Fiscal Year 2011 in Review
Summary highlights for various asset classes for the fiscal year ended June 30, 2011.
US
Still Nursing the U.S. Private Equity Overhang Hangover
Despite a meaningful reduction in the overhang for large private equity funds, it remains too large to be absorbed by anything other than a replay of the easy credit–powered 2005–08 exit environment; mid-market funds are still a more attractive option.
U.S. Equity Style Performance – Reassessing Portfolio Tilts
Our U.S. equity recommendations over the past couple of years have shown mixed results, with large-cap and high-quality stocks lagging behind in the market rally, but growth maintaining a consistent edge over value. After a fresh assessment of current conditions, we conclude that these portfolio tilts still make sense today.
Reefing the Sails Even as the Storm Clouds Lift?
U.S. equity investors, corporations, and consumers continue to exercise restraint amid signs of economic stability.
U.S. Private Equity – Sleeping Off the Overhang Hangover
For all the hand-wringing over the private equity overhang, most problems seem confined to the large buyout space; things look a sight better for mid-market funds, some of which may be poised to capitalize on opportunities created by the credit crisis.
The State of State Finances
Deteriorating municipal finances have implications for investors though default risk is remote. However, there are technical drivers that may support the tax-exempt market for some time.
U.S. Dollar: The Cyclical Versus the Secular
Cyclical factors appear to be dollar supportive against other major developed markets currencies, while secular fundamentals argue for continued U.S. dollar weakness against emerging markets currencies.
Awaiting Confirmation from Fundamentals
The year 2010 will likely be a challenging one given the high expectations reflected in current market prices, uncertainties surrounding the economy and government policy, and the absence of clear signs of sustainable economic strength.
Amid Surging Supply of U.S. Treasuries, Can Demand Hold Up?
Thus far, record issuance of U.S. Treasuries has been absorbed by a changing mix of buyers, with increased domestic participation. Treasury buyers should tread carefully in 2010, maintaining deflationary hedges while considering the potential impact of the changing supply/demand dynamics.
U.S. Venture Capital: Good, Bad … or Ugly?
Given the numerous headwinds facing the U.S. venture industry, at the moment we believe venture capital makes sense only for the small subset of investors fortunate enough to have access to select high-quality managers running appropriately sized funds.