Global Finance: Tell us about Uzbekistan’s transformation over the past eight years and what else you are looking to accomplish.

Laziz Kudratov: The changes that started in 2016 continue. We have seen GDP rise by 6% in 2023 and 6.4% in the first half of 2024. Along with a more business-friendly environment, key reforms, such as reducing VAT from 20% to 12% and creating special economic zones, we have strengthened our position as an attractive destination for foreign investors.

We have unified the exchange rate and liberalized the forex market, making it easier for international partners to do business here, including through public-private partnerships and outsourcing. We have also become a hub for IT with the creation of the Tashkent IT Park; and our first unicorn, Uzum, an e-commerce platform, is now valued at over $1 billion.

On the green energy front, we are striving to become a leader in Central Asia. We have recently secured a $13.1 billion investment from ACWA Power for 9.6 GW wind and solar power projects, and we partnered with Masdar for 2 GW green projects with investments of $1.7 billion, which is a key part of our broader effort to increase the share of renewables in our energy mix. In total, 35 agreements for green energy projects with a total capacity of 18.6 GW have been signed over the past four years—an essential step toward creating a more sustainable energy future.

Moving forward, we plan further legal reforms aimed at solidifying investor rights, enhancing transparency and improving business efficiency. By integrating more closely with the global economy, particularly through WTO membership, Uzbekistan aims to become a dynamic economic force regionally and globally.

GF: Uzbekistan is Central Asia’s most diversified economy. Has this been an advantage in driving growth?

Kudratov: Diversification sits at the heart of all our modernization efforts, allowing us to remain resilient in the face of an increasingly volatile global economy. By ensuring growth across multiple sectors with the support of international investors, we are positioning for long-term, sustainable development. This balance between established industries and emerging sectors is driving our progress.

We have built upon our traditional industries, such as textiles, mining, and agriculture. In the textile sector, we created Specialized Textile Industrial Zones, designed to attract investments by offering favorable operating conditions. Since the reforms began in 2017, the sector has welcomed investments totaling $9.8 billion. Today, as in the past, Uzbekistan is Central Asia’s textile hub.

We also have a highly developed mining industry. The Navoi Mining and Metallurgical Company (NMMC) ranks among the top four gold producers globally, while the Almalyk Mining and Metallurgical Complex (AMMC) is a leading global copper producer. The agricultural sector has been transformed, with several programs implemented to boost trade and provide farmers with access to essential technology, supplies and funding.

Manufacturing has seen a significant boost, contributing over $55 billion to the economy in 2023. Today, automotive firms such as BYD, KIA, and GM are producing cars in Uzbekistan, making us the leading car producer in Central Asia. In the electronics sector, in partnership with Samsung, an enterprise was established for production of electrical appliances, with investments of half a billion dollars. The chemical industry, built on abundant mineral resources, is benefiting from modernization efforts and government initiatives. From 2017 to 2023, we attracted $9.7 billion in FDI, with companies such as AIR Products and Casale building facilities here.

Meanwhile, Uzbekistan’s building materials industry is booming in response to growing demand. Over $8.7 billion has been invested by international companies in cement plants, glass factories, and rolling mills between 2017 and 2023.

We have also made a conscious effort to develop new sectors such as pharmaceuticals, IT, and renewable energy. IT sector expanded rapidly, with the IT Park exporting $344 million in IT products and services in 2023. These sectors are quickly becoming key pillars of our economy.

Total FDI in electricity over the last six years has amounted to an impressive $10 billion, and we are aiming to increase generating capacity coming from renewable sources to 20 GW by 2030, ensuring that green energy is about 40% of the total.

GF: The recent Central Asia summit saw the countries of the region commit to regional integration. How realistic is this given Uzbekistan’s historic close relations with Russia—and have we started to see evidence of it yet? 

Kudratov: Uzbekistan has prioritized strengthening ties with its neighbors and fostering regional collaboration, with particular focus on diplomatic initiatives like Consultative Meetings of Central Asian Leaders, border demarcation, visa liberalization, initiatives stimulating regional trade and certainly economic cooperation.

Integration priorities include regional connectivity, water resource management, energy and security cooperation, as well as cultural and educational exchange.

The recent Summit marked an important step toward deeper regional integration. Uzbekistan is actively focusing on improving trade routes. One key example is the China-Kyrgyzstan-Uzbekistan railway, which will be crucial in facilitating trade within the region and beyond.

GF: In terms of attracting FDI and other investments, what are Uzbekistan’s main advantages? 

Kudratov: Uzbekistan offers three key attributes that make it a highly attractive destination for FDI.

Third is our reforms. Our more business-friendly environment includes customs duty exemptions on over 7,000 raw materials, a three-year tax exemption on dividends for foreign investors, and a lowered profit tax rate of 12%. We have also strengthened legal protections for foreign investors, ensuring their businesses are both secure and welcomed in Uzbekistan. Our inclusion in the OECD’s Regulatory Restrictiveness Index highlights our growing competitiveness.

Between 2017 and 2023, Uzbekistan utilized $60.9 billion in FDI and non-guaranteed loans, which funded large-scale projects across both sectoral and regional programs. We are continually striving to create a business ecosystem that is dynamic, inclusive, and future-ready.

GF: The plan is to attract some $250 billion in investment by 2030. How realistic is this?

Kudratov: Our goal is ambitious, and it is not something we can achieve alone. Uzbekistan is moving forward, and we are making it one of the best places to do business. But we need partners who share our ambition. The opportunities are here, the workforce is ready, and the incentives are in place. This is a chance to be part of something big, something transformative. Together, we can build an economy that benefits everyone.

Global Finance: Against a backdrop of rising debt, geopolitical and economic instability, how is the role of Islamic finance evolving to address emerging global challenges?

Yousef Khalawi: Despite its centuries-old heritage, Islamic finance is still a comparatively young industry. In its modern iteration, it is really just a half century old. Sukuk, for example, is less than 20 years old, making it relatively new compared with Western bonds.

