Could these EM challengers displace Silicon Valley?

Could US tech stocks be eclipsed by a new wave of emerging market (EM) challengers? We think that’s a key question for the coming months and years as China and India pick up the pace in their adoption of new technologies.

We note, for example, that China has some 40% of the world’s artificial intelligence (AI) scientists as well as five of the 10 most highly valued tech ‘unicorns’.*

Global internet usage and e-commerce statistics paint a similar picture. In 2015, for example, India displaced the US as the second largest internet user population. India is also building a global lead both in its number of smartphone users and the number of e-commerce sales transacted on mobile phones.

We think this highlights an important point. For all their status as the darlings of Wall Street, the current crop of US tech leviathans face a serious challenge. As EMs create their own centres of expertise, we believe investors may be well served by looking beyond the narrow confines of Silicon Valley to a wider world of global innovation.

Drew Guff – Siguler Guff, a BNY Mellon company

* Unicorns’ are defined as unlisted tech companies with a valuation above US$1bn.

Could US tech stocks be eclipsed by a new wave of emerging market (EM) challengers? We think that’s a key question for the coming months and years as China and India pick up the pace in their adoption of new technologies. We note, for example, that China has some 40% of the world’s artificial intelligence (AI) scientists as well as … read more

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Private equity: At the peak?

For yield-hungry investors, private equity has been one of the more attractive asset classes in recent years and it is unlikely to lose its appeal given the lower returns expected from more traditional investments over the coming year.

However, 2017 may offer some challenges. There are signs private equity may be near the top of the cycle: with valuations some consider stretched, deteriorating credit conditions and private equity firms struggling to put un-invested cash to work.

Although we expect private equity to continue to outperform public equity markets on a relative basis, investors may need to be more discerning – looking at more contrarian strategies: special situations, more illiquid strategies and those that are geographically diverse.

For investors who have so far focused on developed markets, the emerging markets could be a potential hunting ground. Private equity opportunities in emerging markets tend to be much less leveraged, operate in higher growth environments and valuations tend to be lower than in the public markets, meaning they do not look, in our opinion, as stretched as those in the US and Europe. Many businesses have also evolved over the past decade to be formidable competitors on the global stage.

Ralph Jaeger – Siguler Guff, a BNY Mellon company

For yield-hungry investors, private equity has been one of the more attractive asset classes in recent years and it is unlikely to lose its appeal given the lower returns expected from more traditional investments over the coming year. However, 2017 may offer some challenges. There are signs private equity may be near the top of the cycle: with valuations some … read more

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