Addressing an audience of more than 275 investors, a group of diverse investment professionals identified good investment opportunities that can be found despite a very challenging investment environment. Their presentations were given as part of the second annual Commerce Street Investment Conference held at Southern Methodist University in Dallas, Texas on October 30, 2014.
Dory Wiley, President and CEO of Commerce Street Holdings, LLC, welcomed attendees and explained the mission of the conference.
“SMU and Dallas deserve a world class investment conference that offers cutting edge ideas, innovative strategies and leading speakers,” Wiley stated. “Dallas is an influential money center with numerous money managers and a great concentration of wealth.”
Most speakers noted the challenges presented by a continuing low interest rate environment, a fully valued stock market and an unusual correlation in performance of asset classes. Despite these headwinds, all speakers said that compelling opportunities could be found.
Discussing the worldwide gold market, Terry Hanlon, President of Dillon Gage, described gold as “…an insurance policy, not an investment…” and pointed out gold’s significant popularity in Asia and Eastern Europe as a solution to liquidity and safety.
Three panelists representing “credit” concurred that both tight interest rates spreads and a competitive lending environment are likely to continue for three-to-four years. Randy Brown, Managing Director of Fortress Investment Group LLC, observed more “covenant lite” loans being made, but that a lending bubble isn’t yet apparent. Other credit panelists included Ari David Kocen, Managing Director of Bluehenge Capital Partners and John Brynjolfsson, Chief Investment Officer of Armored Wolf.
Three hedge fund managers shared their unique strategies to find alpha for their investors. Abraham Trading Company President Salem Abraham said his firm trades 60 different future markets and makes money on market movements and emotional investors. Wilbur Matthews, CEO of Vaquero Global Investment LP, noted that well-selected corporate credits in emerging markets offer compelling yields, despite continuous volatility. Vollero Beach Capital Partners Managing Partner Gentry Beach added that his firm’s long/short equity focus is market neutral and finds value in companies that are impacted by movements in commodities.
Keynote speaker Dr. George Friedman, Chairman of Stratfor Global Intelligence, alerted investors that their current focus should be on disturbing trends in Europe more than fanatics in the Middle East. Noting economic, social and political instability within the European Union, Friedman expressed special concerns about Germany’s export dependency, Russia’s declining economy and southern European countries’ resentment of Germany.
The Carlyle Group, one of the world’s largest money managers, was represented by Co-President Glenn Youngkin who shared that every category of institutional investor is now allocating more money to private equity (PE), just as PE investing prospects are improving. Youngkin advised that Carlyle favors the health care industry, is avoiding cyclical industries and is building a middle market buyout portfolio in Europe and Asia.
Three panelists discussing asset allocation agreed that investing today is very challenging. Phillip Durst, Chief Investment Officer of Tolleson Wealth Management, said his firm is keeping “dry powder” for future opportunities, believes U. S. markets are fully valued, but thinks strong regional banks and global dividend stocks are currently interesting. Crow Holdings Capital, LLC’s Kevin Sedwick observed that his firm is investing the conservative portion of portfolios in high quality, short duration municipal bonds. He added that he is cautious on current U. S. valuations, high yield corporate debt and certain real estate sectors. Noting a return target of eight percent, SMU’s Chief Investment Officer Mike Condon spoke of the importance of diversity in portfolios and noted several investment strategies SMU is following, including investing with several funds that are middle market lenders in Europe as bank debt becomes less available.
An energy panel comprised of David Miller, Managing Partner of EnCap Investments, L. P. and Dheeraj Verma, Managing Director of Quantum Energy Partners said that energy PE investors seek a 20-30 percent return and that top performers can find opportunities in both up and down cycles. Miller advised that $82 per barrel oil is not disastrous, but if prices slip and stay below $75 per barrel, rigs will be taken down and over-leveraged companies could become distressed. Verma emphasized the importance of profit margins over oil and gas pricing and noted that a shortage of talent and expertise is likely to be one of the biggest challenges in the energy industry in the future.
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About Commerce Street Investment Management
Commerce Street Capital, LLC (Member FINRA/SIPC) and Commerce Street Investment Advisor LLC (“CSIA”), dba Commerce Street Investment Management (“CSIM”), are wholly-owned subsidiaries of Commerce Street Holdings LLC, a Texas limited liability company. The firm is headquartered at 1445 Ross Avenue, Suite 2700, Dallas, TX 75202. The firm provides asset management services for private equity and credit opportunity funds which invest in bank and financial institution-related transactions.
This press release is for information purposes only and does not constitute a solicitation or offer by Commerce Street Investment Management to buy or sell any securities, futures, options, foreign exchange or other financial instrument or to provide any investment advice or service.