Insights from Jonathan Belz on Alternative Asset Investment and Technological Innovation

Paul Sanger: I'm Paul Sanger for the Finance News Network, and today I have the pleasure of speaking with Jonathan Belz. Jonathan is the founder of one of Australia's premier alternative asset investor communities, catering to Australian and Asian family offices and ultra-high net worth investors. He has built businesses from inception to become a trusted brand for both the world's leading fund managers and Australia's prominent family offices and wealth managers. On behalf of his nearly 400-strong LP base, BFA has executed close to 20 investments spanning global technology in venture capital and private equity, and has assets under management approaching 300 million. With extensive expertise in private assets, fund management, allocation strategy, and corporate advisory, Jonathan brings valuable insights to the investment landscape. In recognition of his entrepreneurial endeavors and innovative contributions, Jonathan was nominated by the Australian government in 2022 for the Entrepreneurship Innovation Award.

Welcome, Jonathan.

Jonathan Belz: Good morning, Paul. It's great to be here.

Paul Sanger: So Jonathan, can you maybe just kick things off today by providing us with an overview of BFA Global?

Jonathan Belz: Absolutely, happy to. So BFA Global, I like to say kind of spawned from a combination of my Western investment banking training, which I say spans across Goldman Sachs and Credit Suisse in Sydney, New York, Hong Kong, and some time in Shanghai where I was across the investment banking, trading, and all areas of the financial markets. But then also a combination of my time both working for the Victor Smorgon Group, looking after their private assets and actually spending time learning Chinese in Shanghai and in Hong Kong. I like to say it's a fusion of the East and West, and what that really is about is about recognizing that sometimes traditional financial markets, advisory systems, investment management platforms, may not actually give you the long-term alpha and the long-term outcomes that investors are really after. So what we seek to do with BFA Global Investors is provide an investment management platform that allows family offices, advisors, and high net worth, get access to really world-class opportunities and opportunities that really reflect what venture capital, private equity, and alternative assets, are all about and were meant to be all about, before things got very large and incentives changed in the market.

So I like to say we're a new age alternative platform. We really help people gain access to global opportunities that they otherwise wouldn't see, and then help them get up the curve in what's increasingly a rapidly changing paradigm when it comes to investing across financial markets.

Paul Sanger: That's great. So let's delve a little bit deeper. So how does BFA Global facilitate access to direct venture capital investment opportunities, particularly the appellate ones?

Jonathan Belz: Yeah, so what we do, obviously a combination of myself, my co-founder, Gavin Ezekowitz, and our team, we've been in markets for a long time and what we do is we have pretty strong relationships globally with a number of emerging managers and companies. They give us a pretty unique set of access points, which is across the US, somewhat a little bit in Europe and in Asia. How we do it is essentially we do what a lot of other groups do, which could be look at the entire universe out there and say, what emerging trends are happening in the world that really facilitate the time and attention? In particular, we look at, what are the way that consumers are taking data, how are they using data, how are they consuming content? And then most critically, what's the technology that's changing around that, and where the world will be in five or 10 years?

And then we spend a lot of time with our partners, which include very prominent investors such as Microsoft, Google, Disney, Nvidia, and others, and we say, which firms, which funds do you trust when they take technical underwrites for some of the thematics that we're trying to invest in? Which groups would you invest with? Which sectors do you think these emerging managers and the companies have expertise in? Then we deep dive within those and pick, which ones do we think are relevant for in an investor base here in Australia and in Asia, that need that allocation, that are underweight in that allocation. And then from there, we go and make those investments alongside the managers. And as we get to know them better, we do more with them in terms of follow-on investments and co-investments. So it's really been part of the different ecosystems that are out there, recognizing that there's not one stop shop for a lot of the themes we're trying to get into. And then identify, who do we think are the best people to be placed to generate the alpha for our clients?

Paul Sanger: Let's talk a bit more about the people. I understand that your work involves collaborating with younger founders or the younger generations of established families. How do the investment preferences differ between these younger generations and their predecessors?

Jonathan Belz: Yeah, it's a great point, and something people talk about a lot. Clearly when you start talking about AI and next-gen computing and quantum computing, a lot of people who come from first-gen or second generations, who come from traditional operating businesses and property, have certain biases or might switch off and say, look, this is too far away from me, this is too hard, I can't touch it and feel it, and it doesn't feel like my property portfolio, so I'll stay away from it. And quite clearly the second gen, third gen, tend to be much more open because they recognize, in large part, this is coming quickly, and what I call financial literacy for your next generation, involves much more than investing in a set of property portfolios. If you want your kids to really be in a world that they can be literate across these thematics like AI and computing, semiconductors, China, all these kind of investment themes and key paradigms that are shifting, you absolutely need to be up the curve in these technologies.

