WEBVTT - Day Three Part Two from the Milken Institute Global Conference 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.720 --> 0:00:13.960 Wait inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.200 America's most trusted business magazine, plus gloom O Business Finance 0:00:18.239 --> 0:00:22.280 and tech news. The Bloomberg Business Week Podcast with Carol 0:00:22.360 --> 0:00:25.800 Messer and Tim Stenebeck from Bloomberg Radio. 0:00:27.240 --> 0:00:29.920 Welcome back to our special Bloomberg coverage live from the 0:00:29.920 --> 0:00:33.480 Milicon Global Institute Conference in Beverly Hills, California. Armor Romain 0:00:33.560 --> 0:00:37.400 Bostik alongside Carol Masser and Carol the next guest, really 0:00:37.440 --> 0:00:39.360 does have a great view on what's going on in 0:00:39.360 --> 0:00:41.120 the world of credit and private markets. 0:00:41.360 --> 0:00:43.120 Steven says yeah, even says that within the. 0:00:43.120 --> 0:00:44.680 Liquid credit marker right now, there are a lot of 0:00:44.720 --> 0:00:48.080 opportunities out there partickling in high yield bonds, I'll leverage 0:00:48.120 --> 0:00:52.000 loans primarily because he sees those as areas of market imbalance. 0:00:52.080 --> 0:00:54.120 Armon Panosi and joining us right now the co chief 0:00:54.160 --> 0:00:57.600 Executive Officer and how to performing credit over at oakh Trey. 0:00:57.640 --> 0:00:58.680 Great to see you again, arm Man. 0:00:58.760 --> 0:00:59.640 To see it too, Thank you. 0:01:00.040 --> 0:01:01.160 Le's start, we got a lot to talk about. Let's 0:01:01.160 --> 0:01:02.960 start with the liquid credit here, because I am curious 0:01:02.960 --> 0:01:06.039 about that supplied demand and balance, what's driving that and 0:01:06.040 --> 0:01:06.960 what closes the gap. 0:01:07.520 --> 0:01:11.040 You know, it's a it's an unusually uncertain time because 0:01:11.120 --> 0:01:13.760 we have a lot of liquidity in the markets, especially 0:01:13.840 --> 0:01:16.960 after all the COVID related stimulus. A lot of savers 0:01:17.280 --> 0:01:20.399 have capital to spend and to invest. But meanwhile we 0:01:20.520 --> 0:01:23.759 have some overhangs. We have the highest cost of borrowing 0:01:23.760 --> 0:01:26.640 we've seen in many years, we have a slow in 0:01:26.720 --> 0:01:31.560 growth rate in the economy, and it just no one knows. 0:01:31.360 --> 0:01:33.840 You know, should we be really heavily. 0:01:33.520 --> 0:01:37.160 Going into the markets and getting that yield that's available 0:01:37.160 --> 0:01:39.759 in the markets these days, or are spreads too tight 0:01:39.800 --> 0:01:44.000 and so that vacillation between the opportunities that causes some 0:01:44.080 --> 0:01:45.160 volatility month to month. 0:01:45.240 --> 0:01:46.759 Well, that's what I'm curious about, particularly in the high 0:01:46.800 --> 0:01:49.160 yield space, like how much risk is there and when 0:01:49.200 --> 0:01:51.280 you get when you're looking at spreads, is there enough 0:01:51.320 --> 0:01:52.520 compensation for that risk. 0:01:53.000 --> 0:01:57.639 So when we when we think about spreads or total 0:01:57.640 --> 0:02:01.120 return from pre COVID days, we would always focus on spread. 0:02:01.480 --> 0:02:03.600 The reason was was because high old bonds were priced 0:02:03.600 --> 0:02:08.920 at par and the absolute yields on treasuries were very 0:02:09.000 --> 0:02:12.280 very low, so spread was what you were really focusing on. 0:02:12.800 --> 0:02:15.000 These days, there's other ways to win in high yield. 