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PRIVATE MARKETS AND ALTERNATIVE ASSETS

TVJ Spotlight 🔦

📝 Accessing private markets: Evergreen funds (Partners Group)

📝 How investors can gain advantage as the asset class matures (BCG)

📝 Rise of the retail investor: Impact on private markets (Juniper Square)

📝 2025 Global investor survey: Navigating private markets (Adams Street)

📝 Harnessing technological change in private markets (Goldman Sachs)

📝 Tapping into India’s transformation (BlackRock)

📝 Mapping the evolution: Hedge funds in a new market regime (Goldman Sachs)

✏️ Tokenization could expand retail private market access (Institutional Investor)

✏️ Private assets scrutinised (EDHEC)

✏️ Private market investments in defined contribution plans (Goldman Sachs)

📜 Periodicals »

📝 Guide to alternatives 1Q FY25 (JP Morgan)

✏️ TRTPM monthly blog – Edition February 2025 (UBS)

✏️ Unified global alternatives – Hedge fund bulletin (UBS)

The Valt Journal Library

PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

📝 Global Debt Report 2025 (OECD)

📝 Asset-based credit in 2025: Powering ahead (TPG)

📝 Income generation: Seeking steady streams in unstable times (Goldman Sachs)

📝 Evolution of direct lending (Morgan Stanley)

📝 Lower middle market direct lending: A resilient opportunity (TPG)

📝 Perspectives On Private and Liquid Credit (Antares Capital)

📝 The case for active fixed income (BNY Investments)

📝 Building diversified portfolios with CLOs (Nuveen)

📝 Sharpening the lens on private credit (Barings)

📝 Investing in European private credit (Morgan Stanley)

📝 Unlocking the potential of European leveraged loans (Amundi)

📝 Five reasons European investors should not overlook U.S. senior loans (Nuveen)

📝 EM Debt Restructurings: A Year of Resilience and Innovation (MetLife IM)

📝 EM Debt: The benefits of a blended approach (Barings)

✏️ Why Asia-Pacific investment grade is a hidden gem (KKR)

✏️ Asia credit market on the recovery path (UBS)

✏️ Fortifying portfolios with private real estate credit (Brookfield)

✏️ Fund financing: An opportunity for insurers (Abrdn)

✏️ Private debt in an evergreen format (Stepstone)

✏️ Middle-market demand helps fuel expansion in private credit (TCW)

✏️ Private debt made accessible (Stepstone)

✏️ Private Credit – current dynamics shaping markets (UBS)

✏️ The M&A resurgence: Opportunities in fixed income (Neuberger Berman)

✏️ Going global in investment grade credit (Neuberger Berman)

✏️ Germany’s fiscal shift: A boost for European credit? (Robeco)

✏️ Should you bet on mean reversion in fixed income premiums? (Dimensional)

✏️ A unique window for real estate debt investors (Barings)

✏️ Three strategies for smarter corporate lending (BCG)

📜 Periodicals »

📝 In brief: And one more thing … in credit (KKR)

📝 Howard Marks note: Give me credit (Oaktree)

📝 Global fixed income views (JPMorgan)

📝 Global fixed income weekly (Goldman Sachs)

✏️ High Yield investment views (Nomura)

The Valt Journal Library

PRIVATE EQUITY

TVJ Spotlight 🔦

📝 StepStone private equity 2025 market outlook (StepStone)

📝 Global private equity report 2025 (Bain & Company)

📝 The compelling case for semi-liquid evergreen PE (Morgan Stanley)

📝 India growth equity report 2025 (Praxis x IVCA)

📝 2024 US private equity: Middle-market annual report (E78)

📝 Outperformance in the European small to middle market (StepStone)

✏️ Secondaries in 2025: The rise of single-asset specialists (TPG)

✏️ Typical time between VC rounds is shrinking in SaaS & rising in fintech (Carta)

🎥 GP-Led secondaries market in Asia (TPG)

The Valt Journal Library

SECTOR FOCUS

Energy Transition x Climate Finance

📝 The case for sustainable investment opportunities across asset classes (TCW)

📝 The $10 billion opportunity in green shipping (BCG)

📝 Landing the economic case for climate action with decision makers (BCG)

✏️ Breadth and depth make water an attractive long-term investment (Robeco)

✏️ Improving women’s health is a $100 billion–plus opportunity (BCG)

✏️ Five issues for sustainability investors in 2025 (Abrdn)

✏️ Offshore ambitions: China’s outsized role in decarbonising the world (M&G)

Tech x AI

📝 Navigating DeepSeek’s disruption: Opportunities and challenges (State Street)

📝 Lower AI costs will drive innovation, efficiency, and adoption (TCW)

📝 The next frontier: The rise of agentic AI (Adams Street)

✏️ DeepSeek and the evolution of LLMs: Cheaper, better, faster? (KKR)

✏️ Quantum computing: A new era for financial services (State Street)

✏️ GenAI revenue could surpass $1 trillion by 2028 (Morgan Stanley)

Real Estate x Infrastructure

✏️ Infrastructure 2025: Megatrends and mid-market opportunities (Goldman Sachs)

✏️ AI and datacenters: A new source of electricity demand (UBS)

✏️ Adapting to economic trends in real estate (UBS)

✏️ Real estate: Prudent optimism amid uncertain times (Natixis)

📝 Europe real estate roundtable 2025 (Nuveen)

Disclaimer:

The content provided on this platform contains references and links to external sources, including articles, reports, websites, images, or videos. We do not own or claim copyright over the content found in these external sources. The ownership and rights of the content belong to the original creators.

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and affiliated persons and companies assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Welcome to the latest edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else! Click on the titles to access the report/article.

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1,800+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

TVJ Spotlights 🔦 featured in this edition:

• Pantheon perspectives: Private markets in 2025 (by Pantheon)

• Private market outlook and investor views - APAC (by Preqin)

• Accessing private markets: Evergreen funds (by Partners Group)

• Asset-based credit in 2025: Powering ahead (by TPG)

• All about ABF: The benefits and strategies of asset-backed finance (by TCW)

PRIVATE MARKETS AND ALTERNATIVE ASSETS

TVJ Spotlight 🔦

📝 Pantheon perspectives: Private markets in 2025 (Pantheon)

📝 Private market outlook and investor views - APAC (Preqin)

📝 Accessing private markets: Evergreen funds (Partners Group)

📝 Global pension fund consolidation mergers (State Street)

📝 Big picture - Key themes for 2025 (Morgan Stanley)

📝 Global wealth investment playbook (KKR)

📝 Putting themes to work for your portfolio (Robeco)

📝 Global M&A Report 2025 How leaders are adapting to meet the moment (Bain)

📝 What Trump 2.0 means for the economy and markets (Amundi)

📝 Markets: A tug of war between inflation fears and optimism (Amundi)

✏️ US and Europe private company trends: Bucking the trend (ICG)

✏️ Private markets: As the ice breaks (Neuberger Berman)

✏️ Turning illiquid asset into a liquid one (Institutional Investor)

✏️ Pursuing private assets for diversified returns (Institutional Investor)

✏️ Is there a better alternative to the endowment model? (Institutional Investor)

✏️ Unlocking Africa’s potential through smart private investment (BCG)

The Valt Journal Library

PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

📝 Asset-based credit in 2025: Powering ahead (TPG)

📝 All about ABF: The benefits and strategies of asset-backed finance (TCW)

📝 KKR Credit and Markets: Outlook 2025 and Q4 2024 review (KKR)

📝 Unraveling 9 key questions about credits – The 2025 edition (Robeco)

📝 An acceleration in the global flywheel (KKR)

📝 What CLO investors should know in 2025 (Nuveen)

✏️ A broader toolkit to capitalize on the credit opportunity (Blackstone)

📝 An income fix amid tariff turbulence (Nuveen)

✏️ Work the problem (Blackstone)

✏️ The corporate credit route to urban logistics (ICG)

✏️ Emerging markets: Potential opportunity (Neuberger Berman)

✏️ Why ‘A’-rated debt may be the riskiest in 2025 (Impax)

✏️ Local currency bonds: The next frontier (Neuberger Berman)

✏️ Debt ceiling uncertainty: Impact on money markets? (Goldman Sachs)

✏️ Three years of responsible horizons euro impact bond (BNY Mellon)

📜 Periodicals »

📝 Permira credit market update Q4 2024 (Permira)

📝 Corporate pension monthly (Goldman Sachs)

📝 Global fixed income weekly (Goldman Sachs)

The Valt Journal Library

PRIVATE EQUITY

📝 Private equity impact report 2023 – 2024 (Nuveen)

✏️ What do tariffs mean for private equity? (Neuberger Berman)

The Valt Journal Library

SECTOR FOCUS

Energy Transition x Climate Finance

✏️ Climate investing across private markets: A return-focused perspective (HarbourVest)

✏️ Green newsletter Feb 2025: EV tariff war and carbon pricing policies (Schroders)

✏️ Reduce, recycle, reshore: localization is revving up circular revolution (Robeco)

✏️ Five things to watch in energy markets in 2025 (Institutional Investor)

✏️ Energy transition : Navigating change and stability (Natixis)

✏️ Denying climate causality won’t alter the changing investment landscape (Impax)

Real Estate x Infrastructure

📝 The infrastructure evolution: investing in energy megatrends (Nuveen)

📝 C-PACE outlook amid economic and political shifts (Nuveen)

📝 Investing in commercial property assessed clean energy (C-PACE) (Nuveen)

✏️ UK commercial real estate recovery (UBS)

✏️ Homing in on the UK’s build-to-rent sector (Abrdn)

✏️ European real estate market outlook Q1 2025 (Abrdn)

✏️ North America real estate market outlook Q1 2025 (Abrdn)

✏️ UK real estate market outlook Q1 2025 (Abrdn)

✏️ Asia-Pacific (APAC) real estate market outlook Q1 2025 (Abrdn)

AI x Tech

✏️ The next wave of enterprise AI: Horizontal and vertical solutions (Lightspeed)

✏️ DeepSeek and the AI arms race (State Street)

✏️ DeepSeek disruption: What it means for investors (Principal AM)

✏️ Generative SF: What’s next in crypto, AI, and blockchain (Lightspeed)

✏️ What’s next for pharmacy benefit managers? (Neuberger Berman)

The Valt Journal Library

Disclaimer:

The content provided on this platform contains references and links to external sources, including articles, reports, websites, images, or videos. We do not own or claim copyright over the content found in these external sources. The ownership and rights of the content belong to the original creators.

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and affiliated persons and companies assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Welcome to the latest edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else!

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1,700+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

PRIVATE MARKETS AND ALTERNATIVE ASSETS

📝 Implications of Trump 2.0 on the private markets (Stepstone)

📝 5 Things to Know From KKR’s 2025 Outlook (KKR)

📝 Vantage Point 1Q2025 (BNY Mellon)

📝 Investment outlook 2025: The turning of the wheel (Arcpita)

📝 Carry now, pay later (TCW)

📝 A nascent real estate recovery beckons (Nuveen)

✏️ Nine themes poised to reshape portfolios and the future (Robeco)

✏️ Staying invested in a changing world (GIC)

The Valt Journal Library

PRIVATE CREDIT x FIXED INCOME

✏️ Negative covenants: The silent, but mighty, guard rails of credit (KKR)

✏️ Outlook for direct lending (Morgan Stanley)

✏️ Four reasons to be optimistic about high yield bonds in 2025 (Impax)

✏️ Is 2025 (finally) the ‘Year of the Bond’? (Morgan Stanley)

✏️ Asset-based finance in action: A buy now, pay later loan portfolio (KKR)

✏️ Finding the credit sweet spot (Harbourvest)

✏️ A compelling case for high yield (BNY Mellon)

✏️ Diversifying private credit portfolios: beyond traditional metrics (UBS)

📝 Emerging markets: Attractive relative valuations; differentiation is key (TCW)

✏️ Emerging market debt: High conviction for higher rewards (Robeco)

✏️ Eight reasons to like investment grade bonds in 2025 (Abrdn)

✏️ Bonds are back: Mastering market timing for long-term success (Robeco)

✏️ Fixed income: poised to shine in 2025? (Abrdn)

✏️ What could the new cycle hold for real estate debt investors? (M&G Investments)

✏️ Will US bond markets outperform Europe and China in 2025? (UBS)

📜 Outlook and Periodicals »

📝 Defined contribution trends 2025 (Goldman Sachs)

📝 Q4 2024 quarterly liquid credit market commentary (Partners Group)

📝 Global fixed income weekly (Goldman Sachs)

📝 2025 US corporate pension review and preview (Goldman Sachs)

📝 Municipal fixed income outlook 2025 (Goldman Sachs)

The Valt Journal Library

PRIVATE EQUITY

✏️ The state of private equity: Hope in ‘25 (Juniper Square)

✏️ The state of venture capital: A look back at 2024, an eye on 2025 (Juniper Square)

The Valt Journal Library

SECTOR FOCUS

Real Estate x Infrastructure

✏️ Real estate: building the business case for sustainability (Abrdn)

✏️ Known unknowns of infrastructure investments (UBS)

✏️ Enabling Asia’s rapid electrification (Impax)

✏️ How digital infrastructure investment could support economic prosperity (Macquarie)

AI x Tech

📝 AI makes telcos smart. But are telcos smart about AI? (BCG)

✏️ DeepSeek or swim: Has the AI thesis fundamentally changed? (JP Morgan)

📝 AI investment potential undeterred by DeepSeek news (TCW)

✏️ Consumer trends in 2025: Retail media, entertainment and injectable aesthetics (Robeco)

✏️ Unlocking AI's potential in asset and wealth management (PWC)

✏️ Medtech innovation: dissecting inefficiencies in healthcare deliver (Impax)

The Valt Journal Library

Disclaimer:

The content provided on this platform contains references and links to external sources, including articles, reports, websites, images, or videos. We do not own or claim copyright over the content found in these external sources. The ownership and rights of the content belong to the original creators.

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and affiliated persons and companies assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Welcome to the latest edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else!

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1,700+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

Quickly scan the list of all 2025 investment outlook reports here!

TVJ Spotlights 🔦 featured in this edition:

• Global healthcare private equity report 2025 (by BlackRock)

• Co-Investments: Dispelling the myth of adverse selection (by Adams Street)

• Fund finance: NAV financing unlocked (by Partners Group)

• Building the future: Megatrends and investment themes (by Blackstone)

• Navigating private credit’s next act (by Neuberger Berman)

PRIVATE MARKETS AND ALTERNATIVE ASSETS

TVJ Spotlight 🔦

✏️ Building the future: Megatrends and investment themes
Blackstone
Megatrends reshaping industries today are AI, infrastructure, life sciences, and the digital economy. AI requires a c.$2T investment in global digital infra by 2030; US power demand to rise by 40% over next 10 years. Key sectors include logistics, data centers, and infra, clean energy. In emerging markets the focus is on India, specifically in EVs and real estate.

✏️ Alternative investments in 2025: Top five themes to watch
JP Morgan
Key drivers: a persistent US housing shortage, rising demand for AI-driven infra, normalizing interest rates, and increasing capital investment to support innovation. PE is expected to rebound, with focus on tech, industrials, and real estate. Private credit, particularly asset-backed ($500B in a $20T market) and direct lending strategies, presents attractive yields.

✏️ Private market predictions 2025
HarbourVest
Key trends in PE include vertical integration, with wealth managers and PE firms exploring synergies; sectors like AI and space ($2T combined opportunity in <10 years); and a potential record-breaking year for IPOs and buyouts. The rise of private wealth is reshaping the market, while liquidity is expected to improve, spurring deal activity.

📝 On bubble watch
Oaktree
Howard Marks warns about the tech bubble, highlighting its psychological aspects in this memo. Bubbles are driven by irrational exuberance, fear of missing out, and optimism, which can lead to huge losses when reality sets in. While innovation is often good, it can be overhyped, leading to overvaluation and eventual collapse, as seen in TMT and housing crises.

✏️ Global investor sentiment 2025
OTPP
A recent survey of 1,200 global investors shows optimism for 2025, with 70%+ investors viewing the private market investment environment as favorable. Key drivers include rapid tech advancements, like AI, cost of capital, M&A activity, liquidity, private credit availability. In India, a tech hub, 91% see the pace of technological change as favourable to investors.

✏️ Three performance drivers could help hedge funds rev up returns
Wellington Management
Hedge funds performed well in the 1990s and 2000s due to high-security dispersion, macro volatility, and higher interest rates, which created favourable conditions for equity long/short and macro funds. As inflation, fiscal spending, and government involvement rise, a more volatile environment could benefit hedge funds. Managers are likely to generate more alpha, making hedge fund exposure a valuable part of portfolios with critical manager selection.

✏️ The new standard in portfolio allocation
Institutional Investor
Institutional investors in Europe and Middle East are planning to increase their allocations to private market assets, driven by rising geopolitical risks and market volatility. Major focus on increasing private credit and real estate debt holdings (data centers and retirement facilities) to capture high interest rates and illiquidity premiums. These investments are valued for their income-generation potential, diversification benefits, and insulation from fluctuations.

✏️ M&A outlook 2025: Expectations are high
BCG
The M&A landscape is poised for a recovery in 2025, driven by declining inflation, lower interest rates, and improving valuations. Sentiment is strongest in US and Europe, particularly in tech and financial services, while APAC remains sluggish due to economic uncertainty. Growing opportunities in sectors like healthcare, energy, TMT, consumer and industrials

📜 2025 Outlook and Periodicals »

📝 Market signals and shifts: What to watch in 2025 (State Street)

📝 Investment outlook 2025: The turning of the wheel (Arcpita)

✏️ The allocator’s checklist for 2025 and beyond (Wellington Management)

✏️ H1 2025 hedge fund outlook (Abrdn)

The Valt Journal Library

PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

📝 Fund finance: NAV financing unlocked
Partners Group
NAV financing (c.$600B by 2030 vs $100B in 2022 at 25%+ CAGR) is a crucial tool in private markets to address challenges like slow fundraising and tough asset exits. It enhances value for LPs by increasing investment capacity and capital management efficiency, while offering GPs flexible, cost-effective financing options. Clear objective is vital as private credit grows.

✏️ Sector focus: Continuing our 2025 private credit outlook
LGIM
The infrastructure debt market saw strong activity in 2024, driven by energy security, decarbonisation, and digitalisation, with a focus on sectors like LNG, renewables, and data centres. The real estate debt market offers attractive opportunities in sectors like living, logistics, and retail parks, despite market corrections, with strong private credit prospects.

TVJ Spotlight 🔦

✏️ Navigating private credit’s next act
Neuberger Berman
Private credit has experienced rapid growth over the last 15 years, and this trend is expected to continue, expanding beyond direct lending into areas like asset-based and specialized lending - key sectors include IP/royalty financing, NAV lending, venture lending and regulatory capital relief trades (c.$330B collective addressable market).

✏️ The role of private credit in the expanding LDI toolkit
HarbourVest
As corporate defined benefit plans exceed 100% funded status, many sponsors are exploring private credit as an alternative to traditional liability hedging strategies. Adding senior direct lending to a portfolio can boost yield and provide sector diversification without significantly increasing volatility, especially for closed or frozen plans. However, sponsors must manage duration mismatches and liquidity needs to optimize their portfolios and returns.

✏️ Frontier Bonds: reward versus risk is still attractive in 2025?
Abrdn
Frontier market bonds have a positive outlook for 2025, with improved fundamentals, declining default risk, and attractive yields. Fiscal consolidation efforts, debt restructurings, and the reopening of primary markets have strengthened these markets. While risks remain, even if US Treasury yields rise massively, frontier bonds are still expected to offer good returns.

📜 2025 Outlook and Periodicals »

📝 2025 US corporate pension review and preview (Goldman Sachs)

📝 Weekly market directions (Amundi)

📝 Fixed Income Default Study 2025 (UBS)

📝 CIO Weekly: Why munis can thrive in 2025 (Nuveen)

📝 Fixed income weekly: Treasury yields start 2025 marching higher (Nuveen)

✏️ 2025 global fixed income outlook (Morgan Stanley)

✏️ European leveraged loans outlook 2025: The recovery continues (M&G)

🎥 Specialty credit through cycles (TPG)

🎙 Ask not why yields are rising – Ask why the curve is steepening (Morgan Stanley)

The Valt Journal Library

PRIVATE EQUITY

TVJ Spotlight 🔦

📝 Global healthcare private equity report 2025
Bain
Global healthcare PE reached a record-breaking $115B in 2024, driven by an increase in large deals, particularly in biopharma and medtech. US led with 65% of global deal value, while Europe saw a surge in biopharma and medtech deals, with 5 $5B+ deals vs 2 in 2023. APAC saw a 49% decline in deal volume, reflecting a shift in regional dynamics.

TVJ Spotlight 🔦

📝 Co-Investments: Dispelling the myth of adverse selection
Adams Street
Lead GPs are motivated to build strong, long-term relationships with LPs, making it unlikely that they would offer co-investment opportunities on weaker deals. Data across multiple economic cycles shows no evidence of adverse selection, with co-investment deals performing similarly to all deals by lead GPs. Successful co-investment requires good deal flow and careful alignment with the lead GP and selection of the most attractive investments to ensure returns.

✏️ Next in private equity: Trends shaping 2025 and beyond
PWC
PE firms are adapting to challenges by diversifying into new asset classes and regions, such as private credit and infra, but face operational complexity as they scale up. Focus is shifting from traditional financial engineering to building robust value creation plans, emphasizing improvements in talent, pricing, and operations. Sustainability is a key differentiator.

✏️Asia private equity 2025 preview: Exits and liquidity
ION Analytics
India is becoming a key market for secondary deals, with increasing activity in direct stakes and portfolio transactions despite challenges in deal flow. While sellers are reluctant, due to price dislocations and macro pressures, the demand for exits remains strong, especially in emerging markets like India, Japan, and Vietnam. The outlook for 2025 suggests a rebound in PE exits, growing secondary deals and narrowing bid-ask spreads as interest rates stabilize.

✏️ VC-backed unicorns still waiting for the exit lane to open
Institutional Investor
The VC industry continues to struggle, with unicorns still underperforming and IPOs and funding remaining subdued. While AI investments have fueled some growth, overall exit activity has been minimal. Valuations remain mismatched, most exit deals are small, failing to meet investor expectations. 2025 is expected to be more business-friendly.

✏️ Why mid-market healthcare private equity firms are outperforming
Bain
Mid-market healthcare PE funds have outperformed larger funds and maintained strong deal volume in a challenging environment. These funds are diversifying their focus beyond traditional provider assets into healthcare IT, provider services, biopharma, and medtech. A shift toward "buy-and-build" strategies and tuck-in acquisitions has helped drive value.

The Valt Journal Library

SECTOR FOCUS

📝 Key themes for 2025: Riding the real estate recovery
Nuveen
Key opportunities in Real estate credit, US medical office, senior housing in US and Japan, necessity retail in Europe and US, student housing in APAC and Europe, self-storage in Europe and US, light industrial and affordable housing in US.

📝 2025 Inside real estate outlook: Poised for growth
Principal Asset Management
Commercial real estate (CRE) values have adjusted, and while the office sector remains a concern, opportunities will emerge in structurally-driven sectors such as data centers, logistics, and residential properties. Real estate debt is a top strategy for 2025.

📝 Current developments for the real estate industry
PWC
The US real estate market is showing cautious optimism for 2025, with 65% of investors expecting good profitability despite high interest rates and regulatory changes. Transaction volume has slightly increased, with a focus on sustainable growth markets and opportunities in sectors like data centers and digital infra driven by AI and energy security needs.

📝 Economic growth opportunities in a greening world
BCG
The transition to a green global economy is creating opportunities worth $2T, with the potential to grow to $11 trillion by 2040. Areas like critical minerals, green tech, industrial materials, and services are critical . However, large-scale transitions will face challenges, including competition, technological evolution, and market volatility.

📝 How digital and AI will reshape health care in 2025
BCG
In 2025, digital health is shifting from telemedicine and digital therapeutics to AI-driven solutions that integrate healthcare more effectively. AI will enhance chronic disease management, personalize treatments, and empower healthcare providers with decision-making tools. Advancements like smart implants, wearable devices, and GenAI applications will improve patient care, while AI-driven workflows will optimize healthcare systems.

✏️ Finding investments where disruption meets transformation
JP Morgan
Investors can capitalize on the growth of climate adaptation solutions, such as weather-proofed homes and resilient infrastructure while addressing AI’s environmental impacts with efficient energy and water solutions. Additionally, shifting geopolitical policies and regulations are driving investments in the energy transition.

✏️ Next in banking and capital markets 2025
PWC
Investors are focusing on strategic expansions, including infrastructure lending and AI-driven efficiencies. The rapid adoption of AI and data management is reshaping the sector, offering opportunities for banks to enhance operational efficiency, improve customer experiences, and attract top talent wile focusing on profitability.

✏️ Next in asset and wealth management 2025
PWC
Asset and wealth management (AWM) firms are adopting holistic strategies to address challenges like expanding into new markets (private credit, crypto) and managing competition. With a focus on growth, firms are leveraging mergers, partnerships, and AI advancements to diversify, streamline operations, and enhance client experiences, operational efficiency, data analysis, faster market responses and add new revenue streams.

📜 2025 Outlook and Periodicals »

📝 Q1 2025 Commercial real estate: Breaking ground on a rebound (FS Investments)

📝The road to revival for the CRE market in 2025 (FS Investments)

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Disclaimer:

The content provided on this platform contains references and links to external sources, including articles, reports, websites, images, or videos. We do not own or claim copyright over the content found in these external sources. The ownership and rights of the content belong to the original creators.

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and affiliated persons and companies assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Happy New Year 2025!

Welcome to the latest edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else!

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1,700+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

Quickly scan the list of all 2025 investment outlook reports here!

TVJ Spotlights 🔦 featured in this edition:

1) Private markets outlook 2025 (by BlackRock)
2) SWFs and Public Pension Funds are reshaping private markets (by BCG)
3) Royalties: A primer (by Partners Group)
4) Demystifying the opportunity in investment grade private credit (by Apollo Global)
5) Asset-Based Credit: Easy As 1-2-3 (by TPG)

PRIVATE MARKETS AND ALTERNATIVE ASSETS

TVJ Spotlight 🔦

📝 Private markets outlook 2025: A new era of growth
BlackRock
Private markets are set to grow from $13T to $20T+ by 2030, driven by rising investment activity, moderating financing costs, and demand for long-term capital. Key growth areas include private debt, infrastructure, and AI. As M&A and IPO activity rise, exits and distributions are accelerating, while secondaries play a crucial role in portfolio strategies.

TVJ Spotlight 🔦

📝 SWFs and Public Pension Funds are reshaping private markets
BCG
Principal investors, including SWFs and PPFs, are managing $36T of AUM as of 2024, with an expected 6% CAGR through 2030. Over the past decade, their allocations to private markets grew 10% annually, now controlling 70% of global private AUM. Infrastructure and private credit are gaining prominence and have grown at 14% and 20% CAGR, respectively.

TVJ Spotlight 🔦

📝 Royalties: A primer
Partners Group
Royalties have emerged as a growing $2T asset class within private markets, offering investors diversification through predictable income streams (revenue-sharing or synthetic contracts), combining downside mitigation with the potential for significant upside. Spanning sectors like music rights, pharma, green metals, natural gas and carbon credits, royalties provide exposure to high-growth industries while delivering attractive yields.

✏️ How does the size of private markets compare to public markets?
HarbourVest
PE and VC encompass 215K+ companies, c.25x the number of public companies listed in the MSCI ACWI IMI Index (8,800 constituents). However, their combined AUM, at $11T (NAV and dry powder), represent just 12% of public equity market capitalization, totalling $87T as of 2024. This data highlights the breadth and growing opportunities within private markets.

✏️Asset tokenization now and in the future
State Street
Asset tokenization is set to revolutionize capital markets by making them faster, cheaper, and more accessible, with bonds, commodities, and PE funds leading adoption. Tokenization could enable 24/7 trading, eliminate multi-day settlement times, and reduce reliance on intermediaries, unlocking new economic models. AI will further enhance productivity in portfolio management but challenges in regulation and cybersecurity will be critical.

✏️ Tokenized cash: A regulatory view of unlocking a digital financial market
State Street
The tokenization of financial instruments through digital cash instruments like stablecoins, tokenized deposits, and Central Bank Digital Currencies (CBDCs) is expected to transform capital markets. Markets are exploring or piloting CBDCs, while some initiatives aim to integrate tokenized cash with existing systems for seamless cross-border payments.

✏️ Fair Winds - Why private markets are positioned for growth
HarbourVest
Global PE deal value reached $1.3T in 9M2024, up 30% YoY, while secondaries are on track for a record $140B in volume. Exits showed promise at $634B, up from $555B in 2023. With increasing participation from individual investors (PE allocations grew to 15% in 2023) and rising demand for private credit, secondaries, and high-growth sectors like AI and climate tech, private markets are set for further growth in 2025.

✏️ The Attribution Advantage: Improving manager analysis in private markets
HarbourVest
Investors in private markets can now leverage advanced tools (like HarbourVest’s model) to differentiate GP skill from market-driven returns. Deal-level benchmarking, analyzing 70K+ deals across vintages, reveals key drivers like sector allocation and deal selection. These tools distinguish true selection skill from favorable conditions, aiding portfolio optimization.

📝 Assessing GPs and the tough environment
Goldman Sachs
Amid increasing fundraising timelines (12–18 months or more), some LPs delay commitments due to overallocation to PE or awaiting distributions. While GPs employ strategies like discounts or partially funded portfolios to attract LPs, one must evaluate funds through rigorous due diligence, balancing early and late commitments depending on capacity constraints. GPs diversify their investor bases and focus on exits to meet LP expectations.

📝 Fundraising challenges ease in Asia-Pacific
Nuveen
Real estate investment in Asia-Pacific is growing, with transaction volumes reaching $96B in 2024, up 28% from 2023. While sectors like logistics and real estate debt attract investor interest, China remains largely avoided due to geopolitical tensions and market challenges. Investors favor developed markets like Japan, Korea, and Australia, focusing on high-conviction opportunities and leveraging mega-mergers for scale and efficiency.

✏️ Can new structures — and new investors—fix a fundraising dilemma?
Institutional Investor
Private asset fundraising declined 3.4% in the past year, but secondaries surged, raising a record $100B, a 31% increase YoY. Asset managers are adapting with evergreen funds targeting HNIs, who could contribute $7T to private markets by 2033. Expanding access to 401(k) plans, holding $25T, is a key focus. If 5% of $450T of global wealth shifts to private assets, it could add $20T, underscoring significant growth potential for private markets.

✏️ Why gold is shining bright in retail portfolios
Institutional Investor
Retail investors are increasingly turning to gold for its versatility, liquidity, and accessibility, driven by the availability of smaller-sized contracts like Micro Gold (MGC) futures. Gold and crypto, often seen as rivals, can complement each other as traders explore both assets for diverse strategies. The introduction of even smaller contracts, such as 1-Ounce Gold futures launching in 2025, further enhances accessibility, allowing investors to tailor their portfolios.

✏️ Is it a golden era for gold?
JP Morgan
With central bank purchases at record levels, increasing retail interest, and geopolitical uncertainties, gold prices are projected to reach $3,150/oz by end-2025. Its low correlation with equities and bonds enhances risk-adjusted returns, making it a key asset for long-term investors seeking stability and diversification.

