London 14th April 2023, Private Markets Alpha (PM Alpha), the digital marketplace for asset managers, wealth managers, advisors and distributors to access and distribute private markets investments, in the run-up to its first product launches of 2023 has identified thematic investment opportunities in Global Corporate Distress & Dislocations and Real Asset Dislocations – both outlined in a recent webcast featuring Daniel Stenson, Partner at Apollo Global Management, Joseph Mazzoli, Director, Global Private Finance at Barings, Stephen Green, Senior Partner, Special Situations Head at Patron Capital, and Thomas Light, Portfolio Manager at Muzinich & Co.
The thematic focus features against a backdrop of rising inflation, in which companies face refinancing at sharply higher interest rates compared to the low-to-zero rates in effect before the global Pandemic impacted three years ago, the managers noted.
And for those companies with weaker balance sheets today, evidence is mounting that private markets investors in asset classes such as credit, real estate and aviation can plug financing gaps abandoned by traditional lenders – the banks – leaving them with the opportunity to generate equity-like returns but higher up the capital structure.
PM Alpha Founder & CIO Alexis Weber, noted that private markets tend to show resilience in periods of dislocation. Building on the theme of the ongoing Great Correction at the macro level, he is looking for strategies in alternative credit, special situations, real estate alongside secondaries and GP-led investments.
Alexis Weber said: “It is a broad opportunity set that we are facing today, but with three key elements: repricing, refinancing and restructuring of large corporate assets and SMEs, real assets, and real estate assets.
“Private markets have demonstrated their ability to navigate these volatile times very well and drive superior returns for investors. Specialist managers are able to take advantage of dislocations using their ability and experience to deploy capital. This has been exemplified in previous vintages, such as off the 2007 credit bubble.
“When lifting up the bonnet and really being able to look at how these private markets managers have driven returns, we see that secondary investments have led the way but also distressed debt and alternative credit, special situations, and real assets and real estate.”
Key trends noted by the participating managers include:
There is an increased probability of more motivated and distressed sellers of assets across private markets, notably in alternative credit and direct lending, as interest rates could remain higher for longer than expected, alongside an increased risk of a ‘hard landing’ in the US.
It is a good time to invest in private credit markets, as current reduced valuations offer interesting risk-reward characteristics, allowing investors to capture more cash flow/assets from businesses. Additionally, high covenanted positions are available to investors as corporates face an urgent need for refinancing due to mounting debt at increased rates.
Aviation as a sector presents particular challenges and opportunities because of the effective supply side duopoly of aircraft, but there are expectations of a significant volume of refinancing to lease new aircraft.
The Europe region real estate market has been led by price adjustments in the UK market - spurred by the fiscal policy shock of the Truss government in September-October 2022 – but similar price adjustments could yet come to other European markets.
Valuations of logistics real estate assets have been hit by interest rate movements, but office real estate is being hit by ESG considerations and more tenants demanding ESG certified facilities.
The current environment must be recognised as fundamentally different to the GFC, when the reaction from monetary authorities and regulators was to cut interest rates and inflate asset values to stimulate growth.
PM Alpha Founder & CEO Tom Douie, commenting on the opportunities spotted by the participating mangers, said: “The twin investment themes of Corporate Distress and Dislocations and Real Asset Dislocations, represent key opportunities that PM Alpha is working on delivering to the wealth management users of its platform. From here, the next step is for our platform to deliver the investable ideas. That announcement will come, and we look forward to exploring those in more detail with people that are specifically interested in Distress and Dislocation.”
A recording of the webcast is available for registered users at PM Alpha’s digital platform.
Notes to Editors
About Private Markets Alpha
PM Alpha is a digital marketplace for Asset & Wealth Managers, Advisors and Distributors to access and distribute the power of private markets investments utilising a flexible open architecture platform. It is focused on delivering best-in-class global private investments leveraging the team’s long-term track record as a principal investor across alternatives in funds and co-investments. Having worked closely with some of the world’s leading Institutional Investors, Asset & Wealth Managers and Family Offices, the PM Alpha team has developed a deep knowledge and understanding of the needs of their businesses and that of their clients.
For more information, please visit https://www.pmalpha.co.uk.
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Fortuna Asset Management Communications Ltd.
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