Portfolio

At the asset class level, the GAA Quant model is overweight equities, underweight bonds, and neutral cash.

The US economy is in the “Overheating” phase, so stronger growth brings higher inflation. Tight monetary policy means recession is still likely over the next 12 months. Stay defensive.

Informe especial

Historically, the biggest driver of the small cap premium was “migration” i.e., a subset of small stocks earning extreme positive returns as they become large stocks. However, migration rates between small and large stocks have declined in the US. Small companies that would have grown to become successful large caps are either staying private, getting acquired by larger companies, or are entering public markets when they are already large caps. As a result, only the very worst companies are left in the small cap space. Investors should avoid a structural passive allocation to US small cap indices.

We are positive Private Credit but currently underweight Public BDCs. Today’s market pricing and sentiment in BDCs are excessively optimistic. Long-term investors should await a better entry point. Traders may find an attractive short. This report also peels back the Public BDC onion and presents over/underweights across individual BDCs via our filtering methodology. Also included at the end of this report is an updated presentation titled 'Private Credit: Drivers Of The Boom And Understanding Risks On The Horizon,' recently presented at GII’s Private Credit Roundtable in Australia. It features updated charts and additional analysis.

At the asset class level, the GAA Quant model is overweight equities, underweight bonds, and neutral cash.

Central banks are in a dilemma whether to prioritize supporting growth or bringing inflation back to target. This is unlikely to end well. Investors should be defensively positioned.

We go overweight Late-Stage Venture Capital and APAC Private Equity but remain underweight North America Buyouts. We maintain our neutral outlook towards Hedge Funds and are positive on Long-Short Equity, Event Driven, and CRO strategies. We are cooling towards Direct Lending strategies as competition and relative opportunities increase. CRE’s downturn continues to unfold; we are starting to be buyers.

Valuation metrics in Private Equity and Venture Capital vary widely by source, stage, location, and other factors. They are prone to imprecision, which is why investors should monitor a diverse set. This report offers a series of charts comparing valuation ratios. Focusing solely on valuations reveals that North America Middle Market Buyouts appear less attractive and geographical selection will be more important going forward.

At the asset class level, the GAA Quant model is overweight equities, underweight bonds, and neutral cash.

The global economy is wobbling precariously between slowing growth and reaccelerating inflation. This is unlikely to end well. Stay cautious, and hedge against both recession and inflation.