Episode 4: Investor’s InsightSadaf Abbas
Exploring Fundraising, Financial Analysis And Capital Market
In this podcast episode, Sadaf Abbas invites Philippe Chalu to discuss the evolving landscape of capital markets. They delve into the resurgence of inflation and its profound impact on interest rates and the equity market, emphasizing the anomalies of the past decade where investors often disregarded foundational financial principles. Reflecting on his personal journey, Chalu highlights his transition from a trading-centric role to one centered around sales, underscoring the irreplaceable value of human interactions in the field. As guidance for aspiring investors, Chalu recommends pursuing the CFA for comprehensive market insights and reading Benjamin Graham’s timeless classic, “The Intelligent Investor.” The episode underscores the vital importance of grounding oneself in fundamental financial knowledge amidst the unpredictable whirlwind of the financial world.
About Our Guest
Capital Market Expert | Financial Analyst
Philippe Chalu, with an impressive tenure of 18 years in investment, fundraising, budgeting, treasury, and capital markets, stands as a beacon of expertise in the financial realm. His intricate knowledge is complemented by an expansive network of professional contacts spanning the Middle East and Africa.
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What You’ll Learn:
- The significant impact of inflation on today’s market and the implications of high rates in the U.S.
- Insight into the unusual bubble of zero rates over the last decade and its effects on equities and market valuations.
- The importance of understanding the consequences of vast money supply and unsustainable deficits.
- The essentiality of adopting a long-term vision in investments rather than seeking immediate gains.
- The realistic limits of growth and potential pitfalls of speculative thinking are illustrated with examples like Bitcoin market cap speculations.
- An overview of the capital market dynamics in the blockchain and cryptocurrency space.
- The importance of having foundational knowledge in finance when venturing into capital markets, especially cryptocurrencies.
- Philippe Chalu’s personal transition from a trading role to a more human-centric advisory position.
- The value of the CFA qualification for those serious about diving deeper into finance and investment.
- A recommendation for “The Intelligent Investor” by Benjamin Graham is a seminal resource for understanding the basics of investment.
Sadaf Abbas: Welcome to our new episode of the Investors Insight podcast. This is your host, Sadaf Abbas from Oak Business Consultant, and our guest is Philippe Chalu; he has 18 years of experience in the world of investment, fundraising and budgeting, treasury and capital market. Philippe has a wealth of knowledge and an extensive network of contacts in the Middle East and Africa. In this episode, we will delve into his career insights and experience in the world of investment and capital markets. So Philippe, can you share a bit about your educational background and what led you to pursue a career in finance investments?
Philippe Chalu: So first of all, good morning and thank you very much, Sadaf, for hosting me in your podcast. Yes. So, in fact, I started because I first did telecommunication engineering because I was good at math and physics in high school. And then, while at university, I started reading a lot about the stock market. I was reading all the newspapers, and really I got a lot of interest. But I realized I said, okay, I studied engineering. But the concept, the theoretical concepts in engineering, telecommunication and finance are the same. All the mathematical tools are exactly the same. The only difference is the underlying. In telecommunication, you talk about signals; in finance, you talk about the stock market and interest rates. So, for me, it was really easy to make the jump. I would say from engineering, this is a huge jump
Sadaf Abbas: Phillipe, It means one from coming from an engineering background, and now you are into the finance world. So this is a huge jump.
Philippe Chalu: Yes, a big jump. So, I did a master of finance in France after telecommunication engineering, and this is how I started my career in finance.
Sadaf Abbas: Awesome. So you’ve held advisory roles at Othium holding company and BCD group of companies. Could you tell us more about your current role and what it is about?
Philippe Chalu: Yeah, so at the moment, I would say my main job occupation is not Othaim Holding company. So, I am advising the CIO, the chief investment officer of the family office. Al Waseem is a very well-known company group in Saudi. They are the largest operator of supermarkets, local supermarkets in the kingdom and a few years ago, they decided to set up a family office. So we are managing the wealth of the founder and before and still in parallel, I’m still getting, like I would say, consultancy project on the side with BCD. It’s like an investment advisory boutique mainly based out of Dubai, and we do a lot of capital raising, corporate finance and investment management for a lot of families and funds in the region.
Sadaf Abbas: My third question is, do you have a strong network of contacts, including corporate, financial institutions, family offices, high net worth individuals and government entities? How has your network contributed to your success in fundraising and business development?
Philippe Chalu: Look, my clients are all part of my network, so my network is everything for me. Without a network, obviously I cannot work. And to build a network, it’s about building trust and understanding their needs, and I would say bringing adequate advice for the client and obviously the suitable solution. It takes time, it takes years to build a reputation, and sometimes you can destroy it in just a second if you make a big mistake If you’re not ethical. Ethics is very important; if you’re not ethical or you become too greedy, you lose everything.