0:02:15.520 --> 0:02:19.600 The prices are discounted, there's convexity, there's higher base rates 0:02:20.080 --> 0:02:22.680 ten year treasury at four and a half, and the 0:02:22.720 --> 0:02:26.960 spreads are not so low that are concerning. They're sort 0:02:27.000 --> 0:02:30.959 of within the range of historical norms. As a result, 0:02:31.000 --> 0:02:34.000 total return is more attractive today than it's been in 0:02:34.040 --> 0:02:36.360 quite some time. Meanwhile, spreads are a little bit tighter, 0:02:36.360 --> 0:02:39.200 but spreads reflect credit risk, and credit risk in the 0:02:39.240 --> 0:02:42.120 high yield bond market is actually lower today. 0:02:41.840 --> 0:02:43.040 Than it's been in quite some time. 0:02:43.160 --> 0:02:44.960 So, having said that, when you look at high yield, 0:02:45.240 --> 0:02:46.320 does it matter the quality? 0:02:46.360 --> 0:02:48.239 Do you want higher quality? Is that how you're looking 0:02:48.320 --> 0:02:49.640 in terms of the investment. 0:02:49.280 --> 0:02:52.480 Play, oak Tree generally in our liquid credit strategies looks 0:02:52.480 --> 0:02:55.480 for higher quality, and usually it's focused on single B 0:02:55.720 --> 0:02:58.960 or upper single BE credit quality. There's a lot of 0:02:59.000 --> 0:03:01.400 opportunity there in the high old bond market. There's about 0:03:01.400 --> 0:03:03.400 eight hundred issuers. It's about a one point four trillion 0:03:03.440 --> 0:03:06.880 dollar market, So you could put together a diversified portfolio 0:03:07.160 --> 0:03:09.400 that will avoid defaults and losses pretty well. That's what 0:03:09.400 --> 0:03:10.120 we're aiming to. 0:03:10.040 --> 0:03:10.600 Achieve it open. 0:03:10.680 --> 0:03:12.600 What are the risks that you think about most in 0:03:12.680 --> 0:03:14.240 terms of having to factor. 0:03:13.919 --> 0:03:18.120 In for hygold in particular. Yeah, let's go hi yield. 0:03:18.280 --> 0:03:21.440 You know, I think high yield is a pretty bifurcated market. 0:03:21.520 --> 0:03:23.200 You know, half of hygyield today is trading out of 0:03:23.240 --> 0:03:24.040 two hundred spread. 0:03:24.560 --> 0:03:25.400 So when you think. 0:03:25.200 --> 0:03:27.440 About that, you say, well, how do I actually get 0:03:27.720 --> 0:03:29.960 the return that I want? Can't really get it with 0:03:29.960 --> 0:03:32.200 two hundred spread. That's kind of more consistent with investment 0:03:32.240 --> 0:03:34.360 great bonds. So you have to look at single bees 0:03:34.400 --> 0:03:38.040 and you have to really select credit carefully. It's really 0:03:38.080 --> 0:03:41.000 easy to make make bad decisions. It's easy to make 0:03:41.040 --> 0:03:45.040 some mistakes, and so avoiding triple c's that have generally 0:03:45.080 --> 0:03:47.400 speaking shorter maturities. I think those are going to be 0:03:48.080 --> 0:03:49.760 the locus of a lot of defaults over the next 0:03:49.800 --> 0:03:52.720 two years. But within that single bee category, can you 0:03:52.760 --> 0:03:56.640 really put together a well diversified by industry, by region 0:03:57.000 --> 0:03:59.560 portfolio that could outperform the markets through a cycle. 0:04:00.040 --> 0:04:00.920 You can just push that in. 0:04:00.960 --> 0:04:03.000 I know it's a little crazy, no, don'tie. We want 0:04:03.000 --> 0:04:03.840 to make sure you can hear us. 0:04:04.360 --> 0:04:06.240 All right, let's move on and talk a little bit 0:04:06.400 --> 0:04:09.120 about M and A or A the LBO environment right now. 0:04:09.240 --> 0:04:10.640 I think a year ago there wasn't a whole lot 0:04:10.680 --> 0:04:12.800 to talk about there. We've seen activities start to pick 0:04:12.840 --> 0:04:13.320 up a little bit. 0:04:13.320 --> 0:04:13.880 What are you seeing. 0:04:14.280 --> 0:04:17.000 Absolutely, the forward pipeline for M and A deal flow 0:04:17.120 --> 0:04:19.760 is certainly better than the last six months, and I 0:04:19.760 --> 0:04:21.320 think it's a combination of factors. 0:04:21.680 --> 0:04:22.640 First of all, spreads have. 0:04:22.640 --> 0:04:26.000 Come in both in broadly syndicated loans and in private credit. 