Transcription
I was thinking of a way to start, but it got my thought process got interrupted by checking my phone, just looking at the latest headlines. That's really how gripped we are with very suddenly, a lot is happening in the news business. We're extremely fatigued given all the developments, but such is the world that we live in. Useful statistics if useful at all. The last six years. Three at least three wars. One pandemic. 100 plus record highs in the S&P 50 $60 swing in oil. It even went negative. When you look at West Texas and it's important to I think the reason I bring this up, it's.
How do you and I know you hear this a lot. How do you differentiate the signal from noise If you wait long enough, some noise to become a signal? And how do you invest through the noise and what to sort of tune out? And I think no better way to give us the best paradigm than from a family, from somebody who is invested through, let's call it the better part of a few hundred years, multiple generations. A lot has happened. So, Your Highness, thank you so much for for joining us. My first question is really, really very simple. What do you make of what's what's going on right now and how bothered are you or how not bothered are you with these current events?
Well, first of all, thank you very much to the organizers and Bloomberg for inviting me to this conference. It's great to be here. Want to share some thoughts? I'm a vet. I'm a LGT. Actually think about ourselves as being a very large multi family office. I'm coming back to your questions. I'm. Clearly there's a lot of noise out there, but I think being already mentioned it in his initial speech. A.I. and the geopolitical sort of changes are really long term trends that keep us incredibly busy. They do create a lot of noise and they are very, very important to sort of think through. And yes, they do make me very nervous, and I'm sort of concerned. I do think that is ultimately an enabling technology that will nevertheless and while we see that already online, sort of change things very quickly and how to navigate and response to this of technology, I think is going to be a huge challenge. I'm for I'm every I'm a business. I'm for investors. I'm a but also for I'm a sort of the broader society and governments. And then the other big thing is sort of the amount of geopolitical dynamics that have accelerated a lot over the last, I would say, five years. It's not a coincidence to me that they have I think I'm sort of political developments tend to be happening in response to broader and fundamental changes that are going on in society. I'm not, but I'm a there are you know, I'm a we are going through a very, very interesting period. And I think some of you have seen a lot of sort of disruption from it, a lot of change, especially accelerating over the last sort of 12 to 18 months. And I think we would see more change if if one takes an investment horizon long enough. Multi-generation, which I think resonates with most people in the audience. Does geopolitics even matter when it comes to taking big bets and just being patient and just letting things play out? How do you how do you balance between. Geopolitics and longer term trends that might be agnostic to, you know, this sort of surviving as a family over a you know, as long as we have armor teaches you that, yeah, I'm sure politics mattered a lot and I learned a few things. Some of that can be as disruptive to businesses and to families. And then I'm a significant disruptive I'm a sort of political changes. I'm a you know, twice in our history, I'm a we have lost most of our assets. I want you to I'm a sort of significant political I'm a changes of disruptions gladly. I'm aware I'm a diversified enough I'm a to even after having lost quite a bit I'm a to retain enough. I'm to recover. I'm a so I'm clearly one of the lessons that that applies. I think all that to this time is, you know of risk and geopolitical risk. Political risk overall armor is increasing. I'm diversification is I'm a sort of a good thing. And and then the other one is yeah I'm a sticking to I'm up to quality I'm good people I'm and I'm and and having good networks that you can rely on that can help you.
I mean, speaking of an opportunity, um, the you've mentioned previously that the purchase of LGBT nine years ago was some form of impact investing, if I'm not mistaken, is how you've once described that opportunity to then buy something, buy an asset and grow it to two to what it is right now in diversifying away from what is available, easily available currently. So for most people, that's public market stocks, public market funds. How do you look at diversifying away from public market assets and into more, perhaps more illiquid? But perhaps more stable and not as correlated assets in private markets.
Yeah, look, I think I'm sort of the I love private markets amount for a whole range of reasons, so I'm out, but I'm let's face it, I'm on the volatility of I'm a good quality amount sort of public companies right I'm a fundamentally is not that different from the volatility of some of their peers on the private sector. It's just same same amount you know won't get traded every day and the other one doesn't write drama. So I'm so I think I'm sort of the key thing is to a structurally I'm a diversifier, right. I'm sort of in a sense of the way I can what can always over diversify and then it becomes sort of difficult to keep track. But I'm a sort of I'm a you know, I'm a that's one consideration that I'm I think I'm but, you know, ultimately, what do we diversify against and what do we diversify for? I'm mean, we're trying to diversify risks. Our my and I'm so understanding and recognizing I'm the rest of the assets that we have and that's drives them are my is and my very important on my and and and ultimately I'm sort of diversifying risks and finding good I'm a return of impact characteristics that I'm sort of correlate to the underlying risks. I think that's what successful investing is all about.
