January 9, 2025 • 17 mins
Happy new year. And it's the perfect time to look forward to what investors might expect from the economy and public and private markets over the next 12 months.
On this show, I’m joined by Schroders’ Group CIO and CEO, Public Markets, Johanna Kyrklund. Johanna will take us through what to expect in stock markets, bonds and commodities in 2025.
Nils Rode, Schroders’ CIO in Private Markets, also joins us. He’ll discuss why he believes the coming year could be a vintage one for private investors.
And we'll tack the economy with Schroders’ Economist George Brown.
RUNNING ORDER:
02:04 - Part one: will we see the return of inflation?
04:37 - Part two: how will Trump's policies affect stock markets?
10:10 - Part three: a vintage year for private markets?
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Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcometo the Investor Download, the podcast
about the themes driving markets andthe economy now and in the future.
I'm your host, David Brett.
(00:24):
2024 was a good year for markets, anddespite all the geopolitical uncertainty,
the global economy remained resilient.
But what about the year ahead?
On this show, I'm joined by SchrodersGroup CIO and CEO of Public Markets,
Johanna Kyrklund.
Johanna will take us through what toexpect in stock markets,
bonds, and commodities in 2025.
(00:46):
Nils Rode, Schroders CIO inprivate markets, also joins us.
He'll discuss why he believes the comingyear could be a vintage
one for private investors.
But first up, it's the economy withSchroders' Economist, George Brown.
On Apple Podcasts,Spotify, or wherever you get your
podcasts, you're listeningto the investor Download.
(01:08):
Despite all that's been going ongeopolitically, growth has been
resilient in the global economy in 2024.
But divergence has been a key part of thatwith US exceptionalism helping it
diverge from the rest of the world.
But will it be the same story in 2025?Yes.
Growth has been really resilient in theglobal economy, particularly
(01:29):
over the past year.
But the divergence hasbeen a key part of that.
The US has really diverged from the restof the world in terms
of this exceptionalism.
But where the USis exceptional is through the growth side.
The household has very muchbeen the driver of that.
Whilst you've seen some weakness in otherparts of the world,
in the US, the consumer hasremained really, really strong.
(01:50):
From a macro perspective, ithas been on the growth front.
Now, looking ahead, we think thatexceptionalism is going to
continue under Trump's policies.
But at the same time, we think I thinkthat that gap with the world is going to
continue to diverge becauseTrump's policy as well is going to be
headwinds for the rest of the world.
We also think theexport cycle is going to turn.
Countries like China, which is obviouslyheavily dependent on manufacturing,
(02:13):
they're going to suffer as a consequence.
Speaking of Trump, the incoming Presidentof the US, how much of what he's saying
should we take as rhetoric and bluster,and how much as investors
should we take seriously?
Going into next year, of course, there'sso much uncertainty with
the Trump administration.
You have to make certain There'scertain assumptions there.
Of course, we do have our scenarios aroundour baseline, which we do have, let's say,
(02:36):
an extreme Trump scenario in which he doeseverything that he says he's going to
do, the Ron Seal Trump, if you like.
But our baseline assumption is thatactually Trump might be quite benign, at
least for the US perspective,and actually that some of those extreme
inclinations will be moderated by the slimmajorities in Congress and the
checks and balances in the system.
(02:57):
Trump has been talking loudly abouttariffs and bringing manufacturing home
again, all of which points to moreexpensive, not cheaper
goods for the consumer.
Will inflation, after seemingly beingtamed in 2024, rear its head
again in the next 12 months?
We think that inflation is going to besticky in a lot of advanced economies
such that we think that central banks aregoing to have less scope to cut
(03:18):
rates than the market predicts.
The likes of the Fed, we think are onlygoing to cut rates once, maybe next year.
The ECB, the Bank ofEngland, maybe two cuts.
In fact, we actually think there might bea situation in which the might have to
ultimately start hiking rates in 2026.
If the interest rate cycle does show signsof having to reverse as inflation rises,
what impact might thathave on public markets?
