The first episode of Investing in the Future delves into one of the most important reasons behind Dubai Investments’ enduring success – diversification. Gautam Mohanty, a seasoned financial services industry leader with over two decades of experience in investment banking and private equity, explains how a diversified investment portfolio has driven its success and discusses the varied sectors it strategically invests in, from real estate and manufacturing to financial services, healthcare, and education.
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00:00Hello and welcome to Investing in the Future, a three-part podcast series by Golf News that
00:21will take you on a journey through one of the major players in the economy of Dubai
00:24and the UAE, Dubai Investments. I'm Lachlan Kitchen, your host for the series. Dubai Investments
00:31was incorporated in 1995 and is one of the UAE's leading investment companies. Listed
00:37on the Dubai financial market, it has over 15,000 shareholders, more than 20 billion
00:42dirhams in assets, and a share capital of 4.25 billion dirhams. Over the course of this
00:49series, we'll cover the evolution of the Dubai and UAE property market and the pivotal role
00:54Dubai Investments plays in shaping the sector, and we'll focus on the company's commitment
00:58to sustainability and green initiatives, which are aimed at creating social and economic
01:04value in different sectors. But first, we will take a look at how Dubai Investments
01:09has been able to generate sustainable returns through diversification. In this episode,
01:14we'll delve deep into why a diversified portfolio is crucial to Dubai Investments' success and
01:19how it enables the company to navigate changing market dynamics. We'll also explore the key
01:25sectors the company invests in, real estate, manufacturing, financial services, healthcare,
01:31and education, among others, and reveal the strategic advantages of such diversification.
01:38Taking us through this insightful discovery is our guest Gautam Mohanty, a financial services
01:42industry leader with over 20 years experience as an investment banker, private equity partner,
01:48and management consultant. Gautam funded a private equity media and entertainment fund,
01:53closing in excess of $100 million, now owned by Aegis Capital. He has been based in the UAE
01:59since 2015 and has a history of success across a variety of different fields. Gautam, thank you
02:06very much for joining us on Investing in the Future. Hi, Kaj. Happy to be here. Thank you for inviting me.
02:11Gautam, financial experts often talk about diversification in your portfolio because it
02:16minimizes your risk, yet still enables the same level of returns. Given your experience, what is
02:22an example of a diversified portfolio, a successful one for an investment company? Sure thing. It's a
02:28very relevant question and great advice from most good financial advisors. Let me give some context
02:33for people who talk about diversification. If you're good at finance, you'll make a 90, but to
02:38make a century, you need diversification. Or to score injury time goal, to take a team through
02:43the line, you need diversification. It does not only minimize risk, but what it also does is it
02:50increases your opportunity to get performance across various sectors, because a lot of the
02:55commodities or assets that people invest in are inversely proportional. When I say that, for
03:01example, when gold goes up, stocks are down, and it's the other way around. So that's what
03:05diversification does for you. It's one of the oldest proverbs in the book, which is,
03:11do not put all your eggs in one basket. And that's still true, especially true in finance.
03:17Now, coming to the second part of the question, there are excellent examples actually in the
03:22region, which are great at diversified investments. Dubai investment is definitely point in case,
03:28and we can talk more about it as we go through the discussion. Another great example is Dubai
03:32Holding, which has done really well with diversification. And there are several examples
03:38like Aegis Capital, which you mentioned, and Sequoia Capital, which is now one of the biggest
03:42investors across the world. Their strength, the fifth gear that they got into is because of
03:48diversification. So on that topic of diversification, if we look at Dubai investments,
03:53they've been so successful, but what is it about their diversification that's made it so successful?
03:58So I would sound like a little academic, but diversification is usually two kinds.
04:04There's concentric and horizontal. Now, Apple, just to make it easy, is horizontal. It looks at
04:11the phones and the ecosystem around it stays in the... Software, subscriptions, those sorts of
04:16things. Absolutely. Versus a company like Dubai Investment, which started this journey much
04:21earlier, not just for the reason, but also globally, is where we look at concentric
04:27diversification. You start at a problem or look at a particular market with real estate,
04:34and then you slowly expand into horizontals, which support the concentric growth, which is
04:40essentially creating multi-use properties, which help build a community and not just a
04:45standalone building, for that example. So when you look at the diversification,
04:50we've touched on some of the reasons of success, but you mentioned you can't put all your eggs in
04:55one basket. One of the other great rules is that change is inevitable. How has the diversification
05:02policy changed over time? Sure. So one thing everybody presumes is when you diversify,
05:09you go into multiple global locations, you go into multiple different commodities and assets.
