S3: Conversation with Winston Ma, Executive Director, Global Public Investment Funds Forum (GPIFF), Adjunct Professor on Sovereign Investors, NYU School of Law

Summary

Educational Alpha – S3: Conversation with Winston Ma (October 1, 2025)

Guest: Winston Ma, Executive Director, GPIFF; Adjunct Professor, NYU School of Law
Host: Bill Kelly

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Episode Overview

In this episode, host Bill Kelly sits down with Winston Ma, a leader in the worlds of sovereign investment and technology policy, to unpack the intersection of technology, law, and finance in an era increasingly defined by state influence in private markets. The conversation explores the growing involvement of the U.S. government in strategic sectors (notably rare earth materials, semiconductors, and AI), the implications of “state capitalism,” the evolution of the U.S. sovereign wealth fund model, and the impact of geopolitics on global capital flows and institutional investment strategy.

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Key Discussion Points & Insights

1. Winston Ma’s Unique Background: A Convergence for Today’s Economy

• Winston describes his career as “a collection of three disciplines or three perspectives which are converged in today's AI economy. These three pillars are tech, law and finance...” [02:37]

  • Education and Early Career: Material science and semiconductor physics at Fudan University, transition to law (NYU LLM), then Wall Street as a securities lawyer and investment banker.
  • Sovereign Wealth Management: Joined China’s CIC at its inception, witnessing the evolution from passive to active sovereign investors.
  • Current Roles: NYU adjunct professor teaching on sovereign funds; AI tech investor in a U.S. family office.

  “If you look at how I approach the AI digital economy today, you need all three pieces, right? You need the tech... you need to be part of the investment world... [and] the legal component is always important...” – Winston Ma [05:32]

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2. The New Face of American State Capitalism: The MP Materials Case

• Host’s Framing: Bill Kelly points out the shift by the U.S. Department of Defense (DoD) to acquire a 15% stake in MP Materials—a rare earths producer—highlighting a trend toward strategic, not merely crisis-driven, equity investment. [06:02]

  • Winston’s Analysis:
    • The U.S. move is not without precedent (e.g., AIG, GM in 2008), but the current focus is on long-term strategic interests, especially in the context of U.S.-China rivalry over critical supply chains and technology leadership.
    • The DoD role is “multi-layered”: equity investor, committed product purchaser (offtake agreements), and credit enhancer making commercial bank lending possible [07:50–12:30]:
      • The U.S. is “crowding in” private capital, not crowding it out – stabilizing and strengthening the company’s position.

  “It actually makes a lot of sense that US Government funding, instead of crowd out private capital, it is actually crowding in, attracting private capital into this project because it provides more financial stability to the company.” – Winston Ma [12:36]

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3. Government’s Expanding Influence: Chips, Tech Titans, and “Golden Shares”

• Contrasting Approaches: Bill raises the inconsistencies in government intervention—sometimes restrictive (chips to China, TikTok bans), sometimes transactional (equity for policy leniency) [12:59-14:20].

  • Winston’s Perspective:
    • The U.S. is employing “golden shares” (minority stakes with veto rights) in deals like Nippon Steel/US Steel, and potentially TikTok, giving government a direct say in strategic corporate decisions [14:20].
    • The “golden share” approach is likened to a “government holding an asset... plus voting rights”—distinct from core operational control, but deeper than mere regulation.

  “Essentially the US government becomes the third player into this merger. It's a golden share... it gives the US government the veto power on companies’ strategic corporate decisions going forward...” – Winston Ma [14:50]

  • Emergence of New Models: U.S. intervention can range from formal ownership, strategic guidance, to active involvement in production (as with MP Materials and potentially Intel) [15:40–18:00].

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4. Tech Value Chains, Corporate Independence, and State Intervention

• Intel as Case Study: The government's demands (including CEO resignation) and possibility of direct investment in Intel are explored as emblematic of rising government involvement in ensuring America’s technological competitiveness [18:03]:

  • Deeper Issues:
    • “Capital will be helpful. But to put this into context... it’s not only a problem of financing, it's also about problem of capabilities.” – Winston Ma [20:58]
    • Directing major players (Apple, Nvidia, AMD) to manufacture in the U.S. and using tariffs/kickbacks to fund strategic investments—illustrating government’s control over the whole value chain.

  “You could say the US government is now very active in the whole value chain, but you could also say there's a big risk that it will go too far to disrupt this overall supply chain.” – Winston Ma [24:09]

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5. Redefining Geopolitical Risk for Asset Owners

• Host’s Question: How are institutional investors recalibrating their approach to geopolitical risk amid more frequent and unpredictable government interventions? [25:11]

  • Winston’s Response:
    • Asset owners must now account for real and persistent disruption in both the U.S. and China, especially since COVID accelerated sanctions and regulatory tension.
    • Example: The breakdown of “offshore VC funds into Chinese startups → U.S. IPOs → liquidity for U.S. LPs” now faces material risk due to cross-border regulatory clampdowns and “reverse CFIUS” mechanisms.
    • “Geopolitical risk is very real because we’re not only talking about private transactions, but also the exit—the IPO process,” with direct investment and regulatory risk on both sides [29:50–32:00].

