Insights

Look to Specialty Finance and Credit Opportunities Strategies for Diversification

Diversifying private credit strategies provide a good complement to portfolio mainstays. While we believe the economic outlook remains strong, it is not without risks. In direct lending, growing amounts of dry powder are pressuring deal structures and pricing. As a result, we anticipate that commitments to less-correlated private credit funds, such as those focused on life sciences, asset-based lending, and flexible credit strategies, will increase next year.

December 2021

Macro Hedge Funds Should Benefit from Improved Opportunities

Rising inflation and moderating growth are generally associated with a higher risk premium as investors start to price in a potential shift in market regime. In the past, global macro managers have generally benefited from better alpha opportunities that arise from volatility. With this backdrop, we expect macro hedge fund performance to be better than average next year.

December 2021

The Other E in ESG Accelerates: Engagement by Shareholders

In the midst of heightened awareness of systemic risks in climate change and social inequality, many investors concerned about long-term portfolio resilience have used their voice to seek change that benefits all investors and the broader system. We expect investors will adopt active engagement practices to a greater extent in 2022, assuming significant policy changes around climate and social issues do not materialize. 

December 2021

Active Equity Manager Performance Benefits as Breadth Widens

A market environment with a wider breadth of winners and losers provides greater opportunity for skilled active managers to distinguish themselves. Given the more balanced earnings contribution across sectors relative to 2020–21 and the widely dispersed equity valuations, we expect the breadth of winners and losers will be wider in 2022.

December 2021

Capital Flows to Cryptoassets Increase, Despite Volatility

Digital assets saw considerable inflows in recent years as investors searched for alternative sources of return amid excessive equity and bond valuations. We expect this momentum will continue next year as regulators increasingly approve easy-to-access cryptocurrency exchange-traded funds (ETFs). Still, global regulatory challenges persist, and cryptoassets will remain highly volatile until there is more clarity on future regulation.

December 2021

The Dollar Finds Temporary Support

The US dollar tends to appreciate during two broad economic regimes. One is when the US economy is materially outperforming its global counterparts, attracting capital looking to benefit from the superior US prospects. The other is when growth slows sharply, attracting safe-haven-seeking capital. This is the “dollar smile” model of the currency, and looking at 2022 through this lens suggests some dollar strength may be in store.

December 2021

Venture Capital Will Continue to Crush It

Globally, the venture capital (VC) industry will continue to evolve as capital floods in seeking compelling returns that can be had for those willing to wait.

December 2021

Government Bond Yields Are Likely to Rise as Central Banks Remove Support

Long-dated government bond yields rose in 2021 on strong economic growth and surging inflation. Central banks have maintained their easy money policies despite the rapid recovery in economic conditions, likely keeping yields lower than they would have been otherwise. This may soon change now that several major central banks are starting the process of dialing back support.

December 2021