Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: I'm Barry Ridhlts. You're listening to Masters in Business on
Speaker 2: Bloomberg Radio. My extra special guest today is Jean Eric Salata.
Speaker 2: He is chair of the QT Group, the largest alternative
Speaker 2: manager outside of the US. They manage over three hundred
Speaker 2: and sixteen billion dollars. Previously, he helped set up the
Speaker 2: Bearings Private Equity Asia Group and built it into one
Speaker 2: of Asia's premiere private equity platforms. With no further adoop,
Speaker 2: John Eric Salado, Welcome to Bloomberg.
Speaker 3: Thank you, Barry. It's great to be here. It's great
Speaker 3: to have you.
Speaker 2: I've been looking forward to this conversation for a while.
Speaker 2: Before we get to EQT, You've a really interesting background
Speaker 2: and I want to dive into that a little bit.
Speaker 2: You grow up in Chile, you go to the Wharton
Speaker 2: School at University of Penn to get a bachelor's in
Speaker 2: finance and economics. Was investing always the career plan?
Speaker 3: Well?
Speaker 4: I yes, investing was always the career plan. That's not
Speaker 4: how I ended up in Asia, but the idea and
Speaker 4: going to Wharton and becoming an investor was something I
Speaker 4: always wanted to do since I was a young boy.
Speaker 4: I remember reading a lot of biographies when I was
Speaker 4: a kid of business people and being very intrigued by that.
Speaker 4: I remember having my first paper delivery route when I
Speaker 4: was like ten or eleven years old and really enjoying
Speaker 4: the idea of making money, and then actually started investing
Speaker 4: that money as a young kid in the stock market
Speaker 4: as well, and kind of understanding how that worked. And
Speaker 4: then when I ended up at Wharton undergraduate and studying
Speaker 4: finance and management, I got very intrigued with global business
Speaker 4: outside the US. I come from an international background.
Speaker 3: My family.
Speaker 4: We grew up in South America. My grandparents actually came
Speaker 4: from Eastern Europe and were refugees that ended up in
Speaker 4: South America. Some generation a generation, we've been moving around
Speaker 4: quite a bit. I always felt like I had a
Speaker 4: quite a different perspective on life and the world than
Speaker 4: a lot of the people I was at school with,
Speaker 4: and so I was interested in pursuing that. And by
Speaker 4: as luck would have it or fate would have it,
Speaker 4: I ended up meeting my girlfriend at the time who's
Speaker 4: now my wife, who's from Hong Kong, and I ended
Speaker 4: up moving there.
Speaker 3: Right after I graduated.
Speaker 4: A year after I graduated from college and ended up
Speaker 4: really building my career in Asia as a result of that.
Speaker 2: And that was Hong Kong before the handover, so Chile
Speaker 2: Hong Kong. You started being as a consultants, end up
Speaker 2: everywhere from Sydney to Boston and then back to Hong Kong.
Speaker 2: Tell us a little bit about that global experience. How
Speaker 2: has that changed how you look at the world of investing.
Speaker 4: Yeah, I sort of have always felt a little bit
Speaker 4: like an outsider in the way I look at things.
Speaker 4: I never felt like I was exactly part of the
Speaker 4: community or the sort of the.
Speaker 3: Consensus view of things.
Speaker 4: I was always thinking about things a little bit more differently,
Speaker 4: I guess given the background. I was always comparing things
Speaker 4: when I was growing up in the US, I was
Speaker 4: always comparing things in the US to the way things
Speaker 4: were in Chile and saying, Oh, this is different or
Speaker 4: that's different. Then when I moved to Hong Kong, I
Speaker 4: had the same perspective. I was thinking, Wow, there's a
Speaker 4: lot that I see happening all my friends working on
Speaker 4: Wall Street or in private equity firms in the late
Speaker 4: eighties early nineties, that's not yet happening here in Hong Kong.
Speaker 3: It felt like there was a gap. It felt like
Speaker 3: there was a gap.
Speaker 4: There, and that always intrigued me and got me motivated
Speaker 4: and interested in thinking about starting something new that would
Speaker 4: sort of try to take advantage of it, or take
Speaker 4: advantage of that opportunity created by that gap. Of what
Speaker 4: eventually made me coming to Asia, that's already happening in
Speaker 4: the US, and that's sort of what led me to
Speaker 4: eventually leave insulting, get into private equity in the early nineties,
Speaker 4: which was really very early in Asian in in Asian
Speaker 4: context in the private equity industry, and from there sort
Speaker 4: of to start building the business.
Speaker 2: So you leave Bain was the next up AIG Global
Speaker 2: Investment there there? Did you help set up their pe
Speaker 2: arm or was that already up and running.
Speaker 4: No, that AIG was essentially an insurance business.
Speaker 3: AIG.
Speaker 4: Some of your listeners might recall Hank Greenberg, who's sort
Speaker 4: of a legend really kind of started He actually didn't
Speaker 4: start that business, but was really the founder that grew
Speaker 4: the business beyond the founder CV Star's initial starting of
Speaker 4: the business in Shanghai of ball places, and that became
Speaker 4: a large global insurance company. And in those days in Asia,
Speaker 4: there really wasn't a private equity industry, but there were
Speaker 4: insurance companies like AIG that had long dated liabilities and
Speaker 4: they needed to find long dated assets, and so you
Speaker 4: had stock market and fixed income and so on. But
Speaker 4: in the private markets there wasn't really a fund to
Speaker 4: invest in per se, so they started making their own
Speaker 4: investments off their balance sheet into companies to match their
Speaker 4: long dated liabilities. And so it was really working for
Speaker 4: AIG in their internal private equity group that got me
Speaker 4: started in the industry.
Speaker 2: Foundational experience at AIG, that's really in private equity. That's
Speaker 2: a sentence you don't hear of that often.
Speaker 1: Yeah, it was.
Speaker 3: It was early days.
Speaker 4: It was interesting because you know, the whole region was
Speaker 4: really starting to boom. It was the golden period of globalization,
Speaker 4: you know, with the emergence of not just China, but
Speaker 4: Southeast Asia, Thailand, Indonesia, Taiwan, Korea, all these markets were
Speaker 4: starting to really develop and industrialize and there was a
Speaker 4: lot of requirement for capital for growth, and so we
Speaker 4: were really growth investors in those days, putting money to
Speaker 4: work behind companies and helping them to grow.
Speaker 2: And then you moved from investor to operator you as
Speaker 2: executive president. You run finance for Shoeing Steel that's a
Speaker 2: giant Hong Kong industrial What was that experience.
Speaker 4: Like, Yeah, that actually that happened before I left to
Speaker 4: do the private exit, So it was vain then shoeing,
Speaker 4: and then and then ai G. But the Shoeing experience, it's, uh,
Speaker 4: it's a part of my background that is a little
Speaker 4: bit different because it's really it's a family business that
Speaker 4: is an industrial company, very traditionally run. It's actually my
Speaker 4: wife's family business. So yeah, it's it's really uh, it
Speaker 4: was a very different experience.
Speaker 1: I went from I can imagine, Yes, I went from
Speaker 1: baning company, you know, sort of business schools down you know,
Speaker 1: everybody has similar backgrounds, very analytical, to the opposite end
Speaker 1: of the spectrum, which is it's a family business.
Speaker 4: Everybody who's in management is related to each other. And
Speaker 4: then uh, you know, you're making decisions based on sort
Speaker 4: of traditional ways of doing things.
Speaker 2: But this isn't a small little family dry claian Er.
Speaker 2: It's a big business, giant conglomerate. It was a.
Speaker 4: Sizable business and it was a good experience for me
Speaker 4: because it sort of helped me shape in the very
Speaker 4: formative years of my career, an appreciation for both.
Speaker 3: Sides of the spectrum.
Speaker 4: On the one hand, you have the need to be analytical, rigorous,
Speaker 4: understand global trends and sort of the way you look
Speaker 4: at things as a business school student. On the other hand,
Speaker 4: if you're going to do business in Asia, you have
Speaker 4: to be a little more entrepreneurial. You have to listen
Speaker 4: to your instinct. You have to be able to develop
Speaker 4: relationships with people, because ultimately, the decision makers in that
Speaker 4: part of the world, a lot of them have those
Speaker 4: sorts of backgrounds, and so you need to be able
Speaker 4: to understand how they think. And so that was a
Speaker 4: very valuable experience during my formative years. But I kind
Speaker 4: of came to the view that I didn't really want
Speaker 4: to spend the rest of my career in that sort
Speaker 4: of a setup, and so I applied to business school,
Speaker 4: and I got into business school. I got into Harvard
Speaker 4: Business School actually, and I was about to start at Harvard.
