Transcription
[Music]
Welcome, welcome everyone. First, I'm excited to be here, uh, at our third FI Priority. Miami Maris Suarez, fantastic job hosting us yet again and bringing together these global leaders, global thinkers, and friends. Uh, which I think is an important part of this is the relationships that we have built, uh, with our friends and the Kingdom and our friends in the US.
First of all, we're going to be hearing some insightful perspectives, uh, from our esteemed guests who've been introduced on the market opportunities within the public and private markets. And why, despite the changing economic conditions and record high, uh, debt levels, there's plenty of room for optimism. I think in particular, we're going to address how exploring opportunities in the public and private markets, in terms of liquidity, transparency, and accessing investment opportunities, uh, in the face of what I think is the greatest transformational opportunity, which is this gen, which we are talking about, our new kid on the block, as well as shifting geopolitical relationships and some uncertain policy, uh, dynamics, and the rising importance, of course, of the public and private partnership.
So Yazid, I want to start with you. One of the things that has struck me in my over, I guess, 15 years of visiting the Kingdom is not just the leadership and the vision, but the fact that the government has decided to be an enabler of opportunity and bringing, you know, foreign direct investment. I understand there's, uh, a goal of over a hundred billion of foreign direct investment. We heard earlier about 25% of that, uh, is coming from US investors. But let's talk about the importance of what you all are doing at the PIF to create an environment to de-risk and create an enable opportunity for global investors to participate in the economy.
Sure. Uh, well, thank you, Robert, for having us here today. And, uh, in fact, as a continuation of what's explained by, uh, His Royal Highness Princess Reema on our Vision 2030 and also His Excellency Mr. Al-Alal on the ambitious target that we have, there will definitely be a central role for PIF to play in and to fill that gap by being a long-term investor, especially either in the private or in the public, uh, sectors.
So I think part of that vision, there are many different programs, and one of the greatest programs that we have is the Financial Sector Development Program, which is led by His Excellency Muhammad. And in terms of developing our capital market, developing our regulations, processes, that's basically ease the business, not just for PIF, for PIF portfolio companies, and also for our partners that some of them are represented here, working with PIF in many different initiatives. I'll just give an example and some statistics and numbers. The assets under management in the public markets in the Kingdom of Saudi Arabia have grown by like 150% since 2018. It was nearly 100 billion US, now it's 266 or $270 billion US. And I think this is just a start where also we are working with different partners, uh, uh, represented here today, to grow that number further and further.
And in terms of the link between the public and the private market, I think it's interlinked where we at the PIF, uh, our board, uh, through their their strategy, basically, uh, uh, sets the 13 different sectors that we need to invest in, where most of these sectors are either untapped or underdeveloped. And we are working with the private sector in the Kingdom, internationally, to develop all these different sectors. And eventually, those companies which are held privately will go definitely into into into, uh, the public market. So I think that's how it's interlinked together.
One is, uh, also, uh, I think to add to that, uh, you know, part of, uh, uh, our working on promoting international investment, as, as we, uh, announced, I think last year, we've, we've signed with the, uh, with with BlackRock, a platform where they have their Middle East platform to invest from real to invest privately, publicly, into different assets, uh, pool, and with others, definitely. So in, in public markets, uh, we've been trying also to work with our partners to introduce different products like the ETF. We've launched the largest, uh, uh, uh, Middle East, uh, ETF that's focused on Asia, like in Hong Kong, and also we have a feeder fund to the mainland of China. And also with our colleague, with your support, who've launched our bond ETF in in London and New York. Those we seed them with investments, but definitely trying to attract more and more investors into these different platforms.
Spectacular, uh, leadership and motion to develop that sort of infrastructure and attract capital. I know, Lisa, let's turn to you. And congratulations on your new appointment. Uh, you all have been investors in the Kingdom and the region for over 100 years. Talk, if you would, a little bit about, first, you know, how you're viewing the, the global macroeconomic, uh, investing environment, and why, in particular, are you continuing to invest capital resources, people, in the Kingdom? What is it about the Kingdom?
Robert, so it's actually 130 years in the Kingdom, and we're, we're exceptionally proud. I think our team is, uh, bigger than three of the next largest teams combined. Uh, but we've been supporting the Vision 2030 and the energy transition, and I think the 99 wonderful PIF companies all through history, and we're thrilled to be doing so.
