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“Risk comes from not knowing what you are doing.” — Warren Buffett
Good morning!
The allure of investing in private markets is bigger than the returns itself.
Long touted by alternative asset management firms for their higher rate of returns relative to traditional investments, private markets are at an inflection point. Institutional investors, endowments, and pension funds are already hooked on private markets, so asset managers’ next target is mom-and-pop investors.
Their challenge is to convince these investors, who typically like to play it safe, to get investing in this opaque and risky corner of the market. And they’ve made great strides in that recently, filing applications for private markets-focused ETFs and launching a few.
The world’s largest asset manager BlackRock’s Larry Fink stressed this idea in his annual shareholder letter on Monday. He said he wants more regular folks to participate and reap the rewards of private assets.
For decades, these alternative firms have argued that the real alpha generation opportunities lie in private markets because by the time an average company goes public, most of its returns have already been made.
Proponents also argue that private-market investments also help diversify portfolios, and in turn, strengthen investments against steeper declines during market downturns. For example, Neuberger Berman has said that private equity has historically experienced less significant drawdowns than the S&P 500 when the dot-com bubble popped and during the 2008 financial crisis and the Covid-19 crash.
A few caveats for that higher return and diversification: Your money will typically get locked up for a few years and the investment fees are high – really high. The former may also be the reason why private equity didn’t suffer as much as stocks in previous bear markets. When you literally cannot access your money, you’re essentially forced to ride out the downturn.
Anything for a meaty return, right?
Except, when looking at returns data (for which there isn’t a lot of fresh data available because it’s private), it seems a little skinny, at least in the case of private equity.
Since the turn of the century, private equity has outperformed S&P 500 and the MSCI World index, but it has lagged behind those two over the past 1- and 3-year horizons, according to McKinsey & Company’s February report. It has also stumbled behind the S&P 500 over a 5-year time period, the report said.
In the case of private credit, State Street launched an ETF this year that will hold 35 per cent of its portfolio in private debt deals originated by Apollo Global Management. But the SEC raised concerns about its plans for mitigating liquidity risk and ensuring accurate pricing.
This is what the FT reported: Apollo has a deal with the fund to provide intraday bids on all Apollo private credit offerings the ETF holds, allowing for daily liquidity. The SEC cast doubt on the arrangement. “We do not believe, however, that it would be sufficient for purposes of [federal securities law] to rely solely on bids from Apollo,” it said.
Since it’s so new to the masses, investing in private markets warrants some extra due diligence.
Share your thoughts
Do you think the risks of investing in private markets are worth the returns? Click here to send us your response.
Here’s what a reader commented
Question: What are your tips on staying calm through the market turbulence?
Response: I learned the hard way not to sell at the bottom. When I got into investing and trading I would unload stocks when they dropped at a loss, only to see all of them soar later on, and I realized if I would have just had more patience and waited all my losing trades on quality companies or index ETSs would have been big winners.
Catch up with FS Insight
The positive reversal Monday is encouraging, but there remains quite a bit of uncertainty ahead. What is notable is that several of the Magnificent Seven have stabilized in relative performance since March 13.
Technical
Head of Technical Strategy Mark Newton is traveling, so there was no technical note yesterday.
Crypto
We break down the evolving crypto setup heading into the second quarter—including the impact of end-of-quarter flows, MicroStrategy’s recent BTC purchase, and why the April 2 tariff announcement remains the most important near-term driver of crypto prices.
