Kind of a weird week for FinTwit, but we’ve got it covered. Market volatility has us thinking about correlation—in other words “what zigs when the market zags?” We have a lineup of the alty-est alternative strategies and more advice for those who are experiencing a quarter-life crisis. The biggest surprise this week? There are so many layers to Rob Dyrdek and his business thinking that were unearthed by Shaan Puri and Sam Parr on the My First Million podcast.
FinTwit
Our real lives got in the way of Twitter a bit this week, but here are some of the best stories we followed we saw:
Chips and a (stiff) Drink: Microchip shortages hit automakers hard
Natural Gas Spikes: If you’re in the US, don’t lock in your rates just yet—will a warm weather kill the massive natural gas price increases? Our European friends may be huddling together for warmth in January?
Entertaining callout from Leo Polevets: Eagerly awaiting the Good Professor’s latest “overvalued” list. Got some cash to deploy!
Non-Correlated
"Finger Paint" by blonde-gypsy is licensed under CC BY-NC-ND 3.0
One of the advantages touted by Private Markets managers is that their asset class and sub-strategies exhibit an extremely low correlation with public markets. Not only because there’s no daily mark-to-market, but also because GPs have the optionality to exit an investment via IPO when market conditions are favorable, and can either hold or exit via strategic/sponsor sale when they aren’t.
But there are further depths to explore in Privates, in a strategy bucket that is often referred to as ‘uncorrelated’. Here’s a breakdown of some of the most popular strategies in this underappreciated frontier market:
Fine Art
Quick description: Certainly one of the oldest forms of investment, Fine Art as an Institutional Asset Class has migrated from informal collection syndicates to art-focused funds like Anthea, Saatchi and Artemundi. Unlike most private markets funds, the term of Fine Art funds can run for more than 10 yrs, and investors typically do not have the same liquidity expectations as PE, VC, etc.
Of late, the democratization of art investment and rise of fractional art ownership through crowd-sourced funds has become mainstream. The emergence of Masterworks.io, which just this week announced it had raised $110m in Series A at a $1bn valuation, is perhaps the best example of this.
Litigation Finance
Quick description: Lit. Finance is a uncorrelated strategy for sure, but it’s become more mainstream and is even now considered to be a Private Credit strategy rather than Uncorrelated. The definition, from third-party funding firm Lex Shares:
“Litigation finance (also called litigation funding or legal financing) is the practice where a third party unrelated to the lawsuit provides capital to a plaintiff involved in litigation in return for a portion of any financial recovery from the lawsuit.”
PE giant Fortress Investment Group has been active in this space for some time, as have many Private Credit firms. As mentioned above, because of the return streams of these investments (upfront payment to acquire financial interest, followed by structured payments from settlement/judgment), they tend to behave like Credit investments and fall into that bucket from both the Investor and Asset Manager perspective.
Music Royalties
Quick description: Possibly the most straight-forward of these, music royalties funds deploy capital to buy the commercial rights for popular music. This has long been the domain of large music companies who enjoyed huge economies of scale and an incredibly shallow pool of competitors. But the prevalence of institutional participation in this type of investment came in 2010 with the founding of Round Hill Music.
Music royalties funds must be expert at acquiring song catalogs (correspondingly, many of these trading events happen when a popular musician is facing a liquidity crunch… divorce being the most common), marketing songs, tracking the use of songs across radio, TV, film, etc. and collecting the associated royalties. Round Hill itself has evolved from pure play investing into a combination Asset Management, Music Production and Technology company over the past decade.
Us at 25
We live in the Specialized Job Board age. If you click on the links below, you’ll see that they are evenly split between niche aggregators and specialist firms. There’s never been a more interesting time to search for a job using the most highly-specialized terms one could imagine. This week, we have some truly great listening recommendations from Capital Allocators and My First Million. We were so inspired by these, that we went extra-deep into the job board search to unearth some truly unique opportunities. We hope you enjoy.
Job Board
Vice President of Project Management, Dyrdek Machine (see below)
Analyst - Impact Investments, Global Endowment Management
UX Researcher - DeFi/Earn, OKcoin
Venture Capital Associate, Vulcan
Featured Job Board: Global Impact Investing Network (GIIN)
Senior Analyst - Market Innovation, Symbiotics
Analyst - Impact Data, Rally Assets
Impact Finance Database Associate, Wharton School - University of Pennsylvania
Required Listening
The My First Million podcast brought a double-dose of interesting investing content; one cautionary tale and one inspiring story
#224: How Tracking Every Second of His Life Took Rob Dyrdek from 0 to $405M in Exits
Sam & Shaan Bet $500, Ozy Media Scam, Why Google is Dying, and More
Capital Allocators w/Ted Seides episode #216 with Barry Sternlicht, “Masterclass in Real Estate in a Post-Covid World”
Mario Gabriele's piece this week is a wonderful, much deeper dive into digital art investing - including both Masterworks (fractional ownership of physical paintings) and digital-first art through OpenSea:
https://www.readthegeneralist.com/briefing/opensea