uh assets uh I've uh joined the company last March last year and before coming uh we set up a PE team uh I'm not sure whether it's a lck
• 305:30 - 306:00 or uh we haven't yet uh made any uh ass Capital deployment yet no one really foresaw covid-19 so uh I mean looking back I feel lucky that we didn't actually make any uh investment last year so earlier the two speakers talked about uh Market uh Trends and status and the PE and the market overall because of covid-19 I believe
• 306:00 - 306:30 that the general consensus is that U um the market needs to change I'm not here to provide any solutions but uh because of all these changes we see new sectors emerging for example uh non-face tace solution businesses or bio sector so because of all these changes brought up by brought about by covid-19 new sectors are getting attention but if you
• 306:30 - 307:00 look at local side I believe that we can do business because we can do it amongst ourselves however covid-19 even if covid-19 is addressed uh there can be another pandemic so uh local business can continue on and can survive however crossb business will be um thly affected so in the second quarter if you look at the transaction uh volume you can see that compared to a month earlier rather the first quarter it shrank by about 60
• 307:00 - 307:30 70% and in the third quarter I believe that the cross border deal is going to decrease even more in terms of volume so last year we had about 10 12 uh overseas deals however uh this year we only had one deal this year so far and I believe that by the year end we will be lucky if we get to do three or four deals so the point I'm trying to make here is that uh this non contact where non-f to face trend is going
• 307:30 - 308:00 to be something permanent now one it's not going to disappear after postco 19 unless we do so I believe that it's going to be difficult to um have our business sustainable so I believe that industrywide we have to come up with this solution I'm sure you would all concur that uh different governments are printing money into the market and the interest rates are at an all-time flow so the security markets are very bullish
• 308:00 - 308:30 so the public market is very bullish and interest rates are low so the bond or the fixed income returns are very low however you you look at Alternative Market it's very much compressed and if you look at local it could be different however the crossb uh Market is very much compressed so if you look at the size of the deal and the number of deals yes there is a shrinkage and there is going to be in the long term a huge imbalance in asset a crossb asset so
• 308:30 - 309:00 this is not going to uh affect just us but it's going to affect everyone that are in this alternative investment Market or business process so we have to uh change this alternative investment uh business process it so far required a lot of contact face tof face uh process or business so we have to think about how we're going to change it into more of a virtual and non-face-to-face process so once we have the solution I believe that uh we can make this
• 309:00 - 309:30 alternative investment Market more sustainable so um I wanted to really point out this problem yeah thank you you covered a policy makers perspective as well thank you for your very broad ranging uh answer and the co uh 19 pandemic definitely has had
• 309:30 - 310:00 wide ranging impacts listening to your answer and last but not least we have Mr who is the chairperson of The NPS investment policy professional committee could you offer us your thoughts uh good afternoon I am the chair person of the investment policy professional committee at NPS I'm probably not the best equipped to talk about uh PE or private Investments
• 310:00 - 310:30 or alternative Investments as a whole uh specifically but I would like to tell you about the story from our perspective how about how we're looking at incorporating pees and Alternatives in our portfolio for us I don't think that the market itself is changing I think that the uh Dimension itself is changing time and space of course has been separated up until this point but
• 310:30 - 311:00 now time and space are now one in a whole so much so that we are at a dimension uh where we are able to interact with people without restrictions of time and space so I think that in PE this type of Freedom or uh liberal spirit is going to be key
• 311:00 - 311:30 preo and postco postco or right now it's it's very difficult to understand there are a lot of negative factors that we see but the stock market is extremely bullish and the debt Market is also doing quite well so I think that we need a new normal type of thinking uh we're not going in search of
• 311:30 - 312:00 the the root causes but in these root causes we can find uh from the nps's perspective that has a responsibility to long-term policy holders is how we can change and transition from just traditional investment assets to more uh from Equity a fixed income to Alternative Investments as well
• 312:00 - 312:30 and in that light I think that the freedom that private Equity offers and the active investment opportunities that PE offers is going to make it even more attracted and popular moving forward and which is why The NPS as well in terms of absolute amount as well but also in terms of percentage and share uh the PE
• 312:30 - 313:00 share Target is probably going to increase from about 12 to 13 14 and 16% moving onwards however there are some areas of concern as well because in Korea the policy holders tend to think that of PE as something that's a little bit too new so they don't have too much confidence in private Equity I'm not going to go too much into
• 313:00 - 313:30 detail about what has transpired throughout the years but there have been some problems and issues that have been revealed in the PE Market or absolute uh return generation processes that are different compared to traditional asset classes it means that it's something that's less familiar to people so people need some
• 313:30 - 314:00 time to adapt and to familiarize themselves with PE and become a little comfortable with it I think there's largely two factors here that we can talk about first and foremost I think that uh we need to think about how we can increase confidence in the financial Market PE of course is about a handful of investors of course but again it's as long as there's uh investment from
• 314:00 - 314:30 numerous people to these handful of uh primary investors confidence is key and I also thought that uh the third speech was definitely intriguing to me because these positive externalities are extremely important moving forward for equity and fixed income there are a lot of uh derivatives
• 314:30 - 315:00 or fallouts or Investments that are going to expand and diversify so these externalities I believe are going to increase moving forward and we need to think about how we can utilize these externalities indirectly to turn these into positives how to make positive uh
• 315:00 - 315:30 externalities and how to identify Industries or investment targets and sectors that allows for that and I think that the public market is going to follow suit as well so I believe that we're on our way towards creating this sort of ecosystem and in that light I think confidence or expectations shall I say in investment is on the
• 315:30 - 316:00 rise yes thank you very much so that was our first round now about to start uh the second round yes uh we are broadcasting this discussion real time and we do have a question to Mr Wong so I would like to relate the question to Mr Hong first so the question is this allow me to read it to you VC is relatively speaking very active so per region so I guess by region talking
• 316:00 - 316:30 about different geographies I guess the question is globally which region VC is doing well well amongst VC investors in Korea I mostly focused on overseas markets and I also spent about 15 years in China so I think that I'm uh in the position to answer that question for us uh we have about100 million do uh in the US and another hundred million dollar in China so when
• 316:30 - 317:00 you talk about VC investment uh we normally thought that it's going to be a local business however when you think about it uh nowadays globally speaking different geographies uh have different Competitive Edge and different uh characteristics so when it comes to VC we have uh geographically differentiated Regional funds so they have been really performing well lately so per different geographies well uh I would say that
• 317:00 - 317:30 Korea is doing well uh I mentioned how we invest about 4 trillion one in the Korean market so uh when BC was first launched in 2000 about 1 trillion one was invested uh at that time by our company so you see a fourfold growth so compared to other Financial sectors the growth rate is quite big however globally speaking VC Market is also growing exponentially and therefore relatively speaking I wouldn't say that VC in Korea has grown at an
• 317:30 - 318:00 exponential Pace um in the US it's 130 trillion uh and China about 70 trillion and according to a analysis understand that um Korea is not one of the leading VC markets in the world Europe uh they are making many different VC Investments so at this moment in time but if we were to focus on certain geography we would say that up and cominging region would
• 318:00 - 318:30 be Southeast Asia uh there are various reasons of course uh the tech is being led by the US mostly however uh different uh regions are following in the footsteps of the tech developments of the United States and we also look at uh the markets that are easier to access from um Korea and the biggest issue lately has been the US China conflict or trade dispute so taking all that into consideration if you look at the global
• 318:30 - 319:00 capital flows and uh we see a lot of businesses moving into southeast Asia so we are also eyeing uh the Southeast Asian market and since I have a microphone I would like to also make a comment regarding Mr hak Kim's presentation we he talked about how we have to change our non-face to we have to change our face-to-face process uh in the alternative in investment Market I also agree um we've been preparing to
