​In this challenging ecosystem, alternative assets showed resilience to the drawdowns in public markets. While some hedge funds have struggled in recent times, the industry is managing the current situation well. For the first time since the pandemic, hedge fund launches have reached pre-pandemic levels again. Regarding performance, in particular large hedge funds have managed the drawdowns well. Figure 2 shows a comparison of public equities and bond indices relative to equity and fixed income hedge funds. For equity strategies, hedge funds were able to mitigate the largest drawdowns of public equities, while also benefitting from the recovery periods (although not to the degree as public equities have). For fixed income strategies, the results are even better. Not only were the funds able to mitigate the drawdowns in fixed income significantly, but they also posted stronger gains in the recovery periods, at least in most instances. Private debt and private equity funds achieved similar results, although it is unknown as of yet how they did in the very short-term. Throughout 2022, private debt funds managed to return a positive performance in each quarter and enhance the stability of a portfolio substantially. Private equity strategies functioned similarly to equity hedge funds, as they mitigated most of the drawdowns of public equity, even for the riskiest sub-strategy in venture capital. Figure 3 shows a comparison of direct lending, private equity, and venture capital benchmark indices versus public equities. While these results are promising, the private equity industry has not been unfazed by the recent crisis. Fundraising became a substantial issue in Q1 2023 as well as more and more downrounds. This leads private equity funds to search for alternatives. One of which seems to be buying back its own debt, which has been more prominent in recent months. Especially in the fundraising department, private debt also saw a substantial shortage, such that pension funds and endowments make up almost 50% of the capital raised. While higher interest rates also lead to higher yields in the private debt markets, it comes at an increased risk with rising loan default rates.

​Despite the recent bank crashes and the increased recession fears they caused, markets have stabilized and performed well in the latter half of March and the beginning of April. Over the past months, the S&P 500 gained almost 7% and holds its position above 4,100. Similar developments occurred for gold and oil prices, with gold being up nearly 7% too, and oil close to 8%. While the gains from the equity markets can be largely attributed to a sign of relief that the banking crisis did not amount to a full crisis and a real possibility of the rate hikes stopping. The strong performance of gold can be largely attributed to the same factors. Within the recent bull run, gold reclaimed the $2000 per ounce mark. While oil plummeted for most of the year, its increase is caused by OPEC+’s last meeting when they announced a sharp production cut.
The crypto industry has been quiet in 2023 thus far. Despite the banking crisis and recession fears, the industry has done. Bitcoin (BTC), the most important coin is almost 80% in 2023 as of the time of writing. While Ethereum (ETH) has been less successful, it is still up 60%. Solana (SOL), a cryptocurrency that has been heralded as Ethereum-killer in 2021 completely collapsed in 2022 when it turned out the chain has substantial security issues. To address these issues the coin has been shut down multiple times which made investors lose confidence in the chain. On 12th April 2023, ETH will implement its Shanghai upgrade which led cryptos rally. The Shanghai upgrade will allow validators and stakers to withdraw their assets from the Beacon chain (the original sub-chain which allowed for the proof-of-stake consensus algorithm), which has not been possible since 2020. In total, more than 16 million ETH were locked on the Beacon chain so far. Although it is another upgrade to the chain, many see this update as “price”-neutral. While it makes staking and validating more attractive now, a lot of capital was locked and will be free for the first time in more than two years. However, most people think that not much will be withdrawn, given the dominance of ETH in DeFi and the relatively high staking yield. Additionally, ETH was worth a lot more and people will want to chase similar highs. While most cryptos rallied ahead of the upgrade, ETH was outpaced by both BTC and SOL. BTC additionally surpassed the $30k mark for the first time in a year ahead of the upgrade. Figure 1 shows the YTD of the three coins mentioned above.

The most notable development over the past two weeks was the collapse and subsequent acquisition of Credit Suisse by UBS. After the collapse of Silicon Valley Bank as well as Silvergate and Signature Bank, the banking sector faced substantial drawdowns. Credit Suisse had been under pressure for a while, largely due to prior scandals in which the bank was involved. It started with a spying scandal involving the prior CEO Tidjane Thiam and more importantly being involved in the Archegos Capital and Greensill Capital collapse. This led to substantial losses to the bank. This is especially notable, as the company struggled with its profitability for a while. In 2022 and in early 2023, the bank was already signaling distress as its largest shareholder, Harris Associates, which held nearly 10% sold its entire stake. The Saudi National Bank stepped in and acquired a stake of around 10% in Credit Suisse. The collapse of SVB and the subsequent announcement of the now ex-CEO of Saudi National Bank that they will not further give capital to the bank. While this is not surprising as a larger stake leads to a lot more regulatory issues. Yet, this announcement was interpreted as a lack of confidence in the bank, which led to a bank run. This started the collapse of the bank. The Swiss government then stepped in and looked for a way to save the bank with the goal of keeping the bank in Swiss hands. The final outcome was that UBS will buy Credit Suisse for 3bn CHF and a substantial involvement by the Swiss National Bank that provides liquidity if necessary and alleviate some of the losses UBS may incur following the acquisition. With the challenging integration ahead, UBS also decided to appoint Ermotti as CEO of UBS who led the company from 2011 to 2020 already.