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1、Outlook for 2025THE BEAT|Bonds|Equities|Alternatives|Transition 3How To Invest in a Fully-Valued Market5The Bull Market Matures on Optimism 7In Fixed Income,Securitized Credit Might Be the Sweet Spot9Stimulus Fatigue:China Cant Band-Aid Its Way to Recovery 12The Potential Impact of Generative AI on

2、Private Markets Table of ContentsThe BEAT is a monthly publication,formerly known as the Monthly Market Monitor,which provides connectivity between market events and investor portfolios,spanning Bonds,Equities,Alternatives and Transition(i.e.cash and cash equivalents held by investors while deciding

3、 other asset classes to“transition”to).THE BEAT|Bonds|Equities|Alternatives|TransitionTHE BEAT|OUTLOOK FOR 2025The Portfolio Solutions Group Our Five Key Themes for 2025How To Invest in a Fully-Valued Marketby Jim Caron CIO,Portfolio Solutions GroupInvestors rarely agree on any one point;after all,t

4、here is a buyer and a seller at every price.But as we enter 2025 most investors do agree on one thing:Market valuations seem to be full and not many think assets are cheap.This is true across both fixed income and equities,the most widely-traded asset classes.The question we then ask about 2025 is:H

5、ow do you invest in a fully-valued market?The simple answer is to optimize asset and investment selection in portfolios,because their return attributions may make a bigger difference than has been the case over the last several years.Said differently,we must prioritize alpha over beta.The Bull Marke

6、t Matures on Optimism by Andrew Slimmon Head of Applied Equity AdvisorsOn September 30,2022 the S&P 500 hit a-25%bear market correction from earlier in the year.But historically,-25%corrections have generated excellent buying opportunities.As it turned out,the 12-month return for the S&P 500 at the

7、end of September 2023 was+20%and 2024 has been equally consistent as the second year of this bull market.We are now entering what we believe is the“optimism phase”of the bull market,where we expect investors to be even more optimistic than they have been in the past two years.The final leg of a bull

8、 market,before the next bear market,is the“euphoric stage”-and thats the danger zone.But that comes later.Expect to enjoy 2025.In Fixed Income,Securitized Credit Might Be the Sweet Spotby Vishal Khanduja,CFA Head of Broad Markets Fixed Income Our central view heading into 2025 is that we believe mon

9、etary policy will outpace current market expectations,driven by moderate growth and a bumpy,yet persistent,disinflationary trend.While the base case remains economic data-dependent,the post-U.S.election environment has made it increasingly policy-dependent as well.If fiscal dovishness materializes a

10、mid higher tariffs,we anticipate further upward pressure on yields,steeper yield curves and rising risk premiums,ultimately pushing terminal rates higher.However,we believe markets are currently priced on the hawkish side of our base case.On the other hand,a moderating monetary policy,coupled with a

11、 strong consumer,robust corporate balance sheets and healthy investor demand for risk should bode well broadly for fixed income spread sectors.Overall,we believe the best opportunities will be in securitized credit,particularly U.S.MBS.123The investment environment to start 2025 is quite interesting

12、.Equity and fixed income markets appear to be fully valued and the Republican sweep in the U.S.could have global ramifications.China continues to struggle to find its footing,while AI might provide significant investment opportunities in alternative investing.The Portfolio Solutions Group looks at f

13、ive key areas going into 2025.1PORTFOLIO SOLUTIONS GROUPTHE BEAT|OUTLOOK FOR 20252PORTFOLIO SOLUTIONS GROUPStimulus Fatigue:China Cant Band-Aid Its Way to Recoveryby Jitania Kandhari Deputy CIO of the Solutions and Multi-Asset Group,Head of Macro and Thematic Research for the Emerging Markets Equity

14、 team,Co-Lead Portfolio Manager,Passport EquitySince September 2024,Chinese policymakers have focused on delivering a series of stimulus packages to inject new life into their struggling economy and boost share prices.However,high debt levels,overinvestment,an unresolved property bubble,underwhelmin

15、g domestic consumption and international trade pressures all contribute to the structural weaknesses in Chinas economy that stimulus packages alone cannot resolve.Lessons from other debt-laden economies suggest the path to stability requires cleaning up bad debt through either write-offs or restruct

16、uring,followed by bank recapitalization.This approach is undeniably painful,but without such drastic measures,stimulus packages will continue to provide fleeting relief.Deeper transformation must occur in China for lasting economic health.The Potential Impact of Generative AI on Private Marketsby St

17、eve Turner Head of Investment Selection for the Portfolio Solutions GroupThe potential impact of generative Artificial Intelligence(AI)on private market performance is expected to be a key theme in 2025.While private equity is expected to participate through both investing in“AI-natives”and companie

18、s that attempt to expand revenue and profitably through AI applications,we recognize that some of the earliest opportunities are identifiable in private infrastructure.Two key infrastructure-related themes driving this have been the digitization of society and economies,and the global energy transit

19、ion.These two mega themes meet where data requirements lead to power demand,and this is leading to extensive investment opportunities.45How To Invest in a Fully-Valued MarketTHE BEAT|OUTLOOK FOR 20253PORTFOLIO SOLUTIONS GROUPInvestors rarely agree on any one point;after all,there is a buyer and a se

20、ller at every price.But as we enter 2025 most investors do agree on one thing:Market valuations seem to be full and not many think assets are cheap.This is true across both fixed income and equities,the most widely-traded asset classes.The question we then ask about 2025 is:How do you invest in a fu

21、lly-valued market?The simple answer is to optimize asset and investment selection in portfolios,because their return attributions may make a bigger difference than has been the case over the last several years.Said differently,we must prioritize alpha over beta.Lets get into it!BONDS:THE BIGGEST CHA

22、LLENGE,YES,BUT PERHAPS THE BEST OPPORTUNITYBonds present the biggest challenge because their expected return and valuations are tied to the well-telegraphed path of policy rates.The majority of bond returns stem from duration,i.e.their sensitivity to interest rate movements.In fact,over 80%of bond r

23、eturns in the Bloomberg Aggregate Bond Index could be historically attributed to duration over the past 40 years.Much of the remaining portion of returns comes from the coupon,with a bit left over from convexity.Given that the Fed is expected to cut interest rates,much of the return in bonds has alr

24、eady been priced in.In addition,credit spreads are trading near historically tight levels so there is little excess return for passive investors to extract from fixed income.But heres where the opportunity comes in.While it may be true that there are great challenges for passive bond investors that

25、rely mainly on beta to drive returns,the opposite is true for those who invest in actively-managed fixed income strategies.These active investors rely less on the interest rate cycle,or beta,to drive returns.Instead,they rely more on asset selection and investment selection.Since the majority of inv

26、estors in fixed income tend to employ passive strategies,we believe those who engage with active management strategies have a great opportunity to add alpha to their return attributions and differentiate themselves.EQUITIES:MORE ABOUT FACTORS AND ALPHA THAN BETAConsistent with our theme for 2025,val