0:04:26.200 --> 0:04:28.279 Over the last twelve to eighteen months, there's probably been 0:04:28.320 --> 0:04:30.320 about one hundred to one hundred and fifty basis points 0:04:30.320 --> 0:04:35.200 of spread compression. Meanwhile, the private equity firms that have 0:04:35.279 --> 0:04:37.560 dry powder, you know, they have a ticket in a 0:04:37.600 --> 0:04:40.320 time clock and they really need to deploy that capital, 0:04:40.360 --> 0:04:42.680 and they took a pause for about twelve to eighteen months. 0:04:42.720 --> 0:04:44.240 So now they're back and a little bit. 0:04:44.160 --> 0:04:46.000 More realistic to have to pay up a little bit 0:04:46.240 --> 0:04:49.400 to buy good businesses. And meanwhile the sellers of those businesses, 0:04:49.920 --> 0:04:52.600 they're also getting realistic because they have investors telling them 0:04:52.600 --> 0:04:54.560 that they want their capital back too. So the bid 0:04:54.600 --> 0:04:57.320 ask is narrowed, and the frequency of deals that we're 0:04:57.320 --> 0:04:59.800 seeing in the market looking for financing solutions. 0:04:59.440 --> 0:04:59.960 Has picked up. 0:05:00.160 --> 0:05:01.960 That's interesting you say that about the gap, that gap 0:05:02.040 --> 0:05:04.919 in between I guess realism and just you know, fantasy, 0:05:05.120 --> 0:05:07.320 because that was a big topic of conversation last year 0:05:07.320 --> 0:05:09.360 that buyers and sellers were just so far apart. Here 0:05:10.000 --> 0:05:12.000 who has actually given in on that? Has it been 0:05:12.040 --> 0:05:14.160 the seller has finally woken up to the fact that 0:05:14.440 --> 0:05:16.440 maybe this just isn't as valuable as I thought it was. 0:05:16.520 --> 0:05:18.560 I think they both moved a little bit. You know, 0:05:18.839 --> 0:05:20.880 when you when you were near a seller and you 0:05:20.920 --> 0:05:22.760 own a let's say you're a private equity firm, you 0:05:22.800 --> 0:05:25.400 own a business, you have it marked at a certain valuation. 0:05:26.160 --> 0:05:27.760 It takes a little bit of time to move that 0:05:28.040 --> 0:05:31.400 value down as you kind of reassess the market conditions. 0:05:31.640 --> 0:05:34.560 So I think generally speaking, those valuations have been stable 0:05:34.600 --> 0:05:38.360 to maybe declining, and it allows those private equity firms 0:05:38.400 --> 0:05:40.880 to transact more they if they could, if they could 0:05:40.880 --> 0:05:42.840 get a price that's as good or better than their mark, 0:05:42.839 --> 0:05:44.960 they're more likely to sell. And by the way they 0:05:44.960 --> 0:05:47.880 had marked up their positions generally speaking, you know, if 0:05:47.880 --> 0:05:50.320 they if they paid one hundred million dollars of inequity 0:05:50.360 --> 0:05:52.800 to buy a business, generally speaking, after a two year 0:05:52.839 --> 0:05:54.600 period that it marked it one and a half times 0:05:54.600 --> 0:05:56.960 two times already. Yeah, and so it is a factor 0:05:57.000 --> 0:06:00.120 of kind of bringing that down and managing that the 0:06:00.160 --> 0:06:03.400 appearance of sort of your marks and the legitimacy of 0:06:03.400 --> 0:06:03.880 those marks. 0:06:03.920 --> 0:06:04.800 Hey, let's talk about some of. 0:06:04.800 --> 0:06:07.360 The upcoming low maturities that are coming on next year 0:06:07.360 --> 0:06:09.200 and for the years to come. What kind of opportunities 0:06:09.200 --> 0:06:10.400 does that present for you guys. 0:06:11.040 --> 0:06:15.040 You know, it's a huge market opportunity for oak Tree. 0:06:15.320 --> 0:06:18.719 We're one of the world's largest providers of capital solutions, 0:06:18.880 --> 0:06:22.719 and we just see a very large tale of credit 0:06:22.800 --> 0:06:25.760 risk or just issues because there were a lot of 0:06:25.760 --> 0:06:28.440 borrowers that took on credit when base rates were near zero, 