1
00:00:02,440 --> 00:00:05,720
Speaker 1: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Prisner.

2
00:00:05,920 --> 00:00:07,960
Speaker 1: On today's episode, we'll be taking a look at the

3
00:00:08,000 --> 00:00:11,400
Speaker 1: state of private credit and venture capital investing in the

4
00:00:11,400 --> 00:00:14,840
Speaker 1: Asia Pacific. Will be joined by vish Ramaswami. He is

5
00:00:14,920 --> 00:00:18,759
Speaker 1: head of APAC Private Investments at Cambridge Associates. But first

6
00:00:18,840 --> 00:00:21,400
Speaker 1: we'll take a look at how markets are digesting the

7
00:00:21,480 --> 00:00:26,400
Speaker 1: latest cabinet picks from President elect Trump. Joining us now

8
00:00:26,480 --> 00:00:30,560
Speaker 1: is Francis Stacy. She is economic strategist and chairwoman of

9
00:00:30,640 --> 00:00:34,680
Speaker 1: the UN's Global Digital Finance Committee. Francis, thanks for making

10
00:00:34,720 --> 00:00:37,319
Speaker 1: time to chat. There's a lot to talk about. Can

11
00:00:37,360 --> 00:00:42,720
Speaker 1: we begin by getting your reaction to the Trump victory

12
00:00:42,880 --> 00:00:46,879
Speaker 1: and a lot of the choices for various cabinet positions

13
00:00:46,880 --> 00:00:48,280
Speaker 1: that we've been hearing about.

14
00:00:48,680 --> 00:00:51,720
Speaker 2: Sure, I really thought that this election was going to

15
00:00:51,720 --> 00:00:55,680
Speaker 2: be much closer, so I didn't see this Republican trifecta

16
00:00:55,800 --> 00:00:59,279
Speaker 2: coming in. Now that it has, of course, equities have

17
00:00:59,680 --> 00:01:02,440
Speaker 2: reacted quite favorably to it, and not so much bonds.

18
00:01:03,320 --> 00:01:05,399
Speaker 3: As far as cabinet choices.

19
00:01:05,920 --> 00:01:09,360
Speaker 2: Not all those are not all my areas of expertise,

20
00:01:09,440 --> 00:01:12,840
Speaker 2: but I think that the Elon Musk choice and the

21
00:01:12,920 --> 00:01:15,800
Speaker 2: vivak Rama Swami, even though they're not technically in his cabinet,

22
00:01:16,280 --> 00:01:18,920
Speaker 2: is very interesting. That's the thing that I studied the

23
00:01:19,000 --> 00:01:22,880
Speaker 2: most before the election and listened to various interviews from

24
00:01:22,880 --> 00:01:26,960
Speaker 2: elon talking about, you know, drastic cuts and fiscal spending.

25
00:01:27,800 --> 00:01:30,280
Speaker 2: I've even seen the number two trillion taken off of

26
00:01:30,280 --> 00:01:33,640
Speaker 2: the budget floated around. And that's the thing that I

27
00:01:33,680 --> 00:01:38,080
Speaker 2: think is most interesting because the fiscal spending is what

28
00:01:38,360 --> 00:01:41,360
Speaker 2: kept so much liquidity in the system while the FED

29
00:01:41,480 --> 00:01:44,959
Speaker 2: was tightening at a record rate, and we that enabled

30
00:01:45,000 --> 00:01:47,400
Speaker 2: the FED to keep rates higher for longer without an

31
00:01:47,440 --> 00:01:48,760
Speaker 2: attendant credit crisis.

32
00:01:48,960 --> 00:01:52,880
Speaker 1: So Musk and vivek Ramaswami will be heading the department

33
00:01:52,960 --> 00:01:56,920
Speaker 1: known as the Department of Government Efficiency. And from what

34
00:01:57,040 --> 00:01:59,960
Speaker 1: I'm reading, I mean they are already beginning to crowdsore

35
00:02:00,280 --> 00:02:02,960
Speaker 1: ideas on x for how to go about doing that.

36
00:02:03,480 --> 00:02:05,760
Speaker 1: Do you have a sense of how they may go

37
00:02:05,880 --> 00:02:08,600
Speaker 1: about it? I mean the areas that might be obvious

38
00:02:08,639 --> 00:02:11,799
Speaker 1: to you, that are low hanging fruit here, it's.

39
00:02:11,600 --> 00:02:12,440
Speaker 3: Hard to say.

40
00:02:12,600 --> 00:02:16,840
Speaker 2: I'm more interested in how much they cut and what

41
00:02:16,960 --> 00:02:20,280
Speaker 2: the rate is, because if I was going to take

42
00:02:20,280 --> 00:02:24,840
Speaker 2: this from a completely apolitical perspective, the rate of change

43
00:02:25,040 --> 00:02:27,560
Speaker 2: in the reduction of fiscal spending. If you look at

44
00:02:27,600 --> 00:02:30,359
Speaker 2: what's happening, You've got a couple of things that are

45
00:02:30,440 --> 00:02:33,160
Speaker 2: inflationary sources in the system. You've got a potential of

46
00:02:33,200 --> 00:02:38,639
Speaker 2: reacceleration of inflation, you know, starting this November. And you know,

47
00:02:38,800 --> 00:02:42,800
Speaker 2: you've got discussions of deportation, which could lead to some

48
00:02:42,960 --> 00:02:45,480
Speaker 2: wage inflation. We don't really know the rate or how

49
00:02:45,480 --> 00:02:48,480
Speaker 2: that's going to shift things, or how the massive immigration

50
00:02:48,639 --> 00:02:50,720
Speaker 2: has actually impacted wages just yet.

51
00:02:50,760 --> 00:02:51,920
Speaker 3: I don't think we have enough data.

52
00:02:53,200 --> 00:02:58,280
Speaker 2: When you look at tariffs, tariffs really increased government revenue

53
00:02:58,320 --> 00:03:01,520
Speaker 2: the last time he was in office, didn't remarkably increase inflation,

54
00:03:01,639 --> 00:03:04,320
Speaker 2: whether that's a past or thing. But now you're doing

55
00:03:04,320 --> 00:03:07,560
Speaker 2: tariffs on top of you know, the inflation after COVID,

56
00:03:07,600 --> 00:03:10,480
Speaker 2: so that's very interesting. And then you know, but then

57
00:03:10,520 --> 00:03:13,680
Speaker 2: you have the tax cuts or the anticipated not raising

58
00:03:13,720 --> 00:03:17,960
Speaker 2: of taxes. So you look at all the potential potentially

59
00:03:18,000 --> 00:03:23,280
Speaker 2: inflationary things going on. Massively reducing the fiscal spending is

60
00:03:24,880 --> 00:03:28,320
Speaker 2: at best disinflationary, but depending on how drastic it is,

61
00:03:28,480 --> 00:03:30,920
Speaker 2: could be deflationary. And so what I have to say

62
00:03:31,000 --> 00:03:35,080
Speaker 2: is Musk is smarter than I am. I'm you know,

63
00:03:35,920 --> 00:03:37,960
Speaker 2: but I just have to think that he thinks of

64
00:03:38,000 --> 00:03:42,040
Speaker 2: things mechanically, and I just really want to have confidence

65
00:03:42,280 --> 00:03:45,080
Speaker 2: in how he's going to approach this. I don't think

66
00:03:45,600 --> 00:03:48,400
Speaker 2: he's going to be I hope he doesn't get too

67
00:03:48,400 --> 00:03:51,600
Speaker 2: carried away, because there's a there's a mechanical inflection point

68
00:03:51,640 --> 00:03:54,200
Speaker 2: that could be drastic. And the whole thing about business

69
00:03:54,200 --> 00:03:58,320
Speaker 2: and credit cycles, unless they've changed after COVID, is that

70
00:03:58,400 --> 00:04:01,200
Speaker 2: when you add money to the system, as we did

71
00:04:01,200 --> 00:04:03,320
Speaker 2: in COVID, you add debt.

