Daily Musings

Evening all

I enjoy a good adventure. Luckily for me: Deutsche Bahn is reliable to cater to my tastes. I have heard many reasons for delays and changed routes. Some more valid than others. But today it seems that nothing was a good enough reason as well. The train conductor announced that we appear to be standing still (right he was). His questioning tone would have been surprising if not for the fact that he quickly added that nothing is blocking the tracks and the technical systems work fine but still we stand nonetheless. With a newfound appreciation that mysteries like these are life’s spice, I share my musings.

Cheers
Philip

Chart Art

The 60/40 portfolio is 60+40=100% outdated. KKR releases a menu of data in their latest private markets research - if that is not a gourmet meal for LPs and private market participants I do not know what is. Below my blurbs from the 66-page report. A story told in charts. But if you also don’t have time for charts - who would on a Friday evening - then I give you one sentence:

Private asset AUMs are booming as investor groups (even retail investors, who are getting access through novel products such as ELTIFs) allocate growing capital shares to alternative markets, which have proven to outperform at low correlation, providing potential to optimise risk-return profiles

• The number of companies - especially small companies - staying private is increasing

• The value captured by private markets is increasing

• The result: Some argue that c. ¾ of company value is created during the private phase of the company’s lifecycle. Higher IPO valuations and longer lifetimes until the date of listing further support this.

• Private asset allocation is increasing and the market may increase 2-3x by 2028. measured in AUM. Good news to private investors and FinTech’s that enable private markets. To mind comes Berlin-based startup Bunch

• More capital is being allocated - especially by family offices and increasingly sovereign wealth - into private asset classes

• And who can blame them? Private asset returns are beating benchmarks across cycles and varying market conditions. J Powell and his money printer do not stand a chance to mitigate this.

• Within private assets, VC produces outsized returns.

• But what about my Sharpe Ratio? Dont worry. Private asset allocation enhances the standard portfolio via diversification effects. Low correlation with high returns. VC correlation to public equities is outstandingly low