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Matthias Knab, Opalesque:

Neuberger Berman writes on Harvest Exchange:

When I participated in the latest meeting of Neuberger Berman's Asset Allocation Committee (AAC), there was a great deal of discussion about low volatility and high valuations across markets. When it came to aggregating the Committee's 12-month return outlooks for various asset classes, we bunched around "neutral," unwilling to endorse strong directional views until a return to volatility created clearer opportunities.

Nonetheless, we did favor some alternative investments. Low-volatility hedged strategies fit the overall view comfortably: When market direction isn't clear, eking out returns from market-neutral or relative-value strategies is often a good approach. But we also upgraded our view on private equity, and that was a much less obvious call.

After all, none of us was arguing that private equity valuations are cheap.

Multiples and Leverage, Absolute and Relative

The multiples being paid for private companies and the leverage being applied are both undeniably high. To make sense of our favorable view of the asset class, bear two things in mind. First, these metrics are always relative. And second, private equity has unique qualities that complicate the question of whether a high purchase price is too high.

It makes sense to look at private equity leverage rela......................

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