May 21, 2025 • 29 mins
Investing in alternative assets such as infrastructure and private equity was once the preserve of large institutions and the uber rich with access to private bankers. But technological advances and product innovation have opened these markets to wealthy retail investors, creating one of the fastest-growing segments in wealth management. Many experts, including BlackRock CEO Larry Fink, refer to this trend as the "democratization" of investing.
So what opportunities are out there in the private market for wealthy investors? And what are some of the risks, especially overinvestment? Steffanie Yuen, Head of Hong Kong for Endowus, breaks down the sector as she joins John Lee and Katia Dmitrieva on the Asia Centric podcast.
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Episode Transcript
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Speaker 1 (00:01):
In his annual letter this year, Larry Fink, CEO of Blackrock,
said that investors should allocate up to twenty percent of
their savings into private assets. That advice from the world's
largest asset manager is quite a departure from the traditional
sixty to forty stocks and bond portfolio. That kind of
advice may not have even been possible a decade ago, and.
Speaker 2 (00:24):
It highlights an interesting shift underway in investing where alternative
assets are slowly becoming more available to the average investor.
For a long time, these opportunities think infrastructure, private credit
where the exclusive domain of the super rich and big
institutions like pension funds and insurance companies. But new products
(00:47):
and technologies have been opening up this world for the
average person. This is what some people are calling the
democratization of investing.
Speaker 1 (00:58):
What's the state of play for this democratization. What are
some of the new areas of private investment that individuals
should be aware of, and what are the risks such
as potentially low returns. You're listening to Asia Centric from
Bloomberg Intelligence, and today we're speaking with someone who can
give us a view into how this landscape is evolving.
(01:19):
We're joined by Stephanie Un, head of Hong Kong for Endows,
it's an investment platform and advisor to more than two
hundred and fifty thousand individuals, family officers and institutions across Asia.
They connect investors to fund managers and they've got more
than seven billion dollars in client assets under management, including
(01:40):
four hundred million from private assets. Stephanie, welcome to the show.
Speaker 3 (01:44):
Thanks for having me.
Speaker 1 (01:46):
Stephanie. For listeners, can you give us an idea of
how endows helps average investors connect with private asset opportunities?
Speaker 3 (01:55):
Sure? So, Endowser's name actually stands for endowment and the
best sting for all of us. We wanted to help
individual investors to be able to invest like an institution,
and we got our inspiration really from the Yale Endowment.
So for those of you guys know about Yale Endowment,
probably know their founding CIO David Swinson, one of the
(02:15):
legendary investors of our times who passed away a few
years ago, but he was really the pioneer of sort
of advocating for as allocation and particularly including private assets
into investors portfolio. He famously talks about how a lot
of investors overpay for liquidity. So at the founding of Endawas,
we talked about how there is now kind of this
(02:37):
increasing interest to help individuals to demoketize into private markets.
But it's actually at the very core the beginning of Endawas,
we actually really wanted to help clients to allocate like
an endowment fund, like a Yale endowment, because we believe
this is the sort of as allocation framework. Actually it's
a lot more scientific for investors than just speculating and
(02:58):
punting on stocks. So in Dallas, this is the core
of our work. How do we help our clients to
allocate like an endowment fund, and it could be a
combination of public markets, private markets, alternatives and as sort
of we mentioned that the intro is really exciting that
previously a few years when we first started in Dallas,
(03:19):
we started until I was seventeen. At that time, we
actually couldn't really offer this yet. But in the past
kind of eighteen months we've really been able to work
with a lot of fund managers to enable this to
really be able to realize this vision that we have
that helping individual investors to invest like an endowment fund.
Speaker 2 (03:37):
So can you tell us a bit about the private
asset side. As John mentioned, you have about four hundred million.
That's you know, a chunk of the seven billion, but
it's your fastest or one of the fastest growing areas.
So can you tell us about why that's such a
fast growing area and sort of why you're seeing a
lot more investors coming to you for that.
Speaker 3 (03:59):
Yes, so right now in Dallas, we offer our service
to Hong Kong and Singapore, and as you've rightly mentioned,
we see alternatives, including private markets and hedge funds the
fastest growing asset class on our platform. It has tripled
year on year to close to four hundred million in
terms of client assets. And I'd say for a lot
of clients there are a lot of reasons to why
(04:20):
they consider including private markets and alternatives into their portfolios.
But I would summarize three big reasons. The first and
it's also why we advocate our clients to consider most
important thing, I think it's helping clients to further diversify
their portfolios. I think all of us have experiences in
(04:41):
the past couple of years, especially twenty twenty two was
really something that a lot of people had soul searching
of the public markets, the correlation of different asset classes.
The correlation really went up. You have public equities, public
bonds all went down double digits, so there was quote
unquote no place to hide. So clients are thinking, Okay,
how can I further diversify my portfolios to really strengthen
(05:05):
the resilience. So private markets is a very broad term.
There are many sub asset classes. You have private equity,
you have private credit, you have private real estate, and
increasingly there are different sub asset classes. We see new
innovations that you can invest in, like intellectual property royalties
from IP rights. Those are all very interesting asset classes
(05:27):
that were previously not available for individual investors. These kind
of sub asset classes do have less correlation to public markets,
so it really helps and make sense for investors as
they look to build a more diversified portfolio. And I
guess the second point I briefly touched upon, it's increasing
your investment universe. You can invest in things that are
(05:50):
kind of out of touch if you just dip your
toes into public markets. Right, the largest private companies we've
all heard of, the SpaceX, the open AIP. You can
invest in these companies through the public markets in this
part of the world. There are also many familiar names,
the likes of Byedance, the parent of tektok. These are
all private companies and in fact, if you look at
(06:11):
the statistics, just look at the US right supposed to
be the most liquid market in the world already if
you look at the number of total companies with one
hundred million US revenue above, actually there are seven times
more private companies than public markets for clients to invest into.
