2024 demonstrated significant economic progress, with declining inflation and steady growth. However, it also highlighted the ongoing need for vigilance in addressing geopolitical tensions and structural economic issues that continue to impact global markets. These challenges have prompted investors to increasingly turn to private markets, which offer a sense of stability during times of economic instability. Private assets are often less correlated to the fluctuations of public markets, making them particularly attractive in uncertain times. At the same time, the complexity of navigating these markets has increased, especially with new regulatory developments in the Environmental, Social, and Governance (ESG) and Financial Services realms, particularly in Europe. These regulatory changes, including updates to MIFID, have added to the challenges faced by investors, who must adapt to these evolving requirements while ensuring compliance.
In spring, we hosted the Spring Seminar 2024 in the United Kingdom. This seminar brought together professionals from across the industry, providing a platform for discussing some of the most pressing topics in financial services. The agenda included presentations on MIFID II, pension liquidity risk, and climate risk. One of the highlights of the seminar was Rafael Zambrana’s research on “MiFID II: Cross-border Impact on Asset Managers.” His study focused on both the US and EU markets, concluding “that brokerage commissions rise for US funds subject to the unbundling rule, with research costs seemingly shifted to US investors, where the use of soft dollars remains permitted. This practice leads to a decrease in performance of US twin funds, while their EU counterparts experienced an increase in performance. “
Access the presentations and papers here.
Kristy Jansen presented her findings on ‘Pension Liquidity Risk,’ challenging the widely held belief that pension funds, as long-term investors, are immune to liquidity risk. Rob Bauer’s research on ‘Mental Models in Financial Markets: How Do Experts Reason About the Pricing of Climate Risk?’ provided insights into how political ideologies influence perspectives on climate risk in financial markets. Bauer demonstrated that “individuals in the US with left-leaning political views often think that other participants in the market are overlooking climate risks, while those with right-leaning perspectives see an excessive focus on climate risks. This heterogeneity in expert’s beliefs regarding the pricing of climate risk can also help clarify why there are variations in their expectations for returns.” The seminar was concluded with Pietro Veronesi’s presentation on ‘Political Uncertainties and Asset Prices,’ in which he discussed how “economic downturns are often accompanied by a rise in political uncertainty, which raises the risk premium attached to it.”
The prize for the best paper presented at the Joint Spring Seminar 2024 was awarded to Heiner Beckmeyer for his work on “A New Option Momentum: Compensation for Risk,” where he explored asset pricing and the application of machine learning methods to economics and finance.
Access the award winning paper.
In March 2024, Magnus Dahlquist assumed his new role as Academic Coordinator and took the opportunity to discuss some of the most pressing themes in the world of investment today. His insights shed light on how Inquire Europe ensures diversity in the topics it sponsors. One area that continues to gain traction in both academia and industry is the use of artificial intelligence (AI) and machine learning (ML) in asset management. Dahlquist explained that “while the interest in data analysis has been present for a long time within asset management, the emergence of big data has emphasized the need for more advanced techniques such as machine learning. These methods, developed in both academia and practice, impact various aspects of finance, from risk management to asset strategies and even to corporate communications.”
Read the Q&A here.
Later in the year, at the autumn seminar in Valencia, the focus shifted to the unique challenges and opportunities associated with private market assets, including real estate, private credit, and private equity. Participants had the chance to listen to discussions on topics such as liquidity premiums for illiquid assets, portfolio choice and illiquidity, performance evaluation, investment vehicles and fund structures, fees and incentives, ESG, and the interaction between private and public markets. Some of the notable presentations included ‘Private Equity, Liquidity and Corporate Governance’ by Per Strömberg, ‘The Commercial Real Estate Ecosystem’ by Stijn Van Nieuwerburgh, and ‘Illiquid Assets and Smooth Returns’ by Andrei Gonçalves. Another standout was Anna Helmke’s paper on ‘Will ETFs Drive Mutual Funds Extinct?’
Access the presentations and papers.
The award for the best paper presented at the Autumn Seminar 2024 went to Isil Erel for her research on ‘Risk-Adjusting the Returns to Private Debt Funds.’ Erel’s paper examined the complexities of risk-adjusting returns in private debt funds, highlighting that unlike bank loans, private debt contributions are delayed over the life of the fund. She explained that “Unlike in the case of bank loans […] private debt contributions are delayed over the life of the fund as well. I have to adjust for that and construct my benchmarks that have matched contributions.” While some might argue that bond factors are sufficient, Erel counters, “I would be arguing against it and go to include equity factors as well and get zero net alpha. So in short, no abnormal returns to LPs, but I would get some alpha if I were to use only bond factors.”
Read the prize-winning paper here.
These seminars and presentations from 2024 demonstrate the continued evolution of the financial landscape. As regulatory challenges increase, the importance of adapting to new rules while exploring new avenues for growth becomes clearer. The continued rise of private markets, alongside the growing role of AI and ML in asset management, highlights a dynamic shift in how investments are approached. It is clear that 2024 was a year of both reflection and innovation, with many of these trends likely to influence the industry in the years to come.
Looking forward to 2025, we are anticipating our spring and autumn and are very excited to celebrate our 35th anniversary with our members.