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Takeaways from our 2021 investment outlook: Legacy of the lockdowns – Investors' Corner BNP Paribas



Here we summarise the big picture for investors at the end of 2020. This constitutes the starting point for our 2021 investment outlook.

  • Since the 2008 global financial crisis, the global economy has been mired in anaemic growth and weak demand, tempered by consistently rising asset prices.
  • In 2020 the global economy faced a crisis of unprecedented magnitude (see Exhibit 1 below) after the pandemic lockdowns. After a contraction of 4.4% in 2020 the IMF forecasts global growth of 5.4% in 2021. Overall, this would leave 2021 GDP some 6.5% lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperilling the significant progress made in reducing extreme poverty over the last 30 years. Countering inequality is a key challenge to be met in 2021 and beyond.

Exhibit 1: Largest decline since WWII – graph shows change in world gross domestic product (inflation-adjusted, in %)

Source: BNP Paribas Asset Management, as of 26/11/2020

  • Under the best-case scenario, one or more vaccines for COVID-19 become widely available by the second half of 2021. Otherwise, the disease remains a longer-term threat requiring us to ‘live with’ the virus – repeated lockdowns will not be a sustainable long-term strategy.
  • In 2020, advanced economies loosened the monetary and fiscal reins most spectacularly. Debt-to-GDP ratios soared, rising for many countries by more than they did in the years after the Global Financial Crisis (GFC). Major central banks have largely financed the increase in budget deficits, monetising an expanding national debt, much as Japan has done.
  • One way to understand the weakness in aggregate economic demand is to study real interest rates (the ‘price’ of money in the economy). In 2006, the real yield of the 10-year inflation-protected US Treasury bond was between 2% and 3%. Since 2010, its yield has mostly been below 1%, including a spell in negative territory both in 2012 and again in 2020. Negative real yields are now common to the G3 economies (see Exhibit 2 below) and beyond. In 60% of the global economy — including 97% of advanced economies — central banks have pushed policy interest rates to below 1%. In one-fifth of the world, policy rates are negative.

Exhibit 2: Real yields are now negative for G3 sovereign debt – graph shows changes in real yields for US, Japanese and eurozone government debt between 1997 and 16/11/2020.

Source: BNP Paribas Asset Management, as of 26/11/2020

  • In 2020, these meagre interest rates, along with cheap, low-risk liquidity from central banks, led asset prices higher. Risk premia for risky assets shrank. Companies whose revenues have plummeted — cruise lines, airlines, cinemas — were able to borrow money in 2020 to survive. Investors had few higher-yield options. Will central banks continue to supply such liquidity in 2021?
  • And how is all this debt to be paid for? The appropriate historical parallel is perhaps the post-World War II period, when central banks capped bond yields at levels well below the trend GDP growth rate to gradually reduce the national debt as a proportion of GDP.
  • Alternatively, instead of financial repression and inflation (as post WW2), the extraordinarily low real interest rates we have seen over the past decade could help achieve fiscal sustainability. It would, however, be imprudent to count on it. No policymaker should expect real interest rates to remain persistently below the growth rate of real GDP. Indeed, forecast imbalances in planned global savings and investment could drive real interest rates higher (ageing societies save a lot, but old societies do not).
  • Another risk is that improved real trend growth does not come to the rescue. Lower global growth after the pandemic accompanied by inadequate fiscal stimulus would leave marginal sections of the economy vulnerable to collapse. Such an outcome would test the paradigm of modest growth, low inflation and supportive central bank policy that has supported asset prices since 2008.

Today we face three interconnected crises – health, economic and climate. The instability provoked by the pandemic presents a window of opportunity to pivot in a new direction. Long-term environmental viability, equality and inclusive growth are essential pre-conditions to a sustainable economy. By taking a holistic, systemic, long-term view, we are less likely to be surprised by crises and better able to manage them.

For in-depth insights into what’s next for the global economy and markets, read our 2021 investment outlook, ‘Legacy of the lockdowns’

Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. The views expressed in this podcast do not in any way constitute investment advice.

The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.

Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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Pandemic is driving a govtech investment boom, says new report – Cities Today



The govtech sector is seeing new levels of development, deployment and investment as the pandemic forces governments at all levels to accelerate their digital transformation. This is the conclusion of a new report from insights and advisory firm StateUp.

The StateUp 21 research, based on analysis of 450 global govtech startups in StateUp’s proprietary Nebula database, finds that venture capitalists (VCs) that have historically been reticent to invest in the sector due to concerns about a slow return on investment are now recognising its importance to a post-pandemic society.

Tanya Filer, Founder and Director, StateUp, and Lead Researcher on Digital Government at the University of Cambridge, told Cities Today: “Govtech may also be benefitting from a broader shift in investors’ perspectives towards ‘impact’ investing.” She said there are signs that VCs are more frequently seeking investment opportunities in companies that can do some material good in the world.


The report reveals that leading govtech startups have secured at least £500 million (US$686 million) in investment over the last year. This includes mobility solutions provider Via which secured US$200 million in March, transportation robotics MIT-spinout Superpedestrian (US$60 million in December) and AI insights company Zencity (US$13.5 million in August).

Much more money is predicted to be invested into the sector in 2021, with national and local governments doubling down on digitalisation and resilience.

