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January 10, 2024 39 mins

Ark Invest CEO and CIO Cathie Wood discusses US regulators for the first time approving exchange-traded funds that invest directly in Bitcoin, a move heralded as a landmark event for the roughly $1.7 trillion digital-asset sector that will broaden access to the largest cryptocurrency on Wall Street and beyond. Ophelia Snyder, President at 21 Shares also joins the conversation. Michael Shvo, Founder and CEO of SHVO, talks about his efforts to revive San Francisco real estate. And we Drive to the Close with Alison Shimada, Head of the Total Emerging Markets team at Allspring Global Investment.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.

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Episode Transcript

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Speaker 1 (00:01):
This is Bloomberg business Week Inside from the reporters and
editors who bring you America's most trusted business magazine, plus
global business finance and tech news. The Bloomberg Business Week
Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

Speaker 2 (00:20):
If you're just now joining us in breaking news, US
regulators for the first time approving ETFs that invest directly
in bitcoin. This is a move heralded as a landmark
event for the roughly one point seven trillion dollar asset industry,
the digital asset sector that will broaden access to the
largest cryptocurrency on Wall Street and beyond. The SEC, whose

(00:40):
three part mandate includes investor protection authorized eleven funds to
begin trading on Thursday. Let's now go to Carol Masser,
who's standing by with Kathy Wood, the CIO, CEO and
co founder of ARC invest.

Speaker 3 (00:54):
All right, so, Kathy, what do you think about in
this moment of time, As we said, this has been
long in coming.

Speaker 4 (01:00):
Yes, well, you described two ways this could happen. It
can happen very quickly or will it happen very slowly?
When you're talking about institutions that that you know have
been very fearful of this space because of Gary Gensler
and you know, all of the drama. I think they're

(01:22):
going to tread lightly. I don't know if you saw,
but Gary Gensler put out a piece today right as
we're about to go effective, and I'm sure we all
went effective roughly around the same time, and he just
denigrated the whole crypto space.

Speaker 5 (01:39):
It was just like I couldn't believe it.

Speaker 4 (01:42):
So anyway, it's with that kind of trepidation that institutions
are going to have to, you know, work through and
do all of their due diligence. However, I do think
that a lot of investors have considered, you know, have
been curious. And you'll see we've been from a marketing campaign.

(02:07):
We've been using this tagline, aren't you a bit curious?
There are so many people who are curious out there.
Of course, a lot of our existing clients know all
about bitcoin because we have owned it since twenty fifteen,
but there are a lot of people who really have
a hunger to know, and we can see that as

(02:30):
more and more people read our research, tune into our
Bitcoin brainstorm that we do with Rod and Bitcoin Park
in Nashville, Tennessee. Read our Bitcoin monthlies and you know,
read all we have to say about crypto and blogs
and in our Brainstorm summary. So you know, we are

(02:52):
getting all the curiosity. I think that's why we started.
So we know a lot of people are waiting and
believe it or not, Carol the curious extend to state
pension funds and state treasurers we're talking to. So it's
a really broad swap.

Speaker 5 (03:12):
Well catch people.

Speaker 3 (03:13):
And I do wonder what you think success will be
out of the gate in terms of investment flows.

Speaker 6 (03:17):
What's your hope, what's your goal or estimate in terms
of bringing investors into the fund.

Speaker 5 (03:23):
Well, it's very interesting.

Speaker 4 (03:25):
I was, we were I was speaking to Eric Beltunis,
her colleague, and according to his estimates, there's there's four
billion dollars waiting, you know, in the wings. And I
said to him, well, from your lips to God's ears,
that would be amazing.

Speaker 5 (03:45):
And you know, we hope we get our fair share
of it.

Speaker 4 (03:48):
I mean, we've certainly, we've certainly done a lot to
educate the community, and we experience a lot of gratitude
for that too, from from from the innovation communities, including
the bitcoin community. But also from the financial community, those
who really are trying to find the next big idea.

(04:09):
The old guard you know, basically throw out there all
kinds of risks, and you know, some people call it fear,
uncertainty and doubt. It happens every time, Carol, And I'm
not saying it's a bad thing for people to really
do their homework. They should do their homework, they should

(04:29):
understand the risks. But this is par for the course
in disruptive innovation, you know. And thank you, Carol. You
gave us our first interview twenty fifteen when we were
barely off the ground.

