J.P. Morgan Asset Management’s 2025 alternatives outlook makes some firm predictions for different asset classes.
According to the report, stocks and bonds “face significant headwinds”, pointing to high valuations that have helped drive institutions’ returns as one problem, and “persistent rate volatility”, implying persistent inflation.
On the other hand, private equity dealmaking might rebound from its depressed state since 2022, driven by “a more robust US growth environment”, with more IPO exits and hungry, well-funded companies and funds
Private credit might benefit from the same trends, especially in corporate direct lending, with US deregulation potentially fuelling public and private lending. According to the report, US banks might claw back some more market share in lending, but private credit is expected to continue to thrive.
Likewise, US real estate may benefit from better operating income. Indeed, the report describes it as representing “a generational investment opportunity”, with lower valuations and improving fundamentals.
Hedge funds could benefit from fiscal and monetary policy shifts, according to the report. Even tariff wars may benefit infrastructure, particularly industrial real estate and transportation as supply chains shift and become more complicated.
Note that most of the positive predictions are based on a strong economic story for the US. That is only one interpretation of the potential impact of persistent inflation and high tariffs.
Continuing high policy rates, especially, could continue to exert pressure on lower-quality borrowers in private credit and real estate.
In private equity, strategies focused on operational enhancement rather than leverage financing may be preferable, as may venture capital propositions, which rely less on lending. And JPMAM’s prediction of possible enhanced opportunities for distressed credit point to rather more ambivalence than some of its positive language would suggest.
The report highlights opportunities “amid global policy suggests”, indicating that policy is now driving the world in unexpected directions, and remains utterly unpredictable. That kind of disruption does not look to be creative of wealth, or of much else. Investors had better be prepared.
