Displaying items by tag: alts
Managed Accounts Could See Surge From Regulatory Changes
Recent changes allow 401(k) plans to hold private market and alternative investments, opening the door for managed accounts to expand their offerings. Managed accounts, which provide professionally managed, customizable portfolios, are seeing rapid growth, with assets reaching $13.7 trillion in 2024 and net flows topping $811 billion.
Incorporating private equity, venture capital, private credit, and real estate into these accounts requires robust technology for reporting, valuations, and liquidity management.
Firms like InvestCloud are creating platforms that enable scalable, model-based access to private market investments, allowing advisors to integrate these assets alongside traditional ETFs and mutual funds. Such technology also supports liquidity solutions, like lending against securities, so investors can access cash without disrupting long-term strategies.
Finsum: With regulatory adjustments, including tweaks to the Accredited Investor rules and the 401(k) shift, managed accounts are positioned to broaden access to previously hard-to-reach alternative investments.
Blackstone’s Private Credit Issuing a Further Half a Billion in Bonds
Blackstone’s flagship private credit fund, BCRED, is issuing $500 million of five-year investment-grade bonds, expected to yield about 1.6 percentage points above Treasuries.
The sale comes after BCRED’s $1 billion issuance in January and follows a $650 million note deal from Ares Management’s BDC earlier this week. Goldman Sachs’s BDC is also preparing a potential offering as business development companies take advantage of renewed investor demand.
These firms, which lend to small and midsize companies, are tapping the market before earnings blackout periods begin. Issuance overall has surged, with 27 companies selling $43 billion of debt Tuesday, the third-largest daily volume on record. Barclays, Citigroup, Goldman Sachs, RBC, and Wells Fargo are managing the deal, with proceeds earmarked for general corporate purposes.
Finsum: The timing of this private credit move is worth monitoring, as it could have implication for earnings season.
Sluggish Infrastructure Spending in the US? Turn Abroad
Advisors facing heightened U.S. market volatility are increasingly turning to global infrastructure ETFs as a way to diversify portfolios and hedge against policy risks. Structural growth drivers like demographic shifts, and supportive government policies, such as Germany’s recent multi-billion-dollar funding initiatives are supportive.
The sector also has a history of resilience during inflationary periods, as infrastructure companies provide essential services that can pass costs on to consumers. One option is the BNY Mellon Global Infrastructure Income ETF (BKGI), which actively invests in global infrastructure firms with strong cash flows, balance sheets, and growth prospects.
BKGI aims to deliver a forward yield of 6% or higher by focusing on dividend-paying companies, with about one-third of assets in U.S. holdings and the rest diversified across Europe and beyond.
Finsum: Infrastructure exposure offers low correlation with U.S. equities, especially when considering outside options.
Is Private Credit Fueling the Next Bubble
UBS strategists have warned that the artificial intelligence boom, fueled heavily by private credit firms and lenders, is raising the risk of overheating in the sector. Private credit, once focused on smaller businesses, has expanded rapidly into big tech, with tech-sector debt from non-bank lenders surging nearly 29%—or $100 billion—in the past year.
The warning echoes concerns from OpenAI CEO Sam Altman, who recently cautioned that excitement around AI may be inflating a bubble. UBS noted that while this influx of capital could support hyperscaler growth plans, it may also create vulnerabilities if assets sour or growth slows.
Tech giants including Meta, Amazon, Microsoft, and Alphabet are projected to spend $344 billion in 2025, much of it on AI-driven infrastructure such as data centers.
Finsum: With private credit now deeply embedded in the sector, analysts caution that investors should carefully monitor risks alongside the sector’s breakneck growth.
Three Things to be Weary of With Structured Notes
Structured notes are often pitched as sophisticated tools for yield and downside protection, but they carry layers of risks that can outweigh their potential benefits. Because they are debt obligations of the issuing bank, their value hinges on the issuer’s creditworthiness, leaving investors vulnerable in the event of a default.
High, often hidden, fees further erode returns, with some products charging over 2% annually on top of advisor commissions. Liquidity is another concern, as structured notes rarely trade in active markets, forcing early sellers to accept steep discounts.
Their complex payoff structures can also mislead investors into believing they hold principal protection when in reality protections are conditional and limited. Tax treatment is murky as well, with many products generating taxable “phantom income,” creating unexpected burdens that make structured notes a risky choice for most retail investors.
Finsum: While structured notes are perfect for lots of investors illiquidity and complexity that may leave investors worse off than with simpler, more transparent options.