StashAway | Investing, redefined

Unpacking China’s Regulatory Crackdowns, with Brendan Ahern, CIO of KraneShares

Episode Summary

Find out what’s behind China’s regulatory crackdowns and the country’s economic outlook, and why it’s worth staying invested for the long term.


Episode Transcript

Philipp: Welcome to another episode of In Your Best Interest, your personal finance podcast. I'm your host, Philipp Muedder, and today I’m here with Brendan Ahern. Brendan is the Chief Investment Officer at KraneShares, which is a China-focused fund manager. We’ll be unpacking some of the big headlines you might have seen in the past few months about China’s tech crackdown as well as China’s long-term economic outlook and its up-and-coming industries. Brendan, welcome to the show.

Brendan: Many thanks. Thank you for the opportunity to connect.

Philipp: Yeah, it's really, really good to have you. We have a lot of listeners. StashAway is based in Southeast Asia at its core - we have offices also in Dubai as well. But our Singapore audience, and Southeast Asian audience is pretty strong. And within StashAway, we have one of your ETFs - called - the ticker symbol’s KWEB, the China Tech Innovation ETF, which I want to talk about a little bit later on. 

But before we do so, we kind of want to get to share a little bit about yourself with the audience so they get to know you better. How did you get started in investing or even interested in investing?

Brendan: Yeah. You know, it's funny, I always had an interest in investing as a child, my father is a great reader, and he would get The Wall Street Journal in The New York Times and all, Time magazine, Newsweek, [02:00] just those newspapers - The Wall Street Journal was always lying around, and I started reading it as like a teenager an ended up reading Peter Lynch's, one of his books. 

So I bought my first stock as a teenager and always had an interest in wanting to get into finance after college. And really my career path was working for mutual fund families in New York City. And then I got hired by Barclays Global Investors during the rollout of the iShares family of exchange-traded funds that they had, Barclays Global Investors, which was the largest index quantitative manager globally. 

And iShares was going to be their first foray into really kind of retail, a product that could be bought by retail investors and they'd hired all these captains of industry and me. Just kind of happenchance, dumb luck. I was like the 20th hire. 

There's probably about two dozen of us in a different office than the rest of the company. And I was like, wow, if this doesn't pan out, they're just going to unplug this office and iShares would go away. But it turned out to be an incredible success. And just sitting in this room in the early days, I sat next to the head of marketing, the head of sales, the head of operations, portfolio management. Just had this great, great learning experience of being a sponge.

Philipp: It's kind of like a start-up atmosphere right within the big brands.

Brendan: Yeah, I mean, we were in San Francisco. So you kind of always had that kind of tech start-up and we really felt like a start-up. We were disrupting a traditional [04:00] active management industry. We were kind of evangels, we had this different way of investing. And it was just a great, great experience. Unfortunately, our parent company, Barclays Bank, got in trouble in the financial crisis and Barclays Bank sold Barclays Global Investors and iShares to BlackRock. And I just moved back to New York, where I'm from originally, so I literally walked up the street with a proverbial cardboard box and worked for BlackRock. 

I ultimately got introduced to Jonathan Krane, our founder and CEO, who had lived in China for years and really experienced living in Shanghai, and how new China economic sectors were taking over. But also, more importantly, from my perspective, was that China was opening up, that they allowed the first foreign investors into China in 2001, and they were opening the door for more foreign investors to go into the Shanghai and Shenzhen, the A-share market. 

And there's lots of different types of investors, you've got fundamental, technical, quantitative, but, working for the largest index asset manager globally, you kind of went to church or your synagogue was MSCI. 

MSCI is the most important company for global investors, that their benchmarks are the rules for what active managers can buy or sell. But for passive managers, [06:00] for ETFs and index funds, they have to do what MSCI. So I kind of jokingly say that the most important book ever written is MSCI Global Investable Market Index methodology. 

Those 200 pages dictate like $15 trillion, both active and passive assets. And when John Crane said, you've got the second-largest stock market in the world is not part of indices, they are allowing more foreign investors. 

I just said, wow, like if you've got $1.5 trillion benchmarked to MSCI Emerging Markets, this A-share market represents 20% of that index. If it was fully included, that  $300 billion has to go into those stocks. And that's a business. So I quit my job to help make Jonathan Krane's vision investable. And we started the company with no assets, no brand in the first few years.

