Trends Watch: Alternative Investment Customization
April 22, 2021
By Elana Margulies-Snyderman
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 Steve Kaczmarek, President, East End Wealth Management.
What is your outlook for alternative investments?
The alternative investment market will continue to evolve as public markets get more and more efficient. Competitive pressures will crimp manager margins in the more common strategies. This could create an environment where smaller managers (like East End Wealth Management) develop a small footprint and offer custom tailored strategies at competitive rates. We do not think that this will hurt the larger players but investors could see a dizzying array of offerings, enabling them to round out their portfolios in multiple strategies.
Where do you see the greatest opportunities and why?
I think that the most opportunity is in the unspoken truths that we shake our heads about daily but don’t know how to address. We all know that modern governments are borrowing today to redistribute wealth and pull forward spending to keep economies going. Increasingly, governments intervene in what used to be free markets. They are all heavily indebted and there is no plan for repayment.
Enter digital currency (a.k.a. cyber currency), a new way for a principal to hedge away some of the bloated government risk that lies before us all. Last month, Federal Reserve Chair Jerome Powell discounted the role of digital currency while others have decided it should be outlawed. India is developing legislation that will limit cyber currency.
Cyber currency is a dagger aimed at the heart of the fiscally irresponsible. This dagger has cut a pinhole in the liner of the world’s fiat currency bubble. The recent price change in crypto currency has been large by most standards, but suppose your economic life is based in a currency like the Real or Peso. This transition is in the very early innings. This is a global trend whose strength lies in the inability of governments worldwide to transition into a more balanced and free economic approach.
What are the greatest challenges you face?
Our primary challenges are client acquisition and communicating to the public. We have been operating the Enhanced Income Strategy, NASDAQ EEEISX, since 2011. It has taken a lot of effort to develop our methodology but an equal measure to develop messaging and framing our objectives. The public does not understand how EIS is up 2.5% in Q1 when the talking heads parrot bad news on bonds. Our clients are primarily accredited investors and understand that they need to be patient in this environment. Data is also a challenge. We added a data science associate last year to assist in research. We believe in big data and AI. Fixed-income has lots of data sets to analyze.
What keeps you up at night?
I worry about the stability of our democracy and the others. You cannot deny or hold back change. These denials all create some kind of arbitrage and mispricing. Prohibition makes people rich. A global corporate tax rate was floated recently as a concept. I think that it is a very good idea whose time will never come. There are quite a few countries that have no corporate tax at all. This is just another example of governments inability to address and fix imbalances in the system.
The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.