Category: Newsletter

Real Assets: The State of Commodities

December 2014 Investment Perspectives

Commodity market investors received a ray of hope in the early months of 2014. After several years of consecutive declines, commodities, as measured by the Bloomberg Commodity Index, began the year on strong footing and posted a gain of 7.1% in the first half of the year. By the end of the third quarter, however, commodities entered negative territory, and the year-to-date return through November for the Bloomberg Commodity Index had fallen to -10.2% (Exhibit 1). In this newsletter, we examine the recent developments in the commodity markets and evaluate their prospects for the coming quarters.

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Investing in MLPs: Which Vehicle is Right for You?

October 2014 Investment Perspectives

Since our last Master Limited Partnership (“MLP”) newsletter in 2011, the MLP market has grown from $220 billion to $437 billion as of September 2014. Investors have been on a “search for yield” over the past few years and the MLP space has proven to be an attractive investment with high yields and attractive growth opportunities. In the past, investing in MLPs has traditionally come with complicated tax related issues, which have often deterred institutional investors. As institutional interest continues to expand into the MLP space, however, institutional-friendly products have emerged. This newsletter takes a look at some of the recent developments in the MLP space and examines the channels by which investors can access MLPs in a tax efficient manner.

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Emerging Markets: The Case for Sub-Asset Class Diversification

March 2014 Investment Perspectives

The purpose of this newsletter is not to debate whether one index provider’s methodology is superior to another index provider’s; there are several papers in the market place that expertly do this in great depth. Rather, we wish to highlight that given the broad choice of core equity EM mandates that are available in the marketplace, investors should look to be on the same definitional page as their chosen or desired asset manager(s) as to what constitutes “emerging market” exposure.

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Emerging Markets: A Crisis of Confidence

February 2014 Investment Perspectives

After a disappointing 2013 and a significant sell-off to begin 2014, many investors are questioning their ongoing allocations to emerging markets (“EM”). Since 2013, EM countries have consistently underperformed their developed market counterparts, with equities losing 8.8% and local currency debt declining 12.5%. This compares to the S&P 500 and the EAFE which have returned 27.2% and 20.1%, respectively, over the same time period.

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2014 Market Preview

January 2014

Similar to previous years, we present our annual market preview newsletter. Each year presents new challenges to our clients, and 2014 is no different: We are coming off a banner year for U.S. equities, low interest rates continue to stymie fixed income investors, and while developed market equities enjoyed a strong 2013, emerging market stocks sputtered. In the alternative space, real estate and hedge funds proved accretive to portfolio returns, while growing dry powder in the private equity space is starting to raise a few eyebrows.

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The State of Real Estate: Location, Location, Location…Where Are We?

October 2013 Investment Perspectives

Core real estate has been an attractive investment since the market’s recovery began in the first quarter of 2010. In this three-and-a-half-year period, the NCREIF Property Index (“NPI”) has returned a stunning 50.7%. Given this 13.1% three-year annualized return and unrelenting appreciation gains reported quarter after quarter, investors may wonder if they are too late to enter into private real estate or if their current investments are poised for a downturn. This newsletter will address these very issues by examining the health of the real estate market as suggested by the key indicators of performance, fund leverage and cash balances, transaction volume, asset values, income environment, and investor appetite.

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Navigating the Low Rate Environment for Healthcare Organizations

September 2013 Investment Perspectives

Despite the recent increase in long-term interest rates, the low rate environment is now more than four years old and continues to create challenges for investors. While interest rates are notoriously volatile the current low rate environment and negative real yields on risk free securities is unprecedented in its duration. Given the Federal Reserve’s clear indication that it will not raise interest rates until there is a substantial drop in unemployment or increase in inflation, it appears the current low rate environment is unlikely to change in the near future. While this creates challenges for all institutional investors, it creates a unique set of challenges for non-profit health care organizations (“HCOs”).

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Global Tactical Asset Allocation

July 2013 Investment Perspectives

At Marquette we work with clients to construct portfolios that minimize risk while generating desired rates of return commensurate with overall program goals. These allocations are strategic in nature and designed to generate acceptable rates of return over long periods of time by assembling a diversified set of asset classes. These allocation decisions are meant for long term performance and, as a result, tend to be fairly static. Allocations are rebalanced to maintain desired risk and return targets but are fairly steady regardless of market conditions.

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Public vs. Private Real Estate Investments

June 2013 Investment Perspectives

Given the rebound in real estate values the last three years, many investors are either renewing or increasing their allocations to the asset class. Considering the overall low interest rate environment, real estate offers a much more compelling yield than most bonds these days, to say nothing of the appreciation component of real estate returns over the last few years. Due to the revitalized interest in the asset class, we feel it is an appropriate time to re-visit the different methods by which to access real estate for institutional investors.

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Passive Strategies Gaining in Popularity

March 2013 Investment Perspectives

Index-based investment strategies, those that passively invest with the goal of replicating the return pattern of a specific benchmark, were first created and marketed to investors beginning in the early 1970s. The well-known financial concept known as Efficient Market Hypothesis was developed earlier in the 1960s and postulated that it was not possible for an investor to consistently beat market returns on a risk-adjusted basis over time since market prices incorporate all available information. The adoption of this hypothesis by the finance community certainly contributed to the proliferation and validation of passive strategies.

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