• 319:00 - 319:30 enter the southeast Asian market starting from last year we do have a fund been put together however we were suddenly hit hit by covid-19 and because um the crossb deals uh would require multiple business trips uh we have to meet people in person to set up but then we have to have uh we are utilizing a digital Technologies and non-face-to-face Technologies to make those happen so without physically
• 319:30 - 320:00 making those business trips we did open offices online office uh offices in Jakarta and Singapore and uh also using video conferencing we uh um interviewed an employees recruited employees in those Regional markets and although we have yet to make any Investments uh we do interviews uh using Zoom with our Taiwanese counterparts and using uh drones we can do uh due diligence of
• 320:00 - 320:30 physical assets so um if you take that into consideration I believe um as time passes we don't we don't we wouldn't require any face t- face interactions anymore uh I think you've already covered what I wanted to uh ask you we are supposed to end at 220 but are we allowed to go a bit over time okay so I'm going to do my best to
• 320:30 - 321:00 run through all the question questions that we have uh Mr Rim what is going to happen in the future and to the investors could you uh tell us about uh what you think in particular about given the changing circumstances especially due to the
• 321:00 - 321:30 pandemic I know that whether it's a bio or Cutting Edge technology so on and so forth that is one area of the changing landscape that is going to be accelerated as you said before well basically that is your is that your stance on this and is that what you that the message that you also sent to your investors or is there anything that's going to change from your stance because of the pandemic I know that people are
• 321:30 - 322:00 concerned about the US China trade relations and how the world is about to change are there any red flags that you see moving forward it's a it's a very challenging question but please give me a brief answer even uh before covid-19 as I said before there were signs of these changes and these changes have just been accelerated because of the pandemic
• 322:00 - 322:30 if we look at investment analysis and assessments as uh Mr Kim talked about because of the difficulties of actually going abroad uh that relates to the export oriented nature of Korean companies and that means that there are uncertainties that are involved and entailed where for industries that are uh
• 322:30 - 323:00 more concentrated in the domestic Market these are our areas of focus naturally and a bio or lifestyle or consumables there are these are the areas of focus for a lot of pees and also for a new and emerging Technologies especially because of covid medical devices bio and so on and so forth are now in the spotlight and are lotted as the Next Generation growth engine and so that's a new area
• 323:00 - 323:30 of focus for pees as well another change that I want to talk about is that in the past pees focused and tended to gravitate towards uh companies with a long track record because it was less risky but now with the mind of AVC even if the numbers and data points aren't there uh we are focusing on the future value or potential that is there as well and I
• 323:30 - 324:00 think that's the change that we're going to be witnessing moving forward as well traditionally speaking most uh private equities tended to overlook this part but uh these large changes and paradigmatic shifts brought on by the pandemic has brought about opportunities for for example uh small manufacturing areas as well uh that can offer more business
• 324:00 - 324:30 value in their proposition as well so because of these restructurings they've given rise to uh so-called special situations so that's about and thank you so Mr Kim so we have um asset managers and uh Ai and uh the
• 324:30 - 325:00 focused on special assets real estate risks so how do you think it's going to change going forward do you think that this trend will continue or uh are you thinking about uh recharting your path forward what's in on your mind yes as I mentioned earlier I believe that if uh what we see continues into the future in Korea we have uh many
• 325:00 - 325:30 different asset managers in different sectors and we obviously have a lot of asset managers in the real estate sector and the competition is quite Fierce during the past four or five years uh theyve requested on overseas real estates they sold real estates from overseas uh and sold to Korean investors and based on that they survived and they grew however because of co9 that is no longer possible so as a side
• 325:30 - 326:00 effect now uh different governments are printing money however cross steal is not taking place so a lot of money is being focused or on the local assets and so you see uh increasing real estate prices in Korea but if we don't address uh the fundamental issue because this is not a recommendable situation I believe that these asset managers that were dedicated to real estate would have to shift towards uh
• 326:00 - 326:30 sectors so I think that there will be a major overhaul or restructuring uh amongst the asset managers in the real estate market and we're not immune either uh we started off as a real estate dedicated asset management company now we're trying to diversify but real estate still accounts for about 70% of our AUM so again the real estate is uh hit a lot by covid-19 so when it comes to our growth driver and profitability in return uh yes uh we uh
• 326:30 - 327:00 are hurt so we're trying to uh diversify our portfolio we're trying to look at uh private Equity infrastructure and so forth and private debt so we are in the process of diversifying at the moment so I believe that not just us but other asset managers instead of focusing on on one dedicated sector of course ifu started off um dedicated uh in a one
• 327:00 - 327:30 sector then you would have an expertise so you may survive however if you are quite new uh asset manager and you are dedicated to one uh sector or you are tilted toward one or two sectors and I think that your sustainability uh can be at risk so diversify in times of uncertainties uh diversify diversify I think that's uh a good answer we haven't heard uh really too
• 327:30 - 328:00 much about hedge funds I know that you're all uh very knowledgeable about hedge funds as well but since we're all from the PE side uh what about from The NPS do you have some exposure to hman as well uh yes overall the basic philosophy at NPS is not about the absolute
• 328:00 - 328:30 Roi for us the priority number one priority is uh stability and reliability and how based on that stability we can maximize our uh AUM and Roi for people's retirement funds but there are risks entailed and of course the uh risks need to be managed and in that term hedge fun funds
• 328:30 - 329:00 are indispensable for us which is why we are looking to incorporate hedge funds as well but the scale or amount of hedge funds that are required is something that is an area where people have differing opinions whether it's a hedge on the overall investment or whether it's a hedge you're hedging the Investments by sector or whether you are hedging the risks involved in overseas Investments foreign investments
• 329:00 - 329:30 uh these are all decisions that we have to make so it's not just about incorporating a hedge fund uh investing in a hedge fund as a whole it's about how we're going to hedge each and every uh risk that is there the but basically what we're doing is that we are moving towards the direction of hedge funds of hedging risks in general thank you very much
• 329:30 - 330:00 definitely the topic uh and the questions uh that uh we talked about were very technical and challenging but I think that uh the answers were very well said so uh do you have anything more to add well you have one more minute um actually I wanted to add something I forgot to say this while providing my answer we do have a representative from MPS so as I mentioned earlier
• 330:00 - 330:30 we uh in the VC sector we do have a lot of startups so yes the volume increased by fourfold uh but the pace is quite slow we have currently about 150 VCS but um not there are not that many investors so we have to collect small Investments so when it comes to VC we talked about reliability and confidence of course they're very important but uh in Korea
• 330:30 - 331:00 VCS were first launched about 20 years ago and if you look at return if you look at especially top tier levels at uh fund maturity uh we have about IR of uh two digits at least 10% and those that are doing really well have HD of 20% so again the topic of the session rather the overarching theme for GIC 2020 is Reinventing alternative investment
• 331:00 - 331:30 postco 19 so here we have Pension funds and also cios so again we do have built a lot of trust and confidence over the years during the past 20 years uh when it comes to DC so um we do have a lot of policy ideas so we look forward to working closely with uh the cios and Pension funds would you like to say anything keep it short
• 331:30 - 332:00 I definitely do agree uh with Mr Hong said I want to make a request actually whether it's uh VCS NPS whether it may be the news tends to cover our failures in Investments and highlight that which really triggers a sense of uh fear in people in Investments so I would want to
• 332:00 - 332:30 make a request of you here at a daily that you may also highlight the goods that are there the pros the poent the potential the promising nature of uh what we have here with Investments and alternative Investments and at MPS we try to heed the voice of the public the people which is why I believe that your support will will help immensely now I'm
• 332:30 - 333:00 going to be wrapping up uh and it's good to end on a the note of trust and confidence which is the most important thing when times are tough so a stable returns reliable returns uh I think uh is one of the way towards building trust and confidence we talked about how uh PE it's been about 20 plus years or so and how it was difficult in the beginning
• 333:00 - 333:30 uh but there's been a lot of changes throughout the years and so very remarkable insights and constructive comments thank you so much I know that our time was short but thank you everyone Mr Kim Mr one Mr rim and Mr Hong for joining us for the panel discussion it's really given us a lot of food for thought e daily will as