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6. The U.S. Sovereign Wealth Fund: An Unorthodox, Decentralized Approach

• Skepticism and Structure: Bill expresses skepticism about the U.S. as a sovereign wealth fund owner—given its debt and lack of an export surplus [32:16–33:36].

  • Winston’s Explanation:
    • The emerging “U.S. sovereign wealth fund” is a decentralized, ad hoc collection of assets and strategic investments driven primarily by executive power, not Congressional authorization or surplus recycling.
    • Three key “buckets”:
      1. Government Holdings (e.g., seized bitcoin, TikTok golden share)
      2. Sovereign Partnerships (e.g., trade deal–linked Japanese and Korean capital invested in U.S. strategic sectors)
      3. Strategic Investments Under Specific Authorization (e.g., Pentagon’s Defense Production Act for MP Materials, potentially Intel)
    • This model is distinctly executive-branch led and national security–focused, rather than a conventional, export-surplus-driven sovereign wealth fund.

  “The difference here is so far the US Sovereign fund concept... has been a collection of assets and strategic investments that are driven by the executive power... focusing on national security related strategic sectors.” – Winston Ma [34:03]

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7. Governance Questions: Risks and Possibilities

• Host’s Concern: Absence of centralized governance in the U.S. model could expose the system to insider benefit and lack of accountability [39:30–40:38].

  • Winston’s Take:
    • Some aspects are being centralized by the current administration, but overall governance remains fragmented.
    • Potential for Improvement: Sovereign partnerships with foreign governments (e.g., U.S.-Japan joint venture) might bring established governance structures, transparency, and professional asset management to the American context, but “details remain to be seen.” [41:00]

  “If this is run by the two governments jointly... they have the opportunity to build up proper governance... just like a typical sovereign fund.” – Winston Ma [41:09]

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Notable Quotes & Memorable Moments

• On Interdisciplinary Edge:

  “It’s a tremendous privilege to have the three areas of backgrounds, tech, law and finance to get into today's AI economy...” – Winston Ma [05:58]

• On the U.S. as a Sovereign Wealth Fund:

  “Most people think the sovereign fund model is about a country having a surplus... but...the U.S. Sovereign fund concept... is a decentralized collection so far, all driven by executive power, focusing on national security...” – Winston Ma [34:03]

• On the Risks of State Overreach:

  “You could say the US government is now very active in the whole value chain, but you could also say there's a big risk that it will go too far to disrupt this overall supply chain.” – Winston Ma [24:09]

• On Asset Owners and Geopolitical Risk:

  “The geopolitical risk is very real because we’re not only talking about private transactions, but also the exit—the IPO process...” – Winston Ma [31:08]

• On Governance Possibilities:

  “If the two governments truly work together... this is a great opportunity for the US sovereign fund to take shape.” – Winston Ma [41:09]

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Timestamps for Key Segments

• Winston Ma’s background and career philosophy – [02:37–06:02]
• The MP Materials case & new U.S. state capitalism – [07:50–12:59]
• Government intervention: chips, TikTok, and “golden shares” – [14:20–18:03]
• The Intel example & supply chain control – [18:03–25:11]
• How institutional investors are adapting to geopolitical risk – [25:11–32:16]
• The evolution and structure of the U.S. sovereign wealth fund model – [33:36–39:30]
• Governance challenges and future possibilities – [39:30–42:45]

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Conclusion

As U.S. industrial policy increasingly merges national security interests with direct state investment, the lines between public and private markets are blurring. Winston Ma’s multidisciplinary lens illuminates how technology, finance, and law are converging in response, and why asset owners and policymakers must rethink traditional models for risk, governance, and capital formation. The evolving, decentralized U.S. sovereign fund experiment holds both great promise and potential peril, especially regarding transparency and long-term accountability.

[For further discussion, see Winston Ma’s article referenced in the episode.]

Transcript

[A]

Welcome to Educational Alpha. I'm Bill Kelly, your host, bringing you on the ground conversations with business leaders, educators and industry colleagues from around the globe. Educational Alpha is sponsored by iCapital, the financial technology company with a mission to power the world's alternative investment marketplace. Part innovator, part educator, and part navigator of the alternatives industry, iCapital offers intuitive, scalable digital solutions that have transformed how private market and hedge fund investments are bought and sold. With iCapital, financial advisors, wealth managers and asset managers around the world now have access to everything they need to deliver the return and diversification potential of alternatives to high net worth investors. To learn more, visit icapital.com.