(03:39):
That's what we'll discuss withJohanna Kyrklund in part 2.
Get in touch with us by email atschroderspodcasts@schroders.
com or visit our website, schroders.
om/theinvestordownload.
Public markets enjoyeda good year in 2024.
(04:00):
But what does 2025 hold for investors?
Clearly, we've had a verystrong year for markets.
The question really is, can equity prices,in particular, continue to rise in 2025?
I think that if we were just looking at itfrom an economic perspective, the
environment is stillquite benign, actually.
With inflation rolling over, we've seen anumber of central banks start to
(04:23):
cut rates, which is very helpful.
It helps the discount rate for markets,but also encourages investors to move up
the risk curve in searchfor better returns.
We've talked about US exceptionalism inthe economy, which George
sees continuing into 2025.
That seems to have beenreflected in equity returns.
Will that continue this year?
(04:44):
As I said, an environment of a softlanding is quite benign for markets.
Rates coming down also helps valuations.
Now, the challenge here is that thevaluation of the S&P 500 in particular
is looking very stretched at this point.
We need to be a little bit careful there.
A lot of good news has beenpriced in to the S&P 500.
Investors have got used to these verynarrow markets led by a
(05:05):
small number of stocks.
I think we're referring mainly tothe so-called Magnificent Seven.
Can their run of form continue?
Interestingly, I don'tthink they're seven anymore.
I think it's more like six.
It's varied over the year.
I think that even Magnificent Sevenwas very much a story for 2023.
Even this year, it's been a bit dented.
I think they've continued to do well, someof them, but really, the peak in that
(05:28):
story was probably aroundJuly, June, July this year.
I still think there'spotential for them to go up.
When we look at the numbers compared tothe internet bubble that we had in the
late '90s, compared to then, theyactually do have a lot of earnings.
We saw this with NVIDIA as well.
They actually are deliveringvery strong earnings.
The question is how much isbaked in in terms of expectation?
(05:48):
But at least there areplenty of earnings there, which was not
the case during the internet bubble.So they could continue to rise.
But I think really it's aboutlooking for other opportunities.
For example, this year, US utilitieshas been a very attractive sector.
Actually, we're seeing that change now.
Really, since the summer, we've actuallyseen a much more interesting path for
(06:08):
markets with different sectorsperforming at different times.
I'd argue that if you move away from themega caps in the United States
and look internationally,the valuations do look more attractive.
However, despite the outlook seeminglybenign for markets in 2025,
geopolitical risks are abundant.
Top of the agenda for investors, at leastfor now, appears to be the impact
(06:30):
of incoming President Trump.
How might his policies affect theoutlook for the next 12 months?
Limited Trump represents a situation wherewe get the deregulation from Trump as well
as corporate tax cuts,and that would actually be a little bit
reflationary and quitepositive for markets.
In fact, we've seen a bit of that gettingpriced in in recent weeks,
(06:50):
even heading into the election.
We then have what wecall full-blown Trump.
This is where we start to see moresignificant tariffs
being imposed around the world.
Now, I think that here, you can see thatthis in the end would be a hit to growth.
In the first instance, it would increaseinflation, but actually it would
eventually bring growth down relative toour forecasts because of the impact of
(07:11):
global trade, but also because higherprices could dent the US consumer.
Generally, an environment where globaltrade is contracting is one where
the pie is shrinking in some sense.
We need to be alert to some of the growthrisks implied by some of these policies.
If growth becomes an issue, then it couldall those tax cuts and spending increases
(07:32):
that have been proposedbecome a problem for markets?
There's been concerns about veryhigh levels of government spending.
We know the deficits are high.
This would really be a scenario whereessentially the US bond market revolves
against further fiscal spending.
We don't think that's a big risk for 2025because, as I said, inflation is
moving in the right direction for now.
This takes a bit of pressure off rates,and I think that this is
(07:55):
potentially more medium-term risk.
Are bonds a safe bet rightfor investors to own?
