Alternative Investing Report - December 30, 2024

*as of 12/29; Sources: S&P, BTC, FTSE, DJRE, CL50

92% of registered investment advisors (RIAs) currently allocate parts of their clients’ portfolios to alternative investments, with 91% of them planning to add to their allocations in the next two years, according to the CAIS-Mercer Alternative Investment Survey of 550 financial advisors. The median client portfolio managed by those surveyed falls between $2 million and $5 million, with 35% of portfolios greater than $5 million. More than three-quarters of those surveyed allocate over 5% of client portfolios to alts, and half allocate 10% or more. The most popular asset classes are private credit, private equity, and real estate.

➨ TAKEAWAY: It is clear that some investment into alts has become an expected part of almost every high net-worth investor’s portfolio. Easier access to certain asset classes, and continuing education about others, will only boost those allocations going forward. When looking at what types of private market investments RIAs are planning to introduce to their clients in 2025, asset and sub-asset classes such as AI (28%), Venture (19%), Sports (15%), and Art & Collectibles (1%) still have plenty of room to grow.

In the newest episode of Smart Humans, Slava Rubin talks with Cambria Investment Management’s CEO and founder Meb Faber about the ideal portfolio allocation, his 2025 outlook, and why investors should look at emerging markets.

🏡 Mortgage rates keep rising: Despite the recent Fed rate cut, the average 30-year fixed mortgage rate rose from 6.72% to 6.85% as the number of expected rate cuts for 2025 fell from four to two.

🪙 State Bitcoin reserves: Texas, Pennsylvania, and Ohio have all seen bills proposed in state legislatures to establish Bitcoin reserves, as the incoming Trump administration considers establishing a federal one. Of course, these bills must become law first, but it does show governmental interest in holding digital assets.

📉 Bench shuts down: The Canadian accounting startup that had raised $113 million in funding abruptly closed its doors last Friday, leaving its reported 35,000 small and medium-sized business clients without immediate access to their accounting and tax data, and 600 employees out of a job.

🎬 $7 million Star Wars collection: Jeff Jacobs, an avid Star Wars toy collector, is auctioning off his collection of more than 5,000 items estimated to be worth $5 million - $7 million, with the first auction of 500 items on January 6 at Hake’s Auction House.

🚀 Crypto VC recap: VC funding for crypto and blockchain startups hit $13.7 billion in 2024, a solid 28% increase over the $10.7 billion figure from 2023. Pre-seed deal count rose by 68% and seed-stage startups raised $3.4 billion, just off of 2021’s record-high $3.8 billion.

💵 PE payouts are down: A leading advisor to private equity firms estimates that funds have paid out $400 billion less to their investors over the past three years compared with historical averages, as liquidity struggles continue.

Monday: Pending home sales report released.

Tuesday: New Year’s Eve; Case-Shiller October home price index and FHFA October house price index released.

Wednesday: New Year’s Day!

Thursday: Mortgage application report released.