10 investment ideas for 2024

Experts say it’s time to shift from public to private investments. 

Anticipating the volatility in public markets in 2024 due to prolonged periods of rising interests, experts make a compelling proposition to invest in private and alternative assets. Some investors already see this as a strategic move to sidestep the more obvious jitters.

According to Samuel Rhee, co-founder, chairman and chief investment officer of Endowus, high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs) are putting greater emphasis on these types of assets.

Rhee said accredited investors in Singapore and professional investors in Hong Kong have also been diversifying into private markets and alternatives, which is underutilised by investors in both cities.

“The systematic harvesting of illiquidity premiums coupled with the fact that companies are staying private for longer and the structural growth of private credit that is disintermediating the banks allows for greater opportunities to be had for investors in this space,” Rhee told the Singapore Business Review and Hong Kong Business magazines.

Currently, Rhee said investors are still underweight in private markets such as private equity and private credit.

The latter, however, has become more appealing to Asian investors. Citing data from Preqin, Rhee said the Asian private credit market has surged from US$3.2b of assets under management (AUM) in 2000 to US$90b as of June, 2022.

As the Asia Pacific market matures, Preqin foresees accelerated growth in the Asian private credit market.

Alta’s head of Private Capital Markets, Muzahir Degani, also agrees that private credit will remain an “attractive asset class.”

“Public or publicly listed credit [usually] receives a relatively smaller spread over the risk free rate, which, to some extent, you’re not very well covered in terms of inflation,” Degani said in a separate interview. “With private credit, the spread that we’re seeing today gives investors yields that are easily in the high single digit or mid-teens level of returns.”

Ben Charoenwong, assistant professor of finance at the National University of Singapore Business School (NUS), said lending in the private credit market or distressed private equity vehicles may provide opportunities for investors within a rising interest environment given that “more borrowers have obligations due and require financing.”

“Although risk-taking appetite may subside going forward, there are still good deals to be found in private markets as the monetary, fiscal, and political situations around the world take a toll on the real economy,” Charoenwong  told the Singapore Business Review.

Apart from private credit, private capital and private equity also offer great opportunities for investors, said Degani.

“Looking at valuations in the private equity market, high growth tech companies have fallen quite significantly over the last 12 to 18 months. We’re able to pick up very good companies that have actually performed well over this sort of funding downturn within private equity and high-growth tech at very reasonable valuations compared to the height of the market,” he said.

As a case in point, Degani cited names like Stripe which, he said, ostensibly did an extremely significant down round sometime in the middle of this year.

“It was almost half the valuation of its peak in 2021,” he said. “If you look at the numbers [of Stripe], it’s actually grown more than two times over that period. You’re arguably getting twice the quality of the company at half the valuation.”

In terms of markets in the private capital space, Indonesia and Thailand stand out, said Degani.

“Select companies within the private capital space that are coming out from these markets are extremely strong. We’ll be keeping an eye out for attractive opportunities in Indonesia and Thailand,” he said.

Alternatives: Real estate, commodities, and hedge funds

Looking at alternative assets and investments, WRISE Wealth Management Singapore chief investment strategist, Cheng Jingwei, has identified real estate, commodities, and hedge funds as high risk-reward instruments.

Multi-strategy hedge funds, in particular, have “consistently generated solid risk-adjusted returns through recent cycles,” said Rhee.

“Market neutral, low beta multi-strategy hedge funds have also generated meaningfully positive returns consistently and these returns shine brighter in periods of market dislocation and drawdowns as we have seen in the past few years,” added the Endowus executive.

Charoenwong, for his part, said there are “likely bargains and opportunities that hedge funds can capture, albeit, a risky strategy.”

“As the yield curve steepens, there are also effects on securities where cash flows lie far out into the future,” said the Singapore-based professor.

He also finds commodities as a good short-term hedge for rising prices. “Oil prices have risen up to almost US$90 a barrel again. However, it is worth noting that although commodities may provide tactical benefit, they are generally not good long-term investments,” Charoenwong said.

One to agree that commodities are a popular asset class is Jingwei, who has observed this among WRISE clients. Talking about real estate, Jingwei said APAC investors have traditionally focused on such asset classes which offer “a potential for high returns.”

Jingwei, however, warned that real estate also carries more liquidity risks in a higher interest rate environment. Rhee, for his part, said investors are still underweight in private real estate.

In the latest property issue of the Singapore Business Review, real estate experts revealed that investors, particularly foreigners, should consider strata commercial spaces as an investment.

“The control in future approvals for new strata subdivision ensures that the supply of such commercial spaces remains limited, which can potentially drive up rental yields and capital appreciation,” Tang Wei Leng, managing director and head of Capital Markets & Investment Services at Colliers Singapore, said in an interview.

“Investing in strata CBD commercial space in Singapore offers local investors the opportunity to leverage their knowledge of the domestic market, and benefit from the continued growth of Singapore's business landscape,” Tang added.

Overall, Degani said real estate is a good inflation hedge because of its steady stream of incomes, and is even a better hedge for inflation than gold.

Healthcare and renewables

Another sector which investors should consider dipping their toes into are healthcare and renewables and sustainability.

Charu Chanana, market strategist at Saxo, said there are opportunities in the healthcare sector given the ageing society.

Charoenwong raised the same point, adding that the United States and counties in North Asia are also seeing ageing populations.

The NUS expert identified telemedicine, new technological developments in biomedicine, and wellness as areas of opportunities.