27、uations are the crux of the equity debate.This is often measured in price-to-earnings(P/E)multiples,which are currently high and seem fully valued.What this means is that it may be difficult for equity return attributions to come mainly from an increase in broad-based multiples,or beta,in equity mar

28、kets.Of course,its possible for multiples to expand but it may take some form of“irrational exuberance”for this to occur.As a result,we expect alpha,not beta,to become a larger source of return attribution.Perhaps this is fed by the“old”economy value sectors finding gains from the“new”economy techno

29、logy sectors,as Capex,AI and electrification increases productivity in broader-based cyclical sectors of the economy.Investment ThemesJim Caron CIO,Portfolio Solutions Group DISPLAY 1Closing the GapThe S&P 500 Equal-Weighted EPS,currently below median,has scope to rise to levels historically consist

30、ent with cyclical peaksThe S&P 500 Market-Cap Weighted and S&P 500 Equal Weighted Indexes Blended 12-month forward EPS relative to long-term exponential trend(a measure of cyclically adjusted EPS)Source:Source:Portfolio Solutions Group.As of September 30,2024.The views and opinions expressed are tho

31、se of the Portfolio Solutions Group at the time of writing/of this presentation and are subject to change at any time due to market,economic,or other conditions,and may not necessarily come to pass.Forecasts/estimates are based on current market conditions,subject to change,and may not necessarily c

32、ome to pass.Past performance is no guarantee of future results.-4.00%-3.00%-2.00%-1.00%0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%10.00%11.00%12.00%13.00%14.00%May 2021Oct.2021Mar.2022Aug.2022Jan.2023Jun.2023Nov.2023Sept.2024Apr.20241.5%5.9%Closing the gapPrevious Cycle Peak:13%above trendPre

33、vious Cycle Peak:9.3%above trend14.00%12.00%10.00%8.00%6.00%4.00%2.00%0.00%-2.00%-4.00%May 2021S&P 500 Equal Weighted Blended 12M Forward Consensus vs.TrendS&P 500 Market Cap Weighted Blended 12M Forward Consensus vs.TrendLong-Term MedianOct.2021 Mar.2022 Aug.2022 Jan.2023Jun.2023 Nov.2021 Apr.2024

34、Sept.20241.5%5.9%Previous Cycle Peak:9.3%above trendPrevious Cycle Peak:13%above trendClosing the gapMany believe that 22x earnings is a high hurdle to sustainably exceed under current conditions-and we agree.Valuations across equity markets typically hinge on three variables:the level of interest r

35、ates,the cost of credit and default risks and the composition of the index itself,i.e.if the index is more heavily weighted toward higher or lower P/E stocks.Since the lower interest rate impulse has passed,and the yield curve is steepening,multiple-expansion-based gains in equities may lose a tailw

36、ind.Rising equity prices may become more reliant on earnings from the broader market.As a result,we expect alpha,not beta,to become a larger source of return attribution.Perhaps this is fed by the“old”economy value sectors finding gains from the“new”economy technology sectors,as Capex,AI and electri

37、fication increases productivity in broader-based cyclical sectors of the economy.In Display 1 we illustrate that there is a large gap between the broader market,as represented by the equal-weighted S&P 500 and the market-cap-weighted version.By positioning portfolios,and selecting assets and active

38、investment styles,we believe closing this gap is the key to performance as we move into 2025.The lines may be blurred between growth,value,small,mid and large cap as a result.ConclusionWe believe its time to change the way we think about market performance,from being confined to sectors and narrow b

39、readth,to factors and a widening breadth.We prefer to focus on free-cash-flow yield,earnings growth,pricing power,profitability and strong balance sheets.Selecting investments and managers that can exploit this value intra-sector may rise in importance compared with simply just picking a sector.For

40、bonds,we think active management is critical to driving alpha over the beta provided by the interest rate cycle.We also believe that alternatives and private market investments will play a growing role in a balanced and well-diversified portfolio,especially since their valuations are more representa

41、tive of early-cycle dynamics than public markets that seem later cycle.4PORTFOLIO SOLUTIONS GROUP HOW TO INVEST IN A FULLY-VALUED MARKETTHE BEAT|OUTLOOK FOR 2025The Bull Market Matures on Optimism 5PORTFOLIO SOLUTIONS GROUPIn retrospect,this bull market and the commensurate actions of investors have

42、 followed a consistent pattern weve seen in the past.To me,that sends a pretty clear signal of whats to come in 2025.On October 25,2022 Applied Equity Advisors hosted our third quarter 2022 webcast.It was a painful time back then.On September 30 of that year the S&P 500 had hit a-25%bear market corr

43、ection from earlier in the year.1 Investors were clearly spooked.One of the charts we used on the webcast showed that historically-25%corrections had generated excellent buying opportunities.The next 12-month S&P 500 return from previous-25%selloffs had produced a+22%return on average-double the ave

44、rage annual return for equities.2 Fast forward one year and that 2022 low produced a similar result.The 12-month return for the S&P to the end of September 2023 was+20%-pretty darn close to the historical average!But did investors get more aggressive toward equities in late 2002/early 2023,knowing t

45、hat deep corrections create wonderful opportunities?Absolutely not.Investors came into 2023 extremely bearish.“BULL MARKETS ARE BORN ON PESSIMISM.”3 That was the story of 2023.The S&P 500 rallied,but the level of selling by retail and skeptics on Wall Street was sky high.4,5 Nothing was different th

46、is time.In my opinion,2024 has been equally consistent with the second year of a bull market.After a year of selling out of equities,as we saw in 2023,the outflows began to dry up as the bull market raged on.Investors realized theyd made a mistake selling equities and took a pause on their negativit

47、y.6 As did the Wall Street disbelievers.Investment ThemesTHE BEAT|OUTLOOK FOR 2025 1 Bloomberg.2 Bloomberg.3 Sir John Templeton 1966.4 Fund flow data.Strategas.5 The expected S&P 500 return among the 11 Wall Street U.S.equity strategists for 2023 was only+4.6%.6 In Q3 2024 the last 12 months equity

48、net flows turned from a large negative to neutral-not necessarily positive,just not as negative as 2023.Strategas.In my opinion,we are entering the optimism phase of the bull market emotional cycle.Flows will likely turn more aggressively positive,and Wall Street will pivot to become much more bulli

49、sh in their outlooks.”Andrew Slimmon Head of Applied Equity Advisors 6PORTFOLIO SOLUTIONS GROUPTHE BULL MARKET MATURES ON OPTIMISMTHE BEAT|OUTLOOK FOR 2025“BULL MARKETS GROW ON SKEPTICISM.”If 2023 and 2024 have been pretty much textbook for the first two years of a bull market,I see no reason to bel

50、ieve that the third year(2025)wont be consistent as well.“BULL MARKETS MATURE ON OPTIMISM.”In my opinion,we are entering the optimism phase of the bull market emotional cycle.I suspect you will hear investors and Wall Street sounding much more optimistic than they have in the past two years.Flows wi

