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00:00Just four years old, you deal with what they call patient capital, but I've lived in Hong Kong
00:06in and out for 36 years. This is not a patient city, right? This is a city of action. So
00:12I want
00:12maybe we can get we can start by kind of giving an update on four years in what has surprised
00:20you
00:20most about the investment climate? Because Hong Kong obviously has had through the pandemic and
00:26through some of the political turbulence, sort of some confidence crisis. What has surprised you
00:32the most about your remit and how it's been performing? Well, thank you, Stephen. Always
00:38glad to be sharing on the Bloomberg stage. From the HGIC's perspective, we started off,
00:44we were established in 2022, but 2024 was the very first year of our full operation. But as you said,
00:52we basically have been through a great trajectory seeing the bounce back of Hong Kong.
00:59The fact that Hong Kong bounce back is always well proven by track record. I think we have been
01:04through many different cycles in the past of different natures. But I think the speed and
01:09the scale of the bounce back is really a pleasant surprise of everybody. Just now the panel, I think
01:14people talk about how talents, how great firms like to have the foothold in Hong Kong as an
01:20international hub. So for us, we actually also see different dimensions. For example, setting
01:26off, we are charged with a mandate, due mandate. Not only bringing home financial return by investment,
01:33but we also want to bring new impetus of growth in upgrading our industry, AI applications, our future
01:40generations. We are very surprised, pleasant surprise. Number one, the great pool of talents that Hong Kong
01:47have. Basically, people are all very focused on innovation technology. So in terms of investable
01:53space and companies, we see a lot. So good for investors, because you have a very great pool of,
01:59I would say, companies and entrepreneurs that you could work with. The second part is what I think the
02:05earlier panel also talked about. Hong Kong, it's played a great role in terms of being a super connector,
02:12bringing the Chinese mainland companies to go outside. But at the same time, it's a two way
02:17flow. We also see a lot of good, high quality, long term capital coming to this part of the world.
02:24So to
02:24your point about patient capital, we think that we are not alone, because a lot of other software
02:29wealth funds, pension plans, they're also looking to invest for the long term, particularly in technology.
02:35Well, technology has been a big part of the portfolio companies and projects that you've invested in.
02:41Does it get to the point when you see the frothy valuations in AI, but then at the same time,
02:47the story that was on the Bloomberg Terminal today was about the National Development and Reform
02:51Commission, among other bodies in China, are talking about spending billions of dollars and building
02:56out data centers across China. That would seem like a golden opportunity for Hong Kong, not only from
03:02the financing perspective, but also for an investment. Well, I earlier mentioned the HKIC was set up in
03:092022. The reason why 2024 was the very first year of operation is because we spend a lot of time
03:18understanding the market and the sweet spot for Hong Kong, because as I said, it's not only for financial
03:23return, but whatever we invest, whoever we partner with, we want them to bring benefits,
03:29long-term benefits to Hong Kong. So the reason I mention this is because when people were debating
03:35what AI large language model is about, we already invested in a number of them in 2024.
03:41When people talk about whether embodied AI is real, again, we already kind of put our best into a
03:49couple of them. So to give you some example, I think a few days ago, the Financial Secretary wrote in
03:54his
03:55blog about a company called Galbord, which is going to operate Hong Kong's very first embodied AI
04:02convenience store in Hong Kong, in the waterfront of Hong Kong.
04:06So what is it, robotics with robotics?
04:08Yes, yes.
04:08Well, actually, yeah, yeah, well, making coffee or like selling different things, more like a full-fledged
04:14convenience store, but meant by embodied AI. So I think this is actually great for Hong Kong. And as I
04:20said, first of its kind in Hong Kong, that company, we invested in 2024. And throughout this trajectory,
04:27they already operate similar stores like in Beijing. So it's not a concept, it's a proven concept that we
04:34can touch, we can see, we can feel, and it's now in Hong Kong. And the other example I could
04:39give is,
04:40I think a lot of us in Hong Kong, very pleased about our very first astronaut, Dr. Lai Ka-ying,
04:47right, who's now in the space with Shenzhou 23. And many of you also may be aware that she is
04:53bringing
04:53with her an innovation from the Hong Kong USD. Basically, it's an AI power, wind power, and weather
05:01forecasting, like solution, and also a monitor. She's bringing with her that and operating in this
05:06space. So that company is called Stellaris, and we invested in 2025.
05:11What was your remit? Take me back four years. And how much leeway were you given on risk appetite?
05:18Because I would say in past, the Hong Kong government can be labeled as a bit conservative,
05:24but then you were given what was originally capital of 62 billion Hong Kong dollars, about
05:308 billion US. It's fully invested, isn't it? Yeah, it's pretty much fully allocated.
05:35Fully allocated. We'll get to in just a minute whether you're going to get some more in the
05:39coffers. But what was your risk appetite then versus right now? We see risk and return going hand
05:47in hand. But our sweet spot and striking zone, I would describe as we try to focus a little bit
05:55more on the space where we could find value for the future of Hong Kong. A few dimensions. Number one,
06:01if you look at the data we share, basically, we invested around like 10% in really early stage,
06:08which is like pre-A round. So around 60% in what we call growth stage, which is actually ABC
06:15rounds.
