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At the TIGER 21 annual conference this year, there was plenty to consider. During the three-day event, Members heard from Wall Street Titans, private equity experts, real estate and investment pros, and other leaders in the world of philanthropy, health, and lifestyle.
Notable presenters included Steven Roth, Robert Arnott, Jeremy Grantham, David Rubenstein, Howard Marks, Felix Zulauf, and Barry Silbert, among others. Each provided their viewpoint of the markets and opportunities for investment – some of which are summarized below.
TIGER 21 Members Explore Investment Possibilities at 2014 Annual Conference
Wall Street heavyweights impart their thoughts on the markets; Members share their own investment opportunities and Bitcoin gets its due
New York, NY (February 13, 2014) – Members of TIGER 21 experienced the art of possibility during their 4th Annual Members Conference. The three-day event at The Phoenician in Scottsdale, Arizona featured presentations by world-class financiers and visionaries in philanthropy, health, and lifestyle.
A theme running through the conference was embracing life’s infinite possibilities, and it was kicked-off with a presentation by the world-renowned conductor of The Boston Philharmonic Orchestra, Benjamin Zander, who is co-author of the aptly named book The Art of Possibility.
The possibilities related to investments comprised an important element of the conference agenda with presentations from such luminaries as Steven Roth, Chairman and CEO of Vornado Realty Trust; Robert Arnott, Chairman of Research Affiliates; Jeremy Grantham, Co-Founder and Chief Investment Strategist of GMO; David Rubenstein, Co-Founder and Co-CEO of The Carlyle Group; Howard Marks, Chairman of Oaktree Capital Management; Felix Zulauf, Co-CIO of Vicenda Asset Management; and, Barry Silbert, Founder & CEO of SecondMarket.
The expertise of TIGER 21 Members was also on display and their access to certain deals showcased in a two hour session where Member-led investment opportunities were discussed. In all, 10 TIGER 21 Members detailed prospects in real estate, energy, healthcare, finance, and other sectors. “TIGER 21 Members are mostly self-made and many of them continue to remain involved in running companies and are active investors. These formal presentations were very well attended and brought together Members from different groups throughout North America. It is not surprising that many of the conversations started at the deal-pitching session continued throughout the conference,” said Michael Sonnenfeldt, Founder and Chairman of TIGER 21.
The following are take-aways from the keynote presentations at the 2014 conference:
Robert Arnott – Research Affiliates
Arnott, who has pioneered several unconventional portfolio strategies, opened his remarks by saying asset allocation is vastly simpler than most people realize. He explained that it is a matter of error avoidance. “The worst thing as investors that we can do is chase fads, chase bubbles, chase trends well past their usefulness,” according to Arnott.
His provocative recommendation for investors is to check the one-, three- and five- year-track records of funds they are considering and give serious thought to the ones with the worst three- and five-year records – while staying well away from the ones with the best three- and five-year records.
As Arnott astutely observed, “The past is not prologue. What has gone up does not necessarily go up. But fees are prologue. What was charged last year will be charged next year. So think twice before buying the most expensive products.”
Arnott also observed that yield matters. He doesn’t advise investors to chase it, but suggests that the classic 60% stocks/40% bonds portfolio balance, which has provided a nice run over last 30 years, is now producing disappointing yields and investors need to broaden their tool kit. By this he means looking to what he calls the third pillar of investing – diversification into markets that are lightly correlated with mainstream stocks and bonds, typically offering higher yield, or higher growth or both and are positively correlated with inflation (helping if inflation reignites). This spectrum of alternative markets includes inflation hedges like TIPS, commodities and REITS as well as emerging market stocks and bonds and high-yield bonds.
A big proponent of mean reversion, Arnott believes that now is a time to rebalance. Arnott points out that 2013 was mostly a bear market year – it was a bull market only for people invested in US and international stocks. “If you invested in bonds, they went down. If you invested outside the mainstream, those investments went down. Anything outside of mainstream, the yields went up, returns were negative or if positive by less than the yield. This presents a marvelous trade opportunity to take stock market profits and build exposure to the third pillar of liquid alternatives.”
Jeremy Grantham – GMO
This titan of Wall Street presented by far the most bearish view of the market, yet all was not doom and gloom.
Grantham said that you must recognize that markets are incredibly inefficient because of career risk. When a bubble gets going, playing against it is bad for business and dangerous for the career of the investing professional – so most professionals will not make the trade that should be made. However, the forming and breaking of the great bubbles are the few real opportunities that institutional professional have to earn their keep. When the bubbles are forming, that is a great opportunity to decrease risk and increase returns.
Grantham related that during the tech bubble his firm witnessed a lot of money going out the door, but they made the right decisions, and profited greatly in the long-term.
On the bubble leading up to the great recession, Grantham said, “In 2007 there was great fiction put out by bankers that nobody saw the crisis coming, but almost certainly everyone we spoke to knew it was coming, they just did not know the exact timing.”
Grantham’s view from 30,000 feet is that you cannot have a bubble unless you have wall-to-wall elegant rationalizations. “Every single bubble had very smart people come out and argue that it was quite reasonable because there had been some permanent change that made the odd data irrelevant,” he said. This makes him think that we are beginning to get the pre-conditions of a bubble now.
David Rubenstein – The Carlyle Group
The private equity expert explained that as emerging markets mature, the frontier markets – those countries with even less developed markets – will present the best investing potential. Rubenstein noted that we’ll have a historic moment in 2014 when the Gross Domestic Product of emerging markets will surpass the GDP of the developed markets – this includes the emerging markets of China (2nd largest economy) and Brazil (6th largest economy).
“If you are going to invest for a 5 or 10 year period of time there is no doubt that the emerging markets are going to become the dominant part of the global economy. The US will still be the greatest place to invest, because while we don’t have great growth rates we do have rule of law, transparency, great financial markets, talented people to run companies and exit opportunities. That aside, emerging markets are the place where you will see the greatest growth and number of opportunities,” said Rubenstein.
On China – where Carlyle has 15 percent of its workforce – Rubenstein thinks the country is experiencing a difficult transition as it grows, but in the long-term it remains a safe bet. The key to Carlyle’s success in China is that