Key takeaways
- 01We remain modestly overweight equities, with a tilt toward companies with durable margins and low refinancing needs.
- 02We have extended fixed income duration gradually, prioritising high-quality issuers.
- 03In private markets, we are slowing commitment pacing and favouring secondaries.
Each quarter, our investment committee reviews the economic backdrop, the opportunity set across asset classes and the risks that could most affect our clients' plans. This letter summarises our conclusions and the positioning changes that follow from them.
The backdrop
Growth has slowed but remains positive, inflation has moderated without fully returning to target, and policy rates are well above where they spent most of the previous decade. Markets are priced for a benign outcome. That is possible, but we think the path to it is narrower than valuations imply.
Equities: owning quality
We remain modestly overweight equities relative to long-term policy targets. Within that allocation, we continue to favour businesses with pricing power, strong free cash flow and limited near-term refinancing needs. Higher-for-longer rates are a slow-moving headwind for leveraged companies, and we would rather not be early in discovering which ones are most exposed.
Fixed income: duration with discipline
For the first time in many years, high-quality bonds offer yields that can meaningfully contribute to a family's spending needs. We have been extending duration in stages, and we prefer government and high-grade issuers over lower-quality credit, where spreads offer limited compensation for the risks involved.
Private markets: patience pays
- We are pacing new primary commitments more slowly, reflecting longer holding periods and slower distributions.
- Secondaries continue to offer attractive entry points and earlier cash flows.
- In real assets, we favour infrastructure with contracted, inflation-linked revenues.
The risks we are watching
The risks we weight most heavily are a sharper slowdown in employment, renewed inflation pressure that keeps policy tighter for longer, and stress in parts of the credit market where leverage built up during the low-rate era. Each of these is addressed through the liquidity reserves we maintain in every client plan, rather than through short-term market timing.
“We do not need to predict the next quarter to be prepared for it. We need every family to be able to hold its plan through it.”
About the author
Priya Raman
Chief Investment Officer
Leads Aevum's investment committee and oversees $300B+ in discretionary and advisory assets.
Insights are provided for informational purposes only and do not constitute investment, tax or legal advice. Opinions reflect the judgment of the authors as of the date of publication and are subject to change without notice.
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