Speaker 4: I literally was there registered. I'm actually in the picture book,
Speaker 4: ready to go. And that's when I got the job
Speaker 4: offer to come back and work for this private equity
Speaker 4: division of AIG, which I decided ultimately that's really what
Speaker 4: I wanted to do rather go back to school again,
Speaker 4: having gone to undergraduate for a business degree already, and
Speaker 4: so I decided to defer my business school go back
Speaker 4: to work in Asia in private equity, and ultimately I
Speaker 4: actually never ended up really coming back to school.
Speaker 2: So after AIG, you helped launch a regional Asian private
Speaker 2: equity program for Bearing Private Equity Partners, a UK based bank. Right, yeah,
Speaker 2: I have the timeline, right, So I'm fascinated nineteen ninety seven.
Speaker 2: What was the investment landscape in Asia like in the nineties,
Speaker 2: Was that a very underappreciated set of opportunities or had
Speaker 2: people started to sniff out, hey, this area is going
Speaker 2: to be boom.
Speaker 4: It was a very very un volatile period actually, if
Speaker 4: you recall was going on at the time. So two
Speaker 4: things happened in nineteen ninety five. Nick Leeson, this is
Speaker 4: just around the time that I was joining Bearing Private Equity.
Speaker 4: Nick Leeson, who was a name that some of your
Speaker 4: listeners mare may recognize, others may not. He brought down
Speaker 4: this three hundred.
Speaker 3: Year old broke Bearings back.
Speaker 4: He broke the bank out of Singapore actually trading Japanese
Speaker 4: stock futures and kind of covering up his losses, which
Speaker 4: eventually brought the.
Speaker 3: Whole bank down.
Speaker 4: It was a you know, three hundred year old bank
Speaker 4: and one of the most prominent firms. So what ended
Speaker 4: up happening is that the Dutch firm Ing took over
Speaker 4: Bearings Famously for one pound and assumed all their liabilities
Speaker 4: and they took it over. This is around the time
Speaker 4: that I had joined, and you know, at the time,
Speaker 4: I remember thinking this is a very unsettling this is
Speaker 4: you know, I don't know what I'm going to do.
Speaker 3: I was very worried.
Speaker 4: I just decided to leave AIG and join this new
Speaker 4: company bearing private equity. In hindsight, sitting here today, I
Speaker 4: can say it's probably one of the best things that
Speaker 4: ever happened to me, was to be able to step
Speaker 4: into a situation that was going through a lot of change.
Speaker 4: And I think it is an important lesson in life
Speaker 4: actually that there are these times when you go through
Speaker 4: There's serendipity number one, so luck. There's also the fact
Speaker 4: that you're often thrust into situations you don't expect, and
Speaker 4: it kind of boils down to how you end up
Speaker 4: responding to them and looking for the best possible outcomes
Speaker 4: or the best way out of a situation can sometimes
Speaker 4: lead to huge opportunities, which is what happened here because
Speaker 4: that confusion of the takeover by IG of Bearings resulted
Speaker 4: in Bearings essentially figuring that they didn't need.
Speaker 3: To have some of these non core businesses.
Speaker 4: And so I approached the new Dutch owners and asked
Speaker 4: them if it was okay if we spun our business out.
Speaker 4: At the time, which we did, it was a very
Speaker 4: small business. It was a twenty five We had twenty
Speaker 4: five million dollars of assets under management, which even in
Speaker 4: those days was not a lot of mine, and we
Speaker 4: were really just getting started. And they agreed, and so
Speaker 4: we ended up establishing an independent, small private equity business
Speaker 4: called Bearing Private Equity Asian.
Speaker 3: So kept the name. We kept the name BPA.
Speaker 2: There was this tremendous transition from what was essentially a
Speaker 2: startup to what eventually became a pretty substantial institution. What
Speaker 2: was that like.
Speaker 4: Initially we were starting off and again it was nineteen
Speaker 4: ninety seven, ninety six, ninety seven, so if he recalled
Speaker 4: nineteen ninety seven was actually the Asian Financial crisis, as
Speaker 4: I referred to which was a terrible period of huge
Speaker 4: currency devaluations, starting with a ruble in Russia, but then
Speaker 4: sort of a contagion effect throughout.
Speaker 2: The ruble was worse the following year with long term
Speaker 2: capital management, if my memory is great. So the Asian
Speaker 2: contagion was the tie Bot crisis.
Speaker 4: And it was it was the Indonesian sort of high
Speaker 4: yield market as well that blew up. We're basically borrowing
Speaker 4: dollars because it was cheaper to do so, using that
Speaker 4: money to then invest in their businesses in Asia, thinking
Speaker 4: that they could make the spread and kind of capture that.
Speaker 2: As long as the currency stay stable, which.
Speaker 3: Is okay, but then it isn't till it isn't right.
Speaker 4: So that's what happened, and so that blew out and
Speaker 4: it caused a tremendous financial crisis across the whole region.
Speaker 4: And this is in the middle of when we were
Speaker 4: getting started. So I remember we're writing the first PPM,
Speaker 4: the first private placement memo to go raise capital, and
Speaker 4: the whole story was in ninety six was about growth
Speaker 4: in Asia, the growth story, and halfway through that writing
Speaker 4: the PPM, we had to basically change the PPM and
Speaker 4: change the strategy to become more of a distress strategy
Speaker 4: on how we're going to capitalize on the dislocation in
Speaker 4: Asia to invest in great companies that have bad balance sheets,
Speaker 4: which is sort of what we did with that first
Speaker 4: twenty five million that we started with, because what happened
Speaker 4: was that Ing gave us that seed capital to get
Speaker 4: going with, which was the twenty five million. They were
Speaker 4: supposed to give us three hundred but it ended up
Speaker 4: not coming through, so we started with twenty five.
Speaker 2: Why is it that the indications of interest and the
Speaker 2: actual cash there's such as a multiple between the two.
Speaker 4: What happened in my case is that there were supposed
Speaker 4: to be three of us that were coming across to
Speaker 4: start the business. There was two very senior guys from
Speaker 4: AIG actually that were poached by Bearings to start the
Speaker 4: business for them in Asia, and they asked me, the
Speaker 4: young kid who was doing all the number crunching, to
Speaker 4: join them to do the actual work. And I said,
Speaker 4: I'd be delighted to because it's such an exciting entrepreneurial opportunity.
Speaker 3: You know, here I am.
Speaker 4: A young junior analyst and I get a chance to
Speaker 4: be potentially a partner in this startup, so I thought,
Speaker 4: I raised my hand. As we were about to get started,
Speaker 4: the two senior guys got a counter offer from Hank Greenberg,
Speaker 4: who called them up and say, hey, you guys are
Speaker 4: too important.
Speaker 3: We want you to stay.
Speaker 4: Here's all this money and equity and that, you know,
Speaker 4: to convince you to stay. But he didn't make me
Speaker 4: a counter offer. He just cut me loose. So those
Speaker 4: guys accepted the counter offer. I was there, left on
Speaker 4: my own, and I went back to the IG folks
Speaker 4: and I said, here, I am, I'm ready to do this.
Speaker 4: They said, well, you're a little young and inexperience. It's
Speaker 4: not what we're expecting. We're going to slash the capital
Speaker 4: that we commit to this from three hundred to twenty five,
Speaker 4: less than ten percent, said I said. That's good enough
Speaker 4: for me. I said, I'll take that. That sounds good.
Speaker 4: So we started with twenty five and we did five
Speaker 4: deals of five million each, and it turned out that
Speaker 4: because of the cycle where we were, we were lucky
Speaker 4: to be able to buy in at good prices and
Speaker 4: we bought some interesting businesses.
