Investors have shown a growing appetite for liquid strategies as they face a challenging market environment due to increased volatility, rising interest rates and persistent macro-economic uncertainty. Stressed and distressed credit strategies are also of significant appeal, said Murano, a firm which acts as a matchmaker across the financial industry – connecting funds and investors.
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Investors have shown a growing appetite for liquid strategies as they face a challenging market environment due to increased volatility, rising interest rates and persistent macro-economic uncertainty. Stressed and distressed credit strategies are also of significant appeal, said Murano, a firm which acts as a matchmaker across the financial industry – connecting funds and investors.
“The opportunities available and potential for returns in less liquid assets are well understood, as evidenced by the large amount of capital that has flowed into private equity and private credit over the past years. More recently, however, many allocators have turned to more liquid variants of strategies, or more generous liquidity terms are being demanded,” observed Tom Reeves, Head of Research, Murano, adding the team saw a propensity for research into liquid variants of strategies, compared to their less liquid counterparts.
For example, a $12 billion foundation in Chicago confirmed it is “gravitating to mainly liquid offerings” as a result of the current market environment. Further, an international private bank from Switzerland said it plans to research private credit strategies in 2023, but only those in an evergreen vehicle.
“This does not make illiquid strategies redundant, of course. It does make it even more important to be able to explain why there is a need to be locked up in a strategy, and the illiquidity premium the strategy is able to exploit,” Reeves noted.
Murano also witnessed an uptick in the number of conversations around stressed and distressed credit strategies particularly, but not only, in the US. This became prevalent in the fourth quarter of 2022 and the pickup has been significant, though, according to Reeves, much of the research is in the initial stages of being exploratory.
Reeves also detailed how allocators want managers to show how their strategies are performing given the new investment environment of higher inflation and rising interest rates. He said: “Currently, it is common that past years’ performance is less important because of the new macro environment. The need to be able to explain how the strategy aims to perform given the change is paramount.”
Further, Murano said it had evidence that the changing environment pushed back allocations in 2022 but that much of the changing environment has now been worked through. Reeves noted: “The CIO of a foundation in Wisconsin ($5bn AuM) discussed with us in October that they had reviewed Lending strategies in 1Q and 2Q of the year but did not allocate due to the moving rate environment. In our October conversation, however, they are again reviewing direct lending and asset-backed lending strategies with a view to allocate.”
From its perspective, Murano seeks to maintain a diversified and global manager base, in order to serve the entire spectrum of institutional allocators the research team speaks with, from small Family Offices all the way up to the largest Sovereign Wealth Funds.
Tom Reeves, head of research, Murano – Tom is Head of Research at Murano Connect based in London. He leads a team of 25 analysts working with institutional investors and asset managers to match allocators’ research mandates with fund strategies. The team works with a diversified range of strategies across the public and private markets. Tom started in the industry as an Equity analyst on long-only Asia portfolios at Aberdeen Asset Management. He then bought into a consultancy working with private companies to raise capital for mezzanine finance deals. After 10 years in Singapore he returned to London to join Murano Connect where he has spent the last 4 years building out the research team. After 12 years total in Asia including a year at Nanjing University, China, he speaks Mandarin at home with his Singaporean wife and son.