• 333:30 - 334:00 requested try our best to highlight the success cases and success stories and Investments as well now with this session two and the panel discussion session for session two has come to an end despite the difficulties brought on by the pandemic there are always opportunities for people who are fast movers and especially given the Paradigm shifts on
• 334:00 - 334:30 by covid-19 there are immense opportunities that are there open thinking uh being more open to what is new is important as we saw during our discussion so thank you so much everyone and now we're going to be taking a short break and we will be back with session three please note the time we will begin at 2:35
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• 344:30 - 345:00 2020 co-hosted by E daily and
• 345:00 - 345:30 kg0
• 345:30 - 346:00 in we are talking about Reinventing
• 346:00 - 346:30 alternative Investments post
• 346:30 - 347:00 covid asset managers who are looking to
• 347:00 - 347:30 diversify or expand their portfolios I believe will'll find our conference extremely insightful and useful and we're now going to be diving right into session three the first presenter is Shane Taylor from CB hello everyone and thank you very much for for this opportunity to speak
• 347:30 - 348:00 with you my name is Shane Taylor and I've been based in Hong Kong for the past 10 years I'm the asia-pacific head of real assets research for CB Global Investors first let me share with you a little about CBR Global Investors in case any of you are less familiar with us so we are the global real assets investment business within the CBRE Group H as you see on this graphic by real assets we Embrace a real estate
• 348:00 - 348:30 platform and an infrastructure platform and crosscutting those platforms are programs in credit private direct private indirect and public Securities and we Implement various Client Solutions via both co-mingle funds and also separate accounts we can uh construct Solutions which span the the whole risk return Spectrum from core to Value ad to opportunity itic and as of
• 348:30 - 349:00 the end of June this year we had just over 109 billion US doll worth of AUM and we provide solutions for over 650 institutional clients our scope is very much Global uh CBR Global Investors has over 800 professionals based in 31 different offices around the world these locations are are shown as the dark green dots on this map uh while our parent company has over
• 349:00 - 349:30 100,000 employees and they're found in more than 530 locations around the world these are plotted in the light grein Dots here so my presentation uh with you today is on the topic of logistics real estate and some of the opportunities and risks for that property type in the current investment environment we invest across many different uh property types and for several years now we have been aiming to increase our allocation weights to
• 349:30 - 350:00 Logistics as of the 30th of June this year uh in our America's business some 15% of our AUM was in the industrial Logistics sector in Europe it was 27% and here in Asia Pacific we had a 49% uh allocation to Industrial Logistics within our a so let's start this conversation around ESG as I'm sure everyone on this call would appreciate this is one of the
• 350:00 - 350:30 the big picture risks to any uh investment and that's climate change uh this raises very urgent questions around how each and every development and investment that we all make can start to address uh such massive risks to the to the environment so here is a case study of a forward purchase that we undertook for one of our value ad funds in the Asia Pacific region uh we're very pleased with the returns that this asset
• 350:30 - 351:00 delivered to our investors but above all it exceeded our expectations from an environmental sustainability perspective so if you look at you know pretty much any aerial photograph of any large city anywhere in the world finding the industrial Logistics zones is very easy they're they're unmistakable because of their large roof plates and so this is a massive opportunity for investors to to utilize that roof space
• 351:00 - 351:30 for example to harvest rainwater catchment which is what we are seeing in drought prun markets such as those in in Australia or as this case study shows to harness solar energy uh either for use within the facility or even to return some of the energy to the grid this uh case study is located in sorro in the far north of of Japan where the the daylight hours um in summer are very long but also where the days are very short in the winter and thus the
• 351:30 - 352:00 installation of solar panels over much of the roof and also the maximization of natural light inside the facility really improved its its attractiveness uh to both its occupier and its ultimate investor let's now turn to the historical growth and performance of the industrial Logistics sector globally the data on the left shows that industrial has been increasing uh in size in terms of the invested universe and by that I
• 352:00 - 352:30 mean all real estate assets which which are tracked and indexed by the msci but it remains far smaller than offices and Retail and even a little smaller than residential and in fact it's less than 14% of the invested universe so it can be uh a more difficult uh property type to to access it it simply does not have the number of assets the size of assets assets or the transaction volumes that are evident in
• 352:30 - 353:00 the three larger property types but it is evident that in the last three years up until the end of 2019 uh that it continued to grow uh even as the market size of both offices and Retail has fallen in recent years while on the chart on the right um their Total return performance um of global logistics uh has been strong um for multiple um periods um particularly since the GFC we've had
• 353:00 - 353:30 a decade of very long strong uh performance um but it's not without its risks you can see how in 2008 2009 the capital values of global logistics plummeted um however the argument I'm about to make is that this sector today is quite different from the Sector 10 years ago and should thus be much more defensive back in the GFC days the industrial listic sector was more occupied by import export international
• 353:30 - 354:00 trade occupiers and pure play retailers and e-commerce was barely a fraction of consumption anywhere back then so the sector is certainly not without its risks but some of those risks We Believe are are somewhat mitigated by the much higher quality of assets and the much stronger uh demand drivers which simply didn't exist 10 years ago so the industrial total returns have clearly outperformed the other four main
• 354:00 - 354:30 property types globally for all four time Horizons calculated here um that is the oneyear total return for 2019 as well as the three-year fiveyear and 10year performances up to the end of 2019 and and note that industrial is the only one of these sectors to deliver Global level double digigit total returns for all four of these time Horizons and briefly turning to you there in Korea here is the Korean msci
• 354:30 - 355:00 property index uh this one's denominated in one and even though industrial is a small emerging sector there and although we only have five years of historical data for that sector it has none nonetheless done relatively well uh and it's delivered an average annual fiveyear return of 8.7% so what has been the major game changer for Logistics real estate in the
• 355:00 - 355:30 past 10 years what what is the opportunity and why do we consider it to be less risky than say during the GFC in one word it's e-commerce uh the chart on the left shows internet retailing as a as a share uh of total retail sales in selected countries and back in 2007 on the eve of the GFC the e-commerce penetration ratio was less than 10% even in Korea which was a world leader uh whereas for other countries listed here it was less than 5% fast forward to 2019
• 355:30 - 356:00 the eve of the the covid-19 crisis um and the penetration ratio for Korea and also China was well above 25% and it was even in the mid- teens for countries like the UK and the US thus a very big powerful new demand driver has emerged and this is one structural Trend uh that we've been very eager to investing for several years now
• 356:00 - 356:30 and it's a global phenomenon and my us research colleagues have undertaken the analysis on the right hand chart here uh proving the strong relationship between the absorption of industrial space and retail sales growth as more and more of those retail sales have moved online so what about 2020 and as we all know the covid-19 pandemic has required governments to to shutter uh many economic activ activities and encourage social distancing and isolation at home
• 356:30 - 357:00 and this has meant that many more households uh need to consume goods online rather than go into physical stores data here from Japan and Sh China show just how much e-commerce and parcel delivery volumes have surged this year really remarkable is that Japan uh and that's an economy that overall is Contracting at a negative 6% Pace this year is seeing such strong double- digigit positive year-on-year growth in
• 357:00 - 357:30 parcel handling and delivery this has translated to very strong demand for Quality Logistics space this year yet more evidence here from the US uh that this crisis is very different in nature from the past two crises as many occupiers actually want uh more space rather than less space given the nature of the current crisis and it seems that given the the supply chain disruptions they are seeking to store more Goods
• 357:30 - 358:00 closer to large cities in a situation known as justtin case inventory which contrasts with the previous model of just in time inventory where the idea was to keep uh Goods moving rather than sitting in storage yet more evidence this time from China where surveys by the research team and our parent company have found that 50 3% of all new leases uh across China
• 358:00 - 358:30 in the first half of 2020 were taken up by thirdparty logistics companies and another 30% by e-commerce occupiers yet more evidence for this driver this time sourced from Korea's kosis data and as you all know the lockdowns in Korea have have not been as strict as in many other countries and even though online sales have overall grown modestly this year year for certain categories notably online sales
