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Insights

Global Equity Performance Exceeds That of High-Quality Bonds

Global equities have returned more to investors than high-quality global bonds in nearly three quarters of the last 30 years. The margin of outperformance during those years has been considerable, averaging 12.5 percentage points. That high historical success rate, along with our view that healthy economic activity will support both positive earnings growth and risk appetite, leads us to expect that equities will yet again outperform high-quality bonds.

December 2021

China A-Shares Outperform Global Equities

China’s equity markets have lagged global equities sharply thus far in 2021 in the face of a regulatory crackdown. We expect Chinese equities, particularly China onshore A-shares, to outperform global equities in 2022.

December 2021

Don’t Expect EM ex China Performance to Impress

Emerging markets ex China equities have underperformed their DM peers this year due, in part, to greater economic and political challenges, which have weighed on sentiment toward the bloc. We expect these issues to persist into next year and are skeptical that EM ex China equities can outperform DM equivalents.

December 2021

Interest in Private Investments Continues to Expand

Investors with mature private investment programs tend to have private exposure to major developed markets, such as the United States and Europe. While many of these investors have added Chinese exposure to their private programs over the last decade, interest has recently increased in less-trafficked Asian markets and more specialized European strategies. We expect this interest will continue to expand next year.

December 2021

Many Real Estate Assets Will Be Boosted by Secular Tailwinds

We believe a healthy macro backdrop and strong demand for inflation-sensitive assets will support most real estate assets in 2022. However, given stretched valuations for many core assets and COVID-19–related uncertainty around some sectors, we think return prospects are highest for assets that benefit from secular trends, such as the growing demand for healthcare and broadband.

December 2021

Allocations to 21st-Century Infrastructure Increase

The infrastructure market has evolved since the financial crisis. Almost a majority of current investing is now in “21st-century infrastructure,” which includes digital and renewable assets. Given the expected importance of both sectors to future growth, we anticipate that investors will commit greater amounts of capital to each in 2022.

December 2021

Look to Specialty Finance and Credit Opportunities Strategies for Diversification

Diversifying private credit strategies provide a good complement to portfolio mainstays. While we believe the economic outlook remains strong, it is not without risks. In direct lending, growing amounts of dry powder are pressuring deal structures and pricing. As a result, we anticipate that commitments to less-correlated private credit funds, such as those focused on life sciences, asset-based lending, and flexible credit strategies, will increase next year.

December 2021

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