The point is that actually in thisenvironment, I think there
is still a role for bonds.
They're looking quite cheap andthey offer an attractive yield.
But the point is not for diversification,which really brings me
on to the next theme.
If you're looking for diversifyinginvestments, we've been advocating the use
(08:18):
of commodity-relatedinvestments, particularly gold.
People often ask me what to do abouta tense geopolitical environment.
I would argue it's impossible to trade,but I think that owning diversifying
investments that improve yourportfolio resilience is very important.
Compared to the last decade whencommodities really offered no
diversification, in this decade, typicallywe have seen benefits from owning
(08:40):
commodities from adiversifying standpoint.
This is for two reasons.
First, if you think about broadercommodities like oil, the main
transmission mechanism from geopoliticaltension to growth and markets
is via the commodity channels.
We saw this with the Ukraine back in 2022.
I think in general, gold is also a goodstore of value, particularly given the
(09:01):
profligate policies pursued by all themajor governments at the moment, a lot of
fiscal spending, which, as I said,undermines the case for
bonds as a diversifier.
I think gold in that contextprovides a better alternative.
Diversification doesn't just mean lookingat assets that are
tradable on public markets.
Private markets are very much becominga consideration for investors.
(09:21):
And that's what we'll discuss in thefinal part of the show with Nils Rode.
It's hard to ignore how much privatemarkets are being turned
to for a source of returns.
One report by Bain & Company estimatedprivate markets will constitute something
like 30% of assets undermanagement by 2032.
(09:44):
And while private assetsremain the purview of mainly professional
investors, regulators are taking steps tomake them more accessible
to retail investors.
They're also intertwinedwith public markets.
For instance, most of the MagnificentSeven began life as private companies
before being listed on public markets.
Nils, what year will 2025be for private markets?
(10:05):
We believe that 2025 will be anespecially attractive vintage year.
Why is that?What we look at is cycles.
And what we see is that there arethree cycles that align favourably.
So the first one being the economiccycle, which is what Johanna spoke about.
So the expectations of interest ratescoming down further, normalising and the
(10:30):
economy moving again into theexpansion phase that provides tailwind.
Even more important than that is thesecond cycle, which is
the private market cycle.
That has historically beena good early indicator.
And what has happened there is that forprivate markets,
we have had a slowdown now for threeyears from the end of 2021 peak.
(10:53):
Fundraising has come down, investmentactivity has come down, valuations have
come down, differentfrom the stock markets.
And valuations coming down is agood thing for new investments.
And we also see signs ofbottoming in various areas.
The third cycle we look at, which is alsofavourable, is the technology cycle,
(11:13):
where now artificial ArtificialIntelligence is the new big topic and will
be the new topic for the next 5 to10 years or even longer than that.
And it's on the scale of other bigtechnology disruptions like the personal
computer, the Internet, the smartphone,and the beginning of such a cycle and such
a wave is always especially attractivefrom an investment perspective.
(11:37):
Why is that so importantin private markets?
Really, most of the innovation inartificial intelligence is currently
taking place in venture great startups.
If you look at pure play AI companies,nearly all of them are
still private companies.Some will go public, but they haven't yet.
Of course, big tech companies also have animportant role in the tech stack,
(11:59):
providing the chips,providing the data centre, and the
infrastructure services that go with it.
But what's happening now is that there arehundreds of startups being created that
work on applications to bring artificialintelligence to consumers in a way that is
useful, and also to help enterprises toimplement artificial intelligence and
(12:19):
change the processes, which is not easy.
That's why we are still very much at thebeginning, and it's driven by private
market investments, byventure capital investments.
Historically, investors have beenattracted to private markets
for their income opportunities.
But in a world of geopoliticaluncertainty, should they be considered,
too, as a form ofprotection for investors?
In terms of resilience, private marketshave historically added a lot of
(12:43):
resilience to investors' portfolios.
We've very recently published a study onprivate equity, where we look in a very
data-driven way at private equityresilience over the last 25
years during the major crisis.
Where private equity has done well.
