(Click image to play) In this episode of the Investor Views series, Aradhna Dayal and I talk about some of the keys to her family office’s success and important lessons learned. S…
In this episode, Aradhna and I talked about:
The importance of encouraging more women to take senior management roles and board positions.
How women need to ‘think like a man’ to succeed in business.
Regal Ford Asia’s success in revitalizing parts of Hong Kong’s commercial real estate market.
How impact investing can generate positive outcomes without sacrificing investment returns.
Aradhna’s method for sourcing the best real estate investment deals.
The importance of micro trends and not going against them.
Why China holds so much investment opportunity.
How Access Alts Asia global investor network helps family offices source investment opportunities.
Key advice for family offices to evolve and thrive in a post-COVID 19 world.
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“Women always have 3 weapons: … (1) knowledge – be smarter than everyone else at the table, (2) network and (3) never take no for an answer.”
“I’m passionate about (encouraging more female directors) and to all network portfolio companies I say please, please have at least one woman in a senior management role and one woman on your boards.”
“We have the same philosophy even now. Whenever scoping out an area for investment, we would walk the entire area on foot, our entire team. I would put on my sneakers, my dirtiest t-shirt and we walk the area for weeks. We know every building, every watchman, we know every tenant, we talk to everybody. So in the process, we end up getting better insights and better deals than anyone else.”
“I truly believe that investments today have become a global business. Historically, families like to invest in their own geographies and around their own core businesses. But increasingly I’ve found that my friends in the Middle East and the US really really want to look at Asia very much as we want to look outside Asia. In my mind, what’s really missing was the trusted point of view that we could use to access opportunities and also understand the local dynamics in those markets. That’s super important. That’s really the reason I started Access Alts Asia. It’s an investment club, a network of about 350 family offices and institutions. We all share ideas, talk about different opportunities in our markets. I feel that together we are able to invest a lot more intelligently, that what we would do individually.”
“In my mind, what’s really missing was the trusted point of view that we could use to access opportunities and also understand the local dynamics in those markets. That’s super important. That’s really the reason I started Access Alts Asia. It’s an investment club, a network of about 350 family offices and institutions. We all share ideas, talk about different opportunities in our markets. I feel that together we are able to invest a lot more intelligently, than what we would do individually.”
“Engage your Gen Next (next generation of family office legacy). Gen Next love innovation and disruption. They are our biggest hidden assets. Bring them in, bring them on. And typically they are bored with generational business so now is a good time to for them to come in and actually transform businesses.”
“It’s a very good time, after decades or maybe 100 years in existence as a business family, to evaluate your ‘need to exist’. Does your business really need to exist in a time like this, or in the future? And if not, how can it be very successful?”
“We are going to see some real distress in assets whether it’s hotels, occupancies down, airlines, shopping malls, company supply and logistics, these are all amazing areas where there will be amazing transformations and a lot of assets are going at fire sale value. So this is a great time to acquire strategically and diversify your core base.”
TRANSCRIPTION: July 2020, Aradhna Dayal, Chief Investment Officer, Regal Ford Asia (Single Family Office)
JB: Welcome to Hedge Interview. I’m your host Jennifer Bruno and this episode is part of the Investor Views series, which features primarily family office investors from around the world. My goal is to shed light on the unique insights and perspectives from this important niche of institutional investors.
My guest today is Aradhna Dayal. She is the Chief Investment Officer of Regal Ford Asia, a Hong-Kong based single family office that manages approximately $100M. Aradhna is also the Founder and CEO of Access Alts Asia, an investment club comprised of 350 of the world’s largest family and institutional investors wth about $1T in assets. She is also a board member at Move4Migrants, an aid organization that empowers minority and migrant communities globally. Thank you for joining me today Aradhna.
AD: Great to be here Jennifer, thank you.
JB:That’s an impressive list of duties – you must be very busy!
AD: Add to that being a mom of two feisty teenagers. It does keep me very busy.
JB: Tell us about Regal Ford Asia, tell us about your family office, what do you focus on in terms of the investments you typically look at?
AD: Regal Ford Asia is my family office that I set up about 25 years back in Hong Kong. My family is originally from India. It was a land-owning family. My father decided about 25 years back that I should move some capital out and start to invest in Hong Kong. That’s what I did. We primarily focus on real estate. We do everything from adventure to industrial to commercial.
JB: Tell me what it’s like managing this office as a woman. What are some of the challenges you face?
