Over the years, as institutional investors have implemented newer and more dynamic private markets strategies in their portfolios in an effort to boost investment returns, they have also faced a timing conundrum. Secondaries have the potential to help address this challenge. We review their potential advantages and show how they can be broadly used as an effective portfolio management tool for investors of all types and sizes.
The private equity secondary market can offer investors efficiency and access that is unavailable elsewhere in the private investment universe. We believe partnering with a knowledgeable and experienced investment team is an important part of finding success within this dynamic and evolving asset class, and we answer seven key questions reviewing private equity secondary funds and their benefits.
Yes, investors should overweight US small-cap stocks, given valuations remain attractive and will provide a cushion if an expected recession unfolds.
Commercial real estate is not immune to economic cyclicality, and we think the sector will be challenged through an economic downturn. However, we think cyclical pressures will likely create opportunities in select sectors and advise investors to selectively invest in these areas to benefit from a rebound during the recovery.
Asset performance is highly sensitive to the global business cycle. In this chart book, we highlight the significant shifts in performance distributions across the global business cycle for major asset classes, including equity regions, styles, sectors as well as for fixed income, real asset and currencies. Ultimately, understanding the distributions of asset performance across business cycle stages and considering where the global economy is headed are key inputs in a rigorous investment decision-making framework.
No, we expect that while the US dollar should decline from its current elevated level over the medium term, there are factors that will continue to provide it with support in the short term. If our expectations are met, later this year or early next year should be an opportune time to consider positioning portfolios to benefit from a weaker dollar.
Inflation is having a moment—driving up the costs of delivering the nonprofit mission and making it more challenging to maintain endowment purchasing power. This environment highlights the importance of endowment spending policies and their role in balancing near-term spending needs and intergenerational equity.
The 2022 Europe ex UK edition of our annual report on the history of financial markets provides context for the range of returns investors can expect from equities, bonds, and cash; reveals the importance of various components of equity returns; examines the evidence for equity mean reversion; and reviews the relationship between initial valuations and subsequent returns for equities and bonds.
The year started with a strong risk-on rally as declines in inflation prints in the United States and Europe fueled the narrative for “soft landing”—suggesting the economy could avoid a crash, while inflation continued to soften. However, the buoyant sentiments abruptly gave way to great uncertainty when Silicon Valley Bank’s stock plummeted in early March.
No. We think most investors should not alter portfolios based solely on debt ceiling risks. Instead, they should remain focused on the long term and rely on the diversification in their existing portfolios. But given the potential for additional stress in funding markets, investors should ensure they have ample liquidity to meet upcoming capital calls and spending needs.