• 358:30 - 359:00 of groceries and of household goods the year-on-year growth has been really quite phenomenal and finally on this point if we needed any more evidence here we have it again from the Australian Bureau of Statistics very strong increases in the share of online retail sales since the pandemic began so e-commerce is proving uh very much to be crisis resilient let's move to pricing uh we are all uh well aware of just how much
• 359:00 - 359:30 cap rates have compressed over the past decade two main points I wish to make uh about uh the data series on this page is the evidence from the US on the upper leftand chart which only plots the cap rates of the upper quartile of the market and back at around 2010 look at the really wide spread between industrial which had the highest cap rates here versus multif Family Apartments which had the lowest but how
• 359:30 - 360:00 that spread between the two of them had dramatically closed by the start of 2020 and this tells us that especially for the higher quality uh industrial Logistics assets there's definitely investor demand and not only is this because there is plenty of capital chasing opportunity but it's also about impressive income streams and note also the chart on the lower right from my research colleagues in Europe um where it's clear that for the past 5 years
• 360:00 - 360:30 their rental index has seen solid growth and this is occurring as the yield has compressed the listed real estate markets of course repic far faster than the appraisal-based unlisted indexes so let's take a look at some recent evidence from the jrits in Japan uh and this data shows that March this year clearly had a great deal of volatility the implied cap rates shot up for all J reats however since then some uh such as
• 360:30 - 361:00 the retail sector REITs have remained at fairly elevated levels whereas the logistics J rats have since compressed and by the end of July this year the logistics rat uh average implied cap rate was just 3.3% and that's uh below what it was in February which was the preco peak pricing for the market so the listed real estate markets are are definitely seeing the the resilient and relevant
• 361:00 - 361:30 nature of these Assets in the near term so with industrial Logistics cap rates having compressed so much already in the past decade and even during 2020 are they overpriced we tend to think not and and there are a number of markets which are forecast to see strong growth and we'll get to those in a moment but here I wanted to illustrate a few more pricing points first on on the Le hand side I show the the massive
• 361:30 - 362:00 current spread in Australia between the prime Logistics yield in the four largest cities and the so-called risk- free rate the Australian 10e government bond yield and I also include our five-year forecast uh of of those yield Trends in this chart as well so even though Logistics yields have never been lower in Australia so too the government bonds at are around their all-time low and so there is a very wi spread and in our base case scenario where bond yields
• 362:00 - 362:30 stay lower for yet longer the main question in our minds is the extent to which Logistics yields will go yet lower and prices higher given this very uh attractive relative value and on the right uh evidence from the US on price appreciation by sector and it's quite evident here that that Logistics as well as residential had very healthy price appreciation to the start of this year so in an absolute sense good Capital value growth is being forecast in most
• 362:30 - 363:00 of our Logistics markets globally so unsurprisingly a lot of institutional Capital has been flowing into this uh sector transaction volumes in China for example in China's Logistics Market in the first half of this year were the second highest of any first half volume ever in China um and on the right the evidence from Europe is also quite comp telling that transaction volumes of industrial properties have
• 363:00 - 363:30 been very strong including the first two quarters of this year and not withstanding the severe disruptions to many of those economies during the lockdown so to in Korea uh where we've seen uh more than 800 million US dollars worth of logistics asset transactions uh for the first half of 2020 and that's the second strongest first half ever a quick word on Supply one one of the greatest risks um that many will
• 363:30 - 364:00 often identify about the sector is that Supply is relatively quicker and easier to build uh than any other property types there's some truth to that and certainly historically it was more the case um and perhaps that's a topic we will have more time to discuss in Greater detail in our upcoming group discussion but a very general view here is that supply and demand are not too much out of balance and there's some evidence in these charts from Europe which show that you completions uh have
• 364:00 - 364:30 recently been falling in the main markets there and furthermore the under construction pipelines of logistics uh are below the fiveyear average takeup uh in many parts of Europe and furthermore the share of speculative development in the under construction pipeline is relatively quite small as well so that is the historic perspective and the current situation in 2020 what about the upcoming 5year period so the
• 364:30 - 365:00 research team CBR Global Investors undertakes five-year total return forecasts for over 80 industrial Logistics markets around the world and there's a lot of uh detail in the next three charts uh there's one for each region again this is perhaps something to discuss at the main event later this week but for now let me simply explain how to interpret these charts first rare stands for risk adjusted real estate as we acknowledge uh not only are there
• 365:00 - 365:30 opportunities but uh there are also risks inherent in every investment the vertical axis shows our average annual unlevered Total return for the 5-year period 2020 to 24 while the horizontal axis shows the required returns for each market and we believe investors require real estate returns to surpass the 10-year government bond yields forecast plus the inflation forecast plus a
• 365:30 - 366:00 series of risk premum and the black disk in the center is the average total return and the average required return position for all the markets on the chart and therefore those above the diagonal line are forecast to be outperforming markets over the next five years whereas those below the line the underperformers thus our European research team like the relative Prospect for rdam hurg Leon and
• 366:00 - 366:30 Paris while here in APAC we like the position of the large Japanese markets uh Sydney Melbourne and also the tier one China cities whereas in contrast uh Singapore the smaller Japanese cities Perth and some of the smaller Australian cities we think are relatively more risky given the likely return prospects finally in the US where our team there forecasts uh industrial
• 366:30 - 367:00 market returns in almost 30 different cities it's the San Francisco Bay area that is the standout um but also Greater Los Angeles uh greater New York and the northern New Jersey area so as we are real assets investors I wanted to leave you with an idea of the uh quite powerful connectivities and strong synergies between modern Logistics facilities and other real asset classes digitalization smart
• 367:00 - 367:30 buildings artificial intelligence uh things like drone delivery and self-driving Vehicles the internet of things and so on all generates a lot of of big data and to be honest Ecommerce has been one of the main drivers in delivering uh Superior customer services and much of it has been based on gathering and analyzing massive amounts of of customer data and location data and this all needs to be transmitted and stored and thus digital infrastructure
• 367:30 - 368:00 and data centers uh we believe have some very strong drivers ahead um but so too do some of the traditional Transportation uh infrastructure such as airports sea ports tollways and expressways and these are all increasingly being seen as very attractive targets by institutional investors so modern state-of-the-art Logistics assets are very much at the center of this whole uh Ecology of real
• 368:00 - 368:30 assets and and the technology that binds them makes these some of the most Cutting Edge technologically of of all the real asset classes so here are my main conclusions from this this research um although history is is not necessarily a guide to the Future uh we do believe that e-commerce is here to stay uh and even in a base case scenario where a covid-19 uh vaccine is found and we can all start to return to normal we think it is it's here to stay um it's a very strong
• 368:30 - 369:00 structural driver that will benefit Logistics real estate for many years to come hence uh we believe that in many Logistics markets around the world the opportunities outweigh the risks with that uh let me thank you all for your time and for your attention today thank you thank you once again to Shane Taylor for your presentation we talked about
• 369:00 - 369:30 industrial Logistics Investments detailed examples as well at the as at the end of uh 2019 there's been a clear trend of growth and he's also pointed out that there has been a uh shift in strategy compared to about 10 years ago and so it's one of these sectors that we need to focus on as well and these types of paradigmatic
• 369:30 - 370:00 shifts are going to be changing postco paral delivery volume explosive right now and also a lot of heated competition in related Industries and with the Resurgence of covid-19 as well in Korea parcel delivery volume has uh exploded so I think these are all good indicators to what we can foresee in uh Logistics and real estate next up we're going to
• 370:00 - 370:30 be hearing from Martin Van elic head of corporate finance hello my name is Martin velik um I lead the corporate finance business at jll um for Asia Pacific out of Singapore first of all thank you so much for having me uh today at your conference um it's a great honor unfortunately I can't be with you live uh to today because of all the travel restrictions but um very happy to uh to