AD: Well Jennifer, when I set up my family office 25 years back in Hong Kong, I have to say I was the only female family office CIO. I would walk into these rooms full of very tall men in grey suits and that would be terribly intimidating. Seriously, I was 20 (years old), I was a woman and I was five feet tall. I really had to work hard to earn my stripes. Women always have 3 weapons so I decided to pull those out and they include 1) knowledge – be smarter than everyone else at the table, 2) network and 3) never take no for an answer. I think that works for us and as I said, we have good returns and ’street creds’.
JB: You said you are seeing more female directors on boards and that’s an important trend as well.
AD: Not as many as I would like to (see). I’m passionate about it. I feel that there are a lot of women who start out on very promising career paths early on and somewhere along the way, they start disappearing. The reason for this is some get married, some have kids and take a break, and that momentum leaning towards senior board positions gets broken. I think there’s also a lot of unexpressed bias against having women in senior roles. That’s changing my business, which is fantastic. I have a great network of mentors and amazing female CIO leaders that I love.
Many of these women are changing the path but there are still not enough women, so I’m passionate about it and to all network portfolio companies I say please, please have at least one woman in a senior management role and one woman on your boards.
JB: Is it helpful coming from a family office that you are able to encourage that trend?
AD: Yes, certainly. I think women can be great mentors to other women and I think that women in today’s world really understand that. So we all try our best. But I also have to say that a lot of men these days are absolute fantastic champions of that. So I’ve seen amazing men around me, including my husband who has always encouraged me and allowed me to follow my dreams. Also my father who raised me. He always taught me to be fearless, tread my own path and he always pushed me to achieve excellence in everything. I think women are great multi-takers so they really help each other. I think whether you come from a family office background or not, you can always pull other women up.
JB: Definitely. I think women can be very meticulous and detailed. I hope to see more women in these types of positions as well because it creates equanimity and a change in perspective sometimes.
AD: I think there’s fantastic data on that. If you look at returns from women portfolio managers or if you look at returns from endowments and foundations that are managed by women, they are far, far better than those run by men. There’s actual data evidence of that. Also I think women have a bit more empathy and more patience, which are very important traits when you are investing.
JB: I wonder if it’s an issue of time as well as opportunity. Sometimes women are stretched thin in terms of family and professional responsibilities.
AD: Yeah, you’re right. That’s a very good point. I’d like to talk about a personal experience I had that changed my mindset towards that and how I was able to develop my own philosophy of actually doing it. So, about four years back, I was really nervous. I never left home much. I was really struggling to take the leap, so to speak. One night, my 17-year old son said, “Mom, I’ll say two things to you: A) You’ll be very successful and B) you need to go into it like a man! I did not understand what he meant by that and I just laughed. But I understand that now Jennifer. As women, we try to be perfect at everything. We want to be perfect moms, perfect wives, we want to be perfect daughter-in-laws before we are perfect professionals. Men don’t have any such compulsions. So as women, we need to be laser-focused and not feel guilty. I think that’s what my son meant and I’m super thankful to him.
JB: That is a great inspiration from such a young man. That’s wonderful! You also mentioned about revitalizing small business in Hong Kong.
AD: Yes, in fact as a family office, it’s very much in our DNA, and we try to integrate that into pretty much everything that we do. So ten or twelve years back, we looked at this amazing entrepreneurial environment in Hong Kong and that lends itself to amazing small, eclectic new businesses that are coming up like wellness, tutoring, education, security, technology startups, etc. but Hong Kong is so expensive as an office real estate market so it’s impossible for these new businesses to take off. We started looking at these used, restorative buildings and thinking why can’t we revitalize them? Why can’t we turn them into eclectic, loft-style creative offices for these new-age businesses? That could save them thousands of dollars in rent. So we started investing in doing that. Today, I have to say we are a pioneer in that and we feel extremely happy that we’ve been able to create a real residence, a real home for many of the smaller businesses of Hong Kong to operate. Interestingly, we’ve done about 25% annualized (returns) on those investments, which very much shows that you don’t really have to sacrifice impact in order to make money. You can do both.
JB: What’s your process for qualifying the right building and tenant. You must have really honed that by now, since you know what would work. Especially since it’s such an expensive area, you know how to find the right fit.