And we've also seen this trend. Interestingly, since two thousand,
(06:32):
the number of public companies has really start to decline
by almost half. So actually the investable universe for individual
investors if you just invest in public markets is shrinking.
And thirdly, obviously very important if you look at historical data,
no matter how you cut it, and for those of
us who study finance understand this concept of this illiquid
(06:55):
premium what Swinson said, a lot of people overpay for
liquidity by investing into private markets. Historically you've seen in
every of these subasset classes it does offer investors higher
risk adjusted returns. So, on top of those two reasons
that I mentioned about sort of potentially harnessing higher potential,
(07:15):
higher adjusted returns. Obviously it's also something very attractive to investors.
So I'd say many, many reasons, but those three reasons
are most compelling for a lot of investors to consider.
Speaker 2 (07:27):
In private asset space. I mean, how much money do
I need to have as a retail investor to invest
in something? And are we talking about things like you know,
toll roads in Brazil that pension funds invest in, or
are these different assets? Like who is actually able to
invest in this?
Speaker 3 (07:44):
So we talked about democratization of private assets, but in
our industry is still very highly regulated industry. For a
lot of these private markets funds, even though we've quote
unquote democratized, there's still privy to what we call professional
investors or credit investors, so people with a certain net worth.
(08:06):
And even though we've worked very hard, for example, in Dallas,
we work very hard without for manager partners to lower
the investment minimum. Generally the investment minimum for these assets
are at one hundred thousand US dollars or above. But
the saving grace is.
Speaker 2 (08:23):
Not quite democratization yet.
Speaker 1 (08:25):
It's still not main street, it's literally.
Speaker 3 (08:30):
But everything is on a relative level. So historically even
the lowest, lowest if you go to a private bank.
Let's say you're quote unquote ultra high networth individual. The
lowest probably it's two to three million US. So on
a relative basis, from two to three million US to
one hundred thousand, it's gone down quite a bit if
you do the math. But what's more interesting is historically
(08:52):
that two three million, it's just into one single product
in Dallas, and a lot of our clients, our core
client base, are fluent clients, early high network clients. What
would realize what they want? It's that beta exposure into
private markets. So I've never had access to private credit.
I've never get access to private equity, not necessarily like
(09:15):
a professional institutional investor looking for alpha, like I am
looking at manager a vintage twenty and twenty that's the
best performing. But for a lot of clients it's their
first double into the asset class. They're okay with just
getting the beta, higher potential of res adjustice return. So
we were actually launching a lot of these what we
(09:37):
call funnel funds. So one hundred k US dollars, you
get a portfolio of private equity managers the likes of
your black Row, your ares, your KHR, and all into
one portfolio with your one hundred K check. So yes,
i'd agree it's not yet sort of average investor yet,
but at least to a certain lower tier. Now you
(10:01):
can get a diversified exposure to these blue chip names
which I started out my career investment banking. These are
gps that I used to cover. I would really never
imagine that I could become an investor in these funds.
So I think as a step.
Speaker 1 (10:17):
Towards this, Asia Centric is produced by Bloomberg Intelligence. We're
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(10:37):
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Bloomberg terminal. If you like what you're hear, don't forget
to subscribe and shair. What type of returns do you
think investors should be expecting in the private space?
Speaker 2 (10:52):
Yeah, because in recent years the returns haven't necessarily been
as high as you know five six years ago.
Speaker 3 (11:00):
So I'd say, going back to what I mentioned when
we advise clients to consider private markets. The number one
reason I always share with clients it's diversification, not necessarily
the returns, because no one can really guarantee the returns. Yes,
we look at historical numbers, the likes of private equity,
the likes of private credit. Historically the numbers have been
(11:22):
higher than public markets. But you never know at what
cycle you invest, And for example, in private equity, I'm
sure a lot of us are familiar with the term
different vintages, right, different vintages could also at different times
where you invest could also have a big impact on
your ultimate returns. So no matter how you cut the data,
(11:44):
there's definitely higher resuggested returns. And going back to what
John you mentioned earlier, I also find it super interesting
for Larry Think to have mentioned that fifty to thirty
twenty allocation. And we've ran some numbers, including us including
a lot of platforms for individual investors. I'm not talking about, okay,
(12:05):
making one specific bet on one private equity fund or
private credit fund. If you're looking at diversification and you
include a more kind of diversified private markets, you have
a bit of private equity, a bit of private realist
at a bit of prior credit into your portfolio and
kind of include it in your sixty to forty portfolio.
(12:27):
If we're not looking at okay, you just happen to
invest in the top tier managers. But if you get
the general average returns overall, it improves against a sixty
to forty by one hundred to one hundred fifty basis point,
and it helps kind of lower the volatility also by
twenty to thirty percent. So I think that's really interesting
(12:48):
and for Larry think right for him about fifteen twenty
years ago to make that big bet on ice shares
and really revolutionized and popularized index investing, for him to
really say, okay, the next thing is private markets. I
think it's it's quite powerful, and we are seeing a
lot of these trends that he mentioned coming together.
Speaker 1 (13:10):
And for the benefit of the listeners, Alarry thinks suggested
that you should invest fifty percent in stocks, thirty percent
in fixed income or bonds, and twenty percent in private assets.
Speaker 2 (13:20):
And I just got to ask, I mean, not to
put you up against Larry, I think, but do you
think that that twenty percent or that mix that John
just mentioned with twenty percent to private assets. Do you
think that's the right one?
Speaker 3 (13:32):
So Eden, Dallas, we never give out any like sort
of okay, everyone should follow the same rule, because we
do think personal investing is something very personal to your
own circumstances. So for us, we definitely remind our clients
that there are reasons to why private markets historically has
(13:52):
only been sort of investable by institution investors or had
now worth individuals because it is indeed illiquid. So we
definitely would not advise our clients to invest their liquid
pocket or their sort of raining day money into private markets.