Speaker 5 (04:45):
You believed in us back then.

Speaker 4 (04:48):
And at the time, you remember, we were talking about Tesla.
So fear uncertainty and doubt, not even about autonomous which
is the next set.

Speaker 5 (04:57):
Of fears, but about evs.

Speaker 4 (05:00):
Wouldn't traditional auto manufacturers absolutely choke them to death? This
is completely new DNA, and so it's the old DNA
as the old car companies were the old DNA, you know,
basically bashing the old new DNA.

Speaker 5 (05:16):
But truth wins out.

Speaker 4 (05:19):
Truth wins out, better, factor, cheaper, more productive.

Speaker 3 (05:24):
So yeah, you know, one thing I want to ask
you is as like yourself all of us here in
the newsroom, you know, watching just you know, new things
come into the market over decades, and this is certainly interesting,
but we are still wondering about the real case use.
I mean that no one has really demonstrated a real
life use case when it comes to bitcoin.

Speaker 5 (05:45):
We think about it all the time.

Speaker 4 (05:48):
Our first paper, white paper, was all about could bitcoin
serve the three rolls of money means of exchange, store value,
unit of account. Most people are thinking store of value
right now. But I'm going to plug one of our
bitcoin brainstorms if you want a mind blowing experience. And

(06:09):
I am lucky to be able to ask questions on
these brainstorms. But we had I think it was either
our second or third brainstorm, which was about the convergence
of bitcoin and artificial intelligence. And we had on people

(06:30):
who are toiling to make all of this happen, one
of them a roast beef from the Lightning Network or
Lightning Labs. And I have to tell you what's going
on in the emerging markets and the division of labor,
the redefinition of labor a little bit like what happened

(06:53):
to the gig economy here, but put that on steroids.
Put that on steroids. It's already starting to happen. So
I would highly, highly highly advise anyone interested in trying
to figure out how the world is going to work
listen to that Bitcoin brainstorm, because it's already starting to

(07:13):
work in the emerging markets where they need it so desperately.

Speaker 3 (07:17):
Kathy, what's the advantage of the arc spot Bitcoin etf
over the others who also got to prove today? You know,
we've been, as you know, reporting a lot about this
kind of war on fees. Again today you guys cutting
your fee. So what's the advantage of going with you
versus a black Rock or a Fidelity or some of
the other players who are out there.

Speaker 4 (07:37):
So at least three advantages, Carol. First, we selected our
partner very carefully. Twenty one Shares is the largest peer
play crypto ETP provider in the world with two and
a half billion dollars in assets.

Speaker 5 (07:58):
So what does that mean.

Speaker 4 (08:00):
That means with their forty funds before we launched with them,
with their forty funds launched over five years, they have
battle tested their infrastructure over booms and busts, over crises, over.

Speaker 5 (08:17):
Havings, over four kings.

Speaker 4 (08:20):
This is not normal for the ETF world, and we
think the other ETF providers have a lot to learn,
and I'm sure they are and they will as we
go through these different kinds of experiences and the end
they have economies of scale, believe it or not that

(08:40):
have enabled us to drive down our fees.

Speaker 5 (08:43):
This way.

Speaker 4 (08:45):
We have more economies of scale because of the infrastructure
that twenty one shares have built out.

Speaker 5 (08:50):
So that's the first. The second is research.

Speaker 4 (08:54):
Both of us give our research away for free. Our
research started in two twenty fourteen. We were trying to
understand the technology, and then when Chris Berniski took over,
we fast forwarded into understanding bitcoin is money and then
a new asset class. So we have been taking our clients' perspective. Clients,

(09:20):
anyone who wants to read our research, this journey with
us through deep, deep research, and it's getting deeper under
Yassin's leadership.

Speaker 5 (09:30):
So that's the second. And then the third, and this
one is not to.

Speaker 4 (09:34):
Be underestimated us, especially when it comes to the wirehouses
like the Morgan Stanley's, the merri Lynch, the ubs Wells Fargo.
Our salesforce, our distributor, Resolute, has had our ETF specials

(09:57):
specialists have had to understand bitcoin since we struck our
partnership in twenty sixteen.

Speaker 5 (10:04):
I had a funny story.