📜 2025 Outlook and Periodicals »

📝 Cross Asset Investment Strategy December 2024 (Amundi)

📝 2025 Outlook: Long-term perspective on markets and economies (Capital Group)

📝 2025 Perspectives, Optimism through the obstacles (Principal AM)

📝 2025 Outlook: Seizing opportunity amid disruptive change (Impax AM)

📝The road ahead: 2025 private markets outlook (LGIM)

📝 Outlook for 2025 - Glass still half full (KKR)

📝 6 Key Themes - 2025 (MFS)

✏️ A semblance of a goldilocks ahead (Amundi)

✏️ Multi-asset investment views - December 2024 (Schroders)

✏️ The Investment Outlook 2025 (Abrdn)

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PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

📝 Demystifying the opportunity in investment grade private credit
Apollo Global
Investment Grade Private Credit is a rapidly growing asset class with a $40T addressable market, offering attractive risk-adjusted returns, higher spread premia, and lower historical losses. Evolving beyond corporate private placements, it now includes diverse sectors like asset-backed finance and bespoke loans, providing senior security and diversification.

📝 Private Credit: An enduring opportunity in dynamic market cycles
Apollo Global
Private credit continues to see strong demand due to its customization, speed, and senior-secured structure, offering attractive yields and incremental spreads over public credit. The sector benefits from M&A growth, less stringent regulations, and resilience in volatile markets. Large-scale direct lending to established businesses remains a key opportunity.

TVJ Spotlight 🔦

✏️ Asset-Based Credit: Easy As 1-2-3
TPG
Asset-Based Credit is a $30T market offering diversified, collateralized cash flows from assets like mortgages, consumer loans, and receivables. Unlike corporate lending, it features self-liquidating structures, lower tail risk, and reduced correlation with traditional credit markets. Significant opportunity present in areas like home equity lines of credit (HELOCs), driven by high home equity and elevated mortgage rates.

✏️ 2025 Private Credit Outlook
Morgan Stanley
Private credit expanded to $1.5T in early 2024, up from $1T in 2020, and is projected to reach $2.6T by 2029. Sponsored middle-market loan activity has remained resilient, driven by demand for incremental financings and $1.6T in PE dry powder. Borrowers increasingly value private credit's speed, certainty, and flexibility amid tighter bank lending. Key growth areas include asset-based finance, hybrid capital for growth companies, and real estate lending.

✏️ Real estate credit: Poised to outperform
TPG
$570B in commercial mortgages maturing in 2025, requiring refinancing, elevated interest rates and a $2T CRE debt maturity wall through 2026 have created a financing gap as traditional lenders retreat, with active CRE lenders down over 30% in the past year. Private real estate credit is well-positioned to step in, offering attractive yields, enhanced downside protection from valuation resets, and favourable relative spreads vs corporate credit.

✏️ The case for euro credit
BNY Investments
Euro-denominated investment-grade credit markets offer compelling opportunities despite 2024’s spread compression. €750B+ in fiscal stimulus in Southern Europe, real GDP expansion, a boom in corporate issuance and high-interest coverage ratios at 14x provide a solid backdrop for active managers to exploit relative-value trades and yield strategies.

✏️ Emerging markets debt under Trump 2.0
Neuberger Berman
Fundamentals have strengthened, with emerging market’s high-yield corporate default rates down to ~3% from double digits in 2022. EMD high-yield spreads offer 100 bps more than US high-yield bonds, supported by robust reforms, improving credit ratings, and fiscal adjustments. Relative value opportunities in sovereigns like Ivory Coast and corporates like Argentina offer strong potential for outperformance in 2025.

📜 2025 Outlook and Periodicals »

📝 2025 outlook- Navigating a shifting landscape- Direct lending (Barings)

📝 Fixed income outlook: resilient US provides an anchor (Capital Group)

📝 2025 Fixed income outlook: Setting the pace (Nuveen)

📝 Quarterly Credit Outlook December 2024 (Robeco)

📝 Global fixed income views (JP Morgan)

✏️ 2025 credit outlook: Changing of the guard (Man Institute)

✏️ Fixed income outlook 2025: Managing uncertainty with flexibility (Abrdn)

🎙 From cash to bonds: A strategic shift in post-pandemic investing (PIMCO)

🎙 Private credit: Asset-based finance shines as lending landscape evolves (PIMCO)

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PRIVATE EQUITY

✏️ 2025 Private Equity outlook
Morgan Stanley
PE is focusing on value creation and operational enhancements to drive EBITDA and profit growth. Global PE dry powder is expected to surpass $1.6T by year-end 2024. IPO activity remains muted, increasing demand for growth equity as VC-backed companies stay private longer, creating opportunities for mid-market firms with scalable value creation potential.

📝 State of private markets: Q3 2024
Carta
Valuations continue to face pressure, with IPO activity subdued, especially among unicorns with $1–5B market caps. Pre-seed funding remains a key area of focus, reflecting resilience in early-stage investing. Global fundraising slowed, with terms becoming more stringent, but substantial dry powder suggests potential for future growth.

✏️ Is/isn’t the number of venture funds shrinking?
Stepstone
The VC landscape shows signs of consolidation post the high-velocity period of 2020–2021. First-time fund formation peaked in 2022 with 804 funds but declined sharply to just 21% of that peak by 2024 YTD. 41% of funds raised since 2000 never raised a subsequent fund, with recent vintages like 2019 showing a 47% non-retention rate. However, resilience remains critical; successful turnarounds highlight the potential for adaptability in VC.

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SECTOR FOCUS

Real Estate x Infrastructure

✏️ How is the AI building boom fueling opportunities in private energy infrastructure?
JP Morgan
The US data center capacity is undergoing a massive expansion, with 3,800 MW under construction, a 70% rise YoY, and an additional 7,000 MW in pre-construction stages. As AI adoption surges, data centers face grid constraints. By 2027, 40% of AI data centers may face operational limits due to power shortages. Private infrastructure investments in power generation and data center support are emerging as lucrative, lower-volatility alternatives.

✏️ Key trends to watch as real estate levels out
Goldman Sachs
The real estate market is showing signs of recovery after three years of dislocation, with CMBS issuance up 180% in 2024 and RE transaction volumes increasing 14% YoY in Q3. Rental housing demand remains resilient, and construction starts for logistics and housing assets are down over 50% from their peak. Over $3T in RE debt needs refinancing in the next 4-5 years, presenting opportunities for private credit funds. E-commerce, AI, and demographic shifts continue to drive sector-specific growth in logistics, healthcare, and sustainable buildings.

✏️2025 Real estate outlook
Morgan Stanley
NOI growth and lower yields are driving a positive outlook, with equity REITs outperforming private valuations. Industrial assets in high-growth, supply-constrained markets and housing segments like multifamily and senior housing present compelling opportunities. Market dislocation, structural demand shifts (e.g., e-commerce and ESG retrofits), and $3T in pending debt maturities are key factors shaping investment strategies.

✏️ Private infrastructure: An asset class for all economic conditions
KKR
Private infrastructure has outperformed all asset classes (except PE) over the last decade and proved effective during high inflation periods. With $3T in global AUM, it has shown lower volatility and higher risk-adjusted returns than public markets. It supports critical sectors like renewable energy, data centers, and logistics, addressing long-term growth trends.

✏️ Infrastructure: How investors can improve your quality of life
Abrdn
Infrastructure investment is surging globally, with spending forecasted to exceed $9T by 2025, driven by energy transition, urbanization, and demographic shifts. Private capital is crucial, with insurers alone increasing their allocation to infrastructure from 1.5% in 2019 to 2.5% in 2023. Infrastructure offers long-term, inflation-linked returns and aligns with tech-driven growth areas like data centers and clean energy.

✏️ The future of data centers: Trends, challenges and real estate opportunities
Institutional Investor
The growing demand for data centers is driven by cloud computing, AI, and big data, with global data volume expected to grow from 33 ZB in 2018 to 175 ZB by 2025. Data center supply is projected to grow at ~10% p.a. through 2028, yet vacancy rates remain low, supporting 10% annual revenue growth per foot for hyperscale centers over the next 3 years.

✏️ Powering up: Macquarie asset management's focus on green investments
Macquarie
The renewable energy sector is experiencing unprecedented growth, driven by stabilizing costs, strong policy support, and surging demand for green power from corporates and industries. Global clean energy investment reached $1.9T in 2023, outpacing fossil fuels, with solar and wind leading new electricity supply due to their low costs and speed of deployment.

AI x Tech

📝 Driving change: Autonomous vehicles revisited
Morgan Stanley
Autonomous vehicle technology is rapidly advancing, with US on track to realize significant benefits from its adoption. In 2023, trucks logged 180B miles in the US, and autonomous trucking could reduce costs to $0.65–$0.85 per mile, creating a $115–$150B addressable market. The robotaxi market also shows promise, with Tesla targeting costs of $0.40 per mile. Proper adoption offers opportunities in safety, cost efficiency, and urban planning.

✏️ Digital Assets: Trump comeback to usher in new era of financial innovation
Abrdn
Donald Trump's election has fueled optimism in cryptocurrencies, with Bitcoin surpassing the $100,000 mark amid expectations of a more crypto-friendly regulatory framework. Anticipated institutional adoption, such as through spot Bitcoin ETFs and potential US Treasury Bitcoin purchases, signals market growth. This regulatory shift enhances global competitiveness while driving broader adoption of tokenized assets and public blockchains.

✏️ The state of the AI Agents ecosystem: The tech, use cases, and economics
Insight Partners
The adoption of AI agents/tools is gaining traction across industries, revolutionizing workflows through automation, enhanced user experiences, and task-specific capabilities. Enterprises are exploring agentic architectures for customized, scalable solutions, balancing trade-offs between internal builds and external purchases. Major opportunities in infra and verticalized platforms are driving the next phase of private credit and enterprise innovation.

✏️ Financial services has a data problem: How AI is fueling innovation
Insight Partners
The financial services sector faces critical data challenges due to legacy infrastructure, data silos, and regulatory demands, compounded by the rise of AI-driven personalization and stricter compliance. Startups are reshaping the landscape by offering AI-powered tools for front-office analysis, middle-office data integration, and back-office automation, enhancing efficiency, compliance, and decision-making while modernizing operational workflows.

✏️ Private biotech: Immunology and inflammation’s third wave
Wellington Management
The immunology and inflammation sector is advancing into a promising third wave of innovation, driven by novel drug modalities, genomic insights, and repurposed tech. Emerging therapies target chronic diseases with enhanced efficacy and patient benefits, attracting strong investor interest through M&A, IPOs, and private financings.

The Valt Journal Library

Disclaimer:

The content provided on this platform contains references and links to external sources, including articles, reports, websites, images, or videos. We do not own or claim copyright over the content found in these external sources. The ownership and rights of the content belong to the original creators.

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and affiliated persons and companies assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Hi, welcome to the new edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else!

Check out TVJ Spotlights 🔦 including 1) Guide to Alternatives 4Q 2024 (by JP Morgan); 2) GCC private equity: Where to next? (by Arcapita); 3) Optimizing private credit investment – benefits of a multi-strategy approach (by LGT Capital)

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1,600+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

Quickly scan the list of all reports in this edition here!

PRIVATE MARKETS AND ALTERNATIVE ASSETS

TVJ Spotlight 🔦

📝 Guide to Alternatives 4Q 2024
JP Morgan
This guide outlines opportunities across private equity, infrastructure, real estate, and private credit, highlighting their resilience and diversification potential in volatile markets. It emphasizes strategic asset allocation, the importance of private markets for long-term growth, and the evolving dynamics of alternative investments in response to macroeconomic changes.

📝 2025 Global Outlook: Building the transformation
BlackRock
BlackRock emphasizes the impact of mega forces like AI and the low-carbon transition, reshaping economies beyond traditional business cycles. Their three themes focus on financing the future through capital markets, rethinking investing with more thematic and tactical approaches, and staying pro-risk with a stronger focus private markets & infra.

📝 Global wealth investment playbook 4Q 2024
KKR
Elevated inflation volatility is increasing stock-bond correlations, pushing investors towards diversifying into real assets like infra and real estate for inflation-linked cash flows. PE continues to offer the highest returns, with a focus on value creation, secular trends, and resilient sectors like securitization, workforce productivity, and high-end consumer markets.

📝 Private Markets Outlook 2025: Building value in a 'brave new world'
Partners Group
Private equity and credit stand to benefit from easing interest rates, while infrastructure and real estate require strategic navigation of geopolitical and interest rate challenges. Emerging asset classes like royalties offer diversification and inflation-resistant growth, making them valuable additions to portfolios.

✏️ The future of private wealth in alternatives
Permira
Private wealth investors are increasingly drawn to private markets due to their high returns, diversification, and high-growth potential, driven by generational wealth transfer and innovative structures. Individual investors held ~50% of global wealth in 2022 ($140-150T) with institutional investors holding ($135-145T). However, individuals account for ~$4T in alternative AUM with average allocations of 3-5% against a typical target allocation of 20%+.

✏️ How might policy changes impact alternative investments?
JP Morgan
Key opportunities, amid high-for-longer rate environment, include increased demand for private infrastructure and benefits for non-bank lenders, while risks include higher financing costs and volatility affecting real estate and private credit. Investors should stay alert to policy shifts while leveraging alternatives for alpha, income, and diversification.

✏️ The quiet revolution in private markets
Morgan Stanley
Semi-liquid funds are revolutionizing private markets by offering greater accessibility, liquidity, and operational efficiency, making alternatives investing viable for wealth managers and individual investors. These structures, especially suited for private credit, balance liquidity needs with the advantages of private markets exposure, democratizing access and meeting the growing demand for innovative investment vehicles.

📜 Periodicals »

📝 2025 outlook: private markets shine bright (Amundi)

📝 Global investment outlook 2025 (Northern Trust)

📝 2025 Year-Ahead Investment Outlook (JP Morgan)

✏️ Outlook 2025: Income, returns and resilience (Schroders)

The Valt Journal Library

PRIVATE EQUITY

TVJ Spotlight 🔦

📝 GCC private equity: Where to next?
Arcapita
The Gulf PE ecosystem has grown significantly, with AUM increasing from $1B in 2008 to $12-15B in 2024, driven by robust economic growth, regulatory reforms, and diversification into sectors like tech, fintech, and essential business services. Opportunities for PE investors are further supported by generational transitions in family-owned businesses, increased outsourcing, and the presence of multinational GPs.

📝 Business transformation draws investors to Japan’s private equity
Adams Street
Corporate reforms, digitization, and shareholder activism are driving opportunities for PE in Japan, including take-private deals and overseas expansion. Japan's PE deal value reached c.$35B in 2023 and fundraising outpaced regional peers, supported by favorable valuations, cultural alignment, and founder-led companies embracing PE as an exit option.

📝 Seizing growth opportunities in cross-border funds
State Street
Luxembourg and Ireland have solidified their positions as leading global fund hubs, managing €5.5T and €4.8T in cross-border funds in 2023, accounting for 95% of Europe's market. Their appeal lies in robust ecosystems, leadership in ETFs and private markets, and advancements in innovation and tech, ensuring their continued dominance in European fund markets.

📝 Buyouts - Navigating the ‘bottom of the iceberg’
TPG
The report discusses narrowing valuation gaps, improving macro conditions, and evolving fundraising dynamics. $385B has been raised for PE funds in 9M 2024, with 56% secured by buyout funds. Despite increased deal activity and normalization of yields, significant hurdles remain, including pressure on GPs for liquidity. Experts highlight a rebound in exits and a strategic shift toward growth-oriented operational capabilities and creative deal structures.

📝 The opportunities across PE’s current liquidity landscape
Neuberger Berman
The current PE market presents opportunities for experienced liquidity providers to address challenges like higher capital costs, reduced exits, and slow fundraising cycles. Key strategies include mid-life equity co-investments, GP-led continuation funds, and custom capital solutions, which offer attractive risk-adjusted returns by providing liquidity, supporting portfolio growth, and facilitating distributions in a constrained environment.

📝 Responsible investing in private equity
Amundi
Global PE AUM is expected to reach $8.5T by 2028. PE and responsible investing align through long-term investment horizons, enabling PE to drive responsible transformation in portfolio companies. Research highlights PE's positive impact on sustainable innovation, growth, and climate transition, positioning it as a critical driver of responsible businesses.

📝 1,000 words or less: Introduction to private equity
Stepstone
PE offers an attractive alternative for diversification, capital preservation, and superior returns, with average outperformance of public markets by 500+ bps over four decades. PE strategies like VC, leveraged buyouts, and growth equity cater to various risk-return profiles, while innovations like evergreen funds are making PE more accessible to individual investors.

📝 Creating value with AI: The race is on in private equity
Bain
A Bain survey on PE reveals increasing interest in GenAI, with most investors expecting significant value within three years. However, challenges such as limited AI readiness, data compatibility, and management expertise hinder progress, as 70% of investors backed out of AI-related deals in the past year. While 20% of portfolio companies are starting to realize AI benefits, many are still in early testing or development stages.

✏️ NFL punches above its weight class in the private equity market
Institutional Investor
The NFL's decision to allow PE firms to acquire up to 10% of its teams has sparked significant interest, with projected PE transactions reaching $12B over the next five years. NFL franchises are highly attractive due to their cultural prominence, surging valuations, and lucrative media rights. PE firms and institutional investors see long-term opportunities in media content, real estate, and international expansion, driving interest in this niche market.

✏️ Hands-on operational improvement key to creating alpha in the middle market
Institutional Investor
The PE landscape now demands a hands-on approach to portfolio operations to drive profitability and equity value amidst higher borrowing costs. Successful firms integrate investment and operating teams from the thesis stage through execution, focusing on strategic planning, operational improvements, and ongoing support to create scalable, durable businesses and achieve sustainable growth in a competitive market.

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PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

📝 Optimizing private credit investment – benefits of a multi-strategy approach
LGT Capital
Private credit has grown rapidly to $1.7 trillion in AUM by 2023, driven by banks retreating from mid-market lending and evolving regulations. This diverse asset class includes strategies like NAV financing, risk-sharing transactions, and a burgeoning secondary market, offering opportunities for alternative lenders to meet the ongoing demand for financing.

📝 How to make sense of emerging market debt in a global portfolio
Principal Asset Management
EMD is poised for a strong recovery in 2025, supported by easing monetary policies, stable commodity prices, and resilient growth outside China. Despite recent under-ownership due to past volatility, favorable fundamentals, attractive income streams (7-9% potential), and improving global conditions create a compelling case for strategic reallocation to EMD.

📝 How private debt is developing and why investors are looking for quality
Nuveen
Private debt is evolving with innovations like infrastructure credit and Property Assessed Clean Energy (PACE) financing, which offer diversification and stability through structural protections and collateral. Investors favor investment-grade opportunities due to attractive yields, reduced risk, and yield enhancements from liquidity premiums.

✏️ How insurers can harness prime opportunities within direct lending
M&G Investments
Direct lending has grown significantly, driven by banks' retreat from mid-market lending and evolving private credit structures. The conservative end of the mid-market presents attractive opportunities, offering strong returns on capital, stable pricing, and lower risk amid competition. ESG integration and a selective approach are crucial as the market evolves.

✏️ A tale of two markets - The impact of scale on credit risk
Man Institute
The direct lending market has expanded, with segmentation between upper and core middle markets based on borrower size. While larger borrowers face competitive pricing and looser terms, the core middle market offers higher yields, stronger covenants, and lower defaults. Effective credit selection, risk management, and a focus on smaller borrowers are critical.

✏️ What does it take to excel in credit investing?
Robeco
A contrarian investment strategy in credit markets capitalizes on inefficiencies created by behavioral biases and fear-driven selling. By adding risk in undervalued, volatile markets and reducing it in overvalued conditions, this approach has consistently delivered outperformance. Examples include capitalizing on the 2020 pandemic and the 2023 bank debt selloff.

✏️ Almost every investor plans to boost bonds
Institutional Investor
Investors are increasing fixed-income allocations, driven by attractive bond yields and strategic rebalancing from equities after years of strong stock performance. Diversifying beyond traditional bonds to assets like inflation-linked bonds, real estate, and commodities is recommended to address future challenges and hedge against inflation.

✏️ BondBloxx, Virtus crack open the market for private credit ETFs
Institutional Investor
Two innovative ETFs targeting private credit have launched, offering retail investors access to a sector traditionally reserved for institutions. BondBloxx’s ETF invests in diversified middle-market CLOs, while Virtus targets undervalued AAA-rated private credit CLOs. Despite growing interest in private credit, these funds face challenges like illiquidity and valuation complexities, though they aim to provide transparency and tradability.

✏️ Time to increase your allocation to credit?
LGIM
The shift towards credit investments is driven by the pursuit of yield and evolving endgame strategies like buy-in, buyout, and run-on. Despite credit spreads being at multi-year lows, schemes and insurers are cautiously adjusting allocations while considering the trade-off between waiting for spreads to widen and capturing current carry.

✏️ Fixed income: Eat meat or die…
Abrdn
Donald Trump’s second term is expected to drive pro-growth US policies like tax cuts and tariffs, potentially increasing inflation and keeping US Treasury yields elevated, especially for long-term bonds. In contrast, Europe faces economic pressures but could respond with increased defense spending and investment, while the UK’s fiscal plans remain uncertain.

📜 Periodicals »

✏️ Outlook 2025: Fixed income (Schroders)

✏️ High yield monthly update (Nomura)

🎥 The long and growing runway for private credit (Blackstone)

🎙Private Credit: Market dynamics heading into 2025 (TCW)

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SECTOR FOCUS

Real Estate x Infrastructure

📝 Turning the corner? Commercial real estate themes for 2025
PIMCO
The commercial real estate market shows early signs of recovery, with rate cuts stimulating activity, particularly in sectors like multifamily housing. While valuations have likely bottomed for Class A properties, challenges persist for Class B and C assets. Investors are advised to focus on debt opportunities, residential properties, and niche areas like data centers, while exercising caution in sectors like life sciences and weaker office markets.

📝 Infrastructure 2025 Outlook
UBS
The report highlights a favorable macro environment for private infra investments, with resilient economic growth, declining interest rates, and moderate valuations. While popular sectors like renewables and digital infrastructure attract investor attention, undervalued areas such as utilities, transportation, and infrastructure debt offer potential opportunities.

📝 Real estate investment enters a new era
Nuveen
Alternative real estate sectors, driven by global megatrends like digitalization and aging populations, offer unique opportunities. Data centers, senior living, and medical outpatient facilities are benefiting from rising demand, while traditional office and retail sectors face challenges from hybrid work and e-commerce. Investors should focus on selective opportunities, such as suburban multifamily housing and grocery-anchored retail.

📝 Infrastructure for powering portfolios
Nuveen
The S&P 500 is on track for a strong year, but risks like persistent inflation and reduced housing supply loom large. Upcoming economic data and potential policy shifts under the new Trump administration could impact markets. Investors may benefit from resilient asset classes like real assets, which offer diversification, income, and inflation hedging.

📝 Global real estate outlook 2025: A new chapter begins
M&G Investments
Real estate investments are gaining appeal as global markets stabilize and enter recovery, offering attractive returns driven by lower entry prices and strengthening rental growth. However, success hinges on selecting the right assets in favorable locations, leveraging structural sector trends, and repositioning weaker assets early in the cycle to capitalize in 2025.

✏️ Key infrastructure themes for the year ahead
Hamilton Lane
Infrastructure offers opportunities in middle-market assets with attractive valuations and potential for value creation. Secondary and co-investment transactions are gaining traction, offering near-term realizations and strong long-term returns, while regions like North America and Western Europe remain key areas of focus. The market is expected to grow significantly over the next decade, with increasing specialization and a more robust manager landscape.

✏️ The space industry is booming. Manufacturers must catch up.
BCG
The global space economy is projected to exceed $1T by 2040, creating significant opportunities for manufacturers of satellites, rockets, and other space components. To meet growing demand, firms must address challenges in strategy, talent, design, supplier collaboration, and operational efficiency, enabling higher production volumes, cost reductions, and faster turnaround times.

AI x Tech

📝 Fintech’s powerful momentum: 10 key charts
Robeco
The fintech sector is experiencing a robust recovery in 2024, driven by global consumer penetration in payments and financial services and a resurgence in capital markets activity. With key M&A deals, new IPO plans, and new unicorns emerging, the fintech ecosystem is poised for significant growth, offering diverse investment opportunities.

✏️ Harnessing the power of AI to enhance investment decision-making
Goldman Sachs
The integration of AI in investment processes enables investors to analyze vast, complex datasets, uncovering actionable insights and improving decision-making. By combining traditional metrics with innovative AI-driven analysis, strategies like sentiment analysis from earnings calls and thematic linkages across stocks provide a more comprehensive understanding of companies and market trends, enhancing alpha generation.

✏️ Consumer building blocks in the age of AI
Lightspeed
The evolution of consumer technology has accelerated with AI as the defining force of the current supercycle. Lightspeed is realigning its Consumer investing team to focus on AI-driven opportunities across sectors like media, health, finance, and gaming. Managers aim to deepen cross-sector collaboration and expand their portfolio of AI-native companies.

✏️AI-enabled disruption in fintech
Lightspeed
Fintech leaders discuss AI's current challenges and opportunities, noting progress in AI's ability to process data but highlighting remaining limitations. Startups have an edge in agility, while incumbents leverage ecosystem strengths. Emerging opportunities lie in optimizing workflows and HR tasks, but staying ahead of copycat competitors is crucial for innovation.

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Disclaimer:

The content provided on this platform contains references and links to external sources, including articles, reports, websites, images, or videos. We do not own or claim copyright over the content found in these external sources. The ownership and rights of the content belong to the original creators.

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and affiliated persons and companies assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Hi, welcome to the new edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else! Clicking the headlines is all it takes.

Check out TVJ Spotlights 🔦 including 1) Historical outperformance of private equity (by BlackRock); 2) Venture capital landscape (by UBS); 3) Unlocking the future of portfolio management for RIAs (by KKR)

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1,500+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

As the year end comes closer, top global firms have released their 2025 investment outlook reports. Check out our special section on Investment Outlook 2025 below.

Quickly scan the list of all reports in this edition here!

PRIVATE EQUITY

TVJ Spotlight 🔦

📝 Historical outperformance of private equity
BlackRock
PE managers draw capital gradually and distribute returns as investments exit, making cash flow timing crucial. PE offers above-market returns, unique access to private firms, portfolio diversification, and incremental alpha through tactical strategies like secondaries and co-investments, enhancing risk-adjusted performance.

📝 Where does competitive edge exist in the secondary market?
Adams Street
Competitive advantages persist in the evolving secondary market, particularly for buyers with strong primary platform relationships and a focus on fundamentals. Mid-sized and small-market funds offer attractive opportunities in an undercapitalized segment, creating favorable dynamics for targeted, quality-focused secondary buyers.

TVJ Spotlight 🔦

✏️ Venture capital landscape
UBS
Venture capital is driving innovation and economic growth globally, with Europe rapidly developing hubs like "Swiss Valley" and "Silicon Canals." Switzerland excels in healthcare and biotech, while Amsterdam and Sweden focus on sustainability and tech. With $47.2 billion in dry powder, European VC is expanding into emerging markets and sectors like health tech, climate tech, and ESG-driven startups, presenting significant opportunities.

✏️ Private Equity 2025 Outlook: Soft landings into dry powder
Schroders
Schroders highlights the resilience of small and mid-cap PE during volatile periods. During Dec 2021 to Dec 2022, buyout funds delivered a 6% return, outperforming the Nasdaq and MSCI indices, which saw declines of 32% and 18%, respectively. This performance is attributed to factors like committed capital allowing firms to hold assets during crises, a focus on less cyclical industries such as healthcare and tech, and active management.

✏️ The evolving role of private equity in diversified portfolios
UBS
PE has gained prominence as a core portfolio component due to its historical outperformance of public markets, driven by operational control, longer horizons, and active management. As allocations grow across institutional and retail investors, PE continues to attract interest for its unique return profile and active management opportunities.

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PRIVATE MARKETS AND ALTERNATIVE ASSETS

📝 Asset management outlook 2025: Reasons to recalibrate
Goldman Sachs
Key themes include opportunities in bonds, diversified equities, private markets, and alternative assets, alongside navigating the evolving impacts of AI, geopolitics, and supply chain changes. Middle-market strategies may provide the most attractive balance among upside potential from active management in PE, scalability of value creation initiatives, downside mitigation in turbulent times and a flexible, multi-dimensional exit strategy.

TVJ Spotlight 🔦

✏️ Unlocking the future of portfolio management for RIAs
KKR
RIAs have a growing focus on private market investments with key themes including increasing allocations to PE and infrastructure, embracing flexible investment structures, overcoming operational challenges like manager selection and client education, and prioritizing tax efficiency. RIAs are leveraging innovative strategies and partnerships to navigate complexities and position portfolios for long-term growth.

✏️ Saudi Arabia: Transformation underway
BlackRock
Saudi Arabia's Vision 2030 seeks to diversify its oil-reliant economy by attracting $3.3T in investments across energy, infrastructure, and tourism, supported by its young workforce and abundant resources. The kingdom's demographic strengths and low-cost energy production position it for long-term growth and investment opportunities.

📝 How do global portfolio investors hedge currency risk?
State Street
Currency hedging varies by investor domicile and asset class, with US investors and equity holders hedging less than their European and fixed-income counterparts. Hedge ratios are typically stable over time but evolve due to market factors and increased post-GFC hedging. These dynamics influence global FX demand along with changes in asset allocation.

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PRIVATE CREDIT x FIXED INCOME

📝 Navigating rate cuts with flexibility and a high-quality focus
PIMCO
Investors can pursue attractive inflation-adjusted returns in fixed income through active management to navigate volatility. Investors can target the 5-10 year yield curve with a neutral duration stance, emphasizing US agency mortgages due to favorable spreads, while maintaining a cautious approach to corporate credit amid tight spreads.

📝 Municipal bond deals: Let’s make a yield
Nuveen
Municipal bonds offer strong yields, with AAA-rated outperforming Treasuries and high-yield options reaching 9%+. Airports and water/sewage providers lead investment-grade opportunities, benefiting from strong demand and liquidity. In high-yield, health care shows recovery as operating margins stabilize, while land-secured deals thrive on robust housing demand, making municipals a compelling choice in the evolving economic landscape.

✏️ Why working capital finance matters
UBS
Working Capital Finance (WCF) supports global trade by bridging the $2T funding gap for suppliers and buyers through factoring and reverse factoring. Non-bank funders are stepping in to capture structural alpha, offering short-duration, self-liquidating assets with attractive risk-adjusted returns. Investors should leverage their expertise in credit underwriting and a robust due diligence process to optimize yields and enhance sourcing/pricing opportunities.

✏️ Selectivity - and size - matter in a growing ILS market
AXA Investment Managers
The Insurance-Linked Securities market is expanding rapidly, driven by record issuances ($12.3B of primary issuance in 1H2024), climate change, and the need for diversification. This growth enhances selectivity, with smaller managers often better positioned to focus on high-conviction opportunities. Offering unique diversification benefits, ILS remains resilient to interest rate changes, but success depends on expertise and careful risk assessment.

✏️ Infrastructure debt - a catalyst for net zero in the UK and Europe
Abrdn
Infrastructure debt is driving the transition to net zero by financing renewable energy, green transportation, energy-efficient buildings, and water security projects across the UK and Europe. With the growing demand for ESG-aligned investments ($131 trillion in investment is required globally to meet net-zero targets by 2050), it offers stable, long-term returns while channelling private capital to reduce emissions and support SDGs.

✏️ Private credit’s growth opportunities take shape
Abrdn
The private credit market includes diverse sub-asset classes like commercial real estate lending, fund finance, and infrastructure debt. High-conviction areas include investment-grade private credit, commercial real estate lending and ESG-focused opportunities. With evolving investor bases, including insurers, credit secondaries, and emerging demand in Asia-Pacific, private credit offers attractive risk-adjusted returns in a growing market.

✏️ Negative correlations, positive allocations
PIMCO
US equities and high-quality fixed income offer strong return potential, supported by a negative correlation. Strategic use of options, inflation-linked bonds, and quantitative techniques can help manage risks and optimize returns. By focusing on core high-conviction positions, investors can build resilient portfolios to navigate evolving risks and opportunities.

