The bond market has taken a beating and investment-grade debt has been anything but a safe haven for income investors. This has been one of the third-worst stretches in history as the YTD returns have been -10.5% which is only bested by the Lehman collapse in late 2008 where returns crept to -14.3% and Volcker’s days of battling high inflation and hiking rates. Investors are selling off investment-grade debt as the risk-free rates on Treasuries are climbing as the Fed’s tightening cycle is beginning. These rising yields are all corporate bond ETFs and driving returns down, but things could get worse as rates will only continue to rise and inflation is only beginning.

Finsum: Income investors need to look to active funds or abroad if they want relief in the bond market.

Stagflation has been out of the public lexicon since the Greenspan era, but as inflation begins to gradually creep up again that word is beginning to seem like a higher probability. Inflation has climbed to 8.5% and growth is expected to slow dramatically for 2021Q1 to 1.7%. Small-cap is a great option during these times because they are a great alternative partially in Finance. Preferred Bank is a great option with earnings estimates rising and is moving into a bullish category on Wallstreet. Others to watch out for are Mercantile Bank Corp and Old Second Bancorp as they are also well-positioned small-cap financials to stave off stagflation.

Finsum: It's amazing that equities are the most stabilizing force on Wallstreet right now, but small-cap might just be the play as volatility rises.

In this episode, Marty Nesbitt joins Melissa Francis and Magnifi by TIFIN to share his views on Private Equity and how the asset class is poised for periods of rising prices.

To watch the full interview with Marty Nesbitt, in addition to interviews with Anthony Scaramucci, Kyle Bass and Jeffrey Gundlach, check out Magnifi by TIFIN.

Melissa Francis: We have a very special guest to talk about private equity investments, Marty Nesbitt. He is co-CEO of The Vistria Group, which is a Chicago based private equity firm. 

He is also on the board of directors of publicly traded companies like CenterPoint Energy, Norfolk Southern Corporation, and American Airlines group. Marty, thank you so much for being here. 

First of all, tell us a little bit about Vistria, some of your founding principles and maybe some of your current assets or maybe the deals you like the most.

Marty Nesbitt: Yeah, sure. I'm happy to do so. Vistria was birthed from a set of personal experience by my co- founder Kip Kirkpatrick and I, who had both been in the investment world, in public service and obviously operated as entrepreneurs. 

And we thought, as we harvested our experiences, that at the intersection of public and private interest, there was a value proposition that we felt hadn't been recognized in the marketplace. 

And so we thought if we invested at the intersection of what was important to the public and what was important to the private sector, we could figure out how to harvest value. 

We thought about the three industries where that opportunity set was greatest and settled in on healthcare, education and financial services, where we thought the value or the opportunity set was greatest. 

And so, Vistria is a name that we made up because that's one of the hardest things there is to do when you start any business, that's find a name, but it means the power of three. 

And it's the power of investing with the requisite amount of investment experience and expertise, the requisite amount of operating expertise, but then also a long term policy perspective so that you can be invested in places that are not only good for the businesses, good for employees, customers, and investors, but also good for the broader public. 

That policy perspective is the third dimension that we invest behind. 

Watch the full episode with Marty Nesbitt HERE

Melissa Francis: Yeah, I know, that brings up so many questions. Let me start with just a few. Private equity in general, you see really great out sized returns. How do you keep that up when stocks and bonds are having such a rough time like they are right now? 

Marty Nesbitt: Well, look, one of the beautiful things about building a private equity platform is the opportunity to be really focused in an industry or a sub- sector of an industry where you can develop real expertise. 

And so we spend a lot of time developing themes that we want to invest behind and then going very, very deep so that we know the levers to create value what the long term proposition is. 

And so even in an environment where we see prices rising, as there's so much capital competing for these opportunities, we have confidence about the value creation plan we can put in place and the way that we can generate our return objectives in a very difficult, challenging pricing environment. 

So being focused is a way to mitigate some of that risk. 

Watch the full episode with Marty Nesbitt HERE

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