Our talented team of investment professionals regularly create and distribute educational materials delivering timely data, perspectives, and insight on the markets and related topics. You can review our most recent publications below.
Over the past decade value has underperformed growth investing, causing some investor disdain, and some sensational headlines portend ‘value is dead’. But is this the end of value, or is there opportunity for value to outperform growth?
A confluence of events pushed the energy sector into a downward spiral the likes of which the industry had never experienced. Indeed, the first part of 2020 felt like death in the oil patch.
While energy markets stabilized through May, looking ahead, we see continued challenges, as global demand destruction could bring a new wave of bankruptcies of public companies and restructurings for private energy managers.
Following one of the most challenging six-week periods in modern records, the U.S. economy displayed a number of bright spots in May, including a sudden and widely unexpected strengthening of the labor market.
Boards play a critical role in the livelihood of nonprofits and the communities they serve. The voluntary nature of board membership is never more evident than in times of crisis, which leaves many left to wonder if they are fulfilling their fiduciary duty. The OCIO model can help board members volunteer without fear during times of extreme market volatility, as has occurred in the wake of COVID-19.
Considering the recent market volatility, we are offering additional context to the FEG Insight: 2020 Fixed Income Outlook published in January 2020. We focus on shortening the duration of the traditional fixed income portfolio and fees.
Living in the time of a pandemic has changed our lives in ways unimaginable just a few months ago. In the private funds industry, the travel schedule is typically packed solid this time of year, as many funds host annual meetings in the spring. Today, however, air-traffic is a mere fraction of normal volume and Buffett has sold his airline stocks at significant losses, citing an inability to envision a profitable future for these companies.
U.S. economic data took an expected but devastating turn for the worse in April, with the labor market shedding more than 20 million jobs and the unemployment rate spiking to 14.7%, while the initial estimate of first-quarter GDP showed the U.S. economy contracting 4.8% quarter-over-quarter.
Coronavirus ended 11 year-long bull market | April 22, 2020
The 11 year-long bull market in U.S. equities ended abruptly in the first quarter of 2020, as the novel coronavirus (COVID-19) pandemic propelled the world into a state of fear and panic. The disrupting force of the virus on global supply chains, investor confidence levels, and, most importantly, the health and wellbeing of countless people around the world drove market volatility to dramatic levels.
The first quarter of 2020 was mired in the saddening global spread of COVID-19, which has infected approximately 2,000,000 people and taken the lives of more than 120,000 around the world. The shock to the economic system brought on by the deflationary forces of business closures, mass layoff activity, missed rent/lease payments, etc., was met with swift accommodative policy responses by both monetary and fiscal authorities.
News of the Senate’s unanimous passing of the $2 trillion “Coronavirus Aid, Relief, and Economic Security Act” or “CARES Act”, late Wednesday, drove a historic rebound across risk assets for the 3-day period ending Thursday, March 26, as the S&P 500 Index gained 17.6%, the strongest 3-day rally since 1933. On Friday, March 27, the bill passed in the House of Representatives, sending the bill to the White House for the President’s signature.
The past few weeks saw a dramatic increase in market volatility with falling interest rates, plummeting oil prices, and equity markets entering a bear market. Hear FEG Head of Research and CIO, Greg Dowling, along with FEG sector heads Keith Berlin, Christian Busken, and Brian Hooper to understand our perspective.
Late February market the start of the market turmoil as the COVID-19 pandemic began. The Federal Reserve (Fed) acted in early March by announcing an emergency 50 basis point (bps) cut to the federal funds rate (FFR) in order to ease financial conditions and stem looming disinflationary forces. Click to read more about the Fed’s actions and how the markets responded.
Last year, the markets were unique in that risky and risk-mitigating assets appreciate in tandem. As the calendar rolls forward, investors face a particularly challenging environment in 2020. How has the opportunity set changed, and what can investors do to manage interest rate risk, enhance returns amid low yields, and find opportunistic allocations?
Considering the recent market volatility, we are offering additional context to the FEG Insight: 2020 Fixed Income Outlook published in January 2020. We focus on shortening the duration of the traditional fixed income portfolio and fees.
