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Beeneet Kothari discusses why Tekne invests in emerging tech markets outside of the US
Key Takeaways
- Beeneet Kothari, CIO and portfolio manager of Tekne, discusses their global technology investment strategy.
- Tekne invests in scaled technology businesses globally, particularly outside of the US and manages a concentrated portfolio of correlated, diversified companies over a long period of time.
- The long roadway of emerging technology markets outside of the US presents a lot of investment opportunities.
Transcript
My name is Beeneet Kothari. I am CIO and portfolio manager of a firm called Tekne. Tekne is a global technology investment firm that's based here in New York, and we are now in the 10th year of our business.
We invest in scaled technology businesses globally. We have a particular focus on parts of the world outside of the U.S. The way we've always thought about it is the best investment opportunities are probably going to be over time, distributed proportionally to where people live and to GDP. We primarily invest in public companies. That's been where I've had the most experience. That's where I've got my professional start, and that's where we feel, by way of historic bias, most comfortable.
Our investment philosophy is the following, we manage money over the very long run, and when you're managing money over the long run, the way we have chosen to define risk is not volatility or drawdowns or your quarterly or monthly or daily marks or any of those things. Risk is defined as the probability of permanent impairment of capital. Number one advantage is you play into the market volatility instead of using it in your favor. The second advantage is, of course, compounding, right? As an investor, there's actually a third one that, to me, is more important than either of those two. And that is, you really get to know these businesses if you own them over periods of time. And what tends to happen if you do that enough times is your knowledge or institutional knowledge of that business really, really grows. We have effectively memorialized that we would only invest in a certain kind of company or certain kinds of companies. So our requirements are the business has to be number one, a growing business. Number two, it's got to be a profitable business. And number three, it's got to be able to do that, grow and make money without the use of leverage. If you own a portfolio of companies that are, let's say, publicly listed, they're scaled, they grow, they make money, and can do so without the use of debt. The odds that you'll take a permanent capital loss on a portfolio like that is very low. What we do on top of that are two additional sort of portfolio level controls because we're so concentrated, we make an effort to make sure that the ten companies we own are internally diversified and uncorrelated with each other.
The emerging markets technology ecosystem to us is not only thriving, but it's sort of the richest in the deepest that it's ever been. So here's how we've always thought about it; if you look at the public markets, the global stock market cap of technology companies, about three-quarters of it's over 70% is here in the United States. And it's not just in the U.S. It's really in two states. Right? It's in California and Seattle or Washington. The problem is the United States is 4% of the world's population, and it's about 16% of global GDP. And that, to us, was a glaring opportunity. And we sort of we kind of bet the fund that these numbers would converge over time because we felt that there was no reason why all the world's technology companies would be here in the U.S.
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