Expect Lackluster Returns on Most Liquid Credits
Low yields on many liquid credit assets curbed returns in 2021, a trend that seems likely to continue in 2022.
Research Publications Archive
Look to Specialty Finance and Credit Opportunities Strategies for Diversification
Diversifying private credit strategies provide a good complement to portfolio mainstays. While we believe the economic outlook remains strong, it is not without risks. In direct lending, growing amounts of dry powder are pressuring deal structures and pricing. As a result, we anticipate that commitments to less-correlated private credit funds, such as those focused on life sciences, asset-based lending, and flexible credit strategies, will increase next year.
Macro Hedge Funds Should Benefit from Improved Opportunities
Rising inflation and moderating growth are generally associated with a higher risk premium as investors start to price in a potential shift in market regime. In the past, global macro managers have generally benefited from better alpha opportunities that arise from volatility. With this backdrop, we expect macro hedge fund performance to be better than average next year.
The Other E in ESG Accelerates: Engagement by Shareholders
In the midst of heightened awareness of systemic risks in climate change and social inequality, many investors concerned about long-term portfolio resilience have used their voice to seek change that benefits all investors and the broader system. We expect investors will adopt active engagement practices to a greater extent in 2022, assuming significant policy changes around climate and social issues do not materialize.
Active Equity Manager Performance Benefits as Breadth Widens
A market environment with a wider breadth of winners and losers provides greater opportunity for skilled active managers to distinguish themselves. Given the more balanced earnings contribution across sectors relative to 2020–21 and the widely dispersed equity valuations, we expect the breadth of winners and losers will be wider in 2022.
Capital Flows to Cryptoassets Increase, Despite Volatility
Digital assets saw considerable inflows in recent years as investors searched for alternative sources of return amid excessive equity and bond valuations. We expect this momentum will continue next year as regulators increasingly approve easy-to-access cryptocurrency exchange-traded funds (ETFs). Still, global regulatory challenges persist, and cryptoassets will remain highly volatile until there is more clarity on future regulation.
College and University Flash Statistics Report: Fiscal Year 2021
The College and University Flash Statistics Report provides a first look at the results of our 2021 College and University Investment Pool Returns survey. Included in the analysis are a summary of investment pool returns and asset allocation for 152 colleges and universities. Additionally, the report provides detailed data by institution on asset allocation and…
The Investment Portfolio’s Swiss Army Knife: Adding Private Credit to Portfolios for US Investors
We view private credit as an underused and effective tool that can help a broad array of investors meet their objectives.
Overestimating Liquidity Needs Can Undercut the Return Potential of US Pension Plans
Many defined benefit plans sponsors may be denying themselves valuable opportunities to generate additional returns by overestimating their liquidity needs. Targeting a liquidity supply/demand ratio of 2x–3x can help portfolios tolerate periods of market stress.
The Rise in Inflation: A Look at the Dynamics at Play
This chartbook reviews the dynamics at play and includes global commentary on the recent inflation rate spike.