That's really not right. So it really depends on you
look at your needs, You look at your current wealth,
(14:14):
how much of that wealth you can park away that's
for long term investing, And it most importantly has to
be matched against your risk appetite. Because finance one oh
one higher returns, you have to take higher risks, so
it is slightly more risky, particularly less liquidity in terms
of these investments. So I'd say for each individual investor,
(14:36):
it really depends. It could be as low as new
I cannot afford to take any illiquid risk, or to
five percent, or to ten percent or to twenty percent.
But I'd say probably unlikely one hundred percent. There must
there has to be a bit of your wealth that
you need to keep it liquid, So I'd say twenty
(14:56):
percent ballpark generically sounds right, but obviously each individual you
should do your own whole work.
Speaker 1 (15:04):
Why now, like private equity has been around for a while,
saying with infrastructure, private credit is a little bit new,
but hedge fund's investing has been around for a long time.
What's open the market to retail investors.
Speaker 3 (15:16):
There's definitely that pull and push factor. So, as I mentioned,
in the past couple of years, we have had a
bit of volatility in the markets, and very famously, I
think in the industry people would know there's this denominator effect.
So historically these private markets and alternative investments have only
been accessible to institutional investors. And in the past couple
(15:39):
of years, for example, during COVID, the public markets really
dropped a lot. And because of that denominator. In fact,
a lot of large institutions how they invest. They have
a mandate and I target let's say thirty into private markets,
forty percent into public equities, and then the rest in
public bonds. And because when the public market bit dropped.
(16:01):
The private market bit is overexposed. It's really out of
wack of their target as allocation, so they have to sell.
And a lot of them fund managers, when they realize
their historical target clients need to all suddenly have to
sell all facing this problem, they need to find other
pockets of capital to take this demand. And this is
(16:24):
kind of the push factor. The pull factor is what
I mentioned. For a lot of individual investors, they're also
realizing there is this meriage for them to double their
tolls into as allocating into private markets. Of the three
reasons that I mentioned, and sort of these two factors
coming together, the industry realized, oh, there is that business
(16:47):
case that need to help enable individual investors to be
able to get access to that. So I'd say there
are two very important things that really help enabled individual
investors to gain access. One is the or the proliferation
of what we call evergreen semi liquid funds green semi
(17:07):
liquid funds. So historically for private markets, the only way
you can invest is what we called a close ended fund.
So what big institutions, the softeign, well funds, the insurance company,
what they had to commit to a manager. It's Okay,
I'll give you money and it gets locked up by
(17:27):
five to seven years, and you invest in market companies.
In the next five to seven years, I cannot redeem
the capital, and in five to seven years you promise
to help return the capital. And there's also a nuance
that you commit a capital and then depends on when
the investment opportunity arise, then they would do capital calls.
(17:49):
So that's kind of the traditional what we call locked
up structure close ended fund that you're completely locked up
for five seven years. I think for institutions, you have
professional teams to manage your cash flows, and it's accepted
that approach for a lot of individual investors. So our
(18:10):
circumstances changed, we might change jobs, we might be out
of jobs, we might enter into a different life stage.
Five to seven years is a really long time. It's
quite difficult for individuals to be able to commit to
a close ended vehicle for five to seven years and
to manage that what we call quote unquote capital calls.
So when you get a capital call kind of email
(18:32):
from your fund manager, they'll be like, you committed to
write a check of X dollars and now I've identified
an investment opportunity. You need to wire the money to
meet in two weeks. If you have an investment team
or treasury team, yes you can do that. For individual investors,
you might be on holiday, you might be busy on
something is very difficult. So the industry realized that the
closed ended funds quite difficult for individuals to quote unquote
(18:55):
use as a vehicle. A fund manager that's very prominent
in kind of an innovator in the space, it's Partners Group,
Swisserland based private equity manager who first started this what
we call semi liquid open ended vehicle. When was that
it should be about more than ten years ago, but
it really only proliferated in the past couple of years.
(19:16):
Very interesting evergreen vehicle, meaning so usually for private closed
ended funds it only has like a fun life of
five to seven years. Once it's done investing, it's wine down.
But for evergreen, you don't have that. It's it's evergreen,
it's always there, it's always okay to take client moneies.
And when I say semi liquid, it's not fully liquid.
(19:39):
Usually the managers understand individuals they need some sleeves of
pocket of liquidity. So all these semi liquid vehicles. They
usually allow individuals to have some redemption kind of liquidity
on an intermittent basis, maybe on a quarterly basis, but
they do have gates because the underlying you're investing in
(20:01):
liquid assets. But they would then make sure that a
pocket of the underlying fund invests in some more liquid
assets to be able to honor these redemptions. So semi
liquid evergreen vehicles have really been proliferated and it's much
better investment vehicle for a lot of investors. And a
(20:21):
lot of these evergreen vehicles are also very diversified mixed
vintages instead of previously for closed ended funds, you have
to pick. You might have very professional teams for professional
investors to pick the right vintage. So semil the quid funds,
it's definitely one and then the second bid. It's technology,
So thanks John for the introduction. For example, for in Dallas,
(20:45):
we are a hybrid platform where a lot of clients
can use our platform online and we serve over two
hundred and fifty thousand clients and for us, we can
act as a aggregator for a lot of these fund managers.
So the managers we work with the likes of black Raw, KKR, CARLA.
Historically they serve the largest institution investors and they don't
(21:09):
want to have to build out an army to do
KYC on individual investors checking AML. So working with tech
platforms like ourselves to be able to connect with us
and we act as an aggregator and also personalizing that
advice for clients to make sure their funds are properly distributed.
It's also the reason. Yeah, so when we talk.
Speaker 2 (21:30):
About technology, we're literally talking about a platform.
Speaker 3 (21:33):
Like in Dallas, including yes, definitely including in Dallas.
Speaker 2 (21:36):
Yeah.
