Bonds: Total Market
Asian currencies experienced a significant rally, reaching their highest levels in seven months. This surge was driven by diminishing concerns about a U.S. recession, expectations of Federal Reserve rate cuts in the near future, and a more favorable economic outlook within the region.
The Bloomberg Asia Dollar Index increased by 0.6%, with notable gains from the South Korean won, Malaysian ringgit, and Thai baht. These currency gains were supported by stronger-than-expected economic data and political developments in key Asian markets. Additionally, regional equities also rose, reflecting growing investor confidence in Asia’s economic prospects.
The South Korean won and the Philippine peso were among the top performers, with the won reaching its highest level since March and the peso marking its biggest gain since November. Meanwhile, the Japanese yen also appreciated, with traders closely monitoring potential hints from the Bank of Japan's governor on the future direction of the country's monetary policy.
Finsum: The demand driving these currency shifts could really come into full swing if the Fed successfully dodges a recession.
Golub Capital is increasingly active in trading private credit deals, reflecting a broader trend in the industry as interest in secondary markets for direct loans grows. The firm traded approximately $1 billion in private debt during the first half of the year, positioning itself as a key player alongside others like JPMorgan Chase.
While secondary trading in the $1.7 trillion private credit market remains relatively uncommon, there's growing demand for liquidity and flexibility among investors. However, some industry participants argue that trading could undermine the appeal of direct lending, which traditionally offers privacy and stability.
Despite this, Golub and other firms are exploring these markets, balancing the benefits of liquidity with the traditional advantages of private credit.
Finsum: For investors not concerned with liquidity, private credit could prove a strong investment in this fall cycle.
Crypto ETFs are expected to be integrated into model portfolios by late 2024, according to Samara Cohen, BlackRock’s Chief Investment Officer for ETFs. Cohen emphasized the roles of Bitcoin and Ether as portfolio diversifiers, noting that major wirehouses are currently conducting due diligence on these assets.
BlackRock projects significant growth in model portfolio management, anticipating an increase from $4.2 trillion to $10 trillion over the next five years.
Cohen also mentioned that while Bitcoin and Ether are gaining traction, the introduction of spot ETFs for altcoins like Solana is unlikely in the near term. Despite net outflows from spot Ether ETFs since their launch, Cohen remains optimistic, viewing them as valuable entry points for investors seeking ETH exposure in their portfolios.
Finsum: Integration into standard financial products has been critical to cryptos success in recent years.
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Family offices are pivoting from conventional asset allocations towards a heavier focus on alternative investments like private equity, real estate, and venture capital. J.P. Morgan's recent report indicates that nearly half of these portfolios now consist of alternative assets, with larger family offices taking the lead in this shift.
This approach is driven by the desire for higher returns, reduced volatility, and better alignment with long-term wealth preservation and growth goals. These offices are capitalizing on their ability to invest in illiquid assets, which offer the potential for higher returns over time.
By engaging more directly in private companies, family offices are leveraging their entrepreneurial expertise to achieve greater alignment with their wealth preservation objectives. While traditional public markets still hold a portion of these portfolios, the emphasis is clearly shifting towards alternatives that can better meet the complex, multi-generational needs of these families.
Finsum: With macro volatility looming alts could offer more risk cover and should be heavily considered.
The growing focus on private equity among family offices is driven by their longer-term outlook and the flexibility of deal-by-deal investing, offering higher potential returns and greater control. This approach is increasingly appealing amid global economic instability, high interest rates, and lingering pandemic effects, as traditional investments often underperform in such conditions.
Private equity can cushion portfolios against market volatility, consistently outperforming listed equities over the past two decades. Family offices pursuing a deal-by-deal strategy face challenges like high minimum investment requirements and the need for specialized expertise.
Embracing alternative investments enables family offices to seek superior returns, greater diversification, and enhanced risk management while contributing to innovation and economic dynamism.
Finsum: If the hedge is the clear concern, maybe investors should lean into alternatives, but look at historical correlations.
The T. Rowe Price International Equity ETF (TOUS) is an active ETF that has gained attention for its diversification benefits, especially after a recent market sell-off. With a competitive 50 basis point fee, TOUS focuses on high-quality international firms with strong business models and good valuations.
TOUS has an active strategy built around macro factors through an international lens that uniquely positions it for the type of interest rate volatility the US is experiencing.
The fund’s active management allows for flexibility in selecting companies, particularly in non-U.S. markets, which could be advantageous during volatile periods. TOUS has returned 9.8% over the past year, making it an appealing option for diversification away from U.S. mega-caps.
Finsum: We’ve been banging the drum on the need to diversify into active funds during this volatility and this recent flash was an example why.