The Valt Journal #12
Featuring latest research on private equity (JPMorgan, BCG, Camradata); private credit (KKR, Blackrock, Ares, M&G, Oaktree, Barings); macro & multi-asset views (UBS, Morgan Stanley, Bain, Schroders)
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
✏️ A simplified way to access private equity
JPMorgan
While PE has historically been available primarily to institutional and HNI investors, the recent emergence of tender offer funds, ‘40 Act’, provides individual investors with greater access to PE with lower investment minimums, simplified tax reporting and potential for liquidity.
📝 Secondaries whitepaper
Camradata
Secondaries in private assets offer flexibility, revolutionizing markets with the secondaries volume at a record $132B in 2021. This trend democratizes investment, but requires careful strategy. What are the opportunities?
✏️ What is the opportunity in the secondary market?
JPMorgan
JPMorgan’s quick take on how secondary market can often relieve liquidity issues for investors in private equity and where are the opportunities in the market.
📝 Doing retail differently
Advent x PEI
PE's interest in the consumer sector persists despite economic challenges. Advent focuses on strategic acquisitions and emphasizes understanding evolving consumer behaviors, ensuring long-term growth and value.
✏️ A conversation on the state of private markets in Asia
Hamilton Lane
In North Asia, buyouts arise from succession needs and tax benefits. China's domestic listings surge as exit strategies diversify, and its private equity shows resilience to public market fluctuations. India remains a focus with its outperformance and potential opportunities.
🎥 China and private markets
State Street
Josh Lerner (Professor of Investment Banking, Harvard Business School) provides a review of the expansion and contraction of VC investment in China.
✏️ In spotlight with BCG: Private Equity x Climate
BCG
A series of articles where BCG comments on sustainability in PE and its role in climate change. BCG also analyses the latest data on PE firms' contributions in climate battle by reducing greenhouse gas emissions. PE-owned companies are also increasing renewable energy use over longer ownership durations.
PRIVATE CREDIT x FIXED INCOME
📝 What’s next for private lending?
KKR
Since the GFC, regulatory changes have shifted banks from private lending to syndicated financing, leading to the rise of private credit. Non-bank lenders bridged the lending gap, with AUM growing significantly. What are the risks and opportunities for private lending?
✏️ Private credit as a catalyst in sports, media & entertainment
Carlyle
Over two decades, media consumption has shifted from traditional outlets to on-demand streaming. Carlyle identifies opportunities in acquiring content rights, supporting content creation, and enhancing live entertainment experiences.
📝 Capital solutions: Flexible financing
Barings
Barings lays out capital solutions strategies, contrasts it with conventional sponsored finance, and describes how this approach provides borrowers and sponsors with a versatile method to craft tailored financing solutions.
✏️ Corporate lending: Contrasting US and European private credit
M&G Investments
Private credit reached $1.5T in assets by 2022 and is expected to reach $2.3T within four years. The European market differs fundamentally from the US, especially in sourcing and trading mechanisms of corporate loan assets.
📝 Private debt in focus
BlackRock
Covenants rise due to 2024 default predictions while real estate debt anticipates maturing bank debts. Opportunities in infrastructure debt, renewables and direct lending.
📝 Private credit in Asia: Filling the void
Ares
APAC faces a significant funding gap due to limited bank lending, creating opportunities for alternative capital providers. Diverse market structures and economic growth amplify this gap, offering lucrative prospects for experienced investors.
📝 Securitized products
TCW
In Sep 2023, the ABS market showed fatigue with increased primary issuance due to economic uncertainty and rising rates, leading to wider ABS spreads. Subordinate bonds outperformed due to lower issuance. What does the market hold for securitized products?
✏️ CLOs: Resilience in the face of uncertainty
Barings
CLOs showcased strong resilience with favorable returns despite economic and geopolitical challenges with emerging opportunities in equity and private credit CLOs.
📝 Performing credit quarterly
Oaktree
The average debt-to-EBITDA ratio for U.S. leveraged credit stood at 4.0x in 2Q2023 vs a high of 6.5x in 4Q2020. With rising interest rates, many companies, face unsustainable debt structures, posing significant risks and potential opportunities for investors.
📝 Fixed income perspectives
Principal Asset Management
Heading into 4Q2023, fixed income investors face opportunities, even as a recession looms. Policymakers are expected to remain hawkish, while key market indicators signal an upcoming economic slowdown.
📝 Corporate credit outlook: Riding the wave
FS Investments
Rising stock/bond correlations in 2022 adversely impacted diversified portfolios. While high duration fixed income investments and large-cap tech stocks were most affected, high yield, loans, and CLOs, have shown resilience, despite the uncertain forecast for 2024.
✏️ Funding markets have been surprisingly resilient
Angelo Gordon
TJ Durkin (Head, Structured Credit and Specialty Finance) talks about the state of the RMBS and housing market and what to look forward to in the coming quarter and in 2024.