Speaker 4 (10:05):
Rebecca Burke, who's our most senior ETF specialist, joked with
me the other day.

Speaker 5 (10:11):
She said, do you know when I was coming to
interview to I looked up what is bitcoin?

Speaker 4 (10:20):
And we all laughed about it because now she not
only understands it, she believes in it. Her conviction is
how she's able to share that message and hold client's
hands when bitcoin goes through some of the volatility that
we see it go through regularly. So I think those three.

(10:41):
We have the infrastructure and operations. We have the research,
deep research, and we've been doing it longer than anyone else.
And three we have a support team a sales team
that I don't think anyone else out there can beat
because we've been doing it together for seven years already,

(11:01):
and the same for twenty one shares. More on the
institutional side, they have been working with their clients for
five years.

Speaker 3 (11:10):
I want to remind everybody we are, of course on
X basis. I'm Carol Master of Bloomberg TV and Radio.
I'm talking with Kathy Wood ourc invest founder CEO CIO
on a day when the SEC approves bitcoin spot.

Speaker 2 (11:23):
You're hearing a conversation that Carol Masser is having with
Kathy Wood, the CEO, CIO and founder of ARC Invest,
talking all about the news today that the US regulators
have approved an ETF that invests directly in bitcoin. Let's
go back to that conversation.

Speaker 6 (11:38):
Listing some of the concerns that could happen.

Speaker 3 (11:41):
One of the things we wondered about Kathy, and I'm curious,
you know, I'm thinking people who are listening to this,
what is the recourse if a custodian who holds the
keys to bitcoin loses them, you know, are they're hacked?

Speaker 6 (11:51):
What's the investor recourse?

Speaker 4 (11:56):
You know what we have with us on those calls
of Felia and Haney, who are the founders of twenty
one shares this you're talking about infrastructure operations.

Speaker 5 (12:08):
This is what I'm talking about. May I open up
the floor to them?

Speaker 6 (12:12):
Aphelia, you want to come in on that. You are partnership.

Speaker 3 (12:15):
You know, it's a partnership with you at our absolutely
what's your thought on that in terms of concerns that
if something happens, if it is hacked, what's the investor recourse?

Speaker 7 (12:25):
So people are completely right to be concerned. This is
the whole point. This is not like stocks and bonds.
This requires a very different level of infrastructure, and so
I think the first step in this discussion is very
clearly prevention. You need to build as robust of a
setup as possible, and you need to battle test it.

(12:47):
So we've been battle testing our implementations with custodians, our
technical infrastructure and the way in which we safeguard assets
for five years. That's the entire point. You can't treat
this like any other asset in the world. It's a
it's a bearer asset, and it's held in a very
technical way. So one of the things that we do

(13:07):
is we obviously we use a concept called cold storage.
That means is that these assets are held offline in
wallets that have never been brought into the Internet, so
you've never used them before, which means that they are
the information related to the private key doesn't exist on
the Internet. It's sort of the you can think of

(13:28):
it as the diametric opposite of cloud storage. You essentially
end up with a private key that's been charted, so
it's been split into multiple pieces, and you need to
bring multiple pieces online at the same time. Those pieces
are held in vaults that are geographically distributed in order
to control access to these products, and then we obviously

(13:51):
have a really robust set of controls around that in
terms of how you initiate transfers and how you actually
move assets, because the most dangerous part of custody is
actually very much the point at which you access it right.
Very frequently, you know, when people say, oh, somebody took
over my exchange account, the underlying wallet's not being hacked.

(14:14):
What's actually happening is that their security and access protocols
are being compromised in some way not dissimilar from certain
social media issues which might have happened yesterday. And so
it's really important how you actually secure these assets and
why you need to go with a provider that's actually
going has a track record of doing this and knows

(14:35):
what they're doing through a variety of market conditions, because
this is actually a very very technical space.

Speaker 6 (14:42):
I appreciate that Ophilias Knightder co founder president of twenty one.

Speaker 3 (14:45):
Years and of course offering up the Bitcoin ETF with
our investments. Kathy One thing I also think is concerns
about the price of bitcoin, the volatility. The last three
full year returns were gains of three hundred and five
percent twenty twenty up another sixty twenty one, followed by
a loss of sixty four twenty twenty two. It's it's

(15:05):
a market that can move around. We saw a little
bit of a pop a bitcoin. Will volatility continue to
be a risk or something that investors have to be
very much aware of? And I'm curious, what is your
price forecast at this point now that you've got the
SEC approval for bitcoin?