Global market reactions have varied through 2020 as the perceived economic impacts of the Coronavirus were assessed. While concerns appeared largely muted until the sell-off on February 24, 2020, we have since seen global equities enter correction territory, the China PMI report an historic drop, and the Federal Reserve (Fed) slash interest rates by 50 bps in an attempt to keep the U.S. economy strong in the face of the Coronavirus outbreak.
Mixed Results in Private Markets | February 26, 2020
The second half of 2019 was a bit rocky for some of the private markets. Venture-backed companies that entered the public sphere had mixed results, which may have pulled down overall valuations for the sector. Credit funds were generally flat for the period and energy continued to be volatile, with private energy generally performing in line with its public market counterpart. Buyout funds and real estate funds provided positive returns in the quarter, but both lagged their public benchmarks.
The global outbreak of the novel coronavirus sparking a risk-off market environment that led to sizable declines across global growth-sensitive corners of the market. Coincidentally, certain bright spots that have recently appeared in select U.S. economic data may aid in keeping the U.S. economic expansion on track in the near term.
Last year, the markets were unique in that risky and risk-mitigating assets appreciate in tandem. As the calendar rolls forward, investors face a particularly challenging environment in 2020. How has the opportunity set changed, and what can investors do to manage interest rate risk, enhance returns amid low yields, and find opportunistic allocations?
Healthcare is approaching 20% of U.S. GDP and the number of companies and drugs in the pipeline have more than doubled this century. With a continued increase in innovation in the biotech sector and vibrant capital markets activity, biotech may be a unique market opportunity for longer-term pools of capital.
In a sharp reversal from calendar year 2018’s broad-based market weakness, performance across nearly every major asset class and category observed by FEG generated notably strong returns in 2019, including a particularly robust fourth quarter.
The fourth quarter of 2019 brought broad-based gains across most major global asset classes and categories, punctuating an exceptionally strong calendar year. A number of factors on the near-term horizon have the potential to keep the current expansion on track, including the improvement in U.S.-China trade relations, the potential for fresh fiscal stimulus and global central bank balance sheet accommodation (QE), among others.
We are pleased to share takeaways from the FEG 2019 Investment Forum where we welcomed more than 500 attendees to discuss strategies to better pursue investment targets and respective missions. Sessions covered include FEG's Investment Outlook; Campbell Harvey, Ph.D.; Howard Marks; CIO Corner Panel; and Robert Smith.
The Federal Reserve lowered interest rates at their October policy meeting, representing the third consecutive cut amid an ongoing adjustment in the Fed’s level of accommodation, and near-term recessionary risks appear to have abated.
During the second quarter of 2019—which is the most recent data available—private markets posted solid results, matching or outpacing public market returns in all areas except credit. Venture capital was particularly strong, as several high-profile IPOs—including those of Uber and Lyft—occurred in the quarter. Bloom has come off the rose as the year has progressed, however, and investors have become more skeptical of the high-spending, negative earnings business model of these notable companies.
The Federal Reserve lowered interest rates at their October policy meeting, representing the third consecutive cut amid an ongoing adjustment in the Fed’s level of accommodation, and near-term recessionary risks appear to have abated.
Mounting tensions between U.S. and China | October 23, 2019
Bucking the trend from the first two quarters of 2019, where positive returns were generated across most major global asset categories, third quarter market performance appeared less directional.
There was more than enough action during the third quarter, including a worsening U.S.-China relationship, a record share of negative-yielding global debt, the first inversion of the Treasury 2/10 curve in the post-Global Financial Crisis era, and the first Federal Reserve rate cut in more than a decade among other events.
Until the second quarter, the U.S. appeared to be resilient against this troubling global backdrop; however, over the past few months, the U.S. economy’s buoyancy has come under pressure, with incoming data suggesting the domestic economy may be in the early stages of succumbing to international weakness.
China is surrounded by a whirlwind of ongoing trade tensions, technology disputes with major players such as Huawei, and large-scale protests in Hong Kong, amid a backdrop of an aging population and slowing growth. These headlines appear at a time when China is not only the second largest economy in the world, but also playing a greater role in global stock markets through the inclusion of the Chinese A-share market in major indices.
