As an economically tumultuous year moves to a close, savvy investors are focused on finding the emerging opportunities which will top investment agendas in 2021. Advisors from the world’s top investment and financial institutions shared their insights on market expectations and investment recommendations.
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2020 has been a record year for business and investment around the world. Strong projections made in January took a hard hit as the pandemic halted business across borders and industries. Whole industries such as hospitality & tourism, natural resources and energy suffered record declines. Stock markets crashed, household brands declared bankruptcy, and the economists hailed a recession to rival that of 2008.
But while the start of the decade will go down in history as one of the worst years for these businesses, it will be remembered as a pinnacle year for the future of others.
Digital communication companies such as Slack saw 5-year growth-targets achieved in a matter of weeks, with development across the rest of the tech sector mirroring these achievements. The pharmaceutical industry saw record growth as well. Companies across the board outperformed in revenue and those who were quick to target emerging needs saw an influx of investment funding.
Stimulus programs led by governments and central banks have pushed mass amounts of liquidity into the market and stocks have bounced back quicker than even the optimists predicted. So while 2020 poses an altered and thereby more complicated financial landscape, it is by no means a dire one.
Evaluating the Changes
How to best navigate this new landscape was the core focus of the British-Slovenian Chamber of Commerce roundtable earlier this month. Moderated by Opportunity Network’s Country Director in CEE, Luka Repansek, the forum discussed the reaching ramifications of the pandemic within the investment space as well as their expectations for recovery and opportunity over the next several years.
One panelist, Kruno Abramovi?, CEO at NLB Skladi, an asset management company based in Ljubljana. In early March, as the rest of the world was lamenting the average 5% per day drop in the global financial market, NLB Skladi was advising partners to buy in. The firm had compiled an investment report predicting a 20%+ increase in the market by year-end. By June, this prediction was proven true.
Nataša Williams, partner at LGT Vestra LLP, was clear in pointing out that although the general market has gone up, it’s not an even spread. “This crisis has masked an incredible acceleration in the trend of how we live our lives. From offline to online, from offices to home, from shops to Amazon. In all of this there are huge winners and losers,” she explained. “We can look at the whole market as having fallen and then gone up, but not everything has gone up. It’s the things that have really really thrived and those who invested in them, who have made rather large fortunes.”
Tech as the Top Ticket
But whether or not fortunes can continue to be made in these spaces is still up for debate. Rapid growth driven by a short-term need may not translate into sustainable growth within the new normal.
Tech stocks, for example, have already seen fluctuations in the market over the past weeks. A cause for concern? Likely not.
“[Technology companies] have this enormous ability to innovate and keep innovating and keep thinking out of the box,” shares Williams. “This is very different from a supermarket company where there’s only one innovation in that you can deliver to the door or maybe stack the shelves differently.”
Contrary to other industries, the tech space is founded on innovation. From big brands to growing companies, the technology industry is an inherently fast-paced and ever-changing environment. As we move into an uncertain new decade, the ability to move quickly and adapt to new circumstances should be a core focus of any investment portfolio.
Back the Relay, Not the Runner
The key to successful investment in the post-COVID tech space lies in collaboration. Peter Merc, founder and managing partner at Fintech Factory EU, emphasized that it’s the collaborative players you want to back in an uncertain market.
“In Fintech, it’s all about the frictionless and seamless user experience,” explained Merc. “I believe in companies that are developing solutions which are lowering the number of clicks to open a bank account or are helping to put tailor-made financial products to the market.”
“It’s more predictable,” added Williams, calling attention to the often underrated B2B sector of the tech space which lends itself to more secure investment opportunities. “[These opportunities are] lower risk and higher returns because they’re less capital intensive than anything that handles a consumer.”
The only caveat in this strategy is the accessibility of these kinds of deals. From an investment perspective, Fintech and other “behind the scenes” technology companies are hard to reach. Very few are public and most only open investment opportunities to specific and specialized funds.
“They become very much the domain of more sophisticated investors, who, through their networks, have access and to private equity managers,” explained Williams. For those part of a network of off-market deals, investing privately with companies can add a level of security in that the companies are not beholden to a temperamental stock market or panicking shareholders.
“Markets are always surprised by things they don’t know about, but later learn all about,” shared Abramovi?, highlighting perhaps the most important takeaway for investors. Flexibility and resiliency will be the greatest assets to any investment opportunities in the coming year.
CEO at NLB Skladi
Partner at LGT Vestra LLP
Country Director in CEE at Opportunity Network