Speaker 3 (21:36):
So I think for a lot of fund managers historically
they don't want to touch individuals because it's difficult to
have to educate all your average show one by one
in terms of what is private equity, what is private credit.
But through platforms like in Dallas, we help become the aggregator.
We use technology, use AI to help personalize that advice
(21:59):
to make sure that the right allocation, the right advice
gives to the right kind of end client. So that
gives confidence to these managers that oh, as she don't
have to worry that I have to deal with the
two hundred and fifty thousand clients I have I just
have to deal with in daoas and they can help
me connect me to these individual pools of capital.
Speaker 2 (22:21):
How do you use AI? You just mentioned that, I
think it's interesting.
Speaker 3 (22:25):
So, I mean AI is something that's been around for
a really long time, and I think what recently been
exploded it's jen ai. But for us at En Dallas,
AI is really two things to what we call the
two E'SE one is efficiency and then the other one
is experienced And in this circumstance, I think most interesting
(22:47):
it's personalizing that advice to individuals because going back to
John's question, right, we don't think every client should get
twenty percent as an allocation to power markets is really
different for everyone's circumstance. So how do I use AI
to ask the right questions to understand what exactly is
(23:07):
the right as allocation to our clients. We're constantly embedding
these elements onto our platform through interactions with clients to
help them come up to the right allocation.
Speaker 2 (23:20):
Right, so it would be like a chatbot or.
Speaker 3 (23:23):
Yes, including a chatbot as well as for our human
client advisors, we also have AI bots that help very
quickly go through all the alternatives and product information to
be able to generate, let's say, answers comparisons for our
clients because a lot of these alternatives it's actually much
(23:45):
more complicated than say a money market fund and equity fund.
We don't have a standardized fact sheet. So actually a
lot of these AI tools actually really helps us to
break down these very sophisticated documents. And it's really difficult
for our clients to read these documents. So how do
we leverage technology to help break down the knowledge barrier
(24:08):
to help clients to be able to understand and absorbed
and to find the right information to answer the questions.
It's also something we find very very interesting.
Speaker 1 (24:16):
Stephanie, you mentioned that in endows is named after the
endowment investment philosophy, and you mentioned Yale University as well. Recently,
there's been some negative news like in particular, US university endowments,
who are heavily exposed to alternative investments, are looking to
sell some of their private equity stakes. How should we
(24:40):
interpret these now? I know there's a bit of a
political element because the President Trump is threatening to reduce
some funding to US universities, But what's your take and
how should retail investors view this?
Speaker 3 (24:52):
Exactly. So I think this really goes back to how
much you allocate really depends on your circumstance, and the
circumstance these endowment funds have really changed. I think it
really makes sense. I mean, if their funding is getting
cut and all these endowments have a yearly expensive daily expenses,
they need to pay their staff, they need the liquidity,
(25:12):
then it makes sense for them to cut down on
their over exposure if now they need more liquidity, if
federal funding is not coming in retail investors, I'd say
is on the other spectrum. So we've seen some institutional investors,
including Yelle endowmen historically allocate close to fifty percent or
over fifty percent to part markets. But for individual investors
(25:35):
on a global scale, including high networth individuals, that average
exposure is about five percent, and I think in this
part of the world it's way lower than five percent.
It's probably zero points something. So we're under exposed. So
I think it's a very very different situation. Those institutions
are overexposed, and they now probably need to think about
(25:57):
having well liquidity. Given John, you mentioned circumstances that they
are facing.
Speaker 1 (26:02):
Stephanie, I wanted to ask you a broader question, not
just limited to private assets, but there's been this big
push for investors to sell US assets. At the beginning
of this year, everyone's talking about US exceptionalism. Everyone was
heavily exposed to US assets. Then we had this present
Trump's tariff's potential trade war, and then you had this
(26:24):
like sell America trade. Did you see this in your data?
Speaker 3 (26:29):
I think definitely we've seen client interests. Historically they have
not asked about, oh, for this portfolio data invested in
how much what's the proportion that's geographical exposures to the US.
But obviously US is still the largest, most liquid market globally.
We think it still has a role in clients investment portfolios.
(26:53):
And we also remind clients when you're investing for five years,
ten years, twenty years, you shouldn't act upon on overnight news.
You're not the professional trader. And I think the events
in the past couple of weeks, in the past months
also demonstrated sometimes newsflow can act very fast, but it
does make sense to have a diversified portfolio. Once again,
(27:16):
and in the past couple of years, there has just
been so many incidents to continuously remind clients of this point,
and since this is an Asia centric podcast, I think
and this happens with investors around the globe, but particularly
in Asia. We've seen Hong Kong and Singapore clients both
do have this home bias kind of. We see this
(27:40):
a lot that their jobs already levered to the home market,
their properties levered to home market, and their investment portfolios
also over levered to their home market. And when the
home market goes south, it's double triple whammy impact, right,
So interestingly that it reminds clients that they should stay
diver and interestingly for priate markets, because Asia, the prime
(28:06):
markets segment is still kind of in this nation state,
a lot of the private markets opportunities and investment opportunities
tend to be in US and Europe. It's also part
of the reason why we see Asian investors interested in
getting exposure to private markets. So in this part of
the world, a lot of including us including parents, like
(28:27):
to buy property. Right, if a client has just sold
a few properties in this part of the world and
they've never invested in developed market property, maybe it makes
sense to invest in a private real estate fund ran
by a professional fund manager to diversify that real estate exposure.
So it's very interesting, particularly from an Asian centric perspective.
(28:50):
We've seen private markets also has its appealed to some
Asian investors in terms of diversifying their underlying exposure.
Speaker 2 (29:00):
Thanks so much for joining us today, Stephanie.
Speaker 3 (29:02):
Thank you.
Speaker 2 (29:04):
You've been listening to Asia Centric from Bloomberg Intelligence. I'm
Kaye Teedmitrieva in Hong Kong and.