I think, Robert, what we're seeing is a, a difficult, in the 60 countries we operate in, it's a very difficult geopolitical shift, uh, trade realignments, um, and how to get your hands around where the biggest tech advances are going to lead you. So we really, our clients and our institutional investors, as well as our corporate investors, think about, think about where do I see political stability? Where do I see policy and fiscal programs that are aligned to my interests? Uh, where do we see potentially energy security as well? Um, and, you know, a stable environment to invest.
So there are probably four regions we're most excited about right now. One would be, uh, Southeast Asia, and they will continue with trade realignment to take advantage of China Plus One. We don't see that changing, and this is an emerging market powerhouse. The other would be India, with with 6 and a half percent GDP and a billion and a half people. Uh, we have 42,000 colleagues in India, and we think the "Make it in India," the "Digital India," will long continue. So we're excited about that. Obviously, the US, a little self-serving, as I lead the US, but I'm excited to hear from President Trump about the positive, pro-business stance, uh, that this administration is undertaking. Uh, we are 30 trillion of GDP, we're a quarter of the world's GDP, which is great, but at plus 2%, uh, we'd like to see, uh, we'd like to see that strengthen further. Uh, it is an innovation economy. We bank 90% of the Fortune 100 companies, but we are helping them go from west to east. And then our number one, uh, sorry, it's a bit self-serving, Saudi. So we will, uh, we will, uh, continue to build and grow here. We're moving into the new Financial District very soon, our 6,000 colleagues.
Great. Let me pivot, uh, Evan. I, I, you know, you are a global investor, and I think last November in Hong Kong, you talked about the opportunities investing in technology globally, uh, especially in artificial intelligence, quantum computing. I think it would be important for the audience to hear your perspective, how you think about, uh, investing in, in this ever-shifting environment with massive opportunity on the one hand, but also has some, some global risk in terms of the partnership dynamics and some of the trade dynamics. I'd love to hear some of your thoughts on where you are focusing your energies and intentions.
Well, just to take a step back, and I would agree that, um, you know, as you look at opportunities around the world, the US continues, I think, and there are lots of reasons for outperformance. Labor markets are strong, companies are delivering earnings, and we're seeing really strong household savings. And the pro-growth agenda of President Trump, I think, will only help that. You know, as we move around the world, um, some of these issues start to to rear themselves, whether it's in Europe, you have relatively low fixed, uh, investments, uh, lower consumer demand, risk of tariffs with the US, and then increasing competition, uh, from China, for example, in the automotive sector. Aging demographics is something that's, uh, very prevalent, uh, in developed economies. It's an issue in Japan. Initially, enormous enthusiasm for the break, uh, from the disinflationary environment of the last number of decades. That is still now in question whether the growth and inflation agenda will continue. And China, of course, has its own internal issues in terms of its consumers, 70% being levered to a challenging housing market.
Emerging markets, I think, is very interesting. And this is maybe the trade, uh, point where, you know, there will be winners and losers. And as we see global supply chains reorganizing, countries like Indonesia, Thailand, Malaysia, uh, South Korea, Taiwan, these have all been beneficiaries. But again, you have to look at it country by country, industry by industry. As a way of example, Indonesia's semiconductor industry is benefiting from its close proximity to China, its tin, nickel production. Which brings us to really the GCC and why we're here today. Because this region, the GCC, the Kingdom, we're so excited about because the IMF is predicting, uh, double the GDP growth in the region relative to the developed world. As we've heard, an enormous number of very high-quality companies coming public. Uh, we're seeing tremendous, uh, debt issuances, both hard currency, local currency. And it's one of the reasons why we were so excited, uh, and delighted to be supported by the Public Investment Fund in launching a fixed income ETF focused around Saudi Arabia, because the story is tremendous. You have great growth prospects, relatively low debt to GDP, uh, a young, vibrant talent pool, and a really strong intent and track record of the government diversifying the economy. If I'm not mistaken, I think non-energy, uh, industry represents at least half, if not more, of the overall economy of Saudi Arabia. And so for all of these reasons, we see the increase, the GCC within, uh, the emerging markets index. It's grown by five percentage points over the last 10 years. Saudi has grown three percentage points over the last 5 years. Uh, that's yet to be recognized by the global indices. So there are so many reasons for investors to want to invest in this region, and one of the reasons why we're so excited to really be focusing our efforts, building on our 30 years in the region.
