A fifth scenario modeling evergreen: Why Private Markets?
At Ortec Finance we have been building and applying Economic Scenario Generator (ESG) models for decades, aimed at enabling people all over the world to manage the complexity of investment decision making. Over the years we have done a lot of R&D around this topic, and shared the results through various conference presentations. Although some cases are more than a decade old, the content of these “scenario modeling evergreens” is still very relevant today.
After VAR Models Do's and Don'ts, A Zero Phase Shift Band Pass Filter, Asset Classes and Business Cycles, and Estimating Liquidity Risk Premia, a fifth such presentation from 2013 looks at why to invest in private markets.
Private market investments can add value for investors but a big problem is that empirical evidence is short, biased or incomplete and academics disagree on many issues. Formulating expected returns requires careful consideration of factors such as leverage, liquidity risk premia and fees. Scenario modeling of private assets should reflect the limited rebalancing possibilities and should include sensitivity analysis to deal with the more than usual uncertainty of the inputs.
In today’s world of low interest rates many investors consider investing in privately held assets. But the trend of institutional investors substituting listed for private assets already started long ago. This makes the learnings included in this presentation still very relevant today, and of course we are happy to share them with you. You can download the presentation by filling in the form below.
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