Trends Watch: Niche 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 Nathaniel Polachek, Founding Partner, Yieldpoint Stable Value Fund, L.P.

What is your outlook for alternative investments?

We anticipate continued growth for alternative investments, especially given recent stock market volatility and uncertainty centered around both COVID-19 and the U.S. presidential election. Given the low interest rate environment, many of our investors are looking to modify the fixed-income portion of their portfolio by substituting traditional bonds with higher yielding alternative investments. We believe investors should look to active managers, especially within the private credit market, to give them the potential to profit even during down markets and periods of economic uncertainty.

What are the greatest opportunities you see and why?

We think the greatest investment opportunities are within alternative investments that offer a stellar risk/reward profile and consistent profits. Most often, we find such opportunities within niche funds that transact within a small sub-set of the market, with a strong business case for continued success. Many of the greatest opportunities we see are in businesses that are capacity constrained, so we recommend that allocators look beyond mega-managers towards smaller capacity-constrained managers with more niche strategies and strong track records of past success. Many investors that are either retired, or are close to retirement, focus on wealth preservation, rather than wealth accumulation, so offering an investment that meets these goals is paramount.

What are the greatest challenges you face and why?

Current challenges for us include building out new relationships and spreading the word about our fund, given the risks of travel and in-person meetings. While we embrace virtual meetings, we find that having a meeting over the internet works to update existing investors, but presents a challenge when seeking to build new relationships. Fortunately, business development has continued at a steady pace throughout the year.

What keeps you up at night?

We sleep very well at Yieldpoint. Our transactions are fully insured with the Lloyds of London Syndicate, and we transact on a back-to-back basis at pre-agreed prices, removing the risks of market fluctuation. While we are active in over fifteen countries around the world, we are able to leverage technology to alert us of significant news or market moving events. We are concerned with the overall impact of COVID-19 on the global economy, but are hopeful for a steady resolution through an effective vaccine.

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