Uriel Loredo

Energy pressures drive inflation higher

Inflation in the United States rose in March, driven by higher energy prices amid geopolitical tensions. However, core inflation showed greater stability, indicating that underlying inflationary pressures remain contained. This dynamic highlights an environment where short-term movements may distort the broader picture, while the underlying trend remains the primary focus for monetary policy.

The recent inflation increase is largely driven by external and transitory factors. The moderation in core inflation suggests that structural pressures have not intensified. In this context, the Fed may remain patient, focusing on the broader inflation trend beyond temporary shocks, with particular attention to services and labor market conditions.

Source: U.S. Bureau of Labor Statistics

A simple guide to understand this asset class

Private equity involves investing in companies that are not publicly listed, with the goal of improving their value and exiting the investment over time. These investments typically have longer horizons and depend on factors such as operational growth, market conditions, and exit opportunities. Unlike public markets, capital is deployed gradually, and returns are realized over time, requiring patience and discipline from investors.

Performance in private equity can vary significantly across managers, making manager selection critical. Factors such as exit execution, access to opportunities, and investment discipline directly impact outcomes. In addition, market cycles, interest rates, and liquidity conditions influence the pace of investment and exits within this asset class.

Source: Jp Morgan

Discipline and perspective in times of uncertainty

Periods of volatility are a natural part of markets. While they create uncertainty, they also highlight the importance of maintaining discipline. In these environments, it is essential to recognize our reactions, put events into perspective, and stay focused on long-term objectives.

History shows that despite recurring crises, markets have remained resilient. Avoiding impulsive decisions and maintaining consistency in strategy often matters more than reacting to short-term movements.

Volatility can create opportunities, but it requires focus. Beyond short-term noise, it is a good time to revisit objectives, evaluate gradual adjustments, and consider strategies such as rebalancing or phased investing. In many cases, the best decision is to stay the course. Consistency, rather than market timing, has historically been the primary driver of long-term portfolio value.

Source: Capital Group, Standard & Poor’s

Due diligence isn’t just about validating performance metrics or checking boxes on operational risk. In alternatives—where relationships are long-term, structures are complex, and outcomes are path-dependent—successful DD must be holistic. It needs to reflect the full scope of what you’re signing up for: financial, operational, reputational, philosophical, and relational.

In our experience—both at a pension fund and now at a family office—some of the worst outcomes stemmed not from flawed models, but from poor alignment and blind spots outside the “investment” lens.

Investment quality is just the start

Investment DD will always be the anchor. Track record, strategy clarity, team pedigree, edge, and portfolio construction matter. But in alts, that’s the easy part. Most managers we meet know how to tell a good story, show a clean IRR, and present a polished deck. The real work starts once you go beyond that.

Operational due diligence reveals whether they can actually run a stable, compliant, well-governed business. You’re looking at valuation policies, fund admin, cybersecurity, service providers, and more. One lesson we learned the hard way: a fund with top-quartile performance can still be operationally brittle. And when things break, it’s usually operational—not strategic—failures that do the damage.

Risk and reputational DD: don’t skip it

The reality is that family offices can’t afford to ignore reputational risk. You’re not just a number on a cap table; your capital comes with a name, a story, and often, a legacy. That means DD must now include headline-risk scanning, regulatory flags, and tax behavior scrutiny.

At Activest we’ve walked away from managers with stellar returns but questionable tax setups. Why? Because aggressive tax structuring often correlates with overly “creative” accounting. If they’re pushing boundaries on one front, you have to ask where else they’re cutting corners.

Similarly, we’ve tightened our screens around ESG controversies and governance patterns. A GP embroiled in labor disputes or past sanctions might not affect this quarter’s NAV—but it can absolutely affect your long-term brand, values, and peace of mind.

Alignment and philosophical fit are everything

Some of the most important DD questions aren’t in the data room. They’re in the conversations.

• Do they think in terms of compounding, or of raising the next fund?
• Do they cap fund size to preserve performance, or do they chase AUM?

How do they handle mistakes—and communicate when things go wrong?

We’ve declined funds not because they lacked performance, but because they lacked cultural fit. If the manager’s approach to risk, alignment, and communication doesn’t match ours, the relationship will fray over time. It’s not just about the numbers; it’s about how those numbers are achieved—and how repeatable that process is over 15–20 years.

One of the things we’re most grateful for is that alignment internally. We make plenty of mistakes, but our goals and vision remain unified—and genuinely, that’s what makes the whole platform work. Everyone—from investment to ops to IC—understands that compounding capital and protecting the family’s reputation are two sides of the same coin.

DD as a long-term partnership filter

Ultimately, we treat due diligence as the start of a potential long-term partnership. Whether it’s a GP, a co-invest platform, or a direct operating company, our lens is simple: Would we be comfortable doing business with this team across a cycle? Would we want to deepen the relationship if things go well—or would we feel exposed?

That’s why we pace our involvement: primaries first, then secondaries, then co-invests, and only much later, direct deals. By the time we consider a direct, we’ve already seen the GP under pressure, across exits, and in less-than-perfect environments. That’s when trust becomes tangible.

Holistic due diligence is not just a best practice—it’s a requirement if you want to build a resilient alternatives portfolio. Investment, operational, risk, tax, reputational, and philosophical alignment all matter. In isolation, each might look “fine.” But when woven together under a unified framework, they create a powerful filter that protects capital and compounds confidence over decades.

Source: AWM Internal Analysis

The Federal Reserve decided to keep its benchmark interest rate unchanged within a range of 3.5%–3.75%, amid persistent inflation, mixed signals from the labor market, and rising geopolitical tensions.

While projections point to solid economic growth and a gradual moderation in inflation, higher oil prices and uncertainty related to the conflict in the Middle East have reduced expectations for near-term rate cuts. Policymakers continue to signal a cautious stance, with gradual adjustments expected over the coming years.

Analysis

The current environment reinforces central banks’ data-dependent approach and highlights the importance of external factors such as energy prices and geopolitical risks. Limited visibility on rate cuts could keep financial conditions restrictive for longer.

Market context

The Federal Reserve’s decision to keep rates unchanged reflects a complex balance between inflation dynamics, economic growth, and external risks. Rising oil prices and geopolitical uncertainty have reduced expectations for near-term rate cuts.

In this environment, monetary policy will remain highly data-dependent and shaped by global developments. This reinforces the importance of maintaining discipline, diversification, and a long-term strategic approach in portfolio construction.

Economic projections

Economic Projections of Federal Reserve Members

Source: Federal Reserve