(13:04):
And the same can also be said aboutother private market strategies.
That's not possible to go back 25 yearsbecause for many of the other strategies,
the data is not there becausethe strategies are younger.
Why do they show such resilience?
The way private market investments arestructured with long-term time horizons
and the according structures,there's less need for fire sales, and
(13:29):
capital can drawn also during crisis.
There are fundamental reasons.
For example, private equity hasa very different sector mix.
There are strategies that have other riskprofiles like insurance-linked securities
with catastrophe risk or renewableswith exposure to energy risk.
And there are technical reasons.
Private market valuations are valuations,not market prices, and that
(13:52):
takes also some volatility out.
So there are these three reasons for thatresilience, which is one of the
motivators to invest in private markets.
Are there any other reasons 2025 couldbe a vintage year for private investors?
The fourth topic I want to briefly touchupon is the nonfinancial impact that can
be generated throughprivate market investments.
(14:15):
One important example is decarbonisation,which is driven by renewable energy
investments, wind and solar infrastructureinvestments, which is a
strongly growing market segment.
But what about the the fact that somecountries are openly retreating from
proposed decarbonizationtargets and strategies?
The trend towards decarbonization and thegrowth of renewable energy investments
(14:41):
will continue, and that is driven largelyby the economic rationale because
renewable energy in many places ofthe world has become cost competitive.
And it's also driven by the fact that manycorporations have net zero targets and
want to make sure that in their supplychain there's green energy and the recent
(15:05):
rise of artificial intelligence and datacentres and the required energy needs, but
also electric vehicles and other reasonswhy electricity demand is going up will
also be positive for renewable energy.
So there it is, your guideto what to expect in 2025.
And there'll be much more to comefrom us over the next 12 months.
(15:27):
So keep listening.
That was the show.
We very much hope you enjoyed it.
You can subscribe to the investordownload wherever you get your podcasts.
And if you want to get in touch withus, it's schroderspodcasts@schroders.
com.
And you can find out much,much more at schroders.
com/insights.
New shows drop every otherThursday at 05:00 PM UK time.
(15:50):
In the meantime, keep safe and go well.
The value of investments and the incomefrom them may go down as well as up.
And investors may not get backthe amounts originally invested.
Past performance is not aguide to future performance.
The information is not an offer,solicitation, or recommendation of any
funds, services, or products, orto adopt any investment strategy.
Welcometo the Investor Download, the podcast
about the themes driving markets andthe economy now and in the future.
I'm your host, David Brett.
(00:24):
2024 was a good year for markets, anddespite all the geopolitical uncertainty,
the global economy remained resilient.
But what about the year ahead?
On this show, I'm joined by SchrodersGroup CIO and CEO of Public Markets,
Johanna Kyrklund.
Johanna will take us through what toexpect in stock markets,
bonds, and commodities in 2025.
(00:46):
Nils Rode, Schroders CIO inprivate markets, also joins us.
He'll discuss why he believes the comingyear could be a vintage
one for private investors.
But first up, it's the economy withSchroders' Economist, George Brown.
On Apple Podcasts,Spotify, or wherever you get your
podcasts, you're listeningto the investor Download.
(01:08):
Despite all that's been going ongeopolitically, growth has been
resilient in the global economy in 2024.
But divergence has been a key part of thatwith US exceptionalism helping it
diverge from the rest of the world.
But will it be the same story in 2025?Yes.
Growth has been really resilient in theglobal economy, particularly
(01:29):
over the past year.
But the divergence hasbeen a key part of that.
The US has really diverged from the restof the world in terms
of this exceptionalism.
But where the USis exceptional is through the growth side.
The household has very muchbeen the driver of that.
Whilst you've seen some weakness in otherparts of the world,
in the US, the consumer hasremained really, really strong.
(01:50):
From a macro perspective, ithas been on the growth front.
Now, looking ahead, we think thatexceptionalism is going to
continue under Trump's policies.
