Beyond Bulls & Bears


Alts Angle: Will 2023 be a good vintage year for private markets?

What does winemaking have to do with private markets? Like good wines, the best vintages in private markets often come from challenging environments, according to Franklin Templeton Institute’s Tony Davidow. Read more:

Like a good wine, the best vintages in private markets often come from challenging environments. The best wines aren’t always born from perfect conditions; rather, the best vintages often come from difficult environments, where the vines must work to source water and nutrients. The legendary Napa Valley Cabernet Sauvignon thrives in a dry, hot and sunny climate that ultimately produces a big, bold flavor. Some of their best vintages have come during periods of droughts.

There are two essential determinants of a great wine:

Terroir is mother nature’s influence on grape growing, including climate, soil and natural surroundings.

Vintage is the human element of facilitating the growth and harvesting of the grapes, which includes pruning, irrigation, cultivation, soil treatments, pest management and harvesting process.

Similarly, private market results vary by vintage years, and data suggest that certain strategies perform best in challenging environments.1 The analysis by CAIS, a group dedicated to democratizing advisors’ access to alternative investments, showed that venture capital, buyout and real estate experienced “golden vintages” in recessionary periods. It is not yet clear when or if we’ll have a recession in 2023— but it has certainly been a challenging market environment, and with dislocation comes opportunity.

The last decade has been incredibly strong for private markets, marked by increased demand, high-flying valuations, and annual fundraising topping US $1.2 trillion the past several years. Despite the economic headwinds of 2022, private markets remained relatively resilient throughout the year, with record amounts of dry powder on the sidelines. The failure of Silicon Valley Bank earlier this year put even more pressure on private market valuations, and credit conditions have tightened considerably.

In our view, the disruption of 2022 and early 2023 should create an environment where seasoned private market managers can effectively deploy capital. Valuations have been coming down, exits have slowed precipitously, and there is a scarcity of lending. Much like we see with wine vintages, the best investment opportunities can be produced in challenging periods where declining equity markets, rising interest rates and economic uncertainty prevail.

Private market managers who can effectively prune, cultivate and harvest their portfolios should be rewarded with a resilient vintage. We believe in the long-term merits of private markets and think that 2023 may represent a compelling investment opportunity and a strong vintage year. 


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1. Source: CAIS. “When Might ‘Golden Vintages’ Appear in Private Markets?” January 24, 2023.

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