Mark Kravietz

Add this WSJ article to the cacophony of exasperation being expressed by private equity investors (LPs) frustrated by the absence of liquidity provided by PE operators (GPs). A conundrum not likely to be resolved soon, and likely to dampen the realized returns ultimately received by LPs (asset owners). With foreseeable public market equity returns (as defined by a market index) widely expected to be insufficient to fund asset owners’ minimum required funding thresholds (ie: often estimated to be spending plus inflation approximating 7-8% per annum), are then 10-year US Treasuries yielding roughly 5.50% likely to be the best performing asset in an asset owners’ portfolio? If yes, then asset owners’ have a looming funding shortfall - especially absent changes to doctrinaire equity style-box and index-tracking implementation dogmas.   A fresh perspective on public market equity implementation that focuses on satisfactory investment outcomes that are relevant to asset owners’ actual spending needs and goals, rather than continuing the historically common practice – and expected future folly – of tethering one’s equity beta to that of an equity benchmark whose performance from today’s elevated levels is widely expected to be sluggish and insufficient to fund minimum liabilities (ie: payout rates, actuarial hurdles, spending goals, etc.). Such a change in public equity perspective comes without ratcheting-up illiquidity, non-transparency, leverage or alts-like fees & expenses. Heather Gillers

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Second Round Success: Strategies for Sophomore Venture Capital Funds Raising a sophomore venture capital fund presents unique challenges, particularly for first-time fund managers who need to prove their investment thesis and operational capabilities beyond their initial fund. While securing funds from existing investors (re-ups) is common, the endeavor remains daunting due to high market expectations and the inherent pressures of maintaining or exceeding the first fund's performance. For instance, Pentathlon Ventures , focusing on early-stage B2B SaaS startups, has set a target of $55 million for its second fund, aiming to invest in 25 companies. Similarly, DigitalDx Ventures, a woman-led firm emphasizing health technology, seeks to significantly increase its fund size up to $150 million for its sophomore effort, after raising around $24 million in its debut fund. Another example is Crane Venture Partners which successfully raised $140 million for its second fund, focusing on open-source, AI, and developer tools critical for digital infrastructure. These examples illustrate both the ambition and the scale of efforts required to successfully navigate the challenges of raising a sophomore fund. https://lnkd.in/gtfZAQv6 #venturecapital #funding #capitalfunding #scaling #startups #strategy #ventures

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“The best surprise is no surprise.” -         Kemmons Wilson, Founder, Holiday Inn It was no surprise that the Federal Open Market Committee (#FOMC) decided against making any changes to their target overnight rate at their May 1st meeting, leaving it at 5.50%. Market #expectations have moved materially since the beginning of the year. The belief then was that we would see six rate cuts by end of 2024, beginning in March, which we believed was a little too dovish. After Wednesday’s meeting, market pricing has changed again―the market doesn’t even expect to see two full 25 basis points (bps) rate cuts this year, with the first not materializing until November. In our view, perhaps the pendulum has swung a little too far the other way. The key message from Chair #Powell, however is that the next rate decision is clearly one-sided in favour of a cut. As noted by my colleague, Alex Grassino, “By means of background, the narrative around the Fed has shifted decisively since the last meeting six weeks ago, when the view was still very much that a mid-year cut was on the table. The reason? In essence, a combination of too-strong growth and stubbornly high MoM inflation for the first three months of 2024 would have made it difficult for the Fed to credibly ease in June, which has led to higher yields up to today, a stronger US dollar and volatility in the equity markets. Analysts also questioned other central banks’ ability to cut if the Fed were to drastically change track. At today’s meeting, Fed chair Powell went to considerable length to underscore that the next move would be a cut, effectively quashing a modest but growing line of thought that inflationary pressure would force the Fed to reintroduce two-sided risk around their decision-making function, meaning the next move could be a cut or a hike. The elimination of that possibility undercuts the source of recent market volatility, and it was immediately noticeable in markets: U.S. 10-year yields were down ~5bps at that time of writing, the entire curve was steepening, and the U.S. Dollar was slightly weaker.” Our take on the impact of rate moves to investors hasn’t changed: The uncertainty of timing and magnitude of future rate cuts, stickier inflation, and a weaker economic environment points to the need for a balanced approach to portfolio management with an emphasis on flexibility within the underlying investments. #Fed #interestrates #fixedincome #bonds #rates #equities #stocks #investments #financialadvisor #manulife

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New book recommendation: Buy Back Your Time by Dan Martell. Gives tactics on how to maximize your value/time. https://lnkd.in/gjzXPg2t

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Four Steps for Family Offices to Start Managing Risks (via Forbes): https://ow.ly/x30W50ScHv3 #familyoffices #wealthmanagement #privatewealth #forbes

