As we stare down at the remains of the barrel of 2021 we begin to focus on how we will attack 2022; a year that is certain to be as interesting a year as ever. There seems to be a real push toward investments outside the traditional baskets of stocks and bonds. This was reiterated in a note out of JP Morgan this month where they said:
Interest rate risk should probably make room for credit risk and forex components should be seriously considered. Alternative assets and strategies such as private equity, hedge funds and dedicated infrastructure plays (from a credit and an equity perspective) become mandatory building steps in new investment and trading blueprints.
Hardly the “barbell” approach so many financial advisors preach about. The simple fact is that central bank policys, technology, the after-effects of Covid, and the speed of which markets move now has changed the investing landscape forever.
On November 16th, the Wall Street Journal highlighted the changes at the nation’s largest pension fund Calpers, and explained how they are exploring using both leverage and alternative assets as they desperately try to meet their recently lowered investment-return target. They cited private equity and hedge funds as vehicles with whom they were consulting. We are highly confident in saying that cryptocurrency exposure is one of the first topics of discussion that comes up as well as institutions that look to the future.
‘The move by the $495B California Public Employees’ Retirement System reflects the dimming prospects for safe publicly traded investments by households and institutions alike and sets a tone for increased risk-taking by pension funds around the country.’
These two examples just reinforce what we have been and are trying to structure in the Four Arm Fund.
Between the end of 2020 and the end of 2025, global AUM in alternatives is expected to increase by 60%, equal to a CAGR of 9.8%. The rate of growth should far outpace global GDP and inflation, with significant real appreciation across the alternative asset space.
The chart below clearly represents where the trend is headed. The question is: Are you currently positioned correctly for the changes ahead?