Infrastructure, commodities, water – here’s what some of the world’s largest investors are buying
Joan Ng
[DAVOS] Some of the world’s largest investors see good prospects in commodities, infrastructure, real estate and water assets. They also remain bullish on China, noting that its sheer size makes it a geography that investors cannot ignore.
Discussing the investment landscape at a World Economic Forum (WEF) panel on Jan 19 (Thursday) were:
- Jeffrey Jaensubhakij, group chief investment officer of Singapore state investor GIC;
- Allyson Tucker, chief executive of the Washington State Investment Board;
- Marcos Troyjo, president of the multilateral development bank New Development Bank; and
- William Ford, chief executive officer of private equity firm General Atlantic.
Here are their views on several asset classes and investment themes:
Equities
Investors should seek out secular growth by focusing on stocks in the sectors of healthcare, life sciences and technology, as well as plays on the energy transition, said Ford. This is where it will be possible to find long-term growth.
Commodities
Tucker said commodities have been “underinvested in for a while”. As more governments adopt protectionist policies, this asset class is likely to become even more important.
Real estate and infrastructure
There aren’t too many assets that can beat inflation, said Dr Jaensubhakij. Equities are one, but real estate and infrastructure are also good bets. Some types of real estate that enjoy good demand can also command rental increases in line with the rate of inflation. This is also the case with infrastructure, which often includes contracts linked to inflation.
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Food and water security
Related to both commodities and infrastructure is the theme of food and water security. Emerging economies such as India and China are growing fast. History shows that much of the increase in income from such economic growth goes to food, said Dr Troyjo. “There’s going to be a major increase of food consumption in the world, and the single most important input in the production of food is water.”
Tucker warned, however, that water is a political asset. When investing in it, she said, “you just have to be careful”.
Venture capital
After an investment boom, investors in the venture capital (VC) space are becoming more circumspect, noted Dr Jaensubhakij. “There are only so many good ideas that can be funded at any one time,” he said. VC players have only themselves to blame, though. “The fact that we were trying to push all that money through one funnel is our fault. We are much chastised, we are thinking much more soberly. I’d be surprised if any of us are not setting much higher bars.” Among these: At what point can the company’s offering be commercialised and monetised?
China
In spite of the significant volatility and the negative sentiment surrounding Chinese assets, Ford said his firm has considered the country “investible the whole way”. Rather than focus on beneficiaries of China’s export economy, however, General Atlantic has been putting money into what Ford calls “China for China” – plays on the domestic economy, such as healthcare, consumer and retail. These sectors benefit from a shift towards consumption, which Ford said is consistent with the government’s policy to rebalance the economy towards domestic consumption.
Given the size of China’s economy, Ford pointed out it’d be a “mistake” to ignore the opportunities in China. But there are spaces he would avoid. “It’s hard for innovators to be successful, so it’s not an area that we prioritise,” Ford added. The exception is life sciences, where innovation has really improved. Media is also “more or less off-limits”.
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