Market Matters: August 31, 2023
Most asset classes declined in August as higher bond yields and mixed economic signals weighed on risk appetite.
Credit/Fixed Income
Review of Market Performance: Fiscal Year 2023
Risk assets enjoyed mostly positive returns in fiscal year 2023. Equities rebounded as fears over the severity of a possible recession moderated. Emerging markets equities lagged developed markets as the pace of reopening in China disappointed. Bond performance improved as credit assets posted positive returns but developed markets sovereign bonds struggled. Real assets suffered due to higher interest rates and slowing demand.
Does Fitch’s Recent Ratings Downgrade of US Sovereign Debt Change Our View on Treasuries?
No, we continue to believe investors should hold US Treasuries in line with policy allocations. While the recent decision by Fitch Ratings to downgrade the sovereign credit rating of the United States added upward pressure on Treasury yields, we do not expect it will have a lasting impact.
Credit Score: Why Bank Retrenchment Spells Opportunity for Pensions
Banking sector challenges have helped to establish private lenders as main sources of capital to mid-market and large companies and created a range of private credit investment opportunities for pension plan sponsors, which requires thoughtful portfolio construction when implementing these strategies in an uncertain market environment.
Market Matters: July 31, 2023
Risk assets rallied in July as slowing inflation and pockets of economic resilience supported performance.
Is Now a Good Time to Allocate to Private Credit Strategies?
Yes. Despite elevated macro uncertainty, it is an opportune time to allocate to private credit.
Private Direct Lending or Public BDCs? Guidance for Pension Plan Sponsors
Private credit strategies such as private direct lending funds and public business development companies have become popular among pension plan sponsors seeking yield enhancement over their public fixed income allocations. Understanding the key characteristics of both will better enable them to choose the best fit for their plan.
Market Matters: June 30, 2023
Performance was mixed in second quarter as several crosscurrents painted an uncertain outlook.
Don’t Count Out Government Bonds Just Yet
For investors that typically rely on high-quality government bonds as a counterbalance in equity-heavy portfolios, poor recent performance, higher cash yields, and uncertainty about inflation are difficult hurdles to overcome. However, they are not a reason to underweight government bonds. The outlook for government bonds is more constructive, and we expect them to outperform cash over the next one to three years.
Private Credit: Opportunities Abound
The current macroeconomic and market environment creates an attractive opportunity for credit opportunity managers. We believe managers with flexible capital, strong sourcing efforts, and structuring skills will find ample investment opportunities and will deliver strong returns in the coming years.