Nine out of 10 financial advisers say they plan to pour clients’ money into “alternative” investments over the next couple of years, including such lucrative high-fee vehicles as private equity, private credit, hedge funds, venture capital and the like.
Granted, this may not be a fully representative sample of the entire money management industry. CAIS and Mercer polled 200 financial advisers who had turned up to their Alternative Investment Summit last month at the Beverly Hilton Hotel in LA. Those attending were, naturally, more predisposed toward “alternatives.”
Then there is the Heraclitus problem, meaning that the future will not be the same as the past. Private-equity managers benefited enormously from the long-term collapse in interest rates from 1982 until, well, last year. They were able to buy companies with cheap debt and then flip them. What happens if rates continue to go back up? We shall see.
Important note: That is especially astonishing because during that period, from 2006 to 2020, the interest rate on BBB-rated corporate bonds halved. So the private equity crowd, who make their money by purchasing undervalued companies with debt, should have been making out like bandits.
Property is in the mix too.
Exactly. Whereas crypto are nothing but random numbers.