AD: That’s actually an excellent question. I found the answer to that 25 years back when I would sit on this cap tables with amazing, amazing families, amazing guys, very evolved and they would love to use optic tools to scope out an area and see what was happening there. But I would put on my sneakers and go walk. We have the same philosophy even now. Whenever scoping out an area for investment, we would walk the entire area on foot, our entire team. I would put on my sneakers, my dirtiest t-shirt and we walk the area for weeks. We know every building, every watchman, we know every tenant, we talk to everybody. So in the process, we end up getting better insights and better deals than anyone else. Often when having drinks with my friends and they would ask how did you put that together? And I would say, when you were in a chopper, I was walking. It just goes to show that there is no replacement for grass-roots level work.
JB: What do you look to avoid as far as risks?
AD: I think that we are very good at understanding micro trends and we never try to go against them. We invest globally in real estate and about five years back we started narrowing down the areas we are not comfortable with. We divested out of the Middle East. We brought back a lot of investment from the US as well and realized that Asia is really the next growth center. So in many ways if you take that macro call, that really is our best risk management.
JB: You mentioned the importance of building relationships in China. How has that impacted your investment choices and how do you make that bridge?
AD: You know Jennifer, I truly believe that investments today have become a global business. Historically, families like to invest in their own geographies and around their own core businesses. But increasingly I’ve found that my friends in the Middle East and the US really really want to look at Asia very much as we want to look outside Asia. In my mind, what’s really missing was the trusted point of view that we could use to access opportunities and also understand the local dynamics in those markets. That’s super important. That’s really the reason I started Access Alts Asia. It’s an investment club, a network of about 350 family offices and institutions. We all share ideas, talk about different opportunities in our markets. I feel that together we are able to invest a lot more intelligently, that what we would do individually.
JB: That makes so much sense. How does this group work, how often do you meet and how do people join your group?
AD: Well it’s a membership-based club. It’s really by invitation. Initially it was my friends, people we’ve had relationships with for almost 25-30 years. We’ve also broadly brought in families who are in different geographies and different sectors. So we have logistics families out of Jordan or we have trading families out of Dubai or we have oil and gas families out of Kuwait, we have healthcare families out of Boston and Silicon Valley and in China they are very close to the strategics. When you think about it, pretty much almost all of the investments now happen through these strategic investors. We meet twice a year, once in New York, once in Dubai, once in Shanghai. I don’t know when we can meet next but it’s a very collegial, fun group. It constantly floors me to have these amazing people which keeps me young as well, keeps us all young.
JB: That must be such a great reference network especially when you know an oil and gas family for example and you’re evaluating something and to get their input potentially or if you wanted to include something in your portfolio that you know someone else does really well, it’s such a great research base of sorts, in a way.
AD: Absolutely and I’ll give you a few examples. A couple of years back we have this amazing cross-border payments company to a large fashion apparel family that we knew on the west coast. They move about $6M globally to the supplies and from the customers because they are based in the US and they needed an amazing no pains, one email click payment gateway and they invested in that technology and they were able to open up to the rest of our networks. That was very beneficial. Last year we tried bringing a regenerative cardio vascular from the US into China and we basically opened them to all of the families, the CFDA and all of our friends. That business. That will easily be a $1B business in the next 7-8 years. I remember an investor in a coconut water company in Thailand and a large retail business in the US and we just made one phone call and those beautiful Thai coconut waters are now on all shelves in the US.
JB: Amazing! It’s all about who you know. It comes down to networking, really, it’s so important. So what are some of the new sectors and areas that one should look at to build businesses in China.
AD: I’ll talk about China, then I’ll talk globally. You know, many in the Western world are really discounting China because post-COVID 19 China will lose its sheen, lose its clout on the world stage, but you know they really have to come to China to see the dramatic pace of digitalization that’s happening there. China has the advantage of still being the largest demand engine. It has the largest personal savings, it has the largest number of factories. So it’s not going anywhere really. Another thing that people don’t realize is that there are going to be new massive opportunities coming out of China. China has just announced a $5 trillion-dollar plan to build additional economy. The first part of that plan is to build additional infrastructure. They are building smart cities. They are building virtual consumerism and an additional currency. You must have heard about that. There is going to be a digital RMB, and many in the world are asking if that’s going to attract the US dollar. So there’s a lot happening in China. With regards to investing globally, you know I feel that this is really an unprecedented opportunity for family offices to move away from the creation of businesses and start looking at investing in areas and technologies that will cover the new world, post-COVID. You know you and I are talking on Zoom. We are not meeting, as you know. So the way we live, travel, create, connect with people is all going to change significantly and dramatically in the next 5 or 6 months and I think that will continue. So, looking at technologies and sectors that will really cover the great ‘re-opening’, you know safe back to work, safe back to school, you know well-being, these are all going to be amazing, amazing themes to look at. So within that I would say you should look at food and agriculture. All the families I know are investing in food in one way or the other. Healthcare, because well-being is on everyone’s mind. All the way from vaccine to telemedicine. I think it’s going to be a dramatic area to invest in globally. I think looking at the future of work is very important. I mean, look at us – we’re talking on Zoom, so what other technologies can make the whole future of work easy? I’ll give you an example. I’m not a ‘technologist’ but I like the sector. A couple of years back we invested in a company that’s a one-stop ID platform. So what’s happening post COVID is just by facial recognition, the employer can know everything about your employment history. And now they are adding things like temperature scanning, contact tracing, previous work history. So essentially, as I enter that factory, my employer knows everything about me and I can safely go back to work. So, I think those kind of technologies are going to be a game changer, and as family offices I think we should all be looking to power some of those amazing ideas.
