Established in 2009, Portfolio Construction Forum Markets Summit is THE investment markets scene setter of the year. With interest rates near historical lows and asset prices around all-time highs, practitioners are grappling with the defensive side of multi-asset portfolios. Downside protection is essential in such an uncertain environment. Arguably, the best offence is a great defence! Markets Summit will help you better understand the key drivers of and outlook for the markets, and the opportunities and risks ahead on a three- to five-year view, to aid your search for return and to help them build better quality investor portfolios.
Markets Summit 2024 "History doesn't repeat, but it rhymes!" will help you better understand the key drivers of and outlook for the markets, and the opportunities and risks ahead on a three- to five-year view, to aid your search for return and to help you build better quality investor portfolios. Join us Wednesday 21 February 2024 at the live studio, a live site or via live stream.
There's much to learn from history, but every time is different when it comes to markets. The backdrop for investing will require investors to identify how the outlook today intersects with our experiences of the past and where it differs.
This economic cycle will mean revert to a traditional business cycle - a cycle that may not exactly repeat but will rhyme with prior inflation cycles. Opportunities exist in global bonds in 2024 and 2025 no matter hard or soft landing outcomes.
Second term presidents tend to be more ideologically aggressive, since they are freed from the need to face voters again. Investors globally need to think through the implications of a second term for either candidate.
While investors need to be mindful of the potential risks posed by different stress events, they should largely ignore macro and geopolitical predictions when it comes to selecting companies to invest in. The discussion covered a range of investment topics, from inflation predictions to niche equity opportunities in mid-cap and emerging markets
Equity valuations are at attractive levels for most emerging markets but the lack of interest in emerging markets in general has led to extraordinarily attractive valuations.
Private Credit has experienced tremendous growth, becoming a US$1.4 trillion asset class that is expected to scale to US$2.3 trillion by 2027. Despite 8% to 12% annualised returns, outpacing traditional fixed income and even exceeding long-run equity returns, some commentators argue that Private Credit represents emerging systemic risk. That is a fundamental misunderstanding of Private Credit. There are lending verticals where banks are not efficient capital providers or cannot lend economically, due to structural changes, regulation and changing prudential standards. Credit funds can capitalise on this dynamic by providing tailored lending solutions to borrowers, earning a premium in secured, asset-backed and defensive loans, often the ones banks provided historically. It is a generational opportunity for outsized returns per unit of risk - a structural evolution, not risky business.
Investors should explore opportunities beyond the ASX20, focusing instead on the Ex-20 index which provides exposure to Australia's future rather than its past.
Three investment experts offer and debate their high conviction thesis on a long-term, deep rooted structural change impacting markets over a decade or more.
There's no such thing as "normal" for supply chains. The challenges for 2024 and 2025 that echo the past include logistics network disruptions, geopolitical risks and the cash costs of environmental policies - which make investing in supply chain security more important than ever.
Global REITs have been overwhelmed by the rapid rise in interest rates, headlines about the demise of the office, and concerns over bank lending to commercial real estate. However, history is not repeating. These issues mask the reality of an industry in strong shape. With lower financial leverage, well-laddered debt maturities and diversified sources of debt, GREITs’ capital structures are well positioned. The office sector has shrunk to less than 10% of the global REIT benchmark and in its place are sectors such as data centres, healthcare and logistics that are benefiting from long-term secular growth trends. Rising construction costs and lower risk appetite have curtailed new construction volumes while demand remains focused on modern, sustainable buildings. As a result, economic rents needed to justify new construction are rising and many segments of the commercial real estate market could face undersupply conditions in the medium term. Consequently, GREIT valuations are relatively attractive, trading at a discount to private market real estate values and, in some cases, below replacement costs. Hence, as a store of wealth with a growing income stream, GREITs now warrant more allocation.
Market cycles show there is a clear anomaly in the Senior Secured Loans space with record setting yields and compelling risk-adjusted returns. High interest rates may be testing company balance sheets potentially increasing defaults, but sitting a-top the capital stack the risk-adjusted proposition from loans exceeds that available across the debt spectrum. While interest rates will likely remain elevated over the next 12 months, even as they fall, lower yields from loans will be offset by a moderation in future defaults, supporting the case for loans’ superior risk-adjusted returns through the upcoming cycle, much like prior cycles – as sung so memorably by the great Shirley Bassey “…it seems quite clear that it’s all just a little bit of history repeating”.
US investment banker J Pierpont Morgan over a century ago gave a stock market forecast which remains as accurate today as then. “I can tell you exactly what it will do for years to come. It will fluctuate,” he famously said. History shows investors should always expect the unexpected – which simply underscores the benefits of adding private debt to a portfolio. It can deliver a consistent yield with lower volatility than other asset classes to help smooth the inevitable cyclical returns of a diversified portfolio. Without it, investors are more vulnerable to the market vicissitudes that can up-end bond and equity strategies with little notice.
For the last two decades, private equity has consistently outperformed the public market, through market cycles and with less volatility. Private equity has won the debate in the minds of institutional investors, with the majority allocating an overweight position. However, an even greater opportunity for alpha exists in the mid-market, where there is comparatively less capital competing for a broader set of investable opportunities. In 2023, private equity continued to show the superior opportunity for returns in the mid-market. Looking forward, the outlook for private equity is stronger, powered by intergenerational wealth transfer, a stabilising macro environment, a large universe of investable opportunities, and the declining number of public companies.
Australia's residential vacancy rate is at a record low and net overseas migration at a record high. But, the banks can no longer participate in the market like they used to, providing greater opportunity for real estate private credit.
Higher than desired inflation is now structurally embedded in the global economy, driven by the ‘Four D’s of Inflation’ – Decarbonisation, Deglobalisation, Demographics and, new for 2024, Deficits. Critically, the boom-bust inflation cycle of the 1970s gives a useful historical parallel, providing investors insight into the coming decade. Such an environment of whipsawing volatility and low real returns provides opportunity for those prepared, with Australian equities - by virtue of its make-up - standing to provide a natural hedge to ongoing volatility and structural high inflation ahead. But beware, understanding ‘who is in the Chair’ at the Fed, RBA and RBNZ is now more important than ever.
The Magnificent 7 drove markets higher in 2023, accounting for roughly 60% of the S&P500’s 26% return last year. These seven stocks now account for a record 33% of the S&P500’s total market capitalisation. Their market cap is roughly equivalent to the combined value of the UK, Japanese, and Canadian equity markets. The technology sector has now eclipsed its all-time high relative to the S&P 500, exceeding its dot.com bubble highs. So this begs the question – is this a bubble and what is the risk of another tech wreck? In fact, this is not a case of history repeating itself. Stock performance has largely been driven by earnings growth, and valuations are at reasonable levels, vastly different to the dot.com era. And, the outlook remains positive with AI driven spending likely to support earnings growth over the next few years. In short, the technology sector remains an attractive investment opportunity over the next three to five years.
With heightened global geopolitical risks, reduced fiscal support from governments, a deflating Chinese property bubble, and an ongoing US commercial real estate crisis, 2024 is a year for investors to be nimble and tactical.
