Trends Watch: Hedge Fund Hurdles

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 Mike Khorrami, Managing Partner, Cayley Investment Management.

What is your outlook for alternatives? 

I believe the concentration of risk taking within larger firms will continue to grow relative to smaller funds, i.e. fewer bigger funds, hence the trend for the last ten years will continue.   This is generally bad for market liquidity, as is the dominance of algorithmic trading, which will eventually force a market disruption.

Where do you see the greatest opportunities and why?

Valuations and global central bank liquidity support have reduced opportunities globally.  I believe the best opportunities will be short-to-medium-term tactical/momentum trading to take advantage of mean reversion both to the upside and to the downside.

What are the greatest challenges you face and why? 

It is impossible to start a new hedge fund. Accessing stable seed, acceleration and initial investor class capital is most important.

What keeps you up at night? 

Going out of business and facing shrinking opportunities in the hedge fund industry.