[Book Sips] Advice from 13 Financial Titans Who Delivered Profits Even in Downturns

Editor's NoteSome sentences encapsulate the entire content of a book, while others instantly resonate with readers and create a point of connection with the book. Here, we introduce such meaningful sentences selected from various books.

With the end of the zero interest rate era, the financial markets have undergone major changes. As both stock and bond prices declined, almost every investor suffered significant losses. Bonds have traditionally served to cushion investment portfolios during stock market downturns, but this time, they failed to do so. The real estate and cryptocurrency markets were not much different. So where did high-net-worth individuals invest their money? The answer was private credit, or non-bank lending, which offers higher returns than bonds. The author meets with 13 financial industry giants who have achieved remarkable results regardless of booms or busts, and explores alternative investments that minimize risk while maximizing rewards.

Companies typically establish new funds every few years. These are referred to as new "vintages." Each new fund acquires a range of investment targets. For example, each private equity fund might acquire between five and fifteen companies. The performance of each vintage can vary greatly depending on the economic environment and market cycle at the time the fund is launched, as well as the performance of the individual companies and assets included in the fund. However, unlike wine enthusiasts, investors only find out which vintage is good after their money has been spent. They must invest first and then wait for the results of the "harvest." This is precisely why most institutional investors invest in multiple vintages managed by many asset managers. This strategy provides greater diversification and ensures exposure to as many vintages as possible. Of course, this is difficult for individual investors. Even very wealthy individuals usually do not have enough capital to invest in numerous vintages managed by various managers. For this reason, they tend to concentrate their investments in a few funds and, as a result, are exposed to greater risk.

Now, qualified individual investors have the opportunity to own professional sports teams. Some co-investment products for sports teams diversify across multiple teams in all major leagues (MLB, NBA, NHL, MLS, Premier League), rather than investing in a single team. According to Bloomberg, Fenway Sports Group owns the Boston Red Sox, the Pittsburgh Penguins, and Liverpool. Teams that have attracted private equity investors include the Sacramento Kings, the Golden State Warriors, and the Tampa Bay Lightning of the NHL. According to PitchBook, more than one-third of clubs in Europe's top five soccer leagues have received private equity investment. Owning numerous teams across different leagues and regions provides diversification effects that are uncorrelated. Ownership stakes in teams also allow for depreciation or amortization to be applied to fund investors, resulting in tax benefits. Now we can better understand why the world's wealthiest people own sports teams. It is not simply a trophy investment. In fact, after decades of working in alternative investments, I consider professional sports team ownership to be an absolute all-star, with a track record that is hard to believe. This ownership is diversified globally, uncorrelated, and has demonstrated resilience for a century.

We are experiencing an energy revolution in which renewable and clean energy sources are steadily taking market share from less clean sources. While this trend will continue, according to many experts we interviewed, it will be difficult for existing fossil fuels to be completely replaced. This view stands in stark contrast to the outlook often presented by media outlets, which report as if the transition to renewables will happen in the short term. For those accustomed to such coverage, it may be shocking to hear that society will not simply switch off fossil fuels overnight. Instead, it is more likely that technological innovation will make existing fossil fuels much cleaner and more environmentally friendly. In fact, the technology to achieve this already exists; it is simply a matter of time before it is commercialized.

Private credit is another way for individual investors to gain indirect exposure to real estate. Both commercial building and residential property owners need capital, especially as bank lending has all but disappeared. Many property owners will have to rely on private credit (sometimes called "hard money" loans). These non-bank lenders provide short-term loans secured by assets to borrowers in need of quick cash. Such loans offer very high yields and have strong protections in place in case borrowers default. Real estate loans can be an excellent addition to a "holy grail" portfolio as a means of generating portfolio returns.

In Asia, ministries such as the Ministry of Finance or the Ministry of Trade, Industry and Energy are very powerful and active. Some people even say they interfere with the market. The role of these Asian government ministries can be traced back to Confucian traditions, where public officials were seen as guides and guardians of society. These ministries believe they are fulfilling the same role today. I once heard a policymaker refer to himself as the "invisible hand" that Adam Smith described in relation to the free market. Yes, I have a slightly different perspective. But that is the role they play. Therefore, to do business in Asia, you must work with them. Differences start here and extend to the way business groups are organized. In Korea and Japan, there are large corporate groups. In Korea, family-owned conglomerates control 80% of industry. You must learn how to work with these family-owned conglomerates, which are now in their third generation of ownership.

The Path to Wealth | Tony Robbins et al. | Translated by Baek Woojin | 480 pages | RH Korea | 38,000 KRW