Private equity (PE) is not the only game in town for institutional investors seeking exposure to emerging companies with significant potential for growth.
With a similar historic return profile to PE, the current market environment may be pointing towards an allocation to micro cap stocks. Find out why.
This white paper is the second in a series designed to bring understanding of the U.S. equity market to the next level. This paper is organised into two parts, the first and longer part focusing on CAPE-based valuations, and the second focusing on corporate profit margins. The paper addresses both the multiple and the…
Winner of Savvy Investor Awards - Best Asset Allocation Paper 2021
Oliver Wyman Forum asks why stock market valuations in the United States varied so much throughout history. Relative to historical benchmarks, are valuations in recent years as extreme as commonly believed? And why have margins also varied so much and…
The recovery from the global equity bear market of 2022 has been on pause for Emerging Market stock markets since the middle of last year. On paper, the region could find the economic and policy environment of 2024 hospitable. In such a diverse area, we think it is worth digging deeper into which countries we would favour…
Co-head of private investments Michael Carmen shares his outlook for venture capital markets, including the state of deal flow, valuations, and the IPO market.
This white paper is the third in a series. First, it introduces a new equity market valuation metric that outperforms the traditional ones. Second, it reveals 10 largely unknown but highly significant facts about the U.S. economy and financial markets, which improve investors’ ability to navigate market moves. Third, it re-…
This is the first in a series of papers that seeks to explore why U.S. profit margins have remained elevated for the last 10 or so years compared to history. I look back to a paper written just over a decade ago in which I predicted a return to normal profit margins. I obviously couldn’t have been more wrong. In this paper I…
Insurance Multi-Asset Strategist Tim Antonelli provides his latest multi-asset views for insurers, with an emphasis on the value of core fixed income in today's environment.
We begin this paper by looking at the economic determinants of equity risk premiums, including investor risk aversion, information uncertainty and perceptions of macroeconomic risk. In the standard approach to estimating the equity risk premium, historical returns are used, with the difference in annual returns on stocks…
Warren Buffett suggested that the ratio of the market value of publicly traded stocks to economic output could identify equity market mispricings. The authors extend the existing research from the United States to international equity markets by investigating the return-predictive characteristics of the market value of…
All 2-sigma equity bubbles in developed countries have broken back to trend. But before they did, a handful went on to become superbubbles of 3-sigma or greater: in the U.S. in 1929 and 2000 and in Japan in 1989. There were also superbubbles in housing in the U.S. in 2006 and Japan in 1989. All five of these superbubbles…
Eastern Europe has some of 2023’s best-performing equity markets globally, with large markets such as Poland rallying 52% and Greece gaining 48%1. This was driven by valuations 40-45% below historic averages, an improved economic and political outlook and easing inflation. We believe there is plenty of room for this strong…
Our analysis suggests it is public markets rather than private equity that are irrational. In fact, we would argue that through historical bouts of market volatility, private equity has acted very rationally.
Equity returns have defied expectations the first half of 2023. Despite a backdrop of banking stress, rising recession risk, and materially tighter monetary policy than expected at the outset of the year, equities have continued to march higher.
High-quality fixed income assets may offer the best return potential in more than a decade along with diversification benefits as a likely recession approaches.
The greater the misalignment between financial quantities and economic quantities, the more distorted and grotesque the whole picture becomes, particularly if nobody carefully connects the dots. Unfortunately, investors and policy makers repeatedly insist on learning that the hard way.
Co-Head of Private Investments Michael Carmen shares his outlook for the private equity market, highlighting today's normalizing multiples, continued innovation, and, in a number of cases, fewer competitors for the most attractive deals.
Warren Buffett paraphrased Ben Graham in 1987, saying “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” In my view, those two aspects of the financial markets operate simultaneously. Valuations are the “weighing machine” and provide information about likely long-term investment…
In recent years, tech innovators backed by growth equity investors have grown rapidly to valuations of $1 billion or more. The underlying technological and business model innovation that made this possible remain sound. But the market shock of 2022 has clear ramifications — and offers new opportunities — to stars, fallen…
Why is it so hard to accept that speculative bubbles can burst? Interest rates were driven to zero for a decade. Yield-starved investors chased stocks to valuations beyond the 1929 and 2000 extremes. That speculation front-loaded more than a decade of future market gains into the present. Those gains are now behind us,…