December 7, 2020 BARRON’S 27
leverage, credit, and illiquidity—and they aren’t measur-
ing them well enough. It’s one thing if private equity is
10% of a portfolio; if it is 30%, that’s very different.
What will investors need to own to boost returns
in the future?
Think about the 10 largest companies 10 or 20 years ago.
What will they be in 10 years? We know they will be dif-
ferent.Exxon Mobil[XOM] has shown it won’t be one of
the largest companies in the next five years because it
didn’t invest in renewables in the way thatBP[BP] and
Royal Dutch Shell[RDS.B] have. Energy has gone from
10% to 3% of the S&P 500 index.
Now, it will be about technology—its use in education,
health, cities, buildings, and energy. Those will be the
jobs of the future. If you are an investor and don’t con-
tinue to find the companies of the future, you will be left
behind. The speed of innovation is going to increase.
That’s a risk because a lot of big institutional investors
haven’t been oriented toward venture [capital].
You have long focused on emerging markets, an
asset class now dominated by China, North Asia,
and India. Should EM investors cast a wider net?
China and North Asia should be their own group. You have
to look to frontier markets and countries like Vietnam.
India will be very interesting; Eastern Europe and Latin
America will be interesting. I worry about Africa because a
lot of the attention to [it] went away during Covid and a lot
of debt that African countries owe is to China.
How will investors approach China in five years?
You can’t not invest in China. The [renminbi] could be
not a reserve currency but a more important currency to
hold in your portfolio. It will be more common for 30%
to 40% of a portfolio to be in [different] currencies rather
than [fully] hedged in the next few years because of the
size of our debt versus other countries.
Our focus has been on companies that benefit from
local growth. If there are restrictions from the West [on
Chinese technology], it won’t affect local companies and
trends. Companies that are highly political, or defense or
state-owned enterprises, or telecom-oriented, could be
tricky. In five years, I think government restrictions will be
replaced by investor restrictions—similar to investors who
don’t want to own stocks of private-prison companies now.
What is the one place that you’d most like to visit
when the pandemic ends?
That is really hard. I really would love to be in Europe.
Thanks, Afsaneh.
—R.K.
MARK SCHNEIDER
Chief Executive, Nestlé
Vevey, Switzerland
Barron’s: How will the coronavirus have reshaped
the postpandemic world?
Mark Schneider:This will have been the coming of age for
e-commerce in the food and beverage area. What we have
related to water and energy. The private sector is going
to lead. Companies are moving toward clean energy
because they know it’s not just regulation; it’s their
consumers [demanding it].
With the amount of interest even today in solar energy,
there aren’t enough service companies producing parts for
wind and solar [energy]. We will see growth in the next
three to five years, and those are [areas] that are more job-
creating. A World Resources Institute study found that for
every $1 million you spend on [clean energy], you create
more than two times as many jobs as when the money is
spent in traditional energy.
RockCreek had been investing heavily in education,
including distance learning; biotech and telemedi-
cine; and renewable energy. What investment trends
will we be talking about in the next five to 10 years?
The pandemic put on a different slope a lot of things,
particularly biotech and health. The technology to de-
velop [a vaccine] faster is also being directed to other
medicines. In five to 10 years, in emerging markets, the
health sector, which has grown from 1% to 3%-4% [of
GDP], will probably be closer to 10%. We have been
making direct investments and co-investing with venture
capital in both health-care delivery systems and biotech.
Also, the delivery of education will be different. With
around 45% of the world not having access to the inter-
net, governments will have to provide more of [the digital
infrastructure], and that means investing in the delivery
system for the internet for that last mile.
How will ESG investing evolve?
There will be a lot more businesses run by black and
brown people and women in five years. Covid and the
recent U.S. election are going to accelerate the trend.
Sustainable and ESG investing will be mainstream in
public and private investments.
What is the most important public policy issue
the U.S. will face post-Covid?
The biggest risk to our system is education. Investing in edu-
cation is key if we don’t want to lose our edge in innovation.
How should investors think about diversification?
Bonds offer no return in the next five to 10 years. Govern-
ments are encouraging companies to take on more loans.
The International Monetary Fund is encouraging coun-
tries to take on more loans. At all levels, there’s more
leverage. The risks that investors are taking are around
What is a key concern for Asia-based investors?
The decoupling of the U.S. and China is a massive change,
and Taiwan is an important fault line. Taiwan wasn’t too
much of an issue when the U.S. and China got along and
all China produced were cheap plastic toys and bicycles.
But this year, the market cap of the global semiconductor
industry is above that of the energy sector.Taiwan Semi-
conductor Manufacturing[TSM] said it is already man-
ufacturing a generation of chips thatIntel[INTC] has said
it won’t be able to fabricate until as late as 2023. If you
think semiconductors matter more than energy, Taiwan
Semi is one of the most important companies in the world.
What are the longer-term ramifications of President
Xi’s crackdown in Hong Kong?
The core thesis is that Xi is a transformational president—
the first imperialist president since the Ming Dynasty. If you
are Xi and you hear your companies won’t have access [to
U.S. markets], Hong Kong sounds like a great way to inter-
nationalize the renminbi and do a digital renminbi. Most
Westerners saw the intervention as the death of Hong Kong,
but China guaranteed Hong Kong would be China’s capital
markets for the foreseeable future. [Xi] has no choice but to
make it a success, which is why the Hong Kong dollar is
stuck at the high end of its [trading] band.
Chinese internet stocks have been hit by increased
regulatory scrutiny, including the scuttling of the
oversubscribed planned public offering of Ant Group.
Does this mark a turning point for these companies?
Since the [suspension] of the Ant IPO and new antitrust
[guidelines], we also had a state-owned coal company
default on one billion renminbi, or $150 million. One big
issue for China has been a trade surplus of $60 billion
and enormous inflows into China tech and bonds driving
the renminbi higher.
In the Western world, we would raise rates [to deal with
potential bubbles]. In China, they have regulatory weapons.
They managed to cool the tech stocks in China and inflows
into Chinese bonds. They got their message through.
You have been living in Vancouver during the
pandemic. What is the one place on Earth that
you’d most like to visit when the pandemic ends?
I have to get back to my Hong Kong and Beijing offices.
I miss my colleagues and my friends there.
Thank you.
—R.K.
AFSANEH MASHAYEKHI
BESCHLOSS
Founder and CEO, RockCreek
Washington, D.C.
Barron’s: What will be the greatest investment
opportunity post-Covid?
Afsaneh Mashayekhi Beschloss:Climate. It is going to
be huge in terms of investments—both in the move to-
ward efficiency and making sure systems are such that
Simon Dawson/Bloombergthey less gas gets into the environment—and everything