✏️ Time for bond investors to take the wheel?
UBS
Bond investing requires a dynamic and flexible approach in current macroeconomic environment. Static allocations may limit opportunities, while active management leveraging fundamental analysis can help investors navigate risks, capitalize on sector-specific and issuer-level insights, and adapt to changing market conditions for optimal returns.

📜 Periodicals »

📝 Fixed income perspectives 4Q 2024 (Principal Asset Management)

✏️ Emerging market debt 2024: Review and Outlook (Abrdn)

🎙 The evolution of asset-backed finance (Oaktree)

🎥 Finding an active edge in global bonds (PIMCO)

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SECTOR FOCUS

Real Estate x Infrastructure

📝 Global real estate outlook 2025
Colliers
Lower interest rates in 2025 are set to boost market momentum and transaction volumes. Prime offices attract capital, while secondary markets offer value-add opportunities. High construction costs limit supply, and data centers thrive. Family offices grow, and a shift from credit to equity structures like M&A is expected.

✏️ European real estate: Fortune favors the brave
KKR
Markets are recovering following a significant repricing, creating opportunities for investors to acquire high-quality assets at attractive valuations. With financing activity increasing, capital scarcity, and reduced competition, sectors like logistics, multifamily, and student housing are poised for growth, offering value-add returns in the early stages of the recovery cycle.

✏️ Korean wave: build-to-rent opportunities in Seoul
Abrdn
Seoul's build-to-rent market is gaining traction, driven by high housing costs, limited supply, and shifts from Jeonse (large deposits) to Wolse (monthly rents). Institutional BTR landlords, especially in co-living projects, benefit from demand for affordable, fraud-resistant housing, offering quicker returns and higher flexibility compared to youth housing developments.

✏️ Investing in the Real Estate recovery
KKR
The current real estate market offers compelling opportunities due to bottomed-out property values, strong fundamentals, and falling interest rates. With demand trends in rental housing, industrial spaces, and private debt, investors can benefit from diversified returns, inflation protection, and favorable entry points, positioning portfolios for the next upcycle.

✏️ Constructive on equipment rental
Impax Asset Management
Non-residential construction spending in the US has surged 45% over three years, driven by investments in manufacturing, infrastructure, and clean energy projects. Equipment rental services are poised to benefit, offering cost-effective, flexible solutions while supporting the growing onshoring movement in critical industries like semiconductors and EVs.

✏️ The digital power problem
KKR
The convergence of digitalization and the energy transition presents significant investment opportunities, driven by rising energy demands from data centers and other digital infrastructure like fiber networks and wireless towers. Solving the digital power problem will require large-scale investments in energy generation, transmission, and innovative tech.

Energy Transition x Climate Finance

📝 Key takeaways from COP16 for natural capital investors
Nuveen
Key takeaways include increased corporate engagement in nature-positive practices, market-based solutions like carbon and biodiversity credit frameworks to scale private investment, innovative financing mechanisms such as green bonds and sustainability-linked loans. Opportunities exist for private capital in land-based investments to combat biodiversity loss.

✏️ Transition indicators in action: clean energy infrastructure
Nuveen
The energy transition is shaped by key indicators like trade policies, corporate carbon reduction, climate technology funding and government subsidies. Corporations sign long-term clean energy agreements to meet sustainability goals, creating stable revenue for providers. Advances in climate tech are accelerating renewable energy integration and unlocking future opportunities like floating offshore wind projects.

AI x Tech

📝 The AI maturity matrix
BCG
AI is poised to significantly shape future economic development, with global AI spending projected to exceed $632 billion by 2028. BCG’s AI Maturity Matrix evaluates 73 economies based on their exposure to AI-driven disruptions and readiness to harness its potential, identifying six archetypes of AI adoption to guide policymakers in maximizing growth.

📝 2024 sales benchmark report
Lightspeed
Lightspeed's report reveals key trends from a survey of 154 portfolio companies. Founder-led sales dominate in companies with under $5M in revenue, with 93% lacking dedicated sales reps. Sales performance improved, with 65% hitting or exceeding targets in 2024, up from 39% in 2022. High-value deals now have longer sales cycles, with 100% of $250K+ deals taking over six months to close, while smaller deals close in 3 months.

✏️ How computational care is critical to next wave of healthtech
Insight Partners
Experts call for user-centric, clinically validated solutions like Kintsugi and Unobravo that simplify care delivery and improve patient outcomes, especially for underserved populations. Barclay also highlighted the importance of validation, scalability, and empathy-driven innovation to rebuild care delivery models and create lasting value in healthcare ecosystems.

✏️ Data centers
UBS
Data centres, critical for supporting growing digital demand, face scrutiny over their environmental impact, with energy use and heat emissions as major concerns. The sector is evolving with AI-driven growth, hybrid cooling technologies, and heightened emphasis on sustainability, including community heat network integration.

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INVESTMENT OUTLOOK 2025

📝 2025 year-ahead investment outlook (JP Morgan)

📝 2025 Investment Outlook (Amundi)

📝 Emerging markets: Election uncertainty shifts to policy uncertainty (TCW)

📝 2025 investment outlook: After the landing (Invesco)

📝 EMEA Investment Outlook 2025: Pushing the boundaries (JP Morgan)

📝 2025 Investment Outlook: Building on strength (JP Morgan)

📝 2025 Global Market Outlook: Investing during transition (T. Rowe Price)

📝 Investment Outlook 2025 – Opportunities in a volatile world (BNP Paribas)

📝 Year Ahead 2025: Roaring 20s – The next stage (UBS)

📝 2025 Outlook: This is not a landing (Robeco)

📝 Investment Outlook 2025: Fragmented resilience (UBP - Union Bancaire Privée)

📝 Investment Outlook 2025: Time to deliver (Barclays)

✏️ 2025 Thematic Outlook: AI and geopolitics forge new paths (BlackRock)

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Disclaimer:

The content provided on this platform contains references and links to external sources, including articles, reports, websites, images, or videos. We do not own or claim copyright over the content found in these external sources. The ownership and rights of the content belong to the original creators.

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and affiliated persons and companies assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Hi, welcome to the new edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else! Clicking the headlines is all it takes.

Check out TVJ Spotlights 🔦 including 1) Hares beware: Future proofing credit (by KKR); 2) Infrastructure secondaries at an inflection point (by Partners Group); 3) Real estate liquidity insights: An analysis of fund-level cash flows (by Stepstone)

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1,500+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

Quickly scan the list of all reports in this edition here!

PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

📝 Hares beware: Future proofing credit
KKR
KKR emphasizes on persistence, consistency, and a disciplined approach over-reactive strategies. In uncertain markets, prioritizing steady, diversified credit portfolios and focusing on long-term resilience over short-term gains is key. Demand for Reinsurance ($7T asset-intensive market) has been amplified by structural shifts in the global credit markets.

📝 Performing credit quarterly 3Q 2024
Oaktree
Oaktree's Q3 2024 report discusses shifts in the credit market, with a focus on opportunities in asset-backed finance (ABF) as traditional banks reduce exposure due to regulatory pressures. The report highlights strong performance across various credit sectors, including high-yield bonds and emerging market debt, and suggests that investors consider a diversified credit portfolio to navigate rising interest rate uncertainty and geopolitical risks.

📝 Utilising securitised credit within your asset allocation
HSBC Asset Management
Securitised Credit has outperformed other fixed income assets recently, offering benefits like diversification, yield enhancement, and low correlation to traditional asset classes, making it a valuable addition for multi-asset portfolios. Its floating-rate nature cushions against duration volatility, and regulatory improvements have strengthened the sector.

📝 Unpacking the $2 trillion wall of maturities
Principal Asset Management
Over the next three years, approximately $2T in commercial mortgages will mature, creating strong demand for refinancing capital. This "wall of maturities," primarily stemming from high 2021-2022 transaction volumes, presents investment opportunities in multifamily and industrial real estate, where demand is robust, and credit conditions favour lenders.

📝 Outlook for emerging markets corporate bonds: Why now?
HSBC Asset Management
Emerging Markets Debt is positioned for growth, with high yields, easing inflation, and central bank rate cuts creating a favorable environment. EM corporates are particularly attractive for long-term investors due to supportive global interest rate trends, improved governance in emerging markets, and strong fundamentals and technicals that enhance their appeal.

📝 Direct lending emerges alongside special situations in Asia
Bain Capital
Direct lending depends on lending to performing borrowers with strong resilient cashflows, with good governance rights and solid downside protection. Direct lending in Asia involves a host of different types of financing to a much wider range of borrowers, including sponsors, but also entrepreneur-owned businesses and large corporates. The Asian credit market remains predominantly bank-driven, often limiting funding options for SMEs.

📝 French public debt: On the rise again?
Natixis
France's public debt is expected to keep rising until at least 2029, projected to stabilize around 120% of GDP. Despite fiscal slippage and a deficit over 6% in 2024, the government aims to reduce the deficit to 5% by 2025 and below 3% by 2029, with fiscal consolidation efforts potentially setting debt on a more sustainable path.

📝 Municipal market: Bonds are acting like bonds again
Nuveen
With the expected rate cuts, municipal bonds are gaining appeal for their tax-exempt income, potential capital appreciation, and reduced downside risk. A steepening yield curve favours longer-duration bonds, offering higher income and total return, while short-term yields are expected to decline. Current high market yields make municipal bonds attractive.

✏️ Time to extend from cash to bonds?
BNY Mellon
As central banks initiate rate cuts, cash rates are expected to decline, while elevated longer-maturity yields present attractive opportunities for bond investors. Historically, easing cycles have benefited bond markets through income and potential capital gains, especially when actively managed to capture value through strategic allocation and credit selection.

✏️ Why are yields moving higher?
JP Morgan
Short rates are expected to trend lower due to declining policy rates, reducing cash-like investments' appeal. Rising yields and volatility are likely to stabilize around 3.75%-4.25% in the coming year. Investors might consider intermediate-duration fixed-income and shorter-term corporate bonds for attractive yields amidst tight spreads and low recession risks.

✏️The tide turns for emerging markets’ debt
Morgan Stanley
Emerging markets debt performed strongly in Q3 2024, driven by favourable macro conditions, Fed rate cuts, and strengthening EM currencies. High real yields and positive net inflows are expected to support EM debt, especially local currency debt. However, careful credit selection remains essential due to wide variations across countries and issuers.

✏️ Emerging market debt reflections following IMF-World Bank meetings
UBS
A "soft landing" for the US allows for an aggressive easing cycle that could support emerging markets (EM) through a weaker dollar and renewed capital inflows. EM debt sentiment has improved, with several countries achieving debt restructuring and reforms, while debt risks shift towards developed markets (DM) due to fiscal concerns.

✏️ Emerging market credit: Untapped growth
Robeco
Emerging market credit has shown resilience in 2024, supported by proactive EM central bank policies and the appeal of higher yields vs developed markets. EM credit is growing in institutional interest and offers unique opportunities through sustainable transition investments, diversification, and strong risk-adjusted returns. With EM companies often underrated, investors can find value and growth in this expanding asset class.

✏️ Outlook for the CLO market amid macroeconomic challenges
UBS
The CLO market is navigating a complex landscape influenced by rate cuts, heightened volatility, and shifts between syndicated loans and private credit. Japanese demand for CLOs remains strong despite recent volatility. Securing high quality syndicated loans is becoming more difficult, which could lead to a need for innovation with CLO structures

✏️Are bond investors ready for a US industrial revolution?
Wellington Management
The US economy may be on the brink of a new industrial revolution, driven by sustained capital spending in areas like AI, energy, and reshoring. This structural growth, coupled with resilient consumer spending, could lead to higher-than-expected economic growth, even if a mild recession occurs. The nature of the capex, resulting productivity gains and urgency and scale of the investments needed are some of the critical factors for these emerging sectors.

✏️ Can investment-grade private credit boost DB schemes ahead of buyout?
Abrdn
As defined benefit pension schemes prepare for buyout, they typically avoid private assets for liquidity reasons. However, investment-grade private credit could provide attractive yields, diversification, and lower risk vs public debt, esp. in commercial real estate and private corporate credit. With the right asset manager, schemes can structure these investments to align with their buyout timeline, capturing additional returns without compromising liquidity.

✏️ Reasons to believe: time for fixed income
Abrdn
Robust corporate fundamentals and resilient credit spreads support investment-grade and selective high-yield bonds, while sustainable bonds focused on climate initiatives offer long-term impact. Investors may benefit from strategies targeting high-quality short-term bonds or BBB and BB-rated bonds for risk-adjusted returns amid a favorable fixed income environment.

✏️ Beware of buying the dip in bonds
Neuberger Berman
Government bond yields have surged recently, and market dynamics suggest that yields may continue rising rather than stabilizing. Investors are advised to remain cautious on government bonds and corporate credit, favoring structured products like CLOs or MBS for better risk-adjusted returns amid expected downside volatility.

📜 Periodicals »

📝 Global fixed income weekly (Goldman Sachs)

📝 Credit market update Q3 2024 (Permira)

✏️ High yield monthly update (Nomura)

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PRIVATE EQUITY

TVJ Spotlight 🔦

📝 Infrastructure secondaries at an inflection point
Partners Group
The infrastructure secondaries market is poised for significant growth ($60B by 2030), driven by rising infrastructure AUM and greater adoption of secondaries. This evolving market favors mid-market investments, offering pricing advantages and unique diversification benefits but requires advanced underwriting expertise. Amid limited capital, a buyer’s market is emerging, providing attractive opportunities for investors.

📝 Venture Pulse Q3 2024
KPMG
In Q3 2024, global VC investment remained subdued, with c.$70B raised across 7,227 deals. The Americas led funding with notable investments in AI and defense tech. AI continued to attract significant interest worldwide, especially in sectors like defense, healthcare, and cybersecurity. IPO activity remained low, while M&A was the main exit route. Optimism is growing for a market rebound in 2025, bolstered by anticipated economic stability and continued interest in AI, healthcare, and biotech.

📝 State of pre-seed Q3 2024
Carta
The report highlights trends in early-stage financing, showing a dip in total cash raised from Q1 highs and a shift towards smaller deal sizes under $250K. SAFEs with discount-only terms and post-money conversions on convertible notes are increasingly popular, with hardware and finance sectors showing high valuation caps in post-money SAFE rounds.

✏️ Hands-on operational improvement key to creating alpha in the middle market
Morgan Stanley
A "buy and hold" strategy is no longer effective for PE today. Instead, hands-on portfolio operations and a strong alignment between investment and operating teams are crucial for value creation and profitability. Mid-market PE firms that build fully integrated and robust operational teams with a structured, repeatable playbook can achieve higher returns.

✏️ Can PE continue to produce excess returns above public markets?
KKR
As PE opportunities become more accessible, today’s environment—with lower public market returns, constrained liquidity, and ample dry powder—positions PE well for continued outperformance. The sector is benefiting from attractive buyout and carve-out opportunities, particularly as public companies are increasingly staying private or shedding non-core assets.

✏️ A simplified way to access private equity
JP Morgan
PE is becoming more accessible to individual investors through 40-Act tender offer funds (Tender Funds), which offer lower minimums, simplified tax reporting, and periodic liquidity. These funds allow new investors to build diversified portfolios across primary, co-investment, and secondary deals, with a focus on small to mid-market buyouts for enhanced returns.

✏️ Private equity report 2024
LGT Capital
Private equity is showing early signs of recovery after challenges from inflation, high rates, and geopolitical instability, with Q2 2024 deal activity doubling from the previous quarter. Valuations have stabilized, but exits remain challenging, and focus has shifted to distributions to paid-in capital (DPI) as GPs aim to generate liquidity to attract future investments.

✏️ Continuation funds come to venture capital
Institutional Investor
VC firms are increasingly turning to continuation funds to provide liquidity in a slow exit market, with newer firms expanding this model to EM in regions such as Emerging Europe, Turkey, and India. As older VC-backed assets struggle to exit, continuation funds are growing in popularity despite challenges, with some major VC firms now exploring this strategy.

✏️ Recent VC vintages struggle with a dip in TVPI and investment valuation
Carta
TVPI is a common metric used by venture fund managers to demonstrate fund performance, comparing the estimated value of holdings to invested capital. Recent vintages of venture funds have seen declines in TVPI, with challenges in accurately marking unrealized portfolio values due to fluctuating market conditions and fewer funding events.

✏️ Top secondary investment trends
Hamilton Lane
The secondary market in PE has seen significant growth, expanding from limited LP interest purchases to a diverse range of transactions, including GP-led continuation funds and preferred equity. With a supply-demand imbalance and reduced competition, buying opportunities are attractive, especially as LPs seek liquidity amidst slower distribution rates.

✏️ Buy, sell or hold? Is private equity cheaper now?
EDHEC
The current PE market faces valuation pressures from high interest rates, reduced exits, and lower distributions, but offers unique opportunities for savvy investors. Key findings include valuation dispersion in sectors like Retail and Tech, and a strong outlook for the Health sector despite high multiples. Subscription-based revenue models attract higher valuations compared to reselling models, indicating investor preference for businesses with recurring revenue.

🎙 Time running out for PE as clock ticks for trillions in dry powder (Institutional Investor)

🎥 GP-aligned investing - Multiple ways to win (Juniper Square)

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PRIVATE MARKETS AND ALTERNATIVE ASSETS

📝 5 things to know about alternatives
KKR
The private markets are increasingly essential for economic growth, as government funding gaps drive the need for private capital, especially in infrastructure and alternative investments. PE and other alternatives are growing, offering diverse investment benefits such as yield, inflation protection, and growth potential. With retirement insecurity rising, individuals may rely more on private market returns, which provide a significant illiquidity premium over public markets, to bridge future savings gaps.

📝 Why transfer agents play a pivotal role in cross-border fund distribution
State Street
Transfer agents are essential in the evolving cross-border fund distribution landscape, adapting to new technologies, product distribution, and market entry. Key areas of change include modernization for trust, enhancing investor experience, adopting technologies like blockchain and AI, supporting new products, and expanding into new markets.

✏️Private market insights: October 2024
UBS
Real estate shows signs of stabilization with the potential for recovery as interest rates fall, while private infrastructure benefits from lower GDP sensitivity, interest rates, and moderate deal flow declines, presenting contrarian opportunities. PE may see increased exits and IPO activity. In private credit, compressing valuations in public markets create an opportunity, particularly in short-duration, asset-backed segments that offer favorable risk-return profiles.

✏️ Decoding impact expectations: best practices for impact investors and companies
Wellington Management
The impact investment industry surpassed $1T but faces challenges in measuring and managing impact amid its rapid growth. Effective impact investing requires clear communication, realistic expectations, and collaboration between investors and companies. Recommendations include investors aligning impact metrics with business outcomes, supporting companies' evolving impact measurement efforts, and fostering transparency.

✏️ Stop fighting data transparency in private markets
Institutional Investor
BlackRock discusses the push for greater transparency in private markets, driven by increasing investor demand for detailed risk insights, similar to those available for public assets. The historical opaqueness of private markets will likely shift with new age tools and platforms.

✏️ Replacing or complementing fixed income with alternatives
FS Investments
With the Fed easing rates, traditional fixed income faces challenges as bond yields fluctuate, creating potential mark-to-market losses. Alternative strategies, like commercial real estate lending, corporate private credit, and multi-strategy funds, offer compelling options to complement or replace fixed income. These alternatives provide higher income, lower duration, and less volatility, making them attractive for investors seeking stable returns.

✏️ The future of portfolio company value creation
PWC
PE firms are increasingly focusing on innovative value creation strategies beyond traditional cost-cutting and financial engineering to meet LPs’ return expectations. With deal multiples often exceeding public market trends, firms are adopting longer hold times and exploring new approaches, such as pivoting business models, enhancing customer experiences, and pursuing digital transformation, to drive growth and strengthen fundraising appeal.

The Valt Journal Library

SECTOR FOCUS

Real Estate x Infrastructure

TVJ Spotlight 🔦

📝 Real estate liquidity insights: An analysis of fund-level cash flows
Stepstone
This report on non-core real estate funds highlights liquidity challenges driven by rising interest rates, causing asset value declines and overleveraged portfolios. Distributions have dropped, transaction volumes are down, and longer hold periods are increasing capital calls. Fundraising is also slower, with institutional investors leaning toward larger managers, leaving smaller and mid-sized managers struggling.

📝 Retail real estate is thriving
Nuveen
The retail real estate sector, especially grocery-anchored and necessity retail, shows resilience and growth potential with high yields and low vacancy rates, as consumer demand for essentials remains strong. Limited new supply and strategic store expansions have driven rents and investor interest in both US and Europe. Compatible with e-commerce, retail parks present further opportunities for growth through click-and-collect facilities.

📝 US real estate: A modest start to the recovery
Barings
Property markets are stabilizing as transaction activity and valuations bottom out, with moderate demand recovery and reduced supply supporting vacancy stabilization. Financing has improved, but leverage remains limited. Rents in office sector were relatively unchanged q-o-q while concessions continued to grow and are elevated.

📝 European real estate: Prime’s time?
Barings
Europe's economy remains sluggish, with hopes resting on real wage growth and stable labor markets. In property markets, core assets are expected to benefit from lower financing costs, while secondary assets may see delayed recovery; investment volumes will likely rise gradually, with strong rental growth in prime office, logistics, and residential sectors.

📝 Emerging trends in real estate 2025
PWC
Real estate is set for a potential upswing as post-pandemic disruptions ease and the rate cuts boost transaction activity. Key investment factors include modernized building stocks and supply-demand dynamics, such as senior housing and premium office spaces.

✏️ Why now is the time to invest in commercial real estate
JP Morgan
Commercial RE values, after a significant decline, are showing signs of recovery due to easing capital markets, falling rates, and strong occupancy rates. With transaction volumes rising and favorable valuations relative to other asset classes, CRE offers an attractive entry point, especially as rate cuts and healthy fundamentals signal potential for strong future return.

✏️ The convergence of data centers and power: A generational investment opportunity
Blackstone
The rapid growth of digital infrastructure, driven by data center expansion and AI, is fueling unprecedented demand for power, creating significant investment opportunities. Blackstone, focusing on data centers, renewable energy, and power infrastructure, sees immense potential in these sectors as power demand rises and the energy transition progresses.

✏️ Asia real estate: A key diversifier
KKR
Asian real estate markets present significant opportunities for investors, driven by robust GDP growth and diverse economic cycles. While Japan benefits from a resurgent economy, South Korea and China see rising demand for multifamily housing. Australia’s booming population growth supports housing needs, and China’s government support signals a potential recovery.

✏️ Global real estate market outlook Q4 2024 (Abrdn)

Energy Transition x Climate Finance

📝 Evolving data center sustainability and the role of the capital partner
Principal Asset Management
Data center providers are increasingly investing in sustainability including sectors like energy and water efficiency, greenhouse gas reductions, and waste management. Sustainability efforts also enhance business competitiveness, reduce costs, ease permitting challenges, and improve employee retention, making it a crucial focus for providers and their partners.

📝 Toward near-zero methane emissions in oil and gas
BCG
Reducing methane emissions is critical to slowing global warming, and oil and gas companies play a major role. Although some industry leaders have committed to near-zero emissions by 2030, the sector's overall pace of abatement remains slow, risking penalties and market access for laggards. Methane reduction is financially viable and essential for meeting global climate targets, yet a significant emissions gap persists, indicating the need for accelerated efforts.

✏️Analysing greenhouse gas emissions: It’s not as easy as 1-2-3
M&G Investments
Analyzing emissions data is becoming as crucial as financial scrutiny for finance professionals, especially with companies setting climate targets. Emissions accounting presents significant challenges due to inconsistent methodologies and sporadic reporting. Regulations aim to enhance disclosure for better analysis of companies' environmental efforts.

✏️ Green energy’s intermittency problem: mitigating power price volatility
Natixis
The transition to renewables is driving increased volatility in power prices due to the intermittent nature of wind and solar energy. Mitigating these price swings requires a diversified, flexible portfolio, investments in storage and demand management, and advanced risk management solutions. Partnering with banks experienced in commodity markets can further help energy providers navigate pricing volatility by effective hedging strategies.

AI x Tech

📝 AI and its impact on real estate
UBS
AI offers asset managers potential improvements in investment processes and property management while creating new market opportunities. AI is projected to boost productivity, increasing US GDP by c.3% by 2032. Sectors like office space may face demand challenges due to anticipated job shifts, esp. in office-heavy fields like tech and professional services.

📝 What GenAI means for health care investors
BCG
Generative AI is transforming health care by enhancing drug discovery, refining diagnostics, personalizing treatments, and expanding care delivery beyond traditional settings. Health care investors have opportunities to support this shift, from startups to mature operators, focusing on GenAI-enabled solutions across various domains.

✏️ The $100 billion opportunity for generative AI in P&C claims handling
Bain
Generative AI offers transformative potential for the insurance industry, particularly in claims handling, where it could reduce loss-adjusting expenses by 20-25% and decrease leakage by 30-50%, resulting in over $100B in benefits. By enhancing claims accuracy, customer experience, adjuster productivity, and litigation support, generative AI can streamline operations, reduce costs, and improve outcomes for insurers and customers alike.

🎙 Central bank digital currencies: A marriage of convenience? (State Street)

🎙 The consequences of the digital age (State Street)

The Valt Journal Library

Disclaimer:

The content provided on this platform contains references and links to external sources, including articles, reports, websites, images, or videos. We do not own or claim copyright over the content found in these external sources. The ownership and rights of the content belong to the original creators.

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and affiliated persons and companies assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Hi, welcome to the new edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else! Clicking the headlines is all it takes.

Check out TVJ Spotlights 🔦 including 1) A hint of lower rates brings LBO green shoots (by TCW); 2) Private Markets outlook: Refilling the glass (by FS Investments); 3) Investing in our future: UK university spinouts reach inflection point (by LGIM)

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1K+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

Quickly scan the list of all reports in this edition here!

PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

📝 A hint of lower rates brings LBO green shoots
TCW
Leveraged loan issuance has reached c.$1T YTD, with most returns driven by interest income rather than price appreciation. Borrowers have capitalized on favorable conditions to reduce borrowing costs, leading to lower spreads and improved debt service coverage. In Q3, declining SOFR rates and repricing transactions reduced interest expenses for borrowers, while increased deal activity resulted in the highest net new issuance in 2.5 years, driven by LBOs, M&A, and general corporate purposes.

📝 Emerging markets: The biggest, fastest growing, and arguably least understood pool of credit in the world
PIMCO
Emerging market debt has evolved to resemble US corporate debt in terms of risk and return, offering diversification rather than high returns. “Investors should not treat EM as a space to hunt for high returns. It may sound counterintuitive, but the case for EM debt should not be anchored on spreads, yields, or some other valuation metric. It should be based primarily on diversification benefits.”

📝 Collaterized Loan Obligations (CLOs)
Camradata
CLOs ($1.2T market) are gaining traction as a de-risking tool for pension funds and insurers, offering liquidity, low duration, and enhanced returns compared to other fixed income options. Despite perceptions of risk, CLOs have demonstrated historically low default rates, making them a valuable component of diversified portfolios. However, investors must carefully navigate the complexities and risks of different tranches to maximize returns.

✏️ Private Credit: Funding the climate transition
Goldman Sachs
The growing climate transition sector is driving significant demand for bespoke debt financing solutions, filling a gap historically dominated by equity investments, with c.$300T needed to meet net-zero goals by 2050. Private debt is expected to contribute up to 60% of the total financing required, with tailored solutions offering attractive returns.

✏️ ECB: Growth concerns
PIMCO
The European Central Bank has cut rates earlier than expected due to weak growth, signaling a focus on managing downside risks while remaining cautious about inflation. Despite falling inflation, with core inflation still above target, monetary policy is expected to stay tight, with another rate cut likely in December. Economic stagnation, weak domestic demand, and slow employment growth continue to pose challenges.

✏️ The hidden gem in today’s bond market?
Robeco
Corporate hybrids offer an attractive yield while maintaining investment grade credit quality, providing a higher-quality alternative to high yield bonds. These subordinated bonds are typically issued by large, stable companies (utilities and telecom) and blend features of both debt and equity. They offer yields between 4% to 8% with low duration, making them less sensitive to interest rate fluctuations.

✏️ The dual advantage of high-income green bonds
Robeco
Green bonds are rapidly growing, with sales reaching a record $356B in 1H 2024. Robeco combines income optimization with impact investing, focusing on higher-yielding BB and BBB-rated green bonds from developed and emerging markets. The strategy emphasizes on green corporate hybrids and subordinated bonds, providing a solution for investors seeking both higher returns and environmental impact amid market volatility with diversification.

✏️ Municipal bonds: Extend duration amidst rate cuts
Principal Asset Management
Municipal bonds are well-positioned to benefit from the Fed’s rate-cutting cycle, making 4Q 2024 an ideal time for tax-sensitive investors to extend duration and secure attractive, tax-advantaged income. Strong fundamentals and credit upgrades provide compelling value, with opportunities expected to increase as election-related pressures ease and bond yields decline.

✏️ Government bonds: the missing link in decarbonising portfolios?
Abrdn
Sovereign bonds have been largely excluded from net-zero investment strategies despite their significant market size. Challenges include concentration risks and difficulties in measuring a country's environmental impact. The rise of labelled green bonds and new frameworks for assessing the climate policies of sovereign issuers are helping overcome these barriers.

✏️ Insurers to continue upping allocations to private credit
Institutional Investor
North American insurers are increasingly turning to private markets, particularly private debt, to diversify portfolios and enhance returns, with 96% planning to increase allocations over the next two years. Globally, 91% of insurers also plan to invest more in private markets, focusing on opportunistic private debt, private placements, and direct lending. This shift is driven by the desire for diversification, lower volatility, and improved risk-adjusted returns.

✏️ Why your bonds may finally excel in your portfolio
Abrdn
The bond market has struggled recently, but bonds perform well in slower growth and weaker inflation periods. The end of yield curve inversion and expectations of a "soft landing" for the US economy may make bonds attractive again as a portfolio diversifier, particularly with falling interest rates ahead.

✏️ US fixed income: How to invest in a falling rate environment?
JP Morgan
Despite recent muted performance due to resilient economic data and shifting interest rate expectations, bonds have strong potential for future gains. Attractive entry points exist across the fixed income spectrum, with yields above historical medians, and the risk/reward profile is skewed to the upside as interest rates stabilize.

✏️ Positive tailwinds brighten fixed income outlook
BNY Mellon
As inflation nears central bank targets and interest rates decline, fixed income markets are expected to benefit, with credit markets offering opportunities in a low-default environment. The demand for corporate bonds remains strong, though credit spreads are tight. Potential exists in asset-backed securities (ABS), driven by lower rates and increased supply.

📜 Periodicals »

📝 Fixed income outlook 4Q 2024 (Goldman Sachs)

📝 Fixed income perspectives 4Q 2024 (Principal Asset Management)

📝 Corporate pension quarterly 3Q 2024 (Goldman Sachs)

📝 Global fixed income weekly (Goldman Sachs)

✏️ Emerging market debt September 2024: Review and outlook (Abrdn)

✏️ Fixed income outlook – 3Q 2024 (UBS)

🎙 Private credit: investment grade opportunities (Abrdn)

The Valt Journal Library

PRIVATE EQUITY

📝 Sustainability in private equity 2024
BCG
The 2024 report on sustainability in PE highlights mixed performance compared to public companies, with private firms excelling in areas like job creation but lagging in board diversity. Private companies often improve sustainability metrics during their hold period, driven by private equity’s long-term focus and management influence. The sector’s growing emphasis on sustainability offers competitive advantages through cost reduction, risk mitigation, and green growth opportunities, supported by increased access to data.

✏️ The potential benefits of a multi-sector approach to private equity
Goldman Sachs
While sector specialists in PE may have advantages in sector-specific knowledge and networks, their performance varies by sector. IT and healthcare specialists have shown strong outperformance, while financial services specialists have lagged. Investors may benefit from a core/satellite approach, combining multi-sector managers with selective allocations to sector specialists, ensuring diversification while capitalizing on targeted expertise.

