Freedom Calls: “An Egyptian astronaut and a Swedish success story”, 9/12/24

From the team at Freedom Asset Management 

++ A quick update on Syria ++ Damascus has fallen and overnight Assad has been granted asylum in Russia.  What comes next for Syria is not clear, except the incoming leader Abu Mohammed al-Jawlani seems to be distancing himself from his ISIS and al Qaeda past to win over Western opinion.  It remains a fluid situation on the ground, and we will pick it up in greater detail in next week’s letter when the dust has settled somewhat ++ Despite the media frenzy today, we do not expect it to have a material impact on markets. ++

This week could have been called “the week of badges”.  Even by Abu Dhabi’s generous standards, I think I collected more lanyards, nametags and wristbands this week than in the previous 6 months.  On Wednesday we dipped into Abu Dhabi Business Week listening to an Egyptian astronaut and a recently relocated UK entrepreneur.  By Friday we were listening to the private markets teams at Mubadala Capital’s investor day and exploring the future of AI.  There is so much “content” coming to Abu Dhabi, it makes managing a global asset management business from Abu Dhabi much easier than it was, and arguably easier than from Europe.  One of those lines that stayed with me was from the Egyptian female astronaut: “we are not trees… we don’t have to stay where we are if there are better growth opportunities elsewhere”.   That does somewhat embody Freedom’s approach to business and investing.

Pictured: Attending Mubadala Capital’s investor day in Abu Dhabi (L-R): Shawn Welgemoed, Adrian Harris, Mubadala Capital’s Blake Klein and Sandrine Reynaud

Artificial Intelligence (“AI”) is still not there yet

One of the most insightful discussions last week was given by Mubadala Capital’s Head Technologist Dr Rafic Makki.  It did not involve trees.  He pointed out that AI still has not been able to map out “love” or “hate” – two of the most powerful emotions we feel.   This is after the 5 largest firms in the US have spent a combined $560bn on capex between 2022-2024 – and most of that on AI. 

Moravec’s paradox states that what is easy for humans is hard for AI and the converse.  Or as Mr. Moravec put it in 1988, “it is comparatively easy to make computers exhibit adult level performance on intelligence tests or playing checkers, and difficult or impossible to give them the skills of a one-year-old when it comes to perception and mobility”.

(Source: Wikipedia)

Makki also noted that when AI brings us an “answer”, nobody can explain exactly how it got there (there are so many probabilistic routes it could have taken to get there).  And sometimes AI “hallucinates”… i.e. it comes us with complete garbage… and nobody knows why.  But amongst all the unexplained outcomes comes a much more valuable and good body of work that is now being used across industry and tech.

The “killer app”, (an unfortunate moniker given where this could go) is the humanoid robot.  Freedom clients will have read Cody’s view that the humanoid robots Tesla is developing could transform people’s lives.  Essentially, Tesla’s ambition is to sell you a $20,000 robot and then sell you a subscription to the software that can turn that robot into either a nurse, a building site worker, production line worker, a gardener, read bedtime stories or take your dog for a walk…. the list goes on.  It is obviously not a great stretch at that point to believe that bad actors might turn a fleet of these robots into a private army… and then we are into proper Star Wars territory.  Musk believes he could have something to sell us within the next couple of years.  Let’s see.

AI is also being used to find the next venture investments.  I spent time with Mubadala Capital’s European ventures deal team and took comfort from the fact that after a couple of years in the doldrums, European VC investment is staging a recovery. It is mainly focused around FinTech and AI, but there are several term sheets chasing the best deals.  And like in the good old days, the best founders and best companies are choosing who they work with.  We are all eagerly awaiting the listing of Klarna, which will be an important signal for the state of European VC (albeit that it is listing in New York, but that is another long story about European decline).

There was much talk about where AI goes in healthcare and some of the more difficult political and society challenges around self-driving cars (Waymo).  But I will end this piece with the closing remark from Dr Makki, “Tech leads… everything else follows, including politics.” 

Fund performance – strong numbers again:

Source: * Estimates Freedom Asset Management as at 8/12/24. Please note depending upon how the funds are invested a small number of underlying funds can price 1-2 days after we take our estimates above so final published NAVs may vary.  Estimated GBP returns are from a $1.2622 FX rate on 2/1/24, ** as at 30/9/24, note fund prices quarterly and includes 5% discount to NAV expressed as 5% performance above for 2024, *** FT Markets as at 8/12/24, I shares

By popular request we have moved this performance piece to a tabular format, especially as we have new funds launching in January.  The world is feeling an unleashing of capitalism in a post-Trump world.  That is a great thing for portfolio returns.  Comrade Starmer please take note for the UK, that is if there is anyone left after April.

A couple of Freedom points, before I sign off:

Freedom’s new SFC-regulated Hong Kong business has now been granted a QFII license allowing us to invest in mainland China for our institutional clients.  That speaks volumes for our small and talented team and friends on the ground in Hong Kong, but also points to how welcoming China is for inward investment right now.  You won’t read that in the FT.  Please reach out if we can help you with anything here. 

New offices in Abu Dhabi – for our clients that have come to visit us over the last 3 years in Abu Dhabi, you will have noted that the office space has been a bit of tight as we have sprawled over two units.  We are moving to a much-improved single space on Reem Island with our own meeting rooms, befitting how important our Abu Dhabi business has become within the whole Freedom group.  We are also booking a big saving on office rental costs on Reem – so everyone’s happy.  We look forward to welcoming our clients there from mid-January.

This week we have articles from:

Sandrine Reynaud, “Lower interest rates are fuelling a resurgence of M&A and IPO activity”

Michael Griffith-Dixon, “Thinking Long Term – A Swedish Success Story”

And Justin Oliver is back from his brief holiday and picks up on the question of “Will the momentum behind US stocks continue?”.

Please scroll down to enjoy the articles.  We are working on some better formatting so you will be able to navigate the weekly articles more easily.  We are not quite there yet, so please bear with us.

I shall be in Abu Dhabi for the rest of this week for Abu Dhabi Finance Week.  If you are in town, I look forward to seeing you – it’s +27C here and the sun is (always) out! 

Adrian