It’s impossible to miss the Spanish accent when talking to Juan Delgado, who currently manages huge investments in the alternative market. Born and raised in Spain he had wanted to become a professional soccer player, "That was my dream. I was quite good when I was 17 but then you realize your limits."
After a brief career in academia he moved into the field of private investments in which he has now been specializing for 25 years. The world of investments is familiar to him, as his father worked in banking. "I was exposed to banks since I was a child and I helped my father manage accounts from a young age," he recalls. "It was something we did at home, but investing is more than money, it's research, analysis and data management to gain insights into risk-taking. It's a specialization and an intellectual journey. Inside I'm a statistician," he says, and that's how he thinks about investment.
Aged 54, he lives in Hong Kong and serves as co-CEO of Hamilton Lane and is a member of the investment committee of the company that was founded 33 years ago and currently manages assets worth $124 billion. Hamilton Lane also advises companies, qualified investors (those with large liquid capital) and various entities that manage funds worth a combined $810 billion, and it is one of the largest firms in the world in its field. The company is traded on Nasdaq at a market cap of $10 billion and revenue last year was $452 million with a net profit of $141 million.
"We are in Israel to stay in Israel"
The enthusiasm in his voice regarding Israel is difficult to miss. Since the outbreak of the war, he has visited Israel five times, and he explains that he is not the only one from the company to come here in the midst of the fighting. Hamilton Lane has invested more than a billion dollars in Israel, in various private companies, a large part of it in recent years, including since the outbreak of the war. The company also has a representative office in Israel with 10 employees and a managing director - Limor Beker.
For him, this is just the beginning: "Hamilton Lane intends to continue investing in Israel in the years to come. We are here to stay.
"I was born in the Basque country, which I think helps with understanding smaller countries like Israel," he says with a smile and adds that his investment is purely rational and economic. He adds, "While Israel is a small country, it’s the leading high-tech market in the world. You’re not the best footballing nation, for example, but you are the leading high-tech market, and that’s something to take pride in. It’s already proven with defense technology and other sectors."
Aren't you afraid to invest in Israel at a time like this?
"On the contrary, I believe now is the best time to invest in Israel. We’ve been active in Israel for over 20 years, in high-tech, private markets, and various funds. Even after the October 7th attack, we’ve closed deals and are among the most active investors in Israel. Why invest now? There’s a lower valuation environment globally, especially in venture capital and growth assets, and many people are hesitant, which reduces competition. This combination of quality assets and good entry prices makes it an ideal time. There are many investment opportunities at reasonable prices, in companies that manage to survive in a challenging environment. Therefore, we are generally increasing our activity in Israel."
He also refuses to be deterred by the rating agencies' downgrades of Israel's credit rating. "These ratings affect the cost of the country's loans. But I invest in the private markets. This is a much longer-term investment. The effect of downgrading is not immediate, and I also believe that it is temporary," he says.
Prepare for volatility in the stock market
When interest rates are high and stock market prices are at their peak, many recommend taking advantage of the relatively high yields in the bond market. But Delgado is a big believer in private investment, and to the question of whether today is not an appropriate time to invest specifically in bonds in the tradable market that give a yield of 4-5% per year, he answers with a question: "Are you happy with 4%? Probably not, especially since you’re investing for the long term. Young investors with extended timelines shouldn’t settle for low-risk, low-return assets. They should look to achieve higher returns, and private markets are ideal for this."
However, the majority of the public does not have direct access to the private market, other than through their savings in investments made in the pension and provident fund institutions.
The strength of Delgado's belief in the private market can also be seen through the large share he allocates to investment in the sector in the investment portfolio he recommends, half in the public market and half in the private sector. Out of the entire portfolio, he allocates 30% to shares abroad, 20% to bonds abroad, 30% to private equity (shares of private companies) and another 20% to private debt. The small investor cannot invest in these areas directly, but can be exposed to them through the general channels in the provident funds and pension funds.
He justifies the allocation of the shortfall to the stock market by saying, "The US economy has proven to be stronger than most models predicted and remains the best global allocation. We don’t believe it’s time to rebalance out of the US. In fact, we expect an upside surprise in consumer strength, innovation, and GDP growth. Equity valuations in public markets are very high, which suggests they’ll trend downwards, with increased volatility driven by political events, elections, global macro factors, and the Fed's changing rate expectations. We anticipate only a 25 basis point rate adjustment, with possible pauses through 2025, leading to near-term equity volatility and potential opportunities to buy during significant corrections."
Opportunities in infrastructure shares
When he looks at his preferred sectors, Delgado sees "many opportunities in the field of infrastructure, in the US, Europe and also in Israel, but not in Asia - starting with logistics, through renewable energies and digitization such as data centers." He adds, "There is enormous potential here for investment, in new construction, in upgrading facilities and in a variety of subfields in this industry. We see a renewed revival in the field of production. The world needed more production, and the lack of production is reflected in the stock price of companies like Nvidia, which reminds one of the times when companies like Cisco and Intel dominated the market. The concentration of cheap production in the world today brings with it risks, and we estimate that during the next decade we will see a correction of this phenomenon."
Published by Globes, Israel business news - en.globes.co.il - on November 5, 2024.
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