July 2024 Private Performance

Since our June 2024 performance update, the public markets have been a stark reminder of how volatile they can be. August started off with a surge in market activity, driven by the Yen Carry trade, which spiked volatility. However, by the end of the week, the VIX (Volatility Index) had settled down, showing just how quickly market conditions can change. Unfortunately, September brought an even rougher start, with the S&P 500 dropping over 4% and the NASDAQ-100 sliding nearly 6%.

In these times, private investments play a crucial role in stabilizing portfolios, offering more consistent performance and less exposure to the extreme ups and downs of public markets. Let’s take a closer look at how private equity, real estate, and credit have performed and provided value.

Private Equity: A Glimpse Into Innovation

In July, both BPIF and iDirect showed positive returns, outpacing the NASDAQ, although they trailed slightly behind the S&P 500. While short-term performance is essential, private equity offers unique value beyond market returns by providing access to investments unavailable in public markets. These investments create true diversification, as their underlying assets are exclusive and highly targeted.

Here are some of the notable investments made by the iDirect Private Market Fund in Q2 2024:

Project Easy: A biotechnology firm advancing cutting-edge cancer treatment trials, aligning with the growth of oncology research.
Project Walmer: A renewable natural gas company working to address energy supply-demand imbalances and promote decarbonization.
Project Bolsover: A leader in energy simulation software, helping optimize the use of renewable energy.
Project Bottle: A cloud-based revenue management platform for life sciences, designed to reduce revenue leakage and improve strategic decision-making.
Project Pineapple: A forward-thinking AI-driven workspace platform tailored for hybrid workforces.
Project Compass: A healthcare tech company focused on improving payment accuracy and operational efficiency using advanced data analytics.

These investments reflect the fund’s wide-ranging exposure to innovative sectors, providing access to high-growth companies with significant upside potential.

Private Real Estate: Steady Growth and Unique Assets

Despite some public market volatility, private real estate has continued to deliver steady performance. While public REITs were down by 0.32% in July, Nuveen’s Global Cities REIT marked its third consecutive positive month, and BREIT, despite a slight dip of 0.19%, remains up over 2% for the year.

Although there are no new investments to highlight this month, I’m particularly enthusiastic about two core assets in these funds: data centers and grocery-anchored retail. BREIT has significantly increased its exposure to data centers, now making up 10% of its portfolio. This is a strategic move given the rising demand for data infrastructure, especially with the rapid growth of AI computing. Similarly, Texas residents will recognize HEB grocery stores as part of Nuveen’s retail portfolio. These investments underscore the importance of true asset diversification, with minimal overlap with other parts of the portfolio.

Private Credit/CLO: Steady Yield in Changing Times

Carlyle and Blackstone’s private credit funds continue to show strong growth, even as the Federal Reserve signals lower interest rates in the future. Both funds are tied to SOFR (Secured Overnight Financing Rate), meaning their underlying loans will adjust as rates decline, resulting in slightly lower dividends over time. However, the spread over interest rates should still provide solid monthly returns.

One of our standout performers, the Priority Income Fund, operates differently. Unlike traditional private credit funds, it is less influenced by Fed policy, maintaining a dividend range of 11-12% regardless of rate movements. While it carries a bit more volatility, akin to high-yield bonds, it still provides a compelling income stream for investors seeking higher returns.

Performance	July	Year to Date	Annualized Dividend Rate
Blackstone REIT¹	-.19%	2.17%	4.7%
Nuveen Global Cities REIT²	.34%	1.08%	5.62%
Blackstone Private Credit³	.9%	7.0%	10.5%
Carlyle Tactical Credit⁴	.85%	6.72%	10.06%
Priority Income Fund⁵	-1.75%	1.08%	12.56%
iDirect Private Markets Fund⁶	.73%	4.95%	-
BlackRock Private Investment Fund⁷	1.28%	5.59%	-

Conclusion: Diversification for Stability and Growth

True diversification is about more than just spreading investments across sectors; it's about incorporating assets that don’t overlap with your public market holdings. Private equity, real estate, and credit provide access to sectors and companies still in their growth phases, offering significant upside potential. As markets continue to shift, having exposure to these types of private investments can smooth out the ride and position your portfolio for long-term success.

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_{This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.}