Philipp: Oh, you met him before the company was alive?

Brendan: Yeah, he's a very cerebral person, he studied the ETF industry for like 2 years and then really, had the gumption, the courage to start this company. And so I joined, before we listed, helped create the products. And, it took a little while, just, I think most investors, particularly here in the US, your main source of information is say, the Wall Street Journal, or Bloomberg, or Reuters. 

And yeah, sometimes you can get a little bit of a negative narrative. And we wanted to provide a data-driven, fact-based analysis of what's [08:00] happening in China - forget the headlines, the hyperbole, the sensationalism, the apocalypse - provide this balanced perspective driven by data. And that really led to our China Last Night blog where we talk about what happened in China, just factually, not the headline.

Philipp: Make sure I do listen to this and read it, so I will make sure to put it in the show notes as well. It's a very good resource for people wanting to learn more and be up to date on the latest topics there, right? So you made your first investment when you were a teenager. Do you still remember what that was?

Brendan: Oh, yeah, I bought like 2 shares of TCBY, which was a frozen yogurt company that; Peter Lynch's One Up On Wall Street book was about buying stuff you know, and as a kid, you know what you love, who doesn't? The company went bankrupt! My first experience was… The commission cost more than the value of the shares I bought.

Philipp: Which is crazy for now for younger people to think about...

Brendan: Yeah, yeah, it was like $200 in commission. And the broker actually had to call the floor of the New York Stock Exchange to get someone to fill this minuscule order. Yeah, but that kind of taught me a real lesson that even though that frozen yogurt was delicious, it wasn't a very well-run company. 

And that was early on, it was good for me to learn that lesson very early. That a great idea doesn't make a great company. Yeah, and a great stock [10:00] and a great company can be two very, very different things.

Philipp: Yeah, and that's individual shares as well. So you already kind of told us a little bit about the background, how you're in Barclay, BlackRock, then starting KraneShares at the beginning, we're talking about ETFs. So, we already had someone explaining a little bit about ETFs, index tracking, and more passive investments. 

But when you guys started KraneShares and you wanted to get into the China market, did you have, one strategy that where you were going after, did you want to just replicate the index to track it? What was always the thought behind KraneShares and where did you see your guys’ USP, so to speak, coming into this crowded market right nowadays?

Brendan: Yeah. So one was to get access into the A-share market. So we listed KBA, our MSCI China ETF was the first MSCI China A ETF globally, and that whole idea there was that at the time. Back in 2014, March of 2014 was that this market, which was difficult to access, we needed to get special quota approval, had to go to Beijing and meet with the regulatory bodies CSRC, SAFE. 

But the whole idea was that eventually they would keep opening up and MSCI could potentially add those stocks and KBA to their indices and that came to fruition in 2018 and 2019. MSCI added Chinese A-shares, we were very specific. We wanted MSCI that there's other China A-share benchmarks like CSI300, FTSE850, but we wanted the MSCI definition because we wanted the stocks that go into MSCI indices and therefore [12:00] MSCI ETFs and index funds. 

The other side was really what John experienced in China, which was you had these new China thematics, and at the top of that list was China Internet that John experienced first-hand how Chinese consumers, due to mobile phone adoption, were using their mobile phones to make a considerable percentage of retail sales happening online. So that definition was a little hazy, you could say. And so there with that index, I went to Shanghai and met with CSI China Securities Index Company because most people would say, well, just buy consumer discretionary, buy consumer staples, but then you get the old retailers.

And then at the time, you had the tech sector who owned a lot of these stocks. Alibaba wasn't public when we listed KWEB, TenCent was, but TenCent was a tech stock. So, there we said, you've got to take this bottom-up approach. You have to look at sub-sectors. So there's a sub-sector called internet retail. OK. That's a really good one. And then there's other little sub-sectors like mobile payments or online advertising, and those sub-sectors fell in different sectors. Today, it's funny - in 2018, the sector definitions changed. 

So Amazon and Alibaba came out of tech and are now in consumer discretionary. TenCent and Facebook went out of tech into [14:00] this new communication sector. So when you've been studying these indices, for me now, it's 20 years, it's a little bit of like a cry for help. 

