NEW YORK--(BUSINESS WIRE)--KKR today released a new outlook piece by Henry McVey, Member & Head of Global Macro and Asset Allocation. In “Getting Closer to Home,” McVey outlines key global trends that he believes will impact asset allocations for the year.
“While the general backdrop for risk assets remains favorable, we are no longer advising folks to “Stay the Course” as we did in our January 2014 Outlook piece,” McVey writes. “Rather, given where we are in the cycle and the magnitude of gains in recent years, we have begun the inevitable process of “Getting Closer to Home” in terms of our asset allocation targets. In particular, we do advise folks to raise some cash and to tilt the invested part of the portfolio to become more opportunistic in 2015.”
In the piece, McVey also outlines key themes that make compelling “arbitrages” in the global macro landscape that CIOs and portfolio managers should pursue this year. These include:
- China’s slowing is not an aberration. As such, its role in the global economy is materially shifting, which means that McVey expects to see sizeable restructuring and recapitalization opportunities in sectors that previously over-earned and/or overstretched their footprints.
- Many corporations still have inefficient capital structures, including too much cash and too little debt, in his view. As such, investors can still benefit from corporate and/or shareholder actions to lower companies’ cost of capital and/or improve growth, including buybacks, dividends, capital expenditures and acquisitions.
- Despite a slew of liquidity in the system, many companies across both emerging and developed economies still can’t get proper access to credit. Hence, McVey still sees a compelling illiquidity premium that is worth pursuing, particularly in today’s low rate environment.
- McVey suggests harnessing volatility in the liquid commodity markets. He continues to favor private real asset investments with upfront yield, growth and long-term inflation hedging relative to traditional liquid commodity notes and swaps.
- Government deleveraging in the developed markets is disinflationary, which drives McVey’s thinking about the direction of long-term interest rates as well as the relative value of risk assets against the risk-free rates.
Links to access the note as well as an archive of McVey’s previous publications follow:
- To read the latest Insights go to: http://www.kkr.com/global-perspectives/publications/getting-closer-home
- To download a PDF version go to: http://www.kkr.com/sites/default/files/KKR_Insights_150108.pdf
- To download the KKR Insights app on iTunes: click here.
- For an archive of previous publications of Insights and Thoughts From the Road please visit www.KKRinsights.com
KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world‐class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners' capital and brings opportunities to others through its capital markets business. References to KKR's investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (NYSE:KKR), please visit KKR's website at www.kkr.com.
The views expressed herein are the personal views of Henry McVey of KKR and do not necessarily reflect the views of KKR. This information is not research and should not be treated as research. It does not represent valuation judgments with respect to any financial instrument, issuer, security or sector that may be described or referenced herein and does not represent a formal or official view of KKR. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own views on the topic discussed herein. There can be no assurance that an investment strategy will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially, and should not be relied upon as such. This information should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or to adopt any investment strategy. This release may contain projections or other forward‐looking statements. Neither KKR nor Mr. McVey assumes any duty to update such statements.