Investment Approaches in Volatile Markets

In this House view briefcase, our CIO team answers burning questions in the #alternatives space, including: Can private equity overcome recent headwinds? #PE faced challenges last year like higher rates and weaker transaction activity. But looking ahead, we expect these headwinds to become less prevalent. We favor funds with a strong track record of boosting operational performance, along with those exposed to strong secular trends. Do hedge funds make portfolios more or less risky? #Hedgefunds come with risks such as illiquidity, less transparency, and complexity. But strategies like macro hedge funds can help smooth returns even in falling markets. We believe holding a collection of funds – including multi-strategy – can provide diversification benefits. Should investors fear losses in private credit? #Privatecredit has garnered a lot of headlines as the lagged effects of higher rates set in. We believe the best private credit managers should be able to whether the storm by focusing on more resilient creditors. While investors should be aware of the risks, we see private credit as strategic source of income in long-term portfolios. Read the full report below for more.

This is one of the most interesting stats for multifamily in 2025: 1) Earlier this year, AvalonBay acquired 8 apartment properties across suburban Dallas and suburban Austin at a cap rate in the "high 4s," according to their press release. 2) This month, AvalonBay announced plans to sell 4 apartment properties in urban Washington, D.C. (inside the District) at a cap rate the buyer said was 5.94%. These are newer-vintage, Class A deals in both cases. So that's a cap rate premium of 100 bps to be in suburban Texas over the urban core of the nation's capital. It's worth noting these deals are not directly comparable for a variety of reasons, but even still, I can't imagine such a spread any time in history prior to COVID. It'd more typically have been reversed. Sales data shows the cities that were once the nation's most liquid -- D.C., Los Angeles, New York -- are less liquid today, and liquidity (investor appetite for a market) impacts pricing. The reason for the shift is not primarily demand side (solid fundamentals in most cases), but policy driven. There is a risk premium to invest where you are viewed as "the bad guys" and local policies reflect that antagonistic approach... (which of course inevitably backfires on renters via reduced supply and higher rents). A few thoughts (and feel free to add others): 1) Is a 100 bps discount for coastal urban the new normal? I don't think so. Cycles happen. When the discount to take on risk expands, opportunistic buyers step in. But that's now an opportunistic bet instead of a core one. Any buyer is banking on these cities adopting some level of regulatory reform or at least a more predictable playing field, and/or just drawn by a very attractive basis well below replacement cost. So don't get me wrong: These cities aren't falling off the map for investors. BUT there is undoubtedly smaller pool of investors today willing to invest in those spots. So those cities are gonna settle into a new normal somewhere between the pre-COVID cap rate premium and this deal's 100 bps discount. 2) Prime suburbs of major markets with lower regulatory risk are now arguably the most liquid in the country. There's a price premium that comes with that (particularly in NIMBY-shaped suburbs where it is super tough to build), and that makes it tougher today for sub-institutional, opportunistic buyers to be buyers in places like Texas -- or even coastal suburbs like Northern Virginia and east side of Seattle etc. Smaller investors previously active in those submarkets will have a tougher time to compete going forward -- and that's already true today. Where does that push those buyers in the next cycle? Lower-tier suburbs? Nearby tertiary markets? Other thoughts?

Investing Gets Easier When You Stop Confusing Decisions With Outcomes Modern Systems Theory teaches us something powerful: In complex environments like markets, cause and effect don’t live in the same moment. You make the decision today… but the outcome arrives later, through a maze of randomness, feedback loops, and changing conditions. This time-lag is why investing feels uncertain, emotional, even irrational at times. Our brains weren’t built for delayed, noisy causality. The solution? Separate “Decision Quality” from “Outcome Quality.” A good decision can lose money. A bad decision can make money. Judging yourself by outcomes in a complex system guarantees frustration. Instead, judge the process. This is why systematic quantitative investing is so powerful: you define your rules, validate their edge, and follow them with discipline. You stop chasing outcomes — and start trusting the system. The market becomes noise. Your rules become the signal. And confidence comes from your process, not from yesterday’s P&L. In complex systems, that’s the only kind of confidence that actually lasts. #Quant #Investing

