Alternative Investment Opportunities Through a Slowing Economy

Positioning formarket dislocations For the secondhalf of 2023, we believe alternative asset managers are positioned to pursue opportunitieswheremany competitorsare limitedby market or liquidityconstraints. This is where liquiditybecomesa differentiatorbetween the “haves” and “have-nots” in these strategies. For example, inperiods of uncertainty and volatility, creditmanagers with stable capital and expertise in securityselection canoften take advantage ofmarket dislocations. If one looksat the high-yield bondmarket’s five biggest declines: four recessions including the global financial crisis as well as the 2015–2016wave of energy sector defaults, the average 24-month return for theHFRI ED: Distressed/Restructuring Indexwas approximately45% ( FIGURE 9 ). FIGURE 9 : Histor ical Distressed Hedge Fund Performance After Difficult Periods for High Yield Bonds Begin End BloombergBarclays Global High Yield Total Return Index Drawdown HFRI ED: Distressed/ Restructuring Index Forward 24M Return Early 90s recession July31, 1990 Oct 31, 1990 -11.2% 66.0% Dot-combust Feb 28, 2001 Sept 30, 2001 -8.7% 30.7% Global Financial Crisis May 31, 2007 Nov30, 2008 -33.2% 34.8% Energy sector'swave of defaults May 31, 2015 Jan 31, 2016 -9.8% 27.8% Early COVIDpandemic Jan 31, 2020 Mar 31, 2020 -13.1% 48.2% Source: Bloomberg, HFR, as of December 31, 2022. Indices are unmanaged. An investor cannot investdirectly in an index. They are shown for illustrative purposes onlyand do not represent the performance of anyspecific investment. Indexreturns do not include anyexpenses, feesor sales charges, whichwould lower performance. Past performance is no guarantee of future results. Real results may vary. Table shows five significant selloffs in high-yield bondsand the subsequent24-month returnsof theHFRI ED Distressed/Restructuring Index. OPPORTUNITIES | WEALTH OUTLOOK 2023 | MID-YEAR EDITION │ ALTERNATIVE INVESTMENTS | 15