✏️ Small and mid-sized co-investment deals shine in the absence of IPOs
HarbourVest
Amid a challenging IPO market, PE’s small and middle-market segments have shown resilience, offering alternative liquidity paths through acquisitions and value creation. These companies, particularly in co-investment strategies, provide diversification and flexibility, making them less dependent on public market exits. Co-investments in small and mid-sized firms offer LPs opportunities for higher returns and liquidity.

✏️ The state of private equity: A look back at Q3 2024
Juniper Square
Q3 2024 saw a 24% jump in PE dealmaking, driven by the Fed’s interest rate cuts, though fundraising has slowed due to limited LP liquidity. Despite fewer exits, values remain strong, and dealmaking is on track to rank third-highest in history. As sponsor-to-sponsor exits increase, there’s hope for a late-year surge in activity, potentially easing liquidity concerns and encouraging future capital commitments from LPs.

🎙The takeaway with Troy Gayeski: Middle market PE secondaries (FS Investments)

The Valt Journal Library

PRIVATE MARKETS AND ALTERNATIVE ASSETS

TVJ Spotlight 🔦

📝 Private Markets outlook: Refilling the glass
FS Investments
The private markets have experienced a slowdown due to rising interest rates, but signs of recovery are emerging as rates begin to decline. Despite challenges, private equity and private credit have performed well, supported by a resilient US economy and strong fundamentals in middle-market firms. While deal activity is expected to rebound in 2025, liquidity remains a challenge for investors, and a gradual recovery is anticipated rather than a rapid one.

TVJ Spotlight 🔦

📝 Investing in our future: UK university spinouts reach inflection point
LGIM
The UK university spinout market is entering a new phase of growth, driven by maturing ecosystems around key university hubs and supportive government policies. The sector has attracted over £14.5B in investment across 1,800 spinouts over the last decade. Key industries, including healthcare, clean energy, and advanced computing, offer significant potential for innovation. Opportunity exists in the early scale-up stages.

📝 Understanding the role of capital solutions
HSBC Asset Management
Strategies like Revolving Credit Facilities (RCF) and Net Asset Value (NAV) financing capture the illiquidity premium through conservatively structured loans, providing enhanced yield without compromising credit quality. RCFs support corporate liquidity, while NAV loans offer senior secured loans tied to private equity portfolios, making them attractive for diversifying institutional portfolios with resilient, high-yielding alternatives.

📝 Ruminating on asset allocation
Oaktree
This memo by Howard Marks emphasizes the critical role of asset allocation in investing. It highlights the importance of determining an investor’s risk posture—whether to prioritize capital preservation or growth—and how this choice influences asset allocation. Marks advocates for increasing credit investments, given current favorable returns and the lower volatility they offer compared to equity, particularly in today’s market environment.

📝 Tax loss harvesting: A primer for investors
Dimensional
Tax loss harvesting helps investors reduce or defer taxes by selling investments at a loss to offset capital gains or income. Investors should be aware of costs, wash-sale rules, and how the strategy aligns with their financial goals. Investors could consider tax-efficient ETFs.

✏️ Choose your vehicle: A closer look at private market fund structures
Goldman Sachs
There is no universal best choice between private market fund structures, as each comes with trade-offs across four key dimensions: liquidity, complexity, product availability, and performance. Evergreen funds offer better liquidity and ease of management, while drawdown funds provide broader access and higher performance potential. The decision should be based on achieving an investor’s long-term investment goals rather than comparing individual funds.

✏️ Distribution drought: The quest for liquidity in private markets
Goldman Sachs
The record-breaking exit activity of 2021 has been followed by a "distribution drought" as exits have slowed due to cyclical and structural factors. GPs are extending hold periods for key investments, seeking intermittent liquidity through continuation vehicles and mid-stack capital solutions. These trends are reshaping PE strategies at entrance and exit, offering new liquidity options for LPs while adapting to longer hold times.

✏️Measuring the moat: Assessing the magnitude and sustainability of value creation
Morgan Stanley
Investors should evaluate corporate strategy to understand how a company builds a competitive advantage, or moat, for sustainable value creation. This involves analyzing industry dynamics, market structure, disruption risks, and integration strategies, followed by assessing the firm's value drivers, pricing, regulation impact, and brand strength. A checklist is provided to guide this assessment.

✏️ Skills required when investing sustainably in private markets
LGT Capital Partners
Private markets have grown over the past decade as investors seek diversification and sustainable opportunities. Success in PE hinges on building strong relationships with top fund managers making it essential to connect with well-established managers early. ‘The ability to take a long-term view, coupled with direct control over assets, makes private markets an investment of choice for asset owners focusing on sustainability and impact.’

✏️ Building a high-velocity back office: Scaling for success
State Street
The document emphasizes the importance of agility and scalability in institutional investors' back-office operations. It highlights the need for strong collaboration between front- and back-office teams, supported by empowered employees and advanced technology platforms. Key strategies include automating manual processes, leveraging data management, and fostering a culture of partnership, all to improve efficiency, decision-making, and overall performance.

✏️ Long short equity strategies: "Hedging" your bets
Morgan Stanley
In the face of market volatility driven by inflation and central bank policies, long-short equity strategies offer risk mitigation by investing both long and short in equities. These strategies, particularly market-neutral ones, can reduce market sensitivity, mitigate downside risks, and provide steady returns through stock selection. They have historically performed well during market downturns, offering flexibility and resilience to diversified portfolios.

✏️ How these hedge funds posted consistent returns in the riskiest markets
Institutional Investor
Six of the top 50 consistently performing global hedge funds invest in volatile emerging markets, averaging over 12.5% returns from 2019-2023 despite challenges like the 2022 rate hike. Key drivers of success include EM credit opportunities, risk management, on-the-ground research, and a strong macro understanding, helping these funds navigate volatility and deliver consistent returns.

✏️ The biggest asset managers keep getting bigger. But small ones have reason to hope
Institutional Investor
Morningstar's research shows that the largest asset management firms continue to dominate, with the top 20 firms holding 85% of US AUM. Firms like Vanguard and BlackRock lead due to passive fund popularity, while smaller firms can still see rapid growth if a product gains traction. Active management and alternative investments are also influencing market dynamics, with active ETFs showing potential for growth.

✏️Not all ‘alts’ are created equal
Man Institute
Defined contribution (DC) investors are turning to alternative assets for diversification, but many of these assets may be more correlated with equities than expected, especially in volatile markets. A liquid alternative approach, focusing on diverse return streams across major asset classes, may provide better diversification and risk management, particularly during portfolio drawdowns. This strategy offers a more robust, cost-effective, and liquid complement to traditional equity and bond investments.

✏️ Trade routes realigned: From integration to fragmentation
Goldman Sachs
Global economic fragmentation is creating new geo-economic fault lines, leading to higher inflation, tighter monetary policy, and lower growth. However, reshoring is driving an industrial renaissance, especially in developed markets like the US, with significant investments in sectors such as semiconductors and clean energy. Fragmentation also presents long-term investment opportunities for companies adapting to the evolving global landscape.

​

📜 Periodicals »

✏️Hedge Fund bulletin September 2024 (UBS)

📝 Weekly economic commentary (Northern Trust)

📝 Asia Pacific economic outlook: A steady ship (Northern Trust)

✏️ Our multi-asset investment views - October 2024 (Schroders)

✏️ Q4 2024 hedge fund strategy outlook: A more cautionary stance (Man Institute)

The Valt Journal Library

SECTOR FOCUS

Energy Transition x Climate Finance

📝 Searching for impact
UBS
The energy transition, particularly in transport electrification, presents a significant investment opportunity, with $175T needed by 2050, primarily for renewables and transport infrastructure. While clean grids have facilitated broader electrification, investments in transport tend to offer higher carbon reduction impacts than renewables in areas where grids are already decarbonized, making it an attractive opportunity for investors.

📝 Optimising for net zero and nature positive outcomes
Nuveen
Net zero and nature positive investing may seem aligned, but net zero strategies can inadvertently embed nature risks, limiting benefits for biodiversity. Insurers should adopt a nature positive investment approach, prioritizing natural resources, land use, and pollution management. This strategy could enhance risk management and long-term financial performance while supporting global sustainability goal.

✏️ Why energy demand just cannot stop growing
M&G Investments
Energy transition models face a tension between improved efficiency due to technological progress and the emergence of new energy use cases driven by these advancements. While the energy system becomes less wasteful, demand continues to rise due to novel applications like AI and electric vehicles. Regions like China and India are experiencing increasing energy consumption, further challenging the global energy transition.

✏️ Making biodiversity investing actionable
Goldman Sachs
Investor interest in biodiversity is growing, driven by its economic importance and regulatory changes, but challenges remain due to the complexity and early stage of the market. To integrate biodiversity into investment strategies, investors need to clarify objectives, such as managing risks or increasing exposure to positive solutions, and build customized toolkits for targeted analysis. The diversity of approaches and tools still complicates adoption.

✏️ The energy transition conversation is changing
KKR
Decarbonization is increasingly seen as a driver of value creation and protection for businesses. Players highlight how sustainability is becoming a core part of corporate strategy, managing electrification complexities, and planning for long-term technological advancements in renewable energy, respectively. The transition presents opportunities to address critical sustainability concerns while generating financial and environmental benefits.

✏️ The rise of natural refrigerants
UBS
The transition to low global warming potential (GWP) refrigerants is gaining momentum due to regulations like the Kigali Amendment, which mandates a phaseout of harmful hydrofluorocarbons (HFCs). CO2-based cooling systems are emerging as a promising alternative, offering energy efficiency and minimal environmental impact. CO2 systems represent a significant growth opportunity in under-penetrated regions such as North America.

✏️ SI Dilemma: Climate adaptation versus mitigation
Robeco
Sustainable investors face the challenge of balancing climate mitigation and adaptation in their portfolios, with limited investment options for adaptation. While mitigation has long been a key focus, adaptation is becoming increasingly critical as global temperatures rise. Investors must consider both strategies, alongside biodiversity efforts like deforestation prevention, to effectively address climate risks and capitalize on emerging opportunities.

Real Estate x Infrastructure

📝 Is it time to reallocate to real estate?
Nuveen
Global real estate returns turned positive in Q2 2024 after two years of losses, signaling a potential recovery in the asset class. Real estate values, which had fallen to 2018 levels after the tightening cycle, showed signs of stabilization, with modest value losses and strong income returns contributing to positive total returns. Investors can reconsider real estate for its historical stability, diversification benefits, and potential for robust returns.

📝 Geopolitics and life sciences real estate
UBS
The life sciences real estate sector in Europe offers strong investment potential due to growing demand driven by demographic shifts, technological advancements, and geopolitical factors affecting pharmaceutical supply chains. European governments are seeking to bolster domestic medicine production and supply chain security, real estate for laboratories, warehouses, and distribution hubs is in short supply, creating opportunities for investors.

✏️ Why is housing supply still so low?
JP Morgan
Housing supply remains limited due to chronic underbuilding since 2008, elevated mortgage rates, and high costs for builders and homeowners. Builders face challenges such as higher material costs, labor shortages, and zoning laws, which have kept new construction levels low despite increasing demand. There are signs of improvement with zoning reforms and potential lower mortgage rates expected to boost builder confidence and activity.

✏️ From roads and bridges to renewables and 5G: An infrastructure evolution
Goldman Sachs
Megatrends like climate change, tech acceleration, shifting trade flows, and demographic changes are creating new investment opportunities, with infrastructure offering resilience, inflation protection, and attractive risk-adjusted returns. Private infrastructure, in particular, provides essential services and offers diversification benefits.

✏️ Japanese property yields: is the only way up?
Abrdn
Despite recent interest rate hikes, rental growth is proving to be a more significant driver of Japanese property yields than rising bond yields. Investors continue to allocate capital to Japanese real estate, especially in sectors like multifamily housing in Tokyo and Osaka, where rental growth is strong, while Japanese REITs present potential value due to current discounts.

✏️ Real Estate: How the future of logistics lies in energy and data
Abrdn
Logistics hubs are increasingly playing a role in energy generation and storage, integrating with data infrastructure. Investors should prioritize logistics sites with strong energy connectivity and renewable infrastructure, as these future-ready sites will attract higher demand, offer rental premiums, and support the green energy transition.

📝 Two years into the generative artificial intelligence age
TCW
The "Generative AI Age" began with the launch of ChatGPT in November 2022, sparking innovation and massive investment, especially in AI infrastructure. Although a mass-adopted AI application hasn't emerged yet, early adopters in areas like software development and advertising show promise. Continued investment in AI infrastructure and future product improvements are expected to drive broader AI adoption and innovation.

✏️ Data center revolution
Natixis
Data centers, a critical asset class at the intersection of real estate, telecommunications, and energy, are rapidly expanding due to the rise of cloud computing, AI, and increasing digital infrastructure needs. While demand for data centers continues to surge, driven by hyperscalers and corporates outsourcing IT needs, the sector faces challenges with energy consumption.

📜 Periodicals »

📝 Current developments for the real estate industry: Fall 2024 (PWC)

✏️ North America real estate market outlook Q4 2024 (Abrdn)

✏️ Asia-Pacific real estate market outlook Q4 2024 (Abrdn)

🎙The diversification benefits of real estate (Nuveen)

Disclaimer:

The content provided on this platform contains references and links to external sources, including articles, reports, websites, images, or videos. We do not own or claim copyright over the content found in these external sources. The ownership and rights of the content belong to the original creators.

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and affiliated persons and companies assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Hi, welcome to the new edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else! Clicking the headlines is all it takes.

Check out TVJ Spotlights 🔦 including 1) Private debt in focus: State of technology (by BlackRock); 2) The advantages of disciplined lower middle market direct lending (by TPG); 3) Southeast Asia resetting expectation (by Lightspeed)

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1K+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

Quickly scan the list of all reports in this edition here!

PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

📝 Private debt in focus: State of technology
BlackRock
The tech sector showed resilience despite a brief market selloff in Q3 2024, driven by rising AI optimism and structural investment. While high inflation led businesses to cut tech spending, IT investment is rebounding. 45% of PE-backed tech companies have been held for 4+ years. Global M&A is showing signs of recovery, with deal value up 10-15% vs 2023.

TVJ Spotlight 🔦

✏️ The advantages of disciplined lower middle market direct lending
TPG
The Lower Middle Market offers compelling opportunities for direct lending due to less competition, higher spreads, lower leverage, and stronger lender protections vs Upper Middle Market (UMM). LMM lenders benefit from better risk-adjusted returns, more meaningful portfolio diversification, and stronger recovery rates. With UMM becoming more competitive and offering lower returns, LMM provides favourable opportunities.

📝 Demand for duration
TCW
In securitized assets, agency MBS and non-agency MBS benefited from falling rates and rising prepayment assumptions in Q3, boosting lower-coupon bonds. Issuance in CMBS, CLOs, and ABS sectors surged, driven by strong investor demand for duration and premium assets, particularly in sectors like digital infrastructure and aircraft deals. Despite volatility, high-quality bonds backed by strong fundamentals and robust structures offer asymmetric upsides.

✏️ Navigating the asset-based finance frontier
KKR
The Asset-Based Finance market, valued at $6T, remains a largely untapped frontier in private credit. Success hinges on proactive origination, leveraging proprietary platforms, and cultivating long-term relationships (in sectors like music royalties and RV loans). With increasing demand and banks pulling back, ABF offers significant growth potential for those able to navigate its complex, diverse landscape with expertise and innovation.

✏️ Private credit’s role in mid-market opportunities
UBS
The convergence of private credit and public markets is shaping investment strategies in the upper middle-market corporate credit space. Despite tighter spreads and competitive terms, private credit remains adaptable, offering flexibility to navigate evolving market conditions. Opportunities exist through diversified credit options, including direct lending, syndicated loans, and high-yield bonds, while managing risk and capitalizing on growing M&A activity.

✏️ Securitized credit: Normalizing, decelerating, or falling off a cliff?
Wellington Management
Securitized credit fundamentals are stabilizing from strong levels, though challenges remain in commercial real estate, with office sector prices down nearly 20%. Default rates in CLOs have moderated to 2.1%, but distressed exchanges bring the rate to 4.5%. Spreads in asset-backed securities (ABS) remain attractive above long-term medians, offering opportunities for active security selection across credit sectors.

✏️ Frontier bonds: are they worth the risk?
Abrdn
Frontier bonds, while riskier and more volatile than other emerging market debt, have outperformed EMD over one, three, and five years. Investors are compensated for the additional risk. As inflation cools rate cuts begin, demand for high-yield frontier bonds is expected to rise, supported by economic reforms in countries like Kenya and Zambia. Frontier bonds present a compelling opportunity for superior returns and diversification.

✏️ Strategic credit for your path to DB buyout
Abrdn
As DB pension schemes approach buyout, trustees should manage asset volatility by aligning credit portfolios with insurers' practices, as insurers typically favor high-quality, MA-eligible bonds. This reduces costs and improves hedging against buyout pricing. Standard credit indices may not meet insurer criteria, due to high BBB exposure and unpredictable cashflows.

✏️ IG credit: Idiosyncratic opportunities in a favorable environment
Barings
Investment-grade corporate credit is well-positioned due to elevated yields, solid fundamentals, and a resilient US economy. US IG yields are at 4.2%, 1.5x higher than the 10-year average, while US corporate EBITDA growth was 1.1% in Q2 2024. Despite risks, inflows into US IG funds reached $260B YTD, absorbing high issuance. Key opportunities include energy and financials, along with crossover credits poised for ratings upgrades.

✏️ CLOs go mainstream
Neuberger Berman
Floating-rate securities like CLOs and senior loans lure investors due to wider spreads and credit enhancements. These investments offer attractive yields, higher seniority in capital structures, and added protection via diversified portfolios and subordination. CLO mezzanine tranches trade at a 200-300 bps premium to similarly rated bonds, with a low cumulative default rate of just over 1%. Investors get to benefit from both yield and risk mitigation.

✏️ What the differing pace of central bank easing could mean for fixed income
Morgan Stanley
Central banks have been collectively cutting rates in 2024, but the pace varies. The US Fed cut rates by 50bps in Sep, with c.250bps of total cuts expected by 2025. Other banks, like Bank of Canada and RBNZ, are expected to cut similarly. Diverging policies present opportunities for fixed-income portfolios, with better value seen in New Zealand and Canada vs US Treasuries.

✏️ A tangled web: Avoid the venom in bond market tail risks
UBS
Different regions present varying risks and opportunities amid rate cuts: while US bonds face headwinds due to optimistic rate cut pricing, eurozone bonds may outperform as their market weakness isn't fully priced in. China's aggressive stimulus adds uncertainty, and global bond investors should actively adjust allocations and maintain liquidity for quick adjustments.

📜 Periodicals »

📝 Global credit outlook: Q4 2024 (BlackRock)

📝 Emerging markets debt monitor Q3 2024 (Morgan Stanley)

📝 Floating-Rate Loan Market Monitor Q3 2024 (Morgan Stanley)

📝 Corporate credit outlook Q4 2024: Jive like it’s 1995 (FS Investments)

✏️ Credit outlook Q4 2024: Glimmers of light, shadows of doubt (Man Institute)

✏️ Market view Sep 2024: High yield monthly update (Nomura)

🎥 Perspectives on private credit (Northern Trust)

🎥The blurring lines between public & private credit markets (Barings)

🎙Private Debt: The appeal, the fears & the facts (Neuberger Berman)

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PRIVATE EQUITY

TVJ Spotlight 🔦

📝 Southeast Asia resetting expectation
Lightspeed
Southeast Asia has attracted significant tech investment, with $72B poured into the sector over the past five years. However, despite the region's potential, tech companies have struggled with capital efficiency, and consumer-class households remain smaller vs India and China. There remains a significant growth opportunity in digital services, supported by increasing tech talent and online advertising, a critical revenue stream for future profitability.

📝 From great to excellent
BlackRock
BlackRock emphasizes a partnership-driven approach to PE, focusing on aligning with management teams early to drive long-term growth and value creation. The investment strategy prioritizes companies with strong balance sheets, moderate leverage, and industry-leading management. Opportunities exist in sectors like healthcare, tech, consumer goods, and financial services. ROIC can be maximized through organic and inorganic growth.

📝 Venture capital market outlook
BlackRock
The VC fundraising environment has faced volatility and has significantly dropped, with 2024 on track to reach its lowest level since 2019, down from a peak of $323B in 2021 to $59B YTD. VCs hold a record $296B in dry powder, while exit value from IPOs in 2024 is $22B vs $674B in 2021. Delayed exits are leading to consolidation and a focus on proven managers.

📝 How to be the perfect partner
Nuveen
Co-investments are popular in private equity due to their benefits of higher returns, diversification, and favorable economics. Co-investing allows investors to deepen relationships with GPs and gain more control over portfolio exposures. It emphasizes the importance of building strong partnerships, proactive deal sourcing, and careful due diligence to secure access to high-quality deal flow, and is expected to grow in the coming years.

✏️ Finding a potential Goldilocks effect in buyouts​
HarbourVest
A diversified portfolio of mid-market buyout funds offers higher risk-adjusted returns compared to portfolios of small or large buyout funds. Mid-market funds provide a "Goldilocks" balance, capturing upside potential while minimizing downside risk, resulting in better portfolio-level performance, as measured by the Sortino ratio.

✏️ For venture fund LPs, DPI is ‘the metric that rules them all’
Carta
Venture capital funds are experiencing delays in generating distributions to paid-in capital (DPI), a key performance metric for LPs. Recent fund vintages (2017-2022) have been slower in providing exits due to a decline in IPOs and M&A activity, driven by a valuation reset in public and private markets. Despite improving valuations, exit activity remains slow, heightening LPs' focus on DPI as the primary indicator of venture fund success

✏️ The case of manufacturing and natural resources sectors in Europe
EDHEC
PE investments offer high returns but come with significant risks, such as return dispersion and unfavourable exits. Sectors like Natural Resources exhibit higher volatility and risk vs Manufacturing. Accurate private asset risk measurement requires specialized indices that capture market dynamics, which uses transaction data to provide precise pricing and data.

✏️ Signs of hope in private equity consumer investing?
Bain
Consumer and retail investing is showing signs of recovery, with megadeals ($1B+) doubling in the H1 2024 vs H1 2023, highlighted by Roark Capital's $9.6B Subway investment. Simultaneously, platform building in consumer services has grown, with 80% of add-on deals valued under $50M, contributing to 45% of total deal activity in the sector.

✏️An introduction to private equity basics
Morgan Stanley
Private equity is a rapidly growing asset class (AUM at $8.5T in June 2023, vs $2.2T in 2000). PE strategies include buyouts, growth equity, and venture capital. While PE provides higher potential returns and portfolio diversification, it comes with illiquidity and higher costs. Despite challenges, it remains an attractive option due to its long-term return potential and alignment of interests between investors and GPs.

✏️ Differences in private markets ESG integration between US and Europe
LGT Capital
US private equity managers lag behind European counterparts in ESG integration due to regulatory resistance, with Europe leading in ESG standards. Geopolitical tensions and climate risks, along with US elections, are key factors influencing global ESG progress, particularly in decarbonization efforts.

📜 Periodicals »

📝Venture monitor Q3 2024 (Pitchbook)

📝US PE breakdown Q3 2024 (Pitchbook)

📝 First cut—State of private markets: Q3 2024 (Carta)

📝AI & ML public comp sheet and valuation guide Q3 2024 (Pitchbook)

📝Digital health & healthcare IT comps and valuation guide Q3 2024 (Pitchbook)

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PRIVATE MARKETS AND ALTERNATIVE ASSETS

📝 The alpha equation: Myths and realities
PIMCO
Alpha’s calculation can be distorted by using improper benchmarks and omitting key factors, esp. in private assets and niche strategies. Active management has historically been more successful at generating alpha in fixed income vs equities, due to constraints faced by major investors. Understanding and measuring alpha requires attention to leverage, liquidity, volatility, time horizons, and valid benchmarks.

📝 What will differentiate the asset management winners of tomorrow?
Barings
The rise of private assets is reshaping asset management, driving acquisitions and new product development, but managers must recognize that private markets will also experience cycles. Asset managers should avoid over-reliance on specific strategies and adapt to the blurring lines between public and private credit, focusing on fundamental credit analysis across assets.

✏️ The investment implications of the wealth surge
JP Morgan
The recent surge in wealth is driven by rising stock markets and home equity. While this wealth boost supports consumer spending and reduces credit risks, it is unevenly distributed. Investors should be cautious as recent market gains are primarily due to rising valuations, not underlying fundamentals, and it may be time to reassess risk and investment strategies.

✏️How higher yields and growing alpha opportunities may lift hedge funds
Morgan Stanley
The recent rise in fixed-income yields has created favourable conditions for hedge fund strategies, particularly those involving long/short equity and credit funds, as they earn more on cash collateral used for short selling. Hedge funds benefit from increased alpha opportunities due to the wider dispersion of returns.

✏️ Investing for more resilient future generations
GIC
The global landscape is shifting beyond cyclical trends, presenting both risks and opportunities for investors. Opportunities arise in supply chain restructuring, AI's potential productivity boost, and financing the climate transition. To navigate these uncertainties, investors should prioritize price discipline, diversification, and long-term partnerships.

✏️A transparent alternative to neural networks
StateStreet
Relevance-based prediction offers a transparent and interpretable alternative to neural networks for forecasting, delivering highly accurate predictions, including better performance in predicting S&P 500 volatility across market regimes. Unlike neural networks, which are complex and opaque, RBP uses a relevance-weighted average of past outcomes.

✏️Proving resilience and durability
UBS
Farmland has demonstrated strong growth potential and resilience as an asset class, offering high returns and low volatility, making it increasingly attractive to investors. With a global market value of c.$9T, farmland provides income, inflation protection, and portfolio diversification due to its negative correlation with equities and bonds. They offer stability and passive cash flow in various economic scenarios.

✏️ The benefits of ‘quantamental’ thematic investing
Robeco
Quantitative methods identify emerging themes and companies. Techniques like NLP and sentiment analysis enhance decision-making by evaluating companies based on value, momentum, and growth. While quantitative approaches have advantages, experienced portfolio managers are needed to ensure accuracy and refine insights. Combining human oversight with machine learning can enhance thematic investment strategies.

✏️ Alternatives managers need an upgrade to their tech
Institutional Investor
Investors are increasing allocations to alternative asset managers but are demanding better technology to improve portfolio insights and analytics. 62% of LPs plan to maintain or boost their alternatives exposure, while 59% seek improved report analytics and 81% desire better data aggregation across multiple funds. Despite some progress, many LPs remain frustrated by the lack of tech integration and unified platforms for monitoring their portfolios.

✏️ Sparse IPOs have paved the way for years of growth in private markets
Institutional Investor
Private market assets are growing rapidly, with AUM expected to increase by 9% p.a., reaching c.$60T by 2032. This growth is driven by higher yields, diversification, and inflation-hedging benefits offered by private equity, private credit, and infrastructure. As public markets face more regulation and fewer incentives for IPOs, investors, including retail clients, are shifting toward private markets, with alternative asset managers gearing up to meet this demand.

📜 Periodicals »

📝 Global outlook Q4 update (BlackRock)

📝Weekly economic commentary (Northern Trust)

📝 Sailing close to the wind: Vantage point Q4 2024 (BNY Mellon)

📝 Multi-asset outlook September 2024: Gold is back as an asset class (Robeco)

📝 Thoughts from the road: Asia (KKR)

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SECTOR FOCUS

Energy Transition x Climate Finance

✏️ What is climate transition finance and why bother?
Robeco
62% of investors consider climate change central to their policies, with 69% committing to net-zero targets. 63% are focusing on transition strategies, investing in high-emitting companies with credible decarbonization plans. Transition investing and green bonds are seen as critical tools to drive real-world emissions reduction and generate returns.

✏️ Not all net zero pathways are created equal
UBS
Improving real estate's sustainability is crucial for addressing climate change, as the sector accounts for 40% of global greenhouse gas emissions. Investors are increasingly demanding detailed net zero pathways to compare investment products' progress toward reducing emissions. This makes it important for investors to carefully examine the assumptions behind each product's net zero trajectory, as not all disclosures are equally reliable.

✏️ Middle East crisis: How oil price outcomes will impact wider financial markets
Schroders
The ongoing Middle East conflict raises concerns about oil supply disruptions, with potential impacts on inflation, interest rates, and economic growth. While OPEC has spare capacity, a disruption in Iran's oil exports could push prices above $100 per barrel, potentially spiking to $147. However, for inflation and central bank policies to shift significantly, oil prices would need to stay above $100 for an extended period.

✏️ Balancing sustainability and returns: What multi-asset investors need to know
Robeco
Sustainability has become crucial in multi-asset investing, improving risk-adjusted returns but introducing market deviations when excluding less sustainable investments. The demand for sustainability-focused funds has risen significantly, with over EUR60B flowing into these funds.

✏️ Reducing costs and carbon in manufacturing networks
BCG
Manufacturers face pivotal decisions on modernizing plant and distribution networks to balance costs, service, growth, sustainability, and resilience. Optimizing networks by integrating sustainability goals could boost EBITDA by 1-3%. Success requires a data-driven approach to navigate these complexities and adapt for future demands.

Real Estate x Infrastructure

📝Recipe for a rebound
FS Investments
The US commercial real estate market, after a prolonged freeze, is showing signs of recovery with prices down 10%-20% and stronger tenant demand. Although acquisition activity remains subdued, optimism is growing as market conditions improve, pointing to potential investment opportunities in 2025 and beyond.

✏️ Fiber optic infrastructure: A connection is made
KKR
Fiber optic investments are gaining traction as high-speed internet becomes essential for modern life. These investments require managing construction and customer acquisition risks, with operators needing to build scalable, competitive models for success. KKR highlights the potential for strong, predictable cash flows and significant long-term growth in fiber infra.

✏️ How does an aging population impact real estate?
Nuveen
The aging global population and shrinking working-age demographics are shifting real estate demands. Key opportunities for investors include developing and refurbishing senior care facilities, repurposing under-used office spaces for senior care, and tapping into increased healthcare needs. This trend presents significant potential in both residential and medical sectors, especially in regions with growing senior populations such as Japan, US, and UK.

📝 Current developments for the real estate industry
PWC
By reducing energy consumption and enhancing property value, energy-efficient upgrades can lower bills. Governments offer incentives like grants, tax breaks, and loans to encourage these investments. Navigating these programs can be complex, but this report highlights key incentives across 10 European countries to help property owners achieve sustainability goals.

📝 Roadmap for a REIT IPO or conversion
PWC
This guide helps real estate companies navigate the complexities of IPOs, REIT conversions, and raising non-traded property/credit products by covering processes, tax planning, corporate governance, and accounting. It addresses key challenges, timelines, compliance requirements, increased interest rates, potential spin-offs, and the expansion of REIT-qualifying properties.

AI x Tech

📝 Artificial General Intelligence (AGI) research
Pitchbook
AGI aims to create software capable of reasoning and adapting to new challenges without task-specific programming, unlike narrow AI. While AGI has historical roots dating back to the 1940s, significant breakthroughs in AI, such as DeepMind's AlphaGo, have fueled recent progress. Emerging tech like neurosymbolic AI and cognitive architectures hold potential for future advancements toward human-level intelligence.

✏️ The next frontier in enterprise automation
Lightspeed
The next wave of enterprise automation, powered by LLMs, will surpass the current robotic process automation (RPA) by enabling intelligent, adaptive workflows. LLM-driven automation can handle unstructured data, apply reasoning, and automate end-to-end tasks with greater accuracy and flexibility, unlocking significant productivity gains. Key market areas are domain-specific solutions, full workflow automation, and content generation.

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Hi, welcome to the new edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else! Clicking the headlines is all it takes.