But at the same time, we think I thinkthat that gap with the world is going to
continue to diverge becauseTrump's policy as well is going to be
headwinds for the rest of the world.
We also think theexport cycle is going to turn.
Countries like China, which is obviouslyheavily dependent on manufacturing,
(02:13):
they're going to suffer as a consequence.
Speaking of Trump, the incoming Presidentof the US, how much of what he's saying
should we take as rhetoric and bluster,and how much as investors
should we take seriously?
Going into next year, of course, there'sso much uncertainty with
the Trump administration.
You have to make certain There'scertain assumptions there.
Of course, we do have our scenarios aroundour baseline, which we do have, let's say,
(02:36):
an extreme Trump scenario in which he doeseverything that he says he's going to
do, the Ron Seal Trump, if you like.
But our baseline assumption is thatactually Trump might be quite benign, at
least for the US perspective,and actually that some of those extreme
inclinations will be moderated by the slimmajorities in Congress and the
checks and balances in the system.
(02:57):
Trump has been talking loudly abouttariffs and bringing manufacturing home
again, all of which points to moreexpensive, not cheaper
goods for the consumer.
Will inflation, after seemingly beingtamed in 2024, rear its head
again in the next 12 months?
We think that inflation is going to besticky in a lot of advanced economies
such that we think that central banks aregoing to have less scope to cut
(03:18):
rates than the market predicts.
The likes of the Fed, we think are onlygoing to cut rates once, maybe next year.
The ECB, the Bank ofEngland, maybe two cuts.
In fact, we actually think there might bea situation in which the might have to
ultimately start hiking rates in 2026.
If the interest rate cycle does show signsof having to reverse as inflation rises,
what impact might thathave on public markets?
(03:39):
That's what we'll discuss withJohanna Kyrklund in part 2.
Get in touch with us by email atschroderspodcasts@schroders.
com or visit our website, schroders.
om/theinvestordownload.
Public markets enjoyeda good year in 2024.
(04:00):
But what does 2025 hold for investors?
Clearly, we've had a verystrong year for markets.
The question really is, can equity prices,in particular, continue to rise in 2025?
I think that if we were just looking at itfrom an economic perspective, the
environment is stillquite benign, actually.
With inflation rolling over, we've seen anumber of central banks start to
(04:23):
cut rates, which is very helpful.
It helps the discount rate for markets,but also encourages investors to move up
the risk curve in searchfor better returns.
We've talked about US exceptionalism inthe economy, which George
sees continuing into 2025.
That seems to have beenreflected in equity returns.
Will that continue this year?
(04:44):
As I said, an environment of a softlanding is quite benign for markets.
Rates coming down also helps valuations.
Now, the challenge here is that thevaluation of the S&P 500 in particular
is looking very stretched at this point.
We need to be a little bit careful there.
A lot of good news has beenpriced in to the S&P 500.
Investors have got used to these verynarrow markets led by a
(05:05):
small number of stocks.
I think we're referring mainly tothe so-called Magnificent Seven.
Can their run of form continue?
Interestingly, I don'tthink they're seven anymore.
I think it's more like six.
It's varied over the year.
I think that even Magnificent Sevenwas very much a story for 2023.
Even this year, it's been a bit dented.
I think they've continued to do well, someof them, but really, the peak in that
(05:28):
story was probably aroundJuly, June, July this year.
I still think there'spotential for them to go up.
When we look at the numbers compared tothe internet bubble that we had in the
late '90s, compared to then, theyactually do have a lot of earnings.
We saw this with NVIDIA as well.
They actually are deliveringvery strong earnings.
The question is how much isbaked in in terms of expectation?
(05:48):
But at least there areplenty of earnings there, which was not
the case during the internet bubble.So they could continue to rise.
But I think really it's aboutlooking for other opportunities.
For example, this year, US utilitieshas been a very attractive sector.
Actually, we're seeing that change now.
Really, since the summer, we've actuallyseen a much more interesting path for
(06:08):
markets with different sectorsperforming at different times.
I'd argue that if you move away from themega caps in the United States
and look internationally,the valuations do look more attractive.
