Trends Watch: Direct/Co-Investments and Uncertainty

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 with Michael Danov, President & CIO, SBP Management.

What is your outlook for alternatives?

My opinion on alternatives is: Things are going to change a lot. Like a lot of family offices, we are seeing more opportunities on direct or co-investments instead. The returns have been more opportunistic on that side versus the traditional side. I think that managers might need to change their strategy, fees and growth, along with take time to make better choices on their investments and have a better outlook for their portfolio, which will reward their LPs.

What is your outlook for the economy?

My outlook for the economy is that we are getting into a very “testy” market as we have too many uncertainties in the world economy.  The U.S. can overhang a small recession but the rest of the world won’t be able to. I would go more on the defense side and look at blue chips as collateral investments and have more exposure to mature and stable companies/businesses that will survive another small correction or smaller recession in the market.  The Fed and the rates will play a big role and the U.S. administration will as well.

What keeps you up at night?

How China and Russia will behave and make their next moves, I think China is growing in major industries and going to dominate the world with their extensive powers and will put pressure on the U.S. to compete. China is already winning a lot of the battles, and if they going to team up with Russia at the 100% level…. We are seeing that already in the oil industry; trying to stay away from the “petrodollar” can put pressure on the markets and the U.S. However, I think this can be a healthy opportunity for other nations and will see if this can affect the markets in the long run. But a good correction is always needed if it can be controlled with the right powers and expectations. I believe Russia will have more influence on Europe going forward (assuming the sanctions will be lifted eventually) and the U.S. will shift away even more; it’s happening already, as we are seeing. Another point: If the U.S. and Russia can co-exist and collaborate to fight terrorism, that would be very helpful for everyone.