NEWSLETTER of February 16, 2024

The following content has been added at finexpert:

Neuberger Berman
ASSET ALLOCATION COMMITTEE OUTLOOK: 1Q 2024
Many investors remain overweight cash, but markets have begun to price for a substantial decline in short-term interest rates. The Asset Allocation Committee (“the AAC”) therefore thinks it is time to deploy liquidity, locking in bond yields before they, too, are dragged down, and seeking out value in equities and other markets. As a result, we have heavily downgraded our view on cash. However, while a redeployment of cash and declining rates could sustain current market momentum, rates are priced for a decline because economic growth is expected to slow, and that fragile fundamental backdrop makes us cautious where valuations are full. Instead, we favor the laggards of the past 12 months, which we think could benefit not only from liquidity coming in from the sidelines, but also from our central scenario of gradually declining inflation and slowing but not recessionary U.S. growth. >more

KKR
LOUD AND CLEAR: KKR 2023 FAMILY CAPITAL SURVEY
At a time of record low activity across the global capital markets, many allocators have been sitting on the sidelines of late, particularly regarding private investments. However, this positioning is not what we are hearing from leading CIOs in the KKR family office network. Indeed, many CIOs who participated in this year’s KKR survey of family offices told us that they plan to increase – not decrease – exposure to Alternatives in 2024. Their rationale: They understand the role the illiquidity premium can play in compounding capital in a tax efficient manner to build wealth for future generations. Importantly, this year’s CIOs are most focused on increasing exposure to Private Credit, Infrastructure, and Private Equity. To fund these investments, they intend to reduce Public Equities and Cash. >more

KfW Research
GERMAN PRIVATE EQUITY BAROMETER Q4 2023
The data for the business climate indexes of the German Private Equity Barometer and the German Venture Capital Barometer are taken from a quarterly survey of the approx. 200 members of the German Private Equity and Venture Capital Association (Bundesverband Deutscher Kapitalbeteiligungsgesellschaften – BVK) and further German private equity companies. On the one side, the market climate in the later-stage segment is reported and on the other the market climate in the venture capital segment of the German equity capital market. The climate data are based on estimates from investment companies, with the focus being on established SMEs for the German Private Equity Barometer and on investment in start-ups and new technology companies for the German Venture Capital Barometer. >more

Aurum
HEDGE FUND INDUSTRY PERFORMANCE DEEP DIVE – FULL YEAR 2023
A resurgence in risk assets provided a significant tailwind to more long-biased and/or historically higher beta strategies, which were among the worst performing strategies in 2022. There are a handful of sub-strategies that delivered strong performance both in 2022 and 2023 – quant – stat arb was up 10.9% in 2023 and 12.7% in 2022. While macro – FIRV was up 10.9% and 8.4%. Five-year performance (CAR) for hedge funds now stands at 6.5%, comfortably outperforming bonds (-0.4%) but underperforming equities (+9.4%) from a total return perspective, however, outperforming equities from a risk-adjusted perspective (Sharpe of 0.7 vs 0.5). Dispersion has continued to fall and now sits at levels more in line with those observed pre-COVID. >more

LIQUIDATION VALUE AND LOAN PRICING
Francesca Barbiero, Glenn Schepens, and Jean-David Sigaux
2023
This paper shows that the liquidation value of collateral depends on the interdependency between borrower and collateral risk. Using transaction-level data on short-term repurchase agreements (repo), we show that borrowers pay a 1.1 to 2.6 basis points premium when their default risk is positively correlated with the risk of the collateral that they pledge. Moreover, we show that borrowers internalize this premium when making their collateral choices. Loan-level credit registry data suggest that the results extend to the corporate loan market as well. >more

USING SOCIAL MEDIA TO IDENTIFY THE EFFECTS OF CONGRESSIONAL VIEWPOINTS ON ASSET PRICES
Francesco Bianchi, Roberto Gomez Cram, and Howard Kung
2023
We use a high-frequency identification approach to document that individual politicians affect asset prices. We exploit the regular flow of viewpoints contained in Congress members' tweets. Supportive (critical) tweets increase (decrease) the stock prices of the targeted firm and the corresponding industry in minutes around the tweet. The bulk of the stock price effects is concentrated in the tweets revealing news about future legislative action. The effects are amplified around committee meeting days, especially when the tweet originates from committee members and influential politicians. Overall, we show that Congress members' social media accounts are an important source of political news. >more