Trends Watch: Emerging Markets

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 Greg Mariasch, Portfolio Manager, Pembroke Emerging Markets Fund.

What is your outlook for alternatives?   

As an alternative manager myself who believes in what I do, of course, I think that every diversified portfolio should have exposure. The evolution of asset management has made it such that investors today can get directional exposure to most asset classes at very competitive fees. Where I see alternatives playing a role is in the mitigation of losses or tail risk, as the industry refers to them. The addition of alternatives to a directional portfolio should have the function of acting as a risk absorber when markets become difficult. My investment arena, emerging markets, has been prone to very sharp swings historically, but the returns have been positive over the 30 years that the asset class has been the focus of investors. To someone who has or is considering an allocation to that space, an uncorrelated alpha-generating strategy is a great complement to directional exposure.

What is your outlook for the economy?

Given my emerging markets scope, I need to look at the world, regions, countries and sectors to understand what and where the potential sources of returns are for the types of risks I want to take. While great emphasis is placed on the U.S. economy by markets, I am also focusing on what impact the U.S. is having on everything else. Right now, we seem to have a two-speed world where the U.S. is moving along nicely, but growth in other large areas is stalling.

What keeps you up at night?

In this sense, I am a professional worrier. I’m constantly thinking of what can change at the macro level that will filter all the way down to the micro level where investments are made. For example, who will be disrupted by the latest technology? What potential regulatory changes can affect the companies invested in when a country swings from surpluses to deficits or undergoes political change? All of this is in addition to understanding the actual businesses in which you are invested.