But there's like gold in there, like these little intricacies, we wanted to exploit. And that's what made KWEB even today, this bottom-up approach unique. And these sector changes are still happening, they're talking about changing them again - that a number of the mobile payment companies might actually leave tech and go into financials. Now, why is that a big deal? Because there's not as much money in financial ETFs and index funds as tech. So people are going to have to sell those names now. 

Philipp:  So, KraneShares aims to get exposure to the China market by looking at publicly-listed Chinese companies as well as popular sub-themes, like internet retail and mobile payments.

Later in the podcast, we’ll cover just how KraneShares is navigating China’s tech crackdown, so keep listening. 

Brendan: Why is this regulation happening? Well, obviously these companies are a big part of China's online retail sales. But we think another aspect is that 2022 is a very important year for China politically. 

Philipp: If I take a step back, then from there you already mentioned KWEB, right? China Internet Tech ETF that you guys run and that we have in our portfolio. Is that then an actively-managed fund in a way? 

Does it just track an index because I know most people will be familiar with the index-tracking part of it. But then of course like I said, this market is exploding. So people that know there's active ETFs there and all kinds of different flavours of ETFs that you can buy. [16:00] So where does KWEB then rank in that kind of theme?

Brendan: So yeah, it's technically passive, but we were very hands-on in the creation of the index and we allow that index to be maintained by an independent third party. And part of our belief is just having studied the movement of these stocks for almost 9 years now, it would be very difficult to say which ones are the winners. 

A lot of times people would say, OK, like domestic consumption online, I get it. Why would I just buy Alibaba? But Alibaba went from $300 to $150 - not so easy. So, I think we find that a lot of investors find what we see, which is the difficulty in picking the winners in the space. And why not just benefit from a diversified basket approach, hold them all and therefore you're going to get exposure to emerging winners as they avail themselves.

Philipp: No, absolutely. I think it's a very interesting ETF. I have followed it way before it was inside StashAway, Freddy and I always talk a lot about investing and we always looked at it for a long time. 

Because I think it's a really good way for people to get exposure in the first place, right? Like you said, it's still not the easiest way to get exposure in this sector in China, right? 

And having a diversified set of assets in one ETF really, really helps the regular investor that wants to get exposure because they believe in the future of it, right? 

So of course, we can't talk about China, we have to talk also about some of the issues or at least like the headlines that have been plaguing us for the last 2 or 3 years. 

You already mentioned some of the stock prices, right, have been trending down throughout the year. [18:00] If I would have to ask you what investors currently are focused on. Are those still the main topics, and how would you talk about them or how as an - you're not an insider, but you are in the space, right? Every day.

Brendan: Yeah, the foreign views of China are very different than what investors in China think about China, and that disparity, if you compare Shanghai, Shenzhen, which is owned by domestic investors versus, say, Hong Kong, US shares. Big, big disparity there. 

And what's driving the foreign apprehension is that regulation itself is not a bad thing? It's been the implementation of that regulation that I think foreign investors have missed is that we view China as this singular entity. 

And when it comes to internet regulation, you have different silos. So you have fintech, you have online education, you have anti-monopoly, anti-competitive and user data, user protection. Now those silos actually have different regulators and those regulators are moving at different speeds. And so as an outsider, it looks like, oh my gosh, it's Baidu this week, Tencent Music next week, Meituan the week after. 

But in reality, it's just these different regulators moving through and that's led a lot of active mutual fund managers to say it's just easier for me to come out of these names than to have to explain something I don't really understand.

Philipp: And I think that's a good point with the “no understanding”, because I think for a lot of investors [20:00] or even when we get questions from people, even friends and family ask me about things, right? They all feel like it’s a black box. You don't really know what's there and especially, I think, with COVID-19 even more so because all we do is TV, right? No one travels. So we can't look in from the outside, we don't really know what's going on. I think that's where some of the fears always come from as well. Uncertainty is more so.

Brendan: Yes, 100%. I think this view from foreigners is that China is some singular entity. And listen, it's a huge country of 1.4 billion people - geographically, it's massive. Like, it's so much more than that. And I think what we've seen is that the weight of China in actively managed funds has come down significantly. And that's just investors moving out of the space. 