51、ll likely turn more aggressively positive,and Wall Street will pivot to become much more bullish in their outlooks.This would be good for equities and for investors allocating to equities for 2025.Of course,the final leg of a bull market before the next bear market is the“euphoric stage.”And thats t

52、he danger zone.Yes,thats out there,but it comes later.We need to get through the optimism phase first.Enjoy 2025!In Fixed Income,Securitized Credit Might Be the Sweet Spot7PORTFOLIO SOLUTIONS GROUPOur central view heading into 2025 is expecting monetary policy to outpace current market expectations,

53、driven by moderate growth and a bumpy,yet persistent,disinflationary trend.While the base case remains economic-data-dependent,the post-U.S.election environment has made it increasingly policy-dependent as well.If fiscal dovishness materializes amid higher tariffs,we anticipate further upward pressu

54、re on yields,steeper yield curves due to inflationary pressures and rising risk premiums,ultimately pushing terminal rates higher.However,we believe markets are currently priced on the hawkish side of our base case.On the other hand,a moderating monetary policy,coupled with a strong consumer,robust

55、corporate balance sheets and healthy investor demand for risk should bode well broadly for fixed income spread sectors.The challenge heading into 2025 is that index-level valuations have already priced in a substantial amount of fundamental upside.Given our constructive macro backdrop,stable balance

56、 sheet fundamentals and sustained strong demand for fixed income,it comes as no surprise that spreads are pricing in substantial optimism.In fact,global credit spreads across both investment grade and high yield are hovering near their richest deciles on a longer-term basis.Amid this environment,the

57、 opportunity lies in active sector and security selection as economic and policy outcomes will further increase dispersion in fundamental outcomes and,in turn,interest rates and spread volatility will remain high.Putting it all together,we believe that the current high starting yields present a comp

58、elling case for fixed income allocations,namely delivering on the dual mandate of providing income/total return alongside the negative correlation with risky assets in client portfolios.Our portfolios are positioned to be overweight credit risk,but being conscious of high valuations and potential po

59、licy-related,near-term volatility spikes,we are at the lower end of the risk overweight spectrum compared to the last three years.Our overweight is primarily within the securitized sector(Mortgage-Backed Securities(MBS),Collateralized Mortgage-Backed Securities(CMBS)and Asset-Backed Securities(ABS),

60、investment grade financials,below investment grade floating rate bank loans and selective high yield issuers.Curve steepeners and long USD(U.S.dollar)are our preferred positions as well.Investment ThemesTHE BEAT|OUTLOOK FOR 2025The best opportunities remain in securitized credit,particularly in U.S.

61、Mortgage-Backed Securities.U.S.households with prime credit ratings have strong balance sheets which should continue to be supportive of consumer credit and ancillary structures,especially as house prices remain firm.”Vishal Khanduja,CFA Head of Broad Markets Fixed Income MACRO We are underweight U.

62、S.duration,and we hold U.S.curve steepeners as we expect the curve to continue normalizing on the back of further upward pressure on yields and rising risk premiums.Easier fiscal policy,tighter monetary policy(relative to previous expectations),trade wars and stronger U.S.growth should also bode wel

63、l for the USD.One caveat to this upbeat narrative is if the U.S.job market worsens substantially.INVESTMENT GRADE As valuations look rather full,we are underweight Investment Grade(IG)credit risk but overweight the short-dated bonds with higher yields.Specifically,we favor EUR IG vs U.S.IG given les

64、s expensive valuations and are overweight financials,as they look attractive relative to non-financials.SECURITIZED The best opportunities remain in securitized credit,particularly in U.S.MBS(both non-agency and agency MBS).U.S.households with prime credit ratings have strong balance sheets which sh

65、ould continue to be supportive of consumer credit and ancillary structures,especially as house prices remain firm.Within ABS and CMBS,we are selective.Regarding ABS,we focus on business-oriented ABS,such as whole business securitizations,and aircraft ABS,as they offer significantly wider spreads and

66、 look attractive.As for CMBS,our focus has been primarily on multi-family housing,single family rentals,logistics,and high-quality hotels,shopping centers and trophy offices.We have been generally moving up in credit quality.HIGH YIELD AND BANK LOANS We are moderately long below IG corporates given

67、the historically high absolute/real yields,which should be supportive for returns,ultimately shielding investors from wider credit spreads.We now prefer bank loans versus bonds given the floating rate coupon,seniority in capital structure,higher carry and attractive risk-adjusted profile.EMERGING MA

68、RKETS Given the policy uncertainty of a Republican sweep,emerging markets(EM)is only a security selection trade for our portfolios,not an asset allocation.Country and security selection remain imperative.Stronger growth,but higher rates and weaker global trade linkages are not usually conducive to s

69、trong EM performance.That said,we believe countries with solid economic outlooks,decent growth,falling inflation and a central bank able and willing to cut interest rates despite policy changes in the U.S.are likely to perform well.8PORTFOLIO SOLUTIONS GROUPIN FIXED INCOME,SECURITIZED CREDIT MIGHT B

70、E THE SWEET SPOTTHE BEAT|OUTLOOK FOR 2025Stimulus Fatigue:China Cant Band-Aid Its Way to RecoverySince September 2024,Chinese policymakers have focused on delivering a series of stimulus packages to inject new life into their struggling economy and boost share prices.However,high debt levels,overinv

71、estment,an unresolved property bubble,underwhelming domestic consumption and international trade pressures are all contributing to the structural weaknesses in Chinas economy that mere stimulus packages cannot resolve.STRUCTURAL CONCERNS:DEBT AND OVERINVESTMENT CAUSED PRODUCTIVITY DECLINE AND DEFLAT

72、IONAt the core of Chinas challenges lies its staggering debt,with a total debt-to-GDP ratio soaring to around 350%.The states dependency on debt-fueled expansion has eroded productivity,as each yuan injected into the economy yields diminishing returns.Another major challenge is overinvestment,with n

73、early 45%of Chinas GDP funneled into projects that now face dwindling domestic demand.This flood of excess capacity has led to lower utilization rates and deflationary pressures in both producer and consumer prices.The recent dip of nominal GDP below real GDP is troubling,as it directly impacts corp

74、orate earnings and,by extension,investor confidence and stock market stability.PROPERTY BUBBLE:A WEALTH ANCHOR HAS TURNED INTO A LIABILITY The property market,a pillar of Chinese wealth and economic activity,is under significant strain.With around 60 million empty units and declining property prices

75、,the positive wealth effect real estate once offered is now a drag on the economy.Property represents about 60%of Chinas net worth,in stark contrast to the United States,where its closer to 27%.This reliance on property as a store of wealth makes the country vulnerable to downturns in real estate.An