0:06:28.760 --> 0:06:31.560 never contemplated five percent or five and a half percent sofa, 0:06:31.920 --> 0:06:34.480 never contemplate four and a half percent treasury rates. And 0:06:34.560 --> 0:06:39.520 so the owners of those businesses have found themselves where 0:06:39.240 --> 0:06:41.760 there are good businesses. They've actually grown over the last 0:06:41.800 --> 0:06:44.160 five years, but they have not grown into a capital 0:06:44.200 --> 0:06:47.159 structure that is now four hundred bases points more expensive 0:06:47.160 --> 0:06:50.960 than it was to difference, huge difference. So capital solutions, 0:06:51.000 --> 0:06:53.680 rescue lending, that's a huge part of what we do. 0:06:53.880 --> 0:06:56.400 Ed OT treat and I expect that over the next 0:06:56.400 --> 0:06:58.560 two or three years we're going to be very, very active. 0:06:58.600 --> 0:07:01.000 There any signs already you're starting to see it or 0:07:01.040 --> 0:07:01.480 not yet. 0:07:01.920 --> 0:07:04.640 Well, we've seen some maturity driven rescue lending, even in 0:07:04.640 --> 0:07:05.360 twenty twenty three. 0:07:05.440 --> 0:07:06.560 We were quite active last. 0:07:06.480 --> 0:07:11.240 Year, and so what we're not seeing yet is cash 0:07:11.280 --> 0:07:15.360 flow shrinkage rescue lending. So in other words, if a 0:07:15.400 --> 0:07:17.960 company is not performing well and just can't cover its 0:07:17.960 --> 0:07:20.440 interest expense, yeah, that's a little bit riskier than what 0:07:20.680 --> 0:07:23.160 most rescue lenders want to step into. At least at 0:07:23.200 --> 0:07:26.040 this time, it's been more focused on maturities, and the 0:07:26.040 --> 0:07:28.760 maturity schedule really kicks in in twenty twenty six and 0:07:28.840 --> 0:07:31.280 twenty seven, so twenty twenty five sort of a year 0:07:31.280 --> 0:07:33.240 in advance that maturity is when it's going to be 0:07:33.360 --> 0:07:34.000 the most active. 0:07:34.080 --> 0:07:35.280 But what do you think is going to be the 0:07:35.320 --> 0:07:36.880 outcome of that. Are we going to start to see 0:07:37.120 --> 0:07:38.280 basically just sales. 0:07:38.000 --> 0:07:38.960 From one fund to another. 0:07:39.000 --> 0:07:41.880 Are we going to see a real exit into public markets? 0:07:41.920 --> 0:07:43.440 Are we just going to have to sort of address 0:07:43.480 --> 0:07:45.120 the fact that some of these companies are. 0:07:45.040 --> 0:07:45.800 Just going to go away. 0:07:46.120 --> 0:07:47.680 I think that's just going to be kicking the can. 0:07:47.760 --> 0:07:48.200 I don't think that. 0:07:48.640 --> 0:07:51.080 I don't think there will be exits writ large. I 0:07:51.120 --> 0:07:53.640 think the best businesses owned by private equity firms will 0:07:53.960 --> 0:07:57.240 certainly get sold, but it's we're really talking about the 0:07:57.320 --> 0:07:59.000 sort of the middle of the pack or the worst 0:07:59.520 --> 0:08:02.720 positions in the private equity fund. They will want some 0:08:02.760 --> 0:08:05.600 sort of solution to kick the can down the road, 0:08:05.640 --> 0:08:08.280 and they're not going to want to draw capital from 0:08:08.320 --> 0:08:10.560 a fund that was raised in twenty seventeen or eighteen 0:08:10.560 --> 0:08:11.280 to support. 0:08:10.960 --> 0:08:13.040 Those But I think it's sort of where the economy 0:08:13.080 --> 0:08:14.800 is and where rates are. And I know Oachre's always 0:08:14.800 --> 0:08:17.360 load to kind of make macro predictions. But if we 0:08:17.400 --> 0:08:20.440 do get maybe a little bit of easing in rates 0:08:20.480 --> 0:08:23.800 and financial conditions and at the same time growth economic 0:08:23.840 --> 0:08:26.360 growth holds up at least some sort of sustainable level, 0:08:26.680 --> 0:08:28.120 does that not offer any relief? 