Outlook for Alternatives in 2014
In the course of the hour which preceded a generous sushi buffet, Marc Henri Barrail discussed:
- which trades worked in 2013 and which ones did not
- outlook for 2014: a year for active management
- opportunities by country
- Alternative Value Proposition
Regarding 2013, hedge funds performed well and, within Mirabaud Asset Management’s range of Funds of Hedge Funds, three had their best year since inception and two outperformed their benchmark. The main winning trades were based on the ongoing Quantitative Easing by the FED, positive macroeconomic data and the fact that over the past year, 60% of the companies beat their earnings estimates. The main detractors were due to the non-trending environment which hurt CTAs, the short book of Long Short managers which penalised performance and government intervention hurt Macro managers.
For 2014, Marc Henri argued that specific regions will be able to play specific themes: energy, in the US, shale gas is turning the US into an energy exporter, the auto industry is changing and the “internet of things” is developing”.
Europe has the largest banking system in the world at 3.2x GDP, vs 0.9x GDP in the US. As European banks continue to recapitalise, this leads to investment opportunities in equities and credit. On the theme of telecommunications, valorisations are much cheaper in Europe than in the US, leading to speculation regarding a possible merger.
The main themes for Emerging Markets are the Middle Class Boom which in turn effects Healthcare (China), Education (Brazil) and Tourism (China).
Finally, regarding 2014, there appears to be more risk in credit than in equity and markets seem more driven by company fundamentals than by macro. This, coupled with the discrepancy in opportunities between regions, provides a positive environment for active managers and for hedge funds in particular.
For more information on any of these themes of how to gain exposure to them, please contact our team in Geneva.
Furthermore, if you would like to be invited to future events, please get in touch with us.