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  • Writer's pictureDeep Knowledge Group

Fortune Arabia: Investment landscape set to undergo transformative shifts in 2023

Dmitry Kaminskiy, General Partner, Deep Knowledge Group

We are living in a time of global disruption, where geopolitical tensions, change management and digital transformation have become the norm. What does this mean for investors? Let’s take a look at some of the shifts in investment that we are most likely to witness in 2023 and beyond.

From public to private investing

A recent trend has been the reallocation of capital away from public markets in search of better returns and greater control over investment strategy. This paradigm shift away from traditional public-market investments towards private alternatives has gained significant momentum, providing investors with opportunities to invest in a much wider variety of asset classes as well as longer-term strategies.

Many private investments also offer greater flexibility than their heavily regulated public counterparts, allowing investors to quickly capitalize on untapped markets. Moreover, the ability to take larger positions within individual companies, coupled with the infusion of data-driven analytics tools, can lead to considerable outperformance relative to publicly traded stocks and bonds.

From West to East

With the emergence of major economic hubs such as China and India, investment is shifting away from West-focused markets to those located in the East. This trend is highlighted by an influx of venture capital and large-scale investments in East-based companies, which are now leading the way when it comes to innovation, research and development. As more investors look to capitalize on this shift, organizations must keep an eye on where their portfolios will be best served to gain maximum potential return in the years to come.

With its growing middle-class population and rapid technological advancements, the East provides a huge opportunity for businesses seeking long-term returns and potentially higher profits. In addition, there are now many emerging free economic zones supported by local governments offering very attractive incentives for foreign investors in these countries compared to developed economies, making it easier for investors to access these markets with less risk.

From legacy systems to InvestTech

InvestTech is revolutionizing the investment management industry, enabling smarter and more profitable investments through specialized software, LegalTech, RegTech and Data Analytics services, making the private equity investment process fast, efficient, knowledge-driven, liquid, technically and legally uncomplicated.

The first InvestTech platform prototypes aimed at providing flexible and comprehensive access to private equity investments emerged several years ago, with companies such as AngelList or EquityZen meeting demand from HNWIs, angel investors, emerging funds and syndicates. Evolving InvestTech infrastructure received a new impetus during the current economic slowdown when a significant part of investors' money was transferred from shrinking stock markets to alternative assets.

However, even now, there is still significant room for improvement in the sector. The level of technological and operational advancement of private equity InvestTech solutions is far behind the public equity infrastructure. The companies which will be able to successfully develop next-gen, fully automated end-to-end InvestTech platforms will dominate the industry.

Although traditional investment strategies can still be quite effective, the benefits of using modern InvestTech solutions are already significant. These advantages include effortless administration and legal operations, enhanced data collection and analysis, more streamlined engagement processes, and a greater number of opportunities for risk management, including enhanced transparency mechanisms. InvestTech can deliver significant rewards for those willing to take advantage of it early on.

From buy-and-hold to active management

In the modern, digital world of investing, the once reliable buy-and-hold approach has been largely replaced by a more active form of management, a move which presents investors with both new opportunities and greater risks. Now more than ever, investors must be vigilant and prepared to adapt in order to make wise decisions with their money; whether that's an investment in stocks or bonds, commodities or currencies—no one market is the same and the landscape is constantly changing.

In an era when knowledge really is power, keeping up with the latest financial developments has become essential for any investor hoping to make a return on their hard-earned investments.

Structured financial products first emerged as baskets of public equity stocks and derivatives providing synthetic exposure to specific sectors, markets or industries for a variety of investors. Later, with the growth of multiple alternative asset classes, investors have been presented with more opportunities than ever to diversify their portfolios and gain access to different markets using standardized financial instruments. Usually structured in the form of performance trackers or actively managed certificates, they make private equity assets liquid, bankable and tradable, allowing almost the same level of flexibility as public equity while providing access to a greater variety of asset classes, investment strategies, diversification and risk management solutions. Eventually, it leads to the commoditization of alternative asset classes, allowing access for all types of institutional and individual investors.

Emergence of new asset classes

As a savvy investor, you need to keep an eye on the most up-and-coming asset classes and investment trends. With ever-changing global markets and technology maturing faster than ever before, new opportunities are emerging daily. From Precision Medicine and Human Longevity to NanoTech and SpaceTech, understanding the different types of investments available is the first step in securing financial success.

Whether you choose to invest in commodities, mutual funds, or real estate, having knowledge of these new diverse classes can help you diversify your portfolio and maximize returns with minimal risk. Make sure your money follows where opportunity leads.

Impact of AI and machine learning on investment strategies

In the never-ending search for new revenue streams and investment opportunities, AI and machine-learning technology has become an indispensable ally. Cutting-edge tech allows quick access to complex data points and provides improved forecasting capabilities, helping investors generate higher yields over traditional strategies.

By gleaning insights from varied sources, AI and machine learning can identify market trends earlier than ever before, affording investors the ability to make both bold decisions as well as highly informed ones. This technological innovation is proving to be a vital tool in the modern investor's repertoire, providing unprecedented levels of profitability alongside limiting losses.

As we move into 2023, there is no doubt that we will see seismic shifts in the investment order—from traditional markets and methods towards emerging geographies and trends, from investments in public to private markets, from legacy systems to InvestTech, in addition to the emergence of new asset classes. With so many options available, understanding what’s driving these changes will help investors capitalize on new opportunities while mitigating risk.

This article first appeared in Arabic in the January 2023 edition of Fortune Arabia magazine. Read the original here.

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