SESSION RECAPS - GPC Conference 2024

2024 marks a pivotal year for global democracy with a record number of elections, which often herald leadership changes and reforms during times of economic distress, particularly in emerging markets. Accounting for inflation, the global growth picture is less attractive than at first glance, and many leading economies face significant fiscal deficits, especially the United States. Market shifts, such as the expected decline in the US dollar, will favor other global growth markets beyond China and the effect of geopolitical tensions on markets will ease in the medium term.

The majority of capital raised for the energy transition has been dedicated to strategies in the US and Europe, yet the gap for renewable energy infrastructure is largest in Asia, Africa, Latin America and the Middle East. Investors are targeting renewable energy assets where strong local demand for reliable power is coupled with long-term, hard-currency-denominated power purchase agreements. Private equity players are investing in energy storage solutions, the battery supply chain, EV charging stations and solutions for decarbonizing heavy-emitting sectors.

Climate, the rise of India, a new generation of infrastructure and human capital are four major forces driving investment activity globally. Private capital-backed businesses are serving low and middle-income populations in developing economies with climate solutions tailored through an impact lens. Solutions such as pay-as-you-go rooftop solar in Africa are often more affordable and better for public health compared to carbon-intensive alternatives.

The Indian private capital ecosystem is entering a new phase due to strong economic growth, policy reforms, digitalization and middle-class consumption, driving deal flow across sectors including traditional retailers. Infrastructure is increasingly dominating private capital flows to global markets, with digital infrastructure, renewable energy and logistics attracting local and international investors into regions such as Latin America. In the war for talent, investors are building ecosystems internally and through partners to gain a competitive edge. Investment teams are collaborating across geographies for knowledge sharing and operational expertise.

Global capital allocators shared first-hand experiences from past disruptive moments in financial markets, such as the Global Financial Crisis, and how they took advantage of market conditions to reshape their alternatives portfolios. Limited partners are emphasizing deeper partnerships with fund managers and strategic collaboration that goes beyond capital commitments. Key investment themes include affordable housing and private credit opportunities as lenders reorganize their balance sheets.

Fajr Capital's investment in Aster DM Healthcare capitalizes on a "de-globalization trend," spinning out the GCC operations of an India-listed healthcare platform in order to capitalize on additional growth opportunities in MENA, particularly in Saudi Arabia.

Amethis’ investment in Naivas, a Kenya-based supermarket, illustrates strong EBITDA growth over a relatively short hold period, highlighting the need for discipline when investing in Africa due to potential volatility.

Crescera Capital is eyeing multiple exit strategies for its investment in Brazilian education provider Alura while exploring AI's potential in translations and coding.

Horizon Capital invested in Ukraine-based Ajax in 2019 through a secondary buyout. Despite the ongoing war, Ajax has achieved double-digit revenue growth.

The exodus of banks since the Global Financial Crisis and local regulatory restrictions on traditional lenders have opened up new opportunities for private credit funds across global markets. Funds are lending to businesses with US-dollar revenue or making local currency lending decisions with potential FX movements taken into account during underwriting. With interest rates now peaking, a wider array of companies, including higher-quality credits, are looking to private markets to meet their needs.

Investors are combining organic growth initiatives and bolt-on acquisitions to build multi-specialty healthcare platforms at scale across global markets. Single-specialty providers, such as those focused on maternal care, have also proven successful. Emerging opportunities include medical device distributors and tertiary healthcare providers. Artificial intelligence is reshaping the pharmaceutical sector by streamlining drug discovery and disease diagnosis, leading to shorter timelines and reduced costs.

The diversification of supply chains away from China is generating opportunities for private capital across a diverse range of geographies. North Africa is leveraging its proximity to Europe to attract automotive parts manufacturing. Poland has become a leading manufacturing center within the EU, but with cost advantages over more mature markets. Vietnam has advanced from simple to complex manufacturing and built warehousing and logistics facilities to international standards. Meanwhile, Mexico emerged as the US's largest trade partner in 2023, benefiting from its competitive pricing and trade agreements.