Speaker 2: Huh, that sounds really that got us started. Basically, Yeah,
Speaker 2: that sounds really really quite fascinating. So BPA was in China, India,
Speaker 2: Southeast Asia, Japan, Korea. Here's the thing that I'm fascinated. Okay,
Speaker 2: So maybe New York is different than Florida, is different
Speaker 2: than Texas, is different than California, but we all speak
Speaker 2: the same language more or less. It's the same laws,
Speaker 2: it's the same regulatory structure. When you're working throughout Asia,
Speaker 2: this different legal system, This is a different cultural dynamic,
Speaker 2: they're different political dynamics. How do you build relationships, how
Speaker 2: do you build a knowledge base and navigate? Like is
Speaker 2: from an American perspective? Are those countries more similar than
Speaker 2: we imagine? Or am I teeing this up correctly? Each
Speaker 2: one is its own, independent, unique region.
Speaker 4: You're absolutely right about that, and that actually is the
Speaker 4: key I think to what we've been able to achieve
Speaker 4: over three decades, was that overcoming those barriers, because ultimately
Speaker 4: people think of Asia, they call it Asia, but it's
Speaker 4: really a first of all geographic, it's a huge, huge expansive.
Speaker 4: You know, from Tokyo to Sydney, it's like a twelve
Speaker 4: hour flight, you know, and from you know, from even
Speaker 4: from Hong Kong all the way to India, it's still
Speaker 4: a pretty long distance and culturally, you're talking about a
Speaker 4: very significant difference in the local culture, the language, the
Speaker 4: ways of doing business. So what we did initially was,
Speaker 4: you know, and we were actually criticized for this in
Speaker 4: the early days because in those days people just did single.
Speaker 3: Country funds for that very reason.
Speaker 4: You had a China fund, you had you know, you
Speaker 4: had a sort of Japan fund and Korea fund. And
Speaker 4: what we set out to do was to say, okay,
Speaker 4: we're going to create a regional investment program. People looked
Speaker 4: at me and said, what do you know about investing
Speaker 4: in Japan? Or like, what do you know about India?
Speaker 4: You're not even from Asia. And so what I early
Speaker 4: on appreciate it, and this has been an important lesson
Speaker 4: in my career is that actually being a good investor
Speaker 4: is very important for what we do in our industry.
Speaker 4: But if you want to build a company, which was
Speaker 4: always my ambition, if you want to build a business
Speaker 4: out of it, you need to actually build a team,
Speaker 4: not just be a good investor. Being a good investor
Speaker 4: is kind of prerequisite to be in our industry, but
Speaker 4: beyond that, it's really about building a team.
Speaker 3: And so I was lucky.
Speaker 4: Enough to meet and to and to bring on board
Speaker 4: some great partners early on, very diverse backgrounds. So you know,
Speaker 4: we have people even to this day and in those
Speaker 4: days from each of these markets. So you know, we
Speaker 4: had great partners from China, from Taiwan on our team
Speaker 4: that we hired early on. We had a very good
Speaker 4: team in India on the ground in Mumbai. We call
Speaker 4: it now local with locals, where you have local teams
Speaker 4: in each market. In two thousand and five, we opened
Speaker 4: up an office in Japan and we hired a great
Speaker 4: team in Japan of great people there. As we're building
Speaker 4: the team a you needed to have people from those
Speaker 4: markets that understood those markets. But the next question is
Speaker 4: how do you stitch it all together? You know, how
Speaker 4: do you create that common thread? And that comes down
Speaker 4: to culture and building a culture of like minded people.
Speaker 4: And so I started to really also gain a huge
Speaker 4: appreciation for the importance of culture in a business. And
Speaker 4: that's something by the way that EQT has I think,
Speaker 4: really excelled in globally. And one of the reasons I
Speaker 4: was ultimately attracted to EQT in combining our business with
Speaker 4: EQT four or five years ago was that Connie Johnson,
Speaker 4: the founder of EQT, early on with the Wallenberg's back
Speaker 4: backing realize that culture ultimately drives performance in an investment
Speaker 4: organization like ours. So built an organization with tremendous culture,
Speaker 4: and our culture was actually somewhat similar. So we were
Speaker 4: able to bring the two cultures together and the cultural
Speaker 4: fit ended up being what made that merger so successful.
Speaker 4: But going back to building the Asia business, building the
Speaker 4: team on the ground, building the common culture, and then
Speaker 4: it was sort of how do we institutionalize this instead
Speaker 4: of just doing deals here, doing deals there, how do
Speaker 4: we create a unified, systematic approach? And this is where
Speaker 4: my main days sort of came in of thinking, let's
Speaker 4: come up with some constructs about how we think about
Speaker 4: capital allocation, how we think about diversification, how do we
Speaker 4: think about macro, how do we think about sector trends,
Speaker 4: how do we think about our investment committee process? How
Speaker 4: do we drive due diligence systematic due diligence in every
Speaker 4: market so we have quality control in each market.
Speaker 3: It's not just random.
Speaker 4: Deal makers doing things the way that they want to
Speaker 4: do them on the ground, and so pulling all that together,
Speaker 4: which it took a lot of time. I'm making it.
Speaker 4: I'm shortening it here, but you know, there was a
Speaker 4: lot of ups and downs. There, a lot of mistakes,
Speaker 4: a lot of setbacks, but eventually we got there and
Speaker 4: we find our strategy over the years and we created
Speaker 4: something that's actually quite hard to replicate, which is this
Speaker 4: regional platform delivering consistent outcomes with a great team of
Speaker 4: consistent of people that have been with us a long
Speaker 4: time and that have a similar approach to underwriting and
Speaker 4: ultimately great performance. And so all that going from twenty
Speaker 4: five million where we ended up. By the time we
Speaker 4: did the deal with EQT, we had twenty five billion
Speaker 4: under management over the spans of what was twenty five
Speaker 4: years of billion.
Speaker 2: The business coming up, we continue our conversation with Jean
Speaker 2: Eric Salata, chairman of EQT Group, discussing the combination of
Speaker 2: BPA and EQT. I'm Barry Ridaults. You're listening to Masters
Speaker 2: in Business on Bloomberg Radio. I'm Barry Ridolts. You're listening
Speaker 2: to Masters in Business on Bloomberg Radio. My extra special
Speaker 2: guest this week is Jean Eric Salata. He is chair
Speaker 2: of EQT Group, one of the largest alternative managers outside
Speaker 2: of the US, they managed three hundred and sixteen billion dollars.
Speaker 2: So let's talk a little bit about how this all came.
Speaker 2: About twenty twenty two, you merge BPA with EQT. That
Speaker 2: was a seven billion dollar deal that followed about twenty
Speaker 2: five years of independence. What led to that decision to merge?
Speaker 2: What could EQT offer that BPA couldn't build on its own?
Speaker 1: Yeah?
Speaker 4: I think what I started to sense in about say
Speaker 4: twenty fifteen, was that the industry was changing. Our industry
Speaker 4: was changing global. You started to see global firms moving
Speaker 4: into Asia. You started to see some firms starting to
Speaker 4: go public. You started to see multi product firms developing
Speaker 4: beyond just a single product, single asset class scale. And
Speaker 4: I realized that although we were doing very well and
Speaker 4: we're very successful and growing, if we wanted to make
Speaker 4: this a multi generational business that's going to continue to thrive,
Speaker 4: we wanted to be part of this industry consolidation, put
Speaker 4: this trend towards scale, rather than to be sort of,
Speaker 4: you know, pushed aside by it. And that's when I
Speaker 4: started thinking, what are our options? I mean, one option
Speaker 4: was for us to try to expand beyond Asia and
Speaker 4: to develop our business outside of the region. That was
Speaker 4: going to be pretty difficult at this stage because the
Speaker 4: business is coming so large and entrenched globally. And then
Speaker 4: I started looking at ways of working with others, and
Speaker 4: that's when I met EQT really through their own IPO
Speaker 4: that they had done at the time gone public in
Speaker 4: twenty eighteen twenty nineteen, and I was curious about that,
Speaker 4: and I saw I went to speak to them about
Speaker 4: how they had done that, and we started talking, and
Speaker 4: you know, one thing led to another, and by the
Speaker 4: end of this conversation, it became evident to all of
Speaker 4: us sitting around the table that actually, there's something here
Speaker 4: that could be quite powerful if we were to come
Speaker 4: bring the businesses together.
Speaker 2: You mentioned earlier how important culture is to performance in
Speaker 2: an investment world. I would imagine that a Swedish firm
Speaker 2: like EQT and essentially a regional Asian firm like BPA,
Speaker 2: you would imagine those are very different cultures and there's
Speaker 2: going to be a challenge integrating the two of them.
