1、2024 OUTLOOK Published December 6,2023IntroductionAs we approach the end of 2023,a number of tough questions confront investors.On the economy,there are overarching concerns,such as will recent interest rate changes lead to weak global growth,have major central banks tamed inflation,and will those s

2、ame central banks maintain policy rates at current levels?Of course,having views on those questions only yield more questions.At a portfolio level,should investors reduce equity exposure in favor of bonds,will the litany of geopolitical crises that sadly char-acterize our current world impact market

3、s,and how will net zero transition efforts be advanced?And,at the asset class level,what public and private opportunities offer potentially compelling returns?In the following pages,we address these questions and many others,as we share our 2024 Outlook.THE GLOBAL ECONOMIC BACKDROP IN 2024Our invest

4、ment views are rooted in our belief that the cyclical backdrop will remain weak in 2024.The consensus expectation is for the global economy to grow 2.7%,which is slightly less than growth is anticipated to be in 2023 and below its post-2000 average of 3.5%.While we believe the global growth rate wil

5、l be positive,risks are skewed to either matching the consensus expectation or missing it lower.Weakness in global aggregate demand will help those inflation rates that experienced pandemic-related surges continue to decelerate.We expect this will allow most key central banks to modestly cut policy

6、rates before the end of 2024.Three major drivers inform these views.First,credit growth in key markets is likely to remain subdued,given high interest rates and the increase in bank underwriting standards.Second,consumer spending growth is likely to either slow(United States)or remain slow(euro area

7、 and United Kingdom),given the depletion of any excess savings that accrued during the pandemic and weakness in consumer confidence.Third,numerous challenges,such as the war in Ukraine,the Israel-Hamas war,and Chinas real estate crisis,will continue to weigh on sentiment and have the unfortunate pot

8、ential to escalate.2United StatesGrowthRateInflationRate1.2%2.7%United KingdomGrowthRateInflationRate0.4%3.1%JapanGrowthRateInflationRate1.0%2.2%EurozoneGrowthRateInflationRate0.6%2.7%ChinaGrowthRateInflationRate4.5%1.7%EXPECTED RATES OF REAL ECONOMIC GROWTH AND INFLATION IN KEY MARKETSAs of Novembe

9、r 30,2023 Bloomberg Consensus Estimates for 2024Source:Bloomberg L.P.OUTLOOK 2024AN OVERVIEW OF OUR 2024 VIEWSPUBLIC EQUITIESWe expect global equity performance will be below its long-term median level,but we believe investors should hold equity allocations in line with policy targets.Within equitie

10、s,we see opportunities in developed value,developed small caps,and China.We doubt European and emerging markets ex China equities will outperform,and we believe the share of active strategies that outperform will increase.PRIVATE EQUITY&VENTURE CAPITALWe expect US venture capital down rounds will in

11、crease,even as artificial intelligence continues to serve as a major catalyst within the market.We believe flows to European turnaround and value strategies will increase and flows to China private investments will remain muted.We expect secondary transaction volume will increase to a record level.H

12、EDGE FUNDSWe expect equity long/short strategies will outper-form their long-term average,due partly to the considerable rise in short rebates.This expectation is also linked to our view that global equity volatility will increase due to our economic expectation and ongoing geopolitical crises.SUSTA

13、INABILITY&IMPACT We expect more companies will set science-based targets to reduce their emissions and develop credible transition plans to meet their targets.We believe funds raised by natural capital strategies will hit a new record and that California carbon allowances will outperform global equi

14、ties.INTEREST RATESWe expect that most major central banks will cut policy rates modestly due to our view that inflation rates will continue to decline.The modest cuts will shift policy rates from restrictive levels closer to neutral levels,which are neither restrictive nor accommodative.Given this

15、view and our view that economic activity will weaken,we see opportunity in US long Treasury securities.CREDIT We expect direct lending and European opportunistic private credit funds will outperform their long-term averages because of high asset yields and the pull back in credit availability among

16、traditional lenders.We like structured credits,particularly high-quality collateralized loan obligation debt,and we expect high-yield bonds will outperform leveraged loans.But we remain neutral on high yield because spreads are compressed.REAL ASSETSWe expect REIT and public infrastructure performan

17、ces will improve,given undemanding valuations and our view on interest rates.We believe private infrastructure funds will perform well,and we think nuclear energy will emerge as a small but important opportunity.CURRENCIESWe expect the US dollar and gold will more or less hold their values,given our

18、 economic expectation and the many geopolitical risks.We believe the yen will appreciate,and we expect the thawing crypto winter will fully transition to a spring.3OUTLOOK 2024Global Equity Performance Should Be Below Median in 2024Kevin Rosenbaum Head of Global Capital Markets ResearchGlobal equiti

19、es face headwinds as we enter 2024.The most prominent headwinds stem from the interest rate changes we have seen in recent years.They have impacted corporate financing costs,economic growth expectations,and the relative appeal of equities versus fixed income.Taken together,we expect global equity pe

20、rformance will be below its long-term median of 15%in 2024.Still,we do not believe investors should underweight equities and overweight fixed income relative to policy allocations,as we see better tactical opportunities within equities and fixed income.Financing cost changes are the direct channel i

21、n which interest rate changes impact corporates.But as it stands,global equity profit margins are expected to expand by roughly 50 basis points(bps)to 10.6%in 2024,despite higher financing costs and according to the consensus analyst opinion.While analyst expectations at the start of the year have l

22、ittle relationship with that years equity performance,how those expec-tations evolve during the year are informative.To us,the near-record profit margin estimate is vulnerable to downside revisions.Economic growth expectation changes are an indirect channel in which interest rate changes impact corp

23、orates.Because we expect risks are skewed to either matching or missing the 2024 consensus global economic growth forecast of 2.7%,we suspect downward revisions to the 2024 consensus corporate sales growth expectation of 4.8%are more likely than upward revisions.Given global companies employ operati

24、onal leverage,lower-than-expected sales growth would add additional pressure to profit margins.Taken together,these factors act as headwinds to equities,which already have dimin-ished appeal relative to fixed income.One such measure of relative appealthe excess yield spread of real equity earnings o

25、ver real bondsrecently compressed to the lowest level other than during the dot-com bubble and the Global Financial Crisis(GFC).But instead of underweighting equities relative to policy,we see opportunities within fixed income to add protection(i.e.,long sovereigns)and within equities to allocate to

26、 segments where price levels have already adjusted to reflect difficult conditions ahead(i.e.,small-cap and value equities).EQUITIES APPEAL RELATIVE TO BONDS HAS DIMINISHEDJanuary 31,1990 November 30,2023Sources:FTSE International Limited,MSCI Inc.,OECD,and Thomson Reuters Datastream.MSCI data provi

27、ded“as is”without any express or implied warranties.34567899982002200620022MedianGlobal Equities Yield Spread Over Global Bonds4OUTLOOK 2024Most Major Central Banks Should Cut Rates in 2024 TJ Scavone Investment Director,Capital Markets ResearchGlobal central banks have aggress

28、ively tightened monetary policy to beat back infla-tion.While monetary policy now appears to be in restrictive territory,it is still too early to declare victory.Inflation rates are falling,but remain elevated.However,we expect restrictive policy will continue to weigh on economic activity and,in tu

29、rn,inflation in 2024.This will ease pressure on central banks,which we expect will lead to modest policy rate cuts by year end.After two successive years of tightening monetary policy,most major central banks currently view policy as appropriately restrictive.Financial conditions have tightened,and

30、inflation globally has fallen considerably from its recent peak.As a result,many central banks are considering pausing tightening and the market consensus projects most central banks will modestly cut rates in 2024.Still,several central banks have suggested rates will need to remain“higher-for-longe

31、r,”increasing uncertainty around interest rate forecasts.In our view,consensus expectations of policy rates are reasonable.Inflation may be elevated,but it is in a downward trend.Global economies have thus far held up better than anticipated,but there are pockets of weakness,particularly in Europe.E

32、ven in the United States,which has been more resilient than other economies,some measures of activity are weakening.For instance,US jobs growth has slowed and the unemployment rate has ticked up from a low of 3.4%to 3.9%.Higher rates and reduced fiscal support will add to downward pressure on growth

33、,which should lead to additional softening in the labor market,wages,and inflation.With inflation moving closer to central banks price targets and labor markets showing clearer signs of softening,central banks will be inclined to modestly ease policy rates in 2024 to avoid overtightening.The Fed is

34、projected to cut rates by roughly 100 bps in 2024.This would be only slightly more than previous“soft landings”in the United States.If growth concerns mount,both inflation and rates could fall more than is currently expected.MOST CENTRAL BANKS ARE PROJECTED TO CUT POLICY RATES IN 2024As of November

35、30,2023 Central Bank Policy Rates(%)202120222023(F)2024(F)World1.13.74.44.0DM-0.13.24.54.1US0.14.45.44.2UK0.33.55.34.5EMU-0.52.04.02.7Japan-0.1-0.1-0.10.2EM2.84.44.33.8Sources:Bloomberg L.P.and Goldman Sachs.5OUTLOOK 2024US Long Treasury Securities Should Outperform Cash in 2024 TJ Scavone Investmen

36、t Director,Capital Markets ResearchUS Treasuries are in a historic slump.While performance has been better in 2023 than the prior couple years,US Treasuries are barely on track to finish up for the year and underperforming cash for the third consecutive year.However,in our view,the worst is behind u

37、s.We expect US long Treasuries will outperform cash in 2024,given our economic outlook,our view that the bond sell-off is overdone,and the fact that current yields look attractive compared to economic fundamentals.The bond sell-off clearly appears overdone.This was also the case in fourth quarter 20

38、22,and ten-year US Treasury yields were recently as much as 75 bps above their 2022 peak.Unlike 12 months ago,many of the drivers of the sell-off are currently reversing.For instance,US inflation is declining.Core consumer price increases(4.0%)are still elevated,but the deviation from target is almo

39、st entirely due to shelter price rises,which are expected to decelerate in the coming months.The US economy has been resilient,but momentum appeared to peak in third quarter 2023,and weaker growth is forecast in the quarters ahead.If consensus is correct,nominal GDP growth for 2024 will fall below i

40、ts trailing ten-year average,a trend that is usually consistent with lower Treasury yields.A“soft landing”would reduce the risk of additional rate hikes.It also makes it more likely the Fed will keep its policy rate elevated for longer.However,this is mostly priced in.The Fed is projected to cut rat

41、es by roughly 100 bps in 2024,which is only slightly more than the number of cuts during previous soft landings.In sum,there is limited risk from further rate hikes,little to no risk from a soft-landing,but significant return upside for long Treasuries if growth concerns mount and the Fed cuts rates

42、 more than expected.Another key difference is that yields look more attractive today.Ten-year US Treasury yields recently peaked above 5.00%.That is more than 1 standard deviation above their implied fair value based on economic fundamentals.Since 1973,the Bloomberg US Long Treasury Index has outper

