Alternative investment specialists have set out the major trends to watch out for in the coming year at the ALFI Conference in Luxembourg.
As part of a panel session at the trade body’s annual conference, specialists covering hedge funds, real estate and private equity outlined the themes they expect to emerge in 2014.
On the panel were: David Reid of London-based hedge fund group SS&C GlobeOp; Jérôme Wittamer, managing director of Luxembourg-based Genii Capitol; and, Christopher Garbe, who is CEO of family-run real estate specialist Garbe Group.
Hedge funds: transparency to top agendas
Discussing hedge funds, Reid believes there are five key themes to watch out for in the hedge fund market over 2014 and beyond.
‘I am anticipating a big increase in convergence, by that I mean long-only managers looking more at what they can do in the alternatives space,’ he said.
In response to this change, Reid said as his second point that alternatives as a whole, not just hedge funds, would have to increase transparency and he expects more work to be done on this point.
‘In addition, I think we will continue to see consolidation both in terms of service providers and also with business mergers.’
‘This, which is my fourth point, will drive a greater effort by larger hedge funds to try and maintain a competitive edge, either through acquisitions or other innovation.’
Once again stressing transparency, Reid said more and more institutional clients will seek personalised services to ensure their needs are met.
‘Finally, I believe that we will see the continued growth of ‘Fund of Ones’, where larger investors look to move towards more personalised, separate accounts. This will definitely continue to grow in 2014.’
Private equity: buying into builders
Representing private equity, Wittamer said he expects an increasing appetite for infrastructure.
‘For us, the key trend has to be infrastructure,’ he said. ‘It currently only makes up 3% of the overall allocation from the 30 biggest pension funds combined. In other words, it accounts for nothing.’
‘If you look at the infrastructure in the developed world, in Europe it will need improvement and definitely the same goes for the United States. Also, there is still huge growth to come from the emerging markets, so infrastructure will be massive.’
Real estate: set for relocation
Hamburg-based Garbe believes trends in real estate will be closely tied to the fortunes of the European economy but could lead to a pronounced shift in investment locations.
‘I think we are going to see countries like Spain and Italy, which have been viewed as only Southern Europe, will come into focus more. This is because people will see the potential return on a relatively small investment.’
‘I believe there is going to be a shift from the core markets to these other markets, or core plus markets, if you will. That is because there is still going to be money coming into the market and that will open up new areas.’