During my career, I’ve secured tens of millions in funding. But looking back there are some things I wish I’d known before I started. Here are four tips I’ve learned the hard way about approaching potential investors with your business idea: 1️⃣ Know your numbers inside out Investors want to see not just passion but also a deep understanding of your business model. It doesn’t matter if you’re not a “numbers person”. Frankly neither am I. I just work hard to master them. Be prepared to discuss your financials in detail: multi-year revenue projections, cost of sales, fixed expenses, and break-even points. Comfort with your numbers demonstrates that you’ve done your homework and are serious about your venture. 2️⃣ Tailor your pitch to the specific investor Not all investors are created equal. Research who you're pitching to and adjust your message accordingly. What do they value? What sectors do they invest in? Who else have they backed and why? Use part of your pitch meeting to ask them about their history and motivations. This is absolutely not about changing your business plan or finances, but thinking about what you emphasise to align your narrative with their interests. 3️⃣ Have a clear exit strategy Investors will back enterprises for all sorts of reasons: a passion for the sector, enthusiasm for the founder, or market potential. But the number one reason they’ll back you is to yield an attractive rate of return. Be ready to discuss how and when they’ll make money from investing in you. Whether it’s through acquisition, IPO, or another exit strategy, showing that you have a plan to return a multiple of their initial investment will instil confidence. It’s not just about the immediate future; it’s about how you envision the long-term growth of your business. 4️⃣ Practice your storytelling People connect with stories, not just facts and data - important as those are. Use storytelling to convey your vision, the problem your business solves, and why you’re the right person to tackle it. A compelling narrative that links to the forecast performance of your business will engage investors emotionally, making them more likely to remember you and your pitch long after the meeting is over. What’s your experience of pitching for funding? What are you still wary of with investors? Share your tips or questions in the comments below!

One of the most concerning developments is the growing divergence between professional and retail investors. Institutional investors have quietly reduced risk, shifting toward defensive sectors and fixed income, while retail traders continue chasing speculative trades. Sentiment surveys confirm this imbalance, showing extreme bullishness among small traders, especially in options markets. With these risks building under the surface, prudent investors should proactively protect their portfolios. No one can predict precisely when the market will correct, but the ingredients for a sharp downturn are clearly in place. Savvy investors should use this period of complacency to reduce risk exposure before the cycle turns. Here are six practical steps investors should consider: ▪️ Rebalancing portfolios to reduce overweight exposure to technology and speculative growth names. ▪️ Increasing cash allocations to provide flexibility during periods of volatility. ▪️ Rotating into more defensive sectors like healthcare, consumer staples, and utilities that tend to outperform during corrections. ▪️ Reducing exposure to leverage by avoiding margin debt and leveraged ETFs. ▪️ Using options prudently—not for gambling, but for protecting portfolios through longer-dated puts on broad market indexes. ▪️ Focusing on companies with strong balance sheets, stable earnings, and reasonable valuations. ▪️ The explosion of zero-day options trading is not a sign of a healthy market. It is a symptom of an unhealthy market increasingly driven by speculation rather than investment discipline. Retail traders have moved from investing to gambling, chasing fast profits while ignoring the mounting risks. Greed is rampant, leverage is extreme, and complacency is near record levels. Markets can remain irrational longer than expected, but history tells us these speculative periods always end in a painful correction. Bull markets do not die quietly; they end with euphoric retail excess followed by painful corrections. Investors who recognize the signs early will avoid the worst of the fallout and be positioned to capitalize when value opportunities return.