Check out TVJ Spotlights 🔦 including 1) Asia credit - a resurgence rooted in resilience and relative value (by HSBC); 2) An alternative perspective (by KKR); 3) The energy transition: 10 essential indicators for institutional investors (by Nuveen); 4) Infrastructure secondaries: Capitalizing on solid foundations (by Pantheon)

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Our private markets and alternative assets focused live repository featuring a collection of 1K+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

Quickly scan the list of all reports in this edition here!

PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

📝 Asia credit - a resurgence rooted in resilience and relative value
HSBC Asset Management
The Fed's rate cut has supported the momentum of Asia credit markets, with positive implications for repayment capabilities and credit quality. Asia's strong domestic demand, coupled with resilient economies in India, China, and ASEAN, is driving solid performance in Asia credit, particularly high yield. Low supply, healthy local demand, and favorable macro conditions make Asia credit attractive, while its lower duration makes it resilient.

📝 The outlook for direct lending
Morgan Stanley
Private credit, particularly direct lending to mid-market companies, has grown significantly with assets reaching $1.5T in 2024. Credit attributes remain stable, and the market offers strong risk-adjusted returns. Private equity's dry powder and the large US mid-market continue to support deal flow, while stringent valuation policies ensure transparency.

✏️ Prime opportunities within direct lending
M&G Investments
The most attractive opportunities in direct lending exist at the conservative end of the mid-market. As competition intensifies in the larger deal space, pricing and terms have deteriorated, making the lower mid-market more appealing for better risk-reward profiles. The floating rate nature, low volatility, and stable pricing of direct lending offer advantages.

✏️ The changing face of private credit at Oaktree Conference 2024
Oaktree
Oaktree discusses whether there is now too much capital chasing too few deals, but market efficiency will eventually restore balance. Private credit, which could reach $2.3T in near term, offers opportunities in direct lending and junior debt, as firms manage higher interest expenses. Regional differences exist, particularly in Europe's private credit market.

✏️ Investment grade ABS - Liquidity and spread pick-up in times of turbulent markets
AXA Investment Managers
Investment-grade Asset-Backed Securities (ABS) offer attractive spreads, liquidity, and diversification benefits vs traditional IG credit, especially in volatile markets. ABS provide higher yields with lower risk, thanks to their collateralized structure, floating rate nature, and shorter durations. Regulations have improved, making ABS an appealing option for investors seeking stable returns, lower volatility, and flexibility in turbulent economic conditions.

✏️ European ABS: A compelling tool for DC default strategies
M&G Investments
Key reasons for DC schemes to consider ABS: ABS offer a return premium, supporting the growth of savings over time; the floating rate structure can help protect savings in inflationary environments; DC schemes could create more resilient default fund structures by diversifying fixed income risk with ABS; defensive asset class that can protect members’ savings.

✏️ Europe’s private credit managers ponder exit puzzle
Pitchbook
Europe's M&A market is showing signs of recovery, but PE sponsors face challenges exiting large holdings, especially with the IPO market struggling. Direct lenders are focusing on mid-sized deals, as jumbo deals remain difficult to exit. M&A pipeline is improving, IT and Healthcare are key sectors with Club deals becoming more common.

📝 What makes infrastructure debt attractive?
UBS
Infrastructure debt offers stability, low volatility, and diversification from corporate risk. While fundraising for senior debt is challenging, high-yield infrastructure debt is appealing due to compressed returns in equity and private debt, making it an attractive lower-risk option for investors, particularly in sectors like energy transition and telecom.

✏️ Private CRE lending: Opportunities to seize and risks to avoid
FS Investments
Private senior secured commercial real estate (CRE) lending has delivered attractive returns, outperforming equities and bonds during market downturns. Opportunities are emerging, esp. in industrial, multifamily, and transitional loans. Lenders can benefit from rolling loan opportunities and purchasing loans from banks rebalancing their portfolios. Challenges in sectors like office but conservative lending in well-located properties offers return potential.

✏️ The case for EM corporate bonds
Abrdn
Emerging Market corporate bonds have grown 250% since 2010, now exceeding $2.5T, making them larger than EM sovereigns and US high-yield markets. The asset class is well-diversified across regions, sectors, and countries, with strong fundamentals like lower leverage vs US and European high-yield bonds. Despite higher perceived risks, EM corporate bonds have shown similar default rates like western counterparts, with favorable spreads offering opportunities.

✏️ The emerging-market-debt switch should always be on
Institutional Investor
Emerging-market debt (EMD) should be a permanent portfolio allocation due to its potential to overcompensate for credit losses. Hard-currency EMD to return to its pre-pandemic excess returns with opportunities in local-currency debt after a decade of poor performance. EMD can be source of alpha, making active management preferable vs passive ETFs.

✏️ Fixed income: Why higher-rated corporate bonds still make sense
Abrdn
IG bonds typically outperform in moderate growth environments, while high-yield (HY) debt may offer limited compensation given tighter spreads. Corporate fundamentals remain strong, but geopolitical risks and higher interest rates pose potential challenges, particularly for HY investors. Caution is advised, especially in the high-yield segment.

✏️ US high-yield funds extend inflow streak
Pitchbook
US high-yield retail funds saw inflows for the sixth straight week, totalling $671M in the week to Sep 25. YTD, net flows are positive at $27B, with mutual funds leading the way. Fund valuations have surged to $297B, nearing all-time highs, as the Fed pivots toward rate cuts. This marks a strong rebound after three consecutive years of outflows.

📝 The Fed’s triumph
Robeco
The market remains confident in the Fed's ability to achieve a soft landing following a 50 bps cut, despite a slowing US economy and weakening labor market. Investment-grade companies are improving leverage, though high-yield firms may face challenges. There is an expectation of a new regime with higher fiscal spending, inflation, and interest rates.

✏️ Bond investing to support positive environmental and social outcomes
M&G Investments
Bond investors can play a key role by directing funds towards companies and projects providing sustainable solutions, and addressing ESG challenges. ESG bonds, green bonds, and sustainable solution providers present opportunities for positive impact and strong financial returns, with active investors focusing on diversifying portfolios and supporting ESG goals.

📜 Periodicals »

📝 Fixed income musings (Goldman Sachs)

✏️ Unconstrained fixed income views: September 2024 (Schroders)

🎙 Opportunistic strategies and outlook for 2024 (Morgan Stanley)

🎙 Misconceptions and opportunities in ABS (M&G Investments)

🎥 Actionable alternatives: Synthetic risk transfer (SRT) (PIMCO)

🎥 The shifting landscape within direct lending (M&G Investments)

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PRIVATE EQUITY

📝 Separating bargains from busts: Five steps to evaluate PE secondaries
FS Investments
Investors have been attracted to PE secondaries due to discounts on stakes and benefits like J-curve mitigation. Investors should assess factors like pricing drivers, the manager’s track record, portfolio quality, and liquidity needs before investing. Recent market dynamics, including rising interest rates, have influenced pricing, though demand is recovering.

📝 Going for growth: Middle market private equity secondaries
FS Investments
Middle-market PE secondaries offer an attractive risk/reward profile, combining growth potential with lower risk vs VC or large-cap PE. With reasonable valuations and targeted EBITDA growth, mid-market PE provides opportunities for growth at a more manageable risk, especially today where other growth options may be more volatile or overpriced.

✏️ Why invest in Asian PE? India as a potential breakout PE/VC market
Morgan Stanley
India is emerging as a key destination for global investors seeking exposure to Asia, with its PE market showing significant potential. India mirrors many characteristics of China’s past growth, including rapid GDP growth, digitalization, and infrastructure investments. Although challenges exist, India’s structural tailwinds, capital efficiency, evolving exit markets make it an attractive PE opportunity, esp. for investors partnering with experienced local managers.

✏️ Research validates growing adoption of continuation transactions
HarbourVest
Continuation funds have seen rapid growth, becoming a flexible tool for GPs to generate liquidity and raise capital while holding onto high-performing assets. These funds offer investors PE-like returns with lower risk, and their adoption has increased even in favourable exit markets. They can deliver outsized risk-adjusted returns vs traditional buyouts, making them a key part of the GP and LP toolkit with strong potential for future growth.

✏️ Private equity fund structures
Carta
PE firms typically use an LP structure, consisting of GPs and LPs. This structure offers operational flexibility, tax advantages, and liability protection. It allows PE funds to efficiently manage and invest in portfolio companies while complying with regulatory requirements and remains widely adopted due to its long-standing tradition in the industry.

✏️ Why it might be a new day for growth equity
JP Morgan
Growth equity offers exposure to fast-growing private companies in innovative sectors like AI, healthcare, and energy transition. Despite recent valuation declines, the space presents long-term growth potential, particularly as valuations are now more attractive than in previous years. Diversification and careful management is needed to balance risks & rewards for clients.

✏️ Fertility investors look to ancillary services as platforms remain scarce
Pitchbook
PE firms are increasingly targeting ancillary fertility services, such as reproductive banking and mini-IVF, due to limited opportunities for large-scale IVF platform investments. The fertility sector remains attractive. Demand for fertility assets persists, with investors seeking to consolidate and expand in a relatively recession-resistant market.

✏️ Private equity deep dive
Wellington Management
This paper compares VC and buyout strategies within PE, highlighting their distinct risk-return profiles and roles in a portfolio. VC targets high-growth, often unprofitable companies, while buyouts focus on profitable, stable firms using leverage for operational improvement. Both strategies offer diversification benefits and are typically less correlated with public markets, providing investors with the potential for higher returns across company’s life cycle.

🎙Alternative Realities: Private equity challenges and opportunities (JP Morgan)

🎙A deep dive into private equity’s future (Bain)

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PRIVATE MARKETS AND ALTERNATIVE ASSETS

TVJ Spotlight 🔦

📝 An alternative perspective
KKR
The Alternatives industry is expected to grow from $15T in 2022 to over $24T by 2028, driven by demand-supply imbalances, the illiquidity premium, and diversification benefits. Alternatives encompass a broad range of asset classes, each offering unique characteristics in terms of return, risk, and liquidity, playing essential roles in modern portfolio construction.

📝 The smarter alternative: Enhanced indexing
Robeco
Investors are increasingly turning to passive strategies, but enhanced indexing offers a smarter alternative by combining broad market exposure and low costs with potential outperformance. By incorporating techniques like machine learning and sustainability, it aims to deliver better risk-adjusted returns compared to traditional passive approaches.

✏️ How does a semi-liquid fund work?
Schroders
A semi-liquid fund combines features of both liquid and illiquid assets. It allows investors to benefit from the higher returns of less liquid assets like PE, real estate, or infrastructure while maintaining some level of liquidity, often through periodic redemption windows. This structure provides greater flexibility and potential for yield.

✏️ 2024 midyear outlook: Hedge funds
Morgan Stanley
1H 2024 was strong for alpha generation across hedge funds, driven by fundamentals as macro factors had less impact on asset-level returns. Hedge funds are expected to benefit from continued alpha opportunities with a preference for market neutral, relative value, and macro strategies. Caution is advised on equity and credit beta given stretched valuations & volatility.

✏️ IPM monthly blog –September 2024
UBS
Real estate investors are seeing signs of recovery, with volumes stabilizing and investment activity rising in some markets, infrastructure investment benefits from improved financing conditions, inflation resilience, and government support. PE could see increased exit activity due to lower interest rates, while in private credit, falling rates are expected to boost refinancing and affordability in the residential real estate sector, supporting housing demand.

✏️ Listed asset managers show record-breaking revenue growth over the past year
Institutional Investor
Publicly traded asset managers in private markets are outperforming their peers, with higher revenue growth vs other asset management firms. These managers saw revenues increase by 6% from Q2 2023 to Q2 2024, with private markets showing the strongest growth. Traditional asset managers are likely to expand into private markets as opportunities continue to rise.

✏️ DC private markets portfolio construction made simple
Abrdn
As barriers to private market investments diminish, DC pension schemes are increasingly seeking diversification beyond traditional asset classes. While private markets offer the potential for enhanced diversification and long-term returns, building a robust portfolio in this space presents challenges, such as managing liquidity, risk, and cashflows.

✏️ Private equity’s woes bleed into other alternative investments
Institutional Investor
Hedge funds are facing challenges raising capital as PE investors struggle with liquidity, with distributions from PE funds significantly down. Despite hedge funds' strong performance in 2024, allocators lack liquid capital to invest due to capital calls from PE funds. As a result, hedge funds have seen redemptions, despite increasing interest from investors.

✏️ Customizing private markets portfolios for success in Asia's dynamic market
Hamilton Lane
Private markets investors in Asia face an evolving landscape with more asset class options beyond traditional PE, allowing for greater diversification and flexibility. Key challenges include macro uncertainty, liquidity, and adapting to higher capital costs. Successful portfolio construction hinges on using newer investment tools and maintaining a disciplined approach.

✏️ Measuring and tracking the alpha of private market funds
EDHEC
A new approach using privateMetrics data has been introduced to measure and track the alpha of private market funds, helping investors select and monitor funds against representative benchmarks. In a comparison of two funds, while both outperformed public markets, only Fund 2 generated positive alpha, highlighting the importance of selection.

✏️ Risky business: Why the smart money forecasts risk, not returns
Man Institute
Investors face challenges in navigating volatile markets, where the short-run relationship between risk and returns is unpredictable. A risk-based approach, focusing on diversification across asset classes, can enhance risk-adjusted returns. By actively managing risk and diversifying against macro shocks, portfolios can achieve greater resilience in periods of stress.

🎙 Alternative Realities: Unlocking value in private markets (JP Morgan)

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SECTOR FOCUS

Energy Transition x Climate Finance

TVJ Spotlight 🔦

📝 The energy transition: 10 essential indicators for institutional investors
Nuveen
The transition toward a lower-carbon energy system is a complex, multi-decade process requiring significant capital allocation of $275T by 2050. 10 key indicators for investors include clean energy capex, EV infra, corporate carbon reduction, EM cost of capital, carbon pricing, coal phase-out, trade policy, land, climate tech funding and nuclear energy & CCUS.

📝 The five forces transforming power markets
BCG
The global energy market is transforming due to a shift towards renewable energy, leading to more fixed-cost generation, increased price volatility, and seasonal price divergence. Market designs will need to adapt to manage investment signals, system costs, and volatility as the share of solar and wind power grows significantly by 2050.

📝 Climate change is here. And so is the need to embrace sustainability in RE
Morgan Stanley
Human actions are driving climate change, significantly impacting the real estate industry, which contributes 40% of global CO2 emissions. Publicly traded real estate companies are uniquely positioned to play a vital role in achieving net-zero targets by 2050, making sustainability a critical factor for future risk and return prospects in real estate investments.

📝 Decarbonizing aerospace – No longer winging it
TCW
Aviation contributes 2% of global energy-related CO2 emissions, with demand expected to double in 20 years, making decarbonization challenging. Sustainable aviation fuel (SAF) is key, expected to account for 65% of carbon mitigation by 2050, but current production is only 0.2% of total aviation fuel due to high costs and limited availability. Innovations in lightweight materials and airframe design aim to improve fuel efficiency incrementally.

📝 Integrating climate adaptation into physical risk models
GIC
Climate change is increasingly impacting real estate, with projected cumulative costs of physical climate risks reaching up to $559B by 2050 under medium-high warming scenarios. While adaptation solutions like floodproofing can reduce these costs, coordinated efforts between private and public sectors are essential to mitigate the worst impacts.

📝 Global developments in sustainability regulation and policy: Q2 2024
Schroders
The quarterly regulation update highlights key global developments in sustainability regulations, focusing on policy milestones and consultations shaping the investment industry. Key updates for Q2 2024 include extending the UK's Sustainable Disclosure Rules (SDR) to portfolio management and the EU's ESMA ESG fund name guidelines.

📝 To understand climate mobility, follow the water
BCG
Climate mobility refers to the movement of people due to climate change, particularly changes in water patterns, such as droughts, floods, and rising sea levels. These shifts affect agriculture, clean water access, and land use, potentially leading to social conflict and altering where and how people live. Addressing water-related climate mobility is critical.

✏️ Big asset owners are leaning further into ESG factors
Institutional Investor
A survey of 500 institutions with $18T in assets found that 67% view ESG as more important now, with 42% of their assets managed using ESG criteria. While challenges like standard data and concerns over returns persist, ESG continues to grow in importance, particularly for managing risks related to climate change and leveraging AI for ESG data innovation.

✏️ Why investing in climate action makes good economic sense
BCG
If global temperatures rise by 3°C by 2100, the world could face economic losses of up to 22% of cumulative GDP. Investing less than 2% of cumulative GDP in climate mitigation could limit warming to below 2°C, reducing potential economic losses by 11-13% of GDP, while also necessitating adaptation investments to avoid further damage.

📝 Climate change: Inaction is not an option
LGIM
The Climate Solutions whitepaper argues that investing in high-emission companies or those impacting other companies' emissions offers significant climate impact and potential returns. This approach emphasizes proactive company engagement to drive business opportunities from the transition while reducing emissions.

Real Estate x Infrastructure

TVJ Spotlight 🔦

📝 Infrastructure secondaries: Capitalizing on solid foundations
Pantheon
Infrastructure secondaries have gained prominence due to liquidity challenges in the market, leading to increased deal flow. This asset class is known for resilience, lower volatility, and attractive risk-adjusted returns, driven by global trends like digitization and decarbonization. The sector's growth is supported by strong primary fundraising, offering investors a shorter-duration, high-potential entry point with favorable valuations.

📝 APAC real estate growth without risk
BlackRock
The APAC region offers strong growth opportunities without emerging market risks, particularly in transparent markets like Australia and Japan. It provides diversification benefits with low global correlations and presents both cyclical and structural investment opportunities, making local knowledge essential for success. In APAC, investor preference has shifted towards value-add strategies (preferred by 63% investors in 2024 vs 33% in 2023).

✏️ Top 3 trends and challenges affecting the life sciences industry
UBS
The growing collaboration between biotech companies and big pharma is crucial, with pharma increasingly acquiring biotech innovations. While public biotech markets have faced challenges, investment opportunities remain strong, particularly in Europe. AI is set to disrupt the biotech industry, accelerating drug discovery. For real estate investors, this collaboration may drive demand for spaces near pharma research centres and AI-focused lab facilities.

✏️ Japan multifamily real estate
UBS
Japan’s economy is transitioning from deflation to inflation, with robust wage growth and increased household spending signaling a positive outlook for long-term yield spreads and rental growth in the multifamily real estate sector. However, demographic challenges and potential policy risks remain, requiring careful investment focus.

AI x Tech

📝 The power of AI in financial planning and forecasting
BCG
AI and machine learning can significantly enhance planning and forecasting processes through "dynamic steering," which combines data automation and driver-based models for agility and accuracy. This approach allows companies to generate more precise financial forecasts and insights, leading to faster planning cycles and improved decision-making.

📝 Technology report 2024
Bain
In 2024, AI adoption surged across the tech sector, but skeptics questioned its return on investment. Bain's research shows that AI's value lies in changing business processes, not just in deployment. Early results suggest generative AI could boost EBITDA by up to 20%, with broad impacts on industries, business structures, and talent.

📝 The stairway to GenAI impact
BCG
Many companies are struggling to realize the expected benefits from GenAI investments, with 66% of executives dissatisfied with their progress. Despite this, 54% still anticipate cost savings in 2024. The key issue lies in treating GenAI as a typical tech upgrade rather than focusing on operational redesign, training, and leadership-driven transformations aimed at measurable financial improvements. Success requires structured planning and C-level support.

✏️ Healthcare IT spending: Innovation, integration, and AI
Bain
Post-pandemic, 75% of healthcare providers and payers increased IT spending to drive innovation, with a focus on cybersecurity and return on investment. Vendors should prioritize easy integration and tech stack management. While generative AI adoption is growing, challenges like regulatory issues and governance remain.

Disclaimer:

The content provided on this platform contains references and links to external sources, including articles, reports, websites, images, or videos. We do not own or claim copyright over the content found in these external sources. The ownership and rights of the content belong to the original creators.

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and affiliated persons and companies assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Hi, welcome to the new edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else! Clicking the headlines is all it takes.

Check out TVJ Spotlights 🔦 including 1) Private Debt: The multi-faceted growth driver (by BlackRock); 2) PE middle market report (by Pitchbook); 3) Solving the private markets allocation gap (by Partners Group)

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1K+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

📝 Private Debt: The multi-faceted growth driver
BlackRock
Private debt is projected to reach $3.5T in AUM by 2028, driven by borrower demand for flexibility and clear pricing, expanding its competition with syndicated debt markets. Changes in public debt and equity markets, including larger deal sizes and companies staying private longer, enhance private debt’s role. Drivers also include reduced bank lending and increased investor demand as they get more confident and comfortable with the asset class.

📝 Why it’s (still) a good time to invest in private real estate credit
Principal Asset Management
With $2T in loans maturing over the next three years and diminished bank lending due to inflation and regulatory pressures, demand for private credit remains high. High interest rates offer opportunities for new investments with attractive returns, making private real estate credit a compelling option for investors.

📝 Benefits of multi-asset credit: Why choose one when you can have them all?
KKR
Multi-asset credit strategies provide dynamic risk management by diversifying across global credit asset classes, such as high-yield and structured credit, while adapting to market conditions. MAC offers flexibility, diversification, liquidity, and operational efficiency, making it a strong option for managing volatility and maximizing returns.

📝 The lower mid-market offers LPs an attractive diversification play
TPG
Lower mid-market (EBITDA <$25M) offers attractive diversification for institutional investors, providing better lender protections, lower leverage, and stronger borrower-lender relationships compared to the upper mid-market where larger lenders compete in commoditized deals. The lower mid-market continues to present opportunities for stable returns, particularly with experienced managers navigating macroeconomic shifts.

✏️ Finding the sweet spot in today’s private credit market
HarbourVest
The traditional view that smaller companies offer better pricing and less risk in private credit is shifting. Credit spreads and leverage levels have converged across company sizes, diminishing the premium for lending to smaller businesses. Larger companies now often provide better downside protection and faster EBITDA growth. Investors should target companies with $50-$150 million in EBITDA.

✏️ Private credit spectrum of solutions
Goldman Sachs
Direct origination models offer better risk assessment and returns. Transparency, customization, and strong investor relations are crucial for managers. While default rates remain low at c.2%, the industry is shifting towards a solutions-oriented approach, fostering closer collaboration between managers and investors.

✏️ The real estate credit opportunity is here
KKR
Commercial real estate transaction volumes have surged, creating opportunities for equity-like returns on real estate debt. Banks’ share of CRE lending fell from 40% to 30%, creating a $300B capital gap. Property values appear to have bottomed, and the scarcity of capital makes real estate credit an attractive, high-yielding investment.

✏️ The critical role of covenants in private credit
UBS
Tailored covenants, specific to the borrower’s industry, enable proactive monitoring and quick responses to potential issues. The lack of covenants, as seen in "covenant lite" deals, has contributed to lower recovery rates, especially in high yield markets, where default recovery rates have plummeted from 73.3% in 2014 to just 38.3% in 2023 for first-lien loans.

✏️ Private real estate credit: Capitalizing on today's market opportunities
Principal Asset Management
Private real estate credit is an attractive investment opportunity due to reduced lending by traditional banks, high interest rates, and strong demand driven by $2T in maturing loans. This has created a lender's market, with wider spreads and higher yields. The sector is poised to benefit as high capitalization rates reset valuations for new investments.

✏️ The economics of corporate bond markets
Institutional Investor
High yield bonds correlate more with equities, while investment-grade bonds align with US Treasuries, although this correlation weakens during market stress. Investment-grade bonds, backed by corporate cash flows, are considered safer, while high-yield bonds carry higher risk, reflecting corporate financial health and exhibiting more equity-like risk.

✏️ Catastrophe bonds: Diversification, performance and impact
Man Institute
Catastrophe bonds transfer natural disaster risks from insurers to investors, offering equity-like returns with low volatility and minimal correlation to traditional assets. They provide fast payouts in developing markets via parametric triggers and are also recognized as socially responsible investments. With steady market growth, ‘Cat’ bonds deliver both uncorrelated returns and social impact for investors focused on resilience in disaster-prone areas.

✏️ Is investment-grade credit still worth considering?
Robeco
The stock-bond correlations are returning to negative, restoring bonds' diversification role. While US Treasuries offer attractive yields, investment-grade credit historically delivers higher long-term returns and benefits from falling interest rates. Strong corporate fundamentals and favourable market conditions support investment-grade credit as a compelling option.

✏️ Navigating volatility: The strategic advantage of bonds
Goldman Sachs
The strategic value of bonds for income, diversification, and stability in portfolios. Higher bond yields compared to the previous cycle offer attractive returns and help protect portfolios during downturns. Structural shifts reinforce the need for active investment strategies and core fixed-income allocations to navigate volatile markets.

✏️ DB Pensions: Investing to hedge buyout pricing
Abrdn
As a DB pension scheme nears a strong funding level, the focus shifts to preparing for an insurer buyout. To minimize volatility and manage financial risks, investment strategies must be optimized to align with insurer pricing sensitivities, such as interest rates, inflation, and credit exposure. Regular reviews and tailored investments ensure the scheme’s funding level is protected and facilitate a smooth, cost-effective buyout process.

📜 Periodicals »

📝 Global fixed income weekly (Goldman Sachs)

✏️ High yield monthly update (Nomura)

✏️ Emerging market debt: August 2024 review and outlook (Abrdn)

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PRIVATE EQUITY

TVJ Spotlight 🔦

📝 PE middle market report
Pitchbook
In H1 2024, US PE middle-market dealmaking saw a modest recovery, with buyouts up 12% vs 2023, despite lagging behind corporate-led M&A. Volumes recovered from a soft 2023, but fundraising in the mid-market was down 10%, with a shift of interest toward mega funds. The small-cap public equity rebound could also boost valuations and drive more M&A activity.

📝 Secondaries : A growing opportunity
Nuveen
The secondary market is experiencing strong growth, with record deal volumes and significant demand for mid-market continuation vehicles. Buyers currently hold pricing power due to a supply-demand imbalance. Continuation vehicles are a growing trend especially in the mid-market. Despite challenges in the exit environment, secondaries remain undercapitalized, presenting further growth opportunities in both GP-led and LP-led transactions.

📝 Private equity for all
Neuberger Berman
Innovations such as open-ended and evergreen funds provide more flexible investment opportunities, allowing investors to maintain continuous exposure without traditional capital calls. These developments aim to make private equity more accessible, especially for institutional investors, while managing liquidity and risks effectively.

📝 Healthcare IT - VC update
Pitchbook
In Q2 2024, VC funding in healthcare IT remained subdued with 77 deals totaling $1.1B, reflecting a consistent trend since Q4 2022. Key challenges include valuation discrepancies and point solution fatigue. AI-driven clinical workflow automation and revenue cycle, particularly prior authorization, were prominent themes.

📝 Mobility tech report
Pitchbook
In Q2 2024, the autonomous driving segment boosted mobility tech funding, reaching $6.7B, a 14% increase vs Q1 2024. Additionally, the marine data and drone segment is emerging, with companies developing underwater drones for scientific, commercial, and defence applications, attracting significant investment. EVs segment had the second-highest deal value with $2B across 35 deals. Exit activity remained largely muted with 19 deals valued at $2.1B in total.

✏️ Opportunities in Japan’s maturing PE market
Carlyle
Japan’s PE market is growing, with $123B in deal value in 2023, driven by corporate reforms, low interest rates, and business succession needs. PE funds are helping firms focus on digitalization, AI, and global growth. The market has strong potential supported by strong local relationships and favorable geopolitical conditions, presenting multiple opportunities.

✏️ Secondaries are pacing for a record year thanks to these investors
Institutional Investor
The secondaries market saw $72B in closed transactions by midyear and a projected total of over $140B. LPs contribute 57% of the volume due to liquidity pressures and attractive prices. Strong demand, fueled by $190B in dry powder and improved buyer optimism, has led to rising fund-level pricing, with buyout stakes reaching 94% of NAV, the highest since 2021.

✏️ Ownership trends in PE 2024
Carta
PE deal volume rebounded in Q2 2024, marking the strongest activity in two years. Major firms have committed to expanding equity ownership to employees beyond top management. Carta highlights a 172% increase in employee stakeholders since 2019, with more PE-backed companies issuing profits interest units (PIUs) to employees as part of equity sharing.

✏️ VC dealmakers weigh in on why dilution is declining
Carta
Median dilution in startup funding rounds has declined, with companies selling smaller portions of equity to VCs. Factors include smaller round sizes, increased bridge rounds, and founders' growing access to fundraising data. This shift reduces immediate dilution but could lead to significant future dilution when convertible notes from bridge rounds convert.

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PRIVATE MARKETS AND ALTERNATIVE ASSETS

TVJ Spotlight 🔦

📝 Solving the private markets allocation gap
Partners Group
Private markets offer structural advantages and long-term outperformance potential, making them attractive for investors seeking diversification. However, they have historically been difficult to access for private wealth clients. Private markets have surpassed public markets in annual fundraising since 2016, and total AUM is expected to reach $30T by the early 2030s.

📝 Principles of alternatives investing
JP Morgan
Alternative investments are growing in demand due to muted returns in public markets and insufficient diversification in traditional portfolios. Alternatives in private markets offer diversification and income opportunities. They enhance portfolio attributes, fill financing gaps, and are becoming increasingly relevant with growing private markets.

📝 Global wealth investment playbook
KKR
Investors are shifting toward equity-based strategies, extending credit duration, and seeking downside protection through assets like infrastructure. Elevated inflation volatility is increasing stock-bond correlation, pushing investors to explore alternative diversification options, with rate cuts benefiting leveraged assets like private equity and real estate.

📝 The industrial reset in emerging markets
Morgan Stanley
The global manufacturing sector is experiencing a revival, driven by government-led industrial policies and reshoring efforts to build resilient supply chains. The exposed risks of overreliance on specific regions, lead to renewed investments in factory automation, semiconductors, and renewable energy. Emerging markets, esp. India and Brazil, are key regions driving growth.

✏️ What’s going on in alternative markets?
JP Morgan
The traditional 60/40 portfolio faces challenges due to high public market valuations, low bond yields, and stock-bond correlation. Investors are increasingly looking to alternatives to improve long-term returns and reduce volatility. Key opportunities include infrastructure investments driven by energy and AI transitions and discounted PE secondaries.

✏️ When public and private markets converge
Wellington Management
The equity market has shifted significantly as private companies stay private longer, with over 10K PE-owned companies compared to just 4K public companies today. Asset owners are navigating this public-private convergence, exploring opportunities in biotech innovation, climate-focused technology, AI, and financial inclusion.

✏️ Investment firms keep launching private asset funds
Institutional Investor
Institutional and retail demand for private assets is growing, with over 80% of asset managers launching new private market funds in the past three years, and 84% planning similar launches in the next three years. LPs like pension funds heavily invest in private equity and debt with Asset managers making the shift too, to meet rising demand.

✏️ Startup M&A activity is holding firm in 2024
Carta
M&A activity, esp. in startups has been steadily increasing, with a 4% rise in Q2 2024, reaching 158 deals. While global M&A transaction counts are down, the value of deals rose by 12% in H1 2024, driven by larger deals. SaaS startups, particularly at seed and pre-seed stages, are the most common M&A targets. Sectors like technology, energy, and healthcare remain strong, with expectations that an IPO resurgence could boost M&A activity.

✏️ From pain to performance at mid-market companies
BCG
Mid-market companies, often burdened with higher borrowing costs and fewer resources, should embrace comprehensive transformation to focus on operational efficiency, customer satisfaction, and talent retention by addressing issues piecemeal. Employees and investors must align behind an ambitious transformation agenda with clear roadmaps.

