BOSTON and LONDON, March 18, 2016 /PRNewswire/ -- Partners Capital, the Outsourced Investment Office acting for endowments and foundations and ultra-high-net-worth families in Europe, North America and Asia, today released to its clients Insights 2016, its 200-page report capturing the firm's analysis of the major factors influencing investment returns and opportunities, and the investment initiatives it is taking on behalf of clients in view of that outlook.
Stan Miranda, Founder and CEO of Partners Capital, said, "The dominant theme of Partners Capital's 2016 macro analysis is clear – the world is growing slower, so returns will be lower. As such, we have identified several initiatives that investors can take to help mitigate much of the impact of slow growth over the long-term. Capturing more illiquidity premium, finding more uncorrelated sources of alpha and attacking fees are among them."
Partners Capital's analysis focuses on both the short-term (3-year) and long-term (10-year) prospects for investment returns. Over the short-term, it is the firm's view that the recent market turmoil will be seen to be an "air pocket" and the U.S. recovery, though relatively shallow, remains on track.
The firm's long-term analysis concludes that returns expected by long term multi-asset-class investors, including endowment and foundations, will be substantially lower than those institutional investors normally require. Specifically, Partners Capital forecasts expected overall long-term "endowment-style portfolio" average nominal net returns of 6.7%, a decline from expected returns of 9.5% just after the global financial crisis in 2009. This expectation reflects the combined impact of slower global growth, lower inflation and rising real interest rates.
Partners Capital has identified several major investment themes for client portfolios in response to this expected sub-par performance from conventional sources of return:
- Optimize allocations to private markets to harvest the high illiquidity premia found across multiple asset classes including private debt, private equity and private real estate.
- Allocate to "non-traditional betas" to decrease reliance on traditional market exposures which are more dependent on the corporate earnings cycle.
- Improve the cost efficiency of portfolios through rigorous assessment of the alpha return earned on manager fees and costs.
- Underweight public equities based on short-term corporate profit pressure (largely driven by rising wages) in favor of credit, property and private and hedged equity.
- Position portfolios to be "long industrial disruption" where significant innovation is creating growth opportunities.
- Increase the capital efficiency of portfolios and focus on strategies which exploit the low cost of borrowing with stable returns or income generation.
- Exploit dislocations from the combination of dispersion and market volatility through sector specialist hedged equities, distressed opportunities and tactical asset allocation generally.
Partners Capital sees some combination of the above strategies and its current lineup of exceptional asset managers continuing to contribute 2% or higher average annual outperformance.
About Partners Capital
Partners Capital is an Outsourced Investment Office, acting for elite endowments and foundations, senior partners at leading global investment firms and sophisticated ultra-high-net-worth families in Europe, North America and Asia. The firm's mission is to deliver the most advanced proven institutional investment model to its individual and institutional clients, across all asset classes and geographies. Partners Capital's 115-member team, which is based in London, Boston, New York, Hong Kong and Singapore, manages assets of more than $17 billion. Its institutional clients include 11 Oxford and Cambridge Colleges, Eton College, the Research Foundation for the State of New York's University System, the Royal Academy of Arts, Milton Academy and the Cancer Research Institute.
SOURCE Partners Capital