As we approach year end, Kay McCarthy, head of Jersey Office at The International Stock Exchange, examines the current standout investment themes, such as ESG in infrastructure and AI, across the markets, their influence on the trends within TISE’s public market and explains why TISE has launched its own private market offering
IT has been a challenging year for markets, with persistently high inflation, rising interest rates and geopolitical tensions perpetuating uncertainty and volatility. While progress was made to bring inflation down, recession fears still loom and the conviction in lower inflation, interest rates and bond yields will be the biggest challenge to sentiment going into 2024.
A high proportion of TISE’s public markets business is correlated to global markets, in particular towards the activity in mergers and acquisitions and the debt capital markets. While activity has slowed most in products with greater exposure to the broader capital markets, we have seen a pickup in the fourth quarter in high-yield corporate bonds and private equity acquisition financing transactions, as well as winning further market share in collateralised loan obligations.
Surging demand for ESG in infrastructure
Demand for clean infrastructure is growing and there has been a surge in available capital to meet the demand.
As traditional sources of financing, such as government and bank lending, have become increasingly constrained, private equity firms and investment banks, via their infrastructure funds, have been filling the gap, with environmental, social and governance now a key consideration in infrastructure projects. Infrastructure funds are specialised private equity funds that invest only in public assets and services which are crucial for our lives and for a functioning society. These include utility services, transport companies, water services, waste management and power, agriculture and farming. Many of these funds are now incorporating ESG factors with investments into renewable energy projects, carbon-friendly transportation, such as electric-vehicle charging stations, devices to measure energy usage and public transportation facilities that reduce carbon footprints.
TISE continues to see an increase in debt listings from investment managers who provide investment capital towards the acquisition and development of solar and wind farms, biomass electricity companies, public transportation facilities that reduce carbon footprints and social housing infrastructure to name a few. ESG considerations are key to companies’ growth prospects going forward, as market participants incorporate ESG factors into their strategies to remain competitive.
Top trend: AI
Investment in companies focused on automation and artificial intelligence is now one of the top trends leading M&A, and while the technology is still at an early stage of development, many industries are benefiting from AI automation, which is already integrated into the workforce.
In terms of listings on TISE, while we have seen activity across sectors, it is in pharmaceuticals and healthcare where we have seen it most. AI has been revolutionising this sector by shaping the future of drug development and healthcare with companies increasing their reliance on the technology in the discovery of life-saving drugs, clinical trials and manufacturing.
Big pharmaceutical companies are already using AI to transform the landscape, as pressures mount to discover and develop new drugs faster. AI is a promising tool to help overcome challenges such as long development timelines and high failure rates.
Private equity firms are purchasing AI-focused companies across sectors because generative AI is expected to strengthen the value of businesses using the technology for the future. Information technology and AI is one of the fastest-growing industries globally and a seismic shift in investment focus towards this is expected in 2024.
AI is touching all our lives. Generative AI systems like ChatGPT (Chat Generative Pre-Trained Transformer) have taken the world by storm. ChatGPT was the fastest-growing consumer software application in history when launched, capturing the imagination with its impressive ability to generate human-like images, text and videos. It is anticipated that developing AI will impact several acquisitions processes in 2024 with most M&A expected to buy companies with AI capabilities.
New launch: TISE Private Markets
In parallel with the public market, TISE launched TISE Private Markets this year, a unique solution for privately owned structures. It provides unlisted companies with a dedicated marketplace through which they can access an integrated set of tailored electronic solutions, including trading, settlement, and registry management.
With the number of substantial private companies in the UK and Channel Islands growing by 4,700 over the past decade to nearly 20,000, TISE sees robust growth opportunities in private markets and continues to invest in the development of its unique offering. Blue Diamond Ltd, the leading garden centre group based in the UK and Channel Islands, has become the first company to join TISE Private Markets.
This launch represents a significant landmark in TISE’s 25-year history and the diversification of its offering and, in doing so, lays the foundations for TISE to develop adjacent services.
With its reach in capital markets, Jersey is ideally positioned to play a leading role in the delivery to public and private companies from across the world and for TISE to continue to play a key role in the local and global finance ecosystem.
About Kay
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Kay is a chartered fellow of the Chartered Institute for Securities and Investment, a chartered wealth manager and a member of the Institute of Directors. She is a financial services and investment professional with over 25 years’ experience in stockbroking, investment management and client relationship management.