06:16Basically, early stage where we think we could bring value. The second point is about the fact
06:22that when we invest in those companies, those are bringing to us like cutting edge technology. We
06:28talk about AI, large language model, embodied AI, and now we're in areas such as commercial aerospace
06:34and also bring computer interface. And the last bit I would like to add is when we call patient capital,
06:40that patient is not just like passive sitting there and waiting for return. What we want to bring
06:47to the table is number one, not only our own capital. We always quote a number saying that the capital
06:53multiplier ratio for every dollar we invest in the company, on average, we are bringing in more than
07:00$8 from the international market, long-term capital, like other software wealth fund in the same company.
07:07So for us, the growth is not like sitting there, picking the right team, but we also want to add
07:12value to them.
07:14So again, I come back to if you're fully allocated with that initial investment in this fund,
07:20will you and when will you possibly receive top-ups and from whom as well?
07:26Well, the financial secretary already mentioned in his budget speech, the fact that we're pretty much fully allocated or committed.
07:35And this concept is like when we invest in early stage companies, as you said, return is good, potential is
07:42good,
07:42but we are very cognizant of risk, right? A lot of this like early stage company, they may or may
07:48not work,
07:49even with our best effort and everybody putting our heads together. So we need to have that professional
07:55and market mindset, how to mitigate risk. So the reason and the way, how we do it is by a
08:00milestone approach.
08:01We identify the company, the sector, the team, and then we put a little bit of money, we try to
08:06test them out,
08:07we set the milestone. So the fact that we set is like fully committed is because by that milestone approach,
08:13we are already committed to give them more, maybe three or five tranches more if they hit a certain like
08:21business milestone.
08:22So that's how we describe as fully committed. And to your point about what makes, basically,
08:28while we are on very good track improving the company and also bring financial return,
08:33the government financial secretary already mentioned in his budget speech in February
08:38that he is considering and discussing with us the capital injection. And well, I will leave that tough
08:45question to the government in terms of how the next chapter of HKIC will be.
08:49But you're managing the portfolio, so how urgent would it be if you see the opportunities right now
08:54while the market is doing pretty well and the returns seem to be pretty well
08:58and you're well invested in growth areas right now? Are we talking this year, next year,
09:04or within a five-year time? Well, for me, the urgency is always really because we see great
09:09opportunities in Hong Kong. And as you said, we need to act now, right? If you see the great
09:14opportunity, you don't want to miss them. But not missing them is not just because they could
09:19generate good financial return, but because additional benefits that they could bring to Hong Kong.
09:24I'm going to put on my financial secretary hat here. I'm Paul Chan right now. Would you need 50%
09:29top up,
09:2925% of the original capital? What kind of top up do you think would be adequate four years into
09:36this fund?
09:38Multiple funds. You have multiple funds. Well, I would say that, number one, we need to think from the broader
09:43perspective. HKIC has been doing a reasonable job with a reasonable trajectory. But what next? Do we want to
09:51build with this platform? Is it financial return? Is it really also more like the international thought leadership?
09:57So if that's the case, so what is the best reputation, the brand that we want to build with the
10:05right amount
10:06of capital? So that's number one. Number two is, aside from the trajectory that we have been through, you may
10:14know from some recent announcement, there are new things that we are doing. First of all, apart from the
10:20individual thematic investment, the names that I have just mentioned, they're coming to fruition.
10:26Another area, we also announced, we talked about launching of an offshore renminbi venture capital fund.
10:33So I think these are the new things. We think we could go hand in hand with Hong Kong's traditional
10:38advantages.
10:39How did you know I was going to ask that next? Because Paul Chan again in his blog post on
10:43June 2nd talked about
10:44they're actively considering launching this offshore renminbi venture capital fund. How close are we to that?
10:52What kind of, you know, capital are we talking about? And where would that be deployed?
10:57I mean, I can honestly see obviously the further integration that we're likely to see with the northern
11:03metropolis and some of these initiatives that are going to be ongoing.
11:07For us, we always want to add value in the way that we try to showcase and marry the traditional
11:15and emerging advantages of Hong Kong, the great attributes of Hong Kong. So the idea of having an
11:22offshore renminbi fund actually is a testament of both. The first part, Hong Kong being the
11:28biggest offshore renminbi center in Hong Kong, I mean, we actually have a very good pool, very deep capital.
11:35capital in that sense. And what we do is to try to leverage this advantage to provide a better
11:44diversity of product. But on the other side, you asked about how close we are. And I could tell you
11:50it's very close because of the fact that it's not only a remote dream or vision that we think it
11:55may work.