JB: Do you think that for real estate, when you talk about technologies like Zoom, how were are meeting now and changing in the post-COVID world, how do you see this impacting real estate in the traditional sense of commercial space?
AD: Real estate tech is actually a very, very big area and you know, a lot of families, whether they are real estate families or not, are looking at it. Think about it. ….(there are) no touch building management and cleaning systems…or technologies that can cut energy consumption to one third… I think all of these technologies are going to transform and add so much value to the real estate we are holding now.
JB: I understand you are interested in technology, but not necessarily tech savvy. What’s the general climate in Asia around the US dollar or even fiat currencies? I can tell you from my own concern around the US dollar, I wonder if that will affect or further the interest in crypto currencies as sort of an alternate store of value. What’s the pulse on currency in general, fiat currency vs. crypto currency?
AD: You know Jennifer, I’ll be honest with you. As a family office, we have stayed away from crypto, bitcoin and that whole space. That’s not to say that things are not happening there. I think it’s an exciting field and some of my very, very smart friends including Jim Draper who I was speaking to last week, are absolute believers and they feel crypto will change the whole world, just as the internet did. They are able to make advanced decisions in terms of investing in that space, but I don’t think I’m at that level. So I have not made any investments in that yet.
JB: You’re going to take a back seat approach and kind of watch what happens, watch what plays out for a while first?
AD: Yes, yes. Maybe I’ll get more comfortable as I see that China’s currency take shape right in our back yard. I think we haven’t seen digital currency backed by government and the state. We love to follow macro themes and I think because central banks and governments have really not come out and supported these currencies. so I’ve never had the comfort to go with that. We live in Hong Kong so we love the US dollar, we are pegged to it.
JB: Well, that’s good for us!
AD: Good for us too, but having said that I think this is the first digital currency in China that’s actually been backed by a government and I think it’s only a matter of time now that all governments will look at China, including the US, and will actually will come out with their own digital currencies. So I think you should ask me this same question two years later. Perhaps I will be invested.
JB: Right, that makes sense. Now, shifting gears a little bit, tell me about your experience in impact investing, the groups you are involved in and your experience.
AD: As I mentioned earlier, my family, starting with my grandfather, we are very very impact-minded and it’s affecting everything that we do. My grandfather, who owned 200 or so rural villages in India at that time, was the Bill Gates of his time. He gave about 80% of his wealth to the people and left the remaining in trust. So that’s very much in our DNA. My father spent a lot of time raising me and he raised me to continue the family’s legacy. Impact is very deeply engrained in our mindset. Apart from the investing that we do, we try to always keep in mind how it benefits the community. As a family, we are invested in the (impact) areas of children, education and children’s health. i think that when children are educated and they are healthy, they can change the world. Another area that’s very close to our heart is migrant and minority communities and their inclusion in society. My 20 year old an my 17 year old both run aid organizations that help minority and migrants and help them upscale. As a family we are really keen to see inclusive, diverse, really healthy societies of tomorrow. And we hope that the whole pandemic that we are seeing right now acts as a catalyst for that.
JB: I hope so too. I’m always so heartened when I speak with family offices that do work in the impact space. It’s so important because who else can afford to take on some of those big issues other than family offices. It’s so great for people to know what you’re doing in that space. So Move4Migrants specifically do and focus on?
