This is not investment advice, a recommendation, or any similar guidance. The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper. Additionally, due to this idea, knowing that private markets are a rolling endeavor to actively generate alpha/internal rate of return (IRR) keeps us busy into the late hours of the night. We stay up at night knowing that public markets have a personality and behavioral makeup outside trading hours that directly or indirectly impact performance dynamics. Higher terminal rates have structurally increased the cost of capital, potentially causing operational slowdowns, earnings weakness and financing instability (possibly causing private equity/credit to inherit a higher-risk threshold). The greatest challenge we perceive is the planning and capital management of balance sheets amid a pending recession, tighter monetary policy and structurally higher target inflation. What are the greatest challenges you face and why? Furthermore, distressed debt and private credit (from the lending/investment perspective) may remain attractive as traditional lending avenues dry up amid tighter monetary policy and Silicon Valley Bank headwinds. small caps and micro-cap equities within health care and diversified technology appear to have better-risk-adjusted return metrics than broader equity markets. We believe private credit and special situation structured equity within domestic markets may present the most significant uncorrelated opportunities. What are the greatest opportunities you see and why? Thus, we perceive that micro/small-cap equities (specifically small-cap value) may provide relative outperformance in 2023. We believe that focusing on companies with healthy economic margins, non-levered core cash flows and efficient capital allocation/management (especially costs of capital) remains pivotal in identifying alpha among small- and micro-cap equities amid the pending recession, higher inflation and tighter monetary policy. Small- and micro-cap equities appear to trade at valuation levels not seen since the late 1990s, potentially displaying a structural opportunity relative to their large-cap counterparts. What is your outlook for investing in small- and micro-cap equities? This week, Elana talks with Hunter Frey, Partner, Dharma Capital Advisors. If you’re interested in being featured, please contact Elana Margulies-Snyderman. Financial Services GroupĮisnerAmper's Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. Media Content License Fees: Contract Compliance Measurement.Special Purpose Acquisition Company (SPAC) Services. Value-Based Services / Government Health Care.Health Care Investor and Private Equity Services.
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