Are Family Offices Ready for Market Turbulence? Market volatility and persistent uncertainty dominate the current investment climate. Most Family Offices anticipated these conditions and strategically positioned themselves ahead of disruptions. The UBS Global Family Office Report 2025 illustrates how these investors effectively transform volatility into opportunity. Top Risks Family Offices Monitor: • Geopolitical Conflict (52%): Middle East tensions, notably involving Iran, have disrupted energy markets and global supply chains, prompting many Family Offices to recalibrate strategies quickly. • Global Trade War (70%): US-China trade disputes are inflating costs and impacting profitability, making this a top priority for strategic adjustments. Family Offices are proactively addressing potential long-term economic challenges: • Global Recession (53%): Inflation and geopolitical tensions indicate a looming economic slowdown, prompting portfolio adjustments. • Debt Crisis (50%): Interest rate hikes have exposed financial vulnerabilities, leading Family Offices to emphasize proactive debt management. • Climate Change & Market Volatility (48% & 46%): Climate concerns are increasingly central to investment planning and risk strategies. Strategies Family Offices Implement for Resilience: • Active Management (40%): Leveraging experienced managers to navigate market shifts effectively. • Hedge Funds (31%): Using hedge funds to protect assets and secure stable returns. • Illiquid Assets (27%): Investing in private markets to maintain consistent, long-term growth. • Precious Metals & Short-Term Bonds: Diversifying with safe-haven assets like gold (19%) and short-duration bonds (26%) for stability. Despite careful planning, Family Offices face challenges in identifying reliable risk strategies in today's uncertain markets. Their strategic adaptability remains key to long-term wealth preservation. Consider: Is your investment strategy aligned with leading Family Offices? Are you ready not just to withstand, but thrive in turbulence? Success in uncertain times hinges on foresight, flexibility, and preparation. Data adapted from the UBS Global Family Office Report 2025. Context updated for June 2025. This analysis is for informational purposes and is not investment advice.

Climate Transition Planning 🌍 Climate transition planning is no longer a nice-to-have—it’s becoming a business necessity. With mounting regulatory requirements and investor expectations, companies must move beyond setting climate targets and demonstrate how they will achieve them through structured Climate Transition Plans (CTPs). CTPs are increasingly embedded in global regulations. The UK, Switzerland, Australia, Hong Kong, and Japan have mandated transition plan disclosures, and other regions are moving in the same direction. In the US, the SEC climate disclosure rule, although currently on hold, also includes transition planning for companies that have one. Many existing sustainability frameworks already incorporate CTP elements. The Task Force on Climate-related Financial Disclosures (TCFD) remains the foundational reference, influencing ISSB’s IFRS S2 standards, SEC climate disclosures, and country-specific regulations. The overlap between frameworks allows businesses to integrate CTPs into existing sustainability reports rather than treating them as standalone requirements. The UK’s Transition Plan Taskforce (TPT) and GFANZ provide structured guidance, while SBTi, CDP, and Climate Action 100+ offer tools to assess credibility and track progress. Beyond compliance, transition planning is a strategic advantage. Investors and financial institutions are embedding transition risk assessments into decision-making, and companies with robust, science-based transition plans are better positioned to access capital and strengthen partnerships. One of the biggest challenges remains financial planning. Only 5% of companies reporting to CDP in 2023 provided sufficient details on how they will fund their transition. Aligning sustainability strategies with CapEx, OpEx, and R&D budgets is essential to turn plans into real action. Businesses that act now will be ahead of regulatory shifts and well-positioned to mitigate transition risks. A strong climate transition plan isn’t just about reducing emissions—it’s about ensuring long-term resilience and competitiveness in a rapidly changing landscape. With regulations evolving across Europe, North America, and Asia-Pacific, the question isn’t whether companies should have a CTP, but rather how well-prepared they are to disclose and implement it. Source: @BSR #sustainability #sustainable #business #esg #climatechange #CTP #risks