Speaker 5 (15:20):
Sure, a couple of things.

Speaker 4 (15:22):
So the volatility, this again is natural for disruptive innovation
that is really going taking market share in any market.
So it's it's normal, Carol. You've seen from our funs
how how disruptive innovation can be affected by exogitiveness factors

(15:50):
that don't have anything to do with the share they're
actually gaining. In fact, we know that during tough time,
innovation gains more traction because it's better, cheaper, faster, more productive,
and so forth. And this and you saw this during
the regional bank crisis. The regional banks imploded, the KRRY

(16:13):
index imploded, we saw bankruptcies and bitcoin shot up forty percent.

Speaker 5 (16:18):
Why it's a flight to safety.

Speaker 4 (16:21):
It is not it will not be a victim of
counter of counterparty risk the way the banks will. So
it's it's actually as time goes on and we go
through more and more crises, and it seems the way
government spending and monetary policies go, you know that that
is not going to change. I think bitcoin is going

(16:44):
to prove it's worth you know, one in terms of price,
and then I'd like to just talk about fees because
that's so context. Yes, so our price target are our
bull price target, and I would say institution tuitional money
moving in makes our bull price target more likely. Now

(17:08):
is one point five million dollars in twenty thirty And
you can see in Big Ideas, our big ideas from
last year ar at ark dash Invest ourdash invest dot
com how we the building blocks for that number, right,
and institutional is one of the biggest reasons. In terms

(17:31):
of fees, you'll notice twenty one that's a very special number.
First of all, those are our partners twenty one year,
but also twenty one million units, our twenty one million
bitcoin will that is the total number that will be

(17:51):
printed or minted right there. It will not go past
twenty one million. This is called this is called a
rules based monetary system. And so that fee we thought
that was clever and we were going to start out
with that one, but we knew what was going to happen,
so we ended up there. But I want to bring

(18:15):
back something I mentioned other before. We already have the
economies of scale that others do not because of our
partner twenty one shares, and so we've been able to
negotiate down service provider fees in a way that we
would not have been able to if we had done
this by ourselves. And the other thing I want to

(18:36):
emphasize we are not looking to maximize profits with this.
We are looking at bitcoin as a public good. It
is a financial super highway and we want to increase
the access to bitcoin, and one of the ways to

(18:57):
do that is this low fee product. We have other
actively managed strategies where we can do more on the
profitability side, right, It's not our objective here, Kathy.

Speaker 3 (19:09):
Just one last question and that I'm glad we got
that thirty seconds is to wrap up. I mean, what
does success look for you guys in a year from
now with this particular product.

Speaker 4 (19:19):
Well, I think I think we will be a part
of the success of bitcoin broadly. I think this opens
a new chapter for bitcoin, and I would like to
believe we would we will be within the top top
three or two top providers of bitcoin through this Bitcoin ETF.

Speaker 3 (19:41):
All right, Just lastly, as you know, I like to
squeeze and stuff fifteen seconds. Is there new cryptocurrent products
ETFs that might come out from you guys as well
in the near future.

Speaker 5 (19:52):
Well, we already put with twenty one shares out five
futures products. Those are right strategy. One last thing I'd
like like to I'd like to.

Speaker 4 (20:01):
Honor all of those who have toiled to make bitcoin
happen through this ETF.

Speaker 5 (20:07):
I want to reassure the community, the bitcoin community.

Speaker 1 (20:10):
That.

Speaker 4 (20:12):
Self custody, self custody and an ETF are not mutually exclusive.
We want to see this ecosystem continue to decentralize, but
we want to bring billions of people into the ecosystem.
And this is why twenty one basis points ARKB.

Speaker 3 (20:33):
Kathy, I so appreciate you including me on this platform. Kathy,
would arcinvest founder CEO CIO.

Speaker 1 (20:40):
You're listening to the Bloomberg Business Week podcast. Catch us
Live weekday afternoons from three to six Eastern Listen on
Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app,
or wants us Live on YouTube.

