Trends Watch: September 21, 2017
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 Lee Gladden, CEO of Witherspoon Asset Management.
What is your outlook for alternative investments, or more specifically, commodity training advisors?
We think there will be growing demand for alternative investments to reduce portfolio volatility over full market cycles and add “crisis alpha” during periods of market stress. CTAs are by far the most liquid, transparent, and cash-efficient of all alternative investments. Historically over periods of 10 years or longer, a 10% commitment to CTAs in a portfolio has significantly reduced volatility (standard deviation and drawdowns) without dampening returns. Because of the non-correlated nature of CTA returns vs. traditional equity and fixed income exposures, CTAs give investors easy access to what they are ultimately looking for -- an asset that will diversify their holdings with a strategy that can complement their portfolio and profit from opportunities from long and short trades in a wide variety of global markets.
What is your outlook for the economy?
This year, the market has been moving up with very low volatility anticipating regulatory reform, big tax cuts, infrastructure spending, and continued economic growth. We think investors will become disappointed with limited progress on these objectives and are heading for some disappointing results next year. We expect there will be a correction within the next 12-18 months as volatility returns to the markets.
What keeps you up at night?
We worry about being positioned to avoid large losses during the next large correction. As in 2008, it will be important for CTA investors to do well relative to equities when the crisis hits.