Services Tags: Defined Contribution

New Year, New President…Same Outlook?

From an investor’s perspective, the current environment feels lot like it did twelve months ago: U.S. equity markets returned over 20% the prior year, fixed income is (still) offering attractive yields, and overall portfolio performance was positive for most programs. Nevertheless, nothing lasts forever and sentiment can shift on a dime. It is also likely that some of President Trump’s policies will have an impact on markets, with the specific impact varying by the policy and asset class.

In this edition:

  • U.S. Economy and Policy Expectations
  • Fixed Income: “If you liked it last year, you’ll like it this year”
  • U.S. Equity: Concentration risk still looms
  • Non-U.S. Equities: Positive earnings outlook, policy uncertainty
  • Real Assets: Real estate bottoms, infrastructure demand robust
  • Private Markets: Private equity on the rebound, private credit still compelling

Marquette Speaking at 2025 Midwest Institutional Forum 4/9–10

On April 9–10, Greg Leonberger, FSA, EA, MAAA, FCA, Jessica Noviskis, CFA, Frank Valle, CFA, CAIA, James Torgerson, and Evan Frazier, CFA, CAIA will be speaking at the 11th Annual Midwest Institutional Forum hosted by Markets Group in Chicago.

On Wednesday, Jessica will be joining the opening panel discussion, “Navigating Markets in 2025: Investment Strategies and Macroeconomic Outlook,” described as follows: The financial landscapes continue to evolve in an era marked by unprecedented global events. Investors are faced with the imperative challenge to construct resilient portfolios in the face of economic shifts and market volatility. This panel will shed light on the current macroeconomic landscape, providing insights into global economic trends and their potential impact on various asset classes. From equities and fixed income to alternative investments, our experts will share their perspectives on where opportunities lie and the potential pitfalls to avoid in the pursuit of optimal asset allocation.

Greg will be joining a panel later in the morning entitled “Portfolio Construction – Finding the Best Opportunities in 2025,” described as follows: Many are calling this a new investment era with opportunities for investors that have never been seen before. Market movements, fiscal challenges, the denominator effect, and revised globalization have all created unique opportunities for investors who go well beyond the traditional 60/40 portfolio construct. Join our panel of experts as they aim to answer several key questions, including:

  • What will a “diversified” portfolio look like in 2025? And what will it look like over the next 5-10 years?
  • How are investors approaching portfolio construction and allocation decisions in the current landscape?
  • Where do they see opportunities across asset classes and sectors, and how is this impacting their decision-making with new and existing managers?

That afternoon, Frank will be conducting an interview, “Opportunities in Public Credit: A Systematic Approach to High Yield,” described as follows: Systematic fixed income strategies have entered the mainstream, having seen their assets more than double over the last year. They are poised to grow further as innovative trading techniques and abundance of structured data provide opportunities to lower transaction costs and generate diversified alpha streams in less liquid asset classes such as high yield. As fixed income is entering a potential golden age given historically high yields, we will discuss how a systematic approach to credit and innovation in credit portfolio trading can help with generating trading efficiencies and targeting differentiated alpha drivers in high yield.

James will also be conducting an interview: “Insurance-Linked Securities – Continued Growth of a Fundamentally Uncorrelated Asset Class.” This fireside chat will focus on the increased interest in insurance-linked securities as a key allocation for diversified portfolios. Specific discussion topics will include an overview of the role of insurance-linked investments in an institutional portfolio, how allocators have been evaluating opportunities of late and the latest developments & growth of the asset class. For allocators newer to the asset class, the session should provide key highlights to use in internal investment strategy meetings and/or consultant-client reviews as well as provide the latest talking points important to reintroducing an opportunity in the space or to evaluating an existing investment.

On Thursday, Evan will be moderating a panel entitled, “Effectively Investing Through Private Markets; Diversification & Returns.” As investors search for additional sources of revenue and methods for portfolio diversification in the volatile and changing environment, private markets stand out as an area of opportunities. The panel brings together leading alternatives investors and allocators to share the role private equity, private debt, venture capital and more play in their portfolios and what they look for in managers to meet their objectives in these asset classes. Panelists will address risks and opportunities across capital structures, expected returns and the operational requirements for managing the unique complexities in private markets.

The Midwest Institutional Forum brings together institutional investors, consultants, and industry experts from across the Midwest. For more information, please visit the event website.

The Market Doesn’t Care

With the election less than two weeks away, polls indicate a very tight race not only for president but for control of the House and Senate as well. Given that margins in some of the swing states are likely to be razor thin, final election results will not be determined until several days after November 5th. There is no debate that the candidates and their expected policies are vastly different, but as investors, should we care who wins? Does the market care?

In this edition, we examine a variety of historical data cuts to determine what market impacts might be expected based on the outcomes of this year’s elections.

3Q 2024 Market Insights

This video is a recording of a live webinar held October 23 by Marquette’s research team analyzing the third quarter of 2024 across the economy and various asset classes and themes we’ll be monitoring over the remainder of the year.

Our quarterly Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real assets, and private markets, with commentary by our research analysts and directors.

Sign up for research alerts to be invited to future webinars and notified when we publish new videos.

If you have any questions, please send our team an email.

Matt Nowak Speaking at Georgetown University Center for Retirement Initiatives 2025 State-Facilitated Retirement Savings Program Network Conference 1/29

On Wednesday, January 29, Matt Nowak, AIF® will be speaking at the Georgetown University Center for Retirement Initiatives (CRI) 2025 State-Facilitated Retirement Savings Program Network (SRSPN) Conference in Nashville, Tennessee.

