Investors Up on Europe and Alternatives, Down on Regulatory Reform

Given the uncertainty about Brexit, regulatory reform, Trump’s policy initiatives, tax reform, and creeping nationalism, investors are upbeat about the use of alternatives, especially in Europe, according to a survey of 300 institutional investors and family offices at a Context Summits meeting in Barcelona.

The survey found 71% of European investors were optimistic about the future of the alternative asset management industry, with 54% planning to increase their net positions in alternatives by the end of 2017.

These results are similar to another Context Summits 2017 survey conducted in Miami where 51% of investors said they were optimistic about the alternatives industry, and 72% planned to increase their allocations to alternative fund managers in 2017. About 75% of respondents said they prefer investing with new managers, while 48% preferred managers with track records of one to three years. Significantly, more than 59% of allocators polled at Miami earlier in the year voiced the same opinion. –

“As the data shows, European allocators—like their US-focused counterparts—are overwhelmingly optimistic about the future of the industry. While challenges remain, particularly in the political and regulatory realms, the overall consensus is that there is strong demand for new strategies and ideas,” according to Mark Salameh, co-founder and CEO of Context Summits.

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On the political front, investors voiced mixed opinions on the impact of Brexit, with 40% calling it an opportunity, 35% a threat, and 25% taking a neutral stance. There was also major concern about the rise of nationalism in France, with more than 63% of investors saying changes to the EU presented the greatest long-term challenge to Europe. Investors were especially worried about the slowdown of globalization, the replacement of free-market policies, and a recession resulting from a weakened economy.

On regulatory issues, 78% of respondents said European financial regulations, such as MiFID II, were a problem due to excessive costs, restrictions, and unpredictability. Only 8% thought regulations benefitted the industry.

Tags: Alternatives, Alts, Brexit, Context, politics

As hedge fund managers and investors gathered at the annual SkyBridge Alternatives Conference (SALT) in Las Vegas last week, one of the key focus areas for investment managers was looking abroad into emerging markets for new opportunities. However, some investors seem to be looking in the opposite direction. -Dr.. Zhao Haiying, chief risk officer of China Investment Corp. (CIC), used her presentation to highlight how CIC is looking at Chinese investment opportunities that have the potential to enter developed markets.

“We are paying attention to the applications of technology in China and we think there are a lot of opportunities,” Dr. Haiying said from the stage. “Chinese companies are growing abroad and are looking at ways of facilitating Chinese consumerism abroad. That’s very interesting to us.”

Dr. Haiying said Tencent was an example of a Chinese company expanding its influence abroad. She touched on the company’s growth in the mobile payment space, which could allow Chinese consumers to shop abroad. “Chinese consumers are global citizens. Think about the potential of being able to transact with mobile payments facilitated by a Chinese company,” she said.

According to Dr. Haiying, the Tencent example is instructive for understanding two key investment themes for CIC: digitization and disruption. “Like any other country, we are facing a lot of challenges,” she said. “One challenge is common, which is technological change.” When it comes to investing around technological change, CIC is seeking opportunities that will be profitable despite the disruption caused by technological change. Tencent, with its large online presence and mobile payments, is positioned to be profitable as more consumers move online for their shopping. Traditional retail in China has faced similar pressures to retail elsewhere; fewer shoppers are coming into stores and are instead looking online for the cheapest price.

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Tags: China Investment Corp, SALT, SkyBridge, Tencent

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