What Midland is seeing?
As Director of Business Development at Midland Trust, the question that I am getting from everyone I speak to is, “what are your clients doing?”. Insight into investor sentiment is on everyone’s mind in financial services and wondering if they can still attract investors for their investment product. Midland Trust is a leader in providing IRAs for individuals to invest in alternative investments, such as hedge funds, commodity trading strategies, private equity, venture capital, real estate, and much more. Through all my discussions with investment managers and individual investors, I’m hoping to share some insight that you may find interesting.
Back in mid-March when the Covid-19 lockdowns started to heat up and markets tanked, we at Midland didn’t know what to think. We had all the same questions that you had at that time with no idea how to prepare. Over the next couple of weeks into early April, we started seeing interesting trends that have now shaped the rest of April and now to today. Keep in mind that as an IRA company that handles individual investor money, these insights are coming from the perspective of the individual or retail investors.
Private Equity/Venture Capital: Nothing coming or going. Clients invested into VC/PE did so with long term thoughts at play and given the illiquid nature of those vehicles, no one pulled out. However, new transactions came to a screeching halt. Typically with VC, we see investors taking stock market gains and putting that money into the asset class. With the market volatility, many investors seem to be on the sideline waiting.
Real Estate: This was the hottest asset class that we saw at Midland, specifically commercial real estate projects in the South East, California, and Texas. Once Covid-19 lockdowns started, this asset class all but stopped on new transactions and hasn’t picked up at all. Office space is a bit in flux right now but data still supports interest in people moving to the South East, so projects will probably pick back up as the economy pushes forward.
Hedge Funds: An area that was severely struggling to garner investor interest over the past couple of years due to investors choosing cheap ETFs that were more effective. However, Hedge Funds for individual investors have seemed to catch on like wildfire. The idea of active management in the equities markets seems to be getting more attractive. Investors are sticking with their current allocations and new investors are coming into the space in hopes these skilled money managers can navigate the waves of the market better than sitting on cheap ETFs. or mutual funds.
Commodity Trading Strategies: If you look at CTA strategy allocation through Midland over the past year, it would seem flat or steady in pace. New investors are still coming into the space, but they are being a bit more selective and not allocating as much to many CTAs. Volatility strategies have become increasing popular in March and have continued throughout the past couple of months. Energy strategies have also seen a slight uptick in the past month.
In summary, the days of sitting on a cheap ETF seem to be gone in the near term and they are actively searching for new ideas and new managers. As financial services professionals, capturing the attention of these investors will need to take a new approach because of the social distancing circumstances. We at Midland have over 16,000 clients invested into the private or alternative investment markets and growing. The interest is there and it will be exciting to see how the dynamics change over the next few months. Feel free to call me then and ask what I’m seeing, but I’m hoping that I will be able to tell you in person at a NIBA event in the near future.
Brad Janitz
Director of Business Development
Midland IRA
Phone: 312.753.6384
Email: bjanitz@midlandira.com