43、formed cash by 11 ppts on average over the next 12 months when this threshold is met,with a 90%probability of a positive excess return.We like those odds.US LONG TREASURIES ARE IN A HISTORIC SLUMPJanuary 31,1973 November 30,2023 Rolling 3-Yr Max Drawdown(%)Sources:Bloomberg Index Services Limited an

44、d Thomson Reuters Datastream.-45-40-35-30-25-20-15-10-5061620216OUTLOOK 2024Global Equity Market Volatility Should Increase in 2024 Sean Duffin Senior Investment Director,Capital Markets ResearchEquity volatility was relatively muted in 2023,even as markets contended

45、 with rising interest rates and the emergence and intensification of multiple geopolitical conflicts.These unre-solved conflicts,coupled with the lagged impact of higher central bank policy rates and the polarized US political environment,will spell more volatility for equities in 2024.Global policy

46、makers continue to walk a fine line balancing economic stability with reining in inflation.Thus far,rate hikes have not caused significant economic pain,as economic data have generally held up better than feared.But key inflation rates remain above central bank targets.While we expect most major cen

47、tral banks will cut rates modestly in 2024,a policy or communication misstep is a key risk.Such a scenario would be sure to unsettle equity markets.Beyond rates,military conflicts loom ominously over global markets.The ongoing war in Ukraine stands as the most significant military confrontation in E

48、urope since World War II and has escalated for nearly two years.Moreover,violence erupted in the Middle East when Hamas initiated an attack on Israel in October,raising the specter of a prolonged conflict.Both conflicts have already taken a devastating human toll,and while we hope both conflicts res

49、olve themselves peacefully,the unfortunate reality is that they could worsen.Tensions between the United States and China remain strained.Trade and financial decoupling between the worlds two largest economies has intensified in recent years,bringing with it the potential for further disruption of s

50、upply chains and corporate profits.This trend is unlikely to reverse soon,given the bipartisan US stance on China.Escalating rhetoric or punitive measures could trigger more significant market jitters next year.US presidential elections will introduce another wave of political uncertainty.The prior

51、election highlighted the deep polarization of American politics and culminated in unprecedented federal charges of election interference against the former president.The pending legal aftermath of those events is likely to become clearer in 2024 and could prove disruptive to the election process.Inv

52、estors dislike uncertainty,and this sort of disruption could increase equity market volatility in the run up to the November election.GEOPOLITICAL RISK HAS JUMPED AGAIN IN LATE 2023January 1,1985 November 27,2023 Geopolitical Risk Index(GDPR)7-Day Moving AvgSource:Dario Caldara and Matteo Iacoviello

53、,Measuring Geopolitical Risk,American Economic Review.0050060070080090000200320062009200219/11 AttacksUS Forces Invade Iraq Syrian RefugeeCrisisUS/Iran TensionsEscalate RussiaInvades UkraineIsrael-Hamas WarLondon BombingsGulf War 7OUTLOOK 2024Developed Val

54、ue Equities Should Outperform Developed Equities in 2024 Sean Duffin Senior Investment Director,Capital Markets Research2023 was another disappointing year for value investors,as the MSCI World Value Index trailed the MSCI World Index for the 12th time in the past 15 years.Value indexes saw their ma

55、rgin of underperformance widen as a subset of tech-related growth stocks surged in tandem with the artificial intelligence(AI)boom this year.Despite this,we see several reasons to believe value stocks will outpace broader equities in 2024.Value stocks trade at heavily discounted prices relative to b

56、roader equities and started to show improving short-term momentum in the latter half of 2023.Developed value traded at a normalized price-earnings(P/E)ratio of 9.3,a 38%discount to broad developed equities,which is substantially wider than its median 22%discount over the previous four decades.Short-

57、term momentum began to turn at the midway point of 2023,with rolling six-month relative momentum jumping off recent lows.Part of this reversal can be attributed to the markets repricing of future interest rates.Value stocks have often held up better in higher rate environments,and although we expect

58、 most major central banks will cut rates modestly by the end of 2024,costs of capital will still be much higher than just a couple years ago.We expect this reality may be a headwind to growth stocks,so investors should anticipate the rate environment in 2024 will continue to remove froth from pricey

59、 growth stocks and help value outperform.Moreover,the pace of the meteoric price rise in a subset of tech stocks linked to the AI boomthe so-called Magnificent Sevendownshifted in the second half of the year.Indeed,an equal-weighted basket of those seven stocks registered a 98%return from January th

60、rough mid-July,but is only up 3%since then.While we anticipate that AI will continue to play a pivotal role in transforming productivity,we expect these productivity enhancements will support all sectors,particularly financials and energy,both of which carry substantial weight in value indexes.We ex

61、pect the market to better factor in the broad benefits of AI next year,which should support value.THE PACE OF THE MAGNIFICENT SEVENS RALLY HAS MODERATED December 31,2022 November 30,2023 US Dollar YTD Cumulative Wealth in Percent TermsSources:Standard&Poors and Thomson Reuters Datastream.100.816.2-1

62、000708090100110Dec-22Feb-23Apr-23Jun-23Aug-23Oct-23Magnificent Seven(Equal-Weighted)MSCI World8OUTLOOK 2024Developed Small-Cap Equities Should Outperform Developed Equities in 2024Sehr Dsani Investment Director,Capital Markets ResearchDeveloped markets(DM)small-cap equities have outperfor

63、med their large-and mid-cap counterparts over the last 25 years by a wide margin,but they lagged by 12 percentage points(ppts)in 2023 through November.However,we think small-cap equities will outperform large-and mid-cap equities in 2024,given attractive valuations,interest rate expectations,favorab

64、le sector exposures,and improving fundamentals.Weak recent returns have resulted in attractive valuations.For instance,the cyclically adjusted price-tocash earnings multiple is currently at the 22nd percentile of observations spanning nearly 20 years.Additionally,the P/E ratio relative to DM large-a

65、nd mid-cap equities is even more compelling,sitting at the 3rd percentile over the last 20 years.While these equities are higher risk investments with less robust balance sheets than their large-and mid-cap counterparts,we believe the valuation discount provides a significant cushion to small-cap pe

66、rformance going forward.Indeed,small-cap equities have tended to outperform during the early stage of a new business cycle precisely for this reason.Small caps underperformed large-and mid-cap equivalents in part due to sector tilts within the index.The small-cap index is underweight communication s

67、ervices and IT,two of the best-performing large-and mid-cap sectors in 2023.The elevated valuation of these two large-and mid-cap sectors will make it more difficult for outperformance to continue in 2024.As investors position for rate cuts,sectors such as real estate,indus-trials,and materialswhich

68、 are overweights in the small-cap indexshould support outperformance.Furthermore,the industrials and materials sectors will benefit from continued increases in investment for infrastructure projects and reshoring supply chains.Additionally,favorable fundamentals should support small-cap equity outpe

69、rformance.As inflation continues to subside,analysts are estimating small caps will achieve better margin improvement and higher earnings per share(EPS)growth than large-and mid-cap equities.We think these improving fundamentals help increase the odds for outperformance versus large-and mid-cap equi

70、ties.January 31,1973 November 30,2023 SMALL-CAP DIVIDEND YIELD SPREADS ARE ATTRACTIVE AND WELL ABOVE HISTORIC MEDIANSSources:MSCI Inc.,Standard&Poors,and Thomson Reuters Datastream.MSCI data provided as is without any express or implied warranties.-3-2-78200120052008

71、20023US Small Cap vs US Dividend YieldDM ex US Small Cap vs DM ex US Dividend Yield9OUTLOOK 2024European Equities Should Underperform Global Equities in 2024 Thomas OMahony Senior Investment Director,Capital Markets ResearchEuropean equities have underperformed global equities by nearly 2

72、50 bps in 2023.Perhaps surprisingly,given the growth disparity between Europe and the United States,earnings growth in Europe has easily outstripped that of all global companies,growing by 7.4%versus a contraction of 2.5%.It has been a much weaker multiple expansion,by contrast,that lies behind this

73、 underperformance.We believe the greater cyclicality of European equities sees risks tilted to weak EPS growth and continued underperformance in 2024.As 2023 draws to a close,the growth impulse in Europe is weaker than in peers,such as Japan and the United States.Cumulative GDP growth in the Eurozon

74、e and United Kingdom in the first three quarters of 2023 was 0.1%and 0.5%,respectively,lagging the 1.5%and 2.3%seen in Japan and the United States.Moreover,the delivered monetary tightening looks likely to weigh more heavily on Europe,given lower poten-tial growth and the structure of mortgage marke

75、ts.This is already evident in weak credit data.Finally,the external exposure of many European economies,particularly to China,may continue to weigh on export-led growth.Therefore,we believe that European EPS growth is likely to lag in 2024.Admittedly,the bar is set reasonably low on a relative basis

76、 for European economic and earnings growth in 2024.Consensus expects earnings to grow by 6.1%in Europe versus 10.4%for all global companies.Similarly,European GDP growth is expected to be 0.5%in comparison to 1.2%for broader developed markets and 2.7%for the world.Nonetheless,expectations of EPS gro

77、wth of 6.1%are ahead of the regions long-run average of 5.8%.A material valuation discount(European forward P/E is just 0.77x that of the MSCI ACWI)restrains us from actively underweighting the region.However,if we see a continued slowdown or recession next year,that valuation cushion may not provid

78、e much mitigation,given the United States tends to perform more defensively than its peers in such circumstances.Ultimately,we continue to see risks skewed to the downside for the region in 2024.January 31,1970 December 31,2022 US Dollar Annualized Real Total Returns(%)Source:MSCI Inc.MSCI data prov

79、ided as is without any express or implied warranties.RELATIVE PERFORMANCE OF EUROPEAN EQUITIES HAS BEEN STRONGEST DURING RECOVERIES AND PARTICULARLY EXPANSIONSRecoveryJapanUSUKEur ex UKGlobalExpansionJapanUSUKEur ex UKGlobalSlowdownJapanUSUKEur ex UKGlobalContractionJapanUSUKEur ex UKGlobal10OUTLOOK

80、 2024Developed Equities Should Outperform Emerging Markets ex China Equities in 2024 Stuart Brown Investment Director,Capital Markets ResearchEmerging markets(EM)ex China equities are set to lag DM peers for a sixth straight year in 2023.Despite this extended underperformance,we dont expect a revers

81、al of fortune in 2024.Still,we see better tactical opportunities elsewhere,and,as a result,we recom-mend that investors hold EM ex China equities in line with the policy target allocation.EM stocks tend to underperform during the late stage of the US business cycle.We expect that cyclical backdrop w

82、ill persist in 2024,given the US yield curve remains inverted,the Federal Reserve likely just ended its rate-hiking cycle,and the US dollar is historically rich.In addition,global trade activity has slowed,as Chinas economic growth has weakened relative to years past.These factors complicate EMs abi

