July 18, 2024

For the diversification of Asset class, GCC investors are overviewing on venture capital

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Image Credit: - Nataliya Vaitkevich/Pixabay.com

As per the webinar held by Kamco Invest stated that the GCC Investors are overviewing the alternative asset classes like Venture Capital for further diversification of their portfolio’s that’s beyond Real Estate, Fixed Income, as well as enlisted equities.

The founder as well as Managing Partner of TechInvest, an advisory firm that offers investors with primary and progress stage investment prospects in US tech firms Fahad AlSharekh, stated that “Ultra-high-net-worth individuals and family offices are looking to follow sovereign wealth funds by investing in tech-companies abroad.”

As quarantine and remoteness protocols were executed globally, the effects have demonstrated to have a constructive influence on the technology sector, he said.

The Director of Third-Party Solutions at Kamco Invest, Faisal AlOthman, who has moderated session added that: The COVID-19 pandemic has converted the venture capital section from an impulsive state to a prospect filled industry powered in by the fast-tracked swing towards digitization.

A foremost apprehension with the ongoing pandemic was the impression it would have on leavings from VC-backed companies. However, not only did high-profile withdrawals continue in 2020, but they also enlarged liquidity to new levels. The total exit value in 2020 amounted to $290.1 billion, exceeding the total value in 2019 over 1,101 exits. While IPOs, M&As and buyouts were active, massive IPOs herded the record exit value.

Prospects and perils involved

Jake Zeller, partner at AngelList, stated that when looking at venture capital, the emphasis is on the areas where all the revenues are happening and that is usually a few outsized illustrations that power all the returns.

He preferred investing in a single prospect like Doordash, Uber or Snowflake where revenues are focused and capable of achieving gigantic scale versus other 100 start-ups that finish up being irrelevant.

His platform for start-up investing ropes over 2.5 billion in assets under management with 77 unicorns in their portfolio.

The panellists approved that the threat of venture capital is excessive and based on historical data that goes back to the 90s with 51 percent forfeiture ratio and 65 percent impairment ratio. Today the average loss ratio is closer to 20 percent and performance could be higher if working with good managers and calibres.

This makes venture capital as one of the better accomplishment asset classes as the threat factor declines and the opportunity of higher revenues increases, they said.

In 2020, a total $73.6 billion was raised, higher than the previous record in 2018 of $68.1 billion. Some of the foremost factors that powered to the record amount were the shifts in industry dynamics, boosted technology adoption rates, and role of expertise in attractive life during the pandemic, in calculation to a robust IPO market.

VC firms raised 44 mega-funds in 2020 consisting of $500 million or more, nearly double the 24 funds closed in 2019.

Venture capital industry has progressed since 2000, and fund managers are executing a more rigorous, risk-managed assembly of companies, said Ihsan Sancay, executive director of Private Equity at Kamco Invest. The funds are surrounding themselves with “incubator” forums and core communities of advisors, as well as setting aside capital for follow-on needs, he said.

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