While many investors may look to alternatives and just see diversification, they can provide much more than just diversified returns. Alts and private equity can offer a variety of risk levels and are potent source of returns. Indeed, for those willing to accept a level of illiquidity, certain parts of private equity can play a major role. In all aspects of alts, however, the right asset management team can offer investor portfolios real benefits.
See more: Morgan Stanley Fixed Income Outlook: Look to Intermediate Duration
That was the topic of discussion during the “Beyond Traditional Assets: Exploring Opportunities in Alternatives” segment of the VettaFi Alternatives Symposium this week. Hosted by VettaFi editor in chief Lara Crigger, the panel included Morgan Stanley Investment Management Executive Director Dennis McCabe.
McCabe shared that, within private equity, his team likes the opportunities in the lower middle market for private equity managers. With more companies in the lower and middle market space and less dry powder, there are inefficiencies for managers like those at Morgan Stanley to discover.
“That creates the ability for outsized returns, or what I would describe as private markets alpha,” McCabe said. “That is the real reason anyone would invest in private equity.”
So, what are the main trends the firm Is seeing in its outlook? Per McCabe, they’re looking at onshoring as a mega trend for real estate. The continued growth of e-commerce, too, looks set to provide opportunities. He sees private credit as continuing to grow, too, into an important asset class offering downside protection and high, attractive yields.
The firm manages about $250 billion across different strategies in alts, McCabe said. The firm looks to leverage its broad reach and contacts as a massive, global firm to provide the best alts-related research it can to its managers, he added.
“We have so much connectivity across capital markets, corporates and individuals,“ McCabe said. “That sourcing capability is really unrivaled.”
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