• 370:30 - 371:00 be part of it over this um over this video so today I want to take you through um some high level observations um we are seeing in the global real estate markets and um at the end I will spend um a little bit of time U giving you a couple of um thoughts I guess for uh for the future now where I want to start with is um and I hope you can follow my slides
• 371:00 - 371:30 is uh on transaction volume what we have seen in the second quarter of this year is a significant drop at Global level in uh transaction volume um the 55% decline um Q2 this year compared to the second quarter of um of 20 uh 2019 now it isn't that dramatic um to put things in perspective um it's
• 371:30 - 372:00 obviously a significant drop um but we haven't seen transaction volume come off um as dramatic as we have seen uh during and just post the global financial crisis in 2008 and 2009 which you can clearly see on this U on this graph now what are the sectors that are either performing uh or underperforming um during this time well I think it is fair to say that pretty much all the
• 372:00 - 372:30 sectors across the board are suffering in some shape or form um the sort of bright spot uh is probably Logistics um and Industrial and the multif family sector all uh all together now um what are top destinations and we track basically Gateway cities across the AC across the globe um um that are favored for cross border capital inflow it's still New
• 372:30 - 373:00 York and London um and and although numbers have come off um dramatically they're still the favorite cities um cities in the world from a crossb capital uh flaw perspective now crossb Capital flaws as you will see on this slide and and I appreciate the the font size maybe a bit small um if you can't see it but but um I guess the call out on this slide is really to explain
• 373:00 - 373:30 that despite the fact that Co is happening with travel restrictions and whatever you have there's still a lot of capital flow going around from east to west and vice versa and definitely for all of us in Asia Pacific we have been good beneficiaries of a lot of inflow uh capital from uh from different uh regions now uh on that same note who have we seen are the more active Capital sources um uh German and Singaporean Capital have been very active um
• 373:30 - 374:00 deploying uh Capital cross border um um and and the call out to make here on this slide as well is both the US and similarly for South Korean capital transaction volumes from a crossborder capital flow perspective have come off significantly now um looking at private funds um Al together in um in from a fundraising perspective what we have seen and and you can see the perspective
• 374:00 - 374:30 here from slightly before the global financial crisis up to where we are today numbers have come up significantly by 26% in the first half of this calendar year uh not as slow uh as um during the global financial crisis but still um significantly lower numbers now um what what is happening um is that with all the capital rares over the last couple of years years there's still a lot of dry powder sitting within a lot
• 374:30 - 375:00 of the typical private uh CLA and funds uh across the globe and all that dry powder is still waiting to get deployed into um the real estate markets in some share or form um on the public side um we have seen um significant drop in the read uh indices um during the peak of uh covid uh now uh we have seen a rebound but it's still moderate and pretty much all
• 375:00 - 375:30 the global re indices are still tracking below where it was um preo if you would zoom in um on the real estate uh public side from a sector perspective Hospitality has been hardest uh hit um followed by retail and for obvious reasons um both have their own drivers um rights for travel um and whatever you have but also definitely from a retail perspective already preo we saw
• 375:30 - 376:00 significant downward pressure on on transaction volume and pricing coming along with that the bright spot again is more on the industrial and listic side and to a certain extent the residential uh side as well now um in addition to my comments just now on a couple of the sectors that have really um stood out I guess of the last 12 months and some even more during the co is really that
• 376:00 - 376:30 Logistics um everything around the living theme and also data centers and that is a sector where we have seen a dramatic pickup in demand and activity around the globe and also driven by as some of you uh we know right from a Korean perspective have been pretty active and looking at data center exposure uh not only in as Asia Pacific but also in in Europe and um and the US
• 376:30 - 377:00 now um retail offers what what will happen for sure um there will be some downward pressure again as we have seen in the retail sector already and on the office um office Front I think we have seen mixed U reports and data points coming out what the future of office will will hold now um one of the things things we need to be uh thinking about um it's not only the the geographies
• 377:00 - 377:30 where we um can deploy Capital um and and um and what type of um sectors I guess at the end of the day uh because a lot of these sectors um as you see on this slide uh will be affected by different shifts in the real estate sector and it is driven by technology it is driven by shifts in how we work and it is also driven by technology and it
• 377:30 - 378:00 will have an effect on also how we live how we travel and how we shop and everything combined will have and it's already having a significant impact on our real estate industry so looking forward we need to think through how can we benefit from all this and how can we make make sure that we find the right opportunities to
• 378:00 - 378:30 deploy our capital and what is important is to also think about how can we unlock these real estate opportunities from different angles and it could be from either a private or a public um perspective could be from a direct and indirect perspective um and it can also be from an equity or debt perspective and combined with some potential stress coming to the market um we uh we could see some cracks in the system from the
• 378:30 - 379:00 Americas in Europe and in Asia Pacific where we could definitely see some recap opportunities um secondary trades um m&a targets and also public to privates in addition to the typical investment um um uh flow of activities that you're all quite familiar with with simply buying direct real St across the globe now the last comment I want to leave you with is
• 379:00 - 379:30 um really from a ja perspective and we have colleagues around the globe from releasing transaction um advisory research perspective um we believe that real estate is definitely not dying but um it is changing for sure and that is something we all need to be very mindful of how we deploy and get access to real estate from an investment perspective uh if not from an owner occupier perspective so um thank you again for um
• 379:30 - 380:00 having me I really appreciate it unfortunately I couldn't be uh there with you live uh today hopefully next year and I hope you have a great day ah had thank you very much that was Mr Martin Van El thank you very much the real estate transaction volumes have decreased and it hurt many
• 380:00 - 380:30 investors and uh he also elaborated on the impacts of covid-19 especially um Hospitality distribution uh were affected and however um real estate and Logistics were less affected um it was also mentioned that we have some capital inflow into the APAC market so we have to identify clearly where those capital is headed uh towards and we have to cut out um detailed strategies to make full use of them so I believe that during the
• 380:30 - 381:00 discussion session we'll be able to discuss more now I'd like to move on and invite over our third speaker for session number three uh we have mru Kim from K Capital Market Institute ladies and Gentlemen please help me welcome Mr Kim good afternoon ladies and gentlemen as was introduced I am P Kim from Kore capital Market Institute so it's a great honor and pleasure of mine to join you in this
• 381:00 - 381:30 very meaningful and valuable occasion today I'm going to talk about uh uh local institutional investors and their investments in offshore real estate uh market and some of the challenges and opportunities so first I would like to uh before we move on and talk about uh the offshore real estate market investment I would say that uh the biggest Trend uh that is noteworthy is
• 381:30 - 382:00 that there is a lot of alternative investment uh funds uh that are attracting Investments we have real estate funds and we also have pef and together they create about 200 trillion one worth of Market out of that related to real estate funds uh we have information but because they are privately pulled uh the information is very limited so um using zero in fund Dr
• 382:00 - 382:30 Pro I did some detailed analysis on offshore AI especially real estate funds this uh does not cover everything however I think that we can still get the gist of overall trend so if you look at the AI fund offshore fund as of 2016 takes up about 36.9% and every year uh the size grew and as of 2020 uh June
• 382:30 - 383:00 takes up about 50% if you look at real estate Fund in particular it takes up about 55% and special asset funds it takes up about 47% so we in the AI fund our investors are making Investments and in which region now uh rits and funds is are less attracting Investments and more Investments are directed to real real
• 383:00 - 383:30 estates or real assets and per region you can see that the US takes up the largest share recently however the portion uh that us takes up is decreasing while the portion taken up by uh EU is increasing uh there were a lot of Investments made in China however real estate uh market prices increased in China and the cap rate has come down and so that affected overall investment flow into that
• 383:30 - 384:00 market and if you look at special asset funds uh we have infrastructure and real estates included in the portfolio and if you look at uh the composition you can see that the portion of infrastructure has been increasing over the years on the other hand if you look at mezzanin or other corporate finance or corporate restructuring related funds especially
