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In a new interview, Ben’s Chief Risk Officer, Yuri Mushkin, joins Oxford Economics’ Global Chief Economist, Innes McFee, to discuss the 2021 outlook for the alternative investment landscape. This discussion covers a range of timely issues, drawing on the research which is detailed in the white paper, “Maximizing the Opportunity in Private Markets.”
Macroeconomic Trends and the Case for Rebalancing
The pandemic has accentuated many of the trends we’ve been seeing over the last decade. Yuri and Innes explore the different ways in which private asset portfolios have been affected by these trends and the strong impact of fiscal policy on the risk/reward profile of these portfolios.
“When thinking about different geographies, parts of the world, different sectors, it is really about the impact that fiscal policy can make there,” notes Innes. “Monetary policy has little room and ability to lift us out of that equilibrium, so fiscal policy is absolutely crucial.”
A Discussion of the State of the Alternatives Market
Private Markets: Poised for Continued Growth
Innes and Yuri explore how the decade following the financial crisis of 2008 is different than what we can expect to see following the pandemic and the challenges-and opportunities-that lie ahead for investors.
“We’ve seen dramatic growth over the last decade in the asset class,” says Yuri. “I think partially that’s a result of a growing number of experienced GPs, more sophisticated LPs, and also accredited investors wanting to get this access to the alternative asset industry that historically has only been accessible largely to institutional investors.”
Allocation Opportunities: Looking Ahead
Risk and Liquidity in the Alternatives Market
Yuri and Innes discuss how weak growth and low inflation could create challenges for investors seeking higher yields. This could lead to even greater demand for alternatives and exacerbate some of the barriers smaller investors face when seeking liquidity for their alternative investments.
Innes notes that “in equity markets, the key thing to remember is we are expecting the level of GDP never quite to get back to the pre-crisis path.” With respect to liquidity, Yuri says that many investors may come to view the lack of liquidity in alternatives as a “risk rather than something that contributes to a [liquidity] performance premium.”