Trends Watch: January 5, 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 David Dardashti, Portfolio Manager, Partner, Mulholland Vista Capital Advisors.

What is your outlook for the alternative investment industry?

The alternative investment industry is a broad universe so it's tough for me to make an overarching assessment. For a multitude of reasons, discretionary hedge funds have had a terrible run since 2008 but I think that investors are giving up on them just at the moment that they should be investing.  Even a moderate cycle of rising short term rates will provide a significant tailwind for most discretionary managers -- especially macro funds and traditional long/short equity funds.

What is your outlook for the economy?

Economies around the world have been struggling with significant structural problems. Monetary policy has been too weak an antidote relative to these impediments to global growth. During recoveries, governments typically provide a tailwind to expansions but fiscal policy has been inexplicably tight. For example, the U.S. government’s contribution to this expansion has been approximately -1.2% annually over the last 7 years. If President-Elect Trump is able to implement successful fiscal policy and improve the operating environment for businesses in the U.S., it would bolster two things that have been historically sub-par during this expansion: business investment and consumer spending. To us, that would mean there are several more years left in the expansion with the potential for other developed economies to copy and implement the policies that work here.

What keeps you up at night?

Personally, worrying that we might be out of good ideas for our portfolio. In markets, the implied recovery rates in high yield bonds are a source of concern for us.