76、y effective economic solution must address challenges within the property sector and its cascading effect on wealth,consumption and financial stability.CONSUMPTION AND EXPORTS:THE GREAT DIVERGENCE Efforts to boost domestic consumption have largely fallen short.The effectiveness of loose monetary pol

77、icy in boosting consumer confidence starkly contrasts with the U.S.In China,as stated,a significant portion of household net worth is tied to real estate.Unlike in the U.S.,where lower interest rates encourage consumer spending,Chinese consumers hesitate to boost their spending due to fears surround

78、ing property market instability and the lack of a social security net.So far,consumption has been overshadowed by ongoing investments in manufacturing,trade and infrastructure.The“Made in China 2025”initiative pushes Beijing to climb the value chain by producing higher-end goods,from electric vehicl

79、es to aerospace technology.Yet,as domestic demand remains insufficient to absorb this output,China increasingly relies on exports to sustain growth.9PORTFOLIO SOLUTIONS GROUPInvestment ThemesTHE BEAT|OUTLOOK FOR 2025Lessons from other debt-laden economies suggest the path to stability for China requ

80、ires cleaning up bad debt through either write-offs or debt restructuring,followed by bank recapitalization.”Jitania Kandhari Deputy CIO of the Solutions and Multi-Asset Group,Head of Macro and Thematic Research for the Emerging Markets Equity team,Co-Lead Portfolio Manager,Passport EquityDISPLAY 1C

81、hinas Five Rounds of Stimulus Led to Five Equity Rallies,but No BreakoutsThe impact of Chinas stimulus packages on nominal GDP and stock marketsYoY Nominal GDP5.00%4.50%4.00%3.50%3.00%2.50%30.00%25.00%20.00%15.00%10.00%5.00%0%-5.00%-10.00%Jan.2002Jan.2004Jan.2006Jan.2008Jan.2010Jan.2012Jan.2014Jan.2

82、016Jan.2018Jan.2020Jan.2022Jan.2024MSCI China(Log Scale)YoY Nominal GDPYoY GDPSource:MSIM and EME research.As of September 30,2024.The views and opinions expressed are those of the Emerging Markets Equity Team at the time of writing/of this presentation and are subject to change at any time due to m

83、arket,economic,or other conditions,and may not necessarily come to pass.Forecasts/estimates are based on current market conditions,subject to change,and may not necessarily come to pass.Past performance is no guarantee of future results.While household consumption accounts for 72%of global GDP,it ac

84、counts for only 53%of Chinas.A familiar trend in development economics offers some context:As national wealth increases,the share of consumption shifts from goods to services.As China follows in the footsteps of manufacturing giants like Germany and Japan,it faces the same limitationsa large,export-

85、driven manufacturing base without a proportionate domestic market to absorb the production.Since the 1990s,Germanys manufacturing as a share of GDP has stabilized,yet its limited domestic goods consumption has led to a massive rise in net exports.Chinas economic trajectory is similarly export-depend

86、ent,which accelerates trade surpluses and accentuates tensions with countries like the U.S.and those in Europe.TRADE PRESSURES:RESILIENCE OR RELUCTANCE?Despite mounting trade tensions,particularly with the U.S.,China has largely retained its global market share,by redirecting exports to the EU and e

87、merging markets.The U.S.may be importing less from China,but other regions have stepped in to fill the void.However,these efforts are not without challenges.Aggressive trade policies have led to international backlash,with foreign direct investment(FDI)trending downward and portfolio investors showi

88、ng increasing reluctance.If China wants to retain its position in global trade,it must balance its growth ambitions with diplomatic acumen and openness to foreign investment.THE CYCLICAL NATURE OF STIMULUS:AN ECHO OF JAPANS“LOST DECADE”Since the Global Financial Crisis,China has rolled out five majo

89、r stimulus packages,which have merely postponed an inevitable reckoning.Chinas latest round of stimulus,its fifth in 15 years,illustrates a recurring pattern of fiscal and monetary intervention that boosts growth temporarily(Display 1).Historically,each stimulus has provided a short-term market lift

90、,but as evidenced in the last cycle of 2022,such effects are beginning to wane.Japans“Lost Decade”of the 1990s provides a sobering parallel.In most countries,monetary expansion causes inflationary pressures as it increases demand relative to output.Chinas current condition bears similarities to Japa

91、ns in 1990s,where the opposite occurred primarily in the way credit expansion fuels the supply side of the economy(production)rather than boosting the demand side(consumption).Output increases more than demand causing deflation rather than inflation.In Japan,supply-side policies failed to drive both

92、 rebalancing and rapid growth.The consumption share of Japans GDP bottomed out at 63.3%in 1991(compared to 53.4%for China in 2023),and it took 17 years for the consumption share to rise by 10 percentage points.In 2008,it had reached 73.8%,still trailing the global average.10PORTFOLIO SOLUTIONS GROUP

93、STIMULUS FATIGUE:CHINA CANT BAND-AID ITS WAY TO RECOVERYTHE BEAT|OUTLOOK FOR 2025During that time,Japans share of global GDP dropped from 15%to 7.9%.Following its economic peak in the 1980s,Japan experienced long-term stagnation interspersed with brief market rallies that averaged 45%.Chinas market,

94、under the influence of stimulus packages,has similarly rallied five times in recent cycles by about 35%,making lower highs and lower lows(Display 2).THE PATH FORWARD:A PAINFUL BUT NECESSARY RESET Until China addresses the root issuesexcessive debt and inefficient investmentthese stimulus measures wi

95、ll remain mere band-aids.While they may temporarily inflate nominal growth and trigger short-term cyclical market rallies,they will be incapable of providing a sustainable economic recovery or a stock market breakout.There are no quick fixes to Chinas economic growth model.Over the years,the imbalan

96、ces in Chinas economy have widened,and only a complete debt restructuring and government-led income redistribution will drive positive change.Lessons from other debt-laden economies suggest the path to stability requires cleaning up bad debt through either write-offs or debt restructuring,followed b

97、y bank recapitalization.This approach is undeniably painful,as it acknowledges financial losses,but without such drastic measures,stimulus packages will continue to provide fleeting relief.A deeper transformation must occur for lasting economic health.11PORTFOLIO SOLUTIONS GROUPTHE BEAT|OUTLOOK FOR

98、2025STIMULUS FATIGUE:CHINA CANT BAND-AID ITS WAY TO RECOVERYDISPLAY 2Chinas Market Is Shadowing Japans in the 1990sAverage rally and drawdown during larger downtrends,MSCI China and JapanSource:MSIM,EME research,Bloomberg.As of October 16,2024.The views and opinions expressed are those of the Emergi

99、ng Markets Equity Team at the time of writing/of this presentation and are subject to change at any time due to market,economic,or other conditions,and may not necessarily come to pass.Forecasts/estimates are based on current market conditions,subject to change,and may not necessarily come to pass.P

