Trends Watch: August 18, 2016
With this post, EisnerAmper‘s Alternative Investments Intelligence blog kicks off its new Trends Watch, a weekly entry featuring investors, along with founders at alternative investment firms . If you’re interested in being featured, please contact Elana Margulies Snyderman.
This entry features the thoughts of Fabiano Silveira Aguilar, Founder and Managing Director of Parabellum.
What is your outlook on the alternative investment industry?
I believe investors have adjusted to a new normal where markets are highly influenced by governments and central bankers in detriment of fundamentals and real returns.
Indexes are at all-time highs in the U.S., but there is little excitement about the duration of this bull market. Most underlying indicators provide mixed signals or outright bearish clues.
There are still managers outperforming indexes out there, but they may not necessarily be the same managers who made the headlines 2-5 years ago.
Lower returns are pressuring fees down and low performing players will lose capital as their lock ups fade away. From 2011 to 2014, we saw funds of funds losing clients and struggling to maintain their business model and in 2015-2016, we have seen investors taking on significant risk to make low, single-digit returns. Institutional and other investors have struggled with their risk-adjusted returns profile.
Will 2017-2018 bring market capitulation and return to fundamentals? We hope so.
Either way, given the industry challenges and its continuous transformation, investors will benefit from lower rates and more specialized investment advice. With the automation of investment advice, private bankers will need to adjust and start providing more transparency on their fees and value-added. Nonetheless, there are still large numbers of high net worth individuals and retail investors who are currently at the margin of the best alternatives managers and products. The industry should increase the size of the pie instead of cannibalizing itself. More innovation and better products and channels are desperately needed.
What are the next steps for the EU post-Brexit?
They should reform their bi-laws and add additional fiscal (and perhaps even political) integration among members. Without reform, the EU risks dissolving slowly in the decades to come. Immigration remains the key risk of political disintegration for the next few years. We may see a rise in the radical right extremism before we see real solutions being adopted.
What keeps you up at night?
All of the above.
My main concern is leaving a better world for my kids and their kids. Democracy hasn’t worked properly for a long while in certain parts of the world (U.S. included), but we don’t have a better alternative in place yet. Overall, politicians have been quite disappointing everywhere, prioritizing their own survival goals instead of their people’s. Worldwide, we have missed great opportunities for advancement of the human race because of them.
Radical religion and its consequences worry me as well. I dream of a world where people can go anywhere they want and respect local values and rules without having to enforce their own. The more our children travel and meet other children that are different from them, the closer we will be to real peace and prosperity.