Our private capital team has proven experience creating and administering flexible structures that help you meet your investment aims, however straightforward or sophisticated your strategy. As you evolve your strategy, we will bring together experts from across our business support you in achieving your goals.
We are almost at the end of Q1 and markets are spooked by the collapse of Silicon Valley Bank with the S&P hitting a new all-time low on 16 March 2023 – a day on from the Ides of March – as the US bank crisis spreads to Europe and the Financial Times reports that Credit Suisse is to borrow up to $54bn from the Swiss central bank.
Despite the doom and gloom, experts believe this must herald an end to many more interest rate hikes in the US and Europe.
Perhaps an injection of capital back into public markets is on the horizon, but the line between optimism and realism is a fine one.
The rays of light at the end of the tunnel are shining through, but investors shouldn't be blind to the fact that the global economic outlook for 2023 is not great. The IMF's World Economic Outlook for January reported that global growth is projected to fall from 3.4% in 2022 to 2.9% in 2023, as high inflation and geopolitical unrest continue to destabilise markets.
Private market opportunity
But out of strife comes opportunity, and private markets have a unique chance to accelerate capital deployment from traditional markets to alternative assets against the backdrop of worsening global economic conditions.
It seems to us that growth in the year ahead will focus on pure private market investments, and a shift towards multi alternative asset strategies. We're also forecasting an increased focus on distressed asset funds which will be longer term and closed ended.
Alternative assets are growing in popularity as they offer the potential for attractive yields and low correlation to economic conditions such as interest rates and inflation, unlike bonds and equities.
We have observed that the whole investment thesis and the investment lifecycle is changing; investors are willing to commit capital for longer and see greater value in private assets, which is driving growth. Investors increasingly believe it will be some time before we see growth in traditional markets.
Data from Preqin shows that Luxembourg is clearly the biggest market in terms of private asset activity; our analysis shows more than 1,170 private funds are raising capital across the major jurisdictions with around 600 based in Luxembourg – compared with 226 in Ireland, 193 in the UK, 83 in Guernsey and 71 in Jersey.
We anticipate that this trend will continue, demonstrating the preference for managers to have onshore European Union structures in the private market space, which applies very much to US managers wanting to expand in the EU.
A longer-term view from investors is certainly enhancing the appeal of private markets, and driving an increased interest in alternative assets, but if providers are going to take advantage of this demand, then the industry does have some catching up to do.
Getting up to speed
It is vital that our industry speeds up on standardisation and tokenisation to match traditional markets. Ocorian estimates the sector has up to 18 months to achieve what traditional markets have done in 12 years in this area – no easy task.
The private market and alternative spaces are definitely deficient in standardisation and this will cost us if clients continue to demand that we are proficient and active in private and alternative markets. Standardisation of data will help drive expansion by enabling private markets to match traditional markets on transparency.
To get up to speed we, as an industry, also need to enhance our digital skills so that we have people who are comfortable handling data and capable in tokenisation, which will enable private market participants to address growing demand from institutional investors.
These are the industry necessities not just of the future, but increasingly of the present.
Spring is the best time to plant seeds for future growth, and in private markets and alternative assets we have fertile ground in which to be working.
Our private capital team has proven experience creating and administering flexible structures that help you meet your investment aims, however straightforward or sophisticated your strategy. As you evolve your strategy, we will bring together experts from across our business support you in achieving your goals.
Whatever the investment vehicle, we will manage it in a way that lets you adopt your preferred strategy. We take care of all reporting and regulatory obligations, allowing you to concentrate on growing your wealth and sourcing new opportunities. Reach out to the team using the contact us form for more information on how we can support in deploying your capital.
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