72
00:04:03,320 --> 00:04:04,000
Speaker 3: To the system.

73
00:04:04,280 --> 00:04:07,240
Speaker 2: And when you tighten, typically you take future liquidity out

74
00:04:07,280 --> 00:04:09,920
Speaker 2: of the system, and when you have a credit situation,

75
00:04:10,000 --> 00:04:12,880
Speaker 2: it's when that future liquidity hits a threshold where then

76
00:04:12,920 --> 00:04:15,720
Speaker 2: you have a credit situation. The fiscal was able to

77
00:04:15,760 --> 00:04:19,320
Speaker 2: save that off along with the private credit, making sure

78
00:04:19,360 --> 00:04:21,840
Speaker 2: that it was refinancing when banks weren't lending, so that

79
00:04:21,960 --> 00:04:25,000
Speaker 2: kept things from being written off the books, which is deflationary.

80
00:04:25,560 --> 00:04:28,440
Speaker 2: And then you had credit cards adding a tremendous amount

81
00:04:28,440 --> 00:04:33,000
Speaker 2: of liquidity to the system. And so if you go

82
00:04:33,080 --> 00:04:36,600
Speaker 2: in and adjust any of those factors mechanically, you sort

83
00:04:36,600 --> 00:04:39,960
Speaker 2: of risk hitting that threshold. And so since fiscal spending

84
00:04:39,960 --> 00:04:42,280
Speaker 2: has kept us afloat. I'm very interested to see how

85
00:04:42,279 --> 00:04:43,839
Speaker 2: aggressive he is and where he starts.

86
00:04:43,839 --> 00:04:45,000
Speaker 3: And it's anyone's guess.

87
00:04:45,200 --> 00:04:47,279
Speaker 1: So as I'm listening to, I'm thinking of what I

88
00:04:47,279 --> 00:04:50,000
Speaker 1: will call the humpty dumpty effect. Right, when you break

89
00:04:50,040 --> 00:04:52,680
Speaker 1: a system like this, it's going to be very, very

90
00:04:52,720 --> 00:04:56,400
Speaker 1: difficult after it's broken to try to reassemble it in

91
00:04:56,440 --> 00:04:58,920
Speaker 1: a way that would be kind of functional.

92
00:04:58,960 --> 00:05:02,680
Speaker 2: Again, is that what you're really saying, Well, that's a possibility.

93
00:05:02,720 --> 00:05:05,520
Speaker 2: It depends on how drastically it's done. I think one

94
00:05:05,520 --> 00:05:07,919
Speaker 2: of the most interesting things I listened to leading up

95
00:05:07,960 --> 00:05:10,839
Speaker 2: to the election was Elon Musk did did the All

96
00:05:10,880 --> 00:05:13,599
Speaker 2: In podcast, which was some of his tech buddies kind

97
00:05:13,600 --> 00:05:16,400
Speaker 2: of really questioning him about this. They were saying, you know,

98
00:05:16,440 --> 00:05:18,160
Speaker 2: are you going to take one or two percent out

99
00:05:18,200 --> 00:05:21,320
Speaker 2: of the fiscal budget a year? And Elon said, we

100
00:05:21,400 --> 00:05:25,040
Speaker 2: have a once in a lifetime operate opportunity to switch

101
00:05:25,080 --> 00:05:28,040
Speaker 2: the operating basis, and he likened it to tech terms

102
00:05:28,080 --> 00:05:31,719
Speaker 2: in that way, we switching the operating basis where government

103
00:05:31,839 --> 00:05:35,240
Speaker 2: spending fiscal spending accounts for an enormous amount of GDP

104
00:05:36,080 --> 00:05:40,760
Speaker 2: into something where it becomes more private sector growth and

105
00:05:41,120 --> 00:05:44,440
Speaker 2: it just depends. And he gave all these examples from

106
00:05:44,520 --> 00:05:47,080
Speaker 2: East and West Germany, in North and South Korea. It's

107
00:05:47,080 --> 00:05:50,040
Speaker 2: a very interesting podcast. I recommend anyone listens to it

108
00:05:50,200 --> 00:05:52,520
Speaker 2: if they want to anticipate what he how he thinks

109
00:05:52,560 --> 00:05:57,560
Speaker 2: about this. And again, it's not necessarily a good, bad,

110
00:05:57,600 --> 00:06:01,520
Speaker 2: wrong or right. It's how quick and how disruptively you

111
00:06:01,600 --> 00:06:04,200
Speaker 2: do it. And I know that they were there were

112
00:06:04,240 --> 00:06:07,200
Speaker 2: some ideas floating around that with you know, government employees,

113
00:06:07,240 --> 00:06:08,960
Speaker 2: they would give them two years of severance.

114
00:06:09,440 --> 00:06:11,400
Speaker 3: I don't know how true that is. I don't know.

115
00:06:11,480 --> 00:06:12,680
Speaker 3: It's hard to determine it.

116
00:06:12,920 --> 00:06:15,360
Speaker 2: You know, sometimes when going through X, what is rumor

117
00:06:15,400 --> 00:06:18,239
Speaker 2: what is not rumor what they will ultimately end up doing.

118
00:06:18,680 --> 00:06:21,880
Speaker 2: So it depends on how quick the switchover is. It's

119
00:06:21,920 --> 00:06:24,200
Speaker 2: just like a diet, you know, you change it too

120
00:06:24,279 --> 00:06:27,000
Speaker 2: drastically or I hate to liken it to this, but

121
00:06:27,480 --> 00:06:30,039
Speaker 2: you know, some of our liquidity stuff is kind of

122
00:06:30,120 --> 00:06:32,880
Speaker 2: like an addiction. So if you if you have a

123
00:06:32,880 --> 00:06:35,640
Speaker 2: guy who drinks a bottle of vodka a day, you

124
00:06:35,680 --> 00:06:37,560
Speaker 2: don't want to cold turkey him off that bottle of

125
00:06:37,640 --> 00:06:39,799
Speaker 2: vodka because that's going to put his system in shock.

126
00:06:42,120 --> 00:06:44,360
Speaker 1: Yeah, right about that. Where does this leave the FED?

127
00:06:44,440 --> 00:06:44,600
Speaker 4: Though?

128
00:06:44,640 --> 00:06:46,880
Speaker 1: I mean today we heard from the FED chairman. He

129
00:06:47,040 --> 00:06:50,840
Speaker 1: was talking about the performance of the economy being remarkably good.

