FinTech equities: trends to watch in 2023

Excessive valuations in our FinTech universe are now largely gone, contributing to a positive 2023 outlook, in our view. We are increasing our exposure to upcoming FinTech companies. 

 

Need to know With worst-case scenarios priced-in across our universe, we believe 2023 should be a good year to build positions in quality FinTech stocks Equity outflows accelerated in 2022 as higher interest rates and inflationary pressures weighed on multiples. When flows do return, quality companies should benefit given their ability to balance growth and funding amid higher interest rates  Cybersecurity will become an increasingly important risk for asset managers to assess in 2023. We have developed a proprietary methodology to assess and engage companies on cyber risk

 

Key themes for 2023

We have identified several key themes that we believe will influence market performance in 2023. Inflationary pressures are likely to persist but we do not expect equity multiples to be impacted to the same extent they were in 2022. We think the base case for China is progressive re-opening after a prolonged period of subdued economic growth. MSCI’s upcoming changes to its Global Industry Classification Standard system will considerably impact our universe, particularly since payments companies will be largely classified as financial rather than technology companies, but ultimately be net-net positive for our portfolio. Finally, cybersecurity risks will come into greater focus among asset managers, as regulators take a more active interest.

 

Positioning the portfolio for 2023

Our positioning during 2022 was conservative, and we chose to be heavily tilted towards stability and predictability. We believe 2023 will be a good year to build positions in FinTech companies and are already adding to our positions in upcoming, quality FinTech names. We believe valuations have become attractive and aim to increase our exposure over the course of 2023, depending on market sentiment.

 

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