However, despite the outlook seeminglybenign for markets in 2025,
geopolitical risks are abundant.
Top of the agenda for investors, at leastfor now, appears to be the impact
(06:30):
of incoming President Trump.
How might his policies affect theoutlook for the next 12 months?
Limited Trump represents a situation wherewe get the deregulation from Trump as well
as corporate tax cuts,and that would actually be a little bit
reflationary and quitepositive for markets.
In fact, we've seen a bit of that gettingpriced in in recent weeks,
(06:50):
even heading into the election.
We then have what wecall full-blown Trump.
This is where we start to see moresignificant tariffs
being imposed around the world.
Now, I think that here, you can see thatthis in the end would be a hit to growth.
In the first instance, it would increaseinflation, but actually it would
eventually bring growth down relative toour forecasts because of the impact of
(07:11):
global trade, but also because higherprices could dent the US consumer.
Generally, an environment where globaltrade is contracting is one where
the pie is shrinking in some sense.
We need to be alert to some of the growthrisks implied by some of these policies.
If growth becomes an issue, then it couldall those tax cuts and spending increases
(07:32):
that have been proposedbecome a problem for markets?
There's been concerns about veryhigh levels of government spending.
We know the deficits are high.
This would really be a scenario whereessentially the US bond market revolves
against further fiscal spending.
We don't think that's a big risk for 2025because, as I said, inflation is
moving in the right direction for now.
This takes a bit of pressure off rates,and I think that this is
(07:55):
potentially more medium-term risk.
Are bonds a safe bet rightfor investors to own?
The point is that actually in thisenvironment, I think there
is still a role for bonds.
They're looking quite cheap andthey offer an attractive yield.
But the point is not for diversification,which really brings me
on to the next theme.
If you're looking for diversifyinginvestments, we've been advocating the use
(08:18):
of commodity-relatedinvestments, particularly gold.
People often ask me what to do abouta tense geopolitical environment.
I would argue it's impossible to trade,but I think that owning diversifying
investments that improve yourportfolio resilience is very important.
Compared to the last decade whencommodities really offered no
diversification, in this decade, typicallywe have seen benefits from owning
(08:40):
commodities from adiversifying standpoint.
This is for two reasons.
First, if you think about broadercommodities like oil, the main
transmission mechanism from geopoliticaltension to growth and markets
is via the commodity channels.
We saw this with the Ukraine back in 2022.
I think in general, gold is also a goodstore of value, particularly given the
(09:01):
profligate policies pursued by all themajor governments at the moment, a lot of
fiscal spending, which, as I said,undermines the case for
bonds as a diversifier.
I think gold in that contextprovides a better alternative.
Diversification doesn't just mean lookingat assets that are
tradable on public markets.
Private markets are very much becominga consideration for investors.
(09:21):
And that's what we'll discuss in thefinal part of the show with Nils Rode.
It's hard to ignore how much privatemarkets are being turned
to for a source of returns.
One report by Bain & Company estimatedprivate markets will constitute something
like 30% of assets undermanagement by 2032.
(09:44):
And while private assetsremain the purview of mainly professional
investors, regulators are taking steps tomake them more accessible
to retail investors.
They're also intertwinedwith public markets.
For instance, most of the MagnificentSeven began life as private companies
before being listed on public markets.
Nils, what year will 2025be for private markets?
(10:05):
We believe that 2025 will be anespecially attractive vintage year.
Why is that?What we look at is cycles.
And what we see is that there arethree cycles that align favourably.
So the first one being the economiccycle, which is what Johanna spoke about.
So the expectations of interest ratescoming down further, normalising and the
(10:30):
economy moving again into theexpansion phase that provides tailwind.
Even more important than that is thesecond cycle, which is
the private market cycle.
That has historically beena good early indicator.
And what has happened there is that forprivate markets,
we have had a slowdown now for threeyears from the end of 2021 peak.
(10:53):
Fundraising has come down, investmentactivity has come down, valuations have
come down, differentfrom the stock markets.