130
00:06:50,920 --> 00:06:53,920
Speaker 1: It's really not sending any kind of sign that the

131
00:06:53,920 --> 00:06:56,800
Speaker 1: FED needs to be in a rush to lower interest rates.

132
00:06:57,080 --> 00:07:00,359
Speaker 1: But you're describing a big unknown now, and it feels

133
00:07:00,400 --> 00:07:02,599
Speaker 1: to me like when I'm listening to this, that the

134
00:07:02,640 --> 00:07:05,960
Speaker 1: FED is going to be in an especially precarious position

135
00:07:06,000 --> 00:07:06,640
Speaker 1: as a result.

136
00:07:07,279 --> 00:07:10,200
Speaker 2: Well, the Fed, I think what Jay Powell has done

137
00:07:10,640 --> 00:07:13,760
Speaker 2: an excellent job with is I think he's given the

138
00:07:13,800 --> 00:07:17,040
Speaker 2: markets tons of anticipation of what he's going to do,

139
00:07:17,760 --> 00:07:19,800
Speaker 2: and I think there have been very few surprises, even

140
00:07:19,880 --> 00:07:23,440
Speaker 2: just recently cutting twenty five basis points with the possibility

141
00:07:23,600 --> 00:07:27,680
Speaker 2: of inflation ticking up a bit, because that's what he projected,

142
00:07:27,720 --> 00:07:31,040
Speaker 2: So that's what he did. And I think probably he's

143
00:07:31,040 --> 00:07:33,520
Speaker 2: going to continue to try to keep volatility out of

144
00:07:33,560 --> 00:07:37,400
Speaker 2: his decision making and out of his projection, as far

145
00:07:37,480 --> 00:07:40,480
Speaker 2: as he'll tell you that he's completely independent from fiscal

146
00:07:40,520 --> 00:07:42,920
Speaker 2: There were some rumors that Trump was going to do

147
00:07:42,960 --> 00:07:46,080
Speaker 2: some kind of executive order, you know, where he would

148
00:07:46,120 --> 00:07:48,600
Speaker 2: be able to sort of intervene with interest rate policy. Again,

149
00:07:48,680 --> 00:07:52,000
Speaker 2: who knows if those are rumors or or there's anything

150
00:07:52,040 --> 00:07:56,240
Speaker 2: like that on the table, But yes, he's going to

151
00:07:56,320 --> 00:07:59,760
Speaker 2: have to try and compensate for what they do. And

152
00:08:00,200 --> 00:08:03,160
Speaker 2: you know, he may be fully prepared. If they drastically

153
00:08:03,160 --> 00:08:05,960
Speaker 2: cut fiscal spending. He may know that that is de

154
00:08:06,120 --> 00:08:10,640
Speaker 2: facto tightening, and he may be willing to adjust monetary policy,

155
00:08:11,040 --> 00:08:14,800
Speaker 2: both interest rates and potentially again asset purchases to compensate

156
00:08:14,840 --> 00:08:19,600
Speaker 2: for that. But it's not an easy position to be in.

157
00:08:19,640 --> 00:08:22,920
Speaker 2: And I you know, and he was asked bluntly if

158
00:08:22,960 --> 00:08:25,120
Speaker 2: Trump wanted to get rid of him when he stepped down,

159
00:08:25,120 --> 00:08:26,400
Speaker 2: and he said absolutely not.

160
00:08:26,600 --> 00:08:28,600
Speaker 3: So there you go.

161
00:08:29,680 --> 00:08:32,520
Speaker 2: You know, hopefully they work together and they work in coordination.

162
00:08:32,679 --> 00:08:35,000
Speaker 2: And I really I do have a lot of faith

163
00:08:35,040 --> 00:08:35,880
Speaker 2: in Elon Musk.

164
00:08:35,920 --> 00:08:37,360
Speaker 3: I mean, you just can't argue with.

165
00:08:37,360 --> 00:08:41,040
Speaker 2: His results, and that he will study the system very

166
00:08:41,120 --> 00:08:43,800
Speaker 2: very carefully. He will understand the mechanics of the system,

167
00:08:44,360 --> 00:08:47,720
Speaker 2: and hopefully he will keep that in mind, because you know,

168
00:08:47,760 --> 00:08:50,880
Speaker 2: it's like having an internal combustion engine versus an electric car.

169
00:08:51,280 --> 00:08:54,400
Speaker 2: Some things you can really revolutionize, but you still have

170
00:08:54,440 --> 00:08:56,440
Speaker 2: axles and wheels. And I kind of feel like the

171
00:08:56,480 --> 00:09:01,200
Speaker 2: credit cycle is still axles and wheels Anario, just because

172
00:09:01,280 --> 00:09:05,440
Speaker 2: fiat currency and the debt cycle mechanically haven't changed. We've

173
00:09:05,440 --> 00:09:08,360
Speaker 2: been living under modern monetary theory, which is it doesn't

174
00:09:08,400 --> 00:09:10,679
Speaker 2: matter how much debt or deficit you have in essence,

175
00:09:10,720 --> 00:09:12,880
Speaker 2: if you have enough liquidity to service that debt.

176
00:09:13,320 --> 00:09:15,720
Speaker 3: But if you go back to the Fall.

177
00:09:15,559 --> 00:09:18,120
Speaker 2: Of Rome or the French Revolution, those things have an endpoint.

178
00:09:18,240 --> 00:09:20,760
Speaker 2: Ray Dalio is calling for that as well, so we

179
00:09:20,840 --> 00:09:23,240
Speaker 2: remain in interesting times. I'm not going to make some

180
00:09:23,400 --> 00:09:27,760
Speaker 2: big prediction because Murphy's law, I won't be correct about it.

181
00:09:28,000 --> 00:09:30,760
Speaker 1: We'll have more with France's coming up. I'm Doug Prisoner

182
00:09:30,800 --> 00:09:41,000
Speaker 1: and this is Bloomberg. Welcome back to the Bloomberg Daybreak

183
00:09:41,000 --> 00:09:44,640
Speaker 1: Asia podcast. I'm Doug Prisner. We're speaking with Francis Stacy.

184
00:09:44,760 --> 00:09:48,640
Speaker 1: She's an economic strategist and also chairwoman of the UN's

185
00:09:48,679 --> 00:09:52,560
Speaker 1: Global Digital Finance Committee. So we know that the APEC

186
00:09:52,840 --> 00:09:56,160
Speaker 1: Summit is happening currently in Peru and Donald Trump really

187
00:09:56,200 --> 00:09:58,880
Speaker 1: may be the elephant in the room. A number of speakers,

188
00:09:58,920 --> 00:10:01,240
Speaker 1: from what I've read, have kind of danced around the

189
00:10:01,320 --> 00:10:05,040
Speaker 1: issue of how Trump would shake up the global economic

190
00:10:05,120 --> 00:10:08,480
Speaker 1: and political landscape. It was one point that I found

191
00:10:08,480 --> 00:10:12,400
Speaker 1: particularly interesting, made by Andreas Flasco from the London School

192
00:10:12,400 --> 00:10:14,760
Speaker 1: of Economics. He was saying that we are moving into

193
00:10:15,160 --> 00:10:18,440
Speaker 1: a more protectionist world led by the US, and for

194
00:10:18,559 --> 00:10:22,840
Speaker 1: countries in the Pacific Rim, in East Asia and in

195
00:10:22,920 --> 00:10:25,880
Speaker 1: Latin America, that's not very good news. How give me

196
00:10:25,920 --> 00:10:28,920
Speaker 1: a sense of how disruptive Trump's policies could be to

197
00:10:28,960 --> 00:10:29,960
Speaker 1: the global economy.

