Simon Brewer  

Welcome today to this Curated edition of the Money Maze Podcast. We're delighted to welcome back Partners Capital. And in a three-way conversation, we're going to explore the Asian investment opportunity. And to do that, we have Arjun Raghavan, the CEO of Partners Capital, Adam Watson, Partner and Co-Head of Asia Pacific, and to understand the perspective of a seasoned investor and allocator, Harvey Toor, Chief Investment Officer of Singapore Management University. So I'm welcoming you all today. And I'd like to start actually with Arjun. I went back and listened to our interview of last year, which was very illuminating. And you said a couple of things that I'm going to refer back to later about the vision and the secular headwinds and tailwinds that are going on in our business. But if I can ask you just to jog back, Partners Capital, can you frame its genesis and its vision?

Arjun Raghavan  

Thank you, Simon. Delighted to be back on the show with you. Just to recap who we are, we're an investment office. Technically, these days, we're called an outsourced investment office. We started life about 21 years ago, and at that point, the best way to think about us was that we were the money manager to the money managers. So the idea was long-term investors. So senior private equity partners back in the day had a real need to find investment opportunities that suited their long-term investment approach. And at that time, there was a very famous book written by David Swensen, who was the Chief Investment Officer of the Yale endowment. And the idea was to try and take that Yale endowment approach and apply it to the senior partners in the private equity industry, and hence the name Partners Capital, because it was meant to manage money for senior partners in the private equity firm. But obviously, we've grown significantly over the last 21 years. Today, we manage about $47 billion of assets. About 55% of our clients are from the endowment and foundation and institutional world where we're essentially applying the Yale endowment and its practices to these smaller institutions. The remainder of our client base, about 45%, are really families and senior partners and these investment firms who were our early clients. They've just grown with us over the last 20 years or so.

Simon Brewer  

That's very helpful. So as I re-read your observations, I'm going to quote you back. You said there are two megatrends which are clear, but this is going to be a bumpy ride; sustainable investing and the flow of assets into Asia. And today's conversation is the latter, and typifying it as a bumpy ride, of course, is correct, because it's all about long-term perspective for successful investing as we know. Just staying with Asia at a high level, you engage with all of the investing bodies that you've just described. Could you just give us a sense of where their Asian allocation is today, and also maybe reference that with where you think it's been in the past?

Arjun Raghavan  

Yeah. Asia is certainly one of the key things that need to be focused on. I've talked about this a year ago. Even more so, I think today, Asia represents a really interesting opportunity set for global investors. But as you rightly point out, Simon, global institutions are probably quite severely under-allocated to Asia. So most of them have under 10% exposure across the Asian landscape. And this is obviously not everyone. There are some institutional investors who are a lot higher than that. But the typical institution would have under 10% in Asia, and in fact, 60 to 65% of their portfolios will be dominated by the US, which has obviously been a great place to invest over the last 20 years or so, particularly given what's happened in technology. So that's been a great ride. But the question most investors are asking today is, 'Is that still the right thing to do?' If you look at a classic institutional portfolio, you're going to have that dominance of the US feature in their portfolios. You're going to have a decent chunk allocated to Europe, and then there's a little bit in Asia. But obviously, as we all know, the US and Europe remain highly correlated. You have macroeconomic and fiscal policies, which are actually very synchronised. And therefore, the way these markets move tend to be in sync. And so the real question for global investors is, where do we go to find a different source of returns? And that's where Asia is back in the limelight in terms of something to explore. But I think there are really good historical reasons as to why Asia has not been a big allocation in institutional investor portfolios.

Simon Brewer  

I've been an investor since the mid '80s and have invested in Asia and I think that it's interesting to observe the evolution. I would just observe that the dollar and the US-centricity in portfolios reflects some of the facts that we've spoken about, technology dominance dominated in the indices, but also, it's been a very strong cycle for the dollar. So I think that as people think about asset diversification, there's a currency element we may come back to in a minute. And I think the other item that we want to explore is for many people, they think about Asian investing and they think about China, which of course back in the '80s, wasn't part of the investment landscape in the way that it has become. And also, they tend to think about equity and equity only. And that whole map has changed as well. So what I'd like to do, first of all, is ask you to put these allocations in a little historic context.

