We entered 2023 with a view that a recession in some economies, namely the United States and much of Europe, was likely this year, and the recent banking sector stresses reinforce our confidence in this view. Investors should be disciplined in maintaining policy targets broadly, remembering the role allocations to stocks, bonds, and cash play in portfolios.
In this edition of Asia Insights, we highlight areas in public equities, private investments, real assets, and hedge funds where we continue to find opportunities, despite the current environment of higher rates and market uncertainty.
No. We argue that after macro conditions helped propel the private investment industry to temporary heights, today’s environment has ushered in a “back to normal” era.
Investing can often feel like steering a ship through stormy seas, traversing risks seen and unseen. Adopting a more disciplined approach to investing for social and environmental equity can help investors minimize portfolio risk and maximize impact, even during flagging markets. In this paper, we review the momentum experienced in sustainable and impact investing and the historical relationship between global recessions and inequality. We then explain the rationale for staying the course during turbulent times, and introduce a framework designed to help investors produce better financial and impact outcomes in any market cycle.
Calendar year 2022 witnessed multi-decade record inflation and central banks responded with rapidly tightening monetary policy. Rising rates saw the correlation between bonds and equities turn positive, contributing to large declines across most asset classes. Funds flows diverted away from growth and momentum strategies, and yield curves flattened with the ten-year/two-year yield curve becoming inverted in most developed markets, signaling economic uncertainty ahead.
Our annual analysis comparing private equity globally with public peers.
This analysis includes our observations on key metrics by which private equity managers execute their strategy.
In first half 2022, US private equity and venture capital broke their trend of sustained positive performance as the downturn in the public markets spilled over to privates.
According to Cambridge Associates indexes, private equity and venture capital in the developed markets underperformed those in emerging markets in first half 2022.
We expect the cyclical backdrop to impact private equity and venture capital returns, ultimately influencing recently invested vintages the most. That said, we think the 2023 vintage could perform well.