The Changing Horizon for Alternative Investments

I've been off-line for the past couple of weeks, attending the 6th Annual Plan Sponsors and Minority Managers Consortium as well as the Toigo Foundation Alumni Investment Management Conference, both here in LA. The events were great and both shared insights on the changing landscape of the investment management industry in general, and some significant changes in the alternatives space specifically. I'm currently compiling my notes and findings and will post a summary when I return back East next week. In preview, topics covered an in depth look at the change and growth in emerging markets and their importance in our local investment programs and objectives. The continuing development and rise of the secondaries market as both a marketplace for LP's looking to reduce exposure to certain segments of their portfolios, like LBO’s, to those looking to gain access to new markets at discounted rates, like distressed bank asset portfolios. There was also a great discussion on the changing use of fund of funds and advisors as this alternative investment space continues to become more complex and offer more investment options. While some have sought to increasingly look to fund of fund and consultants for direction and advice, others are growing their internal desks and looking for direct investments and placement of capital. All this is very interesting and will likely fuel further debate and interest in the alternative space going forward. That will be all for now. I’m going to miss the sun. I’ve heard it’s been quite hazy in the north east of late. And not just in terms of market direction. . .

Secondaries Second Coming - Secondary Market for Private Equity Shows Life

The long existing, lately developing private equity secondary market appears to have been experiencing an increase in interest recently. As more players and liquidity come to the market, more deals and LP’s looking to either raise capital or reduce private equity exposure are met with buyers at this would be financial sample sale. Attracted by discounted prices, of late the space has been reminiscent of the closed-end fund market which has traditionally traded at a discount to NAV. The market has now come alive. As financial markets and economies have stabilized in the interim so has the asset class. With the market supporting more active buyers than sellers it appears that an effective valuation bottom has been reached in the space. Perhaps the best 'deals' are likely to have come and gone and sellers are no longer in such dire shape as the ground beneath the overall asset class has firmed. However, similar to the real estate market, there is also another dynamic at play. As those NAV’s plummeted some sellers simply pulled offerings if they weren’t in a situation where they were forced to sell. There are still numerous offerings in the wings. As these sellers return back to the a market with more natural buyers they are likely to see more 'fair' bids, albeit still at discounted levels.

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