Arjun Raghavan  

Sure. The facts have been obvious to people for several years. You had 50% of the GDP coming from Asia, 60% of the world's population is in Asia. But yet, it is under 10% of a typical investment portfolio. So why is that? The reasons historically have simply been that it's extremely hard to invest effectively in Asia. You need to dig deep to find opportunities. It is a varied region. There are political risks. And getting it right is just tougher, and therefore, unless you put a huge amount of effort into it, it's actually easier to allocate capital in other parts of the world. And of course, as we talked about previously, given the ride we've had in the Western markets, particularly in the US, there was no reason for people to really do the hard work needed to invest in Asia. Now, there is a real opportunity, and I think things are going to start to change. And I'll point to three high-level reasons why I think that's the case. Number one, as I mentioned previously, I think it's very obvious to global investors that US and Europe remain highly synchronised in terms of policy cycles and the way they move. And therefore, there is a huge push to try and find idiosyncratic sources of return, where monetary fiscal policy probably moves at its own drumbeat and we're going to find a differentiated set of opportunities. Asia is one of those regions where you could try and find those sorts of opportunities. So that's reason number one. Reason number two is that valuations are broadly cheaper, which makes entry points attractive across the region. The third reason is something which is a little subtler, that the talent pool of asset managers across the region is far deeper than it was a decade ago, or even five years ago, I'd say. We've all known that there's tons of inefficiencies across asset classes in Asia, but the ability to exploit those inefficiencies effectively requires talent. And I spent eight years in the region between 2013 and 2021. And even in that period, I saw visible change in terms of the talent pool of asset managers able to exploit the inefficiencies that the markets throw up. If I take those three reasons together, Asia becomes a really important opportunity set for global investors. And the one thing to bear in mind is, obviously Asia is a very diverse region. And as previously you said, if you take a truly multi-asset class approach across all these geographies, we think there's plenty of interesting opportunities that investors should think about.

Simon Brewer  

Thank you. That's very clear. And I hope that in this conversation, we're going to dig down into both the geographical spread, but the asset spread because when I started in the 1980s, Japan was a separate investing continent, China didn't feature in the equity indices, and equity was pretty much the only thing that you bought. And that playing field has changed. But I want to switch to Harvey. Harvey Toor, you're the Chief Investment Officer of Singapore Management University. As I was doing a little research on you, I discovered that you have a Master's of Theoretical Physics from the University of Cambridge. So I'm very happy I'm asking, not answering the questions. But anyway, can I just start by you setting the stage and explaining what it is that SMU, Singapore Management University, is seeking to achieve and how it thinks about the investment process?

Harvey Toor  

Sure. So perhaps, a little bit of context, we also employ the Yale Model of investing that American universities and endowments pioneered over the last few decades. Essentially, the endowment fund has a set percentage of its AUM which is paid up to the university to run the operating expenses of the university scholarships, Professor salaries, whatever it is. All of this has some contribution that is expected to be made from the endowment fund. And our target is inflation plus a risk premium for taking risk in different asset classes. Now to do that, we have to create and manage a portfolio that can deliver consistently over the long term. And we have an investment policy which sets up a risk appetite, which will hopefully allow us to meet that payout objective. In the end, this means that we are naturally globally diversified investors. And interestingly enough, a very significant portion, as Arjun mentioned, of our asset allocation is tilted towards the usual suspects, North America, Europe and so forth. The oddity being that we, of course, are an Asian institution. And so there are perennial questions about we live and exist in a region that has significantly stronger growth than what we're seeing in some parts of the West. Presumably, that means we have some greater information sitting here on local opportunities than we might if we were sitting in London or New York. And what would that mean in terms of our ability to take advantage of those opportunities? So that's when we start thinking about how do we tackle the Asian investment opportunity given that we're a department of a university, we're a small investment team, and we'd really like to dig deep and look at the variety of opportunities that exist in our region.

Simon Brewer  

Can you just talk a little bit about your journey to get there? What were the important considerations that you weighed up in choice of partner?

