As we approach year end, Kay McCarthy, Head of Jersey Office at The International Stock Exchange (TISE), casts her eye across markets to examine the current standout investment themes, such as ESG in infrastructure and AI, their influence on the trends within TISE’s public market and why TISE has launched is very 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 & Acquisitions (M&A) and the debt capital markets. Whilst 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 (CLOs).

Surging demand – ESG in infrastructure

Demand for clean infrastructure is growing and there had 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 (ESG) 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 ESG infrastructure assets."

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 automation and Artificial Intelligence (AI) focused companies is now one of the top trends leading M&A and whilst 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, whilst 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.

"In terms of listings on TISE, whilst we have seen AI activity across sectors, it is in pharmaceuticals and healthcare where we have seen it most."

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 like 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 last 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 Limited, 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.

This article was originally published in the Jersey Evening Post, December 2023