After financial industry experts and advisors finished a week at the SALT Conference in Las Vegas that ran May 16-19, some of the top hedge fund managers revealed growing interest for foreign investments and lessening appeal for potentially overvalued domestic assets.
For example, DoubleLine Chief Investment Officer Jeffrey Gundlach urged other asset managers to look abroad, following up on endorsement of emerging market investments, like iShares MSCI Emerging Markets ETF (NYSEArca: EEM), earlier this month.
Investors have stuck with what they know, and the U.S. markets are what many investors are most comfortable with. However, a U.S.-centric portfolio may leave an investor open to potential risks and even cause some to miss out on overseas opportunities.
Many other hedge fund speakers also pointed to European equities for their attractive valuations and as a means to diversify away from American equities, especially in light of recent misgivings with President Donald Trump’s ability to push through his pro-growth agenda. Moreover, Europe is enjoying improving economic and earnings growth and offers more attractive yield opportunities than the income generated here at home.
Former Federal Reserve Chairman Ben Bernanke. Photo: 2017 SALT Conference
According to Reuters, about 1,900 guests paid thousands of dollars to hear speakers including former Federal Reserve Chairman Ben Bernanke, former U.S. Vice President Joe Biden and billionaire hedge fund managers Bill Ackman and Daniel Loeb.
Hedge fund managers and even Bernanke remarked upon the market’s growing indifference to short-term political news, notably growing geopolitical tensions and Trump’s ability to deliver on promises.
Many warned that U.S. political risk is still a major threat that could upend gains, which is also one of the reasons why investors should consider diversifying with overseas assets.
Some panelists also looked to the growing importance of passive investments, especially given the increased scrutiny over active manager fees and their poor performance records in recent years.
Exchange traded funds, which are perceived to be cheaper and in some cases better performing, have gained traction on the misfortunes of active funds, attracting record inflows and continuing to gain on the heels of the more established traditional open-end fund industry.