Transcription
Just four years old. You deal with what they call patient capital. But I've lived in Hong Kong in and out for 36 years. This is not a patient city, right? This is a city of action. So I want maybe we can get we can start by kind of giving an update on four years in. What has surprised you most about the investment climate? Because Hong Kong obviously has had through the pandemic and through some of the political turbulence, sort of some confidence crisis. What has surprised you the most about your remit and how it's been performing?
Well, thank you, Stephen. I'm always glad to be sharing on the Bloomberg stage, uh, from the crisis perspective. We started off we were established in 2022, but 2024 was the very first year of our full operation. But as you said, we basically have been through a great hit actually seeing the bounce back of Hong Kong. The fact that Hong Kong bounce back is always well proven by track record. I think we have been through many different cycles in the past of different natures, but I think the speed and the scale of the balance pack is really a pleasant surprise of everybody. Just now, the panel, I think people talk about how talented and how great firms like to have the foothold in Hong Kong as an international hub. So for us, we actually also see different dimensions. For example, of setting off, we have this. We are charged with a mandate to mandate not only bringing home financial return for investment, but we also want to bring a new impetus of growth in upgrading our industry, ie applications of future generations. We have very surprised, pleasantly surprised. Number one, the great pool of talents that Hong Kong have. Basically, people are all very focused on innovation technology. So in terms of investable space and companies, we see a lot. So good for investors because you have a very big pool thumb, I would say companies and entrepreneurs that you can work with. The second part is what I think the earlier panel also talk about. Hong Kong is play a great role in terms of being a super connector, bringing the Chinese mainland companies to go outside. But at the same time, it's a two way flow. We also see a lot of good, high quality, long term capital coming to this part of the world. So to your point about patient capital, we think that we are not alone because a lot of other sovereign wealth funds, pension plans, they're also looking to invest for the long term, particularly in technology.
Well, technology has been a big part of the portfolio companies and projects that you've invested in. Does it get to the point when you see the frothy valuations in AI? But then at the same time, the story that was on the Bloomberg terminal today, it was about the National Development Reform Commission, among other bodies in China, are talking about spending billions of dollars building out data centres across China. That would seem like a golden opportunity for Hong Kong, not only from the financing perspective, but also for an investment.
Well, um, I earlier mentioned the chassis was set up in 2022. The reason why 2024 was the very first year of operation is because we spent a lot of time on the center market and the sweet spot for Hong Kong because, as I said, it's not only for financial return, but whatever we invest, whoever we partner with, we want them to bring benefits, long term benefits to Hong Kong. So the reason I mention this is because when people were debating while I last language model is about, we already invested in a number of them in 2024. When people talk about whether at bodied, I will again, we already kind of put our best into a couple of them. So gives you some example, I think a few days ago, Financial Secretary wrote in his blog about a company called board, which is going to operate Hong Kong, this very first at a convenience store in Hong Hub in the What? A fan of home. What is it? Robotics with robotics. Yeah. Well, actually. What is it? Yeah, yeah, well, they can call me. Or, like, selling different things. More like a full convenience store, but meant by embodied AI. So I think this is actually great for Hong Kong. And as I said, first of its kind in Hong Kong, that company we invested in 2024. And throughout this trajectory, they already operate similar store like in Beijing. So it's not a concept is a proven concept that we can touch. We can see, we could feel as it's now in Hong Kong. And the other example I could give is I think a lot of us in Hong Kong for please about, um, our very first astronaut, uh, doctorate like how you write was not in the space. We have Shenzhou 23. And many of you also may be aware that she is bringing with her an innovation from the Hong Kong USD basically is an AI power. We empower and weather forecasting like solution and also a monitor. She is bringing with her that and operating in this phase. So that company is called stellaris. And we invested in 2025.