Sadaf Abbas: So the key point is success is your ethical point, and you need to be very honest. Yes?
Philippe Chalu: Yes, and especially in this part of the world, whether it’s the Middle East or even Southeast Asia, people, sometimes they become too greedy. They want to make quick money. You can make quick money, but your reputation will be destroyed. And for me, ethics is, I think, what will keep me running for the rest of my career.I just don’t want to do just one big project, make money and become the person that nobody wants to do business with.
Sadaf Abbas: The main thing, I totally agree with this, Philippe, that you should have a connection with your client. You need to feel the pain what the client is having, and then give the services, then offer what you are having in your plate. So the main thing is that you need to understand the client’s problem and then come to the solution.
Philippe Chalu: Definitely. So you need to understand the client first, what he needs, and this is what will make the difference. A lot of people are advising clients, but you need to bring something which suits him, not suits me, because obviously, okay, I want to make money, but ultimately I’m paid by my client. So, my client is everything for me. So when I get the right understanding, this is how I’m going to be able to bring the right advice. And sometimes, again, you see, advisors, they make more money because they work for their own interest. But for me, I work for the interest of the client. This is a big difference.
Sadaf Abbas: This is a huge difference. So my fourth question, Philippe, with you is that many entrepreneurs are curious about what investors look for in a startup. Could you outline the key criteria or attributes that make a startup stand out to you?
Philippe Chalu: Yeah, definitely. Look, some people often forget what a startup is? For me, a startup is, first of all, about the people. When you invest in a startup, it means that you believe in the people who are building that startup. Once you have the people, then they are working on a product or on a service, and the most important thing down the line is the vision. And the problem is a lot of people invest in a startup, but they don’t see the exit plan. You have a startup today, a great product, excellent. But let’s say in five years time, what’s the exit? What are they going to do with that startup? What are they going to do with the product? And the problem is they just get excited, they work on something, and then they realize after a few years, why is it leading us nowhere? And especially these days, you need to understand that the world keeps constantly changing. Just an example, a few years ago, everybody was talking about blockchain, about cryptocurrencies. It was the hype. All the conferences were about blockchain. Today, who speaks about blockchain? Nobody. Today, for example, it’s all about AI artificial intelligence. And we realize that artificial intelligence has much more added value that is bringing on a day-to-day basis, potentially for people, than blockchain. Blockchain is a great technology, especially for payment, but it’s not impacting our day-to-day lives. Chat gpt is a game changer for everybody. So that’s why in the startup, and I would say in the tech environment, everybody’s moving so fast, all the things are moving, and ultimately it’s all about the value of a startup. How do you value a startup? It’s about the people, as I said, about the intellectual property, about the clients, and ultimately, how you’re going to monetize all of that.
Sadaf Abbas: So regarding the chat gpt, the main thing for the AI is when it is coming to the world, AI, everybody was very scared about this because there are so many jobs, we are just closing out like a content editor, like a video scripter, means you have the content. All the designing jobs are going as well because of AI technology. The main thing is that if the job is going, but a new job is also coming, right? So the main thing is we need to adopt new technology so we can enhance the business performance, we enhance our processes. So I hope my audience will use chat gpt or the Bard or any other AI tool to increase the performance of your business process rather than to be scared of the new technology.
Sadaf Abbas: So my fifth question, Philip, outside of your professional life, what are some of your favorite hobbies or activities that you enjoy in your free time? I hope that you have some free time.
Philippe Chalu: Yeah, of course. First of all, I have two kids who are growing up, so I love spending time with them, especially on the weekends. And for me, because we live in a constant, I would say, crazy world, I need to disconnect. And when I disconnect, I go to the mountain. I’m a mountaineering person. We also have dogs. I take the dogs, I do climbing, I do mountaineering, I do skiing. So, for me, escaping the urban life and going to the mountain, the best thing for me is just to disconnect completely.
Sadaf Abbas: Awesome. Yes, I totally agree with you. I have three kids, and the smaller one is just ten months old. And, you know, my first one is ten years old. So this is a huge gap. After ten years, I’m having a new baby.
Philippe Chalu: Yeah, I understand.
Sadaf Abbas: Kids basically give you space, give you time. This is very important. My free time is for my kids and my paintings.
Philippe Chalu: I can tell you, my kids, they’re two years old, they know how to use YouTube, imagine.
