March 2024 Private Performance

March saw the continued growth of the S&P 500 and NASDAQ-100, giving both indexes superb growth over the last 5 months. There has been a bit of a correction in April as of this writing, but that's to be expected after such an upward trend. But there is now a lot of headwinds for markets overall. We have an ongoing war in Ukraine, Israel is now fighting Hamas and for the first time, a direct conflict with Iran. And then in the U.S., we have a very polarizing election cycle, sticky inflation, and the FED's on going battle of how to lower that inflation without crashing the economy. The AGG has reflected all the craziness, with it being down every month this year. While the equity indexes have seemed to take all the news and drive higher no matter what. I don't know if that can last for the rest of the year. What has happened recently, is the VIX has started looking like what it should look like given all the global events going on right now. So what to do now?

This type of environment is where private funds could help manage that volatility that could come from these global events. Let's hope things clam down and that we do end up with a soft landing from a interest rate standpoint. But in the meantime, let's take a deeper dive into fund that we are using with clients and how they have performed so far this year.

Private Equity

BPIF has now increased performance every month this year. With 1.05% coming in March. We would expect to see solid returns as the economy has had stayed strong. also had a good February, doubling it's performance from January. Again, as we talked about last month, the venture allocation with-in this fund is what excites me most over the next several years. As of this writing we still do not have performance for iDirect. I will keep you in the loop as we get their March numbers.

Private Real Estate

BREIT is moving strongly in the right direction so far this year. And Blackstone's management team believes that they are past the lows of the last cycle. That may seem hard to believe with everything that is going on with stickier inflation and the FED's comments over the last couple of months. But with Blackstone's track record of calling out higher inflation back in 2021 and the fact that based on the companies they own, they would be the 3rd largest employer in the US, they see data points that one else has. So when they start banging the drum on a topic, you better listen and digest what they are saying. Now does that mean that I'm allocating more to the space? No, real estate in general is a long term play and we'll ride out the waves along the way. What that brings to the overall portfolio is the non-correlated movements that provide excellent alpha over the long term. Nuveen's global cities REIT had a bit of a down March, but at the same time, they also increased the monthly dividend. And once again, inside of a taxable account, that dividend is 100% tax free.

Private Credit

Another month of outstanding performance from the private credit space. Both Carlyle's and Blackstone's funds were up over 1% in March. And now both are over 3.1% through March 31 of this year. We also have a new addition to our income focused investments. The Priority Income Fund from Prospect Capital. I was already investing into individual bonds from Prospect Capital. But now after finishing due diligence on their fund, we've starting allocating into the their income focused fund. This fund invests into pools of 1st lien, senior secured loans to large U.S. companies. It has a 10 year track record of paying a fully covered dividends that pay monthly and currently is at 12.08% annualized. There is some good diversification through this fund with 2,071 senior secured loans to over 1,400 companies. And like our other private credit debt, it is floating rate, which limits the impact of interest movements. And more importantly, this fund has averaged a very low 1.16% default rate. Much lower than the overall sector.

Conclusion 

In summary, the impressive early-year gains and the late-year gains in the public markets underscore the importance of diversification. We do not want to miss out on those returns. But private funds added to your public investments, can offer the potential for higher returns, lower volatility, and market non-correlation. Through examining private equity, real estate, and credit sectors, we've seen the value these investments can add to a portfolio. Private equity's unique partnerships, private real estate's resilience and tax advantages, and the robust performance of private credit amidst rate increases highlight the strategic benefits of incorporating these sectors. The insight provided into each area suggests that careful selection and strategic allocation across these diverse investment opportunities can significantly enhance portfolio robustness, guiding investors towards sustained growth amidst market uncertainties.

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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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