The Valt Journal #09
Featuring latest research on private equity and credit from KKR, Apollo, Varde, UBS, JPMorgan, Goldman Sachs; multisector insights from M&G, BCG, State Street and Wellington.
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.
PRIVATE EQUITY
📝 Potential for private equity
UBS
Secondaries transaction volumes remain relatively low in the context of overall private equity AUM. Is there potential for growth and innovation in secondaries?
📝 Growth equity’s time to shine!
Adams Street
Growth equity may be entering a golden age as innovative companies resume fundraising and return to market, creating excess demand for capital. What are the key traits managers must possess in order to create superior returns and avoid the bad bets?
✏️ Fundraising tanked for top private equity firms during the first half of 2023
Institutional Investor
Finding it harder to monetize their holdings in a tough market, managers are turning to “perpetual capital” from investors.
✏️ This miserable market could be a catalyst for private equity firms
Institutional Investor
As risk return expectations will be high in a tough market with higher interest rates, asset managers have to work even harder to improve their portfolio companies, and themselves, to deliver strong returns.
PRIVATE CREDIT x FIXED INCOME
📝 An excellent time to deploy capital
Nuveen
Asset selection is more complex than ever, but the US private debt market can still offer the potential for attractive returns. Is it the right time to allocate to private debt?
📝 Private credit opportunities in the wake of tighter US banking regulations
Varde
The proposed US banking regulatory requirements may exacerbate the supply and demand imbalance for credit and create opportunities for private credit to fill the void.
✏️ Three market scenarios: How would credit perform?
Schroders
Corporate bonds can play a valuable role in portfolios in a wide range of market circumstances. But exactly how a credit portfolio is best positioned depends on what’s happening to interest rates, inflation and economic growth.
✏️ Can private credit continue to perform?
JPMorgan
Private credit has significantly outperformed traditional fixed income in recent years. Flows into the market have been equally strong. Can it continue to outperform and what are the key opportunities?
✏️ Hedge funds diversifying into private debt
Broadridge
With private debt well-positioned to navigate the difficult market headwinds, institutions are moving into the asset class for reliable income, high risk-adjusted returns, and diversification.
✏️ Why ABS could be an attractive option for European insurers
M&G
Are the European insurers in a position to take advantage of the compelling risk adjusted returns on offer in the European ABS market?
✏️ Navigating disinflation: The case for EM local bonds
Goldman Sachs
Disinflation has moved from forecast to fact across emerging markets. As disinflation progresses, many EM banks are easing monetary policy. How will the local bonds tread these waters?
✏️ A tall tale in bond-land
TCW
Why should value investors deeply question the merits of a ‘too good to be true’ opportunity?
✏️ The road ahead: Five reasons to buy bonds
Man Institute
Why are bonds a more attractive proposition than equities in today’s global macro backdrop?
✏️ Private debt expands toolkit in Germany
Latham & Watkins
While YTD LBO volumes in Europe are down by over 50% vs last year, private debt in Germany remains strong due to continued refinancing needs and sponsors looking for alternative sources of finance.
✏️ Navigating EM external debt: earning carry, finding alpha
Goldman Sachs
Emerging market debt offers compelling carry in the realm of US dollar-dominated bonds and diversification benefits for global investors but its heterogenous nature demands active management. How can one find and lock the alpha?
✏️ How the shift toward sustainable finance may reshape fixed income markets
Wellington
The growing focus on sustainability could inspire financial innovation that widens and diversifies the universe of economically attractive securities.
✏️ Fixed income under the spotlight
MFS
What are the key pressing issues facing today's bond investors amid the risk of recession and the potential effects of China's economic slowdown?
✏️ Local government financing vehicles: A growing risk for China’s economy?
PIMCO
LGFVs are considered a component of China’s overall “augmented debt”, which rose from 40% of GDP in 2012 to 95% in 2022. Could these debt-laden municipalities pose a potential risk to China’s economic growth? and financial stability?
REAL ESTATE x INFRASTRUCTURE
📝 Finding opportunities in a bifurcated market
KKR
Where is the US commercial real estate and housing sector headed towards? What are the key trends and opportunities?
📝 Beyond the core in real estate
Partners Group
Value-add investing is capturing investors’ attention by creating opportunities aligned with evolving ESG requirements and the changing dynamics of occupier behaviour. How are value-add strategies taking a center stage in real estate?
📝 A renewed energy
OTPP
The world needs to add renewable energy at an even faster rate to reach net zero by 2050. What are the trends, drivers, and the required investments to scale renewable energy and to help address some of the challenges involved in expanding its use.
✏️ Infrastructure investment in 2023 and beyond
Macquarie
As countries across the world seek to modernise and expand their infrastructure, vast levels of capital will be required to meet demand in the coming decades. How are changing societal needs driving infrastructure investment in 2023 and beyond?
✏️ The deepening UK housing crisis and the role of private capital
M&G
Institutional capital has a pivotal role to play in the UK housing crisis amid higher-than-expected interest rate rises and inflated living costs.
✏️ What’s shaping the value-add opportunity in European real estate?
