Alternative Investing Report - February 21, 2025

*as of 2/20; Sources: S&P, BTC, FTSE, DJRE, 30YM

Private credit is the talk of the town. The asset class has tripled in size to surpass $1.5 trillion in assets, and its popularity is only outmatched by investors’ fascination in trying to define it. At a high level, the assets are loans made not by banks but by private investment funds into spaces that range from private equity deal leverage to business operating capital advances to asset-backed loans to class-action lawsuits, and everything in between. With high returns, high fees and long-term illiquidity, there’s appeal for investors and managers alike, and the products are earning wide adoption in wealth management and advisory channels.

➨ TAKEAWAY: Investors will see more offers to get into private credit through big managers like Blackstone and Apollo, platforms like Percent or even in fund form on mainstream brokerage platforms and apps. Returns are juicy, and given that most credits are floating-rate, they aren’t necessarily impact by today’s interest rates. That said, they do carry a lot of risk, and due to infrequent marking those risks are not always apparent for awhile before things get challenging. Investors should go into any deal with eyes wide open and cognizant of fees, target returns and who’s involved in origination.

Back in November of last year, the fed was cutting rates, and markets were anticipating an additional three to four cuts in 2025. But of late, officials increasingly hint at dovishness in the midst of the January inflation print that came in high, talk of tariffs, and continued strong employment. Public markets seemed to like the minutes from the last FOMC meeting, namely that the next move is still expected be a cut not a hike, and public markets surged to end the day just short of yesterday’s all-time high close.

➨ TAKEAWAY: For certain asset classes, the fed pause will prove tougher to handle. Speculative assets like venture and crypto thrive on lower costs of capital and higher liquidity, and higher-for-longer continues to provide headwinds for growth and IPOs. Asset classes like real estate, which is more sensitive to interest rates, also remain challenged with rates where they are. And a broad swath of public and private borrowers will have to labor longer to make their payments before they can refinance. Investors will benefit from maintaining some liquidity and conservatively marking their illiquid books until things start to ease, and that moment looks to yet again slide further down the road.

🤖 Today’s AI raise: In what seems like a daily occurrence, another raise valued an AI company in the billions — this time Together.ai hauled in $305 million on a $3.3 billion valuation.

🏡 Moderate mortgage relief: Mortgage rates ticked down 15 basis points, a small move but driving hope that a few more like it could pave the way for a strong spring selling season.

🚀 Fintech getting ready: When IPOs ultimately do materialize, fintech could benefit, with Stripe, Klarna and Deel as likely candidates on deck.

🎨 Forger bust: A police raid in Rome uncovered 71 fake works of art including Picasso and Rembrandt forgeries, reinforcing the importance of provenance and authentication for rare collectibles and art.

🏢 Hospitals to homes: Out of use hospitals are proving more attractive than offices for conversions to residential given their favorable layouts and utilities along with central locations, as cities transform hundreds of millions of dollars of real estate to address the housing gap.

🪙 The first crypto admin: The opening month of the new regime featured an unprecedented focus on crypto, and this week the SEC’s cyber and crypto unit pursuing enforcement actions was scaled down, and the attempt to give a ‘dealer’ designation to defi operators was abandoned.

Monday: 🚀 VC secondary discounts
Tuesday: 🏡 Hot housing markets, 🚀 Down round record
Wednesday: 🤖 Robotics Raises, 💵 Corporate Distress
Thursday: 🚀 Venture’s Mixed Fates, ₿ BTC Buy Pressure,

Have a great weekend!

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This is a paid advertisement for Pacaso’s Regulation A offering. Please read the offering circular at invest.pacaso.com.