Investing

Equity investors may be underestimating the potential consequences of a miscalculation of the Federal Reserve interest rate path. The market is already pricing in a Goldilocks scenario of stable economic growth and low inflation. It could be a costly misjudgment.

Institutional investors expect greater transparency when investing in alternative assets, mostly with risk management in mind, according to a new survey by Clearwater Analytics.

According to a poll of 254 institutional investors, representing over $10 trillion in assets under management, the two key benefits to achieving greater transparency in alts should be better risk management (72 per cent) and a better understanding of performance (54 per cent).  

A total of 30 new Reserved Alternative Investment Funds, or Raifs, were added to the Luxembourg Business Register during March 2023, down from 40 in the same month a year earlier. During the first quarter, 15 percent fewer Raifs were registered than in the same period last year.

As inflation has started to normalise, many market observers have started to find bond markets attractive again. Yields have risen to their highest levels in over a decade. Corporate debt has recovered, making bond investors comfortable after years of bad returns.

A recent European Central Bank study calling for a regulatory framework to address instability in the market for Real Estate Investment Funds, known as Reifs, has been downplayed by a growing number of real estate specialists contacted by Investment Officer in Luxembourg and London. 

Alternative investments strategies relying on limited bank financing appear to be well-placed to profit from the current crisis of confidence in the banking sector. And despite EU regulatory measures to deal with greenwashing, ESG products are seeing increased demand.

If there’s one thing clear from recent months, it’s that Luxembourg is placing a major bet on the future of Eltifs, or European Long Term Investment Funds. The EU’s adoption of a major upgrade of the Eltif regulation is opening the doors to private markets for high-net-worth investors and wealth management clients.

Rising interest rates and the demise of Silicon Valley Bank and Credit Suisse have led to a paradigm shift in private equity and venture capital. Reji Vettasseri, lead portfolio manager at Swiss private finance group Decalia, believes investors now need to to be innovative with emerging strategies, carefully selecting ‘small cap’ firms to invest in instead of fleeing to the safety of larger ventures.

The traditional private equity world has realised only in the past two years that creating products specifically for wealth and retail channels is going to be a huge area of growth over the next 10 to 15 years. Europe, said Tarun Nagpal, founder of S64 Capital Innovation, will be the “next frontier” in mainstreaming private equity for retail investors.

Tensions in the banking sector increase the likelihood of a recession during the year, according to chief investment officer Guy Wagner at asset manager BLI - Banque de Luxembourg Investments.

Nevertheless, prior to the onset of the banking turmoil, the resilience of the global economy was still in evidence, with service activities continuing to benefit from robust household demand due to continued full employment in most countries, Wagner and his team said in their latest monthly market report.