83、lity to outperform.Monetary policy is another factor weighing on the EM ex China outlook.EM ex China tends to struggle following the end of Fed rate-hiking cycles.Further,EM central bank policies tended to be more restrictive than DM counterparts,and the lagged impacts of these higher rates may weig

84、h on EM domestic activity in 2024.Indeed,our measure of EM money supply growtha leading indicator for the EM profit cyclewas recently the weakest since at least the mid-1990s,suggesting that earnings growth will be challenged.Low valuations and the current growth outlook prevent us from being outrig

85、ht negative.Equity valuations relative to DM peers are in the bottom percentile of historical observations,suggesting that markets may be well-priced for a late-stage environment.In addition,EM GDP growth is expected to outpace DM by one of the widest margins in the past decade,despite higher EM rat

86、es.Taken together,we recom-mend investors hold EM ex China equity allocations in line with policy.EM CAN STRUGGLE EVEN AFTER THE FED PAUSES HIKING RATESDecember 31,1987 November 30,2023 US Dollar Percentage Points Cumulative EM Excess Return Over DM Sources:Federal Reserve,MSCI Inc.,and Thomson Reut

87、ers Datastream.MSCI data provided as is without any express or implied warranties.-50-40-30-20-23456789101112Number of Months After Fed Pauses Hiking Rates12 Months Starting May 1989February 1995March 1997May 2000June 2006December 201811OUTLOOK 2024Chinese Equities Should Rebound in 2024C

88、elia Dallas Chief Investment StrategistSlowing growth,shifting government priorities,property sector stresses,and geopolit-ical concerns have pushed Chinese equity valuations back near historical lows.After rallying sharply from October 2022 lows,Chinese equities have underperformed in 2023,returnin

89、g-9.7%versus 16.6%for global equities,in US dollar terms.As a result,Chinese equity valuations are back to the depressed levels seen in late 2022 when China was in the teeth of its COVID-19 lockdowns.A de-rating of Chinese equities is justified,given uncertainty over the economic outlook,but we thin

90、k markets have gone too far.Chinese equity fundamentals need only be less bad than priced in for the market to rally.Catalysts for such a turnaround include continued fiscal and monetary policy easing and signs of improving domestic investor confidence.Indeed,Beijing has introduced new,albeit modest

91、,stimulus measures,and Chinese economic data have shown signs of stabilization with recent economic data surprising to the upside.While the economy has disappointed this year,consensus expects Chinas real GDP to grow by 5.2%in 2023 and 4.5%in 2024.Further,the consensus still expects higher corporate

92、 earnings growth in China than in most major developed economies through 2024.Recent policy actions also suggest the government is placing increased focus on controlling financial stress in the property sector,where ongoing weakness has weighed on the recovery in domestic confidence and demand.Comme

93、nts from officials at the Peoples Bank of China and financial regulators have indicated further support is forth-coming in the form of financial institutions increasing lending to developers.Should the Fed begin cutting rates next year,as we expect,this would allow the PBOC to increase monetary stim

94、ulus without placing excessive downward pressure on the renminbi.Simultaneously,officials have signaled a desire to increase government spending on building affordable housing and improving infrastructure for natural disaster prepared-ness.Whether the government decides to act more aggressively to s

95、upport the property sector and the economy remains to be seen.Still,Chinese equities are already priced for a recession-like scenario.Thus,public equities present a near-term opportunity despite the challenges and slower growth outlook.Please see Celia Dallas,Aaron Costello,and Vivian Gan,“VantagePo

96、int:Asia Opportunities Amid Shifting Geopolitics,Cambridge Associate LLC,October 2023.CHINESE EQUITIES TRADE NEAR HISTORICAL LOWS AND ARE POISED FOR A REBOUNDMarch 31,2005 November 30,2023 ROE-Adjusted P/E Percentile(%)Sources:MSCI Inc.and Thomson Reuters Datastream.MSCI data provided as is without

97、any express or implied warranties.02550752009200023MSCI China All SharesMSCI China All Shares Relative to MSCI AC World12OUTLOOK 2024A Higher Share of Active Public Equity Managers Should Outperform in 2024Eric Thielscher Head of Global Public EquitiesActive equity s

98、trategies,in aggregate,have experienced a sustained period of underper-formance,but few investors appreciate the truly cyclical nature of active management.Over the last 50 years,professionally managed portfolios have found themselves in-and out-of-favor for protracted periods.Prior highs and lows o

99、f these serpentine results have occurred well before the introduction of various regulations or the onslaught of passive investing,two of the most common arguments attempting to explain why low efficacy rates are here to stay.Instead,narrow equity market leadership in 2023 and outsized IT sector rep

100、resentation in benchmarksa sector with lofty valuationsshould help drive a greater share of manager outperformance.Since most benchmarks are weighted by market capitalization,they become more exposed to stocks with strong recent performance.In 2023,equity markets experi-enced narrow share price lead

101、ership and,as a result,indexes became more exposed to a small number of stocks.The rapid ascent of this small collection of stocks improves the prospective appeal for the rest of the equity market,which should boost the odds for active managers to generate excess returns.Similarly,thanks to a multiy

102、ear period of sustained outperformance of IT stocks,indexes feature them more prominently than any other sector.Meanwhile,IT valu-ation multiples are particularly high relative to history.This combination,a sector with elevated valuations and one that features prominently in indexes,is a significant

103、 benchmark index risk.Of course,one of the longest-lasting cycles for active manage-ment occurred when the same conditions were at play during the technology,media,and telecommunications era.That boon for stock pickers,which lasted well more than a decade,was further supported by the GFC era,another

104、 period with outsized(finan-cials)sector representation.Ultimately,we believe the landscape is ripe for active managers to reassert themselves in 2024.Expanded breadth of investment opportunities and IT top-heavy benchmarks will be key factors in this recovery.Michael Broucek Investment Director,Pub

105、lic EquityACTIVE MANAGEMENT IS CYCLICALDecember 31,1974 September 30,2023%of Funds Outperforming Over 5-Yr Rolling PeriodsSource:eVestment.025507502200620022USGlobalActivelyManaged Funds OutperfomedActivelyManaged Funds Underperformed13OUTLOOK 20242024 Sho

106、uld Be the Year of the“Transition PlanSimon Hallett Head of Climate StrategyLast year we forecast that net zerooriented investors would shift from portfolio decar-bonization toward driving real world change.As they do so,the hunt is on for data that can help them prioritize their effort,for example

107、tracking whether companies have aligned their business plans with net zero by setting science-based targets(SBTs).More and more companies are setting SBTs,but they may not be the right companies;it is easier to set an ambitious target if your core activities are not emissions intensive to start with

108、.What really matters for the climate is that the most emissions-intensive companies adopt SBTs.A key portfolio metric is not what portion of companies have SBTs but what portion of emissions come from those companies.The aggregate data are striking:39%of MSCI ACWI market value is represented by comp

109、anies that have set SBTs,but these companies represent only 19%of index emissions.The vast majority(81%)of emissions come from companies with no plans to align with net zero.We,therefore,expect to see investors increasingly prioritize persuading their highest emission holdings to adopt SBTs.Setting

110、targets is one thing;delivery is another.As more companies set SBTs,investors will then want to hold them accountable for executing a credible strategya “transition plan”to deliver their targets.Transition plans are not the same as SBTs but will explain how those targets will be met.The Internationa

111、l Sustainability Standards Board,the United Kingdoms Transition Plan Taskforce,and Glasgow Financial Alliance for Net Zero are advancing a standard for transition plans and coop-erating closely with one another to ensure inter-operability.These will give investors the opportunity to judge companies

112、by the credibility of their plans.We expect 2024 will see more companies setting SBTs,including a growing portion of the higher emitters.This will be accompanied by those same companies starting to publish transition plans.Investors will start to evaluate those plans and incorporate them into invest

113、ment decisions using good old-fashioned fundamental analysis.HIGH EMITTERS LESS LIKELY TO SET EMISSIONS REDUCTION TARGETSAs of Third Quarter 2023Source:MSCI Inc.MSCI data provided as is without any express or implied warranties.0%10%20%30%40%Emissions with SBTs%Market Value with SBTsGlobal Companies

114、High-Emissions Companies14OUTLOOK 2024California Carbon Allowances Should Outperform Global Equities in 2024 Celia Dallas Chief Investment StrategistIn 2024,we expect supply of California carbon allowances(CCAs)to decline and demand for such allowances to recover.In late July,the California Air Reso

115、urces Board(CARB)made it clear that it expects to reduce CCA supply to meet the states 2030 emission reduction targets.Furthermore,demand for CCAs is expected to improve in 2024.Such conditions reinforce our recommendation to overweight CCAs relative to global equities,as carbon pricing is driven by

116、 supply and demand dynamics.Cap-and-trade programs seek to reduce carbon emissions by putting a price on carbon and requiring covered entities to purchase allowances to offset emissions.The most attractive time to invest in these markets has been as supply starts to fall short of demand,pushing up p

117、rices.The California cap-and-trade program budgets a 4%annual CCA supply reduction.CARBs review revealed that it would need to reduce CCA supply by 7.7%annually from 202530 to meet its current 2030 emissions reduc-tion target of 40%relative to 1990.Should CARB raise the bar to a 48%reduction,as some

118、 analysts think is likely,supply would need to fall by 11.1%a year.The magnitude of proposed cuts surprised investors,propelling CCA prices 11.4%between late July and its November 16 peak.CARB expects that tightening supply will push up prices and will likely increase price containment and price cei

119、ling levels that exist to slow down the pace of price increases.The program is expected to be in deficit this year.The expected supply cuts will also draw down the cumulative excess supply relative to demand.Demand for CCAs is tied to economic growth and progress in transitioning the economy away fr

120、om carbon.Late 2022 and early 2023 data for the state are consistent with recessionary conditions of falling employment,incomes,and consumer spending.While it is unclear when conditions will recover,weak demand will simply slow down the pace of CCA supply tightening relative to demand,not eliminate

121、it.Please see Tactical CA House Views,Cambridge Associates LLC,November 2023.201730 Cumulative Allowances Net Emmisons(MtCO2e)Sources:Aetos Capital and the California Air Resources Board.CARB CCA PROGRAM REVISIONS WILL REDUCE SUPPLY OF ALLOWANCES RELATIVE TO DEMAND-300400200

122、2020212022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030ECurrent CCA Program ForecastCARB Adjusted 40%Scenario ForecastCARB Adjusted 48%Scenario Forecast(Most Likely)Actual15OUTLOOK 2024Down Round US Venture Capital Financings Should Increase,Amid Rising AI Investment Exuberance Theresa Hajer Head

123、 of US Venture CapitalMany aspects of the US venture capital(VC)market have corrected from their 2021 highs.But we expect the VC market will be a mixed bag in 2024.Among existing investments,we believe there will be an increase in“down rounds,”meaning valua-tions will decrease across financings.At t

124、he same time,we expect AI will continue to serve as a major market catalyst,supporting new investments and fund commitments.Low interest rates helped drive company formation and follow-on funding helped valuations rise to record highs through 2021.Since then,high interest rates and other macro facto

