2020: An Event-filled Year
Entering 2020, global private markets were in an extended period of outperformance, and many felt a downturn was likely one to three years away. And then, in a span of just 10 months, we saw a series of shocks the likes of which we might typically see over multiple decades. In fact, the International Monetary Fund (IMF) issued a report summarizing the year which used the word ‘unprecedented’ 20 times.¹ As we move into 2021, of course, COVID-19 and the uncertain path forward loom large over all.
Four Big Investment Trends for 2021
From an investing lens, COVID-19 is serving as a trend accelerator as digital and technology utilization across all aspects of business becomes a more significant driver of productivity and returns. With this in mind, we see four key themes driving change and contributing to market performance in 2021 and beyond.
Business Model Disruption
Data Big and Small
Environmental, Social, Governance
The first two, business model disruption and digital acceleration, are intertwined. Businesses of all types have been forced to evolve their working models quickly. External meetings have gone virtual, employees are working remotely, and new, innovative, and reliable digital technologies are in high demand.
The third theme is data, both big and small. Lots of firms have access to data, but are they applying it efficiently? Those that will succeed in coming years will likely be adept at not only gathering data but putting it into action to better understand trends and build stronger portfolios for their investors.
The fourth and final theme is ESG, and how it relates to both performance and to critical societal topics such as climate change and diversity and inclusion. For GPs, having good ESG practices is increasingly becoming an important yardstick, and usually signals a mature organization that prioritizes responsible investing. From an investing standpoint, the Biden Administration’s stated commitment to increase the US’ focus on climate change could lead to a more diverse range of ESG-related investment opportunities.