198
00:10:30,480 --> 00:10:34,800
Speaker 2: Well, again, from my perspective, I just think it depends

199
00:10:34,840 --> 00:10:37,959
Speaker 2: on the rate of change. How does he ease out

200
00:10:37,960 --> 00:10:42,079
Speaker 2: of one operating system and into another operating system? And

201
00:10:42,760 --> 00:10:46,319
Speaker 2: you know, I think he did some things the last

202
00:10:46,640 --> 00:10:48,400
Speaker 2: you know, it's it's going to be interesting to see

203
00:10:48,400 --> 00:10:50,560
Speaker 2: what's different this time around. You know, we look at

204
00:10:50,559 --> 00:10:52,480
Speaker 2: some of the things he did in twenty sixteen. It's

205
00:10:52,520 --> 00:10:54,520
Speaker 2: hard to argue with the economy. It's hard to argue

206
00:10:54,520 --> 00:10:58,720
Speaker 2: with you know, very stepid inflation. But it's just he's

207
00:10:58,720 --> 00:11:03,440
Speaker 2: surrounded by a very different crew this time around. And

208
00:11:05,080 --> 00:11:08,320
Speaker 2: you know, he really does have a goal of shrinking

209
00:11:08,360 --> 00:11:11,680
Speaker 2: government and he hasn't been shy about that. And I

210
00:11:11,720 --> 00:11:15,160
Speaker 2: don't know that that was such a clearly enunciated goal

211
00:11:15,840 --> 00:11:19,760
Speaker 2: the last time around. So does he mostly do what

212
00:11:19,840 --> 00:11:22,280
Speaker 2: he did the last time around, or does he try

213
00:11:22,320 --> 00:11:24,760
Speaker 2: to really take this once in a lifetime opportunity and

214
00:11:24,840 --> 00:11:30,560
Speaker 2: drastically overhaul the system from you know, basically a system

215
00:11:30,600 --> 00:11:34,240
Speaker 2: that you know is liquid, largely dependent upon government spending,

216
00:11:34,360 --> 00:11:36,960
Speaker 2: to a system that is mostly driven by the private sector.

217
00:11:37,320 --> 00:11:39,400
Speaker 3: It's just so hard to say, but.

218
00:11:39,520 --> 00:11:43,679
Speaker 2: The disruption comes from drastic rates of change.

219
00:11:43,840 --> 00:11:44,640
Speaker 3: And that's true of.

220
00:11:44,559 --> 00:11:48,760
Speaker 2: Interest rates, that's true of volatility, that's true of miss

221
00:11:48,800 --> 00:11:50,960
Speaker 2: pricing and markets. And so that's the thing I'm most

222
00:11:51,040 --> 00:11:54,000
Speaker 2: interested in watching is how quickly they turn things. You know,

223
00:11:54,040 --> 00:11:54,880
Speaker 2: they turn the ship.

224
00:11:55,400 --> 00:11:57,160
Speaker 1: So when I think of tariffs, I mean, you could

225
00:11:57,160 --> 00:11:58,880
Speaker 1: make the case that this is really kind of a

226
00:11:58,920 --> 00:12:03,000
Speaker 1: negotiating ploy to get more favorable trade deals. But a

227
00:12:03,040 --> 00:12:05,320
Speaker 1: part of the thinking, I think it's fair to say,

228
00:12:05,440 --> 00:12:10,480
Speaker 1: is that you're trying to encourage corporations to reshure their

229
00:12:10,520 --> 00:12:14,679
Speaker 1: operations back to the United States. And maybe during the campaign,

230
00:12:14,920 --> 00:12:18,080
Speaker 1: Trump began to articulate this view in terms of putting

231
00:12:18,080 --> 00:12:22,600
Speaker 1: more American workers back to work in places like certain

232
00:12:22,640 --> 00:12:25,240
Speaker 1: types of manufacturing. But we're living in a day and

233
00:12:25,280 --> 00:12:27,719
Speaker 1: age now. If you visit China and you look at

234
00:12:27,720 --> 00:12:31,920
Speaker 1: some of these manufacturing facilities. The degree of automation is stunning.

235
00:12:32,480 --> 00:12:34,800
Speaker 1: So even if in a best case we were to

236
00:12:34,800 --> 00:12:38,680
Speaker 1: get some kind of re shoring, does it necessarily mean

237
00:12:38,800 --> 00:12:41,680
Speaker 1: that a large part of the labor market is going

238
00:12:41,720 --> 00:12:43,600
Speaker 1: to be a beneficiary of this.

239
00:12:44,320 --> 00:12:47,199
Speaker 2: Wow, that is a really hard prediction to make. Of course,

240
00:12:47,240 --> 00:12:49,760
Speaker 2: that is a lot of his voter base, and understandably,

241
00:12:49,800 --> 00:12:52,360
Speaker 2: they were seriously displaced.

242
00:12:51,800 --> 00:12:54,960
Speaker 3: When we started outsourcing all the manufacturing. And I haven't

243
00:12:55,000 --> 00:12:55,400
Speaker 3: looked at.

244
00:12:55,360 --> 00:13:00,600
Speaker 2: These numbers recently, but the interesting numbers to look at. Primarily,

245
00:13:01,559 --> 00:13:05,040
Speaker 2: you know, we have such a disparity between services and

246
00:13:05,280 --> 00:13:10,440
Speaker 2: manufacturing goods, and so I guess you could theorize that

247
00:13:10,600 --> 00:13:13,040
Speaker 2: if you bring back manufacturing, you might be able to

248
00:13:13,040 --> 00:13:16,600
Speaker 2: stabilize that imbalance a little bit and you know, hopefully

249
00:13:17,080 --> 00:13:19,280
Speaker 2: hire some of these people that were displaced in the

250
00:13:19,320 --> 00:13:22,520
Speaker 2: original cycle. Of course, displacement in the original cycle probably

251
00:13:22,559 --> 00:13:25,080
Speaker 2: happened in a completely different generation, so it's hard to

252
00:13:25,120 --> 00:13:29,280
Speaker 2: predict there. But as you say, one of the risks

253
00:13:29,400 --> 00:13:33,560
Speaker 2: of trying to go backwards is not you know, allotting

254
00:13:33,640 --> 00:13:36,920
Speaker 2: for a lot of the technological and automation changes that

255
00:13:36,960 --> 00:13:40,440
Speaker 2: have occurred. And you know, it may be surprising when

256
00:13:40,559 --> 00:13:42,320
Speaker 2: people think it's going to go back to how it

257
00:13:42,440 --> 00:13:45,040
Speaker 2: used to be. And you know, it used to be

258
00:13:45,120 --> 00:13:47,600
Speaker 2: ten workers and now it's two instead of ten. So

259
00:13:48,240 --> 00:13:50,520
Speaker 2: I'm not sure. And there's a bit of a skills gap.

