September 2024
WELCOME TO OUR MONTHLY NEWSLETTER.
Private credit into a rate easing environment
For investors looking at direct lending, an important part of the investment thesis has been the attractive yields that come with higher interest rates. With the Fed lowering its benchmark rate by a half percentage point in September, is it time to revisit this thesis? Perhaps, but when assessing the forward outlook, it’s important to acknowledge the current market position that direct lenders occupy in the broader capital markets.
Private credit is now a genuine alternative to bank lending and the syndicated market. While credit quality varies, many private lenders set up their direct loans with enhanced protection and have proven to have lower defaults over the long term. And with interest rates, what matters more is where rates settle, not a singular rate change. Should this be in the 2% to 4% range, rather than 0% to 2%, the core tenants for an allocation to direct lending remain in place: enhanced income potential, diversification benefits, and lower correlation to broader fixed income assets.
To learn more, please contact our sales team ([email protected] ) or login to iCapital Marketplace .
Thank you for your continued partnership and support.
Chart of the Month
Expected Fed Funds Target Rates Still Imply a Higher Benchmark Rate
Should benchmark interest rates settle in the low to mid-single-digit range over the medium term, direct lenders should still benefit from greater absolute yields and improved risk-adjusted returns.
New from iCapital
We recently held a Q3 2024 Market Update webinar with Anastasia Amoroso , Joe Burns , Peter Horacek , and Kunal Shah . Watch the replay to gain access to the latest market information, leading indicators, and macroeconomic factors that shape and influence the direction and investment outlook of alternative assets.
Market Pulse
Despite the current market uncertainty, we believe seasonality is not an excuse to sell. The truth is sometimes seasonality works, sometimes it doesn’t. Rather, we have to couple seasonality with what we otherwise fundamentally believe will drive markets. And what we fundamentally believe is the economy is slowing but still growing and the AI growth story is still intact. Read more for ideas on where to steer portfolios in September and beyond. Learn more from Chief Investment Strategist Anastasia Amoroso .
Annuities
Scott Stolz, CFP, RICP discusses the many decisions that go into choosing the appropriate strategy within a fixed indexed annuity (FIA).
Monthly Market Roundup
A 1031 Exchange is an IRS-recognized tax deferral strategy that allows an investor to sell an investment property and acquire a similar property while deferring capital gains. Use this guide to better equip yourself with the expertise to strategically structure 1031 exchanges, optimize tax deferral and offer an enhanced investment approach.
Investors require adequate diversification to protect portfolios from volatility. Over time, direct real estate has exhibited low or negative correlation to the S&P 500. This diversification may be more valuable than ever as episodes of higher stock/bond correlations have increased. Although real estate/equity correlations have spiked during prior recessions, they tend to then reverse quickly and sharply to restore diversification properties. Real estate also tends to have low volatility and produces stable cash flows
With the expansion and broad adoption of private assets, investors and regulated fund managers are seeing increased access to investments once reserved for large, highly sophisticated institutional investors. Investment vehicles offering enhanced liquidity such as mutual funds and interval funds, however, face valuation challenges for underlying private investments which are illiquid in nature.
CEO Spotlight
The Money Management Institute (MMI) announced that Lawrence Calcano , iCapital Chairman and CEO, has been awarded its prestigious Industry Leadership Award. The official recognition will take place during the 2024 MMI Annual Conference on October 15 in Charlotte, NC.
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