Market landscape

Global investors have 120 trillion USD, 85% of that in advanced economies, and started to look at energy and infrastructure as an interesting investment opportunity to deal with the challenging low interest rate environment. Power and Infrastructure assets in emerging markets can provide high risk adjusted yields, predictable and inflation linked cash-flow and on the top of that a low correlation to other assets. Meanwhile mining and O&G businesses in competitive and established locations are well positioned to benefit from the upcoming cycle of unattended demand driven by the ongoing growth and urbanization process in the growing markets of China, India, and Southeast Asia, providing potential value upsides for investors seeking higher returns.

Comprising 60% of the world’s nearly 7.5 billion people and almost 60% of global GDP, emerging markets are a fertile ground for global investors. Frontier markets are expected to grow around twice as fast as advanced economies on average up to 2050. Over the next two decades, the global middle class will expand by another 3 billion people, coming almost exclusively from the emerging world. Approximately 440 emerging-markets cities are posed to deliver close to 50% of global GDP growth. All these countries are eager to catch up with their richer peers.

Infrastructure and energy systems in these economies are already under a huge structural pressure and the trend toward urbanization will increase even more, demanding a huge amount of investment. By 2030 the emerging markets will require more than 30 trillion USD in energy and infrastructure investments just to keep pace with growth. Given current constraints on traditional sources of public financing, institutional investors are increasingly being considered as a source of funding.

Meanwhile the ongoing urbanization process in China as well as in emerging economies like India and in South East Asia will continue to support strong demand for mining commodities. The transition to a consumption based economy in China is taking shape despite associated structural challenges given that GDP growth still materially relies on significant government investment. Strategic projects like One Belt One Road, Public Private Partnerships, and Xiong’an (new development hub for the Beijing-Tianjin-Hebei economic triangle) will continue to support large demand for mining commodities.

In this environment, investors with high quality deal sourcing networks in frontier economies and proper business approaches to assess investment opportunities shall achieve higher risk adjusted returns, while companies in emerging regions with access to strategic sources of funding will have a clear competitive advantage.

The mix of global investment will increasingly shift as emerging-market economies grow and we are fully committed to promote the connection between emerging and advanced economies especially concerning funding and strategic partnerships for Energy, Infrastructure and Mining & Metals initiatives.

  • Energy

    The global energy landscape is undergoing significant change – from the overtake of traditional demand centers from developed economies by fast-growing emerging markets to the development of technologies that are dramatically increasing the energy supply coupled with the emergence of alternative energy sources. In the near term, focus will remain on the continuing adjustment of the oil market, as the impact on supply of the significant cutbacks in investment spending on new projects over the past two years has not yet been fully felt. At the same time the response to those near-term challenges must be connected with longer-term energy transition that is taking place, including (1) continued de-carbonisation of the energy mix, (2) rapid improvements in the competitiveness of renewable energy, and (3) growth of liquefied natural gas increasing the accessibility of gas across the globe, resulting in higher growth rates expected for renewable and natural gas demand relatively to oil or coal.

    Updated: February 1, 2018

  • Mining & Metals

    With a strong but volatile outlook for the sector, the global mining and metals industry has gone through an important cycle of renewed focus on capital discipline and balance sheet austerity which may have been lacking during the recent China driven commodity boom including some ill-timed acquisitions). Interest is back into the sector from global shareholders, institutional investors, creditors, and private equity. We have seen increased M&A activities both in the small, mid, but also large cap sectors, with investors positioning in strategic assets in expectation for the next cycle of supply deficit as a result from the lack of investments in the past few years in new projects and/or capacity replacement.

    The sector will continue to face increased challenges of changing expectations in the maintenance of its social license to operate, skills shortages, effectively executing capital projects and meeting government revenue expectations.

  • Infrastructure

    By 2030 more than 50 trillion USD of global investment in infrastructure will be required just to keep pace with global growth, with emerging economies accounting for 60% of this needs. We expect Latin America to demand around 3.5 trillion USD in infrastructure investments, while China and emerging Asia shall require another 14 and 3 trillion USD respectively.

  • Shipping

    In 2020, the new IMO (International Maritime Organization) fuel regulation will re-shape dramatically the shipping industry, which will affect commodities and trade lines all around the world.

    We expect that the above mentioned effort to reduce maritime sulphur emission will affect more than 80% of the current fleet of bulk and container vessels, and as a result freight rate will change radically.

Our View

We strongly believe that, if properly screened, selected and assessed, emerging markets present attractive opportunities (profitable, scalable, and with capable management) for global investors within these sectors. Our focus is to connect local businesses and projects in Energy, Infrastructure and Mining & Metals with strategic buyers or financial investors worldwide advising, structuring and delivering mid-sized transactions. We serve businesses in both developed and emerging markets with in-depth and cross-border approach, supported by our globally integrated and flexible structure.