This year is already shaping up to be a tough one for investors, with growing debate over central bank actions, the prospect of an economic slowdown and high-stakes elections around the world weighing on fund managers.
Against this backdrop, Bloomberg News asked executives at major investment firms, with combined assets under management of about $2 trillion, about where they plan to invest their money in 2024.
advertisement
Continue reading below
From outsourced pharmaceutical service providers to long-term U.S. Treasuries and private credit, chief investment officers from Singapore to Switzerland are looking for long-term growth as an economic slowdown ultimately pushes asset prices down and attracts buyers. I am confident that a market has been formed.
GIC: Estimated assets under management of $770 billion
Jeffrey Jaensubakij, GIC Pte CIO, believes it has been a year of heightened risks, with “prolonged high interest rates” eroding corporate finances, geopolitical issues and even artificial intelligence forcing companies to make costly adjustments. ing. This means we have more opportunities to become a reliable lender for businesses in need of capital.
“Rising interest rates and tightening credit availability have brought new developments in private credit into focus,” he said, adding that inflation hedging through real assets remains important. “In the real estate industry, fundamentals remain strong in logistics, student accommodation and hospitality.”
And as climate change risks continue to rise, Singapore's sovereign wealth fund is considering investments to support the energy transition.
Pictet: CHF 250 billion ($288 billion)
For Cesar Pérez Ruiz, CIO and head of investments at Pictet Wealth Management, promoting energy independence and combating climate change are key themes in the deal. But that doesn't apply to obvious areas like solar panels or electric cars.
“I want to buy the beneficiary, the companies that are going digital, the companies that are making infrastructure investments,” he said, citing Schneider Electric SE as an example. “There will be industrial companies that I call 'new classics.'
Ruiz remains cautious about China's outlook, with China's real estate, consumer and technology companies all in a volatile situation, citing the Spanish housing crisis of more than a decade ago, which is still having an impact. He says there are many similarities.
“I prefer other parts of the world first,” he said, adding that Europe and Japan are attractive markets for investment, especially for entertainment, consumption, robotics and digital services companies serving the latter's domestic market. He added that there is.
“If there is a recession, small-cap stocks will outperform large-cap stocks because everyone is hiding in large-cap stocks,” he said.
Partners Group: $147 billion
Unlike many of its peers, Partners Group Holding AG's CIO Stéphane Shelli believes China, particularly valuations that exploded at the peak of the COVID-19 pandemic, have become more affordable as it seeks growth. We still see bright spots in areas such as pharmaceutical companies that are starting up. capital.
“We are a global investor, so we will not exclude China,” he said. He added that outsourcing of pharmaceutical services from drug development to manufacturing and packaging companies presents opportunities for both China and other Western markets.
While Sheri is relatively cautious about office properties, he also shares GIC's penchant for last-mile logistics assets and Pictet's enthusiasm for companies that benefit from growing concerns about AI and the environment.
“The IT services sector is changing, so the ability for companies to adopt AI and help other companies adopt AI is an attractive topic,” he said. Companies that provide ESG-related services are also eligible. “We have invested in a world leader in cleaning pipelines, so we can ensure they are truly clean and have no negative impact on the environment.”
China asset management: 1.89 trillion yuan ($263 billion)
Even as China's economic slowdown and real estate crisis weigh on investor confidence, said Richard Pan, chief global capital investment officer at Beijing-based China Asset Management Co., Ltd. , the Chinese market in 2024 may have more upside surprises than downside.
The turnaround could be triggered by a larger-than-expected increase in China, as the end of the US Federal Reserve's expected rate hike cycle could give Chinese policymakers more leeway. It includes lower interest rates and more support for the struggling real estate market, including housing removals. Buy Finest City Curbstone.
“What we lack is confidence,” Pan said, citing China's faster economic growth compared to the United States. Once the real estate crash subsides, “confidence will probably come back.”
He said that since the pandemic began, Chinese companies have become more competitive and will continue to become more competitive. While the rise of electric car makers and solar panel makers is well known, he argued that regulations on advanced chips are helping domestic semiconductor makers further expand their market share.
As evidence, Pan cited electricity generation data from the first half of last year that showed China's economic recovery was being driven more by advanced manufacturing compared to the United States. The size of China's economy also allows for the huge investments needed to develop key technologies such as new energy and AI, Pan said.
advertisement
Continue reading below
“These factors have been grossly ignored by the market,” he said, predicting that valuations would recover in the medical, healthcare and e-commerce sectors.
AMP: A$68 billion ($45 billion)
AMP Ltd. CIO Anna Shelley says her team plans to look for offshore private debt deals within the next six months.
“We were initially focused on the Australian private debt market and I think it has turned out to be a very solid place to invest with good valuations and good yields,” Sherry said in an interview. .
Sherry added that he is looking for “riskier private debt” offshore that offers greater returns, particularly in the United States. “There are also executives who specialize in mid-market and U.S.-based companies, and that's an area we might look at,” he said.
Temasek: S$382 billion ($285 billion)
For Singapore's state-owned investment firm Temasek Holdings, the prospect of a rate cut by the Federal Reserve will be “constructive” for the U.S. market, chief investment officer Rohit Sipahimalani said. He added that easing financial conditions will reduce recession risks.
“While there are attractive opportunities in certain segments, it is unlikely that we will see significant upside at the index level based on valuations,” Sipahimalani said. He likes India, despite its “slightly high” valuation, and is drawn to Japan, in part because of the Tokyo Stock Exchange reforms.
Sipahimalani expects a reassessment of valuations to come to the fore in the private market.
“Some private equity players who need to restore liquidity to their LPs are now under pressure to sell at more realistic prices,” he said. “And the companies that raised a lot of money in 2021 are now starting to leverage that money. They need to come back to raise that money, and do so at more realistic valuations.” There will be a need.”
He said the flooding of private credit into the market could slow demand for capital, especially when it offers “equity-like” returns as it does today. He pointed out that
“But eventually you hit a wall when you need capital,” he says. “People can take on debt up to a point, but they have to cover it with equity.”
Rest Super: A$80 billion ($53 billion)
Australian pension fund Rest Super still recognizes the appeal of property and infrastructure, but chief investment officer Andrew Lill said the private market was facing a “new challenge” of structurally higher inflation. “We haven't factored in the horizon yet,” he added.
Rest Super has “moderately increased” its exposure to private credit over the past 18 months and will continue to do so in 2024, while also focusing on fixed income, which is central to institutional investors' portfolios.
The fund is extending the duration of its fixed income portfolio. “And when the U.S. 10-year rate hit 5% in October, that was the signal to complete the rate extension exercise,” Lill said. “This was a level of yield that made fixed interest a better defensive asset than ever before in a portfolio.”
He said the fund was reducing its high-yield exposure as the risk and reward became less attractive at current spreads above sovereign rates.
© 2024 Bloomberg
