Insights

2023 Year-end Review

As 2022 faded into 2023, a gloomy cocktail of high interest rates, stubborn inflation and fragile consumer confidence contributed to a morose outlook for the global economy.

A stalemate war in Ukraine continued to cast a dark shadow over the decisions made by governments and central banks, sucking in resources and brainpower as geopolitical tension escalated in other global hotspots. The unprecedented attack by Hamas on Israel on 7 October sparked a war that threatens to spread to the wider Middle East and cause untold human and economic damage.

For the US Federal Reserve, European Central Bank (ECB) and the Bank of England (BoE), it was a year of two halves. Interest rate hikes continued through the summer as inflation remained cripplingly high, despite falling from the double-digit peaks of 2022. The Fed increased rates for the final time in July, the BoE in August, and the ECB in September. All three then held for the remainder of the year as “higher for longer” became the mantra for central banks around the world.

There were some positive signs towards the end of the year as inflation continued to drop on the back of lower energy and food prices. Meanwhile, equity markets surged ahead. The S&P 500 ended the year with a 24% gain, having touched record highs, while the pan-European STOXX 600 was up 12.6%. Defying predictions, the US economy, the world’s biggest, grew by 2.5% in 2023, significantly outperforming the 0.5% growth registered in the European Union.

Amid the political and financial turmoil, capital raising proved tough for all but the biggest and most established funds. Trust was the watchword for risk-averse investors, with increasing emphasis placed on existing networks and the ability of funds to differentiate their proposition. Raising a significant fund in this environment was a testament to our reputation and the quality of our outstanding team.

Throughout the extreme volatility of 2023, high-end consumers showed remarkable resilience. The global luxury market was worth €1.5 trillion in 2023, according to the annual Bain-Altagamma Luxury Goods Worldwide Market Study, an increase of around 10% over 2022. Within that figure, the luxury hospitality market rose to an estimated €213 billion and finally surpassed its pre-Covid level.

Driving this resilience was a demand for unforgettable experiences. In particular, the emerging social-media savvy generation of luxury consumers made decisions based on the uniqueness of the experience available in restaurants, retail or hotels. Identifying and developing the correct opportunities to reach these consumers requires a deep knowledge of the assets available and the confidence to be able to transform them and add value.

To succeed in 2023 required a resilience of our own, combined with a truly differentiated proposition and a phenomenal team of highly skilled investment professionals working hand in hand with our value creation and corporate services teams. 2023 was a year full of geopolitical and economic shocks, but our strong portfolio performance reaffirmed our belief in the quality of our assets and the ability of our team to add value.