Research

Market drawdowns throw portfolios out of balance and force investors to make difficult decisions around rebalancing. With COVID-19 as a backdrop, Makena’s latest insight examines the equity risk premium (“ERP”) through historical downturns as a guide for investors rebalancing into risk assets.

Makena’s Mid-Year Investor Letter provides a recap of the first six months of 2020, including market context and how Makena relied on its core investment beliefs to navigate the volatility. The letter also compares and contrasts “quality” and “value” as investors try to discern the true worth of a company beyond its tangible assets.

In Makena’s latest insight on Emerging Markets, we dive into our differentiated strategy for EM equity investing, which utilizes a targeted, bottom-up approach to bypass the suboptimal exposure of the passive emerging markets options.

In our 2019 Annual Letter, we discuss the most recent calendar year and 2020 to date, including how we have reacted to take advantage of investment opportunities.

The coronavirus pandemic is expanding at a seemingly increasing velocity. We continue to monitor the situation and its implications closely. This is an update to our post from last week. We will continue with regular updates as the situation develops.

The coronavirus is a serious global event which we continue to monitor closely. Its impact on global markets is fluid, but we remain confident in our portfolio and its long-term orientation. Protecting our greatest asset – our people – is a top priority.

We believe the formal incorporation of ESG considerations into our investment activities sharpens our ability to identify potential risks and opportunities leading to attractive long-term risk-adjusted returns. As such, we feel it is imperative to partner with best-in-class managers whose objectives and culture are aligned with our own.

In our continual search to find the most attractive investments on behalf of our investors, we have naturally developed biases through our experience at Makena and through our experience as investors in prior roles. In the buyout asset class, we believe small-cap funds provide the strongest opportunity to generate alpha. Due to several factors, which we discuss in the letter, Makena is ideally positioned to source and partner with top investment talent in small-cap buyout.

The investment community is acutely aware of which managers consistently perform in the top quartile, and achieving an allocation to their oversubscribed funds is difficult. Instead of asking “how do we access these top-quartile managers?” Makena chooses to ask the question “how do we find tomorrow’s top-quartile managers?” A discussion about why Makena targets these “emerging managers” and the success signals we have developed to identify them.

The investment committees of endowments and foundations have long relied on portfolios of marketable stocks and bonds to deliver operating payouts while preserving purchasing power. That model has been increasingly threatened by lower forecasted returns across both stocks and bonds, forcing a difficult decision on investment committees: decrease payouts, or embrace illiquidity in the hunt for returns. In this letter, we examine the success of endowments and foundations who have increased their allocation to private asset classes.