[B]

In this episode, Bill Kelly speaks with Winston Ma, Agile professor at NYU and former Managing Director at cic, to unpack the intersection of tech, law and finance in today's AI driven economy. Winston shares his career trajectory across legal, investment banking and sovereign wealth fund sectors, highlighting how these disciplines now converge in shaping U.S. industrial policy. The conversation probes the growing role of government in private markets. Focusing on strategic investments in rare earth materials, semiconductors and AI. Winston offers perspective on the evolving US Sovereign wealth fund model, the influence of geopolitics on capital flows, and what this all means for institutional investors.

[A]

Winston Ma, welcome to Educational Alpha.

[C]

Thank you, Bill.

[A]

You had pinged me, I think, on WhatsApp. I'm not out on the circuit as much as I used to be, but I always saw you everywhere I went and you always were agitated in a good way about what was at the top of the news cycle. And somehow, some way, you've always managed to find yourself right in the thick of things. So you've been a person and a voice and a view that I've always valued. I've always been smarter. When I came away from conversations with you and excited to be talking to you a little bit more in depth today. A lot going on around the world that you'll have informed views on. But before we get into that, as I was saying to you a moment ago before we started the recording that I always feel this is where Winston was born. He was born into this role and always did it. But we all have to accumulate our knowledge base and maybe you can give us a little bit about your background and how you got to be where you are today.

[C]

Yes, thank you very much, Bill. Essentially, my background is a collection of three disciplines or three perspectives which are converged in today's AI economy. These three pillars are tech, law and finance or slash investments because my undergrad was material science back in Shanghai. Fudan University. So my bachelor's degree was in semiconductor physics and I was a minor in software programming as well. From there I became a lawyer, banker and investor because I became a Chinese lawyer and then master of Law at nyu. So my career at Wall street started as a securities lawyer at Davis Polk New York office. But after three years, all the lawyers at that time I wanted to be investment banker. So I got my MBA and I transitioned into JP Morgan investing all the way to 2007. I was hired by Barclays Capital New York to start the Barclays Bank's US equity business. But that was the same year that CIC was created, right? So from 2008 I left BAAP, I moved back to China and then I had 10 years at CIC since its inception. Now it was a great learning for me about the sovereign fund topic because I joined the CIC not only about the inception of cic, but also this beginning of this big trend that global sovereign funds, the Middle east, the Southeast Asia and the rest of the world, right? The sovereign funds are becoming more and more active in the markets from passive investors into active investors. So I learned a lot about the sovereign funds progress during that decade. And since 2019 I moved back to New York, back to be a New Yorker and I'm still stay in the sovereign wealth fund space as the adjunct professor at NYU on this topic. So I teach a course on sovereign wealth funds at NYU Law School and Stern Business School. And at the same time I'm the program director for the Research center on Sovereign Funds, you know, the Global Public Investment Funds Forum, which gave me a great window into the global sovereign funds development. At the same time, I'm a AI tech investor at a US single family office. So which keeps me at the frontier of the AI developments. But altogether, right? If you look at how I approach the AI digital economy today, you need all three pieces, right? You need the tech, not a tech background to understand the latest AI development. And at the same time you need to be part of the investment world so you can see where the frontiers are. And finally, the legal component is always important. Not only the AI technology level for data and tech regulations, but also at the cross border market investment geopolitics perspective, you need to understand the cross border regulatory developments from the different governments relating to AI transactions. So I think overall it's a tremendous privilege to have the three areas of backgrounds, tech, law and finance to get into today's AI economy and especially in the areas related to the sovereign wealth mass.

[A]

A great run, Winston. And your Students at NYU are fortunate to have somebody of your experience. And I think you've left us with opening on a variety of topics, but maybe I want to sort of sum them all up and maybe take a deeper dive on one specifically. And clearly if you've accomplished nothing else and it's been quite a bit of accomplishment, you are a full on capitalist and I say that with admiration and respect. But being a capitalist and getting more and more involved in the capital markets, I think one expectation is a free and fair flow of capital. And maybe that's largely true. But if I were a CEO or a treasurer or CFO of a public company, maybe my biggest fear would have been that Carl Icahn is now on the phone. But maybe that's not so much of a fear so much as the US sovereign is now on the phone. And maybe one opening is this MP Materials. We talked about this and the government through the Department of Defense has taken an active position, 15% stake. They'll be the largest shareholder in this company or are the largest shareholder. And I checked to see the history of this and it's not uncommon for the US to take an equity interest. But this might have been ChatGPT or Google's generative AI, but they described it as an uncommon occurrence. And typically you'd see this type of investment when there was unusual short term events to prevent economic collapse. And this is done for much more strategic reasons and there might be and there are benefits to it. You might know the history better than I because this seems to be an unprecedented move and maybe it would help the listeners to describe what this move exactly is and what the US is trying to accomplish with rare minerals.

