• Leon D. Black • Jay S. Fishman • Han Seung-Soo • Arif M. Naqvi • Peter A. Weinberg
Moderated by • Andrew R. Sorkin
Friday 30 January
What are the bright spots and investing opportunities that are emerging from the financial rubble? The discussion among policy-makers, investors and executives was meant to be an “antidepressant” against the backdrop of the financial crisis.
Participants identified the following areas as potentially poised for growth in the coming years as markets and economies recover:
• Distressed debt – The credit crisis has created tremendous opportunities to buy corporate bonds and bank loans at sharply discounted prices. The problem, as one participant explained, is that closing these deals is like doing “hand-to-hand combat” because buyers and sellers differ dramatically on valuation.
• Metals, mining and non-renewable resources – Prices of many of these commodities have fallen sharply in the last year and, when economies start rebuilding, prices on these basic materials are likely to rise.
• Infrastructure-related businesses – Government stimulus packages are likely to invest heavily in projects such as building bridges and improving electrical grids. Businesses that deliver these services or products will be in demand in the coming years.
• Medical services – Spending on elaborate medical equipment may have been curtailed, but basic goods and services related to medical care will remain strong, particularly as much of it is supported by government spending.
• Businesses with high cash yields – Opportunities abound for investing in companies that generate significant amounts of cash and have low debt ratios, despite being shaken by lack of investor confidence. One participant mentioned a Russian telecommunications company in which the cash flow and assets had not changed but the stock price dropped 70% in the last year amid the economic uncertainty.
• Emerging markets – Countries such as China, South Korea and India have been hurt dramatically by the financial crisis, but the fundamentals of many emerging market economies remain strong. As consumer spending increases and demographic trends ensure that demand will continue to grow, these economies are likely to be restored to health more quickly than others. Most participants expressed greater interest in emerging-market equities than emerging debt.
Even though many of these investment opportunities sound attractive, several participants acknowledged that they are continuing to hold back for now. When asked what assets he was buying, one participant admitted, “Even with our cash, we’re still heading for the hills.”