📜 Periodicals »

📝 Guide to alternatives Q3 2024 (JP Morgan)

✏️ Market pulse September (Goldman Sachs)

✏️ Monthly markets review - August 2024 (Schroders)

🎙The BEAT for September –Key themes and top ideas (Morgan Stanley)

The Valt Journal Library

SECTOR FOCUS

Real Estate x Infrastructure

✏️ The case for mid-market infrastructure
Goldman Sachs
Mid-market infra presents significant investment opportunities as many GPs have shifted to large-cap infra funds. Mid-market companies (valued at $400M-$2B) offer attractive value creation potential, particularly in sectors like renewable energy, battery storage, and logistics. With strong demand from institutional investors, mid-market infra is expected to deliver consistent returns and see increased allocations due to its potential and diverse exit strategies.

✏️A new cycle commences for European real estate
UBS
Investment volumes are beginning to pick up in European real estate market, particularly in the UK, where valuations have adjusted faster vs EU. Additionally, risk-adjusted yields indicate that the pressure from higher interest rates has eased, with prices flattening in some sectors, such as German residential markets, where leasing fundamentals remain strong.

✏️European life sciences real estate
UBS
The life sciences industry's growing real estate demand presents a strong investment opportunity due to the need for specialized facilities. The sector's demand for R&D and manufacturing spaces is expected to increase. ESG requirements and energy efficiency are becoming essential as life sciences companies focus on reducing their carbon footprint.

✏️ The REIT place, the REIT time
Abrdn
This macro environment favors REITs, which are outperforming equities and private real estate, thanks to their correlation with bond yields. REITs also enjoy a cost-of-capital advantage, enabling growth through M&A, particularly in sectors benefiting from structural trends like data centers, logistics, and healthcare, giving an edge over private real estate.

✏️ Driving conversations and action on sustainability
UBS
Success factors in sustainability related investments include emphasizing sustainability throughout the investment lifecycle, prioritizing material topics, fostering collaboration, and acknowledging positive actions. As sustainability becomes more crucial for investors and regulators, engagement programs are essential for driving value in private markets.

🎥 Will it be a podium finish for real estate? (Abrdn)

🎥 Access compelling opportunities in commercial real estate (PIMCO)

AI x Tech

✏️ Artificial intelligence insights
UBS
AI is becoming a transformative force, driving efficiency, innovation, and new investment opportunities across industries, including real estate. While AI can enhance investment processes and productivity, AI is expected to mostly augment jobs rather than replace them, with potential for new job creation in AI development and implementation boosting growth.

✏️ The neobank era has arrived
Robeco
Neobanks are disrupting traditional banking with user-centric online services, transitioning from aggressive growth to sustainable profitability. Major players like Revolut, Starling, and Nubank have reported record profits, fueled by diversified revenue and efficient customer acquisition. While regional strategies vary, neobanks are well-positioned to grow.

✏️Winning strategies for B2B SaaS companies
BCG
Europe's B2B SaaS sector thrived in 2023, with top performers nearly tripling their revenue, particularly in HR, healthcare, and green tech. Growth is projected to accelerate by 2-3x in 2024. To sustain their success, companies should focus on targeting new customers, automating marketing, linking pricing to products, and fostering innovation.

Disclaimer:

The content provided on this platform contains references and links to external sources, including articles, reports, websites, images, or videos. We do not own or claim copyright over the content found in these external sources. The ownership and rights of the content belong to the original creators.

This post and the information presented are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness or completeness of this information. The author and affiliated persons and companies assume no liability for this information and no obligation to update the information or analysis contained herein in the future.

Hi, welcome to the new edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else! Clicking the headlines is all it takes.

Check out TVJ Spotlights 🔦 including 1) Upper middle market lending (by KKR); 2) How private equity’s ‘engine room’ can drive alpha (by Pantheon); 3) The love-hate relationship in private equity secondaries (by Nuveen)

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1K+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

Quickly scan the list of all reports in this edition here!

PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

✏️ Upper middle market lending: Four reasons we focus on larger companies
KKR
Lending to upper middle market companies ($50-$200M EBITDA) offers 1) stronger, more stable financial performance; 2) lower default rates compared to smaller companies, while 3) the spread difference in returns between the two is minimal. 4) Despite competition from syndicated markets, upper-middle market lending remains attractive due to its resilience, limited competition, and better risk-adjusted returns.

✏️ Effects of interest rate movements on securitised credit
HSBC Asset Management
Securitized Credit is positioned as a resilient fixed-income asset class in the current interest rate environment due to its low duration, floating rate nature, higher yields compared to investment-grade corporates, and credit enhancement that cushions against losses. Gradual rate reductions could benefit SC by making debt servicing easier and potentially tightening spreads, offering investors capital gains. SC is expected to deliver attractive returns even in a more normalized positive rate environment.

✏️ Mid-year private credit viewpoints
Hamilton Lane
Private credit is expected to remain resilient due to strong equity contributions, lower loan-to-values, and collaborative lender-borrower relationships. M&A and financing demand is driving deal activity. PE activity is expected to increase in the second half of 2024. LPs demand liquidity and lower borrowing costs are favoring LBOs.

✏️ Climate change and ILS: Boon or bane?
Axa Investment Managers
The increasing frequency and intensity of natural catastrophes is boosting demand for insurance and the growth of the Insurance-Linked Securities (ILS) market. ILS offers investors diversification benefits, attractive risk premiums, and limited correlation with economic cycles, making it an appealing asset class with proper understanding and careful selection.

✏️ What do upcoming rate cuts mean for fixed-income investing?
JP Morgan
Investors are advised to allocate to fixed income now to benefit from the anticipated decrease in yields. Historical data suggests that bonds, particularly high-quality, short-to-intermediate duration bonds, perform well following the first rate cut. Active management and careful security selection within fixed income can help investors capitalize on this opportunity.

✏️ Who will buy the oncoming surge of treasuries? And at what price?
State Street
The growing US federal budget deficits and higher refinancing costs are expected to lead to a significant increase in US Treasury issuance, with an estimated $2T of net issuance annually over the next decade. As price-sensitive buyers like households and corporates take on a larger share of Treasury investments, yields are likely to rise, requiring an additional 95 bps to attract these buyers.

📝 Thinking beyond the landing
Capital Group
The uncertain economic environment suggests that investors should maintain flexibility and diversification in their bond portfolios. Different economic outcomes favour different bond strategies, with longer-duration assets benefiting from a hard landing, and shorter-duration credit-oriented strategies benefiting from a soft landing. If inflation reaccelerates, cash could be the best option.

✏️ The benefits of combining fundamental and multi-factor high-yield
Robeco
Combining a quantitative, factor-based high-yield strategy with a fundamentally managed high-yield portfolio can stabilize performance amid market volatility. This approach leverages diversification and active management, offering resilience against risks like defaults and rating migrations while maintaining alignment with benchmarks, particularly in uncertain macroeconomic conditions.

✏️ Rate-cutting playbook: Investment strategies for offense and defense
JP Morgan
Last week's strong macroeconomic data boosted large-cap equities, leading to the best performance streak in over a month. As the Federal Reserve is expected to begin a rate-cutting cycle, investors are advised to prepare by considering both defensive strategies, such as moving into bonds for stability, and offensive plays in rate-sensitive sectors like refinancing, commercial real estate, and M&A activity.

✏️ Beyond expectations: US credit in an evolving world
Abrdn
While 78% of S&P 500 firms beat earnings forecasts in the latest reporting season, actual earnings growth was significantly lower than expected, leading to increased volatility and uncertainty. This environment highlights the need for income investors to adopt a selective approach, focusing on high-quality, resilient companies, and to consider diversifying across asset classes to navigate potential risks in a slowing economy.

✏️Why there is still time to move from cash into bonds
JP Morgan
The recent bond market rally suggests it's not too late to move out of cash and lock in longer-term yields. Extending duration in a diversified portfolio of high-quality bonds could capture potential price appreciation, offering greater returns compared to staying in cash, especially as risk-free yields are likely to decline.

✏️ What does India's benchmark inclusion mean for investors
M&G Investments
JP Morgan's inclusion of Indian government bonds in its Emerging Market Global Bond Index is seen as a positive development for both India and the index, increasing capital flows and stabilizing yields in India's $1.3T bond market. While this move may introduce some volatility, it comes at a time of improving the economic outlook for India.

✏️ EM corporate bonds and the SDGs: delivering profit with purpose
Abrdn
Opportunities exist in emerging markets, where companies like Brazil's Aegea, Axian Telecom in Africa, and India's ReNew are making significant progress in areas like water sanitation, digital connectivity, and renewable energy, while also delivering strong investment returns.

✏️ Emerging into the spotlight: The case for EMD in insurance portfolios
Man Institute
The growing insurance market is increasingly turning to emerging market hard-currency debt for meeting liabilities with higher yields. EMD offers quality investments, diversification, and longer maturities that align well with insurers' needs. However, insurers should be mindful of the illiquidity risks and issuer concentration in EMD, particularly in corporate bonds, and focus on quasi-sovereigns and large, high-quality issuers to mitigate these risks.

📝 Behind the memo – The impact of debt with Howard Marks and Morgan Housel
Oaktree
Howard Marks and Morgan Housel explore the impact of debt on investment strategies, highlighting the importance of balancing short-term gains with long-term endurance, cautioning against the risks of over-leveraging, which can lead to significant financial distress during downturns.

📜 Periodicals »

✏️ Public pension quarterly 2Q 2024 (Goldman Sachs)

📝 Global fixed income weekly: Musings (Goldman Sachs)

✏️ Municipal fixed income weekly: Shelter from the storm? (Neuberger Berman)

📝 CLO weekly wrap (Pitchbook)

🎥 PIMCO's highest conviction themes in asset-based lending (PIMCO)

🎥 Asset-based lending 101 (PIMCO)

🎥 US life insurers’ utilization of private placements (Wellington Management)

The Valt Journal Library

PRIVATE EQUITY

TVJ Spotlight 🔦

📝 The mid-market: how private equity’s ‘engine room’ can drive alpha
Pantheon
Pantheon finds the mid-market segment compelling due to its focus on buyouts or growth equity in a diverse range of private companies, often with lower entry costs and flexible exit options. The mid-market offers strong historical returns, with careful manager and asset selection being crucial for unlocking its potential. Mid-market funds allow managers to focus on niche sectors and identify undervalued opportunities that larger funds might miss.

TVJ Spotlight 🔦

📝 The love-hate relationship in private equity secondaries
Nuveen
LP-led transactions are still maturing but continue to deliver strong performance for investors. GP-led transactions, typically structured as continuation vehicles where PE firms recapitalize portfolio companies while maintaining control, are becoming a permanent fixture in the market regardless of the M&A environment. The paper suggests that investors would benefit from having exposure to both LP-led and GP-led strategies to optimize their returns.

✏️ The rise of semi-liquid secondaries funds
UBS
The private equity secondary market has seen significant growth, reaching $68B in volume in the 1H 2024 (up by 58% yoy) and is expected to reach $140B by end of 2024. This growth is driven by the increasing complexity and specialization in the market, including the rise of semi-liquid open-ended secondary funds, which offer liquidity and diversification benefits with better access and support of local feeder funds. GP-led (41%) and LP-led (59%) transactions are becoming more prevalent, with LP-led transactions reaching record levels.

✏️Asia’s evolving venture capital market
Wellington Management
The Asian venture capital market has grown significantly, with assets increasing 21x from 2011 to 2022. However, Asian VC funds have generally underperformed vs their Western counterparts due to factors like slower scaling, smaller market sizes, and overcapitalization. To succeed in this market, investors should focus on capital efficiency, local presence, right-size funds, and adopting a global approach with dedicated regional expertise.

📝 Exit alternatives for US VC
Pitchbook
High interest rates have significantly hindered VC-backed exit opportunities, leading to a sharp decline in US VC exit value and a lack of liquidity ($98B, down 85%+ from 2021 highs). This has increased secondary market share sales as early investors seek returns while companies remain private. Although continuation funds offer a potential solution, conflicts of interest and a small market size may limit their use.

📝 Healthcare funds report
Pitchbook
The report highlights a divergence between PE and VC healthcare specialist managers in 2024. PE healthcare specialists are raising more capital and outperforming the broader asset class, while VC healthcare fundraising has declined. Fundraising is increasingly concentrated in fewer, larger funds, with PE healthcare specialists showing strong performance in earlier vintages, though more recent healthcare investments have underperformed due to increased competition and pricing challenges.

📝 Public PE and GP deal roundup
Pitchbook
GP consolidation is accelerating, with deal flow involving GP franchises on track to break records in 2024, reflecting the broader industry's consolidation phase. Fundraising has surged by c.45% in H1 2024, driven by synergies from strategic acquisitions, while credit origination within these firms has shot up by over 155%. Realizations are also improving, with expectations for further gains in the second half of the year as market conditions stabilize.

✏️ Biotech IPOs in 2025: Quantity, quality, and best practices
Wellington Management
The biotech IPO market has cooled since the highs of 2020-2021, with investors now more focused on companies with mature, differentiated assets and clear paths to value creation. Successful biotech IPOs today are characterized by strong product pipelines, experienced management, and realistic valuations. The market is normalizing, favouring biotech companies with unique, de-risked assets and well-defined strategies.

📝 Global machinery & equipment report 2024
Bain
Leading machinery companies are leveraging installed base management and digital twin technologies to enhance product performance, predict maintenance needs, and generate new revenue streams. This approach, which involves continuous data flow from machinery, is expected to drive significant growth in the digital twin market, projected to reach $110 billion by 2028.

📝 State of pre-seed: Q2 2024
Carta
The pre-seed fundraising landscape has shifted significantly, with SAFEs (Simple Agreements for Future Equity) now dominating the market, making up 88% of deals in Q2 vs 12% for convertible notes. This change has important implications for early-stage founders and investors, as SAFEs and convertible notes differ in structure and financial impact during later fundraising rounds while pre-seed rounds are getting smaller.

✏️ How to address the most common VC data challenges
Juniper Square
VC firms face significant challenges in managing and utilizing vast amounts of data, often stored across disparate systems, leading to inefficiencies and difficulties in meeting investor demands. There is a need for a single, interoperable system that offers real-time, self-service access to data, enabling streamlined and automated reporting. AI could enhance portfolio management, provided that data is well-structured and centralized.

✏️ Big deals rule: Healthcare private equity midyear update
Bain
In the first half of 2024, North American healthcare IT and provider deals saw a rebound in deal value ($44B), driven by large-scale assets and IT investments. Despite a global shift in investor focus towards Asia-Pacific, particularly in India, North America remained a key region for healthcare IT investments, with increased interest in derivative plays and specialties like infusion services.

The Valt Journal Library

PRIVATE MARKETS AND ALTERNATIVE ASSETS

✏️ All about alpha: Capturing returns in today's market environment
Morgan Stanley
The current market environment in 2024 has created favourable conditions for hedge fund alpha generation, especially for equity market-neutral strategies. Despite volatility and concentrated market gains driven by technology stocks, hedge funds have outperformed long-only managers due to their ability to generate both long and short alpha, unconstrained by traditional benchmarks.

📝 Smartsourcing: Creating dynamic operating models
State Street
Investment firms are rethinking their operating models to achieve diversification, growth, and competitiveness. Forming partnerships with providers who act as extensions of their business is crucial for creating adaptable models tailored to their current needs. The article explores the benefits of "smartsourcing" models, balancing internal and outsourced capabilities, and leveraging modern technology to optimize operations as businesses grow.

✏️ Thematic investing: uncovering rich seams with mega themes
Abrdn
Three "mega themes" today: energy evolution, health and generational shift, and transformational tech. High-quality companies must be identified within these themes as opportunities exist in sectors like electricity grids, data centers, and gene therapies. Thematic investing is gaining momentum among institutional investors, and a quality-first approach is recommended to capture value in a world where economic growth is slowing.

✏️ Family-office war chests keep shrinking. Here’s where they put that capital to work
Institutional Investor
Family offices have been reducing their cash reserves and reallocating funds across various asset classes, including fixed income, equities, and hedge funds, as inflation eases and market conditions evolve. Family offices are more agile in their investment decisions compared to institutional investors, with a continued focus on alternative investments like private equity and private credit.

✏️ Mind the risk: The value of valuations
LGIM
Forecasting asset returns involves not only considering expected returns but also the associated risks, as changes in risk can offset perceived opportunities from higher expected returns. A consistent allocation strategy may often be more efficient than adjusting allocations based solely on expected return changes, especially during volatile market conditions.

✏️ This private-markets slog? It too shall pass and another boom will follow
Institutional Investor
PE faced a challenging 2023 with declining valuations and tough fundraising, leading to continued struggles in 2024. However, Bain predicts a strong recovery, with private market AUM expected to grow significantly, potentially reaching $60-$65T by 2032. This growth is driven by retail and institutional investors seeking higher returns and diversification in alts.

✏️ EIS funds in the UK
Carta
An EIS fund is a venture capital fund that invests in startups through the Enterprise Investment Scheme, offering tax relief to early-stage investors. These funds help startups secure the necessary funding for growth, with various active EIS funds available, each specializing in different sectors and stages of investment.

✏️A long-term perspective on ARP
LGIM
After nearly a decade of integrating Alternative Risk Premia (ARP) strategies into multi-asset portfolios, it's clear that while ARP strategies have struggled in headline performance, their diversification benefits have been valuable, particularly during market downturns. Despite their challenges, ARPs continue to justify their place in portfolios due to their low correlation with other return streams and their ability to provide stability during volatile periods.

📜 Periodicals »

📝 Alternatives Q2 2024 update (HSBC)

✏️ Private market insights – July/August 2024 (UBS)

✏️ Monthly hedge fund bulletin (UBS)

🎥 Quality is critical in co-investments amid volatility (Adam Street)

The Valt Journal Library

SECTOR FOCUS

Energy Transition x Climate Finance

📝 Navigating the future of energy: The growing power demand in emerging markets
TCW
Emerging markets, driven by economic growth and urbanization, are experiencing rapid increases in energy demand, with India playing a pivotal role. India needs c.$10T by 2070 for its energy transition and to meet its 2030 targets, India must double its pace of renewable energy uptake to about 17% per year. Opportunities exist in renewable energy, grid modernization, and energy storage.

✏️ Biogas – an untapped source of renewable energy
UBS
Biogas and biomethane are renewable energy sources with versatile applications, including heating, power, and clean transportation and currently contribute <1% to the global energy supply. Biomethane offers a reliable, 24/7 energy source that can support the circular economy. Challenges include such as social acceptance and competition with other sources.

✏️ Climate change: sustainable returns, real-world impact via active transition investing
Abrdn
A successful climate investment strategy should prioritize real-world emissions reductions, support the low-carbon transition, and facilitate climate adaptation, focusing on companies that lead in these areas. Fixed income instruments are vital for funding climate-resilient projects. Promising sectors include renewable energy, EVs, and sustainable manufacturing.

✏️ The golden opportunities buried in e-waste
BCG
The UK’s Royal Mint is now extracting gold from discarded electronic devices, reflecting a broader trend of local e-waste recycling driven by advancing clean technologies. While only a fraction of global e-waste is currently recycled, local recycling can address critical mineral supply gaps, reduce geopolitical risks, and improve sustainability.

✏️ “The tortoise and the hare”: It’s a long race for the hydrogen economy
Natixis
Green hydrogen faces challenges in demand due to high costs and a lack of end customers. Despite its long-term potential, widespread adoption is delayed, with significant growth expected post-2030. Government policies, technological advancements, and strategic investments are essential to overcoming barriers and realizing green hydrogen's impact on the global energy transition.

Real Estate x Infrastructure

✏️ Office to multifamily conversions: Implications for CMBS investors
Wellington Management
The demand for office space has significantly declined due to the rise of hybrid work, leading to challenges and opportunities in the commercial mortgage-backed securities (CMBS) market. Cities and states are promoting office-to-multifamily housing conversions through incentives, which could help reduce excess office supply and provide economic benefits.

✏️ Transforming urbanization
Nuveen
Urbanization remains a key driver of opportunities across real estate, infrastructure, and natural capital, with a focus on sustainable development, renewable energy, and smarter urban planning to meet environmental goals.

🎙 Skyscrapers and storefronts: Insights on the commercial real estate market in 2024 (Mawer)

AI x Tech

✏️ Artificial intelligence: Data is the differentiator
Goldman Sachs
Significant investment opportunities in GenAI, particularly for companies involved in data management, storage, cleaning, and protection. As AI models rely heavily on high-quality data, firms that can effectively handle unstructured data, provide secure storage solutions, and offer data cleaning and cybersecurity services are poised to benefit significantly.

✏️ AI enterprise market map: Cutting through the hype
Lightspeed
AI could save professionals up to 12 hours per week and the technology could contribute more than $15T to the global economy in productivity gains by 2030. The rise of AI has led to a crowded and rapidly evolving market, with over 200 startups across foundation models, enablement platforms, and applications. Enterprise applications are expected to drive long-term value by disrupting software categories and enabling end-to-end workflow automation.

✏️ How is GenAI transforming the financial landscape?
State Street
AI is enabling organizations to create content in various formats and transform how they interact with machines. While LLMs offer significant opportunities, they also present challenges such as explainability, cyber risks, and biases. Key opportunities include document intelligence, data quality controls, client onboarding, and productivity enhancements.

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Hi, welcome to the new edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else! Clicking the headlines is all it takes.

Check out TVJ Spotlights 🔦 including 1) Why middle-market co-investment opportunities make sense now (by Hamilton Lane); 2) Global fund performance report (by Pitchbook); 3) Navigating ILPA’s NAV-based facility guidance (by Pitchbook)

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1K+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

Quickly scan the list of all reports in this edition here!

SECTOR FOCUS

Energy Transition x Climate Finance

📝 Capital at risk: nature through an investment lens
BlackRock
Natural capital offers opportunities in both public and private markets in areas like precision agriculture, circular economy solutions, and reforestation. There are $350B of outstanding debt across themes like biodiversity and water conservation. In private markets, large-scale transactions have happened in recent years in regenerative agriculture ($40B market by 2040) and AI & robotics are expected to grow the market to over $150B within a decade.

📝 Carbon management: A candid conversation among investors
BlackRock
Carbon management involves capturing, transporting, and storing or reusing CO2 to reduce emissions, particularly in hard-to-decarbonize industries. There are opportunities in carbon capture, removal, and utilization technologies. Purchases in the durable carbon dioxide removal credits (CDR) market have grown by 7x+. From 2020 to 2023, the space has seen a growth of 5x+. The CDR price index has increased to US$444 per tonne. This indicates that while the market is growing, the costs associated with managing carbon are also increasing, which could pose challenges for scalability and widespread adoption.

📝 Circular economy: reincorporating waste into productive end uses
Nuveen
Waste reduction and circular material use are essential for minimizing natural resource extraction, cutting emissions, and protecting ecosystems. Investments in the circular economy offer unique, ROI-driven opportunities across diverse markets. However, asset selection is crucial to ensure viable unit economics, manageable risks, and experienced management teams in order to scale sustainably.

✏️ Nuclear power’s renaissance
Morgan Stanley
Nuclear power global capacity is expected to double by 2050. Government subsidies and green bonds is fueling investment across the nuclear value chain, including uranium mining, power generation, and waste handling. Innovations like small modular reactors and increasing demand from sectors like AI are further boosting nuclear's growth. “Investments in new capacity will total $470B in China, $250B in the US and $197B in the EU by 2050.”

✏️ Emerging markets, global impact: Driving sustainable growth
Goldman Sachs
EM capital markets offer significant opportunities in areas like renewable energy, biodiversity conservation, and climate resilience, though a large capital gap remains. In 2022, clean energy investments in EMs reached c.$770B. Asia shows notable potential for private sector investment - China’s annual investment could reach $1T by 2030, India's power sector alone presents a $650B opportunity, while Vietnam may need $8-$10 billion annually.

Real Estate x Infrastructure

📝 2024 Mid-year real estate outlook
Principal Asset Management
The report highlights a gradual and uneven recovery in the real estate market, driven by cautious capital markets and continued economic flux. While property returns are improving, the US market remains in negative territory, with AI fueling demand for data centers as a key growth sector. Valuations are expected to stabilize by the year's end, though liquidity and deals remain limited​.

📝 A high-quality component of a fixed-income asset allocation strategy
Principal Asset Management
Core commercial and multifamily mortgage loan investments offer attractive credit risk profiles, appealing relative value, high current income returns, and diversification within fixed-income portfolios. These investments also provide call protection and limited correlation with other fixed-income alternatives, making them appealing in volatile economic environments. Successful navigation of this asset class requires a well-qualified asset manager.

📝 Challenges and opportunities in today’s commercial real estate market
PIMCO
The CRE market is facing a slower recovery due to high interest rates and geopolitical risks, but there are significant opportunities for those with capital and expertise. Key sectors to focus on include data centers and logistics, driven by trends like digitalization, decarbonization, and demographic shifts. Financing solutions, from senior debt to preferred equity, are becoming more important in navigating this complex landscape.

📝 A compelling opportunity in REITs
Morgan Stanley
REITs have underperformed the US equity market over the past five years due to COVID-19 and rising interest rates, resulting in significant undervaluation. With expected interest rates cuts in 2H 2024, and REITs historically performing well during such periods, they present a good opportunity as valuation discount vs equities could lead to outperformance.

📝 After trough NAV discount comes trough NAV
Morgan Stanley
European listed real estate appears to be nearing a trough in NAV discounts, which historically signals a market recovery within six to nine months. Since October 2023, European real estate stocks have rallied, supported by rate cuts, reduced leverage, and a slowdown in development activity, suggesting resilience in rental and capital values. While risks remain, several positive market signals indicate a further sector recovery.

📝 US real estate: Ready, set, go?
Barings
In the property market, transaction volumes have declined for eight consecutive quarters, but investors are preparing to deploy capital as borrowing costs may lower, despite rising distress levels in real estate debt, particularly in the office sector. Real estate debt distress across major property types reached $94B as of the second quarter of this year. Office comprised the largest share of outstanding distress at $41B, however, distress is pending across other property sectors.

📝 European real estate: Let the recovery commence
Barings
Property market recovery will vary by sector, with office and some European markets lagging. Prime office rents are rising despite vacancies, while logistics and physical retail sectors may rebound as macroeconomic conditions improve. European house prices have proved remarkably resilient to the interest rates shock, partly due to tight labor markets and rising nominal wages, but also a shift to fixed-rate mortgage payments.

✏️ Pricing resets offer considerable upside potential
JP Morgan
The rapid rise in interest rates has significantly reset property valuations across sectors, creating opportunities to invest in high-quality assets at discounted prices. CRE investors now face a potential buying opportunity as market fundamentals remain strong, particularly in single-family rentals, last-mile logistics, and development options.

✏️ Diversification: A key to playing the global real estate recovery
KKR
Diversifying across geographies, property types, and capital stacks can enhance risk adjusted returns, as real estate performance varies significantly by region and sector in the current cycle. With deal activity increasing and global opportunities emerging, diversified and well-capitalized investors are well-positioned to capitalize on the recovery.

✏️ Global real estate market outlook Q3 2024
Abrdn
The strength of European real estate cashflows and their growth potential is attracting capital back to core assets. Prime yields jumped 140 bps from a low of 4.3% in June 2022 to 5.7%, on average, in June 2024. Higher yields and the potential for income growth, in the wake of the strong correction in values, now present a compelling entry point for investors.

✏️ Future minerals: why utility and scarcity make a winning union
Abrdn
Copper and other "future minerals" like lithium, aluminium, and nickel are essential for the energy transition, driven by demand in electric vehicles (EVs) and electricity grids. Long-term demand growth due to green energy adoption may lead to a commodities super cycle. Investing in companies across the value chain, from mining to product manufacturing, offers better opportunities than commodities themselves.

AI x Tech

📝 State of enterprise tech report
Insight Partners
Despite external challenges, enterprises continue to innovate, investing in infrastructure, AI, and enhancing employee and customer experiences. This report provides a benchmarking guide for understanding budget shifts, current investments, and key priorities. “3 key reasons to move your applications to the cloud. First, it allows you to innovate faster on behalf of your customers. Second, it can provide greater security, resiliency and flexibility. Finally, cloud done right can be highly cost-effective.”

✏️ Investing where AI, energy and politics intersect
Goldman Sachs
AI, the clean-energy transition, and geopolitics are deeply interconnected forces shaping the global economy. AI's rising energy demand will drive significant advancements in renewable power and infrastructure. Meanwhile, geopolitical tensions, particularly between the US and China, are accelerating deglobalization and impacting clean-tech development. Investors need to understand these interdependencies to navigate emerging risks and opportunities effectively.

✏️ AI governance for private companies
Wellington Management
The rise of generative AI is transforming industries, with many companies adopting the technology for efficiency gains. However, only 21% have AI risk management policies in place, underscoring the need for responsible governance. Companies must address risks such as customer harm, data privacy, and environmental impact while adhering to emerging regulations like the EU AI Act to harness gen AI's potential responsibly.

✏️ What can instant payments and blockchain do for your bank?
Pwc
The demand for instant payments is growing rapidly, offering benefits like faster transactions, improved efficiency, and better cash flow management. Blockchain-based real-time payments are gaining traction, providing secure and efficient payment methods. Banks and corporations adopting instant payments can capitalize on operational efficiencies, cost reduction, and new revenue streams while meeting evolving customer demands in a competitive digital landscape.

🎥 The growing European software landscape (TPG)

🎥 The creator economy and the evolution of content (TPG)

🎙 Infrastructure debt: a critical part of the capital solution (Nuveen)

The Valt Journal Library

PRIVATE CREDIT x FIXED INCOME

📝 Utilising securitised credit within your asset allocation
HSBC
Securitised Credit offers significant diversification and yield enhancement benefits for multi-asset portfolios due to its floating rate structure and low correlation to traditional fixed income and equities. It provides credit exposure tailored to risk/return preferences and has shown resilience with lower volatility and higher Sharpe ratios vs corporate bonds. Sectors like CLOs, CMBS, and Prime RMBS can strengthen a portfolio’s credit profile while maintaining competitive returns.

📝 Understanding style drift in perpetual BDCs
Barings
The democratization of private credit has been fueled by investment fund structures like Business Development Companies (BDC), offering various access points for investors. Public BDCs offer liquidity but higher volatility, private BDCs have lower volatility but limited liquidity, and perpetual BDCs provide semi-liquid exposure to private credit with cash dividends.

📝 Leveraged loan and CLO: new issuance surge
TCW
2Q 2024 saw strong demand for levered credit and record-setting broadly syndicated bank loan issuance. While defaults have risen, private credit solutions have gained traction, offering flexibility for borrowers facing idiosyncratic challenges. YTD CLOs are returning c.4.4% outperforming Investment Grade credit (-0.46%) and High Yield credit (+1.47%).

📝 Income strategy update: high-yielding, high-quality global opportunities
PIMCO
Bond yields are high, inflation is moderating, and interest rates are coming down, creating a favourable scenario for bond investors. Managers should focus on high-quality assets, including agency mortgage-backed securities and non-agency mortgages, positioned to capture attractive yields while navigating market volatility and potential downturns.

📝 Municipal market: Bonds are acting like bonds again
Nuveen
With the Fed signalling rate reductions, longer-duration municipal bonds are becoming more favourable, offering tax-exempt income, potential capital appreciation, and reduced downside risk as the yield curve steepens. “Municipal bond gross supply is expected to be at c.$450B in 2024, up meaningfully from $330B in 2023. However, with c.$400B of bonds maturing in 2024 and significant coupon payments, supply will likely be net neutral.”

📝 Investors will capture more of the lending market
Apollo Global
Apollo CEO discusses the significant shift towards private credit markets, which are increasingly replacing traditional bank loans, driven by investors seeking higher returns and lower liquidity. Apollo considers private credit to be a $40T market with major focus on investment-grade loans, particularly in sectors like digital infrastructure and energy transition.

📝 Are private credit markets too good to be true — Or just factually true?
FS Investments
Despite concerns from investors about whether private credit is saturated with too much capital due to the large sums raised by investment firms and its growing accessibility, the perception of saturation may not fully reflect the opportunities available in this space.