Speaker 3 (21:03):
All right, everybody, So a recent story from our pre
and on here at Bloomberg on how the demise of
San Francisco's has been greatly exaggerated. She talked about kind
of walking around and things weren't as bad as everybody's
been talking about. She also noted that in the twelve
months ending July twenty twenty three, the city actually gained
forty nine hundred residents after also seeing some slight growth
in the prior year, according to some new data that

(21:25):
was out.

Speaker 2 (21:25):
Yeah, some actually good data though, was you know, it's
not just anecdotal, based on her experience there, believing in
this city. Our next guest, who acquired the Transamerica Pyramid
Center in San Francisco for six hundred and fifty million
dollars at the height of the pandemic. Back with us.
We got Michael Schave, chairman and CEO of Cheveaux, a
real estate owner, investor, and developer of unique and innovative

(21:46):
luxury and landmark properties. Michael, good to have you back
with us. How are you, thank you? Happy New Year,
Happy New Year. So let's take a step back and
just talk about your history in San Francisco and how
it came about that you found yourself at you know,
the height of the pandemic acquiring such an iconic building
in the city.

Speaker 8 (22:04):
You know, since my business is really focused on owning,
operating super prime real estate, when the opportunity came about
to acquire the Pyramid, it was not really a matter
of time having these type of opportunities at once in
a lifetime. I'm the second owner of the property, after
the original owner of trans America, which built the building
as their headquarters. But when you buy building for you know,

(22:28):
fifty years or not for five years, you're not really
concerned about the little bumps in the market. You know.
Everybody sees black when when it's dark, and they see
light when it's light, and that's really not the time
to buy real estate. I took a quite a large bed,
not only on San Francisco, San Francisco, Chicago, Miami, LA.
All through COVID. We bought around five billion dollars of
real estate through COVID and a lot of office buildings went.

(22:50):
There was a notion that people are never going to
come back to work. Obviously, that was another demise that
was well, it was so.

Speaker 3 (22:56):
Confident that you thought, well, you know what, that's not
exactly going to happen. Or is the case that you
just bought top tier properties that you know that for
the folks who were coming back to work, that's where
they were going to want to be.

Speaker 8 (23:07):
I think you hit you hit both nails on the head.
But the first notion is that that people are not
meant to be alone. When you walk here to the
Bloomberg's offices, I mean pretty cool stuff, right, cool stuff,
and everybody's together, and everybody's sitting together and want to
be together. The idea of working from home in your
pajamas on zoom is not sustainable, and that was that

(23:27):
was my initial bet. The San Francisco idea was again
a city that took a big hit through COVID because
of you know, tech issues that these are the first
companies that work from home. But in San Francisco is
a resilient city. It's a city that constantly reinvents itself
and the Boom and AI right now is unbelievable.

Speaker 3 (23:47):
It's one you know, one thing I was gonna think about,
tim because I know we've had a lot of conversations
about work from home. If you talk to a lot
of the West Coast tech companies, they're like, we were
already working from home. We were already flexible with how
we were. So I almost wonder that maybe the impact
wasn't going to be as strong. I don't know.

Speaker 8 (24:06):
Again, there was there was a mental impact because it
was it became not just a tech thing. It was
there was a there was a conversation that offices is
absolute right, and and that obviously is was and ended
up being nonsense. And we're seeing today, I mean, our
New York offices on Fifth Avenue are fully occupied. The
Pyramid is renting at two and a half times the

(24:26):
rent that it rented pre COVID. So not only people
are coming back, you know, we've obviously were just completing
a four hundred million dollars renovation there.

Speaker 6 (24:34):
Who is coming back?

Speaker 8 (24:35):
What type of tenants, VC's financial services, law firms. You're
seeing really the gamut, but the pyramids specifically, these are
leaders of the industry, right, It's a building that was
built for for kind of built for the future, right,
and that that's the type of tenants that that we're
getting there. But it's also now become the the you know,

(24:55):
the center of San Francisco. This is what San Francisco
believes is going to be the next thing that's going
to rejuvenate downtown. And when you walk the streets, I
believe you were saying, you walk the streets of San Francisco,
it feels great. You feel the energy. I just came
back a week and a half ago. You feel the
energy on the street. That's something that obviously, through COVID
didn't exist.

Speaker 2 (25:13):
Where in your portfolio around the country, are you seeing
the highest vacancy.