100、ast performance is no guarantee of future results.50403020100-10-20-30-40-50MSCI Japan-40.145.735.4-35.6MSCI ChinaAverage RallyAverage Drawdown12PORTFOLIO SOLUTIONS GROUPPrivate markets have experienced a notable valuation disruption,perhaps best evidenced by the seven consecutive negative quarters

101、of total returns in core private real estate between September 30,2022 and June 30,2024(NCREIF Property Index).This has been a prolonged adjustment that was activated in 2022 when strong private markets performance and lower average headroom in investor allocations were met with rising interest rate

102、s.The impact can still be seen today in private markets fundraising,with capital raising continuing to be materially lower and slower than historical activity.The downstream impact is that transaction activity remains suppressed,but has started to show early signs of recovery.As this regeneration of

103、 private markets transaction activity takes place,hedge funds continue to offer an immediate and actionable path to attractive risk-adjusted returns.After experiencing a challenging alpha environment between 2012 and 2022,average alpha produced by multi-PM hedge fund platforms in the most recent one

104、-year period,for example,has significantly outperformed the average long-only public equity strategy.This is attributable to two factors that are likely to continue into 2025.First,long-short hedge funds benefit from a higher interest rate environment through the“short rebate.”Second,and perhaps mor

105、e importantly,higher volatility and dispersion between investable assets offers greater alpha opportunities to hedge funds with flexible implementation.Private credit was another early beneficiary of the change in market conditions.In 2025 we expect senior corporate loan pricing to be close to long-

106、term averages,with attractive all-in yields and enhanced defensive characteristics through improvements in alignment,leverage and equity contributions.One component of private credit that we expect to perform particularly well in 2025 is special situations lending.These strategies have the flexibili

107、ty to target performing but non-conforming borrower opportunities,and they are experiencing greater deal flow and attractive pricing as corporates continue to adjust to higher interest rate expense and other changes to the business environment.2025 is expected to offer improved equity opportunities

108、in private markets.We are experiencing the first widespread asset repricing in equity investments across private markets since the Global Financial Crisis,gradually being triggered in part by the maturation of relatively cheap financing,along with increasing confidence in the“soft landing”economic o

109、utlook.Lower entry enterprise value multiples are constructive for new investment activity;however,we consider these necessary but Investment ThemesTHE BEAT|OUTLOOK FOR 2025The Potential Impact of Generative AI on Private Markets The potential impact of generative AI in private markets is expected t

110、o be a key theme in 2025.We expect companies will attempt to expand revenue and profitabilty through AI applications,and recognize that some of the earliest opportunities are identifiable in private infrastructure.”Steve Turner Head of Investment Selection for the Portfolio Solutions Group13PORTFOLI

111、O SOLUTIONS GROUPTHE POTENTIAL IMPACT OF GENERATIVE AI ON PRIVATE MARKETTHE BEAT|OUTLOOK FOR 2025not sufficient for attractive forward-looking returns.Managers also need a very competitive tool kit to pursue revenue growth initiatives,margin expansion,and a suitable capital structure,potentially wit

112、h organic growth playing a larger roll relative to inorganic growth within an environment of higher debt service and lower leverage multiples.We would highlight that the middle market size segment of private equity offers investors the best environment for this activity.Our data suggests middle-mark

113、et investments can deliver higher earnings growth and rely less on leverage,making us enthusiastic about middle-market investing in the operating environment that we expect for 2025.One of the clearest price adjustments in response to the prevailing interest rate regime has been observed in private

114、real estate.We expect transaction activity to expand as existing financing matures and investors are required to recapitalize at higher financing costs.The spread between real estate values and borrowing costs remains tight in certain segments,so heightened selectivity is important while this spread

115、 reestablishes itself.The asset class also needs to contend with pockets of positive but moderating demand meeting elevated supply,which puts pressure on rents and vacancies.However,the long-term operating outlook is strong.Supply is set to decrease meaningfully in 2025,and debt markets remain relat

116、ively healthy.As such,we believe we have entered an attractive opportunity within private real estate for credit providers,net lease and equity investors.DISPLAY 1Buyout Valuation Multiples Are Expected To ConvergeSource:Portfolio Solutions Group.As of September 30,2024.The views and opinions expres

117、sed are those of the Portfolio Solutions Group at the time of writing/of this presentation and are subject to change at any time due to market,economic,or other conditions,and may not necessarily come to pass.Forecasts/estimates are based on current market conditions,subject to change,and may not ne

118、cessarily come to pass.Past performance is no guarantee of future results.EBITDA stands for Earnings Before Interest,Taxes,Depreciation and Amortization,a reflection a firms short-term operational efficiency.A lower debt/EBITDA ratio generally reflects a healthier company from a financial standpoint

119、,representing a higher level of cash from earnings to cover debt payments,viewed as less risky for an investor.16151413121110981615141312111098MSCI World EV/EBITDABuyout Valuation MultiplesValuation multiples to reconverge.2012201320142015201620172018201920202021202220232024MSCI World EV/EBITDABuyou

120、t Valuation Multiples,Lagged-9M8910111213141516The potential impact of generative Artificial Intelligence(AI)on private market performance is expected to be a key theme for 2025.While private equity is expected to participate through both investing in“AI-natives”and companies that attempt to expand

121、revenue and profitabilty through AI applications,we recognize that some of the earliest opportunities are identifiable in private infrastructure.Two key infrastructure-related themes driving this have been the digitization of society and economies,and the global energy transition.These two mega them

122、es meet where data requirements lead to power demand,and this is leading to extensive investment opportunities.Generative AI is turbocharging this infrastructure opportunity as the power market is considered inadequate to satisfy the volume,density and low tolerance for intermittency that generative

123、 AI requires.Private investors can target bottlenecks and invest in the solutions,e.g.powered land such as existing industrial sites or retiring power sites,as well as enable opportunities such as energy storage,water cooling and energy efficiency providers.Of course,large-scale investment in data c

124、enters and primary power generation will be equally essential,and participating in the installation of this plumbing for generative AI is likely to be a key theme for 2025.14PORTFOLIO SOLUTIONS GROUPTHE POTENTIAL IMPACT OF GENERATIVE AI ON PRIVATE MARKETTHE BEAT|OUTLOOK FOR 2025ASSET ALLOCATIONOUR V

125、IEWCOMMENTARY=+BONDSDurationFor the first time in the last few years,we have moved overweight duration in our portfolios.After their recent rise,10Y U.S.Treasury yields have approached levels at which we believe further upside is limited,making bonds a better hedge to our increased equity exposure a

126、nd cyclical exposure within the U.S.BONDSCreditEQUITIESRisk LevelOur base case of a soft landing remains in place,supporting equity fundamentals.In the short term,the outcome of the U.S.election is likely to bring investors who had reduced risk before the vote back into the market and“pull forward”s

127、ome equity upside from next year.We acknowledge that from a medium-term perspective there is still not enough information to get a more complete picture of the effect of Trumps second term on equities.ALTERNATIVESPrivate MarketsThe outcome of the U.S.election is expected to expand deal-making activi

128、ty but is likely to have an uneven impact on the growth opportunities and risks within each sector.ALTERNATIVESHedge FundsHedge funds are benefiting from a constructive market environment for skill-based managers.We maintain a preference for market neutral,relative value equity and macro strategies.