The challenges you refer to are not merely domestic or regional—they are truly global in nature, and we see huge potential for the creativity of Islamic finance to address many of these. Take climate change, for example. Last year’s floods in Pakistan were not a result of local, or even regional actions; this is a global problem that can affect any part of the world.

Islamic finance has enormous capacity to develop new solutions to these sorts of challenges, and this is precisely the focus of the AlBaraka Forum, as it seeks to extend Sharia principles beyond the Muslim community.

GF: Where are the greatest growth opportunities?

Khalawi: Beyond the major global centers for Islamic finance of Malaysia and the GCC, Egypt, Pakistan, Indonesia, and Nigeria in particular represent huge growth opportunities for Islamic finance.

Financial inclusion is one way of unlocking that potential. In the case of Nigeria, Pakistan and Indonesia, these Muslim-majority countries each has a population far exceeding 200 million. If you consider the rate of financial inclusion in these countries, the potential for Islamic finance becomes evident.

Turkey also has great promise. Islamic finance penetration there is less than 10%, so raising that to just 20% is doubling the current penetration rates – underscoring the considerable potential for Islamic banking there.

GF: What role can Islamic finance play in advancing a more sustainable global economy?

Khalawi: The non-profit area of Islamic finance represents a huge range of opportunities for sustainability and ESG. If we were to transform the practice of zakat from an individual practice to an institutional practice, for instance, the sky is the limit. This would help institutions to focus on issues of inequality – just one of many of the 2030 Sustainable Development Goals that we are still some way off achieving, with just six years to go. Adapting the concepts of waqf and zakat at an institutional level could effect a great deal of change, especially in the world’s least developed countries.

The wider concepts and standards of Sharia-compliant investment by their nature lend themselves well to the sustainability agenda. Investments in alcohol, tobacco or military activities are prohibited anyway because these activities go against the well-being of individuals.

The fundamentals of Islamic finance have a lot to offer the whole investment industry. Even one of the largest funds in the world, Norway’s $1.6 trillion sovereign wealth fund, is moving closer to Islamic fundamentals. There is huge potential to explore this much more at a global level. So many CEOs in Islamic finance are focused only on the needs of Muslims seeking Sharia principles, but the potential is so much greater.

We need to consider these factors when communicating with Gen Z. We need to understand that they are looking for a digital economy, that ethical issues are important to them, and that they are guided more by values than by brands. A lot of research has been carried out on this topic, and it’s a great development that we need to take into account.

One of the Forum’s upcoming initiatives, scheduled for launch in 2025, is the first dedicated hub for communication strategy frameworks for Islamic finance. The new microsite will offer downloadable assets for anyone interested in exploring opportunities in Islamic finance.

Global Finance: When you took the role of CFO at QIA at the end of 2022, what were your initial areas of focus?

Niall Byrne: When I joined in 2022, QIA was a very well-established organization with a strong finance team. We’ve embarked on a transformation journey to create the state-of-the-art finance function, which hopefully is going to serve QIA for many years to come.

What I want to do is put in place a function, a team, technology systems, an operation that can support the future growth of QIA. Get the right technology in place that’s scalable, that can cope with the increasing size and complexity of everything.

We are migrating our core accounting and investment platforms to a best-in-class, front-to-back solution, and that’s a huge project for QIA. It doesn’t just impact the finance function, it impacts all of the investment teams across the whole organization.

Then I need to create time for my team to do new things that add new value to QIA as an organization. And it’s not about cost-cutting. In fact, my team has grown since I’ve arrived, and I expect it to continue to grow. It is now just over 80 people, and I expect it to grow probably north of 100 over the next couple of years.

GF: Where have you had the most success in QIA so far?

Byrne: The technology journey is probably the most complex part of what’s going on at the moment. And we’ve already seen some successes there. It’s a multiyear journey. As we roll into 2025, we’ll have the core accounting platform in place. And then we’ll be adding things that will be much more visible to the investment teams, such as the way we report on performance.We obviously already have a performance management system, but we’ll have a new cloud-based system.

GF: Is there any concern about moving to the cloud, from a security point of view?

Byrne: Obviously that’s always a focus for any organization. We follow best practices in terms of the security that we demand of our vendors. We’re doing this in a measured, considered way and making sure that it meets all of our requirements, and we don’t jeopardize the security of any of our data.

GF: What are QIA’s key focus areas for investment in terms of geographies and industries?

Byrne: Our mandate is to protect and grow the state’s financial assets and to help diversify the local economy. We invest on a global scale, across multiple sectors, geographies, and we build up strong partnerships with our investee companies, because we’re a long-term investor, we’re able to do that. We have a diversified investment approach, and we really focus on sectors that we think will shape the future global economy, such as technology, healthcare and solutions that power the energy transition.

GF: During your career as a senior financial figure, what have been your best and worst moments?

Byrne: I would say the best is coming to QIA. I’ve worked in many different roles over my career. I was at JPMorgan Chase for a long time. I’ve worked in front-office and support functions, different locations, different businesses. At QIA, I have the opportunity to bring all of that together, leverage all of my experiences, and really deliver value at a level that can positively impact an entire organization. It’s great to be able to do that in such a complex role as the one I have here, and everything I’ve done before essentially prepared me for that task.

Leaving JPMorgan after 25 years was a big step, obviously, for me and my family. I wanted that fresh challenge, a new organization, new set of colleagues, new country and region.

The worst moments involve recognizing when a role isn’t providing the expected challenge and taking action to address it. And that doesn’t sound like a bad moment, but those moments are actually pretty challenging, because you’ve got to recognize that you’re in that situation and then take action to address it.

GF: What can you suggest to a young person aspiring to a career as a CFO?

Byrne: If you’re starting out knowing that you want to be a CFO, it’s great to have that clarity. Number one, invest in yourself. I would also be flexible: you may have a plan, but you need to adjust your plan as opportunities come up. If something different comes up, embrace it, because over time, you’ll build a portfolio of experiences that will make you a stronger candidate for bigger and more complex roles. Generally, building your portfolio of experiences is really important. I would also say, be confident, even when you’re right at the beginning. Be confident in your abilities, but stay humble, ask lots of questions. Admit when you don’t know something, it’s fine to make mistakes, but learn from your mistakes. Probably the most important thing of all is just do things that you enjoy, you get satisfaction from, because you will do your best work when you love what you do.