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Hello Aravind, sorry I am on the sell side commenting and not a HNW investor intrigued by your important focus on fees and investor alignment. I have seen this theme from you before first hand in Edmonton last year at the IAFP, hope to see you again this year. We agree generally with your view on fees but I think you should consider the fees not disclosed and not required to be disclosed; 2-4% borrower fees. This is generally the unknown unknown for most advisors. The OM's will state that the manager can receive fees for originating loans or mortgages but I am yet to see anywhere, where those fees are actually shown. This is a monumental conflict of interest that is the epicentre of dislocation between investor interests and the manager's interests. It is all one single cost to the borrower but as the OM states, the borrower origination, commitment, extension, exit and etc. fees are all paid by the borrower and not by the investors so who needs to know. Wait what? A basic assessment of credit risk is how much a borrower is willing to pay for a loan.  As an advisor, if you do not know how much the borrower is paying for the loan, you will not know how risky the credit/mortgage fund is. Keep up the great work. Cheers.

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MSO earnings season starts this week, with eight of the top ten US operators reporting. Consensus analyst expectations are for the top ten MSOs to show a Q/Q 2.62% contraction in revenue and adjusted EBITDA to decline 6.18%. (1/3) The top ten MSOs' Y/Y revenue is expected to grow by 3.20%, and AEBITDA is expected to expand by 17.30%. Analysts predict the highest Y/Y revenue growth for Ascend Wellness Holdings (CSE: AAWH.U / OTCQX:AAWH) at +22.40%, and Cresco Labs is predicted to have the best Y/Y improvement in AEBITDA at +62.00%. Finally, here are some of the companies reporting this week: May 7: Ascend Wellness Holdings (CSE: AAWH.U / OTCQX:AAWH) May 8: Green Thumb Industries (GTI), Verano, MariMed, Inc. May 9: Curaleaf, Trulieve, TerrAscend, Cannabist, Jushi Holdings Inc. Source: FactSet

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New Whitepaper from Caron's Corner: In this paper we discuss new management techniques required to capture higher returns in a higher inflation regime. A new market regime is upon us catalyzed by rising inflation risks. This presents a challenge to investors seeking to compound returns at target levels with stability because it increases correlation risks. Effectively, it pushes the efficient frontier inwards and reduces risk-adjusted return potential. In this paper, we explain how we counter this adverse impact to returns in this new regime through a new management approach with the goal of achieving stable target returns. https://mgstn.ly/3QNuw0f

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Consolidation or correction? Earnings and liquidity needed to lift spirits from depths of no-rate-cut despair. https://lnkd.in/gR2_kuuV

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I believe there are three possible primary scenarios for the Federal Reserve, all of which would result in higher yields and steeper yield curves. https://lnkd.in/e4SV2-iq

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Private credit was one of the fastest growing private markets strategies over the course of the 2010s, fueled by demand from LPs during record low interest rates and supply by bank retrenchments in the face of Basel and Dodd-Frank post-GFC. What used to be a side hustle of private equity and hedge fund GPs has become an industry in its own right. But, where do we go from here? What role does private credit play in the global economy and how should we think about a tradeoff between a rapidly increased cost of capital and future returns? Really enjoyed this episode of Capital Decanted with Katie Koch of The TCW Group and Kipp deVeer of Ares Management Corporation as we explore some of these questions and concerns. Listen here: https://lnkd.in/gTsEuqSH If you're interested in boosting your (or your team's) knowledge around this very heterogenous asset class, check out the UniFi by CAIA Association Private Debt Microcredential as well: https://lnkd.in/ewUbtrtp #privatecredit #interestrates #economy

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Article featuring my quotes and a link to my blog post regarding how -- or whether -- the results of the upcoming election might affect investors' portfolios.

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Tax Loss Harvesting (TLH) strategy has been around for decades. Recently, there have been many innovations in this strategy to make it evergreen. A few challenges with traditional way of doing TLH is the limited number of rebalances per year as well as the ossification of the portfolio over the years. One innovation has been to use this strategy over a long/short equity portfolio that allows for consistent harvesting. This works great for diversifying a concentrated stock position. Here is a recent paper from AQR Capital Management on this topic. https://lnkd.in/eb4msgaD Another innovation is using options overlay to create a convex anti-correlated return stream to long beta as Jerry Peters explains in his interview with Dean Curnutt. We constantly evaluate how these new ideas can help our client squeeze more out of their dollars. #TrilliumSquare Thanks to Chad R. Morgan, CFA, Josh Rogers and Richard Citrano for your insights on this topic! https://lnkd.in/ej5f_GzM

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