05:16That's not true. Slight tweaks in your same investment strategy causes diversification,
05:22especially for Dubai Investment. Now, like I said, they started with getting allocated land parcels,
05:30and then it was up to them to see and decide whether they want to just create a community
05:36where there are housing alone. But that's not what they looked at. What Dubai Investments has
05:41really done well through its acquisitions is it has now 30 plus wholly owned subsidiaries or
05:47partially owned subsidiaries. And these were in line with the view of doing concentric
05:53diversification, where they looked at companies which have synergies with them, and where their
05:59portfolio increases by strength. What makes it interesting to you? So what's really good is to,
06:06so a lot of my background is mergers and acquisitions. That's what I did for,
06:09that's been bread and butter for a long time. When you're looking at an acquisition,
06:13most of the people are looking at getting the sales pipeline. Essentially, that's what you're
06:18focusing on that their number should sit in my books. Versus Dubai Investment had the vision
06:23at the time when they started acquisitions, that they looked at various portfolio companies,
06:28which will add to their business. And it becomes more complimentary than just increasing the
06:33revenues or the numbers. So you mentioned Apple before, is it the same as Apple decide to buy
06:37Beats headphones, because they want to tap into that sales pipeline of the headphone market?
06:42Absolutely. It's spot on. That's exactly what Apple did. It did not only take away that
06:49Beats headphones market, but also looked at adding to their technology. Which is, I guess,
06:54another form of diversification. Exactly. Gautam, Dubai Investments have been very
06:59successful with their real estate portfolio over the years. So I want to know if you can reveal,
07:03what are some of their latest, what are their new exciting investments in real estate?
07:06There are a lot of exciting projects that Dubai Investments coming up with. A lot of them are
07:12going to be really high ROI investments for investors into real estate. The one I'm most
07:17excited about is at Al Marjan Islands. This is called Dana Bay by Dubai Investments. It's a
07:23billion dirham project. So it will be a premium resort style living project that they're building.
07:30What's really exciting is it's not only approximately 90,000 square meters,
07:35but off that 90,000, it's 40,000 square meter worth of beaches. So it's the perfect investment
07:41that one would look at, especially in Ras al Khaimah. Given the climate in Ras al Khaimah,
07:46it is all about resorts. It has become one of the main free zones, which is encouraging a lot of
07:52companies which are doing well. So that is a project to keep an eye out for.
07:57When it comes down to the rules of investing, I'm a big fan of Warren Buffett. And he always says that
08:02one of the main rules is you never lose money. You've got to focus on the long term, as always,
08:07too many people want to get rich quick. And you've got to really know the product and the market
08:12they're investing in. When Dubai Investments do decide to invest in a portfolio, how do they know
08:19what's right for the company? Is it a case of, are there anything similar in their characteristics
08:25or in the foundations or in the business ecosystem or the lifecycle of the company?
08:30Anything that makes it common with what makes them want to invest in a company?
08:34So it's very interesting. And especially with the current climate, there are so many apps,
08:38which make you invest into stocks, which wasn't the case earlier. Everybody's looking for a quick
08:44turnaround, which is fundamentally what Dubai Investments stayed away from. They have constantly
08:50believed in the number one rule of investment, which is compounding. You compound over the years,
08:54so your wealth grows and multiplies. And it's a geometric progression. Sorry for my maths,
08:59throwing that in. But what really helps is to, DI has stayed in that journey, where they looked at,
09:07like I said, concentric diversification, but making sure that it's compounding the investments
09:13that are already in their portfolio. Gautam, you've been doing this for 20 years, and you
09:18probably don't want me to admit that, but you've been successful for so long. I want to know from
09:22your experience, how does the market react when a company decides they are going to diversify?
