Over a full market cycle, we believe hedge funds can help decrease risk and improve diversification.
At this point in the cycle, we prefer strategies like Relative Value and Macro that can help reduce volatility by being less correlated to risky assets.
Given the likely economic recession later this year, we expect Merger Arbitrage may struggle as deal activity slows, spreads widen, and lead times for deal closings become extended. Conversely, we believe the opportunity set for Distressed Credit strategies to expand as over-leveraged companies adjust to rising debt service levels.
Private Equity valuations generally lag the public market by six to nine months. Therefore, we anticipate a reduction in valuations over the next several quarters, as private markets narrow the gap to public market prices.
While exit and initial public offering is slowing as the risks to economic growth rise, we also recognize that we may experience more attractive entry points for Private Equity as managers generally invest committed capital over a three- to five-year time frame.
Private Debt strategies focused on distressed and special situations are becoming more attractive as lending conditions tighten and credit stress builds.
While Private Real Estate has historically performed well over a full market cycle, we are cognizant of slowing economic growth potentially offsetting the gains from higher inflation.
Alternative investments, such as hedge funds and private equity/private debt funds, are not appropriate for all investors and are only open to accredited or qualified investors within the meaning of the U.S. securities laws. They are speculative and involve a high degree of risk that is appropriate only for those investors who have the financial sophistication and expertise to evaluate the merits and risks of an investment in a fund and for which the fund does not represent a complete investment program. While investors may potentially benefit from the ability of alternative investments to potentially improve the risk/reward profiles of their portfolios, the investments themselves can carry significant risks. There may be no secondary market for alternative investment interests, and transferability may be limited or even prohibited. Hedge fund strategies, such as Equity Hedge, Event Driven, Macro, and Relative Value, may expose investors to risks such as short selling, leverage, counterparty, liquidity, volatility, the use of derivative instruments, and other significant risks.
Wells Fargo Investment Institute (WFII)
Individual Market Charts For use With; Clients and Prospects
INSTRUCTIONS ON ASSEMBLING AN INDIVIDUAL MARKET CHART PRESENTATION
The first page of the presentation must be the Market Chartbook Cover page (Market Charts:
Turning Data into Knowledge) which includes the retail non-deposit investment product
(RNDIP)/Not, No, May disclosure. Chartbook data is updated quarterly. Please
check the effective date on the Cover page to be sure you are assembling the most recent
information available. In Digital Market Charts, this is automatically added as the
opening page of any collection you create.
The final page must be the General Disclosure page which identifies Global Investment Strategy
as a division of WFII and Wells Fargo Advisors as the broker-dealer. In Digital Market
Charts, this is automatically added as the closing page of any collection you
In between the Cover and the General Disclosures pages you may include any individual chart(s)
you decide upon. If a chart contains a separate disclosure page, that page will automatically
accompany the particular chart chosen. For example, if you wish to include the Fixed Income
Scorecard as one of your selected charts, it will automatically be accompanied by the
disclosures on the following page.
After assembling, submit to your Qualified Supervisor for review and approval in compliance with
the Communication Compliance Submission process as outlined in your LOB’s CAR Guide. Slides used
without alteration and with the proper disclosures need Qualified Supervisor review. They don’t
need to go through CAR.
If printed, the chart slides must be printed one per page to ensure that disclosures on the
slides are legible. These pre-approved slides may not be altered in any way or combined onto a