Speaker 8 (25:17):
Rates again, it's it's a it's a it's not a
fair question because we have really high occumvicies because we
only own trophy acids, and the trophy acid category, you know,
vacancy rates are quite low. I mean, if you look
at San Francisco alone, right, vacancy rates and in trophy
office buildings are seven percent, while the entire market is

(25:38):
in the thirties.

Speaker 2 (25:39):
So in New York has similar issues with men and
Marst buildings, every mark and I think I I.

Speaker 8 (25:45):
You know, when we spoke last I said, you know,
there's this notion of converting, converting bad office buildings to
to residences. It's like taking you know, I remember I
told you it's like taking bad milk and making milkshake
out of it. It's still going to be sour milkshake.
It's never gonna work.

Speaker 2 (26:00):
So what makes an office good in twenty twenty four,
Because it's not the world of twenty nineteen anymore, there
is this hybrid work environment. Even if you have a
return to the office, you're still doing a lot of zooms,
you're still doing a lot of teleconferencing. Not everybody's going
to be in your meeting. What's different about an office
space in twenty twenty four.

Speaker 8 (26:19):
Let's start by the fact that you're asking the question
that's already what's different. The difference is that now we're
actually thinking about our office. When you know, five years ago,
before COVID, nobody would never ask me, what's the new
thing about office? Why do people come to work? It
was just natural. Let's put people like like, you know,
like a little fish in a cubicle, and that was
basically Now we understand the same thing that we've been

(26:41):
doing in the residential side and the commercial side that
people actually care about where they work. Your lifestyle at
your office shouldn't be worse than it is at your home.
That's kind of what we've been doing. So what we've
been focused on doing over the last decade is really
transforming the office space to be as similar as it

(27:02):
can to your home environment as far as services, as
far as you know in the environment, the air, the luxury,
the services. If you again, your office is a great
example because it's where people come to collaborate. So you
have the spaces where people can collaborate, open space, you
have the closed offices where they consume. But there these
are flexible spaces. It's not one size fits all, which
was the traditional office kind of pre COVID.

Speaker 3 (27:24):
Hey, Michael, one thing I wonder do you think we
talk a lot about the rate environment. Obviously, what the
Fed's gonna do, What are your expectations in terms of rates?
And obviously a lower rate environment is good for folks
in the real estate world. So how are you thinking
about it and how it might shape some of the
activities you do here in twenty twenty.

Speaker 8 (27:43):
Four, So again I think that, as some of your
previous speakers said before, I think there's obviously an expectation
that that rates are going to go down. I'm looking
for the crystal ball here at the Bloomberg headquarters of
how much they're going to go down.

Speaker 2 (27:57):
Show me where you find the crystal ball.

Speaker 8 (27:58):
I don't know.

Speaker 3 (27:59):
I'm asking you in this way slept away a central
bank safe.

Speaker 8 (28:04):
But but I think that that there's definitely a consensus
that they are going to go down. How much we
don't We don't know yet.

Speaker 3 (28:10):
Yeah, but that's shape what you do this year.

Speaker 8 (28:13):
Well, look, I think from from our point of view,
because you know we part of what we do is
we're partners with with a lot of the German state
pension fund insurance companies. Yeah, and we buy long term
real estate. We'll buy in cash, we'll buy with debt.
Obviously with that would rather buy real estate with debt
if if the debt markets allow it. But were first
and foremost focused on finding the right trophy assets. So

(28:35):
that's why so when I bought the Trans America Pyramid,
it was you know, in the midst of COVID, we
still ended up buying it. So so interest rates are
going to you know, are going to move the market right,
and I think what the more important thing is that
they're going to open the debt markets which were fairly
you know, static over the last three years.

Speaker 3 (28:53):
Us talk to us about New York. You've got a
property right six eighty fifth Fifth Avenue here in New York.

Speaker 8 (28:59):
We got so in New York again, like in most markets,
we developed high end residential, the Mandarin Oriental Residences that
was just completed. We just opened an amazing private restaurant
with Danielle Blued. There lots of fun at the rooftop
loft Danielle. He just opened Cafe Blued, which is also amazing.
We're opening one in Beverly Hills with him. So that

(29:19):
property is really geared to making people's lives better. What
does that mean? You're buying an apartment at the Manden
Residences and you don't even bring your toothbrush because Mandarin
will give you everything from your flippers, from your slippers
to the rope to the toothbrush. And then we have our
office portfolio here. You know, we own seven eleven Fifth Avenue.
We own the Amanta New York five point thirty Broadway

(29:39):
office buildings that we have, you know, severely kind of
upgraded and seven eleven Fifth Avenue again fully occupied building today.
Cork Club just came in there, Raffles just came in there.
So really, you know, Alan and Company, one of one
of the folks in your world, are headquartered there. So
we've created really an environment of a high end boutique

(30:01):
office building designed by Peter Reno, which is fully occupied
in the market that again is not on averages, is
not showing those returns.