Africa’s population is the youngest globally, and widespread adoption of mobile technology has expanded access to homegrown media. Global interest in Afrobeats, Amapiano and other Africa-produced music is increasing due to its popularity on the continent and throughout the diaspora. Major professional leagues, such as the NBA, are setting up in the region to develop local talent and capture wider fan bases. Investors are capitalizing on demand for sporting and music events by investing in stadiums, hotels and retail spaces throughout the continent, such as the BK Arena and Zaria Court in Kigali. In addition, investors are targeting Africa-produced music, film and entertainment for a global audience.

Tech investors are gravitating toward industries primed for transformation in the coming years, focusing on healthtech, supply chain tech, agtech and edtech – sectors that are less saturated by legacy incumbents. In Africa and the Middle East, the scarcity of human capital in healthcare and education limits service availability to consumers, with technology helping to alleviate these issues. The entrepreneurial landscape has undergone a profound shift in Asia due to geopolitical tensions, driving capital flows toward India and Southeast Asia. A new wave of second- or third-time founders is emerging, with a specific focus on profitability and capital efficiency due to the tight financing environment across global markets.

As LPs begin to prioritize social and environmental mandates, a growing number of players have joined the impact investing space, including commercial players that are needed to address gaps in late-stage and growth capital for scaling impact opportunities. Climate adaptation is a key priority for impact investors, given that 80% of the global population most at risk from climate change-related crop failures are in Sub-Saharan Africa, South Asia and Southeast Asia. Quantitative analysis is becoming an essential component of impact reporting that increases transparency for investors and establishes concrete benchmarks.

Infinium, a US-based developer of sustainable aviation fuels, is in the development stages of “Project Roadrunner,” the world’s largest planned e-fuel production facility that will leverage captured carbon and green hydrogen derived from renewable power. Breakthrough Energy highlighted its “Catalyst” program, which provides funding and expertise to help cleantech ventures like Infinium navigate the path to commercialization. Broader investor participation is needed for first-of-a-kind projects to accelerate the climate transition.

Amidst the slowdown in new equity fundraising, demand has increased for alternative financing in the form of credit lines, senior loans and venture debt to support the continued growth of early- and late-stage startups. Lenders use various structuring solutions to protect themselves from default, such as loaning through asset-backed SPVs or including performance-related features into loan agreements. Borrowers should view credit as a complement to equity capital, as it can free founders from thinking about raising their next rounds and instead focus on operations.

As technology adoption accelerates across global markets, new GP teams have emerged to back founders at their earliest stages and support local ecosystems. The Philippines experienced a swift digital transformation during the pandemic, supported by a young population and early-stage investors like Foxmont Capital, which was founded in 2018. Waterbridge Ventures, which was founded in 2016, has navigated up and down cycles in India, focusing its investments on sectors experiencing consistent growth, especially within financial infrastructure. Integra Partners spun out from Dymon Asia in 2020 to focus exclusively on financial services and digital healthcare startups in Southeast Asia.

The surge in electric vehicle (EV) growth in India is propelled by the challenge of air pollution in major cities. National and local governments have pushed to electrify the transportation system, introducing incentives and tax benefits for EV production. However, the sector faces supply-chain constraints, notably in chip manufacturing, which is heavily concentrated in China. Addressing these issues is crucial for scaling up local EV manufacturing and infrastructure. Given its size and growth trajectory, India will be a key player in the global shift towards electric mobility.

VinFast commenced its automobile journey in 2017, introducing three combustion vehicles in just 21 months and capturing the Vietnamese market within a year. Now, the company has pivoted entirely to EVs, offering seven models across all segments. Overcoming semiconductor shortages and supply chain disruptions during the pandemic, VinFast aimed for vertical integration, with 40% of parts now produced in-house. Currently, its focus lies on global expansion, cost optimization and diversification into e-scooters and electric buses, alongside developing Vietnam's charging infrastructure.