Insights on Macro Pressures in Private Markets

Private markets are not immune to economic and market volatility, as valuations eventually catch up to public markets. Slower economic growth and higher rates present challenges, but also create opportunities for investors in private markets, particularly in certain sectors. Private infrastructure assets, such as those in power generation and distribution, offer long-term contracted revenue streams that allow for pass-throughs of costs, making them resilient to inflation. Real estate and transportation assets with long-term leases that reset across time can insulate investors from rising prices and costs. Private credit remains interesting, with stable yields in the middle market space and potential opportunities in distress. In the hedge fund space, strategies that can navigate the current macro volatility, such as macro-driven and long-short strategies, can provide attractive levels of alpha. Despite challenges, private assets still offer diversification and potentially more attractive risk-adjusted returns in a higher rate environment.