The COVID-19 pandemic has radically altered the landscape of business and logistics across the globe. It has caused investment opportunities and priorities to shift as ASEAN governments continue to battle against major economic disruptions. Regardless, there are optimistic projections by experts in the industry who feel confident looking ahead. In a survey by Citi Private Bank, 75% of family offices sought over 5 percent returns in 2022, and part of that optimism stems from new and emerging business opportunities across various sectors.
These opportunities come in three distinct industries that have seen emerging growth in the past five years. On the back of high valuations across traditional assets, family investors in Singapore and the greater ASEAN region should pay closer attention to these industries – namely, infrastructure projects, healthcare technologies, and trade finance.
Infrastructure Projects
Investments in infrastructure projects are an appealing opportunity to family offices for several reasons. First, many ASEAN countries are leaning towards improving or overhauling existing infrastructure to boost domestic economic growth in the wake of pandemic-related job loss and economic downturns. The logic behind this is that government spending to reinforce infrastructure is a surefire way to contribute cash flow back into the economy and provide jobs for many.
The second reason is the new appeal of green and sustainable architecture and Environment, Social, and Governance (ESG) practices. Private equity is increasingly being used to help to encourage sustainable practices in companies and mitigate corporate “greenwashing”. By leveraging these factors, smart investors who pivot early gain the bulk of the benefit when it comes to leading the charge on green and sustainable architecture. ESG practices in tandem with impact investing outlooks mean family offices can also improve their philanthropic standing and contribute to a net positive change across various social sectors.
Lastly, the global direction for infrastructure is moving towards renewable energies and ‘smart’ buildings. However the goal of optimising infrastructure is something that takes more than just government initiative. Family offices can start moving into the sphere and contribute in order to reap the rewards of prudent planning.
Healthcare Technologies
For many family offices, investing in health technology and related fields such as biotech is the next natural step. Healthcare has and always will be in demand, and being innovative while presenting beneficial social impacts allows family offices to begin their philanthropic legacies. Long term capital investments, although not immediately presenting payouts, will eventually reward the patient once technologies become refined.
Furthermore, the pandemic has also shifted some priorities within the healthcare sector, opening up new opportunities in mobility, food and beverage, and elder assistance. The universal impact of COVID-19 has united the world in spurring interest towards healthcare research and development. Take the COVID-19 vaccines for example – every single country was racing to solve the puzzle as to how to tackle this virus, with both public and private investors sinking significant resources to achieve a win.
Apart from the obvious routes of impact investment in healthcare technologies, the future is dynamic and open to interpretation depending on the risk appetite of investors. Short-term development of established tech such as wearables might reap quick rewards without too much capital sink. Meanwhile, long term developmental projects such as research into genomics might take decades to bear fruit, yet might sustain family investors for generations to come.
Trade Finance
When it comes to trade finance, it is all about efficiency and how investors can help quicken product-journeys cross-market – an increasingly attractive option in the wake of international supply chain disruptions and the rapid growth of e-commerce. Safety measures due to COVID-19 have especially helped the e-commerce industry surge in the last few years, with the value of ASEAN’s e-commerce market growing from US$9.5b in 2016 to US$54.2b in 2020.
Attractive factors to consider for family offices would be a low-risk profile, which is important for businesses that prioritise intergenerational longevity over growth; as well as liquidity, which allows for a bigger financial buffer in any worst-case situation. Recent developments such as the development and refinement of blockchain technology is also helping to further reduce costs and risk of trade finance.
Markets with potential for disruption and innovation often possess low risk profiles with massive upside, after the due diligence and research has been done. In the case of the fledgling Facebook, which is now one of the cornerstones of the conglomerate Meta, founder Mark Zuckerberg was able to disrupt the way people interacted and socialised online. Early investors that bought into the project found themselves heavily rewarded for their faith and research. A similar investment opportunity is present in the trade finance sector, especially as continued COVID-19 safety measures across ASEAN push more consumers online for both their daily and discretionary spending.
Diversify your Family Office Investment Portfolio in 2022
The advent of the Digital Age and continued uncertainty due to the COVID-19 pandemic demands that family offices not only diversify their portfolios into new and promising investment opportunities, but also look towards innovation-heavy investments. As key sources of “patient capital”, family offices in Singapore and across ASEAN have the ability to prioritize impact investing, get in early into valuable projects, and diversify into up-and-coming sectors for greater long-term stability and payoff.