125、rs have lessened market enthusiasm for technology start-ups.Later-stage valuations have fallen more sharply than those of early-stage companies,though both still exceed pre-2021 levels.According to Pitchbook,in 2023,the median change in valuation for follow-on financing rounds for early-stage compan

126、ies was 1.7x,which is the lowest change in any year since 2016.Our US VC data tell a similar story,with implied multiples on invested capital falling since fourth quarter 2021.In 2022 and 2023,many start-ups curtailed spending and forewent growth to postpone raising capital.In 2024,with diminished o

127、r expired cash runways,we expect more companies seeking additional funding or liquidity to face down round valuations.Despite this backdrop,the show will go on.The blistering fundraising in 2021 and 2022 means there is ample capital to fund transactions in 2024.Strong companies will have good prospe

128、cts,but as investor appetite has waned,others may be consolidated,have their valuations reset,or simply shut down.Right now,AI is consuming the venture communitys attention,which we believe will catalyze the market but maybe not as quickly as some expect.The field of AI is not new,but the seminal br

129、eakthrough of generative AI is,sparking fervor for opportunities in it.Deep-pocketed incumbents largely control the foundational layer of generative AI.Existing companies,including venture-backed ones,will continue to integrate AI tools to boost productivity and accelerate their businesses,while oth

130、ers may face obsoles-cence.Longer term,AI will drive disruptive innovation.US VC VALUATIONS HAVE FALLEN FROM PANDEMIC HIGHSUS$BillionsSource:Cambridge Associates LLC.84 99 137 156 157 206 443 339 1.9x2.1x3.2x2.2x20023Invested CapitalMarket ValueDecember 31,2017December 31,2019December 31,

131、2021June 30,2023Implied Multiples on Invested Capital16OUTLOOK 2024Capital Flows to Private European Turnaround and Value Transactions Should Increase in 2024 Petros Krappas Senior Investment Director,Private EquityUntil 2023,private investments had enjoyed a decade of buoyant markets,which favored

132、growth-oriented strategies and put turnaround and value managers out of fashion.Fiscal and monetary stimulus as well as pandemic-related supply chain disrup-tions forced central banks to raise interest rates to address inflation.Many companies have yet to feel the full impact of the increased cost o

133、f capital as they accessed cheap debt packages during the more benign period leading up to 2023.Nonetheless,much of this debt will need to be refinanced in 2024 and 2025.The inevitable increase in the cost of capital will put pressure on profitability,test businesses resilience,and likely increase i

134、nsolvency rates.Conglomerates will continue to divest non-core subsidiaries,while public market dislocations could lead to more public-to-private transactions.We expect these market conditions will help flows to turnaround and value managers increase.Managers with large operating teams and restructu

135、ring expertise,differentiated networks of intermediaries,and connections with large corporates to secure carve out deal flow will have an advantage in this market,leading to attractive returns for managers deploying capital in 2024.Investors with exposure to turnaround and/or value managers will ben

136、efit from the increased deployment we expect to see from these managers in 2024,partially offsetting the muted investment activity of the growth-oriented managers that are normalizing their deployment pace.This period of volatility should remind asset allocators that diver-sification is an essential

137、 ingredient of any private equity portfolio.This will boost the appetite for turnaround and value managers increasing the flow of new capital.As always,manager selection is critical to success.Given the narrow universe of high-quality European turnaround and value managers,investors should remain di

138、sciplined and not invest with subpar managers simply to gain exposure.In our view,adding high-quality European turnaround and value exposure to portfolios in 2024 should serve investors well.EUROPEAN COMPANIES FACE LOOMING DEBT REFINANCING WALL202433 US$Billions Maturities for Bloomberg Pan-European

139、 High-Yield IndexSource:Bloomberg L.P.16.189.2118.786.185.436.516.04.32.92.52024202520262027202820292030203OUTLOOK 2024Foreign Capital Flows to China PE/VC Should Remain Muted in 2024 Aaron Costello Regional Head for AsiaChina USD-denominated private equity and venture capital(PE/VC)fundr

140、aising slowed dramatically in 2023,given US-China geopolitical tensions and pending US restrictions on advanced technology investments in China.On the latter,US President Bidens August 2023 Executive Order(EO)limiting investments in advanced semicon-ductors,AI,and quantum computing in China has crea

141、ted uncertainty for US-linked GPs and LPs alike and impacted fund flows.Both GPs and LPs are awaiting clarity on how the measures will be implemented.The Treasury Department will take time to issue revised rules on the proposed program,which will be subject to further feedback and final approval.The

142、refore,clarity is unlikely until early 2024 at the earliest.Even with the regulations finalized,GPs and LPs will need time to digest implications,and therefore fundraising in 2024 will likely remain muted.This is particularly the case for China VC,given the EO is focused on technology and potentiall

143、y reduces the opportunity set for US-linked GPs and LPs.While China growth equity and buyouts may be more insulated,given their sectoral focus,US political rhetoric could deter some US and European investors from committing capital,especially in a US presiden-tial election year.Lower capital commitm

144、ents imply some non-US-linked GPs may also hold back fundraising,especially given broader headwinds to portfolio marks and exits.Politics aside,attractive investment opportunities remain in China PE/VC,given Chinas focus on technology self-sufficiency and other themes(e.g.,consumption and healthcare

145、).Non-US investors are likely to step in amid any pullback from US capital.However,overall foreign fund flows to the market will remain low in 2024 versus the annual average of$29 billion raised from 2014 to 2022,given uncertainty over how Chinas progress in other technology areas(e.g.,advanced manu

146、facturing and green energy)will be impacted by the United States restricting access to high-end semicon-ductors and related technology.Yet,fewer capital-chasing deals may result in better opportunities for investors(US and non-US)willing to tolerate the uncertainty and headline risk.Vivian Gan Assoc

147、iate Investment Director,Capital Markets ResearchPlease see Celia Dallas,Aaron Costello,and Vivian Gan,“US Limits Semiconductor,Quantum Computing,and AI Investments in China,”Cambridge Associates LLC,August 2023,and Celia Dallas,Aaron Costello,and Vivian Gan,“VantagePoint:Asia Opportunities Amid Shi

148、fting Geopolitics,Cambridge Associate LLC,October 2023.USD-DENOMINATED PE/VC FUNDRAISING IN CHINA SLOWED SHARPLY IN 2023201423 US$BillionsSource:PitchBook Data,Inc.0420002120221H23PEVC18OUTLOOK 2024Fundraising by Natural Capital Strategies Should Hit a Record High in

149、 2024JP Gibbons Senior Investment Director,Sustainable&Impact InvestingNatural capital strategies support land-based investments in sustainable agriculture and forestry,oceans and fresh waters,and other ecosystem services.These investments support a healthier planet and are needed to fight climate c

150、hange.We expect fund-raising for natural capital investment strategies will hit a record level in 2024 due to government and public demand,which continues to strengthen the opportunity set.Government policy,particularly in developed markets,is creating attractive investment environments.A new framew

151、ork adopted by 196 countries at the 2022 United Nations Biodiversity Conference put forth several ambitious environmental commitments,complementary to the climate change goals of the 2015 Paris Agreement.Targets include the restoration and protection of 30%of the earths land and sea,substantial redu

152、ctions in harmful subsidies for agriculture and fishing,significant financial support to developing countries,and new reporting requirements regarding corporate influence on nature.Changes in policy should follow to stimulate momentum toward the commitments and create favorable investment opportunit

153、ies.Additional momentum has come from the general publics demand for healthier food,cleaner waters,and thriving natural landscapes.Particularly in jurisdictions where regula-tion is opaque,the private sector has filled the gap through market-based tools that influence business decisions toward natur

154、e-positive projects.Feeling the urgency to act,responsible corporations have bolstered mechanisms through investment in voluntary carbon and biodiversity credits,water conservation,and organic premiums.Recognizing the value of nature is not a new concept,but until recently it wasnt clear how to mone

155、tize that value.These are still early days for natural capital investments,and challenges(i.e.,measurement and valuation)need to be navigated.However,investment in the sectorestimated at$3 billion per year in 2022 according to the United Nations Environment Programmeis realizing significant growth,b

156、oosted by tailwinds like regulation and market demand.Managers are converting more traditional strategies to nature positive and identifying new investment themes.Investors are leaning into the favorable investment environment while mitigating exposure to nature-related risks.The amount of investmen

157、t dollars raised for natural capital will grow significantly from years past as the world recognizes the need and value in protecting our natural resources.NATURAL CAPITAL IS UNDERPINNED BY CORE INVESTMENT THEMES200221%of Capital Commited to Each ThemeSources:Finance Earth(https:/finance.earth/wp-co

158、ntent/uploads/2021/05/Finance-Earth-GPC-Market-Review-of-NbS-Report-May-2021.pdf)and United Nations Environment Programme.ForestryFreshwaterAgricultureBlue EconomyEcosystem ServicesUS$3B Investedin 202219OUTLOOK 2024Private Equity Secondary Transaction Volume Should Increase to a Record Level in 202

159、4 Nicolas Schellenberg Managing Director,Private EquityPrivate investment secondaries have experienced remarkable growth,peaking at a record of more than$130 billion in 2021.Although 2022 and 2023 did not reach the same heights,we anticipate a resurgence in 2024.This optimism is driven by several fa

160、ctors,including the substantial amount of dry powder,an expected narrowing of the bid-ask spread in secondaries,the continuing need for liquidity among LPs,and ongoing market innovation.In 2022 and 2023,the secondary market witnessed large fundraisings,including record-breaking fund closings,which s

161、ignificantly boosted the amount of“dry powder”capital available for new investments.As we enter 2024,dry powder in the global secondaries market is projected to be around$220 billion(1.7x2.2x recent transaction volume).Pricing will experience modest increases,with average discounts around 10%.Howeve

162、r,these pricing improvementsparticularly in high-quality assetsare expected to pique the interest of sellers seeking liquidity.At the same time,valuation adjustments by GPs will reduce the bid-ask spread,facilitating more transactions.And,sellers are becoming increasingly comfortable with discounts,

163、weighing them against the opportunity costs of not reinvesting in crucial manager relationships.Returning to a higher employment of debt by buyers may further bridge the bid-ask spread,facilitating additional transactions and bolstering available capital for secondaries.The GP-led market,though not

164、new,is often viewed as innovative due to its recent growth.Its growth has been propelled by GPs seeking liquidity solutions for their LPs in a challenging exit landscape.Secondary buyers are also becoming more creative to unlock transactions,and we have observed a rise in the implementation of inven

165、tive strategies and structured approaches,including preferred equity solutions and deferred payments.We expect a promising future for private investment secondaries,marked by growth to a new record transaction volume in 2024.PE SECONDARY DEAL VOLUME CONTINUES GROWTH TRAJECTORY201024 US$BillionsSourc