✏️ Public and private credit: Capitalizing on coexistence
Goldman Sachs
The resurgence of public fixed income is driven by higher yields, while private credit markets continue to grow, reaching $2.1T in assets. Public and private credit serve complementary roles in portfolios, with public credit offering liquidity and private credit providing potentially higher returns through tailored lending solutions. Companies increasingly use both markets strategically, optimizing their capital structures to adapt to evolving market conditions.

✏️ The tailwinds behind asset-based finance
Goldman Sachs
The asset-based finance market, estimated at $15T+ by GS, is growing rapidly, offering diversification opportunities beyond traditional corporate lending. It provides investment-grade risk exposure across pools of real estate, consumer, hard, and financial assets, with increasing institutional involvement. ABF offers higher yields, diversification, and flexible term structures, making it attractive to asset allocators like insurers and pension funds.

✏️Asset-based finance – too important to ignore
Axa Investment Managers
The Asset-Backed Finance market is growing rapidly, offering investors diverse exposure, typically with shorter duration and higher control compared to traditional lending. ABF can enhance returns in fixed-income portfolios without increasing risk, acting as an effective diversifier due to its low correlations with other asset classes and providing opportunities for yield enhancement amid tightening bank lending standards.

✏️ Understanding private credit
Goldman Sachs
Private credit offers tailored capital solutions with advantages like certainty, speed of execution, and confidentiality. Over the past decade, the asset class has generated higher yield than most other asset classes, including 3-6% over public high yield and broadly syndicated loans, with overall IRR in the 8-12% range.

✏️ Private credit: From mid-market to real economy financier
Blackstone
Private credit is creating a significant $25T opportunity, particularly in high-grade strategies like asset-based financing and infrastructure. Private credit offers better yields, reduced volatility, and diversification compared to traditional corporate credit, with larger platforms well-positioned to capitalize on the opportunities ahead. “Direct lending generates double-digit yields on c.50% LTV loans with around 300bps of excess yield compared to public loans.”

✏️ Private credit: Lessons from a deal-making expert
UBS
Private credit remains resilient, benefiting from its flexibility and specialized solutions as syndicated markets regain activity. The upper middle market, with its larger, more established businesses, offers strong investment opportunities, while strategic partnerships and origination excellence are crucial for sustained success. As M&A activity rebounds, private credit is poised for continued growth, supported by increased private equity sponsor activity.

✏️ Venture debt financing
Carta
Venture debt is a form of private credit offered to startups alongside equity financing, allowing them to secure additional capital without diluting ownership. It is based on the company's growth potential rather than traditional metrics like revenue or assets. Pros: No ownership dilution, tax deductions, build credit; Cons: You must pay the money back, high interest rates, requires regular income, terms may require certain milestones.

✏️ Emerging into the spotlight: The case for EMD in insurance portfolios
Man Institute
EMD (emerging market debt) offers insurers high-quality, long-duration investments, attractive spreads over US Treasuries, and diversification across a large, growing pool of assets. While EMD presents opportunities, investors should be mindful of liquidity risks, particularly in corporate bonds. EMD can enhance insurance portfolios by offering a spread premium and greater return potential compared to developed market credit.

✏️ US debt sustainability: An uncertain fiscal future
Goldman Sachs
US gross federal debt is projected to surpass $35T by November 2024, continuing its upward trend and potentially reaching $54T by 2034. While the US economy's unique strengths, such as the global reserve currency status of the dollar, offer fiscal flexibility, long-term debt sustainability remains a concern amidst rising interest rates and geopolitical risks.

📜 Periodicals »

📝 Credit market update – 2Q 2024 (Varde)

📝 Performing credit quarterly 2Q 2024 (Oaktree)

📝 2H 2024 Alternative credit insights: Investing for resiliency (Nuveen)

📝 Quarterly liquid credit market commentary 2Q 2024 (Partners Group)

📝 Permira credit market update 2Q 2024 (Permira)

📝 High yield monthly update (Nomura)

📝 Weekly fixed income: Treasury yields retrace their steps, moving higher (Nuveen)

📝 Monthly market roundup: July 2024 (BNY Mellon)

✏️ Emerging market debt July 2024 review and outlook (Abrdn)

✏️ Unconstrained fixed income views: August 2024 (Schroders)

✏️ Q3 Active fixed income outlook: Back to the 1970s? (LGIM)

🎥 Private markets: Early innings for asset-based lending (PIMCO)

🎥 High yield bonds: Assessing the landscape today (Barings)

🎥 Demand for private credit, BDCs not slowing anytime soon (Barings)

🎙 Is private credit a bubble? (FS Investments)

The Valt Journal Library

PRIVATE EQUITY

TVJ Spotlight 🔦

✏️ Why middle-market co-investment opportunities make sense now
Hamilton Lane
In a challenging macro environment, middle-market co-investments offer significant opportunities due to broader deal sets, greater value creation potential, and more conservative valuations with lower leverage. These investments benefit from enhanced exit options and shorter hold periods, resulting in attractive returns. Co-investment funds provide diversification across GPs and sectors in a more fee-efficient structure.

✏️ Pension funds are the most active sellers in this hot secondaries market
Institutional Investor
In 1H 2024, secondary market transactions in private funds surged by a record 50%+, reaching c.$68B. Pension funds were the largest sellers (33%). The market saw significant growth, with deal sizes increasing and secondary transactions gaining momentum, particularly among LPs. Buyers are optimistic about continued growth, anticipating a total volume of $131B by year-end, with strong demand for secondary assets across various strategies.

✏️ Mid-year update: Investors still finding their footing on the path forward
Hamilton Lane
Middle-market buyouts and are expected to offer greater potential for value creation. With increased liquidity and stronger exit activity, especially in the latter half of 2024, co-investments provide diversification, lower leverage, and more conservative valuations. The outlook for private equity remains positive, with Europe offering emerging opportunities, despite its past underperformance relative to the US.

✏️ There’s a wall of assets that need to change hands
Goldman Sachs
The current PE market is shifting toward buyers due to prolonged holding periods and lower DPI ratios from deals between 2019 to 2021. This provides better valuations for buyers, more time for due diligence, and enhanced downside protections like earnouts. With unrealized value still held by many large-cap funds, sellers are becoming cautious, leading to innovative deal structures and an increased focus on strategic exits rather than continuation vehicles.

✏️ Why private equity is increasingly interested in Japan
OTPP
OTPP is expanding its investments in Japan due to compelling opportunities in sectors like industrial tech and healthcare. Japan now has a strong private equity market, driven by corporate reforms and a focus on operational improvements. Although Japan's market requires patience, it offers consistent deal flow and attractive returns.

✏️ State of private markets: Q2 2024
Carta
In Q2 2024, the venture ecosystem saw 4% qoq increase in funding rounds and a 12% rise in total VC investments to c.$21B. Median valuations rose across stages, and down rounds decreased to a six-quarter low, signalling a founder-friendly environment. The time between funding rounds remains longer, but investor-friendly terms have declined, indicating a shift toward more balanced deal structures. Valuations are rebounding in Seed and Series D.

✏️ Pre-money vs. post-money SAFEs
Carta
A pre-money SAFE (Simple Agreement for Future Equity) does not fix an investor's ownership percentage until the SAFE converts during a future funding round. Post-money SAFEs locks in a fixed ownership percentage for investors, giving them more clarity but potentially leading to greater dilution for founders. Post-money SAFEs are generally preferred by investors.

✏️ Survey: A pulse check on venture capital
Juniper Square
The US VC industry is currently divided, with AI-focused firms thriving while others face challenges. A survey of 85 VC professionals revealed that 80% expect fundraising in 2024 to be as difficult, if not harder, than in 2023. LP concerns include investor sentiment, LP liquidity, and a lack of exit activity, with LPs pushing for more liquidity. Meanwhile, top-performing firms with strong track records continue to raise funds successfully.

✏️ Value creation in private equity: Making our own luck
KKR
The value creation within portfolio companies is achieved through repeatable processes, focusing on operational improvements, M&A, and strategic positioning. M&A helps companies expand product lines and geographies, while employee ownership and operational involvement, including granular focus, help foster a culture of long-term value creation.

✏️ Understanding private equity performance
Wellington Management
PE investments offer higher cumulative returns compared to public equities but come with trade-offs like lower liquidity. Key metrics used to evaluate PE performance include IRR, MOIC/TVPI, and DPI, each offering unique insights into fund returns. The J-curve effect, where early returns are negative due to fees and delayed realizations, is a common feature of PE funds, especially early-stage venture capital.

🎙Evolution of private equity and alternative markets (TPG)

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PRIVATE MARKETS AND ALTERNATIVE ASSETS

TVJ Spotlight 🔦

📝 Global fund performance report (with preliminary Q1 2024 data)
Pitchbook
The Global Fund Performance Report shows an improving outlook for private markets after a subdued 2023. Private equity saw a rebound with a one-year IRR of 10.5%, following a decline in 2022. Venture capital, despite six consecutive quarters of negative one-year IRRs, began showing signs of recovery in Q4. Private debt funds had a strong year, returning an estimated 9.2%, driven by floating-rate loans.

TVJ Spotlight 🔦

📝 Navigating ILPA’s NAV-based facility guidance
Pitchbook
The Institutional Limited Partners Association (ILPA) has released new guidelines for LPs and GPs regarding the use of NAV-based loans, addressing the challenges posed by the current fundraising environment, distribution slowdowns, and future allocations. These best practices, aim to improve transparency, legal clarity, and negotiations between LPs and GPs.

📝 Fintech M&A review: Middle-market valuation analysis
PitchBook
PitchBook's latest note highlights a slowdown in fintech private equity buyouts, with Q2 seeing an estimated 12 deals, down 57% qoq. Analysts remain optimistic due to overall healthy dealmaking over the past year. Corporate M&A activity remains flat, and recovery may take time. The report also includes a detailed set of valuation comparisons for the middle market, based on acquisition price and employee count.

📝 Insurance perspectives: Alternatives in focus
TPG
The partnership between insurance companies and alternative asset managers is evolving, driven by the alignment of insurance companies' long-term liabilities and alternative managers' long-term investment outlook. This collaboration is expanding into areas like private credit, real estate, and infrastructure, as insurance companies seek to enhance yields amid rising competition.

📝 5 things to know from KKR’s 2024 mid-year outlook
KKR
KKR sees compelling investment opportunities in 2024, driven by trends like AI, energy transition, and Japan's economic revival. They recommend shifting away from traditional 60/40 portfolios towards private assets like infrastructure, private equity, and credit to improve diversification, hedge inflation, and enhance returns. They also suggest considering reinsurance and real estate credit for their stability and attractive yields.

📝 The enduring appeal: How top companies command high valuations
Adams Street
Premium valuations for growth-stage companies are driven by their ability to demonstrate efficient growth through key metrics like revenue growth, market size, and sales efficiency. Despite recent challenges, investors continue to prioritize sustainable revenue growth over immediate free cash flow, as the software industry’s proven model suggests high gross margins and operating leverage can lead to larger profits long term.

✏️ Alternative investments: Increased accessibility for investors
Morgan Stanley
Alternative investments are now accessible to individual investors due to the "democratization" of alternative investment vehicles. Financial advisors need to understand the value of these investments, as they may help strengthen client portfolios by addressing the need for income, inflation protection, diversification, and stability. Key alternative strategies include hedge funds, private credit, private equity, real estate, and infrastructure.

✏️ Redesigning operating models for private markets
State Street
Investment firms are increasingly allocating to private markets, but managing the associated unstructured data poses significant challenges. New operating models are needed to support these assets, emphasizing the importance of a "whole-of-fund" view. Intelligent data platforms are being explored to automate processes, integrate diverse assets, and scale as firms grow, offering flexibility and improved compliance.

✏️ Institutions are deferring hedge fund investments until 2025
Institutional Investor
Institutional investors remain interested in hedge funds but are holding back allocations until next year, according to a survey of 185 institutions. While diversification and low correlation to other asset classes are appealing, confidence in hedge fund allocations has waned, leading to increased redemptions and a wait-and-see approach, with many deferring new investments until 2025 or later.

✏️ How multi-manager platforms find strength in numbers
Morgan Stanley
Multi-manager platforms attract investor interest by offering diversified strategies, strong risk management, and consistent returns with lower volatility compared to traditional hedge funds. They excel in generating uncorrelated alpha and managing complex market risks, making them a compelling option for investors seeking diversification and stability.

✏️Asymmetric returns: Managing downside for greater upside
FS Investments
While the Sharpe ratio is widely used to assess risk-adjusted returns, it falls short when volatility is skewed positively. The Calmar ratio, which compares returns to the maximum drawdown, offers a better measure of risk, emphasizing the need to focus on capital protection. Alternative investments show more favourable asymmetric returns, making them a compelling option for investors seeking better risk-adjusted performance.

✏️ CAC is the new CapEx, EBIT“CAC” should be the new EBITDA
General Catalyst
Late-stage tech companies often underinvest in growth due to P&L and balance sheet constraints, prioritizing short-term profitability over long-term enterprise value. The solution lies in adopting a new framework like EBITCAC, which emphasizes investing in customer acquisition cost (CAC) for long-term ROI rather than focusing solely on EBITDA.

✏️Are digital regulations finally coming into focus?
State Street
In 2024, global regulatory progress on tokenized assets has accelerated, with the US, UK, and Hong Kong implementing clearer rules for tokenization, distinguishing it from cryptocurrencies. Regulators view tokenization as a way to enhance financial markets' efficiency, offering benefits like faster, cheaper, and more secure trading.

✏️ Every investor wants GPs to have a succession plan. Few of them do
Institutional Investor
Only 38% of GPs currently have a succession plan in place (vs 41% in 2023) as many prioritize other challenges in a tough market. Despite the growing investor anxiety, discussions about succession remain limited, which may be contributing to more consolidation in the asset management industry as managers seek to avoid succession issues by selling off funds.

✏️ Top technology trends in the private markets
Hamilton Lane
Hamilton Lane highlights the growing adoption of tech innovations in private markets, enabling broader participation in value creation opportunities. Key challenges like data transparency persist, but AI is driving improvements in diligence efficiency, investment insights, and content creation.

✏️ US and Europe private company trends: Resilience sustained
ICG
Private companies in Europe and the US maintained strong performance in 2023 and into H1 2024. EBITDA growth re-accelerated 2H 2023 due to stabilizing margins. Sector performance varied significantly, with consumer discretionary and industrials leading, while chemicals and healthcare lagged. Debt metrics remained solid, although interest coverage ratios declined due slower EBITDA growth. Equity cushions provided protection for debt holders.

🎙 Are investors over-allocated to private markets? (Institutional Investor)

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Hi, welcome to the new edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else! Clicking the headlines is all it takes.

Check out TVJ Spotlights 🔦 including 1) Fueling the future (PGIM); 2) CLO equity: 101 (by Barings); 3) Multi-asset credit (MAC) playbook (by Marathon Asset Management); 4) NVCA venture capital monitor 2Q 2024 (by Pitchbook); 5) Understanding private fund performance (by Dimensional Fund)

The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of 1K+ research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

Quickly scan the list of all reports in this edition here!

SECTOR FOCUS

Energy Transition x Climate Finance

TVJ Spotlight 🔦

📝 Fueling the future
PGIM
Three broad investment themes are: Enabling renewable energy by supporting critical inputs and complementary infrastructure; Leaning into lower-carbon fossil fuels while avoiding obsolescence risk; and monitoring innovation around renewable energy sources and green tech.

📝 Transition investing: Exploring alpha potential
Robeco
Significant alpha opportunities exist across various climate solutions and transition leaders in both low- and high-emitting industries, across developed and emerging markets. Global green finance, which includes direct financing to support climate solutions such as wind farms or battery plants, has increased by 100x in the past decade to over $540B; however, it remains a very small part of finance overall. Opportunities exist across both public and private markets.

✏️ The EV opportunity for fuel retailers
BCG
The rise of EVs is significantly impacting the global fuel and convenience retail industry, with market scenarios predicting changes in profit pools, service station closures, and site format evolution by 2035. Some key plays include developing mobility and convenience hubs with charging, developing “segment of one” personalization, providing fleet charging, investing in on-the-go e-trucking hubs, becoming a mobility platform orchestrator, and selectively pursuing mobility-adjacent opportunities such as vehicle leasing and insurance.

📝 Transition finance challenges in turning brown into green
HSBC
Transition finance is crucial for supporting the global shift to a net-zero economy, with $3T needed annually by 2030. Investors face challenges such as balancing short-term portfolio decarbonization with long-term real-world impacts and navigating regulatory constraints, especially in hard-to-abate sectors like steel and transport. Clearer guidelines and sector-based strategies could encourage more investment in these critical areas.

Real Estate x Infrastructure

📝 Q3 2024 Commercial real estate (CRE) outlook: All dressed up
FS Investments
The outlook for Q3 2024 shows cautious optimism for an uneven recovery for US CRE, driven by a potential reduction in construction activity and strong fundamentals, which could lead to higher rent growth and improved investment activity. “Property incomes have held up reasonably well throughout this correction, even as elevated new construction has pushed vacancy rates higher in some sectors. Multifamily has seen a sharp improvement in demand, while the industrial sector has found a more sustainable level. Retail has continued to act as the unsung hero of the CRE asset class, and malls posted positive absorption and a dip in vacancy.”

📝 infra300® 2024Q2 release
EDHEC Infra
The infra300 index saw a 0.4% total return for the quarter, driven mainly by the Renewable Power and Power Generation sectors. Contracted companies contributed the most to returns due to their stable revenue streams. Unlisted Infrastructure is a high-income asset class, with cash yield being an important driver of the index returns. This quarter, the Infra300 index saw a cash return of 0.85%, while the price return was -0.42%. The cash returns were at 11.4% yoy, reflecting substantial dividends paid in the past year.

📝 Listed vs. private infrastructure: Why not both?
Nuveen
Investing in listed infrastructure offers benefits like broader diversification, asset liquidity, and access to high-quality infrastructure assets not available in private markets, making it a compelling option for larger allocations by institutional investors.

✏️ Impact investing: The continued resilience of US affordable housing investments
Nuveen
Investing in US affordable housing offers strong diversification benefits, attractive risk-adjusted returns, and positive social impact. The sector demonstrates economic resilience, consistent demand, and stability supported by government subsidies, making it a valuable component in real estate portfolios. Affordable housing investments provide durable income streams and perform well across economic cycles, particularly during downturns.

✏️ Fiber-to-the-home (FTTH): Missed connections?
UBS
The FTTH sector, despite facing challenges like overinvestment and rising competition, is poised for new investment opportunities as market expectations reset. Factors like declining inflation, potential interest rate trends, and continued demand for high-speed internet make FTTH attractive, particularly with strategic location choices and government support for rural broadband expansion.

✏️ Real estate déjà vu
UBS
Pharma production in EU grew from EUR290B in 2020 to EUR340B in 2022, up by 17% over two years. The growth in the life sciences sector is due to increasing demand from drug and vaccine development companies, driven by improved prosperity in developing countries and an ageing global population. The expansion, similar to the industrial sector, is creating a structural deficit in appropriate real estate, presenting a substantial investment opportunity for building the necessary infra to meet future demand.

✏️ Supply chain diversification: Who benefits in Asia?
Abrdn
The growing importance of supply chain resilience is driving companies to diversify their sourcing and manufacturing to reduce operational and geopolitical risks. While China remains promising, regions like Southeast Asia and India are becoming attractive alternatives for manufacturing due to their lower costs and supportive government initiatives.

🎥 Demystifying the office market (Juniper Square)

🎙Golden handcuffs: The latest on the housing market (FS Investments)

AI & Tech x Healthcare

✏️ IT spending pulse: As GenAI investment grows, other IT projects get squeezed
BCG
Companies are shifting from a cost-focus to growth-oriented strategies, with significant investments in generative AI (GenAI) expected to grow 30% in 2024. This pivot aims for a 3x higher ROI over three years, driven by a need for productivity gains, despite budget constraints. The GenAI sector is expanding rapidly, with leaders anticipating high returns and prioritizing the technology to capitalize on its transformative potential.

✏️ Insurers can parlay technology into a competitive edge
Bain
Bain's analysis reveals that tech leadership boosts premium growth, lowers expenses, and enhances customer loyalty, yet only 5-10% of carriers consistently benefit from tech investments. The main challenge is analyzing new data effectively. Aligning investment priorities with goals in customer experience, products, costs, or distribution fosters a cycle of increased value and market share, enabling further tech innovations.

📝 Pharma services report
Advent International
The innovations in drug development with advancements like GLP-1 agonists, precision medicine, and MRNA vaccines, promise significant health benefits but come with high costs. Producing generic drugs and outsourcing to pharma services companies can make drug delivery more efficient and cost-effective, with broader patient access to life-saving treatments.

📝 A new era for healthcare
BNY Mellon
The healthcare industry is poised for significant growth over the next decade, driven by advances in AI, genetic therapies, and data-driven technologies. These innovations are enabling more efficient and proactive patient care, improving health equity, and offering significant investment opportunities. Genetic medicine, advanced medical devices and digital health delivery are key areas of growth.

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PRIVATE CREDIT x FIXED INCOME

TVJ Spotlight 🔦

📝 CLO equity: 101
Barings
CLO equity provides investors with levered exposure (8-10x) to a diverse portfolio of senior secured loans. It offers benefits such as quarterly cash distributions (3-4% quarterly), potential for high total returns (13%+ IRR), and control features. As per Barings’ note here, in the second quarter, AAA, AA, and single-A CLOs returned 1.8%, 2.0%, and 2.3%, respectively, while BBB, BB, and -B CLOs returned 2.9%, 4.5%, and 9.5%.

📝 Selectivity in selection: Entering a credit picker’s market
FS Investments
Income generation will now be more critical than capital appreciation for returns. “CLOs (c.$99B in new issue volume YTD) provide an alternative way to access the loan market and may enhance the diversification of a traditional fixed income portfolio. In CLOs, a form of asset-backed finance, a dedicated pool of assets serves as collateral, instead of a corporate guarantee.”

TVJ Spotlight 🔦

📝Multi-asset credit (MAC) playbook
Marathon Asset Management
The report outlines the advantages of using Multi-Asset Credit (MAC) in liquid public fixed income investing. It identifies $11T of eligible investment opportunities across select asset classes, focusing on Structured Credit ($3.6T), High Yield ($1.7T), Leveraged Loans ($1.6T), and Emerging Markets ($4.1T), while excluding US Treasuries, investment-grade corporate credit, and emerging market local currency securities. Key investible areas include ABS, CMBS, RMBS, CLOs, HY bonds, middle market syndicated loans, and EM debt.

✏️ The real benefits of private credit
CAIA Association
Private credit has shown significant growth, driven by investors seeking higher returns and low volatility. It encompasses a variety of debt investments and ability to act quickly and regulatory changes highlights its systemic importance and the shift in capital markets dynamics. “Private credit’s growth has also expanded to other investment markets such as mezzanine loans, venture debt, bridge loans, distressed debt, and structured products.”

✏️ Is now the time to add duration to bond portfolios?
JP Morgan
Despite high-quality fixed income yields being attractive, there is a risk of range-bound long-term interest rates due to potential inflationary policies and ballooning deficits. Therefore, investors should consider moving cash into intermediate fixed income securities to lock in attractive yields before cash yields fall.

✏️ Look to securitized markets for alternative sources of yield
Morgan Stanley
The strong start in corporate credit markets has led investors to seek yield in the $13T global securitized market, including RMBS, CMBS, and ABS. Agency RMBS is attractive with current coupon MBS yields above 6%, while non-agency RMBS benefits from a stable housing market and strong employment. However, caution is advised in CMBS due to high financing costs and rising vacancies in the office sector. Consumer ABS appear overvalued amid weakening consumer finances, favoring business-oriented ABS instead.

📝 Don’t overlook ‘munis’
BNY Mellon
An active municipal bond strategy is critical, as ‘munis’ yields are competitive with taxable investment grade bonds and offer strong safety records since the 1970s. Municipal credit conditions are resilient, with states having high cash reserves and rising tax revenues. Historically, municipal returns have been high leading up to rate cutting cycles, suggesting the current environment is an attractive entry point.

✏️ Developed market public debt: Risks and realities
PIMCO
Post-pandemic financial strain has worsened government debt sustainability in many developed economies, especially for countries with high debt levels. US faces a sharply increasing debt trajectory but benefits from issuing the global reserve currency and a lower tax burden. Despite elevated debt and deficits potentially leading to increased macroeconomic volatility, debt remains broadly sustainable, and differing fiscal dynamics may create relative value opportunities in global fixed income.

✏️ Navigating public and private credit markets: Liquidity, risk, and return potential
PIMCO
Private markets should offer an excess premium of c.200 bps to compensate for potential lost alpha, rebalancing constraints, and liquidity needs. Asset selection is crucial, with high-quality, liquid public fixed income offering attractive yields and risk hedging, alongside select private investments in areas like asset-based lending.

✏️ High-yield bonds: Gaining traction for good reason
Northern Trust
High-yield bonds have delivered strong performance in 2024 and are expected to continue this trend due to solid fundamentals, low default risk, and strong investor inflows. The market has grown to over $1.5T, with improved credit quality and low distress levels, making high-yield bonds an attractive investment for portfolio diversification and capturing equity-like returns with less volatility.

✏️ Making sense of infrastructure debt
Nuveen
US power demand is expected to grow significantly over the next decade, driven by data centers, AI, and transportation electrification, requiring 500 GW of new generation capacity. Infra debt offers stable income, inflation protection, and low default rates, making it an attractive, resilient, cash-generative investment for experienced credit managers who can navigate complex projects and ensure downside protection.

✏️ Short-dated enhanced income strategies for insurers
Abrdn
Short-dated enhanced income (SDEI) strategies for insurers aim to deliver higher yields than money markets and defensive credit alternatives, targeting low risk and price stability with a minimum A- portfolio rating and duration under two years. SDEI strategies offer significant yield pick-ups, with an average yield enhancement of +1.75% annually over money markets, while maintaining liquidity and minimizing volatility.

✏️ High yield: A continued bright spot
Barings
High yield issuers remain financially healthy, with corporate profitability advancing and credit quality improving, evidenced by low net leverage and a high percentage of BB issuers. $23B of private debt deals have been refinanced in the public market YTD, with that number expected to double by year-end.

✏️ EM debt: Are the biggest risks behind us?
Barings
EM debt is well-positioned for the rest of the year, with encouraging election outcomes, easing inflation in developed markets, with potential US Fed rate cuts and improving fundamentals and sound credit quality contributing to spread tightening. Yields on 1–3 years EM IG bonds are at 5.5%–6%, vs 5.4% for developed market IG bonds, while EM HY bonds are at 8%–10%, versus 8.1% for developed market HY bonds.

✏️ Why the term premium isn't as boring as it sounds
Man Institute
The term premium, which represents the extra return investors require for bearing interest rate risk over a bond's lifespan, is influenced by market technicals and interest rate uncertainty. Although it cannot be directly observed and must be estimated, it is crucial for assessing bond performance.

✏️ Lifting the lid on impact bonds: 5 questions for investors
Impax Asset Management
Impact bonds offer stability, transparency, and diversification, contributing to a well-rounded investment portfolio. Despite misconceptions, impact bonds do not necessarily involve higher credit risks than conventional securities, making them a compelling option for investors seeking both financial and social returns.

✏️ Come on in, the water’s fine! Ready for a surplus summer
Wellington Management
Insurers might benefit from extending asset duration due to signs of moderating growth and inflation, and central banks' policy easing. The alternative picture is mixed, with weaknesses in leveraged buyout private equity and private credit, but opportunities in venture capital and commodities, especially oil.

📜 Periodicals »

📝 Floating-rate loan market monitor 2Q 2024 (Morgan Stanley)

📝 Emerging markets debt monitor 2Q 2024 (Morgan Stanley)

📝 Municipal bond market monitor 2Q 2024 (Morgan Stanley)

📝 3Q 2024 outlook: Moving beyond cash (Nuveen)

📝 3Q 2024 municipal bonds outlook: poised for growth in a favorable market (Nuveen)

📝 Fixed income perspectives 3Q 2024 (Principal Asset Management)

✏️ Fixed income outlook – 2H 2024 (UBS)

✏️ Q3 2024 Credit outlook: Selective and scrupulous wins the race (Man Institute)

🎥 High yield bonds: Three things to watch in today’s market (Morgan Stanley)

🎥 Private debt: Risks returns and opportunities (State Street)

🎥 The yield advantage in global markets (PIMCO)

🎥 Private markets: Early innings for asset-based lending (PIMCO)

🎥 EM Debt: The improving risk/reward dynamics (Barings)

🎙 Building resilience – The power of private credit in insurance portfolios (Adams Street)

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PRIVATE EQUITY

TVJ Spotlight 🔦

📝 PitchBook-NVCA venture capital monitor 2Q 2024
Pitchbook
The venture market is experiencing a significant generational shift to a focus on supporting promising companies amid challenging exit conditions. Despite reduced interest from LPs due to high-interest rates, there is a trend towards larger investments in experienced managers and founders. Market adjustments and policy impacts, such as industrial initiatives, are shaping a cautious yet optimistic outlook for the future. Tech, AI, healthcare and agritech continued to be the major sectors of focus.

📝 AI’S impact on the private equity M&A lifecycle
Morgan Franklin Consulting
Over the past decade, private equity firms have increasingly focused on technology investments, including AI/ML, to drive growth. This shift has led to the adoption of process automation and advanced analytics for pre-close deal sourcing and value creation during the hold period. The emphasis on leveraging AI/ML for revenue generation and operational efficiency continues to grow.

📝 The state of enterprise SaaS M&A
Pitchbook
Enterprise SaaS M&A activity has stabilized with early signs of growth in deal count, driven mainly by PE buyouts and LBOs, while deal value remains low due to reduced valuations and limited disclosures. VC-backed companies dominate the M&A activity by volume ( 1,340+ deals since 2018, 37.5% of the total), although the highest deal values come from PE-backed ($360B) and publicly held companies ($357B). ERP and CRM segments to drive growth.

✏️ Private equity and net asset value debt: Ripping-up the rules of private equity
Harvard Law
NAV debt is incurred at the fund level and backed by the net asset value of the fund’s portfolio companies. It can be used offensively for acquisitions, defensively to support struggling companies or to provide liquidity to investors. LPs should scrutinize NAV debt's terms and potential impacts on returns and fund performance. Access the complete report here.

✏️ The state of private equity: A lookback at Q2 2024
Juniper Square
The PE industry is stabilizing with deal-making up by 12% yoy, but exits remain slow due to valuation gaps and high interest rates. Fundraising saw a strong first half but is expected to slow down, as large funds take longer to close. To navigate the current environment, PE firms are encouraged to focus on creating value in portfolio companies rather than relying on low interest rates.

✏️Asia private equity: Riding the ‘Three Locomotives’ - China, Japan and India
Neuberger Berman
Private equity is gaining traction in Asia, driven by diversified economies and lower competition compared to US and Europe. Japan, China, and India, each offer unique investment prospects due to their economic stages and growth dynamics. Local teams and deep GP relationships are critical. Manufacturing, consumer and healthcare are the areas offering diverse opportunities in all 3 countries.

✏️ Private equity’s dry-powder mountain reaches record height
Institutional Investor
PE and VC funds have reached a record high of $2.6T in dry powder, with c.$50B added since December 2023 (2x vs previous year). Investor optimism persists, believing that the deal market will improve. However, challenges remain, such as high interest rates and valuation disagreements, and a few large firms hold a disproportionate share of the cash.

✏️ How to build a venture firm (for the long term)
Juniper Square
Venture fundraising has declined, with 2023 seeing the lowest total since 2017 at $67B and a further 11% drop in early 2024. Despite some signs of recovery, the market remains impacted by high inflation, interest rate uncertainty, and limited liquidity. Successful venture firms are focusing on operational efficiencies, transparent communication with investors, and advanced data management.

