BEYOND UNICORN: Private Investors' Knowledge Base

Today’s guest is Yemisi, an epidemiologist specialising in infectious disease at the World Bank. We began our conversation by giving an overview of the virus causing Covid-19, what we knew and what remains to be learnt; we discussed the intricate balance between country priorities and global coordination needed to prevent and respond to a global pandemics like Covid-19; the six building blocks of a well-functioning healthcare system, and the progress made on the global coordination efforts on vaccination and lastly the one thing that we hope governments around the world can learn from the current crisis.

Key highlights from our conversation

Corona viruses are very common in animals. Research has currently estimated that there are over 1,100 Corona viruses that currently exist in animals. Specifically, with regards to human coronaviruses, these were first identified in the 1960s. And to date, there are about seven corona viruses that can infect humans, which have been identified.

The risk of pandemics has been reported to be increasing in the recent decades. Some of the reasons for these increases has been the large rates of urbanization and industrialization, which has led to the disruption of ecosystem humans coming in close contact with wildlife habitat.

The WHO health systems framework encompasses six building blocks 1) service delivery 2) health workforce 3) health information systems 4) access to essential medicines 5) financing 6) leadership / governance.

International Health Regulation 2005 is a legally binding document that countries follow to ensure that they're improving their core public health capacities to be able to adequately prepare, detect, and respond to infectious disease outbreaks.

Healthcare is typically on the funder, and a big part of what has occurred is that there is more reactivity as opposed to proactivity; it means that it's when a crisis has emerged, is when there's a lot of focus on reacting to the crisis, instead of using a wider lens of thinking through how we can be more proactive at preventing and averting crisis.

Content at a glance with time-code

(01.38) Yemisi’s background story
(05.00) What we know about Covid-19 and what remains to be learnt
(09.03) Epidemics and pandemics defined
(10.05) Urbanization and industrialisation resulted in increased risks of pandemics in recent decades
(12.07) The delicate balance between country priorities and global coordination
(20.52) What it takes to shift from reactive to proactive mindset
(22.18) The development and global coordination efforts around vaccination
(25.38) The one thing that we should learn from the current crisis

Episode links
WHO Health Systems Framework: https://www.who.int/healthinfo/systems/WHO_MBHSS_2010_full_web.pdf

International Health Regulation 2005: https://www.who.int/ihr/publications/9789241596664/en/

Today’s guest is David Ng, co-founder and CEO of Pollen, a community sales-as-a-service platform empowering brands to turn their fans into resellers. We began our conversation by diving into Pollen’s business model – understanding the challenges and opportunities of a B2B model versus a B2C model, dissecting the key value proposition and the key stakeholders’ relationships of social commerce, highlighting the difference between social commerce and multi-level marketing. Lastly, we discussed the competitive landscape of social commerce and how Pollen positions itself among the competitors.

Key highlights from our conversation

Direct to consumer brands and social commerce go hand in hand A lot of famous direct to consumer brands became popular due to social media so what social commerce does for D2C brands now is to enable them to go one step further from engaging their community through contents to turning them into resellers for the brands.

Key difference between multi-level marketing and social commerce Multi-level marketing is focused on the recruitment of other agents where the bulk of the income comes from instead of selling for the brand while social commerce focuses on selling for the brand by attracting people who can build personal relationships with the buyers.

The key value proposition for social commerce is centred around the hypothesis that “I am more likely to buy it from someone I trust as opposed to buy it from someone whom I don't know or by seeing a brand’s advertisement”. There are three key stakeholders at the heart of social commerce – the brand or supplier, the resellers and end consumers.

Casual sellers make up the bulk of the reseller network 75% of the community piloted at Pollen is made up of casual sellers who are potential buyers too while the remaining 25% of the community are hardcore sellers who see social commerce as a way a main income generating engine.

Non-commodity type products are more suitable for social commerce such as fashion, beauty, food, wellness, lifestyle because purchasing decisions for such products depend on a multitude of factors beyond pure functionality and price alone.

