Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
Following the smart money to guide portfolios
“Follow the money” is among the most popular sayings in markets, with the regular Bank of America Fund Manager Survey one of the few insights available into how some US$1 trillion ($1.4 trillion) is being allocated.
As is the case in the age of social media, click bait and meme stocks, those with the loudest or most outrageous voices get the most coverage. Yet in most cases, these voices don’t represent the actual ‘consensus’ or views of the broader market and industry.
A case in point is the fact that of the 345 participants surveyed by the Bank of America, 51 per cent expect lower inflation than exists today. Interestingly, despite this view some 39 per cent of those interviewed are now expecting two rate hikes in 2022, and 37 per cent just one, with 13 per cent expecting the Federal Reserve to hold fire.
According to the responses, the most crowded trades span both thematic and geographical ideas, with ‘long ESG’ and ‘long oil’ among the most popular, ‘short China’ and EM were not far behind. Despite growing concerns about valuation risk, respondents are convinced inflation is transitory and are long US big tech as a result.
More importantly, where are they seeing the greatest opportunities today? Not unexpectedly, given their home bias, the S&P500 is expected to continue delivering among the strongest returns, beaten only by emerging markets. Emerging markets may well become the trade of 2022 given their current ‘value’ status following a turbulent year.
The views on Bitcoin may well be the most contradictory, with Bitcoin voted the third most likely asset class to deliver strong returns, despite some 59 per cent of respondents suggesting it remains in a ‘bubble’. So, back the US and emerging markets, say the world’s fund managers.
