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Actionable Investment Opportunities

For certain clients we recommend increasing allocations to mid-term US government debt and engaging more in secondary private equity transactions. In private investments, we highlight the potential of senior direct lending and asset-backed credit solutions, particularly for middle-market borrowers, and we advise capitalizing on these opportunities given the current market conditions and available yields – in addition to select private equity strategies.

Mid-term US government debt

We favor adding duration to fixed income holdings as US Treasury yields are 4.6% to 4.7% for bonds with maturities of 5-to-10 years.   Adding duration increases the chances of meaningful bond price appreciation should 10-year Treasury yields decline by 100bps+ either due to subsiding inflation or if recessionary conditions emerge.   

Private Equity

Secondary volume remains strong both for LP-led transactions and for GP-led deals.

Given low exit activity and nearing maturity walls for several PE fund vintages from 2007-2011, we expect LP-led secondary volume to increase.   We also expect GP-led continuation vehicles to increase with transactions involving high-quality assets.

Growth equity is becoming increasingly attractive as a subset of private equity.

Valuations are more reasonable relative to frothy conditions in 2021 / H1 2022.  

Additionally, companies are achieving a better mix of revenue growth and profitability in terms of key metrics.   In prior years, companies were far too focused on revenue growth at any cost.     

Private Credit (offering potential returns from low double-digits to mid-to-high teens)

Senior direct lending strategies are offering asset-level gross yields of 11%-12% with lower leverage levels and better covenants.  

The opportunity set is especially interesting for middle-market borrowers as regional banks are pulling back on lending and private credit can increasingly capture share.  However, spreads have tightened meaningfully on larger deals as investment banks have re-entered the market for large leveraged loans.   

The demand for flexible junior capital – provision of flexible payment structures (mix of cash and PIK interest) is also increasing and offers asset-level mid-teens IRRs.  Additionally, these capital solutions can demand stronger protections in terms of financial and maintenance covenants.  

Asset-backed credit solutions are seeing increased demand as companies seeking liquidity are pledging high-quality sources of collateral such as receivables, inventory, and certain fixed assets.   

Continue Reading Topics from This Quarter's Review

Alternatives & Private Investments

Private equity reported a 6.2% rise YTD, reflecting solid performance despite broader market challenges. The discussion covers hedge funds, real estate, and private credit markets, highlighting evolving investment valuations and

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Fixed Income Markets

The quarter was challenging for fixed-income assets, with significant declines in US Treasuries and corporate bonds. The analysis discusses the yield environment and bond market responses to economic indicators, noting

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Equity Markets

The S&P 500 surged by 10.4% in Q1, though it faced a 5.4% decline in early April due to inflation concerns and interest rate hikes. We scrutinize equity valuations with

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Shorter-term View

Combining key issues with potential future scenarios, we forecast market movements influenced by inflation trajectories and economic growth patterns. Detailed scenarios range from optimistic projections of robust GDP growth and

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Government Policy and Wealth Taxes

Recent proposals by President Biden aim to implement a minimum 25% tax rate on ultra-high-net-worth households. The narrative extends globally with various states and countries moving towards higher capital gains

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Macroeconomic Conditions

The US economy demonstrated robust growth, with a 3.4% annualized increase in Q4 2023 and continued strength into Q1 2024. We also explore economic performance in Europe and China, noting

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BCA is not for everyone – and we are proud of that distinction. We look for a select group of individuals (and their entities) whose financial position and preferences enable them to thrive while working with us.

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