Private credit
The backdrop supporting a more favourable transaction environment is firmly in place, including better visibility into the macro environment, softening inflationary pressures, potential rate reductions, and heightened pressure from limited partners and private equity firms to generate realisations and invest in new platform companies.
Private equity
Leveraged buyouts (LBOs) are facing tremendous pressure to realise distributions to limited partners in a constrained exit environment due to elevated valuations and a limited appetite within public markets for IPOs. We reassert our focus on growth strategies versus those that require expensive levels of debt.
Real assets
We remain confident that, depending on the region, we are either at or close to the trough of private real estate valuations. Looking forward, it is our conviction that the next couple of years will offer very strong forward-looking returns, hence our upgrade of real assets to neutral.
Hedge funds
At present, merger arbitrage spreads are slightly above their long-term average and represent a decent total return potential. Allocations to merger arbitrage hedge funds will likely come from fixed income in this environment.
Commodities
Commodities hit a 15- month high during the quarter, led by the surging price of metals, including silver and copper. As a result, trend measures saw the largest improvement in Q2 and allowed the asset class to transition from underweight to neutral.