Harvey Toor  

We start with this idea of having a globally maximally diversified portfolio. That includes private equity, venture capital, hedge fund exposure, public equities, the entire gamut of potential investment opportunities. And then what we wanted to try and think about is, if there is greater economic growth in the region in which we live and operate, how do we access that? Is it by, as we've seen with some of our colleagues and peers in say London or the US, going out and buying Chinese equity? They may have tried that thinking that that's the Asian universe, and they may have got their fingers burned. So doing something that is, in our mind, a little bit simple as going out and buying a single country exposure to a single asset class doesn't really help us answer that question, 'Is there a way to extract that economic growth in terms of return?' So we would want an exposure to be multi-asset class from the get-go, which is what we do naturally with the global portfolio. You then say, 'Well, look, is the opportunity largely in China?' And the answer to that is quite clearly no. There are different dynamics throughout our region. When you look at India, the demographics in India are very strong. There's lots of shifts in outsourcing models from major global companies changing where they procure their products and services. And then you look at places like Indonesia, Malaysia, Philippines with sizable populations. But as a small team, as part of a university, there is little chance of us being able to analyse 10 or 12 different jurisdictions, asset managers in each of those areas that have specialities. And in trying to find a partner in doing this research, it's really a journey of learning. We're looking for someone that has the resource and capability, has the relationship, has boots on the ground that would allow us to take that learning journey and extract as much information as we can. There were, to be honest, not that many multi-asset class outsourced investment shops that we could talk to. And Arjun, we've had a long dialogue with and expressed an interest in precisely the same area that we had an interest in.

Simon Brewer  

Staying higher level, you've observed, and I think it would be generally accepted that institutional allocations in Asia have the same US-centric tilt that they do elsewhere in the world for functional reasons that we understand. But what do you think that investors even sitting in the region and seeing this population and the GDP dynamics, etc., might be missing in this underweight? And is the motivation simply fear of missing out in what's been this US equity supercycle?

Harvey Toor  

It's not as simple as saying, 'I want to have some sort of Asian exposure.' The question is, what does that look like? From an asset allocation point of view, which asset classes are undervalued or offer you an opportunity at the moment? And they vary considerably across the region. So someone has to do the legwork to identify those specific opportunities, and they vary across the region. So to give you an example, we've seen the real estate dynamic within China. That has created various dislocations within the real estate credit space. And there are specific managers that might be able to access that. Now, in terms of getting to know those managers and having access to those managers, that's where having a relationship and a friendship with Arjun and Partners Capital can really help us to dig deep, identify who the leading players are. And probably, if you go back 5 or 10 years, these people weren't even in business. And so were building the aeroplanes, we're flying it. And that later on then translates into well, what opportunities does that throw up for us?

Simon Brewer  

That's really helpful. And I think Arjun may have referred to it but it is worth reminding ourselves that Asia Pacific right now accounts for, I think, $42 trillion, which is 50% of the global GDP and we know where the growth is. We know where allocations are as well. I want to turn to Adam. You co-head the Asia Pacific region. You are an active investor here. Before we dig down into some of the assets themselves, how are investors thinking about North versus South Asia? And I suppose almost another way of saying that is, how do people view the map? And then within that, how do they view the silos?

Adam Watson  

Yeah, that's an interesting question, Simon. I think North Asia has obviously seen great growth over the last 20, 30 years. And you've seen the spring up of national champions in different parts of the region and in different countries, which have really transformed those countries and also those capital markets. And I think the opportunity when you have a look at those parts of the world, is that they have some businesses there that are very globally competitive. The problem that you have is that they're competing globally, which means that they're tied a little bit more to the global capital cycle. So you've seen recently, when there's more fear about global growth, you get a sell-off in semiconductor companies, and that's linked most heavily to groups like South Korea and Taiwan. So you get more correlation really, in North Asia. Whereas when you're looking in South Asia and Southeast Asia, these countries are moving to their own beat to some extent. If you have a look at what's happening in the likes of India and Indonesia, there's concerns in the West about rates going up. These countries have been managing with higher rates for a while and actually, the real rates in these countries look more attractive now when you compare them to the likes of the US and the UK. They're more robust in these high-inflation environments because they've experienced them for decades already. So they're more experienced in these environments and are actually continuing to grow strongly in places like India and Southeast Asia despite the headwinds that you're seeing in a lot of other parts of the world. So you have different correlation buckets across there. If you think about how people think of allocating currently, you have a bit more of a dynamic of Japan. 'Do you want to do Japan? Yes or no?' And increasingly, China. 'Do you want to do China? Yes or no.' these dynamics are coming into people's decision-making equations. The rest of Asia is likely to see more capital flow and more development there as people make their decisions on whether or not they want to be doing as much in China and Japan as they previously have done.

