KKR's Henry McVey: New Investment Playbook Required
New Mid-Year Report Provides Update on Global Macro Trends
"From a macro and asset allocation perspective, we feel confident that we are on the cusp of a secular shift where a new playbook for investing may be required,"
McVey continues, "We also continue to see nationalist agendas, particularly as they relate to cross-border trade, supplanting more global ones. Against this backdrop, we now favor more upfront yield in the portfolio, we advocate shortening duration, and we place a premium on low cost liabilities. We also continue to view
In his latest report,
- Asset allocators and macro players must now invest through the lens of fiscal policy accommodation, not monetary policy accommodation, which has dominated the landscape since the Global Financial Crisis.
- Nationalist agendas are now aggressively being emphasized over global ones.
- The structural bid for yielding assets remains outsized, but we are further turning our focus towards hard assets that benefit more from nominal GDP.
- Buy complexity, sell simplicity. Similar to the late 1990s, we think that the market is giving investors a wonderful opportunity to buy complexity at a discount.
- We remain bullish on our ‘Deconglomerization' thesis, and we continue to see a burst of corporate carve-outs across the globe.
- We are increasingly struck by how fast overall consumer behavior patterns are changing and continue to be bullish on our ‘Experiences Over Things' thesis.
- While we continue to favor Emerging Markets over Developed Markets, we acknowledge that our mid-cycle pause thesis is playing out more intensely than we originally envisioned. As such, we continue to advocate more selectivity in the second phase of this secular bull market in Emerging Markets.
Key highlights of Mr. McVey's asset allocation framework include a substantial underweight to global government bonds, particularly at the long-end of the curve; an increasing overweight to Real Assets with Yield and Growth; the decision to remain equal-weight
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