We provide investment consulting, independent research, and an outsourced-CIO solution to university endowments, public and private foundations, corporate and public retirement plans, banks, insurance companies, and nonprofit organizations.
We provide managed portfolios and alternative investment strategies to help you provide high quality investment solutions to your clients.
New Realities: The Popularity of Private Equity
Private equity has been in the news in 2015. There were positive headlines, “Private Equity Exit Volume Hits Record Level in 2014,” and those less flattering, “Pension Funds Can Only Guess at Private Equity Cost.” Increased attention on the industry should not be a surprise. The asset class grew to the equivalent of 4% of the global stock market capitalization at the end of 2014, up from 1.5% in 2000, and regulators have stepped up oversight in the Dodd Frank era.
The Pain of Patience
The U.S. equity markets have been on a tear. I am not referring to the short-term performance year-to-date, but the short-term performance of the past three years. U.S. equities, regardless of the index selected, returned approximately 20% annualized since June 2012. Despite double-digit returns from developed international equities over the same period, weakness in emerging markets and just about everything else has led many to question their holdings.
Diverging Emerging Markets
Over the past few years, emerging markets (EMs) have been seen as subject to developed market demand swings, GDP growth, and commodity prices, effectively becoming a residual discussion to other headlines. Consequently, emerging market equities have widely been viewed as the marginal capital destination for risk seeking investors.
Bears follow Bulls
We view the investment world through multiple lenses including valuation, fundamentals, and sentiment. While valuations serve as the primary driver of investment decisions, recognizing the fundamental underpinnings as well as the prevailing sentiment can provide a solid foundation upon which prudent investment portfolios can be built. We also take a long-term view and avoid short-term projections, but considering whether the conditions that have preceded bear markets in the past exist today is a worthy exercise.