Global Finance: What surprised you in 2024?

Meghan Robson: The economic landscape has been positive and driven credit spreads to multiyear tights. In investment grade bonds, we’re now at spreads of 80 basis points. That’s a level we haven’t seen since 2005. In high yields, we’re now trading below 300 basis points. That’s the tightest since 2022. We were expecting US growth to slow more than it has. Data has been better than we expected, not only in the labor market but also consumer spending remains very resilient. The retail sales reading is strong. This raises the chances of a soft landing.

On monetary policy, the Federal Reserve has been a bit more dovish than we expected. Chairman Jerome Powell used his Jackson Hole speech in August to declare victory on inflation and ended up delivering that 50 basis point cut. Our base case was a 25 basis point cut—a bit more than expected. That really supported a bullish view. The market still expects that the Fed will be able to continue rate cuts at a regular cadence into next year. All that bodes well for credit and lowers the chances of a recession.

GF: Do you foresee a soft landing?

Robson: We are expecting a soft landing. We’re starting to see signs that corporate fundamentals are improving. In the second quarter, growth in Ebitda [earnings before interest, taxes, depreciation and amortization] outpaced interest expense growth for high-yield corporates. We’ve seen this downtrend in interest coverage. That is finally starting to stabilize as we’ve lapped higher rates and have easier comps there. As rates start to come down, that should potentially look better. There’s also the benefit of easier credit conditions going forward, which we think will continue into next year and allow corporates to refinance.

Another point is maturity walls. We’ve seen dramatic improvements with companies addressing maturities due in 2025, but also a lot of progress on maturities due out to 2026. We’re less concerned about that kind of imminent threat we were worried about at the beginning of the year? The risk looks a lot better, and all those reasons support the soft-landing thesis.

GF: Were the recession fears a false alarm?

Robson: Everything you learn as a credit analyst indicates there would be more problems after a rise in rates. So, I think there was some justification in looking at history and the impacts to interest coverage, and predicting that corporate fundamentals would have been more challenged. It seems like markets tend to overreact both positively and negatively to the news. So, the risks were overstated in terms of the market reaction, but I think there were solid reasons to believe we could have seen a bigger downside scenario than we have.

The year-over-year change in corporate margins is still positive, and as a result, profits are broadly expanding. Companies, for the most part, have not had to lay people off. Until you really see that margin compression, I think we won’t see a pickup in layoffs. If we do see margin compression, then companies will be forced to cut costs, and that’s where the recession probability could rise.

GF: How does US credit compare to the rest of the globe?

Robson: We have a modest preference for Europe over the US, given where valuations are. Also, political risk is a bit lower in the European region than the US. We’re also very focused on China’s growth. Beijing’s stimulus, in our view, is not enough yet to be a game changer for some of the sectors with exposure to China that we’re worried about. Chemicals and basics, for example, are going to struggle. We’re also closely watching the Middle East conflict. There’s clearly a feed-through to energy prices, and it could be a headwind to some of our issuers of things like transportation that rely on energy costs.

GF: After LVMH’s earnings, what’s your take on the luxury sector?

Robson: We’re more cautious. In aggregate, we’ve seen a strong labor market, and retail sales are robust. But in the second quarter, this new theme emerged of a slowdown in discretionary spending categories across all income groups, and one subsector is aspirational luxury. Think about a purchase that you might make once per year, like a purse. Consumers are much more discerning around big-ticket items, large leisure goods such as pools and boats. Liquor brands, for example, take these premiumization strategies, and we’re beginning to see spending fall off from those areas. We group all of those into highly discretionary spending categories and are underweight for those types of sectors. But we still think the consumer remains solid.

GF: How might the US presidential election outcome affect the dollar?

Robson: One of the key tail risks with reference to the dollar is sweeping trade policy from Donald Trump. We could have a 10% global tariff across the board and 60% on China. That could boost inflation of up to 5% relative to the baseline and a spike in rates. We would see high yields in the leveraged finance markets much more vulnerable in that situation. Some folks argue that high yield would do better under trade restrictions, just because companies have been more domestically focused in terms of their revenue. Our view is that ultimately, the macro backdrop of inflation and higher rates would be more challenging.

In terms of defensiveness, we like investment grade over high yields. There are certain sectors that we think are offering better risk/reward. So, credit spreads have gotten so tight and so compressed that there’s not much of a cyclical risk premium. You’re not being rewarded as an investor for taking on that extra risk given how tight spreads have become. So, we do like noncyclical sectors like utilities and healthcare, which we think could perform better should we see a pickup in volatility.

GF: Is the election delaying M&A activity?

Robson: There has been a delay of not only M&A, but also capex as it relates to the US election. We think that Kamala Harris would be more dampening to M&A volumes, whereas Trump would be more supportive of M&A just given his track record of supporting less regulation. For debt issuances, there’s typically a six-month runway between announcing the M&A and then seeing the deal price. If we were to see announcements after the election, it wouldn’t be until probably the end of first quarter 2025 or second quarter 2025 that we would see the corresponding debt for that deal.

GF: How does it look for private equity firms?

Robson: The borrowing channel looks better. Interest rates, expected to move lower, signifies that the cost of funding is good. We’ve also seen equity or purchase price multiples of leveraged buyouts, even though there haven’t been many, move lower than the peaks. That’s in specific sectors like software, where the multiples have been lower. That, combined with lower rates, makes it much more economical for private equity sponsorship. We’ve also seen a willingness of sponsors to contribute an elevated percentage of equity to deals, which should facilitate more activity.

GF: For corporates, what should their strategy be?

