As the alternative investment market is ever-changing, especially during uncertain times in the world, many investors and allocators are rethinking their investment strategies and how they allocate their capital. EisnerAmper’s 7th Annual Alternative Invest Summit, Raising the Curtain: The Next Act for Alternative Investments, which took place on September 21- 22, 2022, addressed this timely topic. In a panel discussion titled “Investment Spotlight: Where Investors are Looking for Future Performance,” the following panelists focused on important issues that fund managers and investors should be looking at when it comes to investments in this market:
- Kane Brenan, CEO, TIFF Investment Management;
- Brett A. Hickey, Founder & CEO of Star Mountain Capital;
- William Kelly, President & CEO of CAIA Association; and
- Jennifer Cuello, Partner, EisnerAmper (moderator)
They discussed the following themes:
Emerging Trends: How Should They be Analyzed
In deciding whether to invest when considering an emerging trend, the fundamental investment principals are the same as any other investment decision. Investors must consider their risk tolerance, match the duration of their liabilities to the duration of their assets, and focus on strategies with the highest probability of providing the desired objective. All panelists agreed that diversification of the portfolio is key and emerging trends should be considered as part of the diversification. One approach discussed was to look to frame the macroeconomic trend first and then look at the emerging trend: for instance, trends related to aging demographics in the United States, with many businesses that are family-owned and have non-financial reasons for transacting.
Beginning with the macro factors as a basis helps maintain stability when considering the emerging trend. The constant challenge with emerging trends is there are two differing views, one being the opportunity to be a first mover to create the most appreciation; the other being not wanting to jump into a quick, hot environment which could ultimately fizzle out.
Key Trends Expected for 2023
There have been discussions around the traditional 60/40 allocation strategy and ways to seek alpha through other means. Greater access to alternatives is giving investors more options, but just because a private equity or hedge fund is employing a particular strategy does not mean that an investor will invest. As it relates to emerging trends in particular, managers will need to be able to demonstrate deep sector expertise as a differentiator rather than taking a generalist approach. Certain emerging trends mentioned in the panel included green energy, carbon credit, biotech, credit strategies and new technologies on the blockchain. Areas of concern include fixed income given the higher interest rate environment, as well as commodities. In addition to a manager’s expertise, alignment of …….