Charoenwong and Degani also pointed to companies and technologies involved in sustainability as a good investment, especially those working on the renewable energy sector and general carbon mitigation.

“These include electric vehicles, businesses related to smart grids and storage technologies, and carbon capture,” Charoenwong said.
 
More than electric vehicles, Degani said the whole electrification of the transport network offers investment opportunities for investors.
 
No matter how the short-term market moves, Charoenwong said healthcare and sustainability sectors and related businesses will continue to grow.

Fixed Income, Asian equities and bonds

Should interest rates fall, Rhee said fixed income would be an attractive option.

According to Saxo’s Chanana, the turn in the monetary policy cycle will likely to arrive in early 2024 which could eventually bring a significant respite for the Asian economies.

“A falling interest rate environment, when it comes, will be a big boon to the fixed income sectors,” Rhee said. “In a falling interest rate environment, the high yield and credit markets in fixed income will come back strongly and equity markets in general should do well,” he added.

Fixed income is something that family offices have been paying more attention to, according to Jingwei.

Rhee, for his part, observed that fixed income has also become more appealing to Asian investors.

Asian investors also prefer to invest in Asian equities and bonds, said Jingwei.

“Whilst the current valuations for Asian equities and bonds are favourable, more concrete developments in market sentiment and economic stimulus in China are necessary to bolster confidence in the potential for meaningful capital gains in the upcoming year," added Jingwei.

Charoenwong has a similar sentiment, saying that “Asian stocks appear cheap relative to the United States.” “Such pricing has historically correlated with relatively better returns going forward,” the NUS professor said.

Money market funds and cash funds

In a volatile market, keeping a significant portion of assets in cash or cash equivalents can be a reasonable choice; however, Endowus’ Rhee pointed out that investors can get better returns on cash allocations by investing in money market funds and cash funds.

Goldman Sachs defines a money market fund as a mutual fund that “invests in short term debt securities.”

“These funds allow investors to participate in a more liquid, diverse and high-quality portfolio than if they were to invest individually,” the investment bank stated, adding that it is the “easiest way to gain access” to the money markets.

Forbes named JPMorgan Liquid Assets Money Market Fund, T. Rowe Price Government Money Fund, and BlackRock Wealth Liquid Environmentally Aware Fund Investor amongst the 10 best money market mutual funds of December, 2023.

According to Rhee, money market funds and cash funds yield higher rates over fixed deposits.

Charoenwong said investors have been “piling into” market funds as well, adding that they appear to yield more short-term gains. But he notes that “if the economy takes a turn, then central banks can cut interest rates quickly and investors in money market funds may suddenly see their yields fall.”

Investment strategies

Apart from considering the 10 investments above, experts said the most important thing for investors to do, regardless of environment, is diversification.

“Risk management remains important while investing in Asia or other emerging markets, and portfolio diversification remains key,” Chanana said.

Charoenwong said investors will specifically benefit from “diversification across geographies and industries.”

“This way, if some policy change affects one industry-market in a negative way, there are likely spillover winners elsewhere. For example, the US-China tension results in more American companies moving their supply chains into Southeast Asia, improving returns in the latter markets even if the returns in the Chinese market deteriorate,” Charoenwong said.

“In addition to the standard tools like diversifying across securities within a market, investors may want to focus on diversifying their risks across more dimensions, like industry and geographies. Investors who do not prefer to move allocations into and out of the market rapidly may consider incorporating cross-asset hedges to manage certain types of risks, such as those from currency and interest rate movements,” the NUS professor added.

Rhee, for his part, advised investors to consider adopting a dollar-cost averaging (DCA) strategy as a passive investment approach through a downturn.

He defined DCA as periodic, recurring investments of a fixed amount of money into a specific asset.”

“Investors can either have a total investment amount in mind or have an ongoing investment as a savings plan. DCA removes any emotional and behavioural mistakes and minimises market timing risk,” he explained.

“As such, investors, particularly those with a lower risk tolerance, are less likely to make impulsive, speculative decisions based on personal opinions or market conditions,” he added.

A DCA approach also allows investors to purchase more shares at lower prices whilst remaining positioned for an eventual market rebound, Rhee said.

WRISE’s Jingwei, meanwhile, suggested implementing a barbell strategy, especially for APAC investors.

“A barbell strategy involves allocating a portion of your assets into lower volatility instruments such as short-duration treasuries and high-quality corporate credit to secure a stable return as well as to keep the portfolio liquid,” Jingwei explained.

In addition to adopting a barbell strategy, Jingwei also advised investors to steer clear of long-duration fixed-income investments due to the potential volatility in interest rates.

Whilst experts suggest good investments or strategies, Charoenwong underscored that investors should “avoid investing into something just because others have mentioned it, particularly if the investors themselves do not have any advantage in a particular investment,” citing artificial intelligence as an example.

“Given current market conditions, investing in AI stocks may not yield good returns going forward based on the high current valuations already. The financial markets have focused a lot on the development of AI, but they may have mispriced the relevance of AI as a general purpose tool for other types of companies as well,” Charoenwong said.

He concluded with an important reminder for investors: “Good returns are not about whether you invest in a growing company.”

“It is whether you invest in a company whose performance is better than the market expects. Therefore, when considering allocating a particular way, it is worthwhile asking ourselves what our beliefs are that differ from the market to justify higher-than-market returns,” he said.