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.
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.
Explore the benefits of incorporating AAA-rated CLO notes may provide to an investment strategy including consistent income potential and possible hedge against interest-rate volatility.
The value of investments and any income will fluctuate. This may partly be the result of exchange rate fluctuations. Investors may not get back the full amount invested.
Alternative investment products may involve a higher degree of risk, may engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, may not be required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual portfolios, often charge higher fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. There is often no secondary market for private equity interests, and none is expected to develop. There may be restrictions on transferring interests in such investments.
All data is provided in USD and as of Jan 28, 2025., sourced from Invesco unless otherwise stated.
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
Views and opinions are based on current market conditions and are subject to change.
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