Sadaf Abbas: Yes, absolutely. They are very into the new technology. So we need to be very keen to learn from them as well, how they are utilizing new gadgets. So my sixth question is that what are your future career aspirations and goals in the world of investment? Are there any exciting projects or ventures on the horizon?
Philippe Chalu: Yeah, definitely. For example, now with Al Waseem, what I’ve been doing, I would say personal investment for the family, but I would say the next level is to bring the underlying investments of the funds into the group so, for example, Al Waseem you know, is a group well known in the supermarket business. So now some of the private equity funds, underlying portfolio companies, have, I would say, activities, and they have businesses that are also suitable to the group. So the idea for us now is to bridge that expertise which is embedded within the portfolio companies to the group. Because ultimately, what you want is to enhance the value proposition and potentially also new brands to the group. So it’s all about developing, I would say, a portfolio of assets and integrating them within the main business activity, let’s say, of the group I’m truly advising.
Sadaf Abbas: Awesome. So, can you share a challenging moment or setback in your career and how you overcame it?
Philippe Chalu: That’s a great question. In fact, as part of my consultancy project with BCD, around six years ago, I was working in Iraq, I was advising a big international group in logistics. They had a tender with the government, and obviously, they had a local partner. So they want the tender to do a big project in Iraq. But, you know, in Iraq, what they quickly discovered is that the local partner had to bribe some of the government officials to win the project. And obviously, the competitors knew about it. And they started to go into the tribunal and for about a year, I was just bringing lawyers. In fact, as the international group was completely unaware of, I would say, the local partner, I would say bad behavior. They never knew that they had to bribe people to get the contract. Otherwise, they would have never got into that project. So clearing the name, as I said, is all about reputation and sometimes your reputation can be destroyed, not because of you, but because of your partner. And this is very, for me, very key. And it was very difficult because they had to bring a lot of lawyers. It took about 18 months to clear the name. So now I always say when I do business, it’s all about choosing the right partner because you can control what you do, but sometimes you cannot control what your partner does.
Sadaf Abbas: Absolutely, even you can’t control what a team is doing. So the main thing is that you need to have the whole observation for the partners, for the stakeholders, for the team members, because if somebody is making mistakes, everything will be gone with you as well.
Philippe Chalu: Yeah.
Sadaf Abbas: This is a very difficult part. I can feel it. You have done okay. So, could you share your perspective on the growing importance of ESG criteria and investment decisions?
Philippe Chalu: Look, ESG now is a hot topic. Everybody talks about ESG everywhere in the world. Look, sustainability, transparency, and protecting the workforce obviously are key trends, especially in Europe. I would say the Europeans are the pioneers when it comes to ESG. What we’ve seen especially, I would say in some Middle Eastern countries or even in the US. Let’s say like in Texas, for example, areas, let’s say, where are their big, let’s say, commodity producers, whether it’s oil, whether it’s soft commodities sometimes, whether it’s just steel, iron, sometimes they have to destroy the environment, sometimes they have to abuse about the labor. So those countries sometimes, or those regions, are a bit reluctant to bring ESG. But ultimately, when we see the climate issues that we’re facing, ESG is becoming more and more important. You can just go against that now.
Sadaf Abbas: Now, you can’t deny it. Yeah, global warming climate change.
Philippe Chalu: It costs money, to be frank with you. For example, where I work now in the Middle East, it’s taking some time, not because they’re not aware, but you need training to build the right expertise to implement those frameworks, because today, to have an ESG framework is quite complicated. You bring consultants, and you need to train your own workforce. So this is, I would say, the major challenge, for example, now in the Middle East is about training the employees on ESG criteria. So, this is where I’m focusing now.
Sadaf Abbas: Awesome. I would like to know more about Philippe for the ESG criteria for the workforce because maybe we will implement it in our company as well because we are providing services for international clients. So, we will make sure that we are also doing the ESG criteria for the workforce as well. We will discuss it in this topic in the next episode. Inshallah, so, what trends do you foresee in the world of investment and capital markets in the upcoming years, and how do you stay updated?
Philippe Chalu: Look, the world today is not the world, I would say, even two years ago.
Sadaf Abbas: No, absolutely.
Philippe Chalu: The big difference today is inflation. Inflation is back, and inflation is going to remain for some point in the foreseeable future. And rates today in the US are above 5%. Look, we lived in a completely crazy bubble over the last decade, whereby rates were at zero. It was just crazy. And if you see now the valuation reset of the market, why equities are going down, why rates are going up, it’s just an equilibrium because what we’ve seen before, it was just absolutely abnormal. The amount of money supply in the world just created a huge bubble, and the deficits are unsustainable. So definitely, there will be some cleanup on that side, and for me to stay updated, thank God we have the Internet. So it’s all about reading on the internet. It’s all about webinars. It’s like yours, for example. You will be learning from me; I will be learning from other podcasts and, obviously, conferences and seminars now, thank God. In the post-COVID world, things are getting better, so we can meet in person. And for me face to face is still very important to really feel what’s going on; what is the latest content?
