Toll Free:
877.456.EFSI (3374)
I returned to the office this week after being out in Los Angeles for the Uncorrelated Beverly Hills conference, which EFSI sponsored. I feel like I’ve been on an airplane for most of the first few months of this year – Miami in January, Puerto Rico at the end of March, and now to the west coast.
I’m not complaining. Heading out to events gives me the opportunity to see clients, colleagues and those in our broader network, and it’s nice to get out of the office every once in a while; a change is as good as a rest, as they say.
But when I was on the way back, I couldn’t help but smile to myself when I thought about how the cocktail hour conversation had evolved since the beginning of the year.
In Miami, everyone was talking about the new administration in the U.S. – and the Super Bowl! While the word ‘tariff’ got uttered every now and then, it seemed to get mentioned more in passing as opposed to it being front and center of the conversation. For every utterance of the word, ten people were talking about how the interest rate cuts by the Fed last fall should support alternative investment strategies.
Not true at Uncorrelated Beverly Hills, of course. We are now well into the year, and tariffs truly provided a meaningful chunk of the chat.
Without wanting to get too political, some folks had much stronger feelings than others, of course. But it is clear that the only really certain thing right now is uncertainty.
It will take a while for us to know the full impact of the tariffs on private assets. Not only do the large database companies like Preqin and PitchBook report on a lagged basis, but we also don’t know how long the tariffs will go on for. While some trade deals are being done – such as the one with the UK – other markets where the U.S has more exposure, such as China, will have more of an impact on private markets investors.
It is easier to see how geopolitical events impact the hedge fund space, of course, as a few data providers publish indices monthly. But it is difficult to gauge whether they have done well, or badly, because there’s relativity involved here. The most recent update from HFR suggests that the average hedge fund is down -0.92% year to date through April. Down isn’t good, but the S&P 500 was down -3.56% this year at the time of writing, so many would argue that hedge funds are doing, in part, what they are supposed to be doing so far this year. Then factor in the current geopolitical to-ing and fro-ing, and the case for a pat on the back for hedge funds grows stronger.
We expect to see Q1 fundraising and deal data any time now – the end of May / beginning of June tends to be when Q1 data emerges, and it will be interesting to see whether there has been a pull back versus the first quarter of last year, or not; any growth likely suggests that tariffs had not been as much of a factor to start the year, and perhaps the easing of interest rates at the end of last year had more impact, and vice versa.
The Uncorrelated events are taking a break for the summer and will be back in the fall in New York – make sure you have https://www.uncorrelatedalts.com/ bookmarked. Hopefully, by that time, things will have settled, and the talk at the cocktail hour will be a little bit lighter in both tone and topic.
**********
Anthony D. Mascia is Managing Partner at EFSI. Connect with him on LinkedIn here.
EFSI is an independently owned, SOC-1 compliant, full-service fund administration firm. We provide accounting, reporting, administrative, and capital introduction services to a wide range of alternative investment funds including hedge funds, funds of funds, private equity funds, real estate funds, venture capital funds, and family offices. The center of EFSI’s service incorporates resilient technology and accomplished staff, providing clients a tailor-made service with exhaustive transparency. Give us a call today or reach out to our support team online. We look forward to hearing from you soon.