One of the clearest messages that came out of CAIS 2017 was that the world is changing in innumerable ways that have the capacity to shock and destabilise. One only has to refer recently, to Brexit and the outcome of the US presidential election, to appreciate that uncertainty is the only known certainty to contend with in an ever more complex, interconnected world.
As KPMG's Cowell said, headline risk seems to dominate decision making: "It's unlikely that markets will be able to deliver on expectations. Turbulence in China and uncertainty in US markets is causing an institutional shift in investing. The outcome of quantitative easing is also in doubt and we are on a journey into the unknown. In this type of environment, the unexpected always happens."
Dr Pippa Malmgren urged the audience at this year's event "to stop looking at numbers and look at what is happening right before our eyes", referring to the rise in global populism and the fact that the warning signs were there to see in the US elections, with crowds of rustbelt Americans flocking to Trump's campaign events.
The same sense of disillusionment with globalisation was evident in the run up to Brexit.
Some, like Jeffrey Christian, Managing Partner, CPM Group LLC, a commodities market research and asset management group, think that the UK will probably lose 10 per cent of GDP growth per annum over the next decade as Brexit erodes the UK's earning potential.
"The UK will continue to be a part of a globalised economy, technology will allow that as will political devolution," said Christian. "The ultimate agreement that the UK reaches with the EU might be very similar to the one it is walking away from. The big risk is political. In the UK and US, there has been a failure by mainstream centrist parties to understand the degree to which people have been excluded from global economic growth."
Leading economists such as David McWilliams believe that the future will be deeply uncertain. In his view, the general sense is that the western world is at an "extraordinary tipping point". Echoing Pippa Malmgren's views, McWilliams told the audience at CAIS 2017:
"The problem I see is that conventional people don't see tipping points, they don't think unconventionally. Central bankers have a 'group think' approach and don't have the latitude to see things differently."
Marine Le Pen will, he predicts, win the French election. Many CAIS attendees agree. In a survey, just over half of them picked Le Pen winning the French presidential election as the next 'Trump' or 'Brexit' moment most likely to upset global markets.
McWilliams added that whenever US presidents have gone up against the Federal Reserve, they have lost. In '92, Clinton was elected on a big tax cut for the middle classes; Greenspan refused.
"Will Trump back down? In the eighth year of fiscal expansion, will he try to change the way America – and the Fed – behaves to hit a growth rate of 4 per cent, compared to the Fed's 2 per cent target?" questioned McWilliams.
The group think comment McWilliams made is something that applies equally to alternative fund managers. Going forward, it'll be those who are prepared to challenge the consensus and to think imaginatively that will likely come out on top. They will be the ones embracing technology and willing to evolve. To defy the gravitational forces and elevate their value propositions to a new level with original products, strategies, and ways of engaging with their investors.
Cowell referred to this as the rise of the 'digital-institutional' manager.
Their controls and processes will be institutional grade, he said, yet they will retain their creativity and focus on alpha… all through digital platforms.
"Investors are increasingly demanding more transparency, liquidity and instant access to information. Since the global financial crisis, they have become more questioning and technology is helping them to demystify the art of investing. It will provide more and more portfolio transparency and empower clients in the years to come," said Cowell.
A number of years ago, people would talk about 'star managers', 'has beens' and 'wannabees', but the rhetoric has changed to trying to find the digital superstar – the organisation that has the most integrated digital business model.
Increased transparency and technology was also discussed in the context of impact investing and philanthropy, which was a key theme at CAIS 2017.
Philanthropy is most effective when it's an all-in effort, with contributions coming from all over rather than just one source. However, it is important to remember that defying gravity through performance in the alternatives industry isn't the end game; it is just the beginning. It's time the industry as a whole embraces its potential as a champion of social causes, and helps lead the fight to build a socially responsible world.
"One of the key takeaways from this year's event is that leaders in this industry are committed to not just doing well for their investors, but also to doing good for their local communities and the greater world around them," said Duggan. "Philanthropy, impact investing and ESG investing all play a role, and together we have the potential – and the capital – to drastically improve the world we live in.
"The rise of factor investing, combined with high levels of machine learning and other digital innovations including Blockchain are bringing the industry out of its digital wilderness. Technological change is driving consolidation, driving investor needs and wants, and driving alignment of interests. The future dynamism of the industry now requires alternative investment managers to truly embrace the role of a trusted adviser in this digital age," concluded Cowell.
Mon 05/03/2018 - 10:20
Fri 02/02/2018 - 08:31
Tue 16/01/2018 - 09:29
Mon 11/12/2017 - 12:05
Tue 14/11/2017 - 18:32
Wed 14/03/2018 - 09:04
Wed 14/03/2018 - 09:02
Mon 12/03/2018 - 11:04
Mon 12/03/2018 - 10:50
Fri 09/03/2018 - 15:00