And there's only one way in my mind that you can really get alignment and feel it, and that's being investing with the best people in those sectors. So you find the second, third generations, are far more open. You do find there's this kind of a smaller segment of the first generation that are very interested in things like longevity and AI and how it's going to keep them alive for longer and give them better quality of their life. So you do find there is a sliver of that, but I think the assumptions and the generalizations that the next generations are far more open to it, is definitely true. And I think that trend's accelerating. It's accelerating, I think because we see so much of it in our face now. There's ChatGPT, the Nvidia moments, they're happening more frequently, they're more obvious. Obviously quantum's another topic we're close to, and that's been very topical, lately. So I think those things are accelerating and it's making an impact.

Paul Sanger: And maybe you can delve a bit deeper into the investment prospects within the realm of technology, encompassing AI, semiconductors, next-gen computer, and similar fields.

Jonathan Belz: Yeah, absolutely. So we spend a lot of time in all of those areas. There's a combination of two reasons why we really like it. Clearly the adoption cycles across AI, semiconductors, computing, et cetera, are all happening a lot quicker. We've been on top of that for a few years and we can see it happening at an increasing rate, which is really transformative. One of our partners, Playground Global, who I think you know as well, they like to say the industrial revolution hasn't even happened yet. I think we're about to enter the world with quantum and AI, which is going to transform the way we think about investments, investment returns, but the way we view the world as well and how we solve problems at a broader level. So at the same time, though, I'm somewhat bearish in a sense, on the overall macro picture, in the sense that I do think we are, on a broader level, at risk of some of the 'big black swan' or larger tail risks, I think are higher probability than they've ever been before.

And while that means you can't stay out of the market, what I like to do is focus on the investments that will really perform, A, because of the big super trends which I've mentioned, but also in the event of a bit of a downturn or issues more broadly, are quite protected. So when you look at that, you look at scarcity and what will be really valuable regardless of where we go, and that's where the urgency around semiconductors, the urgency around computing, data, energy transformation, become really relevant. But it's not just deep, deep tech. We're Australia's largest investors in Epic Games, which owns Fortnite, which most, I'm sure many of you play. And that's a really great example because not only is it becoming the choice for people to connect and interact and potentially could replace platforms like Facebook and Instagram and those things for the next generation, but even in the event that we have another pandemic or kind of an even worse type scenario, people will still play their games. Covid proved that. So it's somewhat recession-resilient. So you get both trends together, kind of excites us, and I think we're at a really unique moment in time where the urgency around technology and the adoption is so great that you can kind of find these opportunities to satisfy both of those criteria.

Paul Sanger: And maybe just to finish off, can you shed a little bit of light on the venture capital landscape in the US and elaborate on how Australia and Australian investors can effectively engage in and reap the benefits from this rapid expansion?
Jonathan Belz:

Yeah, totally. So look, venture is in a really interesting point. Like I mentioned, the adoption of new cycles and new technologies has never been greater, but it's also a really, really tricky time to fundraise and to raise money. And we had a major correction post Covid in the tech space, with a lot of unicorns and fake unicorns being washed out. And it's still happening. Now, the benefit for investors there is that deal terms, access, structure on term sheets, has probably been as good as I've ever seen in my career, it's nearly 20 years, which is fantastic if you're entering it at this point, because you're getting lower valuations and better terms. Things like liquidity preferences, et cetera, are better than they've ever been. And at the same time, Australia's really uniquely placed, both to benefit from it, businesses like ours are trying to bring that access and we're at a unique point where Australia has a lot of relevancy, A, because it's becoming more of a relevant player in the underlying technologies, things like PsiQuantum, Element Zero; which is producing green steel, and Australia's seen as a relatively safe democratic country under rule of law. So it's an attractive proposition both for companies and funds who are coming to raise in the region.

So I think it's a really, really interesting time for Australia to get up the curve and put themselves in a position to invest in these global businesses and generate great returns, but also be part of the conversation when it comes to implementing these technologies locally. So I'm really excited about that prospect and it's, in my view, time for Australia to sort of step up to the plate and increase its economic diversity, which has been quite low for a long time, based on the way we export in a pretty crude way to the rest of the world.

Paul Sanger: We hear you loud and clear, Jonathan. Jonathan, it's been an absolute pleasure speaking with you for today. Really appreciate you taking the time.

Jonathan Belz: Not at all. Look forward to next time, Paul. Thank you. We'll speak soon.

Paul Sanger: Thanks, Jonathan.

Jonathan Belz: Cheers, mate. See you. Have a great day.