The Search for Risk Premium with Apollo Strategist Alex Wright
Jul 16, 2024
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Global Wealth Strategist Alex Wright from Apollo and Apollo Chief Economist Torsten Slok discuss strategies for finding risk premiums in a challenging financial landscape. They explore the impact of interest rate cuts on investments, the importance of seeking risk premiums for higher returns, and the growth of private credit markets. The conversation highlights the benefits of incorporating private assets into portfolios and the significance of smaller companies in the economy.
Seeking risk premiums can enhance portfolios in high-rate environments.
Private markets offer superior risk-adjusted returns and diversification opportunities.
Deep dives
Interest Rate Uncertainty and Capital Allocation
The podcast delves into the complexities that uncertainty about interest rates in the economy poses on capital allocation decisions. Discussing the attractiveness of certain market areas amidst the expectation of higher rates, the episode explores the importance of seeking risk premiums to enhance portfolios in a prolonged high-rate environment. The conversation highlights the importance of considering long-term trends beyond immediate rate cuts.
Impact of Different Interest Rate Scenarios on Portfolios
Exploring the potential outcomes of various interest rate scenarios, the episode analyzes the implications of Fed rate cuts on capital allocation decisions in the event of a more aggressive economic slowdown. The discussion emphasizes the significance of understanding risk-return equations and the need for a balanced approach amid changing market conditions. The episode also addresses potential market volatilities and the impact on equity and credit markets under different rate environments.
Private Markets as Portfolio Enhancers
Highlighting the role of private markets in portfolio diversification and superior risk-adjusted returns, the episode underscores the opportunities presented by private assets as replacements for traditional fixed income and equity investments. Emphasizing the value of private equity, secondaries, diversified portfolios, and private credit, the conversation advocates for strategic portfolio allocations towards private markets as a way to drive alpha, manage volatility, and achieve diversification in investment portfolios.
Listen to Apollo Chief Economist Torsten Slok and Alex Wright, Global Wealth Strategist in Apollo’s Client and Product Solutions Group, discuss their views on where to find attractive risk premia at a time of elevated interest rates and lofty valuations. They also tackle a top-of-mind question: Is the private credit market growing too fast?
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