Alternative Investment Professionals Survey Respondents: Recession Imminent

Nearly three-quarters of alternative investment professionals believe the U.S. is already in a recession or will enter one by year’s end, an EisnerAmper survey finds.

Roughly three-quarters of alternative asset professionals believe that the U.S. economy is either already in or will be in a recession by the end of the year, according to a recent survey by consulting firm EisnerAmper. The forecast of a recession from 74% of respondents comes amidst an extended sell-off in equities that has persisted throughout the year while rising rates slashed the value of existing bonds.

Peter Cogan, managing partner of EisnerAmper’s Financial Services Group, says, “the ongoing war in Ukraine, coupled with global records of inflation and poor public market performance, have forced investors to be nimble in their investment philosophies.” The Federal Reserve has made it clear it is steadfast in its mission to lower inflation and “the survey shows that alternative investors expect this to be a long-term challenge to navigate.”

Though 2022 has been challenging for equities, the investment professionals surveyed responded that the top two sectors that present the best potential throughout the rest of the year are health care and life sciences. Optimism still exists for technology, but those of surveyed, only 32% selected tech as a top two industry, down from 50% the prior year. This marks the first time in four years of EisnerAmper’s survey that tech did not capture the top spot. Infrastructure (20%), environment/sustainability (15%), and crypto/digital assets (11%) also garnered many of the votes.

The survey results correspond with NTAM’s recent five-year forecast themes. Participants in the EisnerAmper survey pointed to inflation as the most pressing business challenge facing investors over the next 12 months, followed by geopolitical concerns, and escalating regulatory scrutiny/compliance obligations.

Despite the negativity surrounding the macroeconomy, with most anticipating slower growth and a recession, respondents from private equity and venture capital said that firms would continue to bolster their teams. More than half (54%) of responding firms expect to hire for their investment teams in the next 12 months, 51% expect to hire for operations teams, 21% expect new hires for their investor relations teams and 11% anticipate hiring for their marketing and communications units. Only 26% of responding firms indicated that they would not be looking to make new team additions in any of the departments.

Respondents expect limited partner investors to increase their allocations to sector-specific and growth equity strategies over the next year. While 74% of PE and VC investors said that they have fundraised or launched a fund in the past six months, 30% of these investors had to delay their efforts. When asked the same question, only 44% of hedge fund executives said they have fundraised or launched a fund and 11% reported experiencing delays.

The survey also pointed to the opportunities and challenges alternative investment professionals continue to navigate with environmental, social and governance (ESG) investing. For the second year in a row, lack of standardized reporting and data sets was chosen as the biggest barrier to implementing ESG, cited by 45% of respondents.

Despite their recession concerns, with volatility peaking across the globe, investors find the most opportunity in the U.S. Seventy-two percent of respondents chose the U.S. as one of the top-two biggest regions for investment opportunities in the next three years, followed by emerging Asia (28%) and developed Europe (23%).

While technology continues to develop and advance across the financial services industry, EisnerAmper’s survey has consistently shown that hedge funds are slower to adopt artificial intelligence and machine learning in making investment decisions. Only 12% of hedge fund investors surveyed say they are utilizing these tools in their investment process. While that number is still low, it is double the level from last year’s survey, where only 5% of investors said they were utilizing AI or ML.