What was your remit? Take me back four years. And how much leeway were you given? On risk appetite. Because I would say in the past, the Hong Kong government can be labeled as a bit conservative. But then you were given what was originally the capital of 62 billion HKD, about 8 billion US. It's fully invested, isn't it? Yes. Pretty much fully allocated. Fully allocated. We'll get to in just a minute whether you're going to get some more in the coffers. But, uh, what was your risk appetite then versus right now? We see risk and return going hand in hand. But our sweet spot and striking. So I would describe as we try to focus a little bit more on the space where we could find value for the future of Hong Kong. A few dimensions. Number one, if you look at the data we share, basically we invest around like 10% In really early stage, which is pretty round. So around 60% in what we call growth stage, which is actually a rounds basically early stage where we think we could bring value. The second point is about the fact that when we invest in those companies, those are bringing to us like cutting edge technology, we talk about AI, large language model, embodied AI, and now we are in areas such as commercial aerospace and also bring computer interface. And the last bit I would like to add is when we call patient capital, that patient is not just like passive sitting there and waiting for return. What we wanted to bring to the table is number one, not only our own capital. We always quote a number saying that the capital multiplier ratio for every dollar we invest in the company, on average, we are bringing in more than $8 from the international market. Long term capital like other sovereign wealth funds in the same company. So for us, the grove is not like sitting there picking the right team. But we also want to add value to them.
So again, I come back to if you're fully allocated with that initial uh, investment in this fund, will you. And when will you possibly receive top ups and from home as well.
Well, um, the financial secretary already mentioned in his budget speech the fact that we are pretty much fully allocated or committed. And this concept is like when we invest in early stage companies, as we said, we start as good potential as good. But we are very cognizant of risks, right. A lot of this like early stage companies, they may or may not work even with our like best effort and everybody putting our heads together. So we need to have that professional and market mindset how to mitigate risk. So the reason and the way how I would do it is I was doing approach. We identified the companies, the sector, the team and then we put a little bit of money. We try to test them out. We set the milestone. So the fact that we set is like fully committed is because by that milestone approach, we are already committed to give them more, maybe 3 or 5 tranches more if they hit a certain like this is milestone. So that's how we describe as fully committed. And to your point of also what next? Basically, while we are on very good track incremental company and also bring financial return, the government financial secretary already mentioned in his budget speech in February that he is considering and discussing with us, um, the capital injection and.
Well, I will list that 12 questions to the government in terms of how the next chapter of each case will be. But you're managing the portfolio, so how urgent would it be if you see the opportunities right now, while the market is doing pretty well and the returns seem to be pretty well, and you're well invested in growth areas right now, are we talking this year, next year or within a five year time?
Well, for me the urgency is always really because we see great opportunities in Hong Kong. And as you said, we need to act now. Right. If you see the great opportunity, you don't want to miss them. But not missing them is not just because they could generate good financial heart, but because additional benefits that they could bring to Hong Kong.
I'm going to put on my financial secretary hat here. I'm Paul Chan right now. Would you need 50% top up, 25% of the of the original capital? What kind of top up do you think would be adequate four years into this fund?
Um, well, that's funds you have. Well, I would say that, number one, we need to think from the broader perspective is he has he has been doing a reasonable job with a reasonable trajectory. But what next do we want to build with this platform as a financial return? Is it really also more like the international thought leadership? So if that's the case, so what is the best reputation, the brand that we want to build with the right amount of capital. So that's number one. Number two is aside from the trajectory that we have been through. You may know from some recent announcement there are new things that do what we are doing. First of all, apart from the individual thematic investment, the names that I have just mentioned that come into fruition, another area we also announce, we talk about launching of an offshore and B venture capital fund. So I think these are the new thing. We think we could go hand-in-hand with Hong Kong's traditional advantages.
How did you know I was going to ask that next? Because the Paul Chan, again in his blog post on June 2nd, talked about their actively considering launching this offshore renminbi, uh, venture capital fund. Uh, how close are we to that? What kind of, you know, capital are we talking about and where would that be deployed?
I mean, I can honestly see, obviously, the further integration that we're likely to see with the northern metropolis and some of these initiatives that are going to be on for us, we always want to add value, um, in the way that we try to showcase and marry the traditional and emerging advantages of Hong Kong, the great attributes of Hong Kong. So the idea of having an offshore renminbi fund actually is a testament of both. The first part Hong Kong being the biggest offshore renminbi centre at Hong Kong. I mean, we actually have a very good pool for the capital in that sense. And what we do is to try to leverage this advantage to provide a better diversity of product. But on the other side, you ask about how close we are. And I could tell you is very close because of the fact that it's not only a remote dream or vision that we think it may work. The reason why we propose it, in addition to Hong Kong's traditional advantage, is actually because when we talk to our investors in Middle East, in Southeast Asia, around the world, people are having high and high confidence of offshore renminbi. And actually they have a lot of choices and transactions done in the currency at the back. Of course, after getting the currency, they want to have a deeper and more diversity of product where they could deploy. And that's why when we say we have that idea, we already have that natural matching of the demand supply.