So, so sticking with this theme of global competition, and Evan, let me, let me turn to you. You, you represent Lazard, who's a, you know, a storied institution, global investor, global asset manager. Uh, as this national AI competition continues to heat up, how should public market investors, uh, evaluate what the opportunity sets are? How do you navigate national interest versus business profit? And then what are you advising your clients to think about and how to participate in what will be a transformative, uh, investment landscape?
Yeah, so look, I think you start by saying that investors have to participate. Uh, the question is, how can they also discriminate? And I think that's the next sort of evolution of how we have to think about what's happening across AI. As active investors, we spend our time thinking about not only what's happening today, but also about how the industries that they're going to impact are going to change over time. So the, the breadth of what we heard, we heard Sofra talk about earlier, how AI is going to impact everything in every landscape. That just means that every industry is going to have some sort of disruption. That could be market leadership, it could be market share disruption, it could be margin disruption, and effectively profit margin changes across industries. That's a very exciting time for an active asset management firm to be thinking about where to put capital.
And as we heard last night, uh, from His Excellency Yasser, last night was talking, and I thought it was very interesting that he mentioned that at the, uh, if we look back to previous technology booms or or revolutions that we've had, it wasn't the first wave of companies that had the most success. It actually was sometimes the second wave and the third wave. And I think that that's actually very applicable here in the way in which we're thinking about this. It's not only what we see today and what's winning today, but also about how it's going to transform for tomorrow. And that, for us, is sort of second derivative, third derivative, how we think about the world.
From a business sort of business profit versus national interest, it's very interesting. As, as active investors, as investors generally, we think primarily about business interest, right? We think about national interest as how it changes the economic outcomes, uh, that relate therefore to business profit, right? So when you think about, uh, a change in the way in which regulation may work, when you think about the way in which an ecosystem may develop, that could have an impact on economics, that therefore has an impact on business profit. But when you think about it as active investors, we think primarily about making sure we're making the maximum for risk-adjusted returns on capital, that therefore leads to the most vibrancy in markets, and that therefore leads into an innovation society, which is really where we want to go.
And why that's exciting here today, and and why we're excited about the GCC. We actively manage money, uh, across the GCC, and of course, in Saudi as well, partnering with the PIF to continue to bring the institutional quality, bringing the valuation discipline, bringing the, uh, enormous research capabilities to create the marketplace that will have that segmentation, that will have that sophistication. Because when we think about what's going to be needed, by listening for just the last couple of, uh, panels, the amount of capital that's going to be coming into the region, uh, is going to be enormous. And the greatest gateway for capital to come in is going to be in the public markets. That's going to be the greatest gateway to for foreign direct investment. And therefore, we need to make sure we have the greatest functioning markets. And that's what the PIF is doing an incredible job at, bringing companies from private to public, offering the opportunity to participate.
When you look back at the, uh, as Evan just mentioned, right, what's happening is the GCC is playing a much larger role in the emerging markets. In 2012, they were 2%. Today, they sit about 8 and a half percent, expected to grow to 11%. Saudi, 10 years ago, was 4% and was zero, and today it's sitting at around 4%. But still yet, less than, uh, a third of the companies, or or around a third of the companies, don't really have even research coverage. So it's a great opportunity for active investors to come in, to participate in the market, to help develop a function, a a greatly functioning market, an institutional quality market. And that's going to help develop the entire region.
Good, good point. I, I would turn to Omid here. Omid, you, you work in, in, in an interesting confluence of technology, political, and social change. You know, 1789 Capital, Bill of Rights Capital, we'll call it, uh, is in an interesting place. You have a, a great set of partners, including, uh, Donald Trump Jr. How did you all think about taking advantage of investing in technology, investing in AI, giving what is now a, a new direction of where America is going? And how do you, how do you view your position in that, uh, uniquely, and how can you take advantage of that as an investor?
We can't separate those two things at all. Uh, as I take a step back and I think about the AI revolution, if you compare it to the Industrial Revolution, it's an entirely different cohort that's going to be affected. It's not people who work with their hands who are having their jobs automated. It's a lot of people in this room. We're going to make many lawyers obsolete, which is probably a good thing. Uh, I can say that because I used to be a lawyer, by the way, so respect.