09:28Do you ever see a change in the share price movement? Is there a positive reaction when
09:32a company outlines their new diversification policy? Thanks for reminding me, I've been doing
09:37the devil's work, but for a good cause for the last 20 years. But having said that,
09:44markets are volatile by nature. And that's what keeps it exciting. When a company says we're
09:49going to diversify, it usually sends chills down investors' spine, because they're not sure whether
09:55it's going to happen or not. But when a company like Dubai Investment gets into diversification,
10:00because of the track history and of the companies that they've held, the companies have done well,
10:06their track history has been good, people get excited. So it is a lot to do with how you've
10:11performed, how your past diversifications or acquisitions have performed, which can control
10:17the market sentiment. When it also comes down to certain investments, are any through Dubai
10:23Investments, could they be allocated as diversifiable risk? And by that, I mean,
10:29they can even be practically or reduced or eliminated some of the risk through diversification?
10:35So it's, again, it's very interesting. If you invest in a company, which is already diversified,
10:40you take that risk down. It dilutes the risk. Exactly. So if you go with a Dubai Investment
10:46investment, it dilutes that and you don't have to think yourself about where should I diversify?
10:52It's, you know, some of the top brains of the country, which are sitting together
10:56and thinking of where to diversify. And like I said, have the track record to look at it and say,
11:01this is where we want to put our eggs. And then that's where it goes.
11:05Yeah. And making sure they're not in the one basket, obviously. In your career,
11:09what are some of the other examples that you've seen aside from Dubai Investments
11:13of really successful diversification investments?
11:17So there have been quite interesting stories. I'll talk about a company called Videocon,
11:21which was the pioneer of white goods. It's a very, it's almost a case study. They were into
11:27white goods, they were beaten down by Sony's and Samsung's and the whole wave. They diversified
11:33massively into becoming an investment company and to diversify into telecoms, complete 180 degree
11:41shift. And they did really well and they survived where a lot of their contemporaries completely
11:45died in the market. Now that's how a company works versus like I was saying, Sequoia Capital,
11:50which is one of the biggest venture capitalist funds in the world. They were always very sure
11:56about picking their investments and that tripled them by not completing the investments allocated
12:02for a financial year. Whereas when they diversified, they not only did invest, but also got
12:09brilliant returns, which actually took them past some of the bigger players.
12:13Yeah, I think that when it does come off, it must be so rewarding for a company to be able
12:18to navigate that landscape.
12:19Exactly, exactly. It's, sorry to add there again, going back to cricket,
12:24Surya Kumar Yadav has diversified, has a lot of amazing shots. It doesn't pay all the time,
12:29but when another player who's had the track history does the same thing, it's a calculated risk. So
12:35it's about making sure you bank on what you've done well over the years, especially in the
12:39financial market. And the markets are way more rapidly changing than they used to.
12:43So it's like having a solid defence and that allows you to be creating an attack.
12:47Absolutely.
12:49With every investment, there's always an element of risk attached to it. And that has the potential
12:55to harm the returns, which the market and investors don't like. In order to be as resilient
13:00as possible, how does diversification minimise risk and also try and shield against economic
13:08uncertainties? Why do you think that Dubai Investment has been successful and how do
13:13you think they fare in that regard?
13:15Absolutely. So one man's risk is another man's reward. So that's always the case in an investment
13:22market. So when you look, if we eliminate all risk from the stock market, I think nothing will
13:27grow and nothing will happen. Now, what's important, like I said, is to take calculated risks,
13:31but to be cognisant of some of the other companies who are entering the foray. So a lot of the
13:36companies in the last 10 years, especially in UAE, have, they were traditionally the family
13:41offices or big funds. They've evolved into either a holding company or investment company.
13:47A lot of them are coming to terms with how to execute and what to do here. Some successfully,
13:53some not. And it's predominantly because of the risk that they take in diversifying.
13:58Now, if you look at how Dubai works, the double down on tourism and real estate, if we are
14:06riding the macroeconomic wave of Dubai while investing, which Dubai Investment has done really
14:11well, for example, creating DIP, which is now quite in demand because of being in the right
14:18place at the right time. And that's what's been the differentiator for DIP.
14:21DIP being Dubai Investments Park?
14:23That's correct.
14:23Yes. Gautam Mohanji, thank you very much for coming in and sharing your knowledge
14:27and your experience on the importance of diversifying your portfolio.
14:32Thanks, Keech. It was such a pleasure talking to you. It was quite exciting.
14:36Last thought is don't keep all your eggs in one basket. Thank you so much.
14:40It's a good bit of advice. Thank you.
15:01Thank you, Keech.