• 384:00 - 384:30 uh funds that invest in uh low performing this performing corporate uh debt you can see that the portion has been decreasing so out of all the special ASA funds in Korea you can see that corporate financing portion is increasing and fund the fund uh portion is also increasing on the other hand renewable energy and resources the investments into these
• 384:30 - 385:00 areas have been decreasing and if you look at asset managers in Korea uh we saw a lot of uh PE asset managers and they're trying to introduce and diversify uh different products despite all these efforts however you can see that there are still some hurting behav especially in 2015 and 2016 the many
• 385:00 - 385:30 institutional investors in Korea invested in aircrafts and then the focus was on corporate financing and for real estates uh us commercial core real estate uh markets uh attracted a lot of Korean institutional investors attention next I would like to move on and talk about uh key AI investors in Korea we have first of all Pension funds and we also
• 385:30 - 386:00 have credit unions and we also have security companies and insurance companies first I would like to take a look at Pension funds we have uh big Pension funds and because of the low return coming from traditional assets uh they're trying to diversify and they started to expand exposure to Alternative assets or alternative Investments especially uh with the MPS
• 386:00 - 386:30 has invested a lot in the AI Market NPS obviously is the biggest investor in the AI market today and currently about 40 84.3 trillion one is being invested uh in the AI so that's about 15% of of total NPS and um although it came down slightly compared
• 386:30 - 387:00 to the previous year Redemption actually contributed to that figure but NPS is committed to further expand its exposure to AI because um it's part of its long-term investment strategy to invest in AI other than that we also have teachers pension government employees pension Employment Insurance and Etc and they are also increasing the portion of AI and aside from
• 387:00 - 387:30 NPS um the total um AI investment size is about 9 trillion one and uh per different time frame you can see that uh different Pension funds show different characteristics now if you look at nps's AI they have invested uh in overseas real estate AI overseas real estate market and also
• 387:30 - 388:00 AI so those two are the key drivers so out of a alternative investment of NPS back in 2015 the total portion of AI uh took up about 59% but in 2019 increased rather out of the total total AI offshore uh took up about 59% in 2015 however 2019 increased to 70% and you can see that project type um direct project type counted for 30%
• 388:00 - 388:30 while indirect type took up about 69% and per region Global 33% uh the northern the US 33% and Europe took up about 18% um again I would like to emphasize that uh the there is a punctuated Trend a rather noteworthy Trend uh that a lot of offshore um AI investment is being made back in 2015 um the five big Pension funds invested 18.3% of its AUM in offshore Ai
• 388:30 - 389:00 and that actually grew to 42% in 2019 the reason why they have increased their exposure to Offshore AI because the traditional asset value has came has come down and so in order to replace in an offset that decline they're trying to invest more in offshore AI so I'd like to talk more about that later on during my presentation so if you look at large AI investors uh we have credit unions and here I've
• 389:00 - 389:30 included seven major credit unions uh here in Korea uh we have teachers uh Credit Union the police credit unions and construction workers credit unions and so forth these are the seven major large scale credit unions and I review their disclosure information and um a I uh took up about amounted to about 38.8 trillion
• 389:30 - 390:00 one and out of the total a the AI took up about 50% of course uh depending on individual credit unions uh the exact portion differs but overall credit unions are increasing their exposure to Alternative investment the reason why is because uh now compared to mentioned funds they have more uh discretion in making investment decisions and they also seek
• 390:00 - 390:30 absolute return so they are trying to invest in AI in order to generate more returns for their investors and uh we have a Teachers Credit Union that uh discloses uh information about their Investments uh both uh in Korea and also overseas and you can see that back in 2017 their offshore AI only accounted for about 48% but in 2019 that increased to
• 390:30 - 391:00 57% so the offshore AI primarily led the AI uh strategy of uh Credit Unions aside from them we also have insurance companies and security companies that are also investing a lot in alternative Investments so about uh 10 uh insurance compan compies and eight Securities Companies uh they um their AI size is
• 391:00 - 391:30 about 15.4 trillion one and 13.9 trillion one respectively the reason why we have a lot of security companies and insurance companies investing in AIS because uh they have still unsold assets and um that can become a major risk uh if the asset value declines going forward so so far I've talked about uh different investors in Ai and now what
• 391:30 - 392:00 about return rates again the major reason why they're trying to invest in AI is because uh to generate more return and um there is less interconnection uh between the AI and traditional Assets Now NPS aside from 2017 and 2019 average compared to average um investment return ai's return was much higher and offshore AI return
• 392:00 - 392:30 was higher than domestic return now what about other five Pension funds five major Pension funds you can see that AI return rate was higher compared to traditional asset returns and uh just like NPS uh the offshore AI return rate was higher compared to the domestic Market of course it would be nice if this trend continues on in the future however um postco 19 um I think that uh there will
• 392:30 - 393:00 be some negative impact on offshore AI return again I think that pandemic uh the pandemic is affecting the AI Market in many different ways uh the real estate um financing and also corporate financing sectors are being affected by covid-19 and certain sectors are hit much harder and another factor I like to point out is that covid-19 made it really difficult to do and conduct
• 393:00 - 393:30 due diligence and it's difficult to have uh meetings face tof face meetings and that is why we see less and less crossb AIS now if you look at a real estate market AI again cannot generate uh returns every time every year so uh we only have qu data and here we have a Ritz index IID like to share with you so after covid-19
• 393:30 - 394:00 outbreak you can see the Ritz indices and uh it declined by about 41% globally and yes uh that IND this recovered however the pace was not that fast so compared to um early this year you can see that uh still um the IND this is 14 uh 19.1% lower and uh Australian r index and Japanese r index is much lower compared
• 394:00 - 394:30 to the US r index now what about per sector I think uh this was echoed by other speakers before me so if you look at Commercial Real Estates uh for example office and Retail uh the r in this is has plumed and it has yet to recover but while on the other hand um commercial and also residential real estates are recovering much more faster now
• 394:30 - 395:00 infrastructure again early this year it plummeted by about 40.5% and compared to early this year the recovery uh has yet to fully take place and uh for corporate financing uh we see many new Investments taking place and I believe that yesterday the S&P announced that junk bond bankruptcy rate by the year end is going to be about 10%
• 395:00 - 395:30 so again over corporate financing condition is not in a very good condition so again I believe that a lot of Investments are being made in different asset classes and it's high time for us to review our investments and uh many asset managers in Korea have their Investments made in hotels uh and they have a lot of Investments made in the US market so I believe that uh the institutional
• 395:30 - 396:00 investors in Korea would have to review their Investments and set a new strategy however given the fundamental characteristics AI uh makes it really hard to fundamentally dra and drastically change your strategies so you can review the valuation you can extend uh the Contra and you can renew the uh contract and so forth so I believe that followup measures is going to be very
• 396:00 - 396:30 important and we have to use uh the crisis as an opportunity for uh us to revamp and uh reintroduce and redesign criteria and standard and process for AI ex an um review is taking place in Korea however um per class strategies are not that clearcut and as was mentioned earlier local institutional
• 396:30 - 397:00 investors have uh Investments made in s classes but because uh they are privately pulled it's really difficult uh to uh have full understanding and full transparency only the institutional investors have full information about their Investments so I believe that we have to have uh more data available uh per sector and perhaps we can set up a
• 397:00 - 397:30 council uh so that uh different institution investors can share more information via that vehicle so with that I would like to conclude my presentation thank you thank you for your very insightful message Mr Kim thank you once again we talked about uh offshore funds and how alternative Investments are fairing overseas and why
• 397:30 - 398:00 they are expanding in some areas moving on to the conservative and a bit more negative uh view on things uh since the covid outbreak and how risk management is key during these hard times just to reiterate in April of this year we have held monthly
• 398:00 - 398:30 webinars actually four rounds of webinars throughout the months we've talked about PE hedge funds real estate and recent developments in all of these areas and today is the culmination of our uh half a year long efforts so please stay tuned because next up we have a panel discussion allow me to uh introduce our panelists and
• 398:30 - 399:00 thank you for joining us first off we have uh Kim the CIO of military Mutual AIDS Association Next mu the CIO of carea scientists and Engineers Mutual Aid Association CEO from uh Master investment