Simon Brewer  

So if we just shine a spotlight on some of the opportunities in a multi-asset portfolio, let's just talk about hedge funds, because I did note as I went through your materials that you have an important allocation to hedge funds. And of course, that allows you to think about alpha, not just beta. And I say that because earlier on, we were alluding to equity investment being the traditional way people gained access to Asian capital markets. Can you just talk a little bit, first of all, about the maturity and opportunity set within the hedge fund universe?

Adam Watson  

Sure. Happy to cover that, Simon. It's relatively topical as well. We've had a big series of investment conferences. Last week in Singapore, I was privileged to attend and to present at one of them where the topic of the discussion was actually Asia's alternative investment plane. So really talking about the hedge fund industry, primarily in Asia, and how you're going to make money there and what are the attractive areas. The way that I discussed it on that panel, and I think the way that makes sense to discuss it now is there's really three things you need for a good environment for investing. You need good entrepreneurial businesses, you actually need people who are creating value within the real economy. You need to have good investment talent, people who can identify those good businesses. And you need to have a good set of instruments to trade those businesses. What we've seen in Asia is a development across all three factors over the last 10 years. In terms of the businesses, we've seen a great rise in entrepreneurship in the region. And digitalisation has really broken multiple barriers that previously existed for people to create great companies. The amount of capital that you need to develop businesses is a lot lower now. And we also have this infrastructure getting onto the investment talent which can provide capital in there. What we saw historically at the start when Arjun and I first moved out to Asia, was that you had a lot of people who had maybe been investing in Western markets pre-GFC but had initially come from Asia, and they decided to repatriate to Asia and set up their own firms, set up their own places focused specifically on Asia under their own names. And now we're seeing that talent has grown and also sprung off to create new businesses and it's become a really good training ground for people. Increasingly, you're actually seeing different people coming back to Asia for more of platform businesses rather than just equity businesses, people who are trading rates, people who are trading derivatives more frequently, which is something that you didn't really see when Arjun and I first moved out to Asia, but you're seeing that grow significantly. And the amount of quants and rates managers that you see out here now are really increasing, and the quality is pretty good. And I think that's something that's developed just given the availability of instruments to trade in markets and actually, just the openness of markets has improved significantly over the last 10 years. The overall landscape and platform for hedge funds, I think, has significantly improved.

Simon Brewer  

That's helpful. Thank you. I think it was Harvey who mentioned in an earlier call that one of the other interesting things is what is available in public markets isn't necessarily what you may want to buy. And as I was reflecting on these populations, Indonesia is 270 million, Vietnam is near 100 million, the Philippines is a 110 million. One of the observations has been the growth in e-payments and digital services, and some of that, you can't get in public markets, and therefore, you have to think about private equity and venture capital. So let's just talk a little bit about what your process is to access some of these opportunities.