0:08:28.600 --> 0:08:31.120 It can, but I think that those two statements are 0:08:31.120 --> 0:08:35.000 at odds with one another. Seeing a meaningful reduction in 0:08:35.120 --> 0:08:37.320 rates usually means that some sort of shock has occurred, 0:08:37.559 --> 0:08:39.040 and then you have to ask yourself, well, how good 0:08:39.040 --> 0:08:42.160 do I feel about my portfolio, especially my equity portfolio 0:08:42.440 --> 0:08:44.800 in that type of environment. I mean, what happened to 0:08:44.880 --> 0:08:47.720 cause one hundred basis point decline. A twenty five to 0:08:47.760 --> 0:08:50.280 fifty basis point decline I think is immaterial in. 0:08:50.280 --> 0:08:52.440 Light of where we've gone in rates. 0:08:52.679 --> 0:08:54.160 I think you really need to see one hundred or 0:08:54.200 --> 0:08:57.120 two hundred basis point decline to really see a broad 0:08:57.160 --> 0:09:00.880 based relief for some of the most levered in the market. 0:09:01.080 --> 0:09:03.200 I'm curious about what you want to do for investors, 0:09:03.240 --> 0:09:05.000 and Bloomberg was reporting that you guys are looking to 0:09:05.040 --> 0:09:07.400 do a raise of about two billion for an asset. 0:09:07.120 --> 0:09:09.840 Back lending product. What can you tell us about. 0:09:09.640 --> 0:09:13.000 That, Well, we don't comment on specific fund raises, but 0:09:13.320 --> 0:09:17.280 we are seeing some dislocation in markets, sometimes caused by 0:09:18.240 --> 0:09:21.040 rates being high, in maturities kicking in, and sometimes caused 0:09:21.040 --> 0:09:22.200 by regulatory changes. 0:09:22.320 --> 0:09:22.480 You know. 0:09:25.320 --> 0:09:25.840 Regulation. 0:09:26.559 --> 0:09:29.200 There's a lot of work being done by regulators and 0:09:29.200 --> 0:09:32.160 banks to figure that out, and it results in higher 0:09:32.240 --> 0:09:36.400 risk weighted assets required in terms of capital at banks, 0:09:36.640 --> 0:09:39.760 which means that they will exit these legacy areas of lending, 0:09:40.080 --> 0:09:42.760 creating an opportunity for investment managers to step in. 0:09:42.800 --> 0:09:44.240 Well, just on that point too, and I know you 0:09:44.240 --> 0:09:46.040 can't comment on the funding, but at least based on 0:09:46.040 --> 0:09:48.960 what Bloomberg is reporting the focus have that fun So 0:09:49.880 --> 0:09:54.040 deals back by like equipment leases, royalty payments, things like that. 0:09:54.160 --> 0:09:56.240 These all seem like more steady streams of revenue, and 0:09:56.240 --> 0:09:58.199 they seem a little bit different than maybe what was 0:09:58.240 --> 0:10:00.079 in the complexion of the portfolio prior. 0:10:00.120 --> 0:10:00.600 Is that not right? 0:10:00.640 --> 0:10:02.720 Well, the way to think about asset back finance is 0:10:02.960 --> 0:10:05.240 it doesn't mean hard asset back finance. It just means 0:10:05.280 --> 0:10:09.640 any contractual cash flow stream that could then be securitized 0:10:09.760 --> 0:10:13.800 or a series of securities could be structured around them. 0:10:14.160 --> 0:10:16.880 So that applies to a lot of different industries. It 0:10:16.880 --> 0:10:19.760 could be medical royalties, it could be music royalties, it 0:10:19.760 --> 0:10:23.680 could be equipment finance, shipping finance, aircraft finance, and various 0:10:23.679 --> 0:10:29.160 types of consumer lending. So it's asset back finance is 0:10:29.200 --> 0:10:32.160 just different than corporate blending, which is what we really 0:10:32.160 --> 0:10:33.720 do a lot of it a treat, whether it's on 0:10:33.760 --> 0:10:36.240 the distress side or on the performing side. But really 0:10:36.440 --> 0:10:39.800 enterprise value lenders, which is what a corporate direct a 0:10:39.880 --> 0:10:43.480 corporate lending, whether it's public or private, that's what is 0:10:43.520 --> 0:10:46.240 the focus there. Asset back finance is attaching to a 0:10:46.320 --> 0:10:47.040 revenue stream. 