260
00:13:50,559 --> 00:13:52,120
Speaker 2: I mean, I remember I took a bit of a

261
00:13:52,160 --> 00:13:55,760
Speaker 2: break from the financial industry for just a couple of

262
00:13:55,840 --> 00:13:59,320
Speaker 2: years after the financial crisis, and when I came back,

263
00:13:59,360 --> 00:14:02,800
Speaker 2: even you know, the technology around trading options, the spreads

264
00:14:02,800 --> 00:14:05,200
Speaker 2: between the bid and the ask, the volatility, all of

265
00:14:05,240 --> 00:14:08,480
Speaker 2: it had changed dramatically, you know, and you have to

266
00:14:08,520 --> 00:14:12,200
Speaker 2: relearn the system. So he he must be again. I

267
00:14:12,240 --> 00:14:16,040
Speaker 2: want to give them some credit, you know, obviously the

268
00:14:16,120 --> 00:14:19,240
Speaker 2: people that he you know, and I haven't studied all

269
00:14:19,280 --> 00:14:23,560
Speaker 2: of the cabinet members, but Vivek and you know, particularly Elon,

270
00:14:24,560 --> 00:14:28,040
Speaker 2: these are not stupid people, they really aren't. They've done

271
00:14:28,120 --> 00:14:31,920
Speaker 2: They've accomplished a lot. And Elon knows how to run

272
00:14:32,040 --> 00:14:35,000
Speaker 2: profitable organizations, and he knows how to run teams, and

273
00:14:35,040 --> 00:14:37,400
Speaker 2: he knows operations, and he knows how to get the

274
00:14:37,440 --> 00:14:38,320
Speaker 2: best product out.

275
00:14:38,680 --> 00:14:39,360
Speaker 3: He's efficient.

276
00:14:39,800 --> 00:14:42,960
Speaker 2: So I definitely want to have every confidence that they

277
00:14:42,960 --> 00:14:44,640
Speaker 2: are going to be looking at the things that you

278
00:14:44,720 --> 00:14:48,240
Speaker 2: and I are discussing. It just remains to be seen

279
00:14:48,320 --> 00:14:51,120
Speaker 2: how that's going to be implemented. And then you know

280
00:14:51,160 --> 00:14:54,200
Speaker 2: what pushback they get, what you know, what changes have

281
00:14:54,280 --> 00:14:56,760
Speaker 2: to go through Congress, What changes can they do ya

282
00:14:56,840 --> 00:15:00,680
Speaker 2: executive order? And how quickly these things, how quickly these

283
00:15:00,760 --> 00:15:03,240
Speaker 2: changes are made. But I do think that some of

284
00:15:03,280 --> 00:15:06,360
Speaker 2: these displaced workers may have an opportunity to get back

285
00:15:06,360 --> 00:15:09,560
Speaker 2: into the workforce. And I really think that that's beneficial

286
00:15:09,640 --> 00:15:12,480
Speaker 2: for America because some of them have succumbed entirely to

287
00:15:13,120 --> 00:15:16,720
Speaker 2: you know, drug addiction and other sort of unintended consequences

288
00:15:16,760 --> 00:15:20,320
Speaker 2: of losing you know, that ability to provide and work

289
00:15:20,600 --> 00:15:21,600
Speaker 2: in a productive way.

290
00:15:21,880 --> 00:15:23,440
Speaker 1: So one of the things that you have kind of

291
00:15:23,480 --> 00:15:25,960
Speaker 1: caveated there, if I can use that term, is the

292
00:15:26,040 --> 00:15:31,440
Speaker 1: rate of change. Let's imagine that it's accelerated, that it's

293
00:15:31,480 --> 00:15:35,480
Speaker 1: in the best interest of the incoming administrative, that it's

294
00:15:35,520 --> 00:15:39,040
Speaker 1: in the best interest of the incoming administration to move swiftly.

295
00:15:39,440 --> 00:15:42,760
Speaker 1: Would that kind of change the way you're thinking, Well.

296
00:15:42,520 --> 00:15:45,640
Speaker 2: I will tell you if if Elon Musk phoned me

297
00:15:46,240 --> 00:15:50,000
Speaker 2: and said, you know, and wanted to talk to me

298
00:15:50,040 --> 00:15:52,720
Speaker 2: about these fiscal changes, I would say to him, you

299
00:15:52,880 --> 00:15:55,920
Speaker 2: have to have you have which you know, not that

300
00:15:55,960 --> 00:15:57,160
Speaker 2: he doesn't know some of.

301
00:15:57,080 --> 00:15:59,360
Speaker 3: This, but you have a GDP calculation.

302
00:15:59,760 --> 00:16:03,760
Speaker 2: If you don't want to completely displace growth, you're going

303
00:16:03,840 --> 00:16:07,280
Speaker 2: to have to fill in the fiscal component of it,

304
00:16:08,280 --> 00:16:10,760
Speaker 2: you know, with CAPEX or something else. Right, And if

305
00:16:10,800 --> 00:16:13,800
Speaker 2: you look at the operating basis change that he's discussing,

306
00:16:14,200 --> 00:16:18,080
Speaker 2: obviously CAPEX spending would go up and that would affect GDP.

307
00:16:19,080 --> 00:16:20,520
Speaker 3: Also, you have to.

308
00:16:20,440 --> 00:16:24,040
Speaker 2: Look, they want to stop spending because the debt and

309
00:16:24,080 --> 00:16:28,400
Speaker 2: deficits are so high. Okay, but if you if you

310
00:16:28,440 --> 00:16:31,480
Speaker 2: stop spending, you're removing future liquidity.

311
00:16:30,960 --> 00:16:31,680
Speaker 3: From the system.

312
00:16:31,880 --> 00:16:35,240
Speaker 2: And if you remove too much liquidity from the system

313
00:16:35,520 --> 00:16:38,800
Speaker 2: all at once, you don't suddenly have enough liquidity to

314
00:16:39,040 --> 00:16:42,120
Speaker 2: service that debt. And the debt doesn't go away. The

315
00:16:42,120 --> 00:16:47,280
Speaker 2: debt gets written off or it matures or you know,

316
00:16:47,400 --> 00:16:50,200
Speaker 2: and written off is of course a default default scenario,

317
00:16:50,200 --> 00:16:51,520
Speaker 2: but the debt just doesn't go away.

318
00:16:51,560 --> 00:16:52,200
Speaker 3: You still have to.

319
00:16:52,200 --> 00:16:54,080
Speaker 2: Service that debt in our federal debt, you know, I

320
00:16:54,120 --> 00:16:58,520
Speaker 2: think it's one trillion every year to services. So that's

321
00:16:58,600 --> 00:17:01,680
Speaker 2: the discussion I would have. I would say, okay, if

322
00:17:01,720 --> 00:17:03,720
Speaker 2: you want growth to remain high, and you're going to

323
00:17:03,800 --> 00:17:06,879
Speaker 2: remove fiscal spending, which the all In Guys estimated was

324
00:17:06,920 --> 00:17:10,280
Speaker 2: around forty percent of GDP. When you take federal, state,

325
00:17:10,359 --> 00:17:14,240
Speaker 2: and local together and you take that component out, you're

326
00:17:14,240 --> 00:17:18,159
Speaker 2: going to have to put something else there. The problem

327
00:17:18,160 --> 00:17:22,080
Speaker 2: with the global financial crisis, which trading that was sort

328
00:17:22,119 --> 00:17:25,399
Speaker 2: of my baptism of fire, was that so many loans

329
00:17:25,400 --> 00:17:28,840
Speaker 2: failed all at once that they wrote those loans off

330
00:17:28,880 --> 00:17:29,479
Speaker 2: of the books.

