Over 250 professionals congregate in Singapore at AIC to discuss the Future of Capital
Updated: Nov 10, 2019
The Future of Capital
Innovation and technology is set to be the name of the private equity game.
In fact, much of this is already in place, according to key industry leaders at this year’s Asia Investment Conference, pointing to how technology is transforming traditional businesses, from farming to property.
“If you’re looking at 10 years ago, most of our capital went to the traditional sectors – consumer, industrial and manufacturing, some energy in South-east Asia. There was very little focus or exposure to those in new technologies or the venture space,” said a managing director of private equity at a leading alternative asset manager with more than USD 55 Billion of assets under management, at the one-day forum.
“Starting from five years ago, the trend really started to change. A pretty significant portion of our portfolio exposure has gone to early-stage investment, technology, media and telecom (TMT), the new economy-type businesses. 10 years ago, things like these didn’t exist in this part of the world. Now peoples’ everyday lives have completely changed because of (technology).”
Other panellists such as the managing partner of a Singapore-based Private Equity firm, have similarly placing their top bets on technology. This private equity firm has a partnership with a top American multinational technology conglomerate based in Silicon Valley to evaluate and invest in next-generation information and communications technology (ICT) businesses across Asia Pacific.
“I see a huge potential out there, and if you look at one big macroeconomic theme globally, it’s the advent of AI, robotics, machine learning, and I think that’s a very (big) space for me,” he said.
The conference on May 4, led and initiated by IJK Capital Partners, drew nearly 300 investors and senior professionals from leading institutional funds, private equity and venture capital firms.
It was the second of its series in Singapore, held at One15 Marina on the tourist island Sentosa.
The event covered topics centred on the future of capital in this region, from fund-raising in the new economy to finding opportunity in overlooked markets like Russia, as well as innovative investing and negotiating fund terms, among others.
One trend that Olzhas Zhiyenkulov, chief executive of asset and wealth company Paladigm Capital, is bullish about involves deals in the secondary market – which has grown significantly in recent years as a result of record levels of uninvested cash. A Bloomberg report has put the level of dry powder globally at about USD 963 billion.
This much idle cash, he noted, has resulted in some low-quality deals, such as in the United States, where investors have found themselves trapped without being able to exit their funds.
“That has, in turn, created a secondary market, where funds hunt down primary investors and offer to alleviate their problems,” he said, adding that this trend is likely to continue, with more fund money going into “secondary unicorns”.
Investing in China, unsurprisingly, was another topic that dominated the spotlight during the conference.
Javad Movsoumov, managing director and head of Asia-Pacific private funds at UBS Private Funds Group, noted that Greater China continues to be dominant for investors, attracting a significant portion of capital in Asia.
Javad expects both mid-market buyouts and secondary deals to remain on the rise in the next five years, the latter being drive by the massive stock of unexited companies in Asia-Pacific.
Speakers at the conference acknowledged that all of these trends are taking place against a backdrop of major shifts across the global business landscape. The looming trade war between the United States and China, for instance, is one thing that cannot be ignored.
Still, Faisal Sarkhou, chief executive officer of KAMCO Investment, a leading investment banking and asset management firm in the GCC region, believes it all boils down to perspective.
“I come from a region with a lot of geopolitical issues around it. The way you see these events, the way you look at these issues is quite important,” he said.
He cited the oil price rout in the last three years that has affected Kuwait’s oil-reliant market, forcing businesses to look at diversification and change. Investment professionals, with fears of oil prices dropping further, also looked at alternative ways of generating money, such as through other asset classes.
“Whenever there is an event that forces people to get out of their comfort zone, you start to search for new opportunities, new ways of looking at things,” said Sarkhou. “So trade wars or tariffs will have an impact on sentiment and direction. But it’s just a matter of people understanding the impact, how deep it is.”