KKR Releases 2016 Global Macro Outlook
Henry McVey Calls it a Year for "Adult Swim Only"
"In laymen's terms, today's market conditions are somewhat akin to swimming at the beach when there is a strong undertow that could pull a less experienced swimmer out to sea. It might not happen, but the probability is certainly higher than under normal circumstances. As such, we think that the mantra "Adult Swim Only" seems to be a prescient catch phrase for the current macro investing environment,"
Key investment opportunities for 2016 include the following:
1. Private Credit Appears to Be a Huge Opportunity in 2016. Recent gyrations in the financing markets are providing non-bank lenders a significant opportunity to leverage the market's illiquidity premium to earn compelling risk-adjusted returns. In particular, private financing opportunities linked to real estate, infrastructure, corporate take-overs, and equipment currently appear to be the best risk-adjusted opportunity in the market today.
2. Liquid Markets Favors Credit. Within liquid markets, we currently favor credit over equities, and within credit, we see strong relative value across credit particularly in high quality levered loans. In equities, we argue for multiple contraction, driven by China's shift in currency policy, heightened geo-political tensions, and the lengthy duration of the cycle.
3. Global Consumer. The outlook for certain segments influenced by the global consumer is positive. A high priority, we believe, would be to find opportunities around key trends like improving household formation, increasing
4. Debt-Driven Restructurings. China's ongoing slowdown in fixed investment could lead to new and exciting opportunities for Distressed/Special Situations investors. We are also bullish on the dislocated credit opportunities that we see in
In addition to the above themes, the report details key macro influences that factor into the Global Macro and Asset Allocation's updated asset allocation model for 2016.
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KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world‐class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners' capital and brings opportunities to others through its capital markets business. References to KKR's investments may include the activities of its sponsored funds. For additional information about
The views expressed herein are the personal views of Henry McVey of KKR and do not necessarily reflect the views of KKR. This information is not research and should not be treated as research. It does not represent valuation judgments with respect to any financial instrument, issuer, security or sector that may be described or referenced herein and does not represent a formal or official view of KKR. It is being provided merely to provide a framework to assist in the implementation of an investor's own analysis and an investor's own views on the topic discussed herein. There can be no assurance that an investment strategy will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially, and should not be relied upon as such. This information should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or to adopt any investment strategy. References to a target portfolio and allocations are hypothetical allocation of assets and not reflect an actual portfolio. The views expressed herein and discussion of any target portfolio or allocations may not be reflected in the strategies and products that KKR offers or invests, including strategies and products to which
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