From Dislocation to Opportunity: The Maturity Wall & How Private Credit Is Stepping In As Banks Pull Back When the Federal Reserve raised rates by over 525 basis points during 2022–2023, the commercial real estate (CRE) sector came under significant pressure. Financing costs surged, and cap rates followed suit. Banks, which traditionally held nearly 50% of all CRE loans on their balance sheets (as shown in the first chart below), started dialing back their exposure. This retrenchment created a liquidity vacuum that Private Credit and the CMBS market have stepped in to fill. Despite the considerable volume of troubled loans still working through the system, the CRE property market is stabilizing, aided by the Federal Reserve’s shift toward a new easing cycle. In short, CRE is healing. However, a massive maturity wall and financing gap looms with over $1.5 trillion in CRE debt maturing by the end of 2026. This represents an unprecedented refinancing challenge. Marathon Asset Management, along with other credit managers equipped with strong CRE lending teams (sourcing, underwriting, structuring, asset management), will be incredibly active in the coming years. Our strategy has been two-fold: 1. In the $1T+ CMBS market: Capitalize on the fallout to acquire securities that are senior to the fulcrum tranche. With 1,600 securitizations and 9,000+ tranches, this highly inefficient and fragmented market offers opportunity for those with differentiated data, proprietary tech, and deep credit/asset-level insight to generate alpha and absolute returns. 2. In the broader CRE loan market (~5x the size of CMBS), my recommendation is to partner with world-class real estate sponsors, owners, and operators to originate loans backed by prime, well-located assets with stable cash flows and growth potential. As the CRE market recalibrates, those with deep real estate credit expertise, flexible capital, and relationship/strategic partnerships will be best positioned to lead this next cycle.

This week’s market volatility has everyone focused on oil. But oil is not the real story. What matters is the chain reaction it can trigger across the system. Higher oil prices feed directly into inflation expectations. Inflation expectations push yields higher. Higher yields compress equity multiples. And all of this is happening while private credit is already under pressure and AI is accelerating structural disruption across the economy. In other words, several forces that normally unfold separately are now colliding at the same time: • Energy shocks • Financial leverage • AI-driven labor disruption • Rising global yields • The early stages of a transition toward digital financial networks Markets often look stable on the surface until the connections between these forces become visible. In this week’s video I walk through the framework I’m using to think about this moment, from the Strait of Hormuz and inflation expectations to private credit stress, AI adoption friction, and why Bitcoin and stablecoins will become increasingly important parts of the next financial architecture. The goal isn’t prediction. It’s understanding how the system is evolving. Video here:https://lnkd.in/eTRgZ2qh

The headlines say investors are nervous. But if you dig deeper, the data tells a more interesting story. February saw $114.8 billion flow into U.S. ETFs. That’s not a sign of retreat. It’s a sign of discipline. In volatile environments, investors aren’t exiting the market—they’re repositioning. And ETFs have become the go-to vehicle to do it. They’re no longer just passive wrappers. They’re tools. Tools to manage sector exposure. Tools to hedge risk. Tools to move with speed, transparency, and scale. Look at Vanguard. $14.5 billion in net flows in one week. $95 billion year-to-date. When markets get complicated, investors don’t want promises—they want precision. Cost matters. Liquidity matters. Simplicity matters. Vanguard delivers all three. Now compare that to what’s happening on the speculative side. Crypto-linked ETPs have recorded $6.4 billion in outflows across five weeks. That’s not just volatility—it’s exhaustion. Investors are walking away from hype and back toward structure. And structure is winning. Buffer ETFs, managed futures, dividend tilts—these are the strategies gaining traction. Not because they’re trendy. But because they give investors exposure with a plan. A way to stay invested without taking blind risk. The pattern is clear. Capital is moving. But it’s moving with intent. Investors are demanding clarity. They want portfolios that can be adapted in real time—without sacrificing control. ETFs give them that power. Whether it’s a sector rotation or a macro hedge, the ETF toolkit is how smart investors are expressing conviction today. Flows used to be a lagging indicator. Now, they’re a map. They show you where the real risk-taking is happening—and where it’s pulling back. So next time you read a market forecast, check the flows first. You might find the story is already being written in real time. What are you seeing in your portfolios? Are flows lining up with your views?