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Executive Summary – 2024 AIF Southwest Investors’ Forum

2024 AIF Southwest Investors' Forum

Each year AIF brings together investors, board trustees and academics from throughout the Southwest United States to discuss opportunities and best practices. 2024 was no different. Over the course of a two day program attendees heard from practitioners and leading researchers about how markets are changing and how institutional investors can be prepared for the future.

Day one of the forum was anchored by sessions from AIF’s Center for Private Capital which offered sessions aimed at helping investors and board trustees understand the growth of private credit as an asset class and how to construct portfolios that are well positioned to capture opportunities within private credit. Other roundtables over the two days included discussions of infrastructure, private equity and real estate.

Executive Summary

  • Risk management has evolved over the years from risk measurement to a more robust set of tools but that doesn’t mean it’s possible to fully eliminate risk from a portfolio. The role of the CIO is to understand best as possible what is in the portfolio and what the outcomes might be across a range of market regimes.
  • As institutional investors think through their risk management frameworks it may be worthwhile to examine them against current market conditions. A passive equities portfolio benchmarked to the S&P 500 may exhibit more volatility and a higher concentration of risk due to over concentration of the index in mega cap tech stocks. Similarly, early investors in direct lending may discover that it makes more sense from a risk management perspective to diversify into other areas of private credit as the asset class has grown significantly in response to structural shifts within the lending market.
  • The growth of private credit has also improved its liquidity. If institutional investors are concerned about making a long-term allocation to an illiquid asset class, solutions like NAV loans are available to provide liquidity as needed. Listed private credit exposure like that offered by BDCs can also provide investors with a way to enter and exit private credit without having to engage with lockups or lengthy redemption windows.
  • Markets are changing, with interest rates likely to be higher for longer and heightened volatility being the new norm, now may be a good time for a target allocation study. Structural changes in the market can offer new opportunities and highlight areas of portfolio construction that may need to be adjusted.

Opening Keynote Discussion: The State of the Economy in 2024

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