 How hard is it to beat the world equity indexA world equity index is hard to beat. And, according to the SPIVA studies, very few active global equity managers do so persistently. Listed Private Market Managers have persistently outperformed world equitiesAnd yet, an index-tracking fund that tracks an index of the largest listed private market managers (firms such as Apollo Global Management, Blackstone, Brookfield, KKR and 3i) has persistently outperformed a broader world equity index since 2008. This persistent long-term outperformance is one of the reasons we like including Listed Private Market Managers as an exposure within portfolios we consult on. What is the return premium for Private Market Managers?We refresh our regular study and find that the long-term (since 2008) premium of Listed Private Market Managers performance over Public Equities increased from +3.2% at end 2023 to +3.4% at end 2024. For investment committess targeting a net return of say World Equities +2%, net of fees, exposure to a simple Private Market Managers ETF has consistently delivered persistent alpha. How did Private Market Managers perform in 2024?In 2024, Private Market Managers was one of the best performing asset classes, returning +31.7%, compared to +17.3% for World Equities, both in GBP terms. What is the right "PME" benchmark for a private equity fund?This raises the question should private equity funds aim to deliver returns above public equities (represented by a world equity index), or should they aim to deliver returns above the returns of a listed private market managers index (on a public market equivalent ("PME") calculation basis)? We think the latter: but we don't expect many to accept the challenge. What are the risks?Unsurprisingly, Listed Private Market Managers is a higher beta index, relative to a world equity index. This means when markets are up, they go up more. When markets are down, they go down more. The performance of Listed Private Market Managers experienced a major dip in 2022 as interest rates rose rapidly. This was because of the exposure of private market funds to rising borrowing costs. This made the sector even more sensitive to rising interest rates than the Property or Infrastructure sector, within the Alternative Assets basket. What about the "illiquidity premium"?We prefer not to have exposure to illiquid funds in any portfolio we consult on for our UK financial adviser community. Why? Because we think the "illiquidity premium" is elusive: hard to harvest if things go well, and evaporating quickly if things do not. What does this mean for investment committees?
How can UK advisers get exposure?This exposure is readily available via a London-listed ETF launched back in 2007. There is nothing new about this exposure, but it is certainly worth taking a fresh look. For platforms that cannot trade ETFs, advisers can consider a Alternatives fund that includes an allocation to a Listed Private Markets Manager ETF. Find out more  What is driving gold prices?There are three key drivers of the gold price in 2024-25. Some of these trends are structural, some are more short-term. 1. Geopolitical Risk and "Risk-Off" DemandFirstly, gold is an uncorrelated asset class meaning that it is an accessible and liquid diversifier. It can act as a shock absorber during period of elevated geopolitical risk. So the recent uncertainty around Trump's tariff policies and what that could do to equity markets (earnings risk) and bond markets (inflation risk), makes Gold an "risk-off" Alternative. 2. Central Bank Buying: Structural Demand from Emerging MarketsSecondly, Central Bank buying: although the Western world has reduced the amount of gold it holds in Central Banks reserves, Developing Markets - such as China, India and Russia - have been buying physical gold, such that overall, Central Bank gold reserves are on the increase. This is has been a medium-term trend for BRICs countries to reduce their dependency on the Dollar. This is a medium-term structural trend. 3. Gold as a Store of Value and Inflation Hedge: Debt ConcernsFinally, a store of value and inflation hedge: as markets worry about debt indigestion - the oversupply of US Government Bonds and the long-term sustainability of Western e.g. US/UK debt levels, Gold is a "real asset" that preserves value should there be any risk of devaluation of debt securities. Gold is a "real" store of value because it also acts as an inflation hedge: whereas nominal Bonds cannot hold their real value when inflation rises, Gold tends to hold its value in real terms and has withstood inflation shocks through revolutions, wars and even back in Biblical times! This is a long-term structural trend. Find out more
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As we look forward to 2025, it is worth revisiting the themes and predictions of our 2024 outlook “turning the corner” to get a sense of what we anticipated at the time, how this informed our recommendations to UK adviser firms’ investment committees. Asset class performance for 2024 is summarised in the chart above. Our 2025 outlook is published separately. Subscribe to our weekly newsletter to get all our insights to your inbox (for UK financial advisers only) Steady as she slows In 2024, we anticipated a gradual deceleration in the U.S. economy, with markets pricing in the likelihood of a slight recession. In the event, the U.S. economy surprised on the upside. Growth forecasts were upgraded from 1.15% at the start of the year to an impressive 2.6% by year-end. This revision supported robust equity market returns and served as a reminder of the resilience of U.S. economic fundamentals. In summary, a resilient US economy defied expectations. What did we recommend to our clients at the outset and during the year? We took a balanced view between accepting concentration risk (traditional S&P 500) and diversified (active, sector exposures). We also recommended clients lean in to broader US equity corporate landscape via 1) Equal Weight and 2) US Small Caps exposures. By contrast, the UK had that shrinking feeling as regards economic growth, and although out of a technical recession, we are not confident of its prospects relative to the US. Pause before pivot At the close of 2023, we were focused on the Federal Reserve’s pause in interest rate hikes, noting that a rate cut was a question of when, not if. While the consensus view was that the first cut would be announced by mid-2024, we anticipated that the timing would hinge on the performance and strength of the U.S. economy. Indeed, the economy’s resilience delayed the start of what we anticipate to be a rate-cutting cycle to September 2024, when the Federal Reserve finally delivered a significant 50-basis-point cut. In fact, the eventual BoE Fed pivot came a month or two later than we had estimated at the start of the year, but we recommended our clients remain dynamic with regards to duration management. We recommended clients go strongly overweight duration in June as a good time to extend duration ahead of BoE cuts, with Fed following suit, and we saw the additional duration deliver returns on the bond side of the portfolio before attention shifted to debt supply and the UK budget later in the year, which led us to recommending to move back to neutral. The importance of portfolio resilience Our focus on resilience proved vital when it came to navigating the key macro factors in 2024: Growth, Inflation and Interest Rates. For Growth, anticipating a soft landing for the US economy, we highlighted the potential outperformance of cyclical sectors, and momentum, yield and size factors. In the event, momentum emerged as the best-performing factor, with yield and size also delivering strong returns. For Rates, we adjusted duration exposure mid-year to capture the effect of falling policy rates, aligning portfolios with a changing interest rate environment. For Inflation, which remained above target, the inclusion of liquid real assets (but to a lesser extent than in 2022) and shorter duration inflation-linked bonds, ensured continued portfolio resilience. We continue to emphasise the importance of a diversified alternatives exposure from a correlation perspective, not just in name. Our recommendation to consider Private Market Managers and Gold & Precious Metals paid off during the year – as these were the best performing asset classes for the year, outperforming world and US equities. Political and Geopolitical risks In a year of elections, we saw a change in government in the UK and in the US following Trump’s Presidential win. Both have a greater impact on bond yields and currency dynamics than equity markets, in our view. Geopolitical risks remain elevated with the Russia-Ukraine war continuing to grind, escalating conflict and contagion in the Middle East – all at tragic human cost. Conclusion Markets did indeed turn a corner in 2024, with economic growth, earnings and equity market returns outperforming expectations. With 2024 in the rear-view mirror, it’s time to look ahead to 2025. Our 2025 outlook is published separately. Henry Cobbe, CFA Head of Research, Elston Consulting Gold remains a useful diversifier because of its uncorrelated relationship with other asset classes.
As a “liquid real asset” It has inflation-protecting characteristics. Gold provides protection against geopolitical risks and insurance against market shocks. Read in full View all our Gold & Precious Metals research  Our head of fund research, Jackie Qiao, shares her desert island fund picks with Citywire.
Read in full  The purpose of including alternatives in a portfolio, is for one reason: diversification. But how can we be sure alternatives are doing their job?
Read the full article in FT Adviser or watch the CISI-endorsed CPD webinar  [3 min read, open as pdf]
Watch the CISI-endorsed CPD webinar on this topic  [5 min read, open as pdf]
 In an interview with CityWire, Elston's Head of Research explains his love of Gold as a Valentine's Day idea in 2024. You can read the full article here
Watch our original CISI-endorsed CPD webinar back in 2021 with representatives from the World Gold Council anticipating these structural trends See all our public Gold & Precious Metals research  Central Banks' policy rates are expected to pivot towards cuts in 2024 with a material impact on asset class perspectives.
Wealth managers discuss the ongoing issues with property funds and explain how investors should get their exposure to the asset class going forward.
Read the full article in Trustnet.  [3 min read - open as pdf]
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1. Yield is back: for equities, bonds and alternatives - the yield drought is over 2. Selectivity matters more: within and across asset classes 3. Inflation is getting stickier: getting past the peak, but still a problem Read the summary article Find out more:
 [5 min read, open as pdf]
A private market allocation is structurally hard to reverse if things go wrong with any of 1) the investor’s liquidity needs, 2) the private market fund’s underlying investments, or 3) the realised returns relative to risk-free investments (e.g. gilts) for a given term. As such, an allocation to private markets should be seen more like an irreversible decision, unlike almost all other investments available to institutional investors which can be sold at a day, week or month’s notice. In this brief note, we do not set out the case for investing in private markets – that has been set out extensively elsewhere. We do however raise some points of challenge to those stated advantages. [Read full paper as pdf]  [3 min read, open as pdf]
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