Wealth Management
Private credit firms are increasingly shifting from traditional cash-flow lending toward asset-backed finance using collateral that now includes intellectual property, data centers, and energy infrastructure.
Despite the US ABF market totaling $5.5 trillion, private credit holds only a small share and is partnering more frequently with banks to expand. The recent bankruptcy of First Brands has raised concerns about how well lenders understand the risks in ABF, especially as more unfamiliar assets require precise valuation in a downturn.
Demand for digital and energy infrastructure is driving ABF growth, with data center financing alone expected to jump sharply by 2028. Yet the sector has not been tested under high interest rates or recessionary conditions, prompting warnings from regulators about potential systemic risks.
Finsum: Look for asset return correlation in stress scenario to test your demand for private markets.
The S&P 500 fell last week, marking its weakest performance since early October as investors sold off tech stocks amid fading hopes for a December rate cut. Market volatility jumped sharply, with the CBOE Volatility Index rising roughly 14 percent and signaling heightened investor anxiety.
Expectations for a rate cut dropped meaningfully, and concerns around inflated AI valuations added further pressure to the tech-driven market.
In this environment, some investors are turning to volatility ETFs as tactical tools to hedge near-term uncertainty and potentially benefit from market swings. Several ETFs, including VXX, VIXY, and VIXM, offer exposure to VIX futures for those seeking short-term protection or volatility-linked opportunities.
Finsum: Rapid capital inflows into AI resemble past speculative bubbles, increasing the risk of concentrated losses if sentiment shifts.
Capital Group and KKR have launched two new interval funds that double quarterly share repurchase limits from the industry-standard 5% to 10%, offering a more liquid twist on traditionally illiquid products.
The funds—Core Plus+ and Multi-Sector+—blend public and private credit, allowing them to support higher liquidity while still targeting alternative-style returns. Advisors are watching closely, as adding liquidity by holding more cash or Treasuries could dilute performance even as it broadens investor access.
The move comes amid surging demand for alternatives, with interval fund sales tripling in recent years and overall alternative investment fundraising expected to hit $200 billion this year. While advocates say these products help democratize private credit, skeptics warn that rising rates or economic stress could expose the risks in leveraged private-market borrowers.
Finsum: Many advisors may take a cautious, wait-and-see approach before embracing the new 10% liquidity model, but some may be more willing.
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FUTY and XLU both provide strong exposure to U.S. utilities, but FUTY stands out thanks to broader diversification, lower volatility, and more balanced subsector representation. As interest rates gradually decline and AI-driven electrification boosts long-term power demand, utilities are increasingly attractive for investors seeking stability and income.
Both ETFs benefit from these structural trends, with similar yields and nearly identical top holdings, but FUTY’s larger roster of companies helps reduce concentration risk. While performance and valuation metrics between the two funds remain very close, FUTY’s lower standard deviations give it a slight advantage for risk-adjusted returns.
Investors should remain aware of sector risks, including interest-rate uncertainty and the heavy influence of top holdings like NextEra Energy.
Finsum: This is a great way to get exposure to the energy AI boom.
The industry is entering a new macro environment that challenges long-standing assumptions about returns, inflation, diversification, and governance. After decades in which strong returns and easy diversification masked deeper structural risks, asset owners now face a paradigm where high valuations and slower economic growth may limit future returns.
Inflation appears contained in the short term, yet structural forces such as deglobalization and rising public debt suggest it remains a long-run risk that investors must manage more deliberately. These shifts elevate the importance of real returns and purchasing-power protection as core objectives for DC plans, endowments, sovereign wealth funds, and retirement savers.
They also imply that traditional diversification is less reliable than it once was, requiring new approaches to allocating across asset classes and seeking differentiated return streams.
Finsum: In this environment, multi-asset investing becomes inherently active, demanding broader use of private markets.
Asian equities saw significant foreign selling in early November as investors took profits amid concerns over stretched tech valuations and the durability of the recent market rally.
Across Taiwan, South Korea, India, Thailand, Indonesia, Vietnam, and the Philippines, foreign investors pulled a combined $10.18 billion for the week ending November 7, reversing October’s net inflows.
South Korea and Taiwan were hit hardest, with outflows of $5.05 billion and $3.86 billion respectively, largely driven by weakness in major AI-related companies. Regional tech indices reflected this pressure, as MSCI’s Asia ex-Japan IT sector fell over 4% after massive multi-month gains. Elsewhere in the region, India saw $1.42 billion in outflows, while Indonesia and the Philippines bucked the trend with moderate inflows.
Finsum: Despite volatility, some strategists argue valuations remain justified, citing strong expected global tech earnings growth.