Alternative Investment Industry Highlights from ALTSMIA
January 04, 2023
By Eric Fogelfis and Jeff Parker
The alternative investment community converged in South Florida last month at the ALTS Miami (ALTSMIA) 2022 conference. Industry professionals shared their views and outlook on the market, including real estate, private equity, venture capital, and hedge funds.
Here are some highlights from the panels and discussions at the event:
Keynote panels included “Private Equity Outlook in 2023,” “Tackling Headwinds for Alternative Investments,” and “ESG Investment Opportunities.” The event also included various roundtable discussions, including “How LPs Can Use Technology to Aggregate Data Across their Private Markets’ Portfolio” and “Are Allocators & Managers Investing Their Time Wisely in 2022.”
The following topics were discussed:
Private Equity Outlook in 2023
Given the volatility of 2022 with the rising rates and geopolitical factors, private equity valuations have been reduced yielding new opportunities and challenges looking into next year. Private equity firms have record amounts of “dry powder” to be deployed to companies where multiples and valuations have normalized while facing fewer competitors. The panel also indicated that, should conditions of rising interest rates persist, allocators may shift funds away from venture capital to fixed income strategies that would reduce deal count and present obstacles to fundraising for new funds and reduce commitments as investors look for liquidity given the environment.
Tackling Headwinds for Alternative Investments
The global macro forces continue to put the markets to the test. Inflation and interest rate increases are at the forefront of investors’ and managers’ minds along with fears of a looming recession. Other market factors include the invasion of Ukraine, supply chain risks, changing regulatory landscapes, and general volatility. The panel indicated volatility and rising interest rates could persist into 2023; managers should aim to structure a diversified portfolio composed of fixed income securities and strategic selection of long and short positions to mitigate downside risk. The panel concurred there are opportunities within the health care sector and credit strategies in the path beyond.
ESG Investment Opportunities
ESG and impact investing remain an important focus within the industry and limited partners (“LPs”) are holding funds accountable to their investment theses. The panel discussed LPs are looking to managers for increased transparency and metrics driven by the respective funds’ investment strategy. It was noted that institutional investors are often mandating that certain capital is deployed to specific industry niches that focus on climate control and other areas that benefit society while driving capital away from controversial industries. There have been circumstances where the institutional investors have been prioritizing societal impact over fund returns. The panel concurred that managers that align their funds’ ESG strategy along with their LP goals may achieve sustainable growth in the future despite initial costs in near term.
Technology and Efficiency
Breakout sessions focused on the use of technology to improve efficiency. Technology platforms that eliminate repetitive tasks, aggregate data and provide leverage are valuable for fund professionals that prefer to focus their time on raising and retaining assets.
Other Relevant Topics
Other topics discussed included operational due diligence, investing in local markets, valuations, liquidity constraints, delivering market-based returns, digital assets, and as one would expect from a Miami-based conference, the evolution of the Florida-based alternative assets industry. The many people in attendance who have relocated to Florida made a compelling argument for those of us from the North to join them.