129、ALTERNATIVESCommoditiesWe are neutral on key commodity markets:geopolitical upside risks are balanced by high spare capacity in markets such as crude,which limit upside absent physical disruptions.TRANSITIONCash/Short DurationIn moving to neutral equities and adding duration back to portfolios,we re

130、duce our position in cash and short duration instruments.15PORTFOLIO SOLUTIONS GROUPRepresentative Allocations from the Portfolios Solutions Groupn n n n CURRENT ALLOCATION n CHANGE FROM NOV 2024For informational purposes and does not constitute an offer or a recommendation to buy or sell any partic

131、ular security or to adopt any specific investment strategy.The tactical views expressed above are a broad reflection of our teams views and implementations,expressed for client communication purposes.The information herein does not contend to address the financial objectives,situation or specific ne

132、eds of any individual investor.The signals represent the Portfolio Solutions Group view on each asset class.HIGH CONVICTION UNDERWEIGHT UNDERWEIGHT =NEUTRAL +OVERWEIGHT+HIGH CONVICTION OVERWEIGHTAsset Allocation Ideas Capital Markets Investment FrameworkTHE BEAT|OUTLOOK FOR 202516EQUITYOUR VIEWCOMME

133、NTARY=+REGIONALDeveloped MarketsWe moved to a slight overweight in U.S.equities:Post-election dynamics are positive for U.S.equities and our base case soft landing view remains intact.We have added to U.S.equity exposure through non-mega cap segments of the market,which we believe are better positio

134、ned for an expansion in earnings trends and valuations.We move underweight European equities:Tariffs related uncertainty is a headwind for growth and compounds structural headwinds facing European equities.Within Europe we continue to favor Banks,as capital returns remain attractive with current ter

135、minal rate expectations and valuations remain cheap.The risk of sharp JPY appreciation and the resulting headwind to Japanese equities are insulated by a renewed USD strength,driven by superior U.S.growth and interest rate differentials vs RoW(Rest of the World).Japans structural domestic improvemen

136、ts remain intact,while valuations remain relatively undemanding.Trump 2.0 spells uncertainty for export-reliant EM economies through protectionist policies and tariffs.China is at the forefront of facing external headwinds,while the lack of decisive fiscal policies at home dampens the prospects for

137、domestic reflation and recovery.REGIONALUnited StatesREGIONALEurozoneREGIONALJapanREGIONALEmerging MarketsSTYLEGrowth vs.ValueGrowth style indexes remain disproportionately exposed to Big Tech trends,where we seek to keep our risk exposure close to neutral.Small caps still have a problem with too mu

138、ch“junk”in the index,yet following an earnings recession and the election of Trump,we see a catalyst for non-mega caps to finally perform better.With little excess risk premium in equities and a limit to economic growth acceleration due to inflation risk,we continue to prefer a tilt toward Quality.W

139、e balance with selective cyclical exposure.We see balanced risk for Dividend Yield style exposures.Note high dividend yield as an independent style factor does not imply quality,though many dividend focused funds also seek quality factors.STYLELarge vs.Small CapSTYLEQualitySTYLEDividend PORTFOLIO SO

140、LUTIONS GROUPFor informational purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy.The tactical views expressed above are a broad reflection of our teams views and implementations,expressed for client commu

141、nication purposes.The information herein does not contend to address the financial objectives,situation or specific needs of any individual investor.The signals represent the Portfolio Solutions Group view on each asset class.HIGH CONVICTION UNDERWEIGHT UNDERWEIGHT =NEUTRAL +OVERWEIGHT+HIGH CONVICTI

142、ON OVERWEIGHTn n CURRENT ALLOCATION n CHANGE FROM NOV 2024Asset Allocation Ideas Representative Global Equity Allocations from the Portfolio Solutions GroupTHE BEAT|OUTLOOK FOR 202517FIXED INCOMEOUR VIEWCOMMENTARY=+BONDSU.S.TreasuriesWe move to a slight overweight duration in portfolios:After the re

143、cent rise,yields are at levels that should allow them to act as more effective hedges against our exposure to risky assets.BONDSInflation Linked BondsBreakevens have risen recently and while we see prospects for them to rise further,they are closer to fair value today than they were a month ago.BOND

144、SEurozone Govt.BondsAs with USTs,we move duration to a slight overweight:As stated,yields are at levels that should allow them to act as more effective hedges against our exposure to risky assets.BONDSEM Hard Currency Govt.BondsEMD spreads have come in a lot since their selloff over the summer.While

145、 somewhat expensive,we still see relative value in the asset class versus other very expensive parts of fixed income.BONDSEM Local Currency Govt.BondsEM Local appears to offer some value on a relative basis with valuations closer to fair versus history,rather than rich.However,the result of the US e

146、lections is likely to keep the USD strong in the short term,dampening returns for the asset class.PUBLIC CREDITMunicipal BondsMuni ratios versus Treasuries have tightened and now look closer to“fair value”than cheap.We still like the asset class for taxable investors,but it looks marginally less att

147、ractive than it did a month ago.PUBLIC CREDITInvestment GradeSpreads currently sit at all-time tights,excess return over USTs should be minimal and IG remains sensitive to left-tail outcomes.Our economic outlook prevents this from being a high conviction underweight.PUBLIC CREDITMBS/ABSHigh convicti

148、on in asset-backed securities and yield per unit of credit quality remains attractive.US 30Y fixed mortgage rates are higher than BB-rated Corporate yields,a rare occurrence in 25 years.PUBLIC CREDITHigh YieldWith spreads at historically low levels across credit ratings,we see little upside left for

149、 the asset class,and prefer to allocate to areas of fixed income with less stretched valuations.PUBLIC CREDITBank LoansBank Loans have not rallied as much as other risky Fixed Income asset classes and excess returns currently look attractive,particularly on a relative basis.PORTFOLIO SOLUTIONS GROUP

150、 HIGH CONVICTION UNDERWEIGHT UNDERWEIGHT =NEUTRAL +OVERWEIGHT+HIGH CONVICTION OVERWEIGHTn n CURRENT ALLOCATION n CHANGE FROM NOV 2024For informational purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy.The

151、 tactical views expressed above are a broad reflection of our teams views and implementations,expressed for client communication purposes.Individual team allocations may differ.The information herein does not contend to address the financial objectives,situation or specific needs of any individual i

152、nvestor.The signals represent the Portfolio Solutions Group view on each asset class.Asset Allocation Ideas Representative Global Fixed Income Allocations from the Portfolio Solutions GroupTHE BEAT|OUTLOOK FOR 202518ALTERNATIVE ASSETSCOMMENTARYPRIVATE MARKETSPrivate EquityWe expect investor cash flo

