I had the opportunity to attend the Cayman Alternative Investment Summit on February 12–13, 2015, at the Ritz-Carlton Hotel on Grand Cayman, Cayman Islands. The audience included venture capital fund managers, economists, investment managers, transactions attorneys, and others. In this post, I’ll recap the first morning’s events, which focused on the big demographic and social trends as well as trends occurring in the world economy.
First, Anthony Cowell, Head of Alternative Investments for KPMG in the Cayman Islands, discussed the big trends that are shaping investment decisions. These so-called “megatrends” include the increased consumption of diapers, the percentage of folks with Internet access, and increased automation and technological advances. Speaking of technological advances, arguably the highlight of the session was a small robot delivering a Diet Coke to the speaker—a robot called MiP.
The three big megatrends outlined by Cowell are (1) the mainstreaming of alternative investments (regulations and new products), (2) the institutionalization of investments (power is concentrated and people want simplicity), and (3) consolidation across the administration/director level and more collaboration at the software development level.
Next, Mark Yusko of Morgan Creek Capital Management gave the first keynote address entitled “Channeling Byron: 10 Potential Surprises of 2015.” He discussed the following potential surprises of the coming year:
- The “Lula pivot”—Greek politician Alexis Tsipras will spur a better Greek market, just like Luiz Inacio Lula da Silva did in Brazil in 2002.
- Deflation will be the primary economic challenge worldwide.
- The U.S. Federal Reserve does not raise rates in 2015, and long bond rates take out the 2012 lows in yield. [In a previous post about the Goodwin Proctor Real Estate Capital Markets (RECM) Conference in January, I mentioned that a JPMorgan panelist said that her firm’s prediction models use a long-term Treasury yield rate of 4%.]
- The S&P breaks its string of 6 consecutive years up and suffers its first losing year since 2008.
- Russian equities turn out to be one of the best global markets in 2015, and bull markets are born on pessimism. The oil price drop likely slows Russian GDP growth.
- Demand for gold and silver increases—folks seem to be migrating to hard currency.
- Emerging market equities will outperform developed market equities. Yusko said that Argentina is a great place to invest over the next 10 years. India is also really cheap right now, and local investors are buying in their local markets.
- Oil prices will fall to 2008 lows ($30 per barrel) and will stay in the $40 to $50 per barrel range this year. By contrast, the U.S. Energy Information Administration (EIA) predicts no excess supply by the end of 2015, but Yusko suggests that the EIA always seems to predict a balanced market and smoother prices. When oil prices are very high, folks lend money to people to build more oil wells. This seems counterintuitive, and now lenders seem to be regretting those decisions given the current price of oil.
- Abenomics (the economic policies of Shinzo Abe that focus on inflation targeting at a 2% annual rate, quantitative easing, correcting the excessive appreciation of the yen, and structural reforms such as participation in the Trans-Pacific Partnership) in Japan seems to be working.
- China will enter a bull market despite the warnings—the quality of growth is a better indicator than the quantity of growth. Chinese e-commerce is one of five core areas of focus for the coming years.
- Bonus surprise prediction: lower gas prices in the U.S. do not result in a windfall for consumers—U.S. real GDP growth will hover around 2% in 2015, as opposed to the relatively strong growth that the IMF predicted as noted by Christina Romer at the RECM Conference last month.
I enjoyed my time at the Cayman Alternative Investment Summit. Check back in a few days for more thoughts on this unique and educational conference.