About three-quarters of alternative asset professionals believe the US economy is already in recession or will be by the end of the year, according to a recent survey by consultancy EisnerAmper. The forecast of a recession by 74% of respondents comes amid a sell-off in equities that has continued throughout the year, as rising rates have reduced the value of existing bonds.
Peter Cogan, Managing Partner of EisnerAmper’s Financial Services Group, said: “The ongoing war in Ukraine, coupled with world record inflation and poor performance in public markets, has forced investors to be nimble. in their investment philosophies. The Federal Reserve has made it clear that it is unwavering in its mission to reduce inflation and “the survey shows that alternative investors expect it to be a long-term challenge to navigate.”
Although 2022 has been difficult for equities, investment professionals surveyed responded that the top two sectors that show the best potential for the rest of the year are healthcare and life sciences. Optimism still exists for technology, but only 32% of respondents selected technology as one of the top two industries, down from 50% the previous year. It’s the first time in EisnerAmper’s four-year survey that technology hasn’t taken the top spot. Infrastructure (20%), environment/sustainability (15%) and crypto/digital assets (11%) also garnered strong votes.
The survey results align with themes from NTAM’s recent five-year forecast. Participants in the EisnerAmper survey named inflation as the most pressing business challenge facing investors over the next 12 months, followed by geopolitical concerns and an escalation of regulatory control/compliance obligations.
Despite the negativity surrounding the macro economy, with most anticipating slower growth and a recession, private equity and venture capital respondents said companies would continue to strengthen their teams. More than half (54%) of companies surveyed plan to hire for their investment teams in the next 12 months, 51% plan to hire for their operations teams, 21% plan new hires for their teams investor relations and 11% plan to hire for marketing. and communication units. Only 26% of responding companies indicated that they would not seek to add new teams in any of the departments.
Respondents expect LPs to increase their allocations to sector and growth equity strategies over the next year. While 74% of private equity and venture capital investors said they had raised funds or launched a fund in the past six months, 30% of those investors had to delay. When asked the same question, only 44% of hedge fund managers said they had raised funds or launched a fund and 11% said they had experienced delays.
The survey also highlighted the opportunities and challenges alternative investment professionals continue to face with environmental, social and governance (ESG) investing. For the second year in a row, the lack of standardized reports and data sets was chosen as the top barrier to ESG implementation, cited by 45% of respondents.
Despite fears of recession, with volatility spikes across the globe, investors are finding the most opportunities in the US Seventy-two percent of respondents chose the US as one of the two largest regions for investment opportunities over the next three years, followed by Asia (28%) and developed Europe (23%).
As technology continues to develop and advance in the financial services industry, EisnerAmper’s survey has consistently shown that hedge funds are slower to adopt artificial intelligence and machine learning in decision-making. of investment. Only 12% of hedge fund investors surveyed say they use these tools in their investment process. While this number is still low, it is double the level of last year’s survey, where only 5% of investors said they use AI or ML.
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Tags: Alternatives, EisnerAmper, Survey