Inflation is not transitory and will negatively impact bond and equity markets this year, according to Managing Partners Group (MPG), the Geneva-based international asset management group.
The Federal Reserve seems to have succeeded in convincing markets that inflation will fall from the annualised 5% recorded in May to average 2% longer term, but MPG sees inflation persisting in the 2.5% to 5% range, driven by a rebounding economy, commodity price hikes, run-away Quantitative Easing and by the reticence of Central Banks servicing large government debt obligations to immediately respond with interest rate hikes. In Switzerland, the inflation rate is forecast to rise from 0.4% – up from 0.2% – in 2021 to 0.6% in both 2022 and 2023.
Higher inflation will negatively impact fixed income markets and equities, which are extremely vulnerable to a significant correction with the Price/Earnings Ratio on the S&P 500 at around 50-times earnings.
“The current situation represents unchartered territory for the Fed and Chairman Jerome Powell pretty much admitted in his last address they have no experience of what they are dealing with,” says Jeremy Leach, Chief Executive Officer, MPG. “Markets are likely to go into a tailspin when they realise the Fed has painted itself into a corner and doesn’t know what it is doing.
“Investors will increasingly seek out alternative investment assets as inflation eats into their fixed income yields and outstrips the dividends they are receiving on their equities.”
MPG expects alternative assets including commodities, real estate and Life Settlements will become increasingly attractive to investors.
Life Settlements are US-issued life insurance policies that have been sold by the original owner at a discount to their future maturity value and are institutionally traded through a highly regulated secondary market.
Research commissioned by MPG showed that more than four out of five
(83%) of institutional investors globally say they would be happy to invest in Life Settlements.
The Life Settlements market increasingly includes high profile institutional investors and service providers, including Apollo Global Management, GWG Life, Vida Capital, Broad River Asset Management, Red Bird Capital Partners, Partner Re, SCOR, Berkshire Hathaway, Coventry First, Wells Fargo, Bank of Utah, Wilmington Trust and Credit Suisse Life Settlements LLC.
MPG’s High Protection Fund, which is an absolute return vehicle that invests in life settlements, recorded its best year in 2020, delivering 9.91% net of fees over the calendar year with no drawdowns in any
month.4 It has returned 154.06% since it was launched in July 2009.5 The standard deviation in its performance has been 0.18% since launch and its Sharpe Ratio of 2.82 reflects its excellent consistency in outperforming the risk-free rate. The fund has no initial charges or performance fees, which has given it a performance edge on competing funds within the Life Settlements sector.
MPG is an award-winning business, having been named the 2018 Alternative Investment Firm of the Year – Europe by The European business publication, in 2019 and 2020 Asset Management Company of the year – UK and Europe by ACQ5 Global Awards and in 2021 was named Best Alternative Asset Management Firm 2021 – Switzerland by the Corporate Vision Magazine 2021 Corporate Excellence Awards, whilst its High Protection Fund won Best Diversified Fund (Five Years) and Best in Insurance-Linked Investments categories 2018 by Corporate USA Today Awards. High Protection Fund also came first in the Best Diversified Fund (Five
Years) and Best in Insurance-Linked Investments categories for three years’ running in the 2019, 2020 and 2021 by Corporate America Today Awards. Most recently, MPG has won the award for Most Outstanding Asset Management Company 2020 by the Acquisition International 2020 Global Excellence Awards. MPG was also awarded Best in Insurance Linked Investments 2019 by the M&A Today Global Awards, which also awarded High Protection Fund in 2019 and 2021 with Best Diversified Fund (Five Years) United Kingdom.
High Protection Fund was also recognised by Global 100 in 2018 and 2020 as the Best in Insurance-Linked Investments & Best Diversified Fund (five years) – United Kingdom. MPG was awarded as Most Outstanding Asset Management Company – Europe 2020 by Acquisition International Global Awards. MPG also won the award for Most Influential Leader in Asset Management 2019 – Switzerland by the CV Magazine 2019 Corporate Excellence Awards as well as Asset Management Group of the year – United Kingdom 2019, 2020 and 2021 by Corporate Live Wire Global Awards. Asset Management Company of the Year – Europe 2021 by ACQ Gamechangers 2021 Awards.
MPG is a multi-disciplined investment house that specialises in the creation, management and administration of regulated mutual funds and issuers of asset-backed securities for SMEs, financial institutions and sophisticated invest