U.S. Equity Outflows Surge, Carbon Credit Programs Fall Under a Spotlight and China's GDP Declines in this week's edition...
Take a Lap Around the Industry
Indian Car Servicing Startup GoMechanic Inflates Sales, Cuts 70% of Jobs (Bloomberg)
Global Elites Seek to Acquire Sports Teams (Bloomberg)
Search Engines Come Under Pressure Following ChatGPT Emergence (WSJ)
Air Travel Costs Record New High in December (BBC)
Investors Are Turning to Non-U.S. Equities, Goldman Sachs Says
According to a group of market strategists from Goldman Sachs, U.S. stocks have fallen out of favor with many investors. Over the first few weeks of the year, U.S. equities experienced outflows totaling nearly $5 billion. On the contrary, Money Market Funds, Investment Grade Bonds, Discount Margin Bonds and Broader Fixed Income products experienced the largest inflows so far this year. With many expecting a painful economic recession on the horizon, investors are fleeing historically safe U.S. funds in search of marginal returns. Strategists point to "lower gas prices, a weaker dollar and optimism about China’s economic reopening" as catalysts for inflows into European, Chinese and Emerging Market Funds.
"We might be at a turning point for regional equity fund flows...[and] a more meaningful acceleration as regional diversification has historically proved more valuable past the dollar peak."
Cecilia Mariotti, Goldman Sachs
Private Funding Pulse Check
The Haniel Family Office, Haniel Group, has participated in a $30M Series A funding round for Aerones, a robotic technology company for wind turbine blade maintenance services
Summit Nanotech, a clean-tech organization optimizing lithium production, has finalized on a $50M Follow-On Series A round that was led in part by Capricorn Investment Group
DOB Equity engaged in a Follow-On $3M Seed funding round in Kwara, a software development company turning credit unions into modern digital banks
Arkin Holdings took part in a $29M Follow-On Series A deal with Welcome Homes, a next generation home builder that produces customized and turnkey properties
Credit Programs Become the New Currency for Electrification Efforts
As the electric vehicle ecosystem continues its expansion, European countries have implemented carbon credit programs to supplement growth projects, particularly those that expand access to public charging stations. However, a battle has emerged between the electricity, biofuel and oil industries for a share of the $84 billion in funding earmarked for the energy space. The two competing industries argue that the carbon savings of EVs are overestimated and are pleading with government officials to correctly classify electricity "as transport fuel". A minor victory manifested in a new proposal for the Renewable Energy Directive III (RED III), credits the electric nature of the vehicle with reducing only a third (75 grams per megajoule) of its total carbon emissions and the remaining two-thirds carbon offset (255 grams per megajoule) is attributed to "higher efficiency". To date, California, Canada, Germany and the Netherlands have implemented credit programs while the European Union is expected to finalize a deal that would create programs across Europe by 2025.
"These programs play a major role in fleet operators’ decisions on where to deploy electric vehicles first...States with these types of programs are leading the adoption of commercial electric vehicles and charging infrastructure."
David Schlosberg, Terawatt
China's Output Declines in 2022, The New Year Remains Unknown
According to the World Bank, China's economy grew slower in 2022 than in any other year over the past several decades with the exception of 2020. Repeated lockdowns and a heavy-handed approach to the Covid-19 pandemic have "emphasized the high cost of zero-tolerance policies". The country's 2022 GDP was reported to be 3%, which is 5% lower than the prior year and aside from 2020, the lowest yearly output since 1976. China is expected to face additional longer term challenges including a "declining demographic and increased confrontation with the United States". Coming on the heels of a country-wide reopening, China finds itself amidst its worst Covid spike since the pandemic began, with hundreds of millions believed to be infected and roughly sixty-thousand deaths since the beginning of December.
"We’re not going to get ahead of ourselves in terms of capacity to China...That’s the big question mark, I think, in terms of international demand for 2023 that we don’t know yet."
Edward Bastian, Delta Air Lines
VC Firms Hold Equities Longer, Pay the Price During Market Pullback
Following the global pandemic, technology stocks underwent an accelerated bull run that witnessed a surge of IPOs and sky-high valuations. However, as the dust settled on 2022 following a significant market pullback, venture capital firms were left holding largely diminished positions. For example, Altos Ventures Management, a Menlo Park, CA-based venture capital firm, held a $7.5B stake in Roblox Corp. when the company went public in March 2021. The firm still holds roughly 60% of its original position and is perhaps unlikely to recover the majority of those losses anytime soon. The emerging strategy of holding venture positions through IPO is one that carries larger amounts of risk, with VC firms traditionally exiting companies that have gone public "to avoid market volatility".
"The rise in the public market was intoxicating for everybody...a number of firms got burned by that."
Hub International, a global insurance brokerage and financial services firm, announced it has acquired the assets of Creative Benefits & Insurance Solutions (Cision)
Simplicity Group finalized a deal to purchase NIW Companies, the leading platform for supplemental retirement savings (Cision)
Fidelity Investments has announced it has acquired Shoobx, a leading provider of automated equity management operations and financing software (BW)
Written by:
Andrew Popp | Sr. Research Associate
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