Adam Watson  

Sure. On your point there in terms of in Southeast Asia, I think it's very interesting with regards to the different capital market access questions. So if you have a look at the likes of Vietnam, you've got a really strong demographic there, well-educated population. And that creates a good opportunity for investment. What they've been lacking a little bit so far has been broader investment into infrastructure, and to some extent, digital infrastructure as well. But that's improving. For people who want to access that, most people would look to public markets. But Vietnam is a very challenging place to access from a public market basis because there's multiple restrictions on how much foreigners can own of publicly listed companies. So if you want to access the best assets there, you actually need to overpay for them if you can access them at all. That market naturally moves you more into the private space, where you can have more control of the type of assets that you own and more control over the destiny of the company. We look at it on a market-to-market basis. So we think some of Southeast Asia actually looks very attractive from a private basis, whether that’s private equity or private credit in certain aspects as well. If you have a look at other markets like India, we think that the story is a little bit more mixed. India's got a very, very large public market space. What you see is that the stocks trade with a reasonable amount of volatility. Now, if you go into private market investment, what you gain from the opportunity of access and value creation, you lose in the option to be able to change your mind and move your position around. So there's a real cost in the ability of not being able to trade and we think in India, if you bet good stock pickers given that they have a much broader scope of listed stocks, then actually that could be quite attractive there and compete with private equity style returns. Getting back to your question as well, ‘How do you think about access there?’ What we have seen in Asia is that when opportunities get attracted, there's capital that wants to go into those specific opportunities. Various managers with certain strategies can only manage a certain amount of capital there. So the way that you need to develop relationships with them to access these opportunities at the right point in time is very important. You can't just turn up in Asia and go to the best managers and say, 'Hello, I'm here. I've got capital to give you.' They'll say, 'Thank you very much. I have a queue that's five times as much as my fund size, so I'll put your name on my distribution list.' So there's got to be this awareness here that it's a relationship-driven environment. And people want to see you on the ground here. And they want to see you on the ground when things are going well. And they want to see you on the ground when things are going poorly. And they want to see how you react in these environments. So for example, now when markets are selling off, it's the perfect time for us to talk to the relationships and the people that we've known for many years. And we can say, 'We told you we're a long-term investor three years ago, four years ago, we're still a long-term investor. How are your other investors playing up? Are they as long-term or can we build our relationship now?' And it's something that we do globally as a firm, but I think it's even more important in Asia because quite often, the opportunities that you want to access can only take smaller amounts of capital.

Harvey Toor  

To touch on Adam's point, there's a real expertise required to navigate public versus private, I would say, in Asia. Some of the countries there, you can find a situation where the public markets can be dominated by a few large-cap utilities that the governments can be very, very close to, and therefore, can be thrown around a little bit depending on what the political winds are like at the time. So that can often push you towards private markets, which have potentially less of a political angle attached to them. Now, within that space, if you look at, for instance, China, you see dislocations as a result of the challenges we've seen in the real estate space. The level of leverage in that space is significantly higher than we've seen in Western markets. And that causes opportunities. How do you access those opportunities? Now, for a classic Western investor, they would need a legal jurisdiction in which they could enforce their rights as a lender. Go back four or five years and you might find a situation where from one region to another within a place like China, you wouldn't have the same approach if you had to enforce your rights in a bankruptcy-type situation. Today, the government there has recognised that and is beginning to create a more standardised footprint, which means the opportunity set is there. The question then becomes so when the opportunity set is there, what are the instruments and who do you trust to be able to extract the value from those opportunities? And it is extremely unlikely, I'd say, that that is going to occur with the classic names that you would expect operating from Western markets. You've got to have local players and even within our own jurisdiction here within Singapore, we have a number of managers that we talked to who, because they're here, they know each of the legal jurisdictions, the nuances of how those credit markets work, where the opportunities are, what the ethics, risks and opportunities might be. And they can bring all of that together to give us an opportunity that if we weren't here, we simply wouldn't be able to access.

Simon Brewer  

So I understand there's an information advantage of being on the ground. It's the theatre of operation that you participate in. You've both hinted that the problem is that the way the investment industry is developed is there's a lot of leaning on the indices to be able to judge performance. And here we have indices that you have said are not sufficiently representative. So I'd like to ask you two questions. I'm going to start with Harvey, and then I'm going to go back to Adam. But how do you think about indices, first of all?

