Trends Watch: May 24, 2018
May 24, 2018
By Elana Margulies-Snyderman
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks to Duncan Coker, CEO, Rivercast Capital.
What is your outlook for alternatives?
I measure success for alternatives collectively as the amount of alpha produced for customers per unit of non-market related risk. Institutional investors weigh in by setting the demand for risk/alpha by allocating a portfolio share of 20% or more to a combination of the best managers. In this way, alternatives play a critical and growing role, but the industry is evolving. Managers are moving away from crowded strategies into niches of expertise. Bigger has proven to not always be better. Managers who can master adaptation will serve clients best.
What is your outlook for the economy?
The economy in 2018 is on track for 3% GDP growth with low unemployment and solid corporate earnings. Government credit will increase form both Fed unwinding and larger Treasury auctions. To date, this supply has been well received. Despite higher nominal rates, real rates and spreads are quite low across the yield curve. Credit liquidity, low real rates, and earnings growth will continue to be positive themes, but deserve close watching.
What keeps you up at night?
2018 tax policy changes overall are positive, but for high-tax states like New York, California, and Illinois there may be unintended consequences. Lower SALT deductions in these states will increase residential carrying costs, raise commercial cap rates, and worsen already deteriorating public balance sheets. For leveraged property markets this could be a tipping point. Business relocations will add to the burden and highly productive areas like the Northeast and West Coast will be tested.