✏️ Fixed or floating: How we’re assessing relative value in leveraged credit
KKR
Since the 2022 rate hikes, floating rates have dominated leveraged credit markets. Given recent economic challenges, there's now a measured shift towards a balanced approach between floating and fixed rates.
✏️ Market view: High yield monthly update
Nomura
In Sep 2023, the US high yield market declined, while European high yield showed resilience amid ECB rate hike expectations. Emerging markets were impacted by US treasury sell-offs, especially long-duration sovereigns.
✏️ Credit market commentary: September 2023
FS Investments
In September, credit markets showed varied results due to sustained high rates. A quick glance at the credit market performance for the month.
📝 Quarterly liquid loan market commentary
Partners Group
In Q3 2023, the US leveraged loan market achieved the highest quarterly volumes since early 2022, however, the market faced challenges with increased credit rating downgrades and economic pressures.
✏️ Middle market deal terms at a glance – Oct 2023
The Lead Left
An infographic providing a quick overview of the mid-market deal terms in Oct 2023.
🎥 Specialty finance: Seize today’s compelling entry point
PIMCO
PIMCO experts talk about the elements shaping distinct opportunities in specialty finance and why they see unprecedented scale and compelling risk-adjusted returns.
🎥 Credit outlook: High quality bonds offer equity-like return potential
PIMCO
Watch insights from PIMCO professionals on how investors can capitalize on attractive yields in top-tier bonds, such as investment grade credit and leverage the possibility of achieving equity-comparable returns with reduced volatility.
🎥 Alternative credit in the gaps (Fall 2023)
Ares
This webinar with Ares experts provides detailed insights into the alternative credit markets, the opportunities available and the various risks and challenges.
SECTOR FOCUS
✏️Real estate in crisis
BCG
German real estate faces market uncertainties due to higher interest rates, recession fears, and inflation. Decreased transaction volumes and refinancing challenges pose financial difficulties. What are the strategies essential for navigating these challenges?
📝 From risk to opportunity: Bottom-up climate scenario analysis for investors
GIC
Traditional risk models struggle to capture evolving risks in climate change due to policy and technological uncertainties. GIC uses comprehensive approaches, including bottom-up scenario analysis, to assess climate impacts at both macro and company-specific levels.
✏️ Deglobalisation, decarbonisation and demographics: how they’re going to reshape the investment landscape
Schroders
Geopolitical tensions are accelerating the shift from traditional energy to cleaner sources, intertwining deglobalization with decarbonization trends. Investors favor equities in developed markets and infrastructure/renewables for medium-term investment opportunities.
📝 Brave new world: AI and its downstream implications
Carlyle
The emergence of AI is reshaping our world, akin to historical shifts like electrification. While immediate impacts are clear, the broader economic potential of AI remains underestimated, with key beneficiaries possibly overlooked.
📝 Generative AI: Overview, economic impact, and applications in asset management
Martin Luk
This paper delves into the advancements of GenAI models, detailing their mechanics and applications in asset management. It addresses their impact on industries, potential risks, and future implications.
📝 Navigating emerging markets healthcare trends
Morgan Stanley
Emerging markets healthcare investments once centered on low-cost drug manufacturers are now eyeing US patent expirations. What are the key trends in emerging market healthcare?
MACRO AND MULTI-ASSET VIEWS
✏️ Mega forces: An investment opportunity
BlackRock
Mega forces drive macroeconomic volatility, altering long-term growth and inflation, presenting both substantial opportunities and risks for investors. Blackrock explores these critical drivers in detail.
✏️ Ten lessons from 20 Years of BCG’s M&A report
BCG
BCG unpacks the critical M&A success factors that have remained consistent over time: prioritize preparation, select ideal acquisitions, and emphasize clear communication and post-deal execution.
✏️ Institutional investor study 2023
Schroders
Schroders' annual study analyzes 770 global institutional investors' views on investments and sustainability, representing $35T in AUM and offers global and regional insights.
📝 The world’s largest 500 asset managers
Thinking Ahead Institute
Top 500 managers' AUM was $114T in 2022, down 13.7% from 2021. BlackRock leads, followed by Vanguard and Fidelity. Regional declines varied, with North America holding 60% of the total AUM. A detailed overview of the top 500 asset managers.
📝 Private market insights – October 2023
UBS
Quick snapshot of latest trends, drivers and news across private asset classes.
✏️ Bold moves for dealmakers in volatile markets
BCG
Dealmakers navigate challenges by seeking flexible alternatives. For acquisitions, options besides full ownership include equity financing, partial stakes, and collaborative ventures. For divestitures, partnerships or strategic acquisitions provide significant options.
🎥 Where are the opportunities in private assets?
Natixis
Experts from AEW, Mirova and MV Credit discuss the outlook for private assets and where they see the specific opportunities across private equity, debt, and real estate markets.
🎙 Bain podcast series: Fine-tuning the fund-raising game
Bain & Co.
The first podcast has experts from Bain explore the tools and tactics GPs use to customize their pitches for specific investors. In the second podcast, Graham Rose (Head, Americas PE) talks about a seismic shift in their capital allocation strategies.
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