Harvey Toor  

Investing in the beta, the broad market beta, is the way that classical European asset managers have been trained to think. And they see the economic beta potential in Asia. So they think, 'I'll just go out and buy the index.' But if you look at something like the Hang Seng Index, it recently peaked in excess of 30,000, now down to 17,000, 18,000. Massive volatility. And so I would say, you really want to dig a little deeper and not just access a single asset class, because a single asset class will have a huge amount of error in how it reflects the economy for a whole variety of reasons. And you should be seeking to minimise that error. And how do you do that? By A, not being within a single country, because you've heard that the demographics in India are good so I'm going to access the Indian market. So you have to be across the entire region and think intelligently about where the specific opportunity set is arising. And second, you have to be across multiple asset classes. So thinking just in terms of indices of single asset classes is not particularly helpful in reducing that error.

Simon Brewer  

So that leads to a really thorny issue which must be measuring performance, because we have a disparate group of assets. You've rightly said that you want to be fishing in multiple ponds, in multiple geographies. What constitutes success for you as you look back in years to come?

Adam Watson  

What would be success for me as we think about this Asian endowment opportunity is that you have a look at the performance of this and you say, 'Well, this is the performance of Yale. This is the performance of Harvard. This is the performance of Stanford. And then how does this compete with that?' Because I think even though we're investing in a smaller geographic set here, the alpha opportunity is much greater. This pool should be able to perform in line with what a large globally diversified endowment portfolio looks like. So that's how I think about us on a relative performance basis.

Simon Brewer  

I'm just going to come back to Arjun. You're recommending that endowment-style portfolios and other managers should have 10 to 15% in Asia, which given its 60% of world GDP, doesn't seem unreasonable at all. But clearly, we're at a very different starting point right now.

Arjun Raghavan  

Yeah. I go back to what I said to begin with, which is I think there's been a good reason why we haven't been able to get there historically because it is tougher. The risks are complicated but the starting point is a lot better for the reasons I described. And obviously, the talent pool is much deeper now. So the way we would benchmark that 10 to 15% going back to the performance point is very much what Adam said. It's an opportunity cost perspective. You need to find a differentiated source of return. There aren't that many places you can go to. Within the Western world, there are certainly pockets of opportunity where there are really attractive returns. Simon, we talked 12 months ago about alternative alternatives, things like litigation financing. You can certainly go to pockets of opportunity. And by the way, I think private debt globally is starting to look very interesting. There's lots of pockets of the credit markets where you can get attractive idiosyncratic returns. But you need as many of them as possible, and to not have a pocket in Asia is a huge missed opportunity, particularly at this point in the cycle. The only thing I would make the point on is that the way to do it is not to be very rigid. It's not to say, ‘We've got a strategic asset allocation in Asia where we want a third in public markets, we want a third in private markets and we want a third and fixed income.’ That's not quite the way to do it. Because if you do it that way, you miss the point of investing in Asia, which is all about the fact that it's fast-moving, there's tons of inefficiencies that pop up, and there is really a horses for courses approach to take when you're exploiting certain themes. So Adam talked about how, if you want to play the consumer growth story in India, you probably want to do that through mid-cap stocks in the listed market. But if you want to play the digitisation drive in India, you probably need to get into venture capital, which is much earlier stage. But that could change in five years. So the whole point is in five years’ time, you might have some fantastic public market companies which are benefiting from the digitisation drive. So the key in Asia is to make sure that there is a dynamic opportunity set that can be exploited. The more rigid you are, the less successful you're likely to be. And that's the way to get the 10 to 15% allocation, not to do it in a way that's very static.

Simon Brewer  

And I noted from some of the research that I've been going through that it is remarkable. So I'm just going to reflect on that. The citizens of Asia have seen their income per capita rise 10 times over the last 30 years. And I think that one would be unwise to judge that their growth rate isn't higher than mature Western economies.

Simon Brewer  

A question that maybe I'll just go back to Harvey about, which is that we've had this conversation. We’ve travelled the map of Asia, and we've not talked about Japan. We all know the demographic situation there but we also know as an economic powerhouse and has great companies. How do you think about allocating to Japan within this portfolio? Because for a long time, Japan was seen as a separate asset class, particularly when it was 39% of the world's indices in 1989.