Robson: Be nimble and flexible in terms of your issuance plan. When market conditions are strong, you’ll be in a place where you can take advantage. Recently, we had some issuers on the sidelines, monitoring the situation for potentially coming to market. We saw rates fall off 10 basis points. They ended up putting those on hold. But should we see an improvement in conditions, they will be able to take advantage of those. I think for investment grade, the demand continues to be strong from yield buyers. Investors domiciled in Japan have seen their hedging costs come down, so that continues to support issuance in investment grade. And then in high yield, given lower recession risks, investors have a lot of appetite for supply. They’ve been starved of issuance. There is potential for those deals to be received well also, but we would recommend waiting until after the election. I think there’s still potential for volatility.

GF: What risks concern you?

Robson: The best catalyst is the one you don’t know. I think for credit, the unknown risk could be a technical one where volatility potentially causes something similar to the European pension-driven selloff. As it relates to Japan, given that the buyer base has grown so much, there could be a forced-selling surprise type of scenario. The selloff in August demonstrates how quickly markets can react negatively and have something turn technical. That is something we’re always trying to unpack. There’s also the underpricing of the election risk: Investors seem very complacent, especially around Trump scenarios where they say he won’t end up actually doing anything he said because he’s “market positive and wouldn’t enact anything.” I think that understates the policy risk.

GF: How will AI shape the future of corporate credit analysis?

Robson: Advancements in AI are extremely exciting for corporate bond researchers. Natural language processing can help with analyzing things like earnings statements. In terms of the creativity in the work product you can generate. Long term, it remains an open question. There will be a lot of investments in companies that can fail. For now, there’s a positive outlook.      

Global Finance: You have been the financial head of Iveco Group for almost a year now. What has been the biggest challenge so far?

Anna Tanganelli: Iveco Group is navigating through a rapidly evolving external market and geopolitical context, bearing new and disruptive complexities which affect the very way in which we do business: from supply chain interruptions to fluctuating market demand, from volatile macroeconomic fundamentals to operating in a “polycrisis” global scenario, while remaining at the forefront of innovation and leading the automotive industry’s transformation journey towards electrification.

As CFO, the biggest challenge has been—and is still today—to ensure that our financial objectives and processes fully align with Iveco Group’s long-term growth ambition, and at the same time enable the company to safely weather any storm and complexity that may lay ahead.

And since the Iveco Group 2024-2028 Strategic Business Plan was scheduled to be presented a little more than three months  [March 2024] after I joined, I had to come up with a solid financial strategy quickly.

GF: Most of your career has been in the automotive industry. Are there specific aspects of this business and industry for a Chief Financial Officer?

Tanganelli: Everyone who works for the automotive sector knows that this industry is not “for the faint of heart.” It’s cyclical, labor-heavy, capital and R&D-intensive, fiercely competitive, and in the midst of a remarkable, all-encompassing transformation—it never stands still.

This requires a CFO to be flexible in adapting financial processes and strategies to changing external and internal conditions, and quick in making decisions, sometimes accepting a reasonable, calculated level of risk.

At the same time, you must have a constant focus on cost control, operational efficiency and cash flow management. In an industry with tight margins, significant capital investments and sometimes long supply chains, optimizing cash generation and ensuring a disciplined liquidity management is vital.

The rapid pace of technological advancements and regulatory changes highlight the need for a forward-thinking, more strategic approach to financial planning and risk management. CFOs must understand the importance of factoring less traditional financial metrics in their decision-making process, such as innovation, connectivity and ESG.

GF: Where do you devote most of your energy and time?

Tanganelli: Besides my core, day-to-day finance-related activities, I spend most of my energy and time on people and processes. This includes identifying and developing our finance leaders of the future, attracting and nurturing talents within the organization, stepping up accountability and strategic thinking, and, above all, being a female leader in a still substantially male-dominated industry—fostering and widening diversity. 

GF: How do you see the use of artificial intelligence (AI) evolving in finance?

Tanganelli: AI has the potential to revolutionize finance by enhancing data analysis, improving forecasting accuracy and automating routine tasks. I see AI evolving to become an important part of the decision-making processes, providing deeper insights and enabling more strategic, data-driven decisions. At Iveco Group, we are exploring ways to leverage AI to optimize our financial operations and drive innovation.

Global Finance: What’s driving the current interest in sports finance?

Neil Barlow: The ownership of major sports franchises has often been the preserve of wealthy billionaires. US investors look toward European soccer and say, “There’s this amazing asset that has global appeal across Asia, the Middle East, South America … but how come their valuations don’t match that of an NFL team? What are they not doing?” Private equity firms seek operational opportunities. They may look at a particular club or franchise in a major sport, such as soccer, and see a potential real estate play. Perhaps a stadium could be redeveloped to host, say, a Taylor Swift concert or the NFL when they come to London or to Frankfurt. They hope to create opportunities to amplify the commercial impact of those teams in terms of what they are doing abroad.

GF: Which firm exemplifies this trend?

Barlow: Consider the likes of Sixth Street; we advised them on Barcelona. But seeing operational opportunities around clubs doesn’t always mean owning a club. That’s incredibly expensive, and there are stringent rules around financial fair play or acquiring players. And in the US, there are rules about the size of a stake that you can own in a franchise. While the NFL is opening up to private equity investment, there are stringent rules in the NBA and the NHL around owning minority stakes.

GF: So, where else in the sports ecosystem can private equity firms find opportunity?

Barlow: One example is media rights. The ability to provide liquidity or capital is readily realized when you say, “Let’s buy a certain percent of your broadcast revenue over the next 10 to 20 years. You can use this money to reinvest in your squad, your facilities, or your coaching and staff.” And the private equity investor has a pretty confident stream of revenue that is on an upward trajectory over a certain period. We have seen a lot more of those types of deals rather than club buyouts. While there are certain trophy clubs and assets out there, private equity firms are typically more focused on the adjacent sports aspects. What you are seeing is family offices—which are private equity in nature but funded in large part by multimillionaires or billionaires—looking at club acquisitions. But we haven’t seen a Blackstone or an Apollo or a Carlyle buy a Manchester United.

GF: Can private equity compete with nation-states?