331
00:17:30,280 --> 00:17:31,160
Speaker 3: And when you write the.

332
00:17:31,119 --> 00:17:33,000
Speaker 2: Loans off of the books, they come off of the

333
00:17:33,080 --> 00:17:35,840
Speaker 2: ledger and it removes the liquidity that those loans provided

334
00:17:35,880 --> 00:17:38,760
Speaker 2: from the system. And then suddenly you have a liquidity

335
00:17:38,760 --> 00:17:42,280
Speaker 2: and attendant credit crisis. And that's why they had to

336
00:17:42,280 --> 00:17:44,560
Speaker 2: do so many bailouts and then they did so many

337
00:17:44,560 --> 00:17:47,480
Speaker 2: iterations of QE and still didn't have inflation under those

338
00:17:47,480 --> 00:17:51,520
Speaker 2: scenarios is because the liquidity shrank so fast. So you know,

339
00:17:51,640 --> 00:17:55,080
Speaker 2: hindsight being twenty twenty, you can't just yank liquidity out

340
00:17:55,080 --> 00:17:58,040
Speaker 2: of the system and not have that. So I would

341
00:17:58,200 --> 00:18:02,720
Speaker 2: say to Elon Vivek or Trump, you're going to have

342
00:18:02,800 --> 00:18:07,600
Speaker 2: to fill that gap with something and taper it more

343
00:18:07,640 --> 00:18:10,240
Speaker 2: slowly than you think because and the reason to taper

344
00:18:10,280 --> 00:18:13,399
Speaker 2: it slowly is because you don't know where the threshold is.

345
00:18:13,480 --> 00:18:15,840
Speaker 2: The FED doesn't know. The FED doesn't know where the

346
00:18:15,880 --> 00:18:19,280
Speaker 2: neutral rate is. Nobody knows where that threshold is because

347
00:18:19,320 --> 00:18:23,080
Speaker 2: the money stock changes by every nanosecond. Every time somebody

348
00:18:23,080 --> 00:18:26,000
Speaker 2: pays a debt, the money stock is reduced, and every

349
00:18:26,040 --> 00:18:28,840
Speaker 2: time somebody you know, takes out debt, even on their

350
00:18:28,880 --> 00:18:32,240
Speaker 2: credit cards, the money stock is increased. And there's so

351
00:18:32,320 --> 00:18:36,000
Speaker 2: many variables happening so rapidly that not knowing where that

352
00:18:36,040 --> 00:18:39,119
Speaker 2: threshold is, you risk really violating that threshold. And I

353
00:18:39,119 --> 00:18:42,919
Speaker 2: think Jay Powell in retrospect has been good about not

354
00:18:43,119 --> 00:18:45,240
Speaker 2: violating that threshold, and that's why we haven't had a

355
00:18:45,280 --> 00:18:49,199
Speaker 2: recession despite the fact that he's tightened, you know, dramatically.

356
00:18:49,560 --> 00:18:51,480
Speaker 1: It's going to be interesting times as we look to

357
00:18:51,560 --> 00:18:54,639
Speaker 1: the future. Francis, thanks for joining us and sharing your perspective.

358
00:18:54,920 --> 00:18:58,960
Speaker 1: Really appreciated. Francis Stacey there. She is economic strategist also

359
00:18:59,000 --> 00:19:02,920
Speaker 1: the chairwoman of the UN's Global Digital Finance Committee. Joining

360
00:19:03,000 --> 00:19:11,560
Speaker 1: us here on the Daybreak Asia podcast. Joining us now

361
00:19:11,840 --> 00:19:15,400
Speaker 1: is vish Ramaswami. He is head of APEC Private Investments

362
00:19:15,480 --> 00:19:20,119
Speaker 1: at Cambridge Associates. Fish joining us from Singapore. Can we

363
00:19:20,160 --> 00:19:22,560
Speaker 1: talk a little bit about what's happening in China. We

364
00:19:22,680 --> 00:19:25,679
Speaker 1: had some inflation data in the recent weeks showing at

365
00:19:25,760 --> 00:19:28,480
Speaker 1: least on the retail level, things are beginning to firm

366
00:19:28,560 --> 00:19:32,480
Speaker 1: up in terms of prices. However, at the wholesale level,

367
00:19:32,960 --> 00:19:38,640
Speaker 1: factory gate inflation in China remains in deflation, and this

368
00:19:38,760 --> 00:19:41,679
Speaker 1: is I know, a big problem for authorities there, particularly

369
00:19:41,760 --> 00:19:44,399
Speaker 1: the PBOC. Give me your sense, Vish on how you

370
00:19:44,480 --> 00:19:46,920
Speaker 1: view what's going on right now in the Chinese economy.

371
00:19:47,440 --> 00:19:50,240
Speaker 4: My view is very much from the ground hearing what

372
00:19:50,400 --> 00:19:53,400
Speaker 4: private invention capital managers are reacting and how your portfolio

373
00:19:53,440 --> 00:19:57,280
Speaker 4: companies are reacting. It is optimistic. Whatever has happened since

374
00:19:57,280 --> 00:20:01,120
Speaker 4: the government's announcements in September seen us sitive steps and

375
00:20:01,160 --> 00:20:04,560
Speaker 4: there's a huge sign of relief. Many of the sectors

376
00:20:04,560 --> 00:20:07,679
Speaker 4: that our managers invest in are not directly connected to

377
00:20:07,720 --> 00:20:10,880
Speaker 4: the consumer sector. People invest in the industrial automation, people

378
00:20:10,920 --> 00:20:15,040
Speaker 4: invest in photo will take cells, new energy and so on.

379
00:20:15,160 --> 00:20:17,840
Speaker 4: So some of those sectors are in a different path.

380
00:20:17,880 --> 00:20:20,200
Speaker 4: But on the consumer side. In the portfolio that we've seen,

381
00:20:20,240 --> 00:20:24,320
Speaker 4: there has been tremendous contraction. Valuations have come down, market

382
00:20:24,400 --> 00:20:26,919
Speaker 4: market valuations have come down because growth has not been

383
00:20:26,920 --> 00:20:28,600
Speaker 4: as robust as as it used to be, so I

384
00:20:28,600 --> 00:20:31,399
Speaker 4: think some of the stimulation is necessary to bring all

385
00:20:31,440 --> 00:20:33,080
Speaker 4: of that back, and it will probably take a few

386
00:20:33,119 --> 00:20:36,240
Speaker 4: more weeks or months so that properly be seen in portfolios.

387
00:20:36,440 --> 00:20:38,959
Speaker 1: I'm wondering whether or not the thread of tariffs from

388
00:20:39,000 --> 00:20:42,360
Speaker 1: the United States represents a big risk that you have

389
00:20:42,440 --> 00:20:46,080
Speaker 1: to begin to consider when you're making investments in China.

