Quick Reads

All About Alpha

March 2022

Past performance is not necessarily indicative of future results. No assurance can be given that any investment will achieve its given objectives or avoid losses. Unless apparent from context, all statements herein represent GCM Grosvenor’s opinion.

Select risks include: market risk, macroeconomic risk, manager risk, liquidity risk, interest rate risk, and operational risk.

Current Outlook: A Rocky Year-to-Date

While 2021 brought us record economic growth, storm clouds were already beginning to brew by the end of the year. It was clear that record GDP growth rates risked slowing as stimulus money from the COVID-19 crisis began to dissipate. Fiscal policy was becoming difficult to sustain, suggesting it was reaching its limits, and monetary policy began tightening. In fact, the beginning of 2022 has been a perfect storm of decades-high inflation, rising interest rates, geopolitical instability-turned-war, not to mention the persistence of the COVID-19 pandemic. These factors combined to generate extreme market volatility that persisted through much of the first quarter.

In our view, the combination and persistence of these factors means that investments reliant on beta are likely to continue to be very challenged. We therefore believe investors will need to seek alpha to drive returns and investing in alternatives can be a key source of such alpha. In the following, we highlight five areas within alternatives that we believe represent pockets of opportunity for alpha generation.

Less typically trafficked areas of the market such as the middle market

Situations where cyclicality associated with an investment is limited

Manager selection and access in absolute return strategies

Pockets of opportunity within private credit

Conclusion

Current and potential forthcoming market conditions can be considered challenging but, in our view, opportunities still exist to generate returns. The importance of properly sourcing, structuring, and executing investments is going to be more important than ever before, as is overall portfolio construction and diversification. We believe investing in the broader markets is going to be highly challenging over the foreseebale future, and therefore investors should focus on alternatives where opportunities for alpha generation exist.

With approximately $72 billion in assets under management, GCM Grosvenor is one of the world’s largest and most diversified independent alternative asset management firms. We have the resources, experience, and long-standing relationships with elite managers to evaluate and implement investments flexibly across our open architecture platform.

Learn more about how we invest.

Related Insights

Personal viewpoint of light effects created by buses and cars speeding past camera as commuters travel through City of London financial district.

2023 Market Outlook

We explore our expectations for 2023 including the potential opportunities that are emerging from the tumultuous past year in the market.

February 16, 2023

Waterfall with person standing behind it

Absolute Return Strategies Mid-Year Market Commentary and Outlook

We believe the current market environment supports the case for active management generally and prudent, less market-sensitive investment strategies implemented by hedged strategies. Here, we provide a brief overview of the year so far and explore where potential opportunities exist.

July 29, 2020

Important Disclosures

For illustrative and discussion purposes only. The information contained herein is based on information received from third parties. GCM Grosvenor has not independently verified third-party information and makes no representation or warranty as to its accuracy or completeness. The information and opinions expresses are as of the date set forth therein and may not be updated to reflect new information.

Investments in alternatives are speculative and involve substantial risk, including strategy risks, manager risks, market risks, and structural/operational risks, and may result in the possible loss of your entire investment. Past performance is not necessarily indicative of future results. The views expressed are for informational purposes only and are not intended to serve as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell securities by GCM Grosvenor. All expressions of opinion are subject to change without notice in reaction to shifting market, economic, or political conditions. The investment strategies mentioned are not personalized to your financial circumstances or investment objectives, and differences in account size, the timing of transactions and market conditions prevailing at the time of investment may lead to different results. Certain information included herein may have been provided parties not affiliated with GCM Grosvenor. GCM Grosvenor has not independently verified such information and makes no representation or warranty as to its accuracy or completeness.