Alternative Investing Report - October 16, 2024

*as of 10/15; Sources: S&P, BTC, FTSE, DJRE, CL50

The median U.S. rental household spends around 30% of its income on rent, a number that has held steady since 2021. The average asking rent nationwide stayed flat in September, and is up 3.3% year-over-year. Apartment demand rose in Q3, but supply hit a 50-year high, which is what led to the flat growth. Eight of the top ten markets in rent growth were in the Midwest, led by Kansas City and Detroit. Again posting the biggest decline in rents was Austin, TX, followed by Raleigh/Durham, NC.

➨ TAKEAWAY: The sheer amount of new multifamily supply to the market has kept rental growth in check. In Austin, for example, inventory has risen by 8.9% in the last year and projects to grow by another 8% in the next twelve months. However, most multifamily construction projects are due to be completed in 2025, and the number of project starts have been falling nationwide, so rent growth might start ticking up again in 2026 as supply stops growing.

Private equity firms have increasingly been buying small and medium-sized businesses (SMBs) in the U.S., in areas like plumbing, electrical and HVAC, in the hopes of consolidating them and running larger, more profitable operations. Some firms have bought hundreds of operations and created billion-dollar service platforms whose scale brings efficiencies in marketing, hiring and managerial strategy.

➨ TAKEAWAY: As private equity investment into bigger companies has fallen the past few years, firms have found another place to deploy their capital. These are cash-flowing, profitable businesses whose owners often had trouble finding buyers if their own families did not want to continue the business. Investing in SMBs is an overlooked alternative asset class, and one that has clearly become more attractive to major players recently.

In this episode of Smart Humans, Slava Rubin talks with Doorvest CEO and co-founder Andrew Luong about how to passively invest in real estate and avoid dealing with tenants.

🪙 Kamala supporting crypto: Vice President Harris released a statement that she will “make sure owners of and investors in digital assets benefit from a regulatory framework,” as both major candidates have now come out in support of digital assets.

🚘 Sammy Hagar’s Ferrari: The rock star’s 2015 Ferrari LaFerrari sold for $4.675 million at the Barrett-Jackson fall auction in Scottsdale, setting a new record for the model and more than tripling the $1.4 million Hagar bought it for a decade ago.

🚀 20VC’s new fund: Podcaster Harry Stebbings’ VC firm announced that it closed a $400 million fundraise for its third fund, which will focus on seed stage and Series A investments into European companies.

🏡 Homebuilder concessions: With mortgage rates still high, many builders have been turning to rate buydowns to attract buyers, one reason why new home sales have been outpacing existing home sales.

💵 Banks and private credit: While overall lending by banks grew by 6% annually the last three years, their exposure to private credit grew by 18% annually over the same time period, as partnerships with fund managers have become more commonplace.

📉 Cybersecurity funding drops: After a breakout Q2, VC funding for cybersecurity startups fell by 51% in Q3 to levels more in line with previous quarters, with the lowest amount of deal flow since 2013.

For the second time in the last month, the token for the Helium network dropped the most of any top-100 coin by market cap, even as the overall crypto market has risen the past two days. The Helium network is a decentralized wireless network that enables people to connect devices to its hotspots. Those who set up and operate the hotspots are rewarded with HNT tokens when users connect. While the launch of Helium Mobile created interest, sending the price of a token above $10, it has fallen since. While the company did announce last week that it was partnering with Ameriband to launch 100,000 new hotspots, the market has not reacted positively.

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