Speaker 2: What was your experience like trying to get all the
Speaker 2: horses pouring in the same direction.
Speaker 4: Yeah, I think initially you could imagine that would be
Speaker 4: the case, but as it turns out.
Speaker 3: I think a few things here.
Speaker 4: First of all, started off as a Swedish firm, but
Speaker 4: it really by the time we met had already become
Speaker 4: a much more global business. So first Swedish, then European,
Speaker 4: expanding into Europe and then expanding into the US. Had
Speaker 4: some presence in Asia, not much. Secondly, EQT is backed
Speaker 4: by the Wallenberg family. The Wallenberg family is a sixth
Speaker 4: generation family from Sweden that has a history of really
Speaker 4: doing business globally. Investors in Ericsson, Electroluxe, SOB, many of
Speaker 4: the big Swedish companies Astrozeneca are backed by the Wallenberg family,
Speaker 4: and so they have a very global mindset, I would say,
Speaker 4: in the way they think about doing business.
Speaker 3: Globally and culturally.
Speaker 4: Then I think the other aspect here is there's a
Speaker 4: difference I think between a European firm like EQT and
Speaker 4: say American firms. The European firms already are thinking in
Speaker 4: terms of well, every country is different. You've got you know,
Speaker 4: the Nordics are different than Germany, which is different than France,
Speaker 4: which is different than Southern Europe. And so when they
Speaker 4: come to Asia they have I think a heightened sense
Speaker 4: of appreciation for the diff cultural differences within Asia, and
Speaker 4: you know, I think I think that to me was
Speaker 4: really important that they understand that within Asia, Japan is
Speaker 4: very different from India, and India is very different from China,
Speaker 4: and so I felt almost like there was a kindred
Speaker 4: spirit there and understanding that each country, each region, the
Speaker 4: cultures really matter. Then I would say that if you
Speaker 4: look at the histories of the firm, we're both about
Speaker 4: thirty years old at the time, we both had our
Speaker 4: ups and downs, we both kind of built the business
Speaker 4: from a founder of Connie and myself, and you know,
Speaker 4: I think there was a lot of common history, shared
Speaker 4: history there, and ultimately a point boiled down to the
Speaker 4: i'd say, the chemistry of the senior team, but then
Speaker 4: ultimately the culture throughout, and I felt very comfortable with it,
Speaker 4: and we did some spend some time together, meeting with
Speaker 4: the team members, meeting with each other, and we ended
Speaker 4: up feeling like this was going to be a great fit.
Speaker 4: Still taking a chance and coming and bringing the business together.
Speaker 4: But having done it now been together now for nearly
Speaker 4: four years, I can tell you it's been a huge success.
Speaker 4: And it really boils down to the fact that the people,
Speaker 4: the cultural fit was very strong. Maybe the good time
Speaker 4: to talk about the values also of EQT, which are
Speaker 4: similar to the values we had at Bearing Private Equity
Speaker 4: at the time. You know, there's some key values that
Speaker 4: EQT has. Number one, it's high performing, which is, you know,
Speaker 4: something that I think most people in the industry are
Speaker 4: going to focus on. But beyond that, it's also we
Speaker 4: focus a lot on transparency, We focus on being informal,
Speaker 4: we focus on being entrepreneurial, and we have another fifth value,
Speaker 4: which is respectful. And if you take all those as
Speaker 4: a package, you know, what you start to sense is
Speaker 4: the sort of people that end up coming to EQT
Speaker 4: staying at EQT. It's not the typical deal maker, kind
Speaker 4: of Wall Street type of deal maker that you get
Speaker 4: in some of our parts of our industry. And I
Speaker 4: think that really appealed to the kind of makeup of
Speaker 4: our firm at the time. You know, having that really
Speaker 4: informal interaction with people that's a little bit of a
Speaker 4: Nordic trade. I would say that this lack of hierarchy.
Speaker 4: You know, you take a look at Connie, he's the
Speaker 4: founder of the firm. He's really opened up the ownership
Speaker 4: of the firm early to all the partners of the firm.
Speaker 4: The fact that he was even open to combining with
Speaker 4: my old business, in a sense, diluting even further on
Speaker 4: a fairly large transaction that as you mentioned, you know,
Speaker 4: that speaks to this kind of expansive view of we're
Speaker 4: trying to build an institution here. It's not about any
Speaker 4: one individual, it's not about sort of creating a legacy
Speaker 4: of any one individual. It's about creating a business that's
Speaker 4: going to last. So that sort of mindset, I think
Speaker 4: really appealed to me and felt like the kind of
Speaker 4: place that was a good home for the company that
Speaker 4: we had built as a partnership prior to that.
Speaker 2: Really really interesting. Let's talk a little bit about how
Speaker 2: the capital has invested. Sixty five percent of eqt's capital
Speaker 2: is in Europe and Asia. How do you think about
Speaker 2: geographic diversification. It's always a challenge.
Speaker 4: I think diverse vacation is becoming more and more top
Speaker 4: of mind for global investors, particularly when we talk to
Speaker 4: our institutional investors. Even in the private world channels. You're
Speaker 4: starting to get a sense that people feel overly concentrated,
Speaker 4: over extended, maybe in US assets not to say that
Speaker 4: US assets are not attractive or that they don't have
Speaker 4: great prospects, which they do. But you know, having eighty
Speaker 4: five ninety percent of your assets tied into a market
Speaker 4: that's already highly concentrated is becoming a little bit uneasy
Speaker 4: for people. So what we're sensing it with our clients
Speaker 4: is a desire to get exposure to more global markets.
Speaker 4: And what do you keep. Where we're strong is we
Speaker 4: have two thirds of our businesses outside of the US.
Speaker 3: We're very strong in Europe, were very strong in Asia.
Speaker 4: Within those markets, we are also you know, exposed to
Speaker 4: some of the best sectors. We have a very thematic approach.
Speaker 4: We invest in healthcare, we invest in technology. Actually, we
Speaker 4: just announced yesterday. I don't know when this is airing,
Speaker 4: but we just announced yesterday that we've been awarded the
Speaker 4: Scale Up Europe Fund mandate by the European Commission, which
Speaker 4: is a huge deal. They decided to ward EQT the
Speaker 4: management of what's going to be a five billion dollar
Speaker 4: fund that will invest in early stage technology ventures across
Speaker 4: Europe to help them to scale up, so kind of
Speaker 4: series be onwards in areas like quantum computing, AI, life sciences, AI, infrastructure,
Speaker 4: industrial technology, really taking the innovation that exists in Europe
Speaker 4: and scaling it up to compete globally at the global
Speaker 4: scale with some of the innovation you see in the
Speaker 4: United States and in China.
Speaker 3: So we have exposure to some.
Speaker 4: Of these really interesting parts of the global investment landscape,
Speaker 4: and that's very additive to what investors typically would have
Speaker 4: in their exposure in their traditional portfolio would be much
Speaker 4: more heavily weighted towards the US, and this is a
Speaker 4: way to get a little bit broader global diversification in
Speaker 4: that sense.
Speaker 2: Really kind of interesting when we look at the performance
Speaker 2: of various markets, really going back to the Great Financial Crisis,
Speaker 2: it feels like Asia and Europe has very much legged
Speaker 2: the US up until a year or two ago exactly.
Speaker 2: I'm curious how you look at some of the macro
Speaker 2: tailwinds that Asia is certainly enjoying, and as we see
Speaker 2: a shift towards China in many many ways, especially leadership,
Speaker 2: and how do you see Europe is some tailwinds to
Speaker 2: some headwinds. They seem to be a little more complex
Speaker 2: than trying to figure out what direction they're heading.
Speaker 4: Yeah, I think what we're starting to see globally right
Speaker 4: now is this capital capex supercycle that is playing out
Speaker 4: with AI infrastructure, but not just AI infrastructure. It also
Speaker 4: feeds into the reindustrialization focus on capex for reindustrialization.
Speaker 2: Reindustrialization meaning explain what that meaning.
Speaker 4: Sort of the investing back in to more of the
Speaker 4: industrial base of say the United States or Europe, away
Speaker 4: from just outsourcing all of that. And so this reindustrialization,
Speaker 4: the AI capex infrastructure, plus you know, the whole power
Speaker 4: energy transition that's going on with electrification, this is resulting
Speaker 4: in much more capital intensive investment than we've ever seen before.