Speaker 3 (30:09):
Let's crease something in my producer is going to have
a heart attack. But you got fifteen twenty seconds. Is
the idea of transforming office into residential? Can it be done?

Speaker 8 (30:18):
Or is that like very very selective. It has to
have the building has to have the right bones, in
the right location, the right ceiling heights, in the right windows.

Speaker 3 (30:25):
You were quick and you save Paul's heart.

Speaker 6 (30:27):
Thank you so much.

Speaker 3 (30:28):
Michael Schaveau, Chairman and CEO of Chaveau real Estate, owner, investor,
developer of innovative, luxury.

Speaker 9 (30:34):
And landmark properties.

Speaker 3 (30:35):
Joining us right here in our Bloomberg Interactive Broker studio.

Speaker 6 (30:38):
This is Bloemoo.

Speaker 1 (30:43):
Marco a journal Now about you let me drive, Oh no, no, no,
no drive, honey, please, I'll do the gravel.

Speaker 3 (30:54):
Great, I want to drive.

Speaker 8 (30:58):
It's a good question.

Speaker 1 (31:02):
This is the Drive to the Clothes dot com. Think
well by run Janda Don on Bloomberg Radio.

Speaker 6 (31:09):
All right, everybody.

Speaker 3 (31:10):
Something we talked about at the end of twenty twenty
three the rally in emerging markets ex China. The group
up seventeen percent in twenty twenty three at in China,
and the game was only seven percent as measure measured
excuse me, by the MSCI indexes. So it's interesting. We
know China was certainly a drag on the global economy

(31:30):
and also certainly on the investment landscape.

Speaker 2 (31:32):
Well, A Drive to the closed guest has certainly has
some thoughts on emerging markets. Alison Shimada is senior portfolio
manager and head of Total Emerging Markets team at all
Spring Global Investments. Alison joins us on Zoom from San Francisco. Allison,
good to have you with us this afternoon. As Carol noted,
not all emerging markets are created equal. How's the outlook

(31:53):
for the category in twenty four and where do you
think investors this year specifically should be putting their money?

Speaker 9 (32:00):
Well, thank you, Carolyn. Sev for having me. I think
there are very solid opportunities in the e M. I
think it has, you know, really been ignored for quite
some time, and I think in three respects. Number one
is that it's somewhat under owned by investors globally. Number two,
it's underappreciated for all the opportunities we see in individual countries.

(32:23):
And number three is that's really undervalued versus particularly the
US SO only selling it about eleven point seven times
PE and one point six times price to book. So
you know, we see opportunities here at the beginning of
the year. You know, we particularly look at growth and income,
and we see a lot of dividends that can be paid.
We see strong companies in terms of the areas we're

(32:46):
focusing on. Really, as you mentioned countries ex China are
interesting to US, India, Brazil, South Korea, Taiwan, there are
a lot of quite a few of the larger companies
are quite promising.

Speaker 5 (33:01):
Is hey.

Speaker 3 (33:02):
One thing I do want to ask you, and we
appreciate you laying out where you do find interesting opportunities,
but I do want to talk about China because our
folks and our team have been talking about how China
is the contrarian trade of twenty twenty four. I mean
people don't like it. You know, when we talk to people,
they're like, no, we don't want to commit new money.
And to me, you know, when everybody's running from something

(33:23):
and something's been an area of the investment landscape, global
investment landscape has been beat up, to me, maybe there
is some opportunity then, so.

