As the world moves past COVID and its implications, investors have been inundated by staggering and terrifying headlines. The market has been beaten down, with many predicting a prolonged “wait” period from investors.
Yet, there are pockets of opportunity that savvy investors can target and exploit. On the forefront, for investors, should be portfolio positioning and risk management.
In this blog, founding partner and managing director of Fuel Venture Capital, Jeff Ransdell, reveals his secrets on how to mitigate your portfolio's overall risk after COVID.
1) Pivoting Your Strategies
Despite the massive and growing uncertainty, private equity (PE) firms are already looking for ways to salvage adversely affected parts of their portfolios and for new bets that emerging trends could support.
Even as wild swings in equity and debt markets have become the next normal, leading investors must pivot their strategies in order to operate in a post-COVID economy, says Jeff.
Although pivoting your strategies may seem like enough to stay afloat, it is not.
2) Diversification
Jeff also stresses the importance of diversification.
Because we simply don't know what the future holds. Investing can be risky but there are also plenty of opportunities if you strike the right balance. He explains that the best way to build a portfolio is to find investments that are not directly correlated to each other. For example, an investor would be wise to invest in different sectors of the economy or countries. This way, if one particular sector struggles, the other will hopefully perform well.
3) Learning What Investors Gravitate Towards
Moreover, Jeff explains that the current investment environment is very different from the past periods.
In the past, there were a few companies that dominated the market, but now there are many more companies competing for their share of the market. This competitive market encourages innovation and provides new solutions to help solve the world's problems. We are seeing many exciting ideas and startups/founders coming from all over the world at this time.
Not to mention, the industries that investors gravitate towards have also changed.
Investors typically focus on Internet or technology startups around the world.
However, since COVID, investors have begun to focus more general ideas across industries. Investors gravitate towards companies that are about making things better, faster, safer, more efficient.
"My team and I just took part in an exciting announcement about a $300 million space satellite factory that one of our portfolio companies is building. From our companies that focus on fintech, whether its taxes or payments or credit, to our companies that focus on mobility or construction." Jeff explains.
It’s also worth noting that since COVID, investors have been much more willing to invest in women-led startups. Before COVID, it was very rare for an investor to consider a woman-led startup when deciding which company to fund. But now, it’s easier for these companies to get funding because there’s more awareness of their potential to disrupt the market.
Conclusion
Despite the massive and growing uncertainty, private equity (PE) firms are already looking for ways to salvage adversely affected parts of their portfolios and for new bets that emerging trends could support.
When it comes to the private equity industry, there are many different strategies and tactics that PE firms can use to attempt to minimize their risk and improve their chances of future success.