And valuations coming down is agood thing for new investments.
And we also see signs ofbottoming in various areas.
The third cycle we look at, which is alsofavourable, is the technology cycle,
(11:13):
where now artificial ArtificialIntelligence is the new big topic and will
be the new topic for the next 5 to10 years or even longer than that.
And it's on the scale of other bigtechnology disruptions like the personal
computer, the Internet, the smartphone,and the beginning of such a cycle and such
a wave is always especially attractivefrom an investment perspective.
(11:37):
Why is that so importantin private markets?
Really, most of the innovation inartificial intelligence is currently
taking place in venture great startups.
If you look at pure play AI companies,nearly all of them are
still private companies.Some will go public, but they haven't yet.
Of course, big tech companies also have animportant role in the tech stack,
(11:59):
providing the chips,providing the data centre, and the
infrastructure services that go with it.
But what's happening now is that there arehundreds of startups being created that
work on applications to bring artificialintelligence to consumers in a way that is
useful, and also to help enterprises toimplement artificial intelligence and
(12:19):
change the processes, which is not easy.
That's why we are still very much at thebeginning, and it's driven by private
market investments, byventure capital investments.
Historically, investors have beenattracted to private markets
for their income opportunities.
But in a world of geopoliticaluncertainty, should they be considered,
too, as a form ofprotection for investors?
In terms of resilience, private marketshave historically added a lot of
(12:43):
resilience to investors' portfolios.
We've very recently published a study onprivate equity, where we look in a very
data-driven way at private equityresilience over the last 25
years during the major crisis.
Where private equity has done well.
(13:04):
And the same can also be said aboutother private market strategies.
That's not possible to go back 25 yearsbecause for many of the other strategies,
the data is not there becausethe strategies are younger.
Why do they show such resilience?
The way private market investments arestructured with long-term time horizons
and the according structures,there's less need for fire sales, and
(13:29):
capital can drawn also during crisis.
There are fundamental reasons.
For example, private equity hasa very different sector mix.
There are strategies that have other riskprofiles like insurance-linked securities
with catastrophe risk or renewableswith exposure to energy risk.
And there are technical reasons.
Private market valuations are valuations,not market prices, and that
(13:52):
takes also some volatility out.
So there are these three reasons for thatresilience, which is one of the
motivators to invest in private markets.
Are there any other reasons 2025 couldbe a vintage year for private investors?
The fourth topic I want to briefly touchupon is the nonfinancial impact that can
be generated throughprivate market investments.
(14:15):
One important example is decarbonisation,which is driven by renewable energy
investments, wind and solar infrastructureinvestments, which is a
strongly growing market segment.
But what about the the fact that somecountries are openly retreating from
proposed decarbonizationtargets and strategies?
The trend towards decarbonization and thegrowth of renewable energy investments
(14:41):
will continue, and that is driven largelyby the economic rationale because
renewable energy in many places ofthe world has become cost competitive.
And it's also driven by the fact that manycorporations have net zero targets and
want to make sure that in their supplychain there's green energy and the recent
(15:05):
rise of artificial intelligence and datacentres and the required energy needs, but
also electric vehicles and other reasonswhy electricity demand is going up will
also be positive for renewable energy.
So there it is, your guideto what to expect in 2025.
And there'll be much more to comefrom us over the next 12 months.
(15:27):
So keep listening.
That was the show.
We very much hope you enjoyed it.
You can subscribe to the investordownload wherever you get your podcasts.
And if you want to get in touch withus, it's schroderspodcasts@schroders.
com.
And you can find out much,much more at schroders.
com/insights.
New shows drop every otherThursday at 05:00 PM UK time.
(15:50):
In the meantime, keep safe and go well.
The value of investments and the incomefrom them may go down as well as up.
And investors may not get backthe amounts originally invested.
Past performance is not aguide to future performance.
The information is not an offer,solicitation, or recommendation of any
funds, services, or products, orto adopt any investment strategy.
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