I'm actually curious, what would you consider as a decent annual yield? Something that's not too greedy, but something that's not too conservative that, you know, creates value over time.
You know, I think armor sort of over the long term. I'm you know, if you take a long term perspective, um, I think, um, and if you don't need some sort of liquidity, it all depends on your needs, right? But if you don't need liquidity and whether you should be investing predominantly in equities, it's my view I'm in and my and hence you will. I'm a you know you should seek I'm a sort of I'm a decent equity returns and that's what I think I'm a a truly long term investor who doesn't have huge liquidity requirements. I'm sort of should seek since I'm a B, since many sort of families organizations have a sort of liquidity in the Internet. And since, frankly, it's always good to have a little bit of dry powder for every order I'm all for, you know, it can be the rainy day. It can be the the sort of the special occasions when it's really helpful to have some dry powder. And so, you know, that's where you want to have some exposure also to a certain assets that you can then liquidate that might not have suffered from the downturn and now provides the opportunity for making good investments. So a bit of a balance. So, you know, I'm somewhere between. Yeah, yeah, yeah. I mean, I think I'm a. Somewhere between five and 10%, I think should be a decent amount ending or not on the risk profile and how much liquidity needs you have? I think so.
Okay. I'm now tempted to ask you how much cash you have in your wallet if only 5 to 10% ready to go at any time. The let let's take a step away from, I think, your views into the markets for a moment and just to look at your own experience and I think a lot of people would benefit certainly from that. I mean, the princeling family. 26 generations of stewardship and passing down. What is your primary advice when it comes to wealth planning and stewardship and making sure that it goes beyond the next two visible generations?
I think if you look at what type of organizations survive for a long time and create good legacies, there tends to be organizations that are that integrates purpose into what they're doing. And, you know, I think among some of the oldest organizations that we're all aware of, they've had to be either universities, Cambridge, Oxford, all the universities online. Even in the U.S., there tends to be religious organizations that tend to be states. All sort of organizations with purpose. So I do think that I'm a purpose is something which people are if they recognize it, I'm sort of I feel I'm sort of subscribed to and feel passionate about. And they intuitively understand that it's worse. I'm sort of I'm pushing for and maintaining. And so I'm integrating a sort of purpose into I'm family institutions, into I'm into the mandates. I'm a you know, I'm a there really are a whole range of interesting organizations that I'm that that affiliate themselves. I'm one of if I'm a philanthropic efforts, I'm where sort of a significant proportion of the profits I'm my goals. I'm into things that hopefully help. I'm on to address some of my issues, that help the communities, that help to make the world a better place. I think those things are I'm a sort of I'm a smart or I'm a to integrate that for us as a family. I would say sort of two key points in our history where when, you know, a couple of hundred years back, I'm of the family, I myself was a decided that I still want to remain relevant in society. Right. I want to put together a constitution and I express the will that some of the family wants to remain relevant and we'll sort of give it some structure, give it some organization. I think that was very helpful. I was then, you know, I'm the family in. I'm about three and a bit more than 300 years ago, I had the chance to form this little country. I'm an Eastern It's the only country I'm going to that I'm aware of that was formed through an end to acquisitions of governance rights across territories that were subsequently merged, that gave the family a whole additional broader purpose and that created a lot of identity, created a lot of motivation for the family to our mom to be successful and remain relevant. It's probably the most successful real estate transaction in history if you the way you phrase it.
Well, if it wasn't just real estate, right, It wasn't. It was actually acquiring the rights. Okay. Oh, okay. The I want to pick up on something you just said there some several hundred years ago, some of your ancestors decided to come up with some sort of constitution. That almost anchors philosophies beyond the single generation. Is that something that you would recommend families to do in as far as ensuring that the values run through generations?
Yeah, I think that I'm sort of formalizing certain things. You know, I'm documenting intent. I'm in a sort of thoughtful way that I think is powerful armor and armor. And if really, if well-done, you know, helps to create legacy. Look at. The, you know, American Constitution. I mean, so I guess I'm coming back to some of these organizations that have been around for a very, very long time. Typically, it includes some written documentation that I've been given, some some good thought that needs to be sort of then they need to update those in time to develop because, you know, things change a little bit, but they need to. But I think it helps the impact. Investing something you mentioned to, you know, if you look at some of the oldest institutions, whether that's, you know, education based or religion based. The question I have is that there seems to be an attachment there to doing something that is relevant to society that will. That gives some permanence to that institution or that asset. And I wonder whether people should look at the tradeoff between something that is socially helpful and relevant. Again, something that is very profitable short term, because some people might see that tradeoff as not the same things.
