On 28 January, J.P. Morgan Private Bank analyzed the US and world economy, and stated that, “Our current subjective view is that there is a 20% chance of recession.”
Barely 6 weeks later, following the madness of “Liberation Day” and a rapidly escalating trade war, Goldman Sachs “raised the odds of a U.S. recession to 45% from 35%, the second time it has increased its forecast in a week.”
It took massive sell-offs in the $28 trillion U.S. Treasury Bonds market before Trump de-escalated the trade war (for now), recognizing the damaging consequences of international trade and economic policies drafted on the back of a Big Mac box.
The latest predictions come from J.P. Morgan Research, which mirrors what numerous other analysts and investors are saying and thinking:
“The probability of a recession occurring in 2025 is up to 60% — up from 40%.”
The cause is obvious as it is existential and as potentially hard to control or prevent: “Aggressive tariff policy could push the U.S. — and possibly the global economy — into recession this year.”
J.P. Morgan Research went onto show that:
- The latest unwinding of the Liberation Day tariffs reduces the shock to the global trading order, but the remaining universal 10% tariff is still a material threat to growth.
- The 145% tariff on China keeps the probability of a recession at 60%.
- The Fed expects to start easing in September, with further cuts at every meeting thereafter through January 2026 — reaching a 3% policy rate by June 2026.
- The ex-ante (pre-substitution) tax hike amounts to nearly $1 trillion, or 3% of GDP — making it the largest tax increase on U.S. households and businesses since World War II.
Table 1: Probability of recession (60%): Different pathways the U.S. and global economy could take
No one wants a recession, not Wall Street nor Main Street, nor anyone on any particular street anywhere in the world.
The question many investors and analysts are asking is: How do we offset the risk of a recession and ensure our investments keep performing even in an economic downturn?
For many investors, the strategy going forward will be as much about risk mitigation as safeguarding existing levels of returns and maintaining fund growth performance.
When there’s turbulence, investors usually move funds into safe haven assets. Gold is the most widely-used safeguard against recession or inflationary risks.
However, that is far from the only answer to this problem.
Alternative assets ⏤ PE, VC, private credit, infrastructure, ESG funds, real estate, transport, energy, and even collectibles ⏤ are also potentially viable safeguards against inflationary fears.
Communicating the unique value proposition alternative assets can bring to your investors is going to become increasingly important in the months ahead.
We can help you articulate and communicate this message.
What Makes Alternative Assets Attractive in Turbulent Times?
In 2022, the economy struggled with inflation on a macro and micro level. Prices went up everywhere, as did interest rates to combat inflation.
A natural, albeit uncomfortable consequence of this is that investor, business, and consumer spending and confidence were reduced. Despite this, J.P. Morgan Wealth Management noticed that: “Commodities stood out as one of the few public market assets that generated positive returns. What also stood out is the positive return from a mix of alternative investments.”
Preqin, the global leader in alternative assets data, tools, and insights, “forecasts the global alternatives industry to reach $29.2tn in assets under management (AUM) by 2029, from $16.8tn at the end of 2023.”
Preqin predicts “an annualized growth rate of 9.7% in the forecast period, 2023-end to 2029.”
These predictions and financial models were made with the expectation of economic disruption and dislocation factored in, as you can see from the wording of their statement:
“Global alternatives markets continue to evolve rapidly, especially as individual investors’ access opens up, as the private wealth channel’s growth continues to gather pace. While policy rates are expected to decline, macroeconomic conditions are likely to remain more challenging than during the pre-pandemic era, and our forecast of slower industry growth reflects that.”
“Investors are navigating evolving geopolitical risks as we move towards a multipolar world order – which presents a new set of investment opportunities and risks”, said Cameron Joyce, Global Head of Research Insights at Preqin.
In short, Preqin expects that challenging macroeconomic conditions, geopolitical risks, and the resulting multipolar shift, means alternative assets are going to be an increasingly attractive asset class.
