The Golden Age of Credit, Continued
Near-term economic uncertainty should keep corporations conservative and focused on balance sheet repair.
The past 12 months have tested the world in ways that were hard to imagine last January. What started as a solid year for equities was turned upside down as the COVID-19 virus spread across the world in the first quarter, crushing global economies and virtually all asset classes and, more importantly, devastating the lives of millions.
While markets have stabilized – and more – the longer-term impact of the pandemic is difficult to gauge, whether it be related to healthcare, economic inequality, or how consumer and corporate behaviors will fundamentally change as a result of the outbreak. What can be assured, though, is that markets and investors will adapt to whatever comes their way. They always do.
Past will not be prologue
And make no mistake, there’s far more on the horizon than the ultimate path of the coronavirus. The political backdrop over the
next four years will be much different than the past four. Central banks around the world will be grappling with the right mix of stimulus (or, eventually, a lack thereof). Diversity and inclusion, ESG and social equality will play far bigger roles in the political and financial arenas. And China’s place in the global economy will continue to evolve, with potentially massive consequences.
For investors, this all adds up to more than just uncertainty. It adds up to opportunity. Trends that were already in place prior to the pandemic are in many cases being accelerated, while new and unique avenues of growth continue to be established, crisis or no crisis.
Dealing with all of these issues – and myriad others – takes a manager large enough to have an established, global footprint, but flexible enough to adjust to rapidly changing conditions. A major advantage of PGIM’s business model is that we can offer our clients specialized expertise at-scale from businesses that are autonomous and nimble.
No one was ready for 2020, but we can be prepared for 2021 and, ultimately, look to a future we saw before the pandemic hit. So, what follows here are some of those opportunities that we believe are worth watching. We can’t be certain that all of our views will play out as expected, but we can promise you this: Our focus at PGIM has and always will be on the long-term trends and undercurrents that can lead to unique and untapped investment opportunities for our clients.
Moving Out: The Growth of the Suburban Rental Market
The COVID-19 outbreak and changing lifestyle demands of an aging millennial cohort are transforming the suburban rental market.
‘Bridging the Gap,’ In Good Times and Bad
Mezzanine lenders who are ready to “bridge the gap” in a company’s capital structure may see a large opportunity within the mezzanine product category.
Growth in a world of flux
The pandemic has fortified and, in many ways accelerated, the early stages of a paradigm shift in how companies enable growth.
Enhancing Returns: A Portable Alpha Overlay
The next 10 years may be less hospitable for investors and traditional approaches are unlikely to produce the long-term returns that asset owners need.
Next Generation of DC: Taking an Institutional Approach
DC plans need to evolve towards prioritizing retirement readiness, and one way to do that is by adopting a more institutional approach to investing.