Thailand EAM Leader Paul Gambles on Curating Quality and Integrity in Private Asset Investments
The evolution of demand for private assets in Asia is well documented, but how has this rising interest been affected by the weakness in mainstream markets in 2022? Are there growing risks as we face a different decade ahead? And how should wealthy Thai private clients be adjusting their portfolios in face of current global financial and geopolitical headwinds? Paul Gambles, Director at the Bangkok-headquartered and long-established MBMG Group, offered his views to delegates during a panel discussion at the May 25 Hubbis Thailand Wealth Management Forum in Bangkok. He believes private assets of all types are of interest to private clients, but that there is a danger of following the crowd. Quality of deals and the integrity of the due diligence and then the robust negotiation of the terms of those investments are all vital elements that he and colleagues look for in any private deals they put in front of clients. We have summarised some of his valuable insights in this short report.
Gambles opened his observations by noting that many of the big VC funds have a set menu that they put in front of investors. Essentially, he worries that these big-name players simply slap their terms and conditions down in front of the investors and ask for a cheque of at least one million dollars, and often far more.
“If you can negotiate your own terms and governance; that’s a true private deal,” he said. “You have to be really very careful as to which part of the private markets you're looking at and how you approach such deals.”
Tread with caution
Gambles then addressed some of the other challenges faced by clients seeking to access private equities. Normally, he told delegates, a key hurdle is the size of commitment required, with very large minimum investments and then with follow-on commitments as well on top of those.
Additionally, he indicated that in some private market investments a bubble effect has been seen in recent years and therefore locking in commitments with no liquidity in typical private equity structures for five to 10 years on top of what appears to be a bubble situation is a concern.
Don’t follow blindly
Moreover, he added that if investors go into a fund and then participate in the next round, they often have little or no idea what will be in that, so at that point they are really investing into an empty bag more on good faith and optimism, based on the fact that maybe some of the same people are still with the brand name funds or key players out there. He said this continuous cycle of launching funds and then launching new ones off those brands and off that sort of momentum is a strategy where the lack of alignment of interests creates added risks for investors.
Gambles indicated that without the clarity on the investments in these funds and faced with more uncertain conditions in the years ahead rather than the very benign conditions of the past decade, there are elevated risks that need to be fully understood and addressed.
The cart before the horse?
“My concern is that they raise money in these funds, they start charging fees and they are obliged to invest, but it is a sort of artificial model of invest now, get it done and then get to the next one and get that done,” he cautioned.
“The whole thing becomes riskier as it is driven by the process of fundraising, which obviously relates to the process of fee generation, rather than by being driven by the process of finding good investments.”
Another issue that concerns Gambles is that many of the big VC funds come to investors and intermediaries with a fixed template of terms and no room for discussion or negotiation.
“The big VC funds can often slap their terms down and ask for a very large cheque in return,” he said. “However, if you negotiate your own governance and your own terms, that is a genuinely private deal,” he commented. “You've got to be really careful which part of the private market you're looking at.”
The panel moved on to the topic of democratisation of access to private assets, and Gambles again took a cautious line, noting that, for example, access to private debt products had become so much easier in recent years, but that most would not pass muster under full scrutiny.
Seek out the quality deals
“Perhaps the vast majority of these deals would not pass proper due diligence, but they're out there, they are available,” he warned, on rounding off his observations. “There is a major risk when access arguably becomes too easy, and the underlying investments are then of really questionable quality, and I see this in the area of private debt in particular. In short, I think the democratisation of access is great, but the most important element is access to really good quality private investments, first and foremost.”
A Snapshot of Paul Gambles and MBMG
Paul Gambles has been a stalwart of Thailand’s wealth management scene for more than 27 years, having first arrived in Bangkok in 1994. Not only have he and his wife – who arrived with him all those years ago - raised their family there, but he has also built the MBMG Group into perhaps the largest and best-known multidisciplinary financial practice in the country, which includes leading independent asset management and advisory business MBMG Investment Advisory.
His founding partner, Graham Macdonald, retired in 2016, but Gambles continues today, running a team of 6 in the Investment Advisory team, with Assets Under Advice equivalent to USD1.5 billion at the wealth division, MBMG Investment Advisory.
Paul and his team curate investments and advice for MBMG’s roster of over 30 private clients, institutions and, their main focus, family offices.
He believes in the firm’s original ethos of a fee-driven model that embraces transparency. And he says that his first duty is to protect clients’ wealth, believing that they should be extremely careful in their portfolio risk management, especially at this time as global risks are at their highest since the 1970s, and certainly higher than the rather troubled 1980s.
MBMG Investment Advisory is the Thailand SEC-licensed fee-based wealth division of MBMG Group, which has, over the past nearly three decades, become a well-diversified financial services provider, and since 2015 a member of the GGI Group, the sixth-largest global professional services group. Paul himself is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner. The firm operates out of Bangkok and also has an office in the upmarket royal seaside resort of Hua Hin.
MBMG Group today provides legal, accounting and audit services, corporate advisory, insurance brokerage, and Gambles concentrates his time mostly as director and investment advisor with MBMG Investments. They also have financial planning licenses, so they frame the investment allocation decisions to align with broader issues like tax planning, lifestyle planning, and retirement planning.
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