Banks, Recovery

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 John Schneider, CIO, Rhino Small Cap Financial Fund.

What is your outlook for the near future? 

Since we are a small-cap fund focused on banks, I will share my outlook for banks. Banks have a good business model. FDIC insurance gives the industry good funding and above average profits over a cycle. We think banks are at an inflection point. We believe banks that will do well over the next several years differ from those that performed well during the last few years.  We are focused on banks with conservative credit, strong capital and solid management.  There are a large number of publically traded banks so it is great to be a specialist and pick and choose in the space.

What is your outlook for the economy?

We are not seeing anything scary in the near term but it is getting longer in the tooth.  We are in the ninth year of the recovery, entering the tenth year, so clearly we will have a recession eventually; but it’s great to be a hedge fund so we can go long and short.

What keeps you up at night?

The banking industry has unique accounting and regulatory issues, so we have to keep up with all the changes. With any change there are winners and losers.  We are nimble and adjust the portfolio to reflect any new outlook.