News We’re Following
Breaking News
- Zuckerberg Tries to Enlist Trump in Fight Against Meta EU Ruling WSJ
- Trump Administration Will Review Billions in Funding for Harvard NYT
Markets and economy
- US stocks post worst quarter since 2022 as Trump tariff worries swirl FT
- As Trump Stokes Uncertainty, the Fed Asks Businesses Where It Hurts NYT
- Investors flock to gold funds as fears over Trump tariffs mount FT
Business
- Chipotle Went on a Seven-Year Quest to Find Avocados Outside of Mexico WSJ
- Klarna hit by buy now, pay later backlash as it targets $15bn IPO FT
- OpenAI closes $40 billion funding round, largest private tech deal on record CNBC
- Tesla sales fell by nearly 40% in France in March. Wall Street still expects deliveries to improve this quarter. MW
- A Chinese brain chip company could soon surpass Elon Musk’s Neuralink QZ
Politics
- Trump administration concedes Maryland father from El Salvador was mistakenly deported and sent to mega prison CNN
- Today’s Elections Give an Early Look at Trump’s Presidency BR
- Trump’s week of tests SEM
Overseas
- French court leaves Marine Le Pen’s political career on the brink FT
- Le Pen Verdict Fuels Claims That Europe’s Elites Are Colluding Against Populists WSJ
Of Interest
- It’s the NFL’s Most Innovative Play. Is the ‘Tush Push’ About to Get Banned? WSJ
- How to Find Internet Fame in 2025: Talk Tariffs WSJ
- No Toilet Paper and No Privacy: Returning to the Office, Federal Workers Walk Into Chaos NYT
| Overnight |
| S&P Futures +8
point(s) (+0.1%
) Overnight range: -34 to +8 point(s) |
| APAC |
| Nikkei +0.02%
Topix +0.11% China SHCOMP +0.38% Hang Seng +0.38% Korea +1.62% Singapore -0.09% Australia +1.04% India -1.53% Taiwan +2.82% |
| Europe |
| Stoxx 50 +1.31%
Stoxx 600 +1.21% FTSE 100 +0.92% DAX +1.54% CAC 40 +1.13% Italy +1.25% IBEX +0.95% |
| FX |
| Dollar Index (DXY) -0.12%
to 104.09 EUR/USD +0.03% to 1.0819 GBP/USD +0.15% to 1.2937 USD/JPY -0.19% to 149.67 USD/CNY +0.17% to 7.2695 USD/CNH +0.18% to 7.2787 USD/CHF -0.25% to 0.8821 USD/CAD -0.13% to 1.4369 AUD/USD +0.22% to 0.6261 |
| Crypto |
| BTC +2.35%
to 84355.59 ETH +3.65% to 1886.06 XRP +4.72% to 2.1846 Cardano +3.92% to 0.682 Solana +2.88% to 129.03 Avalanche +4.47% to 19.62 Dogecoin +4.89% to 0.1737 Chainlink +3.7% to 14.03 |
| Commodities and Others |
| VIX -1.03%
to 22.05 WTI Crude +0.18% to 71.61 Brent Crude +0.21% to 74.9 Nat Gas -0.9% to 4.08 RBOB Gas +0.42% to 2.293 Heating Oil -1.37% to 2.282 Gold +0.25% to 3131.27 Silver -0.17% to 34.03 Copper +0.91% to 5.08 |
| US Treasuries |
| 1M -1.8bps
to 4.2794% 3M -3.3bps to 4.2605% 6M -4.5bps to 4.1765% 12M -1.6bps to 4.0036% 2Y -0.0bps to 3.8831% 5Y -1.7bps to 3.9322% 7Y -2.1bps to 4.0525% 10Y -2.1bps to 4.1841% 20Y -2.6bps to 4.5724% 30Y -2.5bps to 4.5459% |
| UST Term Structure |
| 2Y-3
M Spread widened 0.7bps to -41.4
bps 10Y-2 Y Spread narrowed 2.1bps to 29.7 bps 30Y-10 Y Spread narrowed 0.4bps to 36.0 bps |
| Yesterday's Recap |
| SPX +0.55%
SPX Eq Wt +0.83% NASDAQ 100 -0.02% NASDAQ Comp -0.14% Russell Midcap +0.43% R2k -0.56% R1k Value +0.92% R1k Growth +0.09% R2k Value -0.32% R2k Growth -0.79% FANG+ -0.37% Semis -0.33% Software -0.98% Biotech -3.91% Regional Banks +0.78% SPX GICS1 Sorted: Cons Staples +1.63% Fin +1.25% Energy +1.07% Materials +1.07% Utes +1.07% Healthcare +0.9% REITs +0.88% Indu +0.64% SPX +0.55% Comm Srvcs +0.24% Tech +0.03% Cons Disc -0.18% |
| USD HY OaS |
| All Sectors +5.5bp
to 390bp All Sectors ex-Energy +7.1bp to 354bp Cons Disc +5.1bp to 379bp Indu +3.1bp to 294bp Tech +12.0bp to 404bp Comm Srvcs +6.2bp to 578bp Materials +8.3bp to 361bp Energy +1.5bp to 385bp Fin Snr +0.4bp to 328bp Fin Sub +5.0bp to 243bp Cons Staples +24.9bp to 275bp Healthcare +8.4bp to 413bp Utes -2.4bp to 270bp * |
| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 4/1 | 9:45AM | Mar F S&P Manu PMI | 49.9 | 49.8 |
| 4/1 | 10AM | Mar ISM Manu PMI | 49.5 | 50.3 |
| 4/1 | 10AM | Feb JOLTS | 7655.0 | 7740.0 |
| 4/2 | 10AM | Feb F Durable Gds Orders | 0.9 | 0.9 |
| 4/3 | 8:30AM | Feb Trade Balance | -123.5 | -131.382 |
| 4/3 | 9:45AM | Mar F S&P Srvcs PMI | 54.2 | 54.3 |
| 4/3 | 10AM | Mar ISM Srvcs PMI | 53.0 | 53.5 |
| 4/4 | 8:30AM | Mar AHE m/m | 0.3 | 0.3 |
| 4/4 | 8:30AM | Mar Unemployment Rate | 4.1 | 4.1 |
| 4/4 | 8:30AM | Mar Non-farm Payrolls | 140.0 | 151.0 |
