The Covid-19 pandemic is set to increase companies' investments in intangible assets – such as research and development, software and patents – by 11 per cent as a shift to remote working erodes the importance of physical assets, according to the Carlyle Group. The rise in intangible investments during this pandemic-triggered recession is 1.5 times higher than the "asset-light" trend following the 2008 global financial crisis and may result in a slower recovery in employment, according to a September research report by the US private equity and asset management company. Intangible assets include all non-physical assets such as goodwill, intellectual property, human capital, data and technology. The report highlighted that a post-pandemic recovery will not be swift. "As the pace of digitisation accelerates, investors would be better served to think in terms of the differences between business models rather than differences between industries," Jason Thomas, head of global research at the Carlyle Group, said. "As such, 'technology' may no longer be viewed as an industry in its own right but instead understood as the key differentiator between all companies irrespective of industry." The Covid-19 pandemic has tipped the world economy into the worst recession since the 1930s Great Depression, disrupted global supply chains, hampered international trade and dealt a blow to key sectors from aviation to shipping. Globally, the virus has infected more than 35.4 million people while the death toll exceeded one million, according to data from Worldometer. More than 26.6 million people have recovered. The Carlyle Group's report highlights key trends of how the coronavirus-triggered recession will impact business conditions in future. Currently, the crisis has highlighted wide variations in performance between industries, with businesses in IT and healthcare growing during the pandemic, while hospitality and tourism took a hit during the lockdown. Over the next two years, however, the biggest variances will be between companies in the same sector as some prove better at technological transformation than others. "It is likely that, as in the last recession, the most salient disparities in two years’ time will be between companies within the same industry, as some management teams successfully reinvent their businesses while others futilely endeavour to get back to January 2020," Mr Thomas said. The recession, which has dealt macroeconomic shocks, will accelerate changes in business models as companies re-think their strategies and organisation, adopt technology and move towards "asset light" models, the report said. The rise of digital business models and intangible assets has made it more difficult to define the true value of a company, though, as these concepts are not reflected under current accounting rules. "It may be that 'asset-heavy' value stocks underperformed to such a great extent this year precisely because remote working has sensitised investors to the risk that future cash flows will come to depend less on physical assets, like offices," Mr Thomas said. "As the pace of digitisation accelerates, this risk premium for obsolescence may have to widen further, turning the 'value premium' into a 'value trap'." Finally, the current outperformance of the technology sector may actually disappear when examining companies' business models. Tech-enabled digital platforms tend to outperform the broader market whether they operate in health care, retail, autos or beverage manufacturing, the report showed. "2020 may be the year that 'technology' stopped being thought of as a sector in its own right and more of the key differentiator between all companies irrespective of industry," Mr Thomas said. These business trends show that the coronavirus-triggered recession will impact economic and financial conditions for some time to come, the report concluded. "Many corporate executives will use this time as an opportunity to rethink and re-imagine their businesses in ways that accelerate the pace of digitisation and cause more investors to categorise in terms of business models rather than industries," Mr Thomas said. "There is nothing wrong with optimism, but those who conceive of this shock as a temporary disruption seem likely to miss much of what’s to come."