• 399:00 - 399:30 management and as the moderator we have Professor sanin from hung University the theme of session three panel discussion is real estate and real assets searching for prospective Investments I hope this session sheds light on the promising and prospective Investments that are out there and how we can come out as winners
• 399:30 - 400:00 and miss this crisis by making uh smart decisions and Investments panelists and moderators please come up to the stage
• 400:00 - 400:30 [Music] she you may now begin ladies and gentlemen good
• 400:30 - 401:00 afternoon as introduced my name is San shin and I will be moderating this panel discussion I'd like to thank the speakers for their uh insightful speeches and before we dive into today's discussion allow me to touch upon the impacts of the covid-19 pandemic I'd like to give you an
• 401:00 - 401:30 overview of what has transpired and then I'll hand over the mic to our panelists first and foremost the covid-19 pandemic in line with industry 4.0 has accelerated growth in technology and uh the healthcare industry as a whole and also for example the sanitary uh sanitation industry as well and there has been a change in demand as
• 401:30 - 402:00 well covid-19 has accelerated polariz income polarized wealth polarization and has aggravated um geological or Regional disputes and has Justified strong market interventionary operations and measures and interest interest rates for the time being as announced by the FED
• 402:00 - 402:30 yesterday will may be maintained at near zero and near 0% at least uh up until 20123 which means that any interest rate hikes will are not foreseeable uh right now it's a deflationary scene and we are concerned about uh infl moving forward so it's definitely a tricky path
• 402:30 - 403:00 forward I am going to be just throwing questions out there and if you have any opinions you would like to offer any comments please feel free to jump in and answer the questions at any time if you have any uh different comments other than what the question is addressing also please feel free to tell us as well my first question is uh such the real estate market
• 403:00 - 403:30 has transfor because of covid-19 uh falling trade transaction volume and also increasing demand for industrial and logistic real estate while on the other hand due to concerns about inflation uh demand for virtual currencies and gold is rising so so if we compare compare pre and postco real estate and real asset
• 403:30 - 404:00 Landscapes will change specifically what changes do you foresee and any reasons that you can give for expecting these types of changes in real estate and real assets because of the covid-19 pandemic um I'm going to start with one of our panelists since Mr Kim already delivered a speech uh let's start from our panelist next to Mr
• 404:00 - 404:30 Kim my name is Kim and I'm from the military Mutual Aid Association as we heard during the presentations uh there have been immense changes and I definitely agree with all the points that were made by our three speakers up until last year if we look at the assets
• 404:30 - 405:00 of credit unions and penion funds they were mostly focused on large scale offices primary Assets in the United States but now in hindsight these markets have compressed since the the global financial crisis and the primary real estate
• 405:00 - 405:30 market especially offices due to the covid-19 pandemic are going to be HD hard in terms of occupancy rates and Etc so in that light the office real estate in the primary real estate market in the US has performed well preco and of course now they're also fairing quite
• 405:30 - 406:00 well but moving forward in the world postco as we heard in the presentations due to changes in the workplace our workstyle or technology the occupancy rate or utilization rate for offices will become uncertain so we believe that this boom is going to uh dip down a bit moving forward since the 2000s the primary real
• 406:00 - 406:30 estate market and the secondary uh real estate market the valuation difference has expanded quite a bit so this expanding valuation Gap will be reviewed and analyzed and if there is a promise in the secondary Market we're also going to look into that as well thank you yes my name
• 406:30 - 407:00 is and uh I'm CIO of Korea scientists and Engineers Mutual end Association uh we have four different classifications for real estates we have residential commercial office and Retail and uh these class four different classifications um I believe um are undergoing changes because of covid-19 for example let's say retail a lot of transactions or sales activities are taking place now
• 407:00 - 407:30 online moving away from offline so data [Music] center or rather warehouses and distribution centers uh space demand is increasing and I believe that residential is growing more compared to office using digital Technologies um we are providing Education Services and medical services and uh if that is
• 407:30 - 408:00 penetrated more then I believe that Urban spatial change is also going to take place and this is going to completely uh change the map of the real assets currently um we believe that demand for retail is going to decrease going forward and on the other hand uh virtual sites for example data centers and Logistics centers uh will fill the G Gap and uh the uh other empty retail spaces perhaps
• 408:00 - 408:30 will be taken up by residential real estates and uh nowadays residential uh real estates would have to play dual role uh it's not going to be only for residents purposes but uh also for working purposes so we believe that that is going to be another unique characteristics so per capita the working space is going to increase however I believe that the demand for office because of all these online
• 408:30 - 409:00 non-face to-face um working environment uh will decrease in the past uh we all had to together um at a certain office space however I believe that that is no longer going to be the case in the future now CBD CB uh was based on the existing um office space model but that is no longer relevant so perhaps uh it's no uh longer
• 409:00 - 409:30 going to be effective so we at s our mutual Aid Association or SEMA we are very much interested in logistic centers commercial spaces and uh data centers and we're going to be very selective when it comes to office space Investments and we're going to also from investing in Real uh retail Mr
• 409:30 - 410:00 Kim my name is Kim and I'm the CE of Master Investment Management we are a asset manager dedicated to real estate assets our AUM is about 17 trillion and offshore accounts for about 25% which is why we were hit uh less compared to others due to the pandemic
• 410:00 - 410:30 because we focus on real estate we also invest in development projects as well because of the [Music] covid-19 pandemic the real estate market of course has been HIIT and to answer your question about that retail uh Hotel these are real estate sectors have been hit hard and because the revenue
• 410:30 - 411:00 has dropped drastically in these sectors that's been a negative side but on the office side there especially in metropolitan cities the occupancy rate has been falling drastically so there are some positive and negative outlooks on office says but personally allow me to give you my uh my personal opinions I
• 411:00 - 411:30 think that we need to catch both Birds uh with one stone for example we need both online and offline it's not just about working from home I don't think that working 100% fully from home is going to enhance productivity so if we want one plus one to equal not just two but 34 and five and create a synergetic effect we need to be creating something new we need to be offline uh and
• 411:30 - 412:00 interact offline as well as we as well as working online online interactions have increased but they are going to be the mainstream moving forward in my personal opinion uh medical uh systems uh convenience facilities and person delivery systems are there so a hybrid system of online and offline City Landscapes are going to
• 412:00 - 412:30 be developed in the future but online isn't going to be the main I think uh it's the balance between the two and for conglomerates for example are going to be maybe out distributed a bit more then countries so I think that the occupancy rate isn't going to fall too drastically I think it's going to be maintained at a certain level and Plateau after a drop in the hotel scene for
• 412:30 - 413:00 example in the primary in primary spots in urban areas whether they're going to be converted to uh areas where demand is high that's something that needs to be taken into consideration uh especially given our experience with development project I think that's something that we need to closely monitor rather than focusing on old and dilapidated or traditional
• 413:00 - 413:30 buildings we are going to focus more on new and techsavvy buildings because they're going to be more attractive if the market price is let's say it's 100 then if the cost is 90 then the 10 will be your profit so for development
• 413:30 - 414:00 projects this means that you're creating a smarter buildings and I think that's a demand for smarter and new uh techn technology driven buildings are going to increase moving forward so for uh features that aren't as much in demand for example if there's a convenience store that isn't too popular uh then you can redevelop that add into for example different uses thank you yes uh good afternoon I from Korea
• 414:00 - 414:30 Investment Management I'm a managing director my name is uh chongu H when it comes to real estate we've been focusing a lot on the overseas real estates so allow me to share with you our perspectives and our thoughts on Trends uh a lot of people are working from their homes and yes we had the uh virtual confidence systems available in the past however nowadays they're much more actively utilized in my personal view thanks to
• 414:30 - 415:00 all these technological developments uh we can do non-face to-face interactions however I don't think that uh it will be the same uh compared to face tof face interactions in order to uh create a uh real estate font we conducted a due diligence using video and it was not as effective as on-site due diligence and currently I believe that JP Morgan ordered all its employees to
• 415:00 - 415:30 return to work the reason why is because uh it found that working from home actually only had limited uh cooperation uh amongst their employees and especially uh amongst newcomers so in my personal view I also concur with that I believe that uh uh once uh the covid-19 pandemic goes away I believe that the demand for office is
