Alternatives
New Frontiers
Finding the untapped opportunities in alts
A True Alternative: Long/Short
Allocations to Health Care
Relative Value in Treasury Market Turbulence
Direct Lending to the “True Middle Market”
The Case for Residential Investing: Unaffordable Homes
Secondaries: A Great Entry Into Private Equity
Jennison AssociAtes
PGIM FIXED INCOME
PGIM PRIVATE CAPITAL
PGIM Real Estate
MONTANA CAPITAL PARTNERS
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INTRODUction
Investors are faced with a host of challenges in today’s market. Whether it be a war raging in Europe, the prospect of higher inflation and interest rates, or an equity market that may look frothy after a relentless run higher, the way forward for traditional investments may not appear as appealing as it was in past years. PGIM’s multi-manager model is based on the belief that highly specialized investment teams with expertise in an asset class allows the firm to remain focused on delivering investment outperformance on behalf of our clients.
The Russia/Ukraine crisis began in a time of solid growth prospects and a strong outlook for the global economy. However, the invasion has sharply heightened uncertainty about the economic outlook. Rising oil prices and punitive sanctions imposed by the US and its allies may create a supply shock, contributing to higher inflation and trimming GDP growth, particularly in Europe. Meanwhile, the Federal Reserve recently embarked on its rate-hike campaign, ushering in the first of what is likely to be a half dozen or so increases in 2022 after a long hiatus.
heightened uncertainty
private market Growth
Private equity
Opportunities in private equity
Growth in private markets
heightened uncertainty
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A True Alternative: Long/Short Allocations to Health Care
Relative Value in Treasury Market Turbulence
Direct Lending to the “True Middle Market”
The Case for Residential Investing: Unaffordable Homes
Secondaries: A Great Entry Into Private Equity
Jennison AssociAtes
PGIM FIXED INCOME
PGIM PRIVATE CAPITAL
PGIM Real Estate
MONTANA CAPITAL PARTNERS
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heightened uncertainty
Growth in private markets
Opportunities in private equity
Against this backdrop of persistent market volatility, it’s not surprising that investor interest in private markets continues to grow, as alts often offer less correlation to more traditional investments. As the amount of capital being funneled into private alternatives increases, however, it is more important than ever that global investors not only take advantage of the differentiating power of alternatives, but also identify the opportunities across alts that are yet to be uncovered.
Private equity continues to be a highly sought-after asset class. In the last 12 months, 60% of the investors have increased their allocation to private equity, according to a recent survey by PGIM’s Montana Capital Partners. About a third of institutional investors, and 87% of family offices and foundations, reported an allocation of more than 10% of their portfolio to the asset class. For both investor types, allocations to private equity have been gradually increasing over the past years, arguably as a key measure to increase portfolio returns and as a result of the relative outperformance of the asset class. Indeed, private equity returns have consistently exceeded other private and public asset returns over the last 10 years, according to research from Preqin.
Of course, there’s more to the alts arena than private equity. Innovative and customized solutions across a host of asset classes and geographies can add substantial value for investors. Interest in private credit and real estate debt and equity is on the rise, and investors in private alternatives will have the potential to unlock substantial yields and longer-term credit protection over comparable public assets.
Health care offers unique opportunities for skilled active managers to generate alpha — both long and short — across multiple health-care industries.
With investors confronting tight credit spreads and stretched equity valuations, rare relative value is left waiting to be captured in the US Treasury market.
Direct lending has grown dramatically over the last 10 years and will likely continue this progression, offering investors a diversifying opportunity set.
There is a clear need for an increase in affordable housing, including single-family and multi-family units in both urban and suburban areas.
Secondaries represent an attractive strategy for private equity investors — both experienced ones and investors new to the asset class.