Speaker 4: I mean, the sort of numbers that people are throwing
Speaker 4: around are just unprecedented within our lifetimes. We've never it's historical,
Speaker 4: the levels of investment that we're seeing, and that has
Speaker 4: knock on effects. The knock on effects are throughout the
Speaker 4: whole supply chain. A lot of the supply chain actually
Speaker 4: feeds back into Europe, it feeds back into Asia certainly.
Speaker 4: And so this kind of global supply chain of capital
Speaker 4: expenditures is creating new investment opportunities and demand for capital
Speaker 4: that we haven't like we have never seen before in
Speaker 4: terms of the quantum of money that's required to make
Speaker 4: this investment play out. So these are sort of broadening
Speaker 4: that exposure across the regions. Is where we see opportunity.
Speaker 4: If I look at the world today, you know, the
Speaker 4: AI infrastructure opportunity globally is probably the single biggest, most
Speaker 4: interesting investment opportunity for US. It means investing in a
Speaker 4: couple of key areas. One is in the compute or
Speaker 4: data center space. We have one of the largest data
Speaker 4: center businesses in the world called it edge Connects. It's
Speaker 4: active both in the US but also in Europe and
Speaker 4: now increasingly in Asia. We have a joint venture in India,
Speaker 4: for example, with the Adani Group in edge Connects, and
Speaker 4: that that data center business has over ninety data centers.
Speaker 4: It's increased in value. We've owned it now for six
Speaker 4: seven years. I think it's increased by twenty x in
Speaker 4: terms of the total installed capacity of the business.
Speaker 3: We have.
Speaker 4: In addition to that, we take kind of an end
Speaker 4: to end solutions approach. So we have the compute but
Speaker 4: we also have about one hundred billion dollars of investment
Speaker 4: into energy. So the energy, the whole energy grid, you know,
Speaker 4: power generation and grid and storage. This is a really
Speaker 4: important part of the comprehensive solution that you need to
Speaker 4: drive AI compute. So we've got the energy, we've got
Speaker 4: the compute, we're also investing in the digital infrastructure to
Speaker 4: connect it all the digital connectivity of all of this,
Speaker 4: and so if you tie that all together, our infrastructure
Speaker 4: business is really riding some of these global tailwinds, not
Speaker 4: just in the US, but really doing this globally. Then
Speaker 4: in addition to that, i'd say the other thing that's
Speaker 4: pretty interesting if you take a sort of non US
Speaker 4: lens at the world, is what's happening in Japan. And
Speaker 4: there the Japanese buyout market is really on a taiar.
Speaker 4: It's being driven primarily by some corporate reforms around shareholder
Speaker 4: reforms and activists, shareholder increasing activism, shareholder activism which is
Speaker 4: supported actually by the Japanese government to improve corporate governance. Essentially,
Speaker 4: that's creating opportunities to really focus on shareholder value and
Speaker 4: to result in a lot more deal flow. The number
Speaker 4: of transactions that we've seen have it's this year to alone,
Speaker 4: it's up sixty percent year to date. The total number
Speaker 4: of activist shareholder campaigns has doubled in the last few
Speaker 4: years fifty to over one hundred a year on the
Speaker 4: back of some of these reforms. So you're seeing a
Speaker 4: whole new market kind of developing there for Japanese buyouts,
Speaker 4: which is very uncorrelated and very complementary to the traditional
Speaker 4: bioopportunities that exist in the United States. And then together
Speaker 4: with the I infrastructure opportunity, which is more global, there's
Speaker 4: just a lot happening in our ecosystem which we see
Speaker 4: as being very additive, very complementary to just the traditional
Speaker 4: bread and butter of US exposure to private equity or
Speaker 4: US infrastructure.
Speaker 2: So I have so many questions to go.
Speaker 4: Sorry, maybe just one last year on that, which is
Speaker 4: that you asked. You started the question up by the
Speaker 4: outperformance of the market. So what ended up happening last year,
Speaker 4: as you pointed out, is that you know, the stock markets,
Speaker 4: if you look at listed markets as a proxy, the
Speaker 4: S and P five hundred did pretty well, was up
Speaker 4: sort of eighteen percent of seventeen, yeah, versus thirty three.
Speaker 4: But everything else in Asia was up much more than that,
Speaker 4: as it turned out, either amazing who would have guessed,
Speaker 4: you know, here is up sixty percent last year, and
Speaker 4: Hong Kong was up, Japan was up in the thirties,
Speaker 4: and you had even europe stock markets did better than
Speaker 4: the US last year. So the idea that having all
Speaker 4: your pension, all your retirement money in one market, it's
Speaker 4: worked pretty well for design being. But the idea of
Speaker 4: the correlation and concentration, and you know, markets don't always
Speaker 4: go up, they go down as well. I think the
Speaker 4: old diversification strategies do play a role in long term
Speaker 4: acid allocation, and that's where EQT, I think has something.
Speaker 2: I have so many questions about Europe and Japan and
Speaker 2: Korea and other areas, but I have to come back
Speaker 2: to China for a moment, which for the better part
Speaker 2: of the past two or three decades has been the
Speaker 2: center of Asia. Feels like the geopolitics, the regulatory environment,
Speaker 2: everything has shifted fairly dramatically. How do you look at China.
Speaker 2: Are they still, you know, the eight hundred pound gorilla,
Speaker 2: or are there enough offsetting economies that are really growing
Speaker 2: and seeing gains in their markets that it's not all
Speaker 2: about China the way it once was ten twenty years ago.
Speaker 4: The world is geopolitically is becoming more polarized, and maybe
Speaker 4: creating more silos in certain strategic areas like technology and defense,
Speaker 4: as you know, as the winds have shifted.
Speaker 3: That's just the.
Speaker 4: Reality of the world that we're living in. Having said that,
Speaker 4: I do think that there's still this underlying ecosystem of
Speaker 4: inter dependence and you know, a desire I think to
Speaker 4: work together. I hope in areas like, for example, in medicine.
Speaker 4: You know, if you look at the biofarm the biotech industry,
Speaker 4: there's a lot going on right now between China and
Speaker 4: the US. A lot of the early stage trials that
Speaker 4: are being done. Many of those are getting acquired by
Speaker 4: US pharmaceutical companies and then being rolled out for the
Speaker 4: benefit of humanity all.
Speaker 3: Over the world.
Speaker 4: And these are areas where there's scope I think for
Speaker 4: cooperation and I think everyone can benefit from that. There
Speaker 4: are areas that are much more sensitive when it comes
Speaker 4: to technology and ships and semiconductors. But even there, I
Speaker 4: would say that it's important for all investors, for all
Speaker 4: business investors, for governments, for policy makers to at least
Speaker 4: understand what's happening in China because I think it's relevant.
Speaker 4: You know, it has an impact on global outlook. You know,
Speaker 4: you look at evs, you look at the solar industry,
Speaker 4: you look at what's happening in battery storage. You know,
Speaker 4: having access to that sort of know how ultimately is
Speaker 4: going to be important for everyone. How you do that
Speaker 4: in a way protects your national interest is a topic
Speaker 4: of the day for policymakers globally, in the US and Europe,
Speaker 4: and I think people are looking at that differently than
Speaker 4: they used to in terms of how much they're willing
Speaker 4: to outsource versus how much they want to do themselves.
Speaker 4: I mean, this Scale Up Europe Fund that I just
Speaker 4: mentioned is also a policy response to wanting to create
Speaker 4: homegrown innovation and scale homegrown innovation, which makes sense the
Speaker 4: way the US wants to do that and the way
Speaker 4: that China wants to do that. I think that the
Speaker 4: Chinese economy, it's truly impressive what's happening there in terms
Speaker 4: of innovation, the way the economy is growing, and the
Speaker 4: amount of R and D if you look at the
Speaker 4: patents being filed, the level of innovation, how the innovation
Speaker 4: is being commercialized. But at the same time, there's some
Speaker 4: very exciting things happening in Europe and in the United States. Obviously,
Speaker 4: the US is also leading in many ways when it
Speaker 4: comes to AI. One of the things to keep an
Speaker 4: eye on, by the way, is the cost of compute
Speaker 4: differential between the US and China. There is a big
Speaker 4: difference there in how compute is generated and ultimately the
Speaker 4: cost of that compute per token to the users, which
Speaker 4: is going to become more of a focus, I think
Speaker 4: going forward than it has been up until now, where
Speaker 4: it's kind of been viewed as a must have, almost
Speaker 4: free available to all employees, they will be more focused
Speaker 4: on ROI and I think this is where people are
Speaker 4: going to start looking at the competitive position of cost
Speaker 4: of compute in different markets versus what's happening in the US.
