Written by: Alexis Weber | PM Alpha
In an era when the number of listed companies continues to fall, the CIO Private Markets Perspectives & Allocations Series report from PM Alpha notes that traditional investor portfolios in 2022 generally experienced one of their worst years in decades, with investors now facing recession risk in both North America and Europe, alongside global inflationary pressures.
In response, those such as wealth managers should consider a significant re-balancing of portfolios on behalf of clients, with PM Alpha recommending a 10%-60% portfolio allocation to private markets.
According to PM Alpha analysis, there has been a near halving of the number of publicly listed US companies since the late 1990s, with companies staying private for longer, coupled with greater value creation happening pre-IPO.
Alexis Weber has outlined core macro drivers, and hence private markets opportunities in 2023 as being:
The Great Correction
- Disclocations from assets repricing
- Corporate financing drying up
- Consumer expenditure retracting
Inflation Era
- Higher inflation risk
- Increased cost of capita
- Shifts in monetary policy
- Consumer liquidity squeeze
- Rising energy costs
Income Gap
- Search for compelling yield
- Protecting from inflation
- Alternative sources of yield
Alexis Weber notes in the report that: “Our (re)balancing act is intended to pivot portfolios towards longer-dated investments, specifically concentrated on the core macro drivers impacting portfolios today and balancing them with the fundamental secular trends that we believe will be driving growth beyond the current period of market volatility.”
Tom Douie, CEO and Founder of PM Alpha, adds: “Private markets are the ideal stage for executing on a targeted investment strategy. The fact that the vast majority of economic activity and commercial revenues are generated by private companies means the opportunity set for investors is orders of magnitude greater than those offered by public markets.”
Read the full white paper here.