166、es:Cambridge Associates LLC and Jeffries LLC.02550750000222023(E)2024(E)?20OUTLOOK 2024US High-Yield Bonds Should Outperform Loans in 2024 Wade OBrien Managing Director,Capital Markets ResearchLeveraged loans are on track for their third consecu

167、tive year of outperformance compared to US high-yield(HY)bonds for the first time in more than 20 years.This is unlikely to continue in 2024 as leveraged loans face greater headwinds from slowing economic growth and rising debt servicing costs.Rising short-term yields have boosted loan coupons and r

168、eturns but hurt issuer funda-mentals.Loan interest coverage ratios have dropped from 4.4x at the end of 2022 to 3.0 x at the end of third quarter 2023 and are even lower once expenses,such as main-tenance capex,are considered.Ratios look even shakier for the weakest borrowers that have driven recent

169、 performance.B-rated borrowers have a coverage ratio of less than 2x.US loan default rates(3.1%over the past 12 months)already outpace those of bonds and higher rating downgrade ratios suggest this will continue.Further,weak loan documentation and an increasing share of loan-only issuers mean these

170、defaults will continue to prove more painful for investors.In contrast,HY index coverage ratios have also declined but remain much higher(around 5.0 x as of mid-year).Much smaller HY index weights for lower rated(B-and CCC)issuers are one explanation.Looking forward,the gap between HY and loan issue

171、r fundamentals should widen as the impact of higher short-term rates continues to be reflected in loan issuer borrowing costs.While we think HY bonds will outperform loans in 2024,we remain neutral overall,given current spreads are below their historical average and levels typically seen during rece

172、ssions.HY defaults are likely to rise,especially if growth disappoints in 2024.Loan defaults also could prove manageable if weak covenants provide companies more cushion and/or private equity owners step in to provide support.Given these dynamics,our preferences in liquid credit remain for securitiz

173、ed assets like investment-grade collateralized loan obligation debt,where yields are in mid-to-high single digits and elevated spreads provide cushion if issuer fundamentals deteriorate in 2024.December 31,1994 November 30,2023 Rolling Three-Yr AACRs Percent(%)Sources:Bloomberg Index Services Limite

174、d and Credit Suisse.LOAN PERFORMANCE LOOKS OVEREXTENDED AND UNLIKELY TO CONTINUE,GIVEN WORSENING CREDIT QUALITY5.51.4-10-505994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2017 2019 2021 2023Leveraged Loan IndexHigh-Yield Bond Index21OUTLOOK 2024Direct Lending Strategies Should

175、 Deliver Above-Average Returns in 2024 Frank Fama Co-Head of Global Credit Investment GroupAfter a decade-plus era of cheap money,the higher-rate environment will continue to directly benefit the floating-rate direct lending asset class.Direct lending strategies tend to provide steady cash flows,gen

176、erate consistent returns,and distribute capital at a faster rate than other private investment strategies,particularly in todays environ-ment.We expect that direct lending strategies will deliver returns above the long-term average of 6%to 7%for unlevered funds and 8%to 10%including fund level lever

177、age,given attractive current yields and solid underwriting standards.Direct lending funds provide first-lien senior-secured loans to middle-market compa-nies.These loans are typically floating rate and had a yield of around 7%when rates were low.Currently,with three-month secured overnight financing

178、 rate roughly 550 bps and credit spreads around 600 bps,investors are enjoying low double-digit asset yields.Direct lending funds will distribute that income quarterly.Loans structured in the current environment are more favorable to lenders than in the recent past.In a higher-rate environment,debt

179、capacity of borrowers is lower,meaning leverage levels have come down and sponsors are contributing more equity to trans-actions.Financial covenants are being set tighter,helping to protect downside if the borrower underperforms.Additionally,loan funds will have a shorter duration than other private

180、 investment asset classes.Loans will typically have a maturity of five years and an average life of three to four years,so distributions to LPs will begin shortly after the end of the investment period.Direct lending strategies have grown significantly over the last ten years amid a period of low in

181、terest rates and a strong economy,leading to low defaults.This has resulted in a period of little dispersion in returns.While todays attractive all-in yields are an opportunity for lenders,they also increase borrowers interest expenses and potential risk.We expect that managers with experience acros

182、s credit cycles and the discipline to maintain underwriting standards will differentiate themselves from the pack.FED FUNDS FORWARD CURVE INDICATES HIGHER-FOR-LONGER RATESApril 30,2021 November 30,2028Sources:Bloomberg L.P.and Federal Reserve.0%1%2%3%4%5%6%202242025202620272028Fed FundsFo

183、rward Curve22OUTLOOK 2024European Opportunistic Private Credit Funds Raised in 2024 Should Deliver Above-Average Returns Vijay Padmanabhan Managing Director,Credit InvestmentsEuropean credit opportunities funds have returned an underwhelming 7.0%since mid-2011 against a targeted return in the mid-te

184、ens.A decade of near-zero interest rates gave corporates easy access to low-cost capital and allowed them to build strong balance sheets.Except for short periods of market dislocations or isolated cases of stress,it was mostly a challenging time for funds that specialize in providing highly structur

185、ed customized solutions to balance sheet problems.But we believe this is set to change in 2024,as we expect corporates to actively look for ways to reduce interest costs and improve liquidity.With interest costs almost doubling and operating costs remaining high,we have started to see a decline in k

186、ey coverage ratios.One key metric,EBITDA-to-interest expense ratio for European buyouts,has fallen from 4.3x in 2022 to 2.5x in 2023.This goes to show the declining level of cash generation by corporates due to the rise in costs.We are likely to see more dispersion in credit with companies in certai

187、n sectors and geographies facing more pressure than others.Since 2022,the pace of public market debt issuance has slowed,and European banks have pulled back to focus on their regulatory capital requirements.We have seen the commercial real estate market come under immediate pressure post-COVID.Pocke

188、ts of distress are emerging in sectors,such as financial services and healthcare,as pandemic-induced financial support has waned.Credit strategies that can provide capital solutions to larger corporates that otherwise would have accessed public market and/or that can pivot into distressed opportunis

189、tically will see a robust deployment environment in 2024.While individual manager performance will,of course,vary,we expect next years vintage of European opportunistic private credit managers will deliver above-average returns.EUROPEAN BUYOUT INTEREST COVERAGE RATIO HAS FALLEN TO LOW LEVELS200623 E

190、BITDA/Interest Expense MultipleSource:Pitchbook Data,Inc.0123452006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD2023NA23OUTLOOK 2024Equity Long/Short Performance Should Be Above Average in 2024 Joe Marenda Head of Hedge Fund Research and Digital Assets Investin

191、gWe expect equity long/short(ELS)hedge funds should perform above the industrys long-term average in 2024,due to the considerable rise in short rebates and economic conditions within major geographic regions.We believe this will support US ELS generalist strategies and sector specialists,as well as

192、regionally focused ELS funds in Europe and Asia.Higher short-term interest rates have increased the short rebate to levels unseen since the GFC.In fact,a funds short book now generates yields greater than benchmark equity dividend yields for the first time since 2008.A higher short rebate improves p

193、otential future performance,as it lowers the cost of carrying short positions and increases the opportunity set for single-name shorts.The weak economic backdrop we expect in 2024 should lead to a greater focus among investors on earnings and free cash flow.This positions ELS funds well,as companies

194、 that have been cheap on a fundamental basis may perform better and companies that are expensive may be strong candidates for shorting.In Europe,dispersion is above median among listed companies,which suggests that active stock pickers have an above-average field of candidates for longs and shorts.E

195、conomically transformative dynamicsreshoring of supply chains and a wall of low interest rate loan maturities,the latter of which will peak in Europe in 2026will lead to clear winners and losers among European companies.In Asia,where long-biased strategies did particularly well over the last decade,

196、we expect less directionally biased ELS funds should outperform in 2024.Market lead-ership and underperformance are likely to shift more rapidly among companies and countries in Asia in 2024 than over the past decade,which will give more nimble port-folios greater alpha opportunities.In the United S

197、tates,the same dynamics facing Asian managers and the broader European economy will set up US ELS and sector specialist funds for a wide dispersion of outcomes.Historically popular long-biased sector strategies are likely to face pressure from peers with lower net exposures and greater skill at sele

198、cting alpha generating shorts.In 2024,long out-of-favor US value ELS funds should perform particularly well.ABOVE-AVERAGE VOLATILITY MAY LEAD TO MORE LONG/SHORT OPPORTUNITIESDecember 31,2005 November 30,2023 Standard Deviation(%)Sources:FactSet Research Systems and MSCI Inc.MSCI data provided“as is”

199、without any express or implied warranties.05200720092001720192021Long-Term AverageUSAsiaEurope24OUTLOOK 2024US REIT Performance Should Rebound in 2024 Sehr Dsani Investment Director,Capital Markets ResearchUS REITs have performed poorly since the end of 2021,underperforming US

200、equities by 20 ppts.Increases in bond yields were a significant headwind,diminishing the relative attractiveness of REIT dividend yields and raising concerns over the value of underlying assets.Following the weak performance,valuations have fallen to an attractive level.This realitycombined with the

201、 fact that REITs are well positioned to take advantage of acquisition opportunities from overlevered private property ownerspositions the sector for a rebound in 2024.Recent poor performance has improved the attractiveness of valuation metrics.First,the sectors price-tofunds from operations(P/FFO)mu

202、ltiple relative to a similar measure for the broader US market is at the 35th percentile of observations since 1990.Second,REITs are trading at a 17%discount to net asset value,which is lower than the 20-year average of a 0.9%discount.Taken together,these metrics suggest the market has already adjus

203、ted price levels to reflect difficult conditions in 2024.Historically,REITs have outperformed as a new business cycle emerges.We expect investors will increasingly get clarity on the next business cycle as 2024 evolves.Despite concerns that the real estate sector must refinance a material volume of

204、debt,REIT balance sheets are generally sound.This is in part because REITs delevered since the GFC.The sectors debt/equity leverage ratio is 35%versus the sectors 50%level during the GFC and 60%+for many private counterparts today.Around 90%of REIT debt is fixed rate,maturities are reasonably stagge

205、red,and the low leverage rate relative to the private sector is due in part to REITs low office exposure(4.6%).In addition,many REITs have the advantage of being able to access the unsecured debt market.These dynamics position REITs favorably relative to their private peers and should allow them to

206、address upcoming refinancings and have the necessary capital to make strategic acquisitions in this environment.Marc Cardillo Head of Global Real AssetsREITS PERFORM BEST DURING EARLY CYCLE April 30,1975 April 30,2020 Average Annual Compound Returns(%)Sources:FTSE International Limited,MSCI Inc.,Nat

207、ional Association of Real Estate Investment Trusts,and National Bureau of Economic Research(NBER).MSCI data provided“as is”without any express or implied warranties.-6.322.915.57.2-4.012.513.210.5RecessionEarly CycleMiddle CycleLate CycleFTSE NAREIT All Equity REITs IndexMSCI US Index(Net)25OUTLOOK