153、ws to recover as a result of increasing market activity,and asset pricing to offer an attractive entry point.While a key discipline in private equity investing is to limit exposure to exogenous risks,the outcome of the U.S.election is expected to expand deal-making activity,but is likely to have an

154、uneven impact on the growth opportunities and risks within each sector.The prospect of deregulation will potentially lead to increased opportunities in financials and healthcare,and reduced anti-trust intervention could spark additional M&A more broadly.However,with growth policies also expected to

155、add to inflation,we continue to focus on middle market strategies that rely less on leverage and are well-placed to deliver asset management initiatives to drive margin expansion and real earnings growth.PRIVATE MARKETSPrivate Real EstateCommercial core real estate ended its run of seven consecutive

156、 negative quarters with a positive total return in the third quarter.This protracted adjustment was driven byhigher debt costs and pockets of elevated supply.A significant amount of commercial real estate debtmatures this year and in 2025,which is expected to drive higher transaction volumes with at

157、tractive entry valuations.Long-term demand tailwinds in key sectors remain in place while supply issues are starting to subside.We expect these dynamics to lead to further improved pricing and represent a compelling opportunity.Private infrastructure continues to participate in the investable opport

158、unities relating to the mega trends of digitization and power generation.These themes converge where data services require power,and generative Artificial Intelligence(AI)is highlighting that the current power mix is insufficient in terms of volume,density and reliability.Private investors are playi

159、ng a key role in suppling this enabling infrastructure with attractive growth prospects.Infrastructure deal volume is also expanding across sectors,with transportation becoming more active as the utilization track records of airports and toll roads recover after the mobility shock caused by COVID-19

160、.In the U.S.,we must be selective to ensure investment activity is aligned with forward-looking policy adjustments.While we believe cost competitive onshore wind and solar investment has irreversible momentum,support for earlier stage and subsidized initiatives such as offshore wind and hydrogen is

161、potentially at risk in favor of expanding conventional oil and gas production.To date we have observed bipartisan support for nuclear power generation and expansion in access to broadband,but policy will need to be considered carefully as details emerge.PRIVATE MARKETSPrivate CreditPrivate loan pric

162、ing and terms are now in line with the long-term average but elevated rates and muted defaults are keeping total return expectations elevated.As corporates continue to seek ways to manage cashflow,special situations strategies are able to capitalize on favorable pricing/terms for opportunities that

163、fall in the white space between more rigid mandates.LIQUID ALTERNATIVESHedge FundsHedge funds are benefiting from a constructive market environment for skill-based managers.We maintain a preference for market neutral,relative value equity and macro strategies.Within macro strategies,we favor discret

164、ionary strategies that are tactically oriented given supportive levels of market and fundamental economic dispersion.Within equity strategies,we continue to have conviction in fundamental long/short equity,but also have increasing confidence in quantitative equity strategies that are benefiting from

165、 the reduction in asset price correlation at the stock level caused by macroeconomic and geopolitical uncertainty.LIQUID ALTERNATIVESCommoditiesWe have closed our position in oil futures:geopolitical risks are more binary at the current juncture and upside outside of major disruptions to supply look

166、s limited,reducing the attractiveness of the position as a hedge in our portfolio.PORTFOLIO SOLUTIONS GROUPFor informational purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy.The tactical views expressed

167、above are a broad reflection of our teams views and implementations,expressed for client communication purposes.The information herein does not contend to address the financial objectives,situation or specific needs of any individual investor.The signals represent the Portfolio Solutions Group view

168、on each asset class.Asset Allocation Ideas Representative Alternatives Commentary from the Portfolio Solutions GroupTHE BEAT|OUTLOOK FOR 2025Portfolio Solutions GroupThe Portfolio Solutions Group provides top-down,macro analysis of equity,fixed income and alternative assets,designed to help clients

169、capitalize on evolving economic dynamics and market dislocations globally.The team builds custom multi-asset investment solutions across a range of broadly-diversified to hyper-focused portfolios.JIM CARONChief Investment Officer,Managing DirectorGREG WATERMANVice PresidentEWA TUREKSEMMELROTHExecuti

170、ve DirectorUMAR MALIKVice PresidentERIC ZHANGExecutive DirectorSCHUYLER HOOPERExecutive DirectorCHRIS CHIAVice President19PORTFOLIO SOLUTIONS GROUPTHE BEAT|OUTLOOK FOR 2025SACHIN RAGHAVANAssociateAsset Allocation CommitteeThe Asset Allocation Committee is an independent group of senior investment pr

171、ofessionals across various disciplines within MSIM and Eaton Vance.The Portfolio Solutions Group presents multi-sector research and investment ideas to the Committee,who is responsible for vetting and challenging these ideas to insure they meet their rigorous standards and can then be included in re

172、presentative asset allocation recommendations.MARK BAVOSO Senior Portfolio Manager,Global Multi-Asset TeamJUSTIN BOURGETTE Portfolio Manager,Head of Investment Strategy for the High Yield TeamCRAIG BRANDON Portfolio Manager,Co-Head of the Municipals TeamJIM CARON Chief Investment Officer,Portfolio S

173、olutions GroupAARON DUNN Portfolio Manager,Co-Head of the Value Equity TeamGREG FINCK Portfolio Manager,Co-Head of the Mortgage and Securitized TeamBRAD GODFREY Co-Head of the Emerging Markets TeamKATIE HERR Head of Fixed Income Product Strategy LAUREN HOCHFELDER Co-Chief Executive Officer of MSREI

174、Head of MSREI AmericasJITANIA KANDHARI Deputy CIO,Solutions&Multi Asset Group;Head of Macro&Thematic Research,Emerging Markets,Co-Lead Portfolio Manager,Passport Equity VISHAL KHANDUJA Portfolio Manager,Co-Head of the Broad Markets Fixed Income TeamKYLE LEE Portfolio Manager,Co-Head of the Emerging

175、Markets TeamSCOTT R.NORBY Private Credit and EquityANDREW SLIMMON Senior Portfolio Manager,Head of Applied Equity AdvisorsANDREW SZCZUROWSKI Portfolio Manager,Co-Head of the Mortgage and Securitized TeamSTEVEN TURNER Head of Investment Selection,Portfolio Solutions Group MARK VAN DER ZWAN Chief Inve

176、stment Officer and Head of the AIP Hedge Fund Team20PORTFOLIO SOLUTIONS GROUPTHE BEAT|OUTLOOK FOR 2025Risk ConsiderationsRISK CONSIDERATIONSThere is no assurance that a portfolio will achieve its investment objective.Portfolios are subject to market risk,which is the possibility that the market valu

177、es of securities owned by the portfolio will decline and that the value of portfolio shares may therefore be less than what you paid for them.Market values can change daily due to economic and other events(e.g.natural disasters,health crises,terrorism,conflicts and social unrest)that affect markets,