Barlow: To quote PGA Tour Commissioner Jay Monahan, when you’re up against a nation-state to fund a project, you have to make strong decisions around how you operate the business. Take the golf example that I am alluding to. There has been a lot of angst and questions: Do you team up with a nation-state and create a merged global product? Is that in the best interests of the product, the players and commercialization? Or, do you look for private equity investment? It may not be of the same level, but you may feel like you have more autonomy around the future of your own product. And clearly there’s a lack of progress around the PGA Tour/LIV Golf merger.

When sovereign wealth investment first came into European soccer, the level and speed of investment happened at a time when the leagues hadn’t fully appreciated the guardrails they may have wanted in place to ensure fair competition. Contrast Manchester City’s investment from Abu Dhabi United Group and PSG’s investment from Qatar Sports Investments, with Newcastle United Football Club and Saudi Arabia’s Public Investment Fund years later. Today, new investments, as seen with Newcastle, happen in a more constrained environment, for example as to the amount that can be deployed on players. The rules have now developed to regulate the enormity of funding.

GF: What lessons have you learned from recent advisory roles, and how can CFOs apply that in their own work?

Barlow: A number of portfolio companies are asked by their owners to move into exit mode at a rapid speed. Sometimes an owner thinks, “Now’s our time. Let’s go.” And I think CFOs have had to really grapple with how quickly they can produce the data, the budgeting, the forecasting and the financials. That puts pressure on the C-suite. Often in those scenarios, only a small number of managers or senior employees at an organization are in the know about that process. So, the ability to be organized and gather information is key. Otherwise, transactions can stall and that obviously puts a huge strain on CFOs.

Also, build a rapport with the private equity owner, where they can preempt in advance when they think those cycles of exit activity are going to happen, and prepare behind the scenes. If the business has seasonal revenue, how’s that going to look to the buyer market? Maybe the buyer dinks you on price and valuation. Then the private equity house goes back to the CFO and says, “Why didn’t we predict this?” Often they can predict it, if they’ve had that conversation. The teams that I’ve seen operate most effectively are having those communications early, in order to preempt when these things might happen.

So, stay on it. Keep your organization organized. Keep your files in place. You’re going to be asked to produce a data room in a matter of weeks or days, and I’ve seen that to be near impossible for the majority of businesses because most businesses of a global nature do not necessarily have all the information you need in a virtual data room at their fingertips.

GF: What’s the biggest challenge for private equity firms today?

Barlow: There is a huge premium on culture, relationship and reputation. The track record of the private equity investor, especially with regulators in different parts of the world, is hugely important. Scrutiny around financial services, banking, etc., has increased exponentially over the past few years. We have seen in Europe, for example, certain regulators take more stringent views on private equity investment because obviously there has been a lot of strain on those businesses with the Covid-19 pandemic. Compared with pension funds and sovereign wealth funds, which traditionally are less involved on the day-to-day operations and more involved on the investment side, private equity firms lean into operational growth, and they obviously have a head start.

GF: How come so many American investors are buying clubs in Europe?

Barlow: That’s something I’ve talked to clients about. The euro and the pound sterling is weak compared with the dollar, so over the past few years, US-based dollar funds see pricing as attractive. Also, if you look at the sports model in the US, they don’t have these tiered leagues or teams like you have in Europe. They just don’t exist. But if you look at the leagues in Italy, England, Scotland, Ireland—there are multitudes of leagues that allow an entry point at a much lower valuation, like Ryan Reynolds got with Wrexham in Wales.

You then professionalize it: Bring in sponsorship and create such a media clamor that the valuation increases. And if there’s an increase in performance and they climb the leagues, you can double or triple the value of these assets. Is a massive private equity house going to look at that as an opportunity? No, because the returns and the multiples aren’t large enough. But there are certainly a large number of private investors, family offices, and individuals that will be hugely attracted to that and can access sports club ownership in a way that you could never do in the US.

GF: Do you expect to see this trend expand to other regions?

Barlow: There has been less movement in South or Latin America because the revenue streams and leagues are less developed. However, that doesn’t mean it won’t happen. We are seeing clients looking especially multiclub models, where you own different clubs in different jurisdictions and you create synergies. There is a huge interest in those opportunities, particularly in countries like Mexico, Argentina and Brazil.

GF: It doesn’t seem like it’s a seller’s market. Do foresee any change in the near or long term?

Barlow: I wish I had a crystal ball, but my current feeling is this is going to continue through the end of this year and into the first quarter of 2025. I think there is a lot of momentum behind people realizing that they need to get on and do something. And I think people have started to either get ready or think about the potential for IPO-ing a businesses. It’s becoming quite difficult for private equity buyers to decide where to spend their time. But, if you’re thinking about IPO-ing in 2025, you’re going to have to start working with your company and management team now to get that preparation going. That is one example of how the industry recognizes that they can’t sit here and say, “Oh, we will wait six months.” Because, at that point, you’re into 2026. As for sports, it’s a great example of a new frontier of operational opportunity for private equity, which is why you’re seeing a massive move in that direction.

Global Finance: What has been the most challenging time of the 10 years you have been CFO at Groupe Berkem?

Anthony Labrugnas: The most challenging time as the financial head of Groupe Berkem was at the beginning, because of the company’s financial situation at that time. Back then, there was a significant level of debt, and the company’s profitability was not high enough. I had to find ways to refinance and find solutions to increase the Group’s capital, to bring in new cash flow. After that, it was easier to build a financial strategy and to achieve acquisitions and finance the capex. To give you a bit of background, we evolved from a small, Dordogne, France–based SME [small and midsize enterprise] to an international player with nearly 300 employees over the past decade, so a lot has changed in that respect. My job is to adapt to ever-changing environments.

GF: Groupe Berkem operates as a bio-based chemical group. Are there specific aspects of this business and industry for a CFO?