390
00:20:46,240 --> 00:20:49,480
Speaker 4: It is part of a portfolio risk assessment, and we

391
00:20:49,560 --> 00:20:52,920
Speaker 4: will have to be within when it's clearer. VC managers,

392
00:20:52,920 --> 00:20:56,960
Speaker 4: for example, have already been planning how to tackle if

393
00:20:57,240 --> 00:21:01,080
Speaker 4: President Joe Biden's executive orders and when it becomes law,

394
00:21:01,160 --> 00:21:04,240
Speaker 4: or if the Bio Secure Act becomes law, so people

395
00:21:04,640 --> 00:21:07,320
Speaker 4: factor that in. And as I said, these are investments

396
00:21:07,400 --> 00:21:09,960
Speaker 4: with a ten year cycle or free time frame in mind.

397
00:21:10,960 --> 00:21:15,520
Speaker 4: There are two possibilities. One it's something temporary for practical, commercial, economic,

398
00:21:15,640 --> 00:21:18,560
Speaker 4: or other reasons they roll back. The other is that

399
00:21:18,560 --> 00:21:20,680
Speaker 4: they are structural, in which case businesses will find a

400
00:21:20,720 --> 00:21:24,080
Speaker 4: new equilibrium, and especially vcs in a place where they're

401
00:21:24,080 --> 00:21:25,400
Speaker 4: building businesses for the future.

402
00:21:25,480 --> 00:21:28,600
Speaker 1: Are you seeing a move to diversify out of China

403
00:21:28,640 --> 00:21:31,720
Speaker 1: in a major way, particularly in a country like India

404
00:21:31,840 --> 00:21:34,160
Speaker 1: or is that happening a little bit more incrementally.

405
00:21:34,600 --> 00:21:36,600
Speaker 4: It is happening, but I hesitate to call it a

406
00:21:36,920 --> 00:21:40,080
Speaker 4: like for like substitute. So as it happens. Allocations to

407
00:21:40,160 --> 00:21:43,679
Speaker 4: China private preauventure capital have declined, but it comes amidst

408
00:21:43,720 --> 00:21:47,080
Speaker 4: that global decline in fundraising and investment, even in the

409
00:21:47,160 --> 00:21:50,680
Speaker 4: United States and Europe and elsewhere. So one thing, one

410
00:21:50,680 --> 00:21:54,280
Speaker 4: thing's happening, which is investment interest. Fundraising for China private

411
00:21:54,359 --> 00:21:56,840
Speaker 4: PLAYVNIC capital has been falling for two years, three years straight.

412
00:21:57,359 --> 00:21:59,359
Speaker 4: But at the same time, other pockets of Asia have

413
00:21:59,480 --> 00:22:02,240
Speaker 4: been got honoring interest. That includes Japan in the biotspace,

414
00:22:02,280 --> 00:22:05,000
Speaker 4: that includes India and the growth and menure space. I

415
00:22:05,119 --> 00:22:08,520
Speaker 4: don't know that if I would qualify this as alightful replacement.

416
00:22:08,560 --> 00:22:11,560
Speaker 4: I think it is happening because some of those markets

417
00:22:11,800 --> 00:22:13,440
Speaker 4: intrinsically are becoming more attractive.

418
00:22:13,640 --> 00:22:16,280
Speaker 1: Are there themes here that you want to discuss and unpack?

419
00:22:16,400 --> 00:22:18,120
Speaker 1: I mean, when I think a lot of what happens

420
00:22:18,119 --> 00:22:21,680
Speaker 1: with VC money here in the US, it's more technology focused.

421
00:22:21,760 --> 00:22:24,040
Speaker 1: Is the same true in the APEC.

422
00:22:24,560 --> 00:22:27,560
Speaker 4: Largely, but perhaps different kinds of technology. So as I

423
00:22:27,600 --> 00:22:30,240
Speaker 4: was alluding to earlier in China, a lot gets done

424
00:22:30,280 --> 00:22:32,919
Speaker 4: that is in consonance with what their long term plans are,

425
00:22:32,960 --> 00:22:37,560
Speaker 4: so energy transition, clean energy, green energy, clean energy, new materials,

426
00:22:37,880 --> 00:22:40,240
Speaker 4: a lot of stuff happening in the EV space. A

427
00:22:40,240 --> 00:22:42,639
Speaker 4: lot of attention right now is going into two areas,

428
00:22:42,640 --> 00:22:46,040
Speaker 4: which is art tech, which would be broadly speaking, robotics

429
00:22:46,040 --> 00:22:49,960
Speaker 4: and automation, which of course melts very well with artificial

430
00:22:49,960 --> 00:22:53,439
Speaker 4: intelligence of various types. People are investing in large language models,

431
00:22:53,440 --> 00:22:57,399
Speaker 4: but also applications that can be more consumer or enterprise friendly.

432
00:22:57,600 --> 00:23:01,840
Speaker 4: So that's happening in China. In India slightly different. There

433
00:23:01,880 --> 00:23:04,240
Speaker 4: isn't the same semiconductor and AI stack in India at

434
00:23:04,280 --> 00:23:06,280
Speaker 4: the moment, so we see a lot of evolution in

435
00:23:06,320 --> 00:23:10,879
Speaker 4: direct to consumer in enterprise, both for India and for

436
00:23:11,000 --> 00:23:14,600
Speaker 4: the globe. So typically businesses that have research and development

437
00:23:14,680 --> 00:23:17,240
Speaker 4: in India but go to market typically in the United States,

438
00:23:17,320 --> 00:23:21,560
Speaker 4: trying to position the global software providers. So the nature

439
00:23:21,600 --> 00:23:24,159
Speaker 4: of v SE is different in these geographies. And then

440
00:23:24,160 --> 00:23:26,280
Speaker 4: you have Korean in Japan which have their own careents

441
00:23:26,320 --> 00:23:27,960
Speaker 4: and they have smaller markets so to speak in terms

442
00:23:28,000 --> 00:23:28,760
Speaker 4: of dollars invested.

443
00:23:29,040 --> 00:23:31,640
Speaker 1: So when you identify a firm in which to invest

444
00:23:32,240 --> 00:23:35,120
Speaker 1: What is the typical runway that you give that company

445
00:23:35,160 --> 00:23:38,000
Speaker 1: before you expect them to be airborne? Is it a

446
00:23:38,040 --> 00:23:39,280
Speaker 1: five year time horizon?

447
00:23:40,040 --> 00:23:42,119
Speaker 4: So we would invest in v SE funds or my

448
00:23:42,240 --> 00:23:44,920
Speaker 4: FEAZI fund managers who invest in those firms. It depends.

449
00:23:45,359 --> 00:23:47,520
Speaker 4: There are folks who would invest in a product market

450
00:23:47,560 --> 00:23:51,000
Speaker 4: post product market fit company which is already generating revenues

451
00:23:51,040 --> 00:23:53,920
Speaker 4: and perhaps gets to profitability orbita in two years of

452
00:23:53,960 --> 00:23:56,040
Speaker 4: five years, depending on how fast they want to grow.

