Taking a short break from the Iran conflict this week to dig into another notable investment story – private investment worries- through three articles covering the why the sky isn’t falling in private credit, how to size private equity correctly in a portfolio, and one private investing critic’s updated views. From there we shift to the case for buying Treasury bonds now, how to use QCD’s correctly, and steps to make your tax planning more productive and less stressful. And a book recommendation to help understand the Iran conflict’s complexity and origins (and video recommendation for those who prefer the movie version…)
This Week’s Takeaways:
- Cliff Asness isn’t taking a private credit victory lap because he didn’t call what’s happening and isn’t sure it’s a disaster. He has long-term separate concerns about private investments centered around future return expectations and the supposed illiquidity premium.
- Private credit concerns are overstated, according to Larry Swedroe. Losses in weaker deals will happen, but they’re a normal part of lending and the asset class is performing according to expectations.
- Private equity can add value by offering opportunities not available in public markets, but needs to sized appropriately in your portfolio after considering your goals, liquidity needs, and tolerance for complexity.
- With yields still elevated and recession risks rising, Treasury bonds offer both attractive income and potential upside if interest rates fall.
- Qualified Charitable Distributions are a good tax-savings tool and to do them correctly the distribution must go directly from the IRA to the charity, be applied correctly toward any RMD, and not be double-counted as a deduction.
- Tax planning doesn’t have to be a last-minute scramble — a seven-step framework from Savant can help you stay ahead of it year-round.
- Our Boston Corner looks at why local CEO’s are worried about reducing taxes in Mass.
I Did Not Predict What Is Going on in Privates by AQR
Cliff Asness of AQR has been critical of private investments, and in this latest piece he explains that the victory lap people are asking him to take is misguided, and that he isn’t sure private credit is a disaster. He doesn’t like these strategies because they are sold as low-volatility and low-correlation when they are just not marked to market as often as public assets and feels that private equity returns will be weaker going forward
The Sky Isn’t Falling by Larry Swedroe
Concerns about private credit are overstated, as the asset class has generally performed as expected given its structure and risks. While there will be losses in weaker deals, that’s a normal part of lending and not evidence of systemic failure. Overall, private credit remains a viable part of diversified portfolios rather than a looming disaster.
Right-sizing private equity in a portfolio: It depends on more than you think by Vanguard
Private equity can add value by offering access to opportunities outside public markets and the potential for higher long-term returns driven by active management. But it should be used thoughtfully rather than aggressively, with allocations based on an investor’s goals, liquidity needs, and tolerance for complexity and illiquidity—not just return expectations. The takeaway is to size private equity carefully so it enhances the portfolio without introducing risks that outweigh its benefits.
Why It Might Be Time to Buy Treasury Bonds by Barron’s
Treasury bonds are becoming more attractive as economic growth shows signs of slowing and downside risks increase. At the same time, elevated yields provide a more compelling entry point, offering both income and potential price appreciation if rates decline. For investors, this combination creates an opportunity to add high-quality duration as a hedge against a weakening economy.
Clearing Up QCD Confusion by Morningstar
Qualified charitable distributions create a valuable opportunity to give from an IRA while reducing taxable income, but the rules are often misunderstood. The confusion typically stems from how QCDs interact with required minimum distributions, contribution timing, and the fact that the tax benefit comes from excluding income rather than taking a deduction. The solution is to send the distribution directly from the IRA to the charity, ensure it counts toward your RMD if applicable, and avoid double-counting by not also claiming it as an itemized deduction.
How to Make Next Year’s Tax Season Less Stressful by Savant Wealth
Sharing a 7 step plan to make tax-prep time next year less stressful than this year.
Book Recommendation
Black Wave by Kim Ghattas
A New York Times Notable Book of 2020 – “[A] sweeping and authoritative history” (The New York Times Book Review), Black Waveis an unprecedented and ambitious examination of how the modern Middle East unraveled and why it started with the pivotal year of 1979
Prefer the visual version? Bitter Rivals: Iran and Saudi Arabia by PBS covers the same ground beautifully.
Boston Corner
Boston CEOs Warn Tax-Cut Proposal Would Make State Worse Off by Bloomberg
Business leaders are warning that proposed tax cuts could reduce state revenue in ways that undermine long-term economic stability and public investment. While the cuts may offer near-term relief, they risk creating budget shortfalls that could affect infrastructure, education, and broader competitiveness. The concern is that weakening the state’s fiscal position could ultimately be more harmful to the business environment than the taxes themselves.