0:10:47.120 --> 0:10:49.000 Well, speaking of assets, you know you guys do get 0:10:49.000 --> 0:10:50.960 into the real estate area, and I'm just curious, what's 0:10:51.000 --> 0:10:53.080 the smart what are you seeing when it comes to 0:10:53.120 --> 0:10:53.560 real estate? 0:10:53.640 --> 0:10:55.120 Some of the concerns that are outher, especially when it 0:10:55.160 --> 0:10:55.840 comes to office and. 0:10:55.880 --> 0:10:59.760 Other Well, I think that we're gonna have several years 0:10:59.800 --> 0:11:02.920 of maturities in real estate that will result in sort 0:11:02.920 --> 0:11:05.719 of a rolling set of defaults and losses in real 0:11:05.840 --> 0:11:09.520 estate creates an opportunity for buyers who are willing to 0:11:09.640 --> 0:11:11.400 kind of pick and choose the right markets and the 0:11:11.480 --> 0:11:14.559 right assets. So, you know what, anytime we see risk, 0:11:14.640 --> 0:11:18.000 we also see opportunity and we're excited about the opportunity 0:11:18.000 --> 0:11:18.480 part of that. 0:11:18.720 --> 0:11:21.160 But do you hear crisis around what's going on. 0:11:21.120 --> 0:11:21.640 In real estate? 0:11:21.679 --> 0:11:22.640 Like, I don't think it's a crisis. 0:11:22.840 --> 0:11:24.840 We see opportunity, But I'm just I don't. 0:11:24.640 --> 0:11:28.440 Think it's a crisis other than in certain markets in office, 0:11:28.600 --> 0:11:30.880 I think it's really hard to find a way through 0:11:30.920 --> 0:11:34.199 some of those assets without a massive repositioning in them. 0:11:34.360 --> 0:11:36.480 But even that creates an opportunity for the right. 0:11:36.360 --> 0:11:38.800 Investment, and you feel like there are people out there 0:11:38.800 --> 0:11:40.800 willing to take on that risk, take on that opportunity. 0:11:40.920 --> 0:11:43.000 Slowly, slowly, it's not there. 0:11:43.080 --> 0:11:45.760 Even though there's a lot of capital parkland the sidelines generally, 0:11:45.920 --> 0:11:48.960 especially for credit, we're not seeing a lot of that 0:11:49.000 --> 0:11:51.640 capital flood into real estate all at once right now. 0:11:51.880 --> 0:11:55.280 I think it's just the issues, especially around maturities is 0:11:55.320 --> 0:11:58.199 so significant over the next few years. There's a lot 0:11:58.240 --> 0:12:00.320 of concern to just kind of put all your exit 0:12:00.320 --> 0:12:01.240 one basket at the moment. 0:12:01.559 --> 0:12:02.719 All right, Arman, we have to leave it. 0:12:02.720 --> 0:12:04.320 They are always great to get your insights with you 0:12:04.360 --> 0:12:06.199 and the guys over and the folks over at oak Tree. 0:12:06.240 --> 0:12:07.920 You're doing off always really insightful. 0:12:08.200 --> 0:12:08.880 Thank you so much. 0:12:09.000 --> 0:12:10.720 So, then give our best to Howard arm and Punulsi, 0:12:10.760 --> 0:12:12.800 and they are co chief executive over. 0:12:12.760 --> 0:12:13.520 At oak Tree. 0:12:13.600 --> 0:12:15.400 Yeah, I think it's fascinating about the real estate side 0:12:15.400 --> 0:12:17.680 of things. I've had some conversations with folks here that's saying, 0:12:17.679 --> 0:12:19.320 you know, maybe the government's got to step in and 0:12:19.360 --> 0:12:21.760 take take some of these assets and just deal with 0:12:21.760 --> 0:12:23.520 them because nobody wants them. But it's interesting to hear 0:12:23.600 --> 0:12:25.480 Armed site. Yeah, there's gonna be buyers. 0:12:25.160 --> 0:12:27.080 How long people do want them? You know you still 0:12:27.080 --> 0:12:27.840 work in office. 0:12:27.880 --> 0:12:28.120 I do. 0:12:28.600 --> 0:12:30.160 I work at a gorgeous office. 0:12:30.200 --> 0:12:31.400 I mean, there's the man out there. 0:12:31.440 --> 0:12:33.520 It's just a different type of demand, right, Yeah, maybe 0:12:33.520 --> 0:12:35.640 it's a little less maybe the complexion of a change. 