Speaker 1 (29:09):
I'm John Lee, also in Hong Kong. You can find
all our episodes on Apple Podcasts, Spotify or wherever you listen.
And this podcast was also produced and edited by Clara
Chen And thanks for listening.
Speaker 2 (29:21):
See you next time.
In his annual letter this year, Larry Fink, CEO of Blackrock,
said that investors should allocate up to twenty percent of
their savings into private assets. That advice from the world's
largest asset manager is quite a departure from the traditional
sixty to forty stocks and bond portfolio. That kind of
advice may not have even been possible a decade ago, and.
Speaker 2 (00:24):
It highlights an interesting shift underway in investing where alternative
assets are slowly becoming more available to the average investor.
For a long time, these opportunities think infrastructure, private credit
where the exclusive domain of the super rich and big
institutions like pension funds and insurance companies. But new products
(00:47):
and technologies have been opening up this world for the
average person. This is what some people are calling the
democratization of investing.
Speaker 1 (00:58):
What's the state of play for this democratization. What are
some of the new areas of private investment that individuals
should be aware of, and what are the risks such
as potentially low returns. You're listening to Asia Centric from
Bloomberg Intelligence, and today we're speaking with someone who can
give us a view into how this landscape is evolving.
(01:19):
We're joined by Stephanie Un, head of Hong Kong for Endows,
it's an investment platform and advisor to more than two
hundred and fifty thousand individuals, family officers and institutions across Asia.
They connect investors to fund managers and they've got more
than seven billion dollars in client assets under management, including
(01:40):
four hundred million from private assets. Stephanie, welcome to the show.
Speaker 3 (01:44):
Thanks for having me.
Speaker 1 (01:46):
Stephanie. For listeners, can you give us an idea of
how endows helps average investors connect with private asset opportunities?
Speaker 3 (01:55):
Sure? So, Endowser's name actually stands for endowment and the
best sting for all of us. We wanted to help
individual investors to be able to invest like an institution,
and we got our inspiration really from the Yale Endowment.
So for those of you guys know about Yale Endowment,
probably know their founding CIO David Swinson, one of the
(02:15):
legendary investors of our times who passed away a few
years ago, but he was really the pioneer of sort
of advocating for as allocation and particularly including private assets
into investors portfolio. He famously talks about how a lot
of investors overpay for liquidity. So at the founding of Endawas,
we talked about how there is now kind of this
(02:37):
increasing interest to help individuals to demoketize into private markets.
But it's actually at the very core the beginning of Endawas,
we actually really wanted to help clients to allocate like
an endowment fund, like a Yale endowment, because we believe
this is the sort of as allocation framework. Actually it's
a lot more scientific for investors than just speculating and
(02:58):
punting on stocks. So in Dallas, this is the core
of our work. How do we help our clients to
allocate like an endowment fund, and it could be a
combination of public markets, private markets, alternatives and as sort
of we mentioned that the intro is really exciting that
previously a few years when we first started in Dallas,
(03:19):
we started until I was seventeen. At that time, we
actually couldn't really offer this yet. But in the past
kind of eighteen months we've really been able to work
with a lot of fund managers to enable this to
really be able to realize this vision that we have
that helping individual investors to invest like an endowment fund.
Speaker 2 (03:37):
So can you tell us a bit about the private
asset side. As John mentioned, you have about four hundred million.
That's you know, a chunk of the seven billion, but
it's your fastest or one of the fastest growing areas.
So can you tell us about why that's such a
fast growing area and sort of why you're seeing a
lot more investors coming to you for that.
Speaker 3 (03:59):
Yes, so right now in Dallas, we offer our service
to Hong Kong and Singapore, and as you've rightly mentioned,
we see alternatives, including private markets and hedge funds the
fastest growing asset class on our platform. It has tripled
year on year to close to four hundred million in
terms of client assets. And I'd say for a lot
of clients there are a lot of reasons to why
(04:20):
they consider including private markets and alternatives into their portfolios.
But I would summarize three big reasons. The first and
it's also why we advocate our clients to consider most
important thing, I think it's helping clients to further diversify
their portfolios. I think all of us have experiences in
(04:41):
the past couple of years, especially twenty twenty two was
really something that a lot of people had soul searching
of the public markets, the correlation of different asset classes.
The correlation really went up. You have public equities, public
bonds all went down double digits, so there was quote
unquote no place to hide. So clients are thinking, Okay,
how can I further diversify my portfolios to really strengthen
(05:05):
the resilience. So private markets is a very broad term.
There are many sub asset classes. You have private equity,
you have private credit, you have private real estate, and
increasingly there are different sub asset classes. We see new
innovations that you can invest in, like intellectual property royalties
from IP rights. Those are all very interesting asset classes
(05:27):
that were previously not available for individual investors. These kind
of sub asset classes do have less correlation to public markets,
so it really helps and make sense for investors as
they look to build a more diversified portfolio. And I
guess the second point I briefly touched upon, it's increasing
your investment universe. You can invest in things that are
(05:50):
kind of out of touch if you just dip your
toes into public markets. Right, the largest private companies we've
all heard of, the SpaceX, the open AIP. You can
invest in these companies through the public markets in this
part of the world. There are also many familiar names,
the likes of Byedance, the parent of tektok. These are
all private companies and in fact, if you look at
(06:11):
the statistics, just look at the US right supposed to
be the most liquid market in the world already if
you look at the number of total companies with one
hundred million US revenue above, actually there are seven times
more private companies than public markets for clients to invest into.
And we've also seen this trend. Interestingly, since two thousand,
(06:32):
the number of public companies has really start to decline
by almost half. So actually the investable universe for individual
investors if you just invest in public markets is shrinking.
And thirdly, obviously very important if you look at historical data,
no matter how you cut it, and for those of
us who study finance understand this concept of this illiquid
(06:55):
premium what Swinson said, a lot of people overpay for
liquidity by investing into private markets. Historically you've seen in
every of these subasset classes it does offer investors higher
risk adjusted returns. So, on top of those two reasons
that I mentioned about sort of potentially harnessing higher potential,
(07:15):
higher adjusted returns. Obviously it's also something very attractive to investors.