Speaker 9 (33:32):
I totally agree with you. Yeah, no, that is absolutely true.
We have been investing in China for the better part
of twenty five years, many of us on this team
and have seen it since it opened. And you know,
I think this that there have been many crises in China. However,
I think that there is with selectivity and proper stock

(33:56):
selection and the history of understanding these companies and the policy,
one can properly invest in China. I don't think it's
to be entirely avoided, but I think you need to
be selective and until we understand the greater, the intermedia term,
the longer term objectives of the country, it is somewhat
of a trading opportunity, but we certainly have we are

(34:19):
underway China, but we do have quite a few holdings
in China. And not only in the industrial space, but
in the financial space and somewhat limited to the in
the consumer space as well.

Speaker 2 (34:31):
What do you think is the biggest risk in China
right now and do you think that the country can
get beyond that?

Speaker 5 (34:39):
Yeah.

Speaker 9 (34:40):
I think that one of the biggest risks is just
not doing enough and not staying the course in terms
of reopening and supporting industry.

Speaker 2 (34:48):
Do you mean not doing enough in terms of government support?

Speaker 9 (34:51):
Yeah. I think that they have done some policy that
has been supportive, but it's been here and there, unlike
the US with the inflation reduct very early on. I
think that was a very effective policy because we got
it out there, started working on it, and now you
see some very positive effects of that. I think China
has hesitated a bit on policy and had hoped that

(35:14):
they could just you know, make it through the difficulties
of the property industry. But it's a very large scale
and I think that that has to be addressed, and
I think that the markets are lacking confidence. It's really
a sentiment issue. I think that the overall the country
is okay. Policy worth regards to property will take some time.

(35:36):
It's just it's going to take a lot of time.

Speaker 2 (35:38):
Do you think we get back to a Do we
get to a point where, I mean, the S and
P five hundred has been an incredible force over the
last decade or so?

Speaker 1 (35:47):
Absolutely? Yeah.

Speaker 2 (35:48):
Do we get to a point where emerging markets start
to hold a candle? I mean, even at seventeen percent,
if you exclude China, it underperformed. Emerging markets underperformed the
S and P five hundred last year. Again, do we
get to a point where the emerging markets as a
whole outperform large caps in the US?

Speaker 9 (36:10):
I really hope so in over the next few years.
And the reason I think so is for the three
reasons that I stated earlier on. I do think that
the forty five percent discount of emerging markets overall to
DM is too big, and you know, everything is like
a rubber band, it eventually kind of goes back the
other direction. I think it's purely a sentiment issue. There's

(36:32):
a very strong home market bias on the US. People
do not want to give up on it despite valuations
high valuations, and they're just hesitant to go overseas. But
I think if the dollar starts to roll over, which
I think, you know, it peaks in October, right, that
that's going to be a count you know that is
going to the minute the dollar rolls over, it's going

(36:52):
to flash a green sign and people will have to
look for other forms of returns in other places. And
it's not necessarily China, but it could be in other
countries in em Hey.

Speaker 3 (37:04):
Listen, just get about a minute left and you actually
had you know, shared with our producer Paul some names
that you find interesting. Just pick one that you think investors,
global investors should have on their radar.

Speaker 5 (37:17):
Yeah.

Speaker 9 (37:17):
I think Bijoj Auto is a very interesting name. It's India,
you know, the largest two wheeler and three wheeler producer
in India and they have had very strong earnings. It's
a great group, an industrial group bag and I think
that it's a play on the rural space in India
as well. But the overall economy of India is a

(37:38):
multi year growth story, as I think most investors understand now.
But we really see it as a very strong player
in the market and has a three percent divit in
yield as well, so we really.

Speaker 3 (37:50):
We get to buy it in a fund, right because
there's no ADR here in the United States?

Speaker 9 (37:54):
Correct? Correct? Yes, many of these names, and you know
it's true for India overall, right, a lot of have ADRs,
but there are some of the larger names, for instance,
the banks or the enterprise software enterprise hardware software companies
they do have they do have US listed.

Speaker 3 (38:12):
Since it's refreshing to talk about emerging markets, I feel
like a few years back, and you know, whether it
was a Mark Mobis or somebody, you would just talk
about it constantly. It kind of took a back seat
as we've really focused only totally take some of the
runs right that we've seen in like US big caps
and the indexing. Allison Shamada, thank you so much, Senior
portfolio manager, head of the Total Emerging Markets team over

(38:32):
at all Spring Global Investments on zoom in San Francisco.

Speaker 1 (38:36):
This is the Bloomberg Business Week podcast. I'll available on Apple, Spotify,
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