0:12:35.800 --> 0:12:36.120 I don't know. 0:12:36.160 --> 0:12:38.360 Some of those properties in midtowm Manhattan, those old properties, 0:12:38.400 --> 0:12:40.000 I do wonder whether or not you can kind of 0:12:40.000 --> 0:12:40.480 rework them. 0:12:40.559 --> 0:12:43.319 Yeah, we've seen whether they can repurpose them and find purposes. 0:12:43.480 --> 0:12:45.480 I'll some juristicans doing some interesting things. 0:12:46.240 --> 0:12:49.679 You're listening to the Bloomberg Business Week podcast Can't Just 0:12:49.800 --> 0:12:53.040 Live weekday afternoons from two to five pm Eastern Listen 0:12:53.080 --> 0:12:55.280 on Apple car Play and then brought auto with a 0:12:55.280 --> 0:12:59.400 Bloomberg Business at or Wan't Just Live on YouTube. 0:13:00.080 --> 0:13:01.800 We've got to have up some pretty good discussions today. 0:13:01.800 --> 0:13:04.000 Obviously there's been a big focus on what's going on 0:13:04.040 --> 0:13:06.080 here domestically, but I had a chance to catch up 0:13:06.080 --> 0:13:08.319 with a few people who are really investing internationally. 0:13:08.640 --> 0:13:09.400 Now Runo along. 0:13:09.440 --> 0:13:12.040 She's a co founder and the co founding partner of 0:13:12.080 --> 0:13:14.920 a company called Development Partners International, and they just focus 0:13:15.240 --> 0:13:17.480 on companies in the Pan African region. 0:13:17.600 --> 0:13:19.320 I love this because we've been so I feel like 0:13:19.360 --> 0:13:21.040 a lot of US centric, if you will. 0:13:21.000 --> 0:13:22.080 So it's interesting to see what she. 0:13:22.080 --> 0:13:22.520 Has to say. 0:13:22.559 --> 0:13:24.560 And this gets back to the old idea. Everybody's looking 0:13:24.559 --> 0:13:26.800 for that next big opportunity. She was on a panel 0:13:26.800 --> 0:13:29.560 this morning. They really talked about digital transformation, how that 0:13:29.600 --> 0:13:30.439 could actually. 0:13:30.120 --> 0:13:32.160 Close the global growth growth. 0:13:31.920 --> 0:13:34.439 Gap, and she talked a lot about how these African 0:13:34.480 --> 0:13:37.080 companies they're not looking to export their skill set. They 0:13:37.080 --> 0:13:39.120 want to kind of keep this internal here. It's an 0:13:39.120 --> 0:13:41.160 interesting dynamic. Let's take a listen as to what she 0:13:41.200 --> 0:13:41.640 had to say. 0:13:43.960 --> 0:13:47.240 The opportunity in this space is the pure demographics and 0:13:47.280 --> 0:13:51.720 all the secular trends. Huge population growth, one out of 0:13:51.920 --> 0:13:54.240 every four humans in the world by twenty fifty will 0:13:54.240 --> 0:13:58.200 be in Africa. Huge urbanization eighteen out of the thirty 0:13:58.240 --> 0:14:01.599 biggest cities in the world hoping now Africa, huge digitization, 0:14:02.200 --> 0:14:06.360 and really great opportunities for a private equity investor like 0:14:06.400 --> 0:14:09.920 myself to invest there. Am I finding it en nothing absolutely. 0:14:10.280 --> 0:14:13.760 There's a lot of talk about digitization. There's talk about 0:14:13.800 --> 0:14:16.839 the Global South, so it is being worked in all 0:14:16.880 --> 0:14:17.880 of the discussions here. 0:14:18.040 --> 0:14:20.160 So to break up, I mean, gen you mentioned the 0:14:20.160 --> 0:14:22.160 Global South because when a lot of people talk about it, 0:14:22.200 --> 0:14:24.200 you hear a lot more in the context of some 0:14:24.200 --> 0:14:24.840 of the Latin. 0:14:24.640 --> 0:14:26.040 American nations as well. 0:14:26.040 --> 0:14:29.160 As some of the Southeast Asian nations break it down 0:14:29.160 --> 0:14:31.320 as to how some of the African countries fit into that, 0:14:31.560 --> 0:14:32.400 what's the hierarchy. 