Based in London, Neil Maffey is head of institutional at Monex Europe, a UK-based foreign exchange company, and whose team is “quite heavily focused” on the private capital space and institutional investors. When we sat down for an interview at the end of December to talk about the top issues on his radar for 2024, he mentioned that he initially thought of addressing this topic very broadly. But given that Delano is based in Luxembourg--where Monex --he decided it made more sense to approach the question from an alternative investment perspective, “simply because the footprint Luxembourg has in that market is sizeable.”

“I think for investors in 2024, it’s very much about focusing on whether they are able to--and how well they are able to--take advantage of global macro factors which are supporting their offering and attaining investments, particularly in industry-leading organisations that have got strong returns,” said Maffey.

“It’s a competitive space,” he added. “There is a phenomenal number of extremely skilled and experienced investors, not only in Luxembourg, but globally.”

Opportunities are there

Considering what’s happening in public markets--particularly in terms of initial public offerings, or IPOs--“market volatility, geopolitical instability, poor aftermarket IPO performances have certainly reduced enthusiasm in the IPO space since 2021, fairly significantly.”

“Those factors--coupled with a higher interest rate environment globally--are hitting valuations,” noted Maffey. “IPO deal volume since 2021 is well below the two-year average, just under 65% of what would have been expected previously.”

“For private capital, the opportunity is certainly there, to be flexible and to move quickly on deals. I think certainly that’s exciting. The challenge will be making sure that those deals are structured in the right way.”

Looking at the four major pillars of alternative investments--private equity, private debt, infrastructure and real estate--there’s about $4trn in dry powder, said Maffey. “There’s a large number of entities that are poised to be able to act. And what is both exciting and a challenge is very much: can they get into the right investments, at the right time, right vertical markets, right geographies, etc. in what is becoming a very competitive space.”

Macro perspective

A major theme for next year will be “interest rate volatility,” said Maffey. “We’ve already seen a lot of volatility in major currency pairs just over the course of December, just off the back of the prospect of interest rates being cut in 2024, let alone it actually materialising.”

“While markets are taking quite an aggressive stance of the pace of easing by central banks, it’s by no means a foregone conclusion--we could still see increased volatility. Furthermore, whilst nominal interest rates are likely to come down, financial conditions are also likely to remain reasonably tight for the global economy as central banks are simultaneously draining liquidity from the economic system as they aim to wind down their balance sheets… post-covid.”

From an FX perspective, “I think markets are--generally speaking--projecting a fairly benign macro outlook for 2024, which means that hedging for both positive as well as negative environments for the year ahead is relatively cheap, particularly in the options market.”

“I think we’re also likely to see more participation in options, not just because of how cost-effective hedging is, but also because of the aforementioned liquidity constraints that investors are likely to experience in the coming months.”

“It’s about ensuring that the right level of attention is paid to managing what is a particularly volatile market,” Maffey concluded. As we move into an environment which is “still relatively unpredictable, I think it’s about trying to get ahead of potential risks and ensure that business ventures are hedged, and so that to the highest degree possible, risk is removed.”