Trends Watch: Active Growth Equity and Fixed-Income Investing

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 Liridon Gila, Co-CIO, Portfolio Manager, Sawgrass Asset Management.  

What is your outlook for investing in active growth equity and fixed income?

We look at the outlook for equities and fixed income in the context of where we are in the economic cycle and the trends of monetary policy and fiscal policy. We have a challenging macro environment for risk assets. The economy is facing a potential recession in the near term, the Fed is still implementing a highly restrictive monetary policy, and fiscal policy has turned less accommodative at the margin. We expect a range bound market for growth equities in the near term. We think current earnings estimates are optimistic and should expect elevated volatility as we go through the adjustment process. With regards to fixed income, we believe inflation has peaked and economic growth has slowed recently. The current yields in the bond market are very attractive for a high-quality asset class, and we expect strong positive total returns from the bond market in the next few years.  

Where do you see the greatest opportunities and why?

We see the best opportunities in large-cap growth at a reasonable price (GARP) and the small-cap growth space. We think quality companies with strong fundamentals and high return on invested capital that are trading at reasonable multiples offer an attractive risk/reward profile. Also, small-cap growth is another area we believe offers very good relative value. Small-cap has underperformed large-cap in the last decade by a significant margin. These large moves tend to go in cycles, and we think the rotation to small-cap will start soon and should expect good relative performance going forward.

What are the greatest challenges you face and why?

The extreme concentration of large-cap growth. The top five largest companies make up 37% of the Large Cap Growth Index.

 What keeps you up at night?

Geopolitical risk of escalation of international conflicts and a potential banking crisis with systemic implications for the economy and financial markets.  

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.