You had your many hedge funds buy the stocks -  there’s this hedge fund Archegos, when it was liquidated, they bought those stocks, right? It's a liquidation event. You always buy a liquidation event, but then you have the regulation. And so those investors got hurt. Tencent Music was at $30. It got sold out of Archegos at $20, and then it fell below $10. 

So those investors moved out of the space. A lot of active funds have to show all of their holdings at the end of June. You don't want to spend all day defending Alibaba. You just get rid of it. So a lot of investors have moved out now. 

Now what we think is that underway to China represents the dry powder, the money that can come back into them. They just need to have confidence that the regulation is over. And we think that there are, proverbial green shoots. There's signs that that is taking place. The user data, user protection laws went into effect September 1st, [22:00] November 1st. There's some really positive - a lot of the companies are buying back stock that they're very, very inexpensive relative to their historical valuations, relative to US internet stocks. They're incredibly cheap. And then we're kind of going through… But the iron, the hard thing has been the earnings from the companies have been strong the whole way.

Philipp: Yeah, and that's very interesting. I wanted to get there, right? Because if regulation is affecting the stock price, but the company's revenues and the business model is still intact, like nothing changed about Alibaba's business, right? It's still gigantic. They still run a lot of the industry, and same with the other big players there, right? When is the price at the bottom?  This is kind of like when is the time to get back in? Because if those fundamentals are great, right, then ultimately it should adjust itself back to healthy normal levels, right?

Brendan: Yeah. Yeah, I mean, we just had Singles Day and Alibaba, the revenue went up 8% year-over-year. For, it went up over 30%. So for us, that was a great sign - just that this quarter for Alibaba will be nice. 

So I think there are positive signs and that's been - the hard thing is just understanding how can the fundamentals be so strong? But you have to put yourself in the shoes of an active mutual fund manager. Do you want to spend all day defending Alibaba? No, you don't want to talk to any clients, you want to analyse and speak to companies, and so they've moved out. 

What we think some people are missing is that why is this regulation happening? Well, obviously these companies are a big part of China's online retail sales. But we think another aspect is [24:00] that 2022 is a very important year for China politically that you read about President Xi wanting a third term.

But a lot of senior government officials in China are in and around the retirement age. And if you think about how we disseminate news today - it is different. It's not just TV or the newspaper. It's the podcast, and Twitter, and YouTube, and Facebook. 

And the same is true in China. And could this regulation be about ensuring in a politically sensitive time period that the message you want disseminated around potential political leadership changes is aligned with reality? 

And in 2021, particularly for a US person, you just saw what happened with the election and fake news. And even unfortunately around COVID some of the things you read, you just kind of shake your head. And so. So maybe this regulation is to some degree driven by making sure that this news on social media online is disseminated in alignment with what the government wants and that intuitively makes a lot of sense.

Philipp: Oh, absolutely it does. And I want to go back to one point you made earlier: you said active managers would rather go out instead of explaining themselves, right? So they probably are affected to sell off as well, right? They accelerated those sell offs. Who is then, who are the buyers then in the market for China stocks in general right now, is it more a domestic thing or is it still big institutions or ETFs? [26:00] Obviously, some of them, some of them are not listed except the ones you guys have. So where do you see the buying coming from in order to take these shares to the next level, right? Like the next level of growth?

Brendan: Yeah, yeah, I think it's multifaceted - you have individual investors who are kind of giving up on trying to pick the stocks. But that's through institutionally as well, from speaking to a number of institutional investors. They've seen their dedicated China hedge funds or Asia-oriented funds struggle, in understanding this. 

And you paid really high fees for the smartest people in the world to try to avoid this. And maybe they didn't. You may have seen a few weeks ago a prominent China-focused hedge fund in Hong Kong is likely going to liquidate because they lost 11% in 1 month - that's a problem. 

So we think it's a combination of, retail but also financial advisors, financial institutions. And we are a global company, we've got a European business. We have talked to clients across Asia, Middle East, South America, Canada, and a lot of those investors we've been speaking to for a long time. And they're kind of saying, if I'm going to buy, this is the time to do it. And so we've seen I think it's over $6 billion of net new inflow into a KWEB year-to-date.

