The high volatility experienced in the past year reminded investors of the importance of thoughtful diversification, being cognizant of investments fees, and that good governance should always be part of any investment decision. Our research shows that, while clients remain focused in these areas, most plan to give emphasis to asset allocation, equities and fixed income in 2024. Our findings indicate that the top four long-term priorities that clients are focused on include macro-economic conditions, fees, organizational design/governance and geopolitics. With these goals in mind, we urge investors to focus on diversifying assets, reevaluating active strategies and prioritizing governance.
Higher carry, medium-duration strategies where sensitivity to interest rate movements is moderate and starting yields are elevated look especially attractive.
For those investors willing and able to go the extra mile, private debt continues to offer meaningful return pickup and strong value for risk taken. We are finding the most attractive opportunities today in private debt where managers are able to exploit the full breadth of markets and flex capital toward areas with the most attractive risk-adjusted returns; read more about it in our paper, "Private debt – opportunity in uncertainty".
Similarly, this macroeconomic environment can create opportunities in the hedge fund space. Hedge funds tend to generate attractive alpha-driven returns during periods of higher macro volatility and asset class return dispersion. To help investors navigate hedge funds, we considered the validity of a number of commonly held beliefs in Five myths of hedge fund investing. In this piece we showed that even though hedge funds can be opaque and expensive, they also have an opportunity to add alpha and reduce volatility of the overall portfolio if approached correctly. We believe the key is to focus on a total portfolio and select uncorrelated diversifying alpha sources through careful selection of highest conviction strategies and managers.
Select uncorrelated diversifying alpha sources in real assets
Value-seeking themes
Conclusion
As we navigate the intricate landscape of 2024, our research underscores the critical lessons learned from the market's high volatility in the previous year. Investors are poised to emphasize thoughtful diversification, fee awareness and the integration of robust governance principles into their investment decisions. The collective focus of our clients for 2024 revolves around macroeconomic conditions, fees, organizational design/governance and geopolitics.
In this dynamic environment, WTW stands as a seasoned partner, ready to assist organizations in translating their objectives into effective investment strategies. As we collectively navigate the challenges and opportunities of 2024, our commitment to empowering clients remains unwavering.
Disclaimer
This document was prepared for general information purposes only and does not take into consideration individual circumstances. The information contained herein should not be considered a substitute for specific professional advice. In particular, its contents are not intended by Towers Watson Investment Services, Inc., and its parent, affiliates, and their respective directors, officers, and employees (WTW) to be construed as the provision of investment, legal, accounting, tax or other professional advice or recommendations of any kind, or to form the basis of any decision to do or to refrain from doing anything. The information included in this presentation is not based on the particular investment situation or requirements of any specific trust, plan, fiduciary, plan participant or beneficiary, endowment, or any other fund; any examples or illustrations used in this presentation are hypothetical. As such, this document should not be relied upon for investment or other financial decisions and no such decisions should be taken on the basis of its contents without seeking specific advice. WTW does not intend for anything in this document to constitute “investment advice” within the meaning of 29 C.F.R. § 2510.3-21 to any employee benefit plan subject to the Employee Retirement Income Security Act and/or section 4975 of the Internal Revenue Code.
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| Title | File Type | File Size |
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| Top investment actions in 2024PDF | 1.6MB |