Speaker 2: Last question of EQT before we start talking a little
Speaker 2: more about the environment out there today. How do investors
Speaker 2: in EQT manage their exposure? Are they putting money into
Speaker 2: one fund that has a little bit of everything or
Speaker 2: do people get very granular or a little bit of both.
Speaker 4: We have thirty different strategies at EQT across four different areas,
Speaker 4: private equity, infrastructure, real estate, and secondaries. Secondaries is our
Speaker 4: newest area that we've just announced that we've required. Color
Speaker 4: Capital hasn't closed it but we're in the process of
Speaker 4: bringing that on board.
Speaker 3: So we have thirty different strategies. I think we have both.
Speaker 4: We have the drawdown funds, which are the main institutional
Speaker 4: vehicles for committing traditionally as you would to a fund
Speaker 4: and invest in buyouts or in growth capital, or in
Speaker 4: life sciences or in real estate. But increasingly, and this
Speaker 4: is the higher, highest growth part of our business and
Speaker 4: for the industry as a whole, we have the open
Speaker 4: ended structures. Some people call them evergreens. We don't call
Speaker 4: them semi liquids because they're not liquid. They're not even
Speaker 4: semi liquid, but they are open ended. And what open
Speaker 4: ended means is that you can subscribe to them every
Speaker 4: month and you can redeem every quarter subject to the
Speaker 4: underlying liquidity availability in the quarter and the You know,
Speaker 4: what we're starting to see is there are a couple
Speaker 4: advantages of the.
Speaker 3: Evergreen or open ended structures.
Speaker 4: Number One, they do invest across everything, so you don't
Speaker 4: have to choose which funds you want to invest and
Speaker 4: you get a broad exposure. Number Two, they invest one
Speaker 4: hundred percent of your money immediately into the asset class.
Speaker 4: So we're starting to see institutional investors also use this.
Speaker 4: Not just the private clients use this because they are
Speaker 4: able to dial up and dial down their exposure instantly.
Speaker 4: So if you want to have a certain percent of
Speaker 4: your portfolio in private markets, rather than waiting for the
Speaker 4: capital to be called over the next two three years,
Speaker 4: you could just put it to work immediately into the
Speaker 4: asset class through these evergreen structures, which are fully invested
Speaker 4: on an nav basis immediately. So that's one of the
Speaker 4: interesting aspects of that. The other interesting aspect of our
Speaker 4: evergreen structures or open endstructures is, unlike some of the
Speaker 4: other products out there which have designated investment strategies or
Speaker 4: investment teams for those open ended structures, our open ended
Speaker 4: structure is essentially a like for like perry pursuit. Alongside
Speaker 4: everything we do, you get exactly the same exposure to
Speaker 4: exactly the same deals and the same pricing and the
Speaker 4: same everything that we provide to our sovereign wealth fund
Speaker 4: clients that we provide to our institutional clients.
Speaker 3: It's all allocated across equally, so there's no cherry picking.
Speaker 4: There's no sort of different strategies for the wealth vehicle
Speaker 4: as there is for the institutional vehicle.
Speaker 3: It's a single vehicle.
Speaker 4: And then I think the other key aspect of our
Speaker 4: investment program, which is sort of where why we've landed
Speaker 4: where we've landed in terms of our fundraising last year,
Speaker 4: we've you know, for example, we've just announced our closing
Speaker 4: of our Asia Fund, which is a fifteen billion dollar fund.
Speaker 4: It's the largest fund ever raised in Asia, fifteen point
Speaker 4: six billion dollars. The reason we've been able to achieve
Speaker 4: this is because of our exits and liquidity.
Speaker 3: Profile of our investment program.
Speaker 4: It's been a tough environment for exit liquid It's one
Speaker 4: of the challenges that you read a lot about in
Speaker 4: our industry. We actually had a record year for exits
Speaker 4: last year at eqtiion dollars. We had forty billion dollars
Speaker 4: in distributions. It's huge, it's huge, it's a reck It's.
Speaker 2: More than ten percent of total investment dollars. That's tremendous.
Speaker 4: It's actually about thirty percent of the navy of the
Speaker 4: strategies that that covers. And if you look at active
Speaker 4: funds and if you look at the liquidity profile there,
Speaker 4: it even included a significant amount of tapping into the
Speaker 4: equity capital markets, the public markets, so we were actually
Speaker 4: the number one ECM firm last year. We had fifteen
Speaker 4: billion dollars of equity capital markets activity, ranked number one
Speaker 4: by far actually relative all the other private equity firms
Speaker 4: out there, on the back of just having some really
Speaker 4: interesting assets that the market.
Speaker 3: Was open for.
Speaker 2: Meaning when you have a liquidity event, that money just
Speaker 2: doesn't sit in bonds, you put it actively into equity markets.
Speaker 4: Now, meaning that we're able to take our companies public
Speaker 4: or sell down through the public markets as an avenue
Speaker 4: of getting liquidity versus just trying to sell to other
Speaker 4: buyout funds or sell to strategic buyers. Those deals have
Speaker 4: been a bit slower, and even the IPO markets have
Speaker 4: been challenging, but we were within a challenging IPO market,
Speaker 4: we had the highest level of activity of all other
Speaker 4: market market participants.
Speaker 2: It's amazing. My bias is not thinking IPO because of
Speaker 2: what we've seen the past five years, but thinking some
Speaker 2: exit and then just parked the cash there. I have
Speaker 2: it exactly backwards. You exit through the IPO market and
Speaker 2: then you distribute the cash.
Speaker 3: To LPs exactly.
Speaker 4: Our biggest exit last year globally as a group was
Speaker 4: a company called Galderma which is a European medical aesthetics
Speaker 4: business providing medical asthetic products including things like botox and
Speaker 4: you that have been on the rise and you know,
Speaker 4: completely uncorrelated to AI. This location and an investment that
Speaker 4: did extremely well for us. In total over the last
Speaker 4: two or three years since we took it public, we
Speaker 4: realized something like twenty four billion dollars of distributions from
Speaker 4: that single investment. Last year alone, we sold over eight
Speaker 4: billion dollars in one single trunch, which was the largest
Speaker 4: transaction ever completed in the public markets by private equi
Speaker 4: be firm. So the point of all this is just
Speaker 4: really to say that in a tough market where liquidity,
Speaker 4: where people are looking for distributions, it's nice to be
Speaker 4: diversified globally where you're not tying all your liquidity proceeds
Speaker 4: to a single strategy or a single market, but you
Speaker 4: have exposure to multiple markets and you're getting cash back
Speaker 4: from different strategies to give you that cash that you
Speaker 4: need at a time when you're lacking distributions from other
Speaker 4: parts of your portfolio.
Speaker 2: Really fascinating. Coming up, we continue our conversation with Joan
Speaker 2: Eric Salada, chairman of EQT Group, discussing the combination of
Speaker 2: BPEA and EQT. I'm Barry Ritults. You're listening to Masters
Speaker 2: in Business on Bloomberg Radio. I'm Barry Ridults. You're listening
Speaker 2: to Asters in Business on Bloomberg Radio. My extra special
Speaker 2: guest this week is Jean Eric Salata. He is chair
Speaker 2: of EQT Group, one of the largest alternative managers outside
Speaker 2: of the US. They managed three hundred and sixteen billion dollars.
Speaker 2: So let's talk a little bit about the state of
Speaker 2: alternatives and markets in the current environment. You mentioned artificial intelligence,
Speaker 2: energy transition, healthcare, digitalization. What has you most excited in
Speaker 2: Asia over the coming decade.