Barings
While there are challenges in real estate, the landscape is presenting attractive value opportunities at a point where we approach the bottom of the cycle.
✏️ A blueprint for energy transition
BCG
BCG’s blueprint outlines ways to scale new low-carbon technologies, the global implications of the shift, and critical actions that stakeholders can initiate.
✏️ Public CRE debt — Risk, opportunity, or both?
Wellington
What are the implications of the ongoing stress in the public CRE debt, or commercial mortgage-backed securities, space for investors.
MACRO AND MULTI-ASSET VIEWS
📝 The changing role of private real assets in the ‘traditional’ portfolio
KKR
KKR believes that stocks and bonds are becoming more correlated, an important structural change for asset allocation, and bonds can no longer act as effective portfolio ‘shock absorbers.’
📝 Superannuation funds transitioning to a ‘Total Portfolio Approach’
State Street
Asset managers are now taking a Total Portfolio Approach by shifting from asset class to risk factor exposures and focusing on delivering targeted outcomes.
📝 Monthly market monitor - September 2023
Morgan Stanley
A concise review of economic and asset class data through clear and impactful charts, providing connectivity between changing market events and implications for investor portfolios.
📝 The proposed ESG auditing rule you know nothing about
Latham & Watkins
The PCAOB’s proposed auditing standards feature major implications for ESG that could upend corporate audits. These standards could heighten requirements for auditors to identify, evaluate, and communicate in case of a company’s noncompliance with the laws.
📝 Policies for crypto-Assets
IMF-FSB
This paper identifies the macro and financial stability risks associated with crypto-assets and outlines the key elements of an appropriate policy response and implications for monetary and fiscal policies.
✏️ Private markets: finding the optimal path for growth
Abrdn
Today’s macroeconomic backdrop is one of rising inflation, higher interest rates, and slowing growth. Investors are reviewing their options in this era of uncertainty. With 60/40 portfolios coming under pressure, is it time to consider an allocation to private markets?
✏️ Private markets: the price is right - or is it?
Abrnd
A detailed answer to a popular question that continues to spark debate across the investment industry – ‘are private market assets overvalued?’
✏️ Climate transition planning for financial institutions
PwC
Climate transition plans are essential for helping financial institution navigate the complex shift to a low-carbon economy and help explain how the objectives fit strategically into the overall business strategy.
✏️ Private fund managers report feeling a squeeze on fees
Pitchbook
Are private fund managers feeling pressure to reduce their fees in order to secure LP commitments amid a competitive fundraising environment?
✏️ Outlook: stocks vs bonds
JPMorgan
Both asset classes sold off significantly since the rate hikes began, resulting in positive stock/bond correlation and, as a side effect, a distrust of duration. What is the outlook for the relationship between stocks and bonds?
✏️ How higher yields and growing alpha opportunities may lift hedge funds
Morgan Stanley
Investors should review portfolio allocations, in light of the greater potential currently seen in fixed-income and hedge funds, relative to equities.
✏️ Three themes (and what they mean) for income investors
Wellington
As markets and global macroeconomic conditions have shifted, there are three themes income investors may want to examine more closely.
✏️ A pension fund is investing in wealth management firms. It won’t be the last.
Institutional Investor
Wealth managers are expected to continue raising capital, but more of them are likely to get it from pension funds and other institutions in the future.
✏️ Considering potential opportunities in ‘Significant Risk Transfer’
M&G
Why now could be a good moment for patient investors to consider SRT transactions, and why should they act soon?
PODCASTS, VIDEOS AND INTERVIEWS
🎥 European credit at a turning point
Oaktree Capital
Armen Panossian (Head, Performing Credit), Madelaine Jones (Portfolio Manager, European Senior Loans), and Nael Khatoun (Head, European Private Debt) discuss the challenges created by the end of the easy money era and the quality advantage that exists in European markets. (~20 min)
🎥 Oaktree's Panossian on private credit, interest rates
Bloomberg
Armen Panossian (co-CEO, Oaktree) discusses how banks are stepping away from the private credit markets and his expectations from the Federal Reserve. (~12 min)
🎙 How important is vintage in private credit investing today?
Apollo Global
Jim Vanek (Co-Head, Global Performing Credit) and Torsten Sløk (Chief Economist) talk about what’s happening in the credit markets, potential opportunities in private credit, and the importance of vintage. (~30 min)
🎥 Bloomberg real yield: September 2023
Bloomberg
A round-table featuring thought leaders from PIMCO, Wells Fargo, Axonic and Richard Bernstein Advisors. (~22 min)
🎙 A primer on multi-strategy hedge funds
Walleye Capital
Will England (CEO and Co-CIO) covers the mechanics and complexity behind the multi-strategy model and the importance of finding managers with aligned incentives. (~80 min)
✏️ Q&A with Adrienne Butler: August may indicate CLO second-half rally
Barings
What are the developments in the US CLO market and where is it headed?
✏️ Q&A with Don Dimitrievich: Decarbonizing the energy infrastructure ecosystem
Nuveen
Don Dimitrievich (Senior MD, Infrastructure Debt) discusses the compelling opportunity for infrastructure debt lending in North America.
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