Matt will be joining a panel entitled, “The Leaky Bucket Challenge: What More Can be Done to Increase Employee Participation and Boost Savings?” ” with several investment professionals.

The SRSPN brings together state executives, legislators, and other key stakeholders to share the latest updates on legislative and program implementation best practices and lessons learned. For more information, please visit the CRI website.

Are You Ready for Some Fixed Income?

As the leaves change to autumn and the authors cheer on their Fighting Leathernecks, fall is the perfect time for investors to reassess their fixed income portfolios. Fixed income is a hybrid security that offers both offensive and defensive properties. Much like a good football team, a fixed income portfolio needs to combine a strong offense with a solid defense.

Some strategies provide more offensive characteristics while others are more defensive. Portfolios with too much offense act like the Greatest Show on Turf. They do well when the economy is strong, but falter in down markets. Conversely, a fixed income portfolio that is overly reliant on defensive strategies will do well in a risk-off environment but will struggle in a strong economy like the Super Bowl Shufflin’ ’85 Bears.

While those were great teams, they were not a dynasty that stood up to the test of time. To build an all-weather fixed income portfolio that will perform in multiple market environments, an investor needs to balance offense and defense.
Fixed income has three primary objectives: income, diversification, and liquidity. Income, or yield, is what an investor is paid for loaning money to another entity. Fixed income helps to diversify portfolios primarily through duration. When risk assets are selling off, interest rates are generally falling. Duration is what drives fixed income prices higher in such scenarios. Finally, fixed income assets can be a source of liquidity. The weight of these qualities is dependent on if the strategy is more offensive- or defensive-minded.

This white paper outlines offensive and defensive fixed income characteristics and strategies and considerations for investors when building a “gameplan” for their fixed income allocation.

What Does Elevated Index Concentration Mean for Active U.S. Equity Managers?

Indexing has risen in popularity over the last decade, particularly for U.S. equity investors. The fees are lower and indexing is perceived as less risky, with investors primarily seeking beta exposure to the market. However, these indices have evolved against an ever-changing economic and financial market backdrop. As a result, several unintended structural issues have emerged, particularly related to concentration risk. Understanding this evolution and how it could alter the overall exposures within a broader portfolio is critical, as these indices are not static. Notably, the composition of some indices alongside the increase in passive capital has created headwinds for active managers and helps to explain recent performance challenges.

This newsletter examines the progression of passive management, how and why U.S. equity index concentration has increased in recent years, and the effects and risks investors need be aware of across the market capitalization spectrum.

Mind the Gap

Any ride on the London Tube reminds riders to mind the gap: Beware the space between train car and platform as you board and depart the train. A recent trip to London brought this phrase back to me and it seemed like a perfect description of how to look at financial markets this year, with the “gap” serving as the difference between expectations and reality, most particularly in terms of interest rate cuts.

In our market preview, we identified the Fed pivot as a primary driver of financial markets this year, most especially how expectations of cuts would line up with actual Fed policy. Going into the year, the market had priced in at least five cuts, which helped fuel a furious fourth quarter rally and investor optimism for 2024. One quarter in, however, those expectations have been turned on their head. Hotter than expected inflation and jobs reports in March have created a “higher for longer” narrative with the market expecting no more than two cuts during the second half of the year. Some economists have taken an even more bearish stance, suggesting there will not be any cuts. Overall, rates rose across the curve during the quarter as current U.S. debt levels sustained the long end of the curve while the short end was relatively unmoved.

Intuitively, many investors would expect such a big change in rate expectations to weigh heavily on markets, both equities and bonds. In that sense, equity performance was surprising during the first quarter, as the upward trend from 2023 continued. Predictably, bonds suffered as rates rose, but below investment grade sectors were profitable. To be fair, though, it should be noted that equities have endured a difficult start to this month, down 4.6% through April 22 as the higher for longer narrative has gained momentum.¹

Going forward, what should we watch for from asset classes as we venture into a market environment that looks much different than what we were expecting only three months ago?

Matt Nowak Speaking at Pensions and Investments Retirement Income Conference 6/18

On Tuesday, June 18, Matt Nowak, AIF® will be speaking at Pensions and Investments’ (P&I) Retirement Income Conference in Chicago: Solutions for the Decumulation Phase.

Matt will be joining a panel entitled, “Customizing Engagement in order to Boost Retirement Readiness,” described as follows: The more we know about the unique positions and objectives of individuals in retirement, the better we can help them maximize their retirement readiness. As plan sponsors manage a multi-generational employee base, they are getting even more granular in tackling the different circumstances and projected outcomes for individuals within each generation. Engagement and communication efforts – from data gathering and evaluation to implementation – are much more targeted for different cohorts. Our panel will discuss ways to identify target groups, personalization, and ways to establish a framework for evaluating retirement income preferences.

  • Assessing participant data to help maximize engagement efforts.
  • Peering into Behavioral Data: Solutions for different cohorts and stages
  • Leading communication techniques, including the use of gen AI to connect with historically low-engagement participants.

P&I’s Retirement Income Conference will bring together plan sponsors and leading industry providers to examine the range of solutions and services that DC plans are currently offering participants in the decumulation phase as well as highlight what’s coming next. For more information, please visit the conference website.

2024 Market Preview Video

This video is a recording of a live webinar held January 25 by Marquette’s research team analyzing 2023 across the economy and various asset classes as well as what trends and themes we’ll be monitoring in the year ahead.

Our quarterly Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real assets, and private markets, with commentary by our research analysts and directors.

Sign up for research alerts to be invited to future webinars and notified when we publish new videos. If you have any questions, please send us an email.