Many of the greatest opportunities for investors in our fast-changing world will be found outside traditional financial markets.
The Fourth Industrial Revolution is accelerating, including through the shift to digital hastened by recent global disruptions. This global wave of innovation, spanning everything from tech-enabled agribusiness and fintech to clean energy and cold-chain logistics, will have a disproportionate impact on economies outside of North America and Western Europe, driving unprecedented investment opportunity.
As technology and private capital have evolved from an isolated silo into an agent of disruptive innovation in every industry, some of the most exciting breakthroughs are taking place in the economies of Sub-Saharan Africa, Latin America, CEE, and emerging Asia.
These markets are at the forefront of remote education, telemedicine, agricultural supply chain transparency, and digital payments as they bypass now-obsolete models to go straight to modern solutions.
Structural inefficiencies such as the financing gap for growth companies left by risk-averse traditional commercial banks, or infrastructure bottlenecks, present outsized opportunity for private investors to put capital to work.
While many countries outside of North America and Western Europe have navigated macroeconomic challenges, the underlying shift in global growth and consumption from older to younger economies is unstoppable.
Today, the share of global GDP attributable to emerging and growth markets represents 44%, and 45% of global household wealth is located in economies outside of North America and Western Europe. In addition, these regions will account for two-thirds of global consumption growth over the next decade.
Africa, Latin America, and emerging economies are also home to the vast majority of the world's digitally native young who are now entering the global workforce and will increasingly drive innovation, productivity, and domestic consumption.
As the reality of climate resilience and food security becomes ever clearer, the decisive battle will be fought in developing continents and the world's most populous, resource-rich nations.
Tackling this challenge is providing a framework for private capital investors to identify opportunity across the continent, from renewable energy and sustainable materials to the circular economy, cold storage, and sustainable agriculture.
At Phatisa, we understand these opportunities far better today than two decades ago when the concept of emerging market private capital first caught the imagination of investors.
Over the past 20 years, private equity and venture capital investors have learned that outperformance comes from adapting the best ideas from around the world to local contexts, not recycling models within a top-down approach to investing.
Now they first seek out fundamental shifts to invest behind, such as energy transition, food security, and digitalization; then specific strategies, such as structured growth equity, asset-backed yields, and direct lending; and industries that stand to benefit from those macro trends, from off-grid solar and agritech to cold-chain logistics and FMCG distribution.
In this context, generating sustainable returns depends on expertise within sectors and a proven ability to execute, irrespective of geography.
Our markets are also benefitting from greater stability and liquidity with the entry of institutional investors committing capital for the long term. Sovereign wealth funds and pension plans are not only backing fund managers, but also co-investing alongside GPs and acquiring private capital-backed businesses directly.
Recent events have led some to dismiss the case for investing outside of traditional markets, but the scale of opportunity looking forward is huge and unprecedented. A growing share of future returns will accrue to those that look beyond today's easy assumptions to recognize entrepreneurial talent and novel business models in new forms and places.
