I'm back, what'd I miss?
Looking back at 2021 through Hustle Cap's eyes
Stories of 2021
Public Markets
This has been an awesome year for investors everywhere, but now that we’re at the end of 2021, we wanted to challenge y’all a bit on how to think about 2022.
Change the way you think about markets. If you hear a friend say:
“Wonder what the stock market will do in 2022?”…..don’t think about a percent return on the S&P 500. Think about corporate profits—are they likely to rise? Why? Are investors likely to want to pay more for these earnings than they do today? What about supply and demand? Who are the sellers of stock and why are they selling?
“I think interest rates are going up”….ask them whether they mean short term rates or long term rates. Think about supply and demand. Who is selling bonds? Who needs to issue new debt? Why would companies/people/businesses be interested in buying that debt? Are borrowers having a hard time paying debts? If so, this would increase credit spreads and hurt high yield
“Real estate is the safest place to put your money because it adjusts with inflation.”….is it really? If inflation goes up, won’t that make interest rates go up too? Won’t that mean that it’s harder to finance real estate purchases with higher interest rates? If cap rates rise from 3% (common in apartments today) to 4%, what kind of change in value is that? (-25%). Will rents be able to go up fast enough to prevent this from happening?
“Crypto is the future. I’m putting half my money in so that I can juice my returns.” Look at the bitcoin price in 2017-2018. It was pretty brutal riding BTC down from $19k down to $3500 (-80%!!). Can you weather that volatility? Maybe if you have a long time horizon, you should dollar cost average vs plunking large chunks of money into crypto at once. If you did that in 2017-2019, sure you bought some at the peak and rode it down, but you also bought some at $3500 and watched it 20x!
Private Markets
Private Equity came for Retail.
Vanguard partnered with Harbourvest to offer a Fund of Funds for UHNW clients. As this offering gains traction, they will add vehicles with increased liquidity and move down-market.
T. Rowe Price acquired Oak Hill Advisors, a NY-based Middle Market Buyout firm, effectively acqui-hiring a PE team to structure investments for their Retail investors.
iCapital Network, the marketplace for retail Private Equity Vehicles, has made waves this year with massive financing rounds, partnerships with global PE firms and by moving into digital assets. Their network of 6,700 RIAs now has access to Alternative Investment products of every variety, and an opportunity to commit to a growing list of blue chip fundraises. This is another firm we’re following closely as DC and true Retail markets remain green fields.
Franklin Templeton bought Lexington Partners, a PE Secondaries shop based in the Northeast. By their very nature, Secondaries have a shorter path to liquidity and less blind pool risk. The conditions are ripe for Retail-friendly vehicles to emerge from this partnership.
Blackrock has announced their intentions to offer in-house PE and Fund of Funds products to Wealth clients. This is an interesting platform play, since BRK can effectively deliver investment options across Alts, investment monitoring (via eFront and Aladdin), and books for record for both wirehouses and individual investors.
Goldman Sachs, who have minority investments in several GPs via the Petershill funds, manage their own Fund of Funds, and owns a Defined Contribution-focused Consulting firm, is primed to deliver investment options downmarket.
Crypto & Digital Assets
Everybody freaked out about the Metaverse (but there were some good takes, too!)
Zuck assured us it would save humanity
Radiohead, Nike, and Fortnite planted their flags in the digital sand, showing us what direction things could believably move in
Decentraland teamed up with Atari to open the Metaverse’s first casino
Also this
Bitcoin went Institutional
Grayscale and iCapital teamed up to provide cryptocurrency options to the UNHW and RIA channel
Houston Firefighters’ Pension Plan opened up an allocation to Bitcoin
Scaramucci denied Institutional adoption was a thing
Bitcoin Future ETFs were finally approved and, man, they took off…
FinTwit/SMB Building in Public
We’ve had a blast watching several folks “build in public” in 2021 as they leapt from the 9to5 world into small business ownership. The stats show that these folks are not alone. 2020 was a massive year for new business formation.
Maybe it’s the leftover eggnog, but this stat got us thinking a bit more critically this past week. If everyone in town starts a cleaning company, a HVAC roll up strategy and a dog walking business, this brings in more competition. If the competition is smart and well-funded, that means that profits get competed away. And if you hit a growth plateau at less than a million in ARR, you’ve probably ended up with a decently high paying job (with long hours) more than a valuable business.
This is not meant to discourage risk-taking and entrepreneurship at all—we salute anyone with the chutzpah to take the plunge into SMB ownership. But if you do it, make sure you have a plan to get past the hurdles.
On a related note, this tweet below from @buccocapital highlights how $GOOG and $FB help people launch small businesses, and they help grow them….but their real goal is to extract their profits. So, dear reader, if you just got a $100k inheritance, does this make you want to start a DTC business relying on social media for leads OR just buy $GOOG stock????
