Changes in Investor Sentiment
Life in the alternative investment community has not been easy. The litany of problems and issues that investors have faced during the last several quarters are familiar by now: market erosion and instability, predictions of crippling inflation and deflation, massive bank failures, fraud on a level never seen before, and government ineptitude and impotence. Finally, however, investors are beginning to see a light at the end of the tunnel, although with all of these events still fresh in their minds, they are still cautious.
The portfolio manager of a fund of funds in Geneva who has felt the crush of poor market conditions is forecasting better days ahead. “I am not considering any allocations to alternatives now, but perhaps in three to six months I will be ready to invest. There are already signs that things are changing-only on a case-by-case basis, but positive signs nonetheless.”
This manager also mentioned that the market is in better shape today than it was six months ago, and he saw no reason why it would not continue to gradually improve. “The indications are that the market is recovering,” he said.
An analyst at a family office in London expressed a similar sentiment. “We are fully allocated, but we are researching managers to fulfill specific investment requests from clients and to establish relationships. We are open to all strategies in the hedge fund space, but discretionary global macro funds are of particular interest. We anticipate 2010 will be a strong year and we want to be ready.”
The optimism is not limited to Europe. Some investors in North America are defying the herd mentality and raising capital and making allocations. This is not to say that the environment is what it was, but there are investors that suspect part of the current market turbulence is media driven and the rebound has begun.
Investor sentiment is also positive in Japan. Three weeks ago, a money manager at a wealth advisory firm voiced his concern about the amount of negativity and felt some of it was unjustified. His approach is to recognize the issues, learn from them, and move forward. “To choose inactivity based on poor market conditions is not always the best strategy,” he stated. He expects a measured advance in the market during the remainder of the year and into 2010.
Overall, BHA is hearing investors express a cautious confidence. The alternative investment industry has undergone unprecedented problems during the past several quarters, but investors are optimistic that the market is improving. They are looking ahead, evaluating opportunities, and getting ready to put capital to work.