0:14:33.000 --> 0:14:36.240 I do think the great investment opportunity in Africa is 0:14:36.320 --> 0:14:41.480 the lack of discussion about Africa. So how does it work? Yes, 0:14:41.600 --> 0:14:45.200 Africa is probably developmentally a little bit behind East Asia, 0:14:45.320 --> 0:14:47.320 but it is interesting to note that in the next 0:14:47.400 --> 0:14:50.360 five years Africa will grow as fast as Asia by 0:14:50.440 --> 0:14:54.240 five percent a year. And because of the low level 0:14:54.280 --> 0:14:57.240 of legacy assets and the low level of growth, the 0:14:57.320 --> 0:15:02.400 investment opportunities are huge. One said, before you see a 0:15:02.520 --> 0:15:04.840 town where the kids have no shoes, you can either 0:15:04.880 --> 0:15:07.760 be kids have no shoes there, this is batter you 0:15:07.800 --> 0:15:10.680 can say, I can sell them shoes. In Africa. The 0:15:10.800 --> 0:15:15.120 amount of demand for consumer products, be they pharmaceuticals, be 0:15:15.240 --> 0:15:19.880 they a bank account, be they agribusiness FMGG, all of 0:15:19.920 --> 0:15:23.600 those things huge unmet gap compared to the rest of 0:15:23.640 --> 0:15:27.320 the world. Other em bigger demand. If you look at China, 0:15:27.920 --> 0:15:32.160 Africa actually will have a bigger working population by twenty 0:15:32.240 --> 0:15:34.520 thirty five than either China or India. 0:15:35.480 --> 0:15:36.520 A young population. 0:15:36.760 --> 0:15:38.800 China is leveling off of that, so all of that 0:15:38.880 --> 0:15:40.520 will lead to growth and opportunities. 0:15:40.640 --> 0:15:43.600 Is that exportable growth or opportunities or does that even matter? 0:15:44.400 --> 0:15:44.680 Well? 0:15:44.720 --> 0:15:48.920 I think that Africa, as McKenzie called it, we call 0:15:48.960 --> 0:15:52.560 it the African Lions. They are more about intra Africa growth, 0:15:52.960 --> 0:15:56.120 intra Africa trade, rather than ext morning to the US 0:15:56.600 --> 0:16:00.160 and Europe. So it doesn't matter in the sas that 0:16:00.240 --> 0:16:03.280 it's still least to growth. It does matter to investors 0:16:03.320 --> 0:16:06.800 in the US if you want to hedge. The correlation 0:16:06.960 --> 0:16:10.200 Africa to the US is much less than East Asia, 0:16:10.320 --> 0:16:13.600 It's much less than Latown. So if you want something 0:16:13.720 --> 0:16:18.200 that hedges a bit the US, Africa is the investment destination. 0:16:18.600 --> 0:16:21.120 You're coming off a panel this morning that was about 0:16:21.120 --> 0:16:25.720 digitization and that closing the global growth gap. When you 0:16:25.880 --> 0:16:28.760 hear about African industries and particularly the companies that have 0:16:28.760 --> 0:16:31.280 been successful, a lot of them seem to fall into 0:16:31.320 --> 0:16:34.800 that space, whether it's telecom, internet, etc. Here is that 0:16:34.880 --> 0:16:37.600 the primary investment opportunity there now? 0:16:38.360 --> 0:16:43.160 I think because digitization goes across all industries, it's an 0:16:43.160 --> 0:16:47.240 opportunity in different segments. With the theme of digitization, what 0:16:47.280 --> 0:16:50.400 do I mean by that? In our fund, we're doing 0:16:50.400 --> 0:16:53.840 three things. First, investing directly in fintech companies. We have 0:16:53.880 --> 0:16:57.440 a company called Optasia, company called Ukes that covers all 0:16:57.440 --> 0:17:01.400 of Africa and Southern Africa. We are doing turnarounds of 0:17:01.520 --> 0:17:04.520 legacy assets, which is really one of the most interesting 0:17:04.560 --> 0:17:07.760 things happening in Africa. Look at a company like Mmantemhlan 0:17:07.880 --> 0:17:11.399 in Egypt. A few years ago they were leasing toktoks, 0:17:11.440 --> 0:17:16.000 handwriting microlos. What they're doing today is purely fintech. Millions 0:17:16.040 --> 0:17:19.760 of customers. Only Unicorn in Africa for several years and 0:17:19.800 --> 0:17:23.600