So in lockstep with that statement is how much are your investment strategies in lockstep with national goals and initiatives from mainland China? Obviously they do want, uh, to further internationalize the renminbi. So how do these investment decisions go in lockstep? And I mentioned Northern Metropolis, uh, we've mentioned that the data centers, a number of these different, you know, money oftentimes follows policy initiatives when the weight of policy is, uh, comes to Hong Kong from Beijing, money follows. So would you say that the the the push for the offshore renminbi hub, which Hong Kong already is the largest in the world. Further, um, makes the renminbi more international.
How it works for us, I think it's also the beauty of the skies is we are a testament of the integration of a very proactive government and also a highly efficient market, meaning that when we look at something we propose something we implement something is really a matter of how we see that would fulfill the two mandate. Do mandate. Number one, as I said, financial return. So that's why we actually it always in consensus and dialogue with other investors because we speak the same language and we look at like risk return like mackerel and a lot of these things in the same way. So that's the professional market side. At the same time, we exist for a reason. We want to build a better future for Hong Kong. So for that part, we need to really married a professional and market in size and also that standard, that reputation, that brand, together with how to bring goods and things to the table for Hong Kong. And I would say that so far we think those are very smooth. Um, integration and also implementation because as I said, look at like Gilbert Stellaris these companies and different I and companies, if they are not good companies by themselves, if those are only really policy initiatives, so how will we be able to have that capital multiplier ratio, bringing in other professional investors money? So I think that's a real testament of how good these companies and how good the future of Hong Kong is.
How are you impacted not to go to micro because you have a longer term horizon and you're not dealing with hot money, uh, flows across the border. But again, sentiment is a big issue and confidence for Hong Kong. How are you impacted with your decision making on your portfolio projects? Uh, by the recent raft of regulation to kind of stem Illegal cross-border transfers that have gone into stock markets, gone into insurance products and the like, and also simultaneous crackdowns, or at least scrutiny of source of wealth of high net worth individuals in China?
As long term professional investors across cycle. I think we always try to distinguish noise and rumors with facts and data. Being patient Covid, we have that luxury to see through cycles and also try to pick the themes which could be bringing across jurisdictional cross-generational benefit. So for us, as I said, even though whether as policy, uh, changes, whether those are sentiment changes, but we need to really stick to our core on picking what's best for Hong Kong. The key thing, I would say policy would be interacting very robustly with our choice is really how Hong Kong government plan for the future. So if they say, well, these are the key industries that we want to bring Hong Kong into or we want to accelerate the, um, the development. So definitely those will be the area that we are very focus on.
But that's an area as well. You're going you're diversifying, not just in high tech or hard or core technologies. You told me before this that you're going to be looking at investing in education.
Oh, yes. Well, so, uh, we talk about like thematic individual investment in the core themes previously, which was hard core technology, uh, for target healthtech as well as green energy. Uh, gradually we are pivoting towards also other sectors, including, as I said, offshore ended up in the least as financial services related. Um, and also education, because the more we invest and in this role, we see the great future of Hong Kong because of the talents and the younger generations. So we definitely want to work more in terms of the education side, including, uh, for example, student housing. Uh, wish we allowed to invest. Uh, look, Tang financial secretary, this budget speech where he talk about our expected investment and curation of capital into commercial real estate in Hong Kong.
Can you give him. We only have 15 seconds left. This went by fast. Uh, can you give me an indication? You talked about returns. It's patient capital. So your horizon, your time horizons. A little longer than, uh, than some here in Hong Kong. Uh, but we haven't gotten the number for returns for 2025. We did see five, 2.34 billion in, uh, profit earned at the HK I see in 2024. We're going to get the annual general report coming soon. Can you give an indication of what, as Paul Chen talks about, double digit returns for 2025, is that 10% or 99%?
So I'll stick with I have for his words, like double digit hit hard and, uh, save the secret for the, uh, announcements, the annual report, which is coming online to pretty soon, I think end of this month or early July. But I would say that, uh, it's a pretty decent number where notwithstanding, I'll do mandate even if we compare that with professional market standard, we actually beat the benchmark.