Top investment considerations for alternative investments 2024 

Institutional investors will continue to face a number of challenges. In this year’s report, we have asked our investment teams to focus on what they believe to be a primary issue for their asset class.

In a dynamic macro environment, private markets allocations are moving from the margins to the mainstream of institutional investor portfolios. Our investment teams share their thoughts on issues driving this market in 2024.

Meanwhile, as identified in our paper Themes and opportunities 2024: An age of agility, we see a number of systemic shifts and regime changes taking shape in the mid-to-long term. The higher cost of capital and lower liquidity, an evolving dynamic between cyclical and structural inflationary forces and accelerating climate risks are affecting the way investors might position for the energy transition, understand their relationship with nature, and approach asset classes in a new inflationary environment.

Indeed, over the past year central banks have aggressively tightened monetary policy to restrictive levels in the developed world as they seek a delicate balance between countering inflation and maintaining financial stability, which is discussed in detail in the Economic and market outlook 2024.

All these developments propose important considerations for investors both in terms of strategy and investment beliefs.

Top investment considerations for alternative investments 2024

Given the relationship between interest rates and the performance of buyout funds, investors may wish to reapproach private equity. While interest rates can be one important consideration, a potentially larger factor is to exit markets three to five years after a vintage year.

Potentially attractive demographics, recent technological developments, changing attitudes and regulatory changes means the Asian healthcare market is a potentially attractive area worth consideration.

Challenges such as higher interest rates, valuation declines and a decrease in M&A has translated into a more difficult fund-raising environment for GPs, meaning investors may want to consider their exposure.

A recent technology sector correction on “Unicorn” companies as well as the likely outcomes from the departures of non-traditional investors from late-stage venture capital funding rounds may warrant a reassessment of the role VC plays in private market portfolios.

We believe that opportunistic credit investing is well-positioned to thrive in a market environment defined by higher debt servicing costs, tightening lending standards, and capital scarcity.

The link between interest rates and real estate valuations, as well as the impact of the pandemic, suggests that in some sectors and geographies markets may have reached the bottom and now offer some opportunity.

We believe that the energy infrastructure subsector may be positioned to see extensive activity in the near future. Digitisation, on-shoring, the transition to electric vehicles and energy security are among the sources that are driving expectations.

If the increase in interest rates results in a return to a world in which hedge funds can offer attractive absolute returns, the asset class could be rehabilitated into portfolios sooner rather than later.

With the increasing popularity of “GP-led” or “continuation vehicles” it is worth considering the potential benefits they offer to many potential investors.

Potential “greening of Industrials” is one example of how impact strategies have expanded into a wider variety of sectors, offering opportunities worthy of consideration for potential impact investors.

Top investment considerations for alternative investments 2024

Download the report to learn how recent significant events are affecting various asset classes and what we expect their ramifications to be in 2024 beyond.
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