Finding Safe Havens in Private Markets
The search for yield is intensifying as rates will be even lower for even longer, J.P. Morgan Asset Management leaders said at a media briefing.
Institutional investors are seeking “safe haven” assets in private markets amid coronavirus fears and declining interest rates, according to JPMorgan Chase & Co.’s head of alternative investing.
Anton Pil, manager partner of J.P. Morgan Global Alternatives, said Wednesday during a media briefing in New York that his group has fielded calls from investors worried about stock market volatility. They want higher-yielding alternatives to traditional fixed-income, said Pil, who is recommending real assets and private credit beyond the corporate world.
Following a plunge in stocks, the Federal Reserve made an emergency decision this week to lower its benchmark rate, saying the coronavirus poses risks to economic activity. Pil said he’s paying close attention to corporate cash flows over the next three to six months, as many companies in private markets have been “levered to perfection.”
That means they would have little wiggle room should earnings slide, and could struggle to meet debt payments, he explained. In particular, businesses in the hospitality and services sectors are vulnerable to the spread of coronavirus, Pil said.
The virus has been on the rise in the U.S., with the Centers for Disease Control and Prevention reporting 80 total cases and 9 deaths as recently as Wednesday afternoon. The outbreak began in China and has spread globally, with countries, states and cities trying to contain the disease.
Pil said that JPMorgan has preferred direct lending in areas such as real estate, where deals are backed by physical assets he feels comfortable owning. Beyond private credit, J.P. Morgan Global Alternatives invests in real assets such as renewable energy infrastructure and transportation assets.
Pil expects institutional investors’ demand for infrastructure assets will rise over the long term, particularly now that the Fed has cut rates and yields are so low on U.S. government debt.
The search for yield is going to intensify, according to David Lebovitz, global market strategist for J.P. Morgan Asset Management. Rates are going to be “even lower for even longer,” he said during the media briefing.