Labrugnas: Today, the financial system is very focused on the topic of corporate social responsibility, or CSR. If you are not strong on ESG [environmental, social, and governance] priorities, it will be very difficult to finance your company in the future. A company’s valuation is now fundamentally connected to its CSR, and not only in terms of profitability. It’s a way of growing differently, and luckily CSR is intimately linked to what we do as a manufacturer in the plant-based chemical industry, helping industrial companies replace everyday chemicals with bio-based, ecologically responsible solutions.

GF: What do you spend most of your energy and time on?

Labrugnas: This year is very rich for me, with many challenging operations to manage. One was the acquisition and integration of a new company in Spain, Berkem Ibérica. Another challenge was managing the withdrawal from the stock exchange market for Groupe Berkem. We also managed the multisite implementation of new enterprise resource planning for the group, as well as the latest acquisitions. Finally, there was the task of providing KPIs for the new organization of the group, where we merged all the companies into one and created four distinct business areas.

GF: What is your view on ESG?

Labrugnas: As I mentioned, ESG is key for the company at large and for all of my teams, regardless of where they are based. This is also part of Groupe Berkem’s DNA: Our core mission is to advance the environmental transition of companies producing chemicals used in everyday life. We are constantly integrating plant chemistry into each of the areas we are operating in from Construction and Materials, Hygiene & Protection, Health, Beauty & Nutrition to Industry.

GF: What is your view on the use of artificial intelligence in finance?

Labrugnas: I’m not very confident in the use of AI in finance. I think that AI can’t replace the human relationships that make our jobs interesting and challenging, nor can it replace the bonds that are so important between the banks, analysts and companies we interact with. These connections and relationships remain a must-have in finance, and they are key for me.

GF: Groupe Berkem has been listed on the Euronext since December 2021. How did your role change since the listing?

Labrugnas: Being listed requires much more effort on our part, to close our accounts with the auditors. We have also many more meetings with analysts and investors, so it can be very demanding and time-consuming in that respect. Being listed has also allowed me to improve my presentation skills, in terms of the way I present the group and the figures.

Global Finance: How has rising inflation impacted your country scores?

Yoel Sano: Higher inflation generally means higher risk of social instability. When Russia attacked Ukraine, we saw an immediate inflation spike; the cost-of-living crisis went global. Rising food prices were one of the major factors that disrupted social stability. In terms of the impact, it depends on the country’s macroeconomic backdrop, including import bills, dependency on imports, fiscal position and debt position. In Sri Lanka, President Gotabaya Rajapaksa was toppled in 2022. In Argentina, they elected Javier Milei, a radical sort of free marketeer, late last year to fix triple-digit inflation. We currently have anti-inflation protests erupting in Nigeria. So, the impact manifests itself in different ways. The most extreme cases lead to sudden changes in government, or it could be a slow-burn ejection of a government like we saw in Argentina. Or it could just be sort of sporadic unrest like we see in Nigeria.

GF: Do organized disinformation campaigns affect political analysis?

Sano: Our analysts obviously monitor Twitter [now X] throughout the day to sort of see what news is available. But we also look at the mainstream international outlets from a variety of different sources. It can be hard to verify information. It is often somewhat tricky to absolutely be sure about what happens, for example, in wars like Ukraine and Gaza. The quantity and speed with which information is disseminated makes a lot of noise, so we just have to work our way through it. There are fact-checking organizations, but some may be unreliable themselves. It’s a case of perseverance and trying to see through the fog. But certainly the onset of disinformation can cause situations to erupt quite suddenly. I’m based in the UK. Just in early August, we’ve seen riots by anti-immigrant, far-right activists, which seem to have been triggered by false information concerning the identity of the murderer of three young girls at a dance party. The false aspect of the story had been debunked, but the underlying sort of aggression is still there—it’s still a risk. Those kinds of incidents, where you have a sudden piece of disinformation thrown up, can trigger unrest that will probably be more common going forward. I’d say it’s about the speed of disinformation, and in some ways the volume level as well, than the amount of disinformation.

GF: What’s your outlook for the major Latin American markets?

Sano: We’re quite positive on Mexico’s economy in the long term as an alternative to, say, China. Mexico can bring more manufacturing and business operations to market, as it is geographically closer to the US and perhaps more politically reliable under President-elect Claudia Sheinbaum [she assumes office on October 1]. Sheinbaum is quite a capable, technocratic-type leader who would maintain Mexico’s stability.

In Brazil, there’s a lot of uncertainty about who will succeed Luiz Inácio Lula da Silva. We have municipal elections in October; that’ll be a test for Brazil’s 2026 presidential election. And we know that ex-President Jair Bolsonaro cannot run for the presidency in 2026 due to his own legal challenges. So, the Brazilian right will be looking for a new standard bearer for the 2026 presidential election. We’re watching that very closely.

In Argentina, Milei’s main test will be the midterm elections in October 2025.

In Venezuela, we are seeing the challenges against President Nicolás Maduro, who seems to have retained the support of the military and key institutions. He seems to be able to ride out the protests, but it depends how big any protests become. In order for any leader to be deposed, you need to have protests for weeks, maybe months on end. And even that doesn’t completely guarantee political change because we’ve seen, in 2020 in Hong Kong and Belarus, large protests went on for months and the governments stayed put.

Peru has been a country where we’ve seen almost chronic instability for quite some time now. General elections are scheduled to be held in April 2026. In Ecuador, there’s a lot of drug-related violence. In Bolivia, there seems to be a power struggle within the ruling Socialist movement. They have elections in 2025.

Chile also has elections next year in Latin America. So, again, this will be a test of whether the current center left will retain the presidency or whether the right will come back to power. I know that President Gabriel Boric has faced a number of problems. He has faced constitutional amendments being defeated by referendums, so he has had quite a turbulent presidency thus far.

GF: Will China continue to wield influence in Latin America?

Sano: I think there are a lot of avenues for uncertainty regarding China’s influence on parts of Latin America, where China is a major commodity importer. Milei’s predecessor, Alberto Fernández, signed Argentina up to join BRICS. Milei immediately withdrew Argentina from BRICS when he was elected president. He’s now trying to mend ties with China. But it shows that you can’t assume that just because there’s a sort of China-friendly government in place at one time, it’ll always be the case. Overall, trade is an area where China will remain important for Latin America.

