Trends Watch: Alternatives and New Product Developments
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 Bruce H. Lipnick, CEO & Founder of Alchemy Capital Group LLC.
What is your outlook for alternative investments?
For my entire business career I have been focused on alternatives and new product developments.
Basically like any other growth business, ideas and strategies come and go. I see several important shifts and changes in the alternatives space:
- Demand is increasing amongst family offices, high net worth individuals and institutions (but with a twist. or through the development of new products).
- There is a shift from mega funds that have severely underperformed the last five years to emerging managers (generally under $1 billion in AUM, but more in the $100-500 million AUM range) for investments, seeding, and first-loss. These managers are more nimble, and have very non-correlated niche strategies (which we see and are focusing on as a major growth area, as the market finishes up an extended 11-year bull run). In the area of first-loss programs, a manager or investor takes the first loss up to 10% (but not all strategies fit the profile for this).
- There is also a move to online access for managers (alternatives, long-biased, and indices).These platforms offer more transparency and better liquidity. Lower fees; no K-1s; no potential of gating, fraud, or style drift. Major firms have announced that they are developing their own platforms to service the growing online demand for alternatives.
What is your outlook for private equity?
My feeling for private equity/venture capital is two-fold. Institutions will continue to increase allocations to this sector but are now doing direct investments. Family offices are also increasingly making their marks in the space. With volatility in markets increasing and world political potential disruptions abounding (almost daily), along with the 11-year plus bull run, investors are seeking more strategic, less volatile allocations. However, we are at a time where there is too much money chasing deals (driving up valuations, witness the last few IPOs); as always the market forces will correct excess and present and create opportunities.
What is your outlook for the economy?
The economy has been in an 11-year bull run and rates are the lowest in almost three years. Access to cheap capital, elimination of regulations, the Fed and central banks trying to manage inflation, recession risk and with trade wars: It’s hard to predict, but with increased hedging and using alternatives as investments, investors will adjust for what may be coming.
Ray Dalio was right on the economy and wages. We have to close the rich/poor gap, adjust health care, climate adjustment and work with our allies to solve U.S. and world problems. (Deja vue? Middle East back potentially in war efforts!!)
What keeps you up at night?
On the positive side, I continue to develop new trading tools and initiatives, but I am concerned the world is continuing on a potential bad track. With divisive groups growing the potential for outlying events exists, increasing downside potential risks.