Most assets struggled in 2022. Among alternatives, commodity related categories were at the top of asset rankings (again), while cryptocurrencies and private equity were at the bottom (see chart below).
Private equity again showed that it is a high beta1 version of public equity markets, while hedge funds were in the middle of the pack. The latter have historically struggled to outperform government debt (producing lower returns with more volatility). In 2022, the only hedge fund category to outperform cash was Macro/CTA (commodity trading advisors). Fine wines competed well with equities and at least offered the possibility to drown one’s sorrows if things turn out badly!
We expect falling inflation to pave the way for better outcomes in 2023. We also believe that riskier assets (except commodities) will generate the best returns (private equity, for example). However, we expect falling government bond yields (and weakening US dollar) to boost gold but remain wary of cryptocurrencies.
