DarcMatter Hosts “2018 Global Alternatives Conference” in coordination with Yonhap Infomax
Interest in alternative investment is slowly replacing the traditional form of investment such as cash, stock and bond. What would be the best global alternative investment products?
In order to resolve the question, DarcMatter hosted the “2018 Global Alternatives Conference” (DMAC 2018) in coordination with Yonhap Infomax, Korea’s major news and media outlet that specializes in economic and global financial markets, on December 3, 2018 at Conrad Seoul Hotel. The conference attracted over 200 local and overseas participants for a packed agenda of local and international speakers.
This year’s Global Alternative Conference began with the congratulatory address by Suk Heun Yoon, Governor of Financial Supervisory Service (FSS), the opening address by Sang Lee, CEO and President of DarcMatter, and the welcoming address by Byoung Gook Choi, CEO of Yonhap Infomax, followed by LP & GP sessions. The congratulatory address by Mr. Yoon from FSS particularly shows that DarcMatter has become a recognized financial medium in Korea, as FSS is Korea’s fully integrated financial supervisory authority under law, and has been serving as a specially legislated quasi-government supervisory authority across the entire financial sector since 1999.
The keynote speeches at the LP session were brought by Keun Soo Jung, Head of GIB at Shinhan Bank, Kyoung Il Hur, Head of Overseas Infrastructure & Real Estate Team at Hanwha Asset Management, and Seung Joon Yoon, Head of Corporate Finance Division at the Korean Teachers’ Credit Union.
Mr. Jung announced the alternative investments strategy of Shinhan Bank for next year that it will mainly expand its investments in global private debt fund and global private equity. He introduced Shinhan’s investment plan in 4 areas including private debt fund, infrastructure, private equity, and real investment fund, where there is a potential synergy between its global branches. Shinhan will expand its investments especially in private debt fund targeting midsize businesses in advanced countries such as the United States or Europe via 2 or 3 asset managers each. Mr. Jung pointed out that due to the expansion in economy fluctuation, investment portfolios will be brought to the United States or Europe. On the other hand, when it comes to Asia, since the size of its business is huge, Shinhan is planning to have 2 or 3 investments via partnerships between local asset managers.
Mr. Hur believes that the alternative investments of insurance companies in the future will more likely move to loan rather than equity in the future. Particularly, he pointed out that infrastructure loans will be preferred than real estate mortgage. Since it is much difficult to find loans with low interest rates in overseas country, insurance companies can challenge themselves and participate in loan investment.
(Green: Alternatives, Red: Bonds, Blue: Stocks, in 100M KRW)
Furthermore, Mr. Yoon explained that the Korean Teachers’ Credit Union will dig out the opportunities for acceptance financing and joint investment with foreign asset managers. He pointed out that the joint investment by screening and examining good assets that foreign asset managers propel to invest will reduce management and performance fee while securing high quality investment opportunities. While the Korean Teachers’ Credit Union will mainly promote joint investment, it also plans to expand loan portfolio investment that pays interest periodically. The Korean Teachers’ Credit Union’s investment assets were almost 26 trillion Korean Won in November 2018, and overseas alternative investments took up more than 27% of it, which made them to worth more than 7 trillion Korean Won.
The presentations given by the GPs began after three keynote speeches by the LPs. The presentations were brought by Hugh de Lusignan, Senior Manager of UK DIT, Michael Chae, Principal of IFC Asset Management, Viktor Levkanic, CIO of APS Holding, Theodore Qi Shou, CIO of Skybound Capital, Jay Eum, Co-Founder & Managing Director of Translink Capital, and Hwisang Kim, CIO & Partner of #Hashed.
Mr. Lusignan opened the door explaining the topic of infrastructure. Mr. Lusignan believes that about 600 billion British Pound will be invested in the United Kingdom’s infrastructure business for the next 10 years, as the most important field among industrial strategies established by the government in 2017 is infrastructure investment. He especially pointed out three investment opportunities related to energy infrastructure business: decarbonation, decentralization, and digitalization. Mr. Lusignan believes that these three strategies are guidelines and directions for the United Kingdom’s future energy investment and industry. He also mentioned that the United Kingdom’s government is planning to have related funds such as energy development fund.
Mr. Lusignan’s presentation was followed by Mr. Chae, who explained about Impact Investment and IFC Asset Management’s role in it. Impact Investment, where IFC Asset Management is placing emphasis on, is an investment that generates beneficial impacts on society or environment with a financial return. As a part of World Bank Group, IFC Asset Management puts purpose on providing investment opportunities in an emerging market to private investors, with funds of more than 10 billion United States Dollar. Mr. Chae pointed out that the importance of Impact Investment is being emphasized not only in Europe or the United States but also in Korea. IFC Asset Management’s LPs are usually pension funds or sovereign wealth funds, while Shinhan Bank from Korea also participated as one of them.
The next presenter, Mr. Levkanic, explained that there are various opportunities to invest in nonperforming loans (NPL) in the emerging Europe area. NPL has a higher rate of return with a shorter investment cycle than private equity. According to him, the emerging Europe NPL market is divided into two markets: traditional markets and new markets. Traditional markets, including Poland and Hungary, usually have high rate of return and low risk. New markets, including Greece and Cyprus, have a very high rate of return but volatility can be also a lot. Mr. Levkanic pointed out that local language and networks are important elements when investing in emerging Europe’s NPL. He said as in emerging Europe there are many local languages and local networks are necessarily to connect, the local infrastructure is important to invest in a fractured market.
On the topic of private debt, Mr. Qi Shou examined that private debt area is not related to the increase in the base rate by the Federal Reserve Bank. According to him, even if the Fed continues to increase the interest rate and the bond price decreases, the book value of private debt will not decrease. Mr. Qi Shou actually worries about other aspects rather than the interest rate. First aspect is that private debt is mostly a short-term investment. Therefore, if one extends the expiration, the interest rate rises, and all the extra costs will be shifted to the final borrower. Second aspect is economic environment. As many countries’ rate of economic growth will slow down in the near future, the competition between private equity, hedge funds, or asset managers will be higher.
On behalf of many venture capitals, Mr. Eum presented two promising fields for investment at this moment: artificial intelligence and robotics. He explained that those two are currently the major bright investment areas in Silicon Valley. Mr. Eum pointed out that AI investments are brisk due to the growth in data. There are more data recorded in the last 18 months than the data recorded in the human history. Furthermore, the numbers of deals on the global financing trends related to AI consistently rise. Also, Mr. Eum said that robotics is promising because the technology is progressive, and the operation system makes a technician easy to create a robot. The numbers of deals also constantly rise, like them of AI.
Last presentation was given by Mr. Hwisang Kim from #Hashed, the major blockchain accelerator in Korea. He believes that blockchain will change the ways of people work and receive incentives profoundly. When it comes to a traditional corporation, its value is made by members of the firm and is returned to its shareholders. However, Mr. Kim explained that in the future, a corporation can give its value not only to its members and shareholders, but also to every contributor via blockchain. For example, according to him, Uber and Airbnb want to share their stocks to its drivers and hosts, respectively, who generate values of the platforms.
The presentations brought by the GPs were followed by the closing remarks by Sang Lee, CEO and Co-Founder of DarcMatter.
The DarcMatter Team
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