Buy when the Guns are thundering: Alternative Assets provide alternative Return Streams for your Portfolio

Karen Wendt, SFTL President & expert in responsible, impact and sustainable investing

https://www.linkedin.com/in/profkarenwendt/

Buy when the Guns are thundering: Alternative Assets provide alternative Return Streams for your Portfolio:

This is a resume for our angel investors and a reason why they should care.

New Trends for Private Markets:  There has been a run-up in private market exposures over the past decade for institutional investors. But what are the forces behind it? First of all, low return prospects in public markets Investors had to respond to low return expectations across all asset classes and also respond to the high supply of liquidity from central banks.

This market context rendered achieving risk-adjusted investment returns above 2.5% difficult, while many pension funds communicated a target return of 3% p.a. In particular, institutional investors and pension funds had to go with new market trends in private markets and thematic investments as target returns could not be sufficiently satisfied by public markets under the existing investment policies of the institutions.

The market was therefore characterised by a trend for impact investing, sustainability, and innovation, which was mainly found in start-ups and growth companies in the private market. Many institutions expanded their core-satellite strategy in favour of the satellites, special targeted VC funds with a theme of diversifiers, enabled by high liquidity and a thriving start-up ecosystem. In this uncertain market, banks are hesitant to provide plain vanilla and structured credits. Due to the loss of trust in counterparties, which all have loaded balance sheets with bonds that have decreased in price, the market without the derivative market angle and ecosystem would slide into a credit crunch.

“Buy when the guns are thundering. Sell when the violins are playing” is one of the most famous stock market sayings. It is attributed to the banker Carl Mayer von Rothschild. Does that apply to private markets as well? Talking to many start-ups and VC investors, the situation is this: a lot of VC investors are sitting on huge amounts of dry powder (this is how uninvested capital is called), and start-ups need funds. Many start-ups have scaled their businesses to the growth stage but now feel exhausted and are ready to sell a portion of their shares.

To be allowed to grow further and bring in fresh resources and know-how. This is a brilliant time for private market investors to start investing and negotiating their deals. It is a great time to come in as a strategic investor and not only offer money but also strategic advice, networks, and extra-financial support. Buy when the guns are thundering, which also creates an investor’s impact. Investors in such situations, when money is running dry for growth companies, know that this is the moment where your voice, your ideas, and your money matter.

Assets under management in private markets have seen tremendous growth over the past 20 years—from less than US$1 trillion in the early 2000s to more than US$9.3 trillion in the second half of 2021. While venture capital led the way, private infrastructure and private debt were also strongly growing. So what will the new focus be? We guess cyber-security, AI in asset management (with deep learning programmes), longevity, health, and space exploration.

Presseportal: https://www.presseportal.ch/de/nr/100096065https://swissfintechladies.ch/blog/