178、countries,companies or governments.It is difficult to predict the timing,duration,and potential adverse effects(e.g.portfolio liquidity)of events.Accordingly,you can lose money investing in this portfolio.Please be aware that this portfolio may be subject to certain additional risks.Asset Allocation

179、/Diversification does not protect you against a loss in a particular market;however it allows you to spread that risk across various asset classes In general,equity securities values fluctuate in response to activities specific to a company.Investments in foreign markets entail special risks such as

180、 currency,political,economic,and market risks.The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries.Fixed-income securities are subject to the ability of an issuer to make timely principal and interest payments(credit ri

181、sk),changes in interest rates(interest-rate risk),the creditworthiness of the issuer and general market liquidity(market risk).In a rising interest-rate environment,bond prices may fall and may result in periods of volatility and increased portfolio redemptions.In a declining interest-rate environme

182、nt,the portfolio may generate less income.Longer-term securities may be more sensitive to interest rate changes.Mortgage-and asset-backed securities(MBS and ABS)are sensitive to early prepayment risk and a higher risk of default and may be hard to value and difficult to sell(liquidity risk).They are

183、 also subject to credit,market and interest rate risks.Certain U.S.government securities,such as those issued by Fannie Mae and Freddie Mac,are not backed by the full faith and credit of the United States.It is possible that these issuers will not have the funds to meet their payment obligations in

184、the future.The issuer or governmental authority that controls the repayment of sovereign debt may not be willing or able to repay the principal and/or pay interest when due in accordance with the terms of such obligations.Investments in foreign markets entail special risks such as currency,political

185、,economic,and market risks.The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries.Real estate investment trusts are subject to risks similar to those associated with the direct ownership of real estate and they are sensit

186、ive to such factors as management skills and changes in tax laws.Restricted and illiquid securities may be more difficult to sell and value than publicly traded securities(liquidity risk).Derivative instruments can be illiquid,may disproportionately increase losses and may have a potentially large n

187、egative impact on performance.Trading in,and investment exposure to,the commodities markets may involve substantial risks and subject the Portfolio to greater volatility.Non-diversified portfolios often invest in a more limited number of issuers As such,changes in the financial condition or market v

188、alue of a single issuer may cause greater volatility.By investing in investment company securities,the portfolio is subject to the underlying risks of that investment companys portfolio securities.In addition to a Portfolios fees and expenses,a Portfolio generally would bear its share of the investm

189、ent companys fees and expenses.Alternative investments are intended for qualified investors only.Alternative investments,including hedge funds,provide limited liquidity and include,among other things,the risks inherent in investing in securities and derivatives,using leverage and engaging in short s

190、ales.An investment in an alternative investment fund can be speculative and should not constitute a complete investment program.This summary is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy interests in any fund.INDEX DEFINITIONSThe Blo

191、omberg Aggregate Bond Index is an index comprised of approximately 6,000 publicly traded bonds including United States government,mortgage-backed,corporate and Yankee bonds with an average maturity of approximately 10 years.The S&P 500 Index measures the performance of the large cap segment of the U

192、.S.equities market,covering approximately 75%of the U.S.equities market.The Index includes 500 leading companies in leading industries of the U.S.economy.The S&P 500 Equal Weight Index(EWI)is the equal-weight version of the S&P 500.The index includes the same constituents as the capitalization weigh

193、ted S&P 500,but each company in the S&P 500 EWI is allocated a fixed weight of 0.2%of the index total at each quarterly rebalance.The MSCI China Index captures large and mid-cap representation across China A-shares,B-shares,H-shares,Red-chips and P-chips.It reflects the Mainland China and Hong Kong

194、opportunity set from an international investors perspective.The MSCI Japan Index is a free-floated adjusted market capitalization weighted index that is designed to track the equity market performance of Japanese securities listed on the Tokyo Stock Exchange,Osaka Stock Exchange,JASDAQ and Nagoya St

195、ock Exchange.The MSCI Japan Index is constructed based on the MSCI Global Investable Market Indices Methodology,targeting a free-float market capitalization coverage of 85%.The MSCI World Index is a free float adjusted market capitalization weighted index that is designed to measure the global equit

196、y market performance of developed markets.The term free float represents the portion of shares outstanding that are deemed to be available for purchase in the public equity markets by investors.The performance of the Index is listed in U.S.dollars and assumes reinvestment of net dividends.The NCREIF

197、 Property Index is a quarterly time series composite total rate of return measure of investment performance of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only.21PORTFOLIO SOLUTIONS GROUPTHE BEAT|OUTLOOK FOR 2025IMPORTANT D

198、ISCLOSURESPast performance is no guarantee of future results.The returns referred to herein are those of representative indices and are not meant to depict the performance of a specific investment.There is no guarantee that any investment strategy will work under all market conditions,and each inves

199、tor should evaluate their ability to invest for the long-term,especially during periods of downturn in the market.A separately managed account may not be appropriate for all investors.Separate accounts managed according to the particular Strategy may include securities that may not necessarily track

200、 the performance of a particular index.Please consider the investment objectives,risks and fees of the Strategy carefully before investing.A minimum asset level is required.For important information about the investment managers,please refer to Form ADV Part 2.The views and opinions and/or analysis

201、expressed are those of the author or the investment team as of the date of preparation of this material and are subject to change at any time without notice due to market or economic conditions and may not necessarily come to pass.Furthermore,the views will not be updated or otherwise revised to ref

202、lect information that subsequently becomes available or circumstances existing,or changes occurring,after the date of publication.The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management(MSIM)and its subsidiaries and affiliates(collectively“

203、the Firm”),and may not be reflected in all the strategies and products that the Firm offers.Forecasts and/or estimates provided herein are subject to change and may not actually come to pass.Information regarding expected market returns and market outlooks is based on the research,analysis and opini

204、ons of the authors or the investment team.These conclusions are speculative in nature,may not come to pass and are not intended to predict the future performance of any specific strategy or product the Firm offers.Future results may differ significantly depending on factors such as changes in securi

205、ties or financial markets or general economic conditions.This material has been prepared on the basis of publicly available information,internally developed data and other third-party sources believed to be reliable.However,no assurances are provided regarding the reliability of such information and

206、 the Firm has not sought to independently verify information taken from public and third-party sources.This material is a general communication,which is not impartial and all information provided has been prepared solely for informational and educational purposes and does not constitute an offer or

207、a recommendation to buy or sell any particular security or to adopt any specific investment strategy.The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice,nor should it be construed in any way as tax,accounting,legal or reg

208、ulatory advice.To that end,investors should seek independent legal and financial advice,including advice as to tax consequences,before making any investment decision.Charts and graphs provided herein are for illustrative purposes only.Past performance is no guarantee of future results.The indexes ar

209、e unmanaged and do not include any expenses,fees or sales charges.It is not possible to invest directly in an index.Any index referred to herein is the intellectual property(including registered trademarks)of the applicable licensor.Any product based on an index is in no way sponsored,endorsed,sold

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