Geopolitical tensions and the rise of artificial intelligence are two of the key risks investors should consider this year, Mubadala Investment Company's chief strategy and risk officer has said.
Abu Dhabi's strategic investment arm is also factoring emerging "mega-trends" in Asia into its strategy, including a rapidly growing middle class and an ageing population that will need specialist care, Ahmed Al Calily said.
He spoke to The National at the World Economic Forum in Davos, where there is a significant Emirati presence to tell the world about its ambitions and investment opportunities – and with its famous hospitality on show.
"Save for the major geopolitical crisis that derailed that soft landing, even 2024 is looking to be a good year," said Mr Al Calily.
"The major issue is the geopolitical tensions that could derail the recovery.
"We are in a different world and investors have to take note of that in terms of the changing business models, the changing landscape, the mega-trends that are carrying the world forward: whether it's the ageing population, the new consumer, the rise of Asia.
"These are things that people are seeing, these are not risks. These are things that investors take note of and factor that into their decision-making process, into their risk process."
AI: The big disruptor
Investors had to have the rise of artificial intelligence on their radar and in short and medium-term plans, Mr Al Calily said.
"AI is definitely the next big mover and shaker. It is the next disruptor for the consumer and for enterprise," he said.
"For we and other colleagues from other investment firms, AI is at the centre when we talk about risks, when we talk about opportunities affecting our portfolios, affecting new investments and opportunities – you have to look at AI risk and opportunity."
Investors are generally positive about AI, which has major implications for productivity, from industry to the workplace.
"This is the future, you cannot run away from it," Mr Al Calily said.
Around the world, governments, private enterprises and civil society are trying to predict to what extent AI will affect jobs, and may make traditional businesses obsolete.
AI has the potential for huge job creation and job losses.
In Davos this week, there has been much talk of not merely losses and gains, but "job change", although it is difficult to predict the sweeping impact AI could have on the workplace.
"There are [great opportunities] from an investment perspective, but for civil society, government, for the impact, the politicisation of AI platforms – I think is a risk people should look out for," Mr Al Calily said.
Mega-trends in Asia
Mubadala, whose biggest investments have traditionally been and continue to be in North America, is in the process of a major pivot to Asia.
"We've shifted, we've refreshed our strategy," Mr Al Calily said.
"So our pivot now into Asia, more broadly pan-Asia, is the next big investment area for us.
"We continue to invest in North America. This continues to be our biggest market."
He said Europe had a stronger 2023 than expected, with robust company valuations and entry points for investors.
"But the biggest shift for us is really deploying in Asia. There's a big market we cannot ignore," Mr Al Calily said.
Asia's growing population, and its ageing population, will require governments and the healthcare sector to increase provisions for older people.
Along with better health care, there are advancements on the horizon that would see robots used to make people's later years easier and more comfortable.
Such innovations represent a big opportunity, Mr Al Calily said.
"This is the next big thing, if you can get it right. The ageing population will require different services, different solutions, companies that are thinking ahead will stand to gain from these mega-trends."
No North American recession, yet
The recession that many analysts predicted would hit the US in 2023 failed to materialise, and experts are divided on whether 2024 will see upheaval in the economy, the stock market and elsewhere.
Inflation in the US is hovering at just under 3.5 per cent and ratings agencies predict a series of rate cuts in 2024, which is likely to fuel consumer spending.
The US also saw about 200,000 new jobs created every month last year, making for a buoyant consumer spending market.
"You look at that and look at the outcome, you can say economically it looks good," Mr Al Calily said.
"The negativity, where's it coming from? The geopolitical risks are overshadowing those. Investors are taking note of that but they're not factoring it into their pricing.
"Until we see a big shock that materialises out of these geopolitical risks, investors and markets will be OK in '24."
'Historic' global stocktake approved at Cop28 in Dubai
Net zero and responsible investing
The debate raged over climate change action at Cop28, with the need to strike a deal over phasing down, or out, fossil fuels, net zero, funding for renewables and support for the developing world dominating the headlines.
But in the background, companies were also being told that they have to start considering the ethical and environmental effect of their activities.
The best-run companies have been working on this for a couple of years, and the worst ones have been merely "greenwashing".
Mr Al Calily said the cause is "close to the heart" of leaders in Mubadala, and it is becoming something they expect of key partners.
The need to do more than produce a financial return for the Abu Dhabi government has been instilled in the company for a long time, he said.
Recent investments include clean energy companies such as Skyborn Renewables, the largest private wind farm and Tata Energy in India
Mubadala's net-zero commitment matches the UAE government's 2050 goal. And it is extending to the people it works with.
"We're working with our assets and partnering with them to make sure that they're on the journey on net zero and to really make a positive impact," Mr Al Calily said.
Looking forward, he said Mubadala wants to work with responsible investors, particularly after signing up to the One Planet pledge for sovereign wealth funds.
And what the UAE achieved at Cop28 has set the standard for companies in the Emirates and all over the world, Mr Al Calily said.
"What the UAE has done is bring the world back through its leadership, through its foresight, through its consensus building and really bringing diverse groups around the table … then move the conversation forward in the right direction.
"I think this has been a great success for the UAE."
