Experts at The Beneficient Company Group, L.P. (Ben) and Oxford Economics recently took a focused look at the alternative investment landscape and developed four key perspectives on portfolio allocation strategies in private markets. These strategies show the importance of rebalancing private portfolios and assert the need for secondary market liquidity.
1. Investing During the Next Five Years is Likely to be Characterized by Low Nominal Returns and Uneven Asset Performance
- Our analysis suggests that the hardest-hit sectors during the pandemic such as real estate and natural resources could benefit from a rebound in valuations.
- On the other hand stretched equity valuations suggest caution when allocating towards venture capital strategies in the near-term.
2. Active Portfolio Allocation Strategies for Alternative Assets can be a Source of Performance
- Allocating to a specific strategy does not appear as rewarding when adjusted for risk and compared with a diversified portfolio of private assets.
- Strategic rebalancing and tilting a portfolio towards certain fund strategies and sectors can be a source of outperformance.
3. Scenario Analysis is an Important Tool to Managing Risk and Uncertainty at All Stages of the Economic Cycle
- For a defensive portfolio, we foresee benefits from an overweight in private debt funds, which historically offer relative value over public debt.
- Venture capital and private real estate prove to be particularly susceptible to our downside scenario analysis.
4. Portfolio Construction and Rebalancing Around Market Cycles can Benefit Private Asset Investors
- We expect investors will continue to recognize the illiquid nature of private funds as a potential source of risk.
- Trend towards greater transparency in private markets will continue to generate increased demand for early liquidity.
To gain a deeper insight into how these portfolio allocation strategies work, review the complete report, “Maximizing the Opportunities in Private Markets.”
Within this report, Ben’s proprietary Total Portfolio Management framework is utilized to illustrate two forecasts that demonstrate opportunities available to enable investors who hold diversified portfolios of private assets and liquidity options to execute rebalancing strategies.
Additionally, Ben strives to provide rapid, cost-effective liquidity at potentially higher advance rates which may provide the opportunity needed to support your portfolio investment goals.
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