[C]

This is a big topic about state capitalism, government interference and private sectors. For this big topic I could use a lot of global references, but let's focus on the US to be more specific. From the global perspective you can certainly see Middle east sovereign funds actively investing into AI to promote their local economy. Or for example cic. They will invest into global tech companies because China is transforming its economy from an import export low level value chain manufacturing into advanced manufacturing, right? So it makes investments not only US or but also Europe to try to acquire global technologies as well as western economies. Like Irish. Right? Like the Iceland Sovereign Wealth Fund, the Iceland Strategic Investment fund. During the 2008 financial crisis it took an active role to save the Irish state banks. We can use a lot of those references, but if we just simply focus on the US and we will find, as you just said, it is not that uncommon because if we also started with the 2008 financial crisis, during that time, US treasury took position in AIG and General Motors and a bunch of others troubled companies to provide them the much needed liquidity to stay alive. And then after a few years, the treasury sold those positions kind of back to the market. Right. So in that context, the U.S. treasury during 2008 was some kind of Simon Wealth Fund as well. And then more recently, just to stay relevant, during Trump's first administration term, the US and China were a tech rivalry as well. That time, if you recall, was 5G Networks, right? Today is AI, but eight years ago it was 5G and the main target was Huawei of China. At the time, US government floated this idea, actually by the US Attorney General Barr during the first Trump administration, socialized the idea that the US should take a position, make an equity investment into the 5G tech rivals of Huawei. And interesting enough, actually these are foreign companies in Europe, namely Nokia and Ericsson. But the US government floated the idea that they should take an equity position into Nokia Ericsson to compete with Huawei in the area of 5G technologies. Now fast forward into today. You know you mentioned about this latest investment in July by DOD $400 million into MP materials, the only major rare earth producer in the US and this is certainly strategic because US and China is in the middle of the tariff war. And China's control of global rare earth supply chain is clearly a bargaining chip, right? So for the US government to invest into a US national champion of rare earth, the potential is could be profound. And the strategic angle is very obvious here for several reasons. First, the US investment is equity, like, right, it's convertible into equity, potentially could make the U.S. dOD the biggest shareholder of MP Material. So it's not simply IND research money or some bank loans, right? So it will be involved in the company, even though not immediately. Secondly, the DoD also enters into the offtake agreement relating to the rare earth production of MP materials. So with $400 million, the company MP Materials will start some expansion projects, some new projects. And for the new project, the Pentagon essentially is guaranteed the purchase of those production, provide them a price floor and a guaranteed purchaser available. So this provides more stable revenue outlook for the company. And the third is because of the one or two, the company's balance sheet looks a lot more stronger. And this helps the commercial banks, namely Goldman Sachs and JP Morgan to come in to provide $1 billion lending into the new projects. So when you put all these together, right, then you see the US government in The MP Materials deal essentially plays multiple roles. It is equity investor and it is also a product purchaser. And thirdly, it is also a credit enhancer for the company's bank borrowing. Put it all together like perfect scenario, right? It actually makes a lot of sense that US Government funding, instead of crowd out private capital, it is actually crowding in attracting private capital into this project because it provides more financial stability to the company.

[A]

A very clear definition. And it comports with what little I know on the subject. And maybe as a summation point, if the US for the future economy needs rare earth minerals and we don't have them using the heft of, of the US balance sheet, so to speak. And we'll come back to the sovereign wealth fund as a separate topic in a moment. Who could be against that? I very much get that, but I think that some things can be overdone and to maybe put MP Materials aside for the moment. If I think about investments in chips in Nvidia and AMD coming over and selling chips to China, bad, we can't do that. But then all of a sudden if there's a, and my words, not yours, a kickback, it's okay, TikTok bad, but if you're going to give me an equity interest, let's do it. So it seems like let's make a deal versus let's protect the future of our economy and the future of our sovereign nation. Those are two very, very different things. And I've put them in extreme cases, say, okay, MP Materials, I get that. It makes sense to me. I'm scratching my head over the chip sales where there's a 15% kickback in the threat of tariffs and TikTok is either good or bad and it's not okay for a certain price. So how do you contrast and compare the two of those situations? On the extreme?