You know, I'm sort of against the tradeoff. I'm a sort of perspective. I think we need to look at things more holistically. I have no problem in investing stuff that is hugely profitable, and I'm sort of marginally impactful. But I do think that we need to think about what helps us to create our sort of successful societies over the long term and our and that requires that we always sort of look not just as the financial return, but also sort of what some of the broader externalities are that organizations generate. And I'm you know, where I'm sort of, you know, at some point, to a certain extent, yes, you will need to make tradeoffs. I mean, I really refuse to invest in organizations that will create a substantial returns. And y but also I'm equally I'm a sort of I'm a substantial negative externalities. And that if I sort of take everything into consideration. Right. I'm it's not creating a holistically a sort of assessed I'm good value. You know, if you have a set of a sort of metrics financially, economically, you know, that have been put together, I'm at a point in time where the problems of this world are very, very different than I'm out there today. I'm anybody who would put them together, I'm on a blank sheet of paper today. I would come up with metrics that would look and, well, sort of hopefully much more adequate and well for a lot of what is needed from today's perspective. So we need to look at what we have, but we need to sort of holistically sort of add what should have been added and eventually probably will be added. You know, sometimes, you know, it takes a while for governance systems to change, right. And for metrics is to change. But that's where patience is a virtue, as they say. The 900 years, if I'm not mistaken, of. I spend more time looking forward than looking back than looking back. But we have been around for a while, for a while. I'm just curious, what is this? What is the strangest asset that you guys have owned in history?
You know, I think what I mentioned, some of what you mentioned before, must have been a really good one. Is sort of, you know, having a sort of invested arm in arm in arm the governance rights of these two adjacent territories that's then created this arm, this country, this island that is allies there, you know, a small country, but one that pushes a sort of quite successfully with, you know, one of the highest GDP per capita amount of, if I would say, sort of a lot of things going the right direction in that country. And having sort of created a life purpose for the family. A lot of rewards. I think that probably has been the most unusual asset, but also sort of one of the highest performing one of again, highest performing and well from I'm a total value creation. Right. And, you know, the you're right. The punched above its weight.
Let's let's look forward then. And let me just borrow your analogy thereof to two places that have come together. The M&A analogy was what what investors are trying to figure out now is we're moving from a period where there had been one dominant power in the world, and this transition could take very long, could be very short, and how to figure out how the next hundred years looks like. How do you approach this, the dynamics we're feeling and seeing and reading about every single day?
You know, without naming, I'm sort of I've I feel a bit disappointed of all the developments I want because I feel like I'm a you know, I'm history. I'm sort of once more I'm sort of doesn't quite repeat itself, but it sort of rhymes. And some of you have seen this. I'm a overly nationalistic I'm a sort of I'm a, uh, I'm characteristics in a lot of the European countries. I'm, uh, in the second half of the 19th century and in the first half of the 20th century, you know, and that's what ultimately led us into the first two world wars. Of people don't seem to remember what's created this horrible world wars. And it had a lot to do with excessive and stupid nationalism. Armor and armor. And, you know, I feel that I'm a I see too much of that when I'm analyzing the current geo politics. I think we are much better off. I'm in the mindset that I'm I was established right after the war of the two world Wars, which was one where, um, people reflected how can we I'm a of better work together, how can we make the overall, um, sort of pie larger? And, you know, there was a period when I'm a the United Nations were established, um, I mean, the EU was established. I, well, when I'm a multilateral, I'm sort of agreements with the support of the Americans were very, essentially I'm a sort of set up that have served the world, including um, Asia incredibly well. Right. I'm so, I'm so, I'm so I worry that I'm a the shifts that we are observing now I'm my is I'm is one that is going in the wrong direction. That's all I I'm not giving up hoping that I'm this is a I'm sort of something which I'm hopefully over time I'm I will swing back but I'm see see and for asset allocators that simply deciding based on geographical exposure this this what's happening there do you think largely determines also how people should be looking at how they're investing across the world in terms of geographical exposure?
You know, I'm certainly I think I'm to have some diversification, but also from a geographical I'm a risk. There is application perspective on what makes sense. And, um, and so it's it's definitely one of the considerations that has probably become even more important and relevant in brokering a geopolitical. Sort of. Pictured.