Investors Eye S&P 500 History, Transports Claim Top Clean Energy Spending and VCs Sit on Record Cash Reserves in this Week's Edition...
Take a Lap Around the Industry
Fed Meeting to Signal Steady Rates with Potential Future Cuts (WSJ)
PGA Tour Secures $1.5 Billion Investment from U.S. Investor Group (NYT)
Labor Costs Rise at Slower Pace, Easing Inflation Fears (Bloomberg)
NY Community Bancorp Shares Plummet on Unexpected Loss, Dividend Cut (Bloomberg)
S&P 500 Performance Post-Fed Hikes Hints at History Repeating
The S&P 500 has historically trended upwards following the conclusion of Federal Reserve tightening cycles, with substantial gains especially after rate hikes ended in the mid-1990s. As the Fed seemingly approaches the end of its current campaign, the S&P 500 has already posted significant returns in January 2023, led by AI leaders like Nvidia and Microsoft. However, the Federal Reserve is actively working to mitigate the risks associated with speculative investments in emerging technologies by implementing careful supervision and promoting transparency. While the market may be anticipating rate cuts similar to the mid-90s, elevated price-earnings ratios suggest investors remain cognizant that today's unique economic challenges make direct comparisons difficult. Though optimism exists, it is tempered by the realization that navigating today’s distinct landscape requires balanced policies. Investors seem to be anticipating consistent growth, but they are also mindful of the need for cautious optimism.
"If the Fed is pivoting because a recession is brewing, then earnings tend to decline and the stock market can suffer a drawdown...But a recession doesn't always follow, and 1994-1995 certainly comes to mind as a cycle where the glass was very much half full (if not overflowing!)"
Jurrien Timmer, Fidelity Investments
Private Funding Pulse Check
Chipmetrics, a company producing test chips for advanced materials and microelectronics manufacturing, has secured $2.6M in a Seed funding round joined by Zug, Switzerland-based Occident Group
In a recent Venture round, Horizons Ventures participated in a $7M investment in Xampla, a company creating natural alternatives to single-use plastics
Dolby Family Ventures has participated in a $18.75M Series A funding round for Motif Neurotech, a medical equipment manufacturer of a brain stimulation device
Beedie Capital and Nicola Wealth Management have engaged in a $150M Series D follow-on investment in Kore.ai, an Orlando, FL-based conversational AI platform and solutions provider
Transport Overtakes Renewables as Top Clean Energy Sector as Investment Jumps to $1.77 Trillion
Global investment in clean energy technologies surged to a new record high of $1.77 trillion in 2023, representing a 17% increase from the previous year, according to a report published by BloombergNEF. This growth was driven by strong gains in electrified transport, which overtook renewable energy as the largest sector for clean energy spending. Investment in electric vehicles, charging infrastructure, and other zero-emission transport modes grew 36% to reach $634B. The renewable power sector also saw robust 8% growth to $623B. While China continued to lead, accounting for 38% of total investment, the combined spending of the EU, US and UK outpaced China for the first time. The report notes, however, that current investment remains well below what is needed to reach net zero emissions globally by 2050.
"Last year brought new records for global renewable energy investment. Strong growth in the US and Europe drove the global rise, even as China, the world’s largest renewables market, sputtered, recording an 11% drop. Despite a year of tough headlines, a record amount of offshore wind capacity also reached financial close."
Silicon Valley venture capitalists are sitting on an unprecedented $311B in undeployed capital, demonstrating caution as start-up valuations reset. From 2020 to 2022, American VC firms raised $435B during the pandemic boom years but have only utilized about half this amount. This pile of unused "dry powder" stems from a more conservative investment approach lately, with VCs focused on backing established tech groups or providing follow-on funding for existing portfolio companies. Notable investments include Thrive Capital's sizable backing of fintech Stripe and OpenAI. However, the industry now faces pressure to put this capital to work efficiently and generate returns for their investors. With start-up exits decreasing, VCs are considering creative options like continuation funds while also confronting expectations for more prudent fund management and potential downsizing of fund sizes moving forward. The record dry powder represents both opportunity and obligation for VCs navigating a shifting investment landscape.
"LPs don't usually like to put pressure on VCs to spend money, but if you're entering your third year of not doing anything, they're starting to ask what are my fees for..."
Silicon Valley VC Investor
Declaration Partners Eyes $400M in US Real Estate
New York-based Declaration Partners, led by David Rubenstein, is expanding its presence in the US real estate market, aiming to raise about $400M for its second real estate fund. This move builds on the success of their inaugural US real estate fund in 2022, which Rubenstein seeded with a substantial personal investment. Taking advantage of depressed commercial property values, Declaration aims to leverage expertise in market timing to pursue a diverse range of sub-classes, focused primarily on multi-family housing and industrial assets. Recent investments include self-storage facilities in Florida and North Carolina as well as residential properties near Pittsburgh and Chicago. Drawing on Rubenstein's experience and targeting high-net-worth individuals and family offices, Declaration Partners is capitalizing on current conditions to assemble a broad portfolio across property types and regions in the US real estate market.
"[Declaration Partners] has invested in at least 10 properties since early 2020, including student housing in Pittsburgh, a multifamily development near Atlanta and an office building in Washington."
Mercer Advisors acquired Paragon Wealth Strategies, a comprehensive wealth management firm in Jacksonville, FL founded in 2008
Paragon was founded and led by Managing Partners Jonathan Castle and Michelle Ash, with Scott Snider and Ian Aquilar later joining as shareholders
Jonathan Castle said Paragon joined Mercer Advisors due to their cultural alignment and commitment to clients
The acquisition adds Paragon's $495M in AUM and over 400 clients to Mercer Advisors' significant footprint in Florida (PR Newswire)
Written by:
Andrew Popp | Sr. Research Associate
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