Weekly Comment

April’s inflation data in the U.S. presents a mixed picture: rising prices alongside a consumer that, for now, is holding firm.

U.S. inflation reaches highs while retail holds steady

U.S. inflation accelerated to 3.8% year-over-year in April, its highest level since May 2023. While the energy sector drove much of the increase, core inflation also rose to 2.8%, remaining above the Federal Reserve’s target.

Despite this environment and a slight decline in real wages, consumer spending remains notably resilient. The retail sector added 22,000 jobs during the month, reflecting strong business confidence amid sustained demand.

Persistent inflation complicates the Federal Reserve’s outlook. However, labor market resilience and continued hiring in retail suggest that consumption is, for now, cushioning the impact of higher fuel costs and geopolitical tensions.

Core prices posted their fastest monthly pace since January 2025, complicating the Fed’s path to rate cuts. Still, retail hiring and consumer resilience offer a signal of strength in the real economy.

Source: Bureau of Labor Statistics

Infrastructure is one of the fastest-growing asset classes within private markets. Understanding what drives it and how it generates value is the first step in evaluating its role in a portfolio.

Fundamentals of an asset class built for the long term

Infrastructure encompasses essential assets such as energy, transportation, and digital networks, whose central characteristic is the generation of stable and predictable income over time. Unlike other asset classes, its value does not depend on short-term economic cycles, but on the structural demand for basic services.

In recent years, trends such as the energy transition and digitalization have expanded the universe of available opportunities, attracting institutional capital toward projects with long investment horizons.

However, the current environment presents important nuances: while fundraising has rebounded, it remains concentrated primarily in larger funds. Deal activity, meanwhile, faces pressure from lower transaction volumes.

Infrastructure stands out for its ability to generate predictable and resilient cash flows, even in volatile environments. However, the current landscape shows an imbalance between available capital and investment opportunities. Increased appetite for higher-risk strategies reflects an active search for yield, reinforcing the importance of manager selection and valuation discipline.

Source: JP Morgan

The Federal Reserve kept its benchmark rate unchanged at 3.5%–3.75%, in line with expectations. However, the vote revealed an unusual level of division, with four officials dissenting, the highest since 1992. While some policymakers pushed back against signaling future cuts, another voted in favor of lowering rates. Rising geopolitical tensions, particularly in the Middle East, are increasing uncertainty and complicating the balance between persistent inflation and signs of economic slowdown.

Mixed signals from within

The Fed’s message is more nuanced than the decision itself. Stable rates contrast with a growing internal debate over the policy path ahead. Higher energy prices continue to pressure inflation, while the labor market shows signs of weakening. This backdrop points to increased volatility, with limited visibility on rate cuts and macro risks balanced in both directions.

Source: CNBC

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