Over the long run, we expect portfolios that include private assets to outperform those that do not, as less efficient markets and active ownership should offer greater opportunities to capture a premium. (UBS)
Private assets can play a key role in long-term investment plans, with potential benefits both in terms of better risk adjusted performance over traditional asset classes and enhanced diversification.
Over the long run, we expect portfolios that include private assets to outperform those that do not, as less efficient markets and active ownership should offer greater opportunities to capture a premium.
In private equity, we currently seek exposure to value-oriented buyout and continue to recommend allocations to secondaries. We also see opportunities in thematic private equity for those investors seeking long-term growth in areas such as software, health, and climate-related solutions. We anticipate exit options for portfolio companies to remain subdued through the first half of 2024 but expect secondary exit solutions, such as GP continuation funds, to see a pickup in deal activity. We expect more Limited Partners (LPs) and General Partners (GPs) to turn to the secondaries market for liquidity solutions across both PE and VC
In private credit, we continue to see private debt as attractive for investors as a portfolio diversifier, particularly given our soft-landing outlook. With the recent outperformance of the syndicate market, we look for private credit spreads to tighten the gap and trend lower in 2024
In real assets, the case for private real estate as a diversifier remains intact. But we stay selective and recommend focusing on assets benefiting from strong fundamentals such as logistics, multifamily and data centers. 2024 has the potential to be a transitional and much more interesting year for private commercial real estate (CRE): the plethora of dry powder on the sidelines that needs to go to work, the potential for increased distress in attractive asset classes—including multifamily, which could begin to unlock the transaction market—and clarity from the Federal reserve on the direction of interest rates, with the potential for several fed funds rate cuts in 2024.
For the full report, see: Quarterly private markets update