[C]

Yeah, we can compare the situation first from the government asset perspective and then, you know, we can specifically go into the chip discussion in connection with the latest rumor that the Trump administration may invest into intel as a director shareholder. First, let's chat about the government assets perspective. And for this, the golden shares that the US Government acquired from the Nippon Steel and US Steel merger is a good reference. Think about the Nippon Steel merger with US Steel. You know, here essentially it was a regulatory compliance issue at the very beginning. Right? Because the two companies have entered into the merger agreement which was subject to the CFIUS approval. So the only uncertainty was the CFIUS approval, yes or no. But the solution, or let's say the outcome was actually choice number three. It's neither yes or no, but instead it's the addition of the golden share concept. Essentially the US government becomes the third player into this merger. It's a golden share. It's a small percentage of of the merged company, but it gives the US government the veto power on companies strategic corporate decisions going forward, like a union actions like HR handling, et cetera. Right. So in this case essentially the golden share is like a government holding an asset for the government holding. Very similar to the TikTok situation. Right. The TikTok situation requires the company, the TikTok sells the US company's control to US shareholders. Right. Essentially it needs to take investments from new US investors such that the TikTok's majority control is in the hands of US investors instead of Binance, it's parent in China. So in the TikTok situation, if the deal goes ahead got the China approval, it will come as a investment consortium of various U.S. investors, you know, could include Oracle, right. Or financial investors, et cetera. But in the middle of this consortium, you know, probably there will be a golden share of US government as well because of the legal requirement. You know, maybe the US government will similarly use this golden share, just like the Nippon Steel to have veto power on strategic corporate decisions of TikTok going forward. For these type of golden shares they are more like government assets plus voting rights and they are more like the bitcoin strategic reserve. A few months ago, right when Trump started talking about crypto reserve, it mostly just put the bitcoins already held by the US government, federal and state, the bitcoins seized by the federal and the state governments during civil and criminal actions. So they put all these things together, say we now have a crypto reserve, right? So for all these, they are more about government holdings and government influence. But the empty materials deals go a little further, I would say go a bit further because it actually gets into the operation of the company. It's manufacturing, it's actual manufacturing. So just like the potential US investment into intel, this will involve much more US government involvement because it's not only about financing, but it's also about capabilities. So for this, you know, actually we can go into a much more complex situation, but we can actually start to see the limitations of the government capital funding.

[A]

Intel is an interesting example and before we got to the potential of the US making an investment, again you can correct me on the Winston, but the first volley seemed to be calling for the CEO's resignation. Yes, that's a pretty bold statement. And it kind of ties at least one hand behind my back and I'm tying a couple things together. But then good old happy go lucky. Tim Cook sees this and he says, well, maybe not great for my shareholders, but why do I commit to a hundred million dollar investment in the US to build the iPhone here on shore? And as a shareholder, maybe it's a penny or two to earnings per share, or maybe it's less or more than that, I don't know. But I've seen people that are smarter than me saying not great for the shareholder. But if somebody calls for Tim Cook's scalp and the stock drops 30, 40%, that's not good for the shareholder either. So I think it's forced today's CEO to be thinking about a business risk that really did not exist before. So and I'll wrap one more thing into this and I'll let you reply this whole concept of Jay Powell and Fed independence, I think in some sovereigns setting rates is not independent at all. But in the US for the most part it has been. And it seems like this whole separation of church and state capital markets from the sovereigns norms that we relied upon as citizens and investors seem to be breaking down.

[C]

That's a very big topic. And you earlier mentioned about AMD and Nvidia. Actually they are part of this story as well. Very unexpected, twisted story. I will get into in one second very quickly to touch on Jay Paul in the Federal Reserve and the US Dollar and interest rate policy independence because this is huge for the sovereign wealth funds space that you and I are familiar with. If you think about the U.S. treasury market, the other side of the U.S. treasury market is mostly the global sovereign wealth funds because for the US treasury bonds, the global sovereign wealth fund broadly include the sovereign wealth funds, the public pension funds and also the investment arms of the global central banks. These people are the main purchasers of the U.S. treasuries and they purchase this because the Federal Reserve independence, interest rate policy independence is sort of like the holy grail for this trillion dollar club of global sovereign funds. But now the independence of Federal Reserve and the job of Jay Powell is sort of becoming a question. And this certainly will have implications for the global sovereign funds, which could be a big topic by itself. Now let's focus on the US Companies, especially US Tech companies independence for the moment. And this issue is certainly highlighted by the intel situation. As you said. You know, it's the CEO was called to resign first, but then after meeting, apparently they have a great meeting and the Trump battery like the idea to invest into intel to make Intel a national champion of chip manufacturing going forward. The most important background here, Bill, is the question what is Intel's problem? Right. What is Intel's problem? Now here certainly capital will be helpful. But to put this into context, during Biden's administration there was already the CHIPS Act. So from the Biden's administration time, intel already got sufficient additional financing from the US Government. So you have to look into the another side of the intel problem, which is its product, it has mostly lost to Nvidia. In the AI chip sector, intel has almost like a zero presence. And then in the PC data center chip market, intel is losing market share to amd. And then for general manufacturing, most of the chip design companies, they will go to Taiwan TSMC for manufacturing. In fact, for intel in house designed chips, it is also partially reliant on TSMC to manufacture them, which is really interesting because intel is meant to be a chip manufacturer itself. So when you look at this, it's not only a problem of financing, it's also about problem of capabilities. So the main thing is if intel gets additional financing, that's certainly helpful. But who will buy these products? Right, right. Who will use intel for chip manufacturing? And then that's where the Trump administration's connection with other companies that you mentioned become relevant, whether it's Apple or Nvidia or MD. Right. Because on one hand Trump arranged to get 50% out of AMD and Nvidia for their sales, committed sales to China so that the Trump administration gets the financing, gets the capital for its investments, entail somebody else. But at the same time, Trump administration also has the power on these companies chip export. Potentially the Trump administration could require Nvidia and AMD to manufacture their chips at intel instead of Taiwan TSMC as a condition for their permitted overseas sales. So then it all becomes connected or that potentially includes Apple too. You say if you want to sell your phone with advanced chips outside, you have to manufacture those chips in Intel. So all the story is all connected now, but you could say it's all part of the US AI and chip strategy going forward. Right. Essentially saying from your sales, I will get a piece of the revenue so that I can use that capital to invest into strategic sectors. That I think is of the importance of national security for that intel fits in that category because intel is the only one that can potentially become this major chip manufacturer on the land of America itself. Because right now, even for the US companies, chip manufacturing, they will go to Taiwan TSMC to manufacture especially the AI chips for most part. So here you can see the connection. But that also means the US government is now interfering the private sector's chip manufacturing to whom they will pick to manufacture the chips and where do they sell to and what kind of revenue share they need to give to the US Government with which the US Government can invest into the strategic sectors that they consider of the importance of national security. You could say the US Government is now very active in the whole value chain, but you could also say there's a big risk that it will go too far to disrupt this overall supply chain.