So I'd say many, many reasons, but those three reasons
are most compelling for a lot of investors to consider.
Speaker 2 (07:27):
In private asset space. I mean, how much money do
I need to have as a retail investor to invest
in something? And are we talking about things like you know,
toll roads in Brazil that pension funds invest in, or
are these different assets? Like who is actually able to
invest in this?
Speaker 3 (07:44):
So we talked about democratization of private assets, but in
our industry is still very highly regulated industry. For a
lot of these private markets funds, even though we've quote
unquote democratized, there's still privy to what we call professional
investors or credit investors, so people with a certain net worth.
(08:06):
And even though we've worked very hard, for example, in Dallas,
we work very hard without for manager partners to lower
the investment minimum. Generally the investment minimum for these assets
are at one hundred thousand US dollars or above. But
the saving grace is.
Speaker 2 (08:23):
Not quite democratization yet.
Speaker 1 (08:25):
It's still not main street, it's literally.
Speaker 3 (08:30):
But everything is on a relative level. So historically even
the lowest, lowest if you go to a private bank.
Let's say you're quote unquote ultra high networth individual. The
lowest probably it's two to three million US. So on
a relative basis, from two to three million US to
one hundred thousand, it's gone down quite a bit if
you do the math. But what's more interesting is historically
(08:52):
that two three million, it's just into one single product
in Dallas, and a lot of our clients, our core
client base, are fluent clients, early high network clients. What
would realize what they want? It's that beta exposure into
private markets. So I've never had access to private credit.
I've never get access to private equity, not necessarily like
(09:15):
a professional institutional investor looking for alpha, like I am
looking at manager a vintage twenty and twenty that's the
best performing. But for a lot of clients it's their
first double into the asset class. They're okay with just
getting the beta, higher potential of res adjustice return. So
we were actually launching a lot of these what we
(09:37):
call funnel funds. So one hundred k US dollars, you
get a portfolio of private equity managers the likes of
your black Row, your ares, your KHR, and all into
one portfolio with your one hundred K check. So yes,
i'd agree it's not yet sort of average investor yet,
but at least to a certain lower tier. Now you
(10:01):
can get a diversified exposure to these blue chip names
which I started out my career investment banking. These are
gps that I used to cover. I would really never
imagine that I could become an investor in these funds.
So I think as a step.
Speaker 1 (10:17):
Towards this, Asia Centric is produced by Bloomberg Intelligence. We're
more than five hundred experienced analysts and strategists work around
the clock to bring you timely, world class research. Our
coverage spans two hundred market industries, currencies, commodities, and industries,
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(10:37):
learn more about Bloomberg Intelligence, visit BI go on the
Bloomberg terminal. If you like what you're hear, don't forget
to subscribe and shair. What type of returns do you
think investors should be expecting in the private space?
Speaker 2 (10:52):
Yeah, because in recent years the returns haven't necessarily been
as high as you know five six years ago.
Speaker 3 (11:00):
So I'd say, going back to what I mentioned when
we advise clients to consider private markets. The number one
reason I always share with clients it's diversification, not necessarily
the returns, because no one can really guarantee the returns. Yes,
we look at historical numbers, the likes of private equity,
the likes of private credit. Historically the numbers have been
(11:22):
higher than public markets. But you never know at what
cycle you invest, And for example, in private equity, I'm
sure a lot of us are familiar with the term
different vintages, right, different vintages could also at different times
where you invest could also have a big impact on
your ultimate returns. So no matter how you cut the data,
(11:44):
there's definitely higher resuggested returns. And going back to what
John you mentioned earlier, I also find it super interesting
for Larry Think to have mentioned that fifty to thirty
twenty allocation. And we've ran some numbers, including us including
a lot of platforms for individual investors. I'm not talking about, okay,
(12:05):
making one specific bet on one private equity fund or
private credit fund. If you're looking at diversification and you
include a more kind of diversified private markets, you have
a bit of private equity, a bit of private realist
at a bit of prior credit into your portfolio and
kind of include it in your sixty to forty portfolio.
(12:27):
If we're not looking at okay, you just happen to
invest in the top tier managers. But if you get
the general average returns overall, it improves against a sixty
to forty by one hundred to one hundred fifty basis point,
and it helps kind of lower the volatility also by
twenty to thirty percent. So I think that's really interesting
(12:48):
and for Larry think right for him about fifteen twenty
years ago to make that big bet on ice shares
and really revolutionized and popularized index investing, for him to
really say, okay, the next thing is private markets. I
think it's it's quite powerful, and we are seeing a
lot of these trends that he mentioned coming together.
Speaker 1 (13:10):
And for the benefit of the listeners, Alarry thinks suggested
that you should invest fifty percent in stocks, thirty percent
in fixed income or bonds, and twenty percent in private assets.
Speaker 2 (13:20):
And I just got to ask, I mean, not to
put you up against Larry, I think, but do you
think that that twenty percent or that mix that John
just mentioned with twenty percent to private assets. Do you
think that's the right one?
Speaker 3 (13:32):
So Eden, Dallas, we never give out any like sort
of okay, everyone should follow the same rule, because we
do think personal investing is something very personal to your
own circumstances. So for us, we definitely remind our clients
that there are reasons to why private markets historically has
(13:52):
only been sort of investable by institution investors or had
now worth individuals because it is indeed illiquid. So we
definitely would not advise our clients to invest their liquid
pocket or their sort of raining day money into private markets.
That's really not right. So it really depends on you
look at your needs, You look at your current wealth,
(14:14):
how much of that wealth you can park away that's
for long term investing, And it most importantly has to
be matched against your risk appetite. Because finance one oh
one higher returns, you have to take higher risks, so
it is slightly more risky, particularly less liquidity in terms
of these investments. So I'd say for each individual investor,
(14:36):
it really depends. It could be as low as new
I cannot afford to take any illiquid risk, or to
five percent, or to ten percent or to twenty percent.