GF: What key strategy would you offer to CFOs to manage risk?

Sano: You must have some sort of backup system or resiliency plan to deal with disruption to any operations. For example, several months before the Covid-19 pandemic began, BMI started giving all its staff laptops, replacing traditional PCs. A few weeks before we went into lockdown, we conducted a test situation where we all worked from home—just to see how that would function. When the lockdown actually happened in March 2020, we were ready and able to maintain continuity of business. Imagine if this had happened 20 years earlier, without all this infrastructure. So, it’s important for companies to have backup systems, particularly in this era of cyberthreats.

It also depends on what business you’re in. With international shipping businesses, the Houthis of Yemen started attacking shipping vessels in the Red Sea in late 2023. Freight was rerouted around the Cape of Good Hope in Africa. Yes, it was more expensive and more time consuming, but at least there was an alternative. I think building redundancy in any kind of system is useful.

If you’re a major manufacturer, you don’t want to be reliant on a single source for your components, and you’d ideally want to ship your material from multiple countries so there’s not a single point of failure.

GF: Any surprises in the months since BMI held its last annual “World of Worries” Q&A event?

Sano: Our analysts do these global/macro risk assessments on a global basis and on a regional basis, discussing themes for the coming year. What surprised us in 2024? The Israel-Hamas war in Gaza has gone on a little longer than we expected. I would also say that you can’t predict events like the death of Iranian President Ebrahim Raisi in a helicopter a few months ago and centrist Masoud Pezeshkian winning a snap election. We couldn’t predict that former President Donald Trump would be shot, but we did flag the possibility of the coming US election being conducted without either Donald Trump or Joe Biden on the ballot, either due to Trump’s legal difficulties or Biden’s age. So, we’re correct—in that sense—about the Biden age issue. There will always be something that happens, catching us off guard from time to time. We’re holding another “World of Worries” event on October 9, with much of the focus on risks in 2025.

Luckily, Matthew Adams has at least two decades worth of expertise guiding him with each new policy shift and market shakeup. His resume includes various senior roles at major firms like State Street, HSBC, Northern Trust and BNP Paribas.

By 2022, Adams arrived at First Abu Dhabi Bank (FAB) where he oversees the bank’s international client base of global custodians, broker dealers and private banks.

Adams provided Global Finance with some insight on sub-custody services, his approach to client management, and the complicated nature of modern securities services. The interview has been edited for length and clarity.

Global Finance: What are the latest trends in sub-custodianship?

Matthew Adams: Sub-custodians are experiencing different trends based on regional factors, local economies and regulatory environments. There is often a disparity in how individual markets can keep pace with infrastructure developments. In the GCCE [Gulf Cooperation Council and Egypt] markets where FAB provides sub-custody services, we see a range of models. Some operate on a broker clearing model, while others have transitioned to true delivery versus payment and central counterparty [CCP] clearing models. This diversity presents a significant challenge as global investors seek uniformity in trading venues. Intermediaries and global institutions are looking for regional consistency in partnerships which can drive substantial commercial opportunities. One notable development is the emergence of the General Clearing Member [GCM] initiative. This allows international broker dealers to become remote trading members of the local exchanges. 

GF: How does that help?

Adams: There are multiple benefits to this. It eliminates the need for a local presence and the requirement to transact via a locally licensed broker. Direct connectivity with the exchanges is established to enable trading on both proprietary and client accounts using a licensed custodian clearing member. However, for the global broker community to move away from using established local broker relationships in multiple markets, we will likely need to see a standardized GCM concept across markets, with CCPs in place. The Abu Dhabi Securities Exchange and Dubai Financial Market are expected to go live in 2024, with the Securities Depository Centre Company [EDAA] in Saudi Arabia [owned by Tadawul] following in the future, promising wider adoption thereafter. To achieve post-trade efficiencies and foster commonality in post-trade processes, regional custodians can harness developments in infrastructure to reduce costs and improve overall market efficiency.

GF: Any advice for investment managers when selecting a global custodian?

Adams: The ultimate benefits of appointing a global custodian are efficiency, risk mitigation and cost savings—all captured under one contract. When selecting a global custodian, it is essential to review their due diligence policies with respect to the appointment and maintenance of sub-custodians, as well as their contingent and dual-network operations. Corporates, pension fund trustees and boards of directors should consider these aspects.

GF: Do corporates ever have a say in selecting sub-custodians?

Adams: It’s ultimately up to the global custodian to select and manage sub-custodians. What we do see is that many global custodians, in addition to running dual and/or contingent networks, may appoint an additional sub-custodian at their clients’ request. This typically occurs if the client is of a size and relationship that warrants such a request and has due cause for concerns regarding a particular sub-custodian, whether those concerns are related to risk or competition.

GF: Why are more companies seeking opportunities in emerging markets?

Adams: Many companies are looking to expand into these markets and rightfully so, when you consider the number of untapped opportunities. Many of the more successful markets in the region have a few things in common, such as having a relatively wealthy population—both domestic and foreign—large reserves of capital and most importantly, strong leadership.

To provide some context on why there is more demand in emerging-market expansion, all GCCE markets are currently classified by various metrics as emerging markets. However, each is in a different stage of development. Some, such as the UAE and Saudi Arabia, achieved significant economic progress in recent years. For example, Saudi Arabia’s stock exchange, Tadawul, has risen to take its place among the top exchanges globally since its founding 17 years ago. The market continues to expand and diversify, with around 40 IPOs in the last 12 months alone. However, it remains heavily concentrated in traditional oil stocks, with Saudi Aramco being the only Fortune 500 company in the region.

GF: What are some of the growth drivers?

Adams: Some of the factors driving growth in emerging markets include engagement with the market, pension fund reforms and a growing domestic investment fund industry. 

Strong local or regional financial institutions and service providers can engage with the markets and push for solutions in line with international investor requirements. Many GCC markets have seen a surge in IPOs — the majority of which have been vastly oversubscribed.

