In terms of Rosenthal’s current investment outlook, while he has been at best sanguine on markets of late, he cannot see much value anywhere. He says: “Credit is expensive. Fixed income has had a decade-long run and equities are arguably more interesting but not overly cheap anywhere. I do not see as cheap a world out there as I have in previous years.”
However, he adds his biggest frustration today is the narrative around volatility.
Multi-speed world
“What we have had over the past seven years is an artificially low-volatility environment and what should be happening is a reversal to the mean. Since the crisis we have seen the world’s largest ever financial experiment. No one knows how it is going to end because there is no precedent,” he says.
As it unwinds, he believes the world will move from the single speed of the past few years to a multi-speed one. As a result, there will be a reversion to the mean in volatility and, of course, opportunities within that.
“Volcker and Dodd Frank have changed the world. I have been investing in hedge funds for 16 years and the world’s biggest hedge funds were not listed, they were the big Wall Street and European banks. You only had to look at their quarterly earnings to see that proprietary trading was a huge part of their business,” says Rosenthal.
That has gone, he adds, and volatility and opportunity are set to follow.
The Signia team sees opportunity more broadly. While it recognises the challenges posed by volatility it also acknowledges the level of flux within the industry itself.
Says Malone: “We have a huge opportunity to develop the business and take advantage of what is a very fast-changing industry. There is a lot of consolidation going on and we have the skill, resources and the infrastructure to take advantage of that.”
