Conference Presentation, Panel
Global Capital Markets
Milken InstituteRachel Pether, Hazem Ben-Gacem, Jeremy Coller, Tom Finke, Joseph Naggar, Michael Clowden
- The Milken Institute aims to facilitate discussion at its third annual MENA summit in February, with a concurrent invitation for attendees to join a global conference in Los Angeles from April 27th to May 1st.
- Tom Fink predicts the China-US trade war will conclude, likely by March, though the execution timeline is uncertain, while noting that Chinese government officials face difficulties conducting business with private entities due to anti-corruption efforts.
- Jeremy Coller characterizes Brexit as a short-term disruption with long-term positive implications for the UK, predicting the UK real estate market will maintain 98% capacity driven by e-commerce, and anticipates investors will shift focus to the logistics and warehousing sector in China.
- Tom Fink asserts interest rates must rise, which may reduce market multiples, causing valuations to drop to 20s and 30s at 10x earnings by mid-December 2018; however, he warns that rate hikes driven by economic downturns rather than growth could be detrimental.
- Joe Naga forecasts the next cycle will feature a significantly larger distress cycle due to increased leverage, with approximately $200 billion in distress situations currently available and potential equity market declines of nearly 20% if growth rates deteriorate sharply.
- Joe Naga expects bank loans to evolve into senior secured debt with LIBOR plus 300 to 400 basis point spreads, potentially causing CLO markets to become more volatile, which is viewed as a trading opportunity.
- Tom Fink observes a structural shift in the leverage market where hard asset companies are being replaced by technology, service, and cash flow-driven entities, necessitating adaptations in lending structures.
- Jeremy Coller predicts the secondary market will reach at least $300 billion within 10 years, a fivefold increase, as private equity evolves into a quasi-liquid instrument potentially forming joint secondary and primary firms in the medium term.
- Hazem Ben Gazem anticipates a "tsunami of secondaries" in the Middle East due to population growth and a developing "Anglo-Saxon mindset" for business exits, projecting the region as an attractive emerging market on a risk-adjusted basis by eliminating dollar exposure.
- Hazem Ben Gazem identifies India as a future growth market for foreigners once it matures enough to support IPO exits, while warning of currency risks in Nigeria where a 50% Naira depreciation is possible following an oil price crash.
- Tom Fink suggests investors may move capital from public to private markets to find yield in a low-return environment, noting that covenant-light structures are feasible in liquid public syndicated markets but private markets require tighter protections.
- Jeremy Coller notes that banks selling due to Basel exposure and cost of capital has created opportunities for investors to acquire portfolios, and he expects private equity to extend holding periods to 20 years for suitable businesses beyond the traditional 5-year cycle.
- Hazem Ben Gazem plans to apply for a renminbi license to access capital for purchases in China, while asserting the Middle East will become a unique macro environment attracting Western investors.
- Joe Naga highlights central banks as new financial actors capable of supporting markets during volatility, citing pivots in 2016 and January, and expects currency controls to remain a risk for dollar-linked investments in emerging markets like Nigeria.
- Jeremy Coller advises investing in businesses where "everything has to go wrong for me to lose money" as the market approaches winter, and expects the next bidder to dictate deal prices based on the value they can add.