Expect One More Rate Hike Than Markets Have Priced In: Beschloss

(Bloomberg) -- Investors could see one more interest rate hike this year than the market is expecting, said Afsaneh Beschloss, chief executive officer of the $13 billion Rock Creek Group.

“The inflation numbers are not completely showing the real inflation in the markets," Beschloss told Bloomberg TV’s Scarlet Fu at the Milken Institute Global Conference in Beverly Hills, California. “That’s one of the problems, because the way they’re measured is still measured in old historical ways not really reflecting the market today.”

It’s also "not impossible" to see a 50-basis-point rate hike by the Federal Reserve toward the end of the year if unemployment falls even more and inflation rises faster than what markets expect, said Beschloss, who was formerly chief investment officer of the World Bank. Former Fed Chairman Alan Greenspan is one of her firm’s senior advisers.

Bond traders are pricing in more than two additional Fed rate hikes by the end of this year, and almost four by the end of 2019.

Here are some other points she made:

  • Her firm has been increasing exposure to private lending and to European markets.
  • Also has interest in emerging markets, because of "a great belief in long-term growth."
  • New technological innovations in the emerging market health care sector could make the space "interesting."
  • She likes emerging managers for Rock Creek’s fund-of-hedge funds because there may be more alpha in their niche ideas and, as an example, said the World Bank was one of the first investors in Bridgewater Associates. "Identifying real talent early, not a bad thing," she said.
  • 90 percent of Rock Creek’s management team is made up of women or minorities.
  • “It is much easier to find women, you just have to make a work environment that is open, transparent, equitable and takes into account the needs of men and women.”

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