[A]

Then maybe staying with this topic about the definition of geopolitical risk and this is something that Kaya has recently put into its curriculum. And if you, if you go back not that many years, I think maybe the take on geopolitical risk was it was there, hard to model. And usually over the long term it rinses itself out. And maybe I'm not getting any additional exposure. But I'm wondering first off, you probably talk to more asset owners than I do because now I'm kind of more in the portfolio retirement phase of my career. But I wonder if there are new inputs to, to geopolitical risk and how asset owners think about that risk and how they think about getting compensated for this risk as well, because they are investing assets for the long term and if there's going to be sovereign intervention, and maybe a more pointed word you could use for intervention, it could have a tremendous impact on either what I'm underwriting in my private capital portfolio. More specifically in infrastructure. How are asset owners, particularly institutional asset owners, thinking about a broader definition of geopolitical risk given what's gone on in.

[C]

The near term for asset owners, this geopolitical risk is playing out in the two largest markets that they invest in, right? US and China. In many cases, they're interconnected. I would say the first big catalyst asset owners to look into the geopolitical risk was the beginning of the COVID Because of the COVID lots of the US sanctions got accelerated relating to China, which had profound implications for asset owners allocation to China. So for example, last several years there was a big pullback of asset owners, LP investors investments into US market focus to VC funds. So if you think about offshore US dollar VC funds in Hong Kong, in Singapore, even in Europe, even in U.S. what they do is they will take U.S. or European pension funds, foundations, the LP money, and these are the U.S. dollars and they will invest into Chinese tech startups with overseas structure like Alibaba. Alibaba is A Chinese company, but it's a listing vehicle in the US is the Cayman structure. So these offshore VC funds, they take US dollar from US LPs, you know, the endowments, foundations and pensions invest into the overseas structures of tech companies like Alibaba, like Baidu, Xiaomi, these companies, right? And then these companies will go overseas listing mostly in the us Some in Hong Kong when they got listed on New York Stock Exchange or Nasdaq. Essentially the company gets a US dollar exit. The US LPs also gets their payout. And going forward, the VC fund may continue to manage their positions over these Chinese companies on the public market of Nasdaq and New York Stock Exchange. And potentially these companies will get to expand into the US market after the US listing generated more growth and then more return from the public market positions of these companies for the investors. So we look at this, it was the perfect story when it was smooth because you have the US dollar investing into private market, then go public in the US market and then everyone can get the liquidity. But when the geopolitical tension rises, the China side tightens up the regulatory restriction on Chinese companies overseas listing, which we have seen in the drama of DD listing several years ago. You could even say that was a trigger of that phenomenon. And then, then from the US side, right, it also tightens up the registration requirement of Chinese companies when they seek IPOs in the US so that's why we have seen lots of new announcements from U.S. sEC demanding more and more disclosure relating to these companies, which is very tricky thing because you are dealing with the Chinese companies going for listing with a offshore Cayman structure. But the punchline of this thing is, right, because of the geopolitical tension, that particular market offshore US dollar VC fund into Chinese startups and their related US IPOs has been significantly disrupted for all the investors, the pensions, endowments, foundations who have invested in those VCs and in the related listed Chinese companies in the US they have suffered loss, right, because of this disruption. And now we see a new phase of geopolitical tension relating to AI companies, right? So, and it's even more difficult because in addition to the CFIUS review, which relates to Chinese company, Chinese capital investing into US market into US companies, now we also have the reverse C where the US Government limits US Capital to invest into Chinese tech companies, especially AI, for this, essentially it will hit on that ecosystem even further because now LPs will not only worry about the potential exit risk of their investments, you know, the IPO process disrupted, but also they have to worry about potential US investigation from the reverse Cepheus perspective. Right. So this is more like a US regulatory and reputational risk. We are seeing something happening right now which relates to a US Silicon Valley VC fund made an investment into a Chinese AI company called Manus. And now the media has reported that the US government is looking at the situation and potentially it will require the US Silicon Valley company, a VC fund, to unwind the investment essentially to get out of the position. So when you look at all these, the geopolitical risk is very real because we're not only talking about private transactions, but also the exit the IPO process for which the US SEC is also tightening up. So I think for global investors, especially the asset owners, they have been very actively investing in both US and China. These are two largest markets. And now the geopolitical tension means some of the investments could be disrupted. That's mostly the Chinese companies. That also means some US companies potential revenue opportunities will be disrupted, such as Nvidia. If the geopolitical risk plays out, their sales to China could be completely shut down. So here you see the geopolitical risk on both sides.

