Tumbling global stock and bond prices this year, together with pain in private equity amid deteriorating deal volume left investors around the world casting their nets far and wide for opportunities.
In interviews with Bloomberg News, seven institutional investors with about $2.3 trillion in combined assets under management from Beijing to Toronto and Melbourne outlined investment plans heading into what’s likely to be a challenging 2023.
Some say valuations in public and private markets need to fall further before they’ll spend big, building up cash piles that will enable them to react quickly when an investment thesis aligns. Meantime, others are spotting areas like rare metals as a home for their capital as long-term shifts leave these sectors ripe for big payoffs.
Here’s a look at those strategies and how they’re positioning their funds:
GIC Pte. (estimate $690 billion)
For Singaporean sovereign wealth fund GIC Pte., preparation means having cash at the ready, a willingness to spend it and an ability to buy low-cost assets as other investors sell out. Chief Investment Officer Jeffrey Jaensubhakij has made investments that offer protection from inflation and says that price pressures will continue to rise amid tight labor markets and an underinvestment in commodities.
“Having some dry powder means that as opportunities emerge you have an ability to deploy quickly and not be caught in some asset liability mismatch you need to solve,” he said. “It’s been important for us to try to move assets from the asset classes like bonds and equities into things like real estate and inflation where the ability to either be CPI-linked or the ability with high demand to raise rents over time allows us some protection against inflation.”
Longer term, infrastructure projects and commodities can act as a hedge, he said. Meanwhile, student accommodation that can be used as hotels for tourists and business travelers during summer, and telecoms infrastructure and real estate in key markets like Japan and Australia are among his key investment ideas.
GIC Chief Executive Officer Lim Chow Kiat said buying secondary private equity funds during the pandemic proved lucrative and has whetted the firm’s appetite to do more of this type of deal.
“The opportunity opened up so the team responded to that and actually deployed a lot of capital into that space and generated good return,” he said. “That’s another example of something we’d like to inculcate more and do more here.”
Fidelity International $613.3 billion
Anne Richards, chief executive officer of Fidelity International, said that Asia including China could rebound in sentiment faster than other parts of the world.
“The dynamics in Asia versus the dynamics with the US and Europe are quite different,” Richards said during a panel at the Bloomberg New Economy Forum on Wednesday. “We are more positive on Asia as a region both from a market perspective as well as from a flow perspective for 2023.”
Richards said that she’s seeing increasing interest, if not action yet, for Asia and China. The second largest economy’s recent relaxation of Covid measures and policy support for the property sector have investors betting that Xi Jinping is refocusing his attention on economic growth.