Philipp: Oh, wow, really? Quite a lot. Yeah. So that's good. Good indicators. So moving on then, I think one of the big statements you guys make is that we believe that the relationship between the US and China will be the most important economic partnerships of our lifetime, right? 

So that really resonated with me because I think one thing that was already brought up earlier was [28:00] the last 2 or 3 years - whenever we hear from clients or people asking questions, it's always about that US-China relationship, right? And obviously, it has been, even in Europe now, my family's in Europe, my wife's family's in England. You hear more and more about, oh, we don't want 5G from China. 

There's a lot of factors, bad sentiment going on right now which came with the Trump presidency and kind of got brought up more to the plate, right? Maybe it was underlying, but no one really talked about it, but now it's out there in the market, right? So how do you think the market reflects that relationship? And where do you see their relationship from your experience going forward?

Brendan: Goldman Sachs runs a US-China risk barometer. And what's interesting is there's subcategories - so politically the relationship between the US and China today is arguably at, at one of its lowest levels ever. What's interesting is, economically, the US and China have never had stronger relations. And so we've tried to tell investors that a lot of the political bark doesn't have a lot of economic bite, that US-listed companies generate $376 billion dollar’s worth of revenue in China. 

You just saw Apple, their China revenue doubled in the last quarter from $7 billion to $14 billion. I mean, that's just for the quarter. So you have a lot more exposure to China in US and global multinationals that are doing very well there - automakers and pharmaceuticals.  [30:00]

So we think that a lot of times the political bar is really for that domestic audience. They're not, they don't want to really go after, it's just it's a nice little sound bite as opposed to something that really hurts economically because if you really do hurt China, it only hurts the US economy. 

We've seen that with tariffs, right? Tariffs - China's going to write a check. Well, no, US importers write the tariff check, and that's inflationary. The goods you buy cost more because of that tariff. And the interesting one is steel. You'd be like, oh, well, this is going to help the US but the inputs for US steel makers come from China. 

So it actually hurt all automakers. A lot of the components, the basic inputs that go into high-end manufacturing like auto, come from China. So we think a lot of times there's this political bark, but it's more nuanced when you really look at - does it really hurt? Not, not really.

Philipp: That's good. That's good to know. Just the question we always get, right? So I appreciate you taking it on. So thank you for that. A couple more things before we wrap it up. I have a couple more futuristic questions. And so what are some sectors or industries that you see having tremendous growth in the coming year, something you are excited about personally or even from a work perspective?

Brendan: Yeah, I mean, personally, I mean, I continue to… I've been a buyer of KWEB. I just think it's so darn cheap. You just have to kind of buy it. And I have a longer time horizon. So candidly, I'm down that I started buying a little bit early, but I'm a [32:00] big believer in the KWEB thesis. 

We just had COP26 and I'm a big believer in the Chinese companies that are part of the pollution solution. So within the clean technology ecosystem, you have electric vehicles. Now that's more than just automakers, it's the battery makers like CATL. 

In China, 5% of auto sales were EV and 2020. But the goal is to get that to 25% by 2025 and to 40% by 2030. So, this is not just about Tesla - that's a luxury brand. It's about going to the mass market. And that's where I think these Chinese EV automakers are very well positioned. 

Solar and wind are about 3% and 6.5% of electrical power generation in China. Hydro is about 15%. Nuclear is just about 5%. Those in a decade, two decades to come, are going to double, if onot triple that they have to wean themselves down off of coal.

So we love China's clean technology space because it incorporates these 3 different silos. Big believers in semiconductors that Chinese automakers, no different than Ford and GM, need more of the basic chips than these lower cost chips, the semiconductor manufacturer just wants to sell the really, really super expensive ones. 

And so some of the more basic chips are actually what's the problem - and that's where China can move [34:00] to try to grow the domestic semiconductor industry. Healthcare is another area we really like in China because of the demographics as well as - rich people are going to spend to stay healthy. 

So we're a big believer in the Star Board, which is a new section of the Shanghai Stock Exchange, really focused on these innovative technology companies. So we see lots of opportunities, globally in clean tech. So yeah, these are like my kids.I love all these ETFs we've created. We did a carbon credit allowance fund.

