What You Need to Know
We spent several days in late January with a group of Chief Investment Officers and senior asset allocators. This was useful both as a way to hear the key concerns for a significant group of investors and as an opportunity to think about what one might do in response. The focus of the discussions was very much strategic, so (thankfully) the path of central-bank interest rates and soft versus hard economic landing were not among the topics. Instead, the debate was on structural macro forces, the long-term outlook for returns, how various parts of the investment industry might fare, and what all this means for the broader economy. In this short note, we will summarize a few of the key topics that we think are of general interest.
In terms of practical implications for portfolios, our conclusion is that a majority of institutional investors plan to increase further their allocation to private assets, but that there is much disagreement about what level of returns to expect (especially for private equity). There is also a range of views about the appropriate lens from which to view the risk of such assets, and a lot of discussion about the design of pension portfolios and what level of returns are required.
