Services Tags: OCIO

Second Quarter Review of Asset Allocation: Risks and Opportunities

Overall, the second quarter was positive for financial markets, thanks to strong economic fundamentals and expected Fed stimulus. Unemployment remains low at 3.7% and inflation (1.8% year over year) is near the Fed’s long-term target of 2%. However, there are increasing concerns about a global economic slowdown and early forecasts for 2Q GDP growth are around 1.5%, far lower than what we’ve seen in recent quarters. Globally, the most important trends we see are the following:

  • The U.S.-China trade conflict remains ongoing as talks between the two countries resumed, but little progress has been made;
  • The Federal Reserve is expected to cut rates in July and markets are forecasting another one to two cuts by the end of the year;
  • Business sentiment is declining ­— most notably in the PMI manufacturing index, which is now dangerously close to falling below its growth threshold;
  • Britain continues to struggle with its Brexit and elected a new PM (Boris Johnson) on July 23rd;
  • China and Europe are expected in increase their stimulus measures to combat slow growth and overall global uncertainty;
  • Late-cycle dynamics in credit and equity markets.

The impact of these trends is explored further in this newsletter as we review second-quarter performance and expectations going forward for each of the major asset classes.

Read > Second Quarter Review of Asset Allocation: Risks and Opportunities

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Real Estate: Where Do We Go From Here?

Over the last ten years, core real estate as measured by the NFI-ODCE has delivered an annualized return of almost 9% and has helped boost institutional portfolio returns. However, given the consensus view that we are in the late stage of the economic cycle, coupled with overall global uncertainty and moderating returns in the asset class, investors are wondering if it is time to reduce their allocation to real estate, and if so, where they should allocate these funds.

The following article strives to answer these questions by analyzing the current landscape for real estate investments, including opportunities outside of the traditional “core” strategies that have historically constituted the majority of real estate investments for our clients. Furthermore, we offer guidance on where to allocate assets outside of the real estate asset class if investors have built up overweights to the asset class over the last decade of outperformance.

Read > Real Estate: Where Do We Go From Here?

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

When Will the SOFRing End?

Global authorities such as the SEC, Federal Reserve, European Commission and European Central Bank are currently transitioning the market’s use of LIBOR as a base rate for floating-rate securities such as bank loans, CLOs and private credit towards the use of the current front runner as a replacement: SOFR, which stands for the Secured Overnight Financing Rate.

This newsletter explains what a base rate is and how it is used in investing, why LIBOR is being transitioned to SOFR and the key differences between the two, and when the change is expected to take effect.

Read > When Will the SOFRing End?

For more coverage on LIBOR, please see our Bank Loans Position Paper and recent Chart of the Week, The Sixth Fed Hike and Rising LIBOR.

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Sell in May and Go Away?

Global equity markets declined in May on a flurry of geopolitical news. As tensions persist, stocks are grasping to sustain their former rocket-like pace.

This newsletter details the recent trade and tariff announcements, their impact on the markets, and a look at what to expect in the remaining months of 2019.

Read > Sell in May and Go Away?

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Global Central Banks React to Slowed Economic Momentum

In 2017 the global economy underwent a synchronized move upward and investors saw equities throughout the world generate double-digit returns. That momentum was lost in 2018 and most economic data points missed analysts’ expectations leading to downward revisions in GDP growth. As a result, several major central banks have taken steps to become more accommodative to help navigate the slowdown.

In the U.S., the Fed has put future rate hikes on pause and has communicated it will be patient on future adjustments. Based on Fed Funds futures, the market expects an eventual rate cut. In Europe, the ECB extended its no rate hike stance through the end of 2019. Additionally, the central bank announced its third targeted long-term refinancing operation aimed at avoiding a credit squeeze that could exacerbate the economic slowdown. In China, authorities organized a stimulus package including $298B in tax cuts to help boost domestic demand. Additionally, the country has reduced the bank reserve ratio from 17% at the start of 2018 to 13.5% as of 1Q19. Though still early, there has not been a marked improvement in global economic activity. However, markets have welcomed the more accommodative stances from these three key central banks and equity markets have rebounded from the tough 4Q 2018.

Print PDF > Global Central Banks React to Slowed Economic Momentum

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

First Quarter Review of Asset Allocation

Heading into 2019, the primary risks facing financial markets were the trade war with China, the U.S. government shutdown, Brexit uncertainty, and further Fed rate hikes. However, in the first quarter the majority of these worries subsided.

In this newsletter, we analyze the current market environment with a review of recent performance and future expectations for each major asset class. As always, we caution investors to stay diversified and rebalance as appropriate. There are always potential disruptors to the financial markets and the most powerful tend to be largely unexpected. We will continue to monitor markets and developments as they occur to guide our clients to the most optimal portfolio decisions given the backdrop of program goals and risk tolerance.

Read > First Quarter Review of Asset Allocation

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

The Latest Key Developments in the Healthcare Industry

Health systems today face significant challenges, further complicating an ever-changing landscape. Some of the most notable trends we see in the space include:

  • Higher interest rates, which impact borrowing costs as well as investment opportunities;
  • Efforts to gradually repeal the Affordable Care Act (“ACA”);
  • The emergence of value-based payment programs;
  • The advent of major vertical integrations such as CVS-Aetna;
  • A growing demand for digital healthcare

The following article summarizes these key issues for health systems and where appropriate, provides some potential solutions.

Read > The Latest Key Developments in the Healthcare Industry

With over 20 years of healthcare investment consulting experience, Marquette serves healthcare clients across a broad range of operating cultures — including health systems, stand-alone hospitals, and specialty organizations — and with a variety of focus areas — including operating funds, retirement planning, insurance, endowments, and foundations. For more Marquette coverage of the healthcare industry, please see our previous newsletter Healthcare Organizations’ Top 3 Investment Concerns for Balance Sheet Assets.

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

2018 Investment Symposium Briefing

Our 2018 Investment Symposium speakers summarize their presentations — from CEO Brian Wrubel’s opening remarks to the keynotes and flash talks.

The symposium covered the current market environment, emerging investment themes and investment stewardship challenges in the year ahead. The event featured six flash talks designed by our research team to brief clients on relevant topics and encourage timely conversations with investment consultants.

All keynote and flash talk videos are now available on demand:

 

An October to Forget?

Stock markets around the globe “corrected” in October, experiencing a sudden and broad-based drop. The sell-off was somewhat unusual as there was no glaring fundamental event that triggered the market drop, but rather a confluence of events that all seemed to come to the forefront of investors’ minds simultaneously. These concerns, coming on the heels of a strong third quarter for stocks that left the market looking modestly overvalued, led to an unpleasant month of returns.

Download PDF >

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Real Estate Position Paper – 2018 Update

This real estate position paper seeks to establish a fundamental understanding of the asset class. More specifically, the various styles, benefits, risks, mechanics, and benchmarks relevant to commercial real estate investments are examined, with an emphasis on quantitative and qualitative illustrations. Recommendations and guidance towards the investment manager search process and making an allocation to the asset class are also included.

Download PDF>

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.