Fahad Al-Sharekh

In an unpredictable and rapidly evolving market, Kamco JEDI Fund has valuable advice in terms of the available investment opportunities.

Considering the economic challenges of the present, what strategies and tools would you recommend in taking advantage of the investment opportunities available?

The opportunity is in investing in capital efficient start-ups, because we are seeing the best entry points, due to the economic reset. All other asset classes are going through a serious correction, and no one can determine when the bottom will be reached. This also caused the investments landscape to change materially since the end of 1Q2022. Rock-bottom interest rates since 2008 drove investors to take increasingly bigger risks, pushing stocks to record highs. That party is over now, and reality has set in. Moreover, the US Fed’s aggressive rate hikes—meant to cool the economy and, thus, consumer spending—rippled through the markets and upended the way investing has worked since the financial crisis.

What is your perspective on the different asset classes and their situations at the moment?

When it comes to real estate, in December 2021, the US rate on the 30-year mortgage was at 3%; now, it is more than 6%. The pandemic housing boom is a bust, and many companies in the sector have laid off their employees. It is not clear if US home prices are anywhere near the bottom. The S&P500 is down more than 20% for the year, as the higher-rate environment changed investors’ appetite. We cannot yet pinpoint where this will take the stock market in the coming months. Typically, when stocks are down, investors turn to bonds, though this is not the case right now. With rates on newly issued bonds moving higher, investors have dumped older bonds and favoured short bonds, making the market unreliable. Depending on how we measure it, this sell-off led to perhaps the worst sell off in decades. Finally, some consider cryptocurrencies to be a suitable hedge against inflation; however, as inflation rose, and the Fed started tightening, crypto sold off just like any other risk asset. This has set off a domino effect of several failed companies and currencies.

What investment advice would you provide for 2023?

2023 will be a great year to invest due to the major reset that all capital markets have realized. Therefore, it is the best entry point in over a decade. The uncorrelated asset class with the public markets that are going through a material correction in valuations and market capitalization is the early-stage VC; however, VC requires investing with experienced and well networked managers to get to the best deals early. Therefore, the best advice is to invest with emerging managers in VC funds. Emerging managers in venture capital, also known as first-time or new fund managers, are often considered to be a high-risk, high-return investment opportunity. The reason for this is that these managers are typically less experienced than established managers and have a smaller track record of investments. However, many emerging managers have unique perspectives and strategies that can outperform more established managers. Additionally, emerging managers may be more willing to invest in the early-stage and high-risk companies that established managers may not be as comfortable with. This can lead to a higher potential for returns when these companies are successful. Furthermore, emerging managers are typically more nimble and able to make quicker decisions than established managers, which can be an advantage in a rapidly changing market.