208、2024Infrastructure Performance Should Rebound in 2024 Wade OBrien Managing Director,Capital Markets ResearchPublic infrastructure equities underperformed broader benchmarks in 2023,weighed down by rising interest rates,policy uncertainty,and recent profit warnings in some sectors.Improved valuations

209、,a supportive policy backdrop,and an ability to grow earnings during inflationary environments mean the sector should boost investor portfolios in 2024.Infrastructure assets include those in areas such as transportation,communica-tions,and power generation.An increase in benchmark bond yields,as wel

210、l as profit warnings from some large renewable energy players,caused listed infrastructure assets to underperform,with US and global ex US infrastructure stocks returning-4.5%and 2.4%,respectively,year-to-date through November 30.Improved valuations should mean better relative and absolute performan

211、ce in 2024.P/E ratios for global ex US and US infrastructure indexes have fallen by around 40%and 25%,respectively,since their mid-2021 peaks.Despite weaker earnings guidance from some companies,profitability in both regions remains in line with long-term averages and is protected by long-term contr

212、acts that include the ability to pass on higher costs to users.These dynamics help explain why utility sector earnings forecasts have predicted higher growth than most others in 2023,as well as why listed infra-structure assets historically have outperformed during periods of elevated inflation.Infr

213、astructure assets also have tailwinds from recent policy developments.Legislation like the US Inflation Reduction Act and the European Commissions REPowerEU plan will boost demand for clean energy infrastructure and underlying profit margins.Ambiguity around yet-to-be finalized language in the US le

214、gislation has been one factor recently weighing on stock performance,but this should be cleared up in the months ahead.While public infrastructure equity performance is likely to improve in 2024,investors willing to lock up liquidity for several years may also benefit by allocating to private funds.

215、While approaches and operational risks can vary(i.e.,greenfield versus brown-field assets),the best of these funds can offer exposure to skilled operators capitalizing on secular themes such as the energy transition and burgeoning data center demand.Despite near-term economic uncertainty,these trend

216、s continue to accelerate,which we expect will generate rewards for investors.January 31,1990 November 30,2023 Percent(%)Sources:MSCI Inc.,Standard&Poors,and UBS.MSCI data provided“as is”without any express or implied warranties.INFRASTRUCTURE HAS TENDED TO OUTPERFORM IN HIGH AND MODERATE INFLATIONAR

217、Y ENVIRONMENTS0.910.88.1-4.810.412.6High InflationG7 Inflation Rate Is Top Quartile(2.8%)Moderate InflationMiddle Two QuartilesLow InflationBottom Quartile(1.7%)Global InfrastructureMSCI World26OUTLOOK 2024Nuclear Should Emerge as a Budding Investment Opportunity in 2024Michael Brand Managing Direct

218、or,Real AssetsTechnological advancement,moderating public perception,improved safety,and new challenges in the drive for net zero have created a foundation for nuclear energys next chapter.Renewable energys adoption as a key replacement for dirty coal and other fossil fueloriented power has created

219、large challenges in maintaining reliable baseload power capacity,which underpins the keystone of energy transitionelectrification.Even as the memory of past disasters lingers and the issue of waste storage endures,new technolo-gies and the urgency to bridge the new challenge of intermittency has hel

220、ped nuclear re-emerge as an option for clean,reliable,and scalable baseload electricity.Policymakers have also provided a boost,with countries such as France pledging in 2022 to further build out its nuclear fleet,and even the United States implementing substantial subsi-dies to keep its existing fl

221、eet operational as part of the recent Inflation Reduction Acta sharp about-face from a policy standpoint.We believe nuclear will emerge as an energy transition investment opportunity in 2024,given the need for clean,reliable baseload electricity,recent government policy changes,and technological adv

222、ancements.The opportunity is not exclusive to just reactors,where it is unclear whether the future is modular or traditional,large-scale.Complementing the reactor fleet is a fragmented ecosystem of services and technology companies,which both construct new reactors and keep existing ones running.The

223、 landscape features an abundance of small,entrepreneur-run businesses that fly under the market radar and transact at significant discounts to the broader opportunity set.These companies seek to add value by helping businesses professionalize,consolidate,and harness new technologies.There are also o

224、pportunities associated with AI,software platforms,and plant-management tech-nology,all of which should continue to make the sector safer and more efficient.Hurdles certainly exist in the form of public perception,political jockeying,and even securing a steady stream of fuel,as the mining sector rem

225、ains constrained.However,energy transitions demands have created an ideal environment for the sectors next chapter.With power-hungry 21st century initiatives,such as digitization and electrification,the sector should continue to enjoy increased investor attention as the opportunity emerges.NUCLEAR I

226、S BRIDGING THE ENERGY TRANSITIONDecember 31,2000 December 31,2050(projected)Share of Electricity Generation(%)Source:BloombergNEF.0%20%40%60%80%100%2000200402050RenewablesNuclearCoal/OilGas27OUTLOOK 2024The US Dollar and Gold Should Hold Their Value in 2024Sean Duffin Senior Investment Di

227、rector,Capital Markets ResearchThe US dollar and gold are both stores of value and tend to do well in periods of turmoil.Despite this reality,as well as our views that economic activity will be weak in 2024 and that equity market volatility will increase,we expect that prices of these assets will re

228、main range bound.The dollars best days are likely already behind it for this currency cycle,following the run-up that climaxed in September 2022.Looking forward,the path of least resistance for the greenback over the next five-year period is for it to depreciate from its current elevated real valuat

229、ion.The currency is currently benefiting from wide interest rate differentials versus its peers,expectations of continued US economic outperformance,and risk aversion.The unwinding of any of these factors against a more normalized macroeconomic backdrop could precipitate dollar weakening.Nonetheless

230、,it may be premature to expect these supportive factors to dissipate in 2024.Consensus US growth outperformance versus the Eurozone and United Kingdom for 2024 is relatively modest and could improve,given the headwinds Europe faces.Relatedly,the Fed likely has the strongest claim to genuinely needin

231、g to keep rates higher for longer.And even if conditions in the United States continue to deteri-orate,the flight-to-safety effect the US dollar enjoys may initially mitigate the impact of reduced growth and rate differentials.Therefore,2024 looks more likely to deliver bounded dollar performance th

232、an a surge higher or lower.Like the dollar,we expect golds performance will not stand out.Recently,geopolitical tensions and central bank buying have supported its price,but we believe its recent rally likely means that it is already pricing in an uptick in geopolitical risk and market volatility ne

233、xt year.With real yields now trading at their highest levels since the GFC and our view that the Fed will only modestly cut its policy rate in 2024,the oppor-tunity cost of holding a non-interest-bearing asset like gold will remain high,making tactical gold positioning funded from assets like cash m

234、ore difficult to tolerate.There are several catalysts that could spark another strong year of performance for both gold and the dollar,such as unexpected escalation in geopolitical conflicts or an equity market meltdown,but we consider those catalysts as tail risks.Thomas OMahony Senior Investment D

235、irector,Capital Markets ResearchBOTH THE US DOLLAR AND GOLD ARE TRADING AT ELEVATED PRICESDecember 31,2000 November 30,2023 Percentiles Based on History Back to 1971Sources:Eurostat,Intercontinental Exchange,Inc.,MSCI Inc.,OECD,Refinitiv,Thomson Reuters Datastream,and US Federal Reserve.MSCI data pr

236、ovided“as is”without any express or implied warranties.020406080200420062008200022USD Real Effective Exchange RateReal Gold Price28OUTLOOK 2024The Yen Should Appreciate in 2024 Thomas OMahony Senior Investment Director,Capital Markets ResearchThe Japanese yen has wea

237、kened persistently since the beginning of 2021.Indeed,the most recent sell-off has taken the valuation of the yen to historically cheap levels.Our calculations show the currencys real valuation versus the dollar is lower than 99%of observations back to June 1971.Monetary policy divergence lies at th

238、e heart of the yens decline.The post-COVID surge in inflation occurred sooner and more forcefully among Japans peers,with material monetary tightening being delivered.Japan,by contrast,maintains a negative policy rate.The rise in inflation in Japan is undeniable,however,with Bank of Japan(BOJ)core i

239、nflation(excluding fresh food and energy)currently at 4.0%,the highest since the early 1980s.The only response so far from the BOJ has been to widen the bands of its Yield Curve Control*(YCC)policy.The relative lack of wage pressure has so far stayed the BOJs hand,as it retains concerns about the pe

240、rsistence of current inflation rates.Nonetheless,wage pressures are at the high end of the range of the last three decades and the labor market looks tight by most metrics.With core inflation having been above target for nine months and economic activity coming in firmer than in most of its peers,pr

241、essure is likely to build in 2024 for further monetary tightening.While any further BOJ tightening is likely to be modest in comparison to other regions,it should be sufficient to drive some yen appreciation.It would reduce the currencys negative carry,making it less onerous for those wishing to exp

242、ress a positive JPY view,and less beneficial to those using the yen as a funding currency.There are,of course,scenarios in which the BOJ does not deliver any further tightening.One of the most likely would be in the event of a more severe global economic slowdown.However,in this scenario,other centr

243、al banks would be aggressively cutting interest rates,causing interest rate differentials to move favorably for the yen.While other scenarios could play out,the balance of risks appears skewed toward an appreciating JPY in 2024.*Under yield curve control,a central bank commits to buy whatever quanti

244、ty of bonds is necessary to keep yields at their target level.In practice,the BOJ operated YCC with an allowance band on either side of its central yield target.THE YEN IS CHEAP AGAINST ALL PEERS AND PARTICULARLY SO VERSUS THE US DOLLARAs of November 30,2023 JPY Deviation From Median REER(%)Sources:

245、Eurostat,OECD,Refinitiv,and Thomson Reuters Datastream.-46.2-43.9-32.6-32.1-31.6-31.5CHFUSDEURCADGBPAUD29OUTLOOK 2024The Crypto Winter Should Transition to Spring in 2024 Joe Marenda Head of Digital Assets Investing and Hedge Fund ResearchDigital assets were in a so-called crypto winter from mid-202

246、2 to late 2023.Crypto winters are bear markets when crypto prices and private valuations are depressed for extended periods.While episodic,this is the fourth such winter since the inception of the crypto markets.We expect a crypto spring will arrive in 2024,given recent price dynamics among some cry

247、ptocurrencies,recent regulatory developments in many key markets,and continued growth in both adoption and in the technologys utility.Prior crypto winters have been periods of innovation.Major technical advances and new use cases have followed prior winters.During this winter,progress has been made

248、in core technologies that will make blockchain faster,cheaper,and more capital efficient.As a result,the prices of a few larger cryptocurrencies have performed well in 2023.A hurdle for cryptocurrencies has long been its regulatory footing,but many jurisdic-tions have developed clear regulatory fram

249、eworks.These markets include the United Kingdom,European Union,United Arab Emirates,Singapore,Hong Kong,South Korea,Thailand,and Japan.While US regulatory clarity and banking access remains cloudy,the stars are potentially aligning for the first US spot Bitcoin exchange-traded fund to be approved by