Philipp: I think that's a lot of opportunities, especially in this space. And if you have a longer-term time horizon, this is just where the world is kind of moving to. So you kind of betting on that? Hey, if I have that 10, 15, 20 time horizon, I think that's a very, very good part of your portfolio can be dedicated to this, right? 

Because you might have that exponential growth in these spaces. You just mentioned the Star Board right, what also just happened, I think today or yesterday, this was recorded on the 15th of November, but the Beijing Stock Exchange was set up right for entrepreneurs. Do you see this as a positive thing? Will you guys be able to access this at some point? I know it's probably mostly off limits to foreign investors at first, right? But maybe you can just give us a quick rundown of what it actually is and why it might be exciting.

Brendan: Yeah, so China has a, in the US, they call it pink sheets or an over-the-counter market for kind of small, very small companies - the microcap. And the Beijing Stock Exchange [36:00] started with the 80 largest companies that came off of what they called the NEEQ became the Beijing Stock Exchange. They had some IPOs. 

So these companies tend to be pretty small and we feel like it's more about taking that over-the-counter market and making it an official exchange. So we think over time, the Beijing Stock Exchange will be very interesting. 

Similar to the Star Board, it's about innovative companies. At the same time, we do think the Star Board is out to garner the bigger IPOs, more investable ones. And that's why I think in the short run, we're going to be short to medium. We're probably going to be more focused on Star Board just because the size of the companies are much more investable.

Philipp: Yeah. Oh, that's super interesting. Yeah. Thank you so much for kind of explaining this, because that's obviously been more new and I know we will get quite a few questions on that topic. 

And just to kind of wrap it up, you already mentioned a little bit of what you personally do and how you manage your money. This is also a personal finance podcast, so I always like to hear what kind of - you don't have to share full details, but kind of like what has been your kind of like your personal finance? 

Well, what's the best word to describe, but how has it evolved over time kind of like when you first started out after college, maybe you started saving for one, probably in the US So probably 401K is probably the first people get really exposure to it. But how has it evolved and how do you roughly manage your personal investments?

Brendan: Yeah, it's interesting, who you are is kind of where you came from and my father was born in 1929, he grew up during the Great Depression and World War Two, [38:00] kind of a tough time. My mom is a baby boomer, so happy times -  but my father was an incredible saver and that was something he kind of instilled in myself and my sisters was that, you gotta save - that consumption today is what you can't consume in the future.

Philipp: Thanks. A lot of people don’t do it these days anymore because I have a lot of friends that are the opposite.

Brendan: Yeah. I mean, I'm always like, kind of like a squirrel, hoarding nuts for the next winter. And so I always would fully fund my 401k as a young person. That was just, that's what you do. And certainly, I try to instil that in my kids. Early on, I worked for a kind of traditional, actively managed mutual fund and then working in the passive investment space, you're like, wow, like picking winning stocks is really hard. 

And I'm a big believer that asset allocation, these guys, Brinson, won like all these prizes, saying your asset allocation is going to determine 90% of your financial returns. And yes, there's times like today we're picking individual stocks looks easy, but that can and will change. 

So similar to how StashAway runs money, I actually have a financial advisor who I'm kind of in an all-ETF portfolio here and here in the US and I'm busy with my day job. I don't have time to watch and rebalance the portfolio [40:00] and figure out what's overvalued, and I leave that to a professional investor, very similar to how StashAway and Freddy and the team manage assets.

It's a very similar philosophy. And yes, like I'll personally, I'm very heavily invested in our ETFs. I'm a big believer that you should eat your own cooking. So I have on my personal account, a very big China overweight, which you know, there's years where that's been great and years where that's been not so great. But I'm a big believer in the long-term trajectory.

I would say, I think I'm always, you know, you get a lot of stock, individual stock research. And I just think it's important - my personal situation goes back to that first TCBY - that here was this great product and it turned out to be not very good, well-run. So I try to limit, even when I hear great ideas, I try to make that a smaller part. I say the majority will go into just kind of asset allocation, let professionals and I'll buy individual stocks here and there. But I try not to make it a too big part of my personal portfolio.

