Alpha (beyond average market returns) will now come from active security selection and emphasis must be given to credit analysis. Passive investing will inevitably expose investors to zombie companies. Expect mandates to not be fully invested at times setting up for tactical nimbleness to take advantage of dislocations ahead.
There are good times ahead for investors who have prepared for the risks and opportunities ahead. Beyond the pandemic and the election, the low-interest rate environment and likely negative real yields for years to come will drive the unprecedented and massive $4.3 Trillion currently held in money market funds back to the markets seeking returns from the only places it can safely be sourced – actively managed equity funds, stable cash flowing real estate and private lending to high credit borrowers when banks won’t be able to lend because they find themselves laden with defaults, loads of lower credit borrowers and diminished spreads.
We are excited for the future and we look forward to guiding you to achieve your long-term goals.
Leslie, Matt & Ryan