250、 regulators in 2024.Cryptocurrency usage has also continued to broaden,which we expect will support a spring transition in 2024.One important area involves US dollarbacked“stablecoins”that allow anyone,anywhere to hold US dollars outside of their national banking system using only their cell phone,r

251、egardless of what a government might restrict.In late 2023,stablecoins had an aggregate market value of approximately US$130 billion,up from US$3 billion in 2018.Established companies have noticed the promise of stablecoins,with PayPal launching its own stablecoin in 2023.*For investors focused on n

252、ew markets driven by new technology,2024 may be a good entry point as the next crypto spring commences.*In November 2023,PayPal received a subpoena from the US Securities and Exchange Commission requesting documents on its stablecoin.THERE HAVE BEEN 4 CRYPTO WINTERS SINCE BITCOINS INVENTIONJuly 31,2

253、010 November 30,2023 US Dollar Logarithmic ScaleSources:Bloomberg L.P.,Cambridge Associates LLC,and S.01101001,00010,000100,000200022Crypto WintersBitcoin30The linkages between 2024 viewsWeak Global Economic ActivityKey Inflation Rates DecelerateKey Central Banks Modestly Cut P

254、olicy RatesEuropean Equities UnderperformActive Equity Managers OutperformDeveloped Small Caps OutperformDeveloped Value OutperformsDM Outperforms EM ex ChinaChina Equities ReboundGlobal Equity Performance Is Below MedianGlobal Equity Volatility IncreasesUS REITs ReboundInfrastructure ReboundsNuclea

255、r Emerges as OpportunityFlows to Natural Capital Hit RecordUse of Emission Transition Plans IncreaseCalifornia Carbon Allowances OutperformYen Increases in ValueCrypto Spring Fully EmergesUS Dollar and Gold Hold ValueDirect Lending OutperformsHY Bonds Outperform LoansEuropean Opportunistic Private C

256、redit OutperformsLong Treasuries Outperform CashWeak China Private Investment FlowsPE Secondary Volume IncreasesDown Rounds in US VC IncreaseFlows to European Turnaround&Value IncreasePublic EquitiesFixed IncomePrivate InvestmentsEconomicsHedge FundsReal AssetsCurrenciesSustainable&ImpactGeopolitica

257、l ConflictsSocial UnrestFinancial System RisksIncremental AI GainsExogeneous FactorsEquity Long/Short Hedge Funds OutperformTHE LINKAGES BETWEEN 2024 VIEWSOur investment views are rooted in our belief that the economic backdrop will remain weak in 2024.With arrows,we highlight this dynamic and any i

258、nterplay of views within and across asset classes.While determining the number and direction of linkages is inherently a subjective exercise,we believe that a systems lens approach can be helpful in navigating markets and allocating capital.31Source:Cambridge Associates LLC.OUTLOOK 2024Figure Notes

259、Equities Appeal Relative to Bonds Has Diminished The spread reflects the difference between the cyclically adjusted real earnings yield less the government bond real yield.The global spread calculations are based on data from the MSCI World Index,FTSE World Government Bond Index 7-10 Year,and OECD T

260、otal CPI Index.Most Central Banks Are Projected to Cut Policy Rates in 2024 Data shown in table are year-end central bank policy rates.The policy rates for the US,UK,EMU,and Japan are based on Bloomberg consensus forecasts.The policy rates for the World,DM,and EM are based on Goldman Sachs Research

261、forecasts and are market FX-weighted aggregates.Geopolitical Risk Has Jumped Again In Late 2023 Data downloaded from https:/ on December 1,2023.The Pace of the Magnificent Sevens Rally Has Moderated Magnificent Seven is an equal-weighted basket consisting of the following seven common stocks:Alphabe

262、t,Amazon,Apple,Meta,Microsoft,Nvidia,and Tesla.Alphabet returns are based on A-shares.Small-Cap Dividend Yield Spreads Are Attractive and Well Above Historic Medians US SC and US are represented by the S&P SmallCap 600 and MSCI US indexes,respectively.DM ex US SC and DM ex US are represented by the

263、MSCI World ex US Small Cap and MSCI World ex US indexes,respectively.Data for DM ex US Small Cap vs DM ex US begin March 31,2003.Relative Performance of European Equities Has Been Strongest During Recoveries and Particularly Expansions Performances shown are annualized for each observed cycle.Top an

264、d bottom boxes represent 75th and 25th percentiles,respectively.The whiskers represent 90th and 10th percentiles.Middle line represents median.Asset performance has been deflated by G7 inflation.EM Can Struggle Even After the Fed Pauses Hiking Rates EM and DM are represented by the MSCI Emerging Mar

265、kets and the MSCI World indexes,respectively.Returns are gross of dividend taxes.Chinese Equities Trade Near Historical Lows and Are Poised for a Rebound Data for MSCI China All Shares begin November 30,2008.Data prior to November 30,2008,are implied based on the market capweighted valuation of the

266、MSCI China and MSCI China A Onshore indexes.Active Management Is Cyclical Data are quarterly.US and Global equities are represented by the S&P 500 and MSCI World indexes,respectively.High Emitters Less Likely to Set Emissions Reduction Targets Global Companies are companies within the MSCI All Count

267、ry World Index.High-Emissions Companies are companies in the energy,materials,and utilities sectors within the MSCI All Country World Index.US VC Valuations Have Fallen From Pandemic Highs Based on the total current cost and market value of unrealized investments made by venture capital funds as of

268、each date.USD-Denominated PE/VC Fundraising in China Slowed Sharply in 2023 Data have not been reviewed by PitchBook analysts.PE represents buyouts and growth equity.PE Secondary Deal Volume Continues Growth Trajectory Data for 2023 are through June 30.Data from June 30,2023 through 2024 are estimat

269、es.Fed Funds Forward Curve Indicates Higher-for-Longer Rates Data are as of November 30,2023.European Buyout Interest Coverage Ratio Has Fallen to Low Levels Includes only transactions for which Pro Forma financials were made available.Data for 2023 are through September 30.Above-Average Volatility

270、May Lead to More Long/Short Opportunities The standard deviation is based on rolling 12-month index returns.US,Asia,and Europe are represented by the MSCI US,MSCI All Country Asia,and MSCI Europe indexes,respectively.Long-term average represents historical average of all three regions.REITs Perform

271、Best During Early Cycle Data are monthly.Recessions are NBER-defined US recession dates.Early,middle,and late cycles are expansion phases divided by time into three equal parts.Dates based on six full economic cycles with available data.Infrastructure Has Tended to Outperform in High and Moderate In

272、flationary Environments Data are monthly.Global Infrastructure stocks are represented by the UBS Global Infrastructure Index from January 31,1990 to November 30,2001,and the S&P Global Infrastructure Index from December 31,2001,to present.The data are segmented into three distinct periods of high,me

273、dium,and low inflation.The period of high inflation is defined as the period when the YOY G7 CPI is equal to or exceeds the 75th percentile of historical observations.Medium inflation refers to the period when YOY G7 CPI exceeds the 25th percentile but does not exceed the 75th percentile of all obse

274、rvations.Low inflation refers to the period when YOY G7 CPI is equal to or falls below the 25th percentile of all observations.32OUTLOOK 2024Nuclear Is Bridging the Energy Transition Projections come from BloombergNEFs New Energy Outlook 2022 report.Renewables sector is composed predominantly of sol

275、ar and wind power,with 7%classified as other renewables by 2050.Analysis excludes hydrogen and other,which together are projected to contribute 1%of electricity generation by 2050.The Yen Is Cheap Against All Peers and Particularly So Versus the US Dollar Australian inflation data are quarterly and

276、as of September 30,2023.Eurozone inflation data are preliminary as of November 30,2023.All other inflation data are as of October 31,2023.There Have Been 4 Crypto Winters Since Bitcoins Invention Crypto winters are not universally agreed upon.Logarithmic scale chosen to better display the data from

277、a percent change perspective.iNDeX DescriptioNs Bloomberg Pan-European Aggregate Corporate Index The Bloomberg Pan-European Aggregate Bond Index is a broad-based flagship benchmark that measures fixed-rate,investment-grade securities in the following European currencies:Swiss Franc,Czech Koruna,Dani

278、sh Krone,Euro,British Pound,Hungarian Forint,Norwegian Krone,Polish Zloty,Romanian Leu,Russian Ruble,and Swedish Krona.The principal asset classes are treasuries,government-related,corporate,and securitized,which include Pfandbriefe,other covered bonds and asset-backed securities.Inclusion is based

279、on currency denomination of a bond and not country of risk of the issuer.The Pan-European Aggregate is a component of other flagship indexes,such as the multi-currency Global Aggregate Index.Bloomberg US Corporate High-Yield Index The Bloomberg US Corporate High Yield Index measures the US corporate

280、 market of non-investment-grade,fixed-rate corporate bonds.Securities are classified as high yield if the middle rating of Moodys,Fitch,and S&P is Ba1/BB+/BB+or below.Bloomberg US Long Treasury Index The Bloomberg US Long Treasury Index measures the performance of USD-denominated,fixed-rate,nominal

281、debt issued by the US Treasury with a maturity greater than ten years.STRIPS are excluded from the index because their inclu-sion would result in double-counting.The US Treasury Index is a component of the US Aggregate,US Universal,Global Aggregate,and Global Treasury Indexes.The US Long Treasury In

282、dex has history back to January 1,1973.Citigroup Economic Surprise Index(CESI)The Citigroup Economic Surprise Index(CESI)measures economic data relative to market expectations.Index readings above zero indicate economic releases have been coming in better than expected.In contrast,the data are worse

283、 than expected when the index is below zero.Surprise index readings climb up as economy recovers but declines fast as economy declines.Credit Suisse Leveraged Loan Index The Credit Suisse Leveraged Loan Index tracks the investable market of the USD-denominated leveraged loan market.It consists of is

284、sues rated“5B”or lower,meaning that the highest rated issues included in this index are Moodys/S&P ratings of Baa1/BB+or Ba1/BBB+.All loans are funded term loans with a tenor of at least one year and are made by issuers domiciled in developed countries.FTSE NAREIT All Equity REITs Index The FTSE Nar

285、eit All Equity REITs Index is a free floatadjusted,market capitalizationweighted index of US equity REITs.Constituents of the index include all tax-qualified REITs with more than 50%of total assets in qualifying real estate assets other than mortgages secured by real property.FTSE World Government B

286、ond Index The FTSE World Government Bond Index(WGBI)measures the performance of fixed-rate,local currency,invest-ment-grade sovereign bonds.The WGBI is a widely used benchmark that currently includes sovereign debt from over 20 countries,denominated in a variety of currencies,and has more than 30 ye

287、ars of history available.The WGBI provides a broad benchmark for the global sovereign fixed income market.Geopolitical Risk(GPR)Index Dario Caldara and Matteo Iacoviello construct a measure of adverse geopolitical events and associated risks based on a tally of newspaper articles covering geopolitic

