The best 2024 investments, according to investors
As 2024 begins, volatility caused by escalating interest rates remains a looming risk over public markets. As a response, experts are now advocating for a strategic shift towards private and alternative assets.
Samuel Rhee, co-founder, chairman, and chief investment officer of Endowus, highlighted the emphasis of high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs) towards these alternative assets.
Accredited investors in Singapore and professional investors in Hong Kong are diversifying into private markets and alternatives. This is an area yet to be fully explored by many.
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“The systematic harvesting of illiquidity premiums coupled with the fact that companies are staying private for longer and the structural growth of private credit that is disintermediating the banks allows for greater opportunities to be had for investors in this space,” Rhee shared to the Singapore Business Review and Hong Kong Business magazines.
Despite its potential, Rhee notes that investors are still underweight in private markets like private equity and private credit.
However, the allure of Asian private credit has increased significantly, with its market rising from US$3.2 billion in assets under management in 2000 to a staggering US$90 billion by mid-2022, as per Preqin data.
Private credit is also seen as an “attractive asset class” according to Alta’s head of Private Capital Markets, Muzahir Degani, due to its promising yield prospects in contrast to publicly listed credit, offering investors robust returns in the high single digits or mid-teens level.
“Public or publicly listed credit [usually] receives a relatively smaller spread over the risk-free rate, which, to some extent, you’re not very well covered in terms of inflation,” Degani said in a separate interview.
“With private credit, the spread that we’re seeing today gives investors yields that are easily in the high single-digit or mid-teens level of returns.”
Ben Charoenwong from the National University of Singapore Business School underscored the potential in lending within the private credit market, particularly in distressed private equity vehicles, amidst rising interest rates and increased financing needs among borrowers.
“Although risk-taking appetite may subside going forward, there are still good deals to be found in private markets as the monetary, fiscal, and political situations around the world take a toll on the real economy,” he added.
Furthermore, private capital and equity also offer incredible opportunities. The dip in valuations for high-growth tech companies within the private equity market presents a chance to acquire well-performing entities at reasonable prices, as highlighted by Degani.
While noting attractive markets in the private capital space, Degani pinpoints Indonesia and Thailand as standout destinations for potential investment opportunities.
“Select companies within the private capital space that are coming out from these markets are extremely strong. We’ll be keeping an eye out for attractive opportunities in Indonesia and Thailand,” he shared.
Real estate, hedge funds, and commodities are great alternative investments in 2024
Diversification into alternative assets is also gaining momentum, with experts advocating for real estate, commodities, and hedge funds.
“The control in future approvals for new strata subdivision ensures that the supply of such commercial spaces remains limited, which can potentially drive up rental yields and capital appreciation,” shared Tang Wei Leng, managing director and head of Capital Markets & Investment Services at Colliers Singapore.
“Investing in strata CBD commercial space in Singapore offers local investors the opportunity to leverage their knowledge of the domestic market, and benefit from the continued growth of Singapore’s business landscape,” he added.
Degani also noted that real estate is a good hedge against inflation due to its steady stream of income.
Cheng Jingwei of WRISE Wealth Management also explained the potential of multi-strategy hedge funds to generate solid risk-adjusted returns across market dislocations.
Charoenwong also shared that there are “likely bargains and opportunities that hedge funds can capture, albeit, a risky strategy.”
He also added that commodities are a good short-term hedge for rising prices.
“Oil prices have risen up to almost US$90 a barrel again. However, it is worth noting that although commodities may provide tactical benefit, they are generally not good long-term investments.”
Healthcare and renewables
Additionally, sectors like healthcare and renewables emerge as good grounds for investment, aligning with the demographic shifts toward ageing societies and the increasing focus on sustainability.
Charoenwong and Degani highlighted companies and technologies involved in sustainability, especially those working in the renewable energy sector and general carbon mitigation.
“These include electric vehicles, businesses related to smart grids and storage technologies, and carbon capture,” Charoenwong said.
The electrification of the transport industry also offers investment opportunities for investors, according to Degani.
Fixed income, Asian equities and bonds
Fixed income, Asian equities, bonds, and money market funds present varying yet potentially rewarding avenues.
A falling interest rate environment could favour fixed-income sectors, while Asian equities appear attractively priced compared to their counterparts in the United States.
“Whilst the current valuations for Asian equities and bonds are favourable, more concrete developments in market sentiment and economic stimulus in China are necessary to bolster confidence in the potential for meaningful capital gains in the upcoming year,” shared Jingwei.
“Asian stocks appear cheap relative to the United States,” said Charoenwong.
“Such pricing has historically correlated with relatively better returns going forward.”
Money market funds and cash funds
Experts noted that having cash or cash equivalents can be smart. But there’s a better option: money market funds and cash funds.
According to Goldman Sachs, a money market fund is a mutual fund that “invests in short term debt securities.”
“These funds allow investors to participate in a more liquid, diverse, and high-quality portfolio than if they were to invest individually,” explained the bank, adding that it is the “easiest way to gain access” to the money markets.
Forbes has recognized top performers like JPMorgan Liquid Assets Money Market Fund and others. These offer higher returns compared to sticking cash in regular deposits, noted Rhee.
People are diving into these funds, hoping for quick gains. However, there’s a catch. If the economy changes and banks drop interest rates fast, those good returns might fall, warned Charoenwong.
Strategies to follow this 2024
Amidst these opportunities, the importance of diversification stands strong. Experts are unanimously advocating for diversification across locations, industries, and asset classes to manage risks effectively.
Strategic investment approaches such as dollar-cost averaging and barbell strategies gain prominence as methods to navigate market volatility and secure stable returns.
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Finally, the cautionary note to investors is loud and clear: avoid herd mentality in investment decisions. Instead, focus on differentiated beliefs and the performance potential of invested entities beyond surface-level market trends.
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