But that said, uh, it, uh, it comes with a lot of consequences, and there's going to be a lot of benefits to it. You know, just talking, we are invested in AI, but it's going to have an impact on asset management, as we were talking about, particularly in the public markets. Right now, in public markets, about 30% of all AUM traded is for Quant funds, and that number is going to double. So again, respect to my hedge fund managers out there, but you're probably going to have to lower fees pretty soon too. So I think this is going to be very disruptive. I think in the private markets, it's going to have less of an impact because of the informational asymmetry you have there. Uh, but what it will do is allow diligence to be conducted at a cheaper manner, with less people, which is probably a good thing when it comes to efficiency. Uh, so that's, I think, at a high level, who's going to be hit by it and some of the benefits.
As I said, we're invested in xAI. We think that this is certainly the future. But the caveat and the warning I'd give the room is, I think what we all collectively missed and led to some of the cultural disconnect is, we have to know that the outputs are influenced by the inputs. And what I mean by that is, when we seeded search in this world to one company, we realized now that if they control what you see, they can control culture, and therefore politics. And the fund 17889 Capital was inspired by what we saw to be a collusion amongst very big monopolistic companies that were depriving us of many of our rights, including the First Amendment, during COVID in particular.
And so, as I think about AI going forward, we have to be very careful about the inputs and who's controlling these agents, because ultimately, not only does it have those detrimental effects that I just mentioned, in addition to that, it's going to potentially cause harm even in your portfolio. So, for example, if an agent is taught a certain way, they may think that inexplicably ESG investing is a good thing. Now, we all know that's destroyed shareholder value over the last 15 years. But if it's investing with that mindset because that's the input that's put in, then you're going to lose money. And even furthermore, it could lead to danger. So we really have to emphasize merit and being objective when we're training these agents, and I think you're going to have a much better result and hopefully have more cohesion.
So, uh, Rob, I want to go up 50,000 feet. I want to zoom out a bit, if, if it's okay. Uh, as a, you know, co-founder, BlackRock, largest, you know, asset manager on the planet, when we think about, you know, how to invest with literally, you know, new dynamics that we haven't seen before, you know, AI is a completely new, different, you know, different dynamic to invest in, you know, shifting geopolitical landscape, partnerships, uh, in some cases getting deeper, some of them being, you know, tossed out the window and redrawn. How do you advise your firm, your people, and ultimately your clients on how they should be investing in the near-term and ultimately long-term, uh, in this shifting environment? What regions, uh, what, what particular areas or sectors? And, and, and, you know, if you would give the audience some, some particular insights as to how you personally think about, uh, this market that we're in.
I would tell you that, um, this is the largest career investment and alpha opportunity that I've ever seen. And, uh, the Deputy Governor is being a little humble because he's helping to give us opportunities to invest in ways that we have not been invested in before. So I sat here all morning, and if this was a company meeting, if the KSA was a company, and I was looking to invest, I would be all in on this. I agree, this is sort of the culmination of a lot of the history of the financial markets, the building of the financial markets.
So what do you look for? Well, first of all, you scour the world to try to find great opportunities. But sometimes the best opportunity can be right in front of you. 40 years ago, uh, was my first visit to, uh, to Riyadh. I stayed in the Intercontinental Hotel. I think it was the only hotel on the strip. And, uh, they told me, we export two things here: oil and money. And now, after putting all of that in place, the KSA is investing money back into the country because of all of the opportunities. And they're doing it in a way that really is just so important to every investor in this room.
What do you look for? You have to invest in a company or an area of growth. Sounds maybe, sounds obvious to you, but, you know, people all want to go public. Well, the day you go public, that's just the beginning, because if you can't grow, your stock is going to go down. This is a growth company that we're talking about. You have to invest in scale. You cannot tell me that you don't see and envision the scale that is here. Resiliency. This has been a long time coming to be able to do this right. Youth. You have to be in an area where, uh, people want to, there's a young population that wants to grow, that wants to make a social impact. And Princess Reema told this, this today. Timing is very important. And if you think of the timing today, there's $18 trillion sitting in cash in money market funds. That money needs to be invested. Why? Because populations around the globe are are older, they need to retire in dignity, so they need investments. What kind of investments are they looking for? Well, one that would be incredible would be infrastructure. And if you'd see what, uh, Jerry is building in Diriyah, you, it's unbelievable. What Vision 2030 is. So the building, the infrastructure needs, and I'm selfish about it because for me, it gives me long duration securities that have a yield, that have equity upside, that have a social impact. And that is the perfect product for retirees around the world. So we're going to help to build that.