But I'd say probably unlikely one hundred percent. There must
there has to be a bit of your wealth that
you need to keep it liquid, So I'd say twenty
(14:56):
percent ballpark generically sounds right, but obviously each individual you
should do your own whole work.
Speaker 1 (15:04):
Why now, like private equity has been around for a while,
saying with infrastructure, private credit is a little bit new,
but hedge fund's investing has been around for a long time.
What's open the market to retail investors.
Speaker 3 (15:16):
There's definitely that pull and push factor. So, as I mentioned,
in the past couple of years, we have had a
bit of volatility in the markets, and very famously, I
think in the industry people would know there's this denominator effect.
So historically these private markets and alternative investments have only
been accessible to institutional investors. And in the past couple
(15:39):
of years, for example, during COVID, the public markets really
dropped a lot. And because of that denominator. In fact,
a lot of large institutions how they invest. They have
a mandate and I target let's say thirty into private markets,
forty percent into public equities, and then the rest in
public bonds. And because when the public market bit dropped.
(16:01):
The private market bit is overexposed. It's really out of
wack of their target as allocation, so they have to sell.
And a lot of them fund managers, when they realize
their historical target clients need to all suddenly have to
sell all facing this problem, they need to find other
pockets of capital to take this demand. And this is
(16:24):
kind of the push factor. The pull factor is what
I mentioned. For a lot of individual investors, they're also
realizing there is this meriage for them to double their
tolls into as allocating into private markets. Of the three
reasons that I mentioned, and sort of these two factors
coming together, the industry realized, oh, there is that business
(16:47):
case that need to help enable individual investors to be
able to get access to that. So I'd say there
are two very important things that really help enabled individual
investors to gain access. One is the or the proliferation
of what we call evergreen semi liquid funds green semi
(17:07):
liquid funds. So historically for private markets, the only way
you can invest is what we called a close ended fund.
So what big institutions, the softeign, well funds, the insurance company,
what they had to commit to a manager. It's Okay,
I'll give you money and it gets locked up by
(17:27):
five to seven years, and you invest in market companies.
In the next five to seven years, I cannot redeem
the capital, and in five to seven years you promise
to help return the capital. And there's also a nuance
that you commit a capital and then depends on when
the investment opportunity arise, then they would do capital calls.
(17:49):
So that's kind of the traditional what we call locked
up structure close ended fund that you're completely locked up
for five seven years. I think for institutions, you have
professional teams to manage your cash flows, and it's accepted
that approach for a lot of individual investors. So our
(18:10):
circumstances changed, we might change jobs, we might be out
of jobs, we might enter into a different life stage.
Five to seven years is a really long time. It's
quite difficult for individuals to be able to commit to
a close ended vehicle for five to seven years and
to manage that what we call quote unquote capital calls.
So when you get a capital call kind of email
(18:32):
from your fund manager, they'll be like, you committed to
write a check of X dollars and now I've identified
an investment opportunity. You need to wire the money to
meet in two weeks. If you have an investment team
or treasury team, yes you can do that. For individual investors,
you might be on holiday, you might be busy on
something is very difficult. So the industry realized that the
closed ended funds quite difficult for individuals to quote unquote
(18:55):
use as a vehicle. A fund manager that's very prominent
in kind of an innovator in the space, it's Partners Group,
Swisserland based private equity manager who first started this what
we call semi liquid open ended vehicle. When was that
it should be about more than ten years ago, but
it really only proliferated in the past couple of years.
(19:16):
Very interesting evergreen vehicle, meaning so usually for private closed
ended funds it only has like a fun life of
five to seven years. Once it's done investing, it's wine down.
But for evergreen, you don't have that. It's it's evergreen,
it's always there, it's always okay to take client moneies.
And when I say semi liquid, it's not fully liquid.
(19:39):
Usually the managers understand individuals they need some sleeves of
pocket of liquidity. So all these semi liquid vehicles. They
usually allow individuals to have some redemption kind of liquidity
on an intermittent basis, maybe on a quarterly basis, but
they do have gates because the underlying you're investing in
(20:01):
liquid assets. But they would then make sure that a
pocket of the underlying fund invests in some more liquid
assets to be able to honor these redemptions. So semi
liquid evergreen vehicles have really been proliferated and it's much
better investment vehicle for a lot of investors. And a
(20:21):
lot of these evergreen vehicles are also very diversified mixed
vintages instead of previously for closed ended funds, you have
to pick. You might have very professional teams for professional
investors to pick the right vintage. So semil the quid funds,
it's definitely one and then the second bid. It's technology,
So thanks John for the introduction. For example, for in Dallas,
(20:45):
we are a hybrid platform where a lot of clients
can use our platform online and we serve over two
hundred and fifty thousand clients and for us, we can
act as a aggregator for a lot of these fund managers.
So the managers we work with the likes of black Raw, KKR, CARLA.
Historically they serve the largest institution investors and they don't
(21:09):
want to have to build out an army to do
KYC on individual investors checking AML. So working with tech
platforms like ourselves to be able to connect with us
and we act as an aggregator and also personalizing that
advice for clients to make sure their funds are properly distributed.
It's also the reason. Yeah, so when we talk.
Speaker 2 (21:30):
About technology, we're literally talking about a platform.
Speaker 3 (21:33):
Like in Dallas, including yes, definitely including in Dallas.
Speaker 2 (21:36):
Yeah.
Speaker 3 (21:36):
So I think for a lot of fund managers historically
they don't want to touch individuals because it's difficult to
have to educate all your average show one by one
in terms of what is private equity, what is private credit.
But through platforms like in Dallas, we help become the aggregator.