[A]

Appreciate that Thoughtful summation, Winston, and a related point, and maybe the last one for us to cover. And you alluded to this a couple of times in our conversation. I want to specifically go to this notion of the US Sovereign wealth fund and maybe preface this by saying, I don't know when I first heard this and it was more than just a couple weeks ago, but it wasn't years ago, maybe a few months back. And I really had to laugh because I say, well, last time I checked, we had approaching $40 trillion of debt on the balance sheet and the big beautiful bill has guaranteed the deficits are going to be big and less beautiful. And I'm saying, out of whose hide am I getting money to create a sovereign wealth fund? But then it comes along. Winston, Mar and I read your piece in ARM 5th and you alluded to this before. If the US seizes $5 billion of Bitcoin through nefarious activities, and now I believe they could be the largest holder of bitcoin, okay, drop that in as a down payment. I kind of get that. So if the US has a sovereign wealth fund, it might be, and I don't know if this is good or bad, it's not under central governance structure and control. It's really bifurcated and split it across a lot of different things. So maybe explain to the listeners how the US with its debt and deficits, becomes a sovereign wealth fund owner and maybe sort of the good, the bad and the ugly around that.

[C]

I think lots of people just like you would laugh at the U.S. government idea of a U.S. sovereign wealth fund when Trump announced it back in February, simply because the US Is a import export deficit country. Right. Globally, most of the sovereign funds, like the largest sovereign fund of Norway or the biggest bigger ones in China, in Middle east, they set up these sovereign funds because they have a export surplus either through oil money like the Middle east and Norway, or through like in general import export like China or Southeast Asia countries like Singapore, stuff like that. Right. So these are surplus countries in export or in general. Right. You mentioned about the US Government debt situation. You could even overall say US Government balance sheet overall is a deficit country. So how can you set up a US Sovereign fund? And that's because most of people think the sovereign fund model is about a country having a surplus. Then the country legislature will authorize the government to set up a fund to manage this national wealth for the future generations. Right. Sovereign wealth fund. Right. So here the people would say we don't even have the wealth, so how can we have a sovereign wealth fund? The difference here is so far the US Sovereign fund concept under the Trump administration has been a collection of assets and strategic investments that are driven by the executive power. Essentially, we're not talking about a centralized, well planned sovereign wealth fund. Started with legislature, started with Congress, empowerment with budgeting of the national balance sheet. Instead, it is a decentralized collection so far, all driven by executive power, focusing on national security related strategic sectors. So if we think about the collection so far, this decentralized collection so far under the Trump administration, essentially you can divide them into three big buckets. First big bucket is government holdings, right. Look at the bitcoins that have been held by state and the federal governments through civil and criminal cases. And they put it together and that's certainly under the executive power, the TikTok situation, right. It's up to the executive department to enforce the Congress law about sell or ban. Right. So if you do not sell the control, TikTok will be banned in order to enforce that law. The executive branch is stepping in as a deal broker here and potentially will get a golden share to control the company's strategic corporate decisions going forward. So these are the government holdings out of executive actions. And as a second, I would say we can call it strategic partnership or sovereign partnership out of the trade deals. And you know, the executive branch has been leading the tariff negotiations with global countries. And now Korea, Japan, EU have entered into tariff agreements with the US with committed investments. Now the deals are still remain to be seen, but the concept is these countries will commit making extra investments into the US and into strategic sectors, right? So for example, for Japan we have a White House fact sheet saying that Japan in connection with the trade deal will make 550 billion investments in the US into strategic sectors, from AI chips to medical research. So it's all across strategic sectors. But I think here, no matter which sectors are they going, the clearest picture is that these tariff related investment commitments will bring hundreds of billions into the US and the executive branch is leading this investment effort and will guide these capital into strategic sectors. So with these hundreds of billion dollars, actually they got the opportunity to institutionalize this US sovereign fund concept just like other countries in a sense they got a big pocket of long term capital commitment. The final one, I would call them strategic investments under specific authorization here. Intel is a clear example and it will probably go with the same kind of format like the MP Materials rare earth investment that the Pentagon made. The Pentagon made that investment under the authority of dpa, a Defense Production Act. So instead of a centralized sovereign fund with like centralized Congress authorization, here you see these strategic investments in some kind of an ad hoc fashion coming out of specific authorization here. DPA allows Pentagon to make strategic investments relating to military considerations, things like that. And if you consider that AI is related to the future warfare, then certainly intel can be justified by DPA as well, or maybe some other executive branch related laws that they can think of. So we look at all three, right? This is a very orthodox sovereign wealth fund. It is certainly not a sovereign fund of conventional capital source, but it is clearly a sovereign fund organized by the executive power. And for all three buckets, these government holdings, the sovereign partnership and also strategic investments, all three buckets are clearly under the Executive branch and they are driven by Executive Branch's actions towards national security management.