Filer said: “Resilience-building in a post-pandemic world is the driving force behind new investment into govtech, a relatively young sector that is growing rapidly.

“Although traditionally govtech has been seen as a long-term investment, 2020 has shifted the landscape dramatically, with investors showing a burgeoning interest in technologies to support both public sector efficiency and accountability, and a green recovery. What was once a sector showing low reward over a period of years or decades is now a promising sector that is of growing interest to investors, entrepreneurs and government alike.”

In the US, the Biden-Harris administration has pledged to invest over US$10 billion into federal technology programmes, and the UK government has appointed three senior Digital, Data and Technology (DDaT) leaders to boost capacity in digital government over the next few years.

Raising capital for govtech during the pandemic. Image: StateUp 21

City benefits

Cities globally have outlined the importance of data, infrastructure and resilience measures for their COVID recovery and look set to particularly benefit from the surge in innovation and investment. Urban and local tech companies make up 28 percent of startups in the Nebula database, representing its largest subsector.

Other key sectors include administrative tech (23 percent), procurement (16 percent) and digital engagement/civic engagement (14 percent).

The report finds that smaller companies also view cities as typically having less bureaucracy than central government.

Further, infrastructure and the built environment is tipped as the top govtech ‘subsector to watch’. It currently accounts for ten percent of startups recorded in Nebula, and includes companies developing and managing built assets and infrastructure. France, for example, has set aside €30 billion  (US$36.4 billion) to make buildings energy-efficient, revamp transport networks and shift away from fossil fuels, and 30 percent of the European Union’s €750 billion (US$910 billion) recovery fund is dedicated to ‘green’ projects.


The report also includes detailed profiles of what StateUp sees as the 21 most promising startups within the govtech sector. These include CitizenLab, Commonplace, Remix, Trafi and Zencity.

StateUp created Nebula to address the issue of govtech companies being lost among the more general category of technology. Companies are selected for inclusion in the database based on detailed submissions covering the problems they address, case studies, revenue and revenue growth, business model, strategy, clients and investors.  Startups can self-nominate for the next edition.

Image: Sasinparaksa |

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Startup Founded by Tony Blair's Son Gets $44 Million Investment – BNN



(Bloomberg) — An education company co-founded by Euan Blair, son of former U.K. Prime Minister Tony Blair, has raised $44 million as it plans to expand into the U.S.

The startup, which has been renamed Multiverse, raised the money from investors led by General Catalyst and including GV, the venture-capital arm of Alphabet Inc., according to a statement on its website.

Multiverse, which helps non-graduates find apprenticeships and provides coaching, tripled the number of apprentices it trained last year despite the pandemic, according to the statement. It starts operating in New York this month, and plans further expansion in the U.S. Its clients in Europe include Facebook Inc., Microsoft Corp. and Morgan Stanley.

The firm, which was founded in 2016, previously raised $16 million in 2019 and $4 million the year before, according to a spokesman.

©2021 Bloomberg L.P.

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Valtix Lands Investment From Cisco Investments And TSG To Secure Cloud – Crunchbase News



Valtix has closed a $12.5 million strategic funding round from Cisco Investments, Northgate Capital and The Syndicate Group (TSG) to help push its cloud-native network security platform further into the market.

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The Santa Clara, California-based cybersecurity company had started a conversation in the second half of last year to raise a Series B, however shifted strategies after hiring Douglas Murray as its new CEO in the fourth quarter. Murray said the company instead eyed a strategic investment to help grow it and prove a product/market fit.

“We now have two strategic partners to help create a foundation for our go-to-market strategy,” said Murray, who served as CEO of Big Switch Networks from 2013 until it was bought by Arista Networks in January 2020 for an undisclosed price.

Securing the cloud

Valtix’s platform helps companies secure their application environments in the three large public clouds — AWS, Microsoft’s Azure and GCP. The company helps protect customers from the new vectors they face in public cloud environments, much like incumbent firewall providers like Palo Alto Networks, FireEye and Juniper Networks did for on-premise environments.

Chad Cardenas, CEO of The Syndicate Group, said while the company is still young — founded in 2018 — he has been excited by the number of companies that have shown interest in becoming partners with Valtix.

“Valtix is on the early end of the spectrum for us to get involved with a company,” he said “But it’s a very exciting time for us to get involved.”

The company has about two dozen partners now, but has interest from about three times that amount of companies wanting to partner, Cardenas added.


Although Valtix just started to sell its cloud network platform in the first half of last year, it has dozens of customers, said Murray, who believes the company’s market will be between $3 billion and $4 billion by 2025.

After the company grows its channel partners and proves its go-to-market strategy, a Series B could occur in the 12- to 18-month range, Murray said. The 40-person company now has raised $26.5 million since being founded. Previous investors include Trinity Ventures, Vertex Ventures and Wing Venture Capital.

While the company is not focused on an exit, Murray said he sees the company as a disruptive force in security, just as FireEye and Palo Alto Networks were when they entered the market. Despite competing on some levels with those cybersecurity titans, Murray said Valtix also could look to partner with incumbents, as it did by taking a strategic investment from Cisco’s investing arm.

Murray added that when he joined the company he was looking for something early-stage that he could help mold, and believes Valtix can be formed into a billion-dollar cybersecurity company.

“If our goal was to sell to a strong incumbent I would not have taken the role,” he said.

Illustration: Dom Guzman

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