Harvey Toor  

The way we think about Japan is if you held an optimally diversified portfolio, even from 1990 through till recent times, you were still able to earn a reasonable risk-adjusted rate of return. It's just about having the right mix of asset classes within Japan. More recently, this has happened several times. There have been stories of green shoots for the last 30-odd years. The current inflationary shock that we're experiencing around the world may be the jolt that Japan needed in order to get some level of inflation into the economy. And from what I can see, that does seem to be panning out and might actually be a trigger for them to start growing again.

Simon Brewer  

So Adam, how are you approaching Japan?

Adam Watson  

Our team actually spent a week in Japan earlier this month to really understand what's been happening there since they've started opening up again post-COVID. And actually, the digitalisation of the economy is something that COVID forced upon them. But it has really improved some of their efficiency and has real gains there, particularly, as we mentioned in an area where they have these demographic headwinds as well.

Simon Brewer  

My final question before I summarise really comes down to foreign exchange. The dollar has reigned supreme. If history is likely to repeat itself, it will not always be the case. And the Asian currency universe is generally versus purchasing power models underpriced. How much do you worry or consider foreign exchange as you look at this investing landscape? I'll stay with you, Harvey, and then I'll ask Adam afterwards.

Harvey Toor  

I was talking to some of my peers in different parts of the world recently and they say, 'Look, I invested in this country in Asia and I didn't make money.' And then you ask a little bit deeper and they say, 'Well, the reason we didn't make any money is because the currency went against us.' And I think, to be honest, it's really something they should have considered from the beginning. You want to build in your cost of hedging to your native currency in assessing any investment. And if you do that and you have a structured quantitative approach, it doesn't have to be difficult. It's pretty clear that countries and corporates are not in the same situation from a currency point of view that they were in the late '90s when we saw the Asian financial crisis. It is stronger. The recent strong rally in the dollar did cause those entities which had borrowed in dollars to have some difficulties. That situation does appear to be somewhat resolving itself in recent couple of weeks or so. If you take a disciplined approach and factor in the currency question from the get-go, it doesn't have to be a problem.

Simon Brewer  

And maybe some of the big global winners. Singapore dollar has always reflected a well-managed economy and there are many other currencies that will likely in time reflect that as well. Adam, a word on currency from you.

Adam Watson  

All that I'd say is I think Asia had a bit of a stress test here already in terms of the taper tantrum, and a lot of the economies failed that stress test. When you saw what happened in the currency markets through 2013 to 2014 in Asia is pretty bad. And I think the government's learned quite a lot of lessons in terms of how much reserves they actually need to have. And actually, when you see how they're performing at the moment, they're actually doing much better. Actually, if you have a look at the mix of the Southeast Asian and South Asian currencies broadly speaking, which were the ones that were most impacted back then, they're actually doing better than the North Asian currencies now. But the North Asian currencies have the advantage that a lot of them are export nations. Going back to what we said at the start, these are built around national champions in exporting. So what happens as your currency goes down, your exports are more attractive, your economy does better. So you have a bit more of a self-righting mechanism there. We've managed through this situation reasonably well and potentially stand to benefit if the dollar does start to weaken and people look for other places to park their capital.

Simon Brewer  

This has been an incredibly informative conversation. I'm reminded of a previous guest, Peter Frankopan, who wrote that great book Silk Roads', who made the observation about many in the West that we have our eyes stitched closed. And that's because there's so much that is going on that we tend not to think about because of our own terms of reference. When we process this enormous population and the economic weight, obviously, the investment landscape whilst very varied, has to be considered by allocators. And I will conclude a few things, which is one, when Western investors talk about Asian equity, they often tend to put the spotlight and think of China when in fact, it is such a bigger playing field. They also tend to think about it being equity. And I think what we've learned today is that in building a multi-asset portfolio, there is, partly as a consequence of maturity of the talent pool that has changed a lot, there are a lot of investment opportunities in the hedge fund world. If you want to capture some of these really important structural changes and the growth in domestic demand, you need to go or be able to access private equity and venture capital and credit real estate obviously around other asset classes. So it's been, as I said, extremely helpful. I think I would also conclude that to have access and insights requires local presence, and I think you've all articulated that extremely well. And Harvey, Adam, Arjun, thank you very much for your time today.