• 415:30 - 416:00 going to increase uh but uh not just for ordinary office spaces um we have to think about it um more Health Care oriented buildings will attract higher demands so in order to resume our business we've been getting a lot of proposals lately and I believe that uh many real estates overseas that uh the investors are
• 416:00 - 416:30 attracted to didn't uh really suffer any price decrease so still uh we had to bid our market price in order to uh win the bid so as was mentioned uh by other speakers I believe that we have a lot of dry powder in the market and the interest rates are very low and it's going to go lower in the past so that would lead to increase in real estate prices so once all the dust settles I believe that the
• 416:30 - 417:00 real estate price uh could go up again um earlier one of the speakers or showed data that shows that uh the transaction volume is quite limited um the reason why is because I believe that there is uh no consensus between the seller and the buyer at the moment however once uh more trades are made uh during this crisis there will be a greater consensus uh between the buyers and sellers and uh that would facilitate more transactions however I believe that
• 417:00 - 417:30 uh depending on different sectors the recovery rate is going to be different uh for commercial real estates the prices are higher compared to pre-co uh and for hotels and Retail the prices are uh lower uh but uh we don't know what the right price is for them yet so once the uncertainties clear up I I believe that compared to uh sectors that saw increased prices uh the rather um neglected sectors could attract
• 417:30 - 418:00 investment uh recently we generated a launched a fund uh that uh invests in Japanese real estates uh the real estate prices in Japan have gone up uh the vacancy uh rate is slightly higher uh today however it's uh not as serious to affect our fund so uh given the low interest rates and also High liquidity in the market uh in two years time I believe that the real estate market will
• 418:00 - 418:30 recover thank you for your answer in fact the reason inv investment is always tricky is of course because the future may either turn out to be good or bad but also because the current price may be underpriced or overpriced and that's something that we need to analyze and assess from that point of view that point of you industrial
• 418:30 - 419:00 Logistics just because it looks good right now may not be the best course of action and just because retail and offices aren't doing too well right now that doesn't necessarily mean that they are sectors in real estate investment that we should shy away from or avoid I don't think that's the investment strategy that needs to be employed and in that light Mr uh Mr ha and Mr sa I think that what
• 419:00 - 419:30 you've said is that we need to take all factors into consideration now we don't have too much time left right now so allow me to ask Mr ha about infrastructure or real asset Investments right now the New Deal fund is all the r the goal or purpose is of
• 419:30 - 420:00 course all good and well from the long-term perspective it is in line with the fourth Industrial Revolution and efforts to promote industry 4.0 and its underlying Industries and businesses so it's the government's uh policy response to promote industry 4.0 now I want to ask you uh about some
• 420:00 - 420:30 criticisms that seem to be out there about whether the government really needs to be using these types of funds they can just use policy measures why use funds but the government has uh announced that it will go forward with it so in as an investor from an investment point of view would you consider con uh investing in the New Deal
• 420:30 - 421:00 fund and what do you think in terms of governance for decision making so on and so forth the side effects that might appear due to the New Deal fund what do you think that needs to be taken into consideration where do we need to tread carefully this is a very uh large and difficult topic for me to cover right now in a couple of minutes but in a naturally I do think
• 421:00 - 421:30 that the deal is timely the New Deal fund is very pertinent assets uh tend to revert depending on the trend if there is a huge shock or change and they accumulate accumulate and we reach a certain level then they will revert the information technolog information technology developments were there and they were
• 421:30 - 422:00 just piling up and they weren't able to find a breakthrough but the co pandemic is what brought a breakthrough and now they're spilling over of course the spill this reverting effect will differ between sectors but I think these are the times provide opportunities for the government to take action now in my mind
• 422:00 - 422:30 I think of the Kim Administration after the ancient financial crisis the developments and innovations that were made back then were extremely a revolution AR and Innovative and I think that that is a similar theme that we see with the New Deal
• 422:30 - 423:00 fund especially in terms of telecommunication if the three major Telecom telecom companies in Korea successfully work together to bring the telecommunication advancements that are required and that are the target for promoting uh industry 4.0 right now then I would consider
• 423:00 - 423:30 investing the New Deal fund right now seems to be something a bit new if we look at this from the business side however it looks like a tech growth stock uh investment type of package so I don't uh put too much emphasis on that but when you are establishing a fund I think the mismatch
• 423:30 - 424:00 is the most challenging element if we look at the investment funds that are available in the early 1990s uh retirement funds Pension funds and the major funds that were out there were not
• 424:00 - 424:30 receiving too much funds but right now there are a lot of different Outlets where funds are allocated to which is why people don't have as much capital and funds to allocate to these types of funds which is why I believe that other preparations are needed as well the retirement uh fund the Pension funds duration is
• 424:30 - 425:00 extremely lengthy which is the and the same goes for the New Deal fund as well so there will be a duration mismatch these new technological developments that will be promoted I believe will also uh contribute to creating more jobs as well so that's a plus thank you yes uh I believe that we're running out of time but uh quick question related to real estate again this year uh international travel was not possible so due diligence
• 425:00 - 425:30 is also impossible so how do you decide your overseas Investments yes uh due diligence is virtually impossible so um we have many due diligence uh waiting for us to conduct and I believe that it's is also the case for other investors um for equity and also fixed income funds uh those are pretty much
• 425:30 - 426:00 standardized so it's easy to make decisions however for uh real assets uh we have some decisions to make going forward well in our case uh we invest in uh fun of funds especially we invest in tarf in the US and also in loans so fun fund just like start with [Music] capital we have uh very strong GPS with
• 426:00 - 426:30 proven track records so we're trying to work with them and make co-investments so in those cases uh we don't uh need to do any due diligence so we can move on with that however this year we wanted to um set up an office in Singapore in also in other parts of the world so um by setting up uh Regional Offices I believe that uh in the future if we have any similar pandemic situation then I
• 426:30 - 427:00 think that uh we can effectively make some decisions unaffected by those pandemics thank you yes uh one last question uh to Mr ton Kim uh CIO military Mutual Aid Association um I think that Mr Kimu said it during his presentation but uh Mutual Aid associations have very high exposure to um AI sometimes like 40% and up to 60% so mutual a associations given the
• 427:00 - 427:30 characteristics of their uh debt rather loans um some expressed concerns about uh the high percentage of of AI but given the low interest rates and given the current circumstances is I believe that um many are at a catch 22 situation so how do you uh decide your
• 427:30 - 428:00 management and operation strategies yes as was mentioned I believe that we have to pay about 3% of fixed interest rate every year so fixed income we have Sovereign bonds and public bonds are very safe um however from our investment point of view there um the interest rate is about 0.5 and to up to 1% so the yield that we
• 428:00 - 428:30 can expect is around uh 0.5 to 1% or sometimes uh it can be minus so yes we have to reduce the percentage of traditional assets then uh the option that we're left with with the AI so if you look at uh local institutional investors yes uh we have some her effects taking place and Mark to Market is pretty long and so the um
• 428:30 - 429:00 return uh rate is pretty stable so I think that that in a way allows uh me to long-term investment so Market Market to Market uh is not always uh negative in our understanding yes thank you very much thank you to our panelists and Mr Kim for your presentation I'm sorry that I wasn't able to get to you due to time
• 429:00 - 429:30 constraints I apologize uh thank you everyone for joining us here and I hope the very best all the very best and success in your future endeavors and I look forward to all that we can achieve together ladies and gentlemen uh we are now at the end of session three we talked about uh online
• 429:30 - 430:00 and offline uh a hybrid type of approach moving forward about how working from home or telecommuting has its downsides as well which is why office demand may rise and how uncertainties uh May increase asset prices we've also talked about possibilities of investing in different
• 430:00 - 430:30 real assets and real estate uh venture capital and also retirement funds our Pension funds have been uh topics that we've covered very insightful so thank you to all of our panelists and after we take a short break we're going to resume with our discussion session that will wrap up today's [Music]
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