Alternative Investing Report - November 15, 2024

*as of 11/14; Sources: S&P, BTC, FTSE, DJRE, 30YM

Private fund performance ticked up to an average of 1.8% in Q2, but the 6.6% yearly return still remains well behind 3, 5 and 10-year averages. All of the strategies covered posted positive returns in Q2, a welcome change for venture capital, which was coming off seven consecutive negative quarters, and real estate, which had seen four straight negative quarters. Private credit funds were the top performers, returning 4.2% in Q2, while real assets funds such as commodities and infrastructure, had the highest 1-year returns at 9.1%.

➨ TAKEAWAY: The “higher-for-longer” interest rate environment has hurt most private market asset classes, with private credit a notable exception. Private market performance reporting is often delayed, so keep in mind that these are Q2 numbers. Interest rate cuts that started in September and the recent public market rally should be reflected in future results. Positive performance in Q2 could signal that fund performance has hit its bottom and could point to a strong 2025 ahead.

Real-estate related startups have raised only $3.5 billion in funds so far this year, a stark decline from prior years, and total deal count has also plummeted. So-called “proptech” companies were hot during the booming real estate market of 2020 and 2021, but with home sales stagnating, VC interest in the sector has all but disappeared.

➨ TAKEAWAY: Proptech companies are subject to the cycles of two different industries - real estate and venture capital. With both of them being in a down cycle, it is natural that real estate startups are struggling to attract investment. A survey taken earlier this year showed that 91% of proptech startups are looking to raise capital in the coming years, with 45% looking to do so in the next 12 months. If the environment doesn’t change quickly, do not be surprised to see a lot of startups shut their doors.

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📊 Inflation met expectations: The Consumer Price Index (CPI) increased by 0.2% in October for a yearly inflation rate of 2.6%, in line with expectations, while the Producer Price Index (PPI) also rose by 0.2%, matching forecasts. This keeps a Fed rate cut in December as a strong possibility, with betting markets still predicting another quarter-point cut.

🚜 Loss of farmland: The U.S. is on pace to lose 18.4 million acres of farmland by 2040, which would represent 2% of the current supply, making the remaining land that much more valuable.

🪙 Crypto market cap record: The total value of the cryptocurrency market topped $3.2 trillion, a new record, as the post-election rally continued.

🤖 CoreWeave secondary sale: The AI cloud computing startup closed a $650 million secondary share sale at a valuation of $23 billion, up from a $19 billion valuation in May, and remains on track for a 2025 IPO.

💎 Most expensive emerald: The 37-carat Aga Khan sold for $9 million, making it the most valuable emerald in the world, breaking the previous record of $6.5 million.

🚀 Trump & TikTok: The incoming President is reportedly looking to reverse the ban on TikTok that is set to take place in January, though there are significant legal and political concerns in doing so.

Monday: 🚀 2025 IPOs
Tuesday: 🪙 Crypto market update, ⌚ Watch auctions
Wednesday: 💵 Private equity and retail investors, 🚀 Destiny Tech 100
Thursday: 🏡 Trump and the housing market, 🪙 Crypto VC decline

Have a great weekend!