Regarding pension fund and saving reforms: The UAE is changing the existing end-of-service benefit, which will divert capital investment into domestic mutual funds. This move will shift multiple billions of dollars from what is effectively an accounting liability into the capital markets in the first year.

A growing domestic Investment Fund industry supports further capital investment, employment, and greater efficiency in relation to capital markets. In the UAE, there is a move to mandate for onshore licensed funds to act as feeders to what is currently and largely a distribution market for offshore funds. 

Progressive regulatory reforms are also driving growth. We expect that Saudi Arabia, the largest domestic fund industry in the GCC, to require independent fund administrators to calculate NAVs—a market standard in the larger global fund markets. This will bring further comfort to investors and lead to additional investment in listed securities.

The ability for sub-custodians to keep up with and manage these regional changes to facilitate clients’ entry into these markets is paramount. This is where institutions like FAB can play a pivotal role in assisting across the spectrum of the regional markets which are our “home” markets, promoting interoperability and consistency to increase accessibility and ultimately boost investor confidence. 

GF: How do you see the status of the US economy in the next 12 months?

Bullard: I think the US economy is in good shape for a soft landing. To me, soft landing means that output grows at the potential growth rate, that the job market is in pretty good balance, and that inflation is moving back toward target and isn’t too far from target. All those things are happening. And you know, GDP growth looks to me like the run rate is maybe between 2 and 2.5 percent for 2024, that’s pretty close to the potential growth rate, or a little above the potential growth rate. Inflation has been coming down toward target, and that’s going to enable the Federal Reserve to get going on the interest rate cuts.

GF: Do you then expect a rate cut in September?

Bullard: The committee was pretty clear at the last meeting and in the chairman’s press conference, that they are ready to go at the September meeting, unless something really dramatic happens. I think, you know, they’re about as clear as you can be for a central bank. I do think they’ll start in September with 25 basis points, and then the question is how fast do they want to move to get back toward a more-or-less restrictive stance of monetary policy, and so even when they lower the policy rate a little bit, the policy rate will still be restrictive. They have to continue to lower from that point. And I think it’s probably 25 basis points per meeting for several meetings in a row, until you can get down to a lower level of the policy rate, and then at that point, you could decide whether inflation is continuing to go to 2% or not, and whether you want to continue to normalize the policy rate.

GF:  You see a cut of 75 basis points between now and December, right?

Bullard: Right.

GF: Do you expect big policy differences depending on who will win the US presidential elections in November?

Bullard: One thing I’ve said about this, is that this election does have a lot of uncertainty around it, because not just the White House is up for grabs in a close election, but also the House of Representatives and the Senate are very close. It’s not clear to me that either party will be able to win all three of those. I think divided government is a distinct possibility for the ultimate outcome. And in the US when there’s divided government, that usually means not too much gets done. And usually financial markets like that outcome. And so, I think that that’s been a factor that’s been driving financial markets during the summer here, but the election could change direction very quickly and either party, I would say, could still sweep. If one party sweeps, it will be able to do more, and probably wants to do more. And so that would be a little bit different.

GF: How do you explain the market crisis we had on August 5^th?

Bullard: I would say that the dramatic sell off in US equities and global equities was partly due to the jobs report in the US. But if you look at that report, it was weak, but it was not that weak. I think what really exacerbated the downturn was events in Japan over the weekend and into Monday morning.

I think the [Bank of Japan] is trying to pull back some on its policy. It’s a very dovish policy that’s been in place for many years and, you know, attitudes have changed in Japan some, where they now think that a too weak yen is maybe counterproductive.

And I think that upset some of the carry trade that has been based on the idea that Japan will never do this.  I think that’s what caused the big sell off, especially in Japan. I think the US jobs report was over interpreted, and then that was all exacerbated by the Bank of Japan.

GF: Why are financial markets so stressed?

Bullard: The geopolitical risk is very serious, and I do think we’re living with the [Gaza and Ukraine] wars going on, but they could easily metastasize into larger conflicts, either one of them, and markets do worry about that and that could be a big risk.

I think also maybe more pedestrian is just that the market is up a lot. The equity market is highly valued in the US and … I think that makes people nervous. They think that, you know, maybe those are overvalued, and the air will come out of that level. So, in that sense, they’re right to worry about that, and right to worry about these great companies, but do we really want to value them as how these were valued?

GF: Are you talking about a company like Nvidia?

Bullard: Nvidia, would be a classic, you know, classic one that went way, way up this year. You know, it’s a great company, and they’ve got a great product, and they’re selling a lot of it, but what’s the right valuation, I think, is the question.

GF: How do you see the global economic landscape beside the US?

Bullard: I would say the global landscape is less rosy than the US, because you’ve got China, which I think is struggling, at least by Chinese standards. China is struggling, not growing as fast as they used to. They’ve got clear fundamental problems in their real estate market, maybe elsewhere, and then Europe, which has not had as much growth as us, and has the war going on in Ukraine and has been more tied to, at least the leading economies have been, more tied directly to China. So China slowing down, it’s very clear more than the US. I would say that for global growth, it’s not as clear that we can get the kind of numbers that we’ve had in recent years. It’s a little bit slower there, and there’s more recession risk there than in the US economy.

GF: Do you expect trade tensions, and the decoupling between China and the US continuing?

Bullard: I think both parties in the US have decided that a more protectionist stance on global trade is something that they want to pursue. One of the hallmarks of the Biden administration was that it didn’t really reverse any of the policies of the Trump administration with respect to trade, and I would expect that to continue going forward.

[The attitude toward global trade] fundamentally, it’s more protectionist. It’s less globalist than it would have been even a few years ago, or certainly during the Reagan-Bush years. And I don’t see that turning around. I think we’re going to have more volatility from that dimension going forward, and I’m a little concerned that you could have markets anticipating a trade war even before one actually occurs because both parties, both political parties are talking about getting tougher on tariffs, maybe not only China, but everyone in the world. That would invite retaliation or threats of retaliation that could lead to a lot of volatility.