Content at a glance with time-code

(01.26) David’s background story and the journey to founding Pollen (03.22) Snapshot of Pollen’s business model (05.09) Direct to consumer brands and social commerce go hand in hand (07.43) Difference between social commerce and multilevel marketing (11.46) Casual sellers vs hardcore sellers (13.36) The B2C element of social commerce (16.04) What types of products work best for social commerce (20.05) B2B vs B2C social commerce business models (32.20) Unicorn discussion: the fine balance between profitability and valuation

Episode linksPollen: https://www.pollen.store/ Jumper AI: https://jumper.ai/

Today’s guest is Freddy Lim, Chief Investment Officer and Co-founder of StashAway - an online investment management company headquartered in Singapore. We began with a market update focusing on the thought process investors can use to analyse current market conditions and the key reasons behind the decoupling of financial markets from the real economy. We then shifted our discussion to understand StashAway’s proprietary investment strategy, ERAA - namely the Economic Regime-based Asset Allocation and how ERAA can be applied to understand post-crisis recovery.

Top 5 Takeaways

Focus on aggregate numbers to make sense of what's happening in the market

A useful way to think about the combined economic impact of lost output due to Covid-19 and aggressive government stimulus is to look at how A compared to B in aggregate numbers. It is because the aggregate stock market and the aggregate multi-diversified portfolio only focus on the aggregate loss of output versus aggregate stimulus.

Money multiplier effect created through fractional banking explains the decoupling of financial markets from the real economy

A key reason behind the observed decoupling is the introduction of fractional banking which made "money multiplying" possible. When one dollar is deposited into the banking system, the bank is only required to keep a fraction of the dollar and can lend out the remaining, creating a multiplier effect in the real economy.

Asset allocation is the key determinant of differential portfolio returns

The majority of mid-to-long term return or loss is driven by the economic environment so the act of deciding how to allocate assets into a particular sector or industry is responsible for between 80% and 96% of a portfolio’s return profile. The remaining 10–20% of excess return (i.e. alpha) can be attributed to an investor’s superior ability to pick winners and losers but this is very tough to do successfully over a long period of time.

The importance of staying on course

For investors who have clearly defined their investing objectives and designed long-term investment plans, it is important to stick to these plans and not to make changes based on opportunistic movements in the market.

Staying invested is very key for long-term success

Markets are very dynamic and very hard to be predicted accurately. All investors want to buy low and sell high but many end up buying high due to FOMO or selling low due to the fight-or- flight response. Dollar-cost averaging is a great strategy to smooth things out during periods of high market volatility and help you stay invested in the game. Staying invested is very key for your long-term success. Ultimately you got to do everything you can to not get KO’d by the market.

(01:27): Freddy’s professional investing background and what led him to co-found StashAway (03:15): Focus on aggregate numbers to make sense of what’s happening in the market (07:20): The decoupling of financial markets from the real economy explained (14:06): Why didn’t we see the much-anticipated inflation happening during the recovery phase post 2008 financial crisis? (15:46): StashAway’s proprietary investment strategy, ERAA — Economic Regime-based Asset Allocation explained (19:54): Do the causes underlying each economic regime matter in asset allocation decisions? (23:00): Asset allocation is the key driver of differential asset returns (25:50): What does StashAway’s asset universe look like? (36:52): Has StashAway’s investment strategy changed due to the crisis? What are the in-built mechanisms to respond to crisis situations? (41:59): Answers to the most asked questions on StashAway 1) do I switch my portfolio from a low risk to the highest risk portfolio to take advantage of the market draw down? 2) should I invest more, accelerate my investing plan now? (49:21): The unicorn discussion — StashAway’s decacorn potential

Episode Links

StashAway: https://www.stashaway.sg/ StashAway’s Asset Allocation Framework: https://www.stashaway.sg/r/stashaways-asset-allocation-framework

Today’s guest is Paul, Partner at Pantera Capital – one of the earliest institutional Blockchain investment firms. Paul began by sharing his personal journey from learning about Blockchain to eventually joining Pantera Capital to drive its VC funds. We then went on to discuss its investment thesis and how it evolved from the first fund to third fund now, and then broadened our discussion to evaluate popular industry narratives namely cryptocurrency will become a new asset class and Bitcoin’s role as a safe haven asset. And lastly, we explored how blockchain will impact the VC industry.

