On Wednesday 10th March 2021, the Bath Finance Society held their first annual Alternative Investment Conference. The event hosted a panel of four industry experts, who all work around the field of Alternative Investments. They divulged the challenges and opportunities that exist within the world of alternative investments, gave insight into their experience trading during the volatile pandemic marketplace, and briefly touched on how their industry as a whole has adapted to post-Covid working.
Alternative investments is an investment that excludes stocks, bonds and cash. Instead, it includes investing in tangible and financial assets such as precious metals, art, antiques, real estate, private equity and hedge funds. The industry is on the rise and is predicted to grow to ‘$14 trillion in size by 2023’, which is an unbelievable rise from the industry’s ‘hold of $8.8 billion in 2017’.
The first speaker at the webinar was the Chief Executive Officer of PineBridge Investments Mick Sweeney, a high conviction asset management firm based in Ireland. Sweeney, who introduced himself as the ‘only person to lose £1million in a day at the Bank of Ireland and not get fired’, has had a dynamic and extensive career within the investment world. Sweeney gave the audience a list of pros for working within alternative investments; among them he listed the ‘engaging, risk-taking and ever-changing environment’ as his favourite part of the industry. His advice? If you can’t hack a 24/7, 365-day devotion to the industry, it’s not going be for you. When asked about Coronavirus and its effects on alternative trading, Mr Sweeney stated that his work has adapted fairly well to a virtual workplace. While he usually travels around the world to carry out due diligence and ensure deals cross over the line, he told the 200 or so Bath students in attendance of how he’d been able to buy a company without meeting anyone from the business in person – something he never would have considered possible prior to the pandemic. On the hot topic of the night, Sweeney also stated he is ‘unequivocally’ behind the idea of cryptocurrencies, arguing it’s here to stay.
The second speaker was Ella Hoxha, Senior Investment Manager within the Global Bonds Team at Pictet Asset Management and one of the Financial Times’s ‘50 Leading Women in Hedge Funds’ in 2019. An expert in her field, Hoxha has been working in fixed income for the past 17 years, now in a job which involves managing global bonds, Eurobonds, and global macroeconomics within the multi-asset hedge fund. Very much a realist, Hoxha noted that there are drawbacks to working with Alternative Investing and advised anyone who doesn’t like the stress of constant change and losing money to steer clear of the industry. Clearly for her however, there are far more pros than cons – Hoxha spoke passionately about how she finds the psychological aspect of her work to be most fascinating: “you need to understand what other people are doing with their money, regardless of the fundamental backdrop”.
For Hoxha, COVID-19 has been an interesting time, and her fund’s focus on downside protection and drawdown management has paid dividends, despite quick government/central bank response within the market. Tangentially, she remarked that the insight gained by thinking about any trade’s probability of losing money has been invaluable. Hoxha also believes that as climate change is the biggest problem humans have faced, it will inevitably draw the most capital in the long term. She noted that $3 trillion will be required for compliance with the Paris Climate Agreement of reducing temperature rises to 2 degrees celsius, and that if governments and investors get behind this plan, it will more than likely result in high reward. Hoxha also weighed in on the topics of the moment, holding very clear opinions on the recent GameStop debacle, telling the audience that GameStop has had zero impact on her work. Likewise, she’s not currently interested in cryptocurrencies, citing government sovereignty as a reason behind her apprehension.
Thomas Reeves, the third speaker of the evening, said that he had a comparatively unusual path into his current position as Head of Research at Murano Connect. Reeves studied Mandarin and Japanese as a part of his degree in East Asian studies, rather than the typical business- and economics-focused degrees which usually lead people into the world of finance. He also started out as a trader, unusual for people who end up in research. Reeves’ general investment thesis around Covid is that shocks within the wider economy can lead to new opportunities within the investment world, the difficulty being finding these opportunities in the first instance. Unlike Sweeney, who was largely optimistic about investing during Coronavirus, Reeves seemed skeptical about the diligence of investing when you aren’t able to meet someone in real life. Whilst it’s true that smaller-cap sales didn’t always necessitate travel – deals below $10mn was suggested – for Reeves, sometimes, on-site due diligence is just preferred. He cited this as being particularly the case at the systematic end of the industry, where proprietary investment systems often require access to resources that cannot be replicated virtually. On the hot topics, Reeves stated his opposition to cryptocurrency; being a research man, he doesn’t invest in it as he simply doesn’t understand the fundamentals.
Lastly, Matthew Goodban, a Director in one of PwC’s Deal Teams, spoke about his experience working within the alternative investment industry, largely in roles adjacent to private equity. The diversity and variety his job brings stands out as being his highlight of the role, being able to work with different clients from different backgrounds and different geographies every day. He evidenced this by remarking that he’s working with teams in the US and Turkey concurrently, which he described as a challenging time zone arrangement to maneuver. In this respect, Covid hasn’t changed much – flights were naturally grounded, but the due diligence process continued to follow its pre-Covid course as much as it could. Technologies such as real-time video conferencing/screen-sharing and virtual data rooms have become the industry’s Covid-crutch, and it seems employees’ reward points are taking the hit instead.
Goodban says the goal for his clients in PE is to help them always create value by driving transformation more quickly than other owners can. Sometimes this comes as being a cost-cutting exercise but more often than not, it’s about bring expertise and delivering change. A key aspect of his job therefore involves focusing on ESG (Environmental, Social and Governments) within private equity which are important growth focuses for the immediate future. In particular, Goodban said that Private Equity firms are able to play an active role within ESG issues, by functioning as an accelerant of existing trends by providing capital in large tranches, which enables companies to gain scale and bring down costs further. In relation to the cryptocurrency question, Goodban doubts its success, remarking “it’s a gamble”.