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Setting the investment agenda

29.03.2021

Monthly Agenda March 2021 - Alternatives

Private market investors continued the trend of allocating greater amounts of capital to top tier experienced fund managers in 2020. The proportion of assets under management (AUM) with emerging managers, those classified as having raised three funds or less, has fallen from 28% in 2014 to just 12% in 2020. With rising numbers of new fund managers entering the private markets space veteran investors like Howard Marks have commented that it is increasingly important to invest alongside experienced managers, harnessing a skill premium, who can consistently produce top quartile returns for investors.

Chart 14: Experience pays in private capital fund raising

 

Enlarge Source: Pitchbook

 

 

The iShares Global Clean Energy ETF is down 32% from its record high price posted on 7th January 2021. Investor profit taking and rising interest rates have impacted valuations on many renewable energy companies. Prices are now trading close to levels last seen in November 2020 when the Biden election win and commitments from big nations like China and Japan to Net Zero targets provided a tailwind for the industry. Recent announcements from the Biden administration proposing $3 trillion in spending focused on infrastructure and clean energy will be positive for the industry going forward.

Chart 15: Clean Energy stocks fall from record highs

Enlarge Source: Bloomberg

 

 

The recovery in oil markets has been faster than many had initially expected as activity around the world continues to pick-up post lockdowns. Year to date Brent Crude oil is up over 20% as OPEC members continue to hold supply cuts in place for some time. Despite Russian attempts to influence the market by opposing this decision many view the recent pullback in prices as a function of financial flows rather than a substantial change in supply vs. demand balances. Citi see quarterly declines in supply throughout 2021 leading to prices trading well above $70 later in the year.

Chart 16: Oil prices pullback following strong year to date rise

Enlarge Source: Bloomberg

 

 

Darragh Kennelly
Investment Analyst

 

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