There are several reasons for this, and during an economic downturn, these are key selling points for alternative asset firms:
Lower correlation between alternative assets and traditional stocks and bonds.
Naturally, it depends on the specific investment vehicle and its relationship to economic cycles, but picking the right ones means your investment remains stable even when stocks and bonds are a rollercoaster.
Risk mitigation and offsetting public market losses with private market growth.
In times of market stress, investors may seek assets that can preserve or even grow their capital. Alternative assets like real estate, infrastructure, and commodities can offer this potential.
Longer lock-in periods without secondary liquidity.
When investors panic, herd mentality kicks-in, and the result is that the majority start selling and moving funds around. Numerous studies show that this happens every cycle. It will happen again when the next recession hits.
An effective way to hedge against cyclical reductions and losses is to invest in illiquid, long-term assets and funds. That way, you can be confident that any public market losses can be offset by private gains.
Imagine, if you’ve locked $10 million in a fund where you can’t make any withdrawals in the next 24-months, and are guaranteed a return of 10%, then you know a percentage of your funds are safe from any downturn, and there’s no risk of a panic selling from that particular fund.
A risk-adjusted portfolio that hedges against inflation.
Again, this depends specifically on what and where you invest. Not every alternative asset class offers this, but some funds give you access to counter-inflationary, tax-shielded assets, like our client ITE Management (transport and infrastructure funds).
Ethical and ESG finance is similar, offering a way to de-risk portfolios through investments that are more sustainable in economic and financial terms, not just for the environment. Good governance is an integral part of ESG, and generally speaking, well-managed companies perform better.
For alternative asset CEOs, COOs, and CMOs, the question is: How can we stand out, get noticed, and make a strong case for investors to come our way?
No matter what flavour or vintage of your investment portfolios (PE, VC, credit, real estate, ESG, etc.), you need potential investors to know
1) that you exist;
2) that you can solve their problems, and
3) that you are trustworthy, likable, and capable
4) that an investment with your firm is a safe bet in turbulent times (with all of the caveats one expects with any investment asset).
One of the most effective ways for you to achieve this is to create engaging content and distribute/promote it to reach your audience.
Content is part of the puzzle.
Brand building and storytelling are the rest.
We can help you create more effective storytelling and impactful, high-quality marketing strategies that are unique to your brand, values, and message.
At Uncommon, we are big believers in the power of brand building.
Using brand building and storytelling, you can gain the right visibility with the right audience, and you need it sooner rather than later.
These are some of the reasons you need to work with specialist marketers who really understand alternative assets and ethical and ESG finance.
One of the most effective messaging strategies in turbulent times is to show potential investors what they’ve got to gain (and avoid losing) by investing in your funds.
If you can show the strength of your funds or your sector through a benchmark comparison ⏤ especially if it’s done independently ⏤it puts your firm in a really strong position.
💡 Key narrative and messaging points for alternative asset firms
If you want to stand out during periods of uncertainty, include any or all of the following that apply to your company:
- Risk-adjusted returns;
- Consistent and stable performance (based on your results over the last 5 or 10 years);
- Showcase any positive results you can use from financial downturns and recessions (e.g., your fund’s performance during the Covid-19 pandemic, and better still, if you can demonstrate positive results during The Great Recession of 2007-09, and its long-felt aftermath);
- Low or no risk of secondary liquidity and panicked sell-offs due to lock-in periods;
- That you can offer a counter-cyclical, safe-haven against inflation.
These and any other advantages worth talking about should be included in the messaging and storytelling you deploy.
We can help you with all of this.
Want a Free Tailored Sample & Marketing Analysis?
Now more than ever, alternative asset firms need to stand out and get noticed. You need investors to clearly see the advantages of investing in your offering.
So you can see what we can do, we are offering a free, no obligation marketing analysis and a bespoke sample of copy.
Sounds interesting? Email us at: admin@fintechcontent.marketing and we will get started for you.