00:00 Speaker A

AI trade driving markets higher, but investors are starting to ask whether valuations are getting stretched and whether portfolios are becoming too concentrated. My next guest says there’s more than one way to invest in AI and highlights a few alternative assets to do it. Join me now is Aaron Mulvihill, Global Alternatives strategist at JP Morgan Asset Management. Aaron, it is great to see you. So, let’s dig into this. You say, okay, alternatives offer smart opportunities in AI.

00:26 Speaker A

Let’s talk about them. One is infrastructure. Why is infrastructure start there and why is that sort of a relatively smart, clean, less crowd way to play it.

00:46 Speaker B

Yeah, great to be here Josh. Uh there is more than one way to access the AI theme and and certainly alternative investments is one way to do it. Uh and so on in our alternative investments report that we came out with this year, eighth year in coming up with the report. One of the breakout themes in it is the the accessibility of alternative investments to individual investors.

01:14 Speaker B

So, today there’s about $500 billion dollars of alternative investments accessible as evergreen alternatives, which are a little bit more accessible to investors. Uh as it relates to infrastructure, uh one of the biggest challenges within AI right now is the power, the accessibility of electricity. That’s a big challenge that’s constraining the development of data centers. It’s something that all of the hyperscalers are focused on.

01:46 Speaker B

And what private infrastructure funds are doing is they’re operating the electricity generation and transmission infrastructure that’s necessary for the development of AI. So we see this as an area of enormous growth uh and a lot of potential for investors to get uh an accessibility to the AI uh theme in a maybe less uh uh in a maybe more downside protected way.

02:08 Speaker A

And why why private infrastructure managers? What why would they be better positioned than than a public utility?

02:18 Speaker B

Yeah, it comes down to the public versus private discussion generally. So, public companies, uh uh everything they do, of course is is very accessible. They have to be very very open about uh their plans. Private infrastructure and private companies in general can act very quickly. Uh they don’t have the regulatory burdens often that uh public company companies have. It’s cheaper for them to operate. They don’t need to IPO the company.

02:51 Speaker B

There’s plentiful capital that they can access. So they can act very quickly and when it comes to AI, they’re in a really good position to be able to make deals with the AI companies, the hyper scalar that need the power now, not 10 years in the future, not talking about long-term development projects, but they’re operating power infrastructure that’s uh helpful to to achieve the AI goals right now.

03:22 Speaker A

And Aaron, another theme you mentioned here is private equity. Walk me through that because it sounds like you all are expecting a pretty strong deal environment this year.

03:32 Speaker B

Private equity is all about deal making and this could be one of the best years for deal making that we’ve seen over the last decade. When we look at the factors that are at play right now, uh and we we were talking about this in 2025. We also had good factors in 25, but then we had tariffs, we had stock market jitters and we had a government shutdown that delayed a lot of IPOs. This year,

04:02 Speaker B

if we don’t have, touchwood, some of these these challenges, we have a really good backdrop. We have financing costs coming down. That’s very helpful for private equity and deal making. We have a supportive regulatory environment and business environment and we have a lot of private equity companies that are ready for sale, a lot of IPOs that are being discussed and and pitched and we might see this year potentially the first trillion dollar IPO.

04:27 Speaker B

When we think of a lot of what’s happening within AI, it’s private companies, it’s venture capital backed companies that are doing this development, that are building the AI models. These are all operated privately. They’re only accessible today to alternative investors.

04:47 Speaker B

We may see them enter the public market, but a lot of the value has been created and enjoyed by private market investors and public market investors are coming at the tail end.

05:01 Speaker A

What about private credit, Aaron? Walking through that theme?

05:04 Speaker B

So, private credit yields are coming down. We’re in an interest rate cutting cycle. We had three cuts last year. Um this year we’re likely to have two more interest rate cuts depending on how the jobs market plays out. So yields are coming down in private credits, but there’s still a healthy premium compared to public market. We see a premium of around 200 to 250 basis points typically in in private credits relative to public market credit.

05:40 Speaker B

Uh are there risks? There certainly are heightened risks when you’re when you’re talking about higher premiums and higher yields, there’s always a commensurate relationship of risks. So it is important to be selective in private credit right now. Uh but we feel that the premium is held is is healthy and can justify some of the challenges that might be out there in the market right now.

06:14 Speaker A

Finally, Aaron, you upgraded your outlook, you see on real estate. How come? Why now?

06:21 Speaker B

We did upgrade the outlook on real estate. It’s all down to supply and demand. Uh we’re not building enough houses. We have challenges right now within uh the real estate space in in terms of the the the the amount of real estate that’s being developed. Um commercial real estate prices are actually in many ways uh in in in many cases lower than they were pre-COVID. We’re still coming out of this work from home, hybrid work environment.

06:55 Speaker B

And so we’re seeing office valuations improve. We’re seeing valuations in hospitality, the logistics sector improve. So it’s a really great time to be entering the real estate environment where valuations are lower than they were historically, uh but the rents are are are very healthy and it’s providing healthy income to investors.