Family Office & RIA Weekly Roundup | 2.23.23 | Volume 44
Family Office & RIA Weekly Roundup?
Volume 44
02/23/2023 (4 Min. Read)
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The Anti-Cathie Wood Reaps Returns, Europe Seeks Energy Independence and OpenAI Attracts Top Silicon Valley Talent in this Week's Edition...
Take a Lap Around the Industry
"Anti-Cathie Wood" Finds Success in Legacy Industries
Rajiv Jain, co-founder of GQG Partners, has built his firm into a $92B empire in less than seven years. In an era that has favored technology-focused investment philosophies, Jain has differed by holding investments in 20th-century industries, such as oil, tobacco and banking. Jain is also more cautious than other growth managers but has been known to make outsized, risky bets on individual companies. He invests in stocks with bullet-proof balance sheets, such as Exxon Mobil and Visa, which he believes will mitigate any kind of sudden collapse that could wreak havoc on his portfolio. Due to Jain's high conviction strategy, many of his funds hold a smaller amount of companies compared to funds of a similar ilk. Jain, who invests most of his personal wealth in GQG funds, remains confident in his approach, despite his underperformance this year.
"These kinds of volatile years actually allow you to differentiate a little bit more...A lot of ‘quality growth’ managers basically blew up. We found out whether they really own quality."
Rajiv Jain, GQG Partners
Private Funding Pulse Check?
Europe Fires Up its Green Energy Capacity to Cut Russia Dependence
Europe has responded to Russia's war on Ukraine by rapidly transitioning away from Russian fossil fuels to put President Putin's primary "war machine" in a bind. Although it has been a painful and far from climate-first transition, Europe has prioritized any source of energy that was not Russian and burned more coal, ripping up environmental plans in the process. For example, when Russia cut the supply of gas being fed to the rest of Europe, countries responded by ramping up other forms of supply, especially liquified natural gas (LNG) sources. This has led to Europe getting hit with a roughly €1 trillion energy bill last year, cushioned by hundreds of billions of euros in government subsidies. Matters could have been far worse if it were not for Europe's early transition to clean energy that had begun a few years ago. For context, solar installations across Europe increased by a record 40 GW last year, up 35% compared with 2021.
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"Russia blackmailed us by threatening to cut the energy supply...We have completely got rid of our dependency on Russian fossil fuels. It went much faster than we expected."
Ursula von der Leyen, European Commission
Former Google and Meta Employees Flock to OpenAI
OpenAI, the company behind the popular AI chatbot ChatGPT, has hired dozens of former Google and Meta employees, according to data from LeadGenius and Punks & Pinstripes. OpenAI currently employs around 59 ex-Google workers and about 34 former Meta staff. The data suggests that big tech companies are not optimizing their investments in employees, according to Greg Larkin, CEO of Punks & Pinstripes. OpenAI's leadership team is predominantly made up of former big tech workers, including ex-Google, Meta and Apple employees. OpenAI was founded in 2015 as a non-profit initiative to develop artificial intelligence in a way that would benefit humanity. However, it has since evolved into a competitive start-up, with OpenAI and Google currently locked in an artificial intelligence race. OpenAI CEO Sam Altman recently took a subtle dig at Google, which he called a "lethargic search monopoly". Meanwhile, Microsoft has incorporated OpenAI's technology into its "new Bing" search engine, which could challenge Google's dominance. Google is racing to release its own AI competitor, Bard, later this month.
"If nothing else, OpenAI is a sign that Big Tech, especially Google, isn't optimizing its investments in its employees...A lot of AI talent has been working on secondary products in innovation labs like Alphabet X. For many this means that they rarely see their work have a meaningful impact on the company's core products or earnings."
Greg Larkin, Punks & Pinstripes
Late Paul Allen's Family Office Spinout Bolsters Private Credit Team?
Cercano Management, formerly part of Paul Allen’s family office, is targeting private credit in an effort to expand its operations globally. The firm is positioning itself to capitalize on the expectation that direct lending will be the fastest-growing asset class this year. Cercano, which oversees the investment assets for the estate and family foundation of Allen, plans to hire three additional lending specialists this year to support the initiative. The firm manages roughly $10B on behalf of ultra-high-net-worth individuals and invests across public markets, private equity and fixed-income. Historically, clients typically needed at least $100M to establish an account with Cercano, which is predominantly comprised of wealthy family foundations. Private lending is thriving as investment banks are finding it difficult to remove tens of billions of dollars of debt from their balance sheets.
"Cercano surfaced as an investor this year in US health-care startups SwipeRx and Ferrum Health. It also disclosed this month it had $2.5 billion is US stocks at year-end, including a $408.9 million stake in Microsoft."
Benjamin Stupples, Bloomberg
Industry M&A Wrap Up?