Speaker 4: I think in Asia, as we were touching on a
Speaker 4: little earlier, there's a couple of big themes that we're
Speaker 4: excited about. One is this sort of CAPEC supercycle, which
Speaker 4: is feeding through the Asian supply chain. You know, when
Speaker 4: you're talking about building data centers or semiconductor memory chips
Speaker 4: and so on, there's a whole supply chain that feeds
Speaker 4: into that. Whether it's the cooling, whether it's the grid,
Speaker 4: whether it's the capital equipment that's used to manufacture, the
Speaker 4: testing equipment, the services around that. So there is a
Speaker 4: whole supply chain that's seeing elevated activity and growth. I
Speaker 4: think the number is something like an incremental five trillion
Speaker 4: dollars of CAPEX being spent in Asia within the industrial
Speaker 4: supply chain between now and the next Over the next
Speaker 4: five years, it's growing at about fifteen percent a year,
Speaker 4: so you've got a healthy growth, tremendous CAPEC spend. It's
Speaker 4: a little bit of the picks and shovels approach to
Speaker 4: you have this tremendous boom and AI that you know
Speaker 4: that's feeding through. There's knock on effects into the supply chain,
Speaker 4: and Asia's pretty well positioned to participate in that. You
Speaker 4: look at markets like Korea, you look at markets like Japan.
Speaker 4: Those are probably two of the biggest beneficiaries certain parts
Speaker 4: of Southeast Asia as well, so we're excited about that.
Speaker 4: I think the second big opportunity we touched on it
Speaker 4: earlier as well, is just the Japanese bio market. And
Speaker 4: you know, the level of reform that you're seeing there
Speaker 4: driving increased deal flow, driving really what I call the
Speaker 4: excess returns opportunities that private equity really is good at
Speaker 4: and should be focusing on the days of you know,
Speaker 4: buying under managed assets, either either changing the management or
Speaker 4: enhancing the strategy of the business in order to close
Speaker 4: the gap between the operating performance of the business and
Speaker 4: the full potential of the business. That's kind of the
Speaker 4: traditional playbook of private equity. It's gotten harder to do
Speaker 4: in parts of the market that have become more efficient. Globally,
Speaker 4: you have a lot of shareholder activism already, so most
Speaker 4: public companies are already doing what they should be doing,
Speaker 4: but in Japan they're a little bit still further behind.
Speaker 4: And now you see a big push by the Japanese
Speaker 4: authorities and political leadership to drive efficiency in their economy
Speaker 4: and to drive corporate governance reforms, which is trying to
Speaker 4: close this gap between full potential and performance, and as
Speaker 4: a result, a lot more assets being sold, either corporate divestitures,
Speaker 4: take privates, or generational change happening with founder led businesses
Speaker 4: where you're buying business and you really see the opportunity
Speaker 4: to simplify and improve execution. It's really about that. It's
Speaker 4: about sort of like focusing the business and fewer areas
Speaker 4: and then improving execution on management.
Speaker 2: Let's talk about energy transition. It feels like here in
Speaker 2: the United States, we're sort of backing away from a
Speaker 2: lot of alternatives. Asia seems to be full speed ahead.
Speaker 2: What are you seeing as opportunities in that space and where.
Speaker 4: Yeah, we see a lot of opportunities across both Europe
Speaker 4: and Asia in the energy transition. It's you know what's
Speaker 4: going on now in the Middle East as well. It's
Speaker 4: kind of driving home the point that energy security is
Speaker 4: going to be even more critical in the future. There
Speaker 4: is a tremendous technological push of innovation coming out of
Speaker 4: China in terms of supply chain for batteries, for solar,
Speaker 4: even areas like hydrogen. You're starting to see a lot
Speaker 4: of very interesting scaled up innovation there. We have a
Speaker 4: big infrastructure business in Asia that invests in the energy transition.
Speaker 4: We invest in battery storage, for example. We have a
Speaker 4: big business in Australia. Now Australia is as big in
Speaker 4: this area. We expect to see more opportunities there. Singapore
Speaker 4: has been a leader actually in funding the energy transition
Speaker 4: throughout Southeast Asia. Very forward thinking, i would say, in
Speaker 4: that regard, and it's just a large investment opportunity that
Speaker 4: ultimately with energy transition, with climate related concerns. You know,
Speaker 4: the real catalyst here is ultimately going to be is
Speaker 4: already having having to be the market forces that drive
Speaker 4: this forward. It has to be that it's more cost competitive.
Speaker 4: It's more cost effective to do things using electricity in
Speaker 4: the grid than it is using fossil fuels. Otherwise, if
Speaker 4: it's not more cost effective, the market forces aren't really
Speaker 4: at play, and you're relying on policy or you're relying
Speaker 4: on philanthropy. It's just harder to see the sing scale.
Speaker 4: But we're getting to this tipping point where the cost
Speaker 4: curves are coming down, the security concerns are becoming real,
Speaker 4: and when that happens, then you know, with scale, with volumes,
Speaker 4: whether it's evy batteries, whether it's solar panels, you're starting
Speaker 4: to see the big uptake and the movement in that direction.
Speaker 2: We're getting a sense in the United States that the
Speaker 2: war and Iran and the shunning of the straight or
Speaker 2: hormos is paradoxically accelerating the move away from gas, oil
Speaker 2: crew coal even towards alternatives. What's the perspective like from Asia?
Speaker 3: I would agree with that.
Speaker 4: I think that the energy security is top of mind,
Speaker 4: and you know, certainly China has moved very much in
Speaker 4: this direction, have the largest installed base of renewable energy,
Speaker 4: they're the largest investor in renewable energy globally, and they're
Speaker 4: moving in that direction, probably mainly for energy security reasons
Speaker 4: as well as global competitiveness reasons. And then eventually it
Speaker 4: also is going to come. I mean, there is still
Speaker 4: multi decade run in fossil fuels, for sure that's going
Speaker 4: to play out. But ultimately there's going to be a
Speaker 4: cost issue related to fossil fuels. And if you want
Speaker 4: to be competitive as an economy, what's your cost of energy?
Speaker 4: You know, what is a scarce resource? If the cost
Speaker 4: of energy is going higher and higher versus the other
Speaker 4: alternatives out there, if you haven't invested in that, you're
Speaker 4: playing catchup. It will feed through to the rest of
Speaker 4: the industrial base. And I think this is where it's
Speaker 4: important to take a long term perspective and where private
Speaker 4: equity can play a role in sort of thinking through
Speaker 4: the next five ten years. How do you make companies
Speaker 4: more competitive, how do you drive innovation, how do you
Speaker 4: drive investment in energy competitiveness and the energy transition To
Speaker 4: help this happen.
Speaker 2: We haven't really talked about India, which has always like
Speaker 2: it was, oh, two years away, this is really going
Speaker 2: to be in the next powerhouse economy always feels like
Speaker 2: it's on the verge. What are you seeing there? It
Speaker 2: kind of look feels like one of the more compelling
Speaker 2: growth stories I think.
Speaker 4: I like India a lot. We're very, very bullish on India.
Speaker 4: It's been the biggest market for US over the last
Speaker 4: five years of where we've invested. Historically, the story has
Speaker 4: been a lot about technology investments in the tech services
Speaker 4: industry primarily, which has been a beneficiary of global investment
Speaker 4: in technology and the tech stack and the migration to
Speaker 4: the cloud. That has hit a little bit of a
Speaker 4: disruption now with what's going on with AI, but they're
Speaker 4: quickly adapting to it and using AI tools to actually
Speaker 4: make enterprises more competitive and to help diffuse AI into
Speaker 4: the enterprise using the skills. And they have a you know,
Speaker 4: millions of computer technology programmers and labor available to help
Speaker 4: drive AI adoption, which is one of the things that
Speaker 4: India is very comparitive in. But the bigger story in India,
Speaker 4: I think for the next five years is more about
Speaker 4: the consumer and the growth in the middle class and
Speaker 4: one of the big beneficiaries of the growing middle class
Speaker 4: as you're now seeing a huge increase now in you know,
Speaker 4: it's the largest population in the world, one point four
Speaker 4: billion people. It's also the youngest population in the world,
Speaker 4: so the demographics are very favorable. And one of the
Speaker 4: big early beneficiaries that we're starting to see on the
Speaker 4: ground in India is the healthcare sector.
Speaker 3: Housing and healthcare.
Speaker 4: You know, the first thing that people do when they
Speaker 4: start to save and generate a good income, they buy
Speaker 4: home and then they want to make sure their family
Speaker 4: as well, look after their parents and their children well
Speaker 4: looked after from a healthcare standpoint. So we're seeing strong
Speaker 4: demand for housing, housing, finance, and for healthcare, which is
Speaker 4: some of the areas that we're investing in India.