We use technology, use AI to help personalize that advice
(21:59):
to make sure that the right allocation, the right advice
gives to the right kind of end client. So that
gives confidence to these managers that oh, as she don't
have to worry that I have to deal with the
two hundred and fifty thousand clients I have I just
have to deal with in daoas and they can help
me connect me to these individual pools of capital.
Speaker 2 (22:21):
How do you use AI? You just mentioned that, I
think it's interesting.
Speaker 3 (22:25):
So, I mean AI is something that's been around for
a really long time, and I think what recently been
exploded it's jen ai. But for us at En Dallas,
AI is really two things to what we call the
two E'SE one is efficiency and then the other one
is experienced And in this circumstance, I think most interesting
(22:47):
it's personalizing that advice to individuals because going back to
John's question, right, we don't think every client should get
twenty percent as an allocation to power markets is really
different for everyone's circumstance. So how do I use AI
to ask the right questions to understand what exactly is
(23:07):
the right as allocation to our clients. We're constantly embedding
these elements onto our platform through interactions with clients to
help them come up to the right allocation.
Speaker 2 (23:20):
Right, so it would be like a chatbot or.
Speaker 3 (23:23):
Yes, including a chatbot as well as for our human
client advisors, we also have AI bots that help very
quickly go through all the alternatives and product information to
be able to generate, let's say, answers comparisons for our
clients because a lot of these alternatives it's actually much
(23:45):
more complicated than say a money market fund and equity fund.
We don't have a standardized fact sheet. So actually a
lot of these AI tools actually really helps us to
break down these very sophisticated documents. And it's really difficult
for our clients to read these documents. So how do
we leverage technology to help break down the knowledge barrier
(24:08):
to help clients to be able to understand and absorbed
and to find the right information to answer the questions.
It's also something we find very very interesting.
Speaker 1 (24:16):
Stephanie, you mentioned that in endows is named after the
endowment investment philosophy, and you mentioned Yale University as well. Recently,
there's been some negative news like in particular, US university endowments,
who are heavily exposed to alternative investments, are looking to
sell some of their private equity stakes. How should we
(24:40):
interpret these now? I know there's a bit of a
political element because the President Trump is threatening to reduce
some funding to US universities, But what's your take and
how should retail investors view this?
Speaker 3 (24:52):
Exactly. So I think this really goes back to how
much you allocate really depends on your circumstance, and the
circumstance these endowment funds have really changed. I think it
really makes sense. I mean, if their funding is getting
cut and all these endowments have a yearly expensive daily expenses,
they need to pay their staff, they need the liquidity,
(25:12):
then it makes sense for them to cut down on
their over exposure if now they need more liquidity, if
federal funding is not coming in retail investors, I'd say
is on the other spectrum. So we've seen some institutional investors,
including Yelle endowmen historically allocate close to fifty percent or
over fifty percent to part markets. But for individual investors
(25:35):
on a global scale, including high networth individuals, that average
exposure is about five percent, and I think in this
part of the world it's way lower than five percent.
It's probably zero points something. So we're under exposed. So
I think it's a very very different situation. Those institutions
are overexposed, and they now probably need to think about
(25:57):
having well liquidity. Given John, you mentioned circumstances that they
are facing.
Speaker 1 (26:02):
Stephanie, I wanted to ask you a broader question, not
just limited to private assets, but there's been this big
push for investors to sell US assets. At the beginning
of this year, everyone's talking about US exceptionalism. Everyone was
heavily exposed to US assets. Then we had this present
Trump's tariff's potential trade war, and then you had this
(26:24):
like sell America trade. Did you see this in your data?
Speaker 3 (26:29):
I think definitely we've seen client interests. Historically they have
not asked about, oh, for this portfolio data invested in
how much what's the proportion that's geographical exposures to the US.
But obviously US is still the largest, most liquid market globally.
We think it still has a role in clients investment portfolios.
(26:53):
And we also remind clients when you're investing for five years,
ten years, twenty years, you shouldn't act upon on overnight news.
You're not the professional trader. And I think the events
in the past couple of weeks, in the past months
also demonstrated sometimes newsflow can act very fast, but it
does make sense to have a diversified portfolio. Once again,
(27:16):
and in the past couple of years, there has just
been so many incidents to continuously remind clients of this point,
and since this is an Asia centric podcast, I think
and this happens with investors around the globe, but particularly
in Asia. We've seen Hong Kong and Singapore clients both
do have this home bias kind of. We see this
(27:40):
a lot that their jobs already levered to the home market,
their properties levered to home market, and their investment portfolios
also over levered to their home market. And when the
home market goes south, it's double triple whammy impact, right,
So interestingly that it reminds clients that they should stay
diver and interestingly for priate markets, because Asia, the prime
(28:06):
markets segment is still kind of in this nation state,
a lot of the private markets opportunities and investment opportunities
tend to be in US and Europe. It's also part
of the reason why we see Asian investors interested in
getting exposure to private markets. So in this part of
the world, a lot of including us including parents, like
(28:27):
to buy property. Right, if a client has just sold
a few properties in this part of the world and
they've never invested in developed market property, maybe it makes
sense to invest in a private real estate fund ran
by a professional fund manager to diversify that real estate exposure.
So it's very interesting, particularly from an Asian centric perspective.
(28:50):
We've seen private markets also has its appealed to some
Asian investors in terms of diversifying their underlying exposure.
Speaker 2 (29:00):
Thanks so much for joining us today, Stephanie.
Speaker 3 (29:02):
Thank you.
Speaker 2 (29:04):
You've been listening to Asia Centric from Bloomberg Intelligence. I'm
Kaye Teedmitrieva in Hong Kong and.
Speaker 1 (29:09):
I'm John Lee, also in Hong Kong. You can find
all our episodes on Apple Podcasts, Spotify or wherever you listen.
And this podcast was also produced and edited by Clara
Chen And thanks for listening.
Speaker 2 (29:21):
See you next time.
Hosts And Creators
John Lee
Tom Corbett
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