Chart of the Month: Should Investors Lean into Volatility?

Persistent economic uncertainty and geopolitical risk have made many investors more cautious about committing capital to private markets. This raises an important question: should investors pull back when volatility rises, or can periods of market stress create attractive opportunities?

This analysis builds on our earlier research into fundraising-based market timing, which found that less crowded vintage years historically tended to outperform more heavily fundraised ones. We now ask whether market volatility may offer another useful signal for commitment pacing.

Using Burgiss-MSCI data, we compare hypothetical strategies that scale annual commitments based on the prior year-end VIX level. Historically, the “Pro Volatility” strategy—which increased commitments following periods of elevated volatility—outperformed both a fixed-commitment approach and an “Anti-Volatility” strategy, on an absolute basis and relative to public markets. The pattern was consistent across the major private-market asset classes and regions included in the analysis.

Periods of uncertainty may make it harder to commit capital. Historically, however, they may also have presented attractive opportunities to lean into private markets.

Source: Burgiss

Notes:

1. Due to Venture funds being a large part of North American and APAC Private Capital, we calculate metrics for only PE Buyout, PC Corporate Lending, Real Estate, and Infra for the cross regional comparison
2. North America contains the US and Canada. Burgiss classifies Mexico as part of Latin America
3. Total capital deployed across these three strategies is close but not exact, due to volatility percentiles deviating slightly from 50%

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This material is for informational or educational purposes only and does not constitute investment advice or a securities recommendation under all securities regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor's own objectives and circumstances in conjunction with a professional investment advisor.

References to "downside protection", "risk-adjusted returns" or similar language are not guarantees against loss of investment capital or value.

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