Speaker 2: So I'm going to paraphrase a quote of yours. Talent
Speaker 2: is the key to unlocking outsize returns and private equity.
Speaker 2: You're looking in India, you're looking in China and Japan, Korea,
Speaker 2: Europe and the United States. How do you find and
Speaker 2: develop management teams in such a broad diverse selection of regions.
Speaker 2: That sounds like that is its own specific challenge.
Speaker 4: It is, and I think one of the things that
Speaker 4: we've learned over the years is the importance of being
Speaker 4: able to be what we call an active owner in
Speaker 4: the businesses that we buy, which has really meant that
Speaker 4: we've really migrated primarily to a control biot strategy other
Speaker 4: than in our early stage tech strategies, but in our
Speaker 4: main strategies, we're a buyout investor, which means we have control,
Speaker 4: and I think having control enables you to really affect
Speaker 4: change in the business and collapses this sort of agency
Speaker 4: problem that you see between ownership and management and many
Speaker 4: other markets around the world, and Asia is no exception.
Speaker 4: We're starting to collapse that and see that collapse in
Speaker 4: Asia through the ownership model that the governance modelbly that
Speaker 4: private equity brings when they invest, when we invest as
Speaker 4: an industry, and as a result, as we've scaled our
Speaker 4: business over time, you're starting to be able to really
Speaker 4: develop pools of talent. So, for example, we have seven
Speaker 4: eight hundred what we call industrial advisors across globally across
Speaker 4: EQT from different industrial sectors and different sectors that we
Speaker 4: invest in, and we tap into those to come and
Speaker 4: become what we call our non executive chairs or independent
Speaker 4: non executive chairman, So we have a chairman that we
Speaker 4: bring in from industry. We usually have a CEO, either
Speaker 4: existing CEO or new CEO, and then we have our
Speaker 4: deal partner. And that combination of those three people is
Speaker 4: the governance structure for our investments that drive the active
Speaker 4: ownership model for our business. We also are seeing a
Speaker 4: bigger pool of domestic talent now that we're able to
Speaker 4: develop within say Japan, within India through multiple private equity
Speaker 4: back investments that we've made, where the same CEO, for example,
Speaker 4: that we work with before, we can work with that
Speaker 4: same individual again because the model now has been tried
Speaker 4: and tested and been around for a couple of decades.
Speaker 4: So you're developing much deeper bench of talent in private
Speaker 4: equity in Asia than you've had in the past, and
Speaker 4: that's been I think a key driver returns the combination
Speaker 4: of governance through the buyout strategy plus the talent pool
Speaker 4: that's available now.
Speaker 2: I have one last question before we get to our
Speaker 2: favorites that we ask all our guests. What do you
Speaker 2: think investors are not either talking about or thinking about
Speaker 2: but should be when it comes to private equity, Different geographies,
Speaker 2: different regulatory policy changes. What is getting either undernoticed or overlooked,
Speaker 2: but shouldn't.
Speaker 4: I think one of the really interesting developments is what's
Speaker 4: happening in the convergence between both public and private markets,
Speaker 4: so companies staying private longer, and the sort of blurring
Speaker 4: of the lines there. How you get exposure if you're
Speaker 4: an investor to the best businesses in the world, do
Speaker 4: you wait till they become public or do you do
Speaker 4: it before they become public? You know the historically it
Speaker 4: was a very small minority of institutional investors really that
Speaker 4: got exposure to private markets.
Speaker 3: Individual VESH has almost had zero.
Speaker 4: That's changed a lot in the last few years, but
Speaker 4: it's going to change, I think, even more as we
Speaker 4: move into in the coming years and people start to
Speaker 4: participate more. The democratization of our asset class that people
Speaker 4: talk about, I think is a big trend. Related to
Speaker 4: that is the kind of blurring of the lines between
Speaker 4: or convergence between the secondary market and the primary market
Speaker 4: of private equity. You know, those twosed to be viewed
Speaker 4: as completely different things. You invest in a private equity fund,
Speaker 4: if you can't get your money back after seven or
Speaker 4: eight years, you find someone to buy those interests from you.
Speaker 3: And that's a secondary market that has changed.
Speaker 4: If you think about the public markets, when you invest
Speaker 4: in a stock, you're buying a secondary position. You're buying
Speaker 4: when you buy Apple stock today, you're buying from someone
Speaker 4: who's selling it to you. You're buying a secondary You're
Speaker 4: not buying the IPO of Apple. That was a primary
Speaker 4: that happened twenty five years ago. Same things happened in
Speaker 4: private equity is that you know all the companies that
Speaker 4: are private. In order to buy them, you had to
Speaker 4: buy them as a primary through a fund that bought
Speaker 4: the company as a private deal. Well, now we have
Speaker 4: three point eight trillion dollars of private companies out there
Speaker 4: that are unrealized that everybody is complaining about. That actually
Speaker 4: is the foundation of a secondary market now in private companies,
Speaker 4: private assets that you and I and others can start
Speaker 4: to participate in through the secondary market.
Speaker 3: You don't need to find a new deal to buy.
Speaker 4: You can buy an existing business that's privately owned if
Speaker 4: you like it, if it's got great return potential, if
Speaker 4: it's the right price. It's another way to get exposure
Speaker 4: to the asset class through these evergreen structures, for example,
Speaker 4: and particularly through the credit through the secondary markets structures,
Speaker 4: which is the way a lot of institutional investors starting
Speaker 4: to think about it. If I want to dial up
Speaker 4: or dial down my exposure private markets, I can use
Speaker 4: secondary structures. I don't need to invest in a private
Speaker 4: in a private equity fund, per se.
Speaker 3: I can do that through the secondary markets.
Speaker 2: So let's jump to our speed round, starting with who
Speaker 2: are your early mentors who helped shape your career.
Speaker 3: I was very lucky.
Speaker 4: I had a third grade teacher that kind of took
Speaker 4: an interest in me and kept me after school to
Speaker 4: help me work on independent projects and was like an
Speaker 4: outlet from my creativity that I felt was frustrated in class.
Speaker 3: Really amazing teacher.
Speaker 2: Let's talk about books. What are some of your favorites?
Speaker 2: What are you reading currently?
Speaker 4: I read a great book called Why the West Rules
Speaker 4: for Now, which is a sweeping history of why the
Speaker 4: Industrial Revolution happened in the West and not in Asia
Speaker 4: in the east. But it talks about how going forward
Speaker 4: that could change, and it's if anybody's interested in history,
Speaker 4: I highly recommend that book.
Speaker 3: Really good.
Speaker 2: Final two questions, what sort of advice would you give
Speaker 2: a recent college grad interested in a career in either
Speaker 2: investing or private equity.
Speaker 3: Two things I would say.
Speaker 4: One is you need to be AI native these days,
Speaker 4: which is not the case obviously when I was starting out.
Speaker 4: And secondly, perseverance, don't give up. Stay in the game
Speaker 4: because things come and go, you get knocked down, get
Speaker 4: back up, you stay in the game and new opportunities.
Speaker 2: Final question, what do you know about the world of
Speaker 2: private equity, private real estate, credit, infrastructure alternatives today might
Speaker 2: have been useful back in the nineties when you're really
Speaker 2: getting your legs under you.
Speaker 4: This so called eighth wonder of the world, which is
Speaker 4: the power of compounding. I I wish i'd appreciate that
Speaker 4: a bit more after thirty years of investing, you'd let
Speaker 4: something ride for thirty years. Generally, if it's a decent business,
Speaker 4: it'll be worth a lot of money.
Speaker 2: Jean Eric, this has been absolutely fascinating. Thank you for
Speaker 2: being so generous with your time. We have been speaking
Speaker 2: with Jean Eric Salada, chair of the EQT Group. If
Speaker 2: you enjoy this conversation, well check out any of the
Speaker 2: six hundred and forty we've done over the previous fourteen years.
Speaker 2: You can find those at iTunes, Spotify, Bloomberg YouTube, wherever
Speaker 2: you get your favorite podcasts. I would be remiss if
Speaker 2: I didn't thank the crack team that helps put these
Speaker 2: conversations together each week. Alexis Noriega is my video producer.
Speaker 2: Sean Russo is my researcher. Anna Luke is our producer.
Speaker 2: I'm Barry Ritolts. You've been listening to Masters in Business
Speaker 2: on Bloomberg Radio