We are constantly looking for signs that the markets are overheated. It remains unclear how far purchase price multiples can creep before a setback reprices risk. FEG remains focused on select opportunities with experienced management teams overseeing smaller, agile funds, and the private markets continue to offer access to many dynamic industry trends.
Until the second quarter, the U.S. appeared to be resilient against this troubling global backdrop; however, over the past few months, the U.S. economy’s buoyancy has come under pressure, with incoming data suggesting the domestic economy may be in the early stages of succumbing to international weakness.
U.S. vs. China Trade Conflict Darkens | July 25, 2019
While global macro risks such as unsettling trade tensions between the world’s two largest economies, a lack of clarity around Brexit, and growing signs of an increasingly broad-based global slowdown captured market participants’ attention, investors embraced a backpedaling Federal Reserve (Fed) by supporting demand for asset classes and categories along the risk spectrum.
We face an interesting paradox in the U.S. energy sector, which has become a victim of its own success. Over the past decade, the adoption of new technologies led to record-levels of oil and gas production, making the U.S. one of the largest producers of hydrocarbons in the world. But this rapid growth led to massive distress, dislocations, and bankruptcies that created turmoil throughout the U.S. energy markets.
Recessionary Warning Signs Begin to Appear in the United States | July 15, 2019
Until the second quarter, the U.S. appeared to be resilient against this troubling global backdrop; however, over the past few months, the U.S. economy’s buoyancy has come under pressure, with incoming data suggesting the domestic economy may be in the early stages of succumbing to international weakness.
FEG’s Community Foundation Survey collects data on financial and enterprise topics such as asset allocation, spending policy, responsive investing, and donor advised funds. In 2019, 112 community foundations participated in the survey with assets ranging from less than $25 million to greater than $1 billion.
A governance structure is established to identify the specific roles and responsibilities of the fiduciaries entrusted to oversee and prudently manage an organization’s investment program. What does an investment program governance structure look like?
Adoption of the outsourced chief investment officer (OCIO) model has been on an upward trajectory over the last decade. Typically, with increased adoption, comes standardization—although the plethora of models, fee schedules, and value propositions remains confusing, leaving the OCIO landscape difficult to navigate for many asset owners. The following insights provide an overview of the evolution of the OCIO industry, explore common provider types and models, and discuss the typical client profile for an OCIO relationship.
Throughout May, the U.S. government stepped up pressure on many of the country’s key trading partners. The market responded with a flight-to-quality rally that punished equities and helped send U.S. interest rates to the lowest level in two years.
Cutting Through the Hype: Real Risks and Rewards | June 13, 2019
Opportunity Zones have captured the attention of the investing world; even the name itself impels a sense of urgency and excitement, the potential to make a great investment. The hype surrounding substantial tax benefits, paired with the notion of doing good in underdeveloped and economically challenged areas, has unleashed a torrent of interest.
Trustees, or those who sit on investment committees or boards for nonprofit institutions have to guard not just against decisions that could adversely affect the organization’s funding for one, five, or 10 years from now, they have to be cognizant of making decisions that could impact the funding decades from now.
Why all the fuss around the duties of a fiduciary? Because the stakes involved are so high! For people to have confidence in nonprofits, they need to have confidence that their generous gifts are going to be handled with the utmost care. Likewise, for participants in retirement plans, they must have confidence the funds in their plan are being appropriately managed and monitored.
Central Banks Stoke Market Rally with Dovish Moves | April 19, 2019
There was little follow-through into the first quarter after late-2018’s risk-off market environment, with strong returns generated across nearly every major asset class in the first three months of 2019. Underpinning the sharp performance reversal were expectations for Chinese-related tailwinds as well as an increasingly more accommodative global central bank policy path.
If an organization were a person, the head would be responsible for earning the dollars and the heart would be responsible giving them away. The two need not remain separate, however, as impact investing seeks to combine the desires and functions of both the heart and the head.
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Market Commentary: First Quarter 2020
Coronavirus ended 11 year-long bull market | April 22, 2020