INVESTMENT THOUGHTS

One of the biggest trends of 2021 has been the rise of private investments. At the moment, we are in the midst of a historical shift between the roles of public and private markets. On the private equity side, there has been a long-term secular decline in public ownership of companies. Because of the restrictions imposed after the 2008 Great Financial Crisis, banks can no longer provide loans to several businesses, creating an opportunity for private credit investors to tap into a new market. And given that a real estate investment thesis takes years to play out, private real estate can lead to better long-term returns than publicly-traded REITs. Lastly, because of the inefficiencies of the private markets, skilled investors can generate higher expected returns for the same amount of risk than in the public markets

Custom Direct Indexing is a trend in portfolio management that is growing in popularity amongst advisors and portfolio managers alike. Due to commission-free trading and improvements in technology, portfolio managers now have the resources to apply custom index methodology on their client's portfolios to make them more efficient. And while at the moment it's not appropriate for every client's portfolio, there are two immediate applicable instances where this could be an excellent solution.

One of the hottest words in investment commentary, my own included, has been "tapering." Last week, at their annual Federal Reserve meeting at Jackson Hole, all eyes and ears were on Federal Reserve Chairman Jerome Powell's speech where he outlined the current stance of the Fed, what tapering could look like, and when it could start. As we head into the fall months and then into 2022, commentary on tapering will continue to grow. With that backdrop in mind, I wanted to put together a quick primer on tapering, some other key words associated with it, and how it could unfold in the U.S. based off of Chairman Powell's speech.

One of the topics I’ve heard creep up in my research reports is the idea that the U.S. economy could be headed into a stagflationary environment in the coming months. While we don’t think that’s the likely outcome, it still is a known risk, and I wanted to write a quick primer on what it is and how it could play out.

With summer in full swing, and states re-opening, it feels like things are getting back to normal, or at least the new normal. While COVID-19 continues to be a health risk, and variants are out there, it's been incredible seeing sporting events full, concerts back in full swing, and people just out and about enjoying summer. Yet, as well all know, markets are very much forward-looking. So while things are going relatively well at the moment, investors have already begun to project and position portfolios for the remainder of 2021 and 2022. As part of our ongoing investment research process, I've spent the last few weeks touching base with our portfolio teams, talking to strategists, and reading countless market outlooks. The consensus is that the second half of the year will be far more challenging than the first. The majority of investors I've spoken with don't envision the Delta Variant being a significant risk moving forward, agreed that inflation is here (albeit there is a strong debate about how much of it is transitory) and that Fed actions and interest rate movement will be a significant market driver. Despite the risks outlined, the consensus is that equities still merit overweight to fixed income. While we could see an equity pullback of 10% or more, mid to long-term economic fundamentals favor growth and a risk-on trade.

One of the most significant capital market developments of 2020 was the reemergence of Special Purpose Acquisition Companies or SPACs. These companies are often known as "blank check" companies that are created for the sole purpose of acquiring another company. Per SPAC alpha, there were 248 SPAC IPO's last year. For comparison, from 2016-2019, there were only 152. This development continued into 2021, with 296 SPAC IPOs year to date (as of March 29th) and an additional 248 filed to IPO. Chances are you have seen celebrities (Shaquille O'Neal), politicians (former House Speaker Paul Ryan), and hedge fund billionaires (Bill Ackman) decide to "sponsor" a SPAC. From an investment point of view, these investments are appealing because investors can access a privately owned company and even a venture-backed one before they go public. However, there are many nuances to these investments and considerations that need to be made. This is a quick guide on how they work, why companies could choose to go public using this method, and some of its investment risks.