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What are the key economic and investment trends in 2019?

From the increasingly synchronised global economic growth to the rise of populism, we live in a world of changes that sees continual global diversification. For our first article of 2019, we take a look at the key themes in the global economy that will be influential for private equity and venture capital as we move from into the new year.

Linda Yueh, Leading economists and Fellow in Economics at Oxford University, spoke to us about the global economic issues and analyses the biggest trends in 2019 at SuperInvestor.

Geopolitics

We have been sailing through fairly turbulent waters in 2018 in terms of disruptors within the global economy. We started the year off with nuclear threat from North Korea and political instability in the Latin Americas, but the main ‘star’ of the show was the US-China trade war.

The dispute between the world’s biggest economies created a huge amount of tension and disruption to the global economy and put a lot of financiers on their toes. While everything seems to have calmed down a little since, the trade battle is currently in gridlock and could escalate again. It will take a lot more than just shaking hands for this to be resolved. As President Donald Trump’s “America First” protectionist policies strengthen, its developmental focus will change and its global goals and relations with other nations will be redefined. All we can do is watch on.

Brexit was another player that is getting more and more attention as we get closer to the two-year deadline in March 2019. Soft Brexit? Hard Brexit? No-deal Brexit? As it currently stands, the UK could be heading into a no-deal situation, which will lead to more uncertainty than before for both Britain, its European peers, and indeed the rest of the world. What does this mean for private equity? Let's hear what the experts have to say >>

The global middle class

Thankfully, it’s not all doom and gloom. There are plenty of new opportunities to explore in the new year. One thing to watch for is the emergence of the global middle class, with the majority of this coming from the emerging nations in southeast Asia. As the countries grow and people have more disposable income, this becomes an ideal opportunity for companies specialising especially in consumer durables and services. However, as countries within the region differ greatly, it is important for businesses to keep in mind the different cultures and decision-making factors.

The shift and changes brought in by technology are making waves in consumer behaviour, says Josephine Price, Director, Anthem Asia Limited. What does this mean for investors? What would need to change?

Technology and digitalisation

There was no sector left that technology didn’t influence,” we heard at SuperInvestor. Technology  is everywhere, in every industry, and companies should thrive to incorporate suitable technology into their processes, especially in the industries that are increasingly moving towards advanced digitalisation and “deep tech”, such as financial services and healthcare.

The availability of new and wide-ranging innovative solutions within different sectors not only enables value creation within industries, it also led to new opportunities such as for investors to link the right partners up with the right technology, as well as the development of niche verticals that brings in new offerings.

ESG, diversity, and responsible investment

Environmental, social and governance (ESG) criteria are no longer a tick box exercise for private equity professionals, but a serious base from which investment decisions are made. It is not only recognised throughout the industry, it also gives businesses a competitive edge and sustainability, as demonstrated by Judy Dlamini of Lintel Capital, who talked to us about how businesses like hers evaluates other companies with an ESG lens before they invest with them.

Again and again, we are being reminded that it is essential for the integrity and sustainability of your business to ensure that your team encompasses diversity. Although there are signs that things are slowly but certainly changing, both private equity and venture capital still need to continue to work on become more inclusive and more active in building diversification into your company culture and investing in networks for women in finance.

 

Of course, this is not exclusively about having more women in your businesses, but also the diversity of thoughts and talents from your team – as Kurt Bjorklund of Permira has put very well in his interview.

So, what about 2019?

As we head into another year of the bull run, everyone is preparing for the cycle to move into a downturn. Therefore, the best opportunities are expected to be with those who can deal with complex situations and be flexible enough to deal with different developments.

As always, the nimble and adaptive private equity industry will look the make the best of the changes and shape disruptions into opportunities.

Join us at SuperReturn International 2019, the world's largest private equity and venture capital conference to find out more and learn from the experts >>

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