Weekly Comment

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

The alternative investments world is growing fast, but so is the confusion around how to approach it. I’ve seen investors jump into alts with ambitious, exotic bets—venture funds, crypto hedge funds, distressed debt specials—before building a core foundation. That’s rarely a good idea.

Just like you don’t start fixed income investing with high-yield EM debt, you shouldn’t start private markets with the alts equivalent of rocket fuel.

The Reality of First Steps

In my experience at both a pension fund and now a family office, the most effective portfolios I’ve seen didn’t begin with what’s flashy. They began with what’s durable.

When we started building our alternatives allocation at the family office, we didn’t begin by chasing alpha through frontier VC. We started with private credit. It was relatively “boring” on the surface—but that was exactly the point.

Too often, “alts” are pitched as the high-octane portion of a portfolio. And while that can be true in later stages, the first goal should be building a base layer that complements traditional exposures with income, resilience, and true diversification.

Education Before Complexity

The knowledge gap in alternatives is real. I’ve seen smart advisors with excellent public market skills struggle with the structural nuances of alts: capital calls, valuation lags, illiquidity profiles, GP selection, waterfall mechanics.

That’s not a knock—these concepts aren’t intuitive unless you’ve worked with them.

That’s why I firmly believe alternative investing should follow the same logic we use in public markets: start with what you can explain clearly to yourself and your stakeholders.

In fixed income, that might be treasuries. In equities, the S&P 500. In alternatives, the equivalents are:

• Private credit with solid underwriting and short to medium-term maturities
• Core/core-plus real estate for income and inflation sensitivity
• Broad-based private equity buyout funds with seasoned managers

These are not “exciting” stories to pitch. But they are strategies that provide yield, stability, and learning opportunities. Importantly, they help the allocator (and the governance body) get familiar with alts mechanics before layering complexity.

A Practical Progression

I think of alts entry as a “training wheels” stage—not because investors are unsophisticated, but because the mechanics and manager dispersion in private markets are different.

Here’s how we think about sequencing exposure:

1. Private Credit – First for predictable income, shorter duration, and underwriting clarity
2. Private Equity – Then for growth and compounding over long cycles
3. Real Assets – Infrastructure and real estate offer inflation hedges and tangible anchors
4. Hedge Funds – For strategic diversification, but only with clarity on strategy fit
5. Venture – The aggressive play
6. Anything and everything else – Special situations, crypto, sector niches

We followed this sequence at the family office and it allowed the IC and broader team to gain confidence with each layer before adding the next. It also avoided the performance and governance headaches that can come from leaping into illiquid, idiosyncratic deals too early.

Alts are powerful, but they’re not magic. Like any asset class, their success in a portfolio depends on how well they’re understood, implemented, and managed. The danger lies in starting with “alpha” before mastering “beta.”

So, before going all-in on that new AI-focused VC strategy or that complex special situations fund, ask: Have we built the right foundation?

Because when the next downturn hits—or when liquidity is needed—boring may just become beautiful.

Source: AWM Internal Analysis

The United States and Israel launched airstrikes in Iran, marking an escalation that heightens global geopolitical tensions. Brent crude and gold moved higher following the attacks. While the conflict could increase short-term volatility, the current consensus is that there will be no prolonged disruption to global energy supply.

Markets will remain focused on the Strait of Hormuz, through which roughly 20% of the world’s oil and gas flows, as well as on Iran’s response.

Analysis

Historically, geopolitical shocks tend to generate short-lived episodes of volatility unless they evolve into broader economic disruptions. At this stage, the central scenario points to a limited impact on global energy supply.

In this environment, maintaining discipline, diversification, and a long-term perspective remains key to managing risks and capturing opportunities.

Historical context

History shows that geopolitical shocks often translate into short-term volatility, but not necessarily into lasting economic damage. The performance of the S&P 500 during previous conflicts in the Gulf countries confirms this pattern.

Source: Bloomberg, Edmond de Rothschild

The U.S. economy grew at a 1.4% annualized rate in the fourth quarter of 2025, below expectations, as the government shutdown weighed on spending and exports. For the full year, growth came in at 2.2%, down from 2.8% in 2024.

Meanwhile, core inflation rose to 3% year over year in December, remaining above the Federal Reserve’s target.

Private demand analysis

Although the headline GDP figure was weak, private demand showed resilience: final sales to private domestic purchasers increased 2.4% and private investment rose 3.8%. The main drag came from federal government spending.

With inflation still elevated, the Fed is likely to maintain a cautious stance before considering further rate cuts.