453
00:23:56,320 --> 00:23:58,280
Speaker 4: But some of the earlies stage managers we invest in

454
00:23:58,359 --> 00:24:01,000
Speaker 4: might not see their companies even have a product for

455
00:24:01,000 --> 00:24:03,040
Speaker 4: a year or two and maybe another five or six

456
00:24:03,080 --> 00:24:06,520
Speaker 4: before they generate substantial revenue, approaching close to break even.

457
00:24:06,720 --> 00:24:08,760
Speaker 4: So it depends on how early you go into venture space.

458
00:24:08,960 --> 00:24:11,119
Speaker 4: The earlier you go, the higher the chances that a

459
00:24:11,320 --> 00:24:13,960
Speaker 4: particular company will fail, but the higher the chances that

460
00:24:14,440 --> 00:24:16,399
Speaker 4: at least a few of those companies will be fifty

461
00:24:16,520 --> 00:24:18,240
Speaker 4: x FO one hundred x returners.

462
00:24:18,480 --> 00:24:20,560
Speaker 1: You were speaking a moment ago about the challenges and

463
00:24:20,640 --> 00:24:23,560
Speaker 1: trying to raise fresh capital in the current environment. What

464
00:24:23,600 --> 00:24:27,840
Speaker 1: do you hear as a primary objection to someone perhaps

465
00:24:28,200 --> 00:24:30,879
Speaker 1: being disinclined to put money to work in kind of

466
00:24:30,880 --> 00:24:31,719
Speaker 1: the VC space.

467
00:24:32,320 --> 00:24:35,119
Speaker 4: We track a metric at Cambridge. It's called the if

468
00:24:35,160 --> 00:24:36,879
Speaker 4: you think of it as distribution yield. We look at

469
00:24:36,920 --> 00:24:38,560
Speaker 4: the amount of capital that comes back at the end

470
00:24:38,560 --> 00:24:40,960
Speaker 4: of the year and we compare it to the starting

471
00:24:41,160 --> 00:24:45,040
Speaker 4: enevy that a steady state PO VC program has. Traditionally

472
00:24:45,080 --> 00:24:47,040
Speaker 4: it's been twenty to twenty five percent. Today is ten

473
00:24:47,040 --> 00:24:49,440
Speaker 4: to eleven percent, So the amount of capital coming back

474
00:24:49,480 --> 00:24:51,480
Speaker 4: has talled. As you know, both in P and VC,

475
00:24:51,760 --> 00:24:54,000
Speaker 4: including the United States, it has been a tough time

476
00:24:54,000 --> 00:24:56,800
Speaker 4: to exit. For VC's valuations are low. For P there's

477
00:24:56,840 --> 00:24:59,760
Speaker 4: a large pool of undigested assets that were perhaps bought

478
00:24:59,840 --> 00:25:03,000
Speaker 4: high valuations that need to grow into that so distributions

479
00:25:03,040 --> 00:25:06,080
Speaker 4: have not come back from managers. This is a global phenomenon,

480
00:25:06,359 --> 00:25:09,640
Speaker 4: and on top of that, people might be imputing geopolitical risk,

481
00:25:09,760 --> 00:25:11,880
Speaker 4: which makes them hesitant to invest outside of their own

482
00:25:11,920 --> 00:25:14,720
Speaker 4: home markets, especially for the United States where there is

483
00:25:14,760 --> 00:25:18,320
Speaker 4: a very rich, indeed P and VC market. So I

484
00:25:18,320 --> 00:25:20,840
Speaker 4: think there is the global situation, and perhaps there is

485
00:25:20,840 --> 00:25:22,960
Speaker 4: an additional overlay for some of the emerging markets like

486
00:25:23,000 --> 00:25:26,960
Speaker 4: Indio China, which are further away and perhaps seeing more esky.

487
00:25:27,400 --> 00:25:30,600
Speaker 1: So if things in China were to turn as a

488
00:25:30,600 --> 00:25:32,680
Speaker 1: result of a lot of the stimulus that we've been

489
00:25:33,119 --> 00:25:37,040
Speaker 1: seeing from authorities in Beijing. Do you think the climate

490
00:25:37,080 --> 00:25:41,200
Speaker 1: could pivots as suddenly for VC money and maybe a

491
00:25:41,240 --> 00:25:42,320
Speaker 1: little bit of pe.

492
00:25:42,680 --> 00:25:45,639
Speaker 4: It should in normal circumstances, But I also think it

493
00:25:45,640 --> 00:25:48,960
Speaker 4: won't just be a commercial or economic decision. I think

494
00:25:49,440 --> 00:25:52,480
Speaker 4: USLPCE in particular will be looking at how the US

495
00:25:52,560 --> 00:25:57,359
Speaker 4: government's regulations on them investing in foreign technology evolves. So,

496
00:25:57,400 --> 00:25:59,239
Speaker 4: as you know, the executive quarter is something that has

497
00:25:59,280 --> 00:26:03,280
Speaker 4: happened Grandfather's ec investments until the second of January, and

498
00:26:03,320 --> 00:26:06,560
Speaker 4: beyond that, there are some rules around notifications and prohibitions.

499
00:26:06,760 --> 00:26:09,080
Speaker 4: They don't affect the LPAs because they do not pick

500
00:26:09,119 --> 00:26:11,600
Speaker 4: the companies, but they affect the GPS, and the LPs

501
00:26:11,640 --> 00:26:13,760
Speaker 4: will have a look for obligation to do some of

502
00:26:13,800 --> 00:26:17,760
Speaker 4: the reporting. So I think there are other factors beyond macroeconomics,

503
00:26:18,240 --> 00:26:20,560
Speaker 4: one of which is geopolitics. I think that is a factor,

504
00:26:20,640 --> 00:26:23,160
Speaker 4: but it doesn't necessarily apply the same way to everyone.

505
00:26:23,320 --> 00:26:27,160
Speaker 4: So folks limited partners outside of the United States may

506
00:26:27,200 --> 00:26:30,480
Speaker 4: have a different view of embracing a research in China.

507
00:26:30,560 --> 00:26:33,120
Speaker 4: If the stimulus manages to kick the economy back into gear.

508
00:26:33,720 --> 00:26:35,760
Speaker 1: Vish well leave it there. Thanks so much for joining us. A.

509
00:26:35,800 --> 00:26:40,040
Speaker 1: Vish Ramaswami is Head of APAC Private Investments at Cambridge Associates,

510
00:26:40,359 --> 00:26:43,560
Speaker 1: joining us from Singapore here on the Daybreak Asia Podcast.

511
00:26:46,320 --> 00:26:49,439
Speaker 1: Thanks for listening to today's episode of the Bloomberg Daybreak

512
00:26:49,480 --> 00:26:54,040
Speaker 1: Asia Podcast. Each weekday, we look at story shaping markets, finance,

513
00:26:54,080 --> 00:26:57,199
Speaker 1: and geopolitics in the Asia Pacific. You can find us

514
00:26:57,200 --> 00:27:01,200
Speaker 1: on Apple, Spotify, and the Bloomberg Podcast YouTube channel, or

515
00:27:01,240 --> 00:27:04,600
Speaker 1: anywhere you listen. Join us again for insight on market

516
00:27:04,640 --> 00:27:08,240
Speaker 1: moves from Hong Kong to Singapore and Australia. I'm Doug

517
00:27:08,320 --> 00:27:09,800
Speaker 1: Prisoner and this is Bloomberg