Sadaf Abbas: Awesome. So in your experience, what are common mistakes or misconceptions that investors make when navigating the world of capital markets?
Philippe Chalu: What we’ve seen, you know, over the last decade, it was a crazy bubble and people, they forgot the basics of finance. The basics, for example like Milton Friedman, a very well-known US economist, used to say there is no free lunch, so money at zero was just a free lunch, and it cannot remain for free forever. Second, people are always thinking, and that’s why I would say human nature is all about short-term gains. People, they just want to make money. Not tomorrow, today. And sometimes, you need to have a long-term vision. You cannot just make quick money, and that’s it. Sometimes it works, but most of the time it doesn’t. And there’s a famous German proverb that says trees don’t grow in the sky. So people were thinking that, like Katie Wood, that Bitcoin would reach $500,000. When you think about it, it’s just ridiculous that the market cap of Bitcoin would be higher than the market cap of the entire equity market in the world. When you think about it for like a few seconds, it’s not sustainable. So, for me, it’s all back to fundamentals.
Sadaf Abbas: Let me come back to the capital market for the blockchain of cryptocurrency. The huge capital equity is in the, in the whole world, every capital market staying on one side, and the whole cryptocurrency market will be staying on the other side. Still, the total value of that market is too high. So we can compare the whole market. But again, in cryptocurrency, there are so many people who lost their money as well with a high potential of risk as well. So again, the finest background, the finest knowledge you should have when you are doing the trading, is something like this. So Philippe, again, like you were on the engineer side and then back to the finance. So it helped you a lot as well, I hope so when everybody is going to the capital market, especially in cryptocurrency, they need to understand the finance, how the finance is working, and what the training is as well. Can you tell me about your experience? Do you have any experience in the trading market as well, Philippe?
Philippe Chalu: Yes, so I started my career, in fact, in the banking sector in London almost 20 years ago. In trading, in fact, I was an interest rate and FX derivatives trader. That’s why I had to use my mathematical analytical skills. But then I realized, with time, I was much more of a salesperson. I like to face people and talk to people. It’s good to be in front of a computer, but sometimes, after, let’s say, 10,12 hours in front of a computer, I miss the human nature of the job. So that’s why, progressively, I switched from trading to sales. And now I’ve been more like advising family offices, advising funds, advising financial institutions on their portfolio of investment.
Sadaf Abbas: Awesome. So, my last question as a seasoned investor is, are there any specific books, courses, or resources you recommend for those looking to deepen their knowledge in the field of investment and capital markets?
Philippe Chalu: Look, in terms, of course, obviously, any Master of Finance from a good reputable university is good, but the easiest way and in this part of the world, they love it the CFA. The CFA, for me unfortunately, I don’t have the CFA, but CFA is the best exam by far, and they keep updating the courses. So now, in the CFA, I know that the ESG part is becoming more and more important. So, CFA is still, for me, the best, I would say, and more knowledgeable international diploma. In terms of books, if there is only one book that I suggest, it is a book, in fact, which was originally published in 1949 by a US economist called Benjamin Graham. And the name of the book is “The Intelligent Investor.” They’ve done several updates since. I think the last one was about maybe 15 years ago. And guess who read that book when he was 19? Warren Buffett. And even today, he said that it is by far the best book on investing I’ve ever read in my life. And look at what Warren Buffett did in his life. He became the wealthiest investor and most successful investor. And the beauty of that book, I read it just when I finished my Master of Finance. As I said, it all goes back to fundamentals. So this book will teach you how to think rationally, the difference between real value speculation and real trading, 101. And unfortunately, people in this crazy world they completely forgot the basics of investment.
Sadaf Abbas: So the CFA course is the one thing which we need to do in this current market. And the second thing is we need to read The Intelligent Investor. Right? The book.
Philippe Chalu: Correct. Look, the CFA takes three years to get the full diploma. Yeah. When you have the CFA, then you have a really good overview of the market.
Sadaf Abbas: Awesome, awesome. So thank you once again, Phillipe, for your valuable insights and for participating in this podcast. Your experience and wisdom in the world of investment and capital markets are sure to inspire and educate other people. Thank you once again, Philippe.
Philippe Chalu: Thank you, Sadaf. I really appreciate it. Thank you very much for hosting me on your podcast. Have a nice day. Cheers!