Navigating Market Dislocations: Opportunities in Portfolio Construction for 2024

As investors navigate through market dislocations and uncertainties, the question arises – is now the right time to start? How do market dislocations affect portfolio construction?

One common concern among investors is the tendency for private markets to follow public market corrections. This has led some to consider sitting on the sidelines as a safer option. However, experts suggest that time in the market often beats timing the market when it comes to portfolio construction.

Despite the challenges posed by high interest rates, low GDP growth, and inflation, there are pockets of opportunities across various asset classes. Infrastructure, real estate, and private credit are highlighted as particularly well-suited options for offering downside protection due to their yield component. In addition, explicit inflation protection and pricing power further enhance the appeal of these assets.

In the realm of infrastructure, trends such as digitalization, demographic change, decarbonization, and deglobalization are expected to continue driving investor demand. Real estate, especially in sectors like housing and industrial, benefits from persistent supply/demand imbalances. The rise of green real estate also presents an attractive opportunity with highly appealing risk-adjusted returns.

For investors seeking capital appreciation, private equity secondaries are touted as a promising investment avenue in 2024. Private equity offers access to sectors and themes that may not be available in the public market, such as disruptive technologies and impact investments. The recent easing of the denominator effect, which impacted many private markets asset classes, has created opportunities for investors to acquire assets at a discount.

In conclusion, while market dislocations may create uncertainties, they also present opportunities for savvy investors to build resilient and diversified portfolios. By carefully considering the unique characteristics and potential of different asset classes, investors can navigate through turbulent times and position themselves for long-term success.