Implications

At the same time, core inflation reached 3%, still above the Federal Reserve’s target. While the headline growth figure was soft, private demand and investment showed resilience. The overall backdrop suggests the Fed will remain cautious in the months ahead.

Source: Bureau of Economic Analysis, Bloomberg

Understanding the Diversity of Alternatives: From Real Estate to Crypto

One of the most common questions I get from new team members or family principals is deceptively simple: “What exactly do you mean by alternatives?”

It’s a fair question. “Alts” is a broad label that covers everything from core real estate to crypto tokens.

But in my experience—both at a pension fund and now at a family office—how you classify and organize the alt universe shapes how you build, manage, and ultimately compound capital through it.

At AWM, we use a framework that breaks the space into ten categories: private equity, private debt, real estate, infrastructure, venture capital, hedge funds, secondaries, crypto, co-investments, and direct deals. It’s not perfect, but it’s practical—and it helps ensure we stay thoughtful about the role each bucket plays.

Core Categories: Income, Inflation Protection, and Growth

Private equity and venture capital are the long-term growth engines. PE focuses on improving mature businesses, often over 5–10 years, while VC backs early-stage, high-upside companies. Both are illiquid, high-risk, and long-duration—but also the best shot at accessing true alpha from private markets. They don’t generate regular income, and inflation protection is indirect, but they’re crucial for long-run compounding.

Private debt, on the other hand, is more about steady income. Direct lending, real estate credit, and asset-backed strategies can offer attractive yields, especially when structured with floating rates—which can help when inflation and rates are rising. But credit selection and downside protection become even more critical in downturns.

Real estate and infrastructure are classic “real assets.” They tend to shine during inflationary periods because rents, tariffs, and replacement costs rise with prices. Income streams are often contracted and predictable. Infrastructure—especially in regulated utilities, transport, and digital infra—offers particularly bond-like cash flows, but with the added benefit of tangible asset backing.

Strategy-Oriented Exposures and Portfolio Tools

Hedge funds are more about strategy than asset class. Some seek diversification through macro or market-neutral exposures. Others focus on yield via credit or arbitrage. In my pension fund days, we leaned on certain macro and quant managers for downside protection when rates and equities were both challenged. But dispersion is wide, and fees can erode value quickly without tight underwriting.

Secondaries are a portfolio construction tool. They offer accelerated deployment, discounted entry, and vintage diversification—especially helpful when building a new program. They’re not a direct inflation hedge, but they provide flexibility and cash flow smoothing, which helps in overall planning.

Co-investments and direct deals are where concentrated views meet deep alignment. In our framework, they sit on top of a primary-led core, and we only pursue them after years of building GP relationships and in-house diligence capabilities. They can enhance returns, especially when done with low fees and strong control, but they require more time, judgment, and risk management.

Emerging Exposures and the Role of Crypto

Cryptocurrencies are firmly in the alt category now. We treat crypto as a satellite position—small, high risk, and with a very different return driver. Bitcoin may be “digital gold” in theory, but in practice its behavior has varied across regimes. For us, crypto is less about inflation hedging and more about optionality on new infrastructure and asset paradigms. It’s not core, but it’s worth understanding.

Pulling It All Together

This classification helps us design portfolios where:

• Core real assets and private credit deliver income and inflation resilience
• Growth strategies like PE, VC, and directs aim for long-term capital appreciation
• Tools like secondaries and co-invests improve pacing and net returns
• Satellites like hedge funds and crypto add diversification and idiosyncratic upside

The Takeaway

In alternatives, how you organize matters almost as much as what you invest in. A clear, working taxonomy makes better decisions easier: where to lean in, where to stay cautious, and how to sequence capability development. That’s what turns a collection of deals into a real portfolio.

Source: AWM Internal Analysis

The nomination of Kevin Warsh as the next Chair of the Federal Reserve marks an inflection point for U.S. monetary policy. While he has recently signaled a more pro–lower rates stance, his track record points to a pragmatic, data-dependent approach.

Economic context

With a softening labor market, inflation still above target, and a politically sensitive backdrop, the Fed faces complex decisions. Current signals suggest rate cuts will continue gradually, guided more by economic fundamentals than political pressure.

Market implications

A change in Fed leadership does not automatically imply a loss of independence. Even with a potentially more flexible stance, investors should maintain a long-term investment mindset focused on value creation across market cycles.

Volatility is likely to remain a relevant factor if markets perceive deviations from the Fed’s traditional mandate. This is an environment that calls for careful analysis and a long-term perspective from investors.

Source: Capital Group, Brookings, Federal Reserve