288、al tensions and examine its evolution and economic effects since 1900.The geopolitical risk(GPR)index spikes around the two world wars,at the beginning of the Korean War,during the Cuban Missile Crisis,and after 9/11.Higher geopolitical risk foreshadows lower investment,stock prices,and employment.H

289、igher geopolitical risk is also associated with higher probability of economic disasters and with larger downside risks to the global economy.Goldman Sachs Financial Conditions Index(FCI)The Goldman Sachs Financial Conditions Index is a weighted average of short-term interest rates,long-term interes

290、t rates,the trade-weighted dollar,an index of credit spreads,and the ratio of equity prices to the ten-year average of earnings per share.33OUTLOOK 2024MSCI All Country Asia Index The MSCI All Country Asia Index captures large-and mid-cap representation across developed markets countries and emergin

291、g markets countries in Asia.With 1,481 constituents,the index covers approximately 85%of the free floatadjusted market capitalization in each country.Developed markets countries in the index include:Hong Kong,Japan,and Singapore.Emerging markets countries include:China,India,Indonesia,Korea,Malaysia

292、,the Philippines,Taiwan,and Thailand.MSCI All Country World Index(ACWI)The MSCI ACWI captures large-and mid-cap representation across 23 developed markets(DM)and 24 emerging markets(EM)countries.With 2,947 constituents,the index covers approximately 85%of the global investable equity opportunity set

293、.DM countries include:Australia,Austria,Belgium,Canada,Denmark,Finland,France,Germany,Hong Kong,Ireland,Israel,Italy,Japan,the Netherlands,New Zealand,Norway,Portugal,Singapore,Spain,Sweden,Switzerland,the United Kingdom,and the United States.EM countries include:Brazil,Chile,China,Colombia,Czech Re

294、public,Egypt,Greece,Hungary,India,Indonesia,Korea,Kuwait,Malaysia,Mexico,Peru,the Philippines,Poland,Qatar,Saudi Arabia,South Africa,Taiwan,Thailand,Turkey,and the United Arab Emirates.MSCI China Index The MSCI China Index captures large-and mid-cap representation across China A shares,H shares,B sh

295、ares,Red chips,P chips,and foreign listings(e.g.,ADRs).With 717 constituents,the index covers about 85%of this China equity universe.Currently,the index includes Large Cap A and Mid Cap A shares represented at 20%of their free floatadjusted market capitalization.MSCI China A Onshore Index The MSCI C

296、hina A Onshore Index captures large-and mid-cap representation across China securities listed on the Shanghai and Shenzhen exchanges.MSCI Emerging Markets Index The MSCI Emerging Markets Index captures large-and mid-cap representation across 24 emerging markets countries.Emerging markets countries i

297、nclude:Brazil,Chile,China,Colombia,Czech Republic,Egypt,Greece,Hungary,India,Indonesia,Korea,Kuwait,Malaysia,Mexico,Peru,the Philippines,Poland,Qatar,Saudi Arabia,South Africa,Taiwan,Thailand,Turkey,and the United Arab Emirates.With 1,437 constituents,the index covers approximately 85%of the free fl

298、oatadjusted market capitalization in each country.MSCI Europe Index The MSCI Europe Index captures large-and mid-cap representation across 15 developed markets countries in Europe.With 428 constituents,the index covers approximately 85%of the free floatadjusted market capitalization across the Europ

299、ean DM equity universe.Developed markets countries in Europe include:Austria,Belgium,Denmark,Finland,France,Germany,Ireland,Italy,the Netherlands,Norway,Portugal,Spain,Sweden,Switzerland,and the United Kingdom.MSCI US Index The MSCI US Index is designed to measure the performance of the large-and mi

300、d-cap segments of the US market.With 626 constituents,the index covers approximately 85%of the free float-adjusted market capitalization in the United States.MSCI US Large Cap Index The MSCI US Large Cap Index is designed to measure the performance of the large-cap segments of the US market.With 291

301、 constituents,the index covers approximately 70%of the free floatadjusted market capitalization in the United States.MSCI US Small Cap Index The MSCI US Small Cap Index is designed to measure the performance of the small-cap segment of the US equity market.With 1,924 constituents,the index represent

302、s approximately 14%of the free floatadjusted market capitalization in the United States.MSCI World Index The MSCI World Index represents a free floatadjusted,market capitalizationweighted index that is designed to measure the equity market performance of developed markets.It includes 23 developed ma

303、rkets country indexes:Australia,Austria,Belgium,Canada,Denmark,Finland,France,Germany,Hong Kong,Ireland,Israel,Italy,Japan,the Netherlands,New Zealand,Norway,Portugal,Singapore,Spain,Sweden,Switzerland,the United Kingdom,and the United States.MSCI World ex US Index The MSCI World ex US Index capture

304、s large and mid-cap representation across 22 of 23 developed markets countries(excluding the United States).It includes 22 developed markets country indexes:Australia,Austria,Belgium,Canada,Denmark,Finland,France,Germany,Hong Kong,Ireland,Israel,Italy,Japan,the Netherlands,New Zealand,Norway,Portuga

305、l,Singapore,Spain,Sweden,Switzerland,and the United Kingdom.With 885 constituents,the index covers approximately 85%of the free floatadjusted market capitalization in each country.MSCI World ex US Small Cap Index The MSCI World ex US Small Cap Index captures small-cap representation across 22 of 23

306、developed markets countries(excluding the United States).It includes 22 developed markets country indexes:Australia,Austria,Belgium,Canada,Denmark,Finland,France,Germany,Hong Kong,Ireland,Israel,Italy,Japan,the Netherlands,New Zealand,Norway,Portugal,Singapore,Spain,Sweden,Switzerland,and the United

307、 Kingdom.With 2,431 constituents,the index covers approximately 14%of the free float-adjusted market capitalization in each country.34Copyright 2023 by Cambridge Associates LLC.All rights reserved.This report may not be displayed,reproduced,distributed,transmitted,or used to create derivative works

308、in any form,in whole or in portion,by any means,without written permission from Cambridge Associates LLC(“CA”).Copying of this publication is a violation of US and global copyright laws(e.g.,17 U.S.C.101 et seq.).Violators of this copyright may be subject to liability for substantial monetary damage

309、s.This report is provided for informational purposes only.The information does not represent investment advice or recommendations,nor does it constitute an offer to sell or a solicitation of an offer to buy any securities.Any references to specific investments are for illustra-tive purposes only.The

310、 information herein does not constitute a personal recommendation or take into account the particular investment objectives,financial situations,or needs of individual clients.Information in this report or on which the information is based may be based on publicly available data.CA considers such da

311、ta reliable but does not represent it as accurate,complete,or independently verified,and it should not be relied on as such.Nothing contained in this report should be construed as the provision of tax,accounting,or legal advice.PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.Broad-based sec

312、urities indexes are unmanaged and are not subject to fees and expenses typically associated with managed accounts or investment funds.Investments cannot be made directly in an index.Any information or opinions provided in this report are as of the date of the report,and CA is under no obligation to

313、update the information or communicate that any updates have been made.Information contained herein may have been provided by third parties,including investment firms providing information on returns and assets under management,and may not have been independently verified.The terms CA or Cambridge As

314、sociates may refer to any one or more CA entity including:Cambridge Associates,LLC(a registered investment adviser with the US Securities and Exchange Commission,a Commodity Trading Adviser registered with the US Commodity Futures Trading Commission and National Futures Association,and a Massachuset

315、ts limited liability company with offices in Arlington,VA;Boston,MA;Dallas,TX;Menlo Park,CA,New York,NY;and San Francisco,CA),Cambridge Associates Limited(a registered limited company in England and Wales,No.06135829,that is authorized and regulated by the UK Financial Conduct Authority in the condu

316、ct of Investment Business,reference number:474331);Cambridge Associates GmbH(authorized and regulated by the Bundesanstalt fr Finanzdienstleistungsaufsicht(BaFin),Identification Number:155510),Cambridge Associates Asia Pte Ltd(a Singapore corporation,regis-tration No.200101063G,which holds a Capital

317、 Market Services License to conduct Fund Management for Accredited and/or Institutional Investors only by the Monetary Authority of Singapore),Cambridge Associates Limited,LLC(a registered investment adviser with the US Securities and Exchange Commission,an Exempt Market Dealer and Portfolio Manager

318、 in the Canadian provinces of Alberta,British Columbia,Manitoba,Newfoundland and Labrador,Nova Scotia,Ontario,Qubec,and Saskatchewan,and a Massachusetts limited liability company with a branch office in Sydney,Australia,ARBN 109 366 654),Cambridge Associates Investment Consultancy(Beijing)Ltd(a whol

319、ly owned subsidiary of Cambridge Associates,LLC which is registered with the Beijing Administration for Industry and Commerce,registration No.4972),and Cambridge Associates(Hong Kong)Private Limited(a Hong Kong Private Limited Company licensed by the Securities and Futures Commission of H

320、ong Kong to conduct the regulated activity of advising on securities to professional investors).OUTLOOK 2024Serge Agres,Drew Boyer,Tiffany DiLiberto,Christina Fenton-Neblett,Guillermo Garcia Montenegro,Kristen Greiner,Song Han,Heather Jablow,David Kautter,Grayson Kirk,Graham Landrith,Coleman Long,Li

321、qian Ma,Marcelo Morales,Mark Sintetos,Caryn Slotsky,and Ilona Vdovina also contributed to this publication.MSCI World Value Index The MSCI World Value Index captures large-and mid-cap securities exhibiting overall value style characteristics across 23 developed markets countries(Australia,Austria,Be

322、lgium,Canada,Denmark,Finland,France,Germany,Hong Kong,Ireland,Israel,Italy,Japan,the Netherlands,New Zealand,Norway,Portugal,Singapore,Spain,Sweden,Switzerland,the United Kingdom,and the United States).The value investment style characteristics for index construction are defined using three variable

323、s:book value to price,12-month forward earnings to price and dividend yield.OCED Consumer Price Index The Consumer Price Index measures the overall change in consumer prices based on a representative basket of goods and services over time.S&P Global Infrastructure Index The S&P Global Infrastructure

324、 Index is designed to track 75 companies from around the world chosen to represent the listed infrastructure industry while maintaining liquidity and tradability.To create diversified exposure,the index includes three distinct infrastructure clusters:energy,transportation,and utilities.S&P 500 Index

325、 The S&P 500 Index is widely regarded as the best single gauge of large-cap US equities.The index includes 500 leading companies and covers approximately 80%of available market capitalization.S&P SmallCap 600 Index The S&P SmallCap 600 seeks to measure the small-cap segment of the US equity market.T

326、he index is designed to track companies that meet specific inclusion criteria to ensure that they are liquid and financially viable.UBS Global Infrastructure Index The UBS Global Infrastructure Index is a free floatadjusted,market capitalizationweighted index designed to track the performance of non-utility related global listed infrastructure(transportation and communication).35