June 2024 Private Performance

The last week has corrected the outstanding performance of June. But June was a stellar month in the equity markets.  The S&P 500 was up 3.47%, and then the NASDAQ-100 had back to back months above 6% with a 6.2%. And the AGG was up at .7% on the month. After clients and prospects felt a bit pessimistic last month, the strong run up in the S&P and NASDAQ, had everyone ready to take on risk. What a difference a month makes! But after the last couple of week's shellacking, that optimism is pretty much gone. Instead of going with the wild winds of the markets, it's vitally important to stick your strategy based on your goals. Trying to down-shift or up-shift to match the markets is what gets people in trouble very quickly. Having your portfolio built for an all weather approach is so important. As part of that balanced approach is why I use private investments to build out part of my portfolios. Let's check out June's performance and how it helped balance my client's portfolios.

Private Equity

The private equity funds that I use are about a month behind in reporting performance. Both BPIF and iDirect just recently have updated May's performance. BPIF was flat in May and then iDirect was up 2.28%. Both are up over 3.5% on the year, but trailing the S&P 500 and NASDAQ as of this writing. And this makes sense, the types of companies that these type of funds buy are smaller and valuations are highly correlated to interest rates. Also, another factor with these returns, is that they are very closely tied to the actual performance of the companies' earnings. The public markets get more of the benefit of people buying and pushing valuations that may not be anywhere close to the actual earnings of the companies from a fundamental basis. I know private funds detractors love to say there's no transparency, but the reality is that the returns are audited on an ongoing basis. And those returns have to match the reality of the actual earnings. We will see how these funds play out over time. There has been a sector rotation happening in the public markets to the much beleaguered Russell 2000. So I would not be surprised with a nice increase in performance on these 2 funds over the 2nd half of the year. 

Private Real Estate

Nuveen's Global Cities REIT has put up back to back positive months for the first time this year. While BREIT has now been positive every month this year. Again this is exactly what we expect from this part of the portfolio. Real estate should be boring, slowly but surely compounding over time. Again comparing to the public REIT space, which has had wild swings over 10% to up and down side over the last few years. And then as I always mention, the dividends with these 2 funds are tax advantaged and that is something that can not be matched in the public markets.

Private Credit

The funds in our private credit space really are the superstars. Another month of both Carlyle's and Blackstone's funds growing in the right direction. Both are now close to 6% of return on the year and both still have dividends over 10%. BCRED hasn't had a down month in 22 months and Carlyle's fund hasn't in 14 months. The Priority Income Fund is a bit more volatile and was down last month. But for that volatility we get a higher monthly dividend, of which was 12.35% last month. Overall, I'm very happy with this part of the portfolio and what it brings to our income bucket.

Conclusion 

Portfolio building is all about balance. Whether you are focused on growth or income or somewhere in between. It's all about having the diversification that helps lower volatility. Keeping that volatility low is what keeps investors calm, which helps keep investors focused on their goals and not the craziness of the day. 

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1. https://www.breit.com/performance/
2. https://www.nuveen.com/gcreit/performance
3. https://www.bcred.com/performance/
4. https://www.carlyle.com/ctac
5. https://www.priorityincomefund.com/
6. https://idirectpmfund.com/idirect-pm-fund/performance/#performance
7. https://bpif.com/portfolio-and-performance/default.aspx

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