Alternative Investment Opportunities Through a Slowing Economy

Bondmarket implied volatility rose to twice its long-term average as measured by the MOVE Index in the secondhalf of 2022 and has remained elevatedever since. Thisvolatilitypeaked at 180.1 onMarch 13, 2023after the SiliconValleyBank and Signature Bank failures, the highest level since theGlobal Financial Crisis ( FIGURE 7 ). As ofMay 23, 2023, theMOVE Index remained elevatedat 131.7, signaling continueduncertainty. FIGURE 7 : US Tr easury Bond Volatility 0 50 100 150 200 250 300 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 MOVE Index Source: Bloomberg asofMay 23, 2023. Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. Past performance is no guarantee of future results. Real results may vary. Given the stresses on deposits, regional banks will likelyneed to reposition theirportfolios, sellingmore treasuries and mortgages, in order tomeet upcoming stress tests. This, in turn, may lead to an increase inboth volume and volatility, presenting opportunities for fixed income- focusedhedge funds. Additionally, in creditmarkets, the absence of bank lending, lowerETFand CLO volume, and concernsabout corporate profits going forward have created a series of related opportunities to be the prime liquidityprovider in themarket, but within the risk and context of continued economic uncertainty. Acquiring the creditsof fundamentallysound companiesat attractive valuations requires significant breadthof knowledge and may provide bothdownsidemitigation and potential future appreciation, if done well.We should expect continuedvolatility, which can allow fixed income investors to exercise their bond-picking skills. OPPORTUNITIES | WEALTH OUTLOOK 2023 | MID-YEAR EDITION │ ALTERNATIVE INVESTMENTS | 11