And the other thing for you investors out here, there's one thing that I tried to figure out. What is a common thread between the top seven or eight companies in the world? What is needed for you to invest in that? Well, one is you have to have access. And we're getting access in the wrappers that make sense for us. But the one word that's a common thread is convenience. MH. And that is what the next generation in the world wants. So I don't have to go out to buy anything. Some of you in the back row are already on Amazon during this, buying products for when you get home. Very convenient. When you get out of here, you're not going to flag a taxi, you're going to get an Uber. And our friends from, uh, from Uber here today. If I ask you a tough question, you're going to Google it. So whatever you're investing in has to have that thread of convenience, because that's what the future is.
And when we talk about AI and data centers, timing is very important. What does all of this need? It needs energy. All of this is coming full circle in one area of the world, and that is in. So the opportunity, the growth, the scale, check, check, check, check. The population, more women in the population, uh, participating in the workforce, all of the things that we've done. And the most important thing to me is thinking about history of the financial world. Railroads. Let's compare railroads to oil. Railroad business. Why did the railroads go out of business or didn't do so well? Cuz they thought they were in the railroad business. MH. They're actually in the transportation business. When I invested in cosmetics, I asked somebody about a makeup and how the margin is and all that. They said to me, we're not in the makeup business, we're in the beauty business. So His Excellency said something here, which is so important. He said 53% of the GDP is non-oil. So the KSA has understood, they're not in the oil business, they're in the energy business, and they're in the technology business. And so they're looking at that. And now what we have to do is figure out all of the different companies, all the different areas that we can invest in. But I assure you, the one thing that'll make you an investor is visiting. How many people here have gone to Saudi Arabia? Raise your hand. So what the hell are you other guys doing? I mean, how are you going to invest if you haven't seen it? But I guarantee you, if you go, the excitement, the can-do attitude, right, of those people like the Deputy Governor and others who are running things, is so incredible that you will get that feeling. And then once you go around and see those opportunities, I guarantee you, you will be a big investor. For those who are competitors of mine, we're building a big office, and we're going to be in there first. For those of you who are retirees that invest with us, this is where a lot of your investment is going to go because we believe in the long-term return potential.
So great. Thank you. I, I, excellent said. I'm going to pick, I'm going to pick up on that word, convenience. You know, one of the greatest opportunities we're seeing in alpha, really, is in areas that we're focused on, you know, generative AI, agentic. 95% of those companies are private still, okay? So how do you make it convenient for the general public to participate, participate in this wealth generation opportunity? One of the most important things, of course, is managing policy. I was very encouraged about what I heard last night about becoming a partner with government and enabling, you know, private businesses to be more successful. The thing that I have noticed in the last 15 years in the Kingdom is they do that well. They have figured out ways to make it easy to invest, easy for companies to come in and to bring talent, capabilities, and capital.
And, uh, Maid, I'll leave you with this last question. If you were to give, uh, some lessons to the folks or some, some messages to the folks who did not raise their hand, what would you tell them about why they should come there? Why they should invest in the Kingdom? And what are the advantages of investing in the Kingdom?
Sure. Uh, maybe I'll just encourage them to attend, uh, Dr. Iman's presentation. She's the Deputy Minister of Commerce. She will present maybe at 2:30 today. She will explain exactly what the, what can the Kingdom offer, either like, you know, ease of business, because, you know, sometimes when you see it like abroad, traveling, you know, from New York to London to Tokyo, and skip that part of the words, it's usually you have that kind of a perceptions that it's difficult, it's, uh, it's not friendly. But in fact, according to the numbers on ease of business, and today, I think, uh, it will be shown to you and presented to you, we are actually, I mean, in the top three, I guess, in terms of of of ease of business, ease of doing business. I think, you know, most of our partners here presented to presented, uh, their, their views, their opinion, and having like, you know, uh, Lazard, BlackRock, State Street, their regional headquarters in the Kingdom is a testimony of the strength and how investors basically coming and bringing back their their, uh, their investments to to the Kingdom.
I would finish this. Thank you all with with the following from Her Grace. The Kingdom has been successful at not looking at today and moving forward, but looking at tomorrow and leaping forward. I thought that was spectacularly said, and that is truly, in my mind, the embodiment of why we are all here to leap forward with the Kingdom. So thank you all for this wonderful.