AD: It’s actually an organization that was started by my son when he was 15. Both my kids were born in Hong Kong and southeast Asians are a minority here. They would go to temple and see kids very similar to them and be friends with them. But I think as they started to become teenagers, their path with these kids diverged tremendously. Many of these kids belonged to the minority and migrant community. My son wanted to empower the migrant and minority kids of Hong Kong and we provide aid in 4 key areas: health care, education, language and credit counsel. We feel that once they are of that high school age, many of them start dropping off school. We want to help them break that cycle and help them break into a universe where they can be doctors, lawyers, teachers. It’s very, very powerful.
JB: What a great way to help ‘move’ migrants into a positive direction. It’s amazing that you do that work, that your son..is it both of your sons?
AD: No actually I have a son and a daughter. My son started Move4Migrants. His journey has been very inspirational. It inspires me everyday. He was invited to the Hong Kong equal opportunities commission to actually come and give his views. He was invited but the United Nations in New York to come and talk about it and he won an award from Yale for social inclusion as well. So I’m very pleased and I think that he’s worked with almost 5000 kids so I’m very pleased about that.
JB: That’s amazing! 5000- fantastic! You are also involved with Teach for China and a youth diabetes association?
AD: Teach for China of course is the China variation of Teach for America. They basically bring in US graduates to work in rural schools in China for about two years. It’s highly supported by the finance community here in Hong Kong. And once those kids have done the 2 years in those schools, we actually try and get them jobs in the finance circuit. You’d be amazed at how evolved, engaged and empathetic we find those kids to be. Certainly better than kids coming out of Harvard. They’re not arrogant, they are highly inclusive. Their experiences they’ve had as a teacher who doesn’t speak any Chinese in remote China is amazing and makes them very complete people. Actually Goldman Sachs takes a lot of those kids every year.
JB: That’s must be so rewarding being involved in impact (endeavors) and you mentioned that you don’t necessarily give up returns in exchange for the impact. Lastly, let’s talk about Corona virus and how it has affected families, how it has affected Access Alts and what you are looking forward to and what your hope is for how things will evolve.
AD: This is a very tricky time and I feel that families who have tried for generations to built their businesses in areas like tourism or retail or shipping or oil and gas, you know they truly face extinction in this time. I have to say, some families are resilient, and they, much like us, have gone through many, many cycles and they’ve faced many crises in their life, but COVID 19 is very different. It’s very challenging. Because it really threatens the structure of business as it stands today. So generally speaking, I have three pieces of advice. Number one: engage your Gen Next (next generation). Gen Next love innovation and disruption. They are our biggest hidden assets. Bring them in, bring them on. And typically they are bored with generational business so now is a good time to for them to come in and actually transform businesses. I think many families are actually scared of bringing in young people in a tumultuous time like this. But actually this is the best time to bring them in. My 20 year old who was absolutely set on going to Africa last year and building an energy business, which he knows nothing about, is now at home and actually helping us reevaluate out portfolio. So, great time to bring in Gen Next. Secondly, it’s a very good time, after decades or maybe 100 years in existence as a business family, to evaluate your ‘need to exist’. Does your business really need to exist in a time like this, or in the future? And if not, how can it be very successful? It’s a great time to re-strategize and come out in a new ‘avatar’ if I may say. I think finally, acquire strategically. This is a great time, we are going to see some real distress in assets whether it’s hotels, occupancies down, airlines, shopping malls, company supply and logistics, these are all amazing areas where there will be amazing transformations and a lot of assets are going at fire sale value. So this is a great time to acquire strategically and diversify your core base. That’s a little general advice from my side.
JB: I think we’re all looking forward to this COVID 19 evolving out of our existence at some point. I’ve looked at documentaries and research on the Spanish Flu and it looks like this type of pandemic lasts between a year to two years. I suspect that when it finally sort of phases out of our existence at some point it’s going to leave lasting effects. I don’t think that people will trust that there isn’t something else around the corner. In the US, when we’ve seen pictures of crowds in China wearing face masks, it seemed like, ‘Oh that’s so, that seems unnecessary.’ But now it seems very necessary! Asians are ahead of the curve as far as anticipating an outbreak, especially in a global environment so maybe it’s something that we’ll all have to get used to. We’ll all have to get used to some new things but, as you said, some exciting new technologies as well that will be really beneficial to transform all areas of our whole existence. So, I really appreciate your time today and thank you so much for your insights. I hope that your next gathering of Access Alts is going to take advantage of new technology and one of those new incarnations that we are talking about so that things can continue to be productive.
AD: Thank you so much. I really enjoyed the conversation, very insightful questions and I look forward to speaking more.
JB: Ok, thank you so much Aradhna.