Alternative Opportunities is a quarterly report from Invesco Solutions. In each new edition, we look at the outlook for private market assets. In particular, we focus on private credit, private equity, real estate, infrastructure and commodities.
We remain neutral on how we’re allocating risk within our alternatives portfolio due to elevated downside growth risks, high equity valuations, and benign capital markets activity. In general, we’re more defensive, favouring private debt and hedged strategies versus private equity.
We remain constructive on the backdrop for direct lending in 2025, given macroeconomic and anticipated deployment tailwinds. Real estate credit remains our preferred way of accessing real estate markets, with the anticipation of a bottoming of valuations coming in 2025.
PE exit activity appears to be improving this year from cycle lows on the backdrop of an improved financing environment with lower interest rates and less regulatory uncertainty. Deal activity is also anticipated to improve, given lower funding rates and a more robust lending environment. Growth strategies are still favoured.
Key to our outlook for 2025 is the fact that global interest rates have started to decline, increasing confidence in real estate markets and enabling a recovery in transaction volumes. Private market values have continued to fall while public market prices have started to recover, leading us to anticipate a recovery of private property values.
Spreads within event driven strategies remain high despite limited capital market activity from mergers and acquisitions as private equity remains sidelined. Trend-following strategies have historically benefited from a tailwind during periods of high and declining rates.
A broad range of investments fall into the ‘alternatives’ asset class, including real estate, private credit, private equity, infrastructure and hedge funds. The asset class is growing, as investors continue to turn to alternatives for diversification and to navigate challenging market conditions.
Alternative assets often behave differently to public market assets like equities and bonds. Their unique characteristics mean that they can help investors achieve a diversified portfolio. Typically, they also generate higher returns than public market assets.
We manage over $177 billion (as of 30 September 2023) in alternative strategies, spanning private credit, real estate, private equity and beyond. We share some highlights below:
Invesco Private Credit’s Kevin Petrovcik discusses new developments for AAA-rated Collateralised Loan Obligation (CLO) note investments and their potential advantages.
Is the current short-term noise and volatility an early indicator of a cyclical movement or a structural shift in commercial real estate investing?
Invesco Real Estate’s value-add team discusses its approach in a challenging market highlighting a disciplined, local team-based execution programme and strategic investments in sectors like logistics and living.
