Services Tags: OCIO

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.

Marquette Views on 2025 Traditional Investments Outlook Featured on Nonprofit News

Published January 9, Director of Research and Partner Greg Leonberger, FSA, EA, MAAA, FCA was interviewed for Nonprofit News’ Special Report 2025: Traditional Investments Outlook (subscription required).

Greg discussed the outlook for both U.S. equities — including expectations for inflation, economic growth, and the impact of the new administration — and fixed income — including Marquette’s customized approach to portfolio construction, particularly as the rate environment has changed in recent years — in the article.

For more coverage of expectations for the year ahead, Marquette’s 2025 Market Preview webinar will be hosted on January 16 with in-depth analysis by our research team and Greg’s Quarterly Letter from the Director of Research will be published the following week.

Keep Your Eye on the Ball

When it comes to baseball, successful hitters have little trouble hitting the ball when they know what pitch is coming. But when pitchers can vary the speed as well as the spin and curve of the ball, hitting becomes exponentially more difficult. An effective curveball can make even the most accomplished hitter look feeble.

As we look at the second half of 2024, we are reminding our clients to “keep their eye on the ball.” Indeed, the first half of the year has been pretty “hittable” as far as returns are concerned, with the majority of asset classes positive through June 30. However, curveballs such as Fed policy, equity index concentration, exchange rates, and a capricious election could quickly flip the script and send investors back to the dugout shaking their heads.

With that said, here is our scouting report for the second half of the year, organized by asset class. We share not only “down the middle” themes but also the curveballs that could flummox performance. A well-prepared investor is no different than a well-prepared baseball player: Insight and realistic expectations provide the foundation for a successful season!

2024 Halftime Market Insights

This video is a recording of a live webinar held July 23 by Marquette’s research team analyzing the first half 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.

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.

The Growing Popularity of Continuation Funds

Historically, the private equity secondary market has been used by limited partners (“LPs”) to sell exposures at the end of their lives and as such contained only tail-end exposures. Selling these lingering exposures to private equity funds allowed LPs to clean up their balance sheets and fueled the growth of secondary private equity funds within the broader private equity space. As the market evolved, however, higher-quality assets began transacting as investors started to use secondary markets as a useful portfolio management tool. More recently, general partners (“GPs”) have come to occupy an increasing percentage of the overall market. In 2023, about $110 billion in volume traded in private equity secondaries, with about 50% of the total transaction activity represented by GP-led transactions.

In this newsletter, we provide an overview of continuation funds, including their growth, structure, transaction requirements, and considerations for investors.

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?

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.

Great Expectations

After ending 2023 with a steep market rally, 2024 began on a more muted note, with Fed-pivot exuberance giving way to the details of execution. Of the many opportunities and risks facing markets this year, one of the most scrutinized will likely be how the Fed’s interest rate cuts compare to market expectations.

This newsletter analyzes current expectations for interest rate movements this year and potential scenarios that could influence the Fed’s policy decisions.

Defined Contribution Plan Legislative Update – 1Q 2024

This legislative update covers proposed regulation by the Department of Labor defining “investment fiduciary,” outlines SECURE Act 2.0’s optional provision regarding student loan repayments, analyzes an increasing trend of private real estate investments within defined contribution plans, summarizes new guidance from CFA Institute defining responsible investment terminology, and reviews 2024 contribution limits from the IRS.