11:56The reason why we propose it, in addition to Hong Kong's traditional advantage, is actually because when we talk to
12:03URP investors in Middle East, in Southeast Asia, around the world, people are having high and high confidence of
12:11offshore renminbi. And actually they have a lot of trades and transactions done in the currency. And at the back,
12:19of course,
12:20after getting the currency, they want to have a deeper and more diversity of product where they could
12:26deploy. And that's why when we say we have that idea, we already have that natural matching of the demand
12:32and supply.
12:32So in lockstep with that statement is how much are your investment strategies in lockstep with national goals and initiatives
12:45from
12:45mainland China? Obviously, they do want to further internationalize the renminbi. So how do these investment decisions go in lockstep?
12:55And I mentioned Northern Metropolis. We've mentioned the data centers, a number of these different, you know,
13:02money oftentimes follows policy initiatives. When the weight of policy comes to Hong Kong from Beijing, money follows.
13:11So would you say that the push for the offshore renminbi hub, which Hong Kong already is the largest in
13:19the world,
13:20further makes the renminbi more international?
13:23How it works for us, I think it's also the beauty of the HCIC is we are a testament of
13:30the integration of a very proactive
13:33government and also a highly efficient market, meaning that when we look at something, we propose something, we implement
13:41something, it's really a matter of how we see that would fulfill the due mandate. Due mandate number one, as
13:48I said,
13:48we look at financial return. So that's why we actually always in consensus and dialogue with other pay investors because
13:56we speak the same language.
13:57And we look at risk return, like macro, and a lot of these things in the same way. So that's
14:02the professional market side.
14:03At the same time, we exist for a reason. We want to build a better future for Hong Kong. So
14:09for that part, we need to really marry the professional
14:12and market insights and also that standard, that reputation, that brand, together with how to bring goods and bring things
14:21to the table for Hong Kong.
14:22And I would say that, so far, we think those are very smooth integration and also implementation. Because as I
14:31said, look at like
14:32Galbraith, Stellaris, these companies and different AI and companies. If they are not good companies by themselves, if those are
14:40only really policy initiatives,
14:42so how will we be able to have that capital multiplier ratio, bringing in other professional investors' money. So I
14:49think that's a real testament of how good these companies
14:52and how good the future of Hong Kong is.
14:54How are you impacted? Not to go too micro, because you have a longer term horizon, and you're not dealing
15:00with hot money flows across the border. But again, sentiment is a big issue
15:05and confidence for Hong Kong. How are you impacted with your decision making on your portfolio projects by the recent
15:13raft of regulation to kind of stem illegal cross-border transfers
15:17that have gone into stock markets, gone into insurance products and the like, and also simultaneous crackdowns or at least
15:24scrutiny of source of wealth of high net worth individuals in China?
15:30As long-term professional investors across cycle, I think we always try to distinguish noise and rumors with facts and
15:39data.
15:40Being patient capital, we have that luxury to see through cycles and also try to pick the themes, which could
15:47be bringing cross-jurisdictional, cross-generational benefit.
15:52So for us, as I said, even though whether it's policy changes, whether those are sentiment changes,
15:59but we need to really stick to our core on picking what's best for Hong Kong.
16:03The key thing, I would say policy would be interacting very robustly with our choice.
16:10It's really how Hong Kong government plan for the future.
16:13So if they say, well, these are the key industries that we want to bring Hong Kong into, or we
16:19want to accelerate the development.
16:22So definitely, those would be the area that we are very focused on.
16:25But that's an area as well, you're going, you're diversifying, not just in high-tech or hard or core technologies.
16:31You told me before this that you're going to be looking at investing in education.
16:35Oh, yes.
16:36Well, so we talk about like thematic individual investment in the core themes previously, which was hard and core technology,
16:44biotech and health tech as well as green energy.
16:47Gradually, we are pivoting towards also other sectors, including, as I said, offshore, Renminbi definitely says financial services related,
16:56and also education, because the more we invest in this role, we see the great future of Hong Kong because
17:04of the talents and the younger generations.
17:05So we definitely want to work more in terms of the education side, including, for example, student housing, which we
17:14allow to invest.
17:15Nook Ting's financial secretary's Scottish speech, where he talked about our expected investment and curation of capital into commercial real
17:23estate in Hong Kong.
17:24Can you give a – we only have 15 seconds left. This went by fast.
17:27Can you give me an indication? You talked about returns. It's patient capital, so your horizon – your time horizon
17:33is a little longer than some here in Hong Kong.
17:35But we haven't gotten the number for returns for 2025. We did see 2.34 billion in profit earned at
17:45the HKIC in 2024.
17:47We're going to get the annual general report coming soon. Can you give an indication of what, as Paul Chan
17:53talks about, double-digit returns for 2025?
17:55Is that 10% or 99%?
17:58So I will stick with – I will borrow his words, like double-digit returns, and save the secret for
18:03the announcement of the annual report, which is coming online pretty soon.
18:07I think end of this month or early July. But I would say that it's a pretty decent number where,
18:13notwithstanding our due mandate,
18:14even if we compare that with professional market standard, we actually beat the benchmark.
18:20.