✏️ Co-investments: the great private equity diversified
Natixis
Co-investments offer quicker and greater exposure to attractive assets, often with better terms, and can provide a diversified portfolio by involving numerous GPs, thereby reducing risk and potentially improving returns. “Mid-cap private equity deals offer potential for rapid repositioning of companies and shorter J-curves.”

✏️ Private equity continuation funds
CAIA Association
Continuation funds offer LPs the chance to stay invested in high-performing portfolio companies post-sale through a minority stake with the GP. While they provide the potential for further growth at lower fees, they also pose conflicts of interest and governance risks. Key considerations include the GP's rationale, investment criteria, decision-making processes, and the robustness of the opportunity set. Proper structuring and clear parameters are essential.

✏️ The regulatory climate is getting hotter for private equity
BCG
PE firms face increasing scrutiny and new compliance challenges from US and EU regulators, driven by concerns over financial stability, technological competition, and ESG reporting. PE leaders must proactively enhance their regulatory compliance strategies across their organizations, investment portfolios, and portfolio companies.

✏️ Private equity adapts to the new normal in geopolitics and trade
BCG
PE firms face substantial risks and opportunities, particularly in cross-border value chains, strategic sectors, and climate regulations. To navigate these changes, PE firms should review their overall fund strategy for geopolitical risks, identify new portfolio value opportunities, and incorporate strong geopolitical perspectives in due diligence processes.

✏️ How advanced analytical tools can help secondary managers find a competitive advantage
HarbourVest
Secondary managers are adopting advanced data analysis tools to complement traditional methods. These tools help in accurately pricing assets, estimating cash flows, and evaluating portfolio quality, ultimately providing a significant advantage in a growing and complex market. Being able to accelerate the speed and confidence in offering a firm proposal helps to secure deals early.

✏️ Embracing the journey - secondaries roundtable
UBS
The global secondary market has more than doubled from $47B in 2014 to over $100B today, with increasing acceptance by investors and fund managers. Growth is expected to continue driven by expanded use in sub-asset classes like private credit and infrastructure. The market is characterized by high intermediation, especially in larger deals, and a growing segment of HNI investors accessing the market through semi-liquid structures with lower minimum investments.

📜 Periodicals »

📝 European venture report 2Q 2024 (Pitchbook)

📝 European PE breakdown 2Q 2024 (Pitchbook)

🎥 Remarkable growth in the secondary market (Blackstone)

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PRIVATE MARKETS AND ALTERNATIVE ASSETS

TVJ Spotlight 🔦

📝 Understanding private fund performance
Dimensional Fund
This study examines the net performance of 6,000 private funds from 1980 to 2022 across buyout, venture, credit, and real estate funds. Average TVPI ranges from 1.3x to 1.8x while the average fund’s public market equivalent is between 0.8x and 1.1x. “By holding unlisted assets, private funds expand public investors’ opportunity set. They may therefore offer genuine diversification benefits, provided their returns are not perfectly correlated with listed asset returns.”

📝 Alternative opportunities: 2024 outlook and methodology
Invesco
High-quality deals in direct lending yielded 12-13% unlevered returns. Distressed debt and special situations present attractive opportunities for equity-like returns with strong credit positions. CRE debt shows signs of recovery, large buyouts present renewed opportunity for take-private transactions and private-to-private exits at favorable valuations.

📝 2024 midyear global outlook
BlackRock
Massive investments areas include AI, low-carbon transition, and supply chain restructuring. AI is expected to grow by 60-100% annually, and energy systems to require $3.5T per year this decade. Strategic risk-taking and adapting to evolving scenarios to capitalize on these transformative opportunities can lead to enhanced returns.

📝 Diversify with real and alternative assets
Amundi
Hedge funds (HF) benefit from securities' prices reflecting fundamentals and greater economic fragmentation. For 2H 2024, L/S equity neutral, EM fixed income, and merger arbitrage strategies are preferred. In private markets, infrastructure investment is favored due to the energy transition, private equity is improving, and private debt remains attractive, real estate is expected to stabilize, particularly in prime central business district properties.

📝 M&A insights H1 2024: The recovery continues
BCG
BCG's M&A Sentiment Index reveals a mixed outlook for 2024, with the current index value at 78, below the ten-year average of 100. The global M&A activity in H1 2024 totalled $1T, up 4% yoy but below the 10-year average of $1.5T. North American deals dominated with $631B, while APAC saw a 40% decline to $117B. Europe saw a 23% increase to $255B, with significant gains in the UK and Sweden. TMT sector continues to dominate.

📝 Full speed ahead: Data and technology to power your back office
State Street
Four key areas where institutional investors can enhance their back-office operations include focusing on building high-velocity back offices, harnessing data and technology, consolidating providers, and maximizing flexibility and agility. Benefits include fewer complaints and improved satisfaction with data reliability, automated alerts for risk reduction and regulatory compliance, and scalable customization of client portfolios without extensive manual effort.

✏️AI in asset management: A lightbulb moment
Man Institute
The adoption of artificial intelligence (AI) in asset management is being compared to the slow but transformative spread of electricity in the early 20th century. Generative AI, particularly, is enhancing productivity at firms like Man AHL by assisting with coding and automating tasks such as extracting data from complex documents. While it hasn't replaced human roles yet, it allows professionals to focus more on generating returns and advancing research.

✏️ Investors still finding their footing on the path forward
Hamilton Lane
Deal-making is expected to accelerate in 2H 2024 due to favourable monetary policy outlooks and narrowing buyer-seller pricing gaps. Private equity has rebounded faster than in previous downturns, with particular promise in the middle-market buyout space and emerging opportunities across Europe. New debt issuance has surged, HY and levered loans up by 80% and 140% YTD.

📜 Periodicals »

📝 Monthly market roundup for June 2024 (BNY Mellon)

📝 Cross asset investment strategy midyear outlook: It’s all about confidence (Amundi)

📝 Private asset allocation report 1Q 2024 (Tiger 21)

✏️ HFS monthly hedge fund bulletin (June 2024) (UBS)

✏️ 2Q 2024 in review: what happened in the quarter? (JP Morgan)

✏️ Q3 2024 Hedge fund strategy outlook – Staying bullish on alpha and diversification (Man Institute)

🎥 2024 Private markets outlook: An analysis of capital distribution and fundraising in global private markets (State Street)

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Hi, welcome to the new edition of The Valt Journal. In every issue, we cover the best and the latest insights into the global private markets. The Valt Journal is a repository of time sensitive and timeless research, delivered to your inbox every 2 weeks, so you don’t have to look anywhere else! Clicking the headlines is all it takes.

Check out TVJ Spotlights 🔦 including 1) Systematic liquid alternatives (by Morgan Stanley); 2) Investing in India’s energy future (by Amundi); 3) Global real estate outlook mid-year 2024 (by M&G)

🚀 The Valt Journal Library 🚀

Our private markets and alternative assets focused live repository featuring a collection of c.5K research reports and articles from 150+ global asset managers and experts across 4 categories and 40+ sub-categories for an efficient, fast and seamless research experience.

Quickly scan the list of all reports in this edition here!

PRIVATE MARKETS AND ALTERNATIVE ASSETS

TVJ Spotlight 🔦

📝 Systematic liquid alternatives
Morgan Stanley
The failure of traditional diversification has highlighted the need for new tools, with liquid alternatives like alternative risk premia (ARP) offering a solution. ARP, which includes market factors previously considered part of alpha, provides low-cost, liquid, and low-correlation diversification options. Including ARP in a 60% equity/40% bond portfolio could improve risk-adjusted returns and complement traditional investments, addressing gaps in hedge fund strategies.

📝 Private markets mid-year outlook: Uncertainty, discipline and megatrends
LGIM
Interest rate uncertainty has led to restrained transaction volumes across private markets, with high levels of dry powder necessitating a disciplined approach to transaction underwriting. Marked valuation corrections offer attractive entry points in real estate and venture capital. Despite recent slowdowns, the long-term interest in private markets, particularly among non-institutional investors, remains strong. A scenario-based approach to revenues and interest rates is crucial for resilience against macro and geopolitical uncertainties.

✏️ The inflection point - democratization of alternative investments
UBS
Strategic inflection points demand immediate adaptation, as threats to business models are imminent. Embracing technology to create efficiencies, scale operations, and enhance the investment process is crucial. With retail clients' complex demands and the democratization of alternative investments, asset managers must quickly adapt to fee compression, rising costs, and increasing client expectations.

📝 Human-robot interactions in investment decisions
Amundi
Amundi explores the impact of introducing a robo-advisor on a large set of Employee Saving Plans. Unlike fully automated services, this robo-advisor proposes investment and rebalancing strategies but allows investors to choose whether to follow them. Findings show that the robo-service increases investor attention and trading activities. Investors respond to the robo-advisor's alerts by adjusting their portfolios to stay closer to target allocations, leading to larger portfolio returns. The potential financial cost of allowing investors to retain control is minimal, as automatic rebalancing by the robot would result in only slightly higher returns.

✏️ Do ESG factors help or hurt private fund returns?
Institutional Investor
A recent Preqin report revealed that ESG factors do not significantly impact investment returns. Analyzing over 11,000 funds, including 200 ESG funds, Preqin found no statistically significant difference in performance between ESG funds and all private capital funds, with ESG funds averaging a 13.5% return versus 15.0% for all funds. However, ESG funds showed lower variance in returns, potentially due to better downside risk management. Despite mixed research findings and differing opinions on ESG's necessity, many asset managers continue to use ESG factors to identify and manage risks, hoping they will appeal to limited partners and improve performance.

✏️ The evolution of operating models
State Street
Institutional investment firms are reassessing their operating systems due to core market changes, focusing on emerging technology, transitioning investment functions in-house, managing scale, regulatory compliance, and enhancing data management. Key drivers include automation, AI, cloud technology, and the need for robust data management strategies to support efficient scaling and compliance.

✏️ Could derivatives help enhance your portfolio?
JP Morgan
Derivatives can be a cost-effective way to protect your portfolio by capping gains to reduce potential losses. These financial instruments, including options, futures, and swaps, help hedge against risks, potentially enhance returns, and generate income. Despite their complexity and risks, with the right guidance, derivatives can offer valuable diversification and protection for investors' portfolios.

✏️ The big picture: Journeying into exotic markets diary of a quant
Man Institute
The author explores the evolution from trading accessible instruments like FX and futures to systematic investing in alternative and exotic markets. These markets, though harder to access, offer unique risk factors and diversification benefits. The journey involved significant operational groundwork and adaptability, leading to successes in trading instruments like CDS and crypto, while encountering some dead ends. The continuous exploration of new markets, such as battery metals and climate-related contracts reflects commitment to portfolio diversification and innovation.

📜 Periodicals »

📝 Mid-Year Outlook 2024 (HSBC)

📝 Private market insights June 2024 (UBS)

📝 Global market insights Q3 2024 (JP Morgan)

✏️ Global investment views July 2024 (Amundi)

🎥 AI in investment markets: A discussion among humans (State Street)

🎥 Retail versus institutional flows: Relationships and implications (State Street)

🎥 Institutionalizing niche sectors (Juniper Square)

The Valt Journal Library

PRIVATE CREDIT x FIXED INCOME

📝 Not all private credit is created equal: what to consider in an uncertain environment
Nuveen
A disciplined approach to selecting borrowers in the core-traditional middle market can provide better risk-adjusted returns in private credit. Focusing on conservatively structured financings, strong private equity relationships, and thorough credit management is essential. Managers with deep expertise and experience, particularly those predating the 2008 financial crisis, can better navigate economic uncertainties and offer higher-quality investment opportunities.

📝 Changing the narrative on sustainable fund flows
TCW
Despite headlines about net outflows from sustainable funds, the global sustainable fund market saw net inflows of c.$900M in Q1 2024. Equity-focused sustainable funds faced c.$12B in outflows, while sustainable fixed-income funds attracted more investments than their non-sustainable counterparts. Definitions of sustainable funds vary, influencing mixed messaging, and regional differences highlight diverse investor appetites, with Europe seeing significant inflows and the US experiencing notable outflows. Sustainable fixed-income funds, particularly in passive strategies, have shown strong growth.

📝 The roundup: Top takeaways from Oaktree conference 2024
Oaktree
The investment environment significantly impacts investment success, especially over shorter time horizons. Commercial banks are reducing asset financing activities due to increased regulations and rising interest rates, creating opportunities for alternative lenders in the $5T asset-backed finance market. This shift is seen as a secular change, not a cyclical one, offering long-term prospects for private credit growth. Key opportunity areas include asset-backed finance, markets like Europe and India, real estate, special situations etc.

📝 Buy and maintain: an alternate approach to fixed-income investing
Nuveen
Nuveen’s buy and maintain investing approach blends active investing's benefits, such as diversification and stringent credit risk management, with passive investing's advantages, like low turnover and cost-effective fees. This long-term strategy involves holding high-quality bonds until maturity, focusing on consistent yield and minimizing risks.

✏️ The rise of private credit: A new frontier for investors
State Street
Private credit assets under management have tripled since 2012, reaching $1.5T and are expected to grow to $2.3T by 2027, attracting insurers and both institutional and individual investors. However, asset managers and investors face challenges such as data management, transparency, volatile financing rates, tightened regulations, and a changing macroeconomic environment.

✏️ Private credit: Everything old is new again
UBS
Private credit has gained prominence due to a structural shift in capital markets. Loans and direct lending are particularly attractive at the moment while CLOs are lucrative on a relative value basis. AAA-rated CLO debt tranches (also called mezzanine tranches) are delivering comparable spreads and returns as similarly rated investment grade corporate debt. Senior loans have a much steadier and resilient return profile.

✏️ Finding value in high-value bonds and credit markets
Northern Trust
High-yield bonds present opportunities due to low volatility, increased performance dispersion, and attractive yields, especially for CCC-rated bonds. Private credit, benefiting from private equity support, offers long-term prospects but requires careful risk assessment and experienced management. Both high-yield bonds and private credit are attractive in the current market but demand an understanding of risk tolerance and market dynamics.

✏️Alternative credit outlook: Risk appetite is back, but performance won’t be evenly distributed
AXA
Market sentiment is cautiously optimistic with expectations of higher-for-longer rates. Value corrections have created attractive entry points in real asset sectors needing significant financing. Geopolitical events will impact risk appetite, but structural trends and bank disintermediation continue to create opportunities. Risk assets had a strong first half of 2024, driven by resilient corporate profits and solid consumer spending, with markets expecting a soft landing for the US economy, which should drive a continued risk asset rally in the latter half of the year.

📝 Inflation-linked bonds: A “real” diversifier for long-term investors
LGT Capital
Inflation-linked bonds (linkers) protect investors against inflation risks by tying payouts to an official inflation index, preserving purchasing power even during high inflation. They offer diversification benefits and are effective for long-term fixed-income portfolios, such as those of pension funds and insurers, by offsetting inflation-indexed liabilities. Key features include continuous inflation compensation and maintaining the purchasing power of invested capital.

✏️ Frontier-market sovereign debt: Distressed to impress
Abrdn
The recent sovereign debt restructurings in Zambia, Ghana, and Sri Lanka have created investment opportunities and provided key lessons for investors. Many lower-rated emerging markets lost access to international bond financing since 2020, leading to defaults influenced by COVID-19, geopolitical conflicts, and rising US Treasury yields. Successful investments in distressed bonds require analytical experience, legal expertise, and patience.

✏️ IG credit: Finding value in a more stable environment
Barings
Record-high yields and supportive fundamentals create opportunities in investment-grade (IG) credit. With yields at c.5.5%, nearly double the 10-year average, and strong demand from insurers and investors, the environment remains favorable. Stabilizing leverage and interest coverage in the industrial and financial sectors, along with selective opportunities in new issuers and sector-specific trades, further bolster the outlook for IG credit.

✏️ Bank on it: Credit opportunities within financials
Man Institute
Over a year later after the US and Europe regional bank collapse, significant differences between European and US banks have emerged, largely due to regulatory variations. European banks have stricter capital requirements and are more resilient due to their experience with volatile rates and higher capital levels. This resilience has improved the investability of European banks, leading to higher returns on equity (c.12% vs 11% for US counterparts) and benefiting bondholders. The paper also explores credit risk sharing (CRS) and broader financial credit opportunities.

✏️ Public and private credit: Where investors should focus
Mawer
Private credit AUM has surged to $2-3T over the past decade. While private and public credit are often viewed separately, they share many similarities. Although long-term allocations to both are beneficial, investor interest has overly favored private credit. Diversified public credit, especially through an unconstrained strategy, provides attractive returns, transparency, and liquidity, and can serve as a stable anchor in a diversified portfolio.

✏️ Filling the void
UBS
The wave of bank consolidations led to a significant reduction in the number of US banks and indirectly facilitated the rise of private credit in 1990s, as banks shifted focus from small to large corporate borrowers. The gradual repeal of the Glass-Steagall Act and the development of leveraged finance and junk bonds in the 1980s also played crucial roles in reshaping the banking landscape and fostering the growth of private credit. “Private credit still has a lot of room to capture market share from other sectors, such as syndicated loans, high yield, asset backed securities and real estate. The key is for institutional investors to get comfortable with the different sub-asset classes within private credit.”

📜 Periodicals »

📝 Quarterly credit outlook: Plus change (Robeco)

📝 Emerging markets: Second half outlook (TCW)

📝 Global fixed income views Q3 2024 (JP Morgan)

📝 Weekly fixed income musings (Goldman Sachs)

📝 Weekly economic commentary: Mid-year themes (Northern Trust)

✏️ High yield monthly update (Nomura)

✏️ Weekly fixed income market commentary: Treasury yields rise, reversing the June rally (Nuveen)

✏️ Second quarter 2024 investment review (JP Morgan)

🎥 Specialty finance: An expanding world of opportunity (PIMCO)

🎥 Gain an active edge in the bond market (PIMCO)

🎙 In private credit, It’s peak popularity — and peak worries (Institutional Investor)

✏️ First cut—State of private markets: Q2 2024 (Carta)

The Valt Journal Library

PRIVATE EQUITY

📝 The importance of diversification
HSBC
Private equity investors face a slowdown in exit markets, leading to reduced distributions and negative cash flows from capital calls. This highlights the need for diversification across investment cycles and industries to mitigate risks. Despite current challenges, managers are actively using tools like continuation funds, NAV loans, and secondary market activity to manage exposure, with expectations of market recovery as interest rates potentially fall.

✏️ A big role for small and middle-market private equity investments
JP Morgan
The smaller end of the buyout market (companies with revenues of $10-$300M) offers several attractive features: a larger opportunity set (147K+ companies - 96% of all privately held companies), 15%-20% lower purchase multiples, and less leverage (20% less acquisition leverage on average). These factors create clear value-creation opportunities through operational improvements and add-on acquisitions. In 2023, the global value of PE exits fell 71% from 2021, with large buyout funds facing an 80% decline in IPO exits, contrasting with the more resilient small and middle-market exits.

✏️ Accessing private markets through primary fund investing: The path to capital appreciation and IRR
HarbourVest
Primary fund investments are used by leading institutional investors and are increasingly popular among family offices, HNIs, and retail investors for private market portfolios. These investments involve LPs providing capital, and GPs investing in a diversified portfolio of 10-30 companies per fund. Primary strategies offer early access to private companies in venture capital, growth equity, and buyouts, providing complementary diversification across strategies, geographies, and time periods, with the potential for capital appreciation and alpha.

📝 Carbon & emissions tech overview
Pitchbook
In 2023, VC deal activity in the carbon & emissions tech sector hit a record c.$18B across 1,130+ deals, driven by the addition of low-carbon manufacturing & industrial processes. Despite challenging market conditions, the sector remained resilient. Exit activity peaked at $3.8B in 2021 but fell to $1.9B in 2023. Key investment categories in Q1 2024 included lithium battery recycling and direct air capture, with significant investments in these areas. The median pre-money valuations for carbon tech companies have remained stable from 2021 to 2024.

📝 APAC healthcare market snapshot
Pitchbook
Asia-Pacific has seen significant healthcare VC investment - Q1 2024 saw $1.1B of deal value across 44 deals ($25M average deal value). China has recently seen $50B+ of investments in Beijing and Shanghai alone. Other top cities include Seoul, Singapore, and Tokyo. Despite China's prolonged downturn, Japan and India show market optimism, and rising geopolitical tensions impact the region.

📝 Key takeaways from medtech MVP venture & partnering
Pitchbook
Reimbursement has become the primary challenge for commercializing medtech devices, surpassing regulatory review. The FDA’s breakthrough program accelerates review periods for certain devices, but its proliferation has lessened exclusivity. M&A activity remains a growth strategy for strategics, with an increase in public medtech company acquisitions due to favorable valuations. IPOs are expected to surge in 2025, despite a less optimistic outlook for the rest of this year. Strategic minority investments present mixed benefits for startups and VCs. Future medtech innovation is likely to be driven by precision medicine, connected devices, and portable therapies.

📝 High-stakes foundation model horse race out of the gate
Pitchbook
Since 2022, Pitchbook has tracked VC megadeals for 14 foundation model research labs, with secondary trading creating liquid markets for companies like OpenAI, Anthropic, Cohere, and xAI. In Q2 2024, valuations for AI unicorns Anthropic, Databricks, and OpenAI increased based on public comparables and secondary transactions. The success of foundation models will depend on reasoning capabilities, with research labs focusing on new approaches to enhance performance.

✏️ The startup industry’s boom in bridge rounds isn’t slowing down yet
Carta
In Q1 2024, bridge rounds accounted for 42% of seed-stage and 43% of Series A investments, marking the highest rates of the decade. Despite a general decline in venture deals, bridge rounds have shown resilience, with Series A bridge rounds only decreasing by 34% compared to a 73% drop in primary rounds since Q4 2021.

✏️ Meeting the capital challenge within impact growth equity
M&G Investments
Private equity investors are increasingly focusing on impact investing, projected to grow from $3T in 2023 to c.$8T in the next decade at a 10% CAGR. However, a reduction in late-stage funding, particularly due to high interest rates and decreased IPO activity, is challenging for impact growth equity. This funding gap is critical, especially for capital-intensive sectors like energy transition. A growth equity impact strategy is required, providing both capital and strategic support to mission-driven companies in climate, health, and inclusive growth sectors.

📜 Periodicals »

📝 Pharmatech: VC and PE trends and industry overview Q1 2024 (Pitchbook)

📝 2024 European private capital outlook: Midyear update (Pitchbook)

📝 Global PE first look Q2 2024 Excel databook (Pitchbook)

📝 NVCA venture monitor first look Q2 2024 Excel databook (Pitchbook)

✏️ First cut—State of private markets: Q2 2024 (Carta)

The Valt Journal Library

SECTOR FOCUS

Energy Transition x Climate Finance

TVJ Spotlight 🔦

📝 Investing in India’s energy future: a just transition challenge
Amundi
India is undergoing significant growth, with a notable focus on its energy transition due to its large scale and impact on the economy and environment. As the third-largest CO2 emitter, India relies heavily on fossil fuels but aims to reach Net Zero emissions by 2070, investing in renewable energy and green sectors. The Securities and Exchange Board of India (SEBI) has enhanced ESG regulations to support this transition, emphasizing the need for inclusive and just practices. Despite these efforts, coal remains a major energy source, posing challenges that require global cooperation and investment to overcome.

📝 Nuveen Natural Capital: 2024 sustainability report
Nuveen
Addressing the interconnected challenges of climate change, biodiversity loss, and unsustainable production requires a holistic approach. Nuveen’s Nature-Positive Farming Program in Europe enhances farming practices' resilience and financial sustainability. Leveraging three decades of land-based investing experience, Nuveen aims to invest in global nature-based climate solutions and sustainably manage farmland and timberland, focusing on improving soil, water, biodiversity, climate, and communities across their assets.

✏️ China’s clean technologies: the risks and opportunities of oversupply
Abrdn
China's surge in clean technology manufacturing, including solar, wind, and battery components, is beneficial for global climate efforts but has led to overcapacity issues. This mismatch between supply and demand affects various sectors, creating challenges but also opportunities for companies in clean technologies. Clean technologies have never been as competitive, which could significantly accelerate the pace of decarbonization. This could provide an upside for multiple businesses including power producers, electrification technologies, and the infrastructure that supports decarbonisation.

✏️ A powerful combination of tailwinds powering impact opportunities
JP Morgan
In mid-2024, the impact investing industry is showing signs of recovery after a challenging 2023, with increased activity in fundraising and deal-making. Climate remains the dominant investment theme, but significant opportunities also exist in education and workforce development. Despite a broader slowdown due to inflation and interest rate adjustments, climate investments have demonstrated resilience, and there's a notable influx of talent into climate investing. Additionally, the education sector is experiencing growth driven by demand for non-traditional training and innovative financing models.

📝 Climate impact pledge: Moving the needle on net zero
LGIM
Climate change poses a significant systemic risk to investment portfolios, prompting LGIM to enhance their Climate Impact Pledge (CIP) assessments and engagements with over 5,000 companies. Despite some progress, the transition to net-zero carbon emissions by 2050 must accelerate, necessitating more stringent actions such as vote sanctions and divestments for underperforming companies. LGIM's recent efforts include focusing on emission-intensive sectors and improving methane emissions disclosure and coal usage, highlighting the importance of public policy and better emissions reporting to drive substantial climate action.

✏️ Renewables: A way to participate in the India growth story
HSBC
India's economy, bolstered by resilient growth in sectors like technology, credit, consumer spending, and services, is attracting investors despite global uncertainties. The renewable energy sector, driven by aggressive clean energy targets and supported by government policies, presents significant opportunities for bond investors. However, challenges such as infrastructure limitations and equipment supply volatility remain. The government's focus on eliminating risks and supporting renewable projects is expected to enhance investment appeal in this sector.

🎙 A sustainable future in aviation (Man Institute)

Real Estate x Infrastructure

TVJ Spotlight 🔦

📝 Global real estate outlook mid-year 2024: A new cycle of contrasts
M&G Investments
After challenging years, optimism for global real estate in 2024 is growing, with many markets expected to bottom out and stabilize. Investors are cautiously re-entering, seeing the potential for attractive returns, but must navigate risks such as high leverage and structural challenges in certain assets. The new cycle will focus more on income generation and preservation rather than capital growth, requiring selective investment decisions. Best-in-class office assets could well see a better rental return than older logistics assets in markets where recent double-digit rental growth has led to a large supply response. Below is a snapshot of the various opportunities in the market.

📝 The new infrastructure blueprint
BlackRock
Societies face overlapping challenges including energy security, transitioning to a low-carbon economy, changing demographics, urbanization, and supply chain realignment, all requiring substantial new infrastructure investments. Traditional funding sources are insufficient, necessitating public-private partnerships and corporate collaborations. This transformational moment in infrastructure investing presents significant opportunities for capital deployment in super batteries, data centers, logistics hubs, and more, with increasing annual energy investments expected to reach c.$4.5T by the 2040s.

📝 Annual sustainability report in real estate
Nuveen
Sustainability remained crucial for Nuveen Real Estate team which has a focus on global energy transformation and affordable housing. Regulatory developments demand greater transparency, and 70% of institutional investors report that ESG factors influence their decisions. Government policy and technological innovation are seen as key drivers of the energy transition, while politicization poses a challenge. Nuveen Real Estate aims for net zero carbon by 2040, integrating long-term trends like digitalization and the low carbon economy into its investment strategy to deliver value to clients and society.

📝 Infrastructure’s second lease of life
Pantheon
Pantheon highlights the surge in infrastructure secondaries deal flow driven by LP demand for liquidity and a slowdown in distributions from existing portfolios. There is a supply-demand imbalance due to a shortage of buy-side capital, leading to entry discounts of 5-15% and occasionally up to 20% for high-quality infrastructure portfolios. This imbalance supports sustained discount levels and potential slight widening, not due to portfolio concerns but due to the availability of capital and buyers for infrastructure secondaries.

✏️ Global real estate outlook – May 2024
UBS
Real estate investment volumes remained subdued globally, with significant price adjustments continuing, especially in the US and UK office sectors. APAC leasing activity was stable, especially in finance and tech sectors, but capital markets saw weak investor sentiment, with a 13% YoY drop in transaction volumes in 1Q24. Cap rates stabilized after significant increases in 2023. US private real estate showed mixed results in 1Q24, with positive returns in retail and industrial sectors offsetting declines in apartments and office buildings. Despite overall one-year negative returns, the expectation for recovery remains for most sectors except office buildings. The European real estate market is recovering but the next few months will be crucial in determining how robust the recovery will be. Total annual commercial transaction volume in Europe amounted to EUR 96B by the end of 1Q24.

✏️Infrastructure for good? It's time to get real with your pension
LGIM
Infrastructure investing, particularly in clean energy, digital telecoms, transportation, and water, is seen as a key strategy. This approach not only targets attractive returns but also aligns with ESG goals, motivating members to invest more in their pensions while contributing to real-world benefits like climate change mitigation and improved societal infrastructure.

Artificial Intelligence x Technology

📝 Beach read: Navigating tomorrow’s game-changing trends
Robeco
The introduction emphasizes the constant nature of societal change driven by evolving trends and structures. Key themes include the transformative impact of technology, robotics, shifting socio-demographics, and the urgent need for climate action, highlighting significant opportunities for investors.

✏️ The gross margin imperative in the age of AI
Lightspeed
This is an exciting time for startups, especially with the impact of AI on software development. Lightspeed emphasizes the importance of gross margins for the long-term viability of new companies. With AI enabling more complex and efficient software capabilities, many disruptive companies are adopting "work as a service" models, charging based on success rather than static pricing. However, this approach can be costly due to the computational demands of large language models (LLMs) and the need for human-in-the-loop workflows to ensure model accuracy.

✏️ Finding certainty in tech's unknown future
OTPP
AI will profoundly transform our lives and work in the coming decades, emphasizing the need for strategic adaptation, innovation, and efficient resource utilization. Clean, reliable, and accessible data will be crucial for AI success, offering a significant competitive edge. As AI technology matures, workflows will evolve around AI to enhance productivity, effectiveness, profits, and overall quality of life.

✏️ Integrating tech into the healthcare value chain
Permira
Tech enablement is transforming healthcare by integrating advanced technologies like AI, machine learning, and robotics to drive efficiency, reduce costs, and improve patient outcomes. Key investment opportunities include specialty pharma, medical devices, and healthtech, with AI enhancing drug development, diagnostic imaging, and surgical procedures. Challenges include regulatory hurdles and data protection, but the potential for AI and precision medicine to revolutionize the sector is significant.

✏️ The hidden advantages for medtech in Europe’s ESG rules
BCG
European medtech companies are facing a surge in ESG regulations, requiring a proactive approach to compliance. They must understand existing and upcoming regulations and deploy a regulatory-watch process to stay agile. Key areas of focus include product design, waste management, and developing strategies to meet new requirements while potentially gaining a competitive edge through ESG initiatives. This approach not only helps avoid noncompliance fines but also positions companies better in procurement, financing, transparency, and attractiveness as employers.

✏️Are you organized to reap value from generative AI?
Bain
Adopting generative AI swiftly requires strategic organizational choices in program sponsorship, governance, staffing, and funding. Bain's analysis of 20 financial firms highlights the importance of C-suite governance for coordination and cross-functional initiatives to engage business units and disseminate successful practices.

Financial Services

✏️ Insurance investors: All change?
Portfolio Institutional
Insurance investors are reassessing their portfolios due to higher treasury yields, risk premium compression, and the need to maximize yield. M&G highlights the shift towards re-evaluating strategic asset allocations, particularly focusing on the core portfolio's fitness for purpose amid tightened investment grade credit spreads and higher government bond yields. Insurers are now prioritizing non-core assets like senior secured private credit to diversify and improve yields, while also considering liquidity needs, liability duration, and capital-raising strategies.

🎥 The cooperative advantage in banking and insurance (Bain)