Trends Watch: September 29, 2016
September 29, 2016
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 to Ty McGuire, Principal, Beacon VP Capital.
What is your outlook on the hedge fund industry?
The hedge fund industry is ripe for disruption. The industry has operated too long under opaque structures. Investors of all types, family offices, endowments and institutions, want greater transparency and accountability by fund managers. I see the industry thinning out over the next 3 years. Currently, according to Eurekahedge, there are 27,000 active funds, and only a small percent have outperformed the market over the last 3. Investors are no longer looking for strategies that are similar, they want unique strategies that produce above-market returns and provide alpha.
What is your view of the economy?
Our perspective is the general economy is doing quite well, although there are areas of concern such as political risk, real estate prices and equity valuations. I would agree with the general consensus that the macro economy is structurally strong but there needs to be a strong focus on job growth and income growth. I personally believe the Fed has done an excellent job the last 6 years in providing a solid foundation and environment for growth and stability but the Fed faces new challenges on how best to maintain this current economy while maintaining inflation.
What keeps you up at night?
I worry about the real estate market and unsustainable prices along with loose lending practices by the large banks. The current environment looks very similar to 2006 - 2007. I believe we must prepare a plan for a soft landing from this real estate boom. We must prevent a real asset crash because it will flow over to other areas of the economy. If we look at cap rates, occupancy levels, lending rates, planned projects and prices per square foot, we can clearly see we are heading towards a softening of the market, which we must prepare for.