Philipp: Oh no, that's awesome. Yeah, thanks for sharing. I think it's very good to have a savers mentality. I always preach this and then obviously invest your savings, not just leaving it there. Made some really good points.

Brendan: Particularly today, I try to tell people like, listen, inflation is, that's your benchmark. You know, you got to, if you're sitting in cash, you're losing, you're losing 2% to 3% a year. And stocks are great transmission engines for inflation. [42:00] And that's why you hold stocks during inflation.

Philipp: Because you earned this, you earned the companies that actually charge more right for the products and services that you pay more for. So, yeah, I agree. It's just that's the part that it's always my biggest thing to help you tell family and friends and say, hey, yes, you can save, but you need to also start investing it right? 

Or did you get a 6% raise from your job this year? Probably not, maybe, right? So but you have to balance this a little bit right of having just enough cash on hand, but then also having your investments work for you over time.

Brendan: Yeah, and that's where fixed income in a higher-inflation regime is just a killer, and I try to tell friends like, listen, like you've got to be in stocks just and I think here in the US, there's a big home bias to US equities. 

And I think that's where, for StashAway clients in Asia, you see the opportunity or in the Middle East, you see there's a big world out there. It's not just about the five FAANG stocks. There's just a big home bias in the US, which is why I'm more interested in diversifying away into non-US equities.

Philipp: Yeah, just having that balance right is super, super important for people to have. And again, yeah, every country has a home bias. If I talk to my friends in Germany, they have German companies, right? So it's always 75% to 80% of the portfolio is home buyers, right? It's like, come on. 

Like yes you know them a bit better and people say, you should invest in things you know. But hey, there's other places in the world that you should also have exposure to as well.

Brendan: Well, 100%.

Philipp: Thank you so much, Brendan, for being with us today. If people want to learn more or stay on top of things, all related to China you will include the link to your blog, right? Anything else in particular [44:00] that you're reading or any good material or a podcast or, I don't know, anything that you follow that people can follow as well.

Brendan: That's a good question, that's a good question. Certainly, yeah, I write the blog. Certainly has more research around our ETFs. But the one thing, actually, it's sitting right in front of me. 

I read this great book called Factfulness, and it's written by a gentleman, Hans Rosling, and it's a great book for during the pandemic. I mean, he wrote it before, but it's about how great it is to be alive in 2021 relative to historical standards, that the standard of living has improved just dramatically, even over the last 10, 20 years, versus 50, 100, 200, 500 years, it's incredible. 

But this book walks through why it's so great to be alive in 2021, how fortunate we are to be alive today. And I just think, obviously with the pandemic, there's a lot of negative narratives in the news and you kind of forget that even in Third World countries, the literacy rate, vaccination for measles, polio have never been higher, never been higher.

Philipp: Very good book that I read also a couple of years ago. So, yes, a very, very good book. I highly recommend it to every listener today as well, because I think it does put things into perspective. And I think I was reading the other day an article about this exact topic [46:00] about some historians who were like cringing when people always say it was better back or back in the day, it was better. Twenty years ago, it was much better and everyone was like, oh no, don't, because people forget really quickly what happened in the past, but they remember the good things that happened. But like, not how it was really like 20, 30, 40, 50 years ago, right?

Brendan: Yeah, yeah, I mean, it's interesting, you know? My mother was actually talking about when she was a kid that they created the polio vaccine. And people would literally - were running to hospitals to get their kids vaccinated because there were, you dealt with kids who unfortunately were disabled by it and had this terrible iron lung that they had. And she kind of felt like it's part of the issue is just we're just far enough removed from that experience that it's led people to say we're not going to get vaccinated. And yeah.

Philipp: A tough topic, but it's good for people. I think this book is really good for this topic, actually. It's actually very timely that you mentioned that. I appreciate that. Thank you so much for coming onto the show today. 

Episode notes

In this episode, Brendan Ahern shares his insights on China’s regulatory crackdowns, long-term economic outlook, and just how it may revolutionise tech with its up-and-coming industries.

Check out Kraneshare’s blog,

For past guests, visit

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Episode Contributors

  • Brendan Ahern (Chief Investment Officer at KraneShares
  • Philipp Muedder (Head of Financial Planning at StashAway)