[A]

I have just a couple minutes for a quick follow up. I'll link this amphithe article that you wrote because I think it brings a lot of interesting insights to help the listener and the reader a little bit more about where we are in this discussion, Winston. But if I think about the governance of a sovereign wealth fund, and I'm not so naive to think that Norges and Norway sovereign wealth fund with the Norway sovereign is the same as Piff and what's going on in the greater sovereign of Saudi and Riyadh. But like it or not, there's a centralized governance role that is theoretically independent to make Independent decisions for the beneficiary. And that beneficiary is either the person on the street in Riyadh or the person on the street somewhere in Norway. With the U.S. sovereign wealth fund, it's the average U.S. citizen. But if the whole person process is decentralized, I would almost wonder do we have any governance at all? And other than maybe the members of Congress and certain families close to these decisions who are benefiting on non public information freely absence of governance, is that a good or a bad thing?

[C]

It goes two directions here. So Bill, let's look at this way, right? You know, if you look at these three buckets, you know the, the gamma holdings like the golden shares and the bitcoins or the strategic investments made by Pentagon, those investments in the past are decentralized anyway. Actually now the Trump administration is like making them more centralized in a sense. But of course they still do not have a centralized sovereign wealth funds type of governance. And then we look at another bucket, you know, the final bucket, the sovereign partnership. Actually these are very interesting set up which could potentially bring some governance into this US sovereign fund mix because the involvement of the foreign governments. So if you look at the US Japan agreement in which Japan will put in $550 billion into this, right? If this is run by the two governments jointly, you know that's by itself is like a global top 10, top 15 sovereign fund, right? 550 million. And if the two governments truly work together, they have the opportunity to build up proper governance and transparency and the accountabilities benchmark or the typical setup in a portfolio asset management context sovereign fund, they could they have this opportunity to do so, right? The only question is what are the details for this agreement? The 500 billion from two major economies, US, Japan, if it's run properly by the two countries together with professionals from both sides actually this is a great opportunity for the US sovereign fund to take shape. And the same is for the joint venture with Korea. Still, you know, details to be seen. But Korea and the U.S. you know, they can run this joint venture fund together and build up a more centralized proper governance just like a typical sovereign fund running like a asset management firm with fiduciary responsibility but details to be seen here.

[A]

I think that's a very good way to perhaps leave it. And I think this time it's different, might really be different. And I think it's up to the asset owner to be thinking about all of these inputs. And we may be entering a period where there's no history to anchor against when you're making future decisions in a rapidly changing world. And we didn't get a chance to fully explore the implications of AI but that's going to be a game changer to how business is conducted, how capital is formated, how value is created. So very interesting things maybe for a part two but Winston, thank you for always finding a way of getting to the center of the inner sanctum. You have a knack for doing it and I wish you well and continue to be a very curious student of the capital markets. It helps me and it'll help our listeners as they reflect on some of the observations you've made today.

[C]

Sure. Thank you very much. Many thanks to Kaya as well.

[A]

Yeah. Thank you. Thanks. Mr. Thank you for listening to Educational Alpha. I'm your host Bill Kelly. Learn more about the Kaya association and subscribe to the [e-mail] that's C A I a.org See you next time.