Pls note that this episode was recorded before the March 12th market crash across cryptocurrencies. For listeners who are interested to read more about what happened and the impact of Covid-19 on crypto, I have shortlisted some articles, do refer to the episode links for more information.

Key Takeaways

• Fiat to crypto on-ramps are very key for people to get access to cryptocurrencies; so, exchanges and wallets that can provide fiat to crypto abilities remain as Pantera’s key investment focus
• Liquidity and scalability remain as the key challenges to be solved before large scale decentralised use cases can emerge; for now, speculation remains as the key usage for crypto
• Besides having institutional grade infrastructures in place, further development in derivatives and regulatory clarity will be needed before institutions invest directly into crypto or token as an asset class; currently their exposure to the industry is via indirect investments into private equity funds
• It is still early to determine the investment success of cryptocurrencies as a new asset class; but the chances of diversified crypto investment going to zero in value are low while the chances of it generating exorbitant returns are present; so it is about limiting one’s exposure to hedge the downside risk with a potential to benefit from its upside

Episode links

Pantera Capital

https://www.panteracapital.com/

What happened on March 12th

https://multicoin.capital/2020/03/17/march-12-the-day-crypto-market-structure-broke/ https://multicoin.capital/2020/03/20/march-12-the-day-crypto-market-structure-broke-part-2/

Crypto in this crisis: Pantera Blockchain Letter March 2020

https://medium.com/@PanteraCapital/crypto-in-this-crisis-pantera-blockchain-letter-march-2020-4c73af3aaaf7

Today’s guest is Stephen Yiu, Chief Investment Officer of Blue Whale Capital. Stephen has over 20 years of experience investing in public equity. His fund has delivered consistent outperformance since inception two and half years ago. We began our conversation with Stephen’s investment approach, such as reasons for running a concentrated, high conviction portfolio, what underlies his buying and selling decisions, valuation metrics he uses. And then delved deeper into his current holdings, what are the key underlying investment themes and how these themes will play out in 2020 and beyond.

Pls note that there is discussion on the past performance of Blue Whale Capital in this episode and Past performance is not a guide to the future. Risk of loss.

Key Takeaways

• Increasingly efficient market narrows the comparative informational advantage enjoyed by professional fund managers and thus making it harder for active funds to outperform benchmark indices
• Stephen adopts a bottom-up investment approach using in-house fundamental research; he runs a concentrated, high conviction portfolio of 25-35 stocks
• Guideline for buying decision: 1) companies with a strong competitive position - typically the market leader in their respective sector 2) good management team 3) companies that are exposed to structural growth drivers 4) ability to generate high return on invested capital 5) company's earnings profile has little to do with macro uncertainties
• Guideline for selling decision: 1) when there’s any risk of disruption to their business model fundamentally 2) when valuation is no longer attractive
• Key valuation metrics used is free cash flow yield; currently the market is trading about 7% free cash flow yield five years from today; based on fundamental analysis, investor can then decide if it is justified to pay a premium or discount relative to the markets
• Key investment themes and companies highlighted 1) Digital transformation: Adobe and Paypal 2) Medical tech – non-invasive procedures: Boston Scientific 2) Luxury brands: LVMH

Episode links

Blue Whale Capital: https://bluewhale.co.uk/ Hargreaves Lansdown: https://www.hl.co.uk/ Blog post on how efficient market is affected active fund management: https://bluewhale.co.